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Rule2022-12376

Renewable Fuel Standard (RFS) Program: RFS Annual Rules

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Published

July 1, 2022

Effective

August 30, 2022

Issuing agencies

Environmental Protection Agency

Abstract

Under section 211 of the Clean Air Act (CAA), the Environmental Protection Agency (EPA) is required to set standards every year to implement nationally applicable renewable fuel volume targets. This action modifies the 2021 and 2022 statutory volume targets for cellulosic biofuel, advanced biofuel, and total renewable fuel, as well as establishes the 2022 volume target for biomass-based diesel. This action also modifies the previously established cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements for 2020. In addition, this action establishes the 2020, 2021, and 2022 renewable fuel percentage standards for all four of the above biofuel categories. Finally, this action also addresses a judicial 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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[Federal Register Volume 87, Number 126 (Friday, July 1, 2022)]
[Rules and Regulations]
[Pages 39600-39677]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12376]

[[Page 39599]]

Vol. 87

Friday,

No. 126

July 1, 2022

Part II

Environmental Protection Agency

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40 CFR Parts 80 and 1090

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

Federal Register / Vol. 87 , No. 126 / Friday, July 1, 2022 / Rules
and Regulations

[[Page 39600]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 80 and 1090

[EPA-HQ-OAR-2021-0324; FRL-8521-01-OAR]
RIN 2060-AV11

Renewable Fuel Standard (RFS) Program: RFS Annual Rules

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under section 211 of the Clean Air Act (CAA), the
Environmental Protection Agency (EPA) is required to set standards
every year to implement nationally applicable renewable fuel volume
targets. This action modifies the 2021 and 2022 statutory volume
targets for cellulosic biofuel, advanced biofuel, and total renewable
fuel, as well as establishes the 2022 volume target for biomass-based
diesel. This action also modifies the previously established cellulosic
biofuel, advanced biofuel, and total renewable fuel volume requirements
for 2020. In addition, this action establishes the 2020, 2021, and 2022
renewable fuel percentage standards for all four of the above biofuel
categories. Finally, this action also addresses a judicial 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: This rule is effective on August 30, 2022. The incorporation by
reference of certain publications listed in this regulation is approved
by the Director of the Federal Register as of August 30, 2022. The
incorporation by reference of ASTM E711-87 (R2004) was approved by the
Director of the Federal Register as of July 1, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2021-0324. All documents in the docket are listed on the
<a href="https://www.regulations.gov">https://www.regulations.gov</a> website. Although listed in the index, some
information is not publicly available, e.g., confidential business
information (CBI) or other information whose disclosure is restricted
by statute. Certain other material is not available on the internet and
will be publicly available only in hard copy form. Publicly available
docket materials are available electronically through <a href="https://www.regulations.gov">https://www.regulations.gov</a>.

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#f0a2b6a3dda2859c959d919b999e9783b0958091de979f86">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION: Entities potentially affected by this 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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NAICS \1\ Examples of potentially
Category codes affected 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 lists the
types of entities that EPA is now aware could potentially be affected
by this action. Other types of entities not listed in the table could
also be affected. To determine whether your entity would be affected by
this 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 action to a particular entity, consult the person
listed in the FOR FURTHER INFORMATION CONTACT section.

Table of Contents

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
G. Administrative Actions
H. Biointermediates
I. Other Changes
J. Environmental Justice
K. 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. Severability
III. Volume Requirements
A. EPA's Assessment of the Statutory Factors for Each Component
Category of Biofuel
B. Interactions Between the RFS Annual Volumes
C. Volume Requirements for 2020
D. Volume Requirements for 2021
E. Volume Requirements for 2022
F. BBD Volume for 2022
G. Summary of the RFS Volumes for 2020-2022
H. Quantitative Impacts of the Volumes
IV. 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
V. Percentage Standards
A. Calculation of Percentage Standards
B. Small Refineries and Small Refiners
C. Modification of the 2020 BBD Percentage Standard
D. Percentage Standards for 2020-2022
VI. Administrative Actions
A. Assessment of the Domestic Aggregate Compliance Approach
B. Assessment of the Canadian Aggregate Compliance Approach
VII. Biointermediates
A. Background
B. Effect of This Action on Biointermediates Provisions Proposed
in the REGS Rule
C. Biointermediates Regulatory Provisions
D. Other Considerations Related to Biointermediates
VIII. Amendments to Fuel Quality and RFS Regulations

[[Page 39601]]

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. Esterification Pathway
H. Technical Amendments
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
K. Congressional Review Act (CRA)
X. Statutory Authority

A red-line version of the regulatory language that incorporates the
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 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, expressed as annual percentage standards, that
obligated parties must meet every year.
In this action we are establishing 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 modifying the applicable volumes that EPA
previously established for cellulosic biofuel, advanced biofuel, and
total renewable fuel for 2020.2 3 We are also establishing
the annual percentage standards (also known as ``percent standards'')
for cellulosic biofuel, BBD, advanced biofuel, and total renewable fuel
that apply to gasoline and diesel fuel produced or imported by
obligated parties in 2020, 2021, and 2022. In addition, we are
addressing the remand of the 2016 annual rule by the U.S. Court of
Appeals for the D.C. Circuit, in Americans for Clean Energy v. EPA, 864
F.3d 691 (2017) (hereafter ``ACE'') by establishing a supplemental
volume of 250 million gallons for 2022. EPA intends to establish 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 resetting 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. This is consistent with the findings in the 2019 and 2020
final rules, which established the 2020 and 2021 BBD volumes
respectively, anticipating that additional BBD would be used above
the BBD volumes to satisfy the advanced biofuel standards. Thus, we
see no need to retroactively reconsider the BBD volumes in any
event. As discussed in Section III.F, we are setting the 2022 BBD
volume pursuant to our ``set'' authority under CAA section
211(o)(2)(B)(ii).

Table I-1--Final Volume Requirements
[Billion RINs] \a\
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Category 2020 2021 2022
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Cellulosic Biofuel.............................................. 0.51 0.56 0.63
Biomass-Based Diesel \b\........................................ \c\ 2.43 \d\ 2.43 2.76
Advanced Biofuel................................................ 4.63 5.05 5.63
Total Renewable Fuel............................................ 17.13 18.84 20.63
Supplemental Standard........................................... n/a n/a \e\ 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).
\e\ The supplemental standard is an additional total renewable fuel obligation. Thus, the total renewable fuel
obligation for 2022 is 20.87 billion RINs; 20.63 billion RINs for the 2022 total renewable fuel standard and
0.25 billion RINs for the supplemental standard. The supplemental standard can be satisfied with any category
(D3, D4, D5, D6, or D7) of RIN.

Finally, we are finalizing 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.
The RFS program is an important federal policy supporting the
production of low-greenhouse gas (GHG) renewable fuels, which are an
important element of addressing climate change through transportation
policy. Expanding the production and use of renewable fuels also helps
protect Americans from volatile crude oil prices by reducing our
reliance on fossil fuels. As detailed in this rule's Regulatory Impact
Analysis (RIA), EPA estimates that this rule will reduce the imports of
crude oil and refined products by approximately 2.9 billion gallons. We
have estimated that these reductions in imports will result in $227
million of energy security benefits. The actual energy security
benefits could be higher as this estimate does not consider military
cost impacts of changes to U.S. imports of crude oil and refined
products. Finally, increasing the domestic production and use of
renewable fuels will also create good-paying American jobs; support our
rural

[[Page 39602]]

economies, American agriculture, and manufacturing; and reduce the
impacts of climate change.
The final volume requirements in this action, combined with the
changes EPA is separately taking with respect to the small refinery
exemption (SRE) program, will provide much-needed stability to the RFS
program. It will also strengthen the role of the program in advancing
greater use of domestically produced low-carbon renewable fuels that
are critical to building real energy independence in the long-term.
Throughout this document, EPA discusses and addresses comments on
the proposed rule that stakeholders submitted to EPA; more in-depth
responses are located in a separate Response to Comments (RTC)
document, available in the docket for this action. EPA also prepared an
RIA to support this final rule, available in the docket for this
action.

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 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 establishing 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 that are retroactive (i.e., rules that apply to conduct
prior to the rule becoming effective) and late (i.e., rules promulgated
after the statutory deadline).\5\ Namely, EPA generally has authority
to promulgate such RFS rules, but EPA must reasonably consider and
mitigate the burdens on obligated parties caused by the issuance of
these rules after the statutory deadline. Several aspects of this
rulemaking are either retroactive or are being finalized after the
statutory deadline, or both. Therefore, we consider this caselaw as
required by the D.C. Circuit and consistent with our obligation to act
reasonably. 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, 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). EPA signed this rulemaking on
December 19, 2019.
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<bullet> The COVID-19 pandemic, which caused a major drop in
transportation fuel demand, a disproportionate fall in gasoline demand
relative to diesel demand, and significantly reduced production and use
of biofuels in 2020 below the volumes we anticipated could be achieved,
and
<bullet> The volume of gasoline and diesel fuel exempted from 2020
RFS obligations through SREs is far lower than projected in the 2020
final rule.
These events adversely affected 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 proposed to
retroactively adjust the 2020 volumes and standards to reflect the
actual volumes of renewable fuels and transportation fuel consumed in
the U.S. in 2020.\8\ In this final rule we are establishing revised
volumes and standards for 2020 based on the actual volumes of renewable
fuel and transportation fuel used in the U.S. in 2020, as we proposed.
As we discuss further in Section III, the revised renewable fuel
volumes are supported by our analysis of the statutory factors that we
must consider when resetting RFS volumes. Our decision to use updated
data on actual transportation fuel consumption is further explained in
Section V.
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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
subsequently further extended that deadline in a separate action (87
FR 5696, February 2, 2022).
\8\ We also call such volumes the volumes that are actually
consumed, actually used, 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).
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C. 2021 Volumes

For 2021, we proposed establishing volumes that were equal to the
volumes of cellulosic biofuel, advanced biofuel, and total renewable
fuel that were projected to be used in the U.S. in 2021 based on data
available at the time of the proposed rule. We also indicated our
intent to update these projections in the final rule. As discussed in
further detail in Section III, 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 no ability to incentivize increased
production and use of renewable fuel in 2021. Consistent with our
proposed rule, we are finalizing volumes for 2021

[[Page 39603]]

that are equal to the actual volumes of cellulosic biofuel, advanced
biofuel, and total renewable fuel that were used in the U.S. in 2021.

D. 2022 Volumes

For 2022 we proposed a cellulosic biofuel volume that was equal to
the volume of qualifying cellulosic biofuel projected to be used in the
U.S. in 2022 and volumes of non-cellulosic advanced biofuel and
conventional renewable fuel that were consistent with the implied
statutory targets for these categories. These volumes were
significantly higher than the proposed volumes for 2020 and 2021. In
this final rule we are establishing volumes for 2022 that are
consistent with the proposed volumes, after updating our projection of
cellulosic biofuel use in 2022 using more recent data. As we discuss
further in Section III, 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 (particularly given the partially prospective nature of the
2022 standards relative to the entirely retrospective 2020 and 2021
standards), 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.\9\ The volumes for 2022 also reflect market
constraints on 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. Finally, the volumes for 2022 take into consideration the
potential adverse impacts of the renewable fuel volumes on several
statutory factors including wildlife habitat, water quality, and water
supply.
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\9\ Throughout this document we often refer to the ``potential''
impacts (positive or negative) of increased biofuel production to
highlight that there is uncertainty associated with these impacts.
The lack of the qualifying word ``potential,'' however, does not
mean that there is no uncertainty. For a fuller discussion of the
uncertainty associated with these impacts see the RIA.
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E. Response to the ACE Remand

In 2015, EPA established the total renewable fuel standard for
2016. As part of that rule, EPA 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.\10\ Several
parties challenged that action, and in ACE 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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\10\ 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 IV, we are adding a
supplemental volume obligation of 250 million gallons, which will be
implemented as a supplemental 2022 standard as we proposed. 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 finalizing
annual standards for 2020, 2021, and 2022 for all four categories of
renewable fuel. We are also finalizing 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 petroleum-based gasoline
or diesel fuel 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. In the 2020 final
rule, we modified the formulas used to calculate the percentage
standards to account for a projection of exempt gasoline and diesel
fuel volumes produced by small refineries and small refiners.\11\ After
seeking comment on this issue in the proposed rule, we are maintaining
the modified formula. Additionally, we project that no exemptions will
be granted for 2020-2022, and thus the exempt volume of gasoline and
diesel fuel will be zero for all three years.
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\11\ 85 FR 7016 (February 6, 2020).
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Four separate percentage standards are required under the RFS
program, corresponding to the four separate renewable fuel categories
shown in Table I-1. The final standards are shown in Table I.F-1.
Details, including the projected gasoline and diesel fuel volumes used,
can be found in Section V. Further details regarding the supplemental
standard can be found in Section IV.

Table I.F-1--Percentage Standards
----------------------------------------------------------------------------------------------------------------
Category 2020 (%) 2021 (%) 2022 (%)
----------------------------------------------------------------------------------------------------------------
Cellulosic Biofuel.............................................. 0.32 0.33 0.35
Biomass-Based Diesel............................................ 2.30 2.16 2.33
Advanced Biofuel................................................ 2.93 3.00 3.16
Renewable Fuel.................................................. 10.82 11.19 11.59
Supplemental Standard........................................... n/a n/a 0.14
----------------------------------------------------------------------------------------------------------------

G. Administrative Actions

The regulations promulgated in 2010 require EPA to make an annual
finding concerning whether the 2007 baseline amount of U.S.
agricultural land has been exceeded in a given year. If the baseline is
found to have been exceeded, then producers using U.S. planted crops
and crop residue as feedstocks for renewable fuel production would be
required to comply with individual recordkeeping and reporting
requirements to verify that their feedstocks are renewable biomass. As
discussed in Section VI, we have concluded that 2007 baseline acreage
has not been exceeded.

H. Biointermediates

Since the RFS2 program was finalized in 2010, we have become
increasingly

[[Page 39604]]

aware that some renewable fuel producers 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, such as
separated municipal solid waste (MSW), may be converted into biocrude--
a biointermediate--at one facility, after which the biointermediate
producer would send the biocrude to a petroleum refinery that would
further process the biocrude to produce a renewable gasoline or
renewable diesel fuel. Such 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.
In this action, we are finalizing provisions to allow for the use
of certain biointermediates to produce qualifying renewable fuels.
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
further discuss the biointermediates provisions in Section VII.

I. Other Changes

We are finalizing regulatory changes that will assist EPA in
implementing our fuel quality and RFS programs. These regulatory
changes include:

<bullet> Changes to registration requirements concerning 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 pathways for stand-alone esterification
<bullet> Other technical amendments to the RFS regulations

Each of these regulatory changes is discussed in greater detail in
Section VIII.

J. 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 people of color 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.\12\ 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.\13\
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\12\ 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>.
\13\ 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/default/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf">https://www.epa.gov/sites/default/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 people
of color, 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 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''), EPA considered how climate change threatens
the health and welfare of the U.S. population. As part of that
consideration, EPA also considered risks to people of color 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

[[Page 39605]]

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),14 15 the
Intergovernmental Panel on Climate Change (IPCC),16 17 18 19
and the National Academies of Science, Engineering, and Medicine
20 21 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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\14\ 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.
\15\ 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="https://dx.doi.org/10.7930/J0R49NQX">https://dx.doi.org/10.7930/J0R49NQX</a>.
\16\ 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.
\17\ 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.
\18\ 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.
\19\ 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.
\20\ 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>.
\21\ 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 rule has the potential to reduce GHG emissions, which would
benefit all populations including people of color, low-income
populations, and indigenous populations. The manner in which the market
responds to the provisions in this final rule could also have non-GHG
impacts, including both positive and negative 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. Replacing petroleum fuels with renewable
fuels is also projected to cause increases in food and fuel prices, and
these price impacts could also disproportionately affect low-income
populations who spend a larger portion of their income on food and
fuel.
The overall EJ implications of these non-GHG impacts is uncertain.
Specifically, it is uncertain whether these impacts are unevenly
distributed spatially in ways that coincide with patterns of pre-
existing exposure and vulnerabilities for people of color, low income
populations, and indigenous peoples. Accurately evaluating the EJ
implications would entail predicting where changes in production of
renewable fuels and land use occur at a fine spatial scale. That is
beyond the scope of our analysis in this rule. A more detailed
discussion of potential EJ concerns as a result of this action can be
found in Chapter 8 of the RIA.

K. 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 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 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
EPA to make an appropriate effects determination. See id. at 598.
On July 16, 2021, the D.C. Circuit 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 EPA 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 ESA section 7(a)(2) and relevant ESA implementing
regulations at 50 CFR part 402, EPA has been engaged in informal
consultation

[[Page 39606]]

including technical assistance discussions with the Services regarding
this rule for over a year.\22\ EPA has prepared an ESA section 7(d)
determination memorandum that discusses our decision to finalize this
action before the consultation process is complete, which is also
available in the docket for this action.23 24
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\22\ A chronology of these interactions between EPA and the
Services is available in the docket for this action. ``Technical
assistance'' and ``informal consultation'' are terms used to
describe aspects of ESA consultation with the Services, as detailed
in the ESA Section 7 Consultation Handbook, March 1998 (available at
<a href="https://media.fisheries.noaa.gov/dam-migration/esa_section7_handbook_1998_opr5.pdf">https://media.fisheries.noaa.gov/dam-migration/esa_section7_handbook_1998_opr5.pdf</a>).
\23\ Section 7(d) of the ESA prohibits a federal agency from
making irreversible or irretrievable commitments of resources that
have the effect of foreclosing the formulation or implementation of
reasonable and prudent alternatives which would not violate ESA
section 7(a)(2).
\24\ EPA intends to respond to the D.C. Circuit's remands of the
ESA determinations made in the 2018 and 2019 RFS rules in a separate
proceeding.
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II. Legal Authorities To Reduce and Establish Volumes

The CAA provides EPA with several authorities to reduce or
establish the nationally applicable renewable fuel volumes. In this
action, as proposed, we are utilizing the cellulosic waiver authority
along with the ``reset'' waiver authority to reduce the applicable
volumes for 2020, 2021, and 2022 for total renewable fuel, advanced
biofuel, and cellulosic biofuel. We are also utilizing our ``set''
authority to establish the 2022 applicable volume for BBD. We have also
considered but declined to make reductions utilizing our ``general''
waiver authority.
This section discusses the statutory authorities, additional
factors we considered due to the retroactivity or lateness of this
rulemaking, additional factors related to our reconsideration of the
previously finalized standards for 2020, how we are applying our
authorities to establish the volumes, as well as the severability of
the various portions of this final rule. A detailed summary of the
comments received on EPA's legal authorities to reduce and establish
volumes and our responses to those comments can be found in the Section
2 of the RTC document.

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 volume requirements different from the statutory volume
targets and thus provided waiver provisions in CAA section 211(o)(7).
In this action, 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. We are not
using our general waiver authority. In addition, while in January 2021
we sought comment on the use of general waiver authority to reduce
volumes for 2020 in response to several petitions from states and
obligated parties submitted during the 2020 compliance year,\25\ we
have determined that reductions under the general waiver authority are
not necessary or appropriate in light of our decision to waive the
volumes using our other authorities.
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\25\ See 86 FR 5182 (January 19, 2021).
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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 established under CAA section
211(o)(2)(B), then EPA must reduce the applicable volume of cellulosic
biofuel to the projected volume available for that calendar year. In
making this projection, EPA must take a ``neutral aim at accuracy.''
American Petroleum Institute (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 EPA 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 2017 final rule.\26\
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\26\ 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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In this action, as proposed, we are utilizing the cellulosic waiver
authority as required by the statute to reduce the applicable volume of
cellulosic biofuel for 2020, 2021, and 2022. As described in Chapter 4
of the RIA, 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 to the projected volume
available in each year. Our interpretation of the ``projected volume
available'' includes 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. Consistent with our past
interpretation of the term as discussed further in Section III.B.2, it
does not include cellulosic carryover RINs. We are also utilizing the
cellulosic waiver authority as a basis for reductions in the total
renewable fuel and advanced biofuel applicable volumes for 2022.
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. In this
action, as proposed, we are utilizing the reset authority to modify the
volume requirements for 2020, 2021, and 2022 as required by the statute
and after careful consideration of the many comments received.
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
standards, these conditions have been met for three categories of
biofuel: cellulosic biofuel, advanced biofuel, and total renewable
fuel.\27\ We describe below, for each

[[Page 39607]]

category of biofuel, how these conditions were satisfied.
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\27\ Because the statutory volumes for BBD 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. In that rule, we waived the
cellulosic biofuel applicable volume for the first time using the
cellulosic waiver authority.\28\ We set the cellulosic biofuel
applicable volume at 6.5 million gallons for 2010.\29\ This waiver
resulted in an applicable volume that was 93.5 percent lower than the
applicable volume requirement provided in the statute (100 million
gallons), 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 statute did not require a change to the applicable
volumes until 2016.\30\
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\28\ 75 FR 14670 (March 26, 2010).
\29\ 75 FR 14675.
\30\ We note that all subsequent annual rules have also waived
the cellulosic biofuel volume by more than 50 percent.
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The conditions for resetting advanced biofuel volumes were met by
the 2014 and 2015 annual standards, which reduced the advanced biofuel
applicable 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.\31\ We set the advanced biofuel volume at 2.67 billion
gallons.\32\ This represented a reduction of 28.8 percent from the
applicable volume requirement provided in the statute (3.75 billion
gallons). 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.\33\ This represented a
reduction of 47.6 percent from the applicable volume requirement
provided in the statute (5.5 billion gallons). 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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\31\ 80 FR 77420 (December 14, 2015).
\32\ Id.
\33\ 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.\34\ This represented a reduction
of 25.8 percent from the applicable volume requirement provided in the
statute (26 billion gallons). 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 volume to 19.92 billion gallons.\35\ This represented a
reduction of 29 percent from the applicable volume requirement provided
in the statute (28 billion gallons). 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).
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\34\ 82 FR 58486 (December 12, 2017).
\35\ 83 FR 63704 (December 11, 2018).
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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 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 United States;
<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
United States, 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.
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 provides authoritative guidance on 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.'' \36\ We received
comments on this issue, with some commenters suggesting that we should
give more weight to certain factors than others; our responses can be
found in Section 2 of the RTC document.
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\36\ 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. .
. .'' \37\ 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,\38\ how the entirely
retroactive nature of the 2020 and 2021 standards as compared to the
partially prospective nature of the 2022 annual and supplemental
standards affects the feasibility of compliance,\39\ the supply of
qualifying renewable fuels to U.S.

[[Page 39608]]

consumers,\40\ soil quality,\41\ and environmental justice.\42\
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\37\ CAA section 211(o)(2)(B)(ii)(VI).
\38\ The first two factors also inform our analysis of the
statutory factor ``review of the implementation of the program.''
CAA section 211(o)(2)(B)(ii).
\39\ 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).
\40\ The fourth factor (supply of renewable fuels) is based on
our analysis of this same statutory factor (the expected annual rate
of future commercial production of renewable fuel), 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)(III)-(V).
\41\ Soil quality is closely tied to water quality and is also
relevant to the impact of renewable fuels on the environment more
generally. See CAA section 211(o)(2)(B)(ii)(I).
\42\ Environmental justice involves consideration of the impact
of renewable fuels on several factors, including environmental and
cost factors. See CAA section 211(o)(2)(B)(ii)(I), (V). 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 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.\43\
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\43\ 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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d. Use of the Reset Authority in This Action
For cellulosic biofuel for 2020, 2021 and 2022, we believe that the
appropriate volume after analyzing the various factors is the projected
volume available in each of those years. For each year, this volume is
equivalent to the resulting volume after exercise of the cellulosic
waiver authority. Thus, these volumes are justified under both the
cellulosic waiver authority and the reset authority.
For advanced biofuel and total renewable fuel, we are establishing
volumes equal to the actual volumes of such fuels available in 2020 and
2021 under the reset authority alone. We recognize that the resulting
volumes are lower than the minimum volumes that could result from
exercising 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.\44\ In other words, larger
reductions in advanced biofuel and total renewable fuel are warranted
under the reset authority than could be provided utilizing the maximum
reductions permissible under the cellulosic waiver authority alone. For
2022, we are utilizing both the reset authority and the cellulosic
waiver authority to reduce the advanced biofuel and total renewable
fuel standards by the same amount as the reduction in cellulosic
biofuel. This results in implied non-cellulosic advanced biofuel and
conventional renewable fuel volumes equal to the implied statutory
volumes. This also represents the maximum permitted reduction under the
cellulosic waiver authority.\45\
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\44\ 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.
\45\ 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).
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In Section III and throughout the RIA, we set forth our policy and
technical rationale for the 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. 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.
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)
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 alleging
that the criteria for the general waiver authority were satisfied and
that lowering the required volumes for 2020 was appropriate. In January
2021, we published a notice in the Federal Register seeking comment on
these requests.\46\ We did not propose to and are not modifying the
2020 volumes utilizing the general waiver authority in this action. In
lieu of doing so, we are revising the 2020 volumes under both the
cellulosic waiver authority and the reset authority to the volumes
actually used in that year. This rule thus 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 Renewable Fuels Association
(RFA) v. EPA, and the hurdles those may present to obligated parties'
compliance.
---------------------------------------------------------------------------

\46\ 86 FR 5182 (January 19, 2021). Comments on these requests
are available in the docket for that notice, EPA-HQ-OAR-2020-0322,
and the docket for this action.
---------------------------------------------------------------------------

To the extent that EPA's independent action to reduce statutory
volumes under both the cellulosic waiver authority and the reset
authority satisfies the petition requests, those requests are now
practically moot. To the extent any petition seeks differing reductions
in applicable volumes than are set forth in this final rule, we believe
the reductions we are finalizing are appropriate, and we are denying
those requests. As discussed in Section III, the modified 2020 volumes
reflect the volumes actually used in the U.S. in 2020. Thus, compliance
with these modified volumes will not result in severe economic harm,
and granting the general waiver petitions is not needed to avert such
harm. As such, EPA is denying all pending requests to lower the 2020
volumes based on severe economic harm. Specifically, we are denying the
petitions to waive the 2020 standards on the basis of severe economic
harm from the following states: Louisiana, Oklahoma, Texas, Utah,
Wyoming, Pennsylvania, and Montana. We are also denying petitions
received from small refineries suggesting EPA waive volumes for 2019
and 2020 utilizing the general waiver authority under a finding of
severe economic harm. These requests sought reductions in individual
obligations utilizing the general waiver authority under a finding of
severe economic harm. For the reasons further discussed in Section 13
of the RTC document, we do not think that the statute should be read to
allow for individual reductions in renewable volume obligations (RVOs)
under the general waiver authority, nor do we believe that the
petitioners have

[[Page 39609]]

demonstrated severe economic harm as required by the statute.

B. Authority To Establish BBD Volumes

EPA has established the BBD requirement under CAA section
211(o)(2)(B)(ii) since 2013 because the statute only provided BBD
volumes through 2012. Thus, EPA is establishing an applicable volume
for BBD for 2022 under this authority, which we term the ``set''
authority.\47\ 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.\48\ The statute
also requires that the BBD volume be set at or greater than the 1.0
billion gallon volume requirement for 2012, but does not provide any
other numerical criteria that EPA is to consider. We are establishing
the BBD volume for 2022 at 2.76 billion gallons as proposed. Our policy
and technical rationale for this volume is also set forth in Section
III and Chapter 10 of the RIA.
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\47\ The applicable volume for BBD for 2021 was established in
the 2020 annual rulemaking. 85 FR 7016 (February 6, 2020).
\48\ 85 FR 7016, 7047-7048 (February 6, 2020).
---------------------------------------------------------------------------

C. Considerations for Retroactive and Late Rulemaking

In this rulemaking, we proposed and are finalizing several late or
retroactive standards. EPA has in the past also missed statutory
deadlines for promulgating RFS standards. In those cases, the D.C.
Circuit found that EPA retains authority to promulgate annual standards
retroactively, so long as EPA exercises this authority reasonably.\49\
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.\50\ Even if the rule does not operate
retroactively, but is nonetheless promulgated after the statutory
deadline, EPA must consider and mitigate the burdens on obligated
parties associated with a delayed rulemaking.\51\ In upholding EPA's
retroactive standards for 2014 and 2015 in ACE, for example, 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.\52\
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\49\ 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).
\50\ NPRA, at 154-58 (D.C. Cir. 2010).
\51\ ACE, 864 F.3d 691, 718 (D.C. Cir. 2017).
\52\ Id. at 721.
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In this rulemaking, we are exercising the reset authority after the
statutory deadline of December 11, 2019 (i.e., one year after the
promulgation of the 2019 final rule, which triggered the reset
obligation for total renewable fuel).\53\ We are also exercising our
set authority for the 2022 BBD volume after the statutory deadline of
October 31, 2020. We are also promulgating the 2020, 2021, and 2022
standards after their statutory deadlines of November 30, 2019, 2020,
and 2021 respectively.\54\ The 2020 and 2021 standards are retroactive
as they apply to gasoline and diesel fuel produced or imported in 2020
and 2021. The 2022 standards, which apply to gasoline and diesel fuel
produced or imported in 2022, are partially retroactive and partially
prospective. We discuss in detail the considerations for late or
retroactive rulemaking for each of these requirements further in
Section III.
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\53\ This was the deadline for resetting total renewable fuel
volumes. The deadlines for resetting advanced biofuel and cellulosic
biofuel volumes passed earlier.
\54\ These are also the deadlines for exercising the cellulosic
waiver authority for those years, which we have also missed.
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In addition, in responding to the ACE remand of the 2016 annual
rule, EPA is promulgating a supplemental standard for 2022.\55\ We are
finalizing this supplemental standard after the statutory deadline for
the 2016 standards (November 30, 2015). As with the other 2022
standards, this standard will also be partially retroactive and
partially prospective. We further discuss our response to the ACE
remand in Section IV.
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\55\ We also intend to propose a supplemental standard for 2023
in a subsequent action.
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D. Considerations in Revisiting an Established RFS Standard

We are revising the previously finalized 2020 standards in this
rulemaking as proposed and after considering the many comments received
both for and against doing so. We generally have authority to
reconsider and revise our rulemakings, so long as we use the same
procedures to amend a rule as we used to promulgate it in the first
instance and set forth good reasons for the reconsideration.\56\ Our
authority to revise RFS annual rules specifically is further buttressed
by the statutory structure, under which Congress created a prospective
regulatory scheme,\57\ but expressly contemplated the possibility for
adjustments based on unanticipated circumstances through waiver
authorities.\58\ This understanding of our authority is also long-
standing; we previously revised the 2011 and 2013 annual rules and have
also adjudicated on the merits numerous petitions to revise other
annual rules.\59\ We believe our power to reconsider, as with our power
to promulgate a rule in the first instance, remains extant even where
the rule operates retroactively or is promulgated after the statutory
deadline, so long as we reasonably consider and mitigate the burdens
associated with a retroactive or delayed rulemaking as described above.
---------------------------------------------------------------------------

\56\ See Motor Vehicle Manufacturers Ass'n v. State Farm Mutual
Automobile Insurance Co., 463 U.S. 29, 42, (1983) (``an agency must
be given ample latitude to adapt their rules and policies to the
demands of changing circumstances); Federal Communications
Commission (FCC) v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009) (recognizing that the Administrative Procedure Act ``makes no
distinction . . . between initial agency action and subsequent
agency action undoing or revising that action''); Perez v. Mortg.
Bankers Ass'n, 575 U.S. 92, 101 (2015) (agencies may amend rules by
using ``the same procedures when they amend . . . a rule as they
used to issue the rule in the first instance''); 5 U.S.C. 553(e)
(``Each agency shall give an interested person the right to petition
for the issuance, amendment, or repeal of a rule.'').
\57\ See, e.g., CAA section 211(o)(2)(B)(i) (statutory volume
table prospectively determined by Congress), (o)(3)(B) (requirement
for EPA to prospectively establish renewable fuel standards for the
following year by Nov. 30 of the prior year).
\58\ CAA section 211(o)(7).
\59\ See 79 FR 25025 (May 2, 2014) (direct final rule adjusting
the 2013 cellulosic biofuel applicable volume and percentage
standard, after the compliance year was complete), 80 FR 77420
(December 14, 2015) (rescinding the 2011 cellulosic biofuel standard
for utilizing methodology invalidated by the court); Denial of AFPM
Petition for Waiver of 2016 Cellulosic Biofuel Standard, available
at: <a href="https://www.epa.gov/sites/default/files/2017-01/documents/afpm-rfs-petition-decision-ltr-2017-01-17.pdf">https://www.epa.gov/sites/default/files/2017-01/documents/afpm-rfs-petition-decision-ltr-2017-01-17.pdf</a>; 77 FR 70752 (November 27,
2012) (notice of denial of requests for a waiver of the renewable
fuel standards for 2012-2013).
---------------------------------------------------------------------------

Despite our legal authority to reconsider past RFS standards, we
believe that we generally should not reconsider such standards.
Reconsideration can impose costs on regulatory certainty and unduly
disrupt market expectations created by previously promulgated
standards. This may be particularly so where the effects of
reconsideration are retroactive, and such retroactive rules must, as
discussed above, consider and mitigate burdens on obligated parties.
Moreover, in the 2020 final rule itself, we expressly stated that we
did not intend,

[[Page 39610]]

at that time, to revisit that rulemaking and subsequently adjust the
standards.\60\
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\60\ See Response to Comments at 173 (Docket Item No. EPA-HQ-
OAR-2019-0136-2157).
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At the same time, reconsideration can also address the impacts of
unexpected actions and market disruptions that occur after the
standards have been set and that lead to high costs and uncertainty
over future standards. In this action we are reconsidering and revising
the 2020 standards in response to several unanticipated and exceptional
events that have occurred since the promulgation of the 2020 standards
and that have had direct and significant impacts on the fuels market
and the ability of obligated parties to comply. We believe these events
have created the unusual situation where retroactive reconsideration
and revision of the 2020 standards is warranted. We discuss these
events and our rationale for revising the 2020 standards further in
Section III.C.\61\
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\61\ EPA also received two petitions from the American Fuel &
Petrochemical Manufacturers (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 7,016 (Feb. 6, 2020) (Mar. 24, 2020); API,
Petition for Reconsideration of the RFS 2020 Rule, EPA-HQ-OAR-2019-
0136 (April 6, 2020). In the proposed rule, we did not determine
whether these petitions met the standards for reconsideration under
CAA section 307(d)(7)(B). Nonetheless, for the reasons described in
this preamble, we believe it is appropriate to reconsider the 2020
standards, and we have provided the procedural process (i.e., a CAA
section 307(d) rulemaking to reconsider the 2020 standards)
requested in the petitions.
---------------------------------------------------------------------------

E. Severability

The following portions of this rulemaking are mutually severable
from each other, as numbered: (1) the volumes and percentage standards
for 2020, 2021, and 2022; (2) the reaffirmation of the modified
definitions in the percentage standard formulas regarding the
projection of exempt gasoline and diesel fuel volumes discussed in
Section V.B; (3) the 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 modified definitions in the percentage standard formula,
we intend the remainder of the rule (including the 2020-2022 volumes
and percentage standards, biointermediates provisions, and other
regulatory amendments) to remain effective.\62\
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\62\ We recognize that we apply the modified definitions in
calculating the percentage standards. However, as we explain further
in Section V.B, even were we to use the prior definitions relating
to SREs in the standard-setting formula, we would still project the
same exempt volume of zero gallons. As a result, the application of
the modified definitions does not affect and is severable from the
percentage standards.
---------------------------------------------------------------------------

We also intend for the volumes and percentage standards for 2020-
2022 to be severable from the 2022 supplemental volume and percentage
standard such that if a court were to set aside the 2022 supplemental
volume and percentage standard, the volumes and percentage standards
for 2020-2022 would remain in place. Our authority and rationale for
establishing the 2020-2022 volumes and standards is independent of
those for establishing the supplemental volume and standard, and we do
not believe that it would be appropriate to further delay
implementation of the former if a court were to find defects in the
latter. However, if the reverse were to occur, and a court were to set
aside the 2020-2022 volumes and percentage standards, we would intend
for the 2022 supplemental standard to be set aside along with the 2020,
2021, and 2022 volumes and percentage standards. This is because we do
not find it appropriate for the 2022 supplemental standard to exist
without the standard to which it is supplemental, i.e., the 2022 total
renewable fuel standard. As a practical matter, we also expect
obligated parties to comply with the supplemental standard in the same
compliance demonstration as the rest of the 2022 standards, as
discussed further in Section IV.C.

III. Volume Requirements

In this rule we are establishing 2020, 2021, and 2022 cellulosic
biofuel, advanced biofuel, and total renewable fuel volumes under the
reset authority.\63\ We are establishing the 2022 BBD volume under our
set authority. The volumes we are establishing in this rule are
generally consistent with the proposed volumes, with relatively minor
adjustments to reflect updated data since the time of the proposed
rule. 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 final rule.
---------------------------------------------------------------------------

\63\ As we explained in Section II.D, some of the volumes we are
establishing 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 advanced biofuel, and conventional renewable fuel.\64\ In
Section III.B we discuss the relationship between the volume
requirements for all three years as part of our review of the
implementation of the program. In Sections III.C through G, we describe
the volumes for 2020, 2021, and 2022, along with our supporting
assessment of the statutory factors. In Section III.H, we summarize the
fuel costs and energy security benefits of the volumes. 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
RIA.
---------------------------------------------------------------------------

\64\ 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

The volumes for 2020, 2021, and 2022 we are finalizing in this rule
are based on our analyses of the statutory factors listed in CAA
section 211(o)(2)(B)(ii). This section summarizes the results of our
analyses. We received numerous comments on the supporting analyses
presented in the Draft RIA of the proposed rule. The summaries
presented here reflect these comments, where appropriate, as well as
updated data since the time of the proposed rule. Further detail on our
analyses of the statutory factors for each of the biofuel types can be
found in the RIA. Additionally, a summary of the comments received on
the analyses presented in the proposed rule can be found in the RTC
document.
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.\65\ This indicates that Congress

[[Page 39611]]

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. Further,
none of the feedstocks expected to be used to produce cellulosic
biofuels through 2022 are specifically produced to be used as
feedstocks for cellulosic biofuel production.
---------------------------------------------------------------------------

\65\ 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 percent (13.0 billion
gallons/15.5 billion gallons) of the total renewable fuel increase.
---------------------------------------------------------------------------

Compressed natural gas and liquid natural gas (CNG/LNG) derived
from biogas represents the vast majority of the cellulosic biofuel
volume projected through 2022. It 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, or food prices. 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-based natural gas. Despite this
relatively low cost of production, the combination of the high
cellulosic RIN price and the significant volume potential for CNG/LNG
derived from biogas is expected to increase the price of gasoline and
diesel by about $0.01 per gallon.\66\
---------------------------------------------------------------------------

\66\ See Chapters 5.1.2.2 and 9.4.3.2 of the RIA for a further
discussion of the expected impact of RINs generated for CNG/LNG
derived from biogas on the transportation fuel market.
---------------------------------------------------------------------------

A small amount of liquid cellulosic biofuel was produced in 2020
and 2021 and efforts continue to develop and commercialize various
technologies. Many of their feedstocks (including agricultural residues
and separated MSW) have limited uses in other markets.\67\ 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.
---------------------------------------------------------------------------

\67\ 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.
---------------------------------------------------------------------------

However, 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 incentives from
state-level programs such as California's low carbon fuel standard
(LCFS) program) to be economically competitive with petroleum-based
fuels.
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 biofuel standard. The statutory target for advanced
biofuel in 2022 (21 billion gallons) allows 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 BBD, 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 biofuels, such as biodiesel
and renewable diesel produced from fats, oils, and greases, have been
determined to provide even greater reductions than the 50 percent
threshold.
Because the vast majority of non-cellulosic advanced biofuels
supplied to the U.S. historically have been advanced biodiesel and
renewable diesel, this summary focuses on the impacts of these fuels.
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 are expected to supply all of the increase in
advanced biofuel through 2022. High domestic production capacity and
availability of imports indicate that volumes of non-cellulosic
advanced biofuel in 2022 are likely to exceed the implied statutory
targets. Similarly, the feedstocks used to make advanced biodiesel and
renewable diesel (e.g., 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 have many existing
uses, such that significant increases in volumes used for biofuels may
potentially require replacement in other markets with suitable
substitute feedstocks such as imported vegetable oils (including palm
oil). However, there is also potential for some ongoing growth in the
production of these feedstocks. As such, higher volume requirements for
non-cellulosic advanced biofuel may provide benefits to the rural
economy, such as increased domestic employment in the biofuels industry
and increased 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
RIA, the cost of biodiesel and renewable diesel is significantly higher
than petroleum-based diesel fuel and is expected to remain so through
2022. These high costs are expected to result in higher fuel prices,
especially for consumers of finished fuels with relatively low
renewable content (e.g., most diesel fuel). This in turn is expected to
increase the cost to transport goods. Even if biodiesel and renewable
diesel blends are priced similarly to petroleum diesel fuel 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 RIA, 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 support significant
increases in advanced biodiesel and renewable diesel through 2022 will
be soybean oil and other vegetable oils whose primary markets are for
food. Increased demand for soybean oil could potentially lead to
diversion of feedstocks from food and other current uses in addition to
further incentivizing

[[Page 39612]]

increased soybean crushing and soybean production and increased imports
of soybean oil. It could also potentially lead to increased cultivation
of other vegetable oils such as canola or palm oil as a substitute for
diverted soybean oil. Increased vegetable oil 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 on
water quality and supply, and increased prices for agricultural
commodities and food prices.
3. Conventional Renewable Fuel
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 renewable fuel facilities exceed this threshold. Notably,
EPA has developed an expedited petition process for ethanol production
facilities using more efficient process technologies.\68\ 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.\69\
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\68\ 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. See
the RIA for the Renewable Fuel Standard Program (RFS2): Final Rule.
\69\ See CAA section 211(o)(2)(A)(i). According to data from
2021, approximately 80% of all corn ethanol generated RINs using a
grandfathered pathway while approximately 20% of all corn ethanol
generated RINs using a pathway required to meet or exceed the 20%
GHG reduction threshold.
---------------------------------------------------------------------------

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 its historical peak of 16.1 billion gallons in
2018.\70\ Higher volumes of conventional renewable fuel production
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. and contributed to
satisfying the RFS requirements.\71\
---------------------------------------------------------------------------

\70\ Energy Information Administration (EIA) Monthly Energy
Review.
\71\ 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 RIA.
---------------------------------------------------------------------------

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 on
water quality and supply, and increased prices for agricultural
commodities and food prices. Furthermore, there are constraints on
ethanol use. The market has not achieved 15 billion gallons of actual
use of conventional renewable fuel in any year, including those in
which the RFS standards included an implied conventional renewable fuel
volume of 15 billion gallons. 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 SREs in
depressing the effective RFS standards, and use of advanced biodiesel
and renewable diesel, buoyed by its tax subsidy and other incentive
programs such as California's LCFS program 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 15 billion gallons of ethanol use due to
declining gasoline demand. The RFS program, along with the many other
federal, state, local, and private incentive programs (e.g., the
Department of Agriculture's (USDA's) Biofuels Infrastructure
Partnership Program and Higher Blends Infrastructure Incentive
Program), have had limited success in inducing the use of higher-level
ethanol blends. As a result, growth in the nationwide average gasoline
ethanol concentration has virtually stagnated as the market reached the
E10 blendwall. While the use of higher-level ethanol blends has
increased since 2011, that growth has been small compared to prior
growth in the use of E10 and non-ethanol biofuels.\72\ We do not
anticipate that use of higher-level 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 and other incentive programs. Excess ethanol production
has generally been directed to exports in recent years rather than
selling greater volumes of E15 or E85 domestically. We expect these
trends in exports to continue given international demand for ethanol.
---------------------------------------------------------------------------

\72\ Since EPA granted E15 a CAA 211(f)(4) waiver in 2011
allowing E15 sales, those sales have increased slowly but steadily,
as described further in Chapters 1 and 5.5 of the RIA.
---------------------------------------------------------------------------

Total demand for gasoline was lower in 2020 and 2021 and is
expected to remain lower in 2022 relative to the volume of gasoline
consumed in 2017-2019 according to data collected by EIA, which will
limit the volume of ethanol used as E10.\73\ Most notably, the COVID-19
pandemic caused a significant fall in gasoline demand and sales of E10
starting in 2020. We expect, therefore, that maintaining the implied 15
billion gallon statutory volume target for conventional renewable fuel
going forward would require that volumes of biodiesel and renewable
diesel (either conventional or advanced)--which are the least costly
alternative biofuels to corn ethanol blended at concentrations greater
than E10--increase to compensate for the limitations on corn ethanol
use.\74\
---------------------------------------------------------------------------

\73\ EIA's Monthly Energy Review (MER) for February 2022
estimates gasoline consumption of 123.7 billion gallons in 2020 and
135.0 billion gallons in 2021, while the January 2022 Short-Term
Energy Outlook (STEO) projects 138.9 billion gallons in 2022. The
MER reported gasoline consumption in 2017-2019 at 143.0-142.7
billion gallons annually.
\74\ See Chapter 2 of the RIA for our projections of biofuels
that will be supplied to satisfy the volume requirements in each
year.
---------------------------------------------------------------------------

Such expected increases in biodiesel and/or renewable diesel are
associated with potentially significant adverse impacts. For instance,
we project that much of this biodiesel and renewable diesel would be
imported, limiting the potential positive impacts on the domestic rural
economy. Further, these fuels could be sourced from grandfathered
facilities that are not required by EPA's regulations to achieve any
GHG reductions relative to petroleum fuels. 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. Were such international land-use change to occur, there would very
likely be significant

[[Page 39613]]

adverse impacts on the environment, which may include impacts on air
wetlands, ecosystems and wildlife habitats, air quality, water quality,
water supply, and GHG emissions.

B. Interactions Between the RFS Annual Volumes

In resetting the volumes, EPA must review the implementation of the
program as required by CAA section 211(o)(2)(B)(ii). In conducting this
review, we have completed a detailed assessment of the RFS program, as
well as renewable fuel production and use more generally, since the
beginning of the RFS program. This review is set forth at length in
Chapter 1 of the RIA and in the RTC document. In this section and
elsewhere in the preamble, we focus on specific aspects of our review
as we deem appropriate.
In our review, we have carefully considered the carryover RIN bank
\75\ and carryforward deficits, which are two compliance mechanisms
that have been historically important to the implementation of the RFS
program and that we expect to continue to play a key role.
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.\76\
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.\77\ 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. Section
III.B.1 below 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 standards. We also evaluate
whether we should set the 2020, 2021, and 2022 volumes at levels that
would intentionally reduce the size of the carryover RIN bank, and we
find that this would not be appropriate. Section III.B.2 then addresses
some special considerations regarding cellulosic carryover RINs, and we
also conclude that it would not be appropriate to intentionally draw
down the bank of cellulosic carryover RINs by including them in the
cellulosic biofuel volume requirement.
---------------------------------------------------------------------------

\75\ 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.
\76\ 40 CFR 80.1427(a)(5).
\77\ 40 CFR 80.1427(b).
---------------------------------------------------------------------------

In reviewing the implementation of the program, we also recognize
the difference between the ability of retroactive versus prospective
volume requirements to affect renewable fuel use. As we explained in
Section II, the 2020 and 2021 standards will be entirely retrospective,
while the 2022 standards will apply prospectively for the remainder of
2022. In Section III.B.3 below, we explain that the retroactive 2020
and 2021 standards will not affect renewable fuel use in 2020 and 2021,
respectively, but we do expect the somewhat prospective 2022 standards
to significantly affect renewable fuel use in 2022. Given this dynamic,
we believe that higher, market-forcing renewable fuel volumes should
occur in 2022 as opposed to 2020 or 2021.
1. Treatment of Carryover RINs
Consistent with our approach in recent annual rules and the
proposed rule, we have 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.\78\ EPA's approach to the
consideration of carryover RINs in exercising our cellulosic waiver
authority was affirmed in Monroe Energy and ACE.\79\
---------------------------------------------------------------------------

\78\ 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 direct 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'').
\79\ Monroe Energy, 750 F.3d 909; 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.\80\ 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.\81\ 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 and reduce spikes in compliance
costs in the face of a variety of unforeseeable circumstances--
including weather-related damage to renewable fuel feedstocks and other
circumstances potentially affecting the production and distribution of
renewable fuel--that could limit the availability of RINs.
---------------------------------------------------------------------------

\80\ See, e.g., 72 FR 23904 (May 1, 2007).
\81\ 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. Moreover, because
carryover RINs are individually and unequally held by market
participants, a small carryover RIN bank may negatively impact the RIN
market,

[[Page 39614]]

even when the market overall could satisfy the standards. In such a
case, market disruptions could force the need for a retroactive 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 helps facilitate
compliance by individual obligated parties, provides for smooth overall
functioning of the program to the benefit of all market 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 the still upcoming compliance
with the 2019 standards for small refineries, when actual biofuel use
in that year is expected to have fallen considerably short of the RFS
standards.\82\
---------------------------------------------------------------------------

\82\ EPA extended the 2019 compliance deadline for small
refineries to the first quarterly reporting deadline after the
effective date of the 2021 standards (i.e., this action). See 87 FR
5696 (February 2, 2022).
---------------------------------------------------------------------------

EPA can also rely on the availability of carryover RINs to support
market-forcing 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.\83\
---------------------------------------------------------------------------

\83\ 79 FR 49793-95 (August 15, 2013).
---------------------------------------------------------------------------

a. 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 standards, we project that there will be approximately
1.83 billion total carryover RINs available, a decrease of 1.65 billion
RINs from the previous estimate of 3.48 billion total carryover RINs in
the 2020 final rule.\84\ Since we are setting both the 2020 and 2021
volume requirements at the actual volume of renewable fuel consumed in
those years, we project that 1.83 billion total carryover RINs will be
available for compliance with the 2022 standards (including the 2022
supplemental standard) as well.
---------------------------------------------------------------------------

\84\ 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 Final Rule,'' available in the
docket for this action.
---------------------------------------------------------------------------

However, there remains uncertainty surrounding the ultimate number
of carryover RINs that will be available for compliance with the 2020,
2021, and 2022 standards (including the 2022 supplemental standard) for
several reasons, including the fact that compliance with the 2019
standards has not yet occurred for all parties. Furthermore, 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. To the extent that there are enforcement
actions in the future, they 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 1.83 billion RINs.
b. 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
(including the 2022 supplemental volume). In the proposed rule we
stated that we did not believe that it would be appropriate to
intentionally draw down the carryover RIN bank, and we received many
comments on this proposed decision. Commenters supporting EPA's
proposed approach--generally obligated parties--agreed with EPA's
statements that maintaining the carryover RIN bank was important to
provide liquidity and maintain a functioning RIN market. Many of these
commenters noted that compliance with the 2019 standards had already
resulted in the significant drawdown of the carryover RIN bank and
fewer carryover RINs were available for use in 2020 than in previous
years. Some of these commenters also stated that revising the 2020
volumes to maintain the existing bank of carryover RINs was
insufficient, and that EPA should lower volumes further to increase the
number of available carryover RINs. Other commenters--generally
renewable fuel producers--opposed EPA's proposal not to draw down the
carryover RIN bank. These parties generally raised concerns that a
large number of carryover RINs could reduce demand for renewable fuels.
Some of these commenters similarly suggested that a large carryover RIN
bank suppresses RIN prices, and that EPA had not demonstrated why a
carryover RIN bank of 1.8 billion RINs (or even a lower volume) was
insufficient to enable the RIN market to function. Our consideration of
these comments is described briefly in this section, and in greater
detail in Section 2 of the RTC document.
In this final rule we are maintaining the proposed approach of not
intentionally drawing down the carryover RIN bank. In reaching this
determination, we considered the functions of the carryover RIN bank,
its projected size, the uncertainties associated with its projection,
its potential impact on the production and use of renewable fuel, the
ability and need for obligated parties to draw on it to comply with
their obligations (both on an individual basis and on a market-wide
basis), and the impacts of drawing it down on obligated parties and the
fuels market more broadly. As previously described, the bank of
carryover RINs provides important and necessary programmatic
functions--including acting as a 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,
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 from 3.48 down to 1.83 billion RINs. This
drawdown is due to a combination of factors, including higher-than-
projected gasoline and diesel fuel use,\85\ a shortfall in renewable
fuel production and use,\86\ and EPA denying all SRE petitions for
2019.\87\ While there is some uncertainty as to the precise amount of
the

[[Page 39615]]

drawdown for the reasons noted above, it is virtually certain that the
draw down will be significant in magnitude.
---------------------------------------------------------------------------

\85\ In establishing the 2019 standards, we projected that 180.4
billion gallons of gasoline and diesel fuel would be used in 2019.
However, based on 2019 RFS compliance data, 185.8 billion gallons
was actually used. See Table 1 at <a href="https://www.epa.gov/fuels-registration-reporting-and-compliance-help/annual-compliance-data-obligated-parties-and">https://www.epa.gov/fuels-registration-reporting-and-compliance-help/annual-compliance-data-obligated-parties-and</a>. This resulted in an increase in the renewable
fuel volumes required by the 2019 percentage standards compared to
the volumes the standards were based on.
\86\ While renewable fuel use in 2019 was higher than in 2018,
it was only marginally so and failed to keep up with the increase in
the renewable fuel standards and the larger-than-expected increase
in gasoline and diesel fuel use.
\87\ EPA issued a large number of SREs in recent years, leading
to significant increase in the size of the carryover RIN bank.
However, EPA recently denied all SRE petitions for 2019, resulting
in these small refineries--most of which had been exempt in recent
years--needing to acquire RINs to demonstrate compliance or
carryforward a deficit.
---------------------------------------------------------------------------

As we describe further in Section III.C, there was an unanticipated
and significant shortfall in RIN generation in 2020 relative to the
volumes that the 2020 final rule intended for the market to achieve.
The shortfall is anticipated to be smaller than the 1.83 billion total
carryover RINs that we project will be available in 2020. While the
carryover RIN bank would likely be sufficient to cover the shortfall in
renewable fuel production in 2020 on aggregate, this does not mean that
all obligated parties would have access to these carryover RINs. RIN
holding data indicates that just four obligated parties--which
represented approximately 40 percent of the 2019 total RVO--currently
hold over half of all available 2019 RINs, and nine obligated parties--
which represented approximately 55 percent of the 2019 total RVO--hold
over three-quarters of all available 2019 RINs.\88\ Conversely,
obligated parties that collectively represent approximately fifteen
percent of the 2019 total RVO currently do not hold any 2019 RINs
whatsoever; thus, these parties may not have access to 2019 carryover
RINs to meet their 2020 obligations. Requiring compliance with the
original 2020 standards could therefore cause significant disruptions
in the RIN market, especially in light of the fact that at least 30
obligated parties carried compliance deficits from 2019 into 2020.\89\
These parties must fully meet their 2020 obligations or they will be in
non-compliance with their RFS obligations. That is, they do not have
the option to carry forward a deficit for a second year in a row.\90\
It is possible that these parties could purchase additional RINs on the
market. However, given the shrinking size of the carryover RIN bank,
the current holders of additional RINs may choose to sell their RINs
only at very high costs or in the alternative choose to not sell their
RINs but retain them for their own compliance purposes. Thus, and as we
explain further in Section III.C, there is a substantial probability
that some parties would not be able to acquire sufficient RINs to
comply with the original 2020 standards.
---------------------------------------------------------------------------

\88\ See ``2019 RIN Holding Data as of March 1, 2022,''
available in the docket for this action. Carryover RIN holdings are
presented in relation to the 2019 total RVO as this is the most
recent year for which EPA has compliance data.
\89\ This number is based on 2019 compliance reports submitted
to EPA to date. There is still some uncertainty in the number of
obligated parties that will carry a deficit into 2020 as EPA has
extended the deadline for small refineries to submit their 2019
compliance reports. See 87 FR 5969 (February 2, 2022).
\90\ See 40 CFR 80.1427(b).
---------------------------------------------------------------------------

However, by revising the 2020 standards to the actual volume of
renewable fuel consumed, additional 2019 RINs will likely become
available in the marketplace. Parties holding more 2019 RINs than are
needed or able to be used (i.e., above the 20 percent carryover limit)
after the revision of the 2020 standards are also more likely to trade
those RINs, making them available to other obligated parties for
compliance with the 2020 standards. These RINs can also be used by
small refineries to demonstrate compliance with their 2019 obligations,
potentially reducing the number of obligated parties that will need to
carry forward a deficit.
The advanced biofuel and total renewable fuel standards we are
finalizing for 2022, moreover, are significantly higher than the volume
of renewable fuel used in 2020 and 2021. As we explain further in
Sections III.E and IV, while we believe that the market is capable of
achieving the 2022 standards (including the 2022 supplemental
standard), those standards are market-forcing and represent a
significant increase in renewable fuel use from the levels used in 2020
and 2021. The market may fall short of using such levels of biofuels,
in which case obligated parties may rely on carryover RINs to achieve
compliance. We believe that preserving the carryover RIN bank to
provide this buffer in the event of a shortfall is important. Given
these factors, as well as the uneven holding of carryover RINs among
obligated parties noted above, we believe that further increasing the
standards with the intent to draw down the carryover RIN bank could
lead to significant deficit carryovers and 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 recent annual rules, we are not setting
the 2020, 2021, and 2022 volume requirements (including the 2022
supplemental standard) at levels that would intentionally draw down the
bank of carryover RINs.
We are not determining that 1.83 billion RINs is a bright-line
threshold for the number of carryover RINs that provides sufficient
market liquidity and allows the carryover RIN bank to play its
important programmatic functions. As in past years, we are instead
evaluating, on a case-by-case basis, the size of the carryover RIN bank
in the context of the RFS standards and the broader transportation fuel
market at this time. Based upon this holistic, case-by-case evaluation,
we are concluding that it would be inappropriate to intentionally
reduce the number of carryover RINs by establishing higher volumes than
what the market achieved in 2020 or 2021 or what we anticipate the
market is capable of achieving in 2022. Conversely, while an even
larger carryover RIN bank may provide greater assurance of market
liquidity, we do not believe it would be appropriate to set the
standards at levels specifically designed to increase the number of
carryover RINs available to obligated parties. As we explain further in
Sections III.D and E, for instance, given the market-forcing intent of
the RFS program, it would be inappropriate to establish the 2020 and
2021 volumes below the levels the market actually used simply to
increase the carryover RIN bank.
2. Consideration of Cellulosic Carryover RINs
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
cellulosic carryover RINs in this projection.
In the proposed rule we requested comment on whether to include
cellulosic carryover RINs as part of the ``projected volume
available.'' Under this interpretation of the cellulosic waiver
authority, the ``projected volume available'' would include the
projected volume of cellulosic biofuel plus the volume of available
cellulosic carryover RINs from the prior year. EPA received a number of
comments on this issue, including those supporting EPA's interpretation
of ``projected volume available'' in previous rules and those
supporting an interpretation of this phrase that would include
available carryover RINs. Both groups of commenters argued that their
preferred interpretation was more consistent with the statutory
language and the policy goals of the RFS program. Commenters opposed to
including cellulosic carryover RINs in the projected volume available
generally argued that cellulosic carryover RINs provided obligated
parties important compliance

[[Page 39616]]

flexibility, just like other categories of carryover RINs. They further
argued that cellulosic carryover RINs were especially important in
light of the uncertainty associated with cellulosic biofuel production
projections. Conversely, commenters that supported including cellulosic
carryover RINs in the projected volume available generally argued that
despite the continued rapid growth in cellulosic biofuel volumes,
excess cellulosic carryover RINs could result in lower cellulosic RIN
prices, as happened in 2019 and 2020. Lower cellulosic RIN prices in
turn could negatively affect investment in cellulosic biofuel
production. These commenters stated that adopting this new
interpretation would ensure that there was a strong market for
cellulosic biofuel and cellulosic RINs in the future and would result
in increased investment in cellulosic biofuel production and ultimately
increased cellulosic biofuel production. Finally, these commenters
generally suggested that the existence of cellulosic waiver credits
adequately addressed obligated parties' need for compliance
flexibility.
In this rule we are finalizing cellulosic biofuel volumes for 2020-
2022 that are based on 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. Consistent with
EPA's longstanding approach, we have not included available cellulosic
carryover RINs in our projection of the projected volume available. 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 possible
interpretations of this ambiguous statutory provision, including the
interpretation adopted by EPA in previous years.
We continue to believe that the interpretation EPA adopted in
previous years strikes an appropriate balance between the interests of
the cellulosic biofuel producers, those obligated to purchase and use
cellulosic biofuels and cellulosic RINs, and consumers; and best
ensures the ongoing smooth implementation of the RFS program.\91\ Below
we summarize the considerations we balanced in deciding to retain our
longstanding approach in this rulemaking; further discussion is
contained in the RTC document.
---------------------------------------------------------------------------

\91\ See Chevron USA, Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984).
---------------------------------------------------------------------------

While we acknowledge that some aspects of the cellulosic biofuel
category (such as the cellulosic waiver authority and the cellulosic
waiver credits) \92\ are unique, we nevertheless believe the benefits
of carryover RINs, discussed in Section III.B.1, generally apply to
cellulosic carryover RINs. Cellulosic waiver credits can help obligated
parties satisfy their cellulosic biofuel volume obligation, but they
are not a full replacement for cellulosic RINs. Rather, to satisfy
their cellulosic biofuel obligation, obligated parties must retire
either a cellulosic RIN or a cellulosic waiver credit plus an advanced
RIN.\93\ In other words, in the event of a shortfall in cellulosic RIN
generation, absent cellulosic carryover RINs, the market must still
rely on the advanced carryover RIN bank in addition to cellulosic
waiver credits.
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\92\ 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.
\93\ See 40 CFR 80.1456(c)(4).
---------------------------------------------------------------------------

Furthermore, because there are no statutory volume targets for
cellulosic biofuel in 2023, and because we are required to establish
the cellulosic biofuel volumes for 2023 and future years on the
assumption that the Administrator will not need to issue a waiver for
these years under CAA section 211(o)(2)(B)(iv), we do not anticipate
using the cellulosic waiver authority for 2023. This means that it is
unlikely that cellulosic waiver credits will be available in 2023.\94\
Including cellulosic carryover RINs in the projected volume available
through 2022 would also likely result in few to no cellulosic carryover
RINs available for use in 2023. Thus, changing our interpretation now
to draw down the cellulosic carryover RIN bank in this rule would
likely create a scenario where few or no cellulosic carryover RINs and
no cellulosic waiver credits would be available in 2023. Obligated
parties would thus effectively lose both important compliance
flexibilities in that year. We do not believe this would be
appropriate.
---------------------------------------------------------------------------

\94\ Moreover, unlike with carryover RINs, obligated parties are
not allowed to carry over cellulosic waiver credits for use in the
following year or use them to meet deficits from the prior year. See
40 CFR 80.1456(b)(1), (4). Thus, although cellulosic waiver credits
are available for 2022, obligated parties will not be able to carry
those over for use in 2023.
---------------------------------------------------------------------------

We recognize that the potential for lower cellulosic RIN prices
could have a directionally negative impact on cellulosic biofuel
investment. The market circumstances that resulted in lower cellulosic
RIN prices in 2019-2020, however, appears to be the result of more than
just the availability of cellulosic carryover RINs. Similar volumes of
cellulosic carryover RINs, and higher levels of available cellulosic
carryover RINs as a percentage of the cellulosic biofuel requirement,
were available in prior years when cellulosic RIN prices were also much
higher relative to 2019-2020.\95\ EPA's assessment of the drop in
cellulosic RIN prices in 2019-2020 suggests that there were multiple
contributing factors, including a new projection methodology for
cellulosic biofuel that under-projected cellulosic biofuel production
in 2018 \96\ and the granting of a significant number of SREs for 2017
and 2018.
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\95\ The number of cellulosic carryover RINs available for use
in 2016 and 2017 were 39 million RINs (17 percent of the 2016
cellulosic biofuel volume requirement) and 34 million RINs (11
percent of the 2017 cellulosic biofuel volume requirement)
respectively. These numbers are similar to the number of cellulosic
carryover RINs available for use in 2019 and 2020 (49 million RINs
or 12 percent of the 2018 cellulosic biofuel volume requirement and
38 million RINs or 6 percent of the 2020 cellulosic biofuel volume
requirement). In 2016 and 2017 cellulosic RIN prices averaged $1.89
and $2.78 per RIN. In 2019 and 2020 cellulosic RIN prices averaged
$1.15 and $1.49 per RIN.
\96\ EPA has continued to apply this projection methodology in
years following 2018, including in this rule. This same projection
methodology resulted in an over-projection of cellulosic biofuel
production in 2019 and 2020. As such, the methodology does not
inherently result in under-projections (or over-projections) of
cellulosic biofuel generally or CNG/LNG derived from biogas more
specifically. Further discussion of EPA's cellulosic biofuel
projection methodology can be found in Chapter 5.1 of the RIA.
---------------------------------------------------------------------------

In projecting cellulosic biofuel production for 2022 using the most
recent available data, and denying pending SRE petitions in a separate
action, we are addressing several of the factors that we believe led to
the drop in cellulosic RIN prices in 2019-2020. Most immediately, we
expect the size of the cellulosic carryover RIN bank to drop from 49
million to 38 million RINs following 2019 compliance. We are continuing
to project significant increases in cellulosic biofuel availability
through 2022, based upon a methodology that takes neutral aim at
accuracy. We do not expect the standards we set, moreover, to be
effectively reduced by future grants of SRE petitions as they have in
some past years. As discussed in Section VII, we are also finalizing
regulations to allow for the production of qualifying

[[Page 39617]]

renewable fuel, including cellulosic biofuel, from biointermediates.
While we cannot predict future RIN prices, this combination of actions
should provide a strong market signal of EPA's intention to support a
robust cellulosic biofuel market.
Further, despite the drop in the cellulosic RIN price in 2019-2020,
cellulosic biofuel production has increased significantly each year
since 2014, demonstrating that cellulosic biofuel production can and
has continued to increase despite volatility in the cellulosic RIN
price.\97\ We do not believe that changing our interpretation of the
``projected volume available'' to include cellulosic carryover RINs is
at this point necessary in order to ensure future growth in cellulosic
biofuels. Instead, we believe that the existing policies described here
are sufficient to provide the market with adequate certainty for
investment and growth in cellulosic biofuels. EPA will continue to
monitor the cellulosic biofuel market closely and assess the efficacy
of the program in providing a sufficient investment environment for
cellulosic biofuels.
---------------------------------------------------------------------------

\97\ See Section 5.1 of the RIA for more detail on annual
cellulosic biofuel production.
---------------------------------------------------------------------------

Finally, we note that the legal arguments made by commenters
supporting a change to include cellulosic carryover RINs in the
cellulosic volume, while still relevant, are less so in the context of
this rulemaking. Commenters' legal arguments generally focused on an
interpretation of the cellulosic waiver authority. In this rulemaking,
however, we are concurrently exercising both the cellulosic waiver
authority and the reset authority. Under the reset authority, we have
broad discretion to establish volumes, including cellulosic biofuel
volumes lower than the volume required under the cellulosic waiver.
Even were EPA's interpretation of ``projected volume available''
erroneous, we would nonetheless reduce the cellulosic biofuel volumes
to the final volumes we are establishing in this document (not
including carryover RINs) utilizing the reset authority. Thus,
regardless of whether the commenters are correct about EPA's legal
authority under the cellulosic waiver, we have legal authority under
the reset authority to establish volumes at the projected volume
available of cellulosic biofuel, excluding any cellulosic carryover
RINs.
3. Ability for the RFS Volumes To Impact Renewable Fuel Supply
In developing the 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 proposed
to establish higher volumes for 2022. By contrast, imposing higher
volumes for 2020 or 2021 would have no effect on the production or use
of renewable fuels in those years. The proposal noted that
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.
Commenters generally acknowledged that higher volume requirements
for 2020 and 2021 would not impact renewable fuel production and use in
those years. However, some commenters stated that revising the 2020
volumes after previously establishing them would reduce confidence in
the market-forcing nature of the RFS program and could negatively
impact renewable fuel production in future years. While we recognize
these concerns, we believe that the unique circumstances in 2020
(described throughout Section III and especially in Section III.C)
justify revising the 2020 volumes.\98\
---------------------------------------------------------------------------

\98\ Further discussion of this topic can be found in Section 6
of the RTC document.
---------------------------------------------------------------------------

In this rule we are finalizing volumes consistent with the proposed
approach: establishing volumes for 2020 and 2021 at the level of
renewable fuel used in these years and establishing higher renewable
fuel volumes for 2022. With respect to 2020 and 2021, these years have
already passed. Both common sense as well as our review of the
implementation of the RFS program indicate that this final rule cannot
retroactively affect the production or use of renewable fuels in 2020
or 2021, or consequently affect the statutory reset factors in CAA
section 211(o)(2)(B)(ii)(I)-(VI) insofar as they are based on renewable
fuel production or use that occurred during those years (e.g., the
impacts of the use of renewable fuels in 2020 and 2021 on cost, the
environment, and so forth). It is possible that the proposed rule,
which was signed on December 7, 2021, may have impacted renewable fuel
production and use during 2021. Given that the proposal came out in
December and was only a proposal and not a final rule, however, those
impacts were likely to be quite limited. Any market effects of the 2020
and 2021 volumes finalized in this rule will be felt after the rule is
promulgated and mediated through the carryover RIN bank. As we explain
below, these mediated market effects can be evaluated with regard to
the statutory factors and favor establishing 2020 and 2021 volumes at
those actually used.
The situation for 2022, however, is different. We are issuing this
final rule with a significant portion of the year remaining. Moreover,
we are finalizing volumes using the same policy approach as in the
proposal, which was issued in December 2021, albeit with some small
changes due to updated data, allowing the proposal to have provided
regulated entities with additional notice of the potential
requirements. Thus, we believe that the RFS standards for 2022 will be
able to significantly affect market decisions for renewable fuel
production, import, and use in 2022, and consequently the related
statutory factors. In turn, we believe it is appropriate to increase
renewable fuel requirements in 2022, when this rule has a much greater
chance of actually increasing renewable fuel use and production, as
opposed to 2020 or 2021.
Further, 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. Such higher volumes would cause
some combination of a drawdown of the carryover RIN bank, carryforward
deficits, or potentially even 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 it is
appropriate to do so in this rule for reasons we described above in
Section III.B.1. We also do not think that intentionally relying on or
effectively compelling carryforward deficits or intentionally causing
non-compliance is generally appropriate.
Renewable fuel production and use in 2020 was significantly lower
than what we projected in the original 2020 final rule. As discussed in
Section III.C, 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 III.B.1, we
currently project that as a result of compliance with the 2019
standards, the number of carryover RINs available for compliance with
the 2020 standards will be approximately 1.83 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

[[Page 39618]]

standards will remain at 1.83 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 substantially, to 680 million RINs,
or less than 4 percent of the 2022 total renewable fuel standard.\99\
This would be the lowest quantity of carryover RINs available since EPA
began projecting the size of the carryover RIN bank in 2013, far below
the levels of carryover RINs available to obligated parties in recent
years. 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. Drawing down the carryover RIN bank to this level could
significantly disrupt the functionality of the RIN market.
---------------------------------------------------------------------------

\99\ 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 Final Rule,'' available in the docket for
this action. Further discussion of the size of the advanced and
cellulosic carryover RIN banks is contained in the above-cited memo,
Section III.B.2, and Section 2.6 of the RTC document.
---------------------------------------------------------------------------

This drawdown in the carryover RIN bank would be particularly
concerning given the uneven nature of carryover RIN holdings and the
number of obligated parties that carried deficits into 2020 discussed
in the previous section. Taken together, these facts present a
significant risk of market disruption were we to not revise the 2020
standards. A number of obligated parties that have not already carried
deficits into 2020 would likely have to carry deficits into 2021. Other
parties may have to carry deficits into 2022. Some parties, especially
those that have already carried a deficit into 2020, may not be able to
acquire sufficient RINs for compliance in 2021 or 2022.\100\ If we were
to leave the 2020 standards unchanged, we find that there would be a
substantial probability that some obligated parties would not be able
to comply with those standards or with the 2021 and 2022 standards we
are finalizing in this action.
---------------------------------------------------------------------------

\100\ 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.
---------------------------------------------------------------------------

We emphasize that the above risks arise from the unanticipated
shortfall in 2020 renewable fuel use and the inherent potential for
future unexpected market events. In turn, noncompliance may lead to
significant adverse business impacts on these parties as well as to
civil penalties. Particularly given our legal duty to consider burdens
on obligated parties when promulgating retroactive standards, we do not
think this outcome would be fair or appropriate.
If these compliance difficulties occur, moreover, 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. If
insufficient RINs are available to obligated parties to meet their
compliance obligations, this could negatively impact the regulatory and
market certainty critical to the investments needed to increase
renewable fuel volumes in 2022 and into the future. Uncertainty in the
RFS program specifically, and the broader fuels market more generally,
could negatively impact investment in increasing renewable fuel
production and accordingly the expected future rate of production of
renewable fuels. It could also negatively affect investment in the
infrastructure necessary to deliver and use of greater quantities of
renewable fuel. As discussed in greater detail in the RIA, biofuel
production and use generally have positive impacts on climate change,
energy security, job creation, and rural economic benefits. Reduced
production and use of renewable fuels would therefore be expected to
negatively impact these statutory factors. In particular, 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, reducing the 2020 required volumes to the volumes of
renewable fuel actually used in 2020 preserves an estimated carryover
RIN bank of 1.83 billion RINs for use in 2021, and establishing the
2021 volumes at the volumes of renewable fuel actually used in 2021
preserves the same estimated carryover RIN bank for compliance with the
market-forcing 2022 standards.
We note lesser reductions to 2020 or 2021 would give rise to
similar concerns. The magnitude of those concerns would depend on how
high the 2020 and 2021 volume requirements are and the resulting impact
on the carryover RIN bank. 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 2021 volumes by 500
million gallons and decrease the 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 increase the risk of market disruption.
This is because while we expect a significantly higher number of RINs
to be generated in 2022 than in either 2020 or 2021, compliance is
still conducted on a year-by-year basis. As noted above, there are
limitations on the ability of obligated parties to carry forward
deficits into 2022 and consequently to leverage 2022 RIN generation to
meet higher 2020 or 2021 standards.

C. Volume Requirements for 2020

We proposed to revise previously finalized 2020 total renewable
fuel, advanced biofuel, and cellulosic biofuel volumes to equal the
volume of such fuels actually consumed in the U.S. in 2020. We also
proposed to make corresponding adjustments to the percentage standards
applicable to obligated parties.\101\
---------------------------------------------------------------------------

\101\ As discussed in Section V, the adjustments to the
percentage standards would also include changes to the non-renewable
gasoline and diesel volumes to reflect actual 2020 consumption.
---------------------------------------------------------------------------

As discussed previously, commenters generally acknowledged that
higher volume requirements for 2020 would not impact renewable fuel
production and use in 2020, but expressed concerns that revising the
2020 volumes after previously establishing them would reduce confidence
in the market-forcing nature of the RFS program and could negatively
impact renewable fuel production and use in future years. Many of these
commenters stated that the structure of the RFS program automatically
adjusted to the lower than expected demand for gasoline and diesel
fuel, and that further modification of the 2020 percentage standards
was thus unnecessary, especially in light of the availability of
carryover RINs. Other commenters supported our proposed revisions to
the previously established 2020 volume requirements, noting the impact
of the COVID-19 pandemic and the shortfall in renewable fuel use
relative to projections in the original 2020 final rule.
In this rule we are finalizing revised 2020 volumes and percentage
standards based on the actual volumes of renewable fuel, gasoline, and
diesel fuel used in 2020, consistent with the proposed rule. While we
recognize the concerns raised by commenters opposing these changes, we
believe that the unique circumstances in 2020 justify revising the 2020
volumes, and that we

[[Page 39619]]

have the authority to do so as discussed in Sections II.C and D.
We acknowledge that we are reconsidering and revising the already
finalized 2020 standards \102\ after the November 30, 2019, statutory
deadline for the 2020 standards in CAA section 211(o)(3)(B)(i). The
revised 2020 standards are also retroactive. Barring unusual
circumstances, we generally do not believe it is appropriate to
reconsider and revise previously finalized RFS standards, particularly
where we are doing so retroactively.\103\ Nonetheless, we are doing so
for 2020 because, in compliance with the statutory requirement that we
review the implementation of the RFS program, we have determined that
critical and unanticipated events have occurred which affected fuels
markets in that year and consequently affect compliance with the RFS
program. Specifically, there was a significant, unprecedented, and
unforeseen shortfall in renewable fuel use in 2020 relative to the
volumes that we required in the original 2020 final rule. Actual use of
qualifying renewable fuel in 2020 (17.13 billion RINs) was nearly 3
billion RINs lower than the 20.09 billion RINs that the 2020 final rule
projected the market could achieve. That is, the actual shortfall is
14.9 percent of the total renewable fuel volume in the original 2020
rule. This is the largest shortfall on record, in both absolute and
percentage terms, since Congress enacted the RFS program.\104\ This
shortfall was largely due to two factors: (1) the COVID-19 pandemic,
which caused an unforeseen and drastic fall in transportation fuel
demand generally and in biofuel demand more specifically; and (2) EPA's
projection in the 2020 rule that we would grant a large number of SREs
for 2020 and our consequent decision to deny all pending 2020 SRE
petitions.
---------------------------------------------------------------------------

\102\ 85 FR 7016 (February 6, 2020).
\103\ We have in the past modified previously finalized RFS
standards, including in response to court decisions (see 80 FR 77420
(December 14, 2015), modifying the cellulosic biofuel standards),
and in response to new information and petitions for reconsideration
(see 79 FR 25025 (May 2, 2014)), also modifying the cellulosic
biofuel standard).
\104\ See Figure 1.2-4 in the RIA.
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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 the sum of gasoline and diesel
fuel production volume. Further, historical deviations before 2020
between the volumes of gasoline and diesel fuel actually used relative
to their projected volumes have been relatively small, on the order of
a few percent.\105\ As a result, we have historically not adjusted the
RFS standards after they have been established to account for updated
gasoline and diesel fuel consumption levels. This is consistent with
our general policy of not reconsidering and revising previously
finalized RFS standards.
---------------------------------------------------------------------------

\105\ See Figure 1.2-1 in the RIA.
---------------------------------------------------------------------------

However, the situation in 2020 was different. As explained further
in Section III.B, the shortfalls in 2020 were both significantly larger
than in any previous year (about 12 percent) and disproportionately
affected gasoline more than diesel fuel.\106\ This is important
because, on average, finished gasoline contains more renewable content
than finished diesel. The vast majority of gasoline contains at least
10 percent ethanol, mostly in the form of E10, whereas the average
concentration of renewables in diesel is considerably less than 10
percent.\107\ 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 larger
drop in gasoline versus diesel fuel demand. In other words, despite the
self-adjusting nature of the RFS standards in response to
transportation fuel demand, the disproportionate fall in gasoline
demand meant actual RIN generation still fell short of what was
ultimately required for compliance.
---------------------------------------------------------------------------

\106\ See Figure 1.2-1 in the RIA.
\107\ According to EIA's January 2022 STEO diesel consumption in
the U.S. in 2020 was 3.51 million barrels per day (54.0 billion
gallons). Biodiesel and renewable diesel in 2020 totaled 2.50
billion gallons, which generated 3.87 billion RINs. Thus, the
average gallon of diesel in the U.S. was blended with renewable fuel
that generated 0.07 RINs (3.87 billion RINs/54.0 billion gallons),
while the average gallon of gasoline was blended with renewable fuel
that generated 0.10 RINs.
---------------------------------------------------------------------------

In addition, 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. Specifically, the 2020 final rule
projected that EPA would grant exemptions of 7.26 billion gallons of
gasoline and diesel, equivalent to approximately 770 million RINs.\108\
We reallocated the projected exempted volumes onto the remaining
obligated parties, thereby significantly increasing the obligations on
those parties. However, EPA recently announced that we were denying
pending SRE petitions before the agency, including all petitions for
2020.\109\ In other words, the actual exempted volume of gasoline and
diesel fuel in 2020 is zero. Were we to leave the 2020 standards
unchanged, this discrepancy between projected and actual exemptions
would significantly raise the effective volume obligations for all
obligated parties. This effect is independent from the COVID-related
transportation fuel demand effects described above.
---------------------------------------------------------------------------

\108\ 85 FR 7053, February 6, 2020.
\109\ See ``June 2022 Denial of Petitions for RFS Small Refinery
Exemptions,'' EPA-420-R-22-011, June 2022.
---------------------------------------------------------------------------

Accounting for these factors, actual renewable fuel use in 2020
(17.13 billion RINs) was approximately 1.23 billion RINs lower than the
estimated obligation for 2020 were we to leave the original 2020
percentage standards unchanged, based on available data of obligated
gasoline and diesel fuel production in 2020 (18.35 billion RINs). As
such, compliance with the original 2020 standards would likely result
in a significant drawdown of the number of carryover RINs available for
use in 2021. As we discussed in Section III.B, this would present a
substantial probability of market disruption, including of
noncompliance by some obligated parties.
While our analyses have focused on the availability of RINs for RFS
compliance in 2020, the risks we describe must be considered in the
broader context of the fuels market. As we explain in Chapter 1 of the
RIA, in our review of the implementation of the RFS program, we find
that the RFS program, the biofuels market, and the broader
transportation fuels market are highly intertwined. This broader
consideration of the larger fuels market further supports our concerns
regarding maintaining the original 2020 standards. For one, 2020
follows a year (2019) in which the market already relied heavily on
carryover RINs to meet the RFS obligations. As noted above, we
anticipate the market to draw down the carryover RIN bank from 3.48
billion to 1.83 billion RINs to meet compliance obligations for 2019.
While the 3.48 billion carryover RIN bank going into 2019 reflected a
historical high, it was the result of roughly three years of
accumulation.\110\ That accumulation occurred during a period when EPA
had incrementally raised the total renewable fuel volume each year and
maintained the conventional volume at the full implied statutory volume
of 15 billion gallons. At the same time, EPA had

[[Page 39620]]

granted large numbers of SREs that were not accounted for in setting
the standards and significantly reduced the effective RFS requirements
below the volumes we established in our annual rules. More recently, we
have denied pending SRE petitions, including all petitions for 2019 and
2020, and we are not aware of any circumstances that would warrant EPA
granting SREs in the future that would increase the size of the
carryover RIN bank akin to what occurred leading up to 2019.\111\
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\110\ See ``Carryover RIN Bank Calculations for 2020-2022 Final
Rule,'' available in the docket for this action.
\111\ See ``June 2022 Denial of Petitions for RFS Small Refinery
Exemptions,'' EPA-420-R-22-011, June 2022.
---------------------------------------------------------------------------

Were we to leave the 2020 standards unchanged, as noted above, we
would expect a further drawdown of the carryover RIN bank to the lowest
historical levels since we began tracking the carryover RIN bank in
2013. The associated shortfall in renewable fuel production and use in
2020 comes on the heels of an already large shortfall in renewable fuel
production and use in 2019. As noted above, the dramatic reduction in
the carryover RIN bank in 2019 eliminated much of the flexibility the
carryover RIN bank might have otherwise provided for 2020. Moreover, a
significant reduction to the number of carryover RINs for two
consecutive years would only increase the general concerns associated
with relying on carryover RINs to meet the RFS obligations, especially
for parties that generally do not own significant quantities of
carryover RINs.
Additional factors regarding the larger transportation fuels market
also support our decision to revise the 2020 standards. The drop in
demand for transportation fuel due to the COVID-19 pandemic had a
significant impact on refiners. Refining margins (often referred to as
the ``crack spread'') dropped sharply in 2020, resulting in broad
losses across the refining industry in 2020.112 113 In
response to this economic environment many refiners sought to minimize
expenses to preserve available capital, taking actions such as delaying
or cancelling capital expenditures.\114\ At the same time, biofuel
producers were also impacted by a dramatic reduction in transportation
fuel demand and challenges across the supply chain for agricultural
commodities, including biofuel feedstocks.\115\ This combination of
factors made the acquisition of the renewable fuel volumes necessary to
meet the RFS obligations in 2020 uniquely challenging, both
economically and practically.
---------------------------------------------------------------------------

\112\ Q4 2020: U.S. Refining Margins Remain Depressed; Refining
Industry in Focus. Baker & O'Brien Inc.; March 12, 2021.
\113\ Somasekhar, Arathy. ``U.S. oil refiners set for first
profit since onset of pandemic.'' Reuters. July 28, 2021.
\114\ Agarwal, Bharti. ``Effect of COVID-19 pandemic on refining
and refiners.'' IHS Markit. August 2020.
\115\ Aday, Serpil and Aday, Mehmet Seckin. ``Impact of COVID-19
on the food supply chain.'' Food Quality and Safety. Volume 4, Issue
4. December 2020.
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Given the above reasons, we have decided to reconsider and revise
the 2020 volumes to those actually used. In doing so, we recognize that
since 2020 has already passed, this rulemaking has no ability to affect
actual production, imports, and use of renewable fuel in 2020. As such,
the impact of the rule on those statutory factors related to renewable
fuel production and use during 2020 is similarly limited. Rather, this
final rule seeks to ensure sufficient RINs are available for
compliance. It acts to relieve burdens on obligated parties, and in
some cases the potentially onerous burden of non-compliance with the
RFS program, the possibility of civil penalties, and associated market
disruptions. This approach also seeks to mitigate related negative
impacts on the regulatory and market certainty critical to the
investments needed to increase renewable fuel volumes in 2022 and into
the future. As discussed in Section III.B.3, this market certainty has
an impact on many of the statutory factors, including the expected
future rate of production of renewable fuels, the development of
infrastructure to distribute and use increased volumes of such fuels,
climate change, energy security, job creation, and rural economic
benefits.
As our reconsideration of the 2020 standards is retroactive, we
have considered and mitigated burdens on obligated parties as required
by the D.C. Circuit's caselaw on retroactive RFS standards. To begin
with, as noted above, we have ensured sufficient RINs for compliance,
and this factor has been key in our decision to reconsider and revise
the standards to actual supply. We have also considered several other
factors:
<bullet> Adequate lead time for obligated parties to comply with
the revised standards.
<bullet> The availability of compliance flexibilities.
<bullet> The impact of the revised standards on those parties that
may have relied on the original standards in making business decisions.
<bullet> Alternatives to revising the 2020 volume requirements to
be equal to the volumes actually consumed.
Each of these factors is discussed below.
Regarding lead time for obligated parties, we note that relatively
less lead time is needed given that we are reducing the stringency of
their obligations, as opposed to increasing their stringency.
Nonetheless, we are providing significant lead time. Earlier this year
we extended the 2020 compliance deadline for obligated parties to the
next quarterly reporting deadline after the 2019 compliance reporting
deadline for small refineries, which in turn was extended in that same
action to the next quarterly reporting deadline that is after the
effective date of this rule.\116\ In other words, obligated parties
will have no less than 5 months after the publication of this final
rule in the Federal Register, and no less than 11 months after the
publication of the 2020-2022 proposal,\117\ to comply with their 2020
obligations. Had we not adjusted the 2020 compliance deadline,
obligated parties would have needed to demonstrate compliance by March
31, 2021.
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\116\ 87 FR 5696 (February 2, 2022).
\117\ 86 FR 72436 (December 21, 2021).
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Regarding the availability of compliance flexibilities, obligated
parties continue to have access to carryover RINs and carryforward
deficits to facilitate compliance. As discussed above, the revision of
the 2020 volumes to those actually supplied preserves the carryover RIN
bank and the availability of this flexibility.
Regarding potential reliance interests, we recognize that
retroactively adjusting the 2020 standards may disrupt market
expectations created by the prior final rule, for instance on the part
of biofuel producers that 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.\118\ As discussed
in Section II, EPA generally has authority to reconsider and revise
prior rulemakings. Congress also specifically granted EPA multiple
waiver authorities. Moreover, as shown in Section 1.9 of the RIA, RIN
prices have fluctuated significantly over time. Thus, market actors may
not possess legally cognizable reliance interests in specific RFS
volumes or

[[Page 39621]]

standards or specific RIN prices. Even hypothetically assuming that
some market expectations amounting to legally cognizable reliance
interests exist, those expectations and interests were already
confounded by the significant and unanticipated events described above,
including the COVID-19 pandemic's impact on the fuels markets.
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\118\ See Monroe Energy, LLC v. EPA, 750 F.3d 909, 919-20 (D.C.
Cir. 2014) (holding that the litigant ``had no legally settled
expectation'' regarding how EPA exercised its waiver authority to
adjust the renewable volume obligations). See also AFPM, 937 F.3d
577-78 (finding it far from obvious that biofuel producers had
serious reliance interests in the annual volumes).
---------------------------------------------------------------------------

Furthermore, obligated parties who obtained additional RINs in
response to the original, higher 2020 standards are not penalized in
any way. To the contrary, these parties will continue to have
sufficient RINs to comply with the revised, lower standards and may
sell excess RINs or carry them over for 2021 compliance consistent with
EPA's regulations. Similarly, biofuel producers who made investments in
response to the original 2020 standards and generated additional RINs
are also able to sell these RINs in the market and may continue to
obtain returns on their investments as the market demands additional
RINs needed to meet the 2022 standards. Although this action may reduce
the market value of 2020 RINs, maintaining the current 2020 standards
would force other obligated parties into noncompliance. We do not
believe any potential reliance interests of RIN-holders would justify
imposing the burden of non-compliance on obligated parties who had no
reason to anticipate the unprecedented events of 2020. Additionally, we
have extended the 2020 compliance deadline so that all parties are
still able to trade and acquire RINs for compliance with the 2020
standards.\119\ In all cases, we believe that revising the standards is
warranted based on the events and factors described above and that we
have set forth a sufficiently detailed justification for doing so.
---------------------------------------------------------------------------

\119\ 87 FR 5696 (February 2, 2022).
---------------------------------------------------------------------------

Finally, we also considered alternatives to our final action,
including revising the 2020 volumes to volumes lesser or greater than
the volume of renewable fuel that was supplied, as well as leaving the
original volumes from the 2020 final rule in place. We do not believe
it is appropriate to retroactively modify the volumes to be lower than
what the market actually used. We acknowledge that reducing the 2020
volumes further would allow the market to build up the carryover RIN
bank so as to provide even greater market liquidity. This would benefit
obligated parties, particularly those that carried forward deficits
into 2020 or have very few or no carryover RINs. However, we do not
believe this would be appropriate since the general purpose of the RFS
program is to incentivize increasing production and use of renewable
fuels over time. Doing so, moreover, would be unprecedented. While EPA
has previously set the RFS standards at what the market actually used
(like for 2014 and 2015 in the 2014-2016 rule), we have never
intentionally reduced the standards with the express intent to inflate
the size of the carryover RIN bank. We further discuss this issue in
the RTC document.
At the same time, we do not believe that requiring higher volumes
than what was actually used is appropriate. As explained above, doing
so would result in some combination of potentially disruptive outcomes:
(1) a reduction in the size of the carryover RIN bank; (2) obligated
parties carrying deficits into 2021; and/or (3) obligated parties being
out of compliance with their RFS obligations. Given the intertwined
nature of compliance from year to year, we acknowledge that requiring
higher volumes in 2020 may increase demand for renewable fuels in 2022.
However, this rule achieves the same result simply by requiring higher
volumes in 2022. Given that this rule cannot affect past years such as
2020 but can affect the future, we believe it is more appropriate to
drive increasing renewable fuel demand prospectively, in 2022. Doing so
also mitigates the compliance concerns, including the potential for
non-compliance, described above. We discussed this issue further in
Section III.B.
The above reasons also support our decision to act after the
statutory deadlines for waiving the volumes and establishing the 2020
standards. We have also further and specifically assessed whether it is
appropriate to exercise the reset authority after the passage of the
statutory deadline and have concluded that it is. We received comments
from certain stakeholders suggesting either that EPA lacked the
authority to utilize the reset authority after the deadline had passed,
or that our discretion is limited when utilizing the reset authority
after the deadline. Commenters suggested that the reset authority only
provides for a prospective waiver and cannot be used to modify volumes
that have already been established. As explained in Section II.A.2, the
statutory deadline for resetting the total renewable fuel volume was in
December 2019 (i.e., one year after the promulgation of the 2019
standards final rule).\120\ 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 exercising
the reset authority for several reasons.
---------------------------------------------------------------------------

\120\ We received comments suggesting that the lead time
requirement in CAA section 211(o)(2)(B) also applied, such that EPA
was required to promulgate modified standards by October 31, 2019
(i.e., 14 months prior to the year in which the standards would take
effect). Since the reset provision in CAA section 211(o)(7) provides
the timing requirement specific for the reset rule (one year after
the last triggering action), we believe that specific provision
controls over the more general 14-month provision in CAA section
211(o)(2)(B), which applies to establishing standards under that
provision more generally (including for BBD after 2012 and for all
other fuel categories after 2022). In any event, whether we utilize
the October 31, 2019 deadline, or the December 2019 deadline, our
exercise of the reset authority is late.
---------------------------------------------------------------------------

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.\121\ This rule makes good on
that intent and meets 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 in 2020. Such 2020 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.\122\ Nonetheless, we believe that these are the
appropriate volumes for the reasons explained above. Fourth, we
acknowledge that the text of the statutory reset provision does
contemplate a prospective waiver of the applicable volumes. This is
not, however, different from other statutory authorities in the RFS
program, which also contemplate prospective actions.\123\ This includes
the authority to establish volumes for 2023 and beyond under CAA
section 211(o)(2)(B)(ii), which requires EPA to establish volume
requirements 14 months in advance of when they apply based on the same

[[Page 39622]]

statutory factors as the reset authority. The D.C. Circuit has reviewed
EPA's belated exercise of authority under that and other RFS provisions
and has held that EPA does not lose authority to act merely as a result
of a missed deadline \124\ and upheld our prior rulemakings as
reasonable. Finally, EPA generally has the authority to reconsider past
actions establishing the RFS standards and in doing so can utilize
explicit waiver authorities provided in the statute to modify volumes
that we declined to use at the time of the initial promulgation of the
rule to reduce volumes beyond initial reductions. Nothing in the
statute indicates that the various waiver authorities (such as the
reset and cellulosic waiver authorities) cannot be used together, nor
does anything indicate that EPA's authorities are limited upon
reconsideration of a rule. Further discussion of this topic is provided
in Section 2 of the RTC document.
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\121\ See 84 FR 36766 (July 29, 2019), 86 FR 72436 (December 21,
2021).
\122\ 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.
\123\ See, e.g., CAA section 211(o)(3)(B)(i) (requiring EPA to
establish standards by November 30 of the preceding year), section
(o)(7)(D)(i) (requiring EPA to determine whether or not to exercise
the cellulosic waiver authority by November 30 of the preceding
year), and section (o)(2)(B)(ii) (requiring EPA to establish volumes
14 months before they apply).
\124\ See ACE at 718-9, NPRA at 154-158, Monroe at 920.
---------------------------------------------------------------------------

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

Table III.C-1--Revised Volume Requirements for 2020
[Billion RINs]
------------------------------------------------------------------------
Original
Standard volume Revised volume
------------------------------------------------------------------------
Cellulosic Biofuel...................... 0.59 0.51
Biomas-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
2-17-22''
\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 revising the 2020 BBD volume in this action.

D. Volume Requirements for 2021

We proposed to establish the cellulosic biofuel, advanced biofuel,
and total renewable fuel volumes for 2021 at the volumes of these fuels
projected to be supplied to the U.S. in 2021. Commenters generally
supported this proposed approach. Many commenters submitted updated
data on renewable fuel use in 2021, or referenced publicly available
data on renewable fuel use and asked that the 2021 volumes reflect this
updated data. Some commenters suggested that the 2021 volumes should be
set at the implied statutory levels despite the retroactive nature of
the 2021 volumes and the anticipated shortfall in renewable fuel use
relative to the implied statutory volumes. In this final rule we are
establishing cellulosic biofuel, advanced biofuel, and total renewable
fuel volumes for 2021 at the volumes of these fuels supplied to the
U.S. in 2021, as proposed. However, instead of basing the 2021 volumes
on a projection of the supply in 2021 as in the proposed rule, we now
have and are updating the volumes based on data on the actual supply of
these fuels in 2021. While this results in some changes relative to the
proposed volumes for 2021, these changes are relatively small, and are
consistent with our stated intent in the proposed rule to finalize
volumes for 2021 consistent with the most current data available.
Given that we are establishing 2021 volumes on the same basis as
the 2020 volumes (i.e., at the volumes of biofuels actually used), 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, because this rule is being
finalized after the end of 2021, there is no longer any ability for the
rule to affect renewable fuel production, imports, and consumption in
the U.S. in 2021. As such, the impact of the rule on each of the
statutory factors with regard to renewable fuel use and production
during 2021 is similarly limited. Also, as with 2020, we could have set
volumes for 2021 that were greater or lesser than the volume of
renewable fuel that was actually consumed in 2021, but we do not
believe that doing so would be appropriate for similar reasons. We do,
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 for part of the year and has the potential
to affect actual biofuel consumption. We discuss this relationship
between the three years further in Section III.B.3.
As with 2020 standards, the 2021 standards are both late (relative
to the statutory deadline of November 30, 2020) and retroactive. Unlike
for 2020, however, we are not modifying previously finalized standards
for 2021. The lateness and retroactivity of the 2021 standards are
appropriate for similar reasons as for 2020. We believe that
establishing the 2021 volumes at the volumes actually 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 extended the compliance reporting deadline for 2021, providing
additional lead time. Obligated parties will have at least 9 months
after the publication of this action in the Federal Register before
having to demonstrate compliance with their 2021 obligations.\125\ We
also maintain the existing compliance flexibilities for obligated
parties including access to carryover RINs and carryforward deficits.
As discussed above, the revision of the 2020 volumes to those actually
supplied preserves the carryover RIN bank that helps facilitate
compliance, including for 2021. 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 rulemakings, which the D.C.
Circuit upheld in ACE.
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\125\ See 40 CFR 80.1451(f)(1)(i)(B)(3); 87 FR 5696 (February 2,
2022).
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As with the 2020 volumes, the 2021 volumes also depend upon an
exercise of the reset authority. We believe using the reset authority
is appropriate for similar reasons as for 2020, including that 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

[[Page 39623]]

cellulosic waiver. As with resetting the 2020 standards, we do not
believe that the passage of time or the retroactive nature of this rule
deprive us of our ability to exercise the reset authority.
Additionally, 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.\126\
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\126\ 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'').
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The volumes of cellulosic biofuel, advanced biofuel, and total
renewable fuel that we are establishing for 2021 are shown in Table
III.D-1. The BBD volume for 2021 was previously established in the 2020
final rule and is included in Table III.D-1 for context. These volumes
are based on the actual consumption of renewable fuels in the U.S., as
discussed in greater detail in Chapter 5 of the RIA.

Table III.D-1--RFS Volumes for 2021
[Billion RINs]
------------------------------------------------------------------------
Category Volume
------------------------------------------------------------------------
Cellulosic Biofuel...................................... 0.56
Biomass-Based Diesel.................................... \a\ 2.43
Advanced Biofuel........................................ 5.05
Total Renewable Fuel.................................... 18.84
------------------------------------------------------------------------
\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 revising the 2021 BBD volume in this action.

E. Volume Requirements for 2022

\127\ 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.
---------------------------------------------------------------------------

We received numerous comments on the proposed volumes for 2022.
Many commenters supported the proposed volumes and the incentives those
volumes provide for increased renewable fuel production and use in the
U.S. Some of these commenters suggested that even higher volumes may be
appropriate, particularly higher volumes of advanced biofuel. We also
received many comments arguing that the proposed volumes were too high.
These comments generally raised concerns that the implied volume for
conventional renewable fuel (15 billion gallons) was far above the E10
blendwall. To address these concerns these parties requested that we
reduce the total renewable fuel volume by 1.2-1.5 billion gallons so
that the implied conventional volume reflected the estimates of the E10
blendwall in the proposed rule. As an alternative means of reducing the
implied volume of conventional renewable fuel below the blendwall, some
commenters suggested that we retain the proposed volume for total
renewable fuel, but increase the advanced biofuel volume requirement by
1.2-1.5 billion gallons. Finally, some commenters requested that we
reduce the advanced biofuel volume. These commenters generally raised
concerns about the availability and/or cost of advanced biofuel
feedstocks, and the environmental impacts associated with increased use
of these feedstocks to produce higher volumes of advanced biofuels.
After considering these comments and updated data on biofuel
production and use, we are establishing 2022 total renewable fuel,
advanced biofuel, and cellulosic biofuel volumes using the same general
approach as in the proposed rule. We are establishing the cellulosic
biofuel volume at the volume of qualifying cellulosic biofuel projected
to be used in the U.S. in 2022. We are establishing the advanced
biofuel and total renewable fuel volumes consistent with the cellulosic
biofuel volume and the implied statutory targets for non-cellulosic
advanced biofuel and conventional renewable fuel (5 billion gallons and
15 billion gallons, respectively). These volum

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