2013............................................................             829             552             603
2014 \c\........................................................             192             143              -7
2015 \c\........................................................             162             147             -33
2016............................................................             530              98             906
2017............................................................             969             144             557
2018............................................................             852             178             426
----------------------------------------------------------------------------------------------------------------
\a\ The opportunity for ``other'' advanced biofuel is calculated by subtracting the number of cellulosic biofuel
  and BBD RINs required each year from the number of advanced biofuel RINs required. This portion of the
  advanced standard can be satisfied by advanced (D5) RINs, BBD RINs in excess of those required by the BBD
  standard, or cellulosic RINs in excess of those required by the cellulosic standard.
\b\ The available BBD (D4) RINs in excess of the BBD requirement is calculated by subtracting the required BBD
  volume (multiplied by 1.5 to account for the equivalence value of biodiesel) required each year from the
  number of BBD RINs available for compliance in that year. This number does not include carryover RINs, nor do
  we account for factors that may impact the number of BBD RINs that must be retired for compliance, such as
  differences between the projected and actual volume of obligated gasoline and diesel. The required BBD volume
  has not been retroactively adjusted for subsequent events, such as differences between projected and actual
  gasoline and diesel use and exempted small refinery volumes.
\c\ The 2014 and 2015 volume requirements were established in November 2015 and were set equal to the number of
  RINs projected to be available for each year.

    In 2014 and 2015, we set the BBD and advanced standards at actual
RIN generation, and thus the space between the advanced biofuel
standard and the biodiesel standard was unlikely to provide an
incentive for ``other'' advanced biofuels. For 2016-2018, the gap
between the BBD standard and the advanced biofuel provided an
opportunity for ``other'' advanced biofuels to be generated to satisfy
the advanced biofuel standard. While the RFS volumes created the
opportunity for up to 530 million, 969 million, and 852 million gallons
of ``other'' advanced for 2016, 2017, and 2018 respectively to be used
to satisfy the advanced biofuel obligation, only 97 million, 144
million, and 178 million gallons of ``other'' advanced biofuels were
generated. This is significantly less than the volumes of ``other''
advanced available in 2012-2013. Despite creating space within the
advanced biofuel standard for ``other'' advanced, in recent years, only
a small fraction of that space has been filled with ``other'' advanced,
and BBD continues to fill most of the gap between the BBD standard and
the advanced standard.
    Thus, while the advanced biofuel standard is sufficient to drive
biodiesel volume separate and apart from the BBD standard, there does
not appear to be a compelling reason to increase the ``space''
maintained for ``other'' advanced biofuel volumes. The overall volume
of non-cellulosic advanced biofuel increased by 500 million gallons for
2019. We determined that it was appropriate to also increase the BBD
volume by the same amount as it would preserve the space already
available for other advanced biofuels to compete in 2018 (850 million
RINs). This space is nearly six times the amount of other advanced
biofuels used in 2017, and over eight times that used in 2016. Even in
an optimistic scenario, we do not believe that the use of other
advanced biofuels will approach such amounts by 2021. We recognize,
however, the dynamic nature of the fuels marketplace, and the impact
that the BBD blender's tax credit can have on the relative economics of
BBD versus other advanced biofuels, so going forward we intend to
assess the appropriate space for other advanced biofuels in subsequent
rules setting BBD volumes. The volume of non-cellulosic advanced
biofuel remains the same (4.5 billion gallons) in 2019-2021, and
therefore, increasing the 2021 BBD volume to maintain space is not
necessary in this action.
    At the same time, the rationale for preserving the ``space'' for
``other'' advanced biofuels remains. We note that the BBD industry in
the U.S. and abroad has matured since EPA first increased the required
volume of BBD beyond the statutory minimum in 2013. To assess the
maturity of the biodiesel industry, EPA compared information on BBD RIN
generation by company in 2012 and 2018 (the most recent year for which
complete RIN generation by company is available). In 2012, the annual
average RIN generation per company producing BBD was about 11 million
RINs (about 7.3 million gallons) with approximately 50 percent of
companies producing less than 1 million gallons of BBD a year.\153\ The
agency heard from multiple commenters during the 2012 and 2013
rulemakings that higher volume requirements for BBD would provide
greater certainty for the emerging BBD industry and encourage further
investment. Since that time, the BBD industry has matured in a number
of critical areas, including growth in the size of companies, the
consolidation of the industry, and more stable funding and access to
capital. In 2012, the BBD industry was characterized by smaller
companies with dispersed market share. By 2018, the average BBD RIN
generation per company had climbed to over 36 million RINs (23.7
million gallons) annually, more than a 3-fold increase. Only 20 percent
of the companies produced less than 1 million gallons of BBD in
2017.\154\
---------------------------------------------------------------------------

    \153\ ``BBD RIN Generation by Company in 2012 and 2018,''
available in EPA docket EPA-HQ-OAR-2019-0136.
    \154\ Id.
---------------------------------------------------------------------------

    We are conscious of public comments claiming that BBD volume
requirements that are a significant portion of the advanced volume
requirements effectively disincentivize the future development of other
promising advanced biofuel pathways.\155\ A variety of different types
of advanced biofuels, rather than a single type such as BBD, would
increase energy security (e.g., by increasing the diversity of
feedstock

sources used to make biofuels, thereby reducing the impacts associated
with a shortfall in a particular type of feedstock) and increase the
likelihood of the development of lower cost advanced biofuels that meet
the same GHG reduction threshold as BBD.\156\
---------------------------------------------------------------------------

    \155\ See, e.g., Comments from Advanced Biofuel Association,
available in EPA docket EPA-HQ-OAR-2018-0167-1277.
    \156\ All types of advanced biofuel, including BBD, must achieve
lifecycle GHG reductions of at least 50 percent. See CAA section
211(o)(1)(B)(i), (D).
---------------------------------------------------------------------------

    We recognize that the space for other advanced biofuels in 2021
will ultimately depend on the 2021 advanced biofuel volume. While EPA
is not establishing the advanced biofuel volume for 2021 in this
action, we anticipate that the non-cellulosic advanced biofuel volume
for 2021, when established, will be greater than 3.65 billion gallons
(equivalent to 2.43 billion gallons of BBD, after applying the 1.5
equivalence ratio). This expectation is consistent with our actions in
previous years. Accordingly, we expect that the 2021 advanced biofuel
volume, together with the 2021 BBD volume proposed today, will continue
to preserve a considerable portion of the advanced biofuel volume that
could be satisfied by either additional gallons of BBD or by other
unspecified and potentially less costly types of qualifying advanced
biofuels.

C. Consideration of Statutory Factors Set Forth in CAA Section
211(o)(2)(B)(ii)(I)-(VI) for 2021 and Determination of the 2021
Biomass-Based Diesel Volume

    The BBD volume requirement is nested within the advanced biofuel
requirement, and the advanced biofuel requirement is, in turn, nested
within the total renewable fuel volume requirement.\157\ This means
that any BBD produced can be used to satisfy both these other
applicable volume requirements even beyond the mandated BBD volume. The
result is that in considering the statutory factors we must consider
the potential impacts of increasing or decreasing BBD in comparison to
other advanced biofuels.\158\ For a given advanced biofuel standard,
greater or lesser BBD volume requirements do not change the amount of
advanced biofuel used to displace petroleum fuels; rather, increasing
the BBD requirement may result in the displacement of other types of
advanced biofuels that could have been used to meet the advanced
biofuels volume requirement. We are proposing to maintain the BBD
volume for 2021 at 2.43 billion gallons based on our review of the
statutory factors and the other considerations noted above and in the
Draft Statutory Factors Assessment for Proposed 2021 BBD Docket
Memorandum. This volume would preserve a gap for ``other'' advanced
biofuels, that is the difference between the advanced biofuel volume
and the sum of the cellulosic biofuel and BBD volumes. This would allow
other advanced biofuels to continue to compete with excess volumes of
BBD for market share under the advanced biofuel standard, while also
supporting further growth in the BBD industry.
---------------------------------------------------------------------------

    \157\ See CAA section 211(o)(2)(B)(i)(IV), (II).
    \158\ While excess BBD production could also displace
conventional renewable fuel under the total renewable standard, as
long as the BBD applicable volume is lower than the advanced biofuel
applicable volume our action in setting the BBD applicable volume is
not expected to displace conventional renewable fuel under the total
renewable standard, but rather is expected to displace other
advanced biofuels. We acknowledge, however, that under certain
market conditions excess volumes of BBD may also be used to displace
conventional biofuels as may have been the case in 2013-16 when the
prices of BBD, advanced, and conventional RINs converged. We have
not, however, observed similar market dynamics in more recent years,
and we think it is unlikely that BBD RINs will become the marginal
biofuel used to meet the total renewable fuel standard in subsequent
years. Rather, conventional biodiesel and renewable diesel have and
will likely continue to play that role.
---------------------------------------------------------------------------

    Consistent with our approach in setting the final BBD volume
requirement for 2020, our primary assessment of the statutory factors
for the 2021 BBD applicable volume is that because the BBD requirement
is nested within the advanced biofuel volume requirement, we expect
that the 2021 advanced volume requirement, when set next year, will
determine the level of BBD use, production, and imports that occur in
2021. Therefore, we continue to believe that approximately the same
overall volume of BBD would likely be supplied in 2021 even if we were
to mandate a somewhat lower or higher BBD volume for 2021. Thus, we do
not expect our 2021 BBD volume requirement to result in a significant
difference in the factors we consider pursuant to CAA section
211(o)(2)(B)(ii)(I)-(VI) in 2021.
    We also considered long-term impacts of the 2021 BBD volume.\159\
We find that while BBD volumes and resulting impact on the statutory
factors in 211(o)(2)(B)(ii) will not likely be significantly impacted
by the 2021 BBD volume in the short term, leaving room for growth of
other advanced biofuels could have a beneficial impact on certain
statutory factors in the long term. Notably, this incentivizes the
development of other advanced biofuels with potentially superior cost,
climate, environmental, and other characteristics, relative to BBD.
---------------------------------------------------------------------------

    \159\ ``Memorandum to docket: Draft Statutory Factors Assessment
for the 2021 Biomass-Based Diesel (BBD) Applicable Volumes.'' See
Docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    With the considerations discussed above in mind, as well as our
analysis of the factors specified in the statute, we are proposing to
set the applicable volume of BBD at 2.43 billion gallons for 2021. This
volume would continue to preserve a significant gap between the
advanced biofuel volume and the sum of the cellulosic biofuel and BBD
volumes. This would allow other advanced biofuels to continue to
compete with excess volumes of BBD for market share under the advanced
biofuel standard. This would allow some long term certainty for
investments on other advanced biofuels that over time could compete
with BBD to fill the advanced biofuel standard. We believe this volume
sets the appropriate floor for BBD, and that the volume of advanced
biodiesel and renewable diesel actually used in 2021 will be driven by
the level of the advanced biofuel and potentially the total renewable
fuel standards that the Agency will establish for 2021. It also
recognizes that while maintaining an opportunity for other advanced
biofuels is important, the vast majority of the advanced biofuel used
to comply with the advanced biofuel standard in recent years has been
BBD. Based on information now available from recent years, despite
providing a significant degree of space for ``other'' advanced
biofuels, smaller volumes of ``other'' advanced have been utilized to
meet the advanced standard. EPA believes that the BBD standard we are
proposing today still provides sufficient incentive to producers of
``other'' advanced biofuels, while also acknowledging that the advanced
standard has been met predominantly with biomass-based diesel. Our
assessment of the required statutory factors and the implementation of
the program supports a proposed volume of 2.43 billion gallons.

VIII. Percentage Standards for 2020

    The renewable fuel standards are expressed as volume percentages
and are used by each obligated party to determine their Renewable
Volume Obligations (RVOs). Since there are four separate standards
under the RFS program, there are likewise four separate RVOs applicable
to each obligated party. Each standard applies to the sum of all non-
renewable gasoline and diesel produced or imported.
    Sections II through IV provide our rationale and basis for the
proposed

volume requirements for 2020.\160\ The volumes used to determine the
proposed percentage standards are shown in Table VIII-1.
---------------------------------------------------------------------------

    \160\ The 2020 volume requirement for BBD was established in the
2019 standards final rule (83 FR 63704, December 11, 2018).

     Table VIII-1--Volumes for Use in Determining the Proposed 2020
                     Applicable Percentage Standards
                            [Billion gallons]
------------------------------------------------------------------------

------------------------------------------------------------------------
Cellulosic biofuel......................................            0.54
Biomass-based diesel....................................            2.43
Advanced biofuel........................................            5.04
Renewable fuel..........................................           20.04
------------------------------------------------------------------------

    For the purposes of converting these volumes into percentage
standards, we generally use two decimal places to be consistent with
the volume targets as given in the statute, and similarly two decimal
places in the percentage standards. In past years we have used three
decimal places for cellulosic biofuel in both the volume requirement
and percentage standards to more precisely capture the smaller volume
projections and the unique methodology that in some cases results in
estimates of only a few million gallons for a group of cellulosic
biofuel producers (see Section III for a further discussion of the
proposed methodology for projecting cellulosic biofuel production and
our decision to round the projected volume of cellulosic biofuel to the
nearest 10 million gallons). However, the volume requirements for
cellulosic biofuel have increased over time, and today's proposed
volume requirements are the highest ever. We propose that volume
requirements and percentage standards for cellulosic biofuel use two
decimal places.

A. Calculation of Percentage Standards

    To calculate the percentage standards, we are following the same
methodology for 2020 as we have in all prior years. The formulas used
to calculate the percentage standards applicable to producers and
importers of gasoline and diesel are provided in 40 CFR 80.1405. The
formulas rely on estimates of the volumes of gasoline and diesel fuel,
for both highway and nonroad uses, which are projected to be used in
the year in which the standards will apply. The projected gasoline and
diesel volumes are provided by EIA, and include projections of ethanol
and biomass-based diesel used in transportation fuel. Since the
percentage standards apply only to the non-renewable gasoline and
diesel produced or imported, the volumes of renewable fuel are
subtracted out of the EIA projections of gasoline and diesel.
    Transportation fuels other than gasoline or diesel, such as natural
gas, propane, and electricity from fossil fuels, are not currently
subject to the standards, and volumes of such fuels are not used in
calculating the annual percentage standards. Since under the
regulations the standards apply only to producers and importers of
gasoline and diesel, these are the transportation fuels used to set the
percentage standards, as well as to determine the annual volume
obligations of an individual gasoline or diesel producer or importer
under 40 CFR 80.1407.
    As specified in the RFS2 final rule,\161\ the percentage standards
are based on energy-equivalent gallons of renewable fuel, with the
cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the BBD standard based on
biodiesel equivalence. However, all RIN generation is based on ethanol-
equivalence. For example, the RFS regulations provide that production
or import of a gallon of qualifying biodiesel will lead to the
generation of 1.5 RINs. The formula specified in the regulations for
calculation of the BBD percentage standard is based on biodiesel-
equivalence, and thus assumes that all BBD used to satisfy the BBD
standard is biodiesel and requires that the applicable volume
requirement be multiplied by 1.5 in order to calculate a percentage
standard that is on the same basis (i.e., ethanol-equivalent) as the
other three standards. However, BBD often contains some renewable
diesel, and a gallon of renewable diesel typically generates 1.7
RINs.\162\ In addition, there is often some renewable diesel in the
conventional renewable fuel pool. As a result, the actual number of
RINs generated by biodiesel and renewable diesel is used in the context
of our assessment of the applicable volume requirements and associated
percentage standards for advanced biofuel and total renewable fuel, and
likewise in obligated parties' determination of compliance with any of
the applicable standards. While there is a difference in the treatment
of biodiesel and renewable diesel in the context of determining the
percentage standard for BBD versus determining the percentage standard
for advanced biofuel and total renewable fuel, it is not a significant
one given our approach to determining the BBD volume requirement. Our
intent in setting the BBD applicable volume is to provide a level of
guaranteed volume for BBD, but as described in Section VII.B of the
2019 standards final rule, we do not expect the BBD standard to be
binding in 2020.\163\ That is, we expect that actual supply of BBD, as
well as supply of conventional biodiesel and renewable diesel, will be
driven by the advanced biofuel and total renewable fuel standards.
---------------------------------------------------------------------------

    \161\ See 75 FR 14670 (March 26, 2010).
    \162\ Under 40 CFR 80.1415(b)(4), renewable diesel with a lower
heating value of at least 123,500 Btu/gallon is assigned an
equivalence value of 1.7. A minority of renewable diesel has a lower
heating value below 123,500 BTU/gallon and is therefore assigned an
equivalence value of 1.5 or 1.6 based on applications submitted
under 40 CFR 80.1415(c)(2).
    \163\ 83 FR 63704, December 11, 2018.
---------------------------------------------------------------------------

B. Small Refineries and Small Refiners

    In CAA section 211(o)(9), enacted as part of the Energy Policy Act
of 2005, and amended by the Energy Independence and Security Act of
2007, Congress provided a temporary exemption to small refineries \164\
through December 31, 2010. Congress provided that small refineries
could receive a temporary extension of the exemption beyond 2010 based
either on the results of a required DOE study, or based on an EPA
determination of ``disproportionate economic hardship'' on a case-by-
case basis in response to small refinery petitions. In reviewing
petitions, EPA, in consultation with the Department of Energy,
determines whether the small refinery has demonstrated disproportionate
economic hardship and may grant refineries exemptions upon such
demonstration.
---------------------------------------------------------------------------

    \164\ A small refiner that meets the requirements of 40 CFR
80.1442 may also be eligible for an exemption.
---------------------------------------------------------------------------

    EPA has granted exemptions pursuant to this process in the past.
However, at this time no exemptions have been approved for 2020, and
therefore we have calculated the percentage standards for 2020 without
any adjustment for exempted volumes. We are maintaining our approach
that any exemptions for 2020 that are granted after the final rule is
released will not be reflected in the percentage standards that apply
to all gasoline and diesel produced or imported in 2020.\165\
---------------------------------------------------------------------------

    \165\ We are not reopening this policy or any other aspect of
the formula at 40 CFR 80.1405(c). Any comments received on such
issues will be deemed beyond the scope of this rulemaking.
---------------------------------------------------------------------------

C. Proposed Standards

    The formulas in 40 CFR 80.1405 for the calculation of the
percentage standards require the specification of a total of 14
variables covering factors such as the renewable fuel volume

requirements, projected gasoline and diesel demand for all states and
territories where the RFS program applies, renewable fuels projected by
EIA to be included in the gasoline and diesel demand, and projected
gasoline and diesel volumes from exempt small refineries. The values of
all the variables used for this final rule are shown in Table VIII.C-
1.\166\
---------------------------------------------------------------------------

    \166\ To determine the 49-state values for gasoline and diesel,
the amount of these fuels used in Alaska is subtracted from the
totals provided by EIA because petroleum based fuels used in Alaska
do not incur RFS obligations. The Alaska fractions are determined
from the June 29, 2018 EIA State Energy Data System (SEDS), Energy
Consumption Estimates.

  Table VIII.C-1--Values for Terms in Calculation of the Proposed 2020
                             Standards \167\
                            [Billion gallons]
------------------------------------------------------------------------
              Term                     Description             Value
------------------------------------------------------------------------
RFVCB..........................  Required volume of                 0.54
                                  cellulosic biofuel.
RFVBBD.........................  Required volume of                 2.43
                                  biomass-based diesel.
RFVAB..........................  Required volume of                 5.04
                                  advanced biofuel.
RFVRF..........................  Required volume of                20.04
                                  renewable fuel.
G..............................  Projected volume of              143.49
                                  gasoline.
D..............................  Projected volume of               57.06
                                  diesel.
RG.............................  Projected volume of               14.62
                                  renewables in gasoline.
RD.............................  Projected volume of                2.48
                                  renewables in diesel.
GS.............................  Projected volume of                   0
                                  gasoline for opt-in
                                  areas.
RGS............................  Projected volume of                   0
                                  renewables in gasoline
                                  for opt-in areas.
DS.............................  Projected volume of                   0
                                  diesel for opt-in
                                  areas.
RDS............................  Projected volume of                   0
                                  renewables in diesel
                                  for opt-in areas.
GE.............................  Projected volume of                0.00
                                  gasoline for exempt
                                  small refineries.
DE.............................  Projected volume of                0.00
                                  diesel for exempt
                                  small refineries.
------------------------------------------------------------------------

    Projected volumes of gasoline and diesel, and the renewable fuels
contained within them, were derived from values in the April 2019
version of EIA's Short-Term Energy Outlook. An estimate of fuel
consumed in Alaska, derived from the June 29, 2018 release of EIA's
State Energy Data System (SEDS) and based on the 2016 volumes contained
therein, was subtracted from the nationwide volumes.
---------------------------------------------------------------------------

    \167\ See ``Calculation of proposed % standards for 2020'' in
docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    Using the volumes shown in Table VIII.C-1, we have calculated the
proposed percentage standards for 2020 as shown in Table VIII.C-2.

         Table VIII.C-2--Proposed Percentage Standards for 2020
------------------------------------------------------------------------
                                                              Percent
------------------------------------------------------------------------
Cellulosic biofuel......................................            0.29
Biomass-based diesel....................................            1.99
Advanced biofuel........................................            2.75
Renewable fuel..........................................           10.92
------------------------------------------------------------------------

IX. Amendments to the RFS Program Regulations

    In implementing the RFS program, we have identified several changes
to the program that would assist with implementation in future years.
These proposed regulatory changes comprise clarification of diesel RVO
calculations, pathway petition conditions, a biodiesel esterification
pathway, distillers corn oil and distillers sorghum oil pathways, and
renewable fuel exporter provisions. These regulatory changes are
described in this section. In addition, as stated in Section I.A.8, we
are considering finalizing certain provisions of the proposed REGS rule
with the final 2020 RVO rule.\168\
---------------------------------------------------------------------------

    \168\ Any comments received on REGS provisions beyond the
specific provisions listed in Section I.A.8 will be deemed beyond
the scope of this rulemaking.
---------------------------------------------------------------------------

A. Clarification of Diesel RVO Calculations

    Historically, home heating oil (HO) and diesel fuel were virtually
indistinguishable because both contained the same distillation range of
hydrocarbons and high level of sulfur. EPA's diesel fuel sulfur
regulations forced a distinction in the marketplace beginning in the
1990s and concluding in 2010 with the phase-in of the ultra-low sulfur
diesel regulations for diesel fuel used in motor vehicles and motor
vehicle engines (MV diesel fuel). Similarly, beginning in 2004, EPA
promulgated requirements for diesel fuel used in nonroad, locomotive,
and marine vehicles and engines (NRLM diesel fuel) that concluded
phasing in at the end of 2014. Thus, all diesel fuel for use in motor
vehicles and motor vehicle engines, and nonroad, locomotive, and marine
vehicles and engines, is currently required to meet a 15 ppm sulfur
per-gallon standard, under regulations set out in 40 CFR part 80,
subpart I \169\ (For purposes of subpart I, such diesel fuel is also
now collectively known as MVNRLM diesel fuel). We did not set standards
for HO under subpart I, with the result that it remained high in sulfur
content and cost less to produce than MVNRLM diesel fuel. As such,
subpart I also requires all parties in the distribution system to
ensure that diesel fuel containing 15 ppm sulfur or less (referred to
as 15 ppm diesel fuel, ultra-low sulfur diesel fuel, or ULSD) remains
segregated from higher sulfur fuels and to take measures to prevent
sulfur contamination of ULSD.
---------------------------------------------------------------------------

    \169\ Subpart I includes an exception to this requirement that
allows diesel fuel used in locomotive or marine engines to meet a
500 ppm sulfur standard if the fuel is produced from transmix
processors and distributed under an approved compliance plan.
---------------------------------------------------------------------------

    The RFS regulations, which place a renewable fuel obligation (RVO)
on the production and importation of diesel transportation fuel, but
not on the production or importation of HO, were promulgated in 2010
and, similar to subpart I regulations, made the same presumption that
HO and MVNRLM diesel fuel would be segregated. The RFS regulations did
not anticipate that these fuels would become indistinguishable, have
the same value in the marketplace, and be commingled in the fuel
distribution system. For example, 40 CFR 80.1407 set forth requirements
for obligated parties to include all products meeting the definition of
MVNRLM diesel fuel, collectively called ``diesel fuel,'' at 40 CFR
80.2(qqq) that are produced or imported during a compliance period in
the volume used to calculate their RVOs

unless the diesel fuel is not transportation fuel.\170\ The definitions
of MV and NRLM diesel fuel state that these products include fuel that
is ``made available'' for use in motor vehicles and motor vehicle
engines, and nonroad, locomotive, or marine vehicles and engines.\171\
---------------------------------------------------------------------------

    \170\ See 40 CFR 80.1407(e) and (f).
    \171\ See 40 CFR 80.2(y) and (nnn).
---------------------------------------------------------------------------

    When the RFS regulations were promulgated in 2010, the lower
production cost of HO relative to diesel fuel provided economic
incentive for refiners, pipelines, and terminals to produce and
distribute HO separately from diesel fuel. After we promulgated the RFS
regulations, however, many states began implementing programs designed
to reduce the sulfur content of HO to 15 ppm or less (15 ppm HO).
Currently, the majority of HO is required to meet a 15 ppm sulfur
standard under numerous state and city programs in the Northeast and
Mid-Atlantic,\172\ making HO once again indistinguishable from ULSD and
of the same economic value as MVNRLM diesel fuel.\173\ Further, in
2015, additional regulations became effective that required marine
diesel fuel used in Emissions Control Areas (ECA marine fuel) to
contain 1,000 ppm sulfur or less.\174\ In response, many companies have
opted to produce and distribute ECA marine fuel containing 15 ppm
sulfur or less (15 ppm ECA marine fuel) fungibly with 15 ppm diesel
fuel, rather than invest in infrastructure to distribute and segregate
higher-sulfur ECA marine fuel. Since HO, ECA marine fuel, and other
non-transportation fuels that meet a 15 ppm sulfur standard are
essentially identical in the marketplace, we believe that some parties
in the fuel distribution system are distributing them together--i.e.,
commingling MVNRLM diesel fuel with 15 ppm HO and 15 ppm ECA marine
fuel.
---------------------------------------------------------------------------

    \172\ Connecticut, Delaware, Maine, Massachusetts, New
Hampshire, New Jersey, New York, Rhode Island, Vermont, the District
of Columbia, and the city of Philadelphia.
    \173\ See the New England Fuel Institute's (NEFI) ``State Sulfur
& Bioheat Requirements for No. 2 Heating Oil in the Northeast & Mid-
Atlantic States,'' available in the docket for this action.
    \174\ ECA marine fuel is not transportation fuel under the RFS
regulations. Therefore, refiners and importers do not incur an RVO
for ECA marine fuel that they produce or import.
---------------------------------------------------------------------------

    The regulations in 40 CFR part 80, subpart I, do not prohibit
parties from commingling MVNRLM diesel fuel with other 15 ppm
distillate fuel that is designated for non-transportation purposes.
However, commingled fuel must meet all of the applicable requirements
in subpart I because the resulting fuel is ``made available'' for use
in motor vehicles, or nonroad, locomotive, or marine vehicles and
engines.\175\ This means that any refiner or importer that produces or
imports 15 ppm distillate fuel that is designated for non-
transportation purposes and is commingled with MVNRLM diesel fuel must
also certify the fuel as meeting the sampling, testing, reporting, and
recordkeeping requirements in subpart I.\176\
---------------------------------------------------------------------------

    \175\ See 40 CFR 80.2(y) and (nnn).
    \176\ We have received requests from a number of regulated
parties asking the agency to amend the fuels regulations to allow
parties to more easily mix and fungibly ship HO, ECA marine fuel,
and MVNRLM fuel that meet the 15 ppm sulfur standard. In a separate
action, we intend to propose additional amendments that would
significantly streamline these regulations (see RIN 2061-AT31 in
EPA's Regulatory Agenda).
---------------------------------------------------------------------------

    Although this approach does not create compliance issues relating
to subpart I requirements, we are concerned that some obligated parties
(e.g., refiners and importers) under the RFS program may be calculating
RVOs without accounting for all of their 15 ppm distillate fuel (i.e.,
distillate fuel that contains 15 ppm sulfur or less) that is ultimately
sold for use as MVNRLM diesel fuel. Specifically, we are concerned that
obligated parties may be excluding 15 ppm HO or 15 ppm ECA marine fuel
from their RVO calculations, and that a downstream party may be re-
designating this fuel as MVNRLM diesel fuel and not incurring an
RVO.\177\
---------------------------------------------------------------------------

    \177\ A similar situation exists with respect to #1 diesel fuel
which is used/blended in the winter due to cold temperature
constraints and its often-identical counterparts of kerosene and jet
fuel.
---------------------------------------------------------------------------

    With the convergence of the MVNRLM diesel fuel, HO, and ECA marine
fuel sulfur standards, some stakeholders have expressed confusion to
EPA on accounting for 15 ppm distillate fuel that leaves the obligated
party's gate designated as HO, ECA marine fuel, or other non-
transportation fuels, but is subsequently re-designated as either
MVNRLM diesel fuel or ultimately used as MVNRLM diesel fuel by a
downstream entity. Specifically, some obligated parties have asked
whether they are required to add re-designated MVNRLM diesel fuel back
to their RVO calculations while some downstream entities have asked
whether they are required to incur an RVO for MVNRLM diesel fuel they
re-designate from non-transportation fuel to transportation fuel.
    We intended for any diesel fuel not used as transportation fuel,
such as HO or ECA marine fuel, to be excluded from RVO calculations in
keeping with statutory requirements.\178\ We also intended for all
diesel fuel ultimately used as transportation fuel to incur an RVO,
even 15 ppm distillate fuel that is initially designated as non-
transportation fuel and subsequently re-designated as transportation
fuel by downstream parties.\179\ Thus, existing regulations allow
downstream parties who are registered as refiners and who comply with
all sampling, testing, recordkeeping, and other refiner requirements to
``produce'' MVNRLM diesel fuel from HO, ECA marine fuel, and other non-
transportation fuels. These refiners incur RVOs for all MVNRLM diesel
fuel that they ``produce'' from the non-transportation fuel. However,
we believe that stakeholder confusion over who should account for re-
designated fuel in their RVO may be causing the omission of some re-
designated MVNRLM diesel fuel from RVO calculations altogether.
Therefore, we are proposing to revise the RFS regulations to more
clearly specify how volumes of re-designated MVNRLM diesel fuel are
accounted for in obligated parties' RVO calculations in order to ensure
that the RFS mandates continue to be met.
---------------------------------------------------------------------------

    \178\ See 40 CFR 80.1407(f)(8).
    \179\ With the other exceptions listed in 40 CFR part
80.1407(f).
---------------------------------------------------------------------------

    We are proposing to clarify the requirement for refiners and
importers to include distillate fuel in their RVO compliance
calculations by providing exceptions for the following three additional
categories of fuel:
     Distillate fuel, such as HO or ECA marine fuel, with a
sulfur content greater than 15 ppm that is clearly designated for a use
other than transportation fuel.
     Distillate fuel that meets 15 ppm sulfur standard, is
designated for non-transportation use, and that remains completely
segregated from MVNRLM diesel fuel from the point of production through
to the point of use for a non-transportation purpose.
     Distillate fuel that that meets the 15 ppm diesel sulfur
standard, that is ultimately used for non-transportation purposes, and
that does not remain completely segregated from MVNRLM diesel fuel.
    Since the first two categories of distillate fuel above are
completely segregated from MVNRLM diesel fuel, we are not concerned
about them being used as a transportation fuel and are therefore not
proposing any additional requirements for these fuels to be excluded
from a refiner or importer's RVO compliance calculations. However,
because the third category of distillate fuel is not completely
segregated and is indistinguishable from MVNRLM diesel

fuel, we are proposing additional requirements for this type of
distillate fuel to be excluded from a refiner or importer's RVO
compliance calculations. Our proposed approach is described in Section
IX.A.1; however, we are also seeking comment on two alternative
approaches, which are described in Sections IX.A.2 and 3. We encourage
stakeholders to comment on all three approaches because there is a
reasonable likelihood that the agency may choose to finalize one of the
alternative approaches.
1. Downstream Re-Designation of Certified Non-Transportation 15 ppm
Distillate Fuel to MVNRLM Diesel Fuel
    In order to allow refiners and importers to exclude distillate fuel
that that meets the 15 ppm diesel sulfur standard, is ultimately used
for non-transportation purposes, and does not remain completely
segregated from MVNRLM diesel fuel from their RVO calculations, we are
proposing to define a new category of distillate fuel: Certified non-
transportation 15 ppm distillate fuel (``certified NTDF''). We are
proposing to define certified NTDF as distillate fuel that meets all of
the following requirements:
     The fuel is certified as complying with the 15 ppm sulfur
standard, cetane/aromatics standard, and all applicable sampling,
testing, and recordkeeping requirements of 40 CFR part 80, subpart I.
     The fuel is designated on the product transfer document as
15 ppm HO, 15 ppm ECA marine fuel, or other non-transportation fuel
(e.g., jet fuel, kerosene, No. 4 fuel, or distillate fuel for export
only) with a notation that the fuel ``Meets all MVNRLM diesel fuel
standards,'' with no designation as MVNRLM diesel fuel.
    Additionally, in order for a refiner or exporter to exclude
certified NTDF from their RVO calculations, they must also have a
reasonable expectation that the fuel will be used as HO, ECA marine
fuel, or another non-transportation purpose. This requirement is
designed to prevent refiners and importers from circumventing the
requirement to incur an RVO for all transportation fuel by simply
designating transportation fuel as non-transportation fuel. While we
recognize that the complexity of the fuel distribution system makes it
difficult for refiners and importers to ensure in all situations that
the fuel they produce and exclude from their RVO calculations will be
used for non-transportation purposes, we are nonetheless proposing
criteria that refiners or importers would need to meet to demonstrate
that they have a reasonable expectation that certified NTDF will not be
used as transportation fuel:
     The refiner or importer supplies areas that use HO, ECA
marine fuel, or 15 ppm distillate fuel for non-transportation purposes
in the quantities being supplied by the refiner or importer.
     The refiner or importer has entered into a contractual
arrangement that prohibits the buyer from selling the fuel as MVNRLM
diesel fuel.
     The volume of fuel designated as HO, ECA marine fuel, or
other non-transportation purposes is consistent with the refiner's or
importer's past practices or reflect changed market conditions.
    In addition, EPA may consider any other relevant information in
assessing whether a refiner or importer has a reasonable expectation
that the fuel was used for non-transportation purposes. We seek comment
on whether these criteria are appropriate to determine that a refiner
or importer has a reasonable expectation that their fuel will be used
for non-transportation purposes.
    Our intent is to ensure that all fuel ultimately used as MVNRLM
diesel fuel incurs an RVO. In order to achieve this goal, we are
proposing requirements that would allow parties in the fuel
distribution system (e.g., downstream of the original refinery or
import facility) to sell certified NTDF as MVNRLM diesel fuel without
incurring an RVO if the total volume of MVNRLM diesel fuel delivered
during each compliance period does not exceed the amount of MVNRLM
diesel fuel received during that compliance period. Parties who re-
designate certified NTDF as MVNRLM diesel fuel would be a refiner for
purposes of the RFS program and would therefore be required to register
as a refiner. They would also be required to maintain a running balance
of MVNRLM diesel fuel that they deliver and ensure that it does not
exceed the volume of MVNRLM diesel fuel that they receive during the
compliance period. If downstream parties deliver a volume of MVNRLM
diesel fuel that exceeds the volume of MVNRLM diesel fuel they received
in that compliance period, however, they would treat the difference as
diesel fuel that they ``produced'' and incur an RVO on this volume.
This will properly account for the aggregate volume of non-
transportation fuel that is re-designated as MVNRLM diesel fuel under
the RFS program. This one-sided test allows MVNRLM diesel fuel to be
sold as HO or ECA marine fuel but prevents the erosion of the renewable
fuel mandate. These parties would also be subject to recordkeeping
requirements to ensure the enforceability of this program.
    We are also proposing corresponding revisions to the RFS program
reporting requirements, including requiring refiners and importers to
report the volume of MVNRLM diesel fuel they produce or import, the
volume of distillate fuel they produce or import that is not
transportation fuel, and the volume of distillate fuel they produce or
import that is certified NTDF. We are also proposing to require
downstream parties who redesignate NTDF as MVNRLM diesel fuel to submit
reports to EPA identifying the volume of MVNRLM diesel fuel received,
the volume of MVNRLM diesel fuel discharged, the volume of fuel re-
designated from certified NTDF to MVNRLM diesel fuel, and the volume of
MVNRLM diesel fuel redesignated to non-transportation use. Further, for
purposes of evaluating compliance, we are also proposing to:
     Require parties who re-designate certified NTDF to MVNRLM
diesel fuel to keep all records relating to these transactions.
     Prohibit a party from exceeding its balance requirements
without incurring an RVO.
     Ensure that the attest auditors review relevant
information to ensure compliance with applicable RFS program
requirements.
2. Presumptive Inclusion of 15 ppm Sulfur Diesel Fuel
    Under this alternative approach, refiners and importers would
assume that any 15 ppm distillate fuel they produce or import is
ultimately used as transportation fuel and would include this fuel in
their RVO calculations regardless of its designation, unless a
downstream party informs the refiner or importer that certain volumes
of their 15 ppm distillate fuel were not used as transportation fuel.
Under this approach, we would require a downstream party that sold any
15 ppm distillate fuel for purposes other than transportation fuel to
notify the original refiner or importer of a 15 ppm distillate fuel's
non-transportation use. We would also allow the upstream party to
subtract the non-transportation volume from its RVO calculations upon
notification from a downstream entity. We seek comment on whether
terminals or other downstream parties could feasibly trace a volume of
fuel that was sold for a non-transportation use to the original refiner
and, if so, how.
    Under this alternative approach, we would require refiners to
report the total volume of 15 ppm diesel fuel they produce and the
volume that they

subtracted from their compliance calculations for fuel that was not
used at transportation fuel. We would also require refiners and
importers who exclude 15 ppm distillate fuel from their RVO calculation
to obtain statements from downstream parties who sell the fuel
certifying that it was used for a purpose other than transportation
fuel. The downstream parties would also need to maintain sales records,
contracts, or other documentation demonstrating that they sold the fuel
to be used for a purpose other than transportation fuel. We would also
prohibit a party from violating any of these new requirements and
require that the attest auditor reviews relevant information to ensure
compliance with applicable RFS regulations.
3. Presumptive Exclusion of 15 ppm Sulfur Diesel Fuel
    Under this alternative approach, we would propose that a refiner or
importer could exclude certified NTDF from its obligated volume of
transportation fuel if it has a reasonable expectation that the fuel
will not be used as transportation fuel, unless a downstream party
notifies the refiner or importer that the certified NTDF was re-
designated as transportation fuel. Under this alternative approach, we
would require the downstream party to notify the refiner or importer
prior to the downstream party's re-designation of the non-
transportation fuel as transportation fuel.\180\ We would require a
refiner or importer to include any non-transportation fuel in their
obligated volume of transportation fuel if they are notified by a
downstream party that the non-transportation fuel was redesignated and
sold as transportation fuel. Under this approach, downstream parties
would only be allowed to sell certified NTDF as MVNRLM diesel fuel if
they are able to trace the redesignated fuel back to the refiner or
importer who excluded the fuel from their RVO. We seek comment on
whether such tracking would in fact be possible, including what types
of transaction structures might be less complex to track than others.
For example, a transaction between a refiner and a direct user of HO
may be a relatively simple transaction to trace. We seek comment on
what type of documentation could serve as the notification to the
original refiner or importer of re-designation, as well as timing of
notification. Under this approach, we would also revise the reporting,
recordkeeping, prohibited acts, and attest engagement requirements that
have been discussed in the other approaches above.
---------------------------------------------------------------------------

    \180\ This requirement would be consistent with the prohibition
in 40 CFR 80.1460(c) (``[n]o person shall cause another person to
commit an act in violation of any prohibited act under this
section.'').
---------------------------------------------------------------------------

4. Potential Expansion of Scope of Proposed Clarification to Gasoline
    While this proposed clarification is designed specifically to
address the issue of the redesignation of 15 ppm diesel fuel, this type
of situation may also arise for gasoline. We have received inquiries
from stakeholders asking whether obligated parties could use a similar
volume balancing approach to exclude exported volumes of gasoline from
their RVO calculations. Since the gasoline benzene and sulfur programs
require refiners and importers to account for specific levels of
benzene and sulfur in each batch of gasoline, we have required parties
to keep gasoline designated for export segregated from gasoline
included in their compliance calculations. We have expected that
obligated parties follow similar procedures to exclude gasoline exports
from incurring an RVO under the RFS program. However, we recognize that
it is much more challenging to identify specific sulfur and benzene
levels for exported fuels versus simply tracking volumes exported.
Therefore, we seek comment on whether we should broaden the scope of
this action to cover gasoline exports or potentially other scenarios
that may arise for the production and distribution of gasoline. We
believe that any of the discussed options above for diesel fuel could
apply to gasoline exports and the proposed regulations could be made
applicable to gasoline, if finalized.

B. Pathway Petition Conditions

    We are proposing to clarify our authority to enforce conditions
created by requirements included in an approved pathway petition
submitted under 40 CFR 80.1416. Since December 2010, we have approved
over 115 pathway petitions. To qualify for the generation of RINs under
an approved petition, the fuel must meet the conditions and associated
regulatory provisions specified in EPA's petition approval document and
the other definitional and regulatory requirements for renewable fuel
specified in the CAA and EPA implementing regulations, including for
RIN generation, registration, reporting, and recordkeeping. Common
conditions include, but are not limited to, compliance monitoring plans
detailing how parties will accurately and reliably measure and record
the energy and material inputs and outputs required to ensure the
lifecycle analysis, process flow diagrams showing the energy used for
feedstock, fuel, and co-product operations, and certifications signed
by responsible corporate officers.
    We have authority to bring an enforcement action of these
conditions under 40 CFR 80.1460(a), which prohibits producing or
importing a renewable fuel without complying with the RIN generation
and assignment requirements. The RFS regulations provide that RINs may
only be generated if the fuel qualifies for a D code pursuant to 40 CFR
80.1426(f) or an approved petition submitted under 40 CFR 80.1416.\181\
If any of the conditions required by an approved petition are not met,
then the fuel does not qualify for a D code, and RINs may not be
generated. These conditions are also enforceable under 40 CFR
80.1460(b)(2), which prohibits creating a RIN that is invalid; a RIN is
invalid if it was improperly generated.\182\ As stated above, a RIN is
improperly generated if the fuel representing the RIN does not qualify
for a D code, and by not following the all required conditions the fuel
does not qualify for a D code.
---------------------------------------------------------------------------

    \181\ See 40 CFR 80.1426(a)(1)(i).
    \182\ See 40 CFR 80.1431(a)(ix).
---------------------------------------------------------------------------

    We propose to modify the RFS regulations to clarify that renewable
fuel must be produced in compliance with all conditions set forth in an
approved petition submitted under 40 CFR 80.1416 (in addition to the
applicable requirements of subpart M). We also propose to add a
prohibited act for generating a RIN for fuel that fails to meet all the
conditions set forth in an approved petition submitted under 40 CFR
80.1416 in order to provide more clarity regarding our ability to bring
enforcement actions for failure to meet such conditions. We seek
comment on these proposed clarifications.

C. Esterification Pathway

    Table 1 to 40 CFR 80.1426 includes pathways for the production of
biodiesel using specified feedstocks and the production process
transesterification. Transesterification is the most commonly used
method to produce biodiesel and involves reacting triglycerides with
methanol, typically under the presence of a base catalyst.\183\ While
the main component of oils, fats, and grease feedstocks are typically
triglycerides, other components, such as free fatty acids (FFAs), can
also exist. Removal or conversion of the FFAs is important where the
traditional base-

catalyzed transesterification production process is used; if they are
not removed or converted prior to this process, FFAs will react with
base catalysts to produce soaps that inhibit the transesterification
reaction.
---------------------------------------------------------------------------

    \183\ Commonly used base catalysts include sodium hydroxide
(NaOH), potassium hydroxide (KOH) and sodium methoxide
(NaOCH3).
---------------------------------------------------------------------------

    One of the most widely used methods for treating biodiesel
feedstocks with a higher FFA content is acid catalysis. Acid catalysis
typically uses a strong acid, such as sulfuric acid, to catalyze the
esterification of the FFAs prior to the transesterification of the
triglycerides as a pre-treatment step. Acid esterification can be
applied to feedstocks with FFA contents above 5% to produce biodiesel.
Because the transesterification of triglycerides is slow under acid
catalysis, a technique commonly used to overcome the reaction rate
issue is to first convert the FFAs through an acid esterification (also
known as an acid ``pretreatment'' step), and then follow-up with the
traditional base-catalyzed transesterification of triglycerides.
    Under the RFS2 final rule, biodiesel from biogenic waste oils/fats/
greases qualifies for D-codes 4 and 5 using a transesterification
process. This conclusion was based on the analysis of yellow grease as
a feedstock, where there was an acid pretreatment of the FFAs contained
in the feedstock. In fact, one of the material inputs assumed in the
modeling for the final RFS2 rule yellow grease pathway was sulfuric
acid, which is the catalyst commonly used for acid esterification. As
we had not stipulated transesterification with esterification
pretreatment as a qualified production process in rows F and H to Table
1 to 40 CFR 80.1426, we are proposing to revise these entries to
include esterification as a pretreatment step to
transesterification.\184\
---------------------------------------------------------------------------

    \184\ In 2012, we issued a direct final rule and a parallel
proposed rule (see 77 FR 700 and 77 FR 462, respectively; January 5,
2012) that would have determined that, among other regulatory
changes, biodiesel produced from esterification met the GHG
reduction requirements. Because we received adverse comment, we
withdrew the direct final rule in its entirety (see 77 FR 13009,
March 5, 2012). In the 2013 final rule based on the parallel
proposal (78 FR 14190, March 5, 2013), we decided not to finalize a
determination at that time on biodiesel produced from esterification
and noted that we would instead make a final determination at a
later time.
---------------------------------------------------------------------------

    Further, there are feedstocks that may contain higher levels of
FFAs compared to those included in the modeling for the RFS2 final rule
from which FFAs could be seperated and processed into biodiesel through
esterification.\185\ In the modeling analysis, we evaluated the key
variables associated with these high levels of FFAs to determine
whether they might cause the biodiesel produced from these high-FFA
feedstocks via esterification or transesterification with
esterification pretreatment to exceed the lifecycle GHG threshold of
50%. The National Biodiesel Board (NBB) conducted a comprehensive
survey of the actual energy used by commercial biodiesel production
plants in the U.S.\186\ The survey depicts the amount of energy and
incidental process materials such as acids used to produce a gallon of
biodiesel. The survey data returned represents 37% of the surveyed 230
NBB biodiesel members in 2008 and includes producers using a variety of
virgin oils and recycled or reclaimed fats and oils. While there is no
specific data on the FFA content of the feedstocks used, the feedstocks
did include reclaimed greases, which represent the feedstocks which
typically have the highest FFA content. As the data is partially
aggregated, we used the maximum surveyed electricity and natural gas
used at the facilities and a high estimate of ``materials used'' based
on a sum of industry averages for all process materials for calculating
potential GHG emissions.\187\ Even though some of the facilities might
be processing feedstocks with relatively low FFA content, we believe
that using these maximum observed inputs for energy used plus a high
estimate for process materials used will result in the highest GHG
emissions profile estimate for biodiesel production GHG emissions.
---------------------------------------------------------------------------

    \185\ EPA. 2010. RFS Program (RFS2) Regulatory Impact Analysis,
February 2010, EPA-420-R-10-006, Chapter 2 (Lifecycle GHG analysis),
Section <IP_ADDRESS>.3.
    \186\ National Biodiesel Board, Comprehensive Survey on Energy
Use for Biodiesel Production (2008) http://www.biodiesel.org/news/RFS/rfs2docs/NBB%20Energy%20Use%20Survey%20FINAL.pdf.
    \187\ According to the survey, the maximum electricity use for a
producer reached as high as 3,071 Btu per gallon biodiesel. This is
about 5 times higher than the industry average. The maximum natural
gas usage for a producer reached as high as 12,324 Btu per gallon
biodiesel, which is about 3.5 times higher than the industry
average. For ``materials used'' only an industry average for each
material was provided in the survey. Therefore, as a conservative
estimate, we totaled all the average material inputs to equal 0.51
kg/gal biodiesel even though not all facilities are likely to use
each and every one of the process materials listed in the survey
(e.g., we totaled all the acids used even though a facility is not
likely to use each different acid).
---------------------------------------------------------------------------

    Using the same methodology as was used for the yellow grease
modeling under the RFS2 final rule, but using the high energy and
materials use assumptions per the above discussion and omitting any
glycerin co-product credit, we estimate the emissions from biodiesel
processing via esterification at 23,708 grams carbon dioxide-equivalent
per million British Thermal Units (gCO2eq per mmBtu) of biodiesel. The
estimated GHG emissions reduction for the entire process is a 71%
reduction relative to the petroleum diesel baseline. Since the GHG
threshold is a 50% reduction for biomass-based diesel and advanced
biofuel, we believe that there is a large enough margin in the results
to reasonably conclude that biodiesel using esterification of specified
feedstocks with any level of FFA content meets the biomass-based diesel
and advanced biofuel 50% lifecycle GHG reduction threshold. Since the
biodiesel modeling completed for the final RFS2 rule includes
esterification upstream of the transesterification process, and since,
as described below even using worst case assumptions the biodiesel
produced from these feedstocks will still qualify as advanced biofuel
with the inclusion of the esterification process step, we again propose
that it is appropriate to revise Table 1 to 40 CFR 80.1426 to include
esterification as a qualified process under which biodiesel can be
produced from the feedstocks currently listed in rows F and H. This
includes processes that produce biodiesel through esterification with
no subsequent transesterification of the output from the esterification
process.
    This addition of an esterification process will allow parties who
have processing units that can take high-FFA feedstocks listed in rows
F and H of Table 1 to 40 CFR 80.1426 and separate the FFAs and
triglycerides for chemical processing in separate standalone
esterification and transesterification units to generate RINs for the
biodiesel produced. It is important to note that while this proposal
would allow the separation of FFAs and triglycerides in qualified high-
FFA feedstocks at the facility producing the biodiesel through these
processes, we have determined that regulatory amendments would be
needed to address situations where this separation takes place at a
facility other than the ultimate renewable fuel production facility. In
the Renewables Enhancement and Growth Support (REGS) rule, we proposed
amendments to the RFS regulations to provide an appropriate regulatory
structure for the generation of RINs for renewable fuel produced from a
biointermediate,\188\ but those regulations have not been finalized.
Therefore, any FFAs separated from triglycerides in a feedstock at a
location other than the biodiesel production facility would be
considered a biointermediate from which RINs cannot currently be
generated.
---------------------------------------------------------------------------

    \188\ See 81 FR 80828 (November 16, 2018).

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

    Therefore, we are proposing to revise rows F and H of Table 1 to 40
CFR 80.1426 by changing the existing process ``Trans-Esterification''
to be ``Transesterification with or without esterification
pretreatment'' and adding ``esterification'' as approved production
process. We are proposing these revisions to rows F and H without
modifying the feedstocks listed in those rows, as these changes not
intended to make any additional feedstocks eligible beyond those
already listed in rows F and H.

D. Distillers Corn Oil and Distillers Sorghum Oil Pathways

    We are proposing to add distillers corn oil and commingled
distillers corn oil and sorghum oil as feedstocks to row I of Table 1
to 40 CFR 80.1426. While the lifecycle GHG emissions associated with
using a very similar feedstock--distillers sorghum oil--as part of this
pathway were evaluated in the grain sorghum oil pathway final rule
(``sorghum oil rule''),\189\ these two feedstocks were not added to row
I as part of that rulemaking. This section discusses the proposal to
add distillers corn oil and commingled distillers corn oil and sorghum
oil as feedstocks to row I and presents the lifecycle GHG emissions
associated with these proposed pathways. We also explain why the most
likely effect of adding these pathways will be to reduce the number of
petitions submitted pursuant to 40 CFR 80.1416.
---------------------------------------------------------------------------

    \189\ See 83 FR 37735 (August 2, 2018).
---------------------------------------------------------------------------

    The March 2010 RFS2 rule included pathways for biodiesel and
renewable diesel produced from non-food grade corn oil. The March 2013
Pathways I rule added pathways for heating oil and jet fuel from non-
food grade corn oil in rows F and H of Table 1 to 40 CFR 80.1426, and
added pathways for naphtha and LPG from Camelina sativa oil in row
I.\190\ The sorghum oil rule amended the RFS regulations to add a new
definition of distillers sorghum oil and to replace existing references
to non-food grade corn oil with the newly defined term distillers corn
oil. That rule also added a number of pathways to rows F and H of Table
1 to 40 CFR 80.1426 for biodiesel, renewable diesel, jet fuel, and
heating oil produced from distillers sorghum oil and commingled
distillers sorghum and corn oil. Pathways for naphtha and LPG produced
from distillers sorghum oil via a hydrotreating process were also added
to row I of Table 1 to 40 CFR 80.1426.
---------------------------------------------------------------------------

    \190\ See 78 FR 14190 (March 5, 2013).
---------------------------------------------------------------------------

    Commingled distillers corn oil and sorghum oil was added as a
feedstock to rows F and H of Table 1 to 40 CFR 80.1426 because
distillers sorghum oil is often co-produced with distillers corn oil at
ethanol plants using a combination of grain sorghum and corn as
feedstocks for ethanol production. Due to the recovery process of the
oils from the distillers grains and solubles (DGS), where the ethanol
plant is using a feedstock that combines grain sorghum and corn, it is
not possible to physically separate the distillers sorghum and corn
oils into two streams, nor is it possible to account for the volume of
sorghum oil or corn oil in this mixture. For these and other
reasons,\191\ after concluding that distillers sorghum oil satisfies
the 50% GHG reduction threshold required for the advanced biofuel and
biomass-based diesel, we added both distillers sorghum oil and
``commingled distillers corn oil and sorghum oil'' to rows F and H of
Table 1 to 40 CFR 80.1426 in the sorghum oil rule. However, unlike rows
F and H, row I did not include a pathway using ``non-food grade corn
oil'' prior to that final rule, nor did we propose to add ``distillers
corn oil'' to that row in the December 2017 sorghum oil proposed
rule.\192\ Thus, in the absence of an assessment of lifecycle emissions
showing that distillers corn oil also meets the GHG reduction threshold
required for the pathways therein, in sorghum oil rule we decided ``it
would be premature for EPA to add either distillers corn oil or
commingled distillers corn and sorghum oil as feedstocks in row I.''
\193\ Currently, in order to generate D-code 5 RINs for naphtha and/or
LPG produced from distillers corn oil and/or commingled distillers corn
and sorghum oil, a fuel producer would first need to petition EPA
pursuant to 40 CFR 80.1416, have EPA review and approve their requested
pathway, and then submit and have EPA accept the registration for the
new pathway. Adding these feedstocks to row I would eliminate the need
for these petitions.
---------------------------------------------------------------------------

    \191\ For the other reasons discussed in the sorghum oil rule
preamble, see 83 FR 37737-39 (August 2, 2018).
    \192\ See 82 FR 61205 (December 27, 2017).
    \193\ See 83 FR 37738 (August 2, 2018).
---------------------------------------------------------------------------

    Table IX.D-1 shows the lifecycle GHG emissions associated with
renewable diesel, jet fuel, naphtha, and LPG produced from distillers
sorghum oil. These results are based on the analysis completed for the
sorghum oil rule.\194\ The lifecycle GHG emissions associated with the
statutory baseline fuels, 2005 average diesel and gasoline, are shown
for comparison. Based on these results, we are proposing that naphtha
and LPG produced from distillers corn oil and commingled distillers
corn and sorghum oil satisfy the 50% lifecycle GHG reduction
requirement at CAA section 211(o)(1)(B), relative to the statutory
petroleum baseline, to be eligible for advanced biofuel RINs.
---------------------------------------------------------------------------

    \194\ See Table III.4 of the sorghum oil rule preamble (83 FR
37743, August 2, 2018).

 Table IX.D-1--Lifecycle GHG Emissions Associated With Biofuels Produced From Distillers Sorghum Oil (kgCO2-eq/
                                                     mmBtu)
----------------------------------------------------------------------------------------------------------------
                                     Renewable
              Fuel                 diesel,  jet       Naphtha           LPG         2005 Diesel    2005 Gasoline
                                       fuel                                          baseline        baseline
----------------------------------------------------------------------------------------------------------------
Production Process..............                   Hydrotreating
                                             Refining
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Livestock Sector Impacts........            19.4            19.4            19.4
Feedstock Production............             6.2             6.2             6.2            18.0            19.2
Feedstock Transport.............             0.3             0.3             0.3
Feedstock Pretreatment..........             0.0             0.0             0.0
Fuel Production.................             8.0             8.0             8.0
Fuel Distribution...............             0.8             0.8             0.8
Fuel Use........................             0.7             1.7             1.5            79.0            79.0
                                 -------------------------------------------------------------------------------
    Total.......................            35.4            36.4            36.2            97.0            98.2
                                 -------------------------------------------------------------------------------

    Percent Reduction...........             64%             63%             63%
----------------------------------------------------------------------------------------------------------------

    Although the lifecycle GHG analysis for the sorghum oil rule
focused on distillers sorghum oil, we believe it is also applicable to
distillers corn oil for purposes of determining whether the distillers
corn oil pathways under consideration satisfy the 50% GHG reduction
requirement. For the sorghum oil rule, we estimated the livestock
sector impacts associated with distillers sorghum oil based on a set of
assumptions about the type of feed that would need to backfill for the
reduction in mass of de-oiled DGS as compared to full-oil DGS. For that
analysis we calculated a substitution rate for how much corn would be
needed to backfill in livestock feed for every pound of grain sorghum
oil diverted to biofuel production, by livestock type. The amounts of
corn needed to replace each pound of extracted sorghum oil were largely
based on studies that evaluated the nutritional values of regular and
reduced-oil distillers grains produced as a co-product of corn starch
ethanol.\195\ Given that the underlying data for our distillers sorghum
oil assessment was largely based on studies conducted on corn ethanol
co-products, we believe it is appropriate to apply the same results to
similar proposed pathways using distillers corn oil feedstock.
---------------------------------------------------------------------------

    \195\ See Table III.2 (Full-Oil and Reduced-Oil Sorghum
Distillers Grains with Solubles Displacement Ratios) of the sorghum
oil rule (83 FR 37741, August 2, 2018) and accompanying footnote
number 36, which lists the sources for the data in that table.
---------------------------------------------------------------------------

    One difference between distillers corn oil and sorghum oil is the
rate of oil recovered per pound of corn versus grain sorghum processed.
The distillers sorghum oil petition submitted by the National Sorghum
Producers reported that 0.67 pounds of distillers sorghum oil are
recovered per bushel of grain sorghum processed to ethanol, whereas
0.84 pounds of distillers corn oil is extracted per bushel of
corn.\196\ Adjusting for this difference results in slightly lower
livestock sector GHG emissions associated with naphtha and LPG produced
from distillers corn oil.\197\ Based on this adjustment the results in
Table IX.D-1 change from a 63% GHG reduction for naphtha and LPG
produced from distillers sorghum oil to a 64% reduction for naphtha and
LPG production from distillers corn oil. We therefore believe it is
appropriate to conclude that these pathways satisfy the 50% GHG
reduction requirement to qualify as advanced biofuel under the RFS
program.
---------------------------------------------------------------------------

    \196\ See Table 4 of ``Grain Sorghum Oil Pathway Petition,''
Docket Item No. EPA-HQ-OAR-2017-0655-0005.
    \197\ The source of the difference is the amount of corn needed
to replace one pound of full-oil versus reduced-oiled DDGS in beef
cattle diets. In our analysis for the sorghum oil rule, we assumed,
based on the best available data provided by NSP, USDA and
commenters, that reduced-oil DDGS are replaced at a lower rate
(1.173 lbs corn per lbs DDGS) than full-oil DDGS (1.196 lbs corn per
lbs DDGS). Increasing the rate of oil extraction produces less de-
oiled DDGS and requires corn replacement at the lower rate of 1.173.
Thus, all else equal, higher rates of oil extraction result in lower
GHG emissions per pound of oil extracted. It's possible this effect
would disappear if we had higher resolution data on corn
displacement ratios for DDGS with different oil contents, but such
data are currently not available.
---------------------------------------------------------------------------

E. Clarification of the Definition of Renewable Fuel Exporter and
Associated Provisions

    We propose to clarify our definition of exporters of renewable fuel
to ensure appropriate flexibility for market participants and to deter
sham transactions. The current RFS regulations require an exporter of
renewable fuel to acquire sufficient RINs to comply with all applicable
RVOs incurred from the volumes of the renewable fuel exported.\198\
Exporter of renewable fuel is currently defined in 40 CFR 80.1401 as:
``(1) A person that transfers any renewable fuel from a location within
the contiguous 48 states or Hawaii to a location outside the contiguous
48 states and Hawaii; and (2) A person that transfers any renewable
fuel from a location in the contiguous 48 states or Hawaii to Alaska or
a United States territory, unless that state or territory has received
an approval from the Administrator to opt in to the renewable fuel
program pursuant to Sec.  80.1443.'' During implementation of the RFS
program, we have observed contract structuring that may erode
compliance assurance. For example, we have observed instances of export
transactions in which parties have sold renewable fuel for export to
entities purporting to accept RIN retirement obligations that were then
not fulfilled by the buyer. We believe that these instances are related
to potential ambiguity in the definition of ``exporter of renewable
fuel'' as to what parties ``transfer'' fuel out of RFS program areas.
Therefore, we are proposing an update to the definition language in
this action to resolve the potential ambiguity and clarify the parties
who may, and may not, be liable for exporter obligations. We have also
observed that this language could be construed to include parties who
transfer renewable fuel from the contiguous 48 states and Hawaii, to an
area (either Alaska or a U.S. territory) that has received an approval
to opt in to the RFS program. We did not intend to impose a RIN
retirement obligation on these parties and are further proposing to
clarify that exporting renewable fuel to opt-in areas does not incur an
exporter renewable volume obligation as detailed below.
---------------------------------------------------------------------------

    \198\ We are not reconsidering or seeking comment on our well-
settled policy of exporter RVOs. Exporters of renewable fuel must
continue to acquire sufficient RINs to comply with all applicable
RVOs, and as such we are not making any substantive changes to the
relevant provisions at 40 CFR 80.1430(a) or (b). Any comments on the
legality or propriety of the exporter renewable volume obligations,
or the substance of 40 CFR 80.1430(a) or (b), are beyond the scope
of this action.
---------------------------------------------------------------------------

    We considered whether to amend the RFS program regulations to be
consistent with concepts from the Foreign Trade Regulations (FTR) and
other federal export-related regulations, such as United States
Principal Party in Interest (USPPI) and Foreign Principal Party in
Interest (FPPI).\199\ However, the FTR and other export-related
obligations in other federal programs use a traditional definition of
``export'' where exported goods leave the U.S. The RFS program
addresses obligations incurred through the transfer of renewable fuel
from areas covered by the program to both domestic and foreign areas
not covered by the program. For instance, the transport of goods from
Oregon to Alaska would not qualify as export under most federal export
regulations, but the transport of biofuel from Oregon, a covered area,
to Alaska, an uncovered

area (unless Alaska chooses to opt in), would qualify as export under
the RFS program. In addition, if we only adopted the FTR approach to
allow allocation of exporter obligations among parties to an export
transaction, we have concerns that a party that is insolvent or lacking
assets in the United States could undertake those obligations and
enforcement efforts could become overly resource intensive where the
fuel has left the country. Given our concerns along with the
inconsistency between the RFS program requirements and other export
regulations, we do not believe it would be appropriate to amend the RFS
program regulations to define an exporter as the USPPI or the FPPI.
---------------------------------------------------------------------------

    \199\ See, e.g., 15 CFR 772.1 (defining exporter as ``[t]he
person in the United States who has the authority of a principal
party in interest to determine and control the sending of items out
of the United States'').
---------------------------------------------------------------------------

    In reviewing the FTR, we also considered the concept of routed
export transactions and the associated flexibility for parties to an
export transaction to structure that transaction to place some
responsibilities with an FPPI.\200\ We believe that this framework is
reflective of market custom, practice, and capability to contractually
allocate liabilities and indemnities among parties to a commercial
transaction. We prefer regulations that accommodate these
flexibilities, while also balancing the need to protect RFS program
integrity. Specifically, we want to allow parties to an export
transaction to allocate RFS program exporter obligations as they see
fit among themselves but protect against contract structuring that may
erode compliance assurance.
---------------------------------------------------------------------------

    \200\ Routed export transaction is the term used to describe an
export transaction in which an FPPI directs the movement of goods
out of the U.S. and authorizes a U.S. agent to file certain
information required by the FTR.
---------------------------------------------------------------------------

    Therefore, we are proposing to revise the definition of exporter of
renewable fuel to clarify that it is ``all buyers, sellers, and owners
of the renewable fuel in a transaction that results in renewable fuel
being transferred from a covered location to a destination outside of
any covered location.'' In conjunction with this proposed revision, we
are proposing a definition of covered location as ``the contiguous 48
states, Hawaii, and any state or territory that has received an
approval from the Administrator to opt-in to the RFS program pursuant
to Sec.  80.1443.'' As described above, we believe that this revised
definition improves clarity on what constitutes an ``export'' under the
RFS program (e.g., how transfers to and from the contiguous 48 states
and Hawaii relate to Alaska and U.S. territories). Our proposed
regulations seek to permit contract flexibilities frequently employed
in export transactions with respect to export obligations under other
regulatory programs, such as the FTR, while providing compliance
assurance so as to maintain a level playing field among would-be
exporters and ensure RIN retirement so as to maintain the integrity of
that market in accordance with the regulatory requirements.
    Under the proposed definition, multiple parties may meet the
definition of an exporter of renewable fuel. For instance, a person
holding title to renewable fuel in the U.S. may sell renewable fuel to
another person (either inside or outside of the covered areas) and
cause the renewable fuel to leave the covered areas. Further, that
buyer and seller may have a third party hold title to the renewable
fuel during transit out of the covered areas. In this case, the buyer
and the seller, both of whom are also owners of the renewable fuel, and
the third-party holding company, as another owner of the renewable fuel
in the transaction, would be jointly-and-severally liable for complying
with the exporter provisions.\201\
---------------------------------------------------------------------------

    \201\ This example is meant to be a stylized illustration of how
our proposed regulations could apply. It is not meant to
exhaustively detail the entities that could meet the definition of
exporter of renewable fuel in this type of transaction. To the
extent that other parties meet the definition of exporter of
renewable fuel, they would also be subject to the exporter
provisions.
---------------------------------------------------------------------------

    EPA does not consider a person to be an exporter of renewable fuel
if that person does not know or have reason to know that the renewable
fuel will be exported. For instance, a renewable fuel producer who
produces a batch of fuel, generates RINs, and sells the renewable fuel
with attached RINs into the fungible fuel distribution system would not
be considered an exporter of renewable fuel under the proposed
definition unless they know or have reason to know that the batch of
fuel would be exported. That is, the mere fact that a producer
introduces renewable fuels into the stream of commerce, coupled with
the fact that a significant portion of the overall biofuel is exported,
does not make the producer an exporter of renewable fuel.
    Our proposed regulations create broad flexibility for parties to
assign responsibilities as they see fit among themselves in structuring
an export transaction. These parties may contractually allocate RIN
retirement, and associated registration, reporting, and attest
engagement obligations, to any one of the parties that meets the
definition of an exporter of renewable fuel. The party undertaking
these requirements would then register as an exporter of renewable fuel
as set forth in 40 CFR 80.1450(a). This approach is also consistent
with our approach to the term ``refiner,'' under which multiple parties
could be considered the refiner of a batch of fuel. In such instances,
we have stated that each party meeting the definition of refiner will
be held jointly-and-severally liable for refiner requirements, and we
are proposing to adopt that approach for exporters of renewable
fuel.\202\
---------------------------------------------------------------------------

    \202\ See ``Consolidated List of Reformulated Gasoline and Anti-
Dumping Questions and Answers: July 1, 1994 through November 10,
1997,'' EPA420-R-03-009, at 256 (July 2003) (discussing a scenario
in which two parties would be considered refiners and would be
independently responsible for all refinery requirements, which would
only need to be met once).
---------------------------------------------------------------------------

    We believe that the proposed amendments clarifying the definition
of exporter of renewable fuel will provide flexibility to all parties
in transactions that result in the transfer of renewable fuel from a
covered location to locations outside of any covered location to
contractually allocate RFS program obligations, indemnities, and
pricing as they see fit in light of the regulatory requirements.
Further, the existing RFS regulations provide that ``[n]o person shall
cause another person to commit an act in violation of any prohibited
act under this section.'' \203\ We believe that this prohibition will
deter parties from engaging in sham transactions to evade RIN
retirement obligations by transferring ownership to undercapitalized
entities that do not meet their RIN retirement obligations. We are
soliciting comment on this clarification, including any ambiguities
that may persist in the proposed revised definition.
---------------------------------------------------------------------------

    \203\ See 40 CFR 80.1460(c).
---------------------------------------------------------------------------

    Finally, we are proposing to make changes throughout the RFS
regulations to more consistently use the term ``exporter of renewable
fuel'' rather than the term ``exporter.'' These clarifying edits
reflect that the ``exporter of renewable fuel'' may be different than
the ``exporter'' under other state and federal regulatory programs.

X. Public Participation

    Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2019-
0136, at https://www.regulations.gov (our preferred method), or the
other methods identified in the ADDRESSES section. Once submitted,
comments cannot be edited or removed from the docket. EPA may publish
any comment received to its public docket. Do not submit electronically
any information you consider to be Confidential Business Information
(CBI) or other information whose disclosure is

restricted by statute. Multimedia submissions (audio, video, etc.) must
be accompanied by a written comment. The written comment is considered
the official comment and should include discussion of all points you
wish to make. EPA will generally not consider comments or comment
contents located outside of the primary submission (i.e., on the web,
cloud, or other file sharing system). For additional submission
methods, the full EPA public comment policy, information about CBI or
multimedia submissions, and general guidance on making effective
comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.

XI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted
to the Office of Management and Budget (OMB) for review. Any changes
made in response to OMB recommendations have been documented in the
docket. EPA prepared an analysis of illustrative costs associated with
this action. This analysis is presented in Section VI.

B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs

    This action is expected to be an Executive Order 13771 regulatory
action. Details on the estimated costs of this proposed rule can be
found in EPA's analysis of the illustrative costs associated with this
action. This analysis is presented in Section VI.

C. Paperwork Reduction Act (PRA)

    The existing Information Collection Request (ICR) covering the RFS
program is entitled ``Recordkeeping and Reporting for the Renewable
Fuel Standard Program,'' EPA ICR No. 2546.01, OMB Control Number 2060-
NEW; it is currently under OMB review. The existing RFS ICR covers
registration, recordkeeping, and reporting requirements currently in 40
CFR part 80, subpart M. The changes affecting RVO calculations will not
change the recordkeeping and reporting burdens vis-[agrave]-vis the
existing collection. Certain of the proposed amendments in this action
would result in an additional burden. The information collection
activities related to the proposed amendments to the RFS regulations in
this proposed rule have been submitted for approval to the Office of
Management and Budget (OMB) under the PRA. You can find a copy of the
ICR in the docket for this rule, identified by EPA ICR Number 2595.01,
OMB Control Number 2060-NEW, and it is briefly summarized here. The
parties for whom we anticipate an increase in burden are generally
described as RIN generators (specifically, those who are producers of
renewable fuel) due the proposed amendments related to pathways, and
those who are generally described as obligated parties (specifically,
those who are refiners and importers) due to the proposed provisions
for certified NTDF. The supporting statement clearly indicates the
proposed amendments and includes detailed tables with regulatory burden
laid out by type of party, regulatory citation, description of
information to be collected, estimated burden in hours and dollars, and
reporting form or format. The following summarizes the burden:
    Respondents/affected entities: The respondents to this information
collection fall into the following general industry categories:
Petroleum refineries, ethyl alcohol manufacturers, other basic organic
chemical manufacturing, chemical and allied products merchant
wholesalers, petroleum bulk stations and terminals, petroleum and
petroleum products merchant wholesalers, gasoline service stations, and
marine service stations.
    Respondent's obligation to respond: Mandatory.
    Estimated number of respondents: 6,323.
    Total number of responses: 357,826.
    Frequency of response: Quarterly, annually, and occasionally.
    Total estimated burden: 28,902 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
    Total estimated cost: $3,162,321 (per year).
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
    Submit your comments on the Agency's need for this information, the
accuracy of the provided burden estimates and any suggested methods for
minimizing respondent burden to EPA using the docket identified at the
beginning of this rule. You may also send your ICR-related comments to
OMB's Office of Information and Regulatory Affairs via email to
<EMAIL_ADDRESS>Attention: Desk Officer for EPA. Since OMB
is required to make a decision concerning the ICR between 30 and 60
days after receipt, OMB must receive comments no later than August 28,
2019. EPA will respond to any ICR-related comments in the final rule.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, the impact of concern is any significant
adverse economic impact on small entities. An agency may certify that a
rule will not have a significant economic impact on a substantial
number of small entities if the rule relieves regulatory burden, has no
net burden, or otherwise has a positive economic effect on the small
entities subject to the rule.
    The small entities directly regulated by the RFS program are small
refiners, which are defined at 13 CFR 121.201. With respect to the
proposed amendments to the RFS regulations, this action will not impose
any requirements on small entities that were not already considered
under the final RFS2 regulations. This action makes relatively minor
corrections and modifications to those regulations, and we do not
anticipate that there will be any significant costs or cost savings
associated with these proposed revisions.
    With respect to the proposed 2020 percentage standards, we have
evaluated the impacts on small entities from two perspectives: As if
the standards were a standalone action or if they are a part of the
overall impacts of the RFS program as a whole.
    When evaluating the standards as if they were a standalone action
separate and apart from the original rulemaking that established the
RFS2 program, the standards could be viewed as increasing the
cellulosic biofuel, advanced biofuel, and total renewable fuel volume
requirements by 120 million gallons between 2019 and 2020. To evaluate
the impacts of the volume requirements on small entities relative to
2019, we have conducted a screening analysis \204\ to assess whether we
should make a finding that this action will not have a significant
economic impact on a substantial number of small entities. Currently
available information shows that the impact on small entities from
implementation of this rule will not be significant. We have reviewed
and assessed the available information, which shows that obligated
parties,

including small entities, are generally able to recover the cost of
acquiring the RINs necessary for compliance with the RFS standards
through higher sales prices of the petroleum products they sell than
would be expected in the absence of the RFS program.\205\ This is true
whether they acquire RINs by purchasing renewable fuels with attached
RINs or purchase separated RINs. The costs of the RFS program are thus
generally being passed on to consumers in the highly competitive
marketplace. Even if we were to assume that the cost of acquiring RINs
was not recovered by obligated parties, and we used the maximum values
of the costs discussed in Section VI and the gasoline and diesel fuel
volume projections and wholesale prices from the April, 2019 version of
EIA's Short Term Energy Outlook, along with current wholesale biofuel
prices, a cost-to-sales ratio test shows that the costs to small
entities of the RFS standards are far less than 1 percent of the value
of their sales.
---------------------------------------------------------------------------

    \204\ ``Screening Analysis for the Proposed Renewable Fuel
Standards for 2020,'' memorandum from Dallas Burkholder and Nick
Parsons to EPA Air Docket EPA-HQ-OAR-2018-0205.
    \205\ For a further discussion of the ability of obligated
parties to recover the cost of RINs see ``Denial of Petitions for
Rulemaking to Change the RFS Point of Obligation,'' EPA-420-R-17-
008, November 2017.
---------------------------------------------------------------------------

    While the screening analysis described above supports a
certification that this rule will not have a significant economic
impact on small refiners, we continue to believe that it is more
appropriate to consider the standards as a part of our ongoing
implementation of the overall RFS program. When considered this way,
the impacts of the RFS program as a whole on small entities were
addressed in the RFS2 final rule, which was the rule that implemented
the entire program as required by EISA 2007.\206\ As such, the Small
Business Regulatory Enforcement Fairness Act (SBREFA) panel process
that took place prior to the 2010 rule was also for the entire RFS
program and looked at impacts on small refiners through 2022.
---------------------------------------------------------------------------

    \206\ 75 FR 14670 (March 26, 2010).
---------------------------------------------------------------------------

    For the SBREFA process for the RFS2 final rule, we conducted
outreach, fact-finding, and analysis of the potential impacts of the
program on small refiners, which are all described in the Final
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners,
including small refiners, through the year 2022 and found that the
program would not have a significant economic impact on a substantial
number of small entities, and that this impact was expected to decrease
over time, even as the standards increased. For gasoline and/or diesel
small refiners subject to the standards, the analysis included a cost-
to-sales ratio test, a ratio of the estimated annualized compliance
costs to the value of sales per company. From this test, we estimated
that all directly regulated small entities would have compliance costs
that are less than one percent of their sales over the life of the
program (75 FR 14862, March 26, 2010).
    We have determined that this proposed rule will not impose any
additional requirements on small entities beyond those already
analyzed, since the impacts of this rule are not greater or
fundamentally different than those already considered in the analysis
for the RFS2 final rule assuming full implementation of the RFS
program. This rule proposes to increase the 2020 cellulosic biofuel,
advanced biofuel, and total renewable fuel volume requirements by 120
million gallons relative to the 2019 volume requirements, but those
volumes remain significantly below the statutory volume targets
analyzed in the RFS2 final rule. Compared to the burden that would be
imposed under the volumes that we assessed in the screening analysis
for the RFS2 final rule (i.e., the volumes specified in the Clean Air
Act), the volume requirements proposed in this rule reduce burden on
small entities. Regarding the BBD standard, we are proposing to
maintain the volume requirement for 2020 at the same level as 2019.
While this volume is an increase over the statutory minimum value of 1
billion gallons, the BBD standard is a nested standard within the
advanced biofuel category, which we are significantly reducing from the
statutory volume targets. As discussed in Section VII, the BBD volume
requirement is below what is anticipated to be produced and used to
satisfy the advanced biofuel requirement. The net result of the
standards being proposed in this action is a reduction in burden as
compared to implementation of the statutory volume targets assumed in
the RFS2 final rule analysis.
    While the rule will not have a significant economic impact on a
substantial number of small entities, there are compliance
flexibilities in the program that can help to reduce impacts on small
entities. These flexibilities include being able to comply through RIN
trading rather than renewable fuel blending, 20 percent RIN rollover
allowance (up to 20 percent of an obligated party's RVO can be met
using previous-year RINs), and deficit carry-forward (the ability to
carry over a deficit from a given year into the following year,
providing that the deficit is satisfied together with the next year's
RVO). In the RFS2 final rule, we discussed other potential small entity
flexibilities that had been suggested by the SBREFA panel or through
comments, but we did not adopt them, in part because we had serious
concerns regarding our authority to do so.
    Additionally, we realize that there may be cases in which a small
entity may be in a difficult financial situation and the level of
assistance afforded by the program flexibilities is insufficient. For
such circumstances, the program provides hardship relief provisions for
small entities (small refiners), as well as for small refineries.\207\
As required by the statute, the RFS regulations include a hardship
relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small
refinery to petition for an extension of its small refinery exemption
at any time based on a showing that the refinery is experiencing a
``disproportionate economic hardship.'' EPA regulations provide similar
relief to small refiners that are not eligible for small refinery
relief (see 40 CFR 80.1442(h)). We have currently identified a total of
9 small refiners that own 11 refineries subject to the RFS program, all
of which are also small refineries.
---------------------------------------------------------------------------

    \207\ See CAA section 211(o)(9)(B).
---------------------------------------------------------------------------

    We evaluate these petitions on a case-by-case basis and may approve
such petitions if it finds that a disproportionate economic hardship
exists. In evaluating such petitions, we consult with the U.S.
Department of Energy and consider the findings of DOE's 2011 Small
Refinery Study and other economic factors. To date, EPA has adjudicated
petitions for exemption from 35 small refineries for the 2017 RFS
standards (10 of which are owned by a small refiner).\208\
---------------------------------------------------------------------------

    \208\ EPA is currently evaluating 1 additional 2017 petition and
39 2018 petitions (10 of which are owned by a small refiner). More
information on Small Refinery Exemptions is available on EPA's
public website at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
---------------------------------------------------------------------------

    In sum, this proposed rule will not change the compliance
flexibilities currently offered to small entities under the RFS program
(including the small refinery hardship provisions we continue to
implement) and available information shows that the impact on small
entities from implementation of this rule will not be significant
viewed either from the perspective of it being a standalone action or a
part of the overall RFS program. We have therefore concluded that this
action will have no net regulatory burden for directly regulated small
entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action
implements mandates specifically and explicitly set forth in CAA
section 211(o) and we believe that this action represents the least
costly, most cost-effective approach to achieve the statutory
requirements.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.

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

    This action does not have tribal implications as specified in
Executive Order 13175. This action will be implemented at the Federal
level and affects transportation fuel refiners, blenders, marketers,
distributors, importers, exporters, and renewable fuel producers and
importers. Tribal governments will be affected only to the extent they
produce, purchase, or use regulated fuels. Thus, Executive Order 13175
does not apply to this action.

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

    EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that EPA has reason to believe may disproportionately affect children,
per the definition of ``covered regulatory action'' in section 2-202 of
the Executive Order. This action is not subject to Executive Order
13045 because it implements specific standards established by Congress
in statutes (CAA section 211(o)) and does not concern an environmental
health risk or safety risk.

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

    This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action proposes the required
renewable fuel content of the transportation fuel supply for 2020,
consistent with the CAA and waiver authorities provided therein. The
RFS program and this rule are designed to achieve positive effects on
the nation's transportation fuel supply, by increasing energy
independence and security and lowering lifecycle GHG emissions of
transportation fuel.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations

    EPA believes that this action does not have disproportionately high
and adverse human health or environmental effects on minority
populations, low income populations, and/or indigenous peoples, as
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).
This regulatory action does not affect the level of protection provided
to human health or the environment by applicable air quality standards.
This action does not relax the control measures on sources regulated by
the RFS regulations.

XII. Statutory Authority

    Statutory authority for this action comes from sections 114, 203-
05, 208, 211, and 301 of the Clean Air Act, 42 U.S.C. 7414, 7522-24,
7542, 7545, and 7601.

List of Subjects in 40 CFR Part 80

    Environmental protection, Administrative practice and procedure,
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports,
Oil imports, Petroleum, Renewable fuel.

    Dated: July 5, 2019.
Andrew R. Wheeler,
Administrator.

    For the reasons set forth in the preamble, EPA proposes to amend 40
CFR part 80 as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

    Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart M--Renewable Fuel Standard

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2. Section 80.1401 is amended by adding in alphabetical order
definitions for ``Certified non-transportation 15 ppm distillate fuel
or certified NTDF'' and ``Covered location'' and revising the
definition of ``Exporter of renewable fuel'' to read as follows:

Sec.  80.1401  Definitions.

* * * * *
    Certified non-transportation 15 ppm distillate fuel or certified
NTDF means distillate fuel that meets all of the following:
    (1) It has been certified as complying with the 15 ppm sulfur
standard, cetane/aromatics standard, and all applicable sampling,
testing, and recordkeeping requirements of subpart I of this part.
    (2) It has been designated as 15 ppm heating oil, 15 ppm ECA marine
fuel, or other non-transportation fuel (e.g., jet fuel, kerosene, No. 4
fuel, or distillate fuel for export only) on its product transfer
document and has not been designated as MVNRLM diesel fuel.
    (3) The PTD for the distillate fuel meets the requirements in Sec.
80.1453(e).
* * * * *
    Covered location means the contiguous 48 states, Hawaii, and any
state or territory that has received an approval from the Administrator
to opt-in to the renewable fuel program pursuant to Sec.  80.1443.
* * * * *
    Exporter of renewable fuel means all buyers, sellers, and owners of
the renewable fuel in a transaction that results in renewable fuel
being transferred from a covered location to a destination outside of
the covered locations.
* * * * *
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3. Section 80.1405 is amended by adding paragraph (a)(11) to read as
follows:

Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) * * *
    (11) Renewable Fuel Standards for 2020.
    (i) The value of the cellulosic biofuel standard for 2020 shall be
0.29 percent.
    (ii) The value of the biomass-based diesel standard for 2020 shall
be 1.99 percent.
    (iii) The value of the advanced biofuel standard for 2020 shall be
2.75 percent.
    (iv) The value of the renewable fuel standard for 2020 shall be
10.92 percent.
* * * * *
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4. Section 80.1407 is amended by adding paragraphs (f)(9) through (11)
to read as follows:

Sec.  80.1407  How are the Renewable Volume Obligations calculated?

* * * * *
    (f) * * *
    (9) Distillate fuel with a sulfur content greater than 15 ppm that
is clearly

designated for a use other than transportation fuel, such as heating
oil or ECA marine fuel.
    (10) Distillate fuel that meets a 15 ppm sulfur standard, is
designated for non-transportation use, and that remains completely
segregated from MVNRLM diesel fuel from the point of production through
to the point of use for a non-transportation purpose, such as heating
oil or ECA marine fuel.
    (11) Certified NTDF, if the refiner or importer has a reasonable
expectation that the fuel will be used for non-transportation purposes.
To establish a reasonable expectation that the fuel will be used for
non-transportation purposes, a refiner or importer must, at a minimum,
do the following:
    (i) Demonstrate that the refiner or importer supplies areas that
use heating oil, ECA marine fuel, or 15 ppm distillate fuel for non-
transportation purposes in the quantities being supplied by the refiner
or importer.
    (ii) Demonstrate that the refiner or importer has entered into a
contractual arrangement that prohibits the buyer from selling the fuel
as MVNRLM diesel fuel.
    (iii) Demonstrate that the volume of fuel designated as heating
oil, ECA marine fuel, or other non-transportation purposes is
consistent with the refiner's or importer's past practices or reflect
changed market conditions.
    (iv) EPA may consider any other relevant information in assessing
whether a refiner or importer has a reasonable expectation that the
fuel was used for non-transportation purposes.
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5. Section 80.1408 is added to read as follows:

Sec.  80.1408  What are the requirements for parties that redesignate
certified NTDF as MVNRLM diesel fuel?

    (a) Parties that redesignate certified NTDF as MVNRLM diesel fuel
must meet all of the following requirements:
    (1) Register as a refiner under Sec.  80.76 and as an obligated
party under Sec.  80.1450(a).
    (2) Maintain a running balance of MVNRLM diesel fuel that they
discharge and receive.
    (i) Parties whose annual running balance at the end of the
compliance period shows that the volume of MVNRLM diesel fuel
discharged exceeds the volume of MVNRLM diesel fuel received incur an
RVO for the volume of MVNRLM diesel fuel discharged above the volume of
MVNRLM diesel fuel received during the compliance period. The volume of
MVNRLM diesel fuel discharged above the volume of MVNRLM diesel fuel
received is considered diesel fuel pursuant to Sec.  80.1407(e) and
contributes towards the party's annual RVO calculations.
    (ii) Parties whose running balance for the compliance period shows
that the volume of MVNRLM diesel fuel discharged did not exceed the
volume of MVNRLM diesel fuel received do not incur an RVO on the MVNRLM
diesel fuel for the compliance period.
    (3) Comply with the reporting requirements of Sec.
80.1451(a)(1)(xix) and (a)(3)(i).
    (4) Comply with the recordkeeping requirements of Sec.  80.1454(t).
    (5) Comply with the attest engagement requirements of Sec. Sec.
80.1464 and 80.1475, as applicable.
    (b) Parties that incur an RVO under paragraph (a)(2)(i) of this
section must comply with all applicable requirements for obligated
parties under this subpart.
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6. Section 80.1426 is amended by:
0
a. Revising paragraph (a)(1)(iii); and
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b. Revising table 1 in paragraph (f)(1) the entries ``F'', ``H'', and
``I''.
    The revisions read as follows:

Sec.  80.1426  How are RINs generated and assigned to batches of
renewable fuel by renewable fuel producers or importers?

    (a) * * *
    (1) * * *
    (iii) The fuel was produced in compliance with the registration
requirements of Sec.  80.1450, the reporting requirements of Sec.
80.1451, the recordkeeping requirements of Sec.  80.1454, all
conditions set forth in an approved petition submitted under Sec.
80.1416, and all other applicable regulations of this subpart M.
* * * * *
    (f) * * *
    (1) * * *

         Table 1 to Sec.   80.1426--Applicable D Codes for Each Fuel Pathway for Use in Generating RINs
----------------------------------------------------------------------------------------------------------------
                                                                               Production process
                            Fuel type                 Feedstock                   requirements           D-code
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
F..................  Biodiesel, renewable    Soy bean oil; Oil from       One of the following:                4
                      diesel, jet fuel and    annual covercrops; Oil       Transesterification with
                      heating oil.            from algae grown             or without esterification
                                              photosynthetically;          pre-treatment,
                                              Biogenic waste oils/fats/    Esterification, or
                                              greases; Camelina sativa     Hydrotreating; excludes
                                              oil; Distillers corn oil;    processes that co-process
                                              Distillers sorghum oil;      renewable biomass and
                                              Commingled distillers corn   petroleum.
                                              oil and sorghum oil.

                                                  * * * * * * *
H..................  Biodiesel, renewable    Soy bean oil; Oil from       One of the following:                5
                      diesel, jet fuel and    annual covercrops; Oil       Transesterification with
                      heating oil.            from algae grown             or without esterification
                                              photosynthetically;          pre-treatment,
                                              Biogenic waste oils/fats/    Esterification, or
                                              greases; Camelina sativa     Hydrotreating; includes
                                              oil; Distillers corn oil;    only processes that co-
                                              Distillers sorghum oil;      process renewable biomass
                                              Commingled distillers corn   and petroleum.
                                              oil and sorghum oil.
I..................  Naphtha, LPG..........  Camelina sativa oil;         Hydrotreating..............          5
                                              Distillers sorghum oil;
                                              Distillers corn oil;
                                              Commingled distillers corn
                                              oil and distillers sorghum
                                              oil.

                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------

* * * * *
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7. Section 80.1427 is amended by:
0
a. Revising in paragraph (b)(2) the definition of ``RVOi'';
and
0
b. Revising paragraph (c)(2).
    The revisions read as follows:

Sec.  80.1427  How are RINs used to demonstrate compliance?

* * * * *
    (b) * * *

    (2) * * *
    RVOi = The Renewable Volume Obligation for the obligated
party or exporter of renewable fuel for calendar year i, in gallons.
* * * * *
    (c) * * *
    (2) In fulfillment of its ERVOs, each exporter of renewable fuel is
subject to the provisions of paragraphs (a)(2), (a)(3), (a)(6), and
(a)(8) of this section.
* * * * *
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8. Section 80.1429 is amended by revising paragraph (b)(3) to read as
follows:

Sec.  80.1429  Requirements for separating RINs from volumes of
renewable fuel.

* * * * *
    (b) * * *
    (3) Any exporter of renewable fuel must separate any RINs that have
been assigned to the exported renewable fuel volume. An exporter of
renewable fuel may separate up to 2.5 RINs per gallon of exported
renewable fuel.
* * * * *
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9. Section 80.1430 is amended by:
0
a. Revising paragraph (a);
0
b. Revising in paragraph (b)(1) the definition of ``k'';
0
c. Revising paragraphs (c), (d)(1), and (e) introductory text; and
0
d. Adding paragraph (h).
    The revisions and addition read as follows:

Sec.  80.1430  Requirements for exporters of renewable fuels.

    (a) Any exporter of renewable fuel, whether in its neat form or
blended shall acquire sufficient RINs to comply with all applicable
Renewable Volume Obligations under paragraphs (b) through (e) of this
section representing the exported renewable fuel. No provision of this
section applies to renewable fuel purchased directly from the renewable
fuel producer and for which the exporter of renewable fuel can
demonstrate that no RINs were generated through the recordkeeping
requirements of Sec.  80.1454(a)(6).
    (b) * * *
    (1) * * *
    k = A discrete volume of renewable fuel that the exporter of
renewable fuel knows or has reason to know is cellulosic biofuel that
is exported in a single shipment.
* * * * *
    (c) If the exporter of renewable fuel knows or has reason to know
that a volume of exported renewable fuel is cellulosic diesel, the
exporter of renewable fuel must treat the exported volume as either
cellulosic biofuel or biomass-based diesel when determining his
Renewable Volume Obligations pursuant to paragraph (b) of this section.
    (d) * * *
    (1) If the equivalence value for a volume of exported renewable
fuel can be determined pursuant to Sec.  80.1415 based on its
composition, then the appropriate equivalence value shall be used in
the calculation of the exporter of renewable fuel's Renewable Volume
Obligations under paragraph (b) of this section.
* * * * *
    (e) For renewable fuels that are in the form of a blend at the time
of export, the exporter of renewable fuel shall determine the volume of
exported renewable fuel based on one of the following:
* * * * *
    (h) Each person meeting the definition of exporter of renewable
fuel for a particular export transaction is jointly and severally
liable for completion of the requirements of this section and all
associated RIN retirement demonstration, registration, reporting, and
attest engagement obligations under this subpart. However, these
requirements for exporters of renewable fuel must be met only once for
any export transaction.
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10. Section 80.1431 is amended by revising paragraph (b)(2) to read as
follows:

Sec.  80.1431  Treatment of invalid RINs.

* * * * *
    (b) * * *
    (2) Invalid RINs cannot be used to achieve compliance with the
Renewable Volume Obligations of an obligated party or exporter of
renewable fuel, regardless of the party's good faith belief that the
RINs were valid at the time they were acquired.
* * * * *
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11. Section 80.1451 is amended by:
0
a. Revising paragraphs (a)(1)(i) and (v);
0
b. Adding paragraphs (a)(1)(xix), (a)(3)(i) and (ii); and
0
c. Revising paragraph (a)(4).
    The revisions and additions read as follows:

Sec.  80.1451  What are the reporting requirements under the RFS
program?

    (a) * * *
    (1) * * *
    (i) The obligated party's or exporter of renewable fuel's name.
* * * * *
    (v) Separately, the production volume and import volume for the
reporting year of all of the following:
    (A) All of the gasoline products listed in Sec.  80.1407(c).
    (B) All of the MVNRLM diesel fuel products listed in Sec.
80.1407(e).
    (C) The combined production volume of all gasoline products and
MVNRLM diesel fuel.
    (D) Distillate fuel that is not transportation fuel.
    (E) Distillate fuel that is certified NTDF.
* * * * *
    (xix) For parties that redesignate certified NTDF as MVNRLM diesel
fuel at any time in the compliance period pursuant to Sec.  80.1408,
all of the following:
    (A) The volume of MVNRLM diesel fuel received during the compliance
period.
    (B) The volume of MVNRLM diesel fuel discharged during the
compliance period.
    (C) The volume of certified NTDF redesignated to MVNRLM diesel fuel
during the compliance period.
    (D) The volume of MVNRLM diesel fuel redesignated to non-
transportation use during the compliance period.
* * * * *
    (3) * * *
    (i) For obligated parties that redesignate certified NTDF as MVNRLM
diesel fuel for any quarter in the compliance period pursuant to Sec.
80.1408, all of the following:
    (A) The volume of MVNRLM diesel fuel received during the quarter.
    (B) The volume of MVNRLM diesel fuel discharged during the quarter.
    (C) The volume of certified NTDF redesignated to MVNRLM diesel fuel
during the quarter.
    (D) The volume of MVNRLM diesel fuel redesignated to non-
transportation use during the quarter.
    (ii) [Reserved]
    (4) Reports required under this paragraph (a) must be signed and
certified as meeting all the applicable requirements of this subpart by
the owner or a responsible corporate officer of the obligated party or
exporter of renewable fuel.
* * * * *
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12. Section 80.1453 is amended by:
0
a. Revising paragraph (b); and
0
b. Adding paragraph (e).
    The revision and addition read as follows:

Sec.  80.1453  What are the product transfer document (PTD)
requirements for the RFS program?

* * * * *
    (b) Except for transfers to truck carriers, retailers, or wholesale
purchaser-consumers, product codes may be used to convey the
information required under paragraphs (a)(1)

through (a)(11) and (e) of this section if such codes are clearly
understood by each transferee.
* * * * *
    (e) On each occasion when any party transfers custody or ownership
of certified NTDF, except when such fuel is dispensed into motor
vehicles or nonroad vehicles, engines, or equipment, the transferor
must provide to the transferee documents that include all the following
information, as applicable:
    (1) The transferrer of certified NTDF must list all applicable
required information as specified at Sec.  80.590 and, if the
distillate fuel contains renewable fuel, all applicable required
information in paragraphs (a), (b), and (d) of this section.
    (2) The transferrer must include the following statement on the
PTD: ``This fuel meets all MVNRLM diesel fuel standards.''
0
13. Section 80.1454 is amended by:
0
a. Revising paragraphs (a) introductory text, (a)(1), and (n);
0
b. Redesignating paragraph (t) as paragraph (u); and
0
c. Adding new paragraph (t). The revisions and addition reads as
follows:

Sec.  80.1454  What are the recordkeeping requirements under the RFS
program?

    (a) Requirements for obligated parties and exporters of renewable
fuel. Beginning July 1, 2010, any obligated party (as described at
Sec.  80.1406) or exporter of renewable fuel (as described at Sec.
80.1430) must keep all of the following records:
    (1) Product transfer documents consistent with Sec.  80.1453 and
associated with the obligated party's or exporter of renewable fuel's
activity, if any, as transferor or transferee of renewable fuel or
separated RINs.
* * * * *
    (n) The records required under paragraphs (a) through (d), (f)
through (l), and (t) of this section and under Sec.  80.1453 shall be
kept for five years from the date they were created, except that
records related to transactions involving RINs shall be kept for five
years from the date of the RIN transaction.
* * * * *
    (t) Requirements for parties that redesignate certified NTDF as
MVNRLM diesel fuel. Parties that redesignate certified NTDF as MVNRLM
diesel fuel must keep all of the following additional records:
    (1) Records related to all transactions in which certified NTDF is
redesignated as MVNRLM diesel fuel.
    (2) Records related to all transactions in which MVNRLM diesel fuel
is redesignated to a non-transportation use.
    (3) Records related to the volume of MVNRLM diesel fuel received.
    (4) Records related to the volume of MVNRLM diesel fuel discharged.
    (5) Records related to the volume of certified NTDF received.
    (6) Records related to the volume of certified NTDF discharged.
* * * * *
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14. Section 80.1460 is amended by adding paragraphs (b)(7) and (j) to
read as follows:

Sec.  80.1460  What acts are prohibited under the RFS program?

* * * * *
    (b) * * *
    (7) Generate a RIN for fuel that fails to meet all the conditions