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

    Since ethanol supplies can flow to countries other than the U.S.,
an important part of understanding potential imports into the U.S. are
the current and future biofuel mandates and goals of other nations.
Such mandates include, for instance, Canada's 5% fuel ethanol mandate
which started in late 2010, requiring approximately 500 million gallons
per year. Another goal is that of the EU, the renewable energy
directive, which includes a minimum target of 10% renewable energy use
in transport by 2020, a portion of which is expected to be met with
ethanol. Other countries with ethanol mandates and goals are India,
Indonesia, Philippines, Costa Rica, Peru, and Argentina, to name a few.
According to Hart Energy Consulting, most countries will be in a
potential supply deficit for ethanol by 2020, and the primary country
in a position to supply the global ethanol market will be Brazil.\32\
Chief competitors for the U.S. to receive Brazilian ethanol are
expected to be the EU, China, and Japan. This increasing international
demand for biofuels may limit export supplies available for the U.S. in
2013.
---------------------------------------------------------------------------

    \32\ Hart Energy Consulting. ``Global Biofuels Outlook: 2010-
2020,'' October 2010.
---------------------------------------------------------------------------

    The demand for ethanol in Brazil is also increasing, further
limiting volumes that will likely be exported. For instance, the sales
share of flex-fuel vehicles (FFVs) in Brazil are reported to have risen
dramatically in the last decade, contributing to an in-use fleet that
is increasingly capable of operating on pure ethanol. By 2014, 70% of
the in-use fleet is expected to be FFVs, compared to only 33% in 2009.
While the aforementioned FAPRI report projected that 2013 Brazilian
demand for ethanol could be 7.7 billion gallons, S&D estimated that
2013 demand could potentially reach as high as 11 billion gallons,
outpacing Brazilian production capacity.\33\
---------------------------------------------------------------------------

    \33\ Sucres et Denr[eacute]es (S&D), ``Ethanol Report,''
November 2010.
---------------------------------------------------------------------------

    We believe that given the discussions above, it is reasonable to
conclude that Brazilian sugarcane ethanol will continue to provide
limited volumes of advanced biofuel in the U.S. in the near term due to
other competitive uses. While imports of sugarcane ethanol into the
U.S. in 2013 could exceed the 190 million gallons estimated in RFS2,
they are unlikely to reach the historical high of 730 mill gallons for
the reasons described above.
    In addition to cellulosic biofuel and imported sugarcane ethanol,
there is also some potential for other advanced biofuels that could be
used to meet the advanced biofuel standard of 2.75 bill gallons. The
most likely of these is sugar-based ethanol from domestic sugarcane.
Several companies have announced plans for sugar-based ethanol
production in California, Louisiana, and Florida. Two of these
companies have announced plans for multiple ethanol production
facilities, however none of these companies have yet begun
construction. In addition, coprocessed renewable diesel is uncertain,
though there could conceivably be up to a hundred million gallons by
2013. Potential production of other advanced biofuels such as renewable
butanol or ethanol from non-corn starches in biomass-fueled facilities
is even less certain for 2013. However, as described in Section II.D,
companies such as Gevo, Solazyme, and LS9 are in the process of
building or converting facilities to produce advanced biofuels in the
form of butanol, jet fuel, and renewable diesel, respectively, that may
count as advanced biofuel. We expect all these other sources of
advanced biofuel to contribute about one or two hundred million gallons
in 2013.
    In summary, we believe that the total volume of cellulosic biofuel,
imported sugarcane ethanol, and other advanced biofuels that may be
available in 2013 is likely to be less than about 1 billion gallons. In
order to reach an advanced biofuel volume of 2.75 billion gallons,
then, it is likely that more than 1.0 bill gallons of biomass-based
diesel (representing more than 1.5 billion ethanol-equivalent gallons)
will be needed. The volume of biomass-based diesel that may be needed
in excess of 1.0 bill gallons could potentially be on the order of
hundreds of millions of gallons. This result is similar to the
assumption made by IHS Global Insight in their recent report, in which
they assume that an additional 300 million gallons of biodiesel will be
needed over and above the 1.0 billion gallons mandate for biomass-based
diesel in order for the advanced biofuel standard to be met.\34\
---------------------------------------------------------------------------

    \34\ ``Biodiesel Production Prospects for the Next Decade,'' IHS
Global Insight, March 11, 2011.
---------------------------------------------------------------------------

    As mentioned above, we do not believe it would be prudent to set
the biomass-based diesel applicable volume for 2013 such that the
increment over 2012 volumes is excessive in comparison to the
increments, and trajectory of increments, established by Congress for
the years 2009-2012. As a result, we believe that a biomass-based
diesel volume of 1.28 bill gallons would both reflect likely increased
demand for biomass-based diesel in 2013 and provide an increment that
is not excessive when compared to those established by Congress.
2. Availability of Feedstocks to Produce 1.28 Billion Gallons of
Biodiesel
    As described above, in the final rulemaking establishing the RFS2
program we developed renewable fuel volume scenarios for all years
between 2010 and 2022. For 2013, we estimated a biomass-based diesel
volume of 1.28 bill gallons. This volume was based primarily on a
projection of the qualifying feedstocks that could be available, as
summarized in Table IV.B.2-1.

 Table IV.B.2-1--Feedstocks Contributing to 2013 Volume of 1.28 Bill Gal
------------------------------------------------------------------------
                                                                 Volume
                            Source                               (mill
                                                                  gal)
------------------------------------------------------------------------
Yellow grease and other rendered fats........................        380
Corn oil.....................................................        300

Virgin vegetable oil.........................................        600
                                                              ----------
    Total....................................................      1,280
------------------------------------------------------------------------

    We continue to believe that the feedstock volumes shown in Table
IV.B.2-1 are reasonable projections for 2013. For instance, according
to the U.S. Census Bureau, the total volume of yellow grease and other
greases (most likely trap grease) produced in 2010 was about 340 mill
gallons.\35\ The volume of inedible tallow produced in the same period
was over 400 mill gallons. Other potential sources could include edible
tallow, lard, and poultry fats. Taken together, the total volume of
available grease and fats for use in producing biomass-based diesel is
in excess of the 380 mill gallons we projected in the RFS2 final rule.
---------------------------------------------------------------------------

    \35\ Current Industrial Reports, U.S. Census Bureau, M311K--Fats
and Oils: Production, Consumption, and Stocks, Table 2b. Assumes 7.5
lb/gal. December projection based on the average of January-
November. http://www.census.gov/manufacturing/cir/historical_data/m311k/index.html.
---------------------------------------------------------------------------

    The 300 million gallons of biodiesel produced from corn oil
extracted from distillers grains produced at ethanol facilities is
based on projections of the percentage of the ethanol industry using
corn oil extraction technology and the amount of oil extracted per
bushel of corn in 2013. The RFS2 final rule projected that by 2013, 34%
of all dry mill ethanol facilities would extract corn oil from the by-
products of ethanol production. A recent survey of the ethanol industry
found that by 2008 over 30% of all dry mill ethanol plants were already
extracting corn oil from their co-products.\36\ EPA expects that the
percentage of dry mill ethanol facilities using some form of corn oil
extraction technology will increase to 60% by 2013. The corn oil
extraction technology currently being used at most dry mill ethanol
facilities is capable of extracting approximately one third of the oil
contained in the corn kernel from the whole stillage and/or its
derivatives (a significantly reduced rate than the two thirds of oil
extracted assumed to be technically feasible by 2022 in the RFS2 final
rule). If 60% of all dry mill corn ethanol facilities were extracting
one third of the oil in the corn kernel in 2013 the amount of corn oil
available for biodiesel production would be approximately 270 million
gallons. As corn oil extraction technology develops and higher oil
extraction rates are achieved, corn ethanol producers are likely to
adopt this new technology. EPA expects that by 2013 these technology
improvements will increase corn oil production levels to the 300
million gallons projected in the RFS2 rule. Alternatively, additional
corn oil could come from ethanol production facilities using corn
fractionation or wet milling technology. This corn oil was not
considered as a biodiesel feedstock in the RFS2 rule, but market
conditions may result in its availability to the biodiesel industry.
The high adoption rate of corn oil extraction and the promise of ever
increasing oil extraction yields indicate that the 300 million gallons
of corn oil extraction projected in the RFS2 rule in 2013 remains a
reasonable projection.
---------------------------------------------------------------------------

    \36\ Mueller, Steffen. ``Detailed Report: 2008 National Dry Mill
Corn Ethanol Survey.'' University of Illinois at Chicago Energy
Resources Center (May 4, 2010). Available online: http://ethanolrfa.3cdn.net/2e04acb7ed88d08d21_99m6idfc1.pdf.
---------------------------------------------------------------------------

    With regard to virgin vegetable oil, the modeling we conducted for
the RFS2 final rule assumed that it would be composed entirely of
soybean oil. For the purposes of today's proposal we examined recent
and historical soybean oil production and consumption volumes from the
U.S. Census Bureau to verify that 600 million gallons was a reasonable
potential volume for biodiesel production in 2013. As shown in Figure
IV.B.2-1, soy oil production has increased steadily over the last 30
years, reaching 2.5 bill gal in 2009. If these production trends
continue, domestic soy oil production could reach nearly 2.9 bill gal
by 2013.

[GRAPHIC] [TIFF OMITTED] TP01JY11.002

    To determine what portion of domestically produced soy oil could be
available for use in the production of biomass-based diesel in 2013, we
also examined recent historical trends for domestic consumption and
exports. Domestic consumption of soy oil for purposes other than
biofuel has also increased steadily over the last 30 years, but was
notably lower in the period 2007-2009 compared to previous years. If
consumption returns to historical trends for years after 2009,
consumption could be as high as 2.5 bill gal by 2013. However, as shown
in Figure IV.B.2-2 below, this would require a significant increase in
consumption from 2009 to 2010. Thus 2013 consumption could be lower
than 2.5 bill gal.

[GRAPHIC] [TIFF OMITTED] TP01JY11.003

    Based on these projections, then, the volume of soy oil that would
be available for the production of biomass-based diesel would be at
least 400 million gallons (2.9-2.5 bill gal). However, soy oil that has
historically been exported represents another potential source of soy
oil for biodiesel production. Exports of soy oil have followed only a
very weak increasing trend, averaging about 230 mill gal/year over the
same 30 year period, and about 250 mill gal/year over the last 10
years. If these exports were diverted to the production of biomass-
based diesel, the total volume of soy oil available for the production
of biodiesel and/or renewable diesel would exceed 600 mill gallons.
    Although we assumed that all virgin vegetable oils used in biomass-
based diesel production would be soy oil in the RFS2 final rule, in
fact other seed oils may contribute meaningful volumes to the pool
available for the production of biomass-based diesel. For instance, on
September 28, 2010 we approved a RIN-generating pathway for biodiesel
made from canola oil.\37\ The volume of biodiesel made from canola oil
was 96 mill gallons in 2008.\38\ In addition, we are evaluating other
pathways for the production of biodiesel from oilseeds, such as
camelina, which could potentially be approved for RIN generation by
2013. Algal oil could also provide additional feedstocks if promising
technologies for production are commercialized.
---------------------------------------------------------------------------

    \37\ 75 FR 59622.
    \38\ EPA memorandum, ``Summary of Modeling Input Assumptions for
Canola Oil Biodiesel for the Notice of Supplemental Determination
for Renewable Fuels Produced Under the Final RFS2 Program,''
Document  EPA-HQ-OAR-2010-0133-0049.
---------------------------------------------------------------------------

    IHS Global Insight recently released an independent report in which
they conducted macroeconomic modeling to investigate biodiesel growth
scenarios and related impacts on commodities such as oilseed crops.
Their agricultural modeling indicated that a slightly more diverse mix
of feedstocks would be used to meet a total domestic biodiesel
production volume of 1.3 bill gallons in 2013. These volumes are shown
in Table IV.B.2-2.

 Table IV.B.2-2--Feedstocks Contributing to 2013 Volume of 1.3 Bill Gal
                    From IHS Global Insight Modeling
------------------------------------------------------------------------
                                                                 Volume
                            Source                               (mill
                                                                  gal)
------------------------------------------------------------------------
Yellow grease and other rendered fats........................        272
Corn oil.....................................................        185
Soybean oil..................................................        624
Canola oil...................................................         68
Palm oil.....................................................          7
Other........................................................        185
    Total....................................................      1,340
------------------------------------------------------------------------
Source: Table 2, ``Biodiesel Production Prospects for the Next Decade,''
  IHS Global Insight, March 11, 2011.

This modeling concluded that soy oil production would be lower than the
trends shown in Figure IV.B.2-1, with a correspondingly lower volume of
soy oil being used for domestic non-biofuel consumption as well.
Nevertheless, their modeling concluded that soy oil availability for
biodiesel production would be 624 mill gallons, slightly higher than
what we assumed in the RFS2 final rule. While their modeling

concluded that the volumes of greases, fats, and corn oil would be
somewhat less than what we assumed in the RFS2 final rule, they were
able to quantify the available volumes of other feedstocks that we did
not explicitly investigate in the RFS2 final rule. As a result, this
report supports our finding that sufficient feedstocks will be
available to produce 1.28 bill gallons of biomass-based diesel in 2013.
3. Production Capacity
    Total production capacity of the biodiesel industry has exceeded
1.28 bill gallons for a number of years. As of January 2011, total
production capacity was more than 2.8 bill gallons for 168 plants \39\.
According to the National Biodiesel Board, 90 of these plants had
registered with the EPA under the RFS2 program as of February 4, 2011,
and these plants had a combined production capacity of over 1.9 bill
gallons. The remaining plants are either producing extremely low
volumes that fall under the regulatory threshold for RIN generation,
are producing products other than biodiesel such as soaps or cosmetics,
or have shut down until such time as the demand for biodiesel rises.
---------------------------------------------------------------------------

    \39\ USA Plants, biodieselmagazine.com, as of January 27, 2011.
---------------------------------------------------------------------------

    Most of the 90 registered plants are currently producing at
significantly under capacity, as evidenced by the fact that total
production volumes in 2010 were 300-400 million gallons, and the
registered plants have a capacity of over 1.9 billion gallons. If these
plants increase production to meet the 800 million gallon volume
requirement for 2011, on average, then, registered biodiesel producers
will be producing at about half of their capacity this year.
Nevertheless, we believe based on the registered capacity of existing
plants and the relative ease of expanding current production within
this capacity that the biodiesel industry can produce at least 1.28
bill gallons in 2013 with little leadtime needed for facilities to ramp
up to higher production levels, and/or for currently idle facilities to
come back online.
4. Consumption Capacity
    Biodiesel is registered with the EPA under 40 CFR part 79 as a
legal fuel for use in highway vehicles. Under this registration, it can
legally be used at any blend level, from 1% (B1) to 100% (B100).
However, other factors typically limit the concentration of biodiesel
in conventional diesel fuel. Since the consumption of biodiesel at
lower blend levels would tend to increase the geographic areas where
biodiesel must be marketed, it is an important consideration in how
much biodiesel can be consumed in the U.S. as a whole as well as how
the infrastructure may need to change to accommodate 1.28 bill gallons
in 2013.
    Most engine manufacturers have explicit statements in their engine
warranties regarding acceptable biodiesel blend levels. Although a few
permit B100 to be used in their engines without any adverse impact on
their warranties, most limit biodiesel blends to B20 or less, and about
half allow no more than B5 \40\. For specific applications where a
party knows which engines will be using biodiesel blends, higher
concentrations of biodiesel may be possible. However, for general
distribution such as at retail facilities, these warranty conditions
create a disincentive to blend or sell biodiesel at higher
concentrations, and would tend to drive most blends towards low
concentrations of biodiesel such as B5.
---------------------------------------------------------------------------

    \40\ ``Automaker's' and Engine Manufacturers' Positions of
Support for Biodiesel Blends,'' Biodiesel.org.
---------------------------------------------------------------------------

    Cold weather operability represents another reason for preferential
use of B5 and even B2. The most common measure of cold weather
operability is the fuel cloud point. The cloud point is the temperature
at which gelling begins (as indicated by solid crystals beginning to
form in the fuel), and thus is an indicator of when potential engine
filter plugging issues could arise. The higher the cloud point
temperature of the fuel, the more likely such problems are to be
experienced in cold weather. Biodiesel generally has a higher cloud
point than conventional, petroleum-based diesel fuel, with fat-based
biodiesel such as tallow having a higher cloud point than virgin oil-
based biodiesel such as a fuel made with soybean and canola oil. While
cloud point issues with conventional, petroleum-based diesel are
generally mitigated through blending with lighter grades (i.e.
1 diesel fuel), the cloud point of biodiesel generally
requires more dramatic interventions such as heated storage tanks,
lines, and blending equipment, as well as heating rail cars and tank
trucks. However, some of these biodiesel cloud point mitigation efforts
may be reduced through the use of low biodiesel blend levels such as B2
or B5, since cloud point is strongly correlated with biodiesel
concentration in the final blend. Insofar as biodiesel is blended into
conventional diesel before being transported to its final destination
for sale, low biodiesel blend levels may reduce the need for heated
equipment at the final destination.
    Based on highway and nonroad diesel consumption projections for
2013 from the EIA, a biodiesel volume of 1.28 bill gallons would
represent about 2.8% of all diesel fuel.\41\ If all biodiesel were to
be blended as B5, just over half of the diesel fuel consumed nationwide
in 2013 would contain biodiesel. However, today some biodiesel is
blended at concentrations higher than B5, and we expect that at least
these same volumes would be blended at concentrations higher than B5 in
the future. This would reduce the amount of diesel fuel that would
contain some biodiesel, and thus would also reduce the geographical
areas where biodiesel must be distributed.
---------------------------------------------------------------------------

    \41\ Annual Energy Outlook (AEO) 2011 Early Release, Table 2.
---------------------------------------------------------------------------

    We believe that distributing and consuming 1.28 bill gallons of
biodiesel in 2013 is achievable. A number of states already have
mandates for the use of biodiesel in 2013, and efforts are underway to
ensure that these mandates can be met. These include Minnesota, Oregon,
Washington, Pennsylvania, New Mexico, and Louisiana. Collectively,
these states account for approximately 13 percent of the nationwide
consumption of diesel. Other states have implemented other forms of
incentives as shown in Table IV.B.4-1.
---------------------------------------------------------------------------

    \42\ U.S. Department of Energy, Alternative Fuels and Advanced
Vehicles Data Center.

   Table IV.B.4-1--States With Rebates, Refunds, Reduced Tax Rates, or
            Credits for Biodiesel Production or Blending \42\
------------------------------------------------------------------------

------------------------------------------------------------------------
                                     Illinois
                                     Indiana
                                     Kansas
                                     Kentucky
                                     Maine
                                     Maryland
                                     Michigan
                                     Montana
                                     North Dakota
                                     Oklahoma
                                     Rhode Island
                                     South Carolina
                                     South Dakota
                                     Texas
                                     Virginia
                                     Washington
------------------------------------------------------------------------
* Conditions and exemptions for all incentive programs vary by state.

    Collectively, these states account for approximately 37% of the
nationwide consumption of biodiesel. A variety of states also have
requirements for the use of biodiesel in state fleets, provisions that
allow biodiesel to be used as an alternative to meeting alternative
fuel vehicle mandates, and credits/rebates

for the installation of biodiesel dispensing and blending equipment.
    Altogether, therefore, more than half of the states in the U.S.
have mandates and/or incentives that will induce them to address
biodiesel infrastructure issues. Efforts in these areas will
directionally help the nation to meet a 1.28 bill gal biomass-based
diesel requirement in 2013.
5. Biomass-Based Diesel Distribution Infrastructure
    Biodiesel/petroleum based diesel fuel blends have limited ability
to be transported using the existing petroleum product distribution
system. There has been limited transportation of up to B5 blends by
certain pipelines that do not carry jet fuel. However, concerns over
potential contamination of jet fuel with biodiesel currently prevent
biodiesel blends from being transported by the majority of
pipelines.\43\ The predominant means of biodiesel distribution is to
transport it separately by rail car, tank truck, or barge to a
petroleum terminal where it is blended with petroleum diesel fuel to
make B2, B5, B20 blends that are then transported by truck to retail or
fleet operators. For this analysis, we have assumed that all biodiesel
is transported in a segregated fashion to petroleum terminals. To the
extent that biodiesel is transported by pipeline, this may tend to
reduce the burden on the fuel distribution system.
---------------------------------------------------------------------------

    \43\ Biodiesel contamination of jet fuel can contribute to fuel
gelling and engine deposits which can lead to jet engine operability
problems.
---------------------------------------------------------------------------

    Heated and insulated rail cars, tank trucks, barges, storage tanks,
and blending equipment are required for biodiesel distribution to
protect against fuel gelling during the cold season. Following are the
cloud points of biodiesel manufactured from various feedstocks: Canola
oil biodiesel 32F, soy biodiesel 34F, yellow grease biodiesel 41F,
jatropha oil biodiesel 46F, tallow biodiesel 54F-63F, and palm oil
biodiesel 63F.\44\ Based on a review of these properties, climactic
data, and the likelihood that downstream parties will need to
accommodate biodiesel produced from various feedstocks, we believe that
heated/insulated biodiesel infrastructure would be needed throughout
most of the U.S.\45\
---------------------------------------------------------------------------

    \44\ The cloud point refers to the temperature at which
biodiesel begins to gell. Biodiesel cloud points are taken from the
NC State University and A&T State University Cooperative Extension
Web page, updated December 9, 2010, http://www.extension.org/pages/Biodiesel_Cloud_Point_and_Cold_Weather_Issues, and the
Biodiesel cold weather blending study, Cold Flow Blending
Consortium, National Biodiesel Board, 2001, http://www.nrel.gov/vehiclesandfuels/npbf/pdfs/cftr_72805.pdf.
    \45\ The ASTM International ``Standard Specification for Diesel
Fuel Oils'', ASTM D975, contains tenth percentile minimum ambient
air temperatures for the U.S.
---------------------------------------------------------------------------

    Approximately 82 petroleum terminals blended biodiesel into
petroleum-based diesel fuel in 2010.\46\ Our evaluation of the changes
to the fuel distribution infrastructure that would be needed to support
the use of 920 mill gallons/yr of biodiesel in 2012 and 1,200 mill
gallons/yr in 2013 is based on the analysis conducted for the RFS2
final rule.\47\ See Table IV.B.5-1.
---------------------------------------------------------------------------

    \46\ Communication from Larry Schafer of the National Biodiesel
Board, March 2, 2011.
    \47\ Renewable Fuels Standard Program (RFS2), Regulatory Impact
Analysis (RIA), EPA-420-R-10-006, February 2010.

            Table IV.B.5-1--Additional Infrastructure Needed To Distribute Biodiesel in 2012 and 2013
----------------------------------------------------------------------------------------------------------------
                                                                    Additional                         Total
                                                    Additional     distribution        Total       distribution
                                                   distribution    assets needed   distribution    assets needed
                                                   assets needed   in 2013 (with   assets needed    to support
                                                      in 2012     1.28 bill gal)  to support the   1.28 bill gal
                                                    relative to     relative to   2012 biodiesel     biodiesel
                                                       2011            2012            volume         volume
----------------------------------------------------------------------------------------------------------------
Petroleum Product Terminals with Biodiesel                    74             130             428             558
 Blending Capability \*\........................
Rail Cars.......................................             131             230             754             984
Tank Trucks.....................................              14              25              83             108
Barges..........................................               4               7              23              29
----------------------------------------------------------------------------------------------------------------
* There are approximately 853 petroleum terminals that offer diesel fuel in the U.S.

    The RFS2 final rule estimated that additional manifest rail and
barge receipt facilities would be needed to accept shipments of
biofuels of all types including biodiesel.\48\ We concluded that
manifest rail and barge shipments of biodiesel would be able to utilize
the manifest rail and barge receipt facilities that were initially
constructed to handle increased ethanol volumes.
---------------------------------------------------------------------------

    \48\ Manifest rail refers to the shipment of a product in rail
cars in a train that includes rail cars containing other products.
---------------------------------------------------------------------------

    We assume that terminals adding biodiesel capability would install
segregated biodiesel storage, in-line biodiesel blending equipment, and
facilities to receive shipments of biodiesel by tank truck. In-line
blending refers to the process of blending biodiesel into petroleum-
based diesel fuel in the delivery line that feeds into the tank truck
from the terminal storage tanks. This process ensures an accurate blend
ratio and a fully mixed biodiesel/petroleum diesel batch. We also
assume that all equipment at terminals as well as the vessels used to
transport biodiesel would be heated and insulated to prevent gelling
during the cold season. We anticipate that some terminals may splash
blend biodiesel before installing in-line biodiesel injection
equipment. Splash blending refers to the process of first loading
petroleum-based diesel fuel into a tank truck followed by biodiesel so
that the final blend meets the desired blend ratio. However, we expect
that this approach will be temporary due to the heightened concerns
over achieving a correct blend ratio and a fully mixed biodiesel blend
that accompanies splash blending. Some terminals may also delay the
need to install segregated/heated biodiesel storage by storing 50/50
blends of biodiesel/petroleum-based diesel fuel that is subsequently
used to manufacture B2/B5/B20 blends for distribution to end users.
These practices may provide additional flexibility if some terminals
wish to temporarily defer installing in-line blending equipment and
segregated biodiesel storage equipment.
    The RFS2 FRM analysis concluded that industry would have the
capability to add the necessary facilities to distribute biodiesel in a
timely fashion to meet the envisioned volumes.\49\ Based on industry
input, we continue to believe that this is the case. Industry
activities are currently progressing to ramp up biodiesel consumption
from the approximately 380 mill gallons estimated to be used in the
U.S. in 2010 to the 760 mill gallons that is estimated

to be used in 2011 to meet the biomass-based diesel volume requirement.
For example, Kinder Morgan and the Renewable Energy Group opened a
substantial biodiesel distribution facility to serve the Chicago area
in December of 2010.\50\ Magellan also recently announced that it plans
to complete its biodiesel blending facility in Sioux Falls Minnesota in
2011.\51\ In addition, just as there has been considerable biodiesel
production capacity idled due to lack of demand which will be brought
back on line as biodiesel volumes ramp up, we believe that there are
also substantial idled biodiesel distribution assets that could be
readily brought back into service.
---------------------------------------------------------------------------

    \49\ See sections 1.6 and 4.2.3 of the RIA to the RFS2 final
rule.
    \50\ Biodiesel Magazine, November 17, 2010. http://www.biodieselmagazine.com/articles/4568/chicago-area-terminal-soon-to-offer-biodiesel.
    \51\ Report to the Legislature, Annual Report on Biodiesel,
Minnesota Department of Agriculture, January 15, 2011. http://
www.mda.state.mn.us/en/news/government/~/media/Files/news/
govrelations/legrpt-biodiesel2011.ashx.
---------------------------------------------------------------------------

    Renewable diesel/petroleum diesel fuel blends can be transported in
existing petroleum product transportation infrastructure from the point
of production to the end-user.\52\ The production facility that we
expect will account for the renewable diesel produced through 2013
currently ships its product short distances by tank truck to facilities
that produce blends with petroleum-based diesel fuel. To estimate the
infrastructure impacts of renewable diesel, we used the estimate from
the RFS2 final rule of 80 mill gallons of renewable diesel in 2013.\53\
This volume is close to the production volume estimated for the Dynamic
Fuels facility in Geismar, Louisiana that we referenced in the final
rulemaking setting the 2011 RFS standards. However, more recently the
U.S. Department of Energy awarded a $241 million loan guarantee for the
construction of a renewable diesel facility by Diamond Green.
Construction on this 137 million gallon per year project is scheduled
to begin in Norco, LA this year and fuel production is scheduled for
the first quarter of 2013. EPA does not expect that the production from
this facility will have a significant impact on overall biomass-based
diesel distribution infrastructure in the U.S. given that the renewable
diesel blends can be transported in existing petroleum product
transportation infrastructure. For the purposes of this analysis we
assumed 80 mill gallons of renewable diesel for consistency with the
RFS2 final rule and the final rule setting the RFS standards for 2011.
---------------------------------------------------------------------------

    \52\ Colonial Pipeline began allowing shipment of 5% renewable
diesel fuel blends beginning January 3, 2011. Colonial pipeline
codes and specifications: http://www.colpipe.com/pdfs/Sect%203%20Prod%20Spec%20Jan%201%202011%20update%20ver%202.pdf.
    \53\ Renewable Fuel Standard Program (RFS2) Regulatory Impact
Analysis, EPA-420-R-10-006, February 2010, Table 1.2-3.
---------------------------------------------------------------------------

    We estimate that a total of 5 tank trucks will be needed to
transport 80 mill gallons/yr of renewable diesel to the locations where
it is blended with petroleum-based diesel fuel in 2012 and 2013.\54\
For the purposes of this analysis, we assumed that approximately one
half of this volume will be produced in 2011. We estimate that an
additional 2-3 tank trucks would be needed to transport renewable
diesel fuel in 2012/2013 compared to 2011. Once renewable diesel fuel
blends are created, further distribution is accomplished in the same
fashion as petroleum-based diesel fuel. In the future, the renewable
diesel fuel production facility identified may be connected by a short
pipeline directly to the Colonial pipeline and/or begin shipping by
barge/rail. If shipment by pipeline develops, then no additional
transportation vessels would be needed to ship renewable diesel fuel
compared to petroleum-based diesel fuel. We anticipate that the
infrastructure at petroleum terminals necessary to blend the 80 mill
gallons/yr of renewable diesel fuel projected for 2012/2013 with
petroleum-based diesel fuel will have been put in place by 2011.\55\
---------------------------------------------------------------------------

    \54\ This is based on each tank truck carrying 7,800 gallons of
renewable diesel fuel making 6 deliveries per day. We anticipate
that the renewable diesel fuel will be blended directly into storage
tanks containing petroleum-based diesel fuel.
    \55\ To manufacture a renewable diesel fuel blend at a petroleum
terminal, renewable diesel fuel may be delivered directly into
storage tanks that contain petroleum-based diesel fuel or injected
into a petroleum-based diesel fuel stream during delivery into a
tank truck or pipeline.
---------------------------------------------------------------------------

    Based in the above discussion, we believe that sufficient fuel
distribution infrastructure will be available to support the use of 1
bill gal of biomass-based diesel in 2012 and 1.28 bill gal in 2013.

C. Impacts of 1.28 Billion Gallons of Biomass-Based Diesel

    In order to evaluate the impacts of a biomass-based diesel volume
of 1.28 bill gal in the areas required under the statute (see Section
IV.A), we first considered what the appropriate reference would be.
Since the statute requires that the biomass-based diesel volume we set
for 2013 be no lower than 1.0 bill gal, this would appear to be a
reasonable reference point. Therefore, in the discussion that follows,
we have focused on either a volume of 1.28 bill gal biomass-based
diesel, or an increment of 0.28 bill gal biomass-based diesel,
depending on the specific sources of information and analyses
available.
    As described in Section IV.B.1 above, even if we set the applicable
volume for biomass-based diesel at 1.0 bill gal, the demand for
biomass-based diesel in 2013 is likely to be on the order of 1.28 bill
gal or more due to the limited projected availability of other advanced
biofuels (including cellulosic biofuel, imported sugarcane ethanol, and
others). Since the actual demand for biomass-based diesel would likely
be 1.28 bill gal or higher regardless of whether we set the biomass-
based diesel requirement at 1.0 or 1.28 bill gal, the net impact of
setting the biomass-based diesel volume requirement at 1.28 bill
gallons in 2013 could be seen as zero.
    We recognize that this conclusion is based on an applicable
advanced biofuel volume of 2.75 bill gallons. While we will be
considering the possibility of lowering the 2013 advanced biofuel
applicable volume below 2.75 bill gal in next year's rulemaking, we
have not presumed any such reduction in today's NPRM. Such reductions
in advanced biofuel must occur in the context of determining the
applicable volume of cellulosic biofuel for 2013, and using information
available at that time regarding advanced biofuel volumes that are
projected to be available in 2013.
    Nevertheless, the statute requires that we analyze specified
environmental and other impacts in deriving an applicable biomass-based
diesel volume for 2013 and other years, and these analyses can be
conducted for 1.28 bill gal biomass-based diesel (or an increment of
0.28 bill gal). Most of the areas we are required to analyze were
covered in the RFS2 final rule in some form, and we believe that we can
use this information in satisfying our statutory obligations to analyze
specified factors in determining the applicable volume of biomass-based
diesel for 2013.
    Some of the analyses presented in the RFS2 final rule were for the
specific case of 1.28 bill gallons in 2013. These analyses included an
investigation of the expected annual rate of commercial production of
biomass-based diesel in 2013, impacts on agricultural commodity supply
and price, and the cost to consumers of transportation fuel. Some of
these were discussed in Section IV.B above. Most of the analyses in the
RFS2 final rule, however, were conducted to represent full
implementation of the RFS2 program in 2022. In these analyses, the
biomass-based diesel volume was estimated to be 1.82 bill gallons, and
was compared to

a reference case in which biodiesel volume was 380 mill gallons. These
cases are shown in Table IV.C-1.

                             Table IV.C-1--Primary Reference and Control Cases From RFS2 Final Rulemaking (Billion Gallons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Advanced biofuel                                                              Non-
-----------------------------------------------------------------------------------------------------------------------------------  advanced
                                                                  Cellulosic biofuel    Biomass-based diesel     Other advanced      biofuel
                                                               ----------------------------------------------        biofuel       -----------   Total
                                                                                ----------------------            renewable
                                                                Cellulosic  Cellulosic   FAME \a\               Other                  Corn       fuel
                                                                  ethanol     diesel    biodiesel   NCRD \b\  biodiesel   Imported   ethanol
                                                                                \c\      ethanol
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reference.....................................................        0.25           0       0.38          0          0       0.64      12.29      13.56
Control.......................................................        4.92        6.52       0.85       0.15       0.82       2.24      15.00      30.50
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Fatty acid methyl ester (FAME) biodiesel.
\b\ Non-Co-processed Renewable Diesel (NCRD).
\c\ Other Biodiesel is biodiesel produced in addition to the amount needed to meet the biomass-based diesel standard.

The biomass-based diesel volume of 1.82 bill gallons analyzed for 2022
in the RFS2 final rule is higher than the 1.28 bill gallons we chose to
evaluate for today's NPRM for 2013. More importantly, the change in
biodiesel production due to EISA mandates for biomass-based diesel plus
other diesel anticipated to meet the advanced biofuel volume (a total
increase of 1.44 billion gallons compared to the reference case without
the EISA mandates) is much larger than the change we are evaluating for
2013 (0.28 billion gallons). Additionally, many of the impacts analyzed
for the RFS2 final rule reflected the whole biofuel mandate, not the
relatively smaller portion just due to biodiesel. Other changes in
renewable fuels analyzed for 2022 were also larger than what would
likely occur in 2013. Therefore, the impacts we would expect in 2013
compared to a case without RFS2 in place would likely be similar to or
smaller than those we estimated for 2022. Given these considerations,
we believe that the impacts assessments in the RFS2 final rule can be
used to determine the directional impacts, and therefore the
reasonableness, of a 1.28 billion gallon volume requirement for
biomass-based diesel in 2013.
1. Climate Change
    Since biodiesel has a GHG benefit exceeding 50% compared to the
petroleum-based diesel it is replacing, an increase in biomass-based
diesel of 0.28 Bill gal from 2012 to 2013 would lead to a displacement
of conventional diesel fuel, with corresponding GHG emissions
reductions. This increased use of biomass-based diesel will contribute
to lower climate change impacts in comparison to the petroleum-based
diesel it is replacing.
    However, due to the nested nature of the RFS2 standards, biomass-
based diesel is also used to meet the advanced biofuel standard.
Moreover, both biomass-based diesel and advanced biofuel must meet a
GHG reduction threshold of 50%. If the 2013 advanced biofuel standard
were to remain at the 2.75 bill gal specified in the statute, an
increase in the biomass-based diesel volume requirement from 1.0 to
1.28 bill gal would not change the total volume of advanced biofuel,
and thus the total volume of biofuels that must meet a 50% reduction in
GHGs would remain unchanged. Under such circumstances, a standard of
1.28 bill gal of biomass-based diesel would have essentially no impact
on climate change in the context of the full mix of biofuels used to
meet the RFS2 requirements.
2. Energy Security4
    An analysis of the energy security impacts of the increased use of
renewable fuels was conducted in support of the RFS2 rulemaking. Based
on that analysis, increasing usage of renewable fuels including
biomass-based diesel helps to reduce U.S. petroleum imports. A
reduction of U.S. petroleum imports reduces both financial and
strategic risks associated with a potential disruption in supply or a
spike in cost of a particular energy source. This reduction in risks is
a measure of improved U.S. energy security. In the RFS2 final rule, we
described in detail the methodology and the Agency's estimate of the
energy security impacts of the RFS2 rule. While EPA's analysis of
energy security benefits of the RFS2 volumes considered the full volume
of biofuels mandated by 2022 (of which biodiesel was only a part), the
production of biodiesel is largely from domestic feedstocks. In
contrast, the diesel fuel displaced is produced from petroleum sources
which are increasingly from foreign sources. Therefore biodiesel
production and use will contribute to a U.S. energy security benefit.
3. Agricultural Commodities and Food Prices
    For the RFS2 rule, we examined the impacts of increased renewable
fuels production on commodity prices, food prices and trade in
agricultural products. This analysis considered the impacts of all the
biofuel feedstock sources anticipated to meet the 2022 biofuel volume
requirements, not just biodiesel. For the RFS2, EPA used two primary
models for its agricultural economic impacts analysis, the Food and
Agriculture Sector Optimization Model (FASOM), and the Food and
Agricultural Policy Research Institute-Center for Agriculture and Rural
Development (FAPRI-CARD) models. The FASOM model is a long-term
economic model of the U.S. forest and agriculture sectors that
maximizes the net present value of the sum of producer and consumer
surplus across the two sectors over time subject to market, technology,
and other constraints. The FAPRI-CARD models are a system of
econometric models covering many agricultural commodities in the U.S.
and internationally. They are based on historical data analysis,
current academic research, and a reliance on accepted economic,
agronomic, and biological relationships in agricultural production and
markets.\56\
---------------------------------------------------------------------------

    \56\ (Add reference to FAPRI description document used in RFS2
FRM.)
---------------------------------------------------------------------------

    To meet the RFS2 renewable fuel volumes, a number of price effects
on the agricultural commodities were estimated for 2022. For instance,
FASOM estimates that an increase in renewable fuel volumes to meet the
RFS2 would result in an increase in the U.S. soybean prices of $1.02
per bushel (10.3 percent) above the Reference Case price in 2022. FASOM
also projected the price of soybean oil would increase by $183 per ton
(37.9 percent) over the 2022 Reference Case price (all prices are

in 2007$). Most of the additional soybeans needed for increased
biodiesel production are diverted from U.S. exports to the rest of the
world. In FASOM, soybean exports decrease by 135 million bushels (-13.6
percent) in 2022 relative to the AEO2007 Reference Case. This change
represents a decrease of $453 million (-4.6 percent) in the total value
of U.S. soybean exports in 2022. However, these price effects are not
attributed to the demand for biodiesel feedstocks alone, rather the
compounding affect of all changes in feedstock demand estimated to
result from the total biofuel mandate in 2022. Since the impact on
soybeans due to biodiesel demand was only a portion of this total
feedstock impact and since the impact in 2013 will be less than
considered in 2022 (since the 2013 biodiesel volumes anticipated are
less than those for 2022), the impact on soybean prices and exports
from an increase to 1.28 bill gall in 2013 could also be less.
    A recent report by IHS Global Insight \57\ also discusses potential
agricultural and economic impacts from increasing vegetable oil demand
for biodiesel production. According to this study, existing soybean
yield technologies are expected to be applied increasingly across the
U.S., resulting in roughly a 10% higher growth rate in soybean yields
than USDA's projections from 2010-2016 which were used by EPA in its
RFS2 analyses. Similarly, Global Insight predicts these higher yield
technologies to be implemented in other large soybean-producing
countries, such as Brazil and Argentina. If higher yields than modeled
for RFS2 indeed are realized, then it is likely the price increases for
soybean oil will be less than estimated for RFS2. Likewise, other price
impacts, such as those on food prices, would still move in the same
direction (i.e., an increase in price resulting from an increase in
demand) but could be smaller than in the RFS2 analysis.
---------------------------------------------------------------------------

    \57\ ``Biodiesel Production Prospects for the Next Decade,'' IHS
Global Insight, March 11, 2011.
---------------------------------------------------------------------------

    For the analyses performed for the RFS2 final rule, EPA estimated a
$10 per person per year increase in food costs due to the total annual
impact of the RFS2 program by 2022 compared to a Reference case that
assumed no RFS2 renewable fuel requirements. Again, the biodiesel
impacts would represent only a small portion of these overall impacts
and would like be even smaller in 2013 due to the smaller volume of
feedstock required.
4. Air Quality
    This section discusses our assessment of the impacts of 1.28 bill
gal of biomass-based diesel on emissions and air quality. We are
relying on the analyses of renewable fuel impacts conducted in support
of the RFS2 rule \58\ to qualitatively discuss the expected impacts of
this biomass-based diesel volume. The RFS2 analyses reflect EPA's most
current assumptions regarding biodiesel emission impacts.\59\
---------------------------------------------------------------------------

    \58\ 75 FR 14670, March 26, 2010.
    \59\ U.S. EPA 2010, Renewable Fuel Standard Program (RFS2)
Regulatory Impact Analysis. EPA-420-R-10-006. February 2010. Docket
EPA-HQ-OAR-2009-0472-11332. Section <IP_ADDRESS>.4
---------------------------------------------------------------------------

    In the RFS2 rule, we analyzed both changes in pollutant emissions
(measured in tons) and changes in ambient air quality associated with
the changes in pollutant emissions. The changes in pollutant emissions
were calculated by comparing the 2022 RFS2 renewable fuel volumes to
volumes if the RFS2 mandate was not in place (the reference
scenario).\60\ The analysis reflected full implementation of the RFS2
program in 2022 and accounted for impacts from multiple types of
renewable fuels, of which biodiesel was only one type. Specifically,
the RFS2 emissions inventory analysis assumed 1.82 bill gal of
biodiesel in the RFS2 scenario compared to 0.38 bill gal of biodiesel
in the reference scenario, reflecting a 1.44 bill gal increase in
biodiesel with the rule in place.
---------------------------------------------------------------------------

    \60\ In the RFS2 Regulatory Impact Analysis, we analyzed the
mandated 2022 RFS2 renewable fuel volumes relative to volumes
required by two reference scenarios: RFS1 mandate (7.1 billion
gallons of renewable fuels) and AEO 2007 (13.6 billion gallons of
renewable fuels). Both reference scenarios assumed the same volume
of biodiesel, so the emission and air quality impacts described in
this section are the same for both reference scenarios.
---------------------------------------------------------------------------

    Biodiesel emission impacts from the RFS2 rule emissions inventory
analysis are presented in Table IV.C.4-1. A complete discussion of the
emissions inventory analysis conducted for the RFS2 rule can be found
in Chapter 3 of the RFS2 Regulatory Impact Analysis (RIA).\61\ These
biomass-based diesel emission impacts, which reflect a 1.44 bill gal
increase in biodiesel, are all less than 1% of the total U.S. emissions
inventory for each pollutant. We expect the impacts of the 1.28 bill
gal of biomass-based diesel, as compared to the 1.0 bill gal statutory
minimum volume, to be smaller.
---------------------------------------------------------------------------

    \61\ U.S. EPA 2010, Renewable Fuel Standard Program (RFS2)
Regulatory Impact Analysis. EPA-420-R-10-006. February 2010. Docket
EPA-HQ-OAR-2009-0472-11332.

  Table IV.C.4-1--Biodiesel Emission Impacts of the RFS2 Renewable Fuel Volumes (1.82 Bill Gal) Relative to the
                                         Reference Case (0.38 Bill Gal)
----------------------------------------------------------------------------------------------------------------
                                                     Biodiesel impacts of RFS2 rule emissions
                                                     inventory analysis ([Delta] 1.44 bill gal
                                                                    Biodiesel)                     Percent RFS2
                                                 ------------------------------------------------   total U.S.
                                                   Upstream \a\   Downstream \b\                     inventory
                                                      (tons)          (tons)       Total (tons)
----------------------------------------------------------------------------------------------------------------
VOC.............................................          -1,049          -2,422          -3,471          -0.03%
CO..............................................             913          -4,104          -3,191          -0.01%
NOx.............................................            -290           1,346           1,056           0.01%
PM10............................................           4,268            -569           3,699           0.10%
PM2.5...........................................             632            -315             317           0.01%
SO2.............................................           1,580               0           1,580           0.02%
NH3.............................................           4,171               0           4,171           0.10%
Benzene.........................................              10             -30             -20          -0.01%
Ethanol.........................................               0               0               0           0.00%
1,3-Butadiene...................................               0             -16             -17          -0.10%
Acetaldehyde....................................               2             -66             -65          -0.14%
Formaldehyde....................................               1            -182            -181          -0.21%
Naphthalene.....................................              -1               0              -1          -0.01%

Acrolein........................................              63              -9              54           0.84%
----------------------------------------------------------------------------------------------------------------
\a\ U.S. EPA 2010, Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006. February
  2010. Docket EPA-HQ-OAR-2009-0472-11332. Table 3.2-11. Note: units in Table 3.2-11 were mislabeled as tons/
  mmBTU. Actual units are tons.
\b\ U.S. EPA 2010, Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006. February
  2010. Docket EPA-HQ-OAR-2009-0472-11332. Table 3.2-9.

    The air quality analysis for the RFS2 rule used photochemical
modeling to characterize primary pollutants that are emitted directly
into the atmosphere and secondary pollutants that are formed as a
result of complex chemical reactions within the atmosphere. Included in
the air quality modeling scenarios for the RFS2 rule were large volumes
of ethanol as well as other renewable fuels, and the nature of these
complex chemical interactions makes it difficult to determine the air
quality impacts of biodiesel alone. Specifically, the RFS2 air quality
analysis reflects a roughly 21 bill gal increase in ethanol, far
outweighing the volume increase in biodiesel (0.43 bill gal). A
complete discussion of the RFS2 air quality analysis and its
limitations can be found in Chapter 3 of the RFS2 Regulatory Impact
Analysis (RIA).\62\
---------------------------------------------------------------------------

    \62\ U.S. EPA 2010, Renewable Fuel Standard Program (RFS2)
Regulatory Impact Analysis. EPA-420-R-10-006. February 2010. Docket
EPA-HQ-OAR-2009-0472-11332.
---------------------------------------------------------------------------

    The RFS2 air quality analysis was completed earlier than the final
emissions inventory analysis because of the length of time needed to
conduct photochemical modeling.\63\ The air quality analysis assumed
0.81 bill gal of biodiesel in the RFS2 scenario compared to 0.38 bill
gal of biodiesel in the reference scenario, reflecting a 0.43 bill gal
increase in biodiesel use with the rule in place.
---------------------------------------------------------------------------

    \63\ Emissions serve as inputs to the air quality modeling
analysis. However, the final fuel volume assumptions (upon which the
emission estimates were based) increased between the time that
emissions were estimated to support the air quality modeling
analysis and the time emissions were estimated to reflect the final
rulemaking.
---------------------------------------------------------------------------

    Given the small emissions impact of a 0.43 bill gal increase in
biodiesel on the total U.S. emissions inventory (the basis for our air
quality modeling scenarios), we would expect the portion of air quality
impacts attributable to a move from 1.0 to 1.28 bill gal (a 0.28 bill
gal biodiesel increase) to be small enough that on a nationwide basis
the air quality impact would likely not be noticeable.
    We note that Clean Air Act section 211(v) requires EPA to analyze
and mitigate, to the greatest extent achievable, adverse air quality
impacts of the renewable fuels required by the RFS2 rule. We intend to
address any potential adverse impacts from increased renewable fuel use
through that study and will promulgate appropriate mitigation measures
separate from today's NPRM.
5. Transportation Fuel Cost
    For the RFS2 final rulemaking, we estimated the year-by-year per-
gallon costs for diesel fuel due to the RFS2 biofuel requirements. For
2013, we based our diesel fuel cost estimate on the production and use
of biodiesel, renewable diesel fuel and some cellulosic diesel fuel.
The unsubsidized cost increase is 0.2 cents per gallon, but accounting
for the subsidy, we estimated a cost savings to consumers for diesel
fuel of 1.7 cents per gallon. This assumes a crude oil price of 81
dollars per barrel, which is within the range of crude oil prices over
the last several years which have ranged from $35 per barrel to $147
per barrel.
6. Deliverability and Transport Costs of Materials, Goods, and Products
Other Than Renewable Fuel
    EPA evaluated in the RFS2 final rule the impacts on the U.S.
transportation network from the distribution of the total additional
volume of biofuels that would be used to meet the RFS2 standards.
Oakridge National Laboratory (ORNL) conducted an analysis of biofuel
transportation activity from production plants to petroleum terminals
by rail, barge, and tank truck to identify potential distribution
constraints to help support the assessment in the RFS2 final rule.\64\
The ORNL analysis concluded that the increase in biofuel shipments due
to the RFS2 standards would have a minimal impact on U.S.
transportation infrastructure. The majority of biofuel transportation
is projected to be accomplished by rail. Nevertheless, it was estimated
that the biofuels transport would constitute only 0.4% of the total
freight tonnage for all commodities transported by the rail system
through 2022.\65\ Given the small increase in freight shipments due to
the transport of biofuels to meet the RFS2 standards, we believe that
the distribution of biofuels will not adversely impact the
deliverability and transport costs of materials, goods, and products
other than renewable fuels.
---------------------------------------------------------------------------

    \64\ ``Analysis of Fuel Ethanol Transportation Activity and
Potential Distribution Constraints'', Oakridge National Laboratory,
March 9, 2009. To simplify the ORNL analysis, biomass-based diesel
volumes were assumed to originate at the same points of production
and to be shipped to the same petroleum terminals as the ethanol
projected to be used to meet the RFS2 standards. This may tend to
overstate the potential impact on the transportation system from the
shipment of biomass-based diesel fuels since biomass-based diesel
production plants were projected to be more geographically dispersed
than ethanol production facilities. In any event, the simplifying
assumption was assessed to have little impact on the results from
the analysis given that biomass-based diesel represented only 8% of
the total projected biofuel volumes.
    \65\ See sections 1.6.4 and 1.6.5 of the RFS2 RIA.
---------------------------------------------------------------------------

7. Wetlands, Ecosystems, and Wildlife Habitats
    As directed by CAA section 211(o)(2)(B)(ii), in setting the 2013
biodiesel volume requirements, EPA is to consider the impacts of
biodiesel production and use on wetlands, ecosystems and wildlife
habitat.
    The most complete and up-to-date assessment of these impacts is
contained in the draft analysis prepared by EPA in response to the
requirements set out in CAA section 204. This report has been released
in draft form in order to allow interested parties to provide comments
on the analyses and policy implications. Concluding this review and the
peer review, updates will be made to the report, and then the final
report will be published in 2012 on the EPA Biofuels Web site.
Nevertheless, since this draft report includes an assessment of the
impact of biofuels on a number of the areas that we are required to
analyze in the process of determining the 2013 biomass-based

diesel volume, we believe it is appropriate to make use of this
information as it represents the most current EPA assessments
available.\66\
---------------------------------------------------------------------------

    \66\ U.S. EPA. Biofuels and the Environment: the First Triennial
Report to Congress (External Review Draft). U.S. Environmental
Protection Agency, Washington, DC, EPA/600/R-10/183A, 2011. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=217443.
---------------------------------------------------------------------------

    This draft report relies on information available as of July 2010.
The report does not attempt to quantify the impacts of biofuel
production and use as these impacts are dependent on local or regional
conditions. Nevertheless the draft provides qualitative assessments and
reasonable expectations of trends which can be used to consider the
environmental impacts of increases in biodiesel production and use.
These trends are only summarized here while the draft report provides
extensive detail.
    The draft assessment focuses on the use of oil from soy beans as
the feedstock for biodiesel production. Other oil seed feedstock
sources represent a very small portion of biofuel production in 2013 so
would be expected to have much less of an impact than soy oil. Corn oil
extracted during the ethanol production process is increasing, adds a
very small increment of process GHG and will offset demands for soy and
other oil seed crops, thus reducing potential agricultural impact of
biodiesel production and adding to the net reduction in GHG emissions.
Finally, waste fats, oils and greases would be expected to have
negligible environmental impact as a feedstock since they do not impact
agricultural land use and would otherwise be used for some lower value
purpose or simply discarded.
    Wetlands can be adversely affected by agricultural production
through runoff that can result in nutrient loading (particularly from
fertilizers) or from sedimentation (from erosion). Soy production tends
to use less fertilizer than corn production (the most likely
alternative crop) and can reduce the amount of fertilizer required for
corn when planted in rotation with corn. However, compared to other
crops, erosion can be higher from fields planted in row crops such as
corn and soy beans. While the impacts of nutrient loading and erosion
tend to be site specific, good farming practices including the optimum
fertilizer use and the set aside of sensitive lands via the CRP program
can significantly help control these adverse affects. Wetlands can also
be adversely affected through diversion of surface and ground water for
agricultural irrigation. Soy bean production less frequently relies on
irrigation than corn and some other crops. More discussion on water
usage is included below in the section on water use and water quality
impacts.
    Ecosystems and wildlife habitat can be adversely affected if CRP
lands are converted to crop production, if row crops such as soy beans
replace grassy crops and in general if new lands with diverse
vegetation are converted to crop production. As noted in the RFS2 rule,
we do not expect the RFS program production to result in an increase in
total acres of agricultural land under production in the US compared to
a reference case without the impact of the RFS2 volumes. The relatively
small increase of 0.28 bill gall should not appreciably affect the
amount of land devoted to oil seed production. Further, since soy beans
are traditionally planted in rotation with other crops such as corn,
this small increase in soy oil demand for biodiesel production is
unlikely to replace grassy crops or result in the indirect increase in
land under crop production. Additionally, the USDA commitment to
support the CRP program should minimize the likelihood of any
significant change in the amount of CRP land. Therefore, while some
very local changes may result due to an individual farmer's planting
decisions, since no new crop land are expected in the U.S. due to this
increase in biodiesel production and sensitive lands will be protected
via programs such as CRP, no measureable impact in aggregate ecosystems
or wildlife habitat is expected.
8. Water Quality and Quantity
    The water quality and quantity impacts of biodiesel are primarily
related to the type of feedstock and the production practices used to
both produce the feedstock and to convert the feedstock into biodiesel.
Soybeans are the principal feedstock used for biodiesel production and
are predicted to account for 600 million gallons of the 1.28 billion
gallons evaluated for 2013. Non-food grade corn oil extracted during
ethanol production, animal fats and recycled fats account for most of
the remaining biodiesel feedstocks. Since these fats are the byproduct
of another use and not produced specifically for biodiesel manufacture
and since corn oil extracted is a by-product of corn ethanol
production, this analysis will focus on soybeans.
    From a water quality perspective, the primary pollutants of concern
from soybean production are fertilizers (nitrogen and phosphorus) and
sediment. There are three major pathways for these potential pollutants
to reach water from agricultural lands: runoff from the land's surface,
subsurface tile drains, or leaching to ground water. Climate,
hydrological, and management factors influence the potential for these
contaminants to reach water from agricultural lands.
a. Impacts on Water Quality and Water Quantity Associated With Soybean
Production
    After corn, soybeans are the second largest agricultural crop in
terms of acreage in the U.S. As with the production of any agricultural
crop, the impact on water quality depends on a variety of factors
including production practices, use of conservation practices and crop
rotations by farmers, and acreage and intensity of tile drained lands.
Additional factors outside agricultural producers' control include soil
characteristics, climate, and proximity to water bodies.
    Soybeans are typically grown in the same locations as corn since
farmers commonly rotate between the two crops. In 2005, the latest year
for which USDA collected data, the U.S. average nitrogen fertilization
rate for soybeans was 16 pounds per acre. In contrast, the average
nitrogen fertilization rate for corn was 138 pounds per acre.\67\
Soybeans fix nitrogen, so they do not require substantial added
fertilizer for adequate yields. Only 18 percent of soybean acres are
fertilized with nitrogen compared to 96 percent of corn acres.\68\
Since significantly less nitrogen fertilizer is applied to soybeans,
less nitrogen is available for runoff or leaching into water. Water
quality generally benefits when soybeans are rotated with corn, since
the next corn crop requires less fertilizer and fewer pesticides.
Therefore, crop rotation is one practice that is part of an effective
system to limit water quality impacts. However, soybeans have less
residue remaining on the field after harvest compared to corn, so
sediment runoff could be more of a concern.
---------------------------------------------------------------------------

    \67\ U.S. Department of Agriculture, Economic Research Service.
Fertilizer Use and Price. http://www.ers.usda.gov/Data/FertilizerUse.
    \68\ U. S. Department of Agriculture, National Agricultural
Statistics Service. 2007. Agricultural chemical usage 2006 field
crops summary. Available at: http://usda.mannlib.cornell.edu/usda/nass/AgriChemUsFC//2000s/2007/AgriChemUsFC-627 05-16-2007--
revision.pdf.
---------------------------------------------------------------------------

    Agricultural conservation systems can reduce the impact of soybean
production on the environment. The systems components include (1)
controlled application of nutrients and pesticides through proper rate,
timing, and method of application, (2) controlling erosion in the field
(i.e.,

reduced tillage, terraces, or grassed waterways), and (3) trapping
losses of soil and fertilizer runoff at the edge of fields or in fields
through practices such as cover crops, riparian buffers, controlled
drainage for tile drains, and constructed/restored wetlands.\69\
---------------------------------------------------------------------------

    \69\ Dinnes, DL; Karlen, DL; Jaynes, DB; Kaspar, TC; Hatfield,
JL; Colvin, TS; Cambardella, CA. 220 2002. Nitrogen management
strategies to reduce nitrate leaching in tile-drained 221 midwestern
soils. Agronomy Journal 94(1): 153-171.
---------------------------------------------------------------------------

    The effectiveness of conservation practices, however, depends upon
their adoption. The USDA`s Conservation Effects Assessment Project
(CEAP) quantified the effects of conservation practices used on
cultivated cropland in the Upper Mississippi River Basin. It found
that, while erosion control practices are commonly used, there is
considerably less adoption of proper nutrient management to mitigate
nitrogen loss to water bodies.\70\ However, as noted above, the
relatively low amount of fertilizer used for soy bean production tends
to lessen the potential for nitrogen loss to water bodies
---------------------------------------------------------------------------

    \70\ U.S. Department of Agriculture, National Resources
Conservation Service. 2010. Assessment of the effects of
conservation practices on cultivated cropland in the Upper
Mississippi River Basin. Available at: http://www.nrcs.usda.gov/technical/NRI/ceap/umrb/index.html.
---------------------------------------------------------------------------

    Water for soybean cultivation predominately comes from rainfall,
although about 11 percent of soybean acres in the U.S. are
irrigated.\71\ Water use for irrigated soybean production in the U.S.
varies from 0.2 acre-feet per acre in Pennsylvania to about 1.4 acre-
feet per acre in Colorado, with a national average of 0.8 acre-feet of
water.\72\
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    \71\ U.S. Department of Agriculture. 2010. 2007 Census of
agriculture, Farm and ranch irrigation survey (2008). http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08.pdf.
    \72\ U. S. Department of Energy. 2006. Energy demands on water
resources: Report to Congress on the interdependency of energy and
water. Available at: http://www.sandia.gov/energy-water/docs/121-RptToCongress-EWwEIAcomments-FINAL.pdf.
---------------------------------------------------------------------------

b. Impacts on Water Quality and Water Quantity Associated With
Biodiesel Production
    Biological oxygen demand (BOD), total suspended solids, and
glycerin pose the major water quality concerns in wastewater discharged
from biodiesel facilities. Actual impacts depend on a range of factors,
including the type of feedstock processed, biorefinery technology,
effluent controls, and water re-use/recycling practices, as well as the
facility location and source and receiving water.
    Despite the existing commercial market for glycerin and the likely
expanded uses for glycerin as discussed in the RFS2 final rule, the
rapid development of the biodiesel industry has caused a temporary glut
of glycerin production, resulting in some instances of facilities
disposing glycerin. Glycerin disposal may be regulated under several
EPA programs, depending on the practice. However, there have been
incidences of glycerin dumping, including an incident in Missouri that
resulted in a large fish kill.\73\ Some biodiesel facilities discharge
their wastewater to municipal wastewater treatment systems for
treatment and discharge. There have been several cases of municipal
wastewater treatment plant upsets due to high BOD loadings from
releases of glycerin.\74\ To mitigate wastewater issues, some
production systems reclaim glycerin from the wastewater. Closed-loop
systems in which water and solvents can be recycled and reused can
reduce the quantity of water that must be pretreated before discharge.
---------------------------------------------------------------------------

    \73\ U.S. EPA. 2010b. Renewable fuel standard program (RFS2)
regulatory impact analysis. EPA-420-R-10-006. Available at: http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
    \74\ U.S. EPA. 2010b. Renewable fuel standard program (RFS2)
regulatory impact analysis. EPA-420-R-10-006. Available at: http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
---------------------------------------------------------------------------

    Biodiesel can also impact water bodies as a result of spills.
However, biodiesel degrades approximately four times faster than
petroleum diesel including in aquatic environments.\75\ Results of
aquatic toxicity testing of biodiesel indicate that it is less toxic
than regular diesel.\76\ Biodiesel does have a high oxygen demand in
aquatic environments, and can cause fish kills as a result of oxygen
depletion. Water quality impacts associated with spills at biodiesel
facilities generally result from discharge of glycerin, rather than
biodiesel itself.
---------------------------------------------------------------------------

    \75\ Kimble, J. n.d. Biofuels and emerging issues for emergency
responders. U.S. EPA. Available at: http://www.epa.gov/oem/docs/oil/fss/fss09/kimblebiofuels.pdf.
    \76\ Kahn, N; Warith, MA; Luk, G. 2007. A comparison of acute
toxicity of biodiesel, biodiesel blends, and diesel on aquatic
organisms. Journal of the Air and Waste Management Association
57(3): 286-296.
---------------------------------------------------------------------------

    Biodiesel facilities use much less water than ethanol facilities to
produce biofuel. The primary consumptive water use at biodiesel plants
is associated with washing and evaporative processes. Water use is
variable, but is usually less than one gallon of water for each gallon
of biodiesel produced; some facilities recycle wash water, which
reduces overall water consumption.\77\
---------------------------------------------------------------------------

    \77\ Renewable Fuels Standard Program (RFS2), Regulatory Impact
Analysis (RIA). EPA-420-R-10-006. Available at: http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
---------------------------------------------------------------------------

9. Job Creation and Rural Economic Development
    The RFS2 is anticipated to increase employment and spur income
expansion in rural areas and farming communities. Income expansion in
rural areas from renewable fuel production will contribute to rural
economic development. As mentioned above, industry activities are
currently progressing to ramp up biodiesel consumption from the
approximately 380 mill gallons estimated to be used in the U.S. in 2010
to the 800 mill gallons that is estimated to be used in 2011 to meet
the RFS2 biomass-based diesel volume requirement. In addition, it is
anticipated that biodiesel production capacity idled due to lack of
demand will be brought back on line as biodiesel volumes ramp up. Also,
expansions to the fuel distribution infrastructure (i.e., more fuel
terminals, rail cars, tank trucks, barges etc.) will be needed to
support the use of 1 bill gal/yr of biodiesel in 2012 and 1.28 bill
gal/yr in 2013 based on the analysis conducted for the RFS2 final
rule.\78\ Bringing online idle biodiesel plants and expanding biodiesel
distribution infrastructure in the U.S. will increase both employment
and promote rural economic development. These increases in employment
are similar to what EPA anticipated when it analyzed the RFS2 rule.
---------------------------------------------------------------------------

    \78\ Renewable Fuels Standard Program (RFS2), Regulatory Impact
Analysis (RIA), EPA-420-R-10-006, February 2010. Available at:
http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
---------------------------------------------------------------------------

D. Proposed 2013 Volume for Biomass-Based Diesel

    We are proposing an applicable volume of 1.28 bill gal biomass-
based diesel for 2013, consistent with our projection for 2103 in the
RFS2 final rule. The 0.28 bill gal increment over the 2012 applicable
volume that is reflected in this proposal does not deviate
substantially from the trend in annual increments that Congress
established in specifying applicable volumes for biomass-based diesel
for 2009 through 2012. As noted in Section IV.B, because we are not
proposing to change the 2013 advanced biofuel applicable volume in this
rulemaking, we have used the 2.75 bill gallon applicable volume for the
analyses in today's proposal. Given an advanced biofuel applicable
volume of 2.75 bill gallons for 2013, the proposed 1.28 bill gal
biomass-based diesel volume requirement is not expected to force any
additional biomass-based diesel

volumes into the market in 2013. As a result, the increase in biomass-
based diesel from the statutory minimum of 1.0 bill gal to 1.28 bill
gal could be seen as not having any impact beyond what is anticipated
to result from meeting the current 2.75 bill gal advanced biofuel
applicable volume.
    However, compared to a reference case without the RFS2 mandates,
1.28 bill gal of biomass-based diesel will lead to displacement of
fossil-based fuel, which will result in reduced GHG emissions from the
transportation sector and increased energy security. There are likely
to be some negative consequences associated with increased air and
water pollution, increased food prices, impacts to wetlands, etc., as
discussed above. However, EPA does not believe that these impacts
outweigh the benefits of moving to an applicable volume of 1.28 bill
gal for 2013. By requiring somewhat more biomass based diesel use in
2013 than the statutory minimum, we are also making it more likely that
we will not need to modify the advanced biofuel mandate in 2013 and,
therefore, that the Congressional goal for advanced biofuel use in 2013
can either be satisfied, or at least come closer to satisfaction. EPA
solicits comment on all issues related to this proposal.

E. 2014 and Beyond

    EPA is directed under CAA 211(o)(2) to determine the required
biomass-based diesel volumes no less than 14 months ahead of the first
year that they would be applicable, and thus we could propose biomass-
based diesel volumes for 2014 and beyond in today's NPRM. Doing so
would provide certainty for the industry and stability for future
investments and contracts. However, we are not proposing biomass-based
diesel standards for 2014 and beyond in today's NPRM since we believe
we will be in a better position in the future to evaluate all of the
factors related to establishing an applicable volume for 2014 and later
years.
    We are aware of two sources that provide projections of biomass-
based diesel for years after 2013: the RFS2 final rulemaking, and a
recent report released by the IHS Global Insight.\79\ The projections
from both of these sources are shown in Table IV.E-1
---------------------------------------------------------------------------

    \79\ ``Biodiesel Production Prospects for the Next Decade,'' IHS
Global Insight, March 11, 2011.

   Table IV.E-1--Projections of Biomass-Based Diesel After 2012 (Bill
                                Gallons)
------------------------------------------------------------------------
                                                              IHS global
                                                 RFS2 final    insight
                                                    rule        report
------------------------------------------------------------------------
2013..........................................         1.28         1.34
2014..........................................         1.39         1.50
2015..........................................         1.53         1.81
2016..........................................         1.56         2.18
2017..........................................         1.60         2.53
2018..........................................         1.64         2.74
2019..........................................         1.68         3.00
2020..........................................         1.72         3.14
2021..........................................         1.77         3.23
2022..........................................         1.82         3.30
------------------------------------------------------------------------

We will consider these and other sources when we determine the required
biomass-based diesel volumes for 2014 and beyond, whether in this or a
future rulemaking.

V. Proposed Changes to RFS2 Regulations

    As the RFS2 program got underway in the second half of 2010, we
discovered that a number of regulatory provisions were causing
confusion among regulated parties. In some cases the confusion was due
to a lack of specificity in terms, while in others it was due to unique
circumstances that were not sufficiently addressed in the RFS2
regulations. A few amendments are being proposed in order to correct
regulatory language that inadvertently misrepresented our intent as
reflected in the preamble to the final RFS2 regulations. Finally, as we
have worked with regulated parties to ensure that the RFS program is
operating as intended, we identified areas in the regulations that
could benefit from clarification and/or streamlining. We also
identified one provision in the gasoline benzene regulations that
misrepresented our intent as stated in the preamble. As a result, we
are proposing a number of amendments to the RFS regulations, and one
amendment to the gasoline benzene regulations, in 40 CFR part 80.

A. Summary of Amendments

    Below is a table listing the provisions that we are proposing to
amend in today's action. We have provided additional explanation for
several of these amendments in Sections V.B through V.F below.

              Table V.A-1--Summary of Technical Amendments
------------------------------------------------------------------------
           Section                            Description
------------------------------------------------------------------------
80.1275(d)(3)................  Removed to allow for the inclusion of
                                transferred blendstocks in the
                                calculation of benzene early credits.
80.1401......................  Amended definition of ``annual cover
                                crop'' to clarify that the crop has no
                                existing market to which it can be sold
                                except for its use as feedstock for the
                                production of renewable fuel.
80.1401......................  Amended definition of ``naphtha'' to
                                clarify that it applies to hydrocarbons
                                only, must be commonly or commercially
                                known as naphtha, and is used for
                                producing gasoline.
80.1405(a), (b), and (d).....  Amended to state the standards for 2012
                                and the date of the annual standards
                                calculation.
80.1405(c)...................  Amended terms ``GEi'' and ``DEi'' to
                                reference the amount of gasoline and/or
                                diesel produced by small refineries and
                                small refiners that are exempt pursuant
                                to Sec.  Sec.   80.1441 and 80.1442.
80.1415(c)(2)................  Amended to state the specific
                                requirements needed for technical
                                justifications for applications for
                                Equivalence Values.
80.1426, Table 1.............  Amended to add ID letters to pathways to
                                facilitate references to specific
                                pathways and to change the reference to
                                ``canola'' to ``canola/rapeseed''.
80.1426(f)(1)................  Corrected typographical error in cross
                                reference to paragraph (f)(6) of Sec.
                                80.1426.
80.1426(f)(5)(ii)............  Amended requirements so that the
                                separated yard waste plans and separated
                                food waste plans need not be approved by
                                EPA, but instead only need to be
                                accepted by EPA under the registration
                                provisions.
80.1429(b)(2)................  Amended to clarify that ``fossil-based''
                                diesel fuel is different from renewable
                                diesel fuel.
80.1429(b)(9)................  Amended to include RIN separation
                                limitations on parties whose non-export
                                RVOs are solely related to imports of
                                gasoline and diesel or the use of
                                blendstocks to produce gasoline or
                                diesel.
80.1449(a)...................  Amended Production Outlook Report due
                                date; added allowance for unregistered
                                renewable fuel producers and importers
                                to submit Production Outlook Reports.

80.1450(b)(1)(vi)............  Amended to require submission of
                                additional evidence as part of
                                registration to verify eligibility for
                                exemptions in Sec.   80.1403(c) or (d).
80.1450(d)(1)-(d)(3).........  Amended to add more specificity on when
                                updates, addenda, or resubmittals are
                                required for engineering reviews and to
                                include references to foreign ethanol
                                producers.
80.1451(a)(1)(xi)............  Amended to clarify that this section
                                references RFS1 RINs retired for
                                compliance.
80.1452(b)(2)................  Corrected typographical error.
80.1452(b)(4)................  Amended to clarify that a RIN-generating
                                importer must submit to EMTS the EPA
                                facility registration number of the
                                facility at which the renewable fuel
                                producer or foreign ethanol producer
                                produced the batch.
Sec.   80.1452(b)(5).........  Amended to clarify that for imports of
                                renewable fuel, the RIN-generator must
                                submit to EMTS the EPA facility
                                registration number of the importer that
                                imported the batch.
80.1460(b)(6)................  Added to clarify that RINs cannot be
                                generated more than once for a single
                                batch of renewable fuel.
80.1464(a)(2)(iii),            Added to clarify that auditors must
 (a)(2)(iv), (b)(2)(iii),       verify that product transfer documents
 (b)(2)(iv), (c)(1)(iii), and   for RIN transactions contain the
 (c)(1)(iv).                    required information for obligated
                                parties/exporters and for renewable fuel
                                producers/importers.
80.1464(a)(2)(i), (a)(3)(ii),  Amended to clarify that auditors must
 (b)(2)(i), (b)(3)(ii).         validate RIN separations for obligated
                                parties/exporters and for renewable fuel
                                producers/importers; amended to correct
                                typographical error.
80.1465(h)(2); 80.1466(h)(2);  Amended to remove the option of using an
 and 80.1467(e)(1), (e)(2),     alternative commitment in lieu of paying
 and (g)(2).                    a bond and to clarify the amount of bond
                                a foreign entity must post.
------------------------------------------------------------------------

B. Technical Justification for Equivalence Value Application

    A producer or importer of renewable fuels is required to submit an
equivalence value (EV) application in accordance with Sec.  80.1415(c)
for any renewable fuel that does not have an EV listed in Sec.
80.1415(b). In addition, a producer or importer could apply for an
alternative EV if the producer or importer has reason to believe that a
different EV than that listed in Sec.  80.1415(b) is warranted. Section
80.1415(c) provides the calculation equation for the EV of the
renewable fuel and the requirements for the technical justification to
be submitted in the EV application.
    We have received many inquiries from producers and importers of
renewable fuels requesting clarification of the specific requirements
for the technical justification listed in Sec.  80.1415(c). In
addition, based on the many EV applications we have evaluated, we have
found that we needed to request additional information from producers
and importers to better understand the composition of the renewable
fuel they produced, such as intermediate steps and energy inputs in
production process, sources of renewable and non-renewable feedstock,
and so forth, to better evaluate and assign the correct EV to the
producer or importer's renewable fuel.
    Therefore, we are proposing to amend Sec.  80.1415(c)(2) to provide
clarification to the current requirements and to include additional
requirements for the technical justification to be submitted in the EV
application. The proposed amendments to Sec.  80.1415(c)(2) include:

--A calculation for the requested equivalence value according to the
equation in Sec.  80.1415(c)(1), including supporting documentation for
the energy content (EC) of the renewable fuel such as a certificate of
analysis from a laboratory that verifies the lower heating value in Btu
per gallon of the renewable fuel produced.
--For each feedstock, component or additive used to make the renewable
fuel, provide a description, the percent input and identify whether or
not it is renewable biomass or is derived from renewable biomass.
--For each feedstock that could independently qualify as a renewable
fuel, state whether or not RINs have been previously generated for the
feedstock.
--A description of renewable fuel and the production process, including
a block diagram that shows quantities of all inputs and outputs
required at each step of the production process for the production of
one batch of renewable fuel.

C. Changes to Definitions of Terms

1. Definition of Annual Cover Crop
    As explained in the preamble of the RFS2 final rulemaking, EPA
extended modeling for cellulosic biofuel made from corn stover and
biodiesel/renewable diesel made from waste oils/fats/greases to annual
cover crops, based on the expectation that cultivation of annual cover
crops, as defined in Sec.  80.1401, will have little impact on the
agricultural commodity markets and therefore little or no land use
impact associated with them. Therefore, certain fuels (as specified in
Table 1 to Sec.  80.1426) derived from annual cover crop feedstocks
qualify for D-codes under the advanced biofuel, biomass-based diesel,
and cellulosic renewable fuel categories.
    Section 80.1401 of the final RFS2 rule defines ``annual cover
crop.'' We are proposing to amend the definition of annual cover crop
in order to more clearly define those feedstocks that meet the intent
of including cover crops in several pathways in Table 1 to Sec.
80.1426.
    In order to extend our modeling to cover crops, we used the
rationale that annual cover crops would have no land use impact since
they are planted on land otherwise used for crop production. Greenhouse
gas emissions would only be associated with growing, harvesting and
transporting the cover crop, and then processing into biofuel. (See 75
FR 14794 col. 3.) Thus, we assumed that no additional land would be
required to plant annual cover crops, that cover crops would not
displace primary crop production, and that the use of the cover crop as
a feedstock for renewable fuels would not have secondary impacts on
other agricultural commodity markets. This implies that annual cover
crops would not be planted and harvested for the purpose of being sold
to existing markets. If a cover crop already had an existing market,
then the increased use of cover crops as feedstocks for renewable fuel
production could potentially impact the existing markets. Therefore, we
propose to amend the current definition for ``annual cover crop'' to
clarify that for purposes of the RFS program the term only includes
crops that have no existing market to which they can be sold except for
the use of the feedstock

for renewable fuel. This will ensure that no unintended land use or
significant indirect effects result from the use of annual cover crops
as feedstocks for renewable fuel production.
    EPA recognizes that there may be additional fuel pathways requiring
lifecycle greenhouse gas (GHG) assessments and the assignment of
appropriate RIN D-Codes, including those using feedstocks that do not
meet the proposed amended definition of annual cover crop. For further
guidance on the process for requesting EPA evaluation of new fuel
pathways, please refer to the following sites:

http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-lca-pathways.htm.
http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/lca-petition-instructions.htm#1.
2. Definition of ``Naphtha''
    In the RFS2 final rule, we included several RIN-generating pathways
in Table 1 for naphtha made from renewable biomass. We also provided a
definition of naphtha in Sec.  80.1401. However, the definition we
finalized was overly broad and did not adequately represent our intent
to limit naphtha to gasoline blendstocks. As a result, some biofuel
producers have expressed interest in interpreting the term ``naphtha''
to include materials that, while falling within the boiling range of
gasoline, are not used as a blendstock to produce gasoline.
    To remedy this situation, we are proposing to revise the definition
of naphtha to also specify that it applies only to blendstocks which
are composed of only hydrocarbons, are commonly or commercially known
as naphtha, and are used to produce gasoline.

D. Technical Amendments Related to RIN Generation and Separation

1. RIN Separation Limit for Obligated Parties
    We propose to amend section 80.1429 to limit the amount of RINs a
company who is an obligated party solely by virtue of importation of
obligated fuel can separate to their Renewable Volume Obligation (RVO).
This change would address the instance where a party may import a small
amount of obligated volumes and then separate all the RINs that it
owns. This change is designed to prevent abuse of the obligated party
RIN separation provision by a company that imports a relatively small
amount of an obligated volume, but then separates a large amount of
RINs. The proposed provision is also designed to help prevent the
hoarding of RINs by parties that do not need them for compliance
purposes, and to generally increase liquidity of RINs.. EPA structured
the original RFS1 separation regulations around facilitating compliance
by obligated parties meeting their RVOs. The proposed change keeps with
the original design and also ensures that importers can separate enough
RINs to meet their obligations.
2. RIN Retirement Provision for Error Correction
    In some instances, renewable fuel producers or importers may
improperly generate RINs in EMTS as a result of calculation errors,
meter malfunctions or clerical errors. Pursuant to Sec.  80.1431(a),
improperly generated RINs are invalid, and cannot be used to achieve
compliance with any Renewable Volume Obligations (RVOs). The
regulations also prohibit any party from creating or transferring
invalid RINs. These invalid RIN provisions apply regardless of the good
faith belief of a party that the RINs are valid. Because of the ``buyer
beware'' aspect of the RIN program, RIN generators should take all
appropriate actions to ensure that they are properly generating RINs,
and all parties in the RIN distribution system should take all
appropriate actions to ensure that they are not trading invalid RINs or
using invalid RINs for compliance purposes.
    The ``buyer beware'' aspect of the RIN program provides an
important incentive for the regulated community to comply with the
regulations. Although EPA believes that these self-policing mechanisms
are a critical component of the RFS2 regulations, we seek comment on
the possibility of amending Sec.  80.1431 to provide the regulated
community with limited flexibility to allow certain RINs that were
improperly generated to nevertheless be transferred and used for
compliance. We envision that this type of flexibility could reduce
disruptions to the RIN market while, if appropriately limited,
continuing to apply appropriate pressure on parties that generate,
transfer and use RINs to comply with the regulations. Parties that
improperly generate RINs would remain liable for generating invalid
RINs.
    We believe that the following general limitations should apply to
any flexibility to allow improperly generated RINs to be transferred
and used for compliance: (1) The RINs must have been improperly
generated as a result of an inadvertent error, (2) the improperly
generated RINs must have the correct D code, (3) the RIN generator must
correct the information submitted to EMTS and retire an equivalent
number and type of any excess RINs that were generated as a result of
the error within fixed time period, (4) the flexibility to allow
improperly generated RINs to be used for compliance would only apply if
the number of excess RINs generated for a particular batch exceeds the
number of RINs that should have been generated by some fixed
percentage, and (5) the flexibility to allow improperly generated RINs
to be used for compliance could not be repeatedly used by a renewable
fuel producer.
    We are seeking comment on whether EPA should amend the regulations
to include this flexibility, whether the conditions set forth above are
appropriate, and whether there are additional or alternative conditions
that should be imposed if the flexibility is granted. We seek comment
on specifying a 60-day time period for a RIN-generator to correct RIN
information submitted to EMTS and limiting the availability of this
flexibility to situations where the number of excess RINs generated for
a particular batch exceeds the number of RINs that should have been
generated by no more than 2%. In addition, we seek comment on the
possibility of establishing a limit on the number of times this
flexibility could be used within a compliance period by a given RIN
generator. Such a limitation could encourage RIN generators to take
appropriate measures to avoid generating invalid RINs, and limit the
possibility that RIN generators would intentionally generate invalid
RINs to take advantage of short term RIN price spikes. EPA seeks
comment on all aspects of this proposal
3. Production Outlook Reports Submission Deadline
    In the final RFS2 regulations, in Sec.  80.1449(a), EPA set the
annual deadline for submitting Production Outlook Reports as March 31
of each year. However, EPA has determined that, in order for the
information contained in the Production Outlook Reports to be most
useful when setting the RFS2 volume requirements and associated
percentage standards for the following calendar year, the reports
should contain the most accurate projections possible. Since the
accuracy of projections tends to increase the closer those projections
are made to the following calendar year, we believe that the March 31
deadline should be moved to June 1. This revised deadline would still
allow the information contained in the Production Outlook Reports to be
used in the development of the final

rulemaking setting the standards for the following year.
4. Attest Procedures
    In the final RFS2 regulations, EPA required in Sec.
80.1464(c)(1)(i) and (c)(2)(ii) that RIN owners conduct attest
procedures for RIN transaction and RIN activity reports that involve
RIN separations. This requirement was intended to be included in the
attest procedures for obligated parties and exporters as well as for
renewable fuel producers and RIN-generating importers, in order to
confirm that RINs are being properly separated by all parties
participating in the RIN market. Thus, today's rule proposes amendments
to Sec.  80.1464(a)(2)(i) and (a)(3)(ii) for obligated parties and
exporters as well as to Sec.  80.1464(b)(2)(i) and (3)(ii) for
renewable fuel producers and RIN-generating importers to include attest
procedures concerning verification of RIN separation.
    Additionally, in the final RFS2 regulations, EPA required in Sec.
80.1464 that auditors of RIN generation reports verify that product
transfer documents (PTDs) include the required information. EPA
believes it would be beneficial for auditors to verify the required
information is present on PTDs for RIN transactions for all parties,
including obligated parties, renewable fuel producers and importers and
RIN owners. Thus, today's rule proposes amendments to Sec.
80.1464(a)(2), (b)(2) and (c)(1) to require auditors to verify that the
PTDs for a representative sample of RINs sold and purchased contains
the information required in Sec.  80.1453.
5. Treatment of Canola and Rapeseed
    On September 28, 2010, EPA published a ``Supplemental Determination
for Renewable Fuels Produced Under the Final RFS2 Program from Canola
Oil'' (FR Vol. 75, No. 187, pg 59622-59634). We are proposing to
clarify two aspects of the supplemental determination. First we propose
to amend the regulatory language in Table 1 to 40 CFR 80.1426 to
clarify that the currently-approved pathway for canola also applies
more generally to rapeseed. While ``canola'' was specifically described
as the feedstock evaluated in the supplemental determination, we had
not intended the supplemental determination to cover just those
varieties or sources of rapeseed that are identified as canola, but to
all rapeseed. We currently interpret the reference to ``canola'' in
Table 1 to 40 CFR 1426 to include any rapeseed. To eliminate ambiguity
caused by the current language, however, we propose to replace the term
``canola'' in that table with the term ``canola/rapeseed''. Canola is a
type of rapeseed. While the term ``canola'' is often used in the
American continent and in Australia, the term ``rapeseed'' is often
used in Europe and other countries to describe the same crop. We
believe that this change will enhance the clarity of the regulations
regarding the feedstocks that qualify under the approved canola
biodiesel pathway.
    Second, we wish to clarify that although the GHG emissions of
producing fuels from canola feedstock grown in the U.S. and Canada was
specifically modeled as the most likely source of canola (or rapeseed)
oil used for biodiesel produced for sale and use in the U.S., we also
intended that the approved pathway cover canola/rapeseed oil from other
countries, and we interpret our regulations in that manner. We expect
the vast majority of biodiesel used in the U.S. and produced from
canola/rapeseed oil will come from U.S. and Canadian crops. Incidental
amounts from crops produced in other nations will not impact our
average GHG emissions for two reasons. First, our analyses considered
world-wide impacts and thus considered canola/rapeseed crop production
in other countries. Second, other countries most likely to be exporting
canola/rapeseed or biodiesel product from canola/rapeseed are likely to
be major producers which typically use similar cultivars and farming
techniques. Therefore, GHG emissions from producing biodiesel with
canola/rapeseed grown in other countries should be very similar to the
GHG emissions we modeled for Canadian and U.S. canola, though they
could be slightly (and insignificantly) higher or lower. At any rate,
even if there were unexpected larger differences, EPA believes the
small amounts of feedstock or fuel potentially coming from other
countries will not impact our threshold analysis. Therefore, EPA
interprets the approved canola pathway as covering canola/rapeseed
regardless of country origin.

E. Technical Amendments Related to Registration

1. Construction Discontinuance & Completion Documentation
    The registration requirements in Sec.  80.1450(b)(1)(vi) state that
for facilities claiming the exemption described in Sec.  80.1403(c) or
(d), evidence must be submitted demonstrating the date that
construction commenced. However, the registration requirements do not
explicitly require the submission of evidence demonstrating that they
meet certain of the other requirements described in Sec.  80.1403(c)(1)
and (2) or (d)(1), (2) and (3).
    In order to verify that facilities which claim to qualify for an
exemption under Sec.  80.1403(c) or (d) in fact meet all of the
qualification requirements for such an exemption, we are proposing to
amend Sec.  80.1450(b)(1)(vi) to include requirements that the owner or
operator of facilities claiming exemption under Sec.  80.1403(c) submit
evidence demonstrating that construction was not discontinued for a
period of 18 months after construction began, and that construction was
completed by December 19, 2010. Similarly, we are proposing that for
facilities claiming the exemption under Sec.  80.1403(d), evidence be
submitted demonstrating that construction was not discontinued for a
period of 18 months after construction began and that construction was
completed within 36 months of the date that construction commenced.
    In addition, we are proposing to add a general provision in (Sec.
80.1450(b)(1)(vi)(D) requiring the submission of additional
documentation and information as requested by the Administrator. This
authority would be used in the event that documents submitted in
accordance with requirements Sec.  80.1450(b)(1)(vi)(A) and (B) are not
sufficient for EPA to verify that the facility has met all requirements
described in Sec.  80.1403(c) or (d).
2. Third-Party Engineering Reviews
    The regulations stipulate that producers of renewable fuels and
foreign ethanol producers are required to update their registration
information, and submit an updated independent third-party engineering
review, every 3 years after their initial registration in accordance
with Sec.  80.1450(d)(3). We have received many inquiries regarding the
start date that EPA uses to determine the 3 year period after which the
producer must submit an updated independent third party engineering
review (such as the registration acceptance date, the third-party
professional engineer's signature date on the engineering review
report, or when the engineering review is due for grandfathered and
non-grandfathered facilities).
    Given the lack of clarity in the current regulations, we are
proposing amendments to specify the time frame for submission of
updated independent third-party engineering reviews. We are proposing,
a simplified method that would group producers according to the
calendar year they were or will be registered, and setting a fixed time

frame for registration updates for each group. Therefore, we are
proposing to amend Sec.  80.1450(d)(3), to stipulate that for all
producers of renewable fuel and foreign ethanol producers in which
their registration was accepted by EPA in calendar year 2010, that the
updated registration information and independent third-party
engineering review shall be submitted to EPA within the three months
prior to January 1, 2014, and within three months prior to January 1 of
every third calendar year thereafter. For all producers of renewable
fuel and foreign ethanol producers registered in any calendar year
after 2010, the updated registration information and independent third-
party engineering review shall be submitted to EPA within three months
prior to January 1 of every third calendar year after the first year
the producer's registration was accepted by EPA. For example, a
producer registered in 2011 would be required to submit an updated
independent third-party engineering review by January 1, 2015, and by
January 1 every three calendar years thereafter.
3. Foreign Ethanol Producers
    We are proposing that the amendments to the registration
requirements in Sec.  80.1450 also apply to foreign ethanol producers.
As defined in Sec.  80.1401, foreign ethanol producers are foreign
producers that produce ethanol for use in transportation fuel, heating
oil or jet fuel but who do not add denaturant to their product.
Therefore, foreign ethanol producers do not technically produce
``renewable fuel'' as defined in our regulations. As discussed in the
preamble to the Direct Final Rule published on May 1, 2010 (see 75 FR
26032), the result of the amendments made in the Direct Final Rule is
to require foreign ethanol facilities that produce ethanol that
ultimately becomes part of a renewable fuel for which RINs are
generated to provide EPA the same registration information as foreign
renewable fuel facilities that export their product to the United
States. In both cases the required registration information is
important for enforcement purposes, including verifying the use of
renewable biomass as feedstock and the assignment of appropriate D
codes. Therefore, we believe amendments to the registration
requirements that we make in this proposed rule should also be
applicable to foreign ethanol producers for same reasons.

F. Additional Amendments and Clarifications

1. Third-Party Engineering Review Addendum
    We have received many inquires as to whether an addendum to the
existing independent third-party engineering review is sufficient to
meet the requirement that all producers of renewable fuel and foreign
ethanol producers submit an updated independent third-party engineering
review if they make changes to their facility that will qualify the
renewable fuel that is produced for a renewable fuel category or D code
that is not already reflected in the producer's registration
information. In some circumstances the majority of the information
verified in the existing independent third-party engineering review
would remain the same, and duplicating the entire effort does not
appear necessary. We believe the concept of allowing the submission of
an addendum in lieu of a updated independent third-party engineering
review is reasonable and therefore we are proposing to amend the
requirements in Sec.  80.1450(d)(1) to state that a producer of
renewable fuel or foreign ethanol producer may submit an addendum to
the existing independent third-party engineering review on file with
EPA provided the addendum meets all the requirements in Sec.
80.1450(b)(2) and verifies for EPA the most up-to-date information at
the producer's existing facility. The updated independent third-party
engineering review or addendum shall be submitted at least 60 days
prior to producing the new type of renewable fuel and must meet all the
same requirements stipulated in Sec.  80.1450(b)(2) for the independent
third-party engineering review, including a new site visit conducted by
the third-party to verify any changes to the facility that allows it to
produce a different renewable fuel that is not currently reflected in
their registration on file with EPA.
2. RIN Generation for Fuel Imported From a Registered Foreign Producer
    In RFS2, EPA finalized provisions allowing importers to generate
RINs for renewable fuel imported from a foreign producer only under
certain circumstances. The importer may only generate RINs for fuel
imported from a foreign renewable fuel producer or foreign ethanol
producer if that producer is registered with EPA and has received EPA
company and facility identification numbers pursuant to Sec.  80.1450.
Pursuant to Sec.  80.1426(c)(4), the importer is prohibited from
generating RINs for fuel imported from a foreign producer that is not
registered with EPA. In today's rule, EPA is clarifying that when an
importer is generating RINs for fuel imported from a registered foreign
renewable fuel producer or foreign ethanol producer, the importer must
submit to EPA via EMTS the importer's company identification number,
the facility identification number of the import facility where the
batch was imported, and the facility identification number for the
foreign renewable fuel or ethanol producer that produced the batch of
fuel for which the importer is generating RINs. These clarifications
are being made in Sec.  80.1452(b)(4) and (5).
3. Bond Posting
    We are proposing to amend paragraphs (e)(1), (e)(2) and (g)(2) of
Sec.  80.1467 to make them consistent with Sec.  80.1467(g)(1). These
amendments attempt to clarify that the amount of the posted bond must
post must cover the number of gallon RINs that are sold and/or
transferred, and also those RINs held and/or obtained by the foreign
entity, including those held and/or obtained to comply with a foreign
importer's RVO requirements. We are also proposing to amend Sec. Sec.
80.1465-80.1467 by striking Sec. Sec.  80.1465(h)(2)(iii),
80.1466(h)(2)(iii) and 80.1467(e)(2)(iii), which allowed entities to
make alternative commitments in lieu of posting bonds. EPA believes
that this method is vague, unnecessary, and unenforceable.
4. Acceptance of Separated Yard Waste and Food Waste Plans
    We are proposing to amend Sec.  80.1426(f)(5)(ii)(A) to remove the
requirement that the separated yard waste plan and separated food waste
plan must be approved by EPA, and instead only require that these two
plans be submitted and accepted by EPA under the registration
procedures specified in Sec.  80.1450(b)(1)(vii). The details and
information required to be submitted in the separated yard waste plan
and separated food waste plan are not overly burdensome or complex, and
therefore we believe it does not warrant a specific EPA approval, but
that EPA acceptance of these plans through the registration procedures
is sufficient.
5. Transferred Blendstocks in Early Benzene Credit Generation
Calculations
    Today's rule also proposes one minor correction to the gasoline
benzene regulations which would clarify how refiners should account for
transferred blendstocks in their early benzene credit generation
calculations. Under current rules, refineries which generated early

benzene credits are required to reduce gasoline benzene during an early
credit generation period by at least 10% compared to the refinery's
benzene baseline, and are also required to make specific operational
changes and/or improvements in benzene control technology to reduce
gasoline benzene levels.\80\ Refineries which reduce their gasoline
benzene by at least 10%, in part by transferring reformate to another
refinery, could also generate early benzene credits, provided the
transferee refinery treated the reformate in specific benzene-reduction
processing units.\81\ See 72 FR 8486-87 (Feb. 26, 2007). However, the
gasoline benzene regulations also contain an additional provision that
requires all blendstock streams transferred to, from or between
refineries to be excluded from a refinery's early credit generation
calculations (except for reformate as described previously). This led
to an inconsistent comparison of a refinery's benzene during an early
credit generation period with a refinery's benzene baseline (which
included blendstocks transferred to the refinery), which was not EPA's
intent.
---------------------------------------------------------------------------

    \80\ Early credit generation periods were July 1, 2007 through
December 31, 2007, and calendar years 2008, 2009 and 2010.
    \81\ Refineries produce gasoline by combining several different
blendstocks produced by various refinery processing units. Reformate
is a blendstock which contains approximately 80% of all benzene
found in gasoline, per the MSAT2 regulatory impact analysis.
---------------------------------------------------------------------------

    As described in the preamble of the gasoline benzene final rule,
EPA intended that refineries not be allowed to generate early benzene
credits exclusively through blendstock trading, without making any
other qualifying reductions (see 72 FR 8487), but that refineries could
generate early benzene credits in part through qualifying reductions
and ``in part'' through other means such as blendstock transfers (see
72 FR 8496-97). However, the current regulations do not allow this
approach, and this inconsistency has caused confusion among refiners
about how to calculate the amount of early credits generated. Refiners
have generally followed the approach set out in the preamble (as EPA in
fact intended), and included all blendstocks transferred to a refinery
in the refinery's early credit generation calculations. Refiners
typically keep records on transferred blendstocks for 1-2 years, and
thus do not have sufficient data to exclude transferred blendstocks
from their early credit generation calculations.
    EPA recently became aware of this inconsistency and is proposing to
change the regulations to make them consistent with EPA's intent as
described in the preamble. Today's proposed rule would amend the
gasoline benzene regulations at 40 CFR 80.1275(d)(3) by deleting that
provision. This would allow a refinery to include blendstocks
transferred to the refinery in the refinery's early benzene credit
generation calculations (all other conditions, including treatment
which removes benzene in transferred reformate streams still applying,
of course). Consistent with EPA's original intent, today's rule also
allows a refinery to include transferred blendstocks in past early
credit generation calculations, provided the refinery met all of the
other requirements for generating early benzene credits. EPA is
proposing to include transferred blendstocks in past early credit
generation calculation not only because this was EPA's intent at the
time of the benzene gasoline rulemaking, but because some refiners have
reasonably relied upon that stated intent in devising their compliance
strategies.

VI. Petition for Reconsideration

    On February 7, 2011, the American Petroleum Institute (API) and the
National Petrochemical and Refiners Association (NPRA) jointly
submitted a Petition for Reconsideration of EPA's final rule
establishing the RFS standards for 2011.\82\ EPA is proposing to deny
the petition for the reasons described below, and solicits comment on
this proposal.
---------------------------------------------------------------------------

    \82\ 75 FR 76790, December 9, 2010.
---------------------------------------------------------------------------

    The petition is available in docket EPA HQ OAR 2010-0133. It makes
three primary assertions:
    1. EPA's 2011 cellulosic biofuel volume requirement of 6.6 million
gallons (6.0 million ethanol-equivalent gallons) is unrealistically
high. At the most, EPA should have used the estimate of 3.94 mill
gallons provided by the Energy Information Administration (EIA).
    2. EPA's determination that there are sufficient sources of
advanced biofuel to warrant not reducing the advanced biofuel standard
lacks adequate factual support.
    3. EPA's treatment of delayed RINs injects undesirable uncertainty
into the regulatory environment, and is contrary to the basic
regulatory framework established by Congress.
    The petition requests that EPA reconsider the regulatory
requirements in all three areas.

A. Legal Considerations of Petition

    The API/NPRA petition was submitted under the reconsideration
provisions of section 307(d)(7)(B) of the Clean Air Act (CAA). This
section strictly limits petitions for reconsideration both in time and
scope. It states that:

Only an objection to a rule or procedure which was raised with
reasonable specificity during the period for public comment
(including any public hearing) may be raised during judicial review.
If the person raising an objection can demonstrate to the
Administrator that it was impracticable to raise such objection
within such time or if the grounds for such objection arose after
the period for public comment (but within the time specified for
judicial review) and if such objection is of central relevance to
the outcome of the rule, the Administrator shall convene a
proceeding for reconsideration of the rule and provide the same
procedural rights as would have been afforded had the information
been available at the time the rule was proposed. If the
Administrator refuses to convene such a proceeding, such person may
seek review of such refusal in the United States court of appeals
for the appropriate circuit (as provided in subsection (b)). Such
reconsideration shall not postpone the effectiveness of the rule.
The effectiveness of the rule may be stayed during such
reconsideration, however, by the Administrator or the court for a
period not to exceed three months.

    Thus the requirement to convene a proceeding to reconsider a rule
is based on the petitioner demonstrating to EPA: (1) That it was
impracticable to raise the objection during the comment period, or that
the grounds for such objection arose after the comment period but
within the time specified for judicial review (i.e., within 60 days
after publication of the final rulemaking notice in the Federal
Register, see CAA section 307(b)(1); and (2) that the objection is of
central relevance to the outcome of the rule.
    Regarding the first procedural criterion for reconsideration, a