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Proposed Rule2025-11128

Renewable Fuel Standard (RFS) Program: Standards for 2026 and 2027, Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other Changes

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Published

June 17, 2025

Issuing agencies

Environmental Protection Agency

Abstract

Under the Clean Air Act (CAA), the Environmental Protection Agency (EPA) is required to determine the applicable volume requirements for the Renewable Fuel Standard (RFS) for years after those specified in the statute. EPA is proposing the applicable volumes and percentage standards for 2026 and 2027 for cellulosic biofuel, biomass-based diesel (BBD), advanced biofuel, and total renewable fuel. EPA is also proposing to partially waive the 2025 cellulosic biofuel volume requirement and revise the associated percentage standard due to a shortfall in cellulosic biofuel production. Finally, EPA is proposing several regulatory changes to the RFS program, including reducing the number of Renewable Identification Numbers (RINs) generated for imported renewable fuel and renewable fuel produced from foreign feedstocks and removing renewable electricity as a qualifying renewable fuel under the RFS program (eRINs).

Full Text

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[Federal Register Volume 90, Number 115 (Tuesday, June 17, 2025)]
[Proposed Rules]
[Pages 25784-25871]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-11128]

[[Page 25783]]

Vol. 90

Tuesday,

No. 115

June 17, 2025

Part III

Environmental Protection Agency

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40 CFR Parts 80 and 1090

Renewable Fuel Standard (RFS) Program: Standards for 2026 and 2027,
Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other
Changes; Proposed Rule

Federal Register / Vol. 90 , No. 115 / Tuesday, June 17, 2025 /
Proposed Rules

[[Page 25784]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 80 and 1090

[EPA-HQ-OAR-2024-0505; FRL-11947-01-OAR]
RIN 2060-AW23

Renewable Fuel Standard (RFS) Program: Standards for 2026 and
2027, Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and
Other Changes

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: Under the Clean Air Act (CAA), the Environmental Protection
Agency (EPA) is required to determine the applicable volume
requirements for the Renewable Fuel Standard (RFS) for years after
those specified in the statute. EPA is proposing the applicable volumes
and percentage standards for 2026 and 2027 for cellulosic biofuel,
biomass-based diesel (BBD), advanced biofuel, and total renewable fuel.
EPA is also proposing to partially waive the 2025 cellulosic biofuel
volume requirement and revise the associated percentage standard due to
a shortfall in cellulosic biofuel production. Finally, EPA is proposing
several regulatory changes to the RFS program, including reducing the
number of Renewable Identification Numbers (RINs) generated for
imported renewable fuel and renewable fuel produced from foreign
feedstocks and removing renewable electricity as a qualifying renewable
fuel under the RFS program (eRINs).

DATES:
Comments. Comments must be received on or before August 8, 2025.
Public Hearing. EPA will announce information regarding the public
hearing for this proposal in supplemental Federal Register document.

ADDRESSES: Comments. Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2024-0505, at <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or removed from the docket. EPA may publish any comment
received to its public docket. Do not submit to EPA's docket at <a href="https://www.regulations.gov">https://www.regulations.gov</a> any information you consider to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Multimedia submissions (audio, video, etc.) must
be accompanied by a written comment. The written comment is considered
the official comment and should include discussion of all points you
wish to make. EPA will generally not consider comments or comment
contents located outside of the primary submission (i.e., on the web,
cloud, or other file sharing system). Please visit <a href="https://www.epa.gov/dockets/commenting-epa-dockets">https://www.epa.gov/dockets/commenting-epa-dockets</a> for additional submission methods; the
full EPA public comment policy; information about CBI or multimedia
submissions; and general guidance on making effective comments.
EPA is specifically soliciting comment on numerous aspects of the
proposed rule. To facilitate comment on those portions of the rule, EPA
has indexed each comment solicitation with a unique identifier (e.g.,
``A-1'', ``A-2'', ``B-1'' . . .) to provide a consistent framework for
effective and efficient provision of comments. Accordingly, we ask that
commenters include the corresponding identifier when providing comments
relevant to that comment solicitation. We ask that commenters include
the identifier either in a heading or within the text of each comment,
to make clear which comment solicitation is being addressed. We
emphasize that we are not limiting comment to these identified areas
and encourage submission of any other comments relevant to this
proposed action.

FOR FURTHER INFORMATION CONTACT: Dallas Burkholder, Assessment and
Standards Division, Office of Transportation and Air Quality,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: 734-214-4766; email address: <a href="/cdn-cgi/l/email-protection#e4b6a2b7c9b691888189858f8d8a8397a4819485ca838b92"><span class="__cf_email__" data-cfemail="1e4c584d334c6b727b737f757770796d5e7b6e7f30797168">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Does this action apply to me?

Entities potentially affected by this action are those involved
with the production, distribution, and sale of transportation fuels
(e.g., gasoline and diesel fuel) and renewable fuels (e.g., ethanol,
biodiesel, renewable diesel, and biogas). Potentially affected
categories include:

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Category NAICS \a\ codes Examples of potentially affected entities
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Industry..................................... 111110 Soybean farming.
Industry..................................... 111150 Corn farming.
Industry..................................... 112111 Cattle farming or ranching.
Industry..................................... 112210 Swine, hog, and pig farming.
Industry..................................... 211130 Natural gas liquids extraction and
fractionation.
Industry..................................... 221210 Natural gas production and distribution.
Industry..................................... 324110 Petroleum refineries (including importers).
Industry..................................... 325120 Biogases, industrial (i.e., compressed,
liquified, solid), manufacturing.
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 wholesalers.
Industry..................................... 457210 Fuel dealers.
Industry..................................... 562212 Landfills.
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\a\ North American Industry Classification System (NAICS).

This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities potentially affected by this
action. This table 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 part 80. 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.

[[Page 25785]]

Preamble Acronyms and Abbreviations

Throughout this document the use of ``we,'' ``us,'' or ``our'' is
intended to refer to EPA. We use multiple acronyms and terms in this
preamble. While this list may not be exhaustive, to ease the reading of
this preamble and for reference purposes, EPA defines the following
terms and acronyms here:

AEO Annual Energy Outlook
AFDC Alternative Fuels Data Center
ATJ alcohol-to-jet
BBD biomass-based diesel
CAA Clean Air Act
CARB California Air Resources Board
CKF corn kernel fiber
CNG compressed natural gas
CWC cellulosic waiver credit
DOE Department of Energy
DRIA Draft Regulatory Impact Analysis
EIA Energy Information Administration
EMTS EPA Moderated Transaction System
EU European Union
FOG fats, oils, and greases
GHG greenhouse gas
LCFS Low Carbon Fuel Standard
LNG liquified natural gas
MSW municipal solid waste
OPEC Organization of Petroleum Exporting Countries
RFS Renewable Fuel Standard
RIN Renewable Identification Number
RNG renewable natural gas
RVO Renewable Volume Obligation
STP standard temperature and pressure
UCO used cooking oil
USDA United States Department of Agriculture
WTI West Texas Intermediate

Outline of This Preamble

I. Executive Summary
A. Summary of the Key Provisions of This Action
B. Impacts of This Rule
C. Policy Considerations
D. Endangered Species Act
II. Statutory Authority
A. Directive To Set Volumes Requirements
B. Statutory Factors
C. Statutory Conditions on Volume Requirements
D. Authority To Establish Volume Requirements and Percentage
Standards for Multiple Years
E. Considerations Related to the Timing of This Action
F. Impact on Other Waiver Authorities
G. Severability
III. Alternative Volume Scenarios for Analysis and Baselines
A. Scope of Analysis
B. Production and Importation of Renewable Fuel
C. Volume Scenarios for 2026-2030
D. Baselines
E. Volume Changes Analyzed
IV. Analysis of Volume Scenarios
A. Energy Security
B. Costs
C. Climate Change
D. Jobs and Rural Economic Development
E. Agricultural Commodity Prices and Food Price Impacts
V. Proposed Volume Requirements for 2026 and 2027
A. Cellulosic Biofuel
B. Non-Cellulosic Advanced Biofuel
C. Biomass-Based Diesel
D. Conventional Renewable Fuel
E. Treatment of Carryover RINs
F. Summary of Proposed Volume Requirements
G. Request for Comment on Alternatives
H. Summary of the Assessed Impacts of the Proposed Volume
Standards
VI. Proposed Percentage Standards for 2026 and 2027
A. Calculation of Percentage Standards
B. Treatment of Small Refinery Volumes
C. Percentage Standards
VII. Partial Waiver of the 2025 Cellulosic Biofuel Volume
Requirement
A. Cellulosic Waiver Authority Statutory Background
B. Assessment of Cellulosic RINs Available for Compliance in
2025
C. Proposed Partial Waiver of the 2025 Cellulosic Biofuel Volume
Requirement
D. Calculation of Proposed 2025 Cellulosic Biofuel Percentage
Standard
VIII. Reduction in the Number of RINs Generated for Imported Fuels
and Feedstocks
A. Introduction and Rationale
B. Legal Authority
C. Implementation
IX. Removal of Renewable Electricity From the RFS Program
A. Historical Treatment of Renewable Electricity in the RFS
Program
B. Statutory Basis for Removal of Renewable Electricity From the
RFS Program
C. Implementation of Proposed Removal of Renewable Electricity
From the RFS Program
X. Other Changes to RFS Regulations
A. Renewable Diesel, Naphtha, and Jet Fuel Equivalence Values
B. RIN-Related Provisions
C. Percentage Standard Equations
D. Existing Renewable Fuel Pathways
E. Updates to Definitions
F. Compliance Reporting, Recordkeeping, and Registration
Provisions
G. New Approved Measurement Protocols
H. Biodiesel and Renewable Diesel Requirements
I. Technical Amendments
XI. Request for Comments
A. Renewable Fuel Volumes and Analyses
B. Import RIN Reduction
C. Removal of Renewable Electricity From the RFS Program
D. Other RFS Program Amendments
E. Policy Considerations
XII. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Executive Order 14192: Unleashing Prosperity Through
Deregulation
C. Paperwork Reduction Act (PRA)
D. Regulatory Flexibility Act (RFA)
E. Unfunded Mandates Reform Act (UMRA)
F. Executive Order 13132: Federalism
G. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
H. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
J. National Technology Transfer and Advancement Act (NTTAA) and
1 CFR Part 51
XIII. Amendatory Instructions
XIV. Statutory Authority

I. Executive Summary

EPA initiated the RFS program in 2006 pursuant to the requirements
of the Energy Policy Act of 2005 (EPAct), which were codified in CAA
section 211(o). Congress subsequently amended the statutory
requirements in the Energy Independence and Security Act of 2007
(EISA). The statute sets forth annual, nationally applicable volume
targets for three of the four categories of renewable fuel (cellulosic
biofuel, advanced biofuel, and total renewable fuel) through 2022 and
for BBD through 2012. For subsequent calendar years, CAA section
211(o)(2)(B)(ii) directs EPA to determine the applicable volume targets
for each of the four categories of renewable fuel in coordination with
the Secretary of Energy and the Secretary of Agriculture, based on a
review of the implementation of the RFS program for prior years and an
analysis of specified statutory factors.
In this action, EPA is proposing the volume targets and applicable
percentage standards for cellulosic biofuel, BBD, advanced biofuel, and
total renewable fuel for 2026 and 2027.\1\ We are also proposing a
number of regulatory changes, including reducing the number of RINs
generated for imported renewable fuel and renewable fuel produced from
foreign feedstocks and removing renewable electricity as a qualifying
renewable fuel under the RFS program (commonly referred to as eRINs).
This preamble describes our rationale for the proposed volume
requirements and regulatory changes and requests comment on the
proposals and supporting rationales, including on EPA's proposed
changes to the RFS program and any legitimate reliance interests that
EPA should consider during this rulemaking.
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\1\ EPA previously established volume requirements and
applicable percentage standards for 2023-2025 on July 12, 2023 (88
FR 44468) (the ``Set 1 Rule'').
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The volume requirements and regulatory changes proposed in this
action would strengthen the RFS program and sharpen the program's focus
on a central goal of the policy: supporting domestic production of
renewable fuels. Ensuring a growing

[[Page 25786]]

supply of domestically produced renewable fuels, particularly those
produced from domestically sourced feedstocks, is a key component in
meeting the statutory goals of increasing the energy independence and
security of the United States. Increasing domestic production of
renewable fuel also contributes to unleashing American energy
production towards the goal of achieving energy dominance, consistent
with the Administration's ``Unleashing American Energy'' Executive
Order \2\ and the energy dominance pillar of EPA's ``Powering the Great
American Comeback'' initiative.\3\ The proposed modifications and
requirements in this action are responsive to input from key
agricultural and energy stakeholders on ways to bolster the RFS
program, and EPA looks forward to engaging with these and additional
interested stakeholders on the proposed changes.
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\2\ Executive Order 14154, ``Unleashing American Energy,''
January 20, 2025 (90 FR 8353; January 29, 2025).
\3\ EPA, ``EPA Administrator Lee Zeldin Announces EPA's
`Powering the Great American Comeback' Initiative,'' February 4,
2025. <a href="https://www.epa.gov/newsreleases/epa-administrator-lee-zeldin-announces-epas-powering-great-american-comeback">https://www.epa.gov/newsreleases/epa-administrator-lee-zeldin-announces-epas-powering-great-american-comeback</a>.
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A. Summary of the Key Provisions of This Action

1. Volume Requirements for 2026 and 2027
Based on our analysis of the factors required in the statute, and
in coordination with the United States Department of Agriculture (USDA)
and Department of Energy (DOE), EPA is proposing the volume
requirements for 2026 and 2027, as shown in Table I.A.1-1. The proposed
volumes represent significant increases from those established for
2023-2025, especially after accounting for the proposal to reduce the
number of RINs generated for imported renewable fuel and renewable fuel
produced from foreign feedstocks.

Table I.A.1-1--Volume Requirements for 2023-2027
[Billion RINs] \a\
----------------------------------------------------------------------------------------------------------------
Volume requirement established in Set 1 Rule Proposed volume requirement
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2023 2024 2025 2026 2027
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Cellulosic biofuel.............. 0.84 \b\ 1.01 \c\ 1.19 1.30 1.36
Biomass-based diesel \d\........ 4.51 4.86 5.36 7.12 7.50
Advanced biofuel................ 5.94 6.54 7.33 9.02 9.46
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Total renewable fuel........ \e\ 20.94 21.54 22.33 24.02 24.46
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\a\ One 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 renewable fuel categories, while gallons are
generally used to describe volumes for individual types of biofuel (e.g., ethanol, biodiesel, renewable
diesel, etc.).
\b\ EPA originally established a cellulosic biofuel volume requirement of 1.09 billion gallons for 2024 in the
Set 1 Rule. EPA subsequently reduced this volume requirement to 1.01 billon RINs in a separate action.
\c\ EPA originally established a cellulosic biofuel volume requirement of 1.38 billion gallons for 2025 in the
Set 1 Rule. As described in Section VII, we are proposing to reduce this volume requirement to 1.19 billion
RINs in this action.
\d\ Through 2025, the BBD volume requirement was established in physical gallons rather than RINs. As described
in Section X.C, we are proposing to now specify the BBD volume requirement in RINs, consistent with the other
three renewable fuel categories, rather than physical gallons. For the sake of comparison, we have converted
the BBD volume requirements for 2023-2025 from physical gallons to RINs using the BBD conversion factor in 40
CFR 80.1405(c) of 1.6 RINs per gallon.
\e\ The total renewable fuel volume requirement for 2023 does not include the 0.25 billion RIN supplemental
standard.

In this action, we are proposing to specify the BBD volume
requirement in billion RINs, rather than billion gallons as in previous
RFS rules. To demonstrate the impact of this change, and to allow for
easier comparison to previous RFS rules, the BBD volume requirements
(in billion RINs) and the volume of BBD (in billion gallons) we project
would be supplied to satisfy the volume requirements are shown in Table
I.A.1-2. Finally, the quantities of renewable fuel we project would be
supplied to satisfy the volume requirements, after accounting for the
nested nature of the RFS volume requirements and the proposed import
RIN reduction provisions, are shown in Table I.A.1-3.

Table I.A.1-2--BBD Volume Requirements for 2023-2027
----------------------------------------------------------------------------------------------------------------
Volume requirement established in the Set 1 Projected volume requirement
Rule -------------------------------
------------------------------------------------
2023 2024 2025 2026 2027
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BBD volume requirement (billion \a\ 4.51 \a\ 4.86 \a\ 5.36 7.12 7.50
RINs)..........................
Projected volume of BBD (billion 2.82 3.04 3.35 \b\ 5.61 \b\ 5.86
gallons).......................
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\a\ Billion RINs estimated assuming the average gallon of BBD generates 1.6 RINs.
\b\ Billion gallons estimated after accounting for the projected impacts of the proposed RIN reduction for
imported renewable fuel and renewable fuel produced from foreign feedstocks and the proposed revised
equivalence value for renewable diesel. We project that the average number of RINs generated for BBD will be
1.27 and 1.28 RINs per gallon in 2026 and 2027, respectively. These numbers are not proposed standards and are
presented for illustrative purposes only.

[[Page 25787]]

Table I.A.1-3--Projected Supply of Renewable Fuels To Satisfy the Volume Requirements for 2023-2027
[Billion gallons]
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Projected volume in the Set 1 Rule Projected volume to meet the
------------------------------------------------ proposed volume requirements
-------------------------------
2023 2024 2025 2026 2027
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Cellulosic biofuel.............. 0.84 1.09 1.38 1.30 1.36
Biomass-based diesel............ 3.71 3.85 4.24 6.83 7.16
Other advanced biofuel \a\...... 0.23 0.23 0.23 0.19 0.19
Conventional renewable fuel..... \b\ 13.85 13.96 13.78 13.78 13.66
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Total renewable fuel........ \b\ 18.63 19.12 19.63 22.10 22.37
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\a\ Other advanced biofuel includes all advanced biofuels that to not qualify as cellulosic biofuel or BBD.
\b\ Volumes do not include the 0.25 billion RIN supplemental standard established for 2023.

As discussed above, CAA section 211(o) requires EPA to analyze a
specified set of factors in making our determination of the appropriate
volume requirements. Many of those factors, particularly those related
to economic and environmental impacts, are difficult to analyze in the
abstract. To facilitate a more robust analysis of the statutory
factors, we identified a set of renewable fuel volumes to analyze prior
to determining the appropriate volume requirements to establish under
the statute. We began by identifying two volume scenarios and then
analyzed the potential impacts of these volume scenarios on the factors
listed in the statute. The derivation of these volume scenarios is
discussed in Section III. Section IV discusses the analysis of the
volume scenarios for the statutory factors. Section V discusses our
conclusions regarding the appropriate volume requirements to propose in
light of the analyses conducted. Finally, Section VI discusses the
formulas and values used to calculate the proposed percentage
standards.
The BBD and advanced biofuel volumes we are proposing for 2026 and
2027 reflect the significant growth observed in the production of these
fuels over the past several years and build off the volumes already
achieved in the marketplace in 2024. The proposed volumes reflect the
projected growth in the domestic supply of feedstocks, primarily
soybean oil, with smaller projected increases in other feedstocks
including used cooking oil and animal fats. Our focus on the growth in
domestic feedstocks when projecting the supply of BBD for 2026 and 2027
is in part due to the uncertainty in the quantity of imported fuels and
feedstocks that will be available to U.S. markets given various
factors, including the available supply of qualifying feedstocks and
demand for these feedstocks and fuels in other countries.
The cellulosic biofuel volumes we are proposing for 2026 and 2027
are slightly lower than the volumes we finalized for 2025.\4\ The
primary reasons for the decrease in the proposed volumes are
limitations on the quantities of compressed natural gas (CNG) and
liquified natural gas (LNG) derived from biogas projected to be used as
transportation fuel in these years. CNG/LNG derived from biogas
comprise most of the qualifying cellulosic biofuel we project will be
supplied through 2027. However, the proposed cellulosic biofuel volumes
also include projections of cellulosic ethanol from corn kernel fiber
(CKF) produced at existing corn starch ethanol production facilities.
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\4\ As discussed in Section VII, we are also proposing to reduce
the previously established cellulosic biofuel volume requirement for
2025 in this action.
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The proposed volumes for total renewable fuel in 2026 and 2027
reflect an implied conventional biofuel volume of 15 billion gallons
each year. This is consistent with the implied conventional renewable
fuel volumes in the statutory tables for 2015-2022,\5\ as well as the
implied conventional biofuel volumes established for 2023-2025. We
recognize that while the supply of conventional biofuel in 2026 and
2027 will likely fall short of the implied 15-billion-gallon volume,
the proposed total renewable fuel volumes are still achievable through
the use of additional volumes of advanced biofuel beyond the volume
requirement for that category.
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\5\ CAA section 211(o)(2)(B)(i).
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The volume requirements that we are proposing in this action are
the basis for the calculation of percentage standards applicable to
producers and importers of gasoline and diesel unless they are waived
in a future action using one or more of the available waiver
authorities in CAA section 211(o)(7).
We believe that it is appropriate to propose volume requirements
for two years instead of a longer timeframe due to the increased
uncertainty of trying to project out further in the future, which
increases the likelihood of needing to adjust volumes in the future.
Adjustments to volume requirements create uncertainty in the RFS
program and hinder the purpose of projecting future years, which is
meant to provide certainty to the market. However, EPA is requesting
comment on whether it would be appropriate to set standards for more
than two years.
2. Partial Waiver of the 2025 Cellulosic Biofuel Volume Requirement
EPA is proposing to partially waive the 2025 cellulosic biofuel
volume requirement and revise the associated percentage standard due to
a shortfall in cellulosic biofuel production. As discussed in Section
VII, we currently project a 0.19 billion RIN shortfall in available
cellulosic biofuel in 2025. As such, we are proposing to use our CAA
section 211(o)(7)(D) ``cellulosic waiver authority'' to reduce the 2025
cellulosic biofuel volume from 1.38 billion RINs to 1.19 billion RINs.
The use of such waiver authority, if finalized, would also make
cellulosic waiver credits (CWCs) available for the 2025 compliance
year.
3. Reduction in the Number of RINs Generated for Imported Renewable
Fuel and Renewable Fuel Produced From Foreign Feedstocks
EPA is proposing to reduce the number of RINs generated for
imported renewable fuel and renewable fuel produced from foreign
feedstocks. In simple terms, we are proposing regulatory changes that
would mean a gallon of imported renewable fuel, or fuel produced from
foreign feedstocks, would generate half the number of RINs that the
same gallon of fuel would generate if produced in the U.S. from
domestic feedstocks. These proposed changes, described in Section VIII,
are in response to the dramatic increase in imported biofuels and
feedstocks used to produce biofuels in the U.S. observed

[[Page 25788]]

in recent years and align with the statutory goals of bolstering
national energy independence. Imported renewable fuel and renewable
fuel produced from foreign feedstocks do not further energy
independence and are projected to result in fewer employment and rural
economic development benefits relative to renewable fuels produced in
the U.S. from domestic feedstocks.
4. Removal of Renewable Electricity From the RFS Program
As described in Section IX, EPA is proposing to remove renewable
electricity as a qualifying renewable fuel under the RFS program
(commonly referred to as eRINs), thereby making it ineligible to
generate RINs. The proposed changes would find that renewable
electricity does not meet the definition of renewable fuel under CAA
section 211(o)(1)(J). On this basis, we are proposing to remove the
regulations related to the production and use of renewable electricity
as a transportation fuel, including the regulations related to facility
registration for renewable electricity producers and the provisions for
generating RINs for use of renewable electricity as a transportation
fuel. We are also proposing to remove the definition of ``renewable
electricity'' and the renewable electricity pathways in Table 1 of 40
CFR 80.1426 in connection with this policy change.
5. Other Regulatory Changes
EPA is also proposing additional regulatory changes in several
areas to strengthen our implementation of the RFS program. These
regulatory changes are discussed in greater detail in Section X and
include:
<bullet> Specifying new equivalence values for renewable diesel,
naphtha, and jet fuel.
<bullet> Updating RIN generation and assignment provisions.
<bullet> Clarifying that RINs cannot be generated on pure or neat
biodiesel that is used as process heat or for power generation.
<bullet> Changing the percentage standards equations, including
specifying the BBD standard in RINs rather than physical gallons.
<bullet> Updating existing renewable fuel pathways and adding new
ones.
<bullet> Adding definitions for terms used throughout the
regulations and updating other definitions.
<bullet> Adding a joint and several liability provision applicable
to importers of renewable fuel.
<bullet> Revising compliance reporting and registration provisions,
including clarifying that small refineries that receive an exemption
from their RFS obligations must still submit an annual compliance
report.
<bullet> Clarifying certain testing requirements for biodiesel and
renewable diesel.
<bullet> Other minor changes and technical corrections.

B. Impacts of This Rule

CAA section 211(o)(2)(B)(ii) requires EPA to assess several factors
when determining volume requirements for calendar years after 2022.
These factors are described in the introduction to this Executive
Summary, and each factor is discussed in detail in the Draft Regulatory
Impact Analysis (DRIA) accompanying this rule.\6\ However, the statute
does not specify how EPA must assess each factor. For two of these
statutory factors--costs and energy security--we provide monetized
estimates of the impacts of the proposed volume requirements. For the
other statutory factors, we are either unable to quantify impacts or we
provide quantitative estimated impacts that nevertheless cannot be
easily monetized. Thus, we are unable to quantitatively compare all the
evaluated impacts of this rulemaking.
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\6\ ``RFS Program Standards for 2026 and 2027: Draft Regulatory
Impact Analysis,'' EPA-420-D-25-001, June 2025.
---------------------------------------------------------------------------

EPA considered all statutory factors in developing this proposal,
including factors for which we provide monetized impacts, otherwise
quantified impacts, or provide a qualitative assessment of relevant
impacts, and we find that the proposed volumes are appropriate under
EPA's statutory authority as an outcome of balancing all relevant
factors. This approach is consistent with CAA section 211(o)(2)(B)(ii),
which requires the EPA Administrator to ``determin[e]'' volumes based
on ``an analysis of'' the statutory factors and does not require that
analysis to monetize or quantify all relevant considerations. A summary
of our assessment of the impacts of this proposed rule can be found in
Section V.H. Table ES-1 in the DRIA provides a list of all the impacts
that we assessed, both quantitative and qualitative. Additional detail
for each of the assessed factors is provided in DRIA Chapters 4 through
10. For this proposed rule, we used data and projections from the U.S.
Energy Information Administration's (EIA's) Annual Energy Outlook 2023,
which was the most recent version available at the time we conducted
our analyses supporting this action.\7\ For the final rule, we intend
to update our analyses using the most recent available data and
projections from EIA and other sources.\8\
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\7\ EIA, ``Annual Energy Outlook 2023'' (AEO2023). <a href="https://www.eia.gov/outlooks/archive/aeo23">https://www.eia.gov/outlooks/archive/aeo23</a>.
\8\ On April 15, 2025, EIA issued ``Annual Energy Outlook 2025''
(AEO2025). <a href="https://www.eia.gov/outlooks/aeo">https://www.eia.gov/outlooks/aeo</a>.
---------------------------------------------------------------------------

C. Policy Considerations

The RFS program is a critical policy tool to support the domestic
production of renewable fuels. This action seeks to get the RFS program
back on track by establishing renewable fuel volumes for 2027 by the
statutory deadline and aligning the incentives provided by the RFS
program with the statutory goals of increasing energy independence and
energy security. The proposed volumes for 2026 and 2027 reflect the
significant growth potential for renewable fuel production in the
United States using domestic feedstocks.
EPA is requesting comment on multiple aspects of this action,
including the proposed volume requirements, our technical analyses
supporting those volumes, our proposal to reduce the number of RINs
generated for imported renewable fuels and renewable fuels produced
from foreign feedstocks, the removal of renewable electricity as a
qualifying renewable fuel under RFS program, and the other proposed
regulatory amendments. We also recognize that while this proposal in an
important first step in getting the RFS program back on track,
opportunities remain to improve the RFS program. To that end, we are
requesting comment on a variety of potential changes to the RFS program
that EPA could consider in future actions that would increase the
program's ability to achieve the goals of EPAct and EISA. Our request
for comment includes, but is not limited to:
<bullet> A general pathway for the production of renewable jet fuel
from corn ethanol, including the consideration of ways to reduce
emissions for this pathway such as the use of carbon capture and
storage, renewable natural gas for process energy and low-carbon
farming practices.
<bullet> The definition of ``produced from renewable biomass.''
<bullet> Additional program amendments to ensure that imported
renewable fuels are produced from qualifying feedstocks and enhance our
ability to track feedstocks to their point of origin. These comments
may include input on methods and data to improve our evaluation of the
environmental impacts associated with imported feedstocks such as used
cooking oil and tallow.
<bullet> Program enhancements to increase the use of qualifying
woody-biomass to

[[Page 25789]]

produce renewable transportation fuel. We specifically request comment
on the extent to which the renewable biomass definition in 40 CFR 80.2
aligns with current wildfire risk potential and corresponds to wildfire
ignition behavior science and how to best maximize the eligibility of
woody biomass residues generated at sawmills and other forest products
manufacturing businesses that have not been adulterated by chemicals or
other non-wood contaminants.
<bullet> An option to apply the import RIN reduction provisions to
imported renewable fuel and renewable fuel produced domestically from
foreign feedstock from only a subset of countries to reflect the
reduced economic, energy security, and environmental benefits of
imported renewable fuel and feedstock from those countries.
<bullet> Any other modifications to the RFS program designed to
unleash the production of American energy.

D. 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, in consultation
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 action 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, the action agency is required to
consult with the Services for actions that ``may affect'' listed
species or designated critical habitat.\9\ Consultation is not required
where the action would have no effect on such species or habitat.
---------------------------------------------------------------------------

\9\ 50 CFR 402.14.
---------------------------------------------------------------------------

Consistent with ESA section 7(a)(2) and relevant implementing
regulations at 50 CFR part 402, EPA engaged in informal consultation
with the Services and completed a Biological Evaluation (BE) for the
Set 1 Rule.\10\ Supported by the analysis in the Set 1 Rule BE, EPA
determined that the Set 1 Rule was ``not likely to adversely affect''
listed species and their habitats. NMFS concurred with EPA's
determination on July 27, 2023, and FWS concurred with EPA's
determination on August 3, 2023, thereby concluding the agencies'
consultation obligations.\11\ For the rulemaking finalizing this
proposed action, EPA intends to develop a biological evaluation to
inform our assessment of the effects of this action, and in turn our
ESA consultation obligations.
---------------------------------------------------------------------------

\10\ EPA, ``Biological Evaluation of the Renewable Fuel Standard
Set Rule and Addendum,'' EPA-420-R-23-029, May 2023 (the ``Set 1
Rule BE'').
\11\ The outcome of the Set 1 Rule ESA consultation is the
subject of pending litigation; oral argument was held on November 1,
2024, and we are awaiting the court's decision. See CBD v. EPA, et
al., Case No. 23-1177 (D.C. Cir.).
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II. Statutory Authority

A. Directive To Set Volumes Requirements

Congress enacted the RFS program for the purpose of increasing the
use of renewable fuel in transportation fuel over time. Congress
specified statutory volumes for the initial years of the program,
including for BBD through 2012, and for the total renewable fuel,
advanced biofuel, and cellulosic biofuel through 2022, but allowed EPA
to waive the statutory volumes in certain circumstances. For years
after 2022, Congress provided EPA with the directive and authority to
establish the applicable renewable fuel volume requirements, as
described in this section.\12\ This section discusses EPA's statutory
authority and additional factors we have considered due to the timing
of this rulemaking, as well as the severability of the various portions
of this rule.
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\12\ We refer to CAA section 211(o)(2)(B)(ii) as the ``set
authority.''
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B. Statutory Factors

CAA section 211(o)(2)(B)(ii) establishes the processes, criteria,
and standards for setting the applicable annual renewable fuel volumes.
That provision provides that the EPA Administrator shall, in
coordination with USDA and DOE,\13\ determine the applicable volumes of
each renewable fuel category, based on a review of the implementation
of the program during the calendar years specified in the tables in CAA
section 211(o)(2)(B)(i) and an analysis of the following factors:
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\13\ In furtherance of this requirement, we will continue
periodic discussions with USDA and DOE on this action.
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<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 biomass-based diesel);
<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.
Congress provided EPA flexibility by enumerating factors that the
Administrator must consider without mandating any particular forms of
analysis or specifying how the EPA Administrator must weigh the various
factors against one another. Thus, as the CAA ``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.'' \14\ These factors were analyzed in the context
of the 2020-2022 RFS Rule that modified volumes under CAA section
211(o)(7)(F),\15\ which requires EPA to comply with the processes,
criteria, and standards in CAA section 211(o)(2)(B)(ii). EPA's
assessment of the factors in that rule was recently upheld by the D.C.
Circuit in Sinclair v. EPA.\16\ EPA has also considered these factors
in establishing the applicable volumes for 2023-2025 under CAA section
211(o)(2)(B)(ii) in the Set 1 Rule. Consistent with our past practice
in evaluating the factors,\17\ we have again determined that a holistic
balancing of the factors is appropriate.\18\
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\14\ Nat'l Wildlife Fed'n v. EPA, 286 F.3d 554, 570 (D.C. Cir.
2002) (analyzing factors within the Clean Water Act); accord
Riverkeeper, Inc. v. U.S. EPA, 358 F.3d 174, 195 (2d Cir. 2004)
(same); BP Exploration & Oil, Inc. v. EPA, 66 F.3d 784, 802 (6th
Cir. 1995) (same); see also Brown v. Watt, 668 F.3d 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. . . .'') (addressing factors articulated in the Out
Continental Shelf Lands Act).
\15\ 87 FR 39600 (July 1, 2022).
\16\ 101 F.4th 871, 888-889 (D.C. Cir. 2024).
\17\ 87 FR 39600, 39607-08 (July 1, 2022).
\18\ EPA, ``RFS Annual Rules: Response to Comments,'' EPA-420-R-
22-009, June 2022 (``2020-2022 RFS Rule RTC''), at 10.
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In addition to those factors listed in the statute, the EPA
Administrator also has authority to consider ``other'' factors,
including both the implied

[[Page 25790]]

authority to consider factors that inform our analysis of the statutory
factors and the explicit authority under CAA section
211(o)(2)(B)(ii)(VI) to consider ``the impact of the use of renewable
fuels on other factors.'' Accordingly, we have considered several other
relevant factors beyond those enumerated in CAA section
211(o)(2)(B)(ii), including:
<bullet> The interconnected nature of the volume requirements for
2026 and 2027, including the nested nature of those volume requirements
and the availability of carryover RINs (Section V.E).\19\
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\19\ This also informs our analysis of the statutory factor
``review of the implementation of the program'' in CAA section
211(o)(2)(B)(ii).
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<bullet> The ability of the market to respond given the timing of
this rulemaking (DRIA Chapter 7).\20\
---------------------------------------------------------------------------

\20\ This also informs our analysis of the statutory factor
``the expected annual rate of future commercial production of
renewable fuels'' in CAA section 211(o)(2)(B)(ii)(III).
---------------------------------------------------------------------------

<bullet> The supply of qualifying renewable fuels to U.S. consumers
(Section III.B).\21\
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\21\ This is based on our analysis of the 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.
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<bullet> Soil quality (DRIA Chapter 4.3).\22\
---------------------------------------------------------------------------

\22\ Soil quality is closely tied to water quality and is also
relevant to the impact of renewable fuels on the environment more
generally, such that this analysis also informs our analysis of the
statutory factor ``the impact of the production and use of renewable
fuels on the environment'' in CAA section 211(o)(2)(B)(ii)(I).
---------------------------------------------------------------------------

<bullet> Ecosystem services (DRIA Chapter 4.6).\23\
---------------------------------------------------------------------------

\23\ Ecosystem services broadly consist of the many life-
sustaining benefits humans receive from nature, such as clean air
and water, fertile soil for crop production, pollination, and flood
control. Ecosystem services are discussed in DRIA Chapter 4 due to
linkages to potential environmental impacts from this rule.
---------------------------------------------------------------------------

<bullet> A consideration of costs and benefits (Section V.H).\24\
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\24\ The consideration of costs and benefits includes our
quantitative analysis of several statutory factors, including costs
and monetizable impacts on energy security.
---------------------------------------------------------------------------

C. Statutory Conditions on Volume Requirements

As indicated above, the CAA affords the EPA Administrator
flexibility to consider and weigh each of the enumerated factors.
However, the CAA contains three overarching conditions that affect our
determination of the applicable volume requirements:
<bullet> A constraint in setting the applicable volume of total
renewable fuel as compared to advanced biofuel, with implications for
the implied volume requirement for conventional renewable fuel.
<bullet> Direction in setting the cellulosic biofuel applicable
volume regarding potential future waivers.
<bullet> A floor on the applicable volume of BBD.
We discuss these conditions in further detail below.
1. Advanced Biofuel as a Percentage of Total Renewable Fuel
While the statute generally provides broad discretion in setting
the applicable volume requirements for advanced biofuel and total
renewable fuel, it also establishes a constraint on the relationship
between these two volume requirements. CAA section 211(o)(2)(B)(iii)
provides that the applicable advanced biofuel requirement must ``be at
least the same percentage of the applicable volume of renewable fuel as
in calendar year 2022,'' meaning that EPA must, at a minimum, maintain
the ratio of advanced biofuel to total renewable fuel that was
established for 2022 for all future years in which EPA itself sets the
applicable volume requirements. In effect, this proportional
requirement limits the proportion of the implied volume of conventional
renewable fuel within the total renewable fuel volume for years after
2022 based on the proportion that existed for calendar year 2022.
The applicable advanced biofuel volume requirement established for
2022 was 5.63 billion gallons.\25\ The total renewable fuel volume
requirement established for 2022 was 20.63 billion gallons, resulting
in an implied conventional volume requirement of 15 billion gallons.
Thus, advanced biofuel represented 27.3 percent of total renewable fuel
for 2022, and EPA must maintain at least that percentage of the
advanced biofuel volume requirement as compared to the total renewable
fuel volume requirement for all subsequent years. The volume
requirements we are proposing in this action for 2026 and 2027, shown
in Table I.A.1-1, exceed this 27.3 percent minimum, and thus they
satisfy this statutory requirement for each year.
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\25\ 87 FR 39601 (July 1, 2022).
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2. Cellulosic Biofuel
CAA section 211(o)(2)(B)(iv) requires that EPA set the applicable
cellulosic biofuel requirement ``based on the assumption that the
Administrator will not need to issue a waiver . . . under [CAA section
211(o)](7)(D)'' for the years in which EPA sets the applicable volume
requirement. We have historically interpreted this requirement to mean
that the cellulosic biofuel volume requirement should be set at a level
that is achievable such that EPA does not anticipate a need to further
lower the requirement through a waiver under CAA section
211(o)(7)(D).\26\ CAA section 211(o)(7)(D) provides that if ``the
projected volume of cellulosic biofuel production is less than the
minimum applicable volume established under paragraph (2)(B),'' EPA
``shall reduce the applicable volume of cellulosic biofuel required
under paragraph (2)(B) to the projected volume available during that
calendar year.'' Therefore, we are proposing the cellulosic biofuel
volume requirements such that a waiver of those requirements is not
anticipated to be necessary for those future years. Operating within
this limitation, and in light of our consideration of the statutory
factors explained in Section V, we are proposing cellulosic volumes for
2026 and 2027 at the projected volume available in each year,
respectively, consistent with our past actions in determining the
cellulosic biofuel volume.\27\ These projections, discussed further in
Sections III.B.1 and V.A, represent our best efforts to project the
potential for growth in the volume of cellulosic biofuel that can be
achieved in 2026 and 2027.
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\26\ The cellulosic waiver authority applies when the projected
volume of cellulosic biofuel production is less than the minimum
applicable volume, per CAA section 211(o)(7)(D).
\27\ See, e.g., 2020-2022 RFS Rule (87 FR 39600; July 1, 2022).
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We recognize that, for 2024 and 2025, the volume of cellulosic
biofuel available was less than the volume required, and we have
partially waived the 2024 cellulosic biofuel volume requirement and are
proposing to partially waive the 2025 cellulosic biofuel volume
requirement in this action as discussed in Section VII. Nevertheless,
we have considered the cellulosic biofuel available in those years and
adjusted our methodology as discussed in Sections III.B.1 and V.A and
DRIA Chapter 7.1 to account for the prior shortfalls in the standards.
Retroactive waivers of the volume requirements under the RFS program
decrease certainty for the market and undermines confidence in the
volumes and standards EPA sets, which could negatively impact
investment in renewable fuel production in future years. In this
action, we propose changes to the methodology used to project
cellulosic biofuel volumes to avoid the need for waivers of the RFS
standards in the future.

[[Page 25791]]

3. Biomass-Based Diesel
EPA has established the BBD volume requirement under CAA section
211(o)(2)(B)(ii) for the years since 2013 because the statute only
provides BBD volume requirements through 2012. CAA section
211(o)(2)(B)(iv) also requires that the BBD volume requirement be set
at, or greater than, the 1.0-billion-gallon volume requirement
enumerated by statute for 2012, but it does not provide any other
numerical criteria that EPA must consider. In the years since 2012, EPA
has steadily increased the BBD volume requirement beyond 1.0 billion
gallons to 3.35 billion gallons in 2025. In this action, we are
proposing BBD volume requirements for 2026 and 2027 of 7.12 and 7.50
billion RINs respectively.\28\ These numbers are not directly
comparable with the BBD volume requirements in previous years, as they
express the required volume of BBD in RINs rather than gallons and
reflect our proposal that imported renewable fuels and renewable fuels
produced from foreign feedstocks would generate fewer RINs.\29\
Nevertheless, the proposed BBD volume requirements guarantee that at
least 4.45 and 4.69 billion gallons of BBD would be used in 2026 and
2027 respectively,\30\ far greater than 1.0-billion-gallon minimum
requirement.
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\28\ As noted in Section I.A.1 and explained further in Section
X.C, we are proposing to specify the BBD volume requirement in RINs,
rather than gallons, as was the case in establishing the 2025 BBD
volume requirement of 3.35 billion physical gallons.
\29\ See Section VIII for more detail on the proposed RIN
reduction for renewable fuels and renewable fuels produced from
foreign feedstocks.
\30\ These volumes represent the lowest possible volume of BBD
that could be used to meet the proposed BBD volume requirements for
2026 and 2027. These numbers are calculated by dividing the proposed
BBD RIN requirements by 1.6, which is the number of RINs generated
for renewable diesel if produced by a domestic renewable fuel
producer using domestic feedstocks.
---------------------------------------------------------------------------

D. Authority To Establish Volume Requirements and Percentage Standards
for Multiple Years

In this action, EPA is proposing applicable volume requirements and
percentage standards for 2026 and 2027. We have a statutory obligation
to promulgate volume requirements under CAA section 211(o)(2)(B)(ii)
and are addressing that requirement in this proposed action. The
statutory deadline for the 2026 applicable volume requirements passed
on October 31, 2024. The statutory deadline for promulgating the 2027
applicable volume requirements is October 31, 2025. We are proposing
this action with the intent to meet that statutory deadline for the
2027 applicable volume requirements and to fulfill our outstanding
obligation to establish the 2026 applicable volume requirements ahead
of the 2026 compliance year.
As to the percentage standards with which obligated parties must
comply, CAA section 211(o)(A)(i) and (iii) requires EPA to promulgate
regulations that, regardless of the date of promulgation, contain
compliance provisions applicable to refineries, blenders, distributors,
and importers that ensure that the volumes in CAA section
211(o)(2)(B)--which includes volumes set by EPA after 2022--are met. As
in the Set 1 Rule, EPA is also proposing to establish corresponding
percentage standards in this action.\31\
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\31\ 88 FR 44468, 44519-21 (July 14, 2023).
---------------------------------------------------------------------------

In summary, we are proposing applicable volume requirements and
associated percentage standards for 2026 and 2027, as further described
in Sections V and VI.

E. Considerations Related to the Timing of This Action

In this action, we are proposing applicable volume requirements for
the 2026 compliance year after the statutory deadline to establish such
requirements.\32\ That deadline was October 31, 2024. EPA has in the
past also missed statutory deadlines for promulgating RFS standards,
including the 2023 and 2024 standards established in the Set 1 Rule,
and the BBD volume requirements for 2014-2017, which were established
under CAA section 211(o)(2)(B)(ii), the same provision under which we
are proposing to establish the 2026 standards in this action. In its
review of EPA's 2015 action establishing BBD volume requirements for
2014-2017,\33\ the D.C. Circuit found that EPA retains authority beyond
the statutory deadlines to promulgate volumes and annual standards,
even those that apply retroactively, so long as EPA exercises this
authority reasonably.\34\ EPA had missed the statutory deadline under
CAA section 211(o)(2)(B)(ii) to establish an applicable volume
requirement for BBD no later than 14 months before the first year to
which that volume requirement will apply for all years. The D.C.
Circuit held that when EPA exercises this authority after the statutory
deadline, EPA must balance the burden on obligated parties of a delayed
rulemaking with the broader goal of the RFS program to increase
renewable fuel use.\35\ In specifically upholding the portion of that
rulemaking that was late but not retroactive, the court considered
whether there was sufficient lead time and adequate notice for
obligated parties.\36\ The court found that EPA properly balanced the
relevant considerations and had provided sufficient notice to parties
in establishing the applicable volume requirements for 2014-2017.\37\
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\32\ See CAA section 211(o)(2)(B)(ii), requiring EPA promulgate
applicable volume requirements no later than 14 months prior to the
first year in which they will apply.
\33\ 80 FR 77420, 77427-28, 77430-31 (December 14, 2015).
\34\ Americans for Clean Energy v. EPA, 864 F.3d 691 (D.C. Cir.
2017) (ACE) (EPA may issue late applicable volumes under CAA section
211(o)(2)(B)(ii)); Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C.
Cir. 2014); NPRA v. EPA, 630 F.3d 145, 154-58 (D.C. Cir. 2010). See
also Sinclair v. EPA, 101 F.4th 871 (D.C. Cir. 2024).
\35\ NPRA v. EPA, 630 F.3d 145, 164-65.
\36\ ACE, 864 F.3d at 721-22.
\37\ ACE, 864 F.3d at 721-23.
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In this action, we are proposing to exercise our authority to set
the applicable renewable fuel volume requirements for 2026 after the
statutory deadline to promulgate such volume requirements under CAA
section 211(o)(2)(B)(ii). We intend to finalize the 2026 standards
prior to the beginning of the 2026 compliance year (i.e., before
January 1, 2026) and do not expect those standards to apply
retroactively. In this proposal, we are providing obligated parties
notice of the proposed 2026 standards. Under the RFS regulations,
demonstrating compliance with the 2025 standards will not be required
until the next quarterly reporting deadline after the 2026 standards
are effective.\38\ Additionally, obligated parties will continue to
have the ability to use existing compliance flexibilities to comply
with the 2026 RFS standards, such as the use of carryover RINs and
carrying forward a deficit from one compliance year into the next.
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\38\ 40 CFR 80.1451(f)(1)(i)(A).
---------------------------------------------------------------------------

F. Impact on Other Waiver Authorities

While we are proposing applicable volume requirements in this
action for future years that are achievable and appropriate based on
our consideration of the statutory factors, we retain our legal
authority to waive volumes in the future under the waiver authorities
should circumstances so warrant.\39\ For example, the general waiver
authority under CAA section 211(o)(7)(A) provides that EPA may waive
the volume requirements in ``paragraph (2),'' which provides both the
statutory

[[Page 25792]]

applicable volume tables and EPA's set authority (the authority to set
applicable volumes for years not specified in the table). Therefore,
similar to our exercise of the waiver authorities to modify the
statutory volumes in past annual standard-setting rulemakings, EPA has
the authority to modify the applicable volumes for 2023 and beyond in
future actions through the use of our waiver authorities.
---------------------------------------------------------------------------

\39\ 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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We note that, as described above, CAA section 211(o)(2)(B)(iv)
requires that EPA set the cellulosic biofuel volume requirements for
2023 and beyond based on the assumption that EPA will not need to waive
those volume requirements under the cellulosic waiver authority.
Because we are, in this action, proposing the applicable volume
requirements for 2026 and 2027 under the set authority, we do not
believe we could also waive those requirements using the cellulosic
waiver authority in this same action in a manner that would be
consistent with CAA section 211(o)(2)(B)(iv), since that waiver
authority is only triggered when the projected production of cellulosic
biofuel is less than the ``applicable volume established under
[211(o)(2)(B)].'' In other words, it does not appear that EPA could use
both the set authority and the cellulosic waiver authority to establish
volumes at the same time in this action.
Proposing the volume requirements for 2026 and 2027 using our set
authority apart from the cellulosic waiver authority has important
implications for the availability of CWCs in these years. When EPA
reduces cellulosic volumes under the cellulosic waiver authority, EPA
is also required to make CWCs available under CAA section
211(o)(7)(D)(ii). In this rule we are proposing cellulosic biofuel
volume requirements without utilizing the cellulosic waiver authority.
We interpret CAA section 211(o)(7)(D)(ii) such that CWCs are only made
available in years in which EPA uses the cellulosic waiver authority to
reduce the cellulosic biofuel volume. Because of this, CWCs would not
be available as a compliance mechanism for obligated parties in these
years absent a future action to exercise the cellulosic waiver
authority. Despite the absence of CWCs, we expect that obligated
parties will be able to satisfy their cellulosic biofuel obligations
for these years because we are proposing to establish the cellulosic
biofuel volume requirement based on the quantity of cellulosic biofuel
we project will used as transportation fuel in the U.S. each year.

G. Severability

We intend for the volume requirements and percentage standards for
each single year covered by this rule (i.e., 2026 and 2027) to be
severable from the volume requirements and percentage standards for the
other year. Each year's volume requirements and percentage standards
are supported by analyses for that year.
We intend for the revised cellulosic biofuel volume requirement and
percentage standard for 2025 in Section VII to be severable from the
volume requirements and percentage standards for the other years. The
cellulosic biofuel volume requirement and percentage standard for 2025
is supported by the analysis for that year.
We intend for the import RIN reduction in Section VIII to be
severable from the volume requirements and percentage standards for
2026 and 2027. While the regulatory amendments in Section VIII propose
to modify the number of RINs generated for imported renewable fuel and
renewable fuel produced from foreign feedstocks, our basis for
proposing the amendments in Section VIII is independent from the volume
requirements themselves. Additionally, we do not anticipate that
invalidation of the import RIN reduction would jeopardize compliance
with the volume requirements and percentage standards.
We also intend for the removal of renewable electricity from the
RFS program in Section IX and the regulatory amendments in Section X to
be severable from the volume requirements and percentage standards.
These regulatory amendments are intended to improve the RFS program in
general and are not part of EPA's analysis for the volume requirements
and percentage standards for any specific year. Further, each of the
regulatory amendments in Sections IX and X is severable from the other
regulatory amendments because they all function independently of one
another.
If any of the portions of the rule identified in the preceding
paragraph (i.e., volume requirements and percentage standards for a
single year, the individual regulatory amendments) is invalidated by a
reviewing court, we intend the remainder of this action to remain
effective as described in the prior paragraphs. To further illustrate,
if a reviewing court were to invalidate the volume requirements and
percentage standards, we intend the other regulatory amendments to
remain effective. Or, as another example, if a reviewing court
invalidates the proposed removal of renewable electricity as a
qualifying renewable fuel under the RFS program, we intend the volume
requirements and percentage standards as well as other regulatory
amendments to remain effective.

III. Alternative Volume Scenarios for Analysis and Baselines

In establishing volumes for 2026 and 2027, the statute requires
that EPA review the implementation of the RFS program in prior years
and analyze a specified set of factors (see Section II.B). Many of
those factors, particularly those related to economic and environmental
impacts, are difficult to analyze in the abstract; it is challenging to
assess impacts without understanding the scale of the volume changes
that are the driving force behind those impacts. In light of this, we
have opted to develop alternative volume scenarios to analyze for each
category of renewable fuel. This section describes the factors we
considered when developing the volume scenarios for analysis. The
analyses of the impacts of the volume scenarios are summarized in
Section IV, and the volumes we are proposing based on these analyses
and a review of the implementation of the RFS program to date are
described in Section V. Note that neither of the volume scenarios we
developed for analytical purposes include the impacts of the proposed
import RIN reduction provisions described in Section VIII.
To develop the alternative volume scenarios for analysis, we first
assessed two fundamental factors: (1) The potential supply of these
fuels from both imports and domestic production; and (2) The ability
for these fuels to be used as qualifying transportation fuel in the
United States. Throughout this preamble, we use the term ``supply'' of
renewable fuel to refer to the quantity of qualifying renewable fuel
that can be used as transportation fuel, heating oil, or jet fuel in
the U.S. Unless otherwise noted, all historical data on the supply of
renewable fuel is based on data from the EPA Moderated Transaction
System (EMTS). The projected domestic production and importation of
renewable fuel and the use of renewable fuel as transportation fuel
closely align with two of the explicit statutory criteria: expected
annual rate of future commercial production of renewable fuel and
sufficiency of infrastructure to deliver and use renewable fuels. For
cellulosic biofuel and conventional renewable fuel, the volume
scenarios we chose to analyze are equal to the projected volumes of
these fuels we project will be used as qualifying transportation fuel
in 2026 and 2027. Our projections of the use of these fuels

[[Page 25793]]

assumes current ongoing incentives for the production and use of these
fuels provided by the RFS program and by other state and federal
programs remain in place for the periods of time currently described in
their respective statutes and regulations.
For non-cellulosic advanced biofuel (including BBD and other
advanced biofuel), the projected supply of these fuels in future years
is highly dependent on the incentives for these fuels provided by the
RFS program, other state and federal incentives in the U.S., and
actions by foreign countries. Unlike cellulosic biofuel and
conventional renewable fuel, we do not expect that the supply of non-
cellulosic advanced biofuel will be limited by the ability for the
market to use these fuels as qualifying transportation fuel. Instead,
we project that the available supply of non-cellulosic advanced biofuel
will depend on a number of interrelated factors, including the supply
of feedstocks to produce these fuels, demand for these feedstocks in
non-biofuel markets, and the available incentives for the production
and use of these fuels in the U.S. and other countries. Further, unlike
cellulosic biofuel and conventional renewable fuel, which are primarily
produced from a single feedstock (biogas and corn starch,
respectively), non-cellulosic advanced biofuel can be produced from a
variety of different feedstocks, and the projected impacts of the
production of these fuels can vary depending on the feedstock used to
produce the fuel. Considering these complexities, we have developed two
different volume scenarios of non-cellulosic advanced biofuel for
analysis rather that attempt to identify a single volume scenario for
the projected supply of these fuels. These assessments are described in
greater detail in Sections III.B and C and DRIA Chapter 6.
We acknowledge that we are adopting a slightly different approach
to developing the volume scenarios for analysis in this action than we
did in the Set 1 Rule, in which EPA first identified ``candidate
volumes'' to analyze for each category of renewable fuel. These
candidate volumes were based primarily on a consideration of supply-
related factors, with a consideration of other relevant factors as
noted in the Set 1 Rule. The approach taken in this action, in which
multiple volume scenarios are analyzed, is designed to provide
additional information about the potential impacts of a broader range
of renewable fuel volume requirements.\40\ The analysis of multiple
scenarios allows EPA to consider different volumes scenarios for non-
cellulosic advanced biofuel, where the impacts may be more heterogenous
(e.g., the impacts are not expected to be consistent on a per-gallon
basis) across a range of potential qualifying fuels and volume
requirements.
---------------------------------------------------------------------------

\40\ We note that the two scenarios analyzed for this action
differ only in the BBD volumes. Considering different BBD volumes is
of the most interest due to the high degree of uncertainty in the
potential supply of this fuel through 2027 and the differences in
the projected impacts between different types of BBD.
---------------------------------------------------------------------------

The volume scenarios we analyzed for this action, as well as the
data that informed these volume scenarios, can be found in Sections
III.B and C. Sections III.D and E describe the baselines we considered
as points of reference for the analysis of the other statutory factors
(i.e., the ``No RFS'' baseline and the 2025 baseline) and the volume
changes calculated in comparison to that baseline, respectively.

A. Scope of Analysis

In Section II.D we discuss our statutory authority to establish RFS
volume requirements and percentage standards for multiple years in a
single action. As discussed in that section, we are proposing to
establish volume requirements and percentage standards for two years:
2026 and 2027. When developing the scenarios described in this section,
however, EPA had not yet determined either the number of years for
which to establish volumes in this action or the exact levels of the
proposed volumes. To preserve the opportunity to consider proposing an
action that would establish volumes for a greater number of years, we
developed scenarios for analysis through 2030. We also assessed a range
of potential fuel volumes to provide stakeholders with a more
comprehensive sense for the potential impacts of different volume
levels. The volume scenarios discussed in this section, as well as the
results of our analysis of these scenarios discussed in Section IV,
therefore consider a range of renewable fuel volumes through 2030. More
information on the projected impacts of the renewable fuel volume
requirements we are proposing for 2026 and 2027 can be found in Section
V and the DRIA.

B. Production and Importation of Renewable Fuel

1. Cellulosic Biofuel
CAA section 211(o)(1)(E) defines cellulosic biofuel as renewable
fuel derived from any cellulose, hemi-cellulose, or lignin that has
lifecycle greenhouse gas (GHG) emissions that are at least 60 percent
less than the baseline lifecycle GHG emissions. Since the inception of
the RFS program, cellulosic biofuel production has steadily increased,
reaching record levels in 2024. This growth has primarily been driven
by biogas-derived CNG/LNG, although small volumes of liquid cellulosic
biofuels, particularly ethanol produced from corn kernel fiber (CKF),
have also played a contributing role. In this section, we discuss our
analysis for projecting the production of qualifying cellulosic biofuel
for 2026-2030, along with key uncertainties associated with these
estimates. Additional details on our volume projections for cellulosic
biofuel can be found in DRIA Chapter 7.1.

[[Page 25794]]

[GRAPHIC] [TIFF OMITTED] TP17JN25.001

a. CNG/LNG Derived From Biogas
Biogas-derived CNG/LNG from qualifying sources must first be
collected and upgraded for vehicle use. The upgraded process varies
depending on the final application but typically involves removing
undesirable components and contaminants from the raw biogas. Biogas
that has been upgraded and distributed through a closed distribution
system, either as a biointermediate or for the production of renewable
fuel, is defined as ``treated biogas,'' whereas biogas that has been
upgraded to be suitable for injection into the commercial natural gas
pipeline system and is used to produce renewable fuel is defined as
``renewable natural gas'' (RNG).\41\ Although they are defined
differently in the regulations, we use the term ``RNG'' to collectively
refer to both treated biogas and RNG in this document. Likewise, we use
``biogas-derived CNG/LNG'' to refer to both treated biogas and RNG when
used as a transportation fuel in CNG/LNG vehicles.
---------------------------------------------------------------------------

\41\ 40 CFR 80.2.
---------------------------------------------------------------------------

To project future volumes of biogas-derived CNG/LNG, we analyzed
two limiting factors: the estimated volume of RNG that could be
produced or captured and the estimated amount of biogas-derived CNG/LNG
that could be consumed as a transportation fuel. Our analysis indicates
that consumption (i.e., use as a transportation fuel), rather than
production, is likely to be the primary constraint on determining
volumes during 2026-2030.
To estimate consumption, we developed a projection of total CNG/LNG
transportation use based on vehicle sector data, including fuel
consumption rates, vehicle miles traveled, and fuel efficiency. Because
biogas-derived CNG/LNG can generate RINs only when used as a
transportation fuel, total CNG/LNG consumption--whether fossil- or
biogas-derived--represents the upper volume limit for biogas-derived
CNG/LNG RIN generation. However, full replacement of total CNG/LNG
usage with biogas-derived fuel is unlikely due to infrastructure
limitations, costs, and other challenges. To account for this, we
applied an efficiency factor to estimate the portion of total CNG/LNG
consumption that could realistically be met with biogas-derived fuel
and, in turn, the number of cellulosic RINs that could be generated.
Based on data from California's Low Carbon Fuel Standard (LCFS)
program, we assume that even in a fully saturated market,\42\ only 97
percent of total CNG/LNG transportation demand would be met with
biogas-derived CNG/LNG. As a result, we applied a 97 percent adjustment
to our total CNG/LNG consumption estimate to calculate the potential
total biogas-derived CNG/LNG volume. The results of this analysis are
shown in Table III.B.1.a-1 and are further described in DRIA Chapter
7.1.4.1.
---------------------------------------------------------------------------

\42\ We use the term ``saturated market'' to describe a market
that consumes the maximum feasible amount of biogas-derived CNG/LNG
relative to its CNG/LNG vehicle population.

Table III.B.1.a-1--Estimated Consumption of Total CNG/LNG and the Estimated Quantity of Biogas-Derived CNG/LNG
[Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
Total CNG/LNG Total biogas-derived
Year consumption CNG/LNG consumption
----------------------------------------------------------------------------------------------------------------
2026.......................................................... 1,210 1,174
2027.......................................................... 1,277 1,239
2028.......................................................... 1,349 1,309
2029.......................................................... 1,426 1,384
2030.......................................................... 1,509 1,464
----------------------------------------------------------------------------------------------------------------

[[Page 25795]]

Initial evidence of this shift towards a consumption-limited
baseline is already apparent. In 2023, RNG volumes were insufficient to
meet the cellulosic biofuel volume requirement established in the Set 1
Rule. This shortfall resulted in a 0.09 billion cellulosic RIN deficit
carried forward from 2023 into 2024. For 2024, RNG production--and
hence cellulosic RIN generation--again fell short of the required
volume. This led EPA to propose a partial waiver of the 2024 cellulosic
biofuel volume requirement.\43\ Similarly, as described in Section VII,
EPA currently projects a shortfall in cellulosic biofuel production for
2025 and is proposing to again partially waive the cellulosic biofuel
volume requirement for 2025. Thus, while EPA is still projecting
continued growth in cellulosic biofuel production, growth in cellulosic
RIN generation is likely to face significant constraints for the
foreseeable future, limited by the ability of fuel consumers to use RNG
as a qualifying transportation fuel.
---------------------------------------------------------------------------

\43\ 89 FR 100442 (December 12, 2024).
---------------------------------------------------------------------------

As a means of cross-checking this expected limitation on cellulosic
RIN generation, we also projected future RNG production. To estimate
this, we used an industry-wide projection methodology that has been
employed in the RFS standard-setting rules since 2018. This methodology
applies an industry-wide year-over-year growth rate to the current
biogas production rate. Specifically, we used RIN generation data from
the most recent 24 months and multiplied the observed growth rate
during that period by the most recent full calendar year of data
available. This growth rate was then repeatedly applied to each
progressive year to project future production. This approach was
previously used in the 2018,\44\ 2019,\45\ 2020-2022,\46\ and Set 1
(2023-2025) Rules. However, unlike the 2018-2022 Rules, the Set 1 Rule
relied on data from 2015-2022 rather than the previous 24 months. This
adjustment was made to account for the expected impact of the COVID-19
pandemic, which was believed at the time to have negatively affected
the market in 2020 and 2021. At the time of the Set 1 Rule analysis,
pre-pandemic growth rates were considered a more accurate reflection of
future biogas production potential, a view supported by stakeholders.
However, with the benefit of post-pandemic data, we have returned to
our prior methodology, basing projections on the most recent 24 months
of data instead of the data from 2015-2022, as described in DRIA
Chapter 7.1.4.2. Performing this analysis and comparing RNG production
to the consumption of RNG-derived CNG/LNG highlights a key point: for
all years from 2026-2030, projected RNG production is expected to
exceed the projected consumption of RNG-derived CNG/LNG, providing
further evidence that future cellulosic RIN generation is limited by
the ability of fuel consumers to use RNG as a qualifying transportation
fuel.
---------------------------------------------------------------------------

\44\ 82 FR 58486 (December 12, 2017).
\45\ 83 FR 63704 (December 11, 2018).
\46\ 87 FR 39600 (July 1, 2022).
---------------------------------------------------------------------------

While RNG production is not expected to be a limiting factor in
determining volumes, the future production of RNG will ultimately
depend on market demand. Because of this, there is significant
uncertainty overall for the production of RNG. One notable source of
uncertainty is the potential for significant competing demands for RNG,
such as to produce RNG-based ammonia (e.g., for use as fertilizer) and
to produce RNG-based hydrogen for use in various process energy
applications. While the demand for these products over the 2026-2030
period is highly uncertain, substantial growth in these competing
demands for RNG have the potential to further limit the available
supply of RNG as a qualifying transportation fuel.
From our analysis of both RNG consumption and production, we
believe that cellulosic RIN generation from biogas-derived CNG/LNG
during 2026-2030 will be constrained by the total usage of CNG/LNG as
transportation fuel (i.e., the total amount of CNG/LNG that can be used
in the fleet of CNG- and LNG-powered vehicles). Accordingly, the
volumes presented in Table III.B.1.a-2 were used as the volume scenario
for biogas-derived CNG/LNG during this period. That said, we recognize
that there is considerable uncertainty in these volumes and that the
methodology used to determine these volumes are different than what we
have done in prior rules. Therefore, we request comment on our
projections for cellulosic biofuel production for 2026-2030,
specifically regarding our assessment of future CNG/LNG consumption. We
also request any additional data or information that could further
inform our projections for cellulosic biofuel production during this
period.

Table III.B.1.a-2--Estimated Volume of Biogas-Derived CNG/LNG
[Million ethanol-equivalent gallons]
------------------------------------------------------------------------
Year Volume
------------------------------------------------------------------------
2026....................................................... 1,174
2027....................................................... 1,239
2028....................................................... 1,309
2029....................................................... 1,384
2030....................................................... 1,464
------------------------------------------------------------------------

b. Ethanol From Corn Kernel Fiber
Several technologies are currently being developed to produce
liquid fuels from cellulosic biomass. However, most of these
technologies are unlikely to yield significant volumes of cellulosic
biofuel by 2030. One notable exception is the production of ethanol
from CKF, for which several companies have developed processes. Many of
these processes involve co-processing of both the starch and cellulosic
components of the corn kernel. However, to be eligible for generating
cellulosic RINs, facilities must accurately determine the amount of
ethanol produced specifically from the cellulosic portion using
approved methodologies. This requires the ability to reliably and
precisely calculate the ethanol derived from the cellulosic component,
distinct from the starch portion of the corn kernel. In September 2022,
EPA issued updated guidance on analytical methods that could be used to
quantify the amount of ethanol produced when co-processing CKF and corn
starch.\47\
---------------------------------------------------------------------------

\47\ EPA, ``Guidance on Qualifying an Analytical Method for
Determining the Cellulosic Converted Fraction of Corn Kernel Fiber
Co-Processed with Starch,'' EPA-420-B-22-041, September 2022.
---------------------------------------------------------------------------

EPA has also had substantive discussions with technology providers
intending to use analytical methods consistent with this guidance, as
well as with owners of facilities registered as cellulosic biofuel
producers using these methods. Based on information from these
technology providers, EPA believes that cellulosic ethanol production
from CKF could be feasible at all existing corn ethanol facilities,
with minimal additional processing units or modifications. To generate
cellulosic RINs for ethanol produced from CKF, a facility would need to
demonstrate the converted fraction consistent with appropriate test
methods. For the purposes of this analysis, we assume that 90 percent
of facilities will produce cellulosic ethanol over this period due to
potential facility-specific challenges that may prevent 100 percent
adoption.
Additionally, while technology providers have indicated that using
analytical methods consistent with EPA

[[Page 25796]]

guidance can demonstrate that approximately 1.5 percent of ethanol
produced at existing corn ethanol facilities comes from cellulosic
biomass, data submitted to EPA by renewable fuel producers generating
cellulosic RINs for CKF ethanol shows that the current industry-wide
average among registered facilities is closer to 1 percent. Therefore,
for the purposes of this analysis, we are using a 1 percent conversion
rate.
The projected production of cellulosic ethanol from CKF, as shown
in Table III.B.1.b-1, is based on projections of total corn ethanol
production, with a 90 percent facility participation rate and a 1
percent conversion efficiency applied.\48\ We request comment on these
projected volumes, including our projections of the percentage of
ethanol producers that will generate cellulosic RINs for CKF ethanol
through 2027 and the proportion of ethanol from cellulose vs. starch at
these facilities.
---------------------------------------------------------------------------

\48\ A detailed discussion of the methodology used to project
cellulosic ethanol production from CKF can be found in DRIA Chapter
7.1.5.

Table III.B.1.b-1--Projected Production of Ethanol From CKF
[Million ethanol-equivalent gallons]
------------------------------------------------------------------------
Year Volume
------------------------------------------------------------------------
2026....................................................... 124
2027....................................................... 123
2028....................................................... 122
2029....................................................... 120
2030....................................................... 119
------------------------------------------------------------------------

c. Other Cellulosic Biofuels
We expect that commercial scale production of cellulosic biofuel in
the U.S. beyond CNG/LNG derived from biogas and ethanol produced from
CKF will be very limited in 2026-2030. There are several cellulosic
biofuel production facilities in various stages of development,
construction, and commissioning that may be capable of producing
commercial scale volumes of cellulosic biofuel by 2030. These
facilities primarily focus on producing cellulosic hydrocarbons from
feedstocks such as separated municipal solid waste (MSW), precommercial
thinnings, and tree residues, which can be blended into gasoline,
diesel, and jet fuel. Since no parties have achieved consistent
production of liquid cellulosic biofuel in the U.S. or consistently
exported liquid cellulosic biofuel to the U.S., production and import
of liquid cellulosic biofuel in 2026-2030 is highly uncertain and
likely to be relatively small. For the volume scenarios we are
analyzing, we have projected no production of these fuels in 2026-2030.
2. Biomass-Based Diesel
CAA section 211(o)(1)(D) defines biomass-based diesel as renewable
fuel that is biodiesel and that has GHG emissions reductions of at
least 50 percent from the baseline. It also excludes biodiesel that is
co-processed with petroleum feedstocks. The BBD standard is nested
within the advanced biofuel standard. Historically, the BBD supply
under the RFS program has exceeded the BBD standard, with the
additional supply used by obligated parties to meet their advanced
biofuel volume requirements. Thus, the advanced biofuel standard has
incentivized the use of BBD beyond just the BBD standard.
Since 2010, when the BBD volume requirement was added to the RFS
program, production of BBD has generally increased annually. The volume
of BBD supplied in any given year is influenced by a number of factors,
including: production capacity; feedstock availability and cost;
available incentives including the RFS program; the availability of
imported BBD; the demand for BBD (and feedstocks used to produce BBD)
in foreign markets; and several other economic factors.
Most renewable fuel that qualifies as BBD is biodiesel or renewable
diesel. Both of these fuels are replacements for petroleum diesel and
are produced from the same lipid-based feedstocks, a diverse category
that includes animal fats, used cooking oil, and vegetable oil
feedstocks. Biodiesel and renewable diesel differ in their production
processes and chemical composition. Biodiesel is an oxygenated fuel
that is generally produced using a transesterification process.
Renewable diesel, on the other hand, is a hydrocarbon fuel that closely
resembles petroleum diesel and that is generally produced by
hydrotreating renewable feedstocks. From 2010-2018, the vast majority
of BBD supplied to the U.S. was biodiesel. Production and imports of
renewable diesel emerged in the U.S. in the early 2010s. Market share
for renewable diesel began a steady upward trend in 2019, and U.S.
domestic supply of these fuels has increased significantly over the
past several years. The supply of biodiesel has been relatively stable
since 2016 amidst the expansion of renewable diesel supply.
In 2023, the supply of renewable diesel exceeded the supply of
biodiesel for the first time (see Figure III.B.2-1). Unlike biodiesel,
which is often produced at relatively small facilities, renewable
diesel is generally produced at large facilities. While some renewable
fuel producers have built new production facilities, much of the
renewable diesel produced in the U.S. uses petroleum refining
infrastructure that has been converted to produce renewable diesel.
Because renewable diesel is more chemically similar to petroleum, it is
generally not subject to the same blending limits as biodiesel. This
has allowed very large volumes of renewable diesel to be supplied to
California and other states with incentives for biofuel use in addition
to the incentives provided by the RFS program. In future years we
expect to continue to see large increases in the supply of renewable
diesel due to the advantages in the economy of scale and the ability to
access markets with higher incentives, and a relatively steady supply
of biodiesel from established facilities with favorable local markets.
BILLING CODE 6560-50-P

[[Page 25797]]

[GRAPHIC] [TIFF OMITTED] TP17JN25.002

BILLING CODE 6560-50-C
There are also small volumes of renewable jet fuel and heating oil
that qualify as BBD.\49\ Renewable jet fuel has qualified as a RIN-
generating BBD and advanced biofuel under the RFS program since 2010
and must achieve at least a 50 percent reduction in GHGs in comparison
to petroleum-based fuels. The technology and feedstocks that can
currently be used to produce renewable jet fuel are often the same as
those used to produce renewable diesel. For example, the same process
that produces renewable diesel from lipids generally produces
hydrocarbons in the distillation range of jet fuel that can be
separated and sold as renewable jet fuel instead of being sold as
renewable diesel. While relatively little renewable jet fuel has been
produced since 2010--20 million gallons or less per year through 2023,
increasing to approximately 110 million gallons in 2024--opportunities
for increasing this category of advanced biofuel exist.
---------------------------------------------------------------------------

\49\ According to EMTS data renewable jet fuel supply ranged
from 0-20 million gallons per year from 2014-2023 and increased to
approximately 110 million gallons in 2024. Renewable jet fuel is
eligible to generate RINs per 40 CFR 80.1426(a)(1)(iv), provided all
other regulatory requirements are met.
---------------------------------------------------------------------------

A tax credit for renewable jet fuel for tax years 2023 and 2024,
often referred to as the ``sustainable aviation fuel credit'' or ``40B
credit,'' may have resulted in increasing volumes of renewable jet fuel
produced from existing renewable diesel production facilities. Another
low carbon transportation fuel tax credit, the ``clean fuel production
credit'' or ``45Z credit,'' is available for tax years 2025-2027, and
provides up to $1.75 per gallon of renewable jet fuel, provided the
relevant wage and apprenticeship requirements are met by the producer.
The 45Z credit may provide continued support for renewable jet fuel
production. Renewable jet fuel production from existing renewable
diesel facilities, however, would likely result in a decrease in
renewable diesel production, with little or no net change in their
overall production of RIN-generating fuels.\50\
---------------------------------------------------------------------------

\50\ The equivalence values for renewable diesel and jet fuel
are similar. As discussed in Section X.A, we are proposing to revise
the renewable diesel equivalence value to be 1.6 RINs per gallon,
while also proposing to establish the renewable jet fuel equivalence
value to be 1.5 RINs per gallon.
---------------------------------------------------------------------------

In this rule we have not separately projected growth in renewable
jet fuel production, but we recognize that some of the projected growth
in renewable diesel production may instead be renewable jet fuel from
the same production facilities. Other renewable jet fuel production
technologies and production facilities (discussed briefly in Section
III.B.2.b) also being developed could enable the future production of
renewable jet fuel from new facilities and feedstocks that are not
expected to impact renewable diesel production.
The remainder of this section provides historical data on biodiesel
and renewable diesel production and production capacity, briefly
discusses potential feedstock limitations for

[[Page 25798]]

biodiesel and renewable diesel production in future years, and
summarizes our assessment of the rate of production and use of
qualifying BBD for 2026-2030, along with some of the uncertainties
associated with those volumes.\51\
---------------------------------------------------------------------------

\51\ Further details on these volume projections can be found in
DRIA Chapter 7.2.
---------------------------------------------------------------------------

a. Biodiesel
For most of the history of the RFS program, the largest volume of
BBD and advanced biofuel supplied in the program each year have been
from biodiesel. Domestic biodiesel production increased from
approximately 1.3 billion gallons in 2014 to approximately 1.8 billion
gallons in 2018. Since 2018, domestic biodiesel production decreased
slightly, to approximately 1.7 billion gallons in 2024.\52\ The U.S.
has also imported significant volumes of biodiesel in previous years
and has been a net importer of biodiesel since 2013. Biodiesel imports
reached a peak in 2016, with the majority of the imported biodiesel
coming from Argentina.\53\ In August 2017, the U.S. announced tariffs
on biodiesel imported from Argentina and Indonesia.\54\ These tariffs
were subsequently confirmed in April 2018 and remain in place.\55\
Biodiesel imports started dropping in 2017 but have increased again in
recent years, reaching approximately 500 million gallons in 2023 and
reduced to 420 million gallons in 2024.\56\ More generally, overall
biodiesel supply in the U.S. has remained between 1.6 and 1.8 billion
gallons since 2016 (see Figure III.B.2-1).
---------------------------------------------------------------------------

\52\ Id.
\53\ In 2016 and 2017, 67 percent of all biodiesel imports were
from Argentina. EIA, ``U.S. Imports by Country of Origin--
Biodiesel,'' Petroleum & Other Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_a.htm">https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_a.htm</a>.
\54\ 82 FR 40748 (Aug. 28, 2017).
\55\ 83 FR 18278 (April 26, 2018).
\56\ EIA, ``U.S. Imports of Biodiesel,'' Petroleum & Other
Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=m_epoordb_im0_nus-z00_mbbl&f=a">https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=m_epoordb_im0_nus-z00_mbbl&f=a</a>.
---------------------------------------------------------------------------

Available data suggests that there is significant unused biodiesel
production capacity in the U.S., and thus domestic biodiesel production
could grow without the need to invest in additional production
capacity. Data reported by EIA shows that domestic biodiesel production
capacity in November 2024 was approximately 2.00 billion gallons per
year, roughly 0.3 billion gallons more than was utilized.\57\ According
to this data, annual average biodiesel production capacity grew
relatively slowly from about 2.1 billion gallons in 2012 to a peak of
approximately 2.6 billion gallons in 2019. EIA reports that domestic
biodiesel production capacity was approximately 2.5 billion gallons as
recently as October 2021. This facility capacity data is collected by
EIA in monthly surveys, which suggests that this capacity represents
the production at facilities that are currently producing some volume
of biodiesel and likely does not include facilities that are inactive
or have closed, as these facilities are far less likely to complete a
monthly survey.
---------------------------------------------------------------------------

\57\ EIA, ``U.S. Biodiesel Production Capacity,'' Petroleum &
Other Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EPOORDB_8BDPC_NUS_MMGL&f=M">https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EPOORDB_8BDPC_NUS_MMGL&f=M</a>.
---------------------------------------------------------------------------

EPA separately collects facility capacity information through the
RFS program facility registration process. This data includes both
facilities that are currently producing biodiesel and those that are
inactive. EPA's data shows a total domestic biodiesel production
capacity of 2.9 billion gallons per year in April 2025, of which 2.6
billion gallons per year was at biodiesel facilities that generated
RINs in 2024.\58\ These estimates of domestic production capacity
strongly suggest that domestic biodiesel production capacity is
unlikely to limit domestic biodiesel production through 2030.
---------------------------------------------------------------------------

\58\ See ``BBD Registered Facility Capacity,'' available in the
docket for this action.
---------------------------------------------------------------------------

b. Renewable Diesel and Renewable Jet Fuel
Renewable diesel and renewable jet fuel are currently produced
using the same feedstocks and very similar production technologies, and
in most cases are produced at the same production facilities. For
example, Montana Renewables produced both renewable diesel and
renewable jet fuel at their Great Falls, Montana facility in 2024.\59\
Historically, greater incentives have been available for renewable
diesel production than for renewable jet fuel production, which has
meant that in practice most production facilities chose to maximize
renewable diesel production. In this section we have focused on
renewable diesel production, but we acknowledge that an increasing
portion of this fuel may be used as renewable jet fuel in future years.
---------------------------------------------------------------------------

\59\ Montana Renewables, ``Products.'' <a href="https://montanarenewables.com/products">https://montanarenewables.com/products</a>.
---------------------------------------------------------------------------

In the near term, we expect that any increase in renewable jet fuel
production will result in a corresponding decrease in renewable diesel
production. We recognize that new technologies are being developed to
produce renewable jet fuel from a wider variety of feedstocks, some of
which are not suitable for use in the hydrotreating process that
dominates renewable diesel production. For example, several companies
are developing new technologies intended to produce renewable jet fuel
from ethanol or other alcohols, through a technology often referred to
as the ``alcohol-to-jet'' (or ``ATJ'') process. To date EPA has not
approved a generally applicable pathway for these fuels, but we have
approved a facility specific pathway for the production of renewable
jet fuel from ethanol to generate BBD RINs.\60\ While ATJ has the
potential to produce significant volumes of renewable jet fuel in
future years, there is a high degree of uncertainty related to the
production of these fuels through 2030 as commercial scale production
of these fuels has been limited and no RINs have yet been generated for
these fuels. Production of renewable jet fuel using these emerging
technologies may not negatively impact renewable diesel production to
the extent that they do not compete for feedstocks. Through 2027,
however, we expect that only relatively modest volumes of fuels might
be produced through these emerging technologies. We request comment on
the potential production volume of such renewable jet fuel through 2027
and any technical and economic data that would help inform our
understanding of the potential impacts of the production of renewable
jet fuel through the ATJ process on the statutory factors.
---------------------------------------------------------------------------

\60\ See EPA, ``Letter from EPA to LanzaJet, Inc.,'' January 12,
2023.
---------------------------------------------------------------------------

Renewable diesel has historically been produced and imported in
smaller quantities than biodiesel, as shown in Figure III.B.2-1. In
recent years, however, domestic production of renewable diesel has
increased significantly. Renewable diesel production facilities
generally have higher capital costs and production costs relative to
biodiesel, which likely accounts for the historically higher volumes of
biodiesel production relative to renewable diesel production prior to
2023. The higher cost of renewable diesel production can largely be
offset through the benefits of economies of scale, since renewable
diesel facilities tend to be much larger than biodiesel production
facilities.\61\ For example, according to EMTS data, in 2024, there
were 23 renewable diesel facilities that produced an average of 157
million gallons of renewable diesel per facility, compared to 71
biodiesel facilities that

[[Page 25799]]

produced an average of 29 million gallons of biodiesel per
facility.\62\
---------------------------------------------------------------------------

\61\ See DRIA Chapter 10 for more detail on our assessment of
the cost to produce biodiesel and renewable diesel.
\62\ See ``Analysis of BBD RIN Generation by Facility Size,''
available in the docket for this action.
---------------------------------------------------------------------------

More importantly, because renewable diesel more closely resembles
petroleum diesel than biodiesel (both renewable diesel and petroleum
diesel are hydrocarbons while biodiesel is a methyl-ester), renewable
diesel can be blended at much higher concentrations with diesel than
biodiesel (it is for this reason that renewable diesel is sometimes
referred to as a ``drop-in'' fuel). This allows renewable diesel to
more easily be blended into diesel at higher rates and enables
renewable diesel producers to sell greater volumes of renewable diesel
in California, benefiting from the LCFS credits in California in
addition to RFS incentives and the federal tax credit.\63\ The greater
ability for renewable diesel to generate credits under California's
LCFS program provides a significant advantage over biodiesel. Biodiesel
blends in California containing 6-20 percent biodiesel require the use
of an additive to comply with California's Alternative Diesel Fuels
Regulations, making the use of higher-level biodiesel blends more
challenging in California.\64\ The Washington and Oregon programs
modeled from the California LCFS have generally mirrored this incentive
structure, and the emerging New Mexico program may do so as well. If
additional States were to adopt clean fuels programs using a similar
structure, these programs could provide an additional advantage to
renewable diesel production relative to biodiesel production in the
U.S.
---------------------------------------------------------------------------

\63\ For example, when LCFS credits are worth $100/metric ton,
blending renewable diesel into California generates LCFS credits
worth approximately $0.25 to $0.90 per gallon (assuming carbon
intensities of 70 and 20 gCO<INF>2</INF>e/MJ respectively).
Renewable fuel producers that sell qualifying renewable fuel in
California can generate both RINs under the RFS program and LCFS
credits.
\64\ CARB, ``Frequently Asked Questions on the Alternative
Diesel Fuels Regulation,'' November 2017. In 2021, nearly all
renewable diesel consumed in the U.S. was consumed in California.
Together renewable diesel and biodiesel represented approximately
65-70 percent of all diesel fuel consumed in California in the
second half of 2024.
---------------------------------------------------------------------------

Total domestic renewable diesel production capacity has increased
significantly in recent years from approximately 280 million gallons in
2017 \65\ to approximately 4.6 billion gallons at the end of 2024.\66\
Additionally, a number of parties have announced plans to build new
renewable diesel production capacity with the potential to begin
production in future years. This new capacity includes new renewable
diesel production facilities, expansions of existing renewable diesel
production facilities, and the conversion of units at petroleum
refineries to produce renewable diesel.
---------------------------------------------------------------------------

\65\ Renewable diesel capacity based on facilities registered in
EMTS.
\66\ EIA, ``U.S. Total Biofuels Operable Production Capacity,''
Petroleum & Other Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/pet_pnp_capbio_dcu_nus_m.htm">https://www.eia.gov/dnav/pet/pet_pnp_capbio_dcu_nus_m.htm</a>.
---------------------------------------------------------------------------

EIA currently projects that renewable diesel production capacity
will continue to expand and could reach nearly 6 billion gallons by the
end of 2025.\67\ A recent report published by the National Renewable
Energy Laboratory found that by 2028 the domestic production capacity
for renewable diesel and renewable jet fuel through the hydrotreating
process alone could increase to 9.6 billion gallons per year.\68\ In
previous years, domestic renewable diesel production has increased in
concert with increases in domestic production capacity, with renewable
diesel facilities generally operating at high utilization rates. In
future years we expect that competition for affordable qualifying
feedstocks may result in renewable diesel and biodiesel facilities
operating below their production capacity. Competition for qualifying
feedstocks could also result in reductions in overall biodiesel
production if larger renewable diesel facilities are able to out-
compete smaller biodiesel producers for feedstock. Further, even if
these facilities operate at levels close to their production capacity,
demand for renewable diesel and renewable jet fuel in other countries
may impact the quantity of these fuels available to U.S. markets.
---------------------------------------------------------------------------

\67\ EIA, ``Domestic renewable diesel capacity could more than
double through 2025,'' Today in Energy, February 2, 2023. <a href="https://www.eia.gov/todayinenergy/detail.php?id=55399">https://www.eia.gov/todayinenergy/detail.php?id=55399</a>.
\68\ Calderon, Oscar Rosales, Ling Tao, Zia Abdullah, Michael
Talmadge, Anelia Milbrandt, Sharon Smolinski, Kristi Moriarty, et
al. ``Sustainable Aviation Fuel State-of-Industry Report:
Hydroprocessed Esters and Fatty Acids Pathway,'' National Renewable
Energy Laboratory NREL/TP-5100-87803, July 30, 2024. <a href="https://doi.org/10.2172/2426563">https://doi.org/10.2172/2426563</a>.
---------------------------------------------------------------------------

In addition to domestic production of renewable diesel, the U.S.
has also imported renewable diesel, with nearly all of it produced from
fats, oils, and greases (FOG) and imported from Singapore.\69\ In more
recent years, the U.S. has also exported increasing volumes of
renewable diesel. In 2022-2024, renewable diesel exports exceeded
renewable diesel imports based on data collected through EMTS (see
Table III.B.2.b-1). This situation, wherein significant volumes of
renewable diesel are both imported and exported, is likely the result
of a number of factors, including the design of the biodiesel tax
credit (which is available to renewable diesel that is either produced
or used in the U.S. and thus eligible for exported volumes as well),
the varying structures of incentives for renewable diesel (with the
level of incentives varying depending on the feedstocks used to produce
the renewable diesel varying as well as by country), and logistical
considerations (renewable diesel may be imported and exported from
different parts of the country). Starting in 2025, the 45Z credit,
which consolidates and replaces the previous $1 per gallon credit for
blending biodiesel and renewable diesel into diesel fuel under 40A,
also provides a production credit for alternative fuels and sustainable
aviation fuel. Since the new 45Z credit is only available for fuel
produced in the United States, it may result in significantly decreased
renewable fuel imports and may in turn also decrease renewable fuel
exports as domestic producers seek to satisfy demand previously met by
imported renewable fuels.
---------------------------------------------------------------------------

\69\ EIA, ``U.S. Imports by Country of Origin--Renewable Diesel
Fuel,'' Petroleum & Other Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDO_im0_mbbl_a.htm">https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDO_im0_mbbl_a.htm</a>.

Table III.B.2.b-1--Renewable Diesel Imports and Exports
[Million gallons]
----------------------------------------------------------------------------------------------------------------
Renewable diesel Renewable diesel
Year imports exports Net imports
----------------------------------------------------------------------------------------------------------------
2015................................................... 120 21 99
2016................................................... 165 40 125
2017................................................... 191 37 154

[[Page 25800]]

2018................................................... 176 80 96
2019................................................... 267 148 119
2020................................................... 280 223 57
2021................................................... 262 241 121
2022................................................... 311 326 -15
2023................................................... 361 414 -53
2024................................................... 430 581 -151
----------------------------------------------------------------------------------------------------------------

c. Domestic BBD Feedstocks
When considering the potential production and import of biodiesel
and renewable diesel in future years and the likely impacts of
renewable diesel production, the availability of feedstocks is a key
consideration. Currently, biodiesel and renewable diesel in the U.S.
are produced from a number of different feedstocks, including FOG,
distillers corn oil, and virgin vegetable oils such as soybean oil and
canola oil.
[GRAPHIC] [TIFF OMITTED] TP17JN25.003

Use of soybean oil to produce biodiesel grew from approximately 10
percent of all domestic soybean oil production in the 2009/2010
agricultural marketing year to 48 percent in the 2023/2024 agricultural
marketing year.\70\ In the intervening years, the total increase in
domestic soybean oil production and the increase in the quantity of
soybean oil used to produce biodiesel and renewable diesel were
similar, indicating that the increase in oil production was likely
driven by the increasing demand for biofuel. However, as the production
of renewable diesel has increased in recent years it appears that
demand for soybean oil is growing faster than demand for soybean meal.
Notably, the percentage of the soybean value that came from the soybean
oil (rather than the meal and hulls) had been relatively stable and
averaged approximately 33 percent from 2016-2020. The percentage of the
soybean value that came from the soybean oil increased significantly
starting in 2021, however, reaching a high of 53 percent in October
2021, before declining slightly to 39 percent in August 2024 (the most
recent date for which data are available).\71\
---------------------------------------------------------------------------

\70\ USDA, ``Oil Crops Yearbook,'' March 2025. <a href="https://www.ers.usda.gov/data-products/oil-crops-yearbook">https://www.ers.usda.gov/data-products/oil-crops-yearbook</a>.
\71\ Id.
---------------------------------------------------------------------------

Through 2020, most of the renewable diesel produced in the U.S. was
made from FOG and distillers corn oil, with smaller volumes produced
from soybean oil.\72\ While some biodiesel production facilities are
unable to use FOG and distillers corn oil without additional capital
investment, renewable diesel production facilities are generally able
to use them. Additionally, through 2024 the vast majority of renewable
diesel consumed in the U.S. is used in

[[Page 25801]]

California due to the combined value of RFS and LCFS incentives
(together with the blenders' tax credit). Under California's LCFS
program, renewable diesel produced from FOG and distillers corn oil
receive more credits than renewable diesel produced from soybean oil
and canola oil.
---------------------------------------------------------------------------

\72\ In December 2022, EPA approved generally applicable
pathways for renewable diesel produced from canola oil (87 FR 73956;
December 2, 2022). Use of canola oil to produce renewable diesel for
consumption in the U.S. was therefore rare before 2023, but has
gradually become more common in recent years.
---------------------------------------------------------------------------

Available volumes of FOG (including used cooking oil and animal
fats) and distillers corn oil from domestic sources are expected to
continue to increase in future years, but these increases are expected
to be limited. FOG are the byproducts of other activities (e.g., food
production and rendering operations), and production of FOG is not
responsive to increasing demand for biofuel production. Because the
production of FOG is generally not responsive to increased demand and
most of the available domestic FOG is currently used for biofuel
production or in other industries, we expect the availability of FOG to
increase slowly, consistent with the observed trend in recent years.
Similarly, distillers corn oil is a byproduct of ethanol production.
Since we do not anticipate significant growth in ethanol production in
future years (see Section III.B.4), we do not project significant
increases in the production of distillers corn oil for biofuel
production, as most ethanol production facilities currently produce
distillers corn oil. Therefore, if renewable diesel production in
future years increases rapidly as suggested by the large production
capacity announcements, it will likely require increased use of
vegetable oils such as soybean oil and canola oil, either from new
production or diverted from other markets, or increased use of imported
feedstocks.
Greater volumes of soybean oil are projected to be produced from
new or expanded soybean crushing facilities through 2030. Several
parties have announced plans to expand existing soybean crushing
capacity or build new soybean crushing facilities. Public announcements
of new and expanded soybean crushing capacity suggest that domestic
soybean crush capacity could increase by approximately 1.5 million
bushels of soybeans per day from 2024 through 2026.\73\ An increase in
the domestic crush capacity of this magnitude would result in an
increase in domestic soybean oil production sufficient to produce
approximately 750 million additional gallons of BBD per year and
suggests a 250 million gallon per year annual increase in soybean oil
production through 2026.\74\ Similarly, an assessment of potential BBD
feedstocks in future years prepared for the National Oilseed Processors
Association by S&P Global estimated that increases in domestic soybean
oil production could support the production of an additional 1 billion
gallons of BBD from 2023 to 2027.\75\ Most of the publicly announced
expansion in soybean crush capacity is scheduled to occur in the next
few years, through 2027. Recent data suggests that the domestic soybean
crushing industry is capable of continuing to add significant capacity
in future years, but that any investment in domestic soybean crushing
is highly dependent on demand for soybean oil (and soybean meal) from
biofuel producers and other markets.\76\
---------------------------------------------------------------------------

\73\ Futrell, Crystal, ``US Soybean Crush Capacity on the
Rise,'' <a href="http://World-Grain.com">World-Grain.com</a>, January 5, 2024. <a href="https://www.world-grain.com/articles/19463-us-soybean-crush-capacity-on-the-rise">https://www.world-grain.com/articles/19463-us-soybean-crush-capacity-on-the-rise</a>.
\74\ This estimate assumes a soybean oil yield of 11 lbs per
bushel of soybeans and 1 gallon of BBD per 7.75 lbs of soybean oil.
\75\ S&P Global, ``Availability of Feedstocks for Biofuel Use--
Key Highlights,'' July 2024.
\76\ See DRIA Chapter 7.2 for a further discussion of this
topic.
---------------------------------------------------------------------------

If domestic crushing of soybeans increases at the expense of
soybean exports, domestic vegetable oil production could increase
without the need for increasing domestic soybean acreage.
Alternatively, increased demand for soybeans from new or expanded
crushing facilities could be met through increased soybean production
in the U.S. Increased demand for BBD feedstock could also be met
through diversion of increasing volumes of qualifying feedstocks (e.g.,
soybean oil and canola oil) from existing markets to produce renewable
diesel. Were this diversion to occur, non-qualifying feedstocks (e.g.,
palm oil or other virgin vegetable oils) could be used in larger
quantities in place of soybean and canola oil in food and oleochemical
markets. Diverting feedstocks from existing uses would be projected to
result in higher prices for these feedstocks, as biofuel producers
would have to outbid the current users of these feedstocks.
d. Imported BBD Feedstocks
In addition to processing domestic feedstocks such as distillers
corn oil and soybean oil, a number of domestic BBD producers produce
BBD from imported feedstocks. In recent years, and as multiple
stakeholders have noted to EPA, the market has seen a significant
increase in the quantity of imported BBD feedstocks. Imports of
feedstocks that are often considered wastes or by-products of other
industries, such as used cooking oil and tallow, have seen the greatest
increase in recent years. Figure III.B.2.d-1 shows total imports of
common BBD feedstocks through 2024. Figure III.B.2.d-2 shows the total
volumes of domestic BBD produced from domestic feedstocks, domestic BBD
produced from imported feedstocks, and imported BBD.
BILLING CODE 6560-50-P

[[Page 25802]]

[GRAPHIC] [TIFF OMITTED] TP17JN25.004

[GRAPHIC] [TIFF OMITTED] TP17JN25.005

There are several factors that have likely contributed to the
recent increases in imports of certain BBD feedstocks to the U.S. Three
key factors contributing to the increase in imported feedstocks are
increasing domestic demand for these feedstocks, increasing available
supply of these feedstocks in other countries, and the structure of

[[Page 25803]]

incentive programs for biofuels in the U.S. relative to other
countries' polices. As noted in Section III.B.2.b, the production
capacity for renewable diesel and renewable jet fuel has increased
rapidly and is expected to continue to grow in future years. As the
total production capacity for these fuels has grown, the demand for
feedstocks for renewable fuel production has grown along with the
production capacity. While some of this demand has been met by the
increasing production of domestic feedstocks, domestic feedstock
production has not grown as quickly as has the production capacity for
renewable diesel and renewable jet fuel. Renewable diesel and renewable
jet fuel producers have thus turned to imports to source the feedstocks
needed to support increased BBD production.
At the same time domestic demand for these feedstocks has been
increasing, the supply available to import from other countries has
also been increasing. For example, we project that production of canola
oil will increase in future years due to expanding canola crushing
capacity in Canada.\77\ Similar to the investments in soybean crushing
in the U.S., a number of companies have announced investment in
additional canola crushing capacity in Canada, and some of these
projects are already under construction. Increasing canola oil
production in Canada could provide an opportunity for domestic
renewable diesel producers to import canola oil for biofuel production.
We note that these parties will face competition for this feedstock
from Canadian biofuel producers as well as food and other non-biofuel
markets. For example, in 2023, Canada began implementing their Clean
Fuels Requirements, requiring that the carbon intensity of
transportation fuel decrease by 1.5 gCO<INF>2</INF>e/MJ per year each
year from 2023 to 2030.\78\ These regulations are expected to increase
demand for biofuels and biofuel feedstocks in Canada, and therefore
also impact the quantities of canola oil and other feedstocks available
for export to the U.S.
---------------------------------------------------------------------------

\77\ Some of the projected expansion in soybean crushing
capacity discussed in Section III.B.2.c is from facilities also
capable of crushing canola and other oilseeds. Domestic production
of canola is limited, however, and the majority of canola oil
supplied to biofuel producers through 2027 is expected to be
imported from Canada.
\78\ Government of Canada, ``What are the Clean Fuel
Regulations?'' July 7, 2022. <a href="https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-regulations/about.html">https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-regulations/about.html</a>.
---------------------------------------------------------------------------

The incentives available in foreign countries to encourage the
production and use of BBD are also changing. In response to the
increase in the prices of energy and agricultural commodities caused by
the Russian invasion of Ukraine in February 2022, a number of
countries, including Croatia, Czech Republic, Finland, Latvia, Poland,
and Sweden, temporarily reduced biofuel mandates and/or the penalties
for not fulfilling the mandates.\79\ The reduction in demand from these
countries resulted in an increase in the available feedstock supply to
the U.S.
---------------------------------------------------------------------------

\79\ USDA, ``Biofuel Mandates in the EU by Member State--2024,''
June 27, 2024.
---------------------------------------------------------------------------

At the same time, the European Union (EU) in recent years took
actions to discourage the importation of used cooking oil (UCO) and
biodiesel produced from UCO from China, which had previously been
supplied in significant volumes. On December 20, 2023, the EU announced
an anti-dumping investigation on biodiesel imported from China.\80\
This investigation resulted in provisional duties on biodiesel from
China sold in the EU, which were announced in July 2024.\81\ The anti-
dumping investigation and resulting fiscal duties on biodiesel imported
from China from the EU opened up an opportunity for increased exports
of UCO (the primary feedstock used to produce biodiesel in China
previously exported to the EU) from China to the U.S.
---------------------------------------------------------------------------

\80\ European Commission, ``European Commission to Examine
Allegations of Unfairly Traded Biodiesel from China,'' December 20,
2023. <a href="https://policy.trade.ec.europa.eu/news/european-commission-examine-allegations-unfairly-traded-biodiesel-china-2023-12-20_en">https://policy.trade.ec.europa.eu/news/european-commission-examine-allegations-unfairly-traded-biodiesel-china-2023-12-20_en</a>.
\81\ Reuters, ``EU to Set Tariffs on Chinese Biodiesel in Anti-
Dumping Probe,'' July 19, 2024. <a href="https://www.reuters.com/business/energy/eu-set-tariffs-chinese-biodiesel-imports-anti-dumping-probe-2024-07-19">https://www.reuters.com/business/energy/eu-set-tariffs-chinese-biodiesel-imports-anti-dumping-probe-2024-07-19</a>.
---------------------------------------------------------------------------

Finally, incentive programs for biofuels in the U.S. have
contributed to the recent observed increases in biofuel feedstock
imports. State low carbon fuel standards or clean fuels programs, such
as California's LCFS, provide greater incentives for fuels with lower
carbon intensities. In general, fuels produced from wastes or by-
products such as UCO or tallow have lower carbon intensity values under
these programs and thus generate greater credits relative to virgin
vegetable oils such as soybean oil and canola oil. In recent years
additional States such as Oregon, Washington, and New Mexico have
adopted programs that similarly provide higher incentives for fuels
with lower carbon intensity.
While these State programs do not explicitly favor imported fuels
and/or feedstocks over domestic fuels and feedstocks, most of the
available waste and by-product feedstocks such as UCO and tallow
available in the U.S. are already being used for biofuel production.
The nature of these programs has likely played a role in biofuel
producers seeking to import UCO and tallow from foreign countries
rather than increasing their use of domestic soybean oil to maximize
their generation of credits under these programs.
Changes to the RFS program have also contributed to the observed
increase in feedstock imports. In December 2022, EPA approved generally
applicable pathways for certain fuels, including renewable diesel, that
are produced from qualifying canola oil.\82\ The ability for renewable
diesel producers to generate RINs for renewable diesel produced from
canola oil created a new demand for canola oil in the U.S.
---------------------------------------------------------------------------

\82\ 87 FR 73956 (December 2, 2022).
---------------------------------------------------------------------------

Together, the trends and policy factors described above
collectively contributed to increasing imports of BBD feedstocks since
2021. We discuss the impact of these dynamics, and a proposed response
to them in the RFS program, in Section VIII.
e. Summary
BBD (including biodiesel, renewable diesel, and renewable jet fuel)
has been the fastest growing category of renewable fuel in the RFS
program since 2021, with nearly all of the growth coming from renewable
diesel. While the domestic supply of BBD feedstocks continues to grow,
in recent years imported BBD and BBD produced from imported feedstocks
have accounted for an increasing share of the total supply of BBD. BBD
production capacity currently exceeds actual production and imports of
these fuels by a significant margin, and ongoing investment is expected
to result in significantly higher production capacity in future years,
particularly for renewable diesel and renewable jet fuel. Further,
because of the high blending rates for BBD in general and renewable
diesel in particular, the use of BBD in the U.S. is unlikely to be
constrained by limitations related to the ability to distribute these
fuels or consume them in existing and future diesel engines.
In the absence of constraints related to the production capacity
and the ability for the market to distribute and use BBD, the factors
most likely to have the largest impact on the quantity of BBD required
under the RFS program--in light of our analysis of the statutory
factors--is the availability of affordable qualifying feedstocks,
competition for those feedstocks for other uses, and competition for
them abroad. The

[[Page 25804]]

sources of the feedstocks used to produce BBD also indirectly impact
other factors, as the environmental and economic impacts of supplying
additional volumes of BBD to the U.S. differ depending on the
feedstocks used to produce the BBD and the likely alternative use of
those feedstocks. For example, the projected economic and environmental
impacts of increasing BBD production vary depending on whether the
feedstock used to produce the BBD was UCO that would not otherwise have
been collected, soybean oil from additional production and processing
of soybeans, or the diversion of feedstocks or biofuels that would
otherwise have been used in other countries.
In developing the volume scenarios for analysis in this action, we
have therefore not attempted to identify the absolute maximum quantity
of BBD that could be produced utilizing all potentially available
production capacity and used in the U.S. Instead, we have developed two
volume scenarios that reflect different growth rates for the quantity
of BBD used in the U.S. based on our projections of the potential
growth in available feedstocks. Both scenarios start with an updated
projection of the supply of BBD to the U.S. which reflects the expected
market conditions for 2025 based on the most recent available data at
the time these scenarios were developed.\83\ The low growth scenario
increases the supply of BBD by 500 million RINs each year, a quantity
approximately equal to our projection of the potential for growth in
waste and byproduct feedstocks such as UCO and tallow, primarily from
foreign sources. The high growth scenario increases the supply of BBD
by 1 billion RINs each year, a quantity approximately equal to our
projection of the potential growth for waste and byproduct feedstocks
(primarily imported) and potential growth in virgin vegetable oil
production that could be available to biofuel producers from the U.S.
and Canada. These two scenarios are summarized in Table III.B.2.e-1 (in
billion RINs) and III.B.e-2 (in billion gallons). More detail on the
development of these scenarios can be found in DRIA Chapters 3 and 6.
---------------------------------------------------------------------------

\83\ Note that the quantity of BBD expected to be supplied in
2025 based on the available data (7.91 billion RINs) is
significantly higher than the quantity of BBD projected to be used
in 2025 in the Set 1 Rule (6.88 billion RINs). See DRIA Chapter 7.2
for more detail on the projected BBD supply for 2025.

Table III.B.2.e-1--BBD Volume Scenarios
[Billion RINs]
----------------------------------------------------------------------------------------------------------------
Scenario 2025 2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Low Growth........................ 7.91 8.41 8.91 9.41 9.91 10.41
High Growth....................... 7.91 8.91 9.91 10.91 11.91 12.91
----------------------------------------------------------------------------------------------------------------

Table III.B.2.e-2--BBD Volume Scenarios
[Billion gallons]
----------------------------------------------------------------------------------------------------------------
Scenario 2025 2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Low Growth........................ 5.08 5.39 5.70 6.01 6.33 6.64
High Growth....................... 5.08 5.70 6.33 6.95 7.58 8.20
----------------------------------------------------------------------------------------------------------------

3. Other Advanced Biofuel
In addition to BBD, other renewable fuels that qualify as advanced
biofuel have been consumed in the U.S. in the past and are expected to
contribute to compliance with applicable RFS volume requirements in the
future. These other advanced biofuels include imported sugarcane
ethanol, domestically produced advanced ethanol, RNG used in CNG/LNG
vehicles not produced from cellulosic biomass, and heating oil,
naphtha, and renewable diesel that does not qualify as BBD.\84\
However, these biofuels have been consumed in much smaller quantities
than biodiesel and renewable diesel in the past or have been highly
variable.
---------------------------------------------------------------------------

\84\ Renewable diesel produced through coprocessing vegetable
oils or animal fats with petroleum cannot be categorized as BBD but
remains advanced biofuel. 40 CFR 80.1426(f)(1).
---------------------------------------------------------------------------

To estimate the volumes of these other advanced biofuels that may
be available in 2026-2030, we used the same general methodology as in
the Set 1 Rule, which EPA originally presented in the Set 1 Rule. We
projected the supply of these other advanced biofuels by including data
on the supply of these fuels from 2023 (the most recent data available
at the time the volume scenarios were defined). This methodology
addresses the historical variability in these categories of advanced
biofuel while recognizing that consumption in more recent years is
likely to provide a better basis for making future projections than
consumption in earlier years. Specifically, we applied a weighting
scheme to historical volumes wherein the weighting was higher for more
recent years and lower for earlier years. The result of this approach
is shown in Table III.B.3-1. Details of the derivation of these
estimates can be found in RIA Chapter 5.4. As the available data varies
significantly from year to year, it does not allow us to identify an
upward or downward trend in the historical consumption of these other
advanced biofuels. Therefore, we have used the volumes in Table
III.B.3-1 for all years in the volume scenarios for analysis (i.e.,
2026-2030).

Table III.B.3-1--Estimate of Annual Consumption of Other Advanced (D5)
Biofuel
[Million RINs] \a\
------------------------------------------------------------------------
Fuel Volume
------------------------------------------------------------------------
Imported sugarcane ethanol........................... 58
Domestic ethanol..................................... 28

[[Page 25805]]

CNG/LNG.............................................. 6
Heating oil.......................................... 3
Naphtha \b\.......................................... 43
Renewable diesel \c\................................. 111
------------------
Total............................................ 249
------------------------------------------------------------------------
\a\ This table does not include fuels that qualify as cellulosic biofuel
or BBD.
\b\ While renewable naphtha is generally a co-product of renewable
diesel production, the supply of renewable naphtha has not increased
in line with the observed increases in renewable diesel production.
\c\ Includes renewable diesel that is co-processed with petroleum, which
does not qualify as BBD.

4. Conventional Renewable Fuel
Conventional renewable fuel includes any renewable fuel that is
made from renewable biomass as defined in 40 CFR 80.1401, does not
qualify as advanced biofuel (including cellulosic biofuel and BBD), and
meets one of the following criteria:
<bullet> Is demonstrated to achieve a minimum 20 percent reduction
in lifecycle GHG emissions in comparison to the gasoline or diesel
which it displaces; or
<bullet> Is exempt (``grandfathered'') from the 20 percent minimum
GHG reduction requirement due to having been produced in a facility or
facility expansion that commenced construction on or before December
19, 2007, as described in 40 CFR 80.1403 and pursuant to CAA section
211(o)(2)(A)(i).
Under the statute, there is no volume requirement for conventional
renewable fuel. Instead, conventional renewable fuel may fill that
portion of the total renewable fuel volume requirement that is not
required to be advanced biofuel. In some cases, this portion of the
total renewable fuel requirement that can be met with conventional
renewable fuel is referred to as an ``implied'' volume requirement.
However, obligated parties are not required to comply with it per se,
since any portion of it can be met with advanced biofuel volumes
exceeding what is needed to meet the advanced biofuel volume
requirement.
To project volumes of conventional renewable fuel for 2026-2030, we
focused primarily on projecting volumes of corn ethanol consumed via
motor gasoline use across all gasoline blends with varying
concentrations of ethanol (i.e., E10, E15, E85). We also investigated
potential volumes of non-advanced biodiesel and renewable diesel.
a. Corn Ethanol
Ethanol made from corn starch has dominated the renewable fuels
market on a volume basis in the past and is expected to continue to do
so for the years addressed by this rulemaking.\85\ Corn starch ethanol
is prohibited by CAA section 211(i)(1)(B)(i) from being an advanced
biofuel regardless of its lifecycle GHG emissions performance in
comparison to gasoline.
---------------------------------------------------------------------------

\85\ Conventional ethanol from feedstocks other than corn starch
have been produced in the past, but at significantly lower volumes.
Production of ethanol from grain sorghum reached 125 million gallons
in 2019, representing just less than 1 percent of all conventional
ethanol in that year; grain sorghum ethanol in 2024 was only 46
million gallons. Waste industrial ethanol and ethanol made from non-
cellulosic portions of separated food waste have been produced more
sporadically and at even lower volumes. These other sources do not
materially affect our assessment of volumes of conventional ethanol
that can be produced.
---------------------------------------------------------------------------

Total domestic corn ethanol production capacity increased
dramatically between 2005 and 2010 and increased at a slower rate
thereafter. As of early 2024, domestic corn ethanol production capacity
exceeded 18 billion gallons.<SUP>86 87</SUP> Actual production of corn
ethanol in the U.S. was approximately 16.2 billion gallons in 2024, up
from approximately 15.6 billion gallons in 2023.\88\
---------------------------------------------------------------------------

\86\ Renewable Fuels Association, ``2024 Ethanol Industry
Outlook,'' February 19, 2024.
\87\ EIA, ``U.S. Fuel Ethanol Plant Production Capacity,''
Petroleum & Other Liquids, August 15, 2024. <a href="https://www.eia.gov/petroleum/ethanolcapacity">https://www.eia.gov/petroleum/ethanolcapacity</a>.
\88\ EIA, ``Monthly Energy Review,'' Total Energy, March 2025.
<a href="https://www.eia.gov/totalenergy/data/monthly/archive/00352503.pdf">https://www.eia.gov/totalenergy/data/monthly/archive/00352503.pdf</a>.
---------------------------------------------------------------------------

The expected annual rate of future commercial production of corn
ethanol will continue to be driven primarily by gasoline demand in
2026-2030, as most gasoline is expected to continue to contain 10
percent ethanol during this period. Commercial production of corn
ethanol is also a function of exports of ethanol and the demand for E0,
E15, and E85. There is evidence that some fuel retailers sell higher
volumes of E15 than E10, leveraging lower prices at the pump and
marketing higher-level ethanol blends to their customers as a cheaper
fuel option with only negligible effects on fuel economy (a 1-2 percent
reduction compared to E10). In addition to government incentives,
industry-led efforts such as Prime-the-Pump have enjoyed great success
in growing markets for higher ethanol gasoline blends by providing
technical and financial assistance to fuel retailers.\89\ Acknowledging
the potential for growth in these fuel markets, we have incorporated
projected growth in opportunities for sales of E15 and E85 blends into
our assessment.
---------------------------------------------------------------------------

\89\ Transportation Energy Institute, ``The Case of E15,''
February 2018.
---------------------------------------------------------------------------

Despite this steady growth, there remains excess of production
capacity of ethanol and corn feedstock in comparison to the ethanol
volumes that we estimate will be consumed domestically during 2026-
2030, given constraints on U.S. ethanol consumption as described in
Section III.B.5. Thus, as was the case with the Set 1 Rule, we do not
expect production capacity to be a limiting factor for meeting the
volume scenarios analyzed in this action.
b. Biodiesel and Renewable Diesel
Other than corn ethanol, the only other conventional renewable
fuels that have been used at significant levels in the U.S. in recent
years have been conventional biodiesel and renewable diesel.
Conventional biodiesel and renewable diesel are produced at facilities
grandfathered under 40 CFR 80.1403 because there are no currently valid
RIN-generating pathways for their production. Almost all conventional
biodiesel and renewable diesel historically used in the U.S. was
imported, with the only exceptions being less than 15 million gallons
per year produced domestically between 2014 and 2024. The use of
conventional biodiesel and renewable diesel did grow marginally in 2024
after a period of very low volume (less than 1 million gallons per year
from 2018-2022), though the overall supply remained negligible (less
than 0.1 percent of total biofuel supply

[[Page 25806]]

to the U.S.). While some sparse generation of D6 RINs \90\ for these
fuels have been observed in recent years, nearly all these RINs were
retired for being designated for use in any application other than
transportation fuel and therefore do not represent qualifying fuel
under the RFS program. As discussed in DRIA Chapter 7.7, there exists
much greater potential for domestic production and use of conventional
biodiesel and renewable diesel than has actually been supplied in prior
years, suggesting the use of these fuels in the U.S. is largely a
function of domestic demand versus other markets. While there exists
some potential for growth across the period covered by this proposed
rule, we are not projecting any increased volumes of these fuels will
be used in 2026-2030.
---------------------------------------------------------------------------

\90\ The D codes given for each component category are defined
in 40 CFR 80.1425(g). D codes are used to identify the statutory
categories that can be fulfilled with each component category
according to 40 CFR 80.1427(a)(2). D6 RINs satisfy only the
``renewable fuel'' category.
---------------------------------------------------------------------------

5. Ethanol Consumption
Ethanol consumption in the U.S. is dominated by E10, with higher-
level ethanol blends such as E15 and E85 being used in much smaller
quantities. The total volume of ethanol that can be consumed--including
ethanol produced from corn, grain sorghum, cellulosic biomass, the non-
cellulosic portions of separated food waste, and sugarcane--is a
function of demand for these three ethanol blends and for E0. The
distribution of consumption for these different gasoline blends is best
reflected by measuring the observed poolwide ethanol concentration.
Ethanol concentration across the entire gasoline pool can exceed 10
percent only insofar as the incremental ethanol in E15 and E85 volumes
more than offsets the lack of ethanol in E0 volume. Poolwide ethanol
concentration increased dramatically from 2003 through 2010 and has
continued to grow more slowly since 2010. As the average ethanol
concentration approached and then exceeded 10 percent, the gasoline
pool became saturated with E10, with a small, likely stable volume of
E0 and small but gradually increasing volumes of E15 and E85. We expect
this trend to continue during 2026-2030.
[GRAPHIC] [TIFF OMITTED] TP17JN25.006

For this action, new volume data from USDA's Higher Blends
Infrastructure Incentive Program (HBIIP) \91\ and additional volume
data acquired directly from six States with high volumes of higher-
level ethanol blends (California, Kansas, Iowa, Minnesota, New York,
and North Dakota) has enabled a data-driven, bottom-up approach to
projecting ethanol volumes into the future that differs from the way
these projections were calculated in previous years.\92\ In the Set 1
Rule, we projected ethanol concentration in the national gasoline pool
using a least-squares regression model using then-current E15 and E85
fueling station population data.\93\ This was due to lack of data and a
subsequent inability to aggregate sales volumes by ethanol volume at
the retail fuel station level. Now, greater availability of sales
volume data from the six aforementioned States, HBIIP, and industry
partners has enabled an updated and simplified methodology for
producing the ethanol volume projections in this action.
---------------------------------------------------------------------------

\91\ USDA, ``Higher Blends Infrastructure Incentive Program,''
May 2023. <a href="https://www.rd.usda.gov/hbiip">https://www.rd.usda.gov/hbiip</a>.
\92\ See DRIA Chapter 7.5.1 for more information on our
projections of ethanol concentration in the gasoline pool.
\93\ See ``Renewable Fuel Standard (RFS) Program: Standards for
2023-2025 and Other Changes Regulatory Impact Analysis,'' EPA-420-R-
23-015, June 2023 (``RFS Set 1 RIA''), Chapter 7.5.1.
---------------------------------------------------------------------------

Using the average sales of each gasoline-ethanol blend per retail
fueling station, as well as updated station populations from DOE's
Alternative Fuels Data Center (AFDC) \94\ and the California Air
Resources Board (CARB) \95\ for 2021-2023, we produced

[[Page 25807]]

forecasts of expected growth in station counts and throughputs out to
2030 for each gasoline-ethanol blend other than E10. We then used these
forecasts to project the total fuel volume for these gasoline-ethanol
blends (E0, E15, and E85) for 2026-2030 using the following relation:
for gasoline-ethanol blends at each concentration, the total fuel
volume consumed in any given year is equal to the product of the number
of retail fueling stations offering that blend for sale and the volume
of that fuel blend sold at a fueling station (i.e., throughput) on
average during that year. Finally, we projected E10 as the remainder of
the gasoline pool, after accounting for the projected volumes of E0,
E15, and E85.
---------------------------------------------------------------------------

\94\ AFDC, ``Historical Alternative Fueling Station Counts.''
<a href="https://afdc.energy.gov/stations/states">https://afdc.energy.gov/stations/states</a>.
\95\ CARB, ``Annual E85 Volumes,'' April 11, 2025.
---------------------------------------------------------------------------

Total ethanol consumption is the sum of ethanol blended with
gasoline (E0) to create E10, E15, and E85.\96\ The ethanol portion of
the projected total consumption for each fuel blend (i.e., total
ethanol consumption) is shown in Table III.B.5-1. While we project that
the ethanol concentration in the gasoline pool will increase in future
years, total ethanol consumption is projected to decrease due to
decreases in total gasoline consumption in future years.
---------------------------------------------------------------------------

\96\ See DRIA Chapter 7.5.1 for a more comprehensive discussion
of the methodology employed to produce the total ethanol consumption
projection.

Table III.B.5-1--Projected Ethanol Concentration and Consumption
----------------------------------------------------------------------------------------------------------------
Projected ethanol Projected ethanol consumption
Year concentration (%) (million gallons)
----------------------------------------------------------------------------------------------------------------
2026............................................... 10.54 13,993
2027............................................... 10.58 13,871
2028............................................... 10.60 13,724
2029............................................... 10.67 13,558
2030............................................... 10.71 13,377
----------------------------------------------------------------------------------------------------------------

C. Volume Scenarios for 2026-2030

Based on the analyses described in Section III.B, we developed two
different volume scenarios for 2026-2030 that we then used to analyze
the expected impacts of the statutory factors. This section describes
the volume scenarios, while Section IV summarizes the results of the
analyses we performed. The volumes we are proposing in this action
based on the analysis of the statutory factors are described in Section
V.
Both of the volume scenarios developed for this action represent
growth in the advanced biofuel and total renewable fuel categories
relative to the volume of these fuels we expect to be supplied in 2025.
Further, both scenarios are identical in the quantities of cellulosic
biofuel, advanced biofuel other than BBD, and conventional renewable
fuel we project will be supplied. Where the scenarios differ is in the
quantity of BBD we project will be supplied in each year. Throughout
this action we refer to these two scenarios as the Low Volume Scenario
and the High Volume Scenario (or collectively, ``the Volume
Scenarios''), though we note that even the Low Volume Scenario
represents an annual growth rate of 500 million RINs per year of BBD.
In developing the Volume Scenarios, we have considered the implied
volumes for each component category of renewable fuel (cellulosic
biofuel, non-cellulosic advanced biofuel, and conventional renewable
fuel) in the statutory tables through 2022. While these volumes are not
binding on the volume requirements in future years, they do provide an
indication of statutory intent. We also considered the statutory intent
of the RFS program to increase renewable fuel volumes over time, along
with other factors enumerated in the statute to inform the proposed
volumes.
Given the nested nature of the statutory renewable fuel categories,
we have largely framed our assessment of volumes in terms of the
component categories rather than in terms of the statutory categories
(cellulosic biofuel, advanced biofuel, total renewable fuel). The
statutory categories are those addressed in CAA section
211(o)(2)(B)(i)-(iii), and cellulosic and advanced biofuel are nested
within the overall total renewable fuel category. The component
categories are the categories of renewable fuels that make up the
statutory categories, but which are not nested within one another. They
possess distinct economic, environmental, technological, and other
characteristics relevant to the factors we must analyze under the
statute, making our focus on them rather than the nested categories in
the statute technically sound. Finally, an analysis of the component
categories is equivalent to analyzing the statutory categories, since
doing so would effectively require us to evaluate the difference
between various statutory categories (e.g., assessing ``the difference
between volumes of advanced biofuel and total renewable fuel'' instead
of assessing ``the volume of conventional renewable fuel''), adding
unnecessary complexity to our analysis. In any event, were we to frame
our analysis in terms of the statutory categories, we believe that our
substantive approach and conclusions would remain materially the same.
1. Cellulosic Biofuel
In determining the cellulosic biofuel volume scenario, we started
by considering the statutory volume targets for 2010-2022. The
statutory volumes for cellulosic biofuel increased rapidly, from 100
million gallons in 2010 to 16 billion gallons in 2022 with the largest
increases in the later years. While notable on its own, it is even more
notable in comparison to the implied statutory volumes for the other
renewable fuel volumes. Statutory BBD volumes did not increase after
2012, implied conventional renewable fuel volumes did not increase
after 2015, and non-cellulosic advanced biofuel volume increases
tapered off in recent years with a final increment in 2022. Thus, the
clear focus of the statute, and CAA section 211(o)(1)(E) in particular,
by 2022 was on growth in cellulosic biofuel volumes, which have the
greatest GHG reduction threshold requirement in the statute.\97\
---------------------------------------------------------------------------

\97\ Cf. CAA section 211(o)(1)(B)(i), (D), (2)(A)(i). See also
definition of ``cellulosic biofuel'' in 40 CFR 80.2.
---------------------------------------------------------------------------

This increasing emphasis in the statute on cellulosic biofuel over
time is likely due to some or all of the following factors:
<bullet> Expectations that cellulosic biofuel has significant
potential to reduce GHG emissions (cellulosic biofuels are required to
reduce GHG emissions by 60

[[Page 25808]]

percent relative to the gasoline or diesel fuel they displace);
<bullet> That cellulosic biofuel feedstocks could be produced or
collected with relatively few negative environmental impacts;
<bullet> That the feedstocks would be comparable or cheaper in cost
relative to other fuel feedstocks, allowing for lower cost biofuels to
be produced than those produced from feedstocks without other primary
uses such as food; and
<bullet> That the technological breakthroughs needed to convert
cellulosic feedstocks into biofuel were likely imminent.
As discussed in Section II.C, CAA section 211(o)(2)(B)(iv) requires
that EPA determine the cellulosic biofuel volume requirement such that
EPA will not need to waive the volumes under CAA section 211(o)(7)(D).
The cellulosic biofuel volumes are the same for both the Low and
High Volume Scenarios and represent the projected amount of qualifying
biofuel expected to be used as transportation fuel in the U.S. for
2026-2030, accounting for incentives provided by the RFS program and
other state and federal programs. The cellulosic biofuel volume
scenario for 2026-2030 is shown in Table III.C.1-1. Because the
technical, economic, and regulatory challenges related to cellulosic
biofuel production vary significantly between the various types of
cellulosic biofuel, we have shown the volumes for ethanol from corn
kernel fiber and CNG/LNG derived from biogas separately.

Table III.C.1-1--Cellulosic Biofuel Volume Scenario
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
RNG use as CNG/LNG.............. 1,174 1,239 1,309 1,384 1,464
Ethanol from CKF................ 124 123 122 120 119
-------------------------------------------------------------------------------
Total cellulosic biofuel.... 1,298 1,362 1,431 1,504 1,583
----------------------------------------------------------------------------------------------------------------

2. Non-Cellulosic Advanced Biofuel
Although there are no volume targets in the statute for years after
2022, the statutory volume targets for prior years represent a useful
point of reference in the consideration of volumes that may be
appropriate for 2026-2030. For non-cellulosic advanced biofuel, the
implied statutory requirement in CAA section 211(o)(2)(B) increased in
every year between 2009 and 2019. It then remained at 4.5 billion
gallons for three years before finally rising to 5.0 billion gallons in
2022. In the Set 1 Rule, EPA further increased the implied volume of
non-cellulosic advanced biofuel over the course of three years to a
total of 5.95 billion RINs in 2025. However, the market has
outperformed these standards to date primarily through higher than
anticipated imports of non-cellulosic advanced biofuels and their
feedstocks. In recognition of this, the volumes for non-cellulosic
advanced biofuel in the Volume Scenarios are higher than the non-
cellulosic biofuel volumes in the Set 1 Rule, starting with an updated
projection of supply for 2025.
For 2026-2030, we anticipate that a key factor in the growth in the
production of advanced biodiesel and renewable diesel (the two non-
cellulosic advanced biofuels projected to be available in the greatest
quantities through 2030) will be the availability of feedstocks as
discussed in Section III.B.2. In light of the significant uncertainties
related to the supply of qualifying feedstock in these years, we
developed two scenarios for the potential supply of advanced biodiesel
and renewable diesel: a low growth scenario and a high growth scenario.
These two volume scenarios, when combined with our projection of the
available supply of other advanced biofuels discussed in Section
III.B.3, are the bases for the two non-cellulosic advanced biofuel
volume scenarios that differentiate the Low Volume Scenario from the
High Volume Scenario.

Table III.C.2-1--Total Non-Cellulosic Advanced Biofuel Volume Scenarios
[Billion RINs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2025 (Set 2025
1) \a\ (Proj.) \b\ 2026 2027 2028 2029 2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Volume Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
BBD............................................................... 6.88 7.91 8.41 8.91 9.41 9.91 10.41
Other advanced biofuel............................................ 0.29 0.25 0.25 0.25 0.25 0.25 0.25
-------------------------------------------------------------------------------------
Total con-cellulosic advanced biofuel......................... 7.17 8.16 8.66 9.16 9.66 10.16 10.66
--------------------------------------------------------------------------------------------------------------------------------------------------------
High Volume Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
BBD............................................................... 6.88 7.91 8.91 9.91 10.91 11.91 12.91
Other advanced biofuel............................................ 0.29 0.25 0.25 0.25 0.25 0.25 0.25
-------------------------------------------------------------------------------------
Total con-cellulosic advanced biofuel......................... 7.17 8.16 9.16 10.16 11.16 12.16 13.16
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Volumes of BBD and other advanced biofuels projected to be used to meet the RFS volume requirements in the Set 1 Rule
\b\ Volumes of BBD and other advanced biofuels projected to be used in 2025 based on data available through May 2024.

[[Page 25809]]

3. Conventional Renewable Fuel
The conventional renewable fuel volume scenario represents the
volume of these fuels we project would be supplied to the market when
considering the incentives that could be available through the RFS
program and other state and national incentives. Since the supply of
ethanol is projected to be limited by the ability for the market to
consume ethanol in gasoline blends, the supply of conventional ethanol
from 2026-2030 can be estimated from the total ethanol consumption
projections from Table III.B.5-1 and our projections for other forms of
ethanol as discussed earlier in this section. Our projected volumes of
ethanol consumption are presented in Table III.C.3-1. We do not
currently project that non-ethanol conventional renewable fuels will be
supplied to the U.S. under the RFS program in 2026-2030.

Table III.C.3-1--Ethanol Consumption Volume Scenario
[Million gallons]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic ethanol.............. 126 125 124 122 120
Imported sugarcane ethanol...... 58 58 58 58 58
Domestic advanced ethanol....... 28 28 28 28 28
Conventional ethanol............ 13,781 13,660 13,514 13,350 13,170
-------------------------------------------------------------------------------
Total ethanol consumption... 13,993 13,871 13,724 13,558 13,377
----------------------------------------------------------------------------------------------------------------

4. Summary
Many of the factors we are statutorily obligated to analyze under
CAA section 211(o)(2)(B)(ii) when setting volume standards for the RFS
program are difficult to analyze in the abstract, particularly those
related to economic and environmental impacts. For this reason, we
opted to develop volume scenarios to analyze for each category of
renewable fuel, which are summarized in Tables III.C.4-1 and 2. Note
that neither of these volume scenarios include the impacts of the
proposed import RIN reduction provisions described in Section VIII.

Table III.C.4-1--Low Volume Scenario
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... 1,298 1,362 1,431 1,504 1,583
Biomass-based diesel (D4)....... 8,410 8,910 9,410 9,910 10,410
Other advanced biofuel (D5)..... 249 249 249 249 249
Conventional renewable fuel (D6) 13,783 13,662 13,516 13,352 13,172
----------------------------------------------------------------------------------------------------------------

Table III.C.4-2--High Volume Scenario
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... 1,298 1,362 1,431 1,504 1,583
Biomass-based diesel (D4)....... 8,910 9,910 10,910 11,910 12,910
Other advanced biofuel (D5)..... 249 249 249 249 249
Conventional renewable fuel (D6) 13,783 13,662 13,516 13,352 13,172
----------------------------------------------------------------------------------------------------------------

To inform the volumes we are proposing for 2026 and 2027, we
analyzed these volume scenarios according to the factors required under
the statute in CAA section 211(o)(2)(B)(ii). A summary of several of
these analyses is described in Section IV and discussed in greater
detail in the DRIA. Details of the individual biofuel types and
feedstocks that make up these volume scenarios are provided in the DRIA
Chapter 3. In Section V, we discuss the proposed volume requirements
based on a consideration of all the factors that we analyzed.

D. Baselines

To estimate the impacts of the Volume Scenarios, we must identify
an appropriate baseline(s). The baseline reflects the use of renewable
fuels absent the proposed action or RFS program (i.e., the alternative
collection of biofuel volumes by feedstock, production process (where
appropriate), biofuel type, and use that would be anticipated to occur
after 2025 in the absence of proposed standards), and acts as the point
of reference for assessing the impacts. To this end, we have developed
a ``No RFS'' scenario that we used as the baseline for analytical
purposes (hereafter the ``No RFS Baseline''), which reflects a world
without the RFS program. Many of the same supply-related factors that
we used to develop the Volume Scenarios were also relevant in
developing the No RFS Baseline.
We also consider a 2025 baseline that in some cases may be more
informative in understanding the impacts of the Volume Scenarios
relative to the status quo. We further discuss alternative baselines to
describe our reasoning for the public and interested stakeholders, and
because we understand there are differing, informative baselines that
could be used in this type of analysis.
1. No RFS Baseline
Broadly speaking, the RFS program is designed to increase the use
of renewable fuels in the transportation sector beyond what would occur
in the absence of the program. It is

[[Page 25810]]

appropriate, therefore, to use a scenario representing what would occur
if the RFS program did not continue to exist as the baseline for
estimating the costs and impacts of the Volume Scenarios. Such a ``No
RFS'' baseline is consistent with the Office of Management and Budget's
Circular A-4, which says that the appropriate baseline would normally
``be a `no action' baseline: what the world will be like if the
proposed rule is not adopted.'' \98\
---------------------------------------------------------------------------

\98\ Office Management and Budget, ``Circular A-4,'' September
17, 2003.
---------------------------------------------------------------------------

Importantly, a ``No RFS'' baseline would not be equivalent to a
market scenario wherein no renewable fuels were used at all. Prior to
the RFS program, both biodiesel and ethanol were used in the
transportation sector, whether due to state or local incentives, tax
credits, or a price advantage over conventional petroleum-based
gasoline and diesel. This same situation would exist in 2026-20230 in
the absence of the RFS program. Federal, State, and local tax credits,
incentives, and support payments will continue to be in place for these
fuels, as well as State programs such as blending mandates and LCFS
programs. Furthermore, now that capital investments in renewable fuels
have been made and markets have been oriented towards their use, there
are strong incentives in place for continuing their use even if the RFS
program were to disappear. As a result, it would be improper and
inaccurate to attribute all use of renewable fuel in 2026-2030 to the
applicable standards under the RFS program.
To inform our assessment of the volume of renewable fuels that
would be used in the absence of the RFS program for the years 2026-
2030, we began by analyzing the trends in the economics for renewable
fuels blending in prior years. Assessing these trends is important
because the economics for blending renewable fuels changes from year to
year based on renewable fuel feedstock and petroleum product prices and
other factors that affect the relative economics for blending renewable
fuels into petroleum-based transportation fuels. A renewable fuel
facility investor and the financiers who fund their projects will
review the historical (e.g., did they lose money in a previous year),
current, and perceived future economics of the renewable fuel market
when deciding whether to continue to operate their renewable fuel
facilities, and our analysis attempted to account for these factors.
The No RFS Baseline economic analysis for 2026-2030 compares the
projected renewable fuel cost with the projected cost for the fossil
fuel it displaces, at the point that the renewable fuel is blended with
the fossil fuel, to assess whether the renewable fuel provides an
economic advantage to blenders. The comparison is performed at the
point that the renewable fuel is blended with the fossil fuel to assess
whether the renewable fuel provides an economic advantage to blenders.
If the renewable fuel is lower cost than the fossil fuel it displaces,
it is assumed that the renewable fuel would be used absent the RFS
program (within the constraints described below). The No RFS Baseline
economic analysis that we conducted mirrors the cost analysis described
in Section IV.C, but there are several differences. The primary
difference is that the No RFS Baseline economic analysis was conducted
from the fuels industry's perspective, whether they would find it
economically advantageous to blend renewable fuel into petroleum fuel
in the absence of the RFS program. Conversely, the social cost analysis
reflects the overall cost impacts on society at large.\99\ A primary
example of a social cost not considered for the No RFS Baseline
economic analysis is the fuel economy effect due to the lower energy
density of the renewable fuel, as this cost is generally borne by
consumers, not the fuels industry. Other ways that the No RFS Baseline
economic analysis is different from the social cost analysis include:
---------------------------------------------------------------------------

\99\ See Section IV.C and DRIA Chapter 10 for descriptions of
the social cost analysis.
---------------------------------------------------------------------------

<bullet> In the context of assessing production costs, we amortized
the capital costs at a higher rate of return more typical for industry
investment instead of the rate of return used for social costs.
<bullet> We assessed renewable fuel distribution costs to the point
where it is blended into petroleum fuel, not all the way to the point
of use, which is necessary for estimating the fuel economy cost.\100\
---------------------------------------------------------------------------

\100\ For several renewable fuels (e.g., ethanol blended as E10,
biodiesel, and renewable diesel), the fuel economy cost is paid by
the consumer. Because it is the fuels industry (i.e., refiners,
terminals, and retailers) that decides whether to blend renewable
fuels into petroleum fuels, they are only concerned about the
relative cost at the point in which the renewable fuel is blended
into the petroleum fuel, not the costs downstream of that blending
point.
---------------------------------------------------------------------------

<bullet> While we generally do not account for the fuel economy
disadvantage of most renewable fuels for the No RFS Baseline economic
analysis, the exception is E85 where the lower fuel economy of using
E85 is so obvious to vehicle owners that they demand a lower price to
make up for this loss of fuel economy. As a result, retailers must
price E85 lower than the primary alternative E10 to account for this
bias and they must consider this in their decisions to blend and sell
E85.\101\
---------------------------------------------------------------------------

\101\ See DRIA Chapter 2 for further discussion of this topic.
---------------------------------------------------------------------------

To estimate the relative cost of a renewable fuel compared to the
fossil fuel being displaced, we considered several different cost
components (i.e., production cost, distribution cost, any blending
cost, retail cost) together to reflect the relative cost of each
renewable fuel to its respective fossil fuel. We also considered any
applicable federal or state programs, incentives, or subsidies that
could reduce the apparent blending cost of the renewable fuel at the
terminal, including the 45Z credit. The exact amount of credit under
45Z is more variable and depends on a range of factors. However,
generally speaking, the amount of credit that fuel producers are able
to claim under 45Z is less than the previous $1 per gallon credit that
biodiesel and renewable diesel producers were able to claim under
40A.\102\ In the case of higher ethanol blends, the retail cost
associated with the equipment or use of compatible materials needed to
enable the sale of these newer fuels is assumed to be reduced by 50
percent due to the HBIIP program.
---------------------------------------------------------------------------

\102\ See DRIA Chapter 1 for a further discussion of the 45Z tax
credit.
---------------------------------------------------------------------------

In addition, there are a number of State programs that create
subsidies for biodiesel and renewable diesel fuel, the largest being
offered by California and Oregon through their LCFS programs.\103\ We
accounted for State and local biodiesel mandates by including their
mandated volume regardless of the economics. Several States offer tax
credits for blending ethanol at 10 percent. Other States offer tax
credits for E85, of which the largest is New York. We are not aware of
any State tax credits or subsidies for E15.\104\ To account for the
various State assumptions, it was necessary to model the cost of using
these biofuels on a State-by-State basis.
---------------------------------------------------------------------------

\103\ At the time the analysis for the No RFS Baseline was
completed, there was insufficient data to project the impacts of
LCFS programs in New Mexico on biofuel consumption in these states
in the absence of the RFS program.
\104\ In light of the fluid situation with respect to a 1-psi
RVP waiver for E15 or actions to remove the 1-psi wavier for E10 in
eight midwestern states, our analysis did not specifically assume
either of these potential changes. These assumptions can affect the
relative cost of E15; however, adopting these assumptions would not
have impacted the overall conclusions with respect to blending E15
in the absence of the RFS program.
---------------------------------------------------------------------------

For most renewable fuels, the economic analysis provided consistent
results, indicating that they are either

[[Page 25811]]

economical in all years or are not economical in any year. However,
this was not true for biodiesel and renewable diesel, where the results
varied from year to year. Such swings in the economic attractiveness of
biodiesel and renewable diesel confound efforts on the part of
investors to project future returns on their investments to determine
whether to continue to operate their facilities, or shutdown. Thus, to
smooth out the swings in the economics for using biodiesel and
renewable diesel and look at it the way facility operators and their
investors would have in the absence of the RFS program, we made two key
assumptions. First, the economics for biodiesel and renewable diesel
were modeled starting in 2009 and the trend in its use was made
dependent on the relative economics in comparison to petroleum diesel
over distinct four-year periods. As a result, the first four-year
period modeled the costs over 2009-2012 to estimate the volume of
biodiesel and renewable diesel that would be used in 2012 in the
absence of the RFS program. Second, the estimated biodiesel and
renewable diesel volumes were limited in the analysis to no greater
volume than what occurred under the RFS program in any year, since the
existence of the RFS program would be expected to create a much greater
incentive for using these fuels than if the RFS program was not in
place.
We also conducted an economic analysis for cellulosic biofuels,
including cellulosic ethanol, corn kernel fiber ethanol, and biogas.
Since the volumes of these biofuels were much smaller, a more
generalized approach was used in lieu of the detailed state-by-state
analysis conducted for corn ethanol, biodiesel, and renewable diesel
fuel.
The No RFS Baseline for 2026-2030 is summarized in Table III.D.1-
1.\105\
---------------------------------------------------------------------------

\105\ See DRIA Chapter 2 for a more complete description of the
No RFS Baseline and its derivation.

Table III.D.1-1--No RFS Baseline
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... 582 619 659 702 749
Biomass-based diesel (D4)....... 3,156 3,310 3,429 3,614 3,753
Other advanced biofuel (D5)..... 197 197 197 197 197
Conventional renewable fuel (D6) 13,571 13,434 13,278 13,099 12,906
----------------------------------------------------------------------------------------------------------------

Our analysis shows that conventional ethanol is economical to use
in 10 percent blends (E10) without the presence of the RFS program.
Conversely, higher-level ethanol blends are only partially economic
without the RFS program. E85 is economic in some of the years before,
during, and after the years 2026-2030 in the State of California; \106\
thus, we assumed that E85 would be consumed in California without the
RFS program.\107\ While E85 is economic in New York, which offers a
large E85 blending subsidy, the volume of E85 sold in New York is very
small even with the RFS program in place; therefore, we ignored E85
sales in New York. Conversely E15 is not economic without the RFS
program due to the high cost associated with the equipment needed to be
installed at retail stations, even if these costs are partially
subsidized by government funding, and the lack of octane blending
value. Some volume of biodiesel is estimated to be blended based on
state mandates in the absence of the RFS program, and some additional
volume of both biodiesel and renewable diesel is estimated to be
economical to use without the RFS program, particularly in California
and Oregon due to the LCFS incentives. The volumes of CNG from biogas
and imported sugarcane ethanol are projected to be consumed in
California due to the economic support provided by their LCFS.
---------------------------------------------------------------------------

\106\ Our analysis indicated that E85 was also economic compared
to gasoline in Oregon; however, because there are only five stations
offering E85 in Oregon, we did not include E85 sold in Oregon in the
No RFS Baseline.
\107\ Since E85 is borderline economic in California in the No
RFS Baseline when we do not assume any increase in California's LCFS
credit, a likely increase in the LCFS credit under the No RFS
Baseline increases the certainty that E85 would be economic.
Additionally, we did not consider the possibility that cellulosic
ethanol, which receives a larger LCFS credit, could be used to
produce E85 and may be more economic than corn ethanol.
---------------------------------------------------------------------------

2. 2025 Baseline
The applicable volume requirements established for one year under
the RFS program do not roll over automatically to the next, nor do the
volume requirements that apply in one year become the default volume
requirements for the following year in the event that no volume
requirements are set for that following year. Nevertheless, the volume
requirements established for the previous year represent the most
recent set of volume requirements that the market was required to meet.
Since the previous year's volume requirements represent the
starting point for any adjustments that the market may need to make to
meet the next year's volume requirements, they represent another
informational baseline for comparison. For this reason, in previous RFS
annual standard-setting rulemakings we have used previous year
standards as a baseline against which to compare the projected impacts
of the proposed volumes and are also doing so here in addition to the
No RFS Baseline for some of the factors (e.g., the cost of this
action). We note that in developing the proposed volume requirements in
this action, we considered updated projections of biofuel production in
2025, which are significantly higher than the 2025 Baseline shown below
that is used as a point of comparison in some of our analyses.
The 2025 volume requirements were finalized in the Set 1 Rule and
the volumes we projected to be used to satisfy these requirements are
shown in Table III.D.3-1.\108\
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\108\ More details on the 2025 Baseline can be found in DRIA
Chapter 2.

[[Page 25812]]

Table III.D.3-1--2025 Baseline
[Million RINs]
------------------------------------------------------------------------
Volume
------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7)......................... 1,376
Biomass-based diesel (D4)............................ 6,881
Other advanced biofuel (D5).......................... 290
Conventional renewable fuel (D6)..................... 13,939
------------------------------------------------------------------------

E. Volume Changes Analyzed

In general, our analysis of the impacts of the Volume Scenarios was
based on the differences between the No RFS Baseline and our assessment
of how the market would respond to the Low and High Volume Scenarios.
Those differences are shown in Tables III.E-1 and 2.\109\ Note that
this approach is squarely focused on the differences in volumes between
the No RFS Baseline and the Volume Scenarios; our analysis does not, in
other words, assess impacts from total renewable fuel use in the U.S.
As noted above, we also consider the impacts of this action relative to
the 2025 Baseline for some of our analyses. The changes in renewable
fuel consumption relative to the 2025 Baseline are shown in in Tables
III.E-3 and 4.
---------------------------------------------------------------------------

\109\ See DRIA Chapter 2 for more details of this assessment,
including a more precise breakout of those differences.

Table III.E-1--Changes in Renewable Fuel Consumption--Low Volume Scenario vs. No RFS Baseline
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... 716 743 772 802 834
Biomass-Based Diesel (D4)....... 5,255 5,600 5,981 6,297 6,658
Other Advanced Biofuel (D5)..... 52 52 52 52 52
Conventional Renewable Fuel (D6) 212 228 238 252 266
----------------------------------------------------------------------------------------------------------------

Table III.E-2--Changes in Renewable Fuel Consumption--High Volume Scenario vs. No RFS Baseline
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... 716 743 772 802 834
Biomass-Based Diesel (D4)....... 5,755 6,600 7,481 8,297 9,158
Other Advanced Biofuel (D5)..... 52 52 52 52 52
Conventional Renewable Fuel (D6) 212 228 238 252 266
----------------------------------------------------------------------------------------------------------------

Table III.E-3--Changes in Renewable Fuel Consumption--Low Volume Scenario vs 2025 Baseline
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... -78 -14 55 128 207
Biomass-Based Diesel (D4)....... 1,529 2,029 2,529 3,029 3,529
Other Advanced Biofuel (D5)..... -41 -41 -41 -41 -41
Conventional Renewable Fuel (D6) -156 -277 -423 -587 -767
----------------------------------------------------------------------------------------------------------------

Table III.E-4.--Changes in Renewable Fuel Consumption--High Volume Scenario vs. 2025 Baseline
[Million RINs]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (D3 & D7).... -78

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