statutory volume target for total renewable fuel, the volume
requirement for total renewable fuel would also be 630 million gallons
more than the applicable volume used to derive the 2018 percentage
standard.

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    As described in Section II.A, when making reductions in advanced
biofuel and total renewable fuel under the cellulosic waiver authority,
the statute limits those reductions to no more than the reduction in
cellulosic biofuel. As described in Section III.D, we are establishing
a 2019 applicable volume for cellulosic biofuel of 418 million gallons,
representing a reduction of 8,082 million gallons from the statutory
target of 8,500 million gallons. As a result, 8,082 million gallons is
the maximum volume reduction for advanced biofuel and total renewable
fuel that is permissible using the cellulosic waiver authority. Use of
the cellulosic waiver authority to this maximum extent would result in
volumes of 4.92 and 19.92 billion gallons for advanced biofuel and
total renewable fuel, respectively.

   Table IV.A-1--Lowest Permissible Volumes Using Only the Cellulosic
                            Waiver Authority
                            [Million gallons]
------------------------------------------------------------------------
                                             Advanced          Total
                                              biofuel     renewable fuel
------------------------------------------------------------------------
Statutory target........................          13,000          28,000
Maximum reduction permitted under the              8,082           8,082
 cellulosic waiver authority............
Lowest 2019 volume requirement permitted           4,918          19,918
 using only the cellulosic waiver
 authority..............................
------------------------------------------------------------------------

    We are authorized under the cellulosic waiver authority to reduce
the advanced biofuel and total renewable fuel volumes ``by the same or
a lesser'' amount as the reduction in the cellulosic biofuel
volume.\80\ As discussed in Section II.A, EPA has broad discretion in
using the cellulosic

waiver authority in instances where its use is authorized under the
statute, since Congress did not specify factors that EPA must consider
in determining whether to use the authority to reduce advanced biofuel
or total renewable fuel, nor what the appropriate volume reductions
(within the range permitted by statute) should be. This broad
discretion was affirmed in both Monroe and ACE.\81\ Thus, we have the
authority set the 2019 advanced biofuel volume requirement at a level
that is designed to partially backfill for the shortfall in cellulosic
biofuel. However, based on our consideration of a number of relevant
factors, we are using the full extent of the cellulosic waiver
authority in deriving volume requirements for 2019.
---------------------------------------------------------------------------

    \80\ CAA section 211(o)(7)(D)(i).
    \81\ See ACE, 864 F.3d at 730-35 (citing Monroe, 750 F.3d 909,
915-16).
---------------------------------------------------------------------------

B. Attainable Volumes of Advanced Biofuel

    We have considered both attainable and reasonably attainable
volumes of advanced biofuel to inform our exercise of the cellulosic
waiver authority. As used in this rulemaking, both ``reasonably
attainable'' and ``attainable'' are terms of art defined by EPA.\82\
Volumes described as ``reasonably attainable'' are those that can be
reached with minimal market disruptions, increased costs, and/or
reduced GHG benefits, and with minimal diversion of advanced biofuels
or advanced biofuel feedstocks from existing uses. We use this phrase
in today's action in the same way that we used it in previous actions.
Volumes described as ``attainable,'' in contrast, are those we believe
can be reached, but would likely result in market disruption, higher
costs, and/or reduced GHG benefits. Neither ``reasonably attainable''
nor ``attainable'' are meant to convey the ``maximum achievable''
level, which as we explained in the 2017 final rule, we do not consider
to be an appropriate target under the cellulosic waiver authority.\83\
Finally, we note that our assessments of the ``reasonably attainable''
and ``attainable'' volumes of non-cellulosic advanced biofuels are not
intended to be as exacting as our projection of cellulosic biofuel
production, described in Section III of this rule.
---------------------------------------------------------------------------

    \82\ Our consideration of ``reasonably attainable'' volumes is
not intended to imply that ``attainable'' volumes are unreasonable
or otherwise inappropriate. As we explain in this section, we
believe that an advanced biofuel volume of 4.92 billion gallons,
although not reasonably attainable, is attainable, and that
establishing such volume is an appropriate exercise of our
cellulosic waiver authority.
    \83\ 81 FR 89762 (December 12, 2016). The maximum achievable
volume may be relevant to our consideration of whether to exercise
the general waiver authority on the basis of inadequate domestic
supply. In 2019, we have determined that the after exercising our
cellulosic waiver authority the advanced biofuel volume is
achievable, and therefore further reductions using the general
waiver authority on the basis of inadequate domestic supply are not
necessary.
---------------------------------------------------------------------------

    As in prior rulemakings, we begin by considering what volumes of
advanced biofuels are reasonably attainable. In ACE, the Court noted
that in assessing what volumes are ``reasonably attainable,'' EPA had
considered the availability of feedstocks, domestic production
capacity, imports, and market capacity to produce, distribute, and
consume renewable fuel.\84\ These considerations include both demand-
side and supply-side factors.\85\ We are taking a similar approach for
2019, with the added consideration of the possibility that higher
volume requirements would lead to ``feedstock switching'' or diversion
of advanced biofuels from use in other countries. We also took these
factors into account in setting the 2017 and 2018 volume requirements,
and we continue to believe that they are appropriate considerations
under the broad discretion provided by the cellulosic waiver authority.
We are establishing the advanced biofuel volume requirement at a level
that would seek to minimize such feedstock/fuel diversions within the
discretion available under the cellulosic waiver authority.
---------------------------------------------------------------------------

    \84\ See ACE, 864 F.3d at 735-36.
    \85\ See id. at 730-35.
---------------------------------------------------------------------------

    Our individual assessments of reasonably attainable volumes of each
type of advanced biofuel reflect this approach. As discussed in further
detail in this section, we find that 100 million gallons of advanced
ethanol, 60 million gallons of other advanced biofuels, and 2.61
billion gallons of advanced biodiesel and renewable diesel are
reasonably attainable. Together with our projected volume of 418
million gallons of cellulosic biofuel, the sum of these volumes falls
short of 4.92 billion gallons, which is the lowest advanced biofuel
requirement that EPA can require under the cellulosic waiver authority.
    Therefore, we also have considered whether the market can
nonetheless make available 4.92 billion gallons of advanced biofuel,
notwithstanding likely feedstock/fuel diversions. That is, we assess
whether 4.92 billion gallons is merely ``attainable,'' as opposed to
reasonably attainable. In particular, we assess whether additional
volumes of advanced biodiesel and renewable diesel are attainable. We
conclude that 2.8 billion gallons of advanced biodiesel and renewable
diesel are attainable, notwithstanding potential feedstock/fuel
diversions. This quantity of advanced biodiesel and renewable diesel,
together with the cellulosic biofuel, sugarcane ethanol, and other
advanced biofuels described above, would enable the market to make
available 4.92 billion gallons of advanced biofuels.
1. Imported Sugarcane Ethanol
    The predominant available source of advanced biofuel other than
cellulosic biofuel and BBD is imported sugarcane ethanol. Imported
sugarcane ethanol from Brazil is the predominant form of imported
ethanol and the only significant source of imported advanced ethanol.
In setting the 2018 standards, we estimated that 100 million gallons of
imported sugarcane ethanol would be reasonably attainable.\86\ This was
a reduction from the 200 million gallons we had assumed for 2016 and
2017, and was based on a combination of data from 2016 and part of 2017
as well as an attempt to balance the lower-than-expected imports from
recent data with indications that higher volumes were possible based on
older data. We also noted the high variability in ethanol import
volumes in the past (including of Brazilian sugarcane ethanol),
increasing gasoline consumption in Brazil, and variability in Brazilian
production of sugar as reasons that it would be inappropriate to assume
that sugarcane ethanol imports would reach the much higher levels
suggested by some stakeholders.
---------------------------------------------------------------------------

    \86\ 82 FR 58507 (December 12, 2017).
---------------------------------------------------------------------------

    Since the 2018 final rule, new data reveals a continued trend of
low imports. At the time of the 2018 standards final rule, we had used
available data from a portion of 2017 to estimate that import volumes
of sugarcane ethanol were likely to fall significantly below the 200
million gallons we had assumed when we set the 2017 standards. Import
data for all of 2017 is now available, and indicates that imports of
sugarcane ethanol reached just 77 million gallons. Moreover, EIA data
on monthly ethanol imports in 2018 through July indicate that no
ethanol was imported.\87\
---------------------------------------------------------------------------

    \87\ However, EIA data on weekly imports of ethanol does
indicate that some ethanol was imported in August and October of
2018, totaling 37 million gallons. This volume was not reflected in
the monthly EIA data as of September 28, 2018.

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

[GRAPHIC] [TIFF OMITTED] TR11DE18.001

    While it is difficult to predict imports for 2019, we believe it
would be reasonable not to increase the assumed volume above 100
million gallons for purposes of determining whether an advanced biofuel
volume requirement of 4.92 billion gallons is reasonably attainable for
2019. Although the advanced biofuel volume requirement for 2019 is
about 630 million gallons higher than that for 2018, creating some
incentive for increases in imports, we note that an even larger
increase in the required volume of advanced biofuel between 2016 and
2017 was accompanied by only a very small increase in imports of
sugarcane ethanol, from 34 million gallons in 2016 to 77 million
gallons in 2017. Moreover, the E10 blendwall and the fact that imported
sugarcane ethanol typically costs more than corn ethanol create
disincentives for increasing imports above the levels in recent years,
though the difference in RIN values between conventional and advanced
ethanol may offset the cost difference to some degree.\88\ Even so, we
do not believe it would be appropriate to reduce the volume of imported
sugarcane ethanol below 100 million gallons for the purposes of
determining the 2019 volume requirement for advanced biofuel because
imports have typically been higher in the second half of the year
compared to the first half of the year, and have reached considerably
more than 100 million gallons in the past.\89\ Taking all of these
considerations into account, we are using 100 million gallons of
imported sugarcane ethanol for the purposes of projecting reasonably
attainable volumes of advanced biofuel for 2019.\90\ This level
reflects a balancing of the information available to EPA at this time;
both the lower import volumes that have occurred more recently with the
higher volumes that are possible based on earlier years and under the
influence of the higher standards in 2019. Additional discussion on
this topic can be found in the RTC document.
---------------------------------------------------------------------------

    \88\ For example, see the relative costs of imported sugarcane
ethanol and corn ethanol in Tables V.D-2 and V.D-3 in the final
rulemaking that established the 2017 standards (81 FR 89746,
December 12, 2016).
    \89\ ``US Imports of Fuel Ethanol from EIA,'' available in
docket EPA-HQ-OAR-2018-0167.
    \90\ We note that even if sugarcane ethanol imports fall below
our projection of 100 million gallons in 2019, the advanced biofuel
volume would still be achievable. For example, if sugarcane ethanol
imports were only 50 million gallons in 2019, the market could still
supply 4.5 billion gallons of non-cellulosic advanced biofuel by
supplying an additional 33 million gallons of advanced biodiesel.
---------------------------------------------------------------------------

    We note that the future projection of imports of sugarcane ethanol
is inherently imprecise, and that actual imports in 2019 could be lower
or higher than 100 million gallons. Factors that could affect import
volumes include uncertainty in the Brazilian political climate, weather
and harvests in Brazil, world ethanol demand and prices, constraints
associated with the E10 blendwall in the U.S., world demand for and
prices of sugar, and the cost of sugarcane ethanol relative to that of
corn ethanol. After considering these factors, and in light of the high
degree of variability in historical imports of sugarcane ethanol, we
believe that 100 million gallons is reasonably attainable for 2019.
2. Other Advanced Biofuel
    In addition to cellulosic biofuel, imported sugarcane ethanol, and
advanced biodiesel and renewable diesel, there are other advanced
biofuels that can be counted in the determination of reasonably
attainable volumes of advanced biofuel for 2019. These other advanced
biofuels include non-cellulosic CNG, naphtha, heating oil, and
domestically-produced advanced ethanol. However, the supply of these
fuels has been relatively low in the last several years.

                                              Table IV.B.2-1--Historical Supply of Other Advanced Biofuels
                                                          [Million ethanol-equivalent gallons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     CNG/LNG       Heating oil       Naphtha         Domestic ethanol        Total \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013...........................................................              26               0               3                       23              52
2014...........................................................              20               0              18                       26              64
2015...........................................................               0               1              24                       25              50
2016...........................................................               0               2              26                       27              55
2017...........................................................               2               2              32                       26              62
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Excludes consideration of D5 renewable diesel, as this category of renewable fuel is considered as part of BBD in Section IV.B.3 below.

    The downward trend over time in CNG/LNG from biogas as advanced
biofuel with a D code of 5 is due to the re-categorization in 2014 of
landfill biogas from advanced (D code 5) to cellulosic (D code 3).\91\
Total supply of these other advanced biofuels has exhibited no
consistent trend during 2013 to 2017. Based on data from EMTS for these
same categories of biofuel in 2018 through August, we estimate that
total RIN generation in 2018 will be approximately the same as in
2017.\92\ Based on this historical record, we believe that 60 million
gallons is reasonably attainable in 2019.
---------------------------------------------------------------------------

    \91\ 79 FR 42128 (July 18, 2014).
    \92\ See ``Projecting Advanced Biofuel Production and Imports
for 2018 (November 2018)'' Memorandum from Dallas Burkholder to EPA
Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    We recognize that the potential exists for additional volumes of
advanced biofuel from sources such as jet fuel, liquefied petroleum gas
(LPG), butanol, and liquefied natural gas (as distinct from CNG), as
well as non-cellulosic CNG from biogas produced in digesters. However,
since they have been produced, if at all, in only de minimis and
sporadic amounts in the past, we do not have a reasonable basis for
projecting substantial volumes from these sources in 2019.\93\
---------------------------------------------------------------------------

    \93\ No RIN-generating volumes of these other advanced biofuels
were produced in 2017, and less than 1 million gallons total in
prior years.
---------------------------------------------------------------------------

3. Biodiesel and Renewable Diesel
    Having projected the production volume of cellulosic biofuel, and
the reasonably attainable volumes of imported sugarcane ethanol and
``other'' advanced biofuels, we next assess the potential supply of
advanced biodiesel and renewable diesel. First, we calculate the amount
of advanced biodiesel and renewable diesel that would need to be
supplied to meet the advanced requirement were we to exercise our
maximum discretion under the cellulosic authority: 2.8 billion gallons.
This calculation, shown in Table IV.B.3-1 below, helps inform the
exercise of our waiver authorities. Second, we consider the historical
supply of these fuels and the impact of the biodiesel tax policy on
advanced biodiesel and renewable diesel use in the U.S. Next, we
consider factors that could potentially limit the supply of advanced
biodiesel including the production capacity of advanced biodiesel and
renewable diesel production facilities, the ability for the market to
distribute and use these fuels, the availability of feedstocks to
produce these fuels, and fuel imports and exports. Based on our
projection of the domestic growth in advanced biodiesel and renewable
diesel feedstocks we project a reasonably attainable volume of 2.61
billion gallons of advanced biodiesel and renewable diesel in 2019.
Since this volume is lower than the 2.8 billion gallons we calculated
would need to be supplied to meet the advanced requirement were we to
exercise our maximum discretion under the cellulosic authority, we
finally consider if additional supplies of advanced biodiesel and
renewable diesel are attainable. Ultimately, we conclude that a volume
of at least 2.8 billion gallons of advanced biodiesel and renewable
diesel is attainable in 2019. We note that we have not attempted to
determine the maximum attainable volume of these fuels. While the
maximum attainable volume of advanced biodiesel and renewable diesel in
2019 is greater than 2.8 billion gallons we do not believe it would be
appropriate to require a greater volume of these fuels (by establishing
a higher advanced biofuel volume for 2019) due to the high cost and the
increased likelihood of adverse unintended impacts associated with
these fuels.
    Calculating the volume of advanced biodiesel and renewable diesel
that would be needed to meet the volume of advanced biofuel for 2019 is
an important benchmark to help inform EPA's consideration of our waiver
authorities. In situations where the reasonably attainable volume of
biodiesel and renewable diesel exceeds the volume of these fuels that
would be needed to meet the volume of advanced biofuel after reducing
the advanced biofuel volume by the same amount as the cellulosic
biofuel volume, as was the case in 2017 and 2018, EPA may consider
whether or not to allow additional volumes of these fuels to backfill
for missing cellulosic biofuel volumes. In situations where the
reasonably attainable volume of advanced biodiesel and renewable diesel
is less than the volume of these fuels that would be needed to meet the
volume of advanced biofuel after reducing the advanced biofuel volume
by the same amount as the cellulosic biofuel volume, EPA may consider
whether or not to use additional waiver authorities, to the extent
available, to make further reductions to the advanced biofuel volume.

   Table IV.B.3-1--Determination of Volume of Biodiesel and Renewable
    Diesel Needed in 2019 To Achieve 4.92 Billion Gallons of Advanced
                                 Biofuel
          [Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------

------------------------------------------------------------------------
Lowest 2019 advanced biofuel volume requirement                    4,918
 permitted using under the cellulosic waiver authority..
Cellulosic biofuel......................................             418
Imported sugarcane ethanol..............................             100
Other advanced..........................................              60
Calculated advanced biodiesel and renewable diesel           4,340/2,800
 needed (ethanol-equivalent gallons/physical gallons)
 \94\...................................................
------------------------------------------------------------------------

    Having calculated the volume of advanced biodiesel and renewable
diesel that would need to be supplied to meet the volume of advanced
biofuel for 2019 after reducing the advanced biofuel volume by the same
amount as the cellulosic biofuel volume, EPA next projected the
reasonably attainable volume of these fuels for 2019. With regard to
advanced biodiesel and renewable diesel, there are many different
factors that could potentially influence the reasonably attainable
volume of these fuels used as transportation fuel or heating oil in the
U.S. These factors include the availability of qualifying biodiesel and
renewable diesel feedstocks, the production capacity of biodiesel and
renewable diesel facilities (both in the U.S. and internationally), and
the availability of imported volumes of these fuels.\95\ A review of
the volumes of advanced biodiesel and renewable diesel used in previous
years is especially useful in projecting the potential for growth in
the production and use of such fuels, since for these fuels there are a
number of complex and inter-related factors beyond simply the total
production capacity for biodiesel and renewable diesel (including the
availability of advanced feedstocks, the expiration of the biodiesel
tax credit, recent tariffs on biodiesel from Argentina and Indonesia,
and other market-based factors) that are likely to affect the supply of
advanced biodiesel and renewable diesel.
---------------------------------------------------------------------------

    \94\ To calculate the volume of advanced biodiesel and renewable
diesel that would generate the 4.34 billion RINs needed to meet the
advanced biofuel volume EPA divided the 4.34 billion RINs by 1.55.
1.55 is the approximate average (weighted by the volume of these
fuels expected to be produced in 2019) of the equivalence values for
biodiesel (generally 1.5) and renewable diesel (generally 1.7).
    \95\ Throughout this section we refer to advanced biodiesel and
renewable diesel as well as advanced biodiesel and renewable diesel
feedstocks. In this context, advanced biodiesel and renewable diesel
refer to any biodiesel or renewable diesel for which RINs can be
generated that satisfy an obligated party's advanced biofuel
obligation (i.e., D4 or D5 RINs). While cellulosic diesel (D7) also
contributed towards an obligated party's advanced biofuel
obligation, these fuels are discussed in Section III rather than in
this section. An advanced biodiesel or renewable feedstock refers to
any of the biodiesel, renewable diesel, jet fuel, and heating oil
feedstocks listed in Table 1 to 40 CFR 80.1426 or in petition
approvals issued pursuant to section 80.1416, that can be used to
produce fuel that qualifies for D4 or D5 RINs. These feedstocks
include, for example, soy bean oil; oil from annual cover crops; oil
from algae grown photosynthetically; biogenic waste oils/fats/
greases; non-food grade corn oil; camelina sativa oil; and canola/
rapeseed oil (See pathways F, G, and H of Table 1 to section
80.1426).
---------------------------------------------------------------------------

    In addition to a review of the volumes of advanced biodiesel and
renewable diesel used in previous years, we believe the likely growth
in production of feedstocks used to produce these fuels, as well as the
total projected available volumes of these feedstocks, are important
factors to consider. This is because while there are many factors that
could potentially limit the production and availability of these fuels,
the impacts of increasing production of advanced biodiesel and
renewable diesel on factors such as costs, energy security, and GHG
emissions are expected to vary depending on whether the feedstocks used
to produce these fuels are sourced from waste sources or by-products of
other industries (such as the production of livestock feed or ethanol
production), are sourced from increased oilseed production, or are
sourced from the diversion of feedstocks from existing uses. The energy
security and GHG reduction value associated with the growth in the use
of advanced biofuels is greater when these fuels are produced from
waste fats and oils or feedstocks that are byproducts of other
industries (such as soybean oil from soybeans primarily grown as animal
feed), rather than a switching of existing advanced feedstocks from
other uses to renewable fuel production or the diversion of advanced
biodiesel and renewable diesel from foreign markets. This is especially
true if the parties that previously used the advanced biofuel or
feedstocks replace these oils with low cost palm oil \96\ or petroleum
derived products, as we believe would likely be the case in 2019.\97\
In this case the global production of advanced biodiesel and renewable
diesel would not increase, and the potential benefits associated with
increasing the diversity of the supply of transportation fuel (energy
security) and the production of additional volumes of advanced
biodiesel and renewable diesel (low GHG sources of transportation fuel)
would be reduced.
---------------------------------------------------------------------------

    \96\ For instance, see the draft GHG assessment of palm oil
biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012).
    \97\ We believe palm or petroleum derived products would likely
be used replace advanced biodiesel and renewable diesel diverted to
the U.S. as these products are currently the lowest cost sources.
---------------------------------------------------------------------------

    Before considering the projected growth in the production of
qualifying feedstocks that could be used to produce advanced biodiesel
and renewable diesel, as well as the total volume of feedstocks that
could be used to produce these fuels, it is helpful to review the
volumes of biodiesel and renewable diesel that have been used in the
U.S. in recent years. While historic data and trends alone are
insufficient to project the volumes of biodiesel and renewable diesel
that could be provided in future years, historic data can serve as a
useful reference in considering future volumes. Past experience
suggests that a high percentage of the biodiesel and renewable diesel
used in the U.S. (from both domestic production and imports) qualifies
as advanced biofuel.\98\ In previous years, biodiesel and renewable
diesel produced in the U.S. have been almost exclusively advanced
biofuel.\99\ Imports of advanced biodiesel increased through 2016, but
were lower in 2017 and 2018, as seen in Table IV.B.2-1. Volumes of
imported advanced biodiesel and renewable diesel have varied
significantly from year to year, as they are impacted both by domestic
and foreign policies, as well as many economic factors.
---------------------------------------------------------------------------

    \98\ From 2011 through 2017 approximately 95 percent of all
biodiesel and renewable diesel supplied to the U.S. (including
domestically-produced and imported biodiesel and renewable diesel)
qualified as advanced biodiesel and renewable diesel (11,701 million
gallons of the 12,323 million gallons) according to EMTS data.
    \99\ From 2011 through 2017 over 99.9 percent of all the
domestically produced biodiesel and renewable diesel supplied to the
U.S. qualified as advanced biodiesel and renewable diesel (10,089
million gallons of the 10,096 million gallons) according to EMTS
data.

                                  Table IV.B.3-2--Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2017
                                                                   [Million gallons] a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  2011         2012         2013        2014 \b\     2015 \b\       2016          2017        2018 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)..........    967 (N/A)  1,014 (+47)  1,376 (+362)  1,303 (-73)  1,253 (-50)  1,633 (+380)   1,573 (-60)  1,896 (+323)
Domestic Renewable Diesel (Annual Change)...     58 (N/A)     11 (-47)      92 (+81)    155 (+63)    175 (+20)     221 (+46)     258 (+37)      255 (-3)
Imported Biodiesel (Annual Change)..........     44 (N/A)      40 (-4)    156 (+116)    130 (-26)   261 (+131)    561 (+300)     462 (-99)    212 (-250)
Imported Renewable Diesel (Annual Change)...      0 (N/A)     28 (+28)    145 (+117)    129 (-16)     121 (-8)     170 (+49)     193 (+23)      197 (+4)
Exported Biodiesel and Renewable Diesel          48 (N/A)    102 (+54)     125 (+23)     134 (+9)     133 (-1)      129 (-4)     157 (+28)     103 (-54)
 (Annual Change)............................
                                             -----------------------------------------------------------------------------------------------------------
    Total (Annual Change)...................  1,021 (N/A)    991 (-30)  1,644 (+653)  1,583 (-61)  1,677 (+94)  2,456 (+779)  2,329 (-127)  2,457 (+128)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the
  RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ Data for 2018 is based on actual production and import data through September 2018, and a projection for October-December 2018. For more information
  on how the volumes for 2018 were determined see ``Projecting Advanced Biofuel Production and Imports for 2018 (November 2018)'' Memorandum from Dallas
  Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.

                                   Table IV.B.3-3--Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2017
                                                                   [Million gallons] a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      2011         2012         2013       2014 \b\     2015 \b\       2016         2017       2018 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)..............      0 (N/A)       0 (+0)       6 (+6)       1 (-5)       0 (+0)       0 (+0)       0 (+0)       0 (+0)
Domestic Renewable Diesel (Annual Change).......      0 (N/A)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       0 (+0)
Imported Biodiesel (Annual Change)..............      0 (N/A)       0 (+0)     31 (+31)     52 (+21)     74 (+22)    113 (+39)     0 (-113)       0 (+0)
Imported Renewable Diesel (Annual Change).......      0 (N/A)       0 (+0)     53 (+53)      0 (-53)   106 (+106)     43 (-63)   144 (+101)    123 (-21)
Exported Biodiesel and Renewable Diesel (Annual       0 (N/A)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       1 (+1)       0 (-1)       0 (+0)
 Change)........................................
                                                 -------------------------------------------------------------------------------------------------------
    Total (Annual Change).......................      0 (N/A)       0 (+0)     90 (+90)     53 (-37)   180 (+127)    155 (-25)    144 (-11)    123 (-21)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with
  the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ Data for 2018 is based on actual production and import data through September 2018, and a projection for October-December 2018. For more information
  on how the volumes for 2018 were determined see ``Projecting Biodiesel and Renewable Diesel Production and Imports for 2018 (November 2018)''
  Memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.

    Since 2011, the year-over-year changes in the volume of advanced
biodiesel and renewable diesel used in the U.S. have varied greatly,
from a low of 127 million fewer gallons from 2016 to 2017 to a high of
779 million additional gallons from 2015 to 2016. These changes were
likely influenced by multiple factors such as the cost of biodiesel
feedstocks and petroleum diesel, the status of the biodiesel blenders
tax credit, growth in marketing of biodiesel at high volume truck stops
and centrally fueled fleet locations, demand for biodiesel and
renewable diesel in other countries, biofuel policies in both the U.S.
and foreign countries, and the volumes of renewable fuels (particularly
advanced biofuels) required by the RFS. This historical information
does not indicate that the maximum previously observed increase of 779
million gallons of advanced biodiesel and renewable diesel would be
reasonable to expect from 2018 to 2019, nor does it indicate that the
low (or negative) growth rates observed in other years would recur in
2019. Rather, these data illustrate both the magnitude of the changes
in advanced biodiesel and renewable diesel in previous years and the
significant variability in these changes.
    The historic data indicates that the biodiesel tax policy in the
U.S. can have a significant impact on the volume of biodiesel and
renewable diesel used in the U.S. in any given year.\100\ While the
biodiesel blenders tax credit has applied in each year from 2010 to
2017, it has only been prospectively in effect during the calendar year
in 2011, 2013 and 2016, while other years it has been applied
retroactively. The biodiesel blenders tax credit expired at the end of
2009 and was re-instated in December 2010 to apply retroactively in
2010 and extend through the end of 2011. Similarly, after expiring at
the end of 2011, 2013, and 2014 the tax credit was re-instated in
January 2013 (for 2012 and 2013), December 2014 (for 2014), December
2015 (for 2015 and 2016), and February 2018 (for 2017). Each of the
years in which the biodiesel blenders tax credit was in effect during
the calendar year (2013 and 2016) resulted in significant increases in
the volume of advanced biodiesel and renewable diesel used in the U.S.
over the previous year (653 million gallons and 779 million gallons
respectively). However, following these large increases in 2013 and
2016, there was little to no growth in the use of advanced biodiesel
and renewable diesel in the following years, only 33 million gallons
from 2013 to 2015 and negative 127 million gallons from 2016 to 2017.
This decrease from 2016 to 2017 occurred even though the required
volume of advanced biofuel increased from 3.61 in 2016 to 4.28 billion
gallons in 2017. This pattern is likely the result of both accelerated
production and/or importation of biodiesel and renewable diesel in the
final few months of years during which the tax credit was available to
take advantage of the expiring tax credit, as well as relatively lower
volumes of biodiesel and renewable diesel production and import in
2014, 2015,

and 2017 than would have occurred if the tax credit had been in
place.\101\
---------------------------------------------------------------------------

    \100\ The status of the tax credit does not impact our
assessment of the reasonably attainable volume of advanced biodiesel
and renewable diesel in 2019 as our assessment is primarily based on
feedstock availability. The status of the tax credit may affect the
maximum attainable volume of these fuels, but our assessment
demonstrates that 2.8 billion gallons of advanced biodiesel and
renewable diesel is attainable whether or not the tax credit is
renewed prospectively (or retrospectively) for 2019.
    \101\ We also acknowledge that EPA not finalizing the required
volumes of renewable fuel under the RFS program for 2014 and 2015
until December 2015 likely affected the volume of advanced biodiesel
and renewable diesel supplied in these years. Further, the
preliminary tariffs on biodiesel imported from Argentina and
Indonesia announced in August 2017 likely negatively affected the
volume of biodiesel supplied in 2017.
---------------------------------------------------------------------------

    Some commenters stated that the tax credit has no impact on the
potential supply of advanced biodiesel and renewable diesel. They
generally argued that while the tax credit impacted the cost of
biodiesel, as well as the RIN price needed to make advanced biodiesel
and renewable diesel cost competitive with petroleum diesel, the RIN
price was ultimately capable of incentivizing the production and use of
advanced biodiesel and renewable diesel with or without the tax credit.
We recognize that this is theoretically true; because the RIN prices
vary with the supply and demand for RINs, the RIN price can rise to
provide the same value as the tax credit in its absence. However, we
note that it is this very aspect of the price of RINs, the potential
that RIN prices may rise or fall depending on market conditions, that
can hinder their ability to incentivize increased production and use of
advanced biodiesel and renewable diesel. Further, higher advanced
biofuel RIN prices can incentivize the production of other advanced
fuels if these fuels can be produced at a price that is cost
competitive with advanced biodiesel and renewable diesel. Conversely,
the tax credit provides a fixed price incentive for all biodiesel and
renewable diesel blended into the diesel fuel pool in the U.S., and is
not available to other advanced biofuels. Ultimately, as discussed
above the supply of biodiesel and renewable diesel is likely to be
influenced by a number of factors, including the 2019 RFS volume
requirements, the advanced and BBD RIN prices, expectations about the
availability of the biodiesel blenders tax credit, and a number of
other market-based factors.
    The historical data suggests that the supply of advanced biodiesel
and renewable diesel could potentially increase from the projected 2.54
billion gallons in 2018 to 2.8 billion gallons in 2019 (the projected
volume needed to meet the advanced biofuel volume for 2019 after
reducing the statutory advanced biofuel volume by the same amount as
the cellulosic biofuel reduction). This would represent an increase of
approximately 250 million gallons from 2018 to 2019, slightly higher
than the average increase in the volume of advanced biodiesel and
renewable diesel used in the U.S. from 2011 through 2017 (218 million
gallons per year) and significantly less than the highest annual
increase during this time (779 million gallons from 2015 to 2016).
    After reviewing the historical volume of advanced biodiesel and
renewable diesel used in the U.S. and considering the possible impact
of the expiration of the biodiesel tax credit (discussed above), EPA
next considers other factors that may impact the production, import,
and use of advanced biodiesel and renewable diesel in 2019. The
production capacity of registered advanced biodiesel and renewable
diesel production facilities is highly unlikely to limit the production
of these fuels, as the total production capacity for biodiesel and
renewable diesel at registered facilities in the U.S. (4.1 billion
gallons) exceeds the volume of these fuels that are projected to be
needed to meet the advanced biofuel volume for 2019 after exercising
the cellulosic waiver authority (2.8 billion gallons).\102\ Significant
registered production also exists internationally. Similarly, the
ability for the market to distribute and use advanced biodiesel and
renewable diesel appears unlikely constrain the growth of these fuels
to a volume lower than 2.8 billion gallons. The investments required to
distribute and use this volume of biodiesel and renewable diesel are
expected to be modest, as this volume is less than 200 million gallons
greater than the volume of biodiesel and renewable diesel produced,
imported, and used in the U.S. in 2016.
---------------------------------------------------------------------------

    \102\ The production capacity of the sub-set of biodiesel and
renewable diesel producers that generated RINs in 2017 is
approximately 3.1 billion gallons. See ``Biodiesel and Renewable
Diesel Registered Capacity (May 2018)'' Memorandum from Dallas
Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Conversely, the availability of advanced feedstocks that can be
used to produce advanced biodiesel and renewable diesel, as well as the
availability of imported advanced biodiesel and renewable diesel, may
be limited in 2019. We acknowledge that an increase in the required use
of advanced biodiesel and renewable diesel could be realized through a
diversion of advanced feedstocks from other uses, or a diversion of
advanced biodiesel and renewable diesel from existing markets in other
countries. Furthermore, the volume of advanced biodiesel and renewable
diesel and their corresponding feedstocks projected to be produced
globally exceeds the volume projected to be required in 2019 (2.8
billion gallons of advanced biodiesel and renewable diesel and the
corresponding volume of advanced feedstocks) by a significant
margin.\103\ It is also the case that actions unrelated to the RFS
program, such as recent tariffs on soybeans exported to China, could
result in increased supplies of domestic biodiesel feedstocks.\104\
However, we expect that further increases in advanced biofuel and
renewable fuel volumes would be increasingly likely to incur adverse
unintended impacts.
---------------------------------------------------------------------------

    \103\ The October 2018 WASDE projects production of vegetable
oils in 2017/2018 in the World to be 203.33 million metric tons.
This quantity of vegetable oil would be sufficient to produce
approximately 58.1 billion gallons of biodiesel and renewable
diesel. Global production of biodiesel is projected to be 38.0
billion liters (10.0 billion gallons) according to the 2018 OECD-FAO
Agricultural Outlook.
    \104\ The potential impacts of this tariff on the availability
of biodiesel feedstocks is discussed in our discussion of available
vegetable oils below.
---------------------------------------------------------------------------

    We perceive the net benefits to be lower both because of the
potential disruption and associated cost impacts to other industries
resulting from feedstock switching, and the potential adverse effect on
lifecycle GHG emissions associated with feedstocks for biofuel
production that would have been used for other purposes and which must
then be backfilled with other feedstocks. Similarly, increasing the
supply of biodiesel and renewable diesel to the U.S. by diverting fuel
that would otherwise have been used in other countries results in
higher lifecycle GHG emissions than if the supply of these fuels was
increased by an increased collection of waste fats and oils or
increased production of feedstocks that are byproducts of other
industries, especially if this diversion results in increased
consumption of petroleum fuels in the countries that would have
otherwise consumed the biodiesel or renewable diesel. By focusing our
assessment of the potential growth in the attainable volume of
biodiesel and renewable diesel on the expected growth in the production
of advanced feedstocks (rather than the total supply of these
feedstocks in 2018, which would include feedstocks currently being used
for non-biofuel purposes), we are attempting to minimize the incentives
for the RFS program to increase the supply of advanced biodiesel and
renewable diesel through feedstock switching or diverting biodiesel and
renewable diesel from foreign markets to the U.S.
    Advanced biodiesel and renewable diesel feedstocks include both
waste oils, fats, and greases; and oils from planted crops. We received
many comments from parties projecting that

available feedstocks from both of these sources are expected to
increase in 2019. We agree that increases in the availability of
advanced feedstocks would in 2019 and we have projected the magnitude
of these increases using the best available data, including data
received in comments on this rule. The projected growth in advanced
feedstocks, however, is expected to be modest relative to the volume of
these feedstocks that are currently being used to produce biodiesel and
renewable diesel. Most of the waste oils, fats, and greases that can be
recovered economically are already being recovered and used in
biodiesel and renewable diesel production or for other purposes. The
availability of animal fats will likely increase with beef, pork, and
poultry production. Most of the vegetable oil used to produce advanced
biodiesel and renewable diesel that is sourced from planted crops comes
from crops primarily grown for purposes other than providing feedstocks
for biodiesel and renewable diesel, such as for livestock feed, with
the oil that is used as feedstock for renewable fuel production a co-
product or by-product.\105\ This is true for soybeans and corn, which
are the two largest sources of feedstock from planted crops used for
biodiesel production in the U.S.\106\ We do not believe that the
increased demand for soybean oil or corn oil caused by a higher 2019
advanced biofuel standard would result in an increase in soybean or
corn prices large enough to induce significant changes in agricultural
activity.\107\ However, we acknowledge that production of these
feedstocks is likely to increase as crop yields, oil extraction rates,
and demand for the primary products increase in 2019.
---------------------------------------------------------------------------

    \105\ For example, corn oil is a co-product of corn grown
primarily for feed or ethanol production, while soy and canola are
primarily grown as livestock feed.
    \106\ According to EIA data 6,230 million pounds of soy bean oil
and 1,579 million pounds of corn oil were used to produce biodiesel
in the U.S. in 2017. Other significant sources of feedstock were
yellow grease (1,471 million pounds), canola oil (1,452 million
pounds), and white grease (591 million pounds). Numbers from EIA's
September 2018 Monthly Biodiesel Production Report.
    \107\ This position is supported by several commenters,
including the South Dakota Soybean Association (EPA-HQ-OAR-2018-
0167-0389), the International Council on Clean Transportation (EPA-
HQ-OAR-2018-0167-0531), and the Union of Concerned Scientists (EPA-
HQ-OAR-2018-0167-0535).
---------------------------------------------------------------------------

    We believe the most reliable source for projecting the expected
increase in vegetable oils in the U.S. is USDA's World Agricultural
Supply and Demand Estimates (WASDE). At the time of our assessment for
this final rule, the most current version of the WASDE is from October
2018. The projected increase in vegetable oil production in the U.S.
from 2017/2018 to 2018/2019 is 0.14 million metric tons per year. This
additional quantity of vegetable oils could be used to produce
approximately 40 million additional gallons of advanced biodiesel or
renewable diesel in 2019 relative to 2018.\108\ We recognize that
oilseed production is projected in increase by a much greater amount
(6.89 million metric tons).\109\ However, it is the vegetable oil,
rather than oilseed production, that is of relevance as an advanced
biodiesel and renewable diesel feedstock.
---------------------------------------------------------------------------

    \108\ To calculate this volume, we have used a conversion of 7.7
pounds of feedstock per gallon of biodiesel. This is based on the
expected conversion of soybean oil (http://extension.missouri.edu/p/G1990), which is the largest source of feedstock used to produce
advanced biodiesel and renewable diesel. Conversion rates for other
types of vegetable oils used to produce biodiesel and renewable
diesel are similar to those for soybean oil.
    \109\ World Agricultural Supply and Demand Estimates. United
States Department of Agriculture. October 11, 2018.
---------------------------------------------------------------------------

    A number of commenters mentioned the tariffs recently enacted by
China on soybean exports from the U.S. as a potential source of
additional feedstock for advanced biodiesel and renewable diesel. The
potential impacts of these tariffs are significant, as approximately 25
percent of the U.S. soybean crop is currently exported to China.\110\
However, the duration and ultimate impacts of these tariffs on total
exports of U.S. soybeans are highly uncertain. In recent months, the
price premium for soybeans from Brazil (the largest global exporter of
soybeans), which are not impacted by the tariffs, have increased to
approximately $2 per bushel.\111\ A likely result of this price premium
is that countries other than China will turn to U.S. sources of
soybeans, rather than sourcing soybeans from Brazil. Ultimately, the
tariffs could have little impact on the overall exports of soybeans
from the U.S.
---------------------------------------------------------------------------

    \110\ Hart, Chad and Schulz, Lee. China's Importance in U.S. Ag
Markets. CARD Agricultural Policy Review. Available online: https://www.card.iastate.edu/ag_policy_review/article/?a=41.
    \111\ Durisin, Megan and Dodge, Sam. Why Soybeans Are at the
Heart of the U.S.-China Trade War. Bloomberg. Published July 5,
2018. Updated July 9, 2018.
---------------------------------------------------------------------------

    The most recent WASDE report projects that exports of oilseeds will
decrease by approximately 2 million metric tons (approximately 3
percent) from 2017/2018 to 2018/2019. In addition, the WASDE projects
that exports of vegetable oils will decrease by 0.10 million metric
tons during this same time period. The October WASDE appears to take
the recent tariffs into account, as there is a notable decrease in the
expected trade of oilseeds in the recent WASDE projections relative to
WASDE projections made prior to the announcement of Chinese tariffs on
U.S. soybeans.\112\ If the 2 million metric tons of soybeans were
crushed to produce vegetable oil, this oil, along with the 0.10 million
metric ton decrease in vegetable oil exports, could be used to produce
approximately 130 million gallons of biodiesel and renewable diesel,
less than 6 percent of the current market.\113\ We believe this is a
reasonable estimate of the volume of biodiesel and renewable diesel
that could be produced from a decrease in exports of oilseeds and
vegetable oil from the U.S. in 2019. However, any biodiesel and
renewable diesel produced from soybeans previously exported to China
are necessarily diverted from other uses (even if the reason for this
diversion is the tariffs, rather than the RFS program), and are
therefore more likely to have the adverse unintended impacts associated
with diverted feedstocks. We therefore have not included this potential
volume increase in our assessment of the reasonably attainable volume
of these fuels in 2019. These feedstocks are a likely source of
additional supply of advanced biodiesel and renewable diesel that could
contribute towards satisfying the difference between the reasonably
attainable volume of these fuels and the 2.8 billion gallons of these
fuels projected to be used to satisfy the advanced biofuel volume for
2019. We further note that even if the 130 million gallons of biodiesel
and renewable diesel that could be produced from a

decrease in exports of oilseeds and vegetable oil from the U.S. in 2019
were included in our projection of the reasonably attainable volume of
advanced biodiesel and renewable diesel, this projection would still be
less than 2.8 billion gallons.
---------------------------------------------------------------------------

    \112\ Projected trade of oilseeds decreased from 63.46 million
metric tons for 2018/2019 in the June 2018 WASDE report to 57.20
million metric tons for 2018/2019 in the October 2018 WASDE.
    \113\ To calculate the quantity of oil that can be produced from
2 million metric tons of oilseeds we converted this total to
approximately 73 million bushels of soybeans, assuming 60 pounds per
bushel. We then calculated that this quantity of soybeans could
produce approximately 800 million pounds of oil assuming each bushel
of soybeans produced 11 pounds of oil. To this, we added the
approximately 220 million pounds (0.10 million metric tons) of
decreased exports of vegetable oils for a total of 1.02 billion
pounds of vegetable oils. Finally, we divided this total by 7.7
pounds of vegetable oil per gallon of biodiesel (or renewable
diesel) to estimate that 130 million gallons of biodiesel and
renewable diesel could be produced from these feedstocks. Support
for the 7.7 pounds of vegetable oil per gallon of biodiesel
conversion factor can be found here: http://extension.missouri.edu/p/G1990. All other conversion factors are from Irwin, S. ``The Value
of Soybean Oil in the Soybean Crush: Further Evidence on the Impact
of the U.S. Biodiesel Boom.'' farmdoc daily (7):169, Department of
Agricultural and Consumer Economics, University of Illinois at
Urbana-Champaign, September 14, 2017.
---------------------------------------------------------------------------

    In addition to virgin vegetable oils, we also expect increasing
volumes of distillers corn oil \114\ to be available for use in 2019.
The WASDE report does not project distillers corn oil production, so
EPA must use an alternative source to project the growth in the
production of this feedstock. For this final rule EPA is using results
from the World Agricultural Economic and Environmental Services (WAEES)
model to project the growth in the production of distillers corn
oil.\115\ In assessing the likely increase in the availability of
distillers corn oil from 2018 to 2019, the authors of the WAEES model
considered the impacts of an increasing adoption rate of distillers
corn oil extraction technologies at domestic ethanol production
facilities, as well as increased corn oil extraction rates enabled by
advances in this technology. The WAEES model projects that production
of distillers corn oil in 2018 will increase by approximately 120
million pounds from the 2017/2018 to the 2018/2019 agricultural
marketing year. This quantity of feedstock could be used to produce
approximately 15 million gallons of biodiesel or renewable diesel. We
believe it is reasonable to use these estimates from the WAEES model
for these purposes.
---------------------------------------------------------------------------

    \114\ Distillers corn oil is non-food grade corn oil produced by
ethanol production facilities.
    \115\ For the purposes of this rule, EPA relied on WAEES
modeling results submitted as comments by the National Biodiesel
Board on the 2019 proposed rule (Kruse, J., ``Implications of an
Alternative Advanced and Biomass Based Diesel Volume Obligation for
Global Agriculture and Biofuels'', August 13, 2018, World
Agricultural Economic and Environmental Services (WAEES)).
---------------------------------------------------------------------------

    While much of the increase in advanced biodiesel and renewable
diesel feedstocks produced in the U.S. from 2018 to 2019 is expected to
come from virgin vegetable oils and distillers corn oil, increases in
the supply of other sources of advanced biodiesel and renewable diesel
feedstocks, such as biogenic waste oils, fats, and greases, may also
occur. These increases, however, are expected to be modest, as many of
these feedstocks that can be recovered economically are already being
used to produce biodiesel or renewable diesel, or in other markets. In
fact, the WAEES model projects an increase of only 5 million gallons in
the volume of biodiesel produced from feedstocks other than soybean
oil, canola oil, and distillers corn oil from 2018 to 2019.\116\
Conversely, an assessment conducted by LMC in 2017 and submitted in
comments on our proposed rule projected that the waste oil supply in
the U.S. could increase by approximately 2.4 million metric tons from
2016 to 2022.\117\ This estimate represents a growth rate of
approximately 0.4 billion tons per year, or enough feedstock to produce
approximately 115 million gallons of biodiesel and renewable diesel per
year. This estimate, however, only accounts for potential sources of
feedstock, and not for the economic viability of recovering waste oils.
While we acknowledge that additional waste oils could be collected in
2019, these waste oils will only be collected if it is economically
viable to do so. Neither the results of the WAEES model, nor the future
prices of soybean oil,\118\ suggest the prices for waste oils will
increase to a level that will incentivize significantly more wasted oil
collection in 2019 relative to previous years. We have therefore
included an additional 5 million gallons of advanced biodiesel and
renewable diesel from wasted oils in our assessment of the reasonably
attainable volume for 2019, consistent with the results of the WAEES
model.
---------------------------------------------------------------------------

    \116\ Id.
    \117\ LMC International. Global Waste Grease Supply. August
2017.
    \118\ CME Group Soybean Oil Futures Quotes. Accessed online
October 23, 2018.
---------------------------------------------------------------------------

    In total, we expect that increases in feedstocks produced in the
U.S. are sufficient to produce approximately 60 million more gallons of
advanced biodiesel and renewable diesel in 2019 relative to 2018. This
number includes 40 million gallons from increased vegetable oil
production, 15 million gallons from increased corn oil production, and
5 million gallons from increased waste oil collection. This number does
not include additional volumes related to decreases in exported volumes
of soybeans to China as a result of tariffs and/or increased collection
of waste oils. Decreased exports of soybeans and soybean oil, represent
feedstocks diverted from use in other countries, while any increase in
the collection of waste oils is highly uncertain. Our projection also
does not consider factors which could potentially decrease the
availability of advanced biofuel feedstocks that could be used to
produce biodiesel or renewable diesel, such as an increase in the
volume of vegetable oils used in food markets or other non-biofuel
industries. In our 2018 final rule, we determined that 2.55 billion
gallons of advanced biodiesel and renewable diesel were reasonably
attainable in 2018,\119\ therefore our projection of the reasonably
attainable volume of advanced biodiesel and renewable diesel in 2019 is
2.61 billion gallons.
---------------------------------------------------------------------------

    \119\ 82 FR 58512 (December 12, 2017).
---------------------------------------------------------------------------

    EPA's projections of the growth of advanced feedstocks does not,
however, suggest that the total supply of advanced biodiesel and
renewable diesel to the U.S. in 2018 will be limited to 2.61 billion
gallons. Rather, this is the volume of these fuels that we project
could be supplied while seeking to minimize quantities of advanced
feedstocks or biofuels from existing uses. The October 2018 WASDE
reports that production of vegetable oil in the U.S. in the 2018/2019
market year will be sufficient to produce approximately 3.5 billion
gallons of biodiesel and renewable diesel (including both advanced and
conventional biofuels) if the entire volume of vegetable oil was used
to produce these fuels. Additional advanced biodiesel and renewable
diesel could be produced from waste fats, oils, and greases. The global
production of vegetable oil projected in the 2018/2019 marketing year
would be sufficient to produce approximately 58.1 billion gallons of
biodiesel and renewable diesel (including both advanced and
conventional biofuels).\120\ While it would not be reasonable to assume
that all, or even a significant portion, of global vegetable oil
production could be available to produce biodiesel or renewable diesel
supplied to the U.S. for a number of reasons,\121\ the large global
supply of vegetable oil strongly suggests that under the right market
conditions 2.8 billion gallons of advanced biodiesel and renewable
diesel is attainable in 2019. Reaching these levels, however, may
result in the diversion of advanced feedstocks currently used in other
markets and/or the import of biodiesel and renewable diesel from these
feedstocks.
---------------------------------------------------------------------------

    \120\ The October 2018 WASDE projects production of vegetable
oils in 2018/19 in the U.S. and the World to be 12.27 and 203.33
million metric tons respectively. To convert projected vegetable oil
production to potential biodiesel and renewable diesel production we
have used a conversion of 7.7 pounds of feedstock per gallon of
biodiesel.
    \121\ These reasons include the demand for vegetable oil in the
food, feed, and industrial markets both domestically and globally;
constraints related to the production, import, distribution, and use
of significantly higher volumes of biodiesel and renewable diesel;
and the fact that biodiesel and renewable diesel produced from much
of the vegetable oil available globally would not qualify as an
advanced biofuel under the RFS program.
---------------------------------------------------------------------------

    Further, the supply of advanced biodiesel and renewable diesel to
the U.S. in 2019 could be increased by

approximately 150 million gallons if all of the exported volumes of
these fuels were used domestically. Diverting this fuel to markets in
the U.S. may be complicated, however, as doing so would likely require
higher prices for these fuels in the U.S. (to divert the fuels from
foreign markets that are presumably more profitable currently). It may
also be more difficult and costly to distribute this additional volume
of biodiesel and renewable diesel to domestic markets than the current
foreign markets. Finally, reducing advanced biodiesel and renewable
diesel exports may indirectly result in the decreased availability of
imported volumes of these fuels, as other countries seek to replace
volumes previously imported from the U.S.
    EPA next considered potential changes in the imports of advanced
biodiesel and renewable diesel produced in other countries. In previous
years, significant volumes of foreign produced advanced biodiesel and
renewable diesel have been supplied to markets in the U.S. (see Table
IV.B.2-1 above). These significant imports were likely the result of a
strong U.S. demand for advanced biodiesel and renewable diesel,
supported by the RFS standards, the low carbon fuel standard (LCFS) in
California, the biodiesel blenders tax credit, and the opportunity for
imported biodiesel and renewable diesel to realize these incentives. As
in 2018, we have not included the potential for increased volumes of
imported advanced biodiesel and renewable diesel in our projection of
the reasonably attainable volume for 2019. There is a far higher degree
of uncertainty related to the availability and production of advanced
biodiesel and renewable diesel in foreign countries, as this supply can
be impacted by a number of unpredictable factors such as the imposition
of tariffs and increased incentives for the use of these fuels in other
countries (such as tax incentives or blend mandates). EPA also lacks
the data necessary to determine the quantity of these fuels that would
otherwise be produced and used in other countries, and thus the degree
to which the RFS standards are simply diverting this fuel from use in
other countries as opposed to incentivizing additional production.
    The RFS requirements and California's LCFS are expected to continue
to provide an incentive for imports of advanced biodiesel and renewable
diesel in 2019. Several other factors, however, may negatively impact
the volume of these fuels imported in 2019. In February 2018 the
biodiesel blenders tax credit, which had expired at the end of 2016,
was retroactively reinstated for biodiesel blended in 2017 but was not
extended to apply to biodiesel blended in 2018 or 2019.\122\ Perhaps
more significantly, in December 2017 the U.S. International Trade
Commission adopted tariffs on biodiesel imported from Argentina and
Indonesia.\123\ According to data from EIA,\124\ no biodiesel was
imported from Argentina or Indonesia since September 2017, after a
preliminary decision to impose tariffs on biodiesel imported from these
countries was announced in August 2017. Biodiesel imports from these
countries were significant prior to the imposition of tariffs,
accounting for over 550 million gallons in 2016 and approximately 290
million gallons in 2017.
---------------------------------------------------------------------------

    \122\ Bipartisan Budget Act of 2018, Public Law 115-123, 132
Stat. 64 sections 40406, 40407, and 40415 (2018).
    \123\ ``Biodiesel from Argentina and Indonesia Injures U.S.
Industry, says USITC,'' Available online at: https://www.usitc.gov/press_room/news_release/2017/er1205ll876.htm.
    \124\ See ``U.S. Imports of Biodiesel'' available in docket EPA-
HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Despite these tariffs, imports of biodiesel and renewable diesel
have not ceased. From January to June 2018, biodiesel and renewable
diesel imports (according to EIA data) are approximately 172 million
gallons, suggesting an annual volume of approximately 390 million
gallons if the current import rates and seasonal trends hold through
the end of the year.\125\ This suggests that imported volumes of
advanced biodiesel and renewable diesel from countries other than
Argentina and Indonesia may increase by approximately 100 million
gallons in 2018 (from approximately 290 million gallons in 2017).
However overall imports have not returned to the levels observed prior
to the tariffs. At this time, the ultimate impact these tariffs will
have on overall imports of advanced biodiesel and renewable diesel to
the U.S. remains uncertain. It appears likely that imports of advanced
biodiesel and renewable diesel from other countries not impacted by
these tariffs will continue to increase, however these increases may
not be sufficient to replace all of the biodiesel imported from
Argentina and Indonesia in previous years by 2019.
---------------------------------------------------------------------------

    \125\ See ``U.S. Imports of Biodiesel'' available in docket EPA-
HQ-OAR-2018-0167 and ``Projecting Biodiesel and Renewable Diesel
Production and Imports for 2018 (November 2018)'' Memorandum from
Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    In addition to EPA's assessment of the market's ability to produce,
import, distribute, and use the 2.8 billion gallons of advanced
biodiesel and renewable diesel projected to be used in 2019 to meet the
advanced biofuel volume requirement, EPA compared the projected
increase in these fuels to the increases observed in recent years.
While each year's circumstances are unique, a projected increase
comparable to pas increases further confirms that the volume is
attainable. Domestic production of advanced biodiesel and renewable
diesel in 2016 and 2017 was approximately 1.85 billion gallons, and is
expected to increase to approximately 2.15 billion gallons in 2018
based on production data through September 2018. Of this total,
approximately 150 million gallons of domestically produced biodiesel
was exported in 2016 and 2017. If imported biodiesel and renewable
diesel volumes continue to increase through 2019 by approximately 100
million gallons per year (to approximately 500 million gallons in 2019)
domestic production would need to increase by approximately 300 million
gallons in 2019 to reach a total advanced biodiesel and renewable
diesel supply of 2.8 billion gallons by 2019.\126\ This growth is
attainable, as it is approximately equal to the increase in the
domestic production of advanced biodiesel and renewable diesel from
2017 to 2018 (approximately 300 million gallons), and significantly
lower than the rate of growth observed in previous years (for example
the increase of 653 million gallons from 2012 to 2013 or the increase
of 779 million gallons from 2015 to 2016). We note, however, that using
this volume of advanced biodiesel and renewable diesel in the U.S. may
result in the diversion of advanced biodiesel and renewable diesel and/
or feedstocks used to produce these fuels, as advanced biodiesel and
renewable diesel that is currently exported may instead be used in the
U.S. and alternative sources for significant volumes of these fuels
would need to be found.
---------------------------------------------------------------------------

    \126\ This estimate assumes that the U.S. continues to export
approximately 150 million gallons of biodiesel per year in 2019.
Alternatively, if the U.S. consumes all domestically produced
biodiesel and renewable diesel, rather than exporting any of this
fuel, domestic production of advanced biodiesel and renewable diesel
would have to increase by approximately 150 million gallons in 2019.
This volume is approximately equal to the increase in the domestic
production of advanced biodiesel and renewable diesel from 2018 to
2019, which we also believe is attainable.
---------------------------------------------------------------------------

    After a careful consideration of the factors discussed above, EPA
has determined that the 2.8 billion gallons of advanced biodiesel and
renewable diesel projected needed to satisfy the implied statutory
volume for non-cellulosic advanced biofuel in 2019 (4.5 billion
gallons) are attainable. The total

production capacity of registered biodiesel and renewable diesel
producers is significantly higher than 2.8 billion gallons, even if
only those facilities that generated RINs for advanced biodiesel and
renewable diesel in 2017 are considered (3.1 billion gallons). This
volume (2.8 billion gallons) is only 200 million gallons higher than
the total volume of biodiesel and renewable diesel supplied in 2016
(approximately 2.6 billion gallons), strongly suggesting that
production capacity and the ability to distribute and use biodiesel and
renewable diesel will not limit the supply of advanced biodiesel and
renewable diesel to a volume below 2.8 billion gallons in 2018.
Sufficient feedstocks are expected to be available to produce this
volume of advanced biodiesel and renewable diesel in 2019, however
doing so may result in some level of diversion of advanced feedstocks
and/or advanced biodiesel and renewable diesel from existing uses.
Finally, the increase in the production and import of advanced
biodiesel and renewable diesel projected from 2018 to 2019 is
comparable to (or has been exceeded) by the increases observed in
recent years. While we do not believe it will be necessary, in the
event that the supply of advanced biodiesel and renewable diesel falls
short of the projected 2.8 billion gallons in 2019, obligated parties
could rely on the significant volume of carryover advanced RINs
projected to be available in 2019 (See Section II.B for a further
discussion of carryover RINs).

C. Volume Requirement for Advanced Biofuel

    In exercising the cellulosic waiver authority for 2017 and earlier,
we determined it was appropriate to require a partial backfilling of
missing cellulosic volumes with volumes of non-cellulosic advanced
biofuel we determined to be reasonably attainable, notwithstanding the
increase in costs associated with those decisions.\127\ For the 2018
standards, in contrast, we placed a greater emphasis on cost
considerations in the context of balancing the various considerations,
ultimately concluding that the applicable volume requirement should be
based on the maximum reduction permitted under the cellulosic waiver
authority. For 2019 we concluded that while it may be possible that
more than 4.92 billion gallons of advanced biofuel is attainable in
2019, requiring additional volumes would lead to higher costs, and
would likely result in feedstock switching and/or diversion of foreign
advanced biofuels.\128\ We do not believe that it would be appropriate
to set the advanced biofuel volume requirement higher than 4.92 billion
gallons given that it could lead to these results.
---------------------------------------------------------------------------

    \127\ See, e.g., Renewable Fuel Standards for 2014, 2015 and
2016, and the Biomass-Based Volume for 2017: Response to Comments
(EPA-420-R-15-024, November 2015), pages 628-631, available in
docket EPA-HQ-OAR-2015-0111-3671.
    \128\ There will likely be some feedstock switching and/or
diversion of foreign advanced biofuels to achieve an advanced
biofuel volume of 4.92 billion gallons. However, further reductions
in the advanced biofuel volume requirement would require the use of
the general waiver authority, which we do not believe is warranted.
---------------------------------------------------------------------------

    We further note that while there is some uncertainty in the volume
of advanced biofuel that may be attainable or reasonably attainable,
even if greater volumes of advanced biofuel are attainable or
reasonably attainable, the high cost of these fuels provides sufficient
justification for our decision to reduce the advanced biofuel volume
for 2019 by the maximum amount under the cellulosic waiver authority.
In Section V we present illustrative cost projections for sugarcane
ethanol and soybean biodiesel in 2019, the two advanced biofuels that
would be most likely to provide the marginal increase in volumes of
advanced biofuel in 2019 in comparison to 2018. Sugarcane ethanol
results in a cost increase compared to gasoline that ranges from $0.39-
$1.04 per ethanol-equivalent gallon. Soybean biodiesel results in a
cost increase compared to diesel fuel that ranges from $0.74-$1.23 per
ethanol-equivalent gallon. The cost of these renewable fuels is high as
compared to the petroleum fuels they displace.
    Based on the information presented above, we believe that 4.92
billion gallons of advanced biofuel is attainable in 2019. After a
consideration of the projected volume of cellulosic biofuel and
reasonably attainable volumes of imported sugarcane ethanol and other
advanced biofuels, we determined that 2.8 billion gallons of advanced
biodiesel and renewable diesel would be needed to reach 4.92 billion
gallons of advanced biofuel. Based on a review of the factors relevant
to the supply of advanced biodiesel and renewable diesel as discussed
in Section IV.B.2 above, including historic production and import data,
the production capacity of registered biodiesel and renewable diesel
producers, and the availability of advanced feedstocks, we have
determined that 2.8 billion gallons of advanced biodiesel and renewable
diesel is attainable in 2019.
    However, we also acknowledge that 2.8 billion gallons of advanced
biodiesel and renewable diesel is higher than the approximately 2.5
billion gallons projected to be supplied in 2018 based on available
data through September 2018. While 2.8 billion gallons would require an
increase in supply of approximately 300 million gallons between 2018
and 2019, this is approximately equal to the increase in domestic
production of these fuels from 2017 to 2018, and approximately 100
million gallons less than the increase in the supply of advanced
biodiesel and renewable diesel between 2017 and 2018 after adjusting
for imported volumes of these fuels from Argentina and Indonesia in
2017.\129\ Nevertheless, there is some uncertainty regarding whether
the market will actually supply 2.8 billion gallons in 2019.
---------------------------------------------------------------------------

    \129\ To calculate the increase in the supply of advanced
biodiesel and renewable diesel between 2017 and 2018 after adjusting
for imported volumes of these fuels from Argentina and Indonesia in
2017, we subtracted the volume of biodiesel imported from Argentina
and Indonesia in 2017 from the total volume of these fuels supplied
in 2017 and compared this volume of advanced biodiesel and renewable
diesel supplied in 2018. There have been no imports of biodiesel
from Argentina and Indonesia since August 2017, when tariffs on
biodiesel imported from these countries were announced.
---------------------------------------------------------------------------

    In the event that the market does not supply this volume, the
carryover RIN bank represents a source of RINs that could help
obligated parties meet an advanced biofuel volume requirement of 4.92
billion gallons in 2019 if the market fails to supply sufficient
advanced biofuels in 2019. As discussed in greater detail in Section
II.B.1 of the preamble, carryover RINs provide obligated parties
compliance flexibility in the face of substantial uncertainties in the
transportation fuel marketplace, and provide a liquid and well-
functioning RIN market upon which success of the entire program
depends. We currently estimate that there are approximately 620 million
advanced carryover RINs available.
    In response to the proposal, we received comments supporting our
proposed volume requirement of 4.92 billion gallons, as well as
comments requesting higher or lower volumes. EPA's assessment of these
comments is provided in the RTC document.
    It should be noted that by exercising the full cellulosic waiver
authority for advanced biofuel, the implied statutory volume target for
non-cellulosic advanced biofuel of 4.5 billion gallons in 2019 would be
maintained. This represents an increase of 0.5 billion gallons from the
2018 volume requirements.

D. Volume Requirement for Total Renewable Fuel

    As discussed in Section II.A.1, we believe that the cellulosic
waiver provision is best interpreted to reduce the advanced biofuel and
total renewable fuel volumes by equal amounts. For the reasons we have
previously articulated, we believe this interpretation is consistent
with the statutory language and best effectuates the objectives of the
statute. If we were to reduce the total renewable fuel volume
requirement by a lesser amount than the advanced biofuel volume
requirement, we would effectively increase the opportunity for
conventional biofuels to participate in the RFS program beyond the
implied statutory volume of 15 billion gallons. Applying an equal
reduction of 8.12 billion gallons to both the statutory target for
advanced biofuel and the statutory target for total renewable fuel
results in a total renewable fuel volume of 19.92 billion gallons as
shown in Table IV.A-1.\130\ This volume of total renewable fuel results
in an implied volume of 15 billion gallons of conventional fuel, which
is the same as in the 2018 final rule.
---------------------------------------------------------------------------

    \130\ EPA also considered the availability of carryover RINs in
determining whether reduced use of the cellulosic waiver authority
would be warranted. For the reasons described in Section II.B, we do
not believe this to be the case.
---------------------------------------------------------------------------

    In response to the July 10, 2018 proposal, some stakeholders said
that EPA had not evaluated whether 19.92 billion gallons of total
renewable fuel was attainable as it did for advanced biofuel. As a
result, they indicated that EPA had not fulfilled its responsibilities
under the statute and had not given stakeholders meaningful opportunity
to evaluate the proposed volume requirement. In response, we note first
of all that we proposed, and are finalizing, the maximum reduction
possible under the cellulosic waiver authority, and thus no additional
reductions are possible under that authority. Secondly, while the
general waiver authority does provide a means for further reductions in
the applicable volume requirement for total renewable fuel, the record
before us does not indicate that a waiver is warranted as described in
Section II of the RTC.
    Notwithstanding the fact that we did not propose to use, and in
this final rule are not using the general waiver authority, we did in
fact provide a description of the ways in which the market could make
19.92 billion gallons volume of total renewable fuel available in 2019
in a memorandum to the docket.\131\ Some stakeholders pointed
specifically to a lack of any analysis of the volumes of E0, E15, and
E85 as a reason that the assessment in that memorandum was
insufficient. However, the supply and use of these gasoline-ethanol
blends is strongly influenced by consumer demand. We noted in the
proposal that, regardless of the outcome of such an assessment, we were
precluded from waiving volumes due to inadequate domestic supply
insofar as our assessment depended on a consideration of demand-side
factors.
---------------------------------------------------------------------------

    \131\ ``Updated market impacts of biofuels in 2019,'' memorandum
from David Korotney to docket EPA-HQ-OAR-2018-0167. In prior actions
including the 2019 proposed rule and the 2018 annual rule proposal,
similar analyses indicated that the market was capable of both
producing and consuming the required volume of renewable fuels, and
that as a result there was no basis for finding an inadequate
domestic supply of total renewable fuel. See 82 FR 34229 & n.82
(July 21, 2017). Given the D.C. Circuit's decision in ACE, however,
assessment of demand-side constraints is no longer relevant for
determining inadequate domestic supply. However, we believe
consideration of the ways that the market could make this volume
available may still be generally relevant to whether and how EPA
exercises its waiver authorities, such as our consideration of
whether the volumes will cause severe economic harm.
---------------------------------------------------------------------------

    More importantly, an analysis of the volumes of E0, E15, and E85
that could be supplied in 2019 was not necessary to determine whether
the volume requirement of 19.92 billion gallons could be reached.\132\
This is because it is the total volume of ethanol that can be consumed
that is the relevant consideration in evaluating the reasonableness of
19.92 billion gallons, not the specific volumes of E0, E15, and
E85.\133\ To this end, we began with the assumption that the nationwide
average ethanol concentration could reach 10.11 percent in 2019 because
it had reached this same level in 2017. In the context of a market
wherein nearly all gasoline contains 10 percent ethanol, the average
ethanol concentration provides a better indication of the net effect of
all E0, E15, and E85 without the need to estimate the volumes of each.
In essence, our assumption that the average ethanol concentration would
be at least 10.11 percent provided a surrogate for attempting to
separately estimate volumes of E0, E15, and E85, which would contain a
high degree of uncertainty. Thus, as a result our use of the average
ethanol content is both more straightforward and more robust. In
addition to a consideration of the volumes of non-ethanol renewable
fuel that could be available in 2019, our consideration of 10.13
percent nationwide average ethanol concentration led us to a proposed
determination that the market could make available 19.88 billion
gallons of total renewable fuel in 2019. Following this same approach,
the updated market impacts for this final rule similarly demonstrates
that the market can make available 19.92 billion gallons of total
renewable fuel in 2019.
---------------------------------------------------------------------------

    \132\ Cf. API, 706 F.3d at 481 (``Nothing in the text of Sec.
7545(o)(7)(D)(i), or any other applicable provision of the Act,
plainly requires EPA to support its decision not to reduce the
applicable volume of advanced biofuels with specific numerical
projections.'').
    \133\ Importantly, EPA is not requiring the use of any specific
ethanol blend; rather, the market chooses which biofuels and blends
to use to satisfy the biofuel standards. See 42 U.S.C.
7545(o)(2)(A)(iii)(II)(bb) (the RFS program ``shall not'' ``impose
any per-gallon obligation for the use of renewable fuel'').
---------------------------------------------------------------------------

V. Impacts of 2019 Volumes on Costs

    In this section, EPA presents its assessment of the illustrative
costs of the final 2019 RFS rule. It is important to note that these
illustrative costs do not attempt to capture the full impacts of this
final rule. We frame the analyses we have performed for this rule as
``illustrative'' so as not to give the impression of comprehensive
estimates. These estimates are provided for the purpose of showing how
the cost to produce a gallon of a ``representative'' renewable fuel
compares to the cost of petroleum fuel. There are a significant number
of caveats that must be considered when interpreting these illustrative
cost estimates. For example, there are many different feedstocks that
could be used to produce biofuels, and there is a significant amount of
heterogeneity in the costs associated with these different feedstocks
and fuels. Some renewable fuels may be cost competitive with the
petroleum fuel they replace; however, we do not have cost data on every
type of feedstock and every type of fuel. Therefore, we do not attempt
to capture this range of potential costs in our illustrative estimates.
    Illustrative cost estimates are provided below for this final rule.
The volumes for which we have provided cost estimates and are described
in Sections III and IV, and result from reducing the cellulosic,
advanced, and total renewable fuel volume requirements using the
cellulosic waiver authority under CAA section 211(o)(7)(D)(i). For this
rule we examine two different cases. In the first case, we provide
illustrative cost estimates by comparing the final 2019 renewable fuel
volumes to 2019 statutory volumes. In the second case, we examine the
final 2019 renewable fuel volumes to the final 2018 renewable fuel
volumes to estimate changes in the annual costs of the final 2019 RFS
volumes in comparison to the 2018 volumes.

A. Illustrative Costs Analysis of Exercising the Cellulosic Waiver
Authority Compared to the 2019 Statutory Volumes Baseline

    In this section, EPA provides illustrative cost estimates that
compare the final 2019 cellulosic biofuel volume requirements to the
2019 cellulosic statutory volume that would be required absent the
exercise of our cellulosic waiver authority under CAA section
211(o)(7)(D)(i).\134\ As described in Section III, we are finalizing a
cellulosic volume of 418 million gallons for 2019, using our cellulosic
waiver authority to waive the statutory cellulosic volume of 8.5
billion gallons by 8.082 billion gallons. Estimating the cost savings
from volumes that are not projected to be produced is inherently
challenging. EPA has taken the relatively straightforward methodology
of multiplying this waived cellulosic volume by the wholesale per-
gallon costs of cellulosic biofuel production relative to the petroleum
fuels they displace.
---------------------------------------------------------------------------

    \134\ Since the implied non-cellulosic advanced biofuel and
implied conventional renewable fuel volumes are unchanged from the
statutory implied volumes, see supra note, there is no need to
estimate cost impacts for these volumes.
---------------------------------------------------------------------------

    While there may be growth in other cellulosic renewable fuel
sources, we believe it is appropriate to use cellulosic ethanol
produced from corn kernel fiber as the representative cellulosic
renewable fuel. The majority of liquid cellulosic biofuel in 2019 is
expected to be produced using this technology, and application of this
technology in the future could result in significant incremental
volumes of cellulosic biofuel. In addition, as explained in Section
III, we believe that production of the major alternative cellulosic
biofuel--CNG/LNG derived from biogas--is limited to approximately 538
million gallons due to a limitation in the number of vehicles capable
of using this form of fuel.\135\
---------------------------------------------------------------------------

    \135\ EPA projects that 538 million ethanol-equivalent gallons
of CNG/LNG will be used as transportation fuel in 2019 based on
EIA's October 2018 Short Term Energy Outlook (STEO). To calculate
this estimate, EPA used the Natural Gas Vehicle Use from the STEO
Custom Table Builder (0.12 billion cubic feet/day in 2019). This
projection includes all CNG/LNG used as transportation fuel from
both renewable and non-renewable sources. EIA does not project the
amount of CNG/LNG from biogas used as transportation fuel. To
convert billion cubic feet/day to ethanol-equivalent gallons EPA
used conversion factors of 946.5 BTU per cubic foot of natural gas
(lower heating value, per calculations using ASTM D1945 and D3588)
and 77,000 BTU of natural gas per ethanol-equivalent gallon per 40
CFR 80.1415(b)(5).
---------------------------------------------------------------------------

    EPA uses a ``bottom-up'' engineering cost analysis to quantify the
costs of producing a gallon of cellulosic ethanol derived from corn
kernel fiber. There are multiple processes that could yield cellulosic
ethanol from corn kernel fiber. EPA assumes a cellulosic ethanol
production process that generates biofuel using distiller's grains, a
co-product of generating corn starch ethanol that is commonly dried and
sold into the feed market as distillers dried grains with solubles
(DDGS), as the renewable biomass feedstock. We assume an enzymatic
hydrolysis process with cellulosic enzymes to break down the cellulosic
components of the distiller's grains. This process for generating
cellulosic ethanol is similar to approaches currently used by industry
to generate cellulosic ethanol at a commercial scale, and we believe
these cost estimates are likely representative of the range of
different technology options being developed to produce ethanol from
corn kernel fiber. We then compare the per-gallon costs of the
cellulosic ethanol to the petroleum fuels that would be replaced at the
wholesale stage, since that is when the two are blended together.
    These cost estimates do not consider taxes, retail margins, or
other costs or transfers that occur at or after the point of blending
(transfers are payments within society and are not additional costs).
We do not attempt to estimate potential cost savings related to avoided
infrastructure costs (e.g., the cost savings of not having to provide
pumps and storage tanks associated with higher-level ethanol blends).
When estimating per-gallon costs, we consider the costs of gasoline on
an energy-equivalent basis as compared to ethanol, since more ethanol
gallons must be consumed to travel the same distance as on gasoline due
to the ethanol's lower energy content.
    Table V.A-1 below presents the cellulosic fuel cost savings with
this final rule that are estimated using this approach.\136\ The per-
gallon cost difference estimates for cellulosic ethanol ranges from
$0.27-$2.80 per ethanol-equivalent gallon.\137\ Given that cellulosic
ethanol production is just starting to become commercially available,
the cost estimates have a significant range. Multiplying those per-
gallon cost differences by the amount of cellulosic biofuel waived in
this final rule results in approximately $2.2-$23 billion in cost
savings.
---------------------------------------------------------------------------

    \136\ Details of the data and assumptions used can be found in a
Memorandum available in the docket entitled ``Cost Impacts of the
Final 2019 Annual Renewable Fuel Standards'', Memorandum from
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in
docket EPA-HQ-OAR-2018-0167.
    \137\ For the purposes of the cost estimates in this section,
EPA has not attempted to adjust the price of the petroleum fuels to
account for the impact of the RFS program, since the changes in the
renewable fuel volume are relatively modest. Rather, we have simply
used the wholesale price projections for gasoline and diesel as
reported in EIA's October 2018 STEO.
    \138\ For this table and all subsequent tables in this section,
approximate costs in per gallon cost difference estimates are
rounded to the cents place.
    \139\ For this table and all subsequent tables in this section,
approximate resulting costs (other than in per-gallon cost
difference estimates) are rounded to two significant figures.

   Table V.A-1--Illustrative Costs of Exercising the Cellulosic Waiver
        Authority Compared to the 2019 Statutory Volumes Baseline
------------------------------------------------------------------------

------------------------------------------------------------------------
Cellulosic Volume Required (Million Ethanol-                         418
 Equivalent Gallons)................................
Change in Required Cellulosic Biofuel from 2019                  (8,082)
 Statutory Volume (Million Ethanol-Equivalent
 Gallons)...........................................
Cost Difference Between Cellulosic Corn Kernel Fiber         $0.27-$2.80
 Ethanol and Gasoline Per Gallon ($/Ethanol-
 Equivalent Gallons) \138\..........................
Annual Change in Overall Costs (Million $) \139\....  $(2,200)-$(23,000)
------------------------------------------------------------------------

B. Illustrative Costs of the 2019 Volumes Compared to the 2018 RFS
Volumes Baseline

    In this section, we provide illustrative cost estimates for EPA
exercising its cellulosic waiver authority to reduce statutory
cellulosic volumes for 2019 (with corresponding reductions to the
advanced and total renewable fuel volumes) compared to the final 2018
RFS volumes. This results in an increase in cellulosic volumes for the
2019 RFS of 130 gallons (ethanol-equivalent) and an increase in the
non-cellulosic advanced biofuel volumes for 2019 of 500 million gallons
(ethanol-equivalent).
1. Cellulosic Biofuel
    We anticipate that the increase in the final 2019 cellulosic
biofuel volumes would be composed of 5 million gallons of liquid
cellulosic biofuel and 125

million gallons of CNG/LNG derived from landfill biogas. Based upon the
methodology outlined in Section V.A, we use corn kernel fiber as the
representative liquid cellulosic biofuel to develop cost estimates of
cellulosic ethanol. We estimate a cost difference between cellulosic
corn fiber-derived ethanol and gasoline of $0.27-$2.80 on an ethanol-
equivalent gallon basis. Next, the per-gallon costs of cellulosic
renewable fuel are multiplied by the 5 million gallon increase between
the final 2019 cellulosic volume and the final 2018 cellulosic RFS
volume requirements to estimate the total costs from the increase in
cellulosic ethanol.
    For CNG/LNG-derived cellulosic biogas, we provide estimates of the
cost of displacing natural gas with CNG/LNG derived from landfill
biogas to produce 125 million ethanol-equivalent gallons of cellulosic
fuel. To estimate the cost of production of CNG/LNG derived from
landfill gas (LFG), EPA uses Version 3.2 of the Landfill Gas Energy
Cost Model, or LFG cost-Web. EPA ran the financial cost calculator for
projects with a design flow rate of 1,000 and 10,000 cubic feet per
minute with the suggested default data. The costs estimated for this
analysis exclude any pipeline costs to transport the pipeline quality
gas, as well as any costs associated with compressing the gas to CNG/
LNG. These costs are not expected to differ significantly between LFG
or natural gas. In addition, the cost estimates excluded the gas
collection and control system infrastructure at the landfill, as EPA
expects that landfills that begin producing high BTU gas in 2019 are
very likely to already have this infrastructure in place.\140\
---------------------------------------------------------------------------

    \140\ Details of the data and assumptions used can be found in a
Memorandum available in the docket entitled ``Cost Impacts of the
Final 2019 Annual Renewable Fuel Standards'', Memorandum from
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in
docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    To estimate the illustrative cost impacts of the change in CNG/LNG
derived from LFG, we compared the cost of production of CNG/LNG derived
from LFG in each case to the projected price for natural gas in 2019 in
EIA's October 2018 STEO.\141\ Finally, we converted these costs to an
ethanol-equivalent gallon basis. The resulting cost estimates are shown
in Table V.B.2-1. Adding the cost of cellulosic ethanol to the costs of
CNG/LNG landfill gas, the total costs of the final 2019 cellulosic
volume compared to 2018 RFS cellulosic volume range from $(2.9)-$23
million.
---------------------------------------------------------------------------

    \141\ Henry Hub Spot price estimate for 2019. EIA, Short Term
Energy Outlook (STEO) available in docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

2. Advanced Biofuel
    EPA provides a range of illustrative cost estimates for the
increases in the advanced standard of 500 million ethanol-equivalent
gallons using two different advanced biofuels. In the first scenario,
we assume that all the increase in advanced biofuel volumes is
comprised of soybean oil BBD. In the second scenario, we assume that
all the increase in the advanced volume is comprised of sugarcane
ethanol from Brazil.
    Consistent with the analysis in previous annual RFS volume rules, a
``bottom-up'' engineering cost analysis is used that quantifies the
costs of producing a gallon of soybean-based biodiesel and then
compares that cost to the energy-equivalent gallon of petroleum-based
diesel. We compare the cost of biodiesel and diesel fuel at the
wholesale stage, since that is when the two are blended together and
represents the approximate costs to society absent transfer payments
and any additional infrastructure costs. On this basis, EPA estimates
the costs of producing and transporting a gallon of biodiesel to the
blender in the U.S.
    To estimate the illustrative costs of sugarcane ethanol, we compare
the cost of sugarcane ethanol and gasoline at the wholesale stage,
since that is when the two are blended together and represents the
approximate costs to society absent transfer payments and any
additional infrastructure costs (e.g., blender pumps). On this basis,
EPA estimates the costs of producing and transporting a gallon of
sugarcane ethanol to the blender in the U.S. More background
information on the cost assessment described in this Section, including
details of the data sources used and assumptions made for each of the
scenarios, can be found in a Memorandum available in the docket.\142\
---------------------------------------------------------------------------

    \142\ Details of the data and assumptions used can be found in a
Memorandum available in the docket entitled ``Cost Impacts of the
Final 2019 Annual Renewable Fuel Standards'', Memorandum from
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in
docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Table V.B.2-1 below also presents estimates of per energy-
equivalent gallon costs for producing: (1) Soybean biodiesel (in
ethanol-equivalent gallons) and (2) Brazilian sugarcane ethanol,
relative to the petroleum fuels they replace at the wholesale level.
For each of the fuels, these per-gallon costs are then multiplied by
the increase in the 2019 non-cellulosic advanced volume relative to the
2018 final advanced standard volume to obtain an overall cost increase
of $190-$610 million.
    In addition, in Table V.B.2-1, we also present estimates of the
total cost of this final rule relative to 2018 RFS fuel volumes. We add
the increase in cost of the final 2019 cellulosic standard volume,
$(2.9)-$23 million, with the additional costs of the increase in non-
cellulosic advanced biofuel volumes resulting from the final 2019
advanced standard volume, $190-$610 million. The overall total costs of
this final rule range from $190-$630 million (after rounding to two
significant figures).

  Table V.B.2-1--Illustrative Costs of the 2019 Volumes Compared to the
                        2018 RFS Volumes Baseline
------------------------------------------------------------------------

------------------------------------------------------------------------
                            Cellulosic Volume
------------------------------------------------------------------------
Corn Kernel Fiber Cellulosic Ethanol Costs:
    Cost Difference Between Cellulosic Corn Kernel Fiber     $0.27-$2.80
     Ethanol and Gasoline Per Gallon ($/Ethanol-
     Equivalent Gallons)................................
    Change in Volume (Million Ethanol-Equivalent                       5
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........        $1.4-$14
CNG/LNG Derived from Biogas Costs:
    Cost Difference Between CNG/LNG Derived from           $(0.03)-$0.07
     Landfill Biogas and Natural Gas Per Gallon ($/
     Ethanol-Equivalent Gallons)........................
    Change in Volume (Million Ethanol-Equivalent                     125
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........     $(4.3)-$9.0
Range of Annual Increase in Costs with Cellulosic Volume      $(2.9)-$23
 (Million $)............................................
------------------------------------------------------------------------

                             Advanced Volume
------------------------------------------------------------------------
Soybean Biodiesel Scenario:
    Cost Difference Between Soybean Biodiesel and            $0.74-$1.23
     Petroleum Diesel Per Gallon ($/Ethanol-Equivalent
     Gallons)...........................................
    Change in Volume (Million Ethanol-Equivalent                     500
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........       $370-$610
Brazilian Sugarcane Ethanol Scenario:
    Cost Difference Between Sugarcane Ethanol and            $0.39-$1.04
     Gasoline Per Gallon ($/Ethanol-Equivalent Gallons).
    Change in Volume (Million Ethanol-Equivalent                     500
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........       $190-$520
Range of Annual Increase in Overall Costs with Non-            $190-$610
 Cellulosic Advanced Volume (Million $).................
------------------------------------------------------------------------
                     Cellulosic and Advanced Volumes
------------------------------------------------------------------------
Range of Annual Increase in Overall Costs with                 $190-$630
 Cellulosic and Advanced Volume (Million $) \143\.......
------------------------------------------------------------------------

    The annual volume-setting process encourages consideration of the
RFS program on a piecemeal (i.e., year-to-year) basis, which may not
reflect the full, long-term costs and benefits of the program. For the
purposes of this final rule, other than the estimates of costs of
producing a ``representative'' renewable fuel compared to cost of
petroleum fuel, EPA did not quantitatively assess other direct and
indirect costs or benefits of changes in renewable fuel volumes. These
direct and indirect costs and benefits may include infrastructure
costs, investment, climate change impacts, air quality impacts, and
energy security benefits, which all are to some degree affected by the
annual volumes. For example, we do not have a quantified estimate of
the lifecycle GHG or energy security benefits for a single year (e.g.,
2019). Also, there are impacts that are difficult to quantify, such as
rural economic development and employment changes from more diversified
fuel sources, that are not quantified in this rulemaking. While some of
these impacts were analyzed in the 2010 final rulemaking that
established the current RFS program,\144\ we have not analyzed these
impacts for the 2019 volume requirements.
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    \143\ Summed costs are presented using two significant figures.
    \144\ RFS2 Regulatory Impact Analysis (RIA). U.S. EPA 2010,
Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis.
EPA-420-R-10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332.
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VI. Biomass-Based Diesel Volume for 2020

    In this section we discuss the BBD applicable volume for 2020. We
are setting this volume in advance of those for other renewable fuel
categories in light of the statutory requirement in CAA section
211(o)(2)(B)(ii) to establish the applicable volume of BBD for years
after 2012 no later than 14 months before the applicable volume will
apply. We are not at this time setting the BBD percentage standards
that would apply to obligated parties in 2020 but intend to do so in
late 2019, after receiving EIA's estimate of gasoline and diesel
consumption for 2020. At that time, we will also set the percentage
standards for the other renewable fuel types for 2020. Although the BBD
applicable volume sets a floor for required BBD use, because the BBD
volume requirement is nested within both the advanced biofuel and the
total renewable fuel volume requirements, any BBD produced beyond the
mandated 2020 BBD volume can be used to satisfy both of these other
applicable volume requirements.

A. Statutory Requirements

    The statute establishes applicable volume targets for years through
2022 for cellulosic biofuel, advanced biofuel, and total renewable
fuel. For BBD, applicable volume targets are specified in the statute
only through 2012. For years after those for which volumes are
specified in the statute, EPA is required under CAA section
211(o)(2)(B)(ii) to determine the applicable volume of BBD, in
coordination with the Secretary of Energy and the Secretary of
Agriculture, based on a review of the implementation of the program
during calendar years for which the statute specifies the volumes and
an analysis of the following factors:
    1. The impact of the production and use of renewable fuels on the
environment, including on air quality, climate change, conversion of
wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
    2. The impact of renewable fuels on the energy security of the
United States;
    3. The expected annual rate of future commercial production of
renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and BBD);
    4. The impact of renewable fuels on the infrastructure of the
United States, including deliverability of materials, goods, and
products other than renewable fuel, and the sufficiency of
infrastructure to deliver and use renewable fuel;
    5. The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
    6. The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
    The statute also specifies that the volume requirement for BBD
cannot be less than the applicable volume specified in the statute for
calendar year 2012, which is 1.0 billion gallons.\145\ The statute does
not, however, establish any other numeric criteria, or provide any
guidance on how the EPA should weigh the importance of the often
competing factors and the overarching goals of the statute when the EPA
sets the applicable volumes of BBD in years after those for which the
statute specifies such volumes. In the period 2013-2022, the statute
specifies increasing applicable volumes of cellulosic biofuel, advanced
biofuel, and total renewable fuel, but provides no guidance, beyond the
1.0 billion gallon minimum, on the level at which BBD volumes should be
set.
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    \145\ See CAA section 211(o)(2)(B)(v).
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    In establishing the BBD and cellulosic standards as nested within
the advanced biofuel standard, Congress clearly intended to support
development of BBD and especially cellulosic biofuels, while also
providing an incentive for the growth of other non-specified types of
advanced biofuels. In general, the advanced biofuel standard provides
an

opportunity for other advanced biofuels (advanced biofuels that do not
qualify as cellulosic biofuel or BBD) to compete with cellulosic
biofuel and BBD to satisfy the advanced biofuel standard after the
cellulosic biofuel and BBD standards have been met.

B. Review of Implementation of the Program and the 2020 Applicable
Volume of Biomass-Based Diesel

    One of the primary considerations in determining the BBD volume for
2020 is a review of the implementation of the program to date, as it
affects BBD. This review is required by the CAA, and also provides
insight into the capabilities of the industry to produce, import,
export, and distribute BBD. It also helps us to understand what
factors, beyond the BBD standard, may incentivize the production and
import of BBD. Table VI.B.1-1 below shows, for 2011-2017, the number of
BBD RINs generated, the number of RINs retired due to export, the
number of RINs retired for reasons other than compliance with the
annual BBD standards, and the consequent number of available BBD RINs;
and for 2011-2019, the BBD and advanced biofuel standards.

              Table VI.B.1-1--Biomass-Based Diesel (D4) RIN Generation and Advanced Biofuel and Biomass-Based Diesel Standards in 2011-2019
                                                             [Million RINs or gallons] \146\
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                                                                             BBD RINs                                                        Advanced
                                             BBD RINs      Exported BBD    retired, non-   Available BBD   BBD standard    BBD standard       biofuel
                                             generated        (RINs)        compliance       RINs \a\        (gallons)        (RINs)         standard
                                                                              reasons                                                         (RINs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................           1,692             110              98           1,483             800           1,200           1,350
2012....................................           1,737             183              90           1,465           1,000           1,500           2,000
2013....................................           2,739             298             101           2,341           1,280           1,920           2,750
2014....................................           2,710             126              92           2,492           1,630       \b\ 2,490           2,670
2015....................................           2,796             133              32           2,631           1,730       \b\ 2,655           2,880
2016....................................           4,008             203              52           3,753           1,900           2,850           3,610
2017....................................           3,849             244              35           3,570           2,000           3,000           4,280
2018 \c\................................           3,898             154              40           3,740           2,100           3,150           4,290
2019....................................             N/A             N/A             N/A             N/A           2,100           3,150           4,920
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Available BBD RINs may not be exactly equal to BBD RINs Generated minus Exported RINs and BBD RINs Retired, Non-Compliance Reasons, due to rounding.
\b\ Each gallon of biodiesel qualifies for 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5
  and 1.7 RINs per gallon, but generally has an equivalence value of 1.7. While some fuels that qualify as BBD generate more than 1.5 RINs per gallon,
  EPA multiplies the required volume of BBD by 1.5 in calculating the percent standard per 80.1405(c). In 2014 and 2015 however, the number of RINs in
  the BBD Standard column is not exactly equal to 1.5 times the BBD volume standard as these standards were established based on actual RIN generation
  data for 2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015, rather than by
  multiplying the required volume of BBD by 1.5. Some of the volume used to meet the BBD standard in these years was renewable diesel, with an
  equivalence value higher than 1.5.
\c\ ``2018 BBD RINs generated,'' ``Exported BBD,'' and ``BBD RINs retired, Non-Compliance Reasons'' are projected based on data through September 2018.

    In reviewing historical BBD RIN generation and use, we see that the
number of RINs available for compliance purposes exceeded the volume
required to meet the BBD standard in 2011, 2012, 2013, 2016 and 2017.
Additional production and use of biodiesel was likely driven by a
number of factors, including demand to satisfy the advanced biofuel and
total renewable fuels standards, the biodiesel tax credit,\147\ and
favorable blending economics. The number of RINs available in 2014 and
2015 was approximately equal to the number required for compliance in
those years, as the standards for these years were finalized at the end
of November 2015 and EPA's intent at that time was to set the standards
for 2014 and 2015 to reflect actual BBD use.\148\ In 2016, with RFS
standards established prior to the beginning of the year and the
blenders tax credit in place, available BBD RINs exceeded the volume
required by the BBD standard by 859 million RINs (30 percent). In 2017,
the RFS standards were established prior to the beginning of the year,
and the blenders tax credit was only applied retroactively; even
without the certainty of a tax credit, the available BBD RINs exceeded
the volume required by the BBD standard by 570 million RINs (19
percent). Extrapolated data for 2018 also indicates that available BBD
RINs will exceed the BBD standard. This indicates that in certain
circumstances there is demand for BBD beyond the required volume of
BBD. We also note that while EPA has consistently established the
required volume in such a way as to allow non-BBD fuels to compete for
market share in the advanced biofuel category, since 2016 the vast
majority of non-cellulosic advanced biofuel used to satisfy the
advanced biofuel obligations has been BBD.
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    \146\ Available BBD RINs Generated, Exported BBD RINs, and BBD
RINs Retired for Non-Compliance Reasons information from EMTS.
    \147\ The biodiesel tax credit was reauthorized in January 2013.
It applied retroactively for 2012 and for the remainder of 2013. It
was once again extended in December 2014 and applied retroactively
to all of 2014 as well as to the remaining weeks of 2014. In
December 2015 the biodiesel tax credit was authorized and applied
retroactively for all of 2015 as well as through the end of 2016. In
February 2018 the biodiesel tax credit was authorized and applied
retroactively for all of 2017.
    \148\ See 80 FR 77490-92, 77495 (December 14, 2015).
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    The prices paid for advanced biofuel and BBD RINs beginning in
early 2013 through September 2018 (the last month for which data are
available) also support the conclusion that advanced biofuel and/or
total renewable fuel standards provide a sufficient incentive for
additional biodiesel volume beyond what is required by the BBD
standard. Because the BBD standard is nested within the advanced
biofuel and total renewable fuel standards, and therefore can help to
satisfy three RVOs, we would expect the price of BBD RINs to exceed
that of advanced and conventional renewable RINs.\149\ If,

however, BBD RINs are being used (or are expected to be used) by
obligated parties to satisfy their advanced biofuel obligations, above
and beyond the BBD standard, we would expect the prices of advanced
biofuel and BBD RINs to converge.\150\ Further, if BBD RINs are being
used (or are expected to be used) to satisfy obligated parties' total
renewable fuel obligation, above and beyond their BBD and advanced
biofuel requirements, we would expect the price for all three RIN types
to converge.
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    \149\ This is because when an obligated party retires a BBD RIN
(D4) to help satisfy their BBD obligation, the nested nature of the
BBD standard means that this RIN also counts towards satisfying
their advanced and total renewable fuel obligations. Advanced RINs
(D5) count towards both the advanced and total renewable fuel
obligations, while conventional RINs (D6) count towards only the
total renewable fuel obligation.
    \150\ We would still expect D4 RINs to be valued at a slight
premium to D5 and D6 RINs in this case (and D5 RINs at a slight
premium to D6 RINs) to reflect the greater flexibility of the D4
RINs to be used towards the BBD, advanced biofuel, and total
renewable fuel standard. This pricing has been observed over the
past several years.
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    When examining RIN price data from 2012 through September 2018,
shown in Figure VI.B.2-1 below, we see that beginning in early 2013 and
through September 2018 the advanced RIN price and BBD RIN prices were
approximately equal. Similarly, from early 2013 through late 2016 the
conventional renewable fuel and BBD RIN prices were approximately
equal. This suggests that the advanced biofuel standard and/or total
renewable fuel standard are capable of incentivizing increased BBD
volumes beyond the BBD standard. The advanced biofuel standard has
incentivized additional volumes of BBD since 2013, while the total
standard had incentivized additional volumes of BBD from 2013 through
2016.\151\ While final standards were not in place throughout 2014 and
most of 2015, EPA had issued proposed rules for both of these
years.\152\ In each year, the market response was to supply volumes of
BBD that exceeded the proposed BBD standard in order to help satisfy
the proposed advanced and total biofuel standards.\153\ Additionally,
the RIN prices in these years strongly suggests that obligated parties
and other market participants anticipated the need for BBD RINs to meet
their advanced and total biofuel obligations, and responded by
purchasing advanced biofuel and BBD RINs at approximately equal prices.
We do note, however, that in 2012 the BBD RIN price was significantly
higher than both the advanced biofuel and conventional renewable fuel
RIN prices. In 2012 the E10 blendwall had not yet been reached, and it
was likely more cost effective for most obligated parties to satisfy
the portion of the advanced biofuel requirement that exceeded the BBD
and cellulosic biofuel requirements with advanced ethanol.
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    \151\ Although we did not issue a rule establishing the final
2013 standards until August of 2013, we believe that the market
anticipated the final standards, based on EPA's July 2011 proposal
and the volume targets for advanced and total renewable fuel
established in the statute. (76 FR 38844, 38843 July 1, 2011).
    \152\ See 80 FR 33100 (2014-16 standards proposed June 10,
2015); 78 FR 71732 (2014 standards proposed Nov. 29, 2013).
    \153\ EPA proposed a BBD standard of 1.28 billion gallons (1.92
billion RINs) for 2014 in our November 2013 proposed rule. The
number of BBD RINs available in 2014 was 2.67 billion. EPA proposed
a BBD standard of 1.70 billion gallons (2.55 billion RINs) for 2015
in our June 2015 proposed rule. The number of BBD RINs available in
2015 was 2.92 billion.
[GRAPHIC] [TIFF OMITTED] TR11DE18.002

    In raising the 2013 BBD volume above the 1 billion gallon minimum
mandated by Congress, the EPA sought to ``create greater certainty for
both producers of BBD and obligated parties'' while also acknowledging
that, ``the potential for somewhat increased costs is appropriate in
light of the additional certainty of GHG reductions and enhanced energy
security provided by the advanced biofuel volume requirement of 2.75
billion gallons.'' \154\ Unknown at that

time was the degree to which the required volumes of advanced biofuel
and total renewable fuel could incentivize volumes of BBD that exceeded
the BBD standard. In 2012 the available supply of BBD RINs exceeded the
required volume of BBD by a very small margin (1,545 million BBD RINs
were made available for compliance towards meeting the BBD requirement
of 1,500 million BBD RINs). The remainder of the 2.0 billion-gallon
advanced biofuel requirement was satisfied with advanced ethanol, which
was largely imported from Brazil.\155\ From 2012 to 2013 the statutory
advanced biofuel requirement increased by 750 million gallons. If EPA
had not increased the required volume of BBD for 2013, and the advanced
biofuel standard had proved insufficient to increase the supply of BBD
beyond the statutory minimum of 1.0 billion gallons, an additional 750