are then multiplied by the stream of emissions for each respective year
for 30 years. The monetized benefits in table VIII.C.3-3 represent the
net present value of these emissions for 30 years using a discount rate
of 7 percent.

     Table VIII.C.3-3--Monetized Benefits (Million 2007$) of RFS-2 Volumes in 2022 Using a 7% Discount Rate
----------------------------------------------------------------------------------------------------------------
                                                                       High            Base             Low
----------------------------------------------------------------------------------------------------------------
5%..............................................................            $606            $620            $631
5% (Newell-Pizer)...............................................           1,212           1,239           1,262
Average SCC from 3% and 5%......................................           2,302           2,355           2,397
3%..............................................................           3,999           4,089           4,163
3% (Newell-Pizer)...............................................           6,665           6,816           6,939
----------------------------------------------------------------------------------------------------------------

D. Criteria Pollutant Health and Environmental Impacts

1. Overview
    This section describes EPA's analysis of the co-pollutant health
and environmental impacts that can be expected to occur as a result of
the increase in renewable fuel use throughout the period from initial
implementation of the RFS2 rule through 2022. Although the purpose of
this final rule is to implement the renewable fuel requirements
established by the Energy Independence and Security Act (EISA) of 2007,
the increased use of renewable fuels will also impact emissions of
criteria and air toxic pollutants and their resultant ambient
concentrations. The fuels changes detailed in Section 3.1 of the RIA
will influence emissions of VOCs, PM, NOX, and
SOX and air toxics and affect exhaust and evaporative
emissions of these pollutants from vehicles and equipment. They will
also affect emissions from upstream sources such as fuel production,
storage, distribution and agricultural emissions. Any decrease or
increase in ambient ozone, PM2.5, and air toxics associated
with the increased use of renewable fuels will impact human health in
the form of a decrease or increase in the risk of incurring premature
death and other serious human health effects, as well as other
important public health and welfare effects.
    This analysis reflects the impact of the 2022 mandated renewable
fuel volumes (the ``RFS2 control case'') compared with two different
reference scenarios that include the use of renewable fuels: a 2022
baseline projection based on the RFS1-mandated volume of 7.1 billion
gallons of renewable fuels, and a 2022 baseline projection based on the
AEO 2007 volume of roughly 13.6 billion gallons of renewable
fuels.\357\ Thus, the results represent the impact of an incremental
increase in ethanol and other renewable fuels. We note that the air
quality modeling results presented in this final rule do not constitute
the ``anti-backsliding'' analysis required by Clean Air Act section
211(v). EPA will be analyzing air quality and health impacts of
increased renewable fuel use through that study and will promulgate
appropriate mitigation measures under section 211(v), separate from
this final action.
---------------------------------------------------------------------------

    \357\ The 2022 modeled scenarios assume the following: RFS1
reference case assumes 6.7 Bgal/yr ethanol and 0.38 Bgal/yr
biodiesel; AEO2007 reference case assumes 13.18 Bgal/yr ethanol and
0.38 Bgal/yr biodiesel; RFS2 control case assumes 34.14 Bgal/yr
ethanol, 0.81 Bgal/yr biodiesel, and 0.38 Bgal/yr renewable diesel.
Please refer to Chapter 3.3 and Table 3.3-1 for more information
about the renewable fuel volumes assumed in the modeled analyses and
the corresponding emissions inventories.
---------------------------------------------------------------------------

    As can be seen in Section VI.D of this preamble, as well as in
Section 3.4 of the RIA that accompanies this preamble, there are both
increased and decreased concentrations of ambient criteria pollutants
and air toxics. Overall, we estimate that the required renewable fuel
volumes will lead to a net increase in criteria pollutant-related
health impacts. By 2022, the final RFS2 volumes relative to both
reference case scenarios (RFS1 and AEO2007), are projected to adversely
impact PM2.5 air quality over parts of the U.S., while some
areas will experience decreases in ambient PM2.5. As
described in Section VI, ambient PM2.5 is likely to increase
as a result of emissions at biofuel production plants and from biofuel
transport, both of which are more prevalent in the Midwest. PM
concentrations are also likely to decrease in some areas. While the PM-
related air quality impacts are relatively small, the increase in
population-weighted national average PM2.5 exposure results
in a net increase in adverse PM-related human health impacts. (the
increase in national population weighted annual average
PM2.5 is 0.006 [mu]g/m3 and 0.002 [mu]g/m3 relative to the
RFS1 and AEO2007 reference cases, respectively).
    The required renewable fuel volumes, relative to both reference
scenarios, are also projected to adversely impact ozone air quality
over much of the U.S., especially in the Midwest, Northeast and
Southeast. These adverse impacts are likely due to increased upstream
emissions of NOX in many areas that are NOX-
limited (acting as a precursor to ozone formation). There are, however,
ozone air quality improvements in some highly-populated areas that
currently have poor air quality. This is likely due to VOC emission
reductions at the tailpipe in urban areas that are VOC-limited
(reducing VOC's role as a precursor to ozone formation). Relative to
the RFS1 mandate reference case, the RFS2 volumes result in an increase
in national ozone-related health impacts (population weighted maximum
8-hour average ozone increases by 0.177 ppb). Relative to the AEO2007
reference case, the RFS2 volumes result in an increase in national
ozone-related health impacts

(population weighted maximum 8-hour average ozone increases by 0.116
ppb).
    The analysis of national-level PM2.5- and ozone-related
health and environmental impacts associated with the required renewable
fuel volumes is based on peer-reviewed studies of air quality and human
health effects (see US EPA, 2006 and US EPA, 2008).358 359
We are also consistent with the benefits analysis methods that
supported the recently proposed Portland Cement National Emissions
Standards for Hazardous Air Pollutants (NESHAP) RIA (U.S. EPA,
2009a),\360\ the proposed NO2 primary NAAQS RIA (U.S. EPA,
2009b),\361\ and the proposed Category 3 Marine Diesel Engines RIA
(U.S. EPA, 2009c).\362\ These methods are described in more detail in
the RIA that accompanies this preamble. To model the ozone and PM air
quality impacts of the required renewable fuel volumes, we used the
Community Multiscale Air Quality (CMAQ) model (see Section VI.D). The
modeled ambient air quality data serves as an input to the
Environmental Benefits Mapping and Analysis Program (BenMAP).\363\
BenMAP is a computer program developed by the U.S. EPA that integrates
a number of the modeling elements used in previous analyses (e.g.,
interpolation functions, population projections, health impact
functions, valuation functions, analysis and pooling methods) to
translate modeled air concentration estimates into health effects
incidence estimates and monetized benefits estimates.
---------------------------------------------------------------------------

    \358\ U.S. Environmental Protection Agency. (2006). Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. Retrieved March, 26, 2009 at http://www.epa.gov/
ttn/ecas/ria.html.
    \359\ U.S. Environmental Protection Agency. (2008). Final Ozone
NAAQS Regulatory Impact Analysis. Prepared by: Office of Air and
Radiation, Office of Air Quality Planning and Standards. Retrieved
March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html.
    \360\ U.S. Environmental Protection Agency (U.S. EPA). 2009a.
Regulatory Impact Analysis: National Emission Standards for
Hazardous Air Pollutants from the Portland Cement Manufacturing
Industry. Office of Air Quality Planning and Standards, Research
Triangle Park, NC. April. Available on the Internet at http://
www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf.
    \361\ U.S. Environmental Protection Agency (U.S. EPA). 2009b.
Proposed NO2 NAAQS Regulatory Impact Analysis (RIA). Office of Air
Quality Planning and Standards, Research Triangle Park, NC. April.
Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/
RIAs/proposedno2ria.pdf. Note: The revised NO2 NAAQS may be final by
the publication of this action.
    \362\ U.S. Environmnetal Protection Agency (U.S. EPA). 2009c.
Draft Regulatory Impact Analysis: Control of Emissions of Air
Pollution from Category 3 Marine Diesel Engines. Office of
Transportation and Air Quality, June. Available on the Internet at
http://www.epa.gov/otaq/regs/nonroad/420d09002.htm. Note: The C3
rule may be final by the publication of this action.
    \363\ Information on BenMAP, including downloads of the
software, can be found at http://www.epa.gov/ttn/ecas/
benmodels.html.
---------------------------------------------------------------------------

    The range of total national-level ozone- and PM-related monetized
impacts associated with the required renewable fuel volumes is
presented in Table VIII.D.1-1.\364\ We present total monetized impacts
based on the PM- and ozone-related premature mortality function used.
Total monetized impacts therefore reflect the addition of each estimate
of ozone-related premature mortality (each with its own row in Table
VIII.D.1-1) to estimates of PM-related premature mortality. These
estimates represent EPA's preferred approach to characterizing the best
estimate of monetized impacts associated with the required renewable
fuel volumes.
---------------------------------------------------------------------------

    \364\ Note that these impacts reflect the national total of PM-
related benefits and disbenefits and ozone-related benefits and
disbenefits. The sum of total of benefits and disbenefits yields a
net negative benefit, or disbenefit. See Tables VIII.D.2-1 and
VIII.D.2-2 for pollutant- and endpoint-specific incidence estimates
and Table VIII.D.3-1 for pollutant- and endpoint specific monetized
values.
---------------------------------------------------------------------------

    Emissions and air quality modeling decisions were made early in the
analytical process and as a result, there are a number of important
limitations and uncertainties associated with the air quality modeling
analysis that must be kept in mind when considering the results. A key
limitation of the analysis is that it employed interim emission
inventories, which were enhanced compared to what was described in the
proposal, but did not include some of the later enhancements and
corrections of the final emission inventories presented in this FRM
(see Section VI.A through VI.C of this preamble). Most significantly,
our modeling of the air quality impacts of RFS2 relied upon interim
inventories that assumed that ethanol will make up 34 of the 36 billion
gallon renewable fuel mandate, that approximately 20 billion gallons of
this ethanol will be in the form of E85, and that the use of E85
results in fewer emissions of direct PM2.5 from vehicles.
The emission impacts, air quality results and benefits analysis would
be different if, instead of E85, more non-ethanol biofuels are used or
mid-level ethanol blends are approved and utilized.
    In fact, as explained earlier in this preamble, our more recent
analyses indicate that ethanol and E85 volumes are likely to be
significantly lower than what we assumed in the interim inventories.
Furthermore, the final emission inventories do not include vehicle-
related PM reductions associated with E85 use, as discussed in Section
VI.A through VI.C. There are additional, important limitations and
uncertainties associated with the interim inventories that must be kept
in mind when considering the results, which are described in more
detail in Section VI. While it is difficult to describe the overall
impact of these limitations and uncertainties on the quantified and
monetized health impacts of the increased renewable fuel volumes
without updating the air quality modeling analysis, we believe the
results are still useful for describing potential national-level health
impacts.
    Additionally, after the air quality modeling was completed, we
discovered an error in the way that PM2.5 emissions from
locomotive engines were allocated to counties in the inventory. The
mismatched allocations between the reference and control scenarios
resulted in PM2.5 emission changes that were too high in
some counties and too low in others, by varying degrees. As a result,
we did not present the modeling results for specific localized
PM2.5 impacts in Section VI.D. However, because the error
was random and offsetting, there was very little impact on national-
level PM2.5 emissions. An analysis of the error's impact on
the national emission inventories found that direct PM2.5
emissions were inflated by 8% relative to the AEO reference case and by
0.6% relative to the RFS1 reference case, leading to a small
overestimation of national PM-related adverse health impacts. Note that
this error did not impact other PM precursor inventories such as
NOX and SO2. As a result, we have concluded that
PM2.5 modeling results are still informative for national-
level benefits assessment, particularly given that other uncertainties
in the PM2.5 inventory (such as E85 usage, discussed below)
have a more important (and offsetting) effect.

Table VIII.D.1-1--Estimated 2022 Monetized PM- and Ozone-Related Health Impacts from the Mandated Renewable Fuel
                                                    Volumes a
----------------------------------------------------------------------------------------------------------------
                                                           Total benefits
    Premature ozone mortality          Reference        (billions, 2007$, 3%    Total benefits (billions, 2007$,
            function                                     discount rate) b,c          7%  discount rate) b,c
----------------------------------------------------------------------------------------------------------------
             2022 Total Ozone and PM Benefits, RFS2 Control Case Compared to RFS1 Reference Case \a\
----------------------------------------------------------------------------------------------------------------
Multi-city analyses.............  Bell et al., 2004.  Total: -$1.4 to -$2.8..  Total: -$1.4 to -$2.6.
                                                      PM: -$0.92 to -$2.3....  PM: -$0.84 to -$2.0.
                                                      Ozone: -$0.52..........  Ozone: -$0.52.
                                  Huang et al., 2005  Total: -$1.8 to -$3.1..  Total: -$1.7 to -$2.9.
                                                      PM: -$0.92 to -$2.3....  PM: -$0.84 to -$2.0.
                                                      Ozone: -$0.83..........  Ozone: -$0.83.
                                  Schwartz, 2005....  Total: -$1.7 to -$3.0..  Total: -$1.6 to -$2.8.
                                                      PM: -$0.92 to -$2.3....  PM: -$0.84 to -$2.0.
                                                      Ozone: -$0.77..........  Ozone: -$0.77.
Meta-analyses...................  Bell et al., 2005.  Total: -$2.5 to -$3.8..  Total: -$2.4 to -$3.6.
                                                      PM: -$0.92 to -$2.3....  PM: -$0.84 to -$2.0.
                                                      Ozone: -$1.6...........  Ozone: -$1.6.
                                  Ito et al., 2005..  Total: -$3.1 to -$4.5..  Total: -$3.0 to -$4.2.
                                                      PM: -$0.92 to -$2.3....  PM: -$0.84 to -$2.0.
                                                      Ozone: -$2.2...........  Ozone: -$2.2.
                                  Levy et al., 2005.  Total: -$3.1 to -$4.5..  Total: -$3.1 to -$4.3.
                                                      PM: -$0.92 to -$2.3....  PM: -$0.84 to -$2.0.
                                                      Ozone: -$2.2...........  Ozone: -$2.2.
----------------------------------------------------------------------------------------------------------------
             2022 Total Ozone and PM Benefits, RFS2 Control Case Compared to AEO Reference Case \a\
----------------------------------------------------------------------------------------------------------------
Multi-city analyses.............  Bell et al., 2004.  Total: -$0.63 to -$1.0.  Total: -$0.60 to -$0.98.
                                                      PM: -$0.29 to -$0.70...  PM: -$0.26 to -$0.63.
                                                      Ozone: -$0.34..........  Ozone: -$0.34.
                                  Huang et al., 2005  Total: -$0.84 to -$1.3.  Total: -$0.81 to -$1.2.
                                                      PM: -$0.29 to -$0.70...  PM: -$0.26 to -$0.63.
                                                      Ozone: -$0.55..........  Ozone: -$0.55.
                                  Schwartz, 2005....  Total: -$0.80 to -$1.2.  Total: -$0.77 to -$1.1.
                                                      PM: -$0.29 to -$0.70...  PM: -$0.26 to -$0.63.
                                                      Ozone: -$0.51..........  Ozone: -$0.51.
Meta-analyses...................  Bell et al., 2005.  Total: -$1.3 to -$1.8..  Total: -$1.3 to -$1.7.
                                                      PM: -$0.29 to -$0.70...  PM: -$0.26 to -$0.63.
                                                      Ozone: -$1.0...........  Ozone: -$1.0.
                                  Ito et al., 2005..  Total: -$1.7 to -$2.2..  Total: -$1.7 to -$2.1.
                                                      PM: -$0.29 to -$0.70...  PM: -$0.26 to -$0.63.
                                                      Ozone: -$1.5...........  Ozone: -$1.5.
                                  Levy et al., 2005.  Total: -$1.8 to -$2.2..  Total: -$1.7 to -$2.1.
                                                      PM: -$0.29 to -$0.70...  PM: -$0.26 to -$0.63.
                                                      Ozone: -$1.5...........  Ozone: -$1.5.
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Total includes premature mortality-related and morbidity-related ozone and PM 2.5 benefits. Range was
  developed by adding the estimate from the ozone premature mortality function to the estimate of PM 2.5-
  related premature mortality derived from either the ACS study (Pope et al., 2002) or the Six-Cities study
  (Laden et al., 2006).
\b\ Note that total benefits presented here do not include a number of unquantified benefits categories. A
  detailed listing of unquantified health and welfare effects is provided in Table VIII.D.1-2.
\c\ Results reflect the use of both a 3 and 7 percent discount rate, as recommended by EPA's Guidelines for
  Preparing Economic Analyses and OMB Circular A-4. Results are rounded to two significant digits for ease of
  presentation and computation.

    The monetized estimates in Table VIII.D.1-1 include all of the
human health impacts we are able to quantify and monetize at this time.
However, the full complement of human health and welfare effects
associated with PM and ozone remain unquantified because of current
limitations in methods or available data. We have not quantified a
number of known or suspected health effects linked with ozone and PM
for which appropriate health impact functions are not available or
which do not provide easily interpretable outcomes (i.e., changes in
heart rate variability). Additionally, we are unable to quantify a
number of known welfare effects, including acid and particulate
deposition damage to cultural monuments and other materials, and
environmental impacts of eutrophication in coastal areas. These are
listed in Table VIII.D.1-2.

 Table VIII.D.1-2--Unquantified and Non-Monetized Potential Effects From
                   the Mandated Renewable Fuel Volumes
------------------------------------------------------------------------
                                             Effects not included in
           Pollutant/effects                  analysis--changes in:
------------------------------------------------------------------------
Ozone Health\a\........................  Chronic respiratory damage\b\.

                                         Premature aging of the
                                          lungs\b\.
                                         Non-asthma respiratory
                                          emergency room visits.
                                         Exposure to UVb (+/-)\e\.
Ozone Welfare..........................  Yields for.
                                         --commercial forests.
                                         --some fruits and vegetables.
                                         --non-commercial crops.
                                         Damage to urban ornamental
                                          plants.
                                         Impacts on recreational demand
                                          from damaged forest
                                          aesthetics.
                                         Ecosystem functions.
                                         Exposure to UVb (+/-)\e\.
PM Health\c\...........................  Premature mortality--short term
                                          exposures\d\.
                                         Low birth weight.
                                         Pulmonary function.
                                         Chronic respiratory diseases
                                          other than chronic bronchitis.
                                         Non-asthma respiratory
                                          emergency room visits.
                                         Exposure to UVb (+/-)\e\.
PM Welfare.............................  Residential and recreational
                                          visibility in non-Class I
                                          areas.
                                         Soiling and materials damage.
                                         Damage to ecosystem functions.
                                         Exposure to UVb (+/-)\e\.
Nitrogen and Sulfate Deposition Welfare  Commercial forests due to
                                          acidic sulfate and nitrate
                                          deposition.
                                         Commercial freshwater fishing
                                          due to acidic deposition.
                                         Recreation in terrestrial
                                          ecosystems due to acidic
                                          deposition.
                                         Existence values for currently
                                          healthy ecosystems.
                                         Commercial fishing,
                                          agriculture, and forests due
                                          to nitrogen deposition.
                                         Recreation in estuarine
                                          ecosystems due to nitrogen
                                          deposition.
                                         Ecosystem functions.
                                         Passive fertilization.
CO Health..............................  Behavioral effects.
HC/Toxics Health\f\....................  Cancer (benzene, 1,3-butadiene,
                                          formaldehyde, acetaldehyde).
                                         Anemia (benzene).
                                         Disruption of production of
                                          blood components (benzene).
                                         Reduction in the number of
                                          blood platelets (benzene).
                                         Excessive bone marrow formation
                                          (benzene).
                                         Depression of lymphocyte counts
                                          (benzene).
                                         Reproductive and developmental
                                          effects (1,3-butadiene).
                                         Irritation of eyes and mucus
                                          membranes (formaldehyde).
                                         Respiratory irritation
                                          (formaldehyde).
                                         Asthma attacks in asthmatics
                                          (formaldehyde).
                                         Asthma-like symptoms in non-
                                          asthmatics (formaldehyde).
                                         Irritation of the eyes, skin,
                                          and respiratory tract
                                          (acetaldehyde).
                                         Upper respiratory tract
                                          irritation and congestion
                                          (acrolein).
HC/Toxics Welfare......................  Direct toxic effects to
                                          animals.
                                         Bioaccumulation in the food
                                          chain.
                                         Damage to ecosystem function.
                                         Odor.
------------------------------------------------------------------------
Notes:
\a\ The public health impact of biological responses such as increased
  airway responsiveness to stimuli, inflammation in the lung, acute
  inflammation and respiratory cell damage, and increased susceptibility
  to respiratory infection are likely partially represented by our
  quantified endpoints.
\b\ The public health impact of effects such as chronic respiratory
  damage and premature aging of the lungs may be partially represented
  by quantified endpoints such as hospital admissions or premature
  mortality, but a number of other related health impacts, such as
  doctor visits and decreased athletic performance, remain unquantified.
\c\ In addition to primary economic endpoints, there are a number of
  biological responses that have been associated with PM health effects
  including morphological changes and altered host defense mechanisms.
  The public health impact of these biological responses may be partly
  represented by our quantified endpoints.
\d\ While some of the effects of short-term exposures are likely to be
  captured in the estimates, there may be premature mortality due to
  short-term exposure to PM not captured in the cohort studies used in
  this analysis. However, the PM mortality results derived from the
  expert elicitation do take into account premature mortality effects of
  short term exposures.
\e\ May result in benefits or adverse health impacts.
\f\ Many of the key hydrocarbons related to this rule are also hazardous
  air pollutants listed in the Clean Air Act.

    While there will be impacts associated with air toxic pollutant
emission changes that result from the increased use of renewable fuels,
we do not attempt to monetize those impacts. This is primarily because
currently available tools and methods to assess air toxics risk from
mobile sources at the national scale are not adequate for extrapolation
to incidence estimations or benefits assessment. The best suite of
tools and methods currently available for assessment at the national
scale are those used in the National-Scale Air Toxics Assessment
(NATA). The EPA Science Advisory Board specifically commented in their
review of the 1996 NATA that these tools were not yet

ready for use in a national-scale benefits analysis, because they did
not consider the full distribution of exposure and risk, or address
sub-chronic health effects.\365\ While EPA has since improved the
tools, there remain critical limitations for estimating incidence and
assessing benefits of reducing mobile source air toxics. EPA continues
to work to address these limitations; however, we did not have the
methods and tools available for national-scale application in time for
the analysis of the final rule.\366\
---------------------------------------------------------------------------

    \365\ Science Advisory Board. 2001. NATA--Evaluating the
National-Scale Air Toxics Assessment for 1996--an SAB Advisory.
http://www.epa.gov/ttn/atw/sab/sabrev.html.
    \366\ In April, 2009, EPA hosted a workshop on estimating the
benefits or reducing hazardous air pollutants. This workshop built
upon the work accomplished in the June 2000 Science Advisory Board/
EPA Workshop on the Benefits of Reductions in Exposure to Hazardous
Air Pollutants, which generated thoughtful discussion on approaches
to estimating human health benefits from reductions in air toxics
exposure, but no consensus was reached on methods that could be
implemented in the near term for a broad selection of air toxics.
Please visit http://epa.gov/air/toxicair/2009workshop.html for more
information about the workshop and its associated materials.
---------------------------------------------------------------------------

2. Quantified Human Health Impacts
    Tables VIII.D.2-1 and VIII.D.2-2 present the annual
PM2.5 and ozone health impacts in the 48 contiguous U.S.
states associated with the required renewable fuel volumes relative to
both the RFS1 and AEO reference cases for 2022. For each endpoint
presented in Tables VIII.D.2-1 and VIII.D.2-2, we provide both the mean
estimate and the 90% confidence interval.
    Using EPA's preferred estimates, based on the ACS and Six-Cities
studies and no threshold assumption in the model of mortality, we
estimate that the required renewable fuel volumes will result in
between 110 and 270 cases of PM2.5-related premature deaths
annually in 2022 when compared to the RFS1 reference case. When
compared to the AEO reference scenario, we estimate that the required
renewable fuel volumes will result in between 33 and 85 cases of
PM2.5-related premature deaths annually in 2022. For ozone-
related premature mortality, we estimate that national changes in
ambient ozone will contribute to between 54 to 250 additional premature
mortalities in 2022 as a result of the required renewable fuel volumes
relative to the RFS1 scenario. When compared to the AEO reference
scenario, we estimate that the required renewable fuel volumes will
contribute to between 36 to 160 additional ozone-related premature
mortalities in 2022.
---------------------------------------------------------------------------

    \367\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. 1997.
``The Relationship Between Selected Causes of Postneonatal Infant
Mortality and Particulate Air Pollution in the United States.''
Environmental Health Perspectives 105(6): 608-612.

 Table VIII.D.2-1--Estimated PM2.5-Related Health Impacts Associated With the Mandated Renewable Fuel Volumes a
----------------------------------------------------------------------------------------------------------------
                                                                 2022 RFS2 Control case   2022 RFS2 Control case
                                                                    compared to RFS1         compared to AEO
                         Health effect                           reference case (5th%-    reference case (5th%-
                                                                       95th%ile)                95th%ile)
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Derived from Epidemiology Literature \b\
Adult, age 30+, ACS Cohort Study (Pope et al., 2002)..........                     -110                      -33
                                                                           (-42 - -170)              (-13 - -53)
Adult, age 25+, Six-Cities Study (Laden et al., 2006).........                     -270                      -85
                                                                          (-150 - -400)             (-46 - -120)
Infant, age <1 year (Woodruff et al., 1997)...................                        0                        0
                                                                               (0 - -1)                 (0 - -1)
Chronic bronchitis (adult, age 26 and over)...................                      -65                      -19
                                                                           (-26 - -110)               (-4 - -18)
Non-fatal myocardial infarction (adult, age 18 and over)......                     -180                      -51
                                                                           (-65 - -290)              (-19 - -84)
Hospital admissions--respiratory (all ages) \c\...............                      -26                       -7
                                                                            (-25 - -26)                (-5 - -8)
Hospital admissions--cardiovascular (adults, age >18) \d\.....                      -55                      -12
                                                                            (-44 - -70)               (-9 - -16)
Emergency room visits for asthma (age 18 years and younger)...                     -180                      -99
                                                                          (-110 - -260)             (-58 - -140)
Acute bronchitis, (children, age 8-12)........................                     -160                      -50
                                                                            (-0 - -330)              (-0 - -100)
Lower respiratory symptoms (children, age 7-14)...............                   -1,900                     -600
                                                                        (-910 - -2,900)            (-290 - -910)
Upper respiratory symptoms (asthmatic children, age 9-18).....                   -1,400                     -450
                                                                        (-450 - -2,400)            (-140 - -750)
Asthma exacerbation (asthmatic children, age 6-18)............                   -1,700                     -540
                                                                        (-190 - -4,800)           (-60 - -1,500)
Work loss days................................................                  -11,000                   -3,200
                                                                    (-10,000 - -13,000)        (-2,800 - -3,700)
Minor restricted activity days (adults age 18-65).............                  -68,000                  -19,000
                                                                    (-57,000 - -78,000)      (-16,000 - -22.000)
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Note that negative incidence expressed in this table reflects disbenefits; in other words, an increase in
  total aggregated national-level PM-related health impacts. Incidence is rounded to two significant digits.
  Estimates represent incidence within the 48 contiguous United States.
\b\ PM-related adult mortality based upon the American Cancer Society (ACS) Cohort Study (Pope et al., 2002) and
  the Six-Cities Study (Laden et al., 2006). Note that these are two alternative estimates of adult mortality
  and should not be summed. PM-related infant mortality based upon a study by Woodruff, Grillo, and Schoendorf,
  (1997).\367\
\c\ Respiratory hospital admissions for PM include admissions for chronic obstructive pulmonary disease (COPD),
  pneumonia and asthma.
\d\ Cardiovascular hospital admissions for PM include total cardiovascular and subcategories for ischemic heart
  disease, dysrhythmias, and heart failure.

 Table VIII.D.2-2--Estimated Ozone-Related Health Impacts Associated With the Mandated Renewable Fuel Volumes a
----------------------------------------------------------------------------------------------------------------
                                                                 2022 RFS2 Control case   2022 RFS2 Control case
                                                                    compared to RFS1         compared to AEO
                         Health effect                           reference case (5th%-    reference case (5th%-
                                                                       95th%ile)                95th%ile)
----------------------------------------------------------------------------------------------------------------
Premature Mortality, All ages \b\
Multi-City Analyses
    Bell et al. (2004)--Non-accidental........................                      -54                      -36
                                                                            (-17 - -92)              (-10 - -62)
    Huang et al. (2005)--Cardiopulmonary......................                      -90                      -59
                                                                           (-31 - -149)             (-18 - -100)
    Schwartz (2005)--Non-accidental...........................                      -83                      -55
                                                                           (-24 - -140)              (-13 - -97)
Meta-analyses:
    Bell et al. (2005)--All cause.............................                     -180                     -120
                                                                           (-80 - -270)             (-49 - -180)
    Ito et al. (2005)--Non-accidental.........................                     -240                     -160
                                                                          (-140 - -350)             (-90 - -230)
    Levy et al. (2005)--All cause.............................                     -250                     -160
                                                                          (-170 - -330)            (-110 - -220)
Hospital admissions--respiratory causes (adult, 65 and older)                      -470                     -310
 \c\..........................................................             (-20 - -860)              (-5 - -580)
Hospital admissions--respiratory causes (children, under 2)...                      -83                     -190
                                                                           (-24 - -140)             (-52 - -330)
Emergency room visit for asthma (all ages)....................                     -260                     -180
                                                                             (0 - -740)               (0 - -510)
Minor restricted activity days (adults, age 18-65)............                 -300,000                 -200,000
                                                                  (-110,000 - -500,000)     (-59,000 - -340,000)
School absence days...........................................                 -110,000                  -75,000
                                                                   (-35,000 - -180,000)     (-19,000 - -120,000)
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Note that negative incidence expressed in this table reflects disbenefits; in other words, an increase in
  total aggregated national-level ozone-related health impacts. Incidence is rounded to two significant digits.
  Estimates represent incidence within the 48 contiguous United States. Note that negative incidence estimates
  represent additional cases of an endpoint related to pollution increases associated with the increased use of
  renewable fuels.
\b\ Estimates of ozone-related premature mortality are based upon incidence estimates derived from several
  alternative studies: Bell et al. (2004); Huang et al. (2005); Schwartz (2005) ; Bell et al. (2005); Ito et al.
  (2005); Levy et al. (2005). The estimates of ozone-related premature mortality should therefore not be summed.
\c\ Respiratory hospital admissions for ozone include admissions for all respiratory causes and subcategories
  for COPD and pneumonia.

3. Monetized Impacts
    Table VIII.D.3-1 presents the estimated monetary value of the
increase in ozone and PM2.5-related health effects incidence
associated with the required renewable fuel volumes relative to both
the RFS1 and AEO reference cases for 2022. All monetized estimates are
stated in 2007$. These estimates account for growth in real gross
domestic product (GDP) per capita between the present and the year
2022. As the table indicates, total adverse health impacts are driven
primarily by the increase in PM2.5- and ozone-related
premature fatalities.
    Our estimate of monetized adverse health impacts in 2022 for the
required renewable fuel volumes relative to the RFS1 reference case,
using the ACS and Six-Cities PM mortality studies and the range of
ozone mortality assumptions, are between $1.4 billion and $4.5 billion,
assuming a 3 percent discount rate, or between $1.4 billion and $4.3
billion, assuming a 7 percent discount rate. The total monetized
adverse health impacts in 2022 for the required renewable fuel volumes
relative to the AEO reference case are between $0.63 billion and $2.2
billion assuming a 3 percent discount rate, and between $0.60 billion
and $2.1 billion assuming a 7 percent discount rate. We are unable to
quantify a number of health and environmental impact categories (see
Table VIII.D.1-2). These unquantified impacts may be substantial,
although their magnitude is highly uncertain.

                Table VIII.D.3-1--Estimated Monetary Value of Health and Welfare Effect Incidence
                                         [In millions of 2007$] \a\ \b\
----------------------------------------------------------------------------------------------------------------
                                                                      2022 RFS2 Control      2022 RFS2 Control
                                                                    case compared to RFS1   case compared to AEO
                                                                        reference case         reference case
----------------------------------------------------------------------------------------------------------------
PM2.5-Related Health Effect                                              Estimated Mean Value of Reductions
                                                                                (5th and 95th %ile)
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Derived from Epidemiology Studies \c\ \d\
    Adult, age 30+ --ACS study (Pope et al., 2002):
        3% discount rate..........................................                 -$860                  -$270
                                                                          (-$100--$2,300)           (-$32--$700)
        7% discount rate..........................................                 -$770                  -$240
                                                                           (-$91--$2,000)           (-$28--$630)

    Adult, age 25+ --Six-cities study (Laden et al., 2006):
        3% discount rate..........................................               -$2,200                  -$680
                                                                           (-$29--$5,500)         (-$90--$1,700)
        7% discount rate..........................................               -$2,000                  -$620
                                                                           (-$26--$5,000)         (-$81--$1,600)
    Infant Mortality, <1 year--(Woodruff et al. 1997).............                 -$4.0                  -$1.7
                                                                             (-$3.0--$15)          (-$1.3--$6.7)
Chronic bronchitis (adults, 26 and over)..........................                  -$32                  -$9.4
                                                                            (-$2.5--$110)          (-$0.72--$33)
Non-fatal acute myocardial infarctions:
    3% discount rate..............................................                  -$23                  -$6.6
                                                                             (-$4.1--$58)           (-$1.0--$17)
    7% discount rate..............................................                  -$23                  -$6.4
                                                                             (-$3.8--$58)          (-$0.95--$16)
Hospital admissions for respiratory causes........................                -$0.39                 -$0.11
                                                                          (-$0.19--$0.57         (-$0.06--$0.17)
Hospital admissions for cardiovascular causes.....................                 -$1.5                 -$0.33
                                                                           (-$0.96--$2.1)        (-$0.20--$0.45)
Emergency room visits for asthma..................................                -$0.07                 -$0.04
                                                                          (-$0.04--$0.10)        (-$0.02--$0.06)
Acute bronchitis (children, age 8-12).............................                -$0.01                -$0.004
                                                                              ($0--$0.03)            ($0--$0.01)
Lower respiratory symptoms (children, 7-14).......................                -$0.04                 -$0.01
                                                                          (-$0.01--$0.07)       (-$0.004--$0.02)
Upper respiratory symptoms (asthma, 9-11).........................                -$0.04                 -$0.01
                                                                          (-$0.01--$0.10)       (-$0.004--$0.03)
Asthma exacerbations..............................................                -$0.09                 -$0.03
                                                                         (-$0.009--$0.28)       (-$0.003--$0.09)
Work loss days....................................................                 -$1.7                 -$0.49
                                                                            (-$1.5--$1.9)        (-$0.42--$0.55)
Minor restricted-activity days (MRADs)............................                 -$4.3                  -$1.2
                                                                            (-$2.5--$6.2)         (-$0.69--$1.7)
----------------------------------------------------------------------------------------------------------------
Ozone-related Health Effect
----------------------------------------------------------------------------------------------------------------
Premature Mortality, All ages--Derived from Multi-city analyses:
    Bell et al., 2004.............................................                  $480                  -$320
                                                                           (-$51--$1,300)           (-$32--$880)
    Huang et al., 2005............................................                 -$800                  -$530
                                                                           (-$90--$2,200)         (-$56--$1,400)
    Schwartz, 2005................................................                 -$740                  -$490
                                                                           (-$76--$2,000)         (-$48--$1,300)
Premature Mortality, All ages--Derived from Meta-analyses:
    Bell et al., 2005.............................................               -$1,600                -$1,000
                                                                          (-$200--$4,000)         (-$130--$,700)
    Ito et al., 2005..............................................               -$2,200                -$1,400
                                                                          (-$290--$5,400)        (-$190--$3,600)
    Levy et al., 2005.............................................               -$2,200                -$1,400
                                                                          (-$300--$5,300)        (-$200--$3,500)
Hospital admissions--respiratory causes (adult, 65 and older).....                  -$11                  -$7.4
                                                                            (-$0.49--$20)          (-$0.13--$14)
Hospital admissions--respiratory causes (children, under 2).......                 -$3.0                  -$1.9
                                                                            (-$1.0--$4,9)         (-$0.52--$3.3)
Emergency room visit for asthma (all ages)........................                -$0.10                 -$0.07
                                                                         (-$0.009--$0.26)       (-$0.008--$0.18)
Minor restricted activity days (adults, age 18-65)................                  -$19                   -$13
                                                                             (-$6.4--$35)           (-$3.6--$24)
School absence days...............................................                  -$10                  -$6.7
                                                                             (-$3.1--$16)           (-$1.7--$11)
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Negatives indicate a disbenefit, or an increase in health effect incidence. Monetary impacts are rounded to
  two significant digits for ease of presentation and computation. PM and ozone impacts are nationwide.
\b\ Monetary impacts adjusted to account for growth in real GDP per capita between 1990 and the analysis year
  (2022).
\c\ Valuation assumes discounting over the SAB recommended 20 year segmented lag structure. Results reflect the
  use of 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines for preparing economic
  analyses.

4. What Are the Limitations of the Health Impacts Analysis?
    Every benefit-cost analysis examining the potential effects of a
change in environmental protection requirements is limited to some
extent by data gaps, limitations in model capabilities (such as
geographic coverage), and uncertainties in the underlying scientific
and economic studies used to configure the benefit and cost models.
Limitations of the scientific literature often result in the inability
to estimate quantitative changes in health and environmental effects,
such as premature mortality associated with exposure to carbon
monoxide. Deficiencies in the economics literature often result in the
inability to assign economic values even to those health and
environmental outcomes which can be quantified. These general
uncertainties in the underlying scientific and economics literature,
which can lead to valuations that are higher or lower, are discussed in
detail in the RIA and its supporting references. Key uncertainties that
have a bearing on the results of the benefit-cost analysis of the
coordinated strategy include the following:
     The exclusion of potentially significant and unquantified
benefit categories (such as health, odor, and ecological benefits of
reduction in air toxics, ozone, and PM);
     Errors in measurement and projection for variables such as
population growth;
     Uncertainties in the estimation of future year emissions
inventories and air quality;
     Uncertainty in the estimated relationships of health and
welfare effects to changes in pollutant concentrations including the
shape of the C-R function, the size of the effect estimates, and the
relative toxicity of the many components of the PM mixture;
     Uncertainties in exposure estimation; and
     Uncertainties associated with the effect of potential
future actions to limit emissions.
    As Table VIII.D.3-1 indicates, total impacts are driven primarily
by the additional premature mortalities estimated to occur each year.
Some key assumptions underlying the premature mortality estimates
include the following, which may also contribute to uncertainty:
     Inhalation of fine particles is causally associated with
premature death at concentrations near those experienced by most
Americans on a daily basis. Although biological mechanisms for this
effect have not yet been completely established, the weight of the
available epidemiological, toxicological, and experimental evidence
supports an assumption of causality. The impacts of including a
probabilistic representation of causality were explored in the expert
elicitation-based results of the PM NAAQS RIA.
     All fine particles, regardless of their chemical
composition, are equally potent in causing premature mortality. This is
an important assumption, because PM related to fuel use in mobile
sources may differ significantly from PM precursors released from
electric generating units and other industrial sources. However, no
clear scientific grounds exist for supporting differential effects
estimates by particle type.
     The C-R function for fine particles is approximately
linear within the range of ambient concentrations under consideration.
Thus, the estimates include health benefits from reducing fine
particles in areas with varied concentrations of PM, including both
regions that may be in attainment with PM2.5 standards and
those that are at risk of not meeting the standards.
     There is uncertainty in the magnitude of the association
between ozone and premature mortality. The range of ozone impacts
associated with the increased use of renewable fuels is estimated based
on the risk of several sources of ozone-related mortality effect
estimates. In a recent report on the estimation of ozone-related
premature mortality published by the National Research Council, a panel
of experts and reviewers concluded that short-term exposure to ambient
ozone is likely to contribute to premature deaths and that ozone-
related mortality should be included in estimates of the health impacts
of reducing ozone exposure.\368\ EPA has requested advice from the
National Academy of Sciences on how best to quantify uncertainty in the
relationship between ozone exposure and premature mortality in the
context of quantifying health impacts.
---------------------------------------------------------------------------

    \368\ National Research Council (NRC), 2008. Estimating
Mortality Risk Reduction and Economic Benefits from Controlling
Ozone Air Pollution. The National Academies Press: Washington, DC.
---------------------------------------------------------------------------

    Acknowledging the omission of a range of health and environmental
impacts, and the uncertainties mentioned above, we present a best
estimate of the total monetized impacts based on our interpretation of
the best available scientific literature and methods supported by EPA's
technical peer review panel, the Science Advisory Board's Health
Effects Subcommittee (SAB-HES). The National Academies of Science (NRC,
2002) has also reviewed EPA's methodology for analyzing air pollution-
related health and environmental impacts. EPA addressed many of these
comments in the analysis of the final PM NAAQS.369 370 This
analysis incorporates this most recent work to the extent possible.
---------------------------------------------------------------------------

    \369\ National Research Council (NRC). 2002. Estimating the
Public Health Benefits of Proposed Air Pollution Regulations. The
National Academies Press: Washington, DC.
    \370\ U.S. Environmental Protection Agency. October 2006. Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. Available at http://www.epa.gov/ttn/ecas/
ria.html.
---------------------------------------------------------------------------

E. Summary of Costs and Benefits

    Presented in this section are a summary of costs, benefits, and net
benefits of the renewable fuel volumes required by final RFS2 program.
Table VIII.E-1 shows the estimated annual societal costs and benefits
of the increased use of renewable fuels in 2022. The table also
presents estimated annual net benefits for 2022. In this table, fuel
savings are presented as negative costs associated with the increased
use of renewable fuels (rather than positive savings). Note that all
costs and benefits are presented in annual terms; we were unable to
estimate a stream of costs and benefits for many of the cost-benefit
categories and were therefore unable to estimate net present value.
    Table VIII.E-1 presents the benefits of reduced GHG emissions--and
consequently the annual quantified benefits (i.e., total benefits) and
quantified net benefits--for each of five interim SCC values considered
by EPA. As discussed in Section VIII.C, there is a very high
probability (very likely according to the IPCC) that the benefit
estimates from GHG reductions are underestimates because, in part,
models used to calculate SCC values do not include information about
impacts that have not been quantified.

Table VIII.E-1--Quantified Costs and Benefits of the Volumes Required by
             RFS2 Relative to the AEO Reference Case in 2022
                    [Billions of 2007 dollars] \371\
------------------------------------------------------------------------
                                                       2022
------------------------------------------------------------------------
                         Quantified Annual Costs
------------------------------------------------------------------------
Overall Fuel Cost \a\..................  -$11.8.
------------------------------------------------------------------------
                       Quantified Annual Benefits
------------------------------------------------------------------------
Reduced GHG Emissions (by SCC):
  SCC 5%...............................  $0.6 to $1.1.

  SCC 5% Newell-Pizer..................  $1.2 to $2.2.
  SCC from 3% and 5%...................  $2.4 to $4.2.
  SCC 3%...............................  $4.1 to $7.3.
  SCC 3% Newell-Pizer..................  $6.8 to $12.2.
PM2.5- and Ozone-Related Benefits b, c.  -$0.63 to -$2.2.
Energy Security Impacts................  $2.6.
Total Benefits (by SCC):
  SCC 5%...............................  $1 to $3.1.
  SCC 5% Newell-Pizer..................  $1.6 to $4.2.
  SCC from 3% and 5%...................  $2.8 to $6.2.
  SCC 3%...............................  $4.5 to $9.3.
  SCC 3% Newell-Pizer..................  $7.2 to $14.2.
------------------------------------------------------------------------
                         Quantified Net Benefits
------------------------------------------------------------------------
Net Benefits (by SCC):
  SCC 5%...............................  $13 to $15.
  SCC 5% Newell-Pizer..................  $13 to $16.
  SCC from 3% and 5%...................  $15 to $18.
  SCC 3%...............................  $16 to $21.
  SCC 3% Newell-Pizer..................  $19 to $26.
------------------------------------------------------------------------
\a\ Negative costs represent fuel savings from decreased gasoline and
  diesel consumption.
\b\ Negative benefits indicate a disbenefit, or an increase in monetized
  health impacts. Total includes premature mortality-related and
  morbidity-related ozone and PM2.5 impacts. Range was developed by
  adding the estimate from the ozone premature mortality function to the
  estimate of PM2.5-related premature mortality derived from either the
  ACS study (Pope et al., 2002) or the Six-Cities study (Laden et al.,
  2006).
\c\ The PM2.5-related impacts presented in this table assume a 3%
  discount rate in the valuation of premature mortality to account for a
  twenty-year segmented cessation lag. If a 7% discount rate had been
  used, the values would be approximately 9% lower.

IX. Impacts on Water
---------------------------------------------------------------------------

    \371\ In this table, we have included only the estimates from
the sector models as they provided a more detailed breakdown of
costs and benefits. We have excluded estimates of the agricultural
sector impacts of the RFS2 in Table VIII F-1 since these impacts are
considered economic rents.
---------------------------------------------------------------------------

A. Background

    As the production of biofuels increases as required by this rule,
there may be adverse impacts on both water quality and water quantity
affecting drinking water sources and ecological habitats. The impacts
could come from several different pathways: Growing crops for the
biofuel feedstock as well as production, storage, and distribution of
the biofuels. Increased production of biofuel crops may lead to changes
in the management of cropland and the use of fertilizer and pesticides
that could lead to greater loadings of nutrients, pesticides, and
sediment to our water resources. While there are methods to minimize
and mitigate the effects on water resources, there is still a potential
to impact both human health and the environment. Since both the
irrigation of corn and ethanol production use large quantities of
water, the supply of water could also be significantly affected in some
locations.
1. Agriculture and Water Quality
    There are three major pathways for contaminants to reach water from
agricultural lands: Run off from the land's surface, man-made ditches
or subsurface tile drains, and leaching to ground water. Many factors
influence the potential for contaminants such as fertilizers, sediment,
and pesticides to reach water from agricultural lands, including: Soil
type, slope, climate, crop type, and management. Management of
agricultural lands can take many forms, but key factors include
nutrient and pesticide application rates and application methods,
tillage, use of conservation practices and crop rotations by farmers,
and acreage and intensity of artificially drained lands.
    To examine the potential water-related impacts of growing crops for
biofuels, EPA focused its analysis on corn production for several
reasons. First, corn acres have increased dramatically, 20% from 2006
to 2007. Although corn acres have since declined somewhat, total corn
acres in 2009 remained the second highest since 1946.\372\ Second, corn
kernels are currently the predominant and most economically viable
feedstock for significant ethanol production. In addition, corn stover
(stalks, leaves) will likely be the predominant feedstock for
cellulosic ethanol production in the Upper Mississippi River Basin
where we modeled water quality impacts. And third, corn production can
contribute significantly to water pollution. Corn has the highest
fertilizer and pesticide use per acre and accounts for the largest
share of nitrogen fertilizer use among all crops.\373\ Corn generally
utilizes only 40 to 60 percent of the applied nitrogen fertilizer or
the residual organic nitrogen from sources such as manure or soybeans.
The remaining nitrogen is available to leave the field and run off to
surface waters, leach into ground water, or volatilize to the air where
it can return to water through depositional processes.
---------------------------------------------------------------------------

    \372\ U.S. Department of Agriculture, National Agricultural
Statistics Service, ``Crop Production'', August 12, 2009, available
online at: http://usda.mannlib.cornell.edu/usda/current/CropProd/
CropProd-08-12-2009.pdf.
    \373\ Committee on Water Implications of Biofuels Production in
the United States, National Research Council, 2008, Water
implications of biofuels production in the United States, The
National Academies Press, Washington, DC, 88 pp.
---------------------------------------------------------------------------

    Over the past 20 years, corn has been increasingly grown in
rotation with other crops, especially soybeans. As corn prices increase
relative to prices for other crops, more farmers choose to grow corn
every year (continuous corn). Continuous corn production results in
significantly greater nitrogen losses annually than a corn-soybean
rotation and lower yields per acre. In response, farmers may add higher
rates of nitrogen fertilizer to try to match yields of corn grown in
rotation. Growing continuous corn also increases the viability of pests
such as corn rootworm. Farmers may increase the use of pesticides to
control these pests. As corn acres increase, use of the common
herbicides like atrazine and glyphosate (e.g. Roundup) may also
increase.
    High corn prices may encourage farmers to grow corn on lands that
are marginal for row crop production such as hay land or pasture.
Typically, agricultural producers apply far less fertilizers and
pesticides on pasture land than land in row crops. Corn yield on these
marginal lands will be lower and may require higher fertilizer rates.
Disturbances of these soils can release nitrogen that has been stored
in the soil. Since nitrogen fertilizer prices are tied to oil prices,
fertilizer costs have fluctuated. How agricultural producers have
responded to these changes in both corn and fertilizer prices is
unclear.
    Artificial drainage is another important factor in determining the
losses of nutrients from cropland. Artificial drainage consists either
of subsurface tiles/pipes or man-made ditches that move water from wet
soils to surface waters so crops can be planted. In a few areas, drains
move water to wells and then groundwater instead of to surface water.
Artificial drainage has transformed large expanses of historic wetland
soils into productive agriculture lands. However, the artificial drains
or ditches also move nutrients and pesticides more quickly to surface
waters without any of the attenuation that would occur if these
contaminants moved through soils or wetlands. The highest proportion of
tile drainage occurs in the Upper Mississippi and the Ohio-Tennessee
River basins in areas of intensive corn production.\374\ Manmade

ditches predominate in areas like the Eastern Shore of the Chesapeake
Bay.
---------------------------------------------------------------------------

    \374\ U.S. Environmental Protection Agency, EPA Science Advisory
Board, Hypoxia in the northern Gulf of Mexico, EPA-SAB-08-003, 275
p., available online at: http://yosemite.epa.gov/sab/sabproduct.nsf/
C3D2F27094E03F90852573B800601D93/$File/EPA-SAB-08-
003complete.unsigned.pdf.
---------------------------------------------------------------------------

    The increase in corn production and prices may also have
significant impacts on voluntary conservation programs funded by the
U.S. Department of Agriculture (USDA). Conservation programs provide
important funding to help agricultural producers implement practices to
protect water quality and other resources. As land values increase due
to higher crop prices, USDA payments may not keep up with the need for
farmers and tenant farmers, to make an adequate return. For example,
the cost of farmland in Iowa increased an average of 18% in 2007 from
2006 prices.
    Both land retirement programs, like the Conservation Reserve
Program (CRP), and working land programs, like the Environmental
Quality Incentives Program (EQIP), can be affected. Under CRP, USDA
contracts with farmers to take land out of crop production to plant
grasses or trees. Generally farmers put land into CRP because it is
less productive and has other characteristics that make the cropland
more environmentally sensitive, such as high erosion rates. CRP
provides valuable environmental benefits both for water quality and for
wildlife habitat. Midwestern states, where much of U.S. corn is grown,
tend to have lower CRP reenrollment rates than the national average.
Under EQIP, USDA makes cost-share payments to farmers to implement
conservation practices. Some of the most cost-effective practices
implemented through these conservation programs include: Riparian
buffers; crop rotation; appropriate rate, timing, and method of
fertilizer application; cover crops; and, on tile-drained lands,
treatment wetlands and controlled drainage. If producers believe that
participation in conservation programs may reduce their profits, they
may be less willing to participate and/or require higher payments to
offset perceived losses.
    The water quality impacts of agricultural cellulosic feedstocks
such as corn stover and switchgrass are unknown, since cellulosic
ethanol is not currently produced commercially. Corn stover appears to
be one of the most viable feedstock for cellulosic ethanol, especially
in the Corn Belt states. When left in the field, corn stover maintains
the soil organic carbon which has many benefits as a source of
nutrients, preventing erosion by wind and water, and increasing soil
aeration and water infiltration. If corn stover is overharvested, there
may be impacts to both soil quality and water quality. Unlike corn,
switchgrass is a native, perennial crop that does not require high
inputs of fertilizers or pesticides. As a perennial crop, there is
limited sediment runoff compared to annual crops. There is very minimal
acreage of switchgrass grown at the present time, so it is difficult to
predict what inputs farmers will use to cultivate it as a commercial
crop. Some concern has been expressed about farmers increasing
fertilizer application rates and irrigation on switchgrass to increase
yields.
2. Ecological Impacts
    Nitrogen and phosphorus enrichment due to human activities is one
of the leading problems facing our nation's lakes, reservoirs, and
estuaries. Nutrient enrichment also has negative impacts on aquatic
life in streams; adverse health effects on humans and domestic animals;
and impairs aesthetic and recreational use. Excess nutrients can lead
to excessive growth of algae in rivers and streams, and aquatic plants
in all waters. For example, declines in invertebrate community
structure have been correlated directly with increases in phosphorus
concentration. High concentrations of nitrogen in the form of ammonia
are toxic to aquatic animals. Excessive levels of algae have also been
shown to be damaging to invertebrates. Finally, fish and invertebrates
will experience growth problems and can die if either oxygen is
depleted or pH increases are severe. Both of these conditions are
symptoms of eutrophication. As a biologic system becomes more enriched
by nutrients, different species of algae may spread and species
composition can shift.
    Nutrient pollution is widespread. Although the most widely known
examples of significant nutrient impacts are in the Gulf of Mexico and
the Chesapeake Bay, there are known impacts in over 80 estuaries/bays,
and thousands of rivers, streams, and lakes. Waterbodies in virtually
every state and territory in the U.S. are impacted by nutrient-related
degradation. Reducing nutrient pollution is a priority for EPA.
3. Impacts to the Gulf of Mexico
    According to the National Research Council, nutrients and sediment
are the two primary water quality problems in the Mississippi River
Basin and the Gulf of Mexico.\375\ Production of corn for ethanol may
exacerbate these existing serious water quality problems. Nitrogen
fertilizer applications to corn are already the major source of total
nitrogen loadings to the Mississippi River. A large area of low oxygen,
or hypoxia, forms in the Gulf of Mexico every year, often called the
``dead zone.'' The primary cause of the hypoxia is excess nutrients
(nitrogen and phosphorus) from the Upper Midwest flowing into the
Mississippi River to the Gulf. These nutrients trigger excessive algal
growth (or eutrophication) resulting in reduced sunlight, loss of
aquatic habitat, and a decrease in oxygen dissolved in the water.
Hypoxia threatens commercial and recreational fisheries in the Gulf
because fish, shrimp, and other aquatic species cannot live in the low
oxygen waters.
---------------------------------------------------------------------------

    \375\ Committee on the Mississippi River and the Clean Water
Act, National Research Council, 2008, Mississippi River Water
Quality and the Clean Water Act: Progress, Challenges, and
Opportunities, The National Academies Press, Washington, DC, 252 pp.
---------------------------------------------------------------------------

    The 2008 hypoxic zone was measured at 8,000 square miles, the
second largest since measurements began in 1985.\376\ In 2009 models
predicted an even larger hypoxic zone, but it was measured at only
3,000 square miles. A combination of below average high flows on the
Mississippi River and winds that mixed Gulf waters are the likely
causes of the reduced size of the 2009 zone. The Mississippi River/Gulf
of Mexico Watershed Nutrient Task Force's ``Gulf Hypoxia Action Plan
2008'' calls for a 45% reduction in both nitrogen and phosphorus
reaching the Gulf to reduce the size of the zone.\377\ The Action Plan
states that an additional reduction in nitrogen and phosphorus beyond
the 45% would be necessary to account for increased corn production for
ethanol and climate change impacts.
---------------------------------------------------------------------------

    \376\ Louisiana Universities Marine Consortium, 2009, `Gulf of
Mexico Dead Zone Surprising Small, but Severe, available online at:
http://www.gulfhypoxia.net/Research/Shelfwide%20Cruises/2009/Files/
Press_Release.pdf.
    \377\ Mississippi River/Gulf of Mexico Watershed Nutrient Task
Force, 2008, Gulf hypoxia action plan 2008 for reducing, mitigating,
and controlling hypoxia in the northern Gulf of Mexico and improving
water quality in the Mississippi River basin, 61 p., Washington, DC,
available online at: http://www.epa.gov/msbasin/actionplan.htm.
---------------------------------------------------------------------------

    Alexander, et al.\378\ modeled the sources of nutrient loadings to
the Gulf of Mexico using the USGS SPARROW model. They estimated that
agricultural sources contribute more than 70% of the delivered nitrogen
and phosphorus. Corn and soybean production accounted for 52% of
nitrogen delivery and 25% of the phosphorus delivery.
---------------------------------------------------------------------------

    \378\ Alexander, R.B., Smith, R.A., Schwarz, G.E., Boyer, E.W.,
Nolan, J.V., and Brakebill, J.W., 2008, Differences in phosphorus
and nitrogen delivery to the Gulf of Mexico from the Mississippi
River basin, Environmental Science and Technology, v. 42, no. 3, p.
822-830, available online at: http://pubs.acs.org/cgi-bin/
abstract.cgi/esthag/2008/42/i03/abs/es0716103.html.
---------------------------------------------------------------------------

    Several recent scientific reports have estimated the impact of
increasing ethanol feedstock acres in the Gulf of

Mexico watershed. Donner and Kucharik's \379\ study showed increases in
nitrogen export to the Gulf as a result of increasing corn ethanol
production from 2007 levels to 15 billion gallons in 2022. They
concluded that the expansion of corn-based ethanol production could
make it almost impossible to meet the Gulf of Mexico nitrogen reduction
goals without a ``radical shift'' in feed production, livestock diet,
and management of agricultural lands. The study estimated a mean
dissolved inorganic nitrogen load increase of 10% to 18% from 2007 to
2022 to meet the 15 billion gallon corn ethanol goal. EPA's Science
Advisory Board report to the Mississippi River/Gulf of Mexico Watershed
Task Force estimated that corn grown for ethanol will result in an
additional national annual loading of almost 300 million pounds of
nitrogen. An estimated 80% of that nitrogen loading or 238 million
pounds will occur in the Mississippi-Atchafalaya River Basin and
contribute nitrogen to the hypoxia in the Gulf of Mexico. The results
of a study by Costello, et al. indicate that moving from corn to
switchgrass and corn stover to produce ethanol will result in a 20%
decrease in the nitrate outputs from the Mississippi-Atchafalaya River
Basin. This decrease is not enough to meet the EPA target for reduction
of the hypoxic zone reduction.\380\
---------------------------------------------------------------------------

    \379\ Donner, S.D. and Kucharik, C.J., 2008, Corn-based ethanol
production compromises goal of reducing nitrogen export by the
Mississippi River, PNAS, v. 105, no. 11, p. 4513-4518, available
online at: http://www.pnas.org/content/105/11/4513.full.
    \380\ Costello, C.; Griffin, W.M.; Landis, A.E.; Matthew, H.S.,
2009, Impact of biofuel crop production on the formation of hypoxia
in the Gulf of Mexico, Environmental Science and Technology, 43
(20), pp. 7985-7991.
---------------------------------------------------------------------------

B. Upper Mississippi River Basin Analysis

    To provide a quantitative estimate of the impact of the increased
use of renewable fuels and production of corn ethanol generally on
water quality, EPA conducted an analysis that modeled the changes in
loadings of nitrogen, phosphorus, and sediment from agricultural
production in the Upper Mississippi River Basin (UMRB). The UMRB drains
approximately 189,000 square miles, including large parts of the states
of Illinois, Iowa, Minnesota, Missouri, and Wisconsin. Small portions
of Indiana, Michigan, and South Dakota also lie within the basin. EPA
selected the UMRB because it is representative of the many potential
issues associated with ethanol production, including its connection to
major water quality concerns such as Gulf of Mexico hypoxia, large corn
production, and numerous ethanol production plants.
    On average the UMRB contributes about 39% of the total nitrogen
loads and 26% of the total phosphorus loads to the Gulf of Mexico. The
high percentage of nitrogen from the UMRB is primarily due to the large
inputs of fertilizer for agriculture and the 60% of cropland that is
artificially drained by tiles. Since the mid 1990s, the annual nitrate-
nitrogen flux has steadily decreased. The Science Advisory Board report
attributes this decline to higher amount of nitrogen removed during
harvest, due to higher crop yields. For the same time period,
phosphorus inputs increased 12%.
1. SWAT Model
    EPA selected the SWAT (Soil and Water Assessment Tool) model to
assess nutrient and sediment loads from changes in agricultural
production in the UMRB. SWAT is a physical process model developed to
quantify the impact of land management practices in large, complex
watersheds.\381\
---------------------------------------------------------------------------

    \381\ Gassman, P.W., Reyes, M.R., Green, C.H., Arnold, J.G.,
2007, The soil and water assessment tool: Historical development,
applications, and future research directions. Transactions of the
American Society of Agricultural and Biological Engineers, v. 50,
no. 4, p. 1211-1240. http://www.card.iastate.edu/environment/items/
asabe_swat.pdf.
---------------------------------------------------------------------------

2. AEO 2007 Reference Case
    In order to assess alternative potential future conditions within
the UMRB, EPA developed a SWAT model of a reference case scenario of
current conditions against which to analyze the future impact of
increased corn production. For the NPRM, we used a 2005 baseline. For
the final rule, we revised the baseline to correspond with the
agricultural analysis described in Section VIII.A. Therefore we used
the corn ethanol production baseline from the Annual Energy Outlook
(AEO) 2007 report\382\ as our reference case. We assumed that 33% of
the corn produced in the UMRB was converted to corn ethanol, based on
estimates from USDA.\383\ This baseline does not include corn ethanol
produced at the volumes required by this rulemaking. The analysis
assumes that no cellulosic ethanol, including ethanol produced from
corn stover, would be produced in the reference case since the AEO
report did not include cellulosic ethanol production in its estimates.
---------------------------------------------------------------------------

    \382\ U. S. Department of Energy, Energy Information
Administration, Annual Energy Outlook 2007 With Projections to 2030,
February 2007, available on-line at: http://tonto.eia.doe.gov/
ftproot/forecasting/0383(2007).pdf.
    \383\ U.S. Department of Agriculture, USDA Agricultural
Projections to 2018, February 2009, available on-line at: http://
www.ers.usda.gov/Publications/OCE091/.
---------------------------------------------------------------------------

    The SWAT model was applied (i.e., calibrated) to the UMRB using
1960 to 2001 weather data and flow and water quality data from 13 USGS
gages on the main stem of the Mississippi River. The 42-year SWAT model
runs were performed and the results analyzed to establish runoff,
sediment, nitrogen, and phosphorous loadings from each of the 131 8-
digit HUC subwatersheds and the larger 4-digit subbasins, along with
the total outflow from the UMRB and at the various USGS gage sites
along the Mississippi River. These results provided the Reference
Scenario model values to which the future alternatives are compared.
    Physical structures that disconnect fertile floodplains with
seasonal fluctuation of stream and river levels also affect water
quantity and quality by altering the ability of these soils to serve as
a sink for nutrient rich waters. In lieu of data on where these
structures are or may be constructed, these effects were not modeled.
3. Reference Cases and RFS2 Control Case
    To assess the impacts of the increased use of corn ethanol, we
modeled an RFS2 Control Case and compared it to both the AEO 2007
Reference Case and the RFS1 Mandate Reference Case for the years 2010,
2015, 2020, and 2022. The RFS2 national corn ethanol volumes of 11.24
billion gallons a year (BGY) for 2010, and 15 BGY for 2016 to 2022 were
adjusted for the UMRB. Annual increases in corn yield of 1.23% were
built into the future scenarios. National average corn yields have been
increasing primarily due to favorable weather conditions and
improvement in practices to reduce stress on the corn plants from
excess water, drought, and pests. Fewer corn acres were needed to meet
ethanol production goals in the Control Case scenario after 2015 due to
those yield increases. Corn acres increased 9% in 2022 between the AEO
2007 Reference Case and the RFS2 (No Stover) Control Case. We were not
able to model the impacts of corn stover removal at this time, so the
analysis only reflects the impacts of increased use of corn grain for
renewable fuel use.
    Tables IX.B.3-1 through IX.B.3-3 compare the model outputs for
nitrogen, phosphorus, and sediment between the AEO 2007 Reference Case
and the RFS2 (No Stover) Control Case scenarios for the years 2010,
2015, 2020, and 2022. Land load is the total amount of nitrogen or
phosphorus that reaches a

stream within the UMRB. The total outflow is the nitrogen, phosphorus,
or sediment measured at the outlet of the UMRB at Grafton, Illinois
after accounting for in-stream loses due to uptake or assimilation.
These results only estimate loadings from the Upper Mississippi River
basin, not the entire Mississippi River watershed. As noted earlier,
the UMRB contributes about 39% of the total nitrogen loads and 26% of
total phosphorus loads to the Gulf of Mexico. The decreasing nutrient
load over time is likely attributable to the increased average corn
yield per acre, resulting in greater plant uptake of nitrogen and fewer
corn acres planted to reach the ethanol production requirements of this
rule.

    Table IX.B.3-1--Average Annual Nitrogen Loads: Comparison of AEO 2007 Reference Case to the 2022 RFS2 (No
                                              Stover) Control Case
                                          [% difference in parentheses]
----------------------------------------------------------------------------------------------------------------
                                             AEO 2007 reference case         2022 RFS2 (No Stover) Control case
                                     ---------------------------------------------------------------------------
              Model run                Total land load,    Total outflow,    Total land load,    Total outflow,
                                         million lbs        million lbs        million lbs        million lbs
----------------------------------------------------------------------------------------------------------------
2010................................               1948               1470       1944 (-0.21)       1467 (-0.20)
2015................................               1911               1441        1946 (1.83)        1469 (1.94)
2020................................               1887               1421        1912 (1.32)        1442 (1.48)
2022................................               1877               1413        1897 (1.07)        1430 (1.20)
----------------------------------------------------------------------------------------------------------------

    About 24 to 26% of the nitrogen and phosphorus leaving agricultural
fields was assimilated (taken by aquatic plants or volatilized) before
reaching the outlet of the UMRB. The assimilated nitrogen is not
necessarily eliminated as an environmental concern. Five percent or
more of the nitrogen can be converted to nitrous gas, a powerful
greenhouse gas that has 300 times the climate warming potential of
carbon dioxide, the major greenhouse. Thus, a water pollutant becomes
an air pollutant until it is either captured through biological
sequestration or converted fully to elemental nitrogen.

   Table IX.B.3-2--Average Annual Phosphorus Loads: Comparison of AEO 2007 Reference Case to the 2022 RFS2 (No
                                              Stover) Control Case
                                          [% difference in parentheses]
----------------------------------------------------------------------------------------------------------------
                                             AEO 2007 Reference case         2022 RFS2 (No Stover) control case
                                     ---------------------------------------------------------------------------
              Model run                Total land load,    Total outflow,    Total land load,    Total outflow,
                                         million lbs        million lbs        million lbs        million lbs
----------------------------------------------------------------------------------------------------------------
2010................................              180.0              133.8      179.9 (-0.06)      133.7 (-0.07)
2015................................              178.2              132.3       179.6 (0.79)       133.6 (0.98)
2020................................              177.0              131.3       178.2 (0.68)       132.4 (0.84)
2022................................              176.5              130.9       177.6 (0.62)       131.8 (0.69)
----------------------------------------------------------------------------------------------------------------

    Total sediment outflow showed very little change over all
scenarios. This result is primarily due to corn stover remaining on the
field following harvest and therefore reducing sediment transport to
water.

  Table IX.B.3-3--Average Annual Sediment Loads: Comparison of AEO 2007
              Reference Case to the 2022 RFS2 Control Case
                      [% difference in parentheses]
------------------------------------------------------------------------
                                             2007 AEO      2022 Control
                                         ----------------   volume case
                Model run                                ---------------
                                          Total outflow,  Total outflow,
                                            million tons   million tons
------------------------------------------------------------------------
2010....................................           6.231    6.232 (0.02)
2015....................................           6.221    6.233 (0.19)
2020....................................           6.214    6.224 (0.16)
2022....................................           6.211    6.220 (0.14)
------------------------------------------------------------------------

    The relationship between the number of acres of corn needed to
produce ethanol and the crop yield is a complex relationship. Increased
demand for corn based ethanol will not always result in increases in
corn acres. Our modeling demonstrated that in less than a decade,
increasing corn yields may counter the need for increased corn
production resulting in the number of acres of corn stabilizing and
additional nutrient and sediment loadings decreasing from the earlier
peaks.
    At this time, we are not able to assess the impact of these
additional loadings on the size of the Gulf of Mexico hypoxia zone or
water quality within the UMRB. For more details on the analysis,
including comparisons with the RFS1, see Chapter 6 in the RIA.
4. Case Study
    To evaluate local water quality impacts that are impossible to
ascertain at the scale of the UMRB, we also modeled the Raccoon River
watershed in central Iowa. The criteria for choosing this watershed
included: Percentage of corn area representative of the UMRB, stream
segments included in EPA's 303(d) list of impaired waters due to high
nutrient levels, biorefinery plants, drinking water intakes, and
observed streamflow and water quality data. Nearly 88% of the watershed
is in agriculture. 75% of the watershed produces corn and soybeans,
mostly in rotation. Hay and other row crops are produced on the
remaining agriculture land. The city of Des Moines makes up about 8% of
the watershed. The state of Iowa has listed numerous stream segments of
the Raccoon River as impaired.
    The case study used the same assumptions and scenarios as those
used for the UMRB analysis. SWAT-simulated streamflow and water quality
(total nitrogen and phosphorus, and sediment loadings) were calibrated
against observed data at both monthly and yearly time steps.

    As in the UMRB study, nitrogen loads to water increased for the
future scenarios, though at a greater rate. Future phosphorus loads
decreased in the Raccoon River model, where they had shown minor
increases in the UMRB model. For the Raccoon River, there was a greater
decrease in sediment load, which is the likely cause for the decrease
in phosphorus loadings.
5. Sensitivity Analysis
    Using the existing UMRB SWAT model, a sensitivity analysis was
conducted on a number of important meteorological and management
related factors. The goal was to further understand the model
characteristics and sensitivities to parameters and input forcing
functions that control the model response for the key environmental
indicators of concern. Scenarios were constructed using four factors:
fertilization application threshold, corn residue removal, daily air
temperature, and daily precipitation. The results of the analysis
showed that rainfall and temperature are the most influential factors
for all model outputs: water yield, total nitrogen and phosphorus
loadings, and sediment loadings. These results underscored the
importance of representing these two driving factors accurately in
hydrologic modeling. Corn residue removal noticeably reduced nutrient
loading into streams while increasing sediment loads. However, since
corn residue is the main source of organic nitrogen and phosphorus, the
removal of the residue leads to the need for higher nutrient inputs in
the growing season. The fertilization application threshold scenario
did not tangibly impact water yield and sediment loading. The findings
from this study indicated that future climate change could greatly
influence water availability and pollution from corn cropland.

C. Additional Water Issues

    The full water quality and water quantity impacts resulting from
corn ethanol production go beyond the ability of our model. For
example, the model does not account for fresh water constraints in
irrigated agriculture in corn producing areas or predict future
increases in drainage of agricultural lands. The following issues are
summarized to provide additional context about the broader range of
potential impacts. See Chapter 6 in the RIA for more discussion of
these issues.
1. Chesapeake Bay Watershed
    In May 2009, President Obama issued Executive Order 13508 on
Chesapeake Bay Restoration and Protection. The order established a
Federal Leadership Committee, chaired by EPA, and with senior
representatives from the departments of Agriculture, Commerce, Defense,
Homeland Security, Interior, and Transportation. In November 2009,
these federal agencies released a draft strategy which contains a range
of approaches for accelerating cleanup of the nation's largest estuary
and its vast watershed.\384\ The draft strategy calls for increased
accountability and performance from pollution control, habitat
protection and land conservation programs at all levels of government,
including an expanded use of regulatory authorities to address
pollution control and additional voluntary and market-based solutions--
particularly when it comes to habitat protection and land conservation
programs. The proposed actions are in response to overwhelming
scientific evidence that the health of the Chesapeake Bay remains
exceptionally poor, despite the concerted restoration efforts of the
past 25 years.
---------------------------------------------------------------------------

    \384\ Federal Leadership Committee for the Chesapeake Bay,
November 9, 2009, Executive Order 13508: Draft Strategy for
Protecting and Restoring the Chesapeake Bay, available on-line at:
http://executiveorder.chesapeakebay.net/.
---------------------------------------------------------------------------

    Agricultural lands contribute more nutrients to the Chesapeake Bay
than any other land use. To estimate the increase in nutrient loads to
the Bay from changes to agricultural crop production from 2005 to 2008,
the Chesapeake Bay Program Watershed Model Phase 4.3 and Vortex models
were utilized. Total nitrogen loads increased by almost 2.4 million
pounds from an increase of almost 66,000 corn acres. As agriculture
land use shifts from hay and pasture to more intensively fertilized row
crops, this analysis estimates that nitrogen loads increase by 8.8
million pounds.
2. Ethanol Production and Distribution
a. Production
    There are three principal sources of discharges to water from
ethanol plants: reject water from water purification, cooling water
blowdown, and off-batch ethanol. Most ethanol facilities use onsite
wells to produce the process water for the ethanol process. Groundwater
sources are generally not suitable for process water because of their
mineral content. Therefore, the water must be treated, commonly by
reverse osmosis. For every two gallons of pure water produced, about a
gallon of brine is discharged as reject water from this process. Most
estimates of water consumption in ethanol production are based on the
use of clean process water and neglect the water discharged as reject
water.
    The largest source of wastewater discharge is reverse osmosis
reject water from process water purification. The reverse osmosis
process concentrates groundwater minerals to levels where they can have
water quality impacts. There is really no means of ``treating'' these
ions to reduce toxicity, other than further concentration and disposal,
or use of in-stream dilution. Some facilities have had to construct
long pipelines to get access to dilution so they can meet water quality
standards. Ethanol plants also discharge cooling water blowdown, where
some water is discharged to avoid the buildup of minerals in the
cooling system. These brines are similar to the reject water described
above. In addition, if off-batch ethanol product or process water is
discharged, the waste stream can have high Biochemical Oxygen Demand
(BOD) levels. BOD directly affects the amount of dissolved oxygen in
rivers and streams. The greater the BOD, the more rapidly oxygen is
depleted in the stream. The consequences of high BOD are the same as
those for low dissolved oxygen: aquatic organisms become stressed,
suffocate, and die.
    Older generation production facilities used four to six gallons of
process water to produce a gallon of ethanol, but newer facilities use
less than three gallons of water in the production process. Most of
this water savings is gained through improved recycling of water and
heat in the process. Water supply is a local issue, and there have been
concerns with water consumption as new plants go online. Some
facilities are tapping into deeper aquifers as a source of water. These
deeper water resources tend to contain higher levels of minerals and
this can further increase the concentration of minerals in reverse
osmosis reject water. Geographic impacts of water use vary. A typical
plant producing 50 million gallons of ethanol per year uses a minimum
of 175 million gallons of water annually. In Iowa, water consumption
from ethanol refining accounts for about seven percent of all
industrial water use, and is projected to be 14% by 2012--or about 50
million gallons per day.
b. Distillers Grain with Solubles
    Distillers grain with solubles (DGS) is an important co-product of
ethanol production. About one-third of the corn processed into ethanol
is converted into DGS. DGS has become an increasingly important feed
component for confined livestock. DGS are higher in crude protein
(nitrogen) and three to four times higher in phosphorus relative to

traditional feeds. When nitrogen and phosphorus are fed in excess of
the animal's needs, these nutrients are excreted in the manure. When
manure is applied to crops at rates above their nutrient needs or at
times the crop cannot use the nutrients, the nutrients can run off to
surface waters or leach into ground waters.
    Livestock producers can limit the potential pollution from manure
applications to crops by implementing comprehensive nutrient
management. Due to the substantially higher phosphorus content of
manure from livestock fed DGS, producers will potentially need
significantly more acres to apply the manure so that phosphorus will
not be applied at rates above the needs of the crops. This is a
particularly important concern in areas where concentrated livestock
production already produces more phosphorus in the manure than can be
taken up by crops or pasture land in the vicinity.
    Several recent studies have indicated that DGS may have an impact
on food safety. Cattle fed DGS have a higher prevalence of a major
food-borne pathogen, E. coli O157, than cattle without DGS in their
diets.\385\ More research is needed to confirm these studies and devise
methods to eliminate the potential risks.
---------------------------------------------------------------------------

    \385\ Jacob, M. D., Fox, J. T., Drouillard, J. S., Renter, D.
G., Nagaraja, T. G., 2008, Effects of dried distillers' grain on
fecal prevalence and growth of Escherichia coli O157 in batch
culture fermentations from cattle, Applied and Environmental
Microbiology, v. 74, no. 1, p. 38-43, available online at: http://
aem.asm.org/cgi/content/abstract/74/1/38.
---------------------------------------------------------------------------

c. Ethanol Leaks and Spills from Fueling Stations
    The potential for exposure to fuel components and/or additives can
occur when underground fuel storage tanks leak fuel into ground water
that is used for drinking water supplies or when spills occur from
aboveground tanks or distribution systems that contaminate surface
drinking water supplies, or surface waters. Additionally, in surface
waters, rapid biodegradation of ethanol can result in depletion of
dissolved oxygen with potential mortality to aquatic life.
    Regarding leaks or spills and drinking water impacts, ethanol
biodegrades quickly and is not necessarily the pollutant of greatest
concern in these situations. Instead, ethanol's high biodegradability
shifts the subsurface geochemistry, which can cause the reduced
biodegradation of benzene, toluene, and xylene (up to 50% for toluene
and 95% for benzene).\386\ The plume of BTEX compounds from a fuel
spill (benzene, toluene, ethylbenzene and xylenes) can extend as much
as 70% farther in ground water and can persist longer, thereby
increasing potential exposures to these compounds.\387\
---------------------------------------------------------------------------

    \386\ Mackay, D.M., de Sieyes, N. R., Einarson, M.D., Feris,
K.P., Pappas, A.A., Wood, I.A., Jacobson, L., Justice, L.G., Noske,
M.N., Scow, K.M., and Wilson, J.T., 2006, Impact of ethanol on the
natural attenuation of benzene, toluene, and o-Xylene in a normally
sulfate-reducing aquifer, Environmental Science & Technology, v. 40,
p. 6123-6130.
    \387\ Ruiz-Aguilar, G. M. L.; O'Reilly, K.; Alvarez, P. J. J.,
2003, Forum: A comparison of benzene and toluene plume lengths for
sites contaminated with regular vs. ethanol-amended gasoline, Ground
Water Monitoring and Remediation, v. 23, p. 48-53.
---------------------------------------------------------------------------

    Ethanol leak and spills from the approximately 600,000 gas stations
in the U.S, could have a significant impact on water quality and
drinking water supplies. Urban areas, that rely on ground water for
drinking water would be affected most, especially where are existing
water shortages.
    With the increasing use of ethanol in the fuel supply nationwide,
it is important to understand the impact of ethanol on the existing
tank infrastructure. Federal regulations require that underground
storage tank (UST) systems be compatible with the fuel stored. Because
much of the current underground storage tank equipment was designed and
tested for use with petroleum fuels, there may be many UST systems
currently in use that contain materials that are incompatible with
ethanol blends greater than 10%. Combined with the fact that ethanol is
more corrosive than petroleum, there is concern regarding the increased
potential for leaks from existing distribution systems, terminals and
gas stations and subsequent impacts on water supplies. Given the
practical challenges of determining the age and materials of
underground storage equipment at approximately 233,000 federally
regulated facilities, it may be difficult or impossible to confirm the
compatibility of current underground storage tanks and other tank-
related hardware with ethanol blends. Further discussion of challenges
in retail distribution are discussed in Section 1.6 of the RIA.
    In 2008, there were 7,400 reported releases from underground
storage tanks. Therefore, EPA is undertaking analyses designed to
assess the potential impacts of ethanol blends on tank infrastructure
and leak detection systems and determine the resulting water quality
impacts.
3. Biodiesel Plants
    Biodiesel plants use much less water than ethanol plants. Water is
used for washing impurities from the finished product. Water use is
variable, but is usually less than one gallon of water for each gallon
of biodiesel produced. Larger well-designed plants use water more
sparingly, while smaller producers use more water. Some facilities
recycle washwater, which reduces water consumption. The levels of BOD
(biological oxygen demand) in process wastewater from biodiesel plants
is highly variable. Most production processes produce washwater that
has very high BOD levels. The high BOD levels of these wastes can
overload and disrupt municipal treatment plants.
    Crude glycerin is an important side product from the biodiesel
process and is about 10% of the final product. Although there is a
commercial market for glycerin, the rapid development of the biodiesel
industry has caused a glut of glycerin production and many facilities
dispose of their glycerin. Poor handling of crude glycerin has resulted
in disruptions at sewage treatment plants and fish kills.
4. Water Quantity
    Water demand for crop production for ethanol could potentially be
much larger than biorefinery demand. According to the National Research
Council, the demand for water to irrigate crops for biofuels will not
have an impact on national water use, but it is likely to have
significant local and regional impacts. The impact is crop and region
specific, but could be especially great in areas where new acres are
irrigated.
5. Drinking Water
    Increased corn production will result in the increased use of
fertilizers and herbicides which can drain to surface water or ground
water sources used by public water systems and individual home owners
on private wells. This may increase the occurrence of nitrate, nitrite,
and the herbicide Atrazine in sources of drinking water. The U.S.
Geological Survey evaluated the fate and transport of herbicides in
surface water, ground water, and in precipitation in the Midwest during
the 1990s. The results of these studies showed the occurrence and
temporal distribution of herbicides and their associated degradation
products in reservoir outflows.\388\
---------------------------------------------------------------------------

    \388\ Scribner, E.A., Thurman, E.M., Goolsby, D.A., Meyer, M.T.,
Battaglin, W.A., and Kolpin, D.W., 2005, Summary of significant
results from studies of triazine herbicides and their degradation
products in surface water, ground water, and precipitation in the
Midwestern United States during the 1990s: U.S. Geological Survey
Scientific Investigations Report 2005-5094, 27 p.

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

    Under the Safe Drinking Water Act, EPA has established enforceable
standards for these contaminants that apply to public water systems.
Source water contamination by these chemicals may raise local water
system costs for treatment or for increased energy to pump water where
ethanol production is accelerating the long running depletion of
aquifers e.g., pumping extra water to grow the additional corn in
addition to pumping extra water to process the corn into ethanol. There
is also an (often concurrent) risk of exhausting local drinking water
supplies where aquifers have been severely depleted.

X. Public Participation

    Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on May 26, 2009 (74 FR 24904), and we considered these
comments in developing the final rule. In addition, we held a public
hearing on the proposed rulemaking on June 9, 2009, and we have
considered comments presented at the hearing.
    Throughout the rulemaking process, EPA met with stakeholders
including representatives from the fuel and renewable fuels industries,
the agricultural sector, and others. The program we are finalizing
today was developed as a collaborative effort with these stakeholders.
    We have prepared a detailed Summary and Analysis of Comments
document, which describes the comments we received on the proposal and
our response to each of these comments. The Summary and Analysis of
Comments is available in the docket for this rule at the Internet
address listed under ADDRESSES, as well as on the Office of
Transportation and Air Quality Web site (http://www.epa.gov/otaq/
renewablefuels/index.htm). In addition, comments and responses for key
issues are included throughout this preamble.

XI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order (EO) 12866 (58 FR 51735,
October 4, 1993), this action is an ``economically significant
regulatory action'' because it is likely to have an annual effect on
the economy of $100 million or more. Accordingly, EPA submitted this
action to the Office of Management and Budget (OMB) for review under EO
12866 and any changes made in response to OMB recommendations have been
documented in the docket for this action.
    In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action. This analysis is contained in the
Regulatory Impact Analysis, which is available in the docket for this
rulemaking and at the docket internet address listed under ADDRESSES in
the first part of this final rule.

B. Paperwork Reduction Act

    The information collection requirements in this have been submitted
for approval to the Office of Management and Budget (OMB) under the
Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The information
collection requirements are not enforceable until OMB approves them.
    Information to be collected under this rulemaking includes
compliance reports and reports regarding the generation and assignment
of, and transactions involving, RINs. This final rule involves
registration requirements, recordkeeping and reporting. Affected
parties include producers of renewable fuels, importers, domestic and
foreign refiners, exporters, domestic and foreign parties who own RINs,
and biofuel feedstock producers. Individual items of recordkeeping and
reporting are discussed in great detail in this preamble and in the
``Supporting Statement for the Renewable Fuels Standard (RFS2) Final
Rule,'' which has been placed in the public docket.
    We estimate the annual recordkeeping and reporting burden for this
rule at 3.2 hours per response. We estimate a total of 1,060,026
respondents; 4,781,126 responses; 1,485,008 burden hours, and a total
cost associated with responding of $112,872,105. Burden is defined at 5
CFR 1320.3(b).
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR Part 9. In addition, EPA is
amending the table in 40 CFR part 9 of currently approved OMB control
numbers for various regulations to list the regulatory citations for
the information requirements contained in this final rule.

C. Regulatory Flexibility Act

1. Overview
    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of the renewable fuel volume
requirements of RFS2 on small entities, small entity is defined as: (1)
A small business as defined by the Small Business Administration's
(SBA) regulations at 13 CFR 121.201 (see table below); (2) a small
governmental jurisdiction that is a government of a city, county, town,
school district or special district with a population of less than
50,000; and (3) a small organization that is any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.
    The following table provides an overview of the primary SBA small
business categories potentially affected by this regulation:

------------------------------------------------------------------------
                                      Defined as small entity  NAICS \a\
            Industry \a\                     by SBA if:          codes
------------------------------------------------------------------------
Gasoline and diesel fuel refiners...  <=1,500 employees......     324110
------------------------------------------------------------------------
\a\ North American Industrial Classification System.

2. Background
    Section 1501 of the Energy Policy Act of 2005 (EPAct) amended
section 211 of the Clean Air Act (CAA) by adding section 211(o) which
required the Environmental Protection Agency (EPA) to promulgate
regulations implementing a renewable fuel program. EPAct specified that
the regulations must ensure a specific volume of renewable fuel to be
used in gasoline sold in the U.S. each year, with the total volume
increasing over time. The goal of the program was to reduce dependence
on foreign sources of petroleum, increase domestic sources of energy,
and help transition to alternatives to petroleum in the transportation
sector.
    The final Renewable Fuels Standard (RFS1) program rule was
published on May 1, 2007, and the program began on September 1, 2007.
Per EPAct, the RFS1 program created a specific annual level

for minimum renewable fuel use that increases over time--resulting in a
requirement that 7.5 billion gallons of renewable fuel be blended into
gasoline (for highway use only) by 2012. Under the RFS1 program,
compliance is based on meeting the required annual renewable fuel
volume percent standard (published annually in the Federal Register by
EPA) through the use of Renewable Identification Numbers, or RINs, 38-
digit serial numbers assigned to each batch of renewable fuel produced.
For obligated parties (those who must meet the annual volume percent
standard), RINs must be acquired to show compliance.
    The Energy Independence and Security Act of 2007 (EISA) amended
section 211(o), and the RFS program, by requiring higher volumes of
renewable fuels, to result in 36 billion gallons of renewable fuel by
2022. EISA also expanded the purview of the RFS1 program by requiring
that these renewable fuels be blended into gasoline and diesel fuel
(both highway and nonroad). This expanded the pool of regulated
entities, so the obligated parties under the RFS program will now
include certain refiners, importers, and blenders of these fuels that
were not previously covered by the RFS1 program. In addition to the
total renewable fuel standard required by EPAct, EISA added standards
for three additional types of renewable fuels to the program (advanced
biofuel, cellulosic biofuel, and biomass-based diesel) and requires
compliance with all four standards.
    As required by section 609(b) of the RFA, as amended by SBREFA, EPA
also conducted outreach to small entities and convened a Small Business
Advocacy Review Panel to obtain advice and recommendations of
representatives of the small entities that potentially would be subject
to the rule's requirements.
3. Summary of Potentially Affected Small Entities
    The small entities that will potentially be subject to the RFS
program include: domestic refiners that produce gasoline and/or diesel
and importers of gasoline and/or diesel into the United States. Based
on 2007 data, EPA believes that there are about 95 refiners of gasoline
and diesel fuel. Of these, EPA believes that there are currently 17
refiners, owning 20 refineries, producing gasoline and/or diesel fuel
that meet the SBA small entity definition of having 1,500 employees or
less. Further, we believe that three of these refiners own refineries
that do not meet the Congressional ``small refinery'' definition.\389\
It should be noted that because of the dynamics in the refining
industry (i.e., mergers and acquisitions), the actual number of
refiners that ultimately qualify for small refiner status under the
RFS2 rule could be different than this estimate.
---------------------------------------------------------------------------

    \389\ EPAct defined a ``small refinery'' as a refinery with a
crude throughput of no more than 75,000 barrels of crude per day (at
CAA section 211(o)(1)(K)). This definition is based on facility size
and is different than SBA's small refiner definition (which is based
on company size). A small refinery could be owned by a larger
refiner that exceeds SBA's small entity standards. SBA's size
standards were established to set apart those businesses which are
most likely to be at an inherent economic disadvantage relative to
larger businesses.
---------------------------------------------------------------------------

4. Reporting, Recordkeeping, and Compliance
    Registration, reporting, and recordkeeping are necessary to track
compliance with the RFS standards and transactions involving RINs. As
discussed above in Sections II.J and III.A, the compliance requirements
under the RFS2 rule are in many ways similar to those required under
the RFS1 rule, with some modifications (e.g., those to account for the
new requirements of EISA). New provisions being finalized in today's
action include the new EPA Moderated Transaction System (EMTS) which
allows for ``real-time'' reporting of RIN generation transactions, and
the ability for small blenders to ``delegate'' their RIN-separation
responsibilities to the party directly upstream. Please see Sections II
and III of this preamble for more detailed information on these and
other registration, recordkeeping, reporting, and compliance
requirements of this final rule.
5. Related Federal Rules
    We are aware of a few other current or proposed Federal rules that
are related to this rule. The primary related Federal rules are: the
first Renewable Fuel Standard (RFS1) rule (72 FR 23900, May 1, 2007),
the RFS1 Technical Amendment Direct Final Rulemaking (73 FR 57248,
October 2, 2008),\390\ and Control of Emissions from New Marine
Compression-Ignition Engines at or Above 30 Liters per Cylinder
(proposed rule: 74 FR 44442, August 28, 2009; final rule: Signed
December 22, 2009).
---------------------------------------------------------------------------

    \390\ This Direct Final Rule corrects minor typographical errors
and provides clarification on existing provisions in the RFS1
regulations.
---------------------------------------------------------------------------

6. Steps Taken To Minimize the Significant Economic Impact on Small
Entities
a. Significant Panel Findings
    We convened a Small Business Advocacy Review Panel (SBAR Panel, or
the Panel), which considered many regulatory options and flexibilities
that would help mitigate potential adverse effects on small businesses
as a result of the increased volumes of renewable fuel required by
RFS2. During the SBREFA Panel process, the Panel sought out and
received comments on the regulatory options and flexibilities that were
presented to Small Entity Representatives (SERs) and Panel members. The
major flexibilities and hardship relief provisions that were
recommended by the Panel were proposed and some are being finalized
today (for more information regarding the Panel process, see the SBREFA
Final Panel Report, which is available in the public docket for this
rule).
b. Outreach With Small Entities (and the Panel Process)
    As required by section 609(b) of the RFA as amended by SBREFA, EPA
conducted outreach to small entities and convened a SBAR Panel prior to
proposing the RFS2 rule to obtain advice and recommendations of
representatives of the small entities that potentially would be subject
to the rule's requirements.
    As part of the SBAR Panel process, we conducted outreach with
representatives from the various small entities that would be affected
by the rule. We met with these SERs to discuss the potential rulemaking
approaches and potential options to decrease the impact of the
rulemaking on their industries. The Panel received written comments
from the SERs, specifically on regulatory alternatives that could help
to minimize the rule's impact on small businesses. In general, SERs
stated that they believed that small refiners would face challenges in
meeting the new standards. More specifically, they voiced concerns with
respect to the RIN program itself, uncertainty (with the required
renewable fuel volumes, RIN availability, and cost), and the desire for
a RIN system review.
    The Panel agreed that EPA should consider the issues raised by the
SERs (and discussions had by the Panel itself) and that EPA should
consider comments on flexibility alternatives that would help to
mitigate any negative impacts on small businesses. Alternatives
discussed throughout the Panel process included those offered in
previous or current EPA rulemakings, as well as alternatives suggested
by SERs and Panel members, and the Panel recommended that all be
considered in the development of the rule.
    A summary of the Panel's recommendations, what the Agency proposed,
and what is being finalized

today is discussed below. A detailed discussion of the regulatory
alternatives and hardship provisions discussed and recommended by the
Panel can be found in the SBREFA Final Panel Report, and a discussion
of the provisions being finalized today is located in Section III.E of
this preamble.
c. Panel Recommendations, Proposed Provisions, and Provisions Being
Finalized
    The purpose of the Panel process is to solicit information as well
as suggested flexibility options from the SERs, and the Panel
recommended that EPA continue to do so during the development of the
RFS2 rule. Recognizing the concerns about EPA's authority to provide
extensions to a subset of small refineries (i.e., those that are owned
by small refiners) different from that provided to small refineries in
section 211(o)(9), the Panel recommended that EPA continue to evaluate
this issue, and that EPA request comment on its authority and the
appropriateness of providing extensions beyond those authorized by
section 211(o)(9) for small refineries operated by a small refiner. The
Panel also recommended that EPA propose to provide the same extension
provision of 211(o)(9) to small refiners who do not own small
refineries as is provided for small refiners who do own small
refineries.
i. Delay in Standards
    The RFS1 program regulations provide small refiners who operate
small refineries as well as small refiners who do not operate small
refineries with a temporary exemption from the standard through
December 31, 2010. Small refiner SERs suggested that an additional
temporary exemption for the RFS2 program would be beneficial to them in
meeting the RFS2 standards. EPA evaluated a temporary exemption for at
least some of the four required RFS2 standards for small refiners. The
Panel recommended that EPA propose a delay in the effective date of the
standards until 2014 for small entities, to the maximum extent allowed
by the statute. However, the Panel recognized that EPA has serious
concerns about its authority to provide an extension of the temporary
exemption for small refineries that is different from that provided in
CAA section 211(o)(9), since Congress specifically addressed an
extension for small refineries in that provision.
    The Panel did recommend that EPA propose other avenues through
which small refineries and small refiners could receive extensions of
the temporary exemption. These avenues were a possible extension of the
temporary exemption for an additional two years following a study of
small refineries by the Department of Energy (DOE) and provisions for
case-by-case economic hardship relief.
    We proposed and took comment on the recommendations of the Panel
and SERs above. As discussed in section III.E of this preamble, based
on our analysis and further review of the provisions and the DOE Small
Refinery Study, we have decided to finalize continuing the small
refinery and small refiner exemption finalized in RFS1 through December
31, 2010 for all small refiners.
ii. Phase-in
    Small refiner SERs' suggested that a phase-in of the obligations
applicable to small refiners would be beneficial for compliance, such
that small refiners would comply by gradually meeting the standards on
an incremental basis over a period of time, after which point they
would comply fully with the RFS2 standards, EPA has serious concerns
about its authority to allow for such a phase-in of the standards. CAA
section 211(o)(3)(B) states that the renewable fuel obligation shall
``consist of a single applicable percentage that applies to all
categories of persons specified'' as obligated parties. This kind of
phase-in approach would result in different applicable percentages
being applied to different obligated parties. Further, as discussed
above, such a phase-in approach would provide more relief to small
refineries operated by small refiners than that provided under the
small refinery provision. Thus the Panel recommended that EPA should
invite comment on a phase-in, but not propose such a provision.
    We took comment on this provision, however we are not finalizing
this provision, as we continue to believe that a phase-in of the
applicable standards would in fact result in different standards for
small refiners.
iii. RIN-Related Flexibilities
    The small refiner SERs requested that the proposed rule contain