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Proposed Rule2021-26839

Renewable Fuel Standard (RFS) Program: RFS Annual Rules

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Published

December 21, 2021

Issuing agencies

Environmental Protection Agency

Abstract

Under section 211 of the Clean Air Act, the Environmental Protection Agency (EPA) is required to set standards every year to implement nationally applicable renewable fuel volume targets. This action proposes to modify the 2021 and 2022 statutory volume targets for cellulosic biofuel, advanced biofuel, and total renewable fuel, as well as to establish the 2022 volume target for biomass-based diesel. This action also proposes to modify the previously established cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements for 2020. In addition, this action proposes the 2020, 2021, and 2022 renewable fuel standards for all four of the above biofuel categories. Finally, this action also proposes to address the remand of the 2016 standard-setting rulemaking, as well as several regulatory changes to the Renewable Fuel Standard (RFS) program including regulations for the use of biointermediates to produce qualifying renewable fuel, flexibilities for regulated parties, and clarifications of existing regulations.

Full Text

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<title>Federal Register, Volume 86 Issue 242 (Tuesday, December 21, 2021)</title>
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[Federal Register Volume 86, Number 242 (Tuesday, December 21, 2021)]
[Proposed Rules]
[Pages 72436-72501]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-26839]

[[Page 72435]]

Vol. 86

Tuesday,

No. 242

December 21, 2021

Part V

Environmental Protection Agency

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40 CFR Parts 80 and 1090

Renewable Fuel Standard (RFS) Program: RFS Annual Rules; Proposed Rule

Federal Register / Vol. 86 , No. 242 / Tuesday, December 21, 2021 /
Proposed Rules

[[Page 72436]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 80 and 1090

[EPA-HQ-OAR-2021-0324; FRL-8521-02-OAR]
RIN 2060-AV11

Renewable Fuel Standard (RFS) Program: RFS Annual Rules

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: Under section 211 of the Clean Air Act, the Environmental
Protection Agency (EPA) is required to set standards every year to
implement nationally applicable renewable fuel volume targets. This
action proposes to modify the 2021 and 2022 statutory volume targets
for cellulosic biofuel, advanced biofuel, and total renewable fuel, as
well as to establish the 2022 volume target for biomass-based diesel.
This action also proposes to modify the previously established
cellulosic biofuel, advanced biofuel, and total renewable fuel volume
requirements for 2020. In addition, this action proposes the 2020,
2021, and 2022 renewable fuel standards for all four of the above
biofuel categories. Finally, this action also proposes to address the
remand of the 2016 standard-setting rulemaking, as well as several
regulatory changes to the Renewable Fuel Standard (RFS) program
including regulations for the use of biointermediates to produce
qualifying renewable fuel, flexibilities for regulated parties, and
clarifications of existing regulations.

DATES: Comments. Comments must be received on or before February 4,
2022.
Public hearing. EPA announced information regarding the public
hearing for this proposal in a Federal Register document published on
December 10, 2021, at 86 FR 70426.

ADDRESSES: Comments. You may send your comments, identified by Docket
ID No. EPA-HQ-OAR-2021-0324, by any of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>
(our preferred method). Follow the online instructions for submitting
comments.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#e180cc808f85cc93cca58e828a8495a1849180cf868e97">[email&#160;protected]</a>. Include Docket ID No. EPA-
HQ-OAR-2021-0324 in the subject line of the message.
<bullet> Mail: U.S. Environmental Protection Agency, EPA Docket
Center, Air Docket, Mail Code 28221T, 1200 Pennsylvania Avenue NW,
Washington, DC 20460.
<bullet> Hand Delivery or Courier (by scheduled appointment only):
EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution
Avenue NW, Washington, DC 20004. The Docket Center's hours of
operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal
Holidays).
Instructions: All submissions received must include the Docket ID
No. for this rulemaking. Comments received may be posted without change
to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal information
provided. For the full EPA public comment policy, information about
confidential business information (CBI) or multimedia submissions, and
general guidance on making effective comments, please visit <a href="https://www.epa.gov/dockets/commenting-epa-dockets">https://www.epa.gov/dockets/commenting-epa-dockets</a>.
Out of an abundance of caution for members of the public and our
staff, the EPA Docket Center and Reading Room are closed to the public,
with limited exceptions, to reduce the risk of transmitting COVID-19.
Our Docket Center staff will continue to provide remote customer
service via email, phone, and webform. We encourage the public to
submit comments via <a href="https://www.regulations.gov">https://www.regulations.gov</a> or email, as there may
be a delay in processing mail and faxes. Hand deliveries and couriers
may be received by scheduled appointment only. For further information
on EPA Docket Center services and the current status, please visit us
online at <a href="https://www.epa.gov/dockets">https://www.epa.gov/dockets</a>.
EPA continues to carefully and continuously monitor information
from the Centers for Disease Control and Prevention (CDC), local area
health departments, and our Federal partners so that we can respond
rapidly as conditions change regarding COVID-19.

FOR FURTHER INFORMATION CONTACT: Dallas Burkholder, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: 734-214-4766; email address: <a href="/cdn-cgi/l/email-protection#eab8acb9c7b89f868f878b8183848d99aa8f9a8bc48d859c">[email&#160;protected]</a>. Comments on this proposal should not be submitted
to this email address, but rather through <a href="https://www.regulations.gov">https://www.regulations.gov</a>
as discussed in the ADDRESSES section.

SUPPLEMENTARY INFORMATION: Entities potentially affected by this
proposed rule are those involved with the production, distribution, and
sale of transportation fuels, including gasoline and diesel fuel, as
well as renewable fuels such as ethanol, biodiesel, renewable diesel,
and biogas. Potentially affected categories include:

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Examples of
Category NAICS \1\ potentially affected
codes entities
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Industry.......................... 324110 Petroleum
refineries.
Industry.......................... 325193 Ethyl alcohol
manufacturing.
Industry.......................... 325199 Other basic organic
chemical
manufacturing.
Industry.......................... 424690 Chemical and allied
products merchant
wholesalers.
Industry.......................... 424710 Petroleum bulk
stations and
terminals.
Industry.......................... 424720 Petroleum and
petroleum products
merchant
wholesalers.
Industry.......................... 221210 Manufactured gas
production and
distribution.
Industry.......................... 454319 Other fuel dealers.
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\1\ North American Industry Classification System (NAICS).

This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be affected by this
proposed action. This table lists the types of entities that EPA is now
aware could potentially be affected by this proposed action. Other
types of entities not listed in the table could also be affected. To
determine whether your entity would be affected by this proposed
action, you should carefully examine the applicability criteria in 40
CFR parts 80 and 1090. If you have any questions regarding the
applicability of this proposed action to a particular entity, consult
the person listed in the FOR FURTHER INFORMATION CONTACT section.

Outline of This Preamble

I. Executive Summary
A. Legal Authorities To Modify and Establish Renewable Fuel Volumes
B. 2020 Volumes
C. 2021 Volumes
D. 2022 Volumes
E. Response to the ACE Remand
F. Annual Percentage Standards

[[Page 72437]]

G. Biointermediates
H. Other Changes
I. Environmental Justice
J. Endangered Species Act
II. Legal Authorities To Reduce and Establish Volumes
A. Authorities To Modify Statutory Volumes Targets
B. Authority To Establish BBD Volumes
C. Considerations for Retroactive and Late Rulemaking
D. Considerations in Revisiting an Established RFS Standard
E. Applicability of Legal Authorities To Establish the Volume
Requirements
F. Severability
III. Proposed Volumes
A. EPA's Assessment of the Statutory Factors for Each Component
Category of Biofuel
B. Proposed Volumes for 2020
C. Proposed Volumes for 2021
D. Proposed Volumes for 2022
E. Proposed Biomass-Based Diesel Volume for 2022
F. Summary of the Proposed Volumes
G. Impacts of the Proposed Volumes
IV. Interactions Between the RFS Annual Volumes
A. Treatment of Carryover RINs
B. Ability for the RFS Volumes To Impact Renewable Fuel Supply
V. Response to ACE Remand
A. Reevaluating the 2014-2016 Annual Rule
B. Consideration of Approaches for Responding to the ACE Remand
C. Demonstrating Compliance With the 2022 Supplemental Standard
D. Authority and Consideration of the Benefits and Burdens
E. Calculating a Supplemental Percentage Standard for 2022
VI. Percentage Standards
A. Calculation of Percentage Standards
B. Small Refineries and Small Refiners
C. Modification of the 2020 Biomass-Based Diesel Percentage
Standard
D. Proposed Standards
VII. Biointermediates
A. Background
B. Re-Proposal of Biointermediates Provisions Previously Proposed
in REGS
C. Changes to the Biointermediates Provisions Previously Proposed
in the REGS Rule
D. Other Considerations Related to Biointermediates
VIII. Amendments to Fuel Quality and RFS Regulations
A. BBD Conversion Factor for Percentage Standard
B. Changes to Registration for Baseline Volume
C. Changes to Attest Engagements for Parties Owning RINs (``RIN
Owner Only'')
D. Public Access to Information
E. Clarifying the Definition of ``Agricultural Digester''
F. Definition of ``Produced from Renewable Biomass''
G. Estimating Landfill Emissions for Lifecycle GHG Analysis of
Fuels Produced From Separated Municipal Solid Waste
H. Technical Corrections and Clarifications
IX. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
B. Paperwork Reduction Act (PRA)
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act (UMRA)
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
G. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act (NTTAA) and 1
CFR part 51
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
X. Statutory Authority
A red-line version of the regulatory language that incorporates the
proposed changes in this action is available in the docket for this
action.

I. Executive Summary

The Renewable Fuel Standard (RFS) program began in 2006 pursuant to
the requirements of the Energy Policy Act of 2005 (EPAct), which were
codified in Clean Air Act (CAA) section 211(o). The statutory
requirements were subsequently amended by the Energy Independence and
Security Act of 2007 (EISA). The statute sets forth annual, nationally
applicable volume targets for each of the four categories of renewable
fuel. It also directs EPA to modify or establish volume targets in
certain circumstances. EPA must then translate the volume targets into
compliance obligations that obligated parties must meet every year.
In this action we are proposing the applicable volumes for
cellulosic biofuel, advanced biofuel, and total renewable fuel for 2021
and 2022, and the biomass-based diesel (BBD) applicable volume for
2022,\1\ as well as to modify the applicable volumes that EPA
previously established for cellulosic biofuel, advanced biofuel, and
total renewable fuel for 2020.2 3 We are also proposing the
annual percentage standards (also known as ``percent standards'') for
cellulosic biofuel, BBD, advanced biofuel, and total renewable fuel
that would apply to gasoline and diesel produced or imported by
obligated parties in 2020, 2021, and 2022. In addition, we are also
proposing to address the remand of the 2014-2016 annual rule by the
D.C. Circuit Court of Appeals, in Americans for Clean Energy v. EPA,
864 F.3d 691 (2017) (hereafter ``ACE'') by proposing a supplemental
volume of 250 million gallons in 2022, and we intend to propose an
additional supplemental volume of 250 million gallons for 2023 in a
subsequent action.
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\1\ The 2021 BBD volume requirement was established in the 2020
final rule. 85 FR 7016 (February 6, 2020).
\2\ 85 FR 7016 (February 6, 2020).
\3\ As explained in Section II, we did not trigger the reset
authority for BBD. Thus, we are not proposing to reset the
previously finalized 2020 and 2021 BBD volumes. In addition, actual
BBD use in both 2020 and 2021 is projected to exceed the previously
finalized volumes, so we see no need to retroactively reconsider the
BBD volumes in any event. As discussed in Section III.E, we are
proposing to set the 2022 BBD volume pursuant our ``set'' authority
under CAA section 211(o)(2)(B)(ii)).

Table I-1--Proposed Volume Requirements
[Billion RINs] \a\
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Category 2020 2021 2022
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Cellulosic Biofuel.............................................. 0.51 0.62 0.77
Biomass-Based Diesel \b\........................................ \c\ 2.43 \d\ 2.43 2.76
Advanced Biofuel................................................ 4.63 5.20 5.77

[[Page 72438]]

Total Renewable Fuel............................................ 17.13 18.52 20.77
Supplemental Standard........................................... n/a n/a 0.25
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\a\ One Renewable Identification Number (RIN) is equivalent to one ethanol-equivalent gallon of renewable fuel.
Throughout this preamble, RINs are generally used to describe total volumes in each of the four categories
shown above, while gallons are generally used to describe volumes for individual types of biofuel such as
ethanol, biodiesel, renewable diesel, etc. Exceptions include BBD, which is always given in physical volumes,
and biogas and electricity, which are always given in RINs.
\b\ The BBD volumes are in physical gallons (rather than RINs).
\c\ Established in the 2019 RFS annual rule (83 FR 63704, December 11, 2018).
\d\ Established in the 2020 RFS annual rule (85 FR 7016, February 6, 2020).

Finally, we are proposing several regulatory changes to the RFS
program, including regulations for the use of biointermediates to
produce qualifying renewable fuel, flexibilities for regulated parties,
and clarifications of existing regulations.

A. Legal Authorities To Modify and Establish Renewable Fuel Volumes

For the 2020, 2021, and 2022 cellulosic biofuel, advanced biofuel,
and total renewable fuel volumes, EPA is fulfilling our statutory
obligation to ``reset'' the statutory volumes in accordance with CAA
section 211(o)(7)(F). This provision, entitled ``Modification of
Applicable Volumes,'' provides that, if a waiver of any statutory
volume target exceeds specified thresholds, EPA shall modify or
``reset'' the statutory volume targets for all years following the year
that the threshold was exceeded. This obligation has been triggered by
EPA actions waiving volumes in previous annual standard-setting
rulemakings. Under this statutory provision, we are proposing new
volume targets for cellulosic biofuel, advanced biofuel, and total
renewable fuel for 2020, 2021, and 2022.\4\
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\4\ As we explain further in Section II, we are also
independently justifying the 2020, 2021, and 2022 cellulosic biofuel
volumes and the 2022 advanced biofuel and total renewable fuel
volumes under the cellulosic waiver authority.
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When resetting the statutory targets, EPA must comply with the
processes, criteria, and standards set forth in CAA section
211(o)(2)(B)(ii). In addition to reviewing the implementation of the
program during previous years and coordinating with the Secretary of
Energy and the Secretary of Agriculture, EPA must also analyze several
factors:
<bullet> The impact of the production and use of renewable fuels on
the environment, including on air quality, climate change, conversion
of wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
<bullet> The impact of renewable fuels on the energy security of
the U.S.;
<bullet> The expected annual rate of future commercial production
of renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and BBD);
<bullet> The impact of renewable fuels on the infrastructure of the
U.S., including deliverability of materials, goods, and products other
than renewable fuel, and the sufficiency of infrastructure to deliver
and use renewable fuel;
<bullet> The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
<bullet> The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
With respect to the 2022 BBD volume, we are setting this volume
under CAA section 211(o)(2)(B)(ii). The requirement to reset the
statutory volume targets does not apply to BBD. However, CAA section
211(o)(2)(B)(ii) separately requires that EPA set the BBD volume for
years including 2022 based on an analysis of the same statutory factors
as the reset authority.
In addition to these statutory provisions, the D.C. Circuit has
also established principles that EPA must follow when promulgating RFS
rulemakings after the statutory deadline as well as retroactive RFS
rulemakings.\5\ Namely, EPA has authority to promulgate such RFS rules,
but EPA must reasonably consider and mitigate the burdens on obligated
parties. Several aspects of this rulemaking are either retroactive or
will be finalized after the statutory deadline, or both. Therefore we
consider this caselaw as required by the court. We further discuss all
our legal authorities to modify or establish volumes in Section II.
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\5\ See, e.g., Americans for Clean Energy v. EPA, 864 F.3d 691
(D.C. Cir. 2017); Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C. Cir.
2014); Nat'l Petrochemical & Refiners Ass'n v. EPA, 630 F.3d 145,
154-58 (D.C. Cir. 2010).
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B. 2020 Volumes

EPA established the applicable 2020 volume requirements and
percentage standards in late 2019.\6\ Since we promulgated those
standards, several significant and unanticipated events occurred that
affected the fuels markets in 2020. The two most prominent of these
events were:
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\6\ 85 FR 7016 (February 6, 2020).
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<bullet> The COVID-19 pandemic and the ensuing fall in
transportation fuel demand, especially the disproportionate fall in
gasoline demand relative to diesel demand, which significantly reduced
the production and use of biofuels in 2020 below the volumes we
anticipated could be achieved, and
<bullet> The potential that the volume of gasoline and diesel
exempted from 2020 RFS obligations through small refinery exemption
(SREs) will be far lower than projected in the 2020 final rule.
These events are expected to adversely affect the ability of
obligated parties to comply with the applicable standards and to
achieve the intended volumes in the 2020 final rule.\7\ As a result, we
are proposing to retroactively adjust the 2020 volumes and standards to
reflect the actual volumes of renewable fuels and transportation fuel
consumed in the U.S. As we discuss further in Sections III and IV,
these revised volumes are supported by our analysis of the statutory
factors that we must consider when resetting RFS volumes.
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\7\ EPA extended the 2020 compliance deadline for obligated
parties to January 31, 2022 (86 FR 17073, April 1, 2021). We have
proposed to further extend that deadline in a separate action (86 FR
67419, November 26, 2021).
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C. 2021 Volumes

We are proposing volumes for 2021 that are equal to our projection
of the volume of cellulosic biofuel, advanced biofuel, and total
renewable fuel that will be used in the U.S. in 2021. Much like our
proposed volumes for 2015,\8\ which were similarly retroactive and
promulgated after the statutory

[[Page 72439]]

deadline, these volume projections are based on actual renewable fuel
use for months in 2021 where data are available and projections of
renewable fuel use for the remainder of the year. These volumes include
both renewable fuel that is produced domestically as well as imported
renewable fuel that is used in the U.S. As discussed in further detail
in Sections III and IV of this proposal, we believe this approach for
2021 is appropriate based on our analysis of the statutory factors EPA
must analyze when resetting the RFS volumes, including our finding that
this retroactive rulemaking has limited ability to incentivize
increased production and use of renewable fuel in 2021.
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\8\ 80 FR 33100 (June 10, 2015).
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D. 2022 Volumes

The proposed volumes for 2022 are significantly higher than the
proposed volumes for 2020 and 2021. As we discuss further in Sections
III and IV, these volumes are based on our analysis of the statutory
factors, including our assessment of the ability for the RFS program to
incentivize increased production and use of renewable fuel in 2022, the
statutory intent to support increasing production and use of renewable
fuels, and the potential positive impacts of renewable fuels on several
of the statutory factors such as climate change and energy security.
The proposed volumes for 2022 also reflect the adverse impacts of
biofuels on some statutory factors, including market and infrastructure
constraints to the ability of RFS annual volume requirements to
incentivize increased production and use of renewable fuel in the near
term. These constraints include the commercial availability of
cellulosic biofuel, the price and availability of feedstocks, and the
availability of infrastructure to distribute higher level blends of
ethanol.

E. Response to the ACE Remand

In 2015, EPA established the total renewable fuel standard for
2016. As part of that rule, we relied upon the general waiver authority
under a finding of inadequate domestic supply to reduce the total
renewable fuel volume target by 500 million gallons.\9\ Several parties
challenged that action, and in ACE the U.S. Court of Appeals for the
D.C. Circuit vacated EPA's use of the general waiver authority, finding
that such use exceeded EPA's authority under the CAA. Specifically, EPA
had impermissibly considered demand-side factors in its assessment of
inadequate domestic supply, rather than limiting that assessment to
supply-side factors. The court remanded the rule back to EPA for
further consideration.
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\9\ See 80 FR 77420 (December 14, 2015); CAA section
211(o)(7)(A)(ii).
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We now intend to restore the full 500 million gallons that we
improperly waived in the 2016 rule but to do so over two years.
Specifically, as we discuss further in Section V, we are proposing to
add a supplemental volume obligation of 250 million gallons to the
proposed 2022 standards. We also intend to propose an additional
supplemental volume of 250 million gallons for 2023 in a subsequent
action.

F. Annual Percentage Standards

The statute directs EPA to establish annual standards that
translate the nationally applicable volume targets into compliance
obligations on obligated parties. In this action, EPA is proposing
annual standards for 2020, 2021, and 2022 for all four categories of
renewable fuel. We are also proposing a supplemental standard to
address the ACE remand, which will apply in the 2022 compliance year.
The renewable fuel standards are expressed as a volume percentage
and are used by each refiner and importer of fossil-based gasoline or
diesel to determine their renewable fuel volume obligations. The
specific formulas we use in calculating the renewable fuel percentage
standards are found in 40 CFR 80.1405. Four separate percentage
standards are required under the RFS program, corresponding to the four
separate renewable fuel categories shown in Table I-1. The proposed
standards are shown in Table I.E-1. Details, including the projected
gasoline and diesel volumes used, can be found in Section VI.
In the 2020 standards final rule, we modified the formulas used to
calculate the percentage standards to account for a projection of
exempt gasoline and diesel volumes produced by small refineries.\10\
Subsequent to the promulgation of that rule, the Tenth Circuit Court of
Appeals vacated three EPA SRE decisions as exceeding our statutory
authority in Renewable Fuels Association v. EPA (hereinafter RFA).\11\
Most recently, the Supreme Court, in HollyFrontier v. Renewable Fuels
Association (hereinafter HollyFrontier), vacated one of the bases for
the RFA decision, holding that small refineries need not have had
continuous exemptions since the original statutory exemption, but did
not opine on the other two holdings in RFA because those issues were
not appealed to the Court. We continue to consider the impact of these
decisions on our SRE policy, and it is still unclear at this time
whether we will be granting SREs for 2020, 2021, or 2022, and if so, to
what degree. Thus, we are proposing a range of exempted volumes of
gasoline and diesel as a result of SREs in the calculation of the
applicable percentage standards, ranging from zero to 8.19 billion
gallons.
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\10\ 85 FR 7016 (February 6, 2020).
\11\ Renewable Fuels Ass'n v. EPA, 948 F.3d 1206 (10th Cir.
2020), rev'd in part sub nom., HollyFrontier Cheyenne Refining, LLC,
v. Renewable Fuels Ass'n, 114 S. Ct. 2172 (2021).
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The resulting range in the proposed percentage standards is shown
in Table I.F-1.

Table I.F-1--Proposed Percentage Standards a
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020 2021 2022
Category -----------------------------------------------------------------------------------------------
Low (%) High (%) Low (%) High (%) Low (%) High (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cellulosic Biofuel...................................... 0.32 0.34 0.36 0.38 0.44 0.46
Biomass-Based Diesel.................................... 2.37 2.50 2.19 2.30 2.42 2.54
Advanced Biofuel........................................ 2.91 3.07 3.03 3.18 3.27 3.42
Renewable Fuel.......................................... 10.78 11.36 10.79 11.33 11.76 12.33
Supplemental Standard................................... n/a n/a n/a n/a 0.14 0.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Low values do not include any projected exempted gasoline and diesel volumes from SREs. High values include 8.19 billion gallons of projected
exempted gasoline and diesel from SREs.

[[Page 72440]]

G. Biointermediates

Since the RFS2 program was finalized in 2010, we have been made
increasingly aware of renewable fuel producers that would like to
process fuel at more than one facility. Specifically, renewable fuel
producers would like to first have a facility process renewable biomass
into a proto-renewable fuel (or ``biointermediate'') and then have a
second, separate facility process that biointermediate into renewable
fuel. In some cases, it may be preferable for economic or practical
reasons for renewable biomass to be subjected to substantial pre-
processing at one facility before being sent to a different facility
where it is converted into renewable fuel. For example, renewable
biomass may be converted into a biointermediate (such as a biocrude) at
one facility that requires some additional processing at a different
facility before it can be used as transportation fuel. These production
methodologies have the potential to lower the cost of using cellulosic
and other feedstocks for the production of renewable fuels by reducing
capital costs for new facilities and/or the storage and transportation
costs associated with feedstock handling--especially for cellulosic
biomass. Thus, we believe that such technologies provide an opportunity
for the future growth in production of the cellulosic biofuels required
under the RFS program. Based on this potential for future growth, in
2016 we included in the proposed the Renewables Enhancement and Growth
Support (REGS) rule provisions to allow for the production, transfer,
and use of biointermediates to generate qualifying renewable fuel under
the RFS program.\12\
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\12\ See 81 FR 80828 (November 16, 2016).
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Due to the elapsed time since the proposed REGS rule and our
continued consideration of how to most effectively allow
biointermediates into the program, we are proposing anew provisions to
allow for the use of biointermediates to produce qualifying renewable
fuels. Consistent with what we previously proposed in the REGS rule,
these provisions specify requirements that apply when renewable fuel is
produced through sequential operations at more than one facility. These
provisions center around the production, transfer, and use of
biointermediates and the creation of new regulatory requirements
related to registration, recordkeeping, and reporting for facilities
producing or using a biointermediate for renewable fuel production. We
are reproposing many of the proposed biointermediate provisions from
the REGS rule without significant changes, making significant changes
to some of the previously proposed provisions, and proposing some
provisions for the first time here. We further discuss biointermediates
in Section VII.

H. Other Changes

We have identified several areas where regulatory changes would
assist EPA in implementing our fuel quality and RFS programs. These
proposed regulatory changes include:

<bullet> Changing the BBD weighting factor from 1.50 to 1.55
<bullet> Changes to registration for baseline volumes
<bullet> Changes to attest engagements for parties owning Renewable
Identification Numbers (RINs)
<bullet> Treatment of confidential business information
<bullet> Clarifying the definition of ``agricultural digesters''
<bullet> Adding a definition of ``produced from renewable biomass''
<bullet> Other minor changes and technical corrections

Each of these regulatory changes is discussed in greater detail in
Section VIII. In Section VIII, we also seek comment on potential
changes to our treatment of landfill emissions in our lifecycle
greenhouse gas (GHG) analysis for fuels produced from separated
municipal solid waste.

I. Environmental Justice

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes
Federal executive policy on environmental justice (``EJ''). It directs
Federal agencies, to the greatest extent practicable and permitted by
law, to make achieving EJ part of their mission by identifying and
addressing, as appropriate, disproportionately high and adverse human
health or environmental effects of their programs, policies, and
activities on minority populations and low-income populations in the
United States. EPA defines EJ as the fair treatment and meaningful
involvement of all people regardless of race, color, national origin,
or income with respect to the development, implementation, and
enforcement of environmental laws, regulations, and policies.\13\
Executive Order 14008 (86 FR 7619, February 1, 2021) also calls on
Federal agencies to make achieving EJ part of their missions ``by
developing programs, policies, and activities to address the
disproportionately high and adverse human health, environmental,
climate-related and other cumulative impacts on disadvantaged
communities, as well as the accompanying economic challenges of such
impacts.'' It also declares a policy ``to secure environmental justice
and spur economic opportunity for disadvantaged communities that have
been historically marginalized and overburdened by pollution and under-
investment in housing, transportation, water and wastewater
infrastructure and health care.'' EPA also released its ``Technical
Guidance for Assessing Environmental Justice in Regulatory Analysis''
providing recommendations on conducting the highest quality analysis
feasible, recognizing that data limitations, time and resource
constraints, and analytic challenges will vary by media and regulatory
context.\14\
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\13\ See, e.g., ``Environmental Justice.'' <a href="http://Epa.gov">Epa.gov</a>,
Environmental Protection Agency, 4 Mar. 2021, <a href="https://www.epa.gov/environmentaljustice">https://www.epa.gov/environmentaljustice</a>.
\14\ The definitions and criteria for ``disproportionate
impacts,'' ``difference,'' and ``differential'' are contained in
EPA's June 2016 guidance document ``Technical Guidance for Assessing
Environmental Justice in Regulatory Analysis.'' <a href="http://Epa.gov">Epa.gov</a>,
Environmental Protection Agency, <a href="https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf">https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf</a>.
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When assessing the potential for disproportionately high and
adverse health or environmental impacts of regulatory actions on
minority populations, low-income populations, tribes, and/or indigenous
peoples, EPA strives to answer three broad questions: (1) Is there
evidence of potential EJ concerns in the baseline (the state of the
world absent the regulatory action)? Assessing the baseline will allow
EPA to determine whether pre-existing disparities are associated with
the pollutant(s) under consideration (e.g., if the effects of the
pollutant(s) are more concentrated in some population groups). (2) Is
there evidence of potential EJ concerns for the regulatory option(s)
under consideration? Specifically, how are the pollutant(s) and their
effects distributed for the regulatory options under consideration?
And, (3) do the regulatory option(s) under consideration exacerbate or
mitigate EJ concerns relative to the baseline? It is not always
possible to assess these questions in ways that produce quantitative
results, though it may still be possible to describe them
qualitatively.
EPA's 2016 Technical Guidance does not prescribe or recommend a
specific approach or methodology for conducting an EJ analysis, though
a key consideration is consistency with the assumptions underlying
other parts of the regulatory analysis when evaluating

[[Page 72441]]

the baseline and regulatory options. Where applicable and practicable,
the Agency endeavors to conduct such an analysis. Going forward, EPA is
committed to conducting EJ analysis for rulemakings based on a
framework similar to what is outlined in EPA's Technical Guidance, in
addition to investigating ways to further weave EJ into the fabric of
the rulemaking process.
In 2009, under the Endangerment and Cause or Contribute Findings
for Greenhouse Gases Under Section 202(a) of the Clean Air Act
(``Endangerment Finding''), the Administrator considered how climate
change threatens the health and welfare of the U.S. population. As part
of that consideration, he also considered risks to minority and low-
income individuals and communities, finding that certain parts of the
U.S. population may be especially vulnerable based on their
characteristics or circumstances. These groups include economically and
socially disadvantaged communities; individuals at vulnerable
lifestages, such as the elderly, the very young, and pregnant or
nursing women; those already in poor health or with comorbidities; the
disabled; those experiencing homelessness, mental illness, or substance
abuse; and/or Indigenous or minority populations dependent on one or
limited resources for subsistence due to factors including but not
limited to geography, access, and mobility.
Scientific assessment reports produced over the past decade by the
U.S. Global Change Research Program (USGCRP),15 16 the
Intergovernmental Panel on Climate Change (IPCC),17 18 19 20
and the National Academies of Science, Engineering, and Medicine
21 22 add more evidence that the impacts of climate change
raise potential EJ concerns. These reports conclude that poorer or
predominantly non-White communities can be especially vulnerable to
climate change impacts because they tend to have limited adaptive
capacities and are more dependent on climate-sensitive resources such
as local water and food supplies, or have less access to social and
information resources. Some communities of color, specifically
populations defined jointly by ethnic/racial characteristics and
geographic location, may be uniquely vulnerable to climate change
health impacts in the United States. In particular, the 2016 scientific
assessment on the Impacts of Climate Change on Human Health found with
high confidence that vulnerabilities are place- and time-specific,
lifestages and ages are linked to immediate and future health impacts,
and social determinants of health are linked to greater extent and
severity of climate change-related health impacts.
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\15\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United
States: Fourth National Climate Assessment, Volume II [Reidmiller,
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K.
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
\16\ USGCRP, 2016: The Impacts of Climate Change on Human Health
in the United States: A Scientific Assessment. Crimmins, A., J.
Balbus, J.L. Gamble, C.B. Beard, J.E. Bell, D. Dodgen, R.J. Eisen,
N. Fann, M.D. Hawkins, S.C. Herring, L. Jantarasami, D.M. Mills, S.
Saha, M.C. Sarofim, J. Trtanj, and L. Ziska, Eds. U.S. Global Change
Research Program, Washington, DC, 312 pp. <a href="http://dx.doi.org/10.7930/J0R49NQX">http://dx.doi.org/10.7930/J0R49NQX</a>.
\17\ Oppenheimer, M., M. Campos, R.Warren, J. Birkmann, G.
Luber, B. O'Neill, and K. Takahashi, 2014: Emergent risks and key
vulnerabilities. In: Climate Change 2014: Impacts, Adaptation, and
Vulnerability. Part A: Global and Sectoral Aspects. Contribution of
Working Group II to the Fifth Assessment Report of the
Intergovernmental Panel on Climate Change [Field, C.B., V.R. Barros,
D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee,
K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N.
Levy, S. MacCracken, P.R. Mastrandrea, and L.L.White (eds.)].
Cambridge University Press, Cambridge, United Kingdom and New York,
NY, USA, pp. 1039-1099.
\18\ Porter, J.R., L. Xie, A.J. Challinor, K. Cochrane, S.M.
Howden, M.M. Iqbal, D.B. Lobell, and M.I. Travasso, 2014: Food
security and food production systems. In: Climate Change 2014:
Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral
Aspects. Contribution of Working Group II to the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change [Field,
C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E.
Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma,
E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L.
White (eds.)]. Cambridge University Press, Cambridge, United Kingdom
and New York, NY, USA, pp. 485-533.
\19\ Smith, K.R., A. Woodward, D. Campbell-Lendrum, D.D. Chadee,
Y. Honda, Q. Liu, J.M. Olwoch, B. Revich, and R. Sauerborn, 2014:
Human health: Impacts, adaptation, and co-benefits. In: Climate
Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global
and Sectoral Aspects. Contribution of Working Group II to the Fifth
Assessment Report of the Intergovernmental Panel on Climate Change
[Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea,
T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B.
Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and
L.L. White (eds.)]. Cambridge University Press, Cambridge, United
Kingdom and New York, NY, USA, pp. 709-754.
\20\ IPCC, 2018: Global Warming of 1.5 [deg]C. An IPCC Special
Report on the impacts of global warming of 1.5 [deg]C above pre-
industrial levels and related global greenhouse gas emission
pathways, in the context of strengthening the global response to the
threat of climate change, sustainable development, and efforts to
eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. P[ouml]rtner,
D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C.
P[eacute]an, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X.
Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T.
Waterfield (eds.)]. In Press.
\21\ National Research Council. 2011. America's Climate Choices.
Washington, DC: The National Academies Press. <a href="https://doi.org/10.17226/12781">https://doi.org/10.17226/12781</a>.
\22\ National Academies of Sciences, Engineering, and Medicine.
2017. Communities in Action: Pathways to Health Equity. Washington,
DC: The National Academies Press. <a href="https://doi.org/10.17226/24624">https://doi.org/10.17226/24624</a>.
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This proposed rule has the potential to reduce GHG emissions which
would benefit all populations including minority populations, low-
income populations, and indigenous populations. The manner in which the
market responds to the provisions in this proposed rule could also have
non-GHG impacts. For instance, replacing petroleum fuels with renewable
fuels could have impacts on water, air, and hazardous waste exposure
for communities living near either existing or new facilities that
produce these fuels. Replacing petroleum fuels with renewable fuels
could also impact feedstock supplies and land-use, which could impact a
range of communities through their impacts on air, water, and soil
quality, as well as water quantity. Impacts on water quality in
particular could impact communities that rely on aquatic ecosystems for
income or sustenance, including indigenous peoples. While replacing
petroleum fuels with renewable fuels is projected to cause small
increases in food and fuel prices, these price impacts also may
disproportionately affect low-income populations who spend a larger
portion of their income on food and fuel.
The extent to which such changes may be unevenly distributed
spatially in ways that coincide with patterns of pre-existing exposure
and vulnerabilities for minority populations, low income populations,
and/or indigenous peoples is uncertain and would require predicting
where these changes in production and land use change would occur at a
fine spatial scale. EPA is taking comment on ways in which such effects
could be better evaluated for future rulemakings. A more detailed
discussion of potential EJ concerns as a result of this action can be
found in Chapter 8 of the Draft Regulatory Impacts Analysis (DRIA),
available in the docket for this action.

J. Endangered Species Act

Section 7(a)(2) of the Endangered Species Act (ESA), 16 U.S.C.
1536(a)(2), requires that Federal agencies such as EPA, along with the
U.S. Fish and Wildlife Service (USFWS) and/or the National Marine
Fisheries Service (NMFS) (collectively ``the Services''), ensure that
any action authorized, funded, or carried out by the agency is not
likely to jeopardize the continued existence of any endangered or
threatened species or result in the destruction or adverse modification
of designated critical habitat for such species. Under relevant
implementing regulations, consultation is required

[[Page 72442]]

only for actions that ``may affect'' listed species or designated
critical habitat. 50 CFR 402.14. Consultation is not required where the
action has no effect on such species or habitat. For several prior RFS
annual standard-setting rules, EPA did not consult with the Services
under section 7(a)(2).
On September 6, 2019, the United States Court of Appeals for the
D.C. Circuit decided American Fuel & Petrochemical Manufacturers v.
EPA, 937 F.3d 559 (2019), finding that EPA had failed to make an
effects determination for ESA purposes with regard to the 2018 RFS rule
and remanding the rule without vacatur to the Agency to make an
appropriate effects determination. See id. at 598.
On July 16, 2021, the same court decided Growth Energy v. EPA, 5
F.4th 1 (2021), finding that EPA's determination that the 2019 RFS rule
would have no effect on listed species or the designated critical
habitat of such species was arbitrary and capricious and remanding the
rule to the Agency without vacatur to comply with the ruling. See id.
at 32.
In light of this case law pertaining to EPA's action in prior years
and consistent with section 7(a)(2) of the ESA and relevant ESA
implementing regulations at 50 CFR part 402, EPA intends to initiate
consultation, as appropriate, with the Services regarding this proposed
rule.\23\ At this time, EPA is evaluating whether any federally listed
threatened or endangered species or their critical habitat are likely
to be adversely affected by the finalization of this rulemaking.
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\23\ EPA also intends to respond to the court's remand of the
2018 and 2019 RFS rules in a separate proceeding. We are not
revisiting our ESA obligations related to the 2018 or 2019 rules in
this rulemaking; any comments received on those topics will be
deemed beyond the scope of this rulemaking.
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II. Legal Authorities To Reduce and Establish Volumes

The CAA provides EPA with several authorities to reduce or
establish the applicable renewable fuel volumes. This section discusses
the statutory authorities, additional factors we are considering due to
the retroactivity or lateness of parts of this rulemaking, additional
factors related to our reconsideration of the previously finalized
standards for 2020, how we are applying our authorities to propose
these volumes, as well as the severability of the various portions of
this proposed rule.

A. Authorities To Modify Statutory Volumes Targets

In CAA section 211(o)(2), Congress specified increasing annual
volume targets for total renewable fuel, advanced biofuel, and
cellulosic biofuel for each year through 2022. However, Congress also
recognized that under certain circumstances it would be appropriate for
EPA to set different volume requirements than the statutory volume
targets and thus provided waiver provisions in CAA section 211(o)(7).
In this proposal, we are utilizing the cellulosic waiver authority
under CAA section 211(o)(7)(D), and the reset authority under CAA
section 211(o)(7)(F) to reduce volumes for 2020, 2021, and 2022. As
discussed below, while we have previously sought comment on the use of
general waiver authority to reduce volumes for 2020, the reductions
proposed in this action are based on the use of our other authorities.
1. Cellulosic Waiver Authority.
Section 211(o)(7)(D)(i) of the CAA provides that if EPA determines
that the projected volume of cellulosic biofuel production for a given
year is less than the applicable volume specified in the statute, then
EPA must reduce the applicable volume of cellulosic biofuel required to
the projected volume available for that calendar year. In making this
projection, EPA must take a ``neutral aim at accuracy.'' API v. EPA,
706 F.3d 474, 479 (D.C. Cir. 2013). Pursuant to this provision, EPA has
set the cellulosic biofuel requirement lower than the statutory volume
for each year since 2010.
CAA section 211(o)(7)(D)(i) also provides EPA with the authority to
reduce the applicable volume of total renewable fuel and advanced
biofuel in years when it reduces the applicable volume of cellulosic
biofuel under that provision. The reduction must be less than or equal
to the reduction in cellulosic biofuel. EPA has used this aspect of the
cellulosic waiver authority to lower the advanced biofuel and total
renewable fuel volumes every year since 2014. Further discussion of the
cellulosic waiver authority, and EPA's interpretation of it, can be
found in the preamble to the 2017 final rule.\24\
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\24\ See 81 FR 89752-89753 (December 12, 2016); see also API v.
EPA, 706 F.3d 474 (D.C. Cir. 2013) (requiring that EPA's cellulosic
biofuel projections reflect a neutral aim at accuracy); Monroe
Energy v. EPA, 750 F.3d 909, 915-16 (D.C. Cir. 2014) (affirming
EPA's broad discretion under the cellulosic waiver authority to
reduce volumes of advanced biofuel and total renewable fuel);
Americans for Clean Energy v. EPA (``ACE''), 864 F.3d 691, 730-735
(D.C. Cir. 2017) (same); Alon Refining Krotz Spring, Inc. v. EPA,
936 F.3d 628, 662-663 (D.C. Cir. 2019) (same); American Fuel &
Petrochemical Manufacturers v. EPA, 937 F.3d 559, 577-78 (D.C. Cir.
2019) (same).
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2. Reset Authority.
The CAA provides that EPA shall modify the statutorily prescribed
RFS volumes once certain triggers are met. This section discusses the
statutory requirements that trigger the use of this reset authority,
describes the process and criteria for such use, and explains the
impact of this modification on our other waiver authorities.
a. Conditions for Resetting Volume Targets
CAA section 211(o)(7)(F) sets forth EPA's authority to modify (or
reset) the applicable volumes once certain triggers have been met.
Specifically, EPA must reset the applicable volumes for a particular
category of biofuel when, under CAA section 211(o)(7)(F)(i), we waive
at least 20 percent of the applicable volume requirement for such
category for two consecutive years, or, under CAA section
211(o)(7)(F)(ii), we waive at least 50 percent of such applicable
volume requirement for a single year. With the promulgation of the 2019
annual standards, these conditions have been met for three categories
of biofuel: Cellulosic biofuel, advanced biofuel, and total renewable
fuel.\25\ We describe below, for each category of biofuel, the specific
annual rules that satisfied these conditions.
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\25\ Because the statutory volumes for biomass-based diesel
lapsed after 2012, the reset provision, which only applies to 2016
and subsequent years, does not apply to BBD.
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The conditions for resetting cellulosic biofuel volumes were met by
the 2010 annual standard, which reduced the applicable cellulosic
biofuel volume by at least 50 percent triggering application of the
reset authority under CAA section 211(o)(7)(F). In that rule, we waived
the cellulosic applicable volume for the first time using the
cellulosic waiver authority.\26\ We set the cellulosic biofuel
applicable volume at 6.5 million gallons for 2010.\27\ This waiver
resulted in an applicable volume that was 93.5 percent lower than the
applicable volume requirement provided in the statute, 100 million,
thus triggering the reset requirement under CAA section
211(o)(7)(F)(ii). However, the statute also provides that ``no such
modification in applicable volumes shall be made for any year before
2016.'' CAA section 211(o)(7)(F). Therefore, although the trigger to
modify the cellulosic biofuel volume target under the reset provision
was met in 2010, the

[[Page 72443]]

statute did not require a change to the applicable volumes until 2016.
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\26\ 75 FR 14670 (March 26, 2010).
\27\ 75 FR 14675.
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The conditions for resetting advanced biofuel volumes were met by
the 2014 and 2015 annual standards, which reduced the applicable
advanced biofuel volume by at least 20 percent for two consecutive
years. For the 2014 annual standard, we waived the advanced biofuel
volume for the first time.\28\ We set the advanced biofuel volume at
2.67 billion gallons.\29\ This represented a reduction of 28.8 percent
from the applicable volume requirement provided in the statute (3.75
billion). This reduction therefore triggered the first year of
reductions of at least 20 percent under CAA section 211(o)(7)(F)(i).
For the 2015 annual standard, we reduced the advanced biofuel
applicable volume to 2.88 billion gallons.\30\ This represented a
reduction of 47.6 percent from the applicable volume requirement
provided in the statute (5.5 billion). This represented the second
consecutive year for which the Administrator waived volumes by at least
20 percent, thus triggering the modification of the advanced biofuel
volume under CAA section 211(o)(7)(F)(i).
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\28\ 80 FR 77420 (December 14, 2015).
\29\ Id.
\30\ Id.
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The conditions for resetting total renewable fuel volumes were met
by the 2018 and 2019 annual standards, which reduced the applicable
total renewable fuel volume by at least 20 percent for two consecutive
years. For the 2018 annual standard, we reduced the total renewable
fuel volume to 19.29 billion gallons.\31\ This represented a reduction
of 25.8 percent from the applicable volume requirement provided in the
statute (26 billion). This reduction therefore triggered the first year
of reductions of at least 20 percent under CAA section 211(o)(7)(F)(i).
For the 2019 annual standard, we reduced the total renewable fuel
applicable volume to 19.92 billion gallons.\32\ This represented a
reduction of 29 percent from the applicable volume requirement provided
in the statute (28 billion). This represented the second consecutive
year for which the Administrator waived volumes by at least 20 percent,
thus triggering the modification of the total renewable fuel volume
under CAA section 211(o)(7)(F)(i).\33\
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\31\ 82 FR 58486 (December 12, 2017).
\32\ 83 FR 63704 (December 11, 2018).
\33\ Although we are exercising the reset authority in this
action for 2020-2022 volumes, we could have exercised the reset
authority for the 2016-2019 cellulosic and advanced biofuel volumes
as well. We do not, however, have authority to reset total renewable
fuel volumes for those years. In any event, we are not proposing to
revisit the 2016-2019 volumes in this rulemaking.
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b. Factors That Must Be Analyzed
In resetting the statutory volumes, EPA must comply with the
processes, criteria, and standards set forth in CAA section
211(o)(2)(B)(ii). That provision provides that the Administrator shall,
in coordination with the Secretary of Energy and the Secretary of
Agriculture, determine the applicable volumes of each biofuel category
specified based on a review of implementation of the program during the
calendar years specified in the table, and an analysis of the impact
of:
<bullet> The production and use of renewable fuels on the
environment;
<bullet> The impact of renewable fuels on the energy security of
the U.S.;
<bullet> The expected annual rate of future commercial production
of renewable fuels;
<bullet> The impact of renewable fuels on the infrastructure of the
U.S.;
<bullet> The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
<bullet> The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
While the statute requires that EPA base its determination on an
analysis of these factors, it does not establish any numeric criteria,
require a specific type of analysis (such as quantitative analysis), or
provide guidance on how EPA should weigh the various factors.
Additionally, we are not aware of anything in the legislative history
of EISA that addresses these issues. Thus, as the Act ``does not state
what weight should be accorded to the relevant factors,'' it ``give[s]
EPA considerable discretion to weigh and balance the various factors
required by statute.'' \34\
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\34\ Nat'l Wildlife Fed'n v. EPA, 286 F.3d 554, 570 (D.C. Cir.
2002); accord Riverkeeper, Inc. v. United States EPA, 358 F.3d 174,
195 (2d Cir. 2004); BP Exploration & Oil, Inc. v. EPA, 66 F.3d 784,
802 (6th Cir. 1995); see also Cal. by Brown v. Watt, 668 F.2d 1290,
1317 (D.C. Cir. 1981) (``A balancing of factors is not the same as
treating all factors equally. The obligation instead is to look at
all factors and then balance the results. The Act does not mandate
any particular balance, but vests the Secretary with discretion to
weigh the elements. . . .'').
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Additionally, we also have authority to consider other factors,
including implied authority to consider factors that inform our
analysis of the statutory factors, as well as explicit authority to
consider ``the impact of the use of renewable fuels on other factors. .
. .'' \35\ Accordingly, we have considered several other factors,
including the intertwined nature of compliance with the 2020-2022
standards, the size of the carryover RIN bank,\36\ how the retroactive
nature of the 2020 and 2021 standards as compared to the prospective
nature of the 2022 annual and supplemental standards affects the
feasibility of compliance (Section IV),\37\ the supply of qualifying
renewable fuels to U.S. consumers (Section III),\38\ soil quality
(Chapter 3 of the DRIA),\39\ and environmental justice (Section I of
this preamble and Chapter 8 of the DRIA).\40\
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\35\ CAA section 211(o)(2)(B)(ii)(VI).
\36\ The first two factors inform our analysis of the statutory
factor ``review of the implementation of the program.'' CAA section
211(o)(2)(B)(ii).
\37\ The third factor (how the standards affect the feasibility
of compliance) also informs our analysis of the statutory factor
``the expected annual rate of future commercial production of
renewable fuels.'' CAA section 211(o)(2)(B)(ii)(III).
\38\ The fourth factor (supply of renewable fuels) is based on
our analysis of this same statutory factor as well as of downstream
constraints on biofuel use, including the statutory factors relating
to infrastructure and costs. CAA section 211(o)(2)(B)(ii)(IV)-(V).
\39\ Soil quality is closely tied to water quality and is also
relevant to the impact of renewable fuels on the environment more
generally.
\40\ Environmental justice involves consideration of the impact
of renewable fuels on several factors, including environmental and
cost factors. This and the other non-enumerated factors are also
relevant under the statutory factor ``the impact of the use of
renewable fuels on other factors. . . .'' CAA section
211(o)(2)(B)(ii)(VI).
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c. Impact on other Statutory Authorities To Waive Volumes
Our proposed use of the reset authority in this action does not
preclude our legal authority to waive volumes under the other waiver
authorities. Nothing in the CAA suggests that once the volumes are
reset they cannot be modified further, or that the reset authority
cannot be used in conjunction with other waiver authorities such as the
cellulosic waiver authority.\41\
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\41\ See J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Intern.,
Inc., 534 U.S. 124, 143-44 (2001) (holding that when two statutes
are capable of coexistence and there is not clearly expressed
legislative intent to the contrary, each should be regarded as
effective).
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3. General Waiver Authority
Section 211(o)(7)(A) of the CAA provides that EPA, in consultation
with the Secretary of Agriculture and the Secretary of Energy, may
waive the applicable volumes specified in the Act in whole or in part
based on a petition by one or more States, by any person subject to the
requirements of the Act, or by the EPA Administrator by his own
initiative. Such a waiver must be based on a determination by the
Administrator, after public notice and opportunity for comment that:
(1)

[[Page 72444]]

Implementation of the requirement would severely harm the economy or
the environment of a State, a region, or the United States; or (2)
there is an inadequate domestic supply.
EPA received several requests for use of the general waiver
authority for the 2020 standards from stakeholders concerned about the
impacts on the fuels markets resulting from the COVID-19 pandemic.
These included requests from the governors of multiple states based on
their belief that the criteria for application of the general waiver
authority were satisfied and that lowering the required volumes for
2020 was appropriate. We published a notice in the Federal Register
seeking comment on these requests.\42\ We are not proposing
modifications to the 2020 volumes utilizing the general waiver
authority in this action. In lieu of doing so, we are proposing to
revise the 2020 volumes under our reset authority as discussed in
Section III.B. Our proposal addresses many of the concerns raised in
the general waiver petitions, including the shortfall in RIN generation
in 2020, uncertainty regarding SREs following the Tenth Circuit's
decision in RFA, and the hurdles those may present to obligated
parties' compliance.
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\42\ 86 FR 5182 (January 19, 2021). Comments on these requests
are available in the docket for that notice, EPA-HQ-OAR-2020-0322.
We have recently received an additional request to waive volumes
using the general waiver authority from the Governor of Montana,
available in the docket for this action.
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B. Authority To Establish BBD Volumes

EPA has established the biomass-based diesel requirement under CAA
section 211(o)(2)(B)(ii) since 2013 because the statute only provided
BBD volumes through 2012. Thus, EPA is proposing an applicable volume
for BBD for 2022 under this authority, which we term the ``set''
authority.\43\ As discussed in prior annual rulemakings, EPA is to
determine the applicable volume of BBD, in coordination with the
Secretary of Energy and the Secretary of Agriculture, based on an
analysis of the same statutory factors enumerated above for
``resetting'' volumes for the other fuel categories.\44\ The statute
also requires that the BBD volume be set at or greater than the 1.0
billion gallon volume requirement for 2012 in the statute, but does not
provide any other numerical criteria that EPA is to consider.
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\43\ The applicable volume for BBD for 2021 was established in
the 2020 annual rulemaking. 85 FR 7016 (February 6, 2020).
\44\ 85 FR 7016, 7047-7048 (February 6, 2020).
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C. Considerations for Retroactive and Late Rulemaking

In this rulemaking, we are proposing several late or retroactive
standards. EPA has in the past also missed statutory deadlines for
promulgating RFS annual standards. In those cases, the D.C. Circuit
found that EPA retains authority to promulgate annual standards for the
years in question, so long as EPA exercises this authority
reasonably.\45\ In doing so, EPA must balance the burden on obligated
parties of a retroactive standard with the broader goal of the RFS
program to increase renewable fuel use.\46\ Even if the rule does not
operate retroactively, but is promulgated after the statutory deadline,
EPA must consider and mitigate the burdens on obligated parties
associated with a delayed rulemaking.\47\ In upholding EPA's
retroactive standards for 2014 and 2015 in ACE, the court considered
several specific factors, including the availability of RINs for
compliance, the amount of lead time and adequate notice for obligated
parties, and the availability of compliance flexibilities.
Additionally, the court separately addressed rulemakings that were late
(i.e., those issued after the statutory deadline) but were nonetheless
not retroactive, emphasizing in that context the amount of lead time
and adequate notice for obligated parties.\48\
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\45\ Americans for Clean Energy v. EPA, 864 F.3d 691, 720 (D.C.
Cir. 2017) (ACE); Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C. Cir.
2014); Nat'l Petrochemical & Refiners Ass'n v. EPA, 630 F.3d 145,
154-58 (D.C. Cir. 2010) (NPRA).
\46\ NPRA, at 154-58 (D.C. Cir. 2010).
\47\ ACE, 864 F.3d 691, 718 (D.C. Cir. 2017).
\48\ Id. at 721.
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In this rulemaking, we are proposing to exercise our reset
authority after the statutory deadline of December 11, 2019 (which is
one year after the promulgation of the 2019 final rule, which triggered
the reset obligation for total renewable fuel).\49\ We are also
proposing to exercise our set authority for the 2022 BBD volume after
the statutory deadline of October 31, 2020. We are also promulgating
the 2020 and 2021 standards after their statutory deadlines of November
30, 2019 and 2020 respectively.\50\ These standards are retroactive and
apply to gasoline and diesel produced or imported in 2020 and 2021. We
discuss in detail the considerations for late or retroactive rulemaking
for each of these requirements further in Section III.
---------------------------------------------------------------------------

\49\ This was the deadline for resetting total renewable fuel
volumes. The deadline for resetting advanced and cellulosic volumes
passed earlier.
\50\ These are also the deadlines for exercising the cellulosic
waiver authority for those years, which we will also miss.
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In addition, in responding to the ACE remand of the 2016 annual
rule, EPA is proposing a supplemental standard for 2022.\51\ We are
proposing this supplemental standard after the statutory deadline for
the 2016 standards (November 30, 2015). However, the proposed
supplemental standard would prospectively apply to gasoline and diesel
produced or imported in 2022. We further discuss our response to the
ACE remand in Section V.
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\51\ We also intend to propose a supplemental standard for 2023
in a subsequent action.
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We acknowledge that the final rule will issued after November 30,
2021, thus rendering the 2022 and supplemental standards late and
retroactive.\52\ Nonetheless, we are issuing this proposal in advance
of 2022, and we anticipate that the final rule will apply mostly, if
not entirely, prospectively to 2022. Thus, we believe the rule will be
able to incent increased renewable fuel demand in that year consistent
with the analysis in this proposal.
---------------------------------------------------------------------------

\52\ As discussed in Section V, the supplemental standard in
response to the ACE remand is already late.
---------------------------------------------------------------------------

D. Considerations in Revisiting an Established RFS Standard

We are proposing to revise the previously finalized 2020 standards
in this rulemaking. We generally have authority to reconsider and
revise previously finalized RFS standards.\53\ In addition, the D.C.
Circuit has held that EPA has authority to promulgate RFS standards
retroactively. CAA section 211(o)(7) generally authorizes EPA to adjust
the volume requirements based on appropriate considerations as well. In
this action we are proposing to revise the 2020 standards in response
to several unanticipated and exceptional events that have occurred
since the promulgation of the standards and that have had direct and
significant impacts on the fuels market and the ability of obligated
parties to comply. We discuss these events and our rationale for
revising the 2020 standards further in Section III.B.\54\
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\53\ Nonetheless, we believe that we generally should not
revisit past RFS standards. Doing so carries inherent costs for
regulatory certainty and may unduly disrupt market expectations
created by previously promulgated standards. Moreover, in the 2020
final rule itself, we expressly stated that we did not intend to
revisit that rulemaking and subsequently adjust the standards. See
Response to Comments at 173, EPA-HQ-OAR-2019-0136.
\54\ EPA also received two petitions from AFPM and API in early
2020 seeking reconsideration of the 2020 annual rule under CAA
section 307(d)(7)(B) in light of the RFA decision and its impact on
EPA's projections of SREs in calculating the percentage standards.
These petitions are available in the docket. See AFPM, Petition for
Administrative Reconsideration of Renewable Fuel Standard Program:
Standards for 2020 and Biomass-Based Diesel Volume for 2021 and
Other Changes, 85 FR 7016 (Feb. 6, 2020) (Mar. 24, 2020); API,
Petition for Reconsideration of the RFS 2020 Rule, EPA-HQ-OAR-2019-
0136 (April 6, 2020). We are not at this time determining whether
these petitions met the standards for reconsideration under CAA
section 307(d)(7)(B). Nonetheless, for the reasons described in this
document, we believe it is appropriate to reconsider the 2020 RFS
standards, and we are providing the procedural process (i.e., a CAA
section 307(d) rulemaking to reconsider the 2020 RFS standards)
requested in the petitions.

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[[Page 72445]]

E. Applicability of Legal Authorities To Establish the Volume
Requirements

EPA is proposing to reduce the applicable statutory volumes for
2020, 2021 and 2022 utilizing both the cellulosic waiver and reset
authorities. As described in Chapter 4 of the DRIA, the projected
volumes of cellulosic biofuel production for 2020, 2021, and 2022 are
all significantly less than the volume targets in the statute.
Therefore, the cellulosic waiver authority requires EPA to lower the
cellulosic biofuel volume for each year to the projected volumes
available in each year. We are proposing to do so in this action.
Additionally, we propose to find that these volumes are also
appropriate under our reset authority.
For advanced biofuel and total renewable fuel, we are proposing,
under the reset authority alone, volumes equal to the projected actual
volumes of such fuels available in 2020 and 2021. We recognize that
this exceeds our maximum discretion under the cellulosic waiver
authority; however, as we explain further in Section III, we do not
believe that the lowest volumes permissible under the cellulosic waiver
authority are appropriate based upon our consideration of the reset
factors.\55\ For 2022, we are proposing, under both the cellulosic
waiver authority and the reset authority, advanced biofuel and total
renewable fuel volumes equal to the implied statutory volumes. This
represents the maximum permitted reduction under the cellulosic waiver
authority.\56\ We also believe these volumes are appropriate under the
reset authority.
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\55\ Under the cellulosic waiver authority, when EPA reduces the
volume of cellulosic biofuel, EPA may reduce the advanced biofuel
and total renewable fuel volumes by the same or a lesser amount.
\56\ This is also consistent with our authority to apply equal
reductions to the volumes of advanced biofuel and total renewable
fuel under the cellulosic waiver. CAA(o)(7)(D)(i), see also 85 FR
7016, 7047-7048 (February 6, 2020).
---------------------------------------------------------------------------

In Sections III and IV and Chapter 2 of the DRIA, we set forth our
policy and technical rationale for the proposed 2020, 2021, and 2022
volumes for cellulosic biofuel, advanced biofuel, and total renewable
fuel. Our analysis is framed in terms of the statutory factors that the
reset authority requires us to consider, along with the considerations
for retroactive and late rules identified by the D.C. Circuit.\57\
Since this analysis subsumes our policy and technical rationale for
exercising the cellulosic waiver authority as well, we are not
providing a separate analysis for the application of the cellulosic
waiver authority.
---------------------------------------------------------------------------

\57\ Further detail on our analysis of the statutory factors is
found in the DRIA.
---------------------------------------------------------------------------

We believe that subsuming the analysis for the application of the
cellulosic waiver authority into the analysis for the application of
the reset authority is appropriate for three reasons. First, with
respect to the cellulosic biofuel volume for each year, the cellulosic
waiver authority requires EPA to lower that volume to the projected
volume available. This quantity is also a relevant consideration under
the reset authority, and, accordingly, we have considered it in that
context. See, e.g., CAA section 211(o)(2)(B)(ii)(III) (``the expected
annual rate of future commercial production of renewable fuels'').
Second, with respect to advanced biofuel and total renewable fuel, the
cellulosic waiver authority does not specify any factors for EPA to
consider (besides limiting the maximum quantity of reductions to the
reduction in the cellulosic biofuel volume), and thus provides EPA
broad discretion to consider relevant factors, including the factors we
are considering in this proposal under the reset authority.\58\ Third,
given the significant overlap between the analyses used for the
cellulosic waiver and reset authorities, we do not believe that two
sets of analyses would provide significant additional value, but would
be redundant for both EPA and the public.
---------------------------------------------------------------------------

\58\ In past annual rules, we considered many of the same
factors as we do in this proposal, albeit under the guise of
different terminology, such as ``reasonably attainable'' and
``attainable'' volumes. See Section IV of the 2020 final rule at 85
FR 7016. For instance, in that rule, just as in this rule, we
considered feedstock availability, advanced biofuel production and
distribution capacity, environmental impacts, and costs. We
acknowledge that the analytical framework has shifted somewhat given
the focus on the statutory reset factors. For instance, in the 2020
final rule, unlike in this proposed rule, we did not explicitly
consider the impacts of renewable fuels on job creation or rural
economic development. Nonetheless, we believe those statutory
factors (along with all the other factors we are considering under
the reset authority) are ones that EPA may consider under the
discretion we have under the cellulosic waiver authority. Congress's
specification of those factors in the reset authority further
suggests that they are permissible considerations for determining
volumes generally, including in exercising the cellulosic waiver.
This approach presents a shift in EPA's policy for the cellulosic
waiver that we explicitly recognize and adopt as reasonable for the
reasons described in this proposal. See FCC v. Fox Television
Stations, Inc., 556 U.S. 502, 515 (2009). Ultimately, we note that
the 2020, 2021, and 2022 total renewable fuel, advanced biofuel, and
cellulosic biofuel volumes are all independently justified by the
reset authority. Thus, any defect in our exercise of the cellulosic
waiver authority is harmless so long as we have properly exercised
the reset authority.
---------------------------------------------------------------------------

We are also proposing a BBD volume for 2022 of 2.76 billion gallons
under CAA section 211(o)(2)(B)(ii). Our policy and technical rationale
for this volume is also set forth in Section III and Chapter 10 of the
DRIA.

F. Severability

The following portions of this rulemaking are mutually severable
from each other: (1) The volumes and percentage standards for 2020,
2021, and 2022; (2) The 2022 supplemental volume and standard; (3) The
proposed provisions for biointermediates (discussed in Section VII);
and (4) The regulatory amendments discussed in Section VIII. Each of
the regulatory amendments in Section VIII is also severable from all
the other regulatory amendments.
If any of the above portions is set aside by a reviewing court, we
intend the remainder of this action to remain effective. For instance,
if a reviewing court sets aside the 2022 supplemental volume and
standard, we intend the remaining 2020-2022 volumes and percentage
standards, biointermediates provisions, and other regulatory
amendments, to remain effective.

III. Proposed Volumes

We are proposing 2020, 2021, and 2022 cellulosic biofuel, advanced
biofuel, and total renewable fuel volumes under our reset
authority.\59\ We are proposing the 2022 biomass-based diesel (BBD)
volume under our set authority. As required by both the reset and set
authorities, we have analyzed the statutory factors under CAA section
211(o)(2)(B)(ii). We have also coordinated with the Secretary of Energy
and the Secretary of Agriculture, including through the interagency
review process, and their input is reflected in this proposal.
---------------------------------------------------------------------------

\59\ As we explained in Section II.D, some of the volumes we are
proposing in this action are also independently justified under the
cellulosic waiver authority, but the policy and technical analysis
for our exercise of the cellulosic waiver is subsumed under our
analysis of the reset factors.
---------------------------------------------------------------------------

In Section III.A, we summarize our analyses as they apply to each
of three component categories of biofuel: Cellulosic biofuel, non-
cellulosic

[[Page 72446]]

advanced biofuel, and conventional renewable fuel.\60\ In Sections
III.B through F, we describe our proposed volumes for 2020, 2021, and
2022, along with our supporting assessment of the statutory factors. In
Section III.G, we summarize the fuel costs and energy security benefits
of the proposed volumes. In Section IV, we further discuss the
relationship between the volume requirements for all three years as
part of our review of the implementation of the program. Our preamble
discussion provides a high-level, narrative summary of the statutory
factors, focusing on the factors that we deem most appropriate. A more
detailed discussion of all the statutory factors is set forth in the
DRIA.
---------------------------------------------------------------------------

\60\ Cellulosic biofuel corresponds directly to the statutory
biofuel category. Cellulosic biofuel plus non-cellulosic advanced
biofuel constitute the statutory advanced biofuel category. Finally,
advanced biofuel plus conventional renewable fuel constitute the
statutory total renewable fuel category. See CAA section
211(o)(2)(B)(i)(I)-(IV).
---------------------------------------------------------------------------

A. EPA's Assessment of the Statutory Factors for Each Component
Category of Biofuel

1. Cellulosic Biofuel
In EISA, Congress established escalating targets for cellulosic
biofuel, reaching 16 billion gallons in 2022. After 2015, 84 percent of
the growth in statutory volume of total renewable fuel was intended to
come from cellulosic biofuel.\61\ This indicates that Congress intended
the RFS program to provide a significant incentive for cellulosic
biofuels and that the focus for years after 2015 was to be on
cellulosic. Consistent with this intent, our assessment of the
statutory factors suggests that cellulosic biofuels have multiple
benefits, including the potential for very low lifecycle GHG emissions
that meet or exceed the 60 percent GHG reduction threshold for
cellulosic biofuel. Many of these benefits stem from the fact that
nearly all of the feedstocks projected to be used to produce cellulosic
biofuel through 2022 are either waste materials (as in the case of
compressed natural gas and liquified natural gas (CNG/LNG) derived from
biogas) or residues (in the cases of cellulosic ethanol from corn
kernel fiber and corn stover, as well as cellulosic diesel and heating
oil from mill residue). The use of many of the feedstocks currently
being used to produce cellulosic biofuel are not expected to cause
significant land use changes that might lead to adverse environmental
impacts.
---------------------------------------------------------------------------

\61\ From 2015 through 2022 the statutory target for cellulosic
biofuel increases by 13.0 billion gallons, from 3.0 billion gallons
to 16.0 billion gallons. During this same time period the statutory
target for total renewable fuel increases by 15.5 billion gallons,
from 20.5 billion gallons to 36.0 billion gallons. Thus, cellulosic
biofuel was expected to account for 84% (13.0 billion gallons/15.5
billion gallons) of the total renewable fuel increase.
---------------------------------------------------------------------------

Despite these similarities, there are also significant differences
between liquid cellulosic biofuels and CNG/LNG derived from biogas.
None of the cellulosic biofuel feedstocks expected to be used to
produce liquid cellulosic biofuels through 2022 are specifically
produced to be used as feedstocks for cellulosic biofuel production.
Many of these feedstocks (including agricultural residues, mill
residue, and separated municipal solid waste (MSW)) have limited uses
in other markets.\62\ Because of this, using these feedstocks to
produce liquid cellulosic biofuel is not expected to have significant
adverse impacts related to several of the statutory factors, including
the conversion of wetlands, ecosystems and wildlife habitat, soil and
water quality, the price and supply of agricultural commodities, and
food prices. Notwithstanding these benefits, the cost of producing
liquid cellulosic biofuel is high. These high costs are generally the
result of low yields (e.g., gallons of fuel per ton of feedstocks) and
the high capital costs of liquid cellulosic biofuel production
facilities. In the near term (through 2022), the production of these
fuels is likely to be dependent on relatively high cellulosic RIN
prices (in addition to state level programs such as California's low
carbon fuel standard (LCFS)) to be economically competitive with
petroleum-based fuels.
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\62\ One potential exception is corn kernel fiber. Corn kernel
fiber is a component of distillers grains, which is currently sold
as animal feed. Depending on the type of animal to which the
distillers grain is fed, corn kernel fiber removed from the
distillers grain through conversion to cellulosic biofuel may need
to be replaced with additional feed.
---------------------------------------------------------------------------

CNG/LNG derived from biogas, like liquid cellulosic biofuel, is
generally produced from waste materials or residues (e.g., through
biogas collection from landfills, municipal wastewater treatment
facility digesters, agricultural digesters, and separated MSW
digesters) and thus is not expected to affect the conversion of
wetlands, ecosystems and wildlife habitat, soil and water quality, the
price and supply of agricultural commodities, and food prices. However,
in contrast to the feedstocks generally used to produce liquid
cellulosic biofuels, significant quantities of biogas from these
sources are currently used to produce electricity, while smaller
quantities are injected into natural gas pipelines. In some situations,
such as at larger landfills, CNG/LNG derived from biogas may also be
able to be produced at a price comparable to fossil natural gas.
Despite this relatively low cost of production, the combination of the
high cellulosic biofuel RIN price and the significant volume potential
for CNG/LNG derived from biogas used as transportation fuel could have
a relatively significant impact (about $0.01 per gallon) on the price
of gasoline and diesel.\63\
---------------------------------------------------------------------------

\63\ See Chapter 5.1.2.2 of the DRIA for a further discussion of
the expected impact of RINs generated for CNG/LNG derived from
biogas on the transportation fuel market.
---------------------------------------------------------------------------

2. Non-Cellulosic Advanced Biofuel
The volume targets established by Congress also anticipated
significant growth in advanced biofuel beyond what is needed to satisfy
the cellulosic standard. The statutory target for advanced biofuel in
2022 (21 billion gallons) allowed for up to 5 billion gallons of non-
cellulosic advanced biofuel to be used towards the advanced biofuel
volume target. In practice the vast majority of non-cellulosic advanced
biofuel in the RFS program has been biomass-based diesel, with
relatively small volumes of sugarcane ethanol and other advanced
biofuels. Some of the statutory factors assessed by EPA suggest that
the targets for non-cellulosic advanced biofuel established by
Congress, or even higher volumes, are still appropriate. Notably, all
advanced biofuels have the potential to provide significant GHG
reductions as they are required to achieve at least 50 percent GHG
reductions relative to the petroleum fuels they displace. Some types of
advanced fuels, such as biodiesel and renewable diesel produced from
fats, oils, and greases, provide even greater reductions than the 50
percent threshold. This summary focuses on the impacts of advanced
biodiesel and renewable diesel.
Advanced biodiesel and renewable diesel together comprise 95
percent or more of the total supply of non-cellulosic advanced biofuel
over the last several years, and is expected to supply all of increase
in advanced biofuel through 2022. High domestic production capacity and
availability of imports indicate that volumes of non-cellulosic
advanced biofuel in 2021 and 2022 may meet or even exceed the implied
statutory targets. Similarly, the feedstocks used to make advanced
biodiesel and renewable diesel (such as soy oil, canola oil, and corn
oil, as well as waste oils such as white grease, yellow grease, trap
grease, poultry fat, and tallow) currently exist in sufficient
quantities globally to supply these increasing volumes. These
feedstocks

[[Page 72447]]

have many existing uses that may require replacement with other
suitable substitutes, but there is also potential for ongoing growth in
the production of many of these feedstocks. Higher volume requirements
for non-cellulosic advanced biofuel may also have energy security
benefits, increase domestic employment in the biofuels industry, and
increase income for biofuel feedstock producers.
However, some of the factors assessed would support lower volumes
of advanced biofuel. For instance, as described in Chapter 9 of the
DRIA, the cost of biodiesel and renewable diesel is significantly
higher than petroleum-based diesel fuel and is expected to remain so
over the next several years. Even if biodiesel and renewable diesel
blends are priced similarly to petroleum diesel at the pump after
accounting for the relevant Federal and state incentives (including the
RIN value), society as a whole nevertheless bears their full costs.
Moreover, the fact that sufficient feedstocks exist to produce
increasing quantities of advanced biodiesel and renewable diesel does
not mean that those feedstocks are readily available or could be
diverted to biofuel production without adverse consequences. As
described in Chapter 5 of the DRIA, we expect only limited quantities
of fats, oils, and greases and distillers corn oil to be available for
increased biodiesel and renewable diesel production in future years. We
expect that the primary feedstock available to biodiesel and renewable
diesel producers in significant quantities through 2022 will be soybean
oil and other vegetable oils whose primary markets are for food.
Increased demand for soybean oil could lead to diversion of feedstocks
from food and other current uses in addition to further incentivizing
increased soybean crushing and soybean production. Increased soybean
production in the U.S. and abroad in turn could result in greater
conversion of wetlands, adverse impacts on ecosystems and wildlife
habitat, adverse impacts negative impacts on water quality and supply,
and increased prices for agricultural commodities and food prices. We
request comment on the impacts of advanced biofuel production on the
statutory factors, including impacts on wetlands, ecosystems, and
wildlife habitat.
3. Conventional Renewable Fuel
As with non-cellulosic advanced biofuel, some of the statutory
factors assessed for conventional renewable fuel favor the implied
statutory volume (15 billion gallons) or higher volumes, while other
factors favor lower volumes. While conventional renewable fuels are
generally required by EISA to achieve 20 percent GHG reductions
relative to the petroleum fuels they displace, some conventional
biofuel facilities exceed this threshold. Notably, EPA has developed an
expedited petition process for ethanol production facilities using more
efficient process technologies.\64\ The statute, however, also contains
grandfathering provisions exempting any facility that had begun
construction on or before December 19, 2007, from this requirement, so
not all producers of conventional renewable fuels meet or are required
to meet the 20 percent GHG reduction threshold.\65\
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\64\ EPA has developed an ``Efficient Producer Petition
Process,'' which encourages adoption of efficiency improvements in
new ethanol facilities by expediting petition review and approval.
Existing EPA estimates for corn starch ethanol produced in 2022
using a dry mill process and natural gas fired process heat range
from a 42 percent to a 17 percent reduction over baseline gasoline,
depending on the technologies used at the production facility.
\65\ See CAA section 211(o)(2)(A)(i).
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The vast majority of conventional renewable fuel that has been
supplied to the U.S. is corn ethanol. Domestic production capacity for
corn ethanol exceeds 16 billion gallons. Production of corn-ethanol in
the U.S. reached a peak of 16.1 billion gallons in 2018.\66\ Higher
volumes of conventional renewable fuel could result in more domestic
jobs in the biofuels industry. At the same time, there are also
significant volumes of palm biodiesel and renewable diesel that are
produced internationally that could qualify as conventional renewable
fuel under the grandfathering provisions of the RFS program. In the
past, small volumes of grandfathered biodiesel and renewable diesel
have been supplied to the U.S.\67\
---------------------------------------------------------------------------

\66\ Energy Information Administration (EIA) Monthly Energy
Review.
\67\ Use of grandfathered biodiesel and renewable diesel reached
a maximum of 157 million gallons in 2016. Since 2018 use of
grandfathered biodiesel and renewable diesel has been very small
(less than 1 million gallons each year). See Chapter 1.6 of the
DRIA.
---------------------------------------------------------------------------

However, some of the analyses we conducted support lower volumes of
conventional renewable fuel. As with soy biodiesel, increased corn
production in the U.S. could result in greater conversion of wetlands,
adverse impacts on ecosystems and wildlife habitat, adverse impacts
negative impacts on water quality and supply, and increased prices for
agricultural commodities and food prices. Furthermore, constraints on
ethanol use may also support lower implied volume requirements for
conventional biofuel. The market has not achieved 15 billion gallons of
actual use of conventional renewable fuel in any year in which the RFS
standards were based on it. This was due to various factors, including
limitations on ethanol use above the E10 blendwall, strong export
markets for domestically produced ethanol, the effect of exempted small
refinery volumes in depressing the effective RFS standards, and use of
advanced biodiesel and renewable diesel, buoyed by its tax subsidy and
other incentive programs, to meet the implied conventional portion of
the total renewable fuel requirement.
While the use of ethanol as E10 has been, and continues to be,
economical for refiners and blenders, the use of E10 alone has not been
sufficient to achieve the 15 billion gallons of ethanol use due to
declining gasoline demand. The RFS program has had limited success in
helping to increase the use of higher ethanol blends, and growth in the
nationwide average gasoline ethanol concentration has virtually
stagnated as the market reached the E10 blendwall. While the use of
higher ethanol blends has increased since 2011, that growth has been
small compared to prior growth in the use of E10 and in the use of non-
ethanol biofuels. We do not anticipate that growth in the use of higher
ethanol blends through 2022 will increase rapidly enough to result in
significantly greater volumes of ethanol consumption in the U.S., even
with the incentives created by the RFS program standards and other
governmental efforts such as Department of Agriculture's (USDA's)
Blender Infrastructure Program and Higher Blends Infrastructure
Incentive Program. Moreover, exporting ethanol to be blended with
gasoline abroad has been more profitable in recent years than selling
greater volumes of E15 or E85 domestically. We expect these trends in
exports to continue given international demand for ethanol.
In addition, total demand for gasoline was lower in 2020 and is
expected to remain lower in 2021 and 2022 relative to the volume of
gasoline consumed in 2017-2019 according to EIA's May 2021 Short Term
Energy Outlook (STEO), which will limit the volume of ethanol used as
E10.\68\ Most notably, the COVID-19 pandemic caused a significant fall
in gasoline demand and sales of E10 starting in 2020. We would

[[Page 72448]]

expect, therefore, that even maintaining the implied 15 billion gallon
statutory volume target for conventional renewable fuel going forward
would require that volumes of biodiesel and renewable diesel, the least
costly alternative source, increase to compensate for the reduction in
ethanol use.
---------------------------------------------------------------------------

\68\ The May 2021 STEO estimates gasoline consumption of 8.03
million barrels per day (123.5 billion gallons) in 2020, projects
8.70 million barrels per day (133.3 billion gallons) in 2021, and
projects 8.92 million barrels per day (136.8 billion gallons) in
2022. The STEO reported gasoline consumption in 2017-2019 at 9.31-
9.33 million barrels per day (142.7-143.0 billion gallons) annually.
---------------------------------------------------------------------------

If biodiesel and/or renewable diesel were able to be supplied in
sufficient quantities to enable a conventional renewable fuel
requirement at 15 billion gallons to be met despite lower ethanol
consumption, there could still be other potentially adverse impacts. We
project that much of this biodiesel and renewable diesel would be
imported. Further, these fuels could be sourced from grandfathered
facilities that may not achieve the desired GHG reductions. If imported
biodiesel and renewable diesel were to increase, we would expect either
an increase in the use of petroleum fuels from countries that
previously used these fuels, or, alternatively, an expansion of palm
oil production to produce biodiesel and renewable diesel, likely
resulting in additional foreign land being converted to cropland for
the production of palm oil. There would likely be both adverse wildlife
impacts and higher GHG emissions of such international land use changes
that would be associated with a higher implied conventional volume
mandate satisfied by grandfathered biodiesel and renewable diesel.
At the same time, we do not believe that setting volumes such that
the implied conventional renewable fuel volume is below the E10
blendwall would be appropriate either. Under such a scenario, imports
of biodiesel and renewable diesel to meet the demand provided by the
implied conventional renewable fuel volume would cease altogether which
would have some benefits for domestic energy independence and may have
some environmental benefits as well insofar as those imports are
produced from palm oil. However, impacts on domestic ethanol production
would be small as E10 would continue to be used regardless. There would
most likely be some decrease in the small amounts of higher ethanol
blends used, but the use of E10 would be essentially unchanged, and
since ethanol blended as E10 dominates the total volume of ethanol
consumed, the overall ethanol volume would be minimally affected. Thus,
we expect that setting the implied volume for conventional renewable
fuel below the E10 blendwall would have little impact on domestic
biofuel production or use.

B. Proposed Volumes for 2020

We are proposing to revise previously finalized 2020 total
renewable fuel, advanced biofuel, and cellulosic biofuel volumes to
equal the volume of such fuels actually used in the U.S. in 2020.\69\
As we discuss in Section VI, we are also proposing to make
corresponding adjustments to the percent standards applicable to
obligated parties.\70\
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\69\ We also call such volumes the volumes that are actually
consumed or actually supplied. In this context, we are using the
term ``supply'' distinct from the statutory term ``inadequate
domestic supply'' in CAA section 211(o)(7)(A)(ii).
\70\ As discussed in Section VI, the adjustments to the
percentage standards would also include changes to the non-renewable
gasoline and diesel volumes to reflect actual 2020 consumption.
---------------------------------------------------------------------------

Since 2020 has already passed, this rulemaking has no ability to
affect actual production, imports, and use of renewable fuel in 2020.
The impact of the rule on each of the statutory factors is similarly
limited. In contrast, were we to revise the 2020 volumes to be greater
than the volume of renewable fuel that was supplied or were we to
simply leave the original volumes from the 2020 final rule in place, we
would expect some combination of potentially disruptive outcomes: (1) A
reduction in the quantity of carryover RINs; (2) obligated parties
carrying deficits into 2021; and/or (3) obligated parties being out of
compliance with their RFS obligations.\71\ While this approach could
have the effect of prospectively increasing demand for renewable fuels
in 2022, simply establishing higher volumes for 2022 is expected to
have the same effect on renewable fuel producers with a much lower risk
of market disruptions that could result from maintaining volume
obligations for 2020. As we explain in Section IV.B, we are proposing
to revise the 2020 volume obligations to forestall potential
disruptions in the fuels market that would impair the ongoing
implementation of the RFS program.
---------------------------------------------------------------------------

\71\ See Section IV.A for a discussion of carryover RINs.
---------------------------------------------------------------------------

We acknowledge that this proposal to reconsider and revise the
already finalized 2020 standards will be finalized after the November
30, 2019, statutory deadline for the 2020 standards and can operate
only retroactively.\72\ We generally do not think it is appropriate to
reconsider and revise previously finalized RFS standards. Nonetheless,
we are proposing to do so because critical and unanticipated events
have occurred affecting fuels markets and RFS compliance. First, we
anticipate a significant and unprecedented shortfall in renewable fuel
use in 2020 relative to the volumes that we required in the 2020 final
rule. This is largely due to the COVID-19 pandemic, which caused an
unforeseen and drastic fall in transportation fuel demand generally and
in biofuel demand more specifically.
---------------------------------------------------------------------------

\72\ 85 FR 7016 (February 6, 2020). In addition, the 2020 BBD
volume was established in the 2019 final rule. 83 FR 63704.
---------------------------------------------------------------------------

In general, under the RFS program, a shortfall in gasoline and
diesel fuel consumption relative to the projected volumes results in a
corresponding decrease in the volume of renewable fuel required. This
self-adjusting nature of the program is a function of the fact that the
RFS standards are applied as a percentage to an obligated party's
gasoline and diesel fuel production; the obligation to acquire RINs for
compliance rises and falls along with gasoline and diesel fuel
production volume. Further, historical deviations between the volumes
of gasoline and diesel actually used relative to their projected
volumes have been relatively small. As a result, we have historically
not adjusted the RFS standards after they have been established to
account for updated gasoline and diesel consumption levels. This is
consistent with our general policy of not reconsidering and revising
previously finalized RFS standards.
However, the situation in 2020 was different. As explained further
in Section IV.B, the shortfalls in 2020 were both significantly larger
than in any previous year and disproportionately affected gasoline more
than diesel fuel. This is important because on average finished
gasoline contains more renewable content than finished diesel. The vast
majority of gasoline contains at least 10% ethanol, mostly in the form
of E10, whereas the average concentration of renewables in diesel falls
far short of that. Thus, while the decrease in transportation fuel
demand in 2020 proportionally decreased the required renewable fuel
volume, the decrease in the demand for renewable fuel was greater given
the greater drop in gasoline versus diesel demand.
Further, even with the lesser impact on diesel fuel consumption, we
still observed a shortfall in the use of biodiesel and renewable diesel
relative to our projections in the 2020 final rule. That is to say, the
projections in the 2020 final rule overestimated the use of biodiesel
and renewable diesel, even if we adjust those projections by the
shortfall in diesel demand.
Second, when we promulgated the 2020 volume requirements, we did so
while projecting for the first time that we would be granting a large
number of SREs for 2020. The 2020 final rule

[[Page 72449]]

reallocated the projected exempted volumes onto the remaining obligated
parties, thereby significantly increasing the obligations on those
parties. As we explain in Section VI.B, there continues to be
substantial uncertainty regarding whether we will grant or deny the
many SRE petitions for 2020 in the wake of the Tenth Circuit's decision
in RFA and the Supreme Court's reversal of one of the bases for the
Tenth Circuit's decision in HollyFrontier.\73\ Among the uncertainties
are the impacts of the additional holdings in RFA that were not
addressed on appeal to the Supreme Court. The significant impact of our
earlier projection on the standards and the consequent impact on our
SRE policy by the litigation in RFA and HollyFrontier suggest that
reconsideration is warranted.\74\
---------------------------------------------------------------------------

\73\ Renewable Fuels Ass'n v. EPA, 948 F.3d 1206 (10th Cir.
2020), rev'd in part sub nom., HollyFrontier Cheyenne Refining, LLC,
v. Renewable Fuels Ass'n, 114 S. Ct. 2172 (2021).
\74\ As noted in Section II.D, we have received petitions
seeking reconsideration of the 2020 annual rule under CAA section
307(d)(7)(B).
---------------------------------------------------------------------------

The decrease in biofuel use, together with the potential impacts of
SRE decisions, means that compliance with the original 2020 standards
would likely result in a significant drawdown of the number of
carryover RINs available for use in 2021, which could negatively impact
the functionality of the RIN market that enables the successful
implementation of the RFS program. A well-functioning RIN market is
foundational for allowing obligated parties to comply with their RFS
mandates, particularly for obligated parties that do not themselves
produce or blend renewable fuels. As discussed in Section IV.A, the
carryover RIN bank is already projected to drop from 3.48 billion RINs
in 2019 to 1.85 billion RINs in 2020, following 2019 compliance. We
project that the 2020 standards, if unmodified and SREs are not
granted, would result in a significant drawdown of the total number of
carryover RINs, to a volume (630 million RINs) that would represent
less than 4 percent of the proposed 2021 and 2022 total renewable fuel
standards.\75\ The number of carryover cellulosic biofuel RINs would
also be projected to decrease significantly, as we project that the
number of cellulosic carryover RINs would be reduced to just 2.2
million RINs, which is less than 0.5 percent of the proposed 2021 and
2022 cellulosic biofuel volumes. Such a drastic reduction in the
carryover RIN bank has the potential to reduce the liquidity of RINs
and could negatively impact parties that do not currently have
sufficient RINs to meet their 2020 obligation. This could make it
difficult for some parties to acquire enough RINs to comply with their
2020 RFS obligations, as well as the 2021 and 2022 standards being
proposed, and could cause those parties to carry forward deficits or to
become non-compliant. This could lead to significant negative impacts
on the fuels market and the ongoing implementation of the RFS program,
as discussed in Section IV.B.
---------------------------------------------------------------------------

\75\ See Section VI of ``Carryover RIN Bank Calculations for
2020-2022 Proposed Rule,'' available in the docket for this action.
---------------------------------------------------------------------------

These considerations also support our decision to retroactively
reduce the 2020 volumes to those actually used. In doing so, we are
relieving burdens on obligated parties, and in some cases, the
potentially onerous burden of non-compliance with the RFS program and
the possibility of penalty payments. This approach also ensures
sufficient RINs for compliance. It also ensures the continued
functioning of the carryover RIN bank, a necessary compliance
flexibility for obligated parties. It also protects the ongoing
implementation of the RFS program and facilitates the higher volumes
proposed for 2022, as we discuss further in Section IV.B.
With regard to lead time, less lead time is needed for obligated
parties given that we are reducing the stringency of their obligations,
as opposed to increasing the stringency of their obligations.
Nonetheless, we are providing significant lead time. We extended the
2020 compliance deadline for obligated parties to January 31, 2022,
providing these parties with additional time to acquire RINs,\76\ and
have proposed to further extend that deadline in a separate action.\77\
Had we not adjusted the compliance deadline, obligated parties would
have needed to demonstrate compliance by March 31, 2021.
---------------------------------------------------------------------------

\76\ 86 FR 17073 (April 1, 2021).
\77\ 86 FR 67419 (November 26, 2021).
---------------------------------------------------------------------------

We recognize that retroactively adjusting the 2020 standards will
disrupt market expectations created by the prior final rule, for
instance on the part of biofuel producers who made investments or other
parties who transacted biofuels or RINs, based on the higher standards
originally finalized. As a general matter, these expectations may not
rise to the level of reliance interests recognized by the courts.\78\
Even if they do, however, we believe that revising the standards is
nonetheless warranted based on the events and factors described above,
which likely confounded market expectations in any event.
---------------------------------------------------------------------------

\78\ Monroe Energy, LLC v. EPA, 750 F.3d 909, 919-20 (D.C. Cir.
2014).
---------------------------------------------------------------------------

As explained in Section II.A.2, the statutory deadline for
resetting the total renewable fuel volume was in December 2019, or one
year after the promulgation of the 2019 final rule. The statutory
deadlines for resetting the advanced biofuel and cellulosic biofuel
volumes occurred even earlier. Despite being late to meet our statutory
obligations, we are proposing to exercise the reset authority for
several reasons. First, doing so satisfies our statutory obligation to
reset the statutory volumes. Second, we have already notified the
public that we intended to exercise the reset authority.\79\ This
proposal is a key step in making good on that intent and meeting our
statutory obligation. Third, the reset authority also provides EPA
broad discretion to modify the renewable fuel volumes and to establish
biofuel volume requirements at the volumes actually consumed. Such
volumes for advanced biofuel and total renewable fuel could not be
established under the cellulosic waiver authority, which was the legal
basis for the original 2020 final rule.\80\ Nonetheless, we believe
that these are the appropriate volumes for the reasons explained above.
---------------------------------------------------------------------------

\79\ See 84 FR 36766 (July 29, 2019).
\80\ The cellulosic waiver authority limits reductions in the
statutory total renewable fuel and advanced biofuel volumes to no
more than the reduction in the cellulosic biofuel volume. In the
2020 final rule, we exercised the cellulosic waiver to the maximum
extent, resulting in an implied conventional renewable fuel volume
of 15 billion gallons and an implied non-cellulosic advanced biofuel
volume of 4.5 billion gallons. However, the volumes of advanced
biofuel and total renewable fuel actually supplied in 2020 fell
short of these numbers.
---------------------------------------------------------------------------

The proposed revised 2020 volumes, along with the original volumes,
are shown in Table III.B-1. The proposed revised 2020 percentage
standards, along with the original percentage standards, are provided
in Section VI.C.

[[Page 72450]]

Table III.B-1--Proposed Revised Volume Requirements for 2020
[Billion RINs]
------------------------------------------------------------------------
Standard Original Revised
------------------------------------------------------------------------
Cellulosic Biofuel...................... 0.59 0.51
Biomass-Based Diesel.................... \a\ 2.43 \a\ 2.43
Advanced Biofuel........................ 5.09 4.63
Total Renewable Fuel.................... 20.09 17.13
------------------------------------------------------------------------
Source: EMTS (EPA Moderated Transaction System). See ``RIN supply as of
3-22-21''.
\a\ The BBD volume for 2020 is in physical gallons (rather than RINs)
and was established in the 2019 final rule (83 FR 63704, December 11,
2018). We are not proposing to revise the 2020 BBD volume in this
action.

We request comment on our proposed approach of reconsidering and
revising the 2020 RFS volumes from those promulgated in the prior final
rule. We also request comment on modifying 2020 volumes to the volumes
of renewable fuel actually supplied in 2020. We further request comment
on whether we should include the approximately 40 million cellulosic
biofuel carryover RINs in the 2020 cellulosic biofuel volume
requirement. We discuss this issue in detail in Section IV.A.3.

C. Proposed Volumes for 2021

We are proposing 2021 total renewable fuel, advanced biofuel, and
cellulosic biofuel volumes at our projections of the volume of such
fuels used in the U.S. this year. This is the same general approach as
for 2020, with the difference that we do not yet have complete data for
biofuel use in 2021, and therefore we are projecting biofuel use
throughout the remainder of 2021.
Given that we are using the same basic approach as for 2020, the
rationale for our 2021 volumes is similar to the rationale for our 2020
volumes. Below we present some of the key similarities and also note
differences where they exist. As with 2020, due to the expected timing
of the finalization of this rule, the ability for the rule to affect
renewable fuel production, imports, and use in the U.S. in 2021 is
limited. As such, the impact of the rule on each of the statutory
factors is similarly limited. Also, as for 2020, we could also set
volumes for 2021 that are greater or lesser than the volume of
renewable fuel that is actually supplied in 2021, but we do not believe
that doing so would be appropriate for similar reasons. EPA does,
however, believe that the RFS program should drive increases in
renewable fuel volumes over time. Given that we are setting volumes for
2020-2022 in this rule and the fact that retrospective volumes have
limited ability to affect biofuel use, we believe that increases in
volume requirements are more appropriate in 2022. That is when this
rule applies prospectively and has the potential to affect actual
biofuel use. We discuss this relationship between the three years
further in Section IV.B.
As with 2020, the 2021 volumes both are late and would operate
retroactively. Unlike for 2020, however, we are not modifying
previously finalized standards for 2021. The lateness and retroactivity
of the 2021 volumes are appropriate for similar reasons as for 2020. We
believe that establishing the 2021 volumes at the volumes projected to
be used properly balances the statutory goal of increasing renewable
fuel use with mitigating burdens on obligated parties. It ensures that
the obligated parties should have sufficient RINs to comply. In a
separate action, we have proposed to extend the compliance and attest
engagement dates for 2021, providing additional lead time, as well as
compliance flexibilities for obligated parties including access to
carryover RINs and carryforward deficits.\81\ In addition, we note that
this approach, of setting volumes at those actually used, is consistent
with our approach in the 2014 and 2015 standards, which the D.C.
Circuit upheld in ACE.
---------------------------------------------------------------------------

\81\ 86 FR 67419 (November 26, 2021).
---------------------------------------------------------------------------

As with the 2020 volumes, the 2021 volumes also depend upon a
belated exercise of the reset authority. We believe using the reset
authority is appropriate for similar reasons as 2020: We are
statutorily obligated to reset 2021 volumes, we have previously
informed the public that we intended to reset the volumes, and the
reset authority gives us discretion to reduce the total renewable fuel
volume beyond what we could establish under the cellulosic waiver.
There is also an additional reason, which is that the statute indicates
that when we reset the volumes, we must do so for all remaining years
in the statutory volume tables, which extend through 2022. Thus, in
resetting the 2020 volumes, we are obligated to reset the 2021 and 2022
volumes.\82\
---------------------------------------------------------------------------

\82\ See CAA section 211(o)(7)(F) (``the Administrator shall
promulgate a rule . . . that modifies the applicable volumes set
forth in the table concerned for all years following the final year
to which the waiver applies'').
---------------------------------------------------------------------------

The volumes of cellulosic biofuel, advanced biofuel, and total
renewable fuel we are proposing for 2021 are shown in Table III.C-1.
The biomass-based diesel volume for 2021 was previously established in
the 2020 final rule and is included in Table III.C-1 for context. These
volumes are based on the projected use of renewable fuels in the U.S.,
as discussed in greater detail in Chapter 5 of the DRIA.

Table III.C-1--Proposed RFS Volumes for 2021
[Billion RINs]
------------------------------------------------------------------------
Proposed
Category volume
------------------------------------------------------------------------
Cellulosic Biofuel...................................... 0.62
Biomass-Based Diesel.................................... \a\ 2.43
Advanced Biofuel........................................ 5.20
Total Renewable Fuel.................................... 18.52
------------------------------------------------------------------------
\a\ The BBD volume for 2021 is in physical gallons (rather than RINs)
and was established in the 2020 final rule (85 FR 7016, February 6,
2020). We are not proposing to revise the 2021 BBD volume in this
action.

In the final rule, we intend to consider additional data, including
more recent data on renewable fuel production and use, and public
comments, and update our projections accordingly. We request comment on
both our proposed approach of establishing the RFS volumes for 2021 at
the volume of renewable fuel projected to be supplied in 2021, as well
as our projections of these volumes. We also request comment on whether
or not to include volumes of cellulosic ethanol produced from corn
kernel fiber in our projection of cellulosic biofuel production in
2021, as discussed in Chapter 5 of the DRIA.

D. Proposed Volumes for 2022

We are proposing 2022 total renewable fuel, advanced biofuel, and
cellulosic biofuel volumes that represent growth compared to historical
volumes and compared to the volumes proposed for 2020 and 2021. We are

[[Page 72451]]

proposing a 150 million gallon increase in the 2022 cellulosic biofuel
volume over the proposed 2021 volume based on the expected continued
growth in biogas use. We are also proposing the full implied statutory
volumes for non-cellulosic advanced biofuel (i.e., 5 billion gallons,
or 500 million gallons more than the proposed 2021 volume) and
conventional renewable fuel (15 billion gallons).\83\ We anticipate
significant growth in the use of non-cellulosic advanced biofuels,
especially in advanced renewable diesel.\84\ While we expect that
conventional ethanol use will fall short of the implied 15 billion
gallon volume in 2022 by roughly 1.2 billion gallons, we project that
greater volumes of biodiesel and renewable diesel could be produced and
imported to offset this shortfall. We discuss the 2022 BBD volume
separately in Section III.D.
---------------------------------------------------------------------------

\83\ The implied statutory volume for non-cellulosic advanced
biofuel in 2022 (5 billion gallons) is the difference between the
statutory volumes for advanced biofuel (21 billion gallons) and
cellulosic biofuel (16 billion gallons) in 2022. Similarly, the
implied statutory volume for conventional renewable fuel in 2022 (15
billion gallons) is the difference between the statutory volumes for
total renewable fuel (36 billion gallons) and advanced biofuel (21
billion gallons) in 2022.
\84\ See Chapter 2 of the DRIA.
---------------------------------------------------------------------------

The proposed cellulosic biofuel volume for 2022 is equal to the
projected available volume of cellulosic biofuel (see Chapter 5.1 of
the DRIA). This volume represents the highest volume of cellulosic
biofuel we can establish for 2022 given the cellulosic waiver
provision, which requires EPA to reduce the statutory cellulosic volume
to the projected volume available. While EPA does have the authority to
establish a lower cellulosic volume under the reset authority, we do
not believe this would be appropriate for 2022, as discussed below.
EPA's approach to the proposed cellulosic biofuel volume for 2022
seeks to realize the potential for GHG benefits associated with
increased cellulosic biofuel production despite the relatively high
costs (or in the case of CNG/LNG derived from biogas, the relatively
high impact on the price of transportation fuel). Thus, while some of
the statutory factors (such as the cost to consumers of transportation
fuel) may suggest that a volume of cellulosic biofuel lower than the
volume projected to be produced in 2022 would be appropriate, we have
determined that these factors are outweighed by other factors (such as
climate change).
The proposed advanced biofuel and total renewable fuel volumes
strike a balance between numerous competing statutory factors. They
reflect the potential for growth in the volume of renewable fuel
produced and consumed in the U.S., and the energy security and
potential climate change benefits that producing and consuming
increasing volumes of qualifying renewable fuels provide. They also
take into consideration the potential negative impacts of renewable
fuels produced from crops such as corn or soybeans on environmental
factors such as the conversion of wetlands, ecosystems, and wildlife
habitat, water quality, and water supply.
We acknowledge that the implied conventional renewable fuel volume
is higher than the volume of these fuels projected to be consumed in
the U.S. in 2022. We believe this may incentivize the continued
expansion of the infrastructure necessary to use higher level blends of
ethanol, which remains the dominant form of conventional renewable
fuel. In recent years, ethanol consumption beyond the E10 blendwall in
the U.S. has been limited by infrastructure constraints (as well as
other factors) to a volume significantly lower than the volume of
ethanol produced in the U.S. and the total production capacity of the
U.S. ethanol industry. If these infrastructure constraints are
addressed, domestic ethanol consumption and ultimately domestic ethanol
production could increase, and this could result in job creation, rural
economic development, higher corn prices for farmers, and a greater
supply of agricultural commodities. Alternatively, additional volumes
of conventional biodiesel and renewable diesel could be supplied in
2022, including renewable fuels that are grandfathered under 40 CFR
80.1403 and are thus not required to meet the minimum 20 percent GHG
reduction required for all qualifying renewable fuel. These fuels would
most likely be produced in foreign facilities, which may cause
additional environmental impacts and would not provide the same
benefits to domestic job creation and rural economic development, but
they could still provide energy security benefits.\85\
---------------------------------------------------------------------------

\85\ Registered capacity to produce conventional biodiesel and
renewable diesel exists at grandfathered facilities. Because
grandfathered renewable fuels are not required to meet the GHG
reduction thresholds, the GHG impacts of these fuels are highly
uncertain.
---------------------------------------------------------------------------

At the same time, this higher volume requirement means that
obligated parties will likely need to look to other sources of
renewable fuel beyond corn ethanol to meet their compliance obligations
for 2022. While we are proposing the non-cellulosic portion of the
advanced biofuel standard at the full implied statutory volume of 5
billion gallons, our assessment of potential supply indicates that some
additional volume will likely be used in 2022. This means that if, as
expected, the market falls short of the implied volume of conventional
renewable fuel in 2022, as has happened in several years in the past,
excess volumes of advanced biofuel beyond what is needed to meet the
advanced biofuel volume could be available to fulfill some portion of
the shortfall. Finally, as discussed for in the context of the proposed
volume requirements for 2020 and 2021, there may also be implications
of the proposed 2022 volume requirements on the carryover RIN bank.
While we are projecting that sufficient renewable diesel, both advanced
and conventional, will be available to meet the proposed 2022 volume
requirements, there is the potential that the market may fall short, in
which case the existence of sufficient carryover RINs in the carryover
RIN bank can still enable compliance. Specifically, obligated parties
may use carryover RINs to help them comply with the proposed 2022
standards. See Section IV.A for a more detailed discussion of carryover
RINs.
We acknowledge that in lieu of maintaining the implied statutory
volumes of non-cellulosic advanced biofuel and conventional renewable
fuel and relying on higher volumes of advanced biofuel to fulfill an
expected shortfall in conventional biofuel, we could instead raise the
advanced biofuel requirement and lower the conventional biofuel volume.
However, we have chosen not to propose this. We expect that the impact
on GHG emissions of the decision not to propose a higher advanced
biofuel volume with a corresponding lower implied conventional biofuel
volume will be minimal, given that additional volumes of advanced
biofuels will likely be used to satisfy the conventional portion of the
total renewable fuel requirement. Moreover, we believe that providing
incentives for increased ethanol distribution and blending
infrastructure through the higher implied volumes of conventional
renewable fuel may result in the potential for greater renewable fuel
consumption in future years.
We note that this approach of maintaining the statutory implied
conventional and non-cellulosic advanced biofuel volumes is inherently
consistent with the volumes Congress itself established in EISA. It is
also consistent with EPA's policy in prior years, during which we have
never established prospective volume requirements lower than the
implied statutory volume targets, with a single

[[Page 72452]]

exception.\86\ While we have discretion to deviate from this policy, we
continue to believe that maintaining the implied statutory volumes
strikes the proper balance based upon our consideration of the reset
factors.
---------------------------------------------------------------------------

\86\ We prospectively established a volume for conventional
renewable fuel for 2016 (14.5 billion gallons) that was lower than
the statutory implied volume (15 billion gallons). In doing so, we
exercised our ``inadequate domestic supply'' waiver authority based
largely on the limited demand for ethanol in the United States. That
decision that was subsequently set aside by the U.S. Court of
Appeals for the District of Columbia Circuit in ACE, as exceeding
our waiver authority.
---------------------------------------------------------------------------

We also acknowledge that we are already late in resetting the 2022
volumes. We nonetheless believe that this late exercise of our reset
authority is appropriate for similar reasons as for 2020 and for 2021.
Moreover, the proposed 2022 volumes are also independently justified
under our cellulosic waiver authority.
The volumes of cellulosic biofuel, biomass-based diesel, advanced
biofuel, and total renewable fuel we are proposing for 2022 are shown
in Table III.D-1. We request comment on these proposed volumes. (The
proposed BBD volume for 2022 is also included in Table III.D-1 for
context, although we discuss it in Section III.E)

Table III.D-1--Proposed RFS Volumes for 2022
[Billion RINs]
------------------------------------------------------------------------
Proposed
Category volume
------------------------------------------------------------------------
Cellulosic Biofuel...................................... 0.77
Biomass-Based Diesel.................................... \a\ 2.76
Advanced Biofuel........................................ 5.77
Total Renewable Fuel.................................... 20.77
------------------------------------------------------------------------
\a\ The BBD volume for 2022 is in physical gallons (rather than RINs).

In particular, we request comment on our projection of cellulosic
biofuel for 2022. As discussed in greater detail in Chapter 4 of the
DRIA, our cellulosic biofuel projections for 2022 do not include any
volume of cellulosic ethanol produced from corn kernel fiber from
facilities that are not currently registered to generate cellulosic
RINs due to outstanding issues. If these technical and regulatory
issues are resolved, we project that as much as 210 million additional
gallons of cellulosic biofuel could be produced from corn kernel fiber
in 2022. Our projections also do not include any volumes that might
result from our proposed biointermediate regulations, as we believe the
impacts of that proposal will not occur until after 2022. We request
comment on whether we should project additional cellulosic biofuel
production from corn kernel fiber or biointermediates in 2022, and, if
so, the volume we should project.

E. Proposed Biomass-Based Diesel Volume for 2022

As described above, we are proposing an increase of 500 million
gallons in the non-cellulosic advanced biofuel volume for 2022.
Consistent with this, we are also proposing to increase the BBD volume
requirement by the same energy-equivalent amount (330 million physical
gallons) to 2.76 billion gallons.
As in recent years, we believe that excess volumes of BBD (above
2.76 billion gallons) will be used in 2022 to satisfy the advanced
standard. Historically, the BBD standard has not independently driven
the use of BBD in the market. This is due to the nested nature of the
standards and the competitiveness of BBD relative to other advanced
biofuels. Instead, the advanced biofuel standard, and occasionally the
total renewable fuel standard, have driven the use of BBD in the
market. We believe this trend will continue in 2022, and that the 2022
advanced standard, and potentially the total renewable fuel standard,
will drive the use of BBD in the market in 2022.
At the same time, we think it is important to maintain space for
other advanced biofuels to participate in the RFS program. Although the
BBD industry has matured over the past decade, the production of other
advanced biofuels continues to be relatively low and uncertain.
Maintaining this space for other advanced biofuels can facilitate in
the long-term increased commercialization and use of other advanced
biofuels, which may have superior environmental benefits and lower
costs relative to BBD. Conversely, we do not think increasing the size
of this space is necessary for 2022 given that only small quantities of
these other advanced biofuels have been used in recent years relative
to the space we have already provided.
The proposed BBD volume for 2022 is consistent with our policy in
previous annual rules, where we also set the BBD volume consistent with
the change, if any, in the advanced volume. In the 2019 final rule, we
set the 2020 BBD volume at 2.43 billion gallons. This was an increase
from the prior year's BBD volume by the same energy-equivalent amount
(330 million physical gallons) as the increase in the 2019 non-
cellulosic advanced biofuel volume (500 million ethanol-equivalent
gallons). By contrast, in the 2020 final rule, when the 2020 non-
cellulosic advanced biofuel volume did not change, we also maintained
the 2021 BBD volume at 2.43 billion gallons. In both rules, we
preserved a significant space for other advanced biofuels to compete,
approximately equal to 850 million RINs (approximately equal to 566
million physical gallons). In reality, only 334 million ethanol-
equivalent gallons of other advanced biofuel was consumed in 2020.
We acknowledge that in proposing the 2022 BBD volume in this
action, we are proposing a late BBD volume. CAA section
211(o)(2)(B)(ii) provides that EPA shall determine the applicable
volume 14 months prior to the year for which the standard will apply.
That deadline has already passed. However, we do anticipate
establishing the 2022 BBD standard ahead of the 2022 compliance year.
The D.C. Circuit in ACE has affirmed EPA's ability to promulgate late
BBD standards as long as those standards are reasonable.\87\ In
evaluating the reasonableness of EPA's standards, the Court suggested
that EPA must ``consider[ ] various ways to minimize the hardship
caused to obligated parties.'' \88\ In this action, we are providing
obligated parties with notice of the potential 2022 BBD volume
requirement well in advance of the 2022 compliance deadline.
Additionally, we are proposing a volume requirement that is consistent
with our treatment of the BBD volume requirement in the past, i.e.,
increasing the BBD volume requirement in accordance with increases in
the implied statutory non-cellulosic advanced volume. Further, as in
this case of previous annual rules, we continue to believe that it will
be the advanced biofuel standard for 2022 that will drive the use of
BBD in the market, and thus, the BBD standard we propose to establish
is unlikely to result in additional burdens on obligated parties.
Finally, we solicit comment on whether we should instead maintain the
BBD standard for 2022 at 2.43 billion gallons. This would increase the
space allowed for other advanced biofuels, as we are proposing to
increase the advanced biofuel volume for 2022 by 500 million gallons
over the proposed 2021 volume.
---------------------------------------------------------------------------

\87\ ACE at 721.
\88\ Id. (quoting Monroe Energy, LLC v. EPA, 750 F.3d 909, 920
(D.C. Cir. 2014)).
---------------------------------------------------------------------------

F. Summary of the Proposed Volumes

The proposed volumes for 2020, 2021, and 2022 are summarized in
Table III.F-1. We request comment on these volumes (excepting the 2020
and 2021 BBD volumes, which were set in the 2019 and 2020 final rules,
respectively), as well as any data or analysis that

[[Page 72453]]

would support alternative volumes for these years.

Table III.F-1--Proposed RFS Volumes for 2020, 2021, and 2022
[Billion RINs]
----------------------------------------------------------------------------------------------------------------
Category 2020 2021 2022
----------------------------------------------------------------------------------------------------------------
Cellulosic Biofuel.............................................. 0.51 0.62 0.77
Biomass-Based Diesel \a\........................................ \b\ 2.43 \c\ 2.43 2.76
Advanced Biofuel................................................ 4.63 5.20 5.77
Total Renewable Fuel............................................ 17.13 18.52 20.77
----------------------------------------------------------------------------------------------------------------
\a\ The BBD volumes are in physical gallons (rather than RINs).
\b\ The BBD volume for 2020 was established in the 2019 final rule (83 FR 63704, December 11, 2018).
\c\ The BBD volume for 2021 was established in the 2020 final rule (85 FR 7016, February 6, 2020).

G. Impacts of the Proposed Volumes

As explained in Chapter 2.2 of the DRIA, we have used a baseline of
the volumes actually supplied in 2020 to assess the impacts of this
proposed rule, and thus the proposed 2020 volumes have no costs or
benefits. We therefore focus on the projected impacts of the 2021 and
2022 volumes.\89\ We recognize that there are other possible baselines
that could be used as a point of comparison, and that the choice of
baseline significantly influences our impact analyses. A potential
alternative baseline that might be informative would be the volumes of
renewable fuels that would be used each year from 2020-2022 in the
absence of RFS obligations. While we have not used this alternative
baseline in this rule, Chapter 2.2 of the DRIA contains a brief
description of what such a baseline might look like. We request comment
on the volumes of renewable fuel and feedstock use that would occur in
these years in the absence of the RFS obligations.
---------------------------------------------------------------------------

\89\ The values for both 2021 and 2022 are calculated relative
to the actual volumes of renewable fuel used in 2020. The 2022
values therefore reflect the incremental volumes for both 2021 and
2022.
---------------------------------------------------------------------------

For two of the statutory factors (fuel costs and energy security
benefits) we were able to quantify and monetize the expected impacts of
this proposed rule.\90\ Information and specifics on how fuel costs are
calculated are presented in Chapter 9 of the DRIA, while energy
security benefits are discussed in Chapter 4 of the DRIA. A summary of
the fuel costs and energy security benefits are shown in Table III.G-1
and Table III.G-2. Other factors, such as job creation and the price
and supply of agricultural commodities, are quantified but have not
been monetized. Further information and the quantified impacts of this
proposed rule on these factors can be found in the DRIA. We were not
able to quantify many of the impacts of this rulemaking, including
impacts on many of the statutory factors such as the environmental
impacts and rural economic development.
---------------------------------------------------------------------------

\90\ Due to the uncertainty related to the GHG emission impacts
of this proposed rule (discussed in further detail in Chapter 3.2 of
the RIA) we have not included a quantified projection of the GHG
emission impacts of this proposal. However, to provide perspective
regarding the scope of the potential benefits, Chapter 3.2.2 of the
RIA illustrates the potential GHG benefits associated with the
proposed volumes in this rule using the lifecycle GHG values
calculated in the 2010 RFS final rule and other prior actions.

Table III.G-1--Fuel Costs of the Proposed Volumes
[2020 and nominal year dollars, millions] \a\
----------------------------------------------------------------------------------------------------------------
Discounted
Year Undiscounted -------------------------------
Rate: 7% Rate: 3%
----------------------------------------------------------------------------------------------------------------
2021............................................................ 278 278 278
2022
Excluding Supplemental Volumes.............................. 2,158 2,017 2,095
Including Supplemental Volumes.............................. 2,302 2,151 2,235
----------------------------------------------------------------------------------------------------------------
\a\ These costs represent the costs of producing and using biofuels relative to the petroleum fuels they
displace. They do not include other factors, such as the potential impacts on soil and water quality or
potential GHG reduction benefits.

Table III.G-2--Energy Security Benefits of the Proposed Volumes
[2020 dollars, millions]
----------------------------------------------------------------------------------------------------------------
Discounted
Year Undiscounted -------------------------------
Rate: 7% Rate: 3%
----------------------------------------------------------------------------------------------------------------
2021............................................................ 64 64 64
2022
Excluding Supplemental Volumes.............................. 151 141 147
Including Supplemental Volumes.............................. 162 151 157
----------------------------------------------------------------------------------------------------------------

Regardless of whether or not we were able to quantify or monetize
the impact of this proposed rule on each of the statutory factors,
consideration of these factors is still required by the statute. We
believe that the proposed standards

[[Page 72454]]

in this rulemaking are appropriate under our reset authority when we
balance all of the relevant factors described throughout this preamble
and the DRIA. We request comment generally on how costs and benefits
quantified in this proposed rule are calculated and accounted for, as
well as methods to quantify and monetize additional statutory factors.

IV. Interactions Between the RFS Annual Volumes

In resetting the volumes, EPA must review the implementation of the
program. In conducting this review, we have assessed the carryover RIN
bank \91\ and carryforward deficits, which are two important compliance
mechanisms. Specifically, the RFS regulations contain provisions that
allow an obligated party to satisfy their RFS obligations for a given
year by using up to 20 percent of RINs generated in the previous
year.\92\ Similarly, the RFS regulations also allow an obligated party
to carry forward a compliance deficit from one year to the next,
provided the party meets their full RFS obligations in the following
year.\93\ These provisions operate such that any excess RINs generated
in one year, or any RIN deficits, can impact the market for RINs and
renewable fuels in the next year. As such, compliance with the RFS
standards for one year is inherently intertwined with compliance for
the prior year. This section discusses the projected volume of
carryover RINs (net of carryforward deficits) that will be available
for use towards compliance with the 2020, 2021, and 2022 RFS
obligations. We also evaluate whether we should intentionally set the
2020, 2021, and 2022 volumes at levels that would intentionally reduce
the size of the carryover RIN bank, and we propose that this would not
be appropriate.
---------------------------------------------------------------------------

\91\ CAA section 211(o)(5) requires that EPA establish a credit
program as part of its RFS regulations, and that the credits be
valid for obligated parties to show compliance for 12 months as of
the date of generation. EPA implemented this requirement through the
use of RINs, which are generated for the production of qualifying
renewable fuels. Obligated parties can comply by blending renewable
fuels themselves, or by purchasing the RINs that represent the
renewable fuels from other parties that perform the blending. There
are different ``D'' codes representing the different RFS standards
that the various renewable fuels can be used to comply with. (e.g.,
D3 represents cellulosic biofuel that can be used to comply with the
cellulosic biofuel standard.) RINs can be used to demonstrate
compliance for the year in which they are generated or the
subsequent compliance year. Obligated parties can obtain more RINs
than they need in a given compliance year, allowing them to ``carry
over'' these excess RINs for use in the subsequent compliance year,
although our regulations limit the use of these carryover RINs to 20
percent of the obligated party's RVO. For the bank of carryover RINs
to be preserved from one year to the next, individual carryover RINs
are used for compliance before they expire and are essentially
replaced with newer vintage RINs that are then held for use in the
next year. For example, vintage 2020 carryover RINs must be used for
compliance in 2021, or they will expire. However, vintage 2021 RINs
can then be ``banked'' for use in 2022.
\92\ 40 CFR 80.1427(a)(5).
\93\ 40 CFR 80.1427(b).
---------------------------------------------------------------------------

In addition, in reviewing the implementation of the program, we
recognize the difference between the ability of retroactive versus
prospective volume requirements to affect renewable fuel use. As we
explained in Section II, we anticipate that the 2020 and 2021 standards
will be largely retrospective, while the 2022 standards will be
prospective. In this section, we explain that we do not expect the
retroactive 2020 and 2021 standards to significantly affect renewable
fuel use in 2020 and 2021, respectively, but we do expect the
prospective 2022 standards to significantly affect renewable fuel use
in 2022. Given this dynamic, we generally believe that higher renewable
fuel volumes should occur in 2022 as opposed to 2020 or 2021.\94\
---------------------------------------------------------------------------

\94\ We further discuss our review of the implementation of the
program throughout the preamble and DRIA, especially in Chapter 1 of
the DRIA.
---------------------------------------------------------------------------

A. Treatment of Carryover RINs

Consistent with our approach in recent annual rules, we have also
considered the availability and role of carryover RINs in setting the
volume requirements for 2020, 2021, and 2022. In general, we have
authority to consider the size of the carryover RIN bank in deciding
whether and to what extent to exercise any of our discretionary waiver
authorities.\95\ EPA's approach to the consideration of carryover RINs
in exercising our cellulosic waiver authority was affirmed in Monroe
Energy and ACE.\96\
---------------------------------------------------------------------------

\95\ These discretionary waiver authorities include the reset
and set authorities, CAA section 211(o)(7)(F) and 211(o)(2)(B)(ii)
(both of which allow EPA to establish RFS volumes based upon a
``review of the implementation of the program''), discretionary
portion of the cellulosic waiver authority, CAA section
211(o)(7)(D)(i) (``the Administrator may also reduce the applicable
volume of renewable fuel and advanced biofuels requirement''), the
general waiver authority, CAA section 211(o)(7)(A) (``The
Administrator . . . may waive the requirements''), and the BBD
waiver authority with regard to the extent of the reduction in the
BBD volume, CAA section 211(o)(7)(E)(ii) (``the Administrator . . .
shall issue an order to reduce . . . the quantity of biomass-based
diesel . . . by an appropriate quantity'').
\96\ Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014); ACE,
864 F.3d at 713.
---------------------------------------------------------------------------

As noted in past RFS annual rules, carryover RINs are a
foundational element of the design and implementation of the RFS
program.\97\ A bank of carryover RINs is extremely important in
providing a liquid and well-functioning RIN market upon which success
of the entire program depends, and in providing obligated parties
compliance flexibility in the face of substantial uncertainties in the
transportation fuel marketplace.\98\ Carryover RINs enable parties
``long'' on RINs to trade them to those ``short'' on RINs instead of
forcing all obligated parties to comply through physical blending.
Carryover RINs also provide flexibility in the face of a variety of
unforeseeable circumstances that could limit the availability of RINs
and reduce spikes in compliance costs, including weather-related damage
to renewable fuel feedstocks and other circumstances potentially
affecting the production and distribution of renewable fuel.
---------------------------------------------------------------------------

\97\ See, e.g., 72 FR 23904 (May 1, 2007).
\98\ See 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55
(December 12, 2016), 82 FR 58493-95 (December 12, 2017), 83 FR
63708-10 (December 11, 2018), 85 FR 7016 (February 6, 2020).
---------------------------------------------------------------------------

Just as the economy as a whole is able to function efficiently when
individuals and businesses prudently plan for unforeseen events by
maintaining inventories and reserve money accounts, we believe that the
RFS program is able to function when sufficient carryover RINs are held
in reserve for potential use by the RIN holders themselves, or for
possible sale to others that may not have established their own
carryover RIN reserves. Were there to be too few RINs in reserve, then
even minor disruptions causing shortfalls in renewable fuel production
or distribution, or higher than expected transportation fuel demand
(requiring greater volumes of renewable fuel to comply with the
percentage standards that apply to all volumes of transportation fuel,
including the unexpected volumes) could result in deficits and/or
noncompliance by parties without RIN reserves. Because carryover RINs
are individually and unequally held by market participants, a small RIN
bank may negatively impact the RIN market, even where the market
overall could satisfy the standards. Consequently, were market
disruptions to occur with an insufficient carryover RIN bank, it could
force the need for a new waiver of the standards, undermining the
market certainty so critical to the RFS program. For all of these
reasons, the collective carryover RIN bank provides a necessary
programmatic buffer that both facilitates individual compliance,
provides for smooth overall functioning of the program to the benefit
of all market

[[Page 72455]]

participants, and is consistent with the statutory provision allowing
for the generation and use of credits. We anticipate that the carryover
RIN bank will serve this very purpose for compliance with the 2019
standards, when actual biofuel use in that year is expected to have
fallen short of the RFS standards.\99\
---------------------------------------------------------------------------

\99\ EPA extended the 2019 compliance deadline for small
refineries to November 30, 2021. See 86 FR 17073 (April 1, 2021). We
have proposed to further extend that deadline in a separate action
(86 FR 67419, November 26, 2021).
---------------------------------------------------------------------------

EPA can also rely on the availability of carryover RINs to support
ambitious volumes that may not be able to be met with renewable fuel
production and use in that year, and in the context of the 2013 RFS
rulemaking we noted that an abundance of carryover RINs available in
that year, together with possible increases in renewable fuel
production and import, justified maintaining the advanced and total
renewable fuel volume requirements for that year at the levels
specified in the statute.\100\
---------------------------------------------------------------------------

\100\ 79 FR 49793-95 (August 15, 2013).
---------------------------------------------------------------------------

1. Carryover RIN Bank Size
We project a significant drawdown in the number of carryover RINs
as a result of compliance with the 2019 standards. After compliance
with the 2019 RFS standards, we project that there will be
approximately 1.85 billion total carryover RINs available, a decrease
of 1.62 billion RINs from the previous estimate of 3.48 billion total
carryover RINs in the 2020 final rule.\101\ Since we are proposing to
set both the 2020 and 2021 volume requirements at the actual volume of
renewable fuel produced in those years, we project that 1.85 billion
total carryover RINs would be available for compliance with the 2022
standards as well.
---------------------------------------------------------------------------

\101\ The calculations performed to estimate the size of the
carryover RIN bank can be found in the memorandum, ``Carryover RIN
Bank Calculations for 2020-2022 Proposed Rule,'' available in the
docket for this action.
---------------------------------------------------------------------------

However, there remains considerable uncertainty surrounding the
ultimate number of carryover RINs that will be available for compliance
with the 2020, 2021, and 2022 standards for several reasons, including
the possibility of SREs and the fact that compliance with the 2019
standards has not yet occurred for all parties. Furthermore, as
discussed in Section V, our proposed response to the remand of the 2016
rulemaking may reduce the total number of carryover RINs by up to 250
million RINs in 2022 (and up to another 250 million RINs in 2023).
Finally, we note that there have been enforcement actions in past years
that have resulted in the retirement of carryover RINs to make up for
the generation and use of invalid RINs and/or the failure to retire
RINs for exported renewable fuel. Future enforcement actions could have
similar results and require that obligated parties or renewable fuel
exporters settle past enforcement-related obligations in addition to
complying with the annual standards. In light of these uncertainties,
the net result could be a total carryover RIN bank larger or smaller
than 1.85 billion RINs.
2. EPA's Decision Regarding the Treatment of Carryover RINs
We evaluated the volume of carryover RINs projected to be available
and considered whether we should intentionally draw down the carryover
RIN bank in setting the 2020, 2021, and 2022 volume requirements. We do
not believe that would be appropriate. As described above, the current
bank of carryover RINs provides an important and necessary programmatic
and cost spike buffer that will both facilitate individual compliance
and provide for smooth overall functioning of the program. We believe
that a balanced consideration of the possible role of carryover RINs in
achieving the statutory volumes for cellulosic biofuel, advanced
biofuel, and total renewable fuel, versus maintaining an adequate bank
of carryover RINs for important programmatic functions, is appropriate
when EPA exercises its discretion under its statutory authorities.
Furthermore, as noted earlier, after compliance with the 2019
standards, we project that there will be a significant drawdown in the
number of carryover RINs. The advanced biofuel and total renewable fuel
standards we are proposing for 2022, moreover, are significantly higher
than the volume of renewable fuel used in previous years, as well as
the volume of renewable fuel expected to be used in 2020 and 2021. As
we explain further in Sections III and V, it may be challenging for the
market to satisfy the 2022 annual standards and the 2022 supplemental
standard entirely with renewable fuel use in 2022. Given this, the
projected shortfall in RIN generation in 2019, and the uneven holding
of carryover RINs among obligated parties, we expect that further
increasing the standards with the intent to draw down the carryover RIN
bank would lead to significant deficit carryovers and potential non-
compliance by some obligated parties that own relatively few or no
carryover RINs. We do not believe this is an appropriate outcome.
Therefore, consistent with the approach we have taken in previous
annual rules, we are not proposing to set the 2020, 2021, and 2022
volume requirements at levels that would intentionally draw down in the
bank of carryover RINs.
As noted above, it is possible the size of the RIN bank may be
different than our projection. Regardless, however, we do not believe
an intentional drawdown of the carryover RIN bank would be appropriate
for many of the reasons stated above. The carryover RIN bank would
continue to be an important compliance flexibility for obligated
parties. Moreover, the standards we are proposing for 2022, along with
the 2022 supplemental standard, are forward leaning and if the
projected growth in renewable fuel volumes do not materialize would
lead to a drawdown of the carryover RIN bank.
3. Consideration of Cellulosic Carryover RINs
In comments on the 2020 proposed rule and supplemental proposal,
several parties suggested that EPA prospectively establish the
cellulosic biofuel volume at the volume projected to be supplied plus
the volume of available carryover RINs from the prior year.\102\ That
is, these parties argued that EPA should set the cellulosic biofuel
volume at a level that would intentionally eliminate the entire
cellulosic carryover RIN bank. Because EPA established volumes solely
under the cellulosic waiver authority that year, those parties focused
their arguments on a legal interpretation of that provision, asserting
that it required or allowed EPA to include, in its projection of the
available volume, cellulosic carryover RINs that are projected to be
available for compliance.
---------------------------------------------------------------------------

\102\ For example, see comments from the Coalition for Renewable
Natural Gas (EPA-HQ-OAR-2019-0136-0723) and AJW and Iogen (EPA-HQ-
OAR-2019-0136-0467).
---------------------------------------------------------------------------

Section 211(o)(7)(D)(i) of the CAA requires EPA to set the
applicable volume of cellulosic biofuel at the ``projected volume
available during [the] calendar year.'' EPA has consistently
interpreted the statutory phrase ``projected volume available'' to
refer to the volume of qualifying cellulosic biofuel projected to be
produced or imported and available for use as transportation fuel in
the U.S. in that year. This is equivalent to the projected number of
cellulosic RINs generated in the year that are available for obligated
parties to use for compliance. Since we first exercised the cellulosic
waiver authority in the 2010 annual rule, we have never included
carryover cellulosic RINs in this projection.
Parties that requested that EPA include carryover RINs in our
projection of the available volume of cellulosic biofuel generally
argued that despite the

[[Page 72456]]

continued rapid growth in cellulosic biofuel volumes, excess carryover
cellulosic RINs in 2018 and 2019 resulted in low cellulosic RIN prices,
which in turn may have negatively affected investment in cellulosic
biofuel production. They further claimed that by including carryover
RINs in the projected volume available, EPA would ensure that there was
a strong market for cellulosic biofuel and cellulosic biofuel RINs in
years when cellulosic biofuel production exceeded the number of
cellulosic biofuel RINs needed by obligated parties for compliance.
Commenters stated that this increased market certainty would result in
increased investment in cellulosic biofuel production and ultimately
increased cellulosic biofuel production. One commenter suggested that
in conjunction with adding projected carryover RINs to the projected
production volume of cellulosic biofuel when establishing the
cellulosic biofuel volume, EPA could also subtract any projected
deficits to account for years when cellulosic biofuel production falls
short of EPA's projected production volume.\103\
---------------------------------------------------------------------------

\103\ See comment from AJW and Iogen (Docket Item No. EPA-HQ-
OAR-2019-0136-0467).
---------------------------------------------------------------------------

In our response to these comments in the 2020 final rule,\104\ we
disagreed with parties who claimed that the statutory language of the
cellulosic waiver authority requires EPA to include carryover RINs in
establishing the required volume of cellulosic biofuel. The statutory
term ``projected volume available'' does not directly address the topic
of carryover RINs. Indeed, the cellulosic waiver provision, CAA section
211(o)(7)(D)(i), does not mention carryover RINs at all, or otherwise
refer to the statutory basis for such RINs, CAA section 211(o)(5).
Thus, we believe there are multiple reasonable interpretations of this
ambiguous statutory provision, including both the interpretation put
forward by the stakeholders as well as the interpretation adopted by
EPA in previous years.
---------------------------------------------------------------------------

\104\ See Section 3.3 of the Response to Comments document for
the 2020 final rule (EPA-420-R-19-018, December 2019).
---------------------------------------------------------------------------

We further stated that the interpretation EPA adopted in previous
years struck an appropriate balance between the interests of the
cellulosic producers, those obligated to purchase and use cellulosic
biofuels and cellulosic biofuel RINs, and consumers; and best ensured
the ongoing smooth implementation of the RFS program.\105\ Finally,
since the 2020 proposed rule did not raise the possibility of including
cellulosic carryover RINs in the projected volume available, we did not
think it would be appropriate to make such a change without first
giving all stakeholders an opportunity to comment.
---------------------------------------------------------------------------

\105\ See Chevron USA, Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984).
---------------------------------------------------------------------------

We are now providing stakeholders notice and opportunity for
comment in this proposal on whether to include cellulosic carryover
RINs as part of the projected volume available. With respect to the
volumes in this rule, were we to include cellulosic carryover RINs, it
would increase the 2020 cellulosic biofuel volume by 40 million gallons
over the currently proposed volume.\106\ It would not affect the 2021
and 2022 cellulosic biofuel volumes, since we are establishing the
cellulosic biofuel volumes based on actual supply for 2020 and 2021,
and therefore at this time we do not project that excess RINs will be
generated for carryover into 2021 or 2022.\107\
---------------------------------------------------------------------------

\106\ The calculations performed to estimate the number of
cellulosic carryover RINs can be found in the memorandum,
``Carryover RIN Bank Calculations for 2020-2022 Proposed Rule,''
available in the docket for this action.
\107\ We acknowledge of course that our projections of the
available volume of cellulosic biofuel are inherently uncertain, and
that there may be more or fewer cellulosic RINs generated in 2020
and 2021 than what we project. However, at the time of this rule, we
have done our best to take neutral aim at accuracy of the projected
volume available.
---------------------------------------------------------------------------

While we acknowledge that some aspects of the cellulosic category
(such as the cellulosic waiver authority and the cellulosic waiver
credits) \108\ are unique, at this time we believe the benefits of
carryover RINs, discussed in Section IV.A, also apply to cellulosic
carryover RINs. Adding carryover RINs to the volume projected to be
produced would effectively guarantee that the demand for these RINs was
always equal to the overall market supply and would likely result in
cellulosic RIN prices at or near the price of an advanced biofuel RIN
plus the price of a cellulosic waiver credit in future years. While
raising prices would increase revenue for cellulosic biofuel producers,
it may also increase the price of cellulosic biofuel. These higher
prices would be passed on to consumers, who ultimately bear these
costs.
---------------------------------------------------------------------------

\108\ Cellulosic waiver credits may be purchased from EPA by
obligated parties in years when EPA uses the cellulosic waiver
authority to reduce the statutory volumes of cellulosic biofuel.
Regulations related to cellulosic waiver credits can be found in 40
CFR 80.1456.
---------------------------------------------------------------------------

We also note that the legal arguments made by the previous
commenters, while still relevant, are less so in the context of this
rulemaking. The prior comments focused on an interpretation of the
cellulosic waiver authority. In this rulemaking, however, we are
concurrently exercising both our cellulosic waiver and reset
authorities. Under the reset authority, we have broad discretion to
establish volumes, including cellulosic biofuel volumes lower than the
volume required under the cellulosic waiver. Thus, regardless of
whether the prior commenters are correct about EPA's legal authority
under the cellulosic waiver, we have legal authority under reset to
establish volumes at actual supply, excluding any carryover RINs. At
the same time, however, the cellulosic waiver authority establishes the
ceiling for cellulosic biofuel volumes. If we agree with the commenters
that the cellulosic waiver mandates or allows volumes at supply plus
carryover RINs, then we may establish cellulosic biofuel volumes up to
that level. Thus, although the legal framework has changed somewhat
since the comments were submitted, their arguments remain relevant, and
EPA is soliciting comment on this issue.

B. Ability for the RFS Volumes To Impact Renewable Fuel Supply

In developing the proposed volume requirements, we considered the
timing of this action and its ability to impact renewable fuel
production, imports, and use. Since only prospective requirements have
a significant chance of affecting actual renewable fuel use, we are
proposing to require higher volumes for 2022. Imposing higher volumes
for 2020 or 2021, in contrast, would have no effect on demand for fuels
in those years. By contrast, retroactively requiring volumes higher
than what the market has actually supplied could create market
disruption and thus interfere with program implementation without
advancing program goals. Setting 2020 and 2021 volumes at those
actually supplied reflects the fact that we are acting retroactively,
while in requiring higher volumes for 2022 we are setting prospective
obligations.
With respect to 2020, that year has already passed, so our
retroactive revision of the RFS volumes cannot affect the production or
use of renewable fuels in 2020 or consequently the statutory reset
factors (e.g., the impacts of the use of renewable fuels on cost, the
environment, and so forth). Any actual market effects will be felt
after the rule is promulgated and mediated through the carryover RIN
bank.
With respect to 2021, there will not be sufficient time for the
market to respond to the volumes that we finalize for 2021. The market
may also respond in a more limited fashion to this proposed rule.

[[Page 72457]]

Regardless, any impact on the production, import, and use of renewable
fuel in 2021 is likely to be limited, and therefore the ability for
this rule to affect the statutory factors is likewise limited.
The situation for 2022, however, is different. The RFS standards
for 2022 will be in place throughout 2022 and should be able to affect
market decisions for renewable fuel production, import, and use in
2022, albeit still within the bounds of the lead time available.
Similarly, the ability for this action to affect the statutory factors
in 2022 will be significantly greater than in 2021 or 2020. Thus, we
believe that increased renewable fuel requirements should be imposed in
2022, when this rule has a much greater chance of actually increasing
renewable fuel use and production, as opposed to 2020 or 2021.
Conversely, there are also disadvantages to requiring higher
volumes for 2020 and 2021 retroactively, or similarly, to maintaining
the 2020 standards in the original final rule. Notably, such higher
volumes would cause some combination of a drawdown of the carryover RIN
bank, carryforward deficits, or non-compliance by obligated parties.
While we have previously found an intentional drawdown of the carryover
RIN bank to be appropriate in one case, we do not think that this is
appropriate in this situation for reasons we describe below. We also do
not think that intentionally relying on or effectively compelling
carryforward deficits or intentionally causing non-compliance is
generally appropriate.
Given the drastic shortfall in renewable fuel use relative to what
we projected in the 2020 final rule as discussed in Section III.B,
compliance with the original 2020 standards would likely result in a
significant drawdown in the number of carryover RINs available for use
in 2021 and 2022. As discussed in Section IV.A.1, we currently project
that as a result of compliance with the 2019 RFS standards, the number
of carryover RINs available for compliance with the 2020 standards will
be approximately 1.85 billion RINs, a considerable drop from the 3.48
billion total carryover RINs we projected in the 2020 final rule. We
expect that as a result of revising the 2020 standards to equal the
actual volume of renewable fuels consumed, the number of carryover RINs
available for compliance with the 2021 and 2022 standards will remain
at 1.85 billion RINs. Were we not to modify the 2020 standards, we
anticipate that the total number of carryover RINs available for
compliance with the 2021 and 2022 standards would decrease dramatically
to 630 million RINs, or less than 4 percent of the proposed 2021 and
2022 total renewable fuel standards.\109\ This would be the lowest
quantity of carryover RINs available since EPA began projecting the
size of the carryover RIN bank in 2013, and the relatively small
carryover RIN bank could increase the risk of disruptions in the RIN
trading market. A number of obligated parties would also likely have to
carry deficits into 2022, fail to comply with the 2021 total renewable
fuel standard if they had already carried a deficit forward from 2020,
or similarly fail to comply with the 2022 total renewable fuel
standard.\110\
---------------------------------------------------------------------------

\109\ The calculations performed to project the number of
carryover RINs that would be available if we did not revise the 2020
standards can be found in the memorandum, ``Carryover RIN Bank
Calculations for 2020-2022 Proposed Rule,'' available in the docket
for this action.
\110\ The regulations at 40 CFR 80.1427(b) allows obligated
parties to only carry forward a deficit if they did not carry
forward a deficit from the previous calendar year; thus, an
obligated party that carries forward a deficit from 2020 into 2021
may not carry forward a deficit from 2021 into 2022.
---------------------------------------------------------------------------

If these compliance difficulties occur, we believe that the harms
would not just be felt by directly affected obligated parties but also
extend to the entire fuels market and the RFS program. Notably, if
insufficient RINs are available to obligated parties to meet their
compliance obligations, that could negatively impact the regulatory and
market certainty critical to the investments needed to increase
renewable fuel volumes in 2022 and into the future. This could in turn
diminish the expected future rate of production of renewable fuels,
impair the development of infrastructure to distribute and use
increased volumes of such fuels, and reduce the expected energy
security, job creation, and rural economic benefits associated with
higher renewable fuel use and production. Reduced business certainty
could also deter the commercialization of novel advanced biofuels,
which have the potential for lower costs and superior environmental
benefits.
Retroactively reducing the 2020 volumes mitigates these concerns.
Specifically, our proposal to reduce the 2020 volumes to those actually
supplied preserves an estimated carryover RIN bank of 1.85 billion RINs
for use in 2021 and establishing the 2021 volumes at those actually
supplied preserves the same estimated carryover RIN bank for compliance
with the relatively aggressive 2022 standards.
We note lesser reductions to 2020 or 2021 would give rise to the
same concerns. The magnitude of those concerns would depend on how high
the resulting volumes are. We think that some of these concerns,
moreover, would remain even were we to make offsetting reductions to
the 2022 volumes (e.g., were we to increase the proposed 2021 volumes
by 500 million gallons and decrease the proposed 2022 volumes by the
same amount). In that case, even though the aggregate incentive for
renewable fuels across all three years might remain the same,
retroactively requiring compliance for past years would be more likely
to lead more RIN bank drawdowns, carryforward deficits, and non-
compliance, and less likely to lead to actual increases in renewable
fuel use and production.
In sum, in proposing the 2020, 2021, and 2022 volumes, we recognize
the interconnected nature of the RFS annual volume requirements. We
believe that the volume should reflect both a desire to provide the
necessary incentives for significant growth in renewable fuel
production and use and our obligation to consider and mitigate the
burdens on obligated parties associated with a retroactive rulemaking.
In general, this indicates that required growth in renewable fuel use
should occur prospectively in 2022, as opposed to retroactively in 2020
and 2021. We request comment on how EPA should consider the carryover
RIN bank in establishing RFS volume obligations.

V. Response to ACE Remand

In addition to proposing the applicable volume requirements and
percentage standards for 2020, 2021, and 2022, in this rulemaking we
are also proposing to address the remand of the 2014-2016 annual rule
\111\ by the U.S. Court of Appeals for the D.C. Circuit in ACE.\112\ In
the 2020 proposal, we proposed to address the D.C. Circuit's remand by
retaining the original 2016 total renewable fuel standard.\113\ We
received many comments both in support of and against this
approach.\114\ In the 2020 final rule, we deferred taking action in
response to the remand.\115\ We now believe that we should address the
remand through supplemental renewable fuel volume requirements totaling
500 million gallons spread over two years. We are proposing a
supplemental renewable fuel obligation of 250 million gallons to be
applied in 2022 coupled with the intention of proposing an additional
250

[[Page 72458]]

million gallon supplemental standard in a subsequent action for 2023.
We propose to establish the supplemental total renewable fuel volume
requirement and the corresponding percentage standard for 2022 in this
rulemaking. This section describes the relevant aspects of the 2014-
2016 annual rule, the court's decision, EPA's responsibilities
following the court's remand, and our proposed approach.
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\111\ 80 FR 77420 (December 14, 2015).
\112\ 864 F.3d 691 (2017).
\113\ 84 FR 36762 (July 29, 2019).
\114\ See Docket No. EPA-HQ-OAR-2019-0136.
\115\ 85 FR 7016 (February 6, 2020).
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A. Reevaluating the 2014-2016 Annual Rule

1. The 2016 Renewable Fuel Standard
On December 14, 2015, we promulgated a rulemaking establishing the
volume requirements and percentage standards for 2014, 2015, and
2016.\116\ In establishing those standards for 2016, we utilized the
cellulosic waiver authority under CAA section 211(o)(7)(D) to lower the
cellulosic biofuel, advanced biofuel, and total renewable fuel volume
requirements, and the general waiver authority under CAA section
211(o)(7)(A) to lower total renewable fuel by an additional
increment.\117\
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\116\ 80 FR 77420. The rule also established BBD volumes for
2017.
\117\ 80 FR 77439.
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As an initial step, under CAA section 211(o)(7)(D), we lowered the
cellulosic biofuel volume requirement by 4.02 billion gallons, to the
projected production of cellulosic biofuel for 2016, as required by the
statute.\118\ Using that same authority, we then elected to reduce the
advanced biofuel and total renewable fuel volumes. We did not reduce
the advanced biofuel volume requirement by the full 4.02 billion
gallons that was permitted under this authority, but rather by a lesser
3.64 billion gallons that resulted in an advanced biofuel volume
requirement that was ``reasonably attainable.'' \119\ This allowed some
advanced biofuel to ``backfill'' for the shortfall in cellulosic
biofuel. We then reduced the total renewable fuel volume by an amount
equivalent to the reduction in advanced biofuel in accordance with our
longstanding interpretation that when making reductions to advanced
biofuel and total renewable fuel under CAA section 211(o)(7)(D), the
best reading of the statute is to reduce them both by the same
amount.\120\
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\118\ See 80 FR 77499.
\119\ 80 FR 77427.
\120\ Id.
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As a second step, under CAA section 211(o)(7)(A), under a finding
of inadequate domestic supply, we further lowered the total renewable
fuel standard by 500 million gallons for 2016.\121\ In assessing
``inadequate domestic supply,'' we considered the availability of
renewable fuel to consumers. Based on such demand-side considerations,
we made the additional 500 million gallon reduction in the total
renewable fuel requirement.
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\121\ 80 FR 77444.
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The 2016 total renewable fuel standard was challenged in court. In
an opinion issued on July 28, 2017, the D.C. Circuit vacated our use of
the general waiver authority under a finding of inadequate domestic
supply to reduce the 2016 total renewable fuel standard, the second
step of setting the 2016 total renewable fuel standard.\122\ The court
in ACE held that we had improperly focused on supply of renewable fuel
to consumers, and that the statute instead requires a ``supply-side''
assessment of the volumes of renewable fuel that can be supplied to
refiners, blenders, and importers.\123\ Other components of our
interpretation of ``inadequate domestic supply'' were either upheld by
the court in ACE (e.g., EPA need not consider carryover RINs as a
``supply source of renewable fuel for purposes of determining the
supply of renewable fuel in a given year'') or were not challenged
(e.g., our consideration of biofuel imports as part of the domestic
supply). Our use of the cellulosic waiver authority to provide the
initial reduction in total renewable fuel was also upheld by the court.
In establishing volume requirements for subsequent years, EPA has
applied the court's holding and not proposed to reduce volumes under a
finding of inadequate domestic supply.\124\
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\122\ ACE, 864 F.3d 691.
\123\ Id. at 696.
\124\ We note that the precedential effect of the ACE decision
has governed subsequent RFS annual rules. Compare, e.g., 82 FR 34229
& n.82 (July 21, 2017) (2018 annual rule proposal, issued prior to
ACE) (soliciting comment on whether it would be appropriate to
exercise the inadequate domestic supply waiver authority based on
the maximum reasonably achievable volume'' of renewable fuel, which
incorporates demand-side considerations), with 82 FR 46177 (Oct. 4,
2017) (2018 annual rule availability of supplemental information and
request for comment, issued after ACE) (recognizing, under ACE, that
EPA may not consider demand-side constraints in determining
inadequate domestic supply).
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2. Agency Responsibility
The court in ACE upheld our volume requirements for advanced
biofuel, BBD, and cellulosic biofuel; there is, therefore, no need for
the agency to adjust those 2016 final volume requirements, or to take
further action with regard to these standards in light of the court's
decision. The court also upheld EPA's use of the cellulosic waiver
authority to reduce the 2016 total renewable fuel volume requirement.
The court only vacated our decision to further reduce that requirement
under the ``inadequate domestic supply'' waiver authority, remanding
this issue to the Agency for further consideration consistent with the
court's opinion.\125\ Our obligation is thus to reevaluate the 2016
total renewable fuel volume requirement in accordance with the court's
decision.
---------------------------------------------------------------------------

\125\ Id. at 703.
---------------------------------------------------------------------------

B. Consideration of Approaches for Responding to the ACE Remand

As discussed in the previous section, we waived 500 million gallons
of total renewable fuel volume associated with the 2016 volume
requirements. In 2017, after the compliance year had passed, and after
obligated parties had complied with those requirements, we received the
ACE court's decision rejecting our use of the general waiver authority
under a finding of inadequate domestic supply to reduce volumes as
being beyond our statutory authority, and remanded the rulemaking
action back to EPA. In this action, we propose to address the court's
remand through a supplemental standard of 250 million gallons of total
renewable fuel in 2022, with the intent of proposing an additional
supplemental volume of 250 million gallons of renewable fuel to be
required in 2023 in a subsequent action. As the court invalidated only
the 500 million gallon total renewable fuel reduction, we therefore
would limit our response to the remand to only the 2016 total renewable
fuel standard and the corresponding 500 million gallon reduction
stemming from our use of the general waiver authority. As the total
renewable fuel volume is the outermost standard in the nested renewable
fuel standards, this approach would not affect the other standards.
1. Proposed Response to the ACE Remand
We are proposing to address the ACE decision by applying a
supplemental standard of 250 million gallons in 2022 with the intention
of proposing an additional 250-million-gallon supplemental standard in
a subsequent action for 2023. Under this approach, the original 2016
standard for total renewable fuel would remain unchanged and the
compliance demonstrations that obligated parties made for it would
likewise remain in place. A supplemental standard would thus avoid the
difficulties associated with reopening 2016 compliance, as discussed
below. This proposed supplemental standard would have the

[[Page 72459]]

same practical effect as increasing the 2022 total renewable fuel
volume requirement by 250 million gallons, as compliance would be
demonstrated using the same RINs as used for the 2022 standard. The
percentage standard for the supplemental standard would be calculated
the same way as the 2022 percentage standards (i.e., using the same
gasoline and diesel projections), such that the supplemental standard
would be additive to the 2022 total renewable fuel percentage standard.
The proposed approach would provide a meaningful remedy in response to
the court's vacatur and remand in ACE and would effectuate the
Congressionally determined renewable fuel volume for 2016, modified
only by the proper exercise of EPA's waiver authorities, as upheld by
the court in ACE. It is with emphasis on these considerations that we
are proposing a different approach from the one proposed in the 2020
proposal.\126\
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\126\ See FCC v. Fox, 556 U.S. 502 (2009), acknowledging an
agency's ability to change policy direction.
---------------------------------------------------------------------------

We propose to treat such a supplemental standard as a supplement to
the 2022 standards, rather than as a supplement to standards for 2016,
which has passed. In order to comply with any supplemental standard,
obligated parties would need to retire available RINs; it is thus
logical to require the retirement of available RINs in the marketplace
at the time of compliance with this supplemental standard. As discussed
below, there are insufficient 2015 and 2016 RINs currently available to
meet a supplemental 2016 standard, and additional 2015 or 2016 RINs
cannot be generated. By applying the supplemental standard to 2022
instead of 2016, RINs generated in 2021 and 2022 could be used to
comply with the 2022 supplemental standard.
In applying the supplemental standard to 2022, we would treat the
supplemental standards like a 2022 standard in all respects. That is,
producers and importers of gasoline and diesel that are subject to the
2022 standards would also be subject to the supplemental standard. The
applicable deadlines for attest engagements and compliance
demonstrations that apply to the 2022 standards would also apply to the
supplemental standard. The gasoline and diesel volumes used by
obligated parties to calculate their obligation would be their 2022
gasoline and diesel production or importation. Additionally, obligated
parties could use 2021 RINs for up to 20 percent of their 2022
supplemental standard.
As described more fully in Section III, the proposed volume
requirements for 2022 are forward leaning, requiring a growth in
renewable fuel volumes that we believe is achievable. We also believe
that compliance with the 2022 supplemental standard in addition to the
proposed standards for 2022 is feasible. If it cannot be fully met
through the supply of additional renewable fuel volumes in 2022, it
could be met through a drawdown of the carryover RIN bank.\127\ After
compliance with the 2019 standards, the carryover RIN bank is expected
to consist of approximately 1.85 billion total carryover RINs for
compliance in 2022 as discussed in Section IV.A.\128\ We acknowledge
that the size of the carryover RIN bank may change by the time this
action is finalized. However, given the projected size of the carryover
RIN bank, we think it is very likely that more than 250 million total
carryover RINs will be available in 2022 for compliance with the
supplemental standard, enabling the market to meet the supplemental
standard entirely with carryover RINs, if necessary.
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\127\ See Section IV.A for a discussion of carryover RINs.
\128\ The calculations performed to estimate the number of
carryover RINs currently available can be found in the memorandum,
``Carryover RIN Bank Calculations for 2020-2022 Proposed Rule,''
available in the docket for this action.
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We believe that the potential drawdown of the carryover RIN bank by
250 million RINs is appropriate. As we stated in the 2020 final rule,
``[t]he current bank of carryover RINs provides an important and
necessary programmatic and cost spike buffer that will both facilitate
individual compliance and provide for smooth overall functioning of the
program.'' \129\ As discussed in Section IV.A, we continue to believe
that a significant carryover RIN bank is fundamental to the
functionality and success of the RFS program. Therefore, we are
reluctant to take potentially counterproductive actions which would
force any significant drawdown of its volume. However, we believe that
the important programmatic benefits of the carryover RIN bank would be
preserved even if the market were to satisfy the supplemental standard
purely by drawing down the carryover RIN bank. It is important to note
that we would only be reducing the carryover RIN bank by up to 250
million RINs per year due to the phased-in nature of our response.
---------------------------------------------------------------------------

\129\ 85 FR 7020-22 (February 6, 2020).
---------------------------------------------------------------------------

By phasing in the 500 million gallons of total renewable fuel
associated with the ACE remand through the implementation of two
supplemental standards over two compliance years we believe we can
maintain the functionality of the carryover RIN bank and lessen both
the disruption to the market and the burden on obligated parties.
Imposing two 250 million gallon standards in two compliance years, as
opposed to one 500 million gallon supplemental standard in a single
compliance year, provides additional notice for both obligated parties
and the renewable fuel industry about the additional volume
requirements and lessens the additional requirements for each
compliance year. This could increase the likelihood that the volumes
are met with additional renewable fuel use and, in turn, lessen the
likelihood that the carryover RIN bank be drawn down.
In summary, we are proposing to implement a 250 million gallon
supplemental volume requirement in 2022 and intend to propose an
additional 250 million gallon supplemental volume requirement in 2023,
totaling 500 million gallons, that represent the reduction in the 2016
total renewable fuel volume improperly waived under the general waiver
authority. This approach would address our obligation to respond to the
ACE remand while accounting for the unique timing of imposing a 2016
requirement in 2022. Importantly, because there are insufficient 2015
and 2016 RINs to satisfy a supplemental standard, this approach would
allow obligated parties to comply with the 2022 supplemental standard
using 2021 and 2022 RINs. We seek comment on this approach of applying
a supplemental standard for 2022 associated with the ACE remand on top
of the proposed standards for 2022.
2. Reopening 2016 Compliance
In the alternative, we considered an approach where EPA could have
obligated parties comply with a modified 2016 total renewable fuel
standard that requires an additional 500 million gallons of renewable
fuel relative to the 2016 standard promulgated in 2015. However, we
have determined that such an approach would be impractical if not
infeasible to implement. Under our current regulations, only 2015 and
2016 RINs can be used to demonstrate compliance with the 2016
standard.\130\ There are far fewer 2015 and 2016 RINs available today
(i.e., RINs that are valid but have not already been retire

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