could have important clinical implications for asthmatics since
transient increases in airway responsiveness following NO2
exposure have the potential to increase symptoms and worsen asthma
control. Together, the epidemiologic and experimental data sets form a
plausible, consistent, and coherent description of a relationship
between NO2 exposures and an array of adverse health effects
that range from the onset of respiratory symptoms to hospital
admission.
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    \212\ U.S. EPA (2008). Integrated Science Assessment for Oxides
of Nitrogen--Health Criteria (Final Report). EPA/600/R-08/071.
Washington, DC,: U.S.EPA. Retrieved on March 19, 2009 from http://
cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=194645.
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    Although the weight of evidence supporting a causal relationship is
somewhat less certain than that associated with respiratory morbidity,
NO2 has also been linked to other health endpoints. These
include all-cause (nonaccidental) mortality, hospital admissions or
emergency department visits for cardiovascular disease, and decrements
in lung function growth associated with chronic exposure.
c. Health Effects of SOX
    Information on the health effects of SO2 can be found in
the U.S. Environmental Protection Agency Integrated Science Assessment
for Sulfur Oxides.\213\ SO2 has long been known to cause
adverse respiratory health effects, particularly among individuals with
asthma. Other potentially sensitive groups include children and the
elderly. During periods of elevated ventilation, asthmatics may
experience symptomatic bronchoconstriction within minutes of exposure.
Following an extensive evaluation of health evidence from epidemiologic
and laboratory studies, the EPA has concluded that there is a causal
relationship between respiratory health effects and short-term exposure
to SO2. Separately, based on an evaluation of the
epidemiologic evidence of associations between short-term exposure to
SO2 and mortality, the EPA has concluded that the overall
evidence is suggestive of a causal relationship between short-term
exposure to SO2 and mortality.
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    \213\ U.S. EPA. (2008). Integrated Science Assessment (ISA) for
Sulfur Oxides--Health Criteria (Final Report). EPA/600/R-08/047F.
Washington, DC: U.S. Environmental Protection Agency. Retrieved on
March 18, 2009 from http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=198843.
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4. Carbon Monoxide
    Carbon monoxide (CO) forms as a result of incomplete fuel
combustion. CO enters the bloodstream through the lungs, forming
carboxyhemoglobin and reducing the delivery of oxygen to the body's
organs and tissues. The health threat from exposures to lower levels of
CO is most serious for those who suffer from cardiovascular disease,
particularly those with angina or peripheral vascular disease.
Epidemiological studies have suggested that exposure to ambient levels
of CO is associated with increased risk of hospital admissions for
cardiovascular causes, fetal effects, and possibly premature
cardiovascular mortality. Healthy individuals also are affected, but
only when they are exposed to higher CO levels. Exposure of healthy
individuals to elevated CO levels is associated with impairment of
visual perception, work capacity, manual dexterity, learning ability
and performance of complex tasks. Carbon monoxide also contributes to
ozone nonattainment since carbon monoxide reacts photochemically in the
atmosphere to form ozone.\214\ Additional information on CO related
health effects can be found in the Carbon Monoxide Air Quality Criteria
Document (CO AQCD).215 216
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    \214\ U.S. EPA (2000). Air Quality Criteria for Carbon Monoxide,
EPA/600/P-99/001F. This document is available in Docket EPA-HQ-OAR-
2004-0008.
    \215\ U.S. EPA (2000). Air Quality Criteria for Carbon Monoxide,
EPA/600/P-99/001F. This document is available in Docket EPA-HQ-OAR-
2004-0008.
    \216\ The CO NAAQS is currently under review and the EPA is
considering all available science on CO health effects, including
information which has been published since 2000, in the development
of the upcoming CO Integrated Science Assessment Document (ISA). A
second draft of the CO ISA was completed in September 2009 and was
submitted for review by the Clean Air Scientific Advisory Committee
(CASAC) of EPA's Science Advisory Board. For more information, see
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=213229.
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5. Air Toxics
    The population experiences an elevated risk of cancer and noncancer
health effects from exposure to the class of pollutants known
collectively as ``air toxics.''\217\ Fuel combustion contributes to
ambient levels of air toxics that can include, but are not limited to,
acetaldehyde, acrolein, benzene, 1,3-butadiene, formaldehyde, ethanol,
naphthalene and peroxyacetyl nitrate

(PAN). Acrolein, benzene, 1,3-butadiene, formaldehyde and naphthalene
have significant contributions from mobile sources and were identified
as national or regional risk drivers in the 2002 National-scale Air
Toxics Assessment (NATA).\218\ PAN, which is formed from precursor
compounds by atmospheric processes, is not assessed in NATA. Emissions
and ambient concentrations of compounds are discussed in Chapter 3 of
the RIA and Section VI.D.3 of this preamble.
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    \217\ U. S. EPA. 2002 National-Scale Air Toxics Assessment.
http://www.epa.gov/ttn/atw/nata2002/risksum.html.
    \218\ U.S. EPA .2009. National-Scale Air Toxics Assessment for
2002. http://www.epa.gov/ttn/atw/nata2002.
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a. Acetaldehyde
    Acetaldehyde is classified in EPA's IRIS database as a probable
human carcinogen, based on nasal tumors in rats, and is considered
toxic by the inhalation, oral, and intravenous routes.\219\
Acetaldehyde is reasonably anticipated to be a human carcinogen by the
U.S. DHHS in the 11th Report on Carcinogens and is classified as
possibly carcinogenic to humans (Group 2B) by the
IARC.220 221 EPA is currently conducting a reassessment of
cancer risk from inhalation exposure to acetaldehyde.
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    \219\ U.S. EPA. 1991. Integrated Risk Information System File of
Acetaldehyde. Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available
electronically at http://www.epa.gov/iris/subst/0290.htm.
    \220\ U.S. Department of Health and Human Services National
Toxicology Program 11th Report on Carcinogens available at:
ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-
7FCE50709CB4C932.
    \221\ International Agency for Research on Cancer (IARC). 1999.
Re-evaluation of some organic chemicals, hydrazine, and hydrogen
peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of
Chemical to Humans, Vol 71. Lyon, France.
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    The primary noncancer effects of exposure to acetaldehyde vapors
include irritation of the eyes, skin, and respiratory tract.\222\ In
short-term (4 week) rat studies, degeneration of olfactory epithelium
was observed at various concentration levels of acetaldehyde
exposure.223 224 Data from these studies were used by EPA to
develop an inhalation reference concentration. Some asthmatics have
been shown to be a sensitive subpopulation to decrements in functional
expiratory volume (FEV1 test) and bronchoconstriction upon acetaldehyde
inhalation.\225\ The agency is currently conducting a reassessment of
the health hazards from inhalation exposure to acetaldehyde.
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    \222\ U.S. EPA. 1991. Integrated Risk Information System File of
Acetaldehyde. This material is available electronically at http://
www.epa.gov/iris/subst/0290.htm.
    \223\ Appleman, L. M., R. A. Woutersen, V. J. Feron, R. N.
Hooftman, and W. R. F. Notten. 1986. Effects of the variable versus
fixed exposure levels on the toxicity of acetaldehyde in rats. J.
Appl. Toxicol. 6: 331-336.
    \224\ Appleman, L.M., R.A. Woutersen, and V.J. Feron. 1982.
Inhalation toxicity of acetaldehyde in rats. I. Acute and subacute
studies. Toxicology. 23: 293-297.
    \225\ Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda,
T. 1993. Aerosolized acetaldehyde induces histamine-mediated
bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1):
940-3.
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b. Acrolein
    Acrolein is extremely acrid and irritating to humans when inhaled,
with acute exposure resulting in upper respiratory tract irritation,
mucus hypersecretion and congestion. The intense irritancy of this
carbonyl has been demonstrated during controlled tests in human
subjects, who suffer intolerable eye and nasal mucosal sensory
reactions within minutes of exposure.\226\ These data and additional
studies regarding acute effects of human exposure to acrolein are
summarized in EPA's 2003 IRIS Human Health Assessment for
acrolein.\227\ Evidence available from studies in humans indicate that
levels as low as 0.09 ppm (0.21 mg/m\3\) for five minutes may elicit
subjective complaints of eye irritation with increasing concentrations
leading to more extensive eye, nose and respiratory symptoms.\228\
Lesions to the lungs and upper respiratory tract of rats, rabbits, and
hamsters have been observed after subchronic exposure to acrolein.\229\
Acute exposure effects in animal studies report bronchial hyper-
responsiveness.\230\ In a recent study, the acute respiratory irritant
effects of exposure to 1.1 ppm acrolein were more pronounced in mice
with allergic airway disease by comparison to non-diseased mice which
also showed decreases in respiratory rate.\231\ Based on animal data,
individuals with compromised respiratory function (e.g., emphysema,
asthma) are expected to be at increased risk of developing adverse
responses to strong respiratory irritants such as acrolein.
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    \226\ Sim VM, Pattle RE. Effect of possible smog irritants on
human subjects JAMA165: 1980-2010, 1957.
    \227\ U.S. EPA (U.S. Environmental Protection Agency). (2003)
Toxicological review of acrolein in support of summary information
on Integrated Risk Information System (IRIS) National Center for
Environmental Assessment, Washington, DC. EPA/635/R-03/003.
Available online at: http://www.epa.gov/ncea/iris.
    \228\ Weber-Tschopp, A; Fischer, T; Gierer, R; et al. (1977)
Experimentelle reizwirkungen von Acrolein auf den Menschen. Int Arch
Occup Environ Hlth 40(2):117-130. In German
    \229\ Integrated Risk Information System File of Acrolein.
Office of Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available
at http://www.epa.gov/iris/subst/0364.htm.
    \230\ U.S. EPA (U.S. Environmental Protection Agency). (2003)
Toxicological review of acrolein in support of summary information
on Integrated Risk Information System (IRIS) National Center for
Environmental Assessment, Washington, DC. EPA/635/R-03/003.
Available online at: http://www.epa.gov/ncea/iris.
    \231\ Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate
sensory nerve-mediated respiratory responses to irritants in healthy
and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571.
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    EPA determined in 2003 that the human carcinogenic potential of
acrolein could not be determined because the available data were
inadequate. No information was available on the carcinogenic effects of
acrolein in humans and the animal data provided inadequate evidence of
carcinogenicity.\232\ The IARC determined in 1995 that acrolein was not
classifiable as to its carcinogenicity in humans.\233\
---------------------------------------------------------------------------

    \232\ U.S. EPA. 2003. Integrated Risk Information System File of
Acrolein. Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available
at http://www.epa.gov/iris/subst/0364.htm.
    \233\ International Agency for Research on Cancer (IARC). 1995.
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 63, Dry cleaning, some chlorinated solvents and other
industrial chemicals , World Health Organization, Lyon, France.
---------------------------------------------------------------------------

c. Benzene
    The EPA's IRIS database lists benzene as a known human carcinogen
(causing leukemia) by all routes of exposure, and concludes that
exposure is associated with additional health effects, including
genetic changes in both humans and animals and increased proliferation
of bone marrow cells in mice.234 235 236 EPA states in its
IRIS database that data indicate a causal relationship between benzene
exposure and acute lymphocytic leukemia and suggest a relationship
between benzene exposure and chronic non-lymphocytic leukemia and
chronic lymphocytic leukemia. The International Agency for Research on
Carcinogens (IARC) has determined that benzene is a human carcinogen
and the U.S. Department of Health and Human Services (DHHS) has
characterized

benzene as a known human carcinogen.237 238
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    \234\ U.S. EPA. 2000. Integrated Risk Information System File
for Benzene. This material is available electronically at http://
www.epa.gov/iris/subst/0276.htm.
    \235\ International Agency for Research on Cancer (IARC). 1982.
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 29, Some industrial chemicals and dyestuffs, World
Health Organization, Lyon, France, p. 345-389.
    \236\ Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry,
V.A. 1992. Synergistic action of the benzene metabolite hydroquinone
on myelopoietic stimulating activity of granulocyte/macrophage
colony-stimulating factor in vitro, Proc. Natl. Acad. Sci. 89:3691-
3695.
    \237\ International Agency for Research on Cancer (IARC). 1987.
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 29, Supplement 7, Some industrial chemicals and
dyestuffs, World Health Organization, Lyon, France.
    \238\ U.S. Department of Health and Human Services National
Toxicology Program 11th Report on Carcinogens available at: http://
ntp.niehs.nih.gov/go/16183.
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    A number of adverse noncancer health effects including blood
disorders, such as preleukemia and aplastic anemia, have also been
associated with long-term exposure to benzene.239 240 The
most sensitive noncancer effect observed in humans, based on current
data, is the depression of the absolute lymphocyte count in
blood.241 242 In addition, recent work, including studies
sponsored by the Health Effects Institute (HEI), provides evidence that
biochemical responses are occurring at lower levels of benzene exposure
than previously known.243 244 245 246 EPA's IRIS program has
not yet evaluated these new data.
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    \239\ Aksoy, M. (1989). Hematotoxicity and carcinogenicity of
benzene. Environ. Health Perspect. 82: 193-197.
    \240\ Goldstein, B.D. (1988). Benzene toxicity. Occupational
medicine. State of the Art Reviews. 3: 541-554.
    \241\ Rothman, N., G.L. Li, M. Dosemeci, W.E. Bechtold, G.E.
Marti, Y.Z. Wang, M. Linet, L.Q. Xi, W. Lu, M.T. Smith, N. Titenko-
Holland, L.P. Zhang, W. Blot, S.N. Yin, and R.B. Hayes (1996)
Hematotoxicity among Chinese workers heavily exposed to benzene. Am.
J. Ind. Med. 29: 236-246.
    \242\ U.S. EPA (2002) Toxicological Review of Benzene (Noncancer
Effects). Environmental Protection Agency, Integrated Risk
Information System (IRIS), Research and Development, National Center
for Environmental Assessment, Washington DC. This material is
available electronically at http://www.epa.gov/iris/subst/0276.htm.
    \243\ Qu, O.; Shore, R.; Li, G.; Jin, X.; Chen, C.L.; Cohen, B.;
Melikian, A.; Eastmond, D.; Rappaport, S.; Li, H.; Rupa, D.;
Suramaya, R.; Songnian, W.; Huifant, Y.; Meng, M.; Winnik, M.; Kwok,
E.; Li, Y.; Mu, R.; Xu, B.; Zhang, X.; Li, K. (2003) HEI Report 115,
Validation & Evaluation of Biomarkers in Workers Exposed to Benzene
in China.
    \244\ Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. Cohen, et
al. (2002) Hematological changes among Chinese workers with a broad
range of benzene exposures. Am. J. Industr. Med. 42: 275-285.
    \245\ Lan, Qing, Zhang, L., Li, G., Vermeulen, R., et al. (2004)
Hematotoxically in Workers Exposed to Low Levels of Benzene. Science
306: 1774-1776.
    \246\ Turtletaub, K.W. and Mani, C. (2003) Benzene metabolism in
rodents at doses relevant to human exposure from Urban Air. Research
Reports Health Effect Inst. Report No.113.
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d. 1,3-Butadiene
    EPA has characterized 1,3-butadiene as carcinogenic to humans by
inhalation.247 248 The IARC has determined that 1,3-
butadiene is a human carcinogen and the U.S. DHHS has characterized
1,3-butadiene as a known human carcinogen.249 250 There are
numerous studies consistently demonstrating that 1,3-butadiene is
metabolized into genotoxic metabolites by experimental animals and
humans. The specific mechanisms of 1,3-butadiene-induced carcinogenesis
are unknown; however, the scientific evidence strongly suggests that
the carcinogenic effects are mediated by genotoxic metabolites. Animal
data suggest that females may be more sensitive than males for cancer
effects associated with 1,3-butadiene exposure; there are insufficient
data in humans from which to draw conclusions about sensitive
subpopulations. 1,3-butadiene also causes a variety of reproductive and
developmental effects in mice; no human data on these effects are
available. The most sensitive effect was ovarian atrophy observed in a
lifetime bioassay of female mice.\251\
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    \247\ U.S. EPA (2002) Health Assessment of 1,3-Butadiene. Office
of Research and Development, National Center for Environmental
Assessment, Washington Office, Washington, DC. Report No. EPA600-P-
98-001F. This document is available electronically at http://
www.epa.gov/iris/supdocs/buta-sup.pdf.
    \248\ U.S. EPA (2002) Full IRIS Summary for 1,3-butadiene (CASRN
106-99-0). Environmental Protection Agency, Integrated Risk
Information System (IRIS), Research and Development, National Center
for Environmental Assessment, Washington, DC http://www.epa.gov/
iris/subst/0139.htm.
    \249\ International Agency for Research on Cancer (IARC) (1999)
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 71, Re-evaluation of some organic chemicals,
hydrazine and hydrogen peroxide and Volume 97 (in preparation),
World Health Organization, Lyon, France.
    \250\ U.S. Department of Health and Human Services (2005)
National Toxicology Program 11th Report on Carcinogens available at:
ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-
7FCE50709CB4C932.
    \251\ Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. (1996)
Subchronic toxicity of 4-vinylcyclohexene in rats and mice by
inhalation. Fundam. Appl. Toxicol. 32:1-10.
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e. Ethanol
    EPA is conducting an assessment of the cancer and noncancer effects
of exposure to ethanol, a compound which is not currently listed in
EPA's IRIS. A description of these effects to the extent that
information is available will be presented, as required by Section 1505
of EPAct, in a Report to Congress on public health, air quality and
water resource impacts of fuel additives. We expect to release that
report in 2010.
    Extensive data are available regarding adverse health effects
associated with the ingestion of ethanol while data on inhalation
exposure effects are sparse. As part of the IRIS assessment,
pharmacokinetic models are being evaluated as a means of extrapolating
across species (animal to human) and across exposure routes (oral to
inhalation) to better characterize the health hazards and dose-response
relationships for low levels of ethanol exposure in the environment.
    The IARC has classified ``alcoholic beverages'' as carcinogenic to
humans based on sufficient evidence that malignant tumors of the mouth,
pharynx, larynx, esophagus, and liver are causally related to the
consumption of alcoholic beverages.\252\ The U.S. DHHS in the 11th
Report on Carcinogens also identified ``alcoholic beverages'' as a
known human carcinogen (they have not evaluated the cancer risks
specifically from exposure to ethanol), with evidence for cancer of the
mouth, pharynx, larynx, esophagus, liver and breast.\253\ There are no
studies reporting carcinogenic effects from inhalation of ethanol. EPA
is currently evaluating the available human and animal cancer data to
identify which cancer type(s) are the most relevant to an assessment of
risk to humans from a low-level oral and inhalation exposure to
ethanol.
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    \252\ International Agency for Research on Cancer (IARC). 1988.
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 44, Alcohol Drinking, World Health Organization,
Lyon, France.
    \253\ U.S. Department of Health and Human Services. 2005.
National Toxicology Program 11th Report on Carcinogens available at:
ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-
7FCE50709CB4C932.
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    Noncancer health effects data are available from animal studies as
well as epidemiologic studies. The epidemiologic data are obtained from
studies of alcoholic beverage consumption. Effects include neurological
impairment, developmental effects, cardiovascular effects, immune
system depression, and effects on the liver, pancreas and reproductive
system.\254\ There is evidence that children prenatally exposed via
mothers' ingestion of alcoholic beverages during pregnancy are at
increased risk of hyperactivity and attention deficits, impaired motor
coordination, a lack of regulation of social behavior or poor
psychosocial functioning, and deficits in cognition, mathematical
ability, verbal fluency, and spatial

memory.255 256 257 258 259 260 261 262 In some people,
genetic factors influencing the metabolism of ethanol can lead to
differences in internal levels of ethanol and may render some
subpopulations more susceptible to risks from the effects of ethanol.
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    \254\ U.S. Department of Health and Human Services. 2000. 10th
Special Report to the U.S. Congress on Alcohol and Health. June.
2000.
    \255\ Goodlett CR, KH Horn, F Zhou. 2005. Alcohol
teratogeniesis: mechanisms of damage and strategies for
intervention. Exp. Biol. Med. 230:394-406.
    \256\ Riley EP, CL McGee. 2005. Fetal alcohol spectrum
disorders: an overview with emphasis on changes in brain and
behavior. Exp. Biol. Med. 230:357-365.
    \257\ Zhang X, JH Sliwowska, J Weinberg. 2005. Prenatal alcohol
exposure and fetal programming: effects on neuroendocrine and immune
function. Exp. Biol. Med. 230:376-388.
    \258\ Riley EP, CL McGee, ER Sowell. 2004. Teratogenic effects
of alcohol: a decade of brain imaging. Am. J. Med. Genet. Part C:
Semin. Med. Genet. 127:35-41.
    \259\ Gunzerath L, V Faden, S Zakhari, K Warren. 2004. National
Institute on Alcohol Abuse and Alcoholism report on moderate
drinking. Alcohol. Clin. Exp. Res. 28:829-847.
    \260\ World Health Organization (WHO). 2004. Global status
report on alcohol 2004. Geneva, Switzerland: Department of Mental
Health and Substance Abuse. Available: http://www.who.int/
substance_abuse/publications/global_status_report_2004_
overview.pdf
    \261\ Chen W-JA, SE Maier, SE Parnell, FR West. 2003. Alcohol
and the developing brain: neuroanatomical studies. Alcohol Res.
Health 27:174-180.
    \262\ Driscoll CD, AP Streissguth, EP Riley. 1990. Prenatal
alcohol exposure comparability of effects in humans and animal
models. Neurotoxicol. Teratol. 12:231-238.SGPO Galley End:?>
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f. Formaldehyde
    Since 1987, EPA has classified formaldehyde as a probable human
carcinogen based on evidence in humans and in rats, mice, hamsters, and
monkeys.\263\ EPA is currently reviewing recently published
epidemiological data. For instance, research conducted by the National
Cancer Institute (NCI) found an increased risk of nasopharyngeal cancer
and lymphohematopoietic malignancies such as leukemia among workers
exposed to formaldehyde.264 265 In an analysis of the
lymphohematopoietic cancer mortality from an extended follow-up of
these workers, NCI confirmed an association between lymphohematopoietic
cancer risk and peak exposures.\266\ A recent National Institute of
Occupational Safety and Health (NIOSH) study of garment workers also
found increased risk of death due to leukemia among workers exposed to
formaldehyde.\267\ Extended follow-up of a cohort of British chemical
workers did not find evidence of an increase in nasopharyngeal or
lymphohematopoietic cancers, but a continuing statistically significant
excess in lung cancers was reported.\268\ Recently, the IARC re-
classified formaldehyde as a human carcinogen (Group 1).\269\
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    \263\ U.S. EPA (1987) Assessment of Health Risks to Garment
Workers and Certain Home Residents from Exposure to Formaldehyde,
Office of Pesticides and Toxic Substances, April 1987.
    \264\ Hauptmann, M.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.;
Blair, A. 2003. Mortality from lymphohematopoetic malignancies among
workers in formaldehyde industries. Journal of the National Cancer
Institute 95: 1615-1623.
    \265\ Hauptmann, M.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.;
Blair, A. 2004. Mortality from solid cancers among workers in
formaldehyde industries. American Journal of Epidemiology 159: 1117-
1130.
    \266\ Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P.
A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. Mortality from
lymphohematopoietic malignancies among workers in formaldehyde
industries: The National Cancer Institute cohort. J. National Cancer
Inst. 101: 751-761.
    \267\ Pinkerton, L. E. 2004. Mortality among a cohort of garment
workers exposed to formaldehyde: an update. Occup. Environ. Med. 61:
193-200.
    \268\ Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended
follow-up of a cohort of British chemical workers exposed to
formaldehyde. J National Cancer Inst. 95:1608-1615.
    \269\ International Agency for Research on Cancer (IARC). 2006.
Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2-ol. Volume
88. (in preparation), World Health Organization, Lyon, France.
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    Formaldehyde exposure also causes a range of noncancer health
effects, including irritation of the eyes (burning and watering of the
eyes), nose and throat. Effects from repeated exposure in humans
include respiratory tract irritation, chronic bronchitis and nasal
epithelial lesions such as metaplasia and loss of cilia. Animal studies
suggest that formaldehyde may also cause airway inflammation--including
eosinophil infiltration into the airways. There are several studies
that suggest that formaldehyde may increase the risk of asthma--
particularly in the young.270 271
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    \270\ Agency for Toxic Substances and Disease Registry (ATSDR).
1999. Toxicological profile for Formaldehyde. Atlanta, GA: U.S.
Department of Health and Human Services, Public Health Service.
http://www.atsdr.cdc.gov/toxprofiles/tp111.html.
    \271\ WHO (2002) Concise International Chemical Assessment
Document 40: Formaldehyde. Published under the joint sponsorship of
the United Nations Environment Programme, the International Labour
Organization, and the World Health Organization, and produced within
the framework of the Inter-Organization Programme for the Sound
Management of Chemicals. Geneva.
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g. Peroxyacetyl nitrate (PAN)
    Peroxyacetyl nitrate (PAN) has not been evaluated by EPA's IRIS
program. Information regarding the potential carcinogenicity of PAN is
limited. As noted in the EPA air quality criteria document for ozone
and related photochemical oxidants, cytogenetic studies indicate that
PAN is not a potent mutagen, clastogen (a compound that can cause
breaks in chromosomes), or DNA-damaging agent in mammalian cells either
in vivo or in vitro. Some studies suggest that PAN may be a weak
bacterial mutagen at high concentrations much higher than exist in
present urban atmospheres.\272\
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    \272\ U.S. EPA. 2006. Air quality criteria for ozone and related
photochemical oxidants (Ozone CD). Research Triangle Park, NC:
National Cetner for Environmental Assesssment; report no. EPA/600/R-
05/004aF-cF.3v. page 5-78 Available at http://cfpub.epa.gov/ncea/.
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    Effects of ground-level smog causing intense eye irritation have
been attributed to photochemical oxidants, including PAN.\273\ Animal
toxicological information on the inhalation effects of the non-ozone
oxidants has been limited to a few studies on PAN. Acute exposure to
levels of PAN can cause changes in lung morphology, behavioral
modifications, weight loss, and susceptibility to pulmonary infections.
Human exposure studies indicate minor pulmonary function effects at
high PAN concentrations, but large inter-individual variability
precludes definitive conclusions.\274\
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    \273\ U.S. EPA Air Quality Criteria for Ozone and Related
Photochemical Oxidants (Final). U.S. Environmental Protection
Agency, Washington, DC, EPA 600/R-05/004aF-cF, 2006. page 5-63. This
document is available in Docket EPA-HQ-OAR-2005-0161. This document
may be accessed electronically at: http://www.epa.gov/ttn/naaqs/
standards/ozone/s_o3_cr_cd.html.
    \274\ U.S. EPA Air Quality Criteria for Ozone and Related
Photochemical Oxidants (Final). U.S. Environmental Protection
Agency, Washington, DC, EPA 600/R-05/004aF-cF, 2006. page 5-78. This
document is available in Docket EPA-HQ-OAR-2005-0161. This document
may be accessed electronically at: http://www.epa.gov/ttn/naaqs/
standards/ozone/s_o3_cr_cd.html.
---------------------------------------------------------------------------

h. Naphthalene
    Naphthalene is found in small quantities in gasoline and diesel
fuels. Naphthalene emissions have been measured in larger quantities in
both gasoline and diesel exhaust compared with evaporative emissions
from mobile sources, indicating it is primarily a product of
combustion. EPA released an external review draft of a reassessment of
the inhalation carcinogenicity of naphthalene based on a number of
recent animal carcinogenicity studies.\275\ The draft reassessment
completed external peer review.\276\ Based on external peer review

comments received, additional analyses are being undertaken. This
external review draft does not represent official agency opinion and
was released solely for the purposes of external peer review and public
comment. The National Toxicology Program listed naphthalene as
``reasonably anticipated to be a human carcinogen'' in 2004 on the
basis of bioassays reporting clear evidence of carcinogenicity in rats
and some evidence of carcinogenicity in mice.\277\ California EPA has
released a new risk assessment for naphthalene, and the IARC has
reevaluated naphthalene and re-classified it as Group 2B: possibly
carcinogenic to humans.\278\ Naphthalene also causes a number of
chronic non-cancer effects in animals, including abnormal cell changes
and growth in respiratory and nasal tissues.\279\
---------------------------------------------------------------------------

    \275\ U. S. EPA. 2004. Toxicological Review of Naphthalene
(Reassessment of the Inhalation Cancer Risk), Environmental
Protection Agency, Integrated Risk Information System, Research and
Development, National Center for Environmental Assessment,
Washington, DC. This material is available electronically at http://
www.epa.gov/iris/subst/0436.htm.
    \276\ Oak Ridge Institute for Science and Education. (2004).
External Peer Review for the IRIS Reassessment of the Inhalation
Carcinogenicity of Naphthalene. August 2004. http://cfpub.epa.gov/
ncea/cfm/recordisplay.cfm?deid=84403.
    \277\ National Toxicology Program (NTP). (2004). 11th Report on
Carcinogens. Public Health Service, U.S. Department of Health and
Human Services, Research Triangle Park, NC. Available from: http://
ntp-server.niehs.nih.gov.
    \278\ International Agency for Research on Cancer (IARC).
(2002). Monographs on the Evaluation of the Carcinogenic Risk of
Chemicals for Humans. Vol. 82. Lyon, France.
    \279\ U. S. EPA. 1998. Toxicological Review of Naphthalene,
Environmental Protection Agency, Integrated Risk Information System,
Research and Development, National Center for Environmental
Assessment, Washington, DC. This material is available
electronically at http://www.epa.gov/iris/subst/0436.htm.
---------------------------------------------------------------------------

i. Other Air Toxics
    In addition to the compounds described above, other compounds in
gaseous hydrocarbon and PM emissions from vehicles will be affected by
today's final action. Mobile source air toxic compounds that will
potentially be impacted include ethylbenzene, polycyclic organic
matter, propionaldehyde, toluene, and xylene. Information regarding the
health effects of these compounds can be found in EPA's IRIS
database.\280\
---------------------------------------------------------------------------

    \280\ U.S. EPA Integrated Risk Information System (IRIS)
database is available at: http://www.epa.gov/iris.
---------------------------------------------------------------------------

F. Environmental Effects of Criteria and Air Toxic Pollutants

    In this section we discuss some of the environmental effects of PM
and its precursors such as visibility impairment, atmospheric
deposition, and materials damage and soiling, as well as environmental
effects associated with the presence of ozone in the ambient air, such
as impacts on plants, including trees, agronomic crops and urban
ornamentals, and environmental effects associated with air toxics.
1. Visibility
    Visibility can be defined as the degree to which the atmosphere is
transparent to visible light.\281\ Airborne particles degrade
visibility by scattering and absorbing light. Visibility is important
because it has direct significance to people's enjoyment of daily
activities in all parts of the country. Individuals value good
visibility for the well-being it provides them directly, where they
live and work, and in places where they enjoy recreational
opportunities. Visibility is also highly valued in significant natural
areas such as national parks and wilderness areas and special emphasis
is given to protecting visibility in these areas. For more information
on visibility, see the final 2004 PM AQCD as well as the 2005 PM Staff
Paper.282 283
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    \281\ National Research Council, 1993. Protecting Visibility in
National Parks and Wilderness Areas. National Academy of Sciences
Committee on Haze in National Parks and Wilderness Areas. National
Academy Press, Washington, DC. This document is available in Docket
EPA-HQ-OAR-2005-0161. This book can be viewed on the National
Academy Press Web site at http://www.nap.edu/books/0309048443/html/.
    \282\ U.S. EPA (2004) Air Quality Criteria for Particulate
Matter (Oct 2004), Volume I Document No. EPA600/P-99/002aF and
Volume II Document No. EPA600/P-99/002bF. This document is available
in Docket EPA-HQ-OAR-2005-0161.
    \283\ U.S. EPA (2005) Review of the National Ambient Air Quality
Standard for Particulate Matter: Policy Assessment of Scientific and
Technical Information, OAQPS Staff Paper. EPA-452/R-05-005. This
document is available in Docket EPA-HQ-OAR-2005-0161.
---------------------------------------------------------------------------

    EPA is pursuing a two-part strategy to address visibility. First,
to address the welfare effects of PM on visibility, EPA has set
secondary PM2.5 standards which act in conjunction with the
establishment of a regional haze program. In setting this secondary
standard, EPA has concluded that PM2.5 causes adverse
effects on visibility in various locations, depending on PM
concentrations and factors such as chemical composition and average
relative humidity. Second, section 169 of the Clean Air Act provides
additional authority to address existing visibility impairment and
prevent future visibility impairment in the 156 national parks, forests
and wilderness areas categorized as mandatory class I federal areas (62
FR 38680-81, July 18, 1997).\284\ In July 1999, the regional haze rule
(64 FR 35714) was put in place to protect the visibility in mandatory
class I federal areas. Visibility can be said to be impaired in both
PM2.5 nonattainment areas and mandatory class I federal
areas.
---------------------------------------------------------------------------

    \284\ These areas are defined in CAA section 162 as those
national parks exceeding 6,000 acres, wilderness areas and memorial
parks exceeding 5,000 acres, and all international parks which were
in existence on August 7, 1977.
---------------------------------------------------------------------------

2. Atmospheric Deposition
    Wet and dry deposition of ambient particulate matter delivers a
complex mixture of metals (e.g., mercury, zinc, lead, nickel, aluminum,
cadmium), organic compounds (e.g., POM, dioxins, furans) and inorganic
compounds (e.g., nitrate, sulfate) to terrestrial and aquatic
ecosystems. The chemical form of the compounds deposited depends on a
variety of factors including ambient conditions (e.g., temperature,
humidity, oxidant levels) and the sources of the material. Chemical and
physical transformations of the compounds occur in the atmosphere as
well as the media onto which they deposit. These transformations in
turn influence the fate, bioavailability and potential toxicity of
these compounds. Atmospheric deposition has been identified as a key
component of the environmental and human health hazard posed by several
pollutants including mercury, dioxin and PCBs.\285\
---------------------------------------------------------------------------

    \285\ U.S. EPA (2000) Deposition of Air Pollutants to the Great
Waters: Third Report to Congress. Office of Air Quality Planning and
Standards. EPA-453/R-00-0005. This document is available in Docket
EPA-HQ-OAR-2005-0161.
---------------------------------------------------------------------------

    Adverse impacts on water quality can occur when atmospheric
contaminants deposit to the water surface or when material deposited on
the land enters a waterbody through runoff. Potential impacts of
atmospheric deposition to waterbodies include those related to both
nutrient and toxic inputs. Adverse effects to human health and welfare
can occur from the addition of excess nitrogen via atmospheric
deposition. The nitrogen-nutrient enrichment contributes to toxic algae
blooms and zones of depleted oxygen, which can lead to fish kills,
frequently in coastal waters. Deposition of heavy metals or other
toxins may lead to the human ingestion of contaminated fish, human
ingestion of contaminated water, damage to the marine ecology, and
limits to recreational uses. Several studies have been conducted in
U.S. coastal waters and in the Great Lakes Region in which the role of
ambient PM deposition and runoff is

investigated.286 287 288 289 290
---------------------------------------------------------------------------

    \286\ U.S. EPA (2004) National Coastal Condition Report II.
Office of Research and Development/Office of Water. EPA-620/R-03/
002. This document is available in Docket EPA-HQ-OAR-2005-0161.
    \287\ Gao, Y., E.D. Nelson, M.P. Field, et al. 2002.
Characterization of atmospheric trace elements on PM2.5 particulate
matter over the New York-New Jersey harbor estuary. Atmos. Environ.
36: 1077-1086.
    \288\ Kim, G., N. Hussain, J.R. Scudlark, and T.M. Church. 2000.
Factors influencing the atmospheric depositional fluxes of stable
Pb, 210Pb, and 7Be into Chesapeake Bay. J. Atmos. Chem. 36: 65-79.
    \289\ Lu, R., R.P. Turco, K. Stolzenbach, et al. 2003. Dry
deposition of airborne trace metals on the Los Angeles Basin and
adjacent coastal waters. J. Geophys. Res. 108(D2, 4074): AAC 11-1 to
11-24.
    \290\ Marvin, C.H., M.N. Charlton, E.J. Reiner, et al. 2002.
Surficial sediment contamination in Lakes Erie and Ontario: A
comparative analysis. J. Great Lakes Res. 28(3): 437-450.
---------------------------------------------------------------------------

    Atmospheric deposition of nitrogen and sulfur contributes to
acidification, altering biogeochemistry and affecting animal and plant
life in terrestrial and aquatic ecosystems across the U.S. The
sensitivity of terrestrial and aquatic ecosystems to acidification from
nitrogen and sulfur deposition is predominantly governed by geology.
Prolonged exposure to excess nitrogen and sulfur deposition in
sensitive areas acidifies lakes, rivers and soils. Increased acidity in
surface waters creates inhospitable conditions for biota and affects
the abundance and nutritional value of preferred prey species,
threatening biodiversity and ecosystem function. Over time, acidifying
deposition also removes essential nutrients from forest soils,
depleting the capacity of soils to neutralize future acid loadings and
negatively affecting forest sustainability. Major effects include a
decline in sensitive forest tree species, such as red spruce (Picea
rubens) and sugar maple (Acer saccharum), and a loss of biodiversity of
fishes, zooplankton, and macro invertebrates.
    In addition to the role nitrogen deposition plays in acidification,
nitrogen deposition also causes ecosystem nutrient enrichment leading
to eutrophication that alters biogeochemical cycles. Excess nitrogen
also leads to the loss of nitrogen sensitive lichen species as they are
outcompeted by invasive grasses as well as altering the biodiversity of
terrestrial ecosystems, such as grasslands and meadows. For a broader
explanation of the topics treated here, refer to the description in
Section 3.6.2 of the RIA.
    Adverse impacts on soil chemistry and plant life have been observed
for areas heavily influenced by atmospheric deposition of nutrients,
metals and acid species, resulting in species shifts, loss of
biodiversity, forest decline and damage to forest productivity.
Potential impacts also include adverse effects to human health through
ingestion of contaminated vegetation or livestock (as in the case for
dioxin deposition), reduction in crop yield, and limited use of land
due to contamination.
    Atmospheric deposition of pollutants can reduce the aesthetic
appeal of buildings and culturally important articles through soiling,
and can contribute directly (or in conjunction with other pollutants)
to structural damage by means of corrosion or erosion. Atmospheric
deposition may affect materials principally by promoting and
accelerating the corrosion of metals, by degrading paints, and by
deteriorating building materials such as concrete and limestone.
Particles contribute to these effects because of their electrolytic,
hygroscopic, and acidic properties, and their ability to adsorb
corrosive gases (principally sulfur dioxide). The rate of metal
corrosion depends on a number of factors, including: the deposition
rate and nature of the pollutant; the influence of the metal protective
corrosion film; the amount of moisture present; variability in the
electrochemical reactions; the presence and concentration of other
surface electrolytes; and the orientation of the metal surface.
3. Plant and Ecosystem Effects of Ozone
    Elevated ozone levels contribute to environmental effects, with
impacts to plants and ecosystems being of most concern. Ozone can
produce both acute and chronic injury in sensitive species depending on
the concentration level and the duration of the exposure. Ozone effects
also tend to accumulate over the growing season of the plant, so that
even low concentrations experienced for a longer duration have the
potential to create chronic stress on vegetation. Ozone damage to
plants includes visible injury to leaves and impaired photosynthesis,
both of which can lead to reduced plant growth and reproduction,
resulting in reduced crop yields, forestry production, and use of
sensitive ornamentals in landscaping. In addition, the impairment of
photosynthesis, the process by which the plant makes carbohydrates (its
source of energy and food), can lead to a subsequent reduction in root
growth and carbohydrate storage below ground, resulting in other, more
subtle plant and ecosystems impacts.
    These latter impacts include increased susceptibility of plants to
insect attack, disease, harsh weather, interspecies competition and
overall decreased plant vigor. The adverse effects of ozone on forest
and other natural vegetation can potentially lead to species shifts and
loss from the affected ecosystems, resulting in a loss or reduction in
associated ecosystem goods and services. Lastly, visible ozone injury
to leaves can result in a loss of aesthetic value in areas of special
scenic significance like national parks and wilderness areas. The final
2006 Ozone Air Quality Criteria Document presents more detailed
information on ozone effects on vegetation and ecosystems.
4. Environmental Effects of Air Toxics
    Fuel combustion emissions contribute to ambient levels of
pollutants that contribute to adverse effects on vegetation. PAN is a
well-established phytotoxicant causing visible injury to leaves that
can appear as metallic glazing on the lower surface of leaves with some
leafy vegetables exhibiting particular sensitivity (e.g., spinach,
lettuce, chard).291 292 293 PAN has been demonstrated to
inhibit photosynthetic and non-photosynthetic processes in plants and
retard the growth of young navel orange trees.294 295 In
addition to its oxidizing capability, PAN contributes nitrogen to
forests and other vegetation via uptake as well as dry and wet
deposition to surfaces. As noted in Section IX, nitrogen deposition can
lead to saturation of terrestrial ecosystems and research is needed to
understand the impacts of excess nitrogen deposition experienced in
some areas of the country on water quality and ecosystems.\296\
---------------------------------------------------------------------------

    \291\ Nouchi I, S Toyama. 1998. Effects of ozone and
peroxyacetyl nitrate on polar lipids and fatty acids in leaves of
morning glory and kidney bean. Plant Physiol. 87:638-646.
    \292\ Oka E, Y Tagami, T Oohashi, N Kondo. 2004. A physiological
and morphological study on the injury caused by exposure to the air
pollutant, peroxyacetyl nitrate (PAN), based on the quantitative
assessment of the injury. J Plant Res. 117:27-36.
    \293\ Sun E-J, M-H Huang. 1995. Detection of peroxyacetyl
nitrate at phytotoxic level and its effects on vegetation in Taiwan.
Atmos. Env. 29:2899-2904.
    \294\ Koukol J, WM Dugger, Jr., RL Palmer. 1967. Inhibitory
effect of peroxyacetyl nitrate on cyclic photophosphorylation by
chloroplasts from black valentine bean leaves. Plant Physiol.
42:1419-1422.
    \295\ Thompson CR, G Kats. 1975. Effects of ambient
concentrations of peroxyacetyl nitrate on navel orange trees. Env.
Sci. Technol. 9:35-38.
    \296\ Bytnerowicz A, ME Fenn. 1995. Nitrogen deposition in
California forests: A Review. Environ. Pollut. 92:127-146.
---------------------------------------------------------------------------

    Volatile organic compounds (VOCs), some of which are considered air
toxics, have long been suspected to play a role in vegetation
damage.\297\ In laboratory experiments, a wide range of tolerance

to VOCs has been observed.\298\ Decreases in harvested seed pod weight
have been reported for the more sensitive plants, and some studies have
reported effects on seed germination, flowering and fruit ripening.
Effects of individual VOCs or their role in conjunction with other
stressors (e.g., acidification, drought, temperature extremes) have not
been well studied. In a recent study of a mixture of VOCs including
ethanol and toluene on herbaceous plants, significant effects on seed
production, leaf water content and photosynthetic efficiency were
reported for some plant species.\299\
---------------------------------------------------------------------------

    \297\ US EPA. 1991. Effects of organic chemicals in the
atmosphere on terrestrial plants. EPA/600/3-91/001.
    \298\ Cape JN, ID Leith, J Binnie, J Content, M Donkin, M
Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects of VOCs on
herbaceous plants in an open-top chamber experiment. Environ.
Pollut. 124:341-343.
    \299\ Cape JN, ID Leith, J Binnie, J Content, M Donkin, M
Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects of VOCs on
herbaceous plants in an open-top chamber experiment. Environ.
Pollut. 124:341-343.
---------------------------------------------------------------------------

    Research suggests an adverse impact of vehicle exhaust on plants,
which has in some cases been attributed to aromatic compounds and in
other cases to nitrogen oxides.300 301 302 The impacts of
VOCs on plant reproduction may have long-term implications for
biodiversity and survival of native species near major roadways. Most
of the studies of the impacts of VOCs on vegetation have focused on
short-term exposure and few studies have focused on long-term effects
of VOCs on vegetation and the potential for metabolites of these
compounds to affect herbivores or insects.
---------------------------------------------------------------------------

    \300\ Viskari E-L. 2000. Epicuticular wax of Norway spruce
needles as indicator of traffic pollutant deposition. Water, Air,
and Soil Pollut. 121:327-337.
    \301\ Ugrekhelidze D, F Korte, G Kvesitadze. 1997. Uptake and
transformation of benzene and toluene by plant leaves. Ecotox.
Environ. Safety 37:24-29.
    \302\ Kammerbauer H, H Selinger, R Rommelt, A Ziegler-Jons, D
Knoppik, B Hock. 1987. Toxic components of motor vehicle emissions
for the spruce Pciea abies. Environ. Pollut. 48:235-243.
---------------------------------------------------------------------------

VII. Impacts on Cost of Renewable Fuels, Gasoline, and Diesel

    We have assessed the impacts of the renewable fuel volumes required
by EISA on their costs and on the costs of the gasoline and diesel
fuels into which the renewable fuels will be blended. More details of
feedstock costs are addressed in Section VIII.A.

A. Renewable Fuel Production Costs

1. Ethanol Production Costs
a. Corn Ethanol
    A significant amount of work has been done in the last decade
surveying and modeling the costs involved in producing ethanol from
corn in order to serve business and investment purposes as well as to
try to educate energy policy decisions. Corn ethanol costs for our work
were estimated using models developed and maintained by USDA. Their
work has been described in a peer-reviewed journal paper on cost
modeling of the dry-grind corn ethanol process, and compares well with
cost information found in surveys of existing plants.
303 304 The USDA models were adjusted to reflect the energy
usage we anticipate for the average ethanol plant in 2022 and
intermediate years, as well as the prices of energy and agricultural
commodities as projected by AEO and the FASOM model respectively.
---------------------------------------------------------------------------

    \303\ Kwaitkowski, J.R., Macon, A., Taylor, F., Johnston, D.B.;
Industrial Crops and Products 23 (2006) 288-296.
    \304\ Shapouri, H., Gallagher, P.; USDA's 2002 Ethanol Cost-of-
Production Survey (published July 2005).
---------------------------------------------------------------------------

    For our policy case scenario, we used corn prices of $3.60/bu in
2022 with corresponding DDGS prices of $124.74/ton (all 2007$). These
estimates are taken from agricultural economics modeling work done for
this rule using the Forestry and Agricultural Sector Optimization Model
(see Section VIII.A).
    For natural gas-fired ethanol production producing dried co-product
(currently describes the largest fraction of the industry), in the
policy case corn feedstock minus DDGS sale credit represents about 54%
of the final per-gallon cost, while utilities, facility, chemical and
enzymes, and labor comprise about 22%, 13%, 7%, and 4%, respectively.
Thus, the cost of ethanol production is most sensitive to the prices of
corn and the primary co-product, DDGS, and relatively insensitive to
economy of scale over the range of plant sizes typically seen (40-100
MMgal/yr).
    We expect that several process fuels will be used to produce corn
ethanol (see RIA Section 1.4), which are presented by their projected
2022 volume production share in Table VII.A.1-1 and cost impacts for
each in Table VII.A.1-2.\305\
---------------------------------------------------------------------------

    \305\ Projected fuel mix was taken from Mueller, S., Energy
Research Center at the University of Chicago; An Analysis of the
Projected Energy Use of Future Dry Mill Corn Ethanol Plants (2010-
2030); cost estimates were derived from modifications to the USDA
process models.

    Table VII.A.1-1--Projected 2022 Breakdown of Fuel Types Used to Estimate Production Cost of Corn Ethanol,
                                    Percent Share of Total Production Volume
----------------------------------------------------------------------------------------------------------------
                Plant type                                         Fuel type                          Total by
---------------------------------------------------------------------------------------------------  plant type
                                                                         Natural gas               -------------
                                              Biomass %      Coal %           %         Biogas %      All fuels
----------------------------------------------------------------------------------------------------------------
Coal/Biomass Boiler.......................            11             0  ............  ............            11
Coal/Biomass Boiler + CHP.................            10             4  ............  ............            14
Natural Gas Boiler........................  ............  ............            49            14            63
Natural Gas Boiler + CHP..................  ............  ............            12  ............            12
                                           ---------------------------------------------------------------------
    Total by Fuel Type....................            21             4            61            14           100
----------------------------------------------------------------------------------------------------------------

  Table VII.A.1-2--Projected 2022 Breakdown of Cost Impacts By Fuel Type Used in Estimating Production Cost of
                        Corn Ethanol, Dollars Per Gallon Relative to Natural Gas Baseline
----------------------------------------------------------------------------------------------------------------
                Plant type                                         Fuel type                          Total by
---------------------------------------------------------------------------------------------------  plant type
                                                                                -------------
                                             Biomass \a\      Coal       Natural gas   Biogas \b\     All fuels
----------------------------------------------------------------------------------------------------------------
Coal/Biomass Boiler.......................       +$0.009       +$0.009

Coal/Biomass Boiler + CHP.................        -0.021        -0.021
Natural Gas Boiler........................  ............  ............      baseline        +$0.00
Natural Gas Boiler + CHP..................  ............  ............       -$0.032
                                           ---------------------------------------------------------------------
    Total by Fuel Type....................  ............  ............  ............  ............       -$0.006
----------------------------------------------------------------------------------------------------------------
\a\ Assumes biomass has same plant-delivered cost as coal.
\b\ Assumes biogas has same plant-delivered cost as natural gas.

    In addition to the primary fuel type used by ethanol production
facilities, we also anticipate new technologies and efficiency
improvements will impact the cost of ethanol production. More efficient
motors and turbines are currently under development and are likely to
be adopted by ethanol producers as ways to lower green house gas
emissions and reduce energy costs. Several new process technologies,
including corn oil extraction, corn fractionation, cold starch
fermentation, and ethanol dehydration membranes will allow ethanol
producers to further reduce energy consumption and produce higher value
co-products. These technologies are discussed in sections <IP_ADDRESS> and
<IP_ADDRESS> of the RIA. In order to reflect the cost advantages of ethanol
producers using these technologies the USDA models were adapted to take
into account the capital costs, lower energy usage, and higher value
co-products that result from the adoption of these new technologies.
The projected adoption rates of these technologies, and their impacts
on the production cost of corn ethanol, are summarized in Table
VII.A.1-3 below. More detail on how the USDA models were adjusted and
the impact this had on the average price of ethanol production can be
found in section <IP_ADDRESS> of the RIA.

                    Table VII.A.1-3--Projected Cost Impacts or New Corn Ethanol Technologies
----------------------------------------------------------------------------------------------------------------
                                             Percent of
                                               plants
                Technology                    adopting      Cost impact (change from      Weighted cost impact
                                             technology             baseline)
                                              (percent)
----------------------------------------------------------------------------------------------------------------
More Efficient Boilers/Motors/Turbines...             100  Baseline..................  $0.00/gal
Raw Starch Hydrolysis....................              22  -$0.066/gal...............  -$0.015/gal
Corn Fractionation.......................              20  -$0.093/gal...............  -$0.019/gal
Corn Oil Extraction......................              70  -$0.079/gal...............  -$0.055/gal
Membrane Separation......................               5  -$0.064/gal...............  -$0.003/gal
                                          ----------------------------------------------------------------------
    Total Cost Impact....................             N/A  N/A.......................  -$0.092/gal
----------------------------------------------------------------------------------------------------------------

    Whether or not the distillers grains and solubles (DGS) are dried
also has an impact on the cost of ethanol production. Drying the DGS is
an energy intensive process and results in a significant increase in
energy usages as well as cost. The advantages of dry DGS are reduced
transportation costs and a product that is less susceptible to
spoilage, and can therefore be sold to a much wider market. If the DGS
can be sold wet, the cost of ethanol production can be reduced by
$0.083 per gallon. A 2007 survey of ethanol producers indicated that
37% of DGS were being sold wet. We anticipate that this percentage of
wet DGS will remain constant in 2022. The net cost impact of selling
37% of the DGS wet is an average cost reduction of $0.031 per gallon.

           Table VII.A.1-4--Average Ethanol Cost of Production
------------------------------------------------------------------------

------------------------------------------------------------------------
Baseline Cost of Production (Natural Gas,   $1.627/gal
 no new technologies, 100% dry DGS).
Fuel Type Cost Impact.....................  -$0.006/gal
New Technology Cost Impact................  -$0.092/gal
DGS Drying Cost Impact....................  -$0.031/gal
Average Cost of Ethanol Production (2022).  $1.499/gal
------------------------------------------------------------------------

    Based on energy prices from EIA's Annual Energy Outlook (AEO) April
2009 updated reference case ($116/bbl crude oil), we arrive at a
production cost of $1.50/gal. More details on the ethanol production
cost estimates can be found in Chapter 4 of the RIA. This estimate
represents the full cost to the plant operator, including purchase of
feedstocks, energy required for operations, capital depreciation,
labor, overhead, and denaturant, minus revenue from sale of co-
products. The capital cost for a 65 MMgal/yr natural gas fired dry mill
plant is estimated at $97MM (the projected average size of such plants
in 2022).
    Similarly, coal and biomass fired plants were assumed to be 110 MGY
in capacity, with an estimated capital cost of $184MM.\306\ Despite the
lower operating costs of coal and biomass fired plants the higher
capital costs result, on average, ethanol produced in a facility using
coal or biomass as a primary energy source results in a per-gallon cost
$0.01/gal higher compared to production using natural gas. See Chapter
4.1 of the RIA for more details.
---------------------------------------------------------------------------

    \306\ Capital costs for a natural gas fired plant were taken
from USDA cost model; incremental costs to use coal as the primary
energy source were derived from conversations with ethanol plant
construction contractors.

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

    In this cost estimation work, we did not assume any pelletizing of
DDGS. Pelletizing is expected to improve ease of shipment to more
distant markets, which may become more important at the larger volumes
projected for the future. However, while many in industry are aware of
this technology, those we spoke with are not employing it in their
plants, and do not expect widespread use in the foreseeable future.
According to USDA's model, pelletizing adds $0.035/gal to the ethanol
production cost.
    Note that the ethanol production cost given here does not account
for any subsidies on production or sale of ethanol, and is independent
of the market price of ethanol.
b. Cellulosic Ethanol
i. Feedstock Costs
Cellulosic Feedstock Costs
    To estimate the cost of producing cellulosic biofuels, it was first
necessary to estimate the cost of harvesting, storing, processing and
transporting the feedstocks to the biofuel production facilities.
Ethanol or other cellulosic biofuels can be produced from crop residues
such as corn stover, wheat, rice, oat, and barley straw, sugar cane
bagasse, and sorghum, from other cellulosic plant matter such as forest
thinnings and forest-fuel removal, pulping residues, and from the
cellulosic portions of municipal solid waste (MSW).
    Our feedstock supply analysis projected that energy crops would be
the most abundant of the cellulosic feedstocks, comprising about 49% of
the total biomass feedstock inventory. Agricultural residues,
predominantly corn stover, make up approximately 36% of the total,
followed by MSW at approximately 15% and forestry residue at about 1%.
At present, there are no commercial sized cellulosic ethanol plants in
the U.S. Likewise, there are no commercially proven, fully-integrated
feedstock supply systems dedicated to providing any of the feedstocks
we mentioned to ethanol facilities of any size, although certain
biomass is harvested for other purposes. For this reason, our feedstock
cost estimates are projections and not based on any existing market
data.
    Our feedstock costs include an additional preprocessing cost that
many other feedstock cost estimates do not include--thus our costs may
seem higher. We used biofuel plant cost estimates provided by NREL
which no longer includes the cost for finely grinding the feedstock
prior to feeding it to the biofuel plant. Thus, our feedstock costs
include an $11 per dry ton cost to account for the costs of this
grinding operation, regardless of whether this operation occurs in the
field or at the plant gate.
Crop Residue and Energy Crops
    Crop residue harvest is currently a secondary harvest; that is they
are harvested or gathered only after the prime crop has been harvested.
In most northern areas, the harvest periods will be short due to the
onset of winter weather. In some cases, it may be necessary to gather a
full year's worth of residue within just a few weeks. Consequently, to
accomplish this hundreds of pieces of farm equipment will be required
for a few weeks each year to complete a harvest. Winter conditions in
the South make it somewhat easier to extend the harvest periods; in
some cases, it may be possible to harvest a residue on an as needed
basis.
    During the corn grain harvest, generally only the cob and the
leaves above the cob are taken into the harvester. Thus, the stover
harvest would likely require some portion of the standing-stalks be
mowed or shredded, following which the entire residue, including that
discharged from the combine residue-spreader, would need to be raked.
Balers, likely a mix of large round and large square balers, would
follow the rakes. The bales would then be removed from the field,
usually to the field-side in the first operation of the actual harvest,
following which they would then be hauled to a satellite facility for
intermediate storage. For our analysis we assumed that bales would then
be hauled by truck and trailer to the processing plant on an as needed
basis.
    The small grain straws (wheat, rice, oats, barley, sorghum) are cut
near the ground at the time of grain harvest and thus likely won't
require further mowing or shredding. They will likely need to be raked
into a windrow prior to baling. Because small grain straws have been
baled and stored for many years, we don't expect unusual requirements
for handling these residues. Their harvest and storage costs will
likely be less than those for corn stover, but their overall quantity
is much less than corn stover (corn stover makes up about 68% of all
the crop residues), so we don't expect their lower costs to have,
individually or collectively, a huge effect on the overall feedstock
costs. Thus, we project that for several years, the feedstock costs
will be largely a function of the cost to harvest, store, and haul corn
stover.
    For the crop residues, we relied on the FASOM agricultural cost
model for farm harvesting and collection costs. FASOM estimates corn
stover would cost $34.49 per dry ton at the farm gate. This reflects
the cost to mow, rake, bale, and field haul the bales and replace
nutrients. This farm gate cost could be lower if new equipment is
developed that would allow the farmer to harvest the corn stover at the
same time as the corn. Energy crops such as switchgrass and miscanthus
would be harvested, baled, stored and transported in a manner very
similar to crop residues. The FASOM model estimates switch grass, which
we are using to be representative of all energy crops, would be
available at farm side at a cost of $40.85.
Forestry Residue
    Harvest and transport costs for woody biomass in its different
forms vary due to tract size, tree species, volumes removed, distance
to the wood-using/storage facility, terrain, road condition, and many
other considerations. There is a significant variation in these factors
within the United States, so timber harvest and delivery systems must
be designed to meet constraints at the local level. Harvesting costs
also depend on the type of equipment used, season in which the
operation occurs, along with a host of other factors. Much of the
forest residue is already being harvested by logging operations, or is
available from milling operations. However, the smaller branches and
smaller trees proposed to be used for biofuel production are not
collected for their lumber so they are normally left behind. Thus, this
forest residue would have to be collected and transported out of the
forest, and then most likely chipped before transport to the biofuel
plant.
    In general, most operators in the near future would be expected to
chip at roadside in the forest, blowing the chips directly into a chip
van. When the van is full it will be hauled to an end user's facility
and a new van will be moved into position at the chipper. The process
might change in the future as baling systems become economically
feasible or as roll-off containers are proven as a way to handle
logging slash. At present, most of the chipping for biomass production
is done in connection with forest thinning treatments as part of a
forest fire prevention strategy. The major problem associated with
collecting logging residues and biomass from small trees is handling
the material in the forest before it gets to the chipper. Specially-
built balers and roll-off containers offer some promise to reduce this
cost. Whether the material is

collected from a forest thinning operation or a commercial logging
operation, chips from residues will be dirty and will require screening
or some type of filtration at the end-user's facility.\307\
---------------------------------------------------------------------------

    \307\ Personal Communication, Eini C. Lowell, Research
Scientist, USDA Forest Service
---------------------------------------------------------------------------

    As with agricultural residues and energy crops we relied on the
FASOM model for road side costs for forestry residue. The FASOM model
estimates costs for both hardwood and softwood logging residues. We
anticipate that forestry residue for the production of cellulosic
biofuels would be a mixture of both hard and soft woods. In order to
obtain a cost for forest residues to be used as a feedstock for
cellulosic biofuels we averaged the costs of the hardwood and softwood
logging residue prices reported by FASOM. This resulted in a forestry
residue price of $20.79 at the roadside. Note that this does not
include the cost of the grinding operation that would be required
before the forestry residues can be processed by the biofuel producer.
Municipal Solid Waste
    Millions of tons of municipal solid waste (MSW) continue to be
disposed of in landfills across the country, despite recent large gains
in waste reduction and diversion. The biomass fraction of this total
stream represents a potentially significant resource for renewable
energy (including electricity and biofuels). Because this waste
material is already being generated, collected and transported (it
would only need to be transported to a different location), its use is
likely to be less expensive than other cellulosic feedstocks. One
important difficulty facing those who plan to use MSW fractions for
fuel production is that in many places, even today, MSW is a mixture of
all types of wastes, including biomaterials such as animal fats and
grease, tin, iron, aluminum, and other metals, painted woods, plastics,
and glass. Many of these materials can't be used in biochemical and
thermochemical ethanol production, and, in fact, would inflate the
transportation costs, impede the operations at the cellulosic ethanol
plant and cause an expensive waste stream for biofuel producers.
    In today's regulation the definition of ``renewable biomass''
includes the separated yard and food waste portion of MSW. As discussed
in Section III.B.4.d, we are including as part of separated yard and
food waste, incidental and post-recycled paper and wood wastes. Thus,
firms planning on using MSW for producing cellulosic biofuels will be
required to account for those components of the waste. We offer three
methods for performing such accounting. One method is ``feedstock
accounting'' in which the components of the waste stream are
inventoried to obtain the fraction representing the portion of the
waste stream that qualifies as renewable biomass. The second method is
that upon verification that the food and yard waste is reasonably
separated, that 100 percent of such waste may be counted as renewable
biomass for purpose of generating RINs. Reasonable separation is
considered to occur where curbside recycling is implemented, or where
technologies are employed that ensure a maximum degree of separation,
including but not limited to material recovery facilities. Under the
second method, the renewable portion of the fuel so produced must be
verified via a carbon dating method (ASTM D-6866 method) which is
specified and incorporated by reference in today's regulation. The
third method is the application of a default fraction of 50% to be
applied to the waste stream purchased and used by the fuel producer.
    One method for sorting that would qualify to ensure reasonable
separation has occurred is single stream recycling, in which the waste
is sorted either at a sorting facility or at the landfill prior to
dumping. There are two prominent options here. The first is that there
is no sorting at the waste creation site, the home or business, and
thus a single waste stream must be sorted at the facility. The second
is that the sorting occurs at the waste collection facility. The
sorting would likely be done by hand or by automated equipment at the
facility known as material recovery facilities (MRFs). To do so by hand
is very labor intensive and somewhat slower than using an automated
system. In most cases the `by-hand' system produces a slightly cleaner
stream, but the high cost of labor usually makes the automated system
more cost-effective. Perhaps the best approach for low cost and a clean
stream is the combination of hand sorting with automated sorting.
    Another method is a combination of the two which requires that
there is at least some sorting at the home or business which helps to
prevent contamination of the waste material, but then the final sorting
occurs downstream at a sorting site, or at the landfill.
    We have little data and few estimates for the cost to sort MSW. One
estimate generated by our Office of Solid Waste for a combination of
mechanically and manually sorting a single waste stream downstream of
where the waste is generated puts the cost in the $20 to $30 per ton
range. There is a risk, though, that the waste stream could still be
contaminated and this would increase the cost of both transporting the
material and using this material at the biofuel plant due to the toxic
ash produced which would require disposal at a toxic waste facility. If
a less contaminated stream is desired it would probably require sorting
at the generation site--the home or business--which would likely be
more costly since many more people in society would then have to be
involved and special trucks would need to be used. Also, widespread
participation is difficult when a change in human behavior is required
as some may not be so willing to participate. Offering incentives could
help to speed the transition to curbside recycling (i.e., charging a
fee for nonsorted waste, or paying a small amount for sorted tree
trimmings and construction and demolition waste). Assuming that
curbside sorting is involved, at least in a minor way, total sorting
costs might be in the $30 to $40 per ton range.
    These sorting costs would be offset by the cost savings for not
disposing of the waste material. Most landfills charge tipping fees,
the cost to dump a load of waste into a landfill. In the United States,
the national average nominal tipping fee increased fourfold from 1985
to 2000. The real tipping fee almost doubled, up from a national
average (in 1997 dollars) of about $12 per ton in 1985 to just over $30
in 2000. Equally important, it is apparent that the tipping fees are
much higher in densely populated regions and for areas along the U.S.
coast. For example, in 2004, the tipping fees were $9 per ton in Denver
and $97 per ton in Spokane. Statewide averages also varied widely, from
$8 a ton in New Mexico to $75 in New Jersey. Tipping fees ranged from
$21 to 98 per ton in 2006 for MSW and $18/ton to $120/ton for
construction and demolition waste. It is likely that the tipping fees
are highest for contaminated waste that require the disposal of the
waste in more expensive waste sites that can accept the contaminated
waste as opposed to a composting site. However, this same contaminated
material would probably not be desirable to biofuel producers.
Presuming that only the uncontaminated cellulosic waste (yard
trimmings, building construction and demolition waste and some paper)
is collected as feedstocks for biofuel plants, the handling and tipping
fees are

likely much lower, in the $30 per ton range.\308\
---------------------------------------------------------------------------

    \308\ We plan on conducting a more thorough analysis of tipping
fees by waste type for the final rulemaking.
---------------------------------------------------------------------------

    The wide variance in the cost of many of these areas affecting the
final cost of MSW as a cellulosic feedstock, including costs for
collecting and sorting MSW as well as the tipping fees for disposing of
waste materials, makes approximating the cost of MSW a difficult task.
Rather than attempt to build a model ourselves that would estimate the
cost of sorted MSW, we decided to contact several companies that are
currently planning on using MSW as a feedstock for cellulosic biofuel
production. In confidential conversations with these companies they
indicated that they believed that sorted MSW would be available at a
near zero cost. In one case they had already begun securing MSW sources
of feedstock for future biofuel production facilities. They indicated
to us that while there would be a significant cost associated with
sorting the MSW, this would be offset, or nearly so, by income
generated from the sale of recovered materials (paper, metals,
plastics, etc.) and the avoidance of tipping fees. There would still,
however, be some costs associated with the transportation and disposal
of materials unfit for the biofuels production process. Based on this
information, we conservatively estimate that MSW would be available for
use in a cellulosic biofuel production process at a cost of $15 per
ton. See section 4.1 of the RIA for further discussion on the cost of
MSW as a feedstock for cellulosic biofuels production.
Secondary Storage and Transportation
    In addition to the roadside costs cited in the preceding sections,
there will also be a cost to transport the cellulosic materials from
the farm or forest to the production facility. We relied on our own
cost analysis to determine the transportation costs. For MSW we do not
anticipate any additional costs to transport the cellulosic material to
the biofuel production facility if it is sourced from within the same
county as the production facility. This is because this material is
already being collected and transported to a sorting center landfill,
and would simply be re-routed to the production facility.
    For agricultural residues, energy crops, and forestry residue,
however, there will be additional costs associated with transporting
them from the farm or forest side to the production facility. These
costs are heavily dependent on the distance that the feedstock must be
transported from the places where it is produced to the biofuel
production facility. In order to estimate these costs we created a cost
estimating tool that calculated transportation costs based on the
distance the cellulosic material would have to be transported from the
farm or forest side to the production facility. This tool relies on
data provided by the National Agricultural Statistics Service for
information on the availability and location of agricultural residue.
Information on abandoned crop land, which was assumed to be the source
of energy crops, was provided by Elliot Campbell at UC Davis. Data on
the availability and location of forest residues was provided by the
national forestry service. For more information on this secondary
storage and transportation cost estimating tool that we used to
estimate transportation costs see Chapter 4.1 of the RIA.
    We also believe that some cellulosic feedstocks will require
secondary storage. Agricultural residues and energy crops will
generally be harvested annually, sometimes in time periods as short as
a few weeks in order to complete the harvest before the onset of winter
weather. The large quantity of feedstock required for a commercial
scale biofuel production plant makes it highly unlikely that a year's
worth of feedstock would be stored at the production facility. It is
also unlikely that farmers would tolerate the baled agricultural
residues or energy crops to be stored on their farms and transported to
the production facility on an as needed basis unless they were
compensated for the space bales occupy and damage done to their fields
by the heavy traffic that would be involved in the collection of this
material from their farms. Bales left exposed to the weather would also
decompose much more rapidly resulting in a higher cost per ton of
usable cellulosic material to biofuel producers. This loss would be
minimized if the bales are stored in covered sheds. Our cost estimating
tool takes these secondary storage costs into account for agricultural
residues and energy crops. MSW and forestry residues have no secondary
storage costs as they can be collected and transported on an as needed
basis.
Cellulosic Feedstock Cost Curve
    When the various costs described above are combined, together with
the cost of grinding the cellulosic material ($11/ton), the result is
not a single cost, but rather a cost curve. This is due to the fact
that each feedstock source has a unique price based on the FASOM
estimate of the cost of production of the feedstock and the cost of
transportation and secondary storage (if appropriate), where feedstocks
have the lowest total cost in the parts of the country where the
cellulosic plants are likely to be located. The cost per ton of
feedstock is lower when the total production of cellulosic biofuel is
low as the cheapest feedstocks are utilized first. As cellulosic
biofuel production increases, so does the cost of cellulosic
feedstocks, as more expensive sources of feedstock are used. The cost
curve for cellulosic feedstocks for the production of up to 16 billion
ethanol equivalent gallons of cellulosic biofuels is shown in Graph
VIII.A.1-1 below. The average cost of cellulosic feedstock at a
production level of 16 billion ethanol equivalent gallons is $67.42,
and is summarized in Table VII.A.1-5.

[GRAPHIC] [TIFF OMITTED] TR26MR10.428

                             Table VII.A.1-5--Summary of Cellulosic Feedstock Costs
----------------------------------------------------------------------------------------------------------------
              Ag Residue                     Switchgrass             Forest Residue                MSW
----------------------------------------------------------------------------------------------------------------
36% of Total Feedstock...............  49% of total Feedstock.  1% of Total Feedstock..  15% of Total Feedstock
----------------------------------------------------------------------------------------------------------------
Mowing, Raking, Baling, Hauling,       Mowing, Raking, Baling,  Harvesting, Hauling to   Sorting, Contaminant
 Nutrients and Farmer Payment $34.49/   Hauling, Nutrients and   Forest Edge, $20.79/     Removal, Tipping Fees
 ton.                                   Farmer Payment $40.85/   ton.                     Avoided, $15/ton
                                        ton.
----------------------------------------------------------------------------------------------------------------
                       Hauling to Secondary Storage, Secondary Storage, Hauling to Plant
                                              $21.53/ton (average)
----------------------------------------------------------------------------------------------------------------
                                                    Grinding
                                                     $11/ton
----------------------------------------------------------------------------------------------------------------
                                                      Total
                                                   $67.42/ton
----------------------------------------------------------------------------------------------------------------

ii. Production Costs for Cellulosic Biofuels
    In this section, we discuss the cost to biochemically and
thermochemically convert cellulosic feedstocks into fuel ethanol.
Biochemical Ethanol
    The National Renewable Energy Laboratory has been evaluating the
state of biochemical cellulosic plant technology over the past decade
or so, and it has identified principal areas for improvement. In 1999,
it released its first report on the likely design concept for an nth
generation biochemical cellulosic ethanol plant which projected the
state of technology in some future year after the improvements were
adopted. In 2002, NREL released a follow-up report which delved deeper
into biochemical plant design in areas that it had identified in the
1999 report as deserving for additional research. Again, the 2002
report estimated the ethanol production cost for an nth generation
biochemical cellulosic ethanol plant. These reports not only helped to
inform policy makers on the likely capability and cost for
biochemically converting cellulose to ethanol, but it helped to inform
biochemical technology researchers on the most likely technology
improvements that could be incorporated into these plant designs.
    To comply with the RFS 2 requirements, NREL assessed the likely
state of biochemical cellulosic plant technology for EPA over the years
that the RFS standard is being phased in. The specific years assessed
by NREL were 2010, 2015 and 2022. The year 2010 technology essentially
represents the status of today's biochemical cellulosic plants. The
year 2015 technology captures the expected near-term improvements
including the rapid improvements being made in enzyme technology. The
year 2022 technology captures the cost of mature biochemical cellulosic
plant technology. Table VII.A.1-6 summarizes NREL's estimated and
projected production costs for biochemical cellulosic ethanol plant
technology for their projected year 2022 technology in 2007 dollars
reflecting a 7 percent before tax rate of return on investment. The
biochemical cellulosic

ethanol costs are based on a cellulosic feedstock cost of 67 per dry
ton.

                               Table VII.A.1-6--Year 2022 Biochemical Cellulosic Ethanol Production Costs Provided by NREL
                                                     [2007 dollars and 7% before tax rate of return]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Year technology                                                                   2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
Plant Size............................................................................................................................                71
MMgal/yr
Capital Cost..........................................................................................................................               199
$MM
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                                $MM/yr       c/gal
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Capital Cost 7% ROI before taxes........................................................................................................................................          22          31
Fixed Costs.............................................................................................................................................................           8          12
Feedstock Cost..........................................................................................................................................................          52          73
Other raw matl. costs...................................................................................................................................................          12          16
Enzyme Cost.............................................................................................................................................................           5           8
Enzyme nutrients........................................................................................................................................................           2           2
Electricity.............................................................................................................................................................         -12         -16
Waste disposal..........................................................................................................................................................           1           1
                                                                                -----------------------
    Total Costs.........................................................................................................................................................          90         127
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Thermochemical Ethanol
    Thermochemical conversion is another reaction pathway which exists
for converting cellulose to ethanol. Thermochemical technology is based
on the heat and pressure-based gasification or pyrolysis of nearly any
biomass feedstock, including those we've highlighted as likely
biochemical feedstocks. The syngas could then be converted into mixed
alcohols, hydrocarbon fuels, chemicals, and power. In the case that the
syngas is converted to ethanol, a possible means for doing so would be
to pass the syngas over a catalyst which converts the syngas to mixed
alcohols--mainly methanol. The methanol can be reacted further to
ethanol.
    NREL has authored a thermochemical report: Phillips, S
Thermochemical Ethanol via Indirect Gasification and Mixed Alcohol
Synthesis of Lignocellulosic Biomass; April, 2007, which already
provided a cost estimate. However, this report only hypothesized how a
thermochemical ethanol plant could achieve production costs at a very
low cost of $1 per gallon. Rather than rely on a very aggressively
analyzed cost assessment that may not be achievable within the
timeframe of our program, EPA contracted NREL to assess the costs for a
thermochemical technology which produces mixed alcohols for years 2010,
2015 and 2022. Table VII.A.1-7 summarizes NREL's estimated and
projected production costs for biochemical cellulosic ethanol plant
technology for their projected year 2022 technology in 2007 dollars
reflecting a 7 percent before tax rate of return on investment. The
costs are based on a cellulosic feedstock cost of 67 per dry ton.

                        Table VII.A.1-7--Year 2022 Thermochemical Cellulosic Production Costs of Mixed Alcohols Provided by NREL
                                                     [2007 dollars and 7% before tax rate of return]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Year technology                                                                   2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
Plant Size............................................................................................................................  72.7 Total
                                                                                Alcohol.
MMgal/yr..............................................................................................................................  61.9 Ethanol.
Capital Cost..........................................................................................................................  207.
$MM
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                                $MM/yr       c/gal
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Capital Cost 7% ROI before taxes........................................................................................................................................          23          37
Fixed Costs.............................................................................................................................................................          13          21
Feedstock Cost..........................................................................................................................................................          52          85
Coproduct Credit........................................................................................................................................................         -13         -21
Other Raw Material, Waste Disposal and Catalyst Costs...................................................................................................................           1           4
                                                                                -----------------------
Total Costs.............................................................................................................................................................          76         126
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Cost estimates for both biochemical and thermochemical ethanol
pathways ended up being ultimately identical. For our cost analysis, we
based the cellulosic ethanol costs on the average of the biochemical
and thermochemical cellulosic ethanol costs.
BTL Diesel Fuel
    If cellulose is converted to syngas, rather than converting the
syngas to mixed alcohols, a Fischer Tropsch reactor can be added to
convert the syngas to diesel fuel and naphtha. This technology is
commonly termed biomass-to-liquids (BTL) because of its similarity to
gas-to-liquids and coal-to-

liquids technology. Diesel fuel's higher energy density per gallon than
ethanol and even biodiesel provides it an inherent advantage over these
other fuels. In addition, BTL diesel fuel can be more easily
distributed from production to retail outlets and used by motor
vehicles. The diesel fuel produced by the Fischer Tropsch process tends
to be comprised of paraffins which provide a much higher cetane number
than petroleum diesel fuel, with a downside of poorer cloud point which
reduces its widespread use in cold temperatures.
    The naphtha produced by the BTL process is also largely comprised
of paraffins, however, as a gasoline blendstock it is poor because of
its very low octane (potentially as low as 50 octane). This material
could be processed by refinery isomerization units raising its octane
to perhaps 70 octane, but it cannot be processed by refinery reformers
since it does not contain the naphthenic compounds that are necessary
for octane improvement by those units. Because of the large amount of
octane rich ethanol which is expected to be made available from both
corn and cellulose, it could be that BTL naphtha could be blended along
with the ethanol into the gasoline pool. Rather than prejudge how this
naphtha may be utilized in the future, for our cost analysis we simply
assigned it a coproduct credit. So we set the BTL naphtha cost to be
83% as much of the cost of BTL diesel fuel based on its relative energy
density.
    Although there were several studies available which provided costs
estimates for BTL diesel fuel, they did not provide sufficient detail
to understand all the cost elements of BTL diesel fuel and naphtha. EPA
therefore asked NREL to estimate the production costs for BTL diesel
fuel and naphtha. Like the other technologies, we asked for cost
estimates for the same years assessed above for cellulosic ethanol
which was for 2010, 2015 and 2022, however, NREL did not believe that
the costs would change that much over this time span. So NREL only
provided the costs for 2022, advising us that the costs would only be
slightly less for earlier years, and most of that difference would
because of the poorer economies of scale for the initial smaller sized
plants.
    Table VII.A.1-8 summarizes NREL's estimated and projected
production costs for a thermochemical Fischer Tropsch biochemical
cellulosic ethanol plant technology for their projected year 2022
technology in 2007 dollars reflecting a 7 percent before tax rate of
return on investment. The costs are based on a cellulosic feedstock
cost of 67 per dry ton.

   Table VII.A.1-8--Year 2022 Production Costs of Thermochemical (BTL)
         Cellulosic Fischer Tropsch Diesel Fuel Provided by NREL
             [2007 dollars and 7% before tax rate of return]
------------------------------------------------------------------------
                                                      33.2 Diesel fuel
                Plant Size MMgal/yr                    49.4 all liquid
------------------------------------------------------------------------
Capital Cost $MM..................................                   346
Capital Cost 7% ROI before taxes ($MM/yr).........                    38
Fixed Costs ($MM/yr)..............................                    18
Feedstock Cost ($MM/yr)...........................                    52
Coproduct Credit ($MM/yr)\a\......................                   -32
Other raw matl. Costs ($MM/yr)....................                   1.5
Waste Disposal and Catalyst Costs ($MM/yr)........                   1.5
Total Costs ($MM/yr)..............................                    79
Total Costs (cents/gallon of diesel fuel).........                   237
------------------------------------------------------------------------
\a\ Based on a naphtha coproduct value of 198 cents per gallon.

Other Cellulosic Diesel Fuel Costs
    For our volumes analysis, we assumed early on for our final rule
analysis that there would likely be several different cellulosic
biofuel technologies, other than BTL, producing cellulosic diesel fuel.
However, we were either not able to obtain cost information from them,
or we were uncertain enough about their future that we felt that we
should not base the cost of the program on them. For example, Cello
Energy has already built a cellulosic diesel fuel facility in Alabama
here in the US with projected costs of about one dollar per gallon of
diesel fuel. However, the facility has had difficulty operating as
designed. As a result, perhaps very conservatively, we assumed that the
other cellulosic diesel fuel costs would be the same as the BTL diesel
fuel costs, and used the 237 cents per gallon cost for BTL diesel fuel
for the entire cost for cellulosic diesel fuel.
c. Imported Sugarcane Ethanol
    We based our imported ethanol fuel costs on cost estimates of
sugarcane ethanol in Brazil. Generally, ethanol from sugarcane produced
in developing countries with warm climates is much cheaper to produce
than ethanol from grain or sugar beets. This is due to favorable
growing conditions, relatively low cost feedstock and energy inputs,
and other cost reductions gained from years of experience.
    As discussed in Chapter 4 of the RIA, our literature search of
production costs for sugar cane ethanol in Brazil indicates that
production costs tend to range from as low as $0.57 per gallon of
ethanol to as high as $1.48 per gallon of ethanol. This large range for
estimating production costs is partly due to the significant variations
over time in exchange rates, costs of sugarcane and oil products, etc.
For example, earlier estimates may underestimate current crude and
natural gas costs which influence the cost of feedstock as well as
energy costs at the plant. Another possible difference in production
cost estimates is whether or not the estimates are referring to hydrous
or anhydrous ethanol. Costs for anhydrous ethanol (for blending with
gasoline) are typically several cents per gallon higher than hydrous
ethanol (for use in dedicated ethanol vehicles in Brazil).\309\ It is
not entirely clear from the majority of studies whether reported costs
are for hydrous or anhydrous ethanol. Yet another difference could be
the slate of products the plant is producing, for example, future
plants may be dedicated ethanol facilities while others involve the
production of both sugar and ethanol in the same facility. Due to
economies of scale, production costs are also typically smaller per
gallon for larger facilities.
---------------------------------------------------------------------------

    \309\ International Energy Agency (IEA), ``Biofuels for
Transport: An International Perspective,'' 2004.
---------------------------------------------------------------------------

    The study by OECD (2008) entitled ``Biofuels: Linking Support to

Performance'', appears to provide the most recent and detailed set of
assumptions and production costs. As such, our estimate of sugarcane
production costs primarily relies on the assumptions made for the
study, which are shown in Table VII.A.1-9. The estimate assumes an
ethanol-dedicated mill and is based off an internal rate of return of
12%, a debt/equity ratio of 50% with an 8% interest rate and a selling
of surplus power at $57 per MWh.

                   Table VII.A.1-9--Cost of Production in a Standard Ethanol Project in Brazil
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Sugarcane Productivity........................  71.5 t/ha.
Sugarcane Consumption.........................  2 million tons/year.
Harvesting days...............................  167.
Ethanol productivity..........................  85 liters/ton (22.5 gal/ton).
Ethanol Production............................  170 million liters/year (45 MGY).
Surplus power produced........................  40 kWh/ton sugarcane.
Investment cost in mill.......................  USD 97 million.
Investment cost for sugarcane production......  USD 36 million.
O & M (Operating & Maintenance) costs.........  $0.26/gal.
Variable sugarcane production costs...........  $0.64/gal.
Capital costs.................................  $0.49/gal.
Total production costs........................  $1.40/gal.
----------------------------------------------------------------------------------------------------------------

    The estimate above is based on the costs of producing ethanol in
Brazil on average, today. However, we are interested in how the costs
of producing ethanol will change by the year 2022. Although various
cost estimates exist, analysis of the cost trends over time shows that
the cost of producing ethanol in Brazil has been steadily declining due
to efficiency improvements in cane production and ethanol conversion
processes. Between 1980 and 1998 (total span of 19 years) ethanol cost
declined by approximately 30.8%.\310\ This change in the cost of
production over time in Brazil is known as the ethanol cost ``Learning
Curve''.
---------------------------------------------------------------------------

    \310\ Goldemberg, J. as sited in Rothkopf, Garten, ``A Blueprint
for Green Energy in the Americas,'' 2006.
---------------------------------------------------------------------------

    The change in ethanol costs will depend on the likely productivity
gains and technological innovations that can be made in the future. As
the majority of learning may have already occurred, it is likely that
the decline in sugarcane ethanol costs will be less drastic in the
future as the production process and cane practices have matured.
Industrial efficiency gains are already at about 85% and are expected
to increase to 90% in 2015.\311\ Most of the productivity growth is
expected to come from sugarcane production, where yields are expected
to grow from the current 70 tons/ha, to 96 tons/ha in 2025.\312\
Sugarcane quality is also expected to improve, with sucrose content
growing from 14.5% to 17.3% in 2025.\313\ All productivity gains
together could allow the increase in the production of ethanol from
6,000 liters/ha (at 85 liters/ton sugarcane in 2005) to 10,400 liters/
ha (at 109 liters/ton sugarcane) by 2025.\314\ Although not reflected
here, there could also be cost and efficiency improvements related to
feedstock collection, storage, and distribution.
---------------------------------------------------------------------------

    \311\ Unicamp ``A Expans[amacr]o do Proalcool como Programa de
Desenvolvimento Nacional''. Powerpoint presentation at Ethanol
Seminar in BNDES, 2006. As sited in OECD, ``Biofuels: Linking
Support to Performance,'' ITF Round Tables No. 138, March 2008.
    \312\ Ibid.
    \313\ Ibid.
    \314\ Ibid.
---------------------------------------------------------------------------

    Assuming that ethanol productivity increases to 100 liters/ton by
2015 and 109 liters/ton by 2025, variable sugarcane ethanol production
costs are be expected to decrease to approximately $0.51/gal from
$0.64/gal since less feedstock is needed to produce the same volume of
ethanol using the estimates from Table VII.A.1-7, above. We assumed a
linear decrease between data points for 2005, 2015, and 2025. Adding
operating ($0.26/gal) and capital costs ($0.49/gal) from Table VII.A.1-
7, to a sugarcane cost of $0.51/gal, total production costs are $1.26/
gal in 2022.
    Brazil sugarcane producers are also expected to move from burned
cane manual harvesting to mechanical harvesting. As a result, large
amounts of straw are expected to be available. Costs of mechanical
harvesting are lower compared to manually harvesting, therefore, we
would expect costs for sugarcane to decline as greater sugarcane
producers move to mechanical harvesting. However, diesel use increases
with mechanical harvesting and with diesel fuel prices expected to
increase in the future, costs may be higher than expected. Therefore,
we have not assumed any changes to harvesting costs due to the
switchover from manual harvesting to mechanical harvesting.
    As more straw is expected to be collected at future sugarcane
ethanol facilities, there is greater potential for production of excess
electricity. The production costs estimates in the OECD study assumes
an excess of 40 kWh per ton sugarcane, however, future sugarcane plants
are expected to produce 135 kWh per ton sugarcane assuming the use of
higher efficiency condensing-extraction steam turbine (CEST) systems
and use of 40% of available straw.\315\ Assuming excess electricity is
sold for $57 per MWh, the production of 95 kWh per ton would be
equivalent to a credit of $0.22 per gallon ethanol produced. We have
included this potential additional credit from greater use of bagasse
and straw in our estimates at this time, calculated as a decrease in
operating costs from $0.26 per gallon to $0.04 per gallon.
---------------------------------------------------------------------------

    \315\ Macedo. I.C., ``Green house gases emissions in the
production and use of ethanol from sugarcane in Brazil: The 2005/
2006 Averages and a Prediction for 2020,'' Biomass and Bioenergy,
2008.
---------------------------------------------------------------------------

    It is also important to note that ethanol production costs can
increase if the costs of compliance with various sustainability
criteria are taken into account. For instance, using organic or green
cane production, adopting higher wages, etc. could increase production
costs for sugarcane ethanol.\316\ Such sustainability criteria could
also be applicable to other feedstocks, for example, those used in
corn- or soy-based biofuel production. If these measures are adopted in
the future, production costs will be higher than we have projected.
---------------------------------------------------------------------------

    \316\ Smeets E, Junginger M, Faaij A, Walter A, Dolzan P,
Turkenburg W, ``The sustainability of Brazilian Ethanol--An
Assessment of the possibilities of certified production,'' Biomass
and Bioenergy, 2008.
---------------------------------------------------------------------------

    In addition to production costs, there are also logistical and port
costs. We used the report from AgraFNP to estimate such costs since it
was the only resource that included both logistical

and port costs. The total average logistical and port cost for
sugarcane ethanol is $0.20/gal and $0.09/gal, respectively, as shown in
Table VII.A.1-10.

        Table VII.A.1-10--Imported Ethanol Cost at Port in Brazil
                                [2006 $]
------------------------------------------------------------------------
                                            Logistical
                 Region                    costs US ($/    Port cost US
                                               gal)           ($/gal)
------------------------------------------------------------------------
NE Sao Paulo............................           0.150           0.097
W Sao Paulo.............................           0.210           0.097
SE Sao Paulo............................           0.103           0.097
S Sao Paulo.............................           0.175           0.097
N Parana................................           0.238           0.097
S Goias.................................           0.337           0.097
E Mato Grosso do sul....................           0.331           0.097
Triangulo mineiro.......................           0.207           0.097
NE Cost.................................           0.027           0.060
Sao Francisco Valley....................           0.193           0.060
Average.................................           0.197           0.089
------------------------------------------------------------------------

    Total fuel costs must also include the cost to ship ethanol from
Brazil to the U.S. The average cost from 2006-2008 was estimated to be
approximately $0.17 per gallon of ethanol.\317\ Costs were estimated as
the difference between the unit value cost of insurance and freight
(CIF) and the unit value customs price. The average cost to ship
ethanol from Caribbean countries (e.g. El Salvador, Jamaica, etc.) to
the U.S. from 2006-2008 was approximately $0.13 per gallon of ethanol.
Although this may seem to be an advantage for Caribbean countries, it
should be noted that there would be some additional cost for shipping
ethanol from Brazil to the Caribbean country. Therefore, we assume all
costs for shipping ethanol to be $0.17 per gallon regardless of the
country importing ethanol to the U.S.
---------------------------------------------------------------------------

    \317\ Official Statistics of the U.S. Department of Commerce,
USITC.
---------------------------------------------------------------------------

    Total imported ethanol fuel costs (at U.S. ports) prior to tariff
and tax for 2022 is shown in Table VII.A.1-11, at $1.50/gallon. Direct
Brazilian imports are also subject to an additional $0.54 per gallon
tariff, whereas those imports arriving in the U.S. from Caribbean Basin
Initiative (CBI) countries are exempt from the tariff. In addition, all
imports are given an ad valorem tax of 2.5% for undenatured ethanol and
a 1.9% tax for denatured ethanol. We assumed an ad valorem tax of 2.5%
for all ethanol. Thus, including tariffs and ad valorem taxes, the
average cost of imported ethanol is shown in Table VII.A.1-12 in the
``Brazil Direct w/Tax & Tariff'' and ``CBI w/Tax'' columns for 2022.

                                   Table VII.A.1-11--Average Imported Ethanol Costs Prior to Tariff and Taxes in 2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Transport cost
        Sugarcane production cost  ($/gal)           Operating cost    Capital cost   Logistical cost   Port cost  ($/  from port to US  Total cost  ($/
                                                        ($/gal)          ($/gal)           ($/gal)           gal)            ($/gal)           gal)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.51..............................................            0.04             0.49             0.20             0.09             0.17             1.50
--------------------------------------------------------------------------------------------------------------------------------------------------------

                            Table VII.A.1-12--Average Imported Ethanol Costs in 2022
----------------------------------------------------------------------------------------------------------------
                                                               Brazil direct w/
                    Brazil direct  ($/gal)                       tax & tariff     CBI  ($/gal)    CBI w/tax  ($/
                                                                   ($/gal)                             gal)
----------------------------------------------------------------------------------------------------------------
1.50.........................................................            2.08             1.50             1.54
----------------------------------------------------------------------------------------------------------------

2. Biodiesel and Renewable Diesel Production Costs
    Biodiesel and renewable diesel production costs are primarily a
function of the feedstock cost, and to a much lesser extent, the
capital and other operating costs of the facility.
a. Biodiesel
    Biodiesel production costs for this rule were estimated using two
versions of a biodiesel production facility model obtained from USDA,
one using degummed soy oil as a feedstock and the other using yellow
grease. The biodiesel from yellow grease model includes acid pre-
treatment steps required to utilize feedstocks with high free fatty
acid content.
    The production model simulates a 10 million-gallon-per-year plant
operating a continuous flow transesterification process. USDA used the
SuperPro Designer chemical process simulation software to estimate heat
and material flowrates and equipment sizing. Outputs from this software
were then

combined in a spreadsheet with equipment, energy, labor, and chemical
costs to generate a final estimate of production cost. The model is
described in a 2006 publication in Bioresource Technology, peer-
reviewed scientific journal. \318\ For the purpose of estimating
biodiesel production cost for this rulemaking, a model with updated
facility, labor, and chemical costs was used. Installed capital cost
was $11.9 million, and energy prices were taken from AEO 2009: natural
gas at $7.75/MMBtu and electricity at $0.066/kWh. Capital charge plus
maintenance was assumed to be 14% of total capital per year. Table
VII.A.2-1 shows the production cost allocation for the soy oil-to-
biodiesel facility as modeled in the 2022 policy case.
---------------------------------------------------------------------------

    \318\ Haas, M.J, A process model to estimate biodiesel
production costs, Bioresource Technology 97 (2006) 671-678.

Table VII.A.2-1--Production Cost Allocation for Soy Biodiesel for Policy
                              Case in 2022
------------------------------------------------------------------------
                                                         Contribution to
                     Cost category                       cost  (percent)
------------------------------------------------------------------------
Soy Oil................................................               85
Other Materials \a\....................................                6
Capital & Facility.....................................                6
Labor..................................................                2
Utilities..............................................                2
------------------------------------------------------------------------
\a\ Includes acids, bases, methanol, catalyst.

    Soy oil costs were generated by the FASOM agricultural model
(described in more detail in Section VIII.A). Historically, the
majority of biodiesel production in the U.S. has used soy oil, a
relatively high-value feedstock, but a growing fraction of biodiesel is
being made from yellow grease (rendered or reclaimed oil that is not
suitable for use in food products). This material has historically sold
for about 70% of the value of virgin soy oil. However, conversion of
yellow grease into biodiesel requires an additional acid pre-treatment
step, and therefore the processing costs are higher than for virgin soy
oil (40-50 cents/gal if feedstock costs are equal), reducing the
attractiveness of the cheaper feedstock to some extent. Another
feedstock we expect to be used in significant quantities in the future
is distressed corn oil extracted from process streams that make up
distillers' grains. This material will also require processing in acid
pre-treatment facilities, and is projected by the FASOM model to have
about one half the value of soy oil.
    Finally, we project a small amount of algae-derived oil (or
similarly advanced feedstock) will be used by 2022. As algal biofuel
technology is still in a relatively early stage of development, there
are many possible configurations for the production of this material
and thus there is considerable uncertainty regarding process
performance and cost. Based on work done by NREL at the time of this
rulemaking, we assumed a production cost of $0.68/lb for this
feedstock.\319\ More details on how this estimate was made can be found
in Chapter 4.1 of the RIA.
---------------------------------------------------------------------------

    \319\ See Technical Memo in the docket entitled ``Techno-
economic analysis of microalgae-derived biofuel production'' by Ryan
Davis of the National Renewable Energy Laboratory.
---------------------------------------------------------------------------

    A co-product of transesterification is crude glycerin. With the
upswing in worldwide biodiesel production in recent years, its price
has been depressed in most markets. Closure of remaining petrochemical
glycerin plants, along with development of processes to make new use of
it as a feedstock for other commodity chemicals has provided some
support for a price recovery. Some companies are experimenting with
using glycerin as a fuel for process or facility heat. We expect new
uses for this coproduct to continue growing to reach an equilibrium
with supply at or near its heating value, which we estimate to be
$0.15/lb. As a result, the sale of this material as a co-product
reduces biodiesel production cost by about $0.13/gal in our control
case.
b. Renewable Diesel
    Renewable diesel production can occur in a few different
configurations: within the boundaries of an existing refinery where it
may or may not be coprocessed with petroleum, or at a stand-alone plant
that may or may not be co-located with other facilities that provide
utilities or hydrogen. Given changes in the tax incentives as well as
current project announcements, we have chosen to project that all
renewable diesel will be produced in stand-alone facilities, not
coprocessing with petroleum. The 75 MMgal/yr Syntroleum facility
scheduled to come online in Geismar, Louisiana, in 2010 is an example
of such a plant.
    Our production cost estimates used hydrogen requirements made
available publicly by UOP, Inc. and overall project cost of $150MM
taken from Syntroleum, Corp. materials.320 321 The feedstock
was assumed to be yellow grease or similar rendered material. Hydrogen
and co-product prices were taken from refinery modeling done for this
rule, while an aggregate figure of $0.069/gal, derived from the UOP
publication, was used to cover other variable operating costs besides
hydrogen (includes labor, catalyst, and utilities). Cost contributions
of various process aspects are shown in Table VII.A.2-2. More details
are available in Chapter 4.1 of the RIA.
---------------------------------------------------------------------------

    \320\ A New Development in Renewable Fuels: Green Diesel, AM-07-
10 Annual Meeting NPRA, March 18-20, 2007.
    \321\ Taken from Syntroleum Investor Presentation, November 5,
2009. See http://www.syntroleum.com/Presentations/
SyntroleumInvestorPresentation.November%205.2009.FINAL.pdf.

  Table VII.A.2-2--Production Cost Allocation for Renewable Diesel for
                           Policy Case in 2022
------------------------------------------------------------------------
                                                         Contribution to
                     Cost category                       cost  (percent)
------------------------------------------------------------------------
Feedstock..............................................               78
Capital & Facility.....................................               11
Hydrogen...............................................                7
Other variable costs...................................                3
------------------------------------------------------------------------

    Table VII.A.2-3 summarizes the production costs for biodiesel and
renewable diesel as estimated for this rule, as well as their projected
volume contribution in 2022. Biodiesel made from yellow grease is
projected to be about 10% cheaper to produce despite its higher
production cost due to the large influence of the feedstock cost, which
is about 30% lower. Biodiesel from extracted corn oil is expected to be
significantly cheaper to produce than this, again due to the projected
feedstock cost being about half that of soy oil. Finally, renewable
diesel from stand-alone production is estimated in this analysis to
have total production cost similar to biodiesel from yellow grease.
However, given the business partnership between the fuel production and
animal processing companies who have announced or are constructing the