[Federal Register Volume 75, Number 236 (Thursday, December 9, 2010)]
[Rules and Regulations]
[Pages 76790-76830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30296]
[[Page 76789]]
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Part II
Environmental Protection Agency
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40 CFR Part 80
Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards;
Final Rule
Federal Register / Vol. 75 , No. 236 / Thursday, December 9, 2010 /
Rules and Regulations
[[Page 76790]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[EPA-HQ-OAR-2010-0133; FRL-9234-6]
RIN 2060-AQ16
Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel
Standards
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: The Environmental Protection Agency is required to set the
renewable fuel standards each November for the following year based on
gasoline and diesel projections from the Energy Information
Administration (EIA). Additionally, EPA is required to set the
cellulosic biofuel standard each year based on the volume projected to
be available during the following year, if the projected volume is less
than the applicable volume provided in the statute. These cellulosic
biofuel volume projections are to be based in part on EIA projections
as well as assessments of production capability from industry. This
action establishes annual percentage standards under Clean Air Act
section 211(o) for cellulosic biofuel, biomass-based diesel, advanced
biofuel, and renewable fuels that apply to all gasoline and diesel
produced or imported in calendar year 2011. We have determined that the
applicable volume of cellulosic biofuel on which the percentage
standard should be based is 6.0 million ethanol-equivalent gallons. We
believe that available volumes of cellulosic biofuel could be
significantly higher in 2012. This action also finalizes two changes to
the Renewable Fuel Standard program regulations: modifications to the
delayed RINs provision which provides a temporary and limited means for
certain renewable fuel producers to generate RINs after they have
produced and sold renewable fuel, and a new process for parties to
petition EPA to authorize use of an aggregate approach to compliance
with the renewable biomass provision for foreign feedstocks akin to
that applicable to the U.S. Finally, this action makes two
administrative announcements, one regarding the price for cellulosic
biofuel waiver credits for 2011, and another regarding the status of
the aggregate compliance provision for domestic crops.
DATES: This final rule is effective on December 9, 2010.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2010-0133. All documents in the docket are listed on the
www.regulations.gov website. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
through www.regulations.gov or in hard copy at the Air and Radiation
Docket and Information Center, EPA/DC, EPA West, Room 3334, 1301
Constitution Ave., NW., Washington, DC. The Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the Air Docket is (202) 566-
1742.
FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; Telephone number: 734-214-4131; Fax number: 734-214-4816; E-mail
address: [email protected], or Assessment and Standards
Division Hotline telephone number: (734) 214-4636; E-mail address:
[email protected].
SUPPLEMENTARY INFORMATION:
I. General Information
A. Does this action apply to me?
Entities potentially affected by this final rule are those involved
with the production, distribution, and sale of transportation fuels,
including gasoline and diesel fuel or renewable fuels such as ethanol
and biodiesel. Potentially regulated categories include:
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Examples of
NAICS \1\ SIC \2\ potentially
Category codes codes regulated
entities
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Industry....................... 324110 2911 Petroleum
Refineries.
Industry....................... 325193 2869 Ethyl alcohol
manufacturing.
Industry....................... 325199 2869 Other basic
organic chemical
manufacturing.
Industry....................... 424690 5169 Chemical and
allied products
merchant
wholesalers.
Industry....................... 424710 5171 Petroleum bulk
stations and
terminals.
Industry....................... 424720 5172 Petroleum and
petroleum
products
merchant
wholesalers.
Industry....................... 454319 5989 Other fuel
dealers.
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\1\ North American Industry Classification System (NAICS).
\2\ Standard Industrial Classification (SIC) system code.
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
final action. This table lists the types of entities that EPA is now
aware could potentially be regulated by this action. Other types of
entities not listed in the table could also be regulated. To determine
whether your activities will be regulated 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 preceding section.
Outline of This Preamble
I. Executive Summary
A. Statutory Requirements for Renewable Fuel Volumes
B. Assessment of 2011 Cellulosic Biofuel Production
C. Advanced Biofuel and Total Renewable Fuel
D. Final Percentage Standards
E. 2011 Price for Cellulosic Biofuel Waiver Credits
F. Assessment of the Aggregate Compliance Approach
II. Volume Production and Import Potential for 2011
A. Cellulosic Biofuel
1. Domestic Cellulosic Biofuel
2. Imports of Cellulosic Biofuel
3. Projections From the Energy Information Administration
4. Overall 2011 Volume Projections
5. Projections of Cellulosic Biofuel for 2012
B. Advanced Biofuel and Total Renewable Fuel
C. Biomass-Based Diesel
III. Percentage Standards for 2011
A. Background
B. Calculation of Standards
1. How are the standards calculated?
2. Small Refineries and Small Refiners
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IV. Cellulosic Biofuel Technology Assessment
A. What pathways are currently valid for the production of
cellulosic biofuel?
B. Cellulosic Feedstocks
C. Emerging Technologies
1. Biochemical
a. Feedstock Handling
b. Biomass Pretreatment
c. Hydrolysis
i. Acid Hydrolysis
ii. Enzymatic Hydrolysis
d. Fuel Production
e. Fuel Separation
f. Process Variations
g. Current Status of Biochemical Conversion Technology
h. Path to Commercialization
2. Thermochemical
a. Ethanol Based on a Thermochemical Platform
b. Diesel and Naphtha Production Based on a Thermochemical
Platform
3. Hybrid Thermochemical/Biochemical Processes
a. Biochemical Step Following Thermochemical Step
b. Concurrent Biochemical and Thermochemical Steps
4. Pyrolysis and Depolymerization
a. Pyrolysis Diesel Fuel and Gasoline
b. Catalytic Depolymerization
5. Catalytic Reforming of Sugars to Gasoline
V. Changes to RFS Regulations
A. Delayed RIN Generation for New Pathways
B. Aggregate Compliance Approach for Renewable Biomass From
Foreign Countries
1. Criteria and Considerations
2. Applicability of the Aggregate Approach
3. Data Sources
4. Petition Submission
5. Petition Process
VI. Annual Administrative Announcements
A. 2011 Price for Cellulosic Biofuel Waiver Credits
B. Assessment of the Domestic Aggregate Compliance Approach
VII. Comments Outside the Scope of This Rulemaking
VIII. Public Participation
IX. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act
D. Unfunded Mandates Reform Act
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
I. National Technology Transfer Advancement Act
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
K. Congressional Review Act
X. Statutory Authority
I. Executive Summary
EPA issued comprehensive regulations in 2007 to implement the
Renewable Fuel Standard (RFS1) program in Section 211(o) of the Clean
Air Act, as required by the Energy Policy Act of 2005 (EPAct). The
statutory requirements for the RFS program were subsequently modified
through the Energy Independence and Security Act of 2007 (EISA),
resulting in the publication of revised regulatory requirements (RFS2)
on March 26, 2010.\1\ In general, the transition from the RFS1
requirements of EPAct to the RFS2 requirements of EISA occurred on July
1, 2010.
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\1\ 75 FR 14670.
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EPA is required to determine and publish the applicable annual
percentage standards for cellulosic biofuel, biomass-based diesel,
advanced biofuel and total renewable fuel for each compliance year by
November 30 of the previous year. The determination of the applicable
cellulosic biofuel standard under RFS2 requires that EPA first project
the volume of cellulosic biofuel production for the following year. If
the projected volume of cellulosic biofuel production is less than the
applicable volume specified in Section 211(o)(2)(B)(i)(III) of the
statute, EPA must lower the required volume used to set the annual
cellulosic biofuel percentage standard to the projected available
volume. If we lower the applicable cellulosic biofuel volume, we must
also determine whether the advanced biofuel and/or total renewable fuel
volumes should be reduced by the same or a lesser amount. We provided
our volume projections and proposed percentage standards for 2011 in a
Notice of Proposed Rulemaking (NPRM) on July 20, 2010 (75 FR 42238).
Today's action provides our final projection of cellulosic biofuel
production for 2011, and final percentage standards for all four
categories of renewable fuel for compliance year 2011. The final 2011
standards have been based upon statutory requirements, comments
received in response to the NPRM, the estimate of projected gasoline,
diesel, and biofuel volumes that the EIA provided to EPA on October 20,
2010, and other relevant information.
Today's rule does not include an assessment of the impacts of the
standards we are finalizing for 2011. All of the impacts of the RFS2
program associated with the applicable volumes of biofuel specified in
the statute were addressed in the RFS2 final rule published on March
26, 2010.
Today's notice also finalizes two changes to the general RFS2
program regulations. The first change modifies a regulatory provision
for ``delayed RINs'' that we implemented through a previous action on
September 28, 2010.\2\ This provision provides a temporary and limited
means for certain renewable fuel producers to generate RINs after they
have produced and sold renewable fuel. In today's action we are
modifying this regulatory provision to be more broadly applicable as
described more fully in Section V.A. The second regulatory provision we
are finalizing today establishes a petition process and criteria for
EPA to use in determining whether to authorize the use of an aggregate
approach to verify that feedstocks from foreign countries meet the
definition of renewable biomass that would be akin to that applicable
to producers using crops and crop residue grown in the United States.
Further discussion of these provisions can be found in Section V.B.
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\2\ 75 FR 59622.
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Finally, in today's rulemaking we are announcing the price for
cellulosic biofuel waiver credits, and are also announcing the results
of our annual assessment of the aggregate compliance approach for U.S.
crops and crop residue. These announcements are provided in Section VI.
A. Statutory Requirements for Renewable Fuel Volumes
The volumes of renewable fuel that must be used under the RFS2
program each year (absent an adjustment or waiver by EPA) are specified
in CAA 211(o)(2)(B). These volumes for 2011 are shown in Table I.A-1.
Table I.A-1--Required Volumes in the Clean Air Act for 2011
[Billion gal]
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Ethanol
Actual equivalent
volume volume
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Cellulosic biofuel............................... \a\ 0.25 0.25
Biomass-based diesel............................. 0.80 1.20
Advanced biofuel................................. 1.35 1.35
Renewable fuel................................... 13.95 13.95
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\a\ This value assumes that all cellulosic biofuel would be ethanol. If
any portion of the renewable fuel used to meet the cellulosic biofuel
volume mandate has a volumetric energy content greater than that for
ethanol, this value will be lower.
By November 30 of each year, the EPA is required under CAA
211(o)(3)(B) to determine and publish in the Federal
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Register percentage standards for the following year that will ensure
that the applicable volumes of renewable fuel are used. These standards
are to be based in part on transportation fuel (i.e. gasoline and
diesel) volume estimates provided by the Energy Information
Administration (EIA). The calculation of the percentage standards is
based on the formulas in 40 CFR 80.1405(c) which express the required
volumes of renewable fuel as a volume percentage of gasoline and diesel
sold or introduced into commerce in the 48 contiguous states plus
Hawaii.
The statute requires the EPA to determine whether the projected
volume of cellulosic biofuel production for the following year is less
than the minimum applicable volume shown in Table I.A-1. If this is the
case, then the standard for cellulosic biofuel must be based upon the
projected available volume rather than the applicable volume in the
statute. In addition, if EPA reduces the applicable volume of
cellulosic biofuel below the level specified in the statute, the Act
also indicates that we may reduce the applicable volume of advanced
biofuels and total renewable fuel by the same or a lesser volume.
B. Assessment of 2011 Cellulosic Biofuel Production
To estimate the projected available volume of cellulosic biofuel in
the U.S. in 2011, we researched potential production sources by company
and facility. This included sources that were still in the planning
stages, those that were under construction, and those that are already
producing some volume of cellulosic ethanol, cellulosic diesel, or some
other type of cellulosic biofuel. We considered all pilot and
demonstration plants as well as commercial plants. From this universe
of potential cellulosic biofuel sources we identified the subset that
had a possibility of producing some volume of qualifying cellulosic
biofuel for use as transportation fuel in 2011. Further analysis and
investigation allowed us to determine which ones were actually in a
position to produce and make available any commercial volumes of
cellulosic biofuel in 2011. In this process we also considered factors
such as the current and expected state of funding, the status of the
technology and contracts for feedstocks or product sales, and progress
towards construction and production goals. This assessment formed the
basis of our projection for potentially available 2011 volumes.
In our assessment we evaluated both domestic and foreign sources of
cellulosic biofuel. We determined that five U.S. facilities have the
potential to make volumes of cellulosic biofuel commercially available
for transportation use in the U.S. in 2011. We also identified three
international facilities, two in Canada and one in Germany, that we
expect will produce cellulosic biofuel in 2011. While these facilities
may also be able to produce cellulosic volume in 2011, we determined
that they are unlikely to make the fuel available to the U.S. market.
Based on our assessment for this rulemaking, we are lowering the
applicable volume of cellulosic biofuel for 2011 from the statutory
volume of 250 million gallons to 6.0 million ethanol-equivalent
gallons. This volume is the basis for the percentage standard we are
setting for cellulosic biofuel in 2011. As with any projections of
future production there is some uncertainty associated with these
volumes. These uncertainties in our 2011 cellulosic volume projection
are discussed in more detail in Section II.A. Nevertheless, we believe
that 6.0 million ethanol-equivalent gallons represents a reasonable
projection of potential 2011 cellulosic production volume for use in
setting the standard.
EPA is currently aware of more than 20 facilities representing over
300 million gallons of production that are targeting commercial
production of cellulosic biofuels in 2012. As a result, although the
cellulosic biofuel standard we are setting for 2011 is considerably
less than the applicable volumes established in EISA, EPA believes
there is reason for optimism when looking at the plans for the
cellulosic biofuel industry in 2012 and beyond.
C. Advanced Biofuel and Total Renewable Fuel
As described in Section I.A above, the statute indicates that we
may reduce the applicable volume of advanced biofuel and total
renewable fuel if we determine that the projected volume of cellulosic
biofuel production for 2011 falls short of the statutory volume of 250
million gallons. Since we are setting the cellulosic biofuel standard
significantly below the statutory volume of 250 million gallons, we
also needed to evaluate whether we should lower the required volumes
for advanced biofuel and total renewable fuel.
We first considered whether it appears likely that the required
biomass-based diesel volume of 0.8 billion gallons can be met with
existing biodiesel production potential in 2011, as biodiesel is
currently the predominant form of biomass-based diesel. As discussed in
Section II.C, we believe that the 0.8 billion gallon standard can
indeed be met. Since biodiesel has an Equivalence Value of 1.5, 0.8
billion physical gallons of biodiesel would provide 1.20 billion
ethanol-equivalent gallons that can be counted towards the advanced
biofuel standard of 1.35 billion gallons. Of the remaining 0.15 billion
gallons (150 million gallons), 6.0 million gallons will be met with
cellulosic biofuel. Based on our analysis as described in Section II.B,
we believe that there are sufficient sources of other advanced biofuel,
such as additional biodiesel, renewable diesel, or imported sugarcane
ethanol, such that the standard for advanced biofuel can remain at the
statutory level of 1.35 billion gallons. We have also determined that
there is sufficient qualifying domestic corn ethanol production
capacity to meet the balance of the total renewable fuel standard that
is not satisfied with advanced biofuel. Therefore, in today's final
rule neither the 2011 volumes for advanced biofuel nor total renewable
fuel are being lowered below the volumes specified in the statute.
D. Final Percentage Standards
The renewable fuel standards are expressed as a volume percentage,
and are used by each refiner, blender or importer to determine their
renewable fuel volume obligations. The applicable percentages are set
so that if each regulated party meets the percentages, and if EIA
projections of gasoline and diesel use are accurate, then the amount of
renewable fuel, cellulosic biofuel, biomass-based diesel, and advanced
biofuel used will meet the applicable volumes required on a nationwide
basis. To calculate the percentage standard for cellulosic biofuel for
2011, we have used the volume of 6.0 million ethanol-equivalent gallons
(representing 6.6 million physical gallons). We are also specifying
that the applicable volumes for biomass-based diesel, advanced biofuel,
and total renewable fuel for 2011 will be those specified in the
statute. These volumes are shown in Table I.D-1.
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Table I.D-1--Final Volumes for 2011
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Actual volume Ethanol equivalent volume
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Cellulosic biofuel....................... 6.6 mill gal................ 6.0 mill gal.
Biomass-based diesel..................... 0.80 bill gal............... 1.20 bill gal.
Advanced biofuel......................... 1.35 bill gal............... 1.35 bill gal.
Renewable fuel........................... 13.95 bill gal.............. 13.95 bill gal.
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Four separate standards are required under the RFS2 program,
corresponding to the four separate volume requirements shown in Table
I.D-1. The specific formulas we use to calculate the renewable fuel
percentage standards are contained in the regulations at Sec. 80.1405
and repeated in Section III.B.1. The percentage standards represent the
ratio of renewable fuel volume to non-renewable gasoline and diesel
volume. The projected volumes of gasoline and diesel used to calculate
the standards are provided by EIA. Because small refiners and small
refineries are also regulated parties beginning in 2011 \3\, there is
no small refiner/refinery volume adjustment to the 2011 standard as
there was for the 2010 standard. Thus, the increase in the percentage
standards relative to 2010 appears smaller than would otherwise be the
case, since more obligated parties will be participating in the
program. The final standards for 2011 are shown in Table I.D-2.
Detailed calculations can be found in Section III.
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\3\ The Department of Energy concluded that there is no reason
to believe that any small refinery would be disproportionately
harmed by inclusion in the RFS2 program for 2011 and beyond. See DOE
report ``EPACT 2005 Section 1501 Small Refineries Exemption Study''
(January 2009). We will revisit extensions to the exemption for
small refineries if DOE revises their study and provides a different
conclusion, or we determine that an individual small refinery has
demonstrated that it will suffer a disproportionate economic
hardship under the RFS program.
Table I.D-2--Final Percentage Standards for 2011
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Percent
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Cellulosic biofuel........................................... 0.003
Biomass-based diesel......................................... 0.69
Advanced biofuel............................................. 0.78
Renewable fuel............................................... 8.01
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E. 2011 Price for Cellulosic Biofuel Waiver Credits
Since we are reducing the required volume of cellulosic biofuel for
2011 below the applicable volume specified in the statute, EPA is
required to offer biofuel waiver credits to obligated parties that can
be purchased in lieu of acquiring cellulosic biofuel RINs. These waiver
credits are not allowed to be traded or banked for future use, and are
only allowed to be used to meet the 2011 cellulosic biofuel standard.
Moreover, unlike cellulosic biofuel RINs, waiver credits may not be
used to meet either the advanced biofuel standard or the total
renewable fuel standard. For the 2011 compliance period, we are making
cellulosic biofuel waiver credits available to obligated parties for
end-of-year compliance should they need them at a price of $1.13 per
credit. Further discussion is provided in Section VI.A.
F. Assessment of the Aggregate Compliance Approach
As part of the RFS2 regulations, EPA established an aggregate
compliance approach for renewable fuel producers who use planted crops
and crop residue from U.S. agricultural land. This compliance approach
relieved such producers (and importers of such fuel) of the individual
recordkeeping and reporting requirements otherwise required of
producers and importers to verify that feedstocks used in the
production of RIN-qualifying renewable fuel meet the definition of
renewable biomass. EPA determined that 402 million acres of U.S.
agricultural land was available in 2007 (the year of EISA enactment)
for production of crops and crop residue that would meet the definition
of renewable biomass, and determined that as long as this total number
of acres is not exceeded, it is unlikely that new land has been devoted
to crop production based on historical trends and economic
considerations. We indicated that we would conduct an annual evaluation
of total U.S. acreage that is cropland, pastureland, or conservation
reserve program land, and that if the value exceed 402 million acres,
producers using domestically-grown crops or crop residue to produce
renewable fuel would be subject to individual recordkeeping and
reporting to verify that their feedstocks meet the definition of
renewable biomass.
The RFS2 regulations provide that EPA will make a finding
concerning whether the 2007 baseline amount of U.S. agricultural land
has been exceeded in a given year and will publish this finding in the
Federal Register by November 30 of the same year. Based on data
provided by the USDA, we have estimated that U.S. agricultural land
reached 398 million acres in 2010, and thus did not exceed the 2007
baseline acreage.
We also stated in the preamble to the final RFS2 rule that if, at
any point, EPA finds that the total agricultural land is greater than
397 million acres, EPA will conduct further investigations to evaluate
validity of the domestic aggregate compliance approach. The total
acreage estimate of 398 million acres exceeds the trigger point for
further investigation, therefore EPA, with the help of USDA, will
conduct further investigations into this matter. Additional discussion
on this matter can be found in Section VI.B of this preamble.
II. Volume Production and Import Potential for 2011
In order to project production volumes of cellulosic biofuel in
2011 for use in setting the percentage standards, we collected
information on individual facilities that have the potential to produce
qualifying cellulosic biofuel volumes for consumption as transportation
fuel, heating oil, or jet fuel in the U.S. in 2011. We also evaluated
the production and import potential for biomass-based diesels, advanced
biofuels, and other conventional renewable fuels such as corn-ethanol.
This section describes the volumes that we believe could potentially be
produced or imported in 2011. As with any projections of future
production there is some uncertainty associated with these volumes.
Many of the uncertainties associated with our projected volumes are
also discussed in this section. Section III describes the derivation of
the percentage standards that will apply to obligated parties in 2011.
The 2011 volume projections in today's final rule are based on
information from a wide spectrum of sources. For instance, EPA received
input on our assessment of 2011 production and import volumes from
other government organizations including the Department of Energy
(DOE), Energy Information
[[Page 76794]]
Administration (EIA), and United States Department of Agriculture
(USDA). The EIA projections of gasoline, diesel, biomass-based diesel,
and cellulosic biofuel provided to EPA on October 20, 2010 were
particularly germane. These EIA projections are discussed in more
detail in Section II.A.3.
We also received a number of comments related to our proposed
volume projections and the associated percentage standards. With regard
to the proposed cellulosic biofuel projections, most commenters agreed
that the proposed range of 5--17.1 million gallons (6.5--25.5 million
ethanol-equivalent gallons) was appropriate, but no commenter suggested
a specific volume for 2011 or a clear methodology for determining the
appropriate volume. However, several commenters provided qualitative
assessments. For instance, refiners suggested that the low end of the
range would be more appropriate as it would minimize the possibility
that obligated parties would be unable to procure sufficient cellulosic
biofuel RINs to meet their obligations. They further stated that the
cellulosic biofuel volume used to set the 2011 standard should be based
on existing production volumes rather than a projection of potential
volume in 2011. In contrast, several proponents of the advanced
biofuels industry stated that the cellulosic biofuel standard should be
set as high as possible in order to establish the market demand that
investors seek before funding cellulosic biofuel projects. They argued
that the cellulosic biofuels industry is unlikely to grow without
support in the form of a high cellulosic biofuel standard.
Since commenters did not provide their own quantitative assessments
of projected cellulosic biofuel volumes for us to consider, we based
our assessment of the production capabilities of planned and existing
biofuel production facilities on projections provided by EIA as well as
data provided by other government agencies and our own contact with
many of these companies. In directing EPA to project cellulosic biofuel
production for purposes of setting the annual cellulosic biofuel
standard, Congress did not specify what degree of certainty should be
reflected in the projections. We believe that the cellulosic biofuel
standard should provide an incentive for the industry to grow according
to the goals that Congress established through EISA. However, we also
believe that the cellulosic biofuel standard that we set should be
within the range of what can be attained based on projected domestic
production and import potential. Any estimate we use to set the
cellulosic biofuel standard for 2011 will have some uncertainty in
terms of actual attainment, and the level of such uncertainty generally
rises with the volume mandate. Our intention is to balance such
uncertainty with the objective of providing an incentive for growth in
the industry. To this end, we explored the 2011 volumes for individual
companies as projected by EIA to determine not only what volumes might
be anticipated, but more importantly what volumes were potentially
attainable. Our final projected available volume of cellulosic biofuel
for 2011 reflects these considerations. Nevertheless, in the event that
the biofuel industry ultimately fails to provide sufficient volumes to
meet the 2011 standard for cellulosic biofuel, obligated parties can
purchase waiver credits from the EPA under the provisions of Sec.
80.1456. The price for such waiver credits is being established in
today's action in Section VI.A.
In addition to the sources described above, we had intended to use
information provided through the Production Outlook Reports required
under Sec. 80.1449 for all registered renewable fuel producers and
importers. These reports were due to the Agency by September 1, 2010.
While these reports were informative for the companies that did submit
them, most potential cellulosic biofuel producers had not yet
registered under the RFS program and therefore were not required to
submit Production Outlook Reports. Moreover, only a small percentage of
the reports were both complete and correct upon initial submission, and
about one-fourth of all registered producers and importers failed to
submit a report. These issues are likely the result of this being the
first time that such reports were due and remedial actions are expected
to lead to a more complete set of valid reports later in 2010. However,
the Production Outlook Reports were of limited value for development of
the biofuel volume projections that we used to set the standards for
2011.
In our analysis, we have focused on biofuel production as required
by Section 211(o)(7)(D)(i) of the Clean Air Act. We have not considered
the demand for biofuels as a factor in determining the appropriate
volume of cellulosic biofuel to require in 2011. However, we note that
the volumes of cellulosic biofuel that we proposed and the required
volume we are finalizing today are very small in terms of total demand
for biofuels, and are thus unlikely to impact issues related to demand
for biofuels such as infrastructure for distributing or consuming
biofuels.
A. Cellulosic Biofuel
The task of projecting the volume of cellulosic biofuels that could
be produced in 2011 is challenging. Announcements of new projects,
changes in project plans, project delays, and cancellations occur with
great regularity. Biofuel producers face not only the challenge of the
scale-up of innovative, first-of-a-kind technology, but also the
challenge of securing funding in a difficult economy.
In order to project cellulosic biofuel production volumes for 2011,
EPA has tracked the progress of over 100 cellulosic biofuel production
facilities. From this large group of over 100 production facilities we
identified 35 that had planned to begin cellulosic biofuel production
by early 2012. From this smaller list of facilities we used publically
available information, as well as information provided by DOE and USDA,
to determine which facilities were the most likely candidates to
produce cellulosic biofuel and make it commercially available in 2011.
Each of these companies was then contacted to provide the most up to
date information possible on their current cellulosic biofuel
production plans for 2011. Our estimate of the projected available
cellulosic biofuel volume for 2011 is based on the information we
received in conversations with these companies as well as our own
assessment of the potential for these facilities to produce cellulosic
biofuel in the volumes indicated. Throughout this process EPA engaged
in discussions with EIA to share information and insights into
potential cellulosic biofuel production in 2011. For more details on
EIA's cellulosic biofuel projections for 2011 and a discussion of the
differences between the projections made by EPA and EIA see Section
II.A.3.
A brief description of each of the companies we believe has the
potential to produce cellulosic biofuel and make it commercially
available can be found below. A more in-depth discussion of the
technologies used to produce cellulosic biofuels can be found in
Section IV. Based on this information, EPA projects that 6.6 million
gallons of cellulosic biofuel (corresponding to 6.0 million ethanol-
equivalent RINs) could be produced and made available in 2011. This is
the number we used as the basis for the percentage standard for 2011.
The rest of this section describes the analyses that we used as the
basis for this projected available production volume.
[[Page 76795]]
1. Domestic Cellulosic Biofuel
Based on our assessment of the cellulosic biofuel industry, we
believe that there are four companies in the United States with the
potential to produce cellulosic alcohol and make it commercially
available in 2011. These companies are DuPont Danisco, Fiberight, KL
Energy Corporation, and Range Fuels. EPA also believes that a fifth
company, KiOR, will be in a position to produce some cellulosic diesel
fuel in 2011. This section will provide a brief description of each of
these companies and our assessment of their potential fuel production
in 2011 based on information we have acquired to date.
DuPont Danisco Cellulosic Ethanol (DDCE) began start up operations
at a small demonstration facility in Vonore, Tennessee in early 2010.
This facility has a maximum production capacity of 250,000 gallons of
ethanol per year and uses an enzymatic hydrolysis process to convert
corn cobs into ethanol. DDCE has indicated that they could produce up
to 150,000 gallons of ethanol in 2011 from the Vonore facility.
Fiberight is a company planning to convert MSW to ethanol.
Fiberight purchased a small corn ethanol plant in Blairstown, IA and
has modified it to produce ethanol from cellulosic biomass. They use an
enzymatic hydrolysis process to convert the cellulosic waste materials
to simple sugars and then to ethanol. Fiberight plans to initially use
a waste cellulose stream from a paper recycling facility as their
primary feedstock, and eventually complement that with a sorted MSW
stream. Fiberight started producing ethanol in the summer of 2010 and
plans to ramp up to full production capacity by late 2011. Fiberight
has provided month-by-month production targets for 2011 to EPA. Based
on these targets their projected production potential for 2011 is 2.8
million gallons of cellulosic ethanol. While there is still some
uncertainty as to whether their supply of waste cellulose from paper
recycling meets the regulatory definition of renewable biomass, fuel
from such feedstock would only account for about one-fifth of the total
ethanol expected to be produced by Fiberight in 2011. Moreover,
Fiberight's choice of feedstock for ethanol production could change
depending on whether waste cellulose from paper recycling is determined
to meet the regulatory definition of renewable biomass. For the
purposes of projecting potentially available cellulosic volume for
2011, therefore, we have included in our estimates the portion that
could be produced from waste cellulose from paper recycling.
The third company that EPA is aware of with the potential to
produce cellulosic ethanol in 2011 is KL Energy Corporation. KL Energy
has a demonstration facility in Upton, Wyoming that uses an enzymatic
hydrolysis process to convert wood chips and wood waste to ethanol and
has just announced a partnership with Petrobras for the construction of
additional facilities. The demonstration facility has a maximum annual
production volume of 1.5 million gallons and has been operational since
the fall of 2007. Since KL Energy completed construction of this
facility they have been gradually ramping up production and gathering
information to optimize this and future ethanol production facilities.
While production levels from this facility have so far been below
capacity, KL has informed EPA that they intend to produce up to 400,000
gallons of cellulosic ethanol from their Upton, WY facility in 2011.
A fourth company that EPA expects will produce cellulosic biofuel
in 2011 is Range Fuels. Range has a facility in Soperton, Georgia
capable of processing 125 dry tons of feedstock per day. This facility
completed commissioning in the second quarter of 2010 and began
producing cellulosic methanol in the third quarter of 2010. Range
initially plans to use wood chips as their feedstock, but will also
investigate using different types of woody biomass and herbaceous
energy crops. In Phase I of this project, Range will predominantly use
a commercial methanol catalyst, but they plan to produce some ethanol
using a proprietary mixed alcohol catalyst. No approved pathway
currently exists under the RFS program for the generation of RINs for
methanol, and the opportunities for using methanol in the
transportation fuel market are limited. However, Range does plan on
adding capabilities in Phase II that will increase the relative
production volume of ethanol versus methanol. Moreover, EPA is
evaluating possible RIN-generating pathways for cellulosic methanol,
including the potential for cellulosic methanol used in the production
of biodiesel to qualify for the generation of cellulosic biofuel RINs.
At this time EPA projects that Range Fuels will produce 0.1 million
gallons of ethanol and 2.9 million gallons of methanol from this
facility in 2011. Given a methanol equivalence value of 0.75, this fuel
represents 2.3 million ethanol equivalent gallons. Based the potential
for Range to produce larger proportions of ethanol, and the possibility
that RIN-generating pathways for cellulosic methanol could be
identified or approved we are projecting production of 2.3 million
gallons of RIN-generating cellulosic biofuel by Range Fuels in 2011.
The only company that EPA is aware of that may be a producer of
cellulosic diesel in 2011 is KiOR. KiOR has developed a catalytic
pyrolysis technology capable of converting cellulosic biomass directly
to a bio-crude with a low oxygen content. KiOR currently has a small
pilot facility capable of producing 10-15 barrels of bio-crude per day
in Houston, Texas. In order for this fuel to be used as a
transportation fuel it would have to go through further refining. This
could either be done at the KiOR facility if the necessary equipment is
installed, or at an existing refinery. While KiOR is not currently
producing a finished transportation fuel, this bio-oil could be
upgraded and be eligible for RIN generation under the RFS program. EPA
projects that this facility can produce 0.2 million gallons of fuel,
representing 0.3 million RINs in 2011.
In the proposed rule we also discussed two other potential
cellulosic diesel producers, Bell BioEnergy and Cello Energy. Since the
publication of the proposed rule the project that Bell BioEnergy had
been working on that EPA had identified as a potential source of
cellulosic biofuel has been terminated. They are currently exploring
other options for locations for their first commercial facility, as
well as potential sources of funding. While we are not counting on any
volume from Bell BioEnergy for the 2011 projected available volume, it
is feasible that they could produce cellulosic diesel or jet fuel in
2011 if they are able to identify a suitable location for their
facility and secure the necessary funding in the near future.
The other cellulosic diesel company discussed in the proposed rule
is Cello Energy. Cello has a structurally complete facility in Bay
Minette, Alabama with an annual production capacity of 20 million
gallons of diesel per year. While their facility is structurally
complete, they have experienced feedstock preparation and handling
issues that need to be resolved before they will be able to again
attempt start up and production. Litigation related to contract issues
has also provided a set-back likely delaying any potential production
from Cello's facility. On October 20, 2010 Cello Energy filed for
Chapter 11 bankruptcy, therefore no volume from this facility has been
included in our projected cellulosic biofuel volume for 2011.
[[Page 76796]]
We are currently unaware of any companies in the United States
planning on producing cellulosic biofuel other than ethanol, methanol,
and diesel and making it commercially available in 2011. EPA is
currently tracking the efforts of 10 companies that plan to produce
fuels such as butanol, gasoline, jet fuel, dimethyl ether (DME), and
others. Many of these companies have reported that they are still
developing their technologies and waiting for funding, and that they
are not expecting to make any cellulosic fuel commercially available
until 2012 at the earliest. There are several companies with small
demonstration facilities who intend to produce biofuels from cellulosic
feedstocks, but are currently optimizing their technology with sugar or
starch feedstocks. EPA anticipates that in the future this may be a
significant source of cellulosic biofuel, however we have not counted
these potential volumes in our projections for 2011.
2. Imports of Cellulosic Biofuel
In addition to the companies located in the United States, EPA is
also aware of three companies located in other countries with the
potential for cellulosic biofuel production in 2011. If this fuel is
produced with renewable biomass and imported into the United States for
use in transportation fuel, jet fuel, or heating oil, it would be
eligible to participate in the RFS2 program. However, for the reasons
described below, we have not included any imported cellulosic biofuel
in our projections of available U.S. volume for 2011.
Iogen uses a steam explosion pre-treatment process followed by
enzymatic hydrolysis to produce cellulosic ethanol from wheat, oat, and
barley straw. They have a demonstration facility with an annual
production capacity of 500,000 gallons of ethanol located in Ontario,
Canada. This facility has been operational and producing small volumes
of ethanol since 2004. So far all of the ethanol produced by this
facility has been used locally and in racing and other promotional
events. In conversations with EPA Iogen has indicated that they do not
intend to export any fuel to the United States from this facility in
2011.
Another Canadian company with the potential to produce cellulosic
ethanol in 2011 is Enerkem. Enerkem plans to use a thermo-chemical
process to gasify separated MSW and other waste products and then use a
catalyst to convert the synthesis (syn) gas into methanol and ethanol.
Enerkem finished construction on a 1.3 million gallon per year facility
in Westbury, Quebec in June 2010 and plans to begin producing methanol
and ethanol later in 2010. They are also planning a 10 million gallon
per year facility in Edmonton, Alberta, however production from this
facility is not expected until 2012. Enerkem has informed EPA that they
plan to market their products locally, and do not intend any exports to
the United States.
A third international company that may produce commercial volumes
of cellulosic biofuel in 2011 is Choren. Choren has completed
construction of a facility in Freiberg, Germany with a production
capacity of 3.9 million gallons of diesel fuel. This facility used a
thermochemical process to convert biomass to syngas and then
catalytically converts the syngas to diesel fuel. The facility is
currently undergoing commissioning and it is unclear when they will
begin commercial production. Additionally, there is likely to be strong
local demand for the fuel. Due to these factors, EPA is not projecting
that any fuel produced by Choren will be imported into the U.S. in
2011.
While these facilities appear to be the most likely sources of
imported cellulosic biofuel, it is possible that cellulosic biofuels
produced by other foreign companies may be imported into the United
States. One strong candidate as a potential source of cellulosic
biofuel imports is Brazil, due to its established ethanol industry and
history of importing ethanol into the United States. EPA is aware of
several companies planning commercial scale production of cellulosic
biofuel in Brazil. It is unlikely these projects will be completed in
time to supply cellulosic biofuel to the United States in 2011; however
they may be a significant source of cellulosic biofuel imports in
future years.
3. Projections From the Energy Information Administration
Section 211(o)(3)(A) of the Clean Air Act requires EIA to ``* * *
provide to the Administrator of the Environmental Protection Agency an
estimate, with respect to the following calendar year, of the volumes
of transportation fuel, biomass-based diesel, and cellulosic biofuel
projected to be sold or introduced into commerce in the United
States.'' EIA provided these estimates to us on October 20, 2010.\4\
With regard to cellulosic biofuel, the EIA estimated that the available
volume in 2011 would be 3.94 mill gallons based on their assessment of
the utilization of production capacity. A summary of the plants they
considered is shown below in Table II.A.3-1.
---------------------------------------------------------------------------
\4\ Letter from Richard Newell, EIA Administrator to Lisa
Jackson, EPA Administrator October 20, 2010.
Table II.A.3-1--EIA's Projected Cellulosic Biofuel Plant Production Estimates for 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expected 2011
Company name Location Feedstock Fuel Capacity Facility status utilization Production
(MGY) (Percent) (MG)
--------------------------------------------------------------------------------------------------------------------------------------------------------
DuPont Danisco.................. Vonore, TN......... Corn cobs, then Ethanol............ 0.25 Online............. 10 0.03
switchgrass.
Fiberight....................... Blairstown, IA..... MSW................ Ethanol............ 6.0 Online............. 46 2.76
KL Energy....................... Upton, WY.......... Wood............... Ethanol............ 1.5 Online............. 10 0.15
Range........................... Soperton, GA....... Wood Waste......... Methanol, Ethanol.. 4 Online............. 25 1.0
-----------------------------------------------------------------------------------------------------------------------
Total....................... ................... ................... ................... ......... ................... ........... 3.94
--------------------------------------------------------------------------------------------------------------------------------------------------------
While EIA's projected cellulosic biofuel production estimate for
2011 is, with the exception of KiOR, based on an evaluation of the same
companies that EPA evaluated, the production volume assumed by EIA for
each company is lower in all cases. We believe that the difference
reflects EIA's intention to estimate volumes that each company has a
high certainty of reaching in 2011. As described in Section II.A above,
we have projected the volume of cellulosic
[[Page 76797]]
biofuel that we believe is attainable given the issues that each
company faces, while recognizing that there is some uncertainty in the
projected volumes. We believe that many or all of the uncertainties
associated with the potential volume production at each company can be
resolved in a positive direction.
We have considered EIA's projection of cellulosic biofuel
production for 2011 in the context of setting the 2011 cellulosic
biofuel standard, and we believe that it represents a volume that the
industry is unlikely to fall below. However, we believe that it is
appropriate to set the applicable volume at a level that provides an
incentive for developing cellulosic biofuel facilities to come on line
as expeditiously as possible, and to provide reasonable assurance that
there will be a market for their product if they do. Moreover, we also
believe that CAA 211(o)(7)(D) is best interpreted to vest the authority
for making the projection with EPA, since it provides that the
projection is ``determined by the Administrator based on the estimate
provided [by EIA].'' If Congress intended that EPA simply adopt EIA's
projection without an independent evaluation, it would not have
specified that the projection is ``determined'' by EPA. Although the
statute provides that our determination must be ``based on the estimate
provided'' by EIA, we believe that our consideration of EIA's estimate
in deriving our own projection satisfies this statutory requirement.
For the reasons described above, we believe that EPA's projection takes
into account uncertainties in a manner that best furthers the
objectives of the statute.
4. Overall 2011 Volume Projections
The information EPA has gathered on the potential cellulosic
biofuel producers in 2011, summarized above, allows us to project the
potential production volume of each facility in 2011. After the
appropriate equivalence value has been applied to the volumes from
these facilities, the overall projected ethanol-equivalent volume of
cellulosic biofuel for 2011 can be totaled. This information is
summarized in Table II.A.4-1 below.
Table II.A.4-1--Projected Potential Volume of Cellulosic Biofuel Production in 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected Ethanol
Capacity potential equivalent
Company name Location Feedstock Fuel (MGY) Facility status volume gallons
(MG) (MG)
--------------------------------------------------------------------------------------------------------------------------------------------------------
DuPont Danisco................... Vonore, TN.......... Corn cobs, then Ethanol............ 0.25 Online............. 0.15 0.15
switchgrass.
Fiberight........................ Blairstown, IA...... MSW................ Ethanol............ 6 Online............. 2.8 2.8
KL Energy........................ Upton, WY........... Wood............... Ethanol............ 1.5 Online............. 0.4 0.4
KiOR............................. Houston, TX......... Wood Waste......... Diesel............. 0.2 Online............. 0.2 0.3
Range............................ Soperton, GA........ Wood Waste......... Methanol, Ethanol.. 4 Online............. 3.0 2.3
----------------------------------------------------------------------------------------------------------------------
Total........................ .................... ................... ................... ......... ................... 6.6 6.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
While the production volumes in Table II.A.4-1 have some
uncertainty, we believe that a total volume of 6.0 million gallons is
attainable. By basing the 2011 cellulosic biofuel standard on the
attainable volumes rather than discounting projected volumes to account
for uncertainty, we aim to avoid the undesirable scenario in which
cellulosic biofuel production exceeds the mandated volume. Such a
scenario would result in weak demand for cellulosic biofuels and RINs.
Additionally, while obligated parties are able to purchase cellulosic
biofuel waivers credits in the event that production of cellulosic
biofuel is insufficient to meet the 2011 standard, no mechanism exists
for this standard to be raised should cellulosic biofuel production
exceed the 2011 standard. The intent of Congress in establishing the
RFS program through EISA was to provide a reliable market for renewable
fuels and in doing so to spur growth in the cellulosic biofuels
industry. EPA believes the projected available volume finalized in this
rule best reflects these intentions.
Three commenters (Abengoa, Growth Energy, and Unica) supported the
range of 6.5-25.5 million gallons that EPA proposed in the NPRM. The
Biotechnology Industry Organization and Dupont Danisco Cellulosic
Ethanol commented that the EPA's proposed range was a reasonable
estimate, but encouraged EPA to consider ways the RFS program can serve
a risk mitigation function for the cellulosic biofuel industry. Two
commenters, American Petroleum Institute and National Petrochemical &
Refiners Association, suggested that EPA consider only companies that
have demonstrated, proven production records when setting the
cellulosic standard for the following year. The Low Carbon Synthetic
Fuels Association suggested EPA set the standard high enough so that
any cellulosic biofuel that might be produced in 2011 in the U.S. or
internationally would be included in the volume projections. They
suggest that this would mean using the high end of the proposed volume,
or even some volume above the proposed range.
Based on our assessment of the potential production capabilities of
individual companies as described above, EPA is finalizing the
cellulosic biofuel standard for 2011 at 6.0 million ethanol-equivalent
gallons of cellulosic biofuel. This number represents the volume of
RIN-generating cellulosic biofuel that we believe can be made available
for use as transportation fuel, heating oil, or jet fuel in 2011. It
incorporates some reductions from the annual production capacity of
each facility based on when fuel production can begin and assumptions
regarding a ramp-up period to full production. We believe that a
production volume of 6.0 mill gal is attainable despite the
uncertainties, since none of the possible impediments to attaining this
volume appear insurmountable. Moreover, by setting the standard for
cellulosic biofuel based on the volumes that are attainable, we are
providing greater incentives for producers to overcome uncertainties
and greater opportunities for funding based on an established demand.
There are also a variety of factors that could lead to production
volumes greater than those listed in Table II.A.4-1 and make up for
potential shortfalls elsewhere. For instance:
For each of the facilities listed, with the exception of
KiOR, we are projecting that their production will be some
[[Page 76798]]
volume less than the capacity of their facility. It is possible,
however, that these companies could produce a greater volume of fuel
than they are currently anticipating or has been projected by EPA.
It is possible that companies that are currently targeting
2012 for commercial production may produce cellulosic biofuel ahead of
schedule and generate RINs in 2011. None of this volume was included in
our projection for 2011.
A high demand for cellulosic biofuels may be sufficient to
cause companies to import fuel into the United States, even if they
currently have no plans to do so. As described in Section II.A.2 above,
there are several foreign producers that are either producing
cellulosic biofuel now, or could potentially produce some cellulosic
biofuel volume in 2011.
Finally, we note that if the actual volume of cellulosic biofuel
RINs that are available in 2011 falls short of the 6.0 million gallon
RINs used to derive the 2011 cellulosic biofuel standard, obligated
parties have other recourses:
Purchase cellulosic biofuel waiver credits from the EPA
(see further discussion in Section VI.A).
Carry over a deficit from 2011 into 2012 according to
Sec. 80.1427(b).
5. Projections of Cellulosic Biofuel for 2012
In addition to the companies discussed above, EPA also assessed the
production capabilities of many other companies to determine their
ability to produce cellulosic ethanol in 2011. Many of these companies
had at some point planned to produce cellulosic ethanol at commercial
scale by 2011, but due to a variety of factors have had their plans
delayed. Despite these delays, the outlook for 2012 and later years
still looks promising.
Although the cellulosic biofuel standard we are setting for 2011 is
considerably below the applicable volumes established in EISA, EPA
believes there is reason for optimism when looking at the plans for the
cellulosic biofuel industry in 2012 and beyond. EPA is currently aware
of more than 20 facilities representing over 300 million gallons of
production that are targeting commercial production of cellulosic
biofuels in 2012. Many companies, including Abengoa, AE Biofuels,
BlueFire Ethanol, Coskata, Fulcrum, POET, and Vercipia, are intending
to begin bringing large scale facilities online, with physical
capacities of between 10 and 100 million gallons of cellulosic biofuel
per year. There is also hope within the industry that as these first-
of-a-kind technologies prove commercially viable that new financing
opportunities will open up for both new facilities and facility
expansion alike. This could lead to rapid growth in the cellulosic
biofuel industry as many companies, in addition to those mentioned
above, have announced project plans that have been put on hold until
funding or project partners can be found.
B. Advanced Biofuel and Total Renewable Fuel
Under CAA 211(o)(7)(D)(i), EPA has the discretion to reduce the
applicable volumes of advanced biofuel and total renewable fuel in the
event that the projected volume of cellulosic biofuel production is
determined to be below the applicable volume specified in the statute.
As described in Section II.A above, we are indeed projecting the volume
of cellulosic biofuel production for 2011 at significantly below the
statutory applicable volume of 250 million gallons. Therefore, we must
consider whether and to what degree to lower the advanced biofuel and
total renewable fuel applicable volumes for 2011.
As described in the NPRM, because cellulosic biofuel is used to
satisfy both the cellulosic biofuel standard and the advanced biofuel
standard, it is possible that a required volume of cellulosic biofuel
for a given year that is less than the volume specified in the statute
could lead to a situation where there is insufficient volume of
advanced biofuels to satisfy the applicable volume of advanced biofuel
volume set forth in the statute. However, it is also possible that
other advanced biofuels, such biomass-based diesel, sugarcane ethanol,
or other biofuels, may be available in sufficient volumes to make up
for the shortfall in cellulosic biofuel. We believe that it would be
consistent with the energy security and greenhouse gas reduction goals
of EISA to use the applicable volume of advanced biofuel set forth in
the statute to derive the advanced biofuel standard if there are
sufficient volumes of advanced biofuels available, even if those
volumes do not include the amount of cellulosic biofuel that Congress
may have desired.
If we were to maintain the advanced biofuel, biomass-based diesel,
and total renewable fuel volume requirements at the levels specified in
the statute, while also lowering the cellulosic biofuel standard to 6.0
million gallons, then 1,206 million gallons of the 1,350 million gallon
advanced biofuel mandate would be satisfied automatically through the
satisfaction of the cellulosic and biomass based diesel standards. An
additional 144 million ethanol-equivalent gallons of additional
advanced biofuels would be needed. See Table II.B-1.
Table II.B-1--Projected Fuel Mix if Only Cellulosic Biofuel Volume is
Adjusted in 2011
[mill gallons]
------------------------------------------------------------------------
Ethanol-
equivalent Physical volume
volume
------------------------------------------------------------------------
Total renewable fuel................. 13,950 13,500-13,549
Conventional renewable fuel a........ 12,600 12,600
Total advanced biofuel............... 1,350 903-951
Cellulosic biofuel................... 6.0 6.6
Biomass-based diesel................. 1,200 800
Other advanced biofuel b............. 144 c 96-144
------------------------------------------------------------------------
a Predominantly corn-starch ethanol.
b Rounded to nearest million gallons for simplicity.
c Physical volume is a range because other advanced biofuel may be
ethanol, biodiesel, or some combination of the two.
The most likely sources of additional advanced biofuel would be
imported sugarcane ethanol and biodiesel. To determine if there are
likely to be sufficient volumes of these biofuels to meet the need for
144 million gallons of other advanced biofuel, we examined historical
data on ethanol imports and EIA projections for 2011. For instance, as
shown in Table II.B-2 below, recent annual import volumes of ethanol
were
[[Page 76799]]
higher than what would be needed in 2011.
Table II.B-2--Historical Imports of Ethanol (mill gallons) \5\
------------------------------------------------------------------------
------------------------------------------------------------------------
2007....................................................... 439
2008....................................................... 530
2009....................................................... 194
------------------------------------------------------------------------
Brazilian imports have made up a sizeable portion of total ethanol
imported into the U.S. in the past, and these volumes were
predominantly produced from sugarcane. These historical import volumes
demonstrate that Brazil has significant export potential under the
appropriate economic circumstances. However, as shown above, ethanol
import volumes decreased significantly in 2009. Moreover, they have
dropped to nearly zero in the first half of 2010 according to EIA's
Short Term Energy Outlook. Some have speculated that this decline in
imports is related to the cessation of the duty drawback that became
effective on October 1, 2008, and to changes in world sugar prices.\6\
However, Brazil is second worldwide in the production of ethanol,
reaching about 6.5 billion gallons in 2008.\7\ Thus, by establishing an
increased U.S. demand for 144 million gallons of other advanced biofuel
in 2011, we believe it may once again be economical for Brazilian
producers to export at least this volume of sugarcane ethanol to the
U.S. Moreover, California's Low Carbon Fuel Standard goes into effect
in 2011, and may compel some refiners to import additional volumes of
sugarcane ethanol from Brazil into California. These same volumes could
count towards the federal RFS2 program as well.
---------------------------------------------------------------------------
\5\ ``Monthly U.S. Imports of Fuel Ethanol,'' EIA, released 4/8/
2010.
\6\ Lundell, Drake, ``Brazilian Ethanol Export Surge to End;
U.S. Customs Loophole Closed Oct. 1,'' Ethanol and Biodiesel News,
Issue 45, November 4, 2008.
\7\ Renewable Fuels Association (RFA), ``2008 World Fuel Ethanol
Production,'' http://www.ethanolrfa.org/pages/statistics#E, March
31, 2009.
---------------------------------------------------------------------------
We also examined the potential for excess biodiesel to help meet
the need for 144 million gallons of advanced biofuel. The applicable
volume of biomass-based diesel established in the statute for 2011 is
800 million gallons (which corresponds to 1,200 ethanol equivalent
gallons). As discussed more fully in Section II.C below, we believe
that the biodiesel industry has the potential for producing significant
volumes above 800 million gallons if demand for such volume exists.
Finally, there are also other potential sources of advanced
biofuels that could contribute to compliance with the advanced biofuels
standard in 2011, such as diesel fuel additives made from waste cooking
oil or restaurant grease. Given all of these potential sources, we
believe that there are likely to be sufficient volumes of advanced
biofuels such that the advanced biofuel standard need not be lowered
below the 1.35 billion gallon level specified in the Act. Thus, we are
not reducing the applicable volume of advanced biofuel for 2011.
If we were reducing the applicable volume of advanced biofuel for
2011, it would follow that there could be a shortfall of RINs capable
of satisfying the general renewable fuel volume requirements. However,
we are not doing so, and thus there is no need to lower the applicable
volume of total renewable fuel below the statutory volume of 13.95
billion gallons.
In response to the NPRM, biodiesel producers, advanced biofuel
producers, and UNICA (representing importers of sugarcane ethanol)
supported our proposal to maintain the applicable volume of advanced
biofuel at 1.35 bill gallons for 2011. They generally agreed that there
exists sufficient potential sources of advanced biofuel to make up for
the reduction of the applicable volume of cellulosic biofuel for 2011,
and that the very existence of a demand for this volume will lead these
sources to provide sufficient volume to meet that demand. Other
commenters, such as refiners and proponents of corn-ethanol, opposed
our proposal for leaving the 2011 applicable volume of advanced biofuel
at 1.35 bill gallons on the grounds that other sources of advanced
biofuel sufficient to make up for the reduction in the applicable
volume of cellulosic biofuel were too uncertain.
We disagree with the suggestion that volumes of other advanced
biofuels are too uncertain and that the applicable volume of advanced
biofuel should be lowered. As described above, we believe that there
are sufficient potential sources of other advanced biofuel to make up
for the reduction in the applicable volume of cellulosic biofuel.
Moreover, our authority to lower the advanced biofuel and/or total
renewable fuel applicable volumes is discretionary, and we believe that
actions to lower these volumes should only be taken if it appears that
insufficient volumes of qualifying biofuel can be made available, based
on such circumstances as insufficient production capacity, insufficient
feedstocks, competing markets, constrained infrastructure, or the like.
Since this is not the case for 2011, we do not believe that the
advanced biofuel applicable volume of 1.35 bill gallons or the total
renewable fuel applicable volume of 13.95 billion gallons should be
reduced.
Although refiners and proponents of corn-ethanol agreed on the
treatment of advanced biofuel for 2011, they differed in their views of
how the total renewable fuel standard should be treated. Refiners
stated that the advanced biofuel standard and the total renewable fuel
standard should be lowered in concert and by the same amount.
Proponents of corn-ethanol, on the other hand, stated that the total
renewable fuel standard of 13.95 bill gal should be maintained while
the advanced biofuel standard should be lowered to reflect the
projected shortfall. They argued that excess volumes of corn-ethanol
were more certain than excess volumes of advanced biofuel, and that
their suggested approach would effectively result in a demand for corn-
ethanol above 12.6 billion gallons (see Table II.B-1). They further
argued that this approach would generate more GHG reductions than if
the advanced biofuel and total renewable fuel standards were lowered in
concert. One commenter explicitly opposed any changes to the advanced
biofuel and total renewable fuel standards that would increase the
demand for corn-ethanol under RFS2 above 12.6 billion gallons (see
Table II.B-1).
We agree that there is sufficient corn-ethanol production capacity
and feedstocks to produce more than 12.6 bill gallons in 2011. Indeed
EIA projects that corn-ethanol production in 2010 will exceed 13
billion gallons.\8\ However, as described above, we disagree with the
suggestion that there is insufficient volume of advanced biofuels to
justify maintaining the advanced biofuel applicable volume at the level
specified in the statute. Moreover, since there is no need to waive any
portion of the advanced biofuel applicable volume, there is likewise no
need to consider the possibility of corn ethanol making up for a
shortfall in advanced biofuel volumes. As a result, the demand for corn
ethanol will not be greater as a result of today's action than it would
be if all applicable volumes as specified in the statute were used in
deriving the 2011 standards.
---------------------------------------------------------------------------
\8\ EIA STEO, September 2010, Table 8.
---------------------------------------------------------------------------
C. Biomass-Based Diesel
While the statutory requirement that we project volumes of
cellulosic biofuel for next year does not explicitly apply to biomass-
based diesel, we must, as
[[Page 76800]]
discussed above, determine whether the required volumes of advanced
biofuel and/or total renewable fuel should be reduced at the same time
that we reduce the required volume of cellulosic biofuel. The amount of
biomass-based diesel that we project can be available directly affects
our consideration of adjustments to the volumetric requirements for
advanced biofuel and total renewable fuel discussed above in Section
II.B.
Although there are a variety of potential fuel types that can
qualify as biomass-based diesel, biodiesel is by far the predominant
type. To project biodiesel production volumes for 2011, we examined
historical and recent production and export rates as well as the
production potential of the industry. As shown in Table II.C-1,
domestic production of biodiesel in 2007-2009 has ranged from 490 to
678 million gallons.
Table II.C-1--Historical Biodiesel Production, Net Exports, and Consumption (Million Gallons)
[Source: EIA Monthly Energy Review, August 2010]
----------------------------------------------------------------------------------------------------------------
Domestic Domestic
production Net exports consumption
----------------------------------------------------------------------------------------------------------------
2007............................................................ 490 132 358
2008............................................................ 678 362 316
2009............................................................ 505 189 315
----------------------------------------------------------------------------------------------------------------
The variations in production and net exports appear to be
correlated to availability of the U.S. tax subsidy that was effective
from 2004 to 2009, ``splash-and-dash'' activities, and European Union
(EU) action to impose duties on exported U.S. biodiesel. In splash-and-
dash, biodiesel producers took advantage of the U.S. tax credit for
biodiesel even though the biodiesel was not consumed in the U.S.,
instead exporting the biodiesel to Europe. As can be seen in Figure
II.C-1, the EU took action beginning in March 2009 to apply duties/
tariffs to biodiesel from the U.S. Exports of biodiesel from the U.S.,
as well as domestic production volumes, immediately fell following this
EU action. Production also fell following the expiration of the
biodiesel tax credit at the end of 2009.
[[Page 76801]]
[GRAPHIC] [TIFF OMITTED] TR09DE10.000
Although biodiesel production appears to have been significantly
affected by both the EU tariff on biodiesel from the U.S. and the
expiration of the biodiesel tax credit, the fact that the U.S.
biodiesel industry has produced higher volumes when it was economic for
it to do so suggests that the industry may have the capability to
produce greater volumes in the future under the appropriate
circumstances. According to information from the biodiesel industry,
only 52 biodiesel facilities with a production capacity totalling 600
million gallons have been idled. The total biodiesel production
capacity at facilities that are still
[[Page 76802]]
operating is 2.4 billion gallons.\9\ Ramping up production will require
some time and potentially some reinvestment, but based on feedback from
industry we nevertheless believe that it can occur in time to meet a
production goal of 800 million gallons.
---------------------------------------------------------------------------
\9\ Plant List from Biodiesel Magazine (http://www.biodieselmagazine.com/plant-list.jsp.)
---------------------------------------------------------------------------
In response to the NPRM, some commenters suggested that the 2011
volume requirement for biomass-based diesel should be lowered because
the biodiesel industry is expected to produce insufficient volumes in
2010 to meet the 2009/2010 biomass-based diesel standard based on an
applicable volume of 1.15 billion gallons. This, they argued,
demonstrates that the biodiesel industry cannot be expected to meet
demand of 800 million gallons in 2011. However, for the first five
months of 2010, the average production rate was about 32 million
gallons per month.\10\ If this production rate continued through the
rest of 2010, the total annual production of biodiesel would be
approximately 380 million gallons. As described in EPA's Question and
Answer document,\11\ EPA estimated that the 1.15 bill gal standard for
biomass-based diesel in 2010 would generate a demand for about 345 mill
gallons of qualifying biodiesel and renewable diesel in 2010. The
remaining portion of the 1.15 bill gal standard would be met with
previous-year RINs. Thus, an annual production volume of 380 million
gallons should be sufficient to enable obligated parties to meet the
2010 biomass-based diesel standard if exports are kept to a minimum. In
fact net exports of biodiesel have gone down every year since 2008, due
in part to fewer cost-effective opportunities for sale of biodiesel in
Europe.
---------------------------------------------------------------------------
\10\ EIA Monthly Energy Review for August 2010, Table 10.4.
\11\ See question 6.7 in EPA's ``Questions and Answers on
Changes to the Renewable Fuel Standard Program (RFS2)'', http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-aq.htm#6.
---------------------------------------------------------------------------
Moreover, we do not believe that the activities of the biodiesel
industry in 2009 and 2010 are necessarily an appropriate indicator of
its potential for 2011. A regulatory mandate for biomass-based diesel
did not exist in 2009, and the mandate for biomass-based diesel in 2010
was a unique circumstance that allowed a significant number of 2008 and
2009 biodiesel RINs to be used for compliance in 2010. Current
biodiesel production rates actually suggest that the industry is
positioned to put idled capacity into production when demand for
greater volumes exist. For instance, despite the expiration of the
biodiesel tax credit at the end of 2009, monthly domestic consumption
of biodiesel was actually higher in the first 5 months of 2010 than it
was during the same period in 2009. One possible reason for this is
that 2010 was the first year that the biomass-based diesel standard was
in effect. Moreover, for the three years prior to 2010, the monthly
average production in the second half of the year was higher than in
the first half of the year. Thus, although the annual production total
for 2010 would be projected to be 380 mill gal based on monthly
production rates between January and May, it could be 500 million
gallons or more by year's end if production rates increase in the
second half of the year as they have done in the past. An increase in
monthly biodiesel production rates later in 2010 would also be
consistent with the fact that obligated parties are not required to
demonstrate compliance with the 2010 biomass-based diesel standard
until February 28, 2011. Thus, the presence of a requirement for
biomass-based diesel in 2010 seems to be providing the incentive for
greater consumption of biodiesel, which in turn is encouraging higher
production volumes.
In addition to current production rates, the biodiesel industry's
production potential also supports a finding that it can more than
satisfy the applicable volume of biomass based diesel specified in the
statute for 2011. In July of 2010, over 1.8 billion gallons of
production capacity had been registered under the RFS2 program.\12\ As
of September 2010, the aggregate production capacity of biodiesel
plants in the U.S. was estimated at 2.6 billion gallons per year across
approximately 170 facilities.\13\ Indications from the biodiesel
industry are that idled facilities can be brought back into production
with a relatively short leadtime. Imports of biodiesel from foreign
countries also has the potential to increase the volume available for
consumption in the U.S.
---------------------------------------------------------------------------
\12\ Comments from National Biodiesel Board on the July 20, 2010
NPRM. Submitted to docket EPA-HQ-OAR-2010-0133 on August 19, 2010.
\13\ Figures taken from National Biodiesel Board's Member Plant
List as of September 13, 2010. http://biodiesel.org/buyingbiodiesel/plants/showall.aspx.
---------------------------------------------------------------------------
Finally, we believe that there will be sufficient sources of
qualifying renewable biomass to more than meet the needs of the
biodiesel industry in 2011. The largest sources of feedstock for
biodiesel in 2011 are expected to be soy oil, canola oil, rendered
fats, and potentially some corn oil extracted during production of fuel
ethanol, as this technology continues to proliferate. Moreover,
comments we received from a large rendering company after the May 2009
RFS2 proposed rule suggest that there will be adequate fats and greases
feedstocks to supply biofuels production as well as other historical
uses.\14\
---------------------------------------------------------------------------
\14\ See Federal Register v.74 n.99 p.24903. Comments are
available in docket EPA-HQ-OAR-2005-0161.
---------------------------------------------------------------------------
In order to meet a 2011 biomass-based diesel volume requirement of
800 million gallons to be consumed in the United States, approximately
725 million gal of biodiesel would need to be consumed. This value
accounts for the production of 75 million gallons of renewable diesel
at one renewable diesel facility in Geismar, Louisiana, set to begin
operations by 2011.\15\ Assuming net exports continue at a rate
equivalent to that in the first five months of 2010, biodiesel
production in the U.S. would need to total approximately 835 million
gal in 2011. Based on the modeling used by EIA to project volumes for
its Short-Term Energy Outlook, EIA projects that the 800 mill gallon
mandate would be binding, and that this level of consumption would be
unlikely to occur in the absence of a mandate. However, the biodiesel
industry has demonstrated that it is capable of meeting historic demand
for biodiesel, and is in a position to produce significantly more than
it has in recent years.
---------------------------------------------------------------------------
\15\ Project status updates are available via the Syntroleum Web
site, http://dynamicfuelsllc.com/wp-news/.
---------------------------------------------------------------------------
Based on our review of current biodiesel production rates, the
production potential of the biodiesel industry, and the availability of
qualifying feedstocks, we believe that substantially more than the 800
million gallons needed to satisfy the biomass based diesel standard can
be produced in 2011. Today's rule therefore includes a final biomass-
based diesel standard that, as proposed, is based on the 800 million
gallon applicable volume specified in the Act. We also believe that the
excess production capacity can be utilized to help satisfy the 2011
advanced biofuel standard we are finalizing today.
In response to the NPRM, several parties supported our proposal to
set the 2011 standard based on the 800 million gallon applicable volume
specified in the Act. One party requested that we raise the biomass-
based diesel standard for 2011 above the 800 million gallon statutory
mandate based on the significantly higher production capacity in the
industry. However, the statute specifies the applicable volumes of
biomass based diesel that we are to use
[[Page 76803]]
in setting the annual standards through 2012. We do not have the
authority to raise the applicable volume above the level specified in
the statute for 2011.
Another commenter requested that the standard for biomass-based
diesel should be tied to the biodiesel tax credit and projections of
likely consumption in 2011 assuming no mandate. We disagree. Demand for
biomass-based diesel will be a function of the RFS standard we set for
2011. The authority provided under CAA 211(o)(7)(A) to waive any
portion of the statutory biomass-based diesel volume mandate is limited
to cases in which we determine that the mandate would severely harm the
economy or environment, or that there is inadequate domestic supply.
Under CAA 211(o)(7)(E) we may also order a reduction in required use of
biomass based diesel if we find that there is a significant renewable
feedstock disruption or other market circumstances that would make the
price of biomass-based diesel fuel increase significantly. No commenter
has suggested that any of these conditions exist. The expiration of the
biodiesel tax credit is, by itself, an insufficient basis for a waiver,
and we do not have the authority to waive a portion of the standard
based on projections of what demand would be in the absence of a
mandate.
III. Percentage Standards for 2011
A. Background
The renewable fuel standards are expressed as a volume percentage,
and are used by each obligated party to determine their renewable
volume obligations (RVO). Since there are four separate standards under
the RFS2 program, there are likewise four separate RVOs applicable to
each obligated party. Each standard applies to the sum of all gasoline
and diesel produced or imported. The applicable percentage standards
are set so that if each regulated party meets the percentages, then the
amount of renewable fuel, cellulosic biofuel, biomass-based diesel, and
advanced biofuel used will meet the volumes required on a nationwide
basis.
As discussed in Section II.A.4, the cellulosic biofuel volume
requirement for 2011 is 6.6 million gallons (6.0 million ethanol
equivalent gallons). This volume is used as the basis for setting the
percentage standard for cellulosic biofuel for 2011. We have also
decided that the advanced biofuel and total renewable fuel volumes will
not be reduced below the volumes set forth in the statute. The 2011
volumes used to determine the four percentage standards are shown in
Table III.A-1.
Table III.A-1--Volume Requirements for 2011
----------------------------------------------------------------------------------------------------------------
Actual volume Ethanol equivalent volume
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel....................... 6.6 mill gal................ 6.0 mill gal.
Biomass-based diesel..................... 0.80 bill gal............... 1.20 bill gal.
Advanced biofuel......................... 1.35 bill gal............... 1.35 bill gal.
Renewable fuel........................... 13.95 bill gal.............. 13.95 bill gal.
----------------------------------------------------------------------------------------------------------------
B. Calculation of Standards
1. How Are the Standards Calculated?
The following formulas are used to calculate the four percentage
standards applicable to producers and importers of gasoline and diesel
(see Sec. 80.1405):
[GRAPHIC] [TIFF OMITTED] TR09DE10.001
[[Page 76804]]
Where:
StdCB,i = The cellulosic biofuel standard for year i, in
percent.
StdBBD,i = The biomass-based diesel standard (ethanol-
equivalent basis) for year i, in percent.
StdAB,i = The advanced biofuel standard for year i, in
percent.
StdRF,i = The renewable fuel standard for year i, in
percent.
RFVCB,i = Annual volume of cellulosic biofuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
RFVBBD,i = Annual volume of biomass-based diesel required
by section 211(o) of the Clean Air Act for year i, in gallons.
RFVAB,i = Annual volume of advanced biofuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
RFVRF,i = Annual volume of renewable fuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
Di = Amount of diesel projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
RGi = Amount of renewable fuel blended into gasoline that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
RDi = Amount of renewable fuel blended into diesel that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
GSi = Amount of gasoline projected to be used in Alaska
or a U.S. territory in year i if the state or territory opts-in, in
gallons.
RGSi = Amount of renewable fuel blended into gasoline
that is projected to be consumed in Alaska or a U.S. territory in
year i if the state or territory opts-in, in gallons.
DSi = Amount of diesel projected to be used in Alaska or
a U.S. territory in year i if the state or territory opts-in, in
gallons.
RDSi = Amount of renewable fuel blended into diesel that
is projected to be consumed in Alaska or a U.S. territory in year i
if the state or territory opts-in, in gallons.
GEi = The amount of gasoline projected to be produced by
exempt small refineries and small refiners in year i, in gallons, in
any year they are exempt per Sec. Sec. 80.1441 and 80.1442,
respectively. For 2011, this value is zero. See further discussion
in Section III.B.2 below.
DEi = The amount of diesel projected to be produced by
exempt small refineries and small refiners in year i, in gallons, in
any year they are exempt per Sec. Sec. 80.1441 and 80.1442,
respectively. For 2011, this value is zero. See further discussion
in Section III.B.2 below.
The four separate renewable fuel standards for 2011 are based in
part on the 49-state gasoline and diesel consumption volumes projected
by EIA. The projected volumes of gasoline, ethanol, and biodiesel used
to calculate the final percentage standards are provided by the EIA's
Short-Term Energy Outlook (STEO), while the projected volume of
transportation diesel used to calculate the final percentage standards
is provided by the most recent Annual Energy Outlook (AEO). In the
proposal, we used the March 2010 issue of STEO and the Early Release
version of AEO2010. For this final rule, we have used the volumes of
transportation fuel provided by EIA under CAA 211(o)(3)(A) in a letter
dated October 20, 2010.\16\ This letter aggregates volume projections
from several EIA sources including the most recently available versions
of STEO and AEO. Gasoline and diesel volumes are adjusted in the
formulas to account for renewable fuel contained in the STEO and AEO
projections. Beginning in 2011, gasoline and diesel volumes produced by
small refineries and small refiners will generally no longer be exempt,
and thus there is no adjustment to the gasoline and diesel volumes in
today's final rule to account for such an exemption. However, as
discussed more fully in Section III.B.2 below, depending upon the
results of a Congressionally-mandated DOE study, it is possible that
the exemption for some small refineries could be extended. In addition,
we may extend the exemption for individual small refineries on a case-
by-case basis if they demonstrate disproportionate economic hardship.
If any small refinery exemptions for 2011 are approved after this final
rulemaking, the parties in question would be exempt but we would not
intend to modify the applicable percentage standards and announce new
standards for 2011. EPA believes the Act is best interpreted to require
issuance of a single annual standard in November that is applicable in
the following calendar year, thereby providing advance notice and
certainty to obligated parties regarding their regulatory requirements.
Periodic revisions to the standards to reflect waivers issued to small
refineries or refiners would be inconsistent with the statutory text,
and would introduce an undesirable level of uncertainty for obligated
parties.
---------------------------------------------------------------------------
\16\ Letter from Richard Newell, EIA Administrator to Lisa
Jackson, EPA Administrator.
---------------------------------------------------------------------------
As described in the March 26, 2010 RFS2 final rule, the standards
are expressed in terms of energy-equivalent gallons of renewable fuel,
with the cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the biomass-based diesel
standard based on biodiesel equivalence. However, all RIN generation is
based on ethanol-equivalence. More specifically, the RFS2 regulations
provide that production or import of a gallon of biodiesel will lead to
the generation of 1.5 RINs. In order to ensure that demand for 0.8
billion physical gallons of biomass-based diesel will be created in
2011, the calculation of the biomass-based diesel standard provides
that the required volume be multiplied by 1.5 under the assumption that
biodiesel will predominate the biomass-based diesel market. The net
result is that a physical gallon of biodiesel will be worth 1.0 gallons
toward the biomass-based diesel standard, but worth 1.5 gallons toward
the other standards.
The levels of the percentage standards would be reduced if Alaska
or a U.S. territory chooses to participate in the RFS2 program, as
gasoline and diesel produced in or imported into that state or
territory would then be subject to the standard. Neither Alaska nor any
U.S. territory has chosen to participate in the RFS2 program at this
time, and thus the value of the related terms in the calculation of the
standards is zero.
Note that the equation's terms for projected volumes of gasoline
and diesel use include gasoline and diesel that has been blended with
renewable fuel. In the equation, the total renewable fuel volume is
subtracted from the total gasoline and diesel volume to get total non-
renewable gasoline and diesel volumes (because the gasoline and diesel
volumes provided by EIA include renewable fuel use), The values of the
equation variables for 2011 are shown in Table III.B.1-1.\17\ Terms not
included in this table have a value of zero.
---------------------------------------------------------------------------
\17\ To determine the 49-state values for gasoline and diesel,
the amounts of these fuels used in Alaska is subtracted from the
totals provided by DOE. The Alaska fractions are determined from the
most recent (2008) EIA State Energy Data, Transportation Sector
Energy Consumption Estimates. The gasoline and distillate fuel oil
fractions are approximately 0.2% and 0.7%, respectively. Ethanol use
in Alaska is estimated at 5% of its gasoline consumption (based on
the same State data), and biodiesel use is assumed to be zero.
Table III.B.1-1--Values for Terms in Calculation of the Standards (Bill
Gal)
------------------------------------------------------------------------
Term Value
------------------------------------------------------------------------
RFVCB,2011................................................... 0.006
RFVBBD,2011.................................................. 0.80
RFVAB,2011................................................... 1.35
RFVRF,2011................................................... 13.95
G2011........................................................ 139.07
D2011........................................................ 49.21
RG2011....................................................... 13.45
RD2011....................................................... 0.71
------------------------------------------------------------------------
Using the volumes shown in Table III.B.1-1, we have calculated the
percentage standards for 2011 as shown in Table III.B.1-2.
[[Page 76805]]
Table III.B.1-2--Percentage Standards for 2011
------------------------------------------------------------------------
Percent
------------------------------------------------------------------------
Cellulosic biofuel........................................... 0.003
Biomass-based diesel......................................... 0.69
Advanced biofuel............................................. 0.78
Renewable fuel............................................... 8.01
------------------------------------------------------------------------
2. Small Refineries and Small Refiners
In CAA section 211(o)(9), enacted as part of EPAct, Congress
provided a temporary exemption to small refineries (those refineries
with a crude throughput of no more than 75,000 barrels of crude per
day) through December 31, 2010. In RFS1, we exercised our discretion
under section 211(o)(3)(B) and extended this temporary exemption to the
few remaining small refiners that met the Small Business
Administration's (SBA) definition of a small business (1,500 employees
or less company-wide) but did not meet the statutory small refinery
definition as noted above. Because EISA did not alter the small
refinery exemption in any way, the RFS2 program regulations exempt
gasoline and diesel produced by small refineries and small refiners in
2010 from the renewable fuels standard (unless the exemption was
waived). See 40 CFR Sec. 80.1441.
Under the RFS program, Congress has provided two ways that small
refineries can receive an extension of the temporary exemption beyond
2010. One is based on the results of a study conducted by the
Department of Energy (DOE) to determine if small refineries would face
a disproportionate economic hardship under the RFS program. The other
is based on EPA evaluation of claims of disproportionate economic
hardship, the DOE study, and other economic factors on a case-by-case
basis in response to small refinery petitions.
In January 2009, DOE issued a Small Refineries Exemption Study
which did not find that small refineries would face a disproportionate
economic hardship under the RFS program. The conclusions were based in
part on the expected robust availability of RINs; DOE further noted
that, if the RIN market were to change, individual refineries still
have a statutory right to apply for relief on a case-by-case basis.
Subsequently, the Senate Appropriations Committee ``directed [DOE] to
reopen and reassess the Small Refineries Exemption Study by June 30,
2010,'' listing a number of factors that the Committee intended DOE to
consider in the revised study. The Final Conference Report to the
Energy & Water Development Appropriations Act added that the conferees
``support the study requested by the Senate on RFS and expect the
Department to undertake the requested economic review.'' DOE was
directed to complete a reassessment and issue a revised report by June
30, 2010. A revised study had not been issued at the time of the RFS2
final rulemaking, or at the time of this writing.
We have received three petitions from small refineries requesting
an extension of their exemption from the RFS2 requirements. In
evaluating these petitions, EISA requires that EPA ``* * * consider the
findings of the [DOE] study * * * and other economic factors.''
Although the DOE study issued in January 2009 would satisfy the
statutory requirement that we consider the DOE study before acting, we
believe that our evaluation of these three petitions will be better
informed if we consider the findings of the forthcoming revised DOE
study. Since the revised study is not yet available, we have assumed
that all small refineries and small refiners will be subject to the
RFS2 standards in 2011 for the purposes of calculating those standards.
If, subsequent to announcing the 2011 standards, we make a
determination that one or more hardship petitions should be approved,
we do not intend to revise the 2011 standards applicable to other
obligated parties to require that they make up for volumes that will
not be attained by the exempt refineries.
We received only three comments on the treatment of small
refineries in the RFS2 program, and all supported the inclusion of
small refineries and small refiners as obligated parties beginning in
2011. API additionally requested that any consideration of extending
the exemption for any small refinery into 2011 also take into account
the impact that such an action would have on other refineries,
specifically with regard to the ethanol blendwall. However, we do not
believe that the extension of any small refinery exemptions into 2011
will have a significant impact on the ethanol blendwall. Since the
total volume of renewable fuel required under RFS2 is the same
regardless of whether any small refineries are exempt or not, such
exemptions will have no impact on the relative volumes of ethanol and
gasoline in the nationwide transportation fuels market. Thus, the
timing of the onset of the nationwide blendwall will not be affected by
any small refinery exemptions. We do recognize that any exemption for a
small refinery will result in a proportionally higher percentage
standard for remaining obligated parties, and that this will affect the
degree to which individual obligated parties can acquire sufficient
RINs for compliance through blending ethanol into gasoline that they
produce. This may be of particular concern to obligated parties whose
gasoline production volume is higher than the volume of gasoline that
they market, since such parties may have fewer opportunities to blend
renewable fuels into their own gasoline and diesel. In such cases,
obligated parties also have the option of marketing E85 for use in
FFVs, extending their operations to include more gasoline marketing, or
purchasing RINs on the open market.
IV. Cellulosic Biofuel Technology Assessment
In projecting the volumes of cellulosic biofuel for 2011, we
conducted a technical assessment of the production technologies that
are under consideration by the broad universe of companies we
investigated. Many of these companies are still in the research phase,
resolving outstanding issues with specific technologies, and/or in the
design phase to implement those technologies for the production of
commercial-scale volumes of cellulosic biofuel. A subset of the
companies we investigated have moved beyond the research and design
phase and are actively preparing for production. This smaller group of
companies formed the basis for our projection of potential 2011 volumes
of cellulosic biofuel.
This section discusses the full range of cellulosic biofuel
technologies being considered among producers, with reference to those
individual companies that are focusing on each technology and those we
project will be most likely to use those technologies to produce
cellulosic biofuel in 2011.
A. What pathways are currently valid for the production of cellulosic
biofuel?
In determining the appropriate volume of cellulosic biofuel on
which to base the percentage standard for 2011, it is important to
consider the ability of the biofuel to generate cellulosic RINs under
the RFS2 program. As of this writing, there are three valid pathways
available as shown in Table IV.A-1 below.
[[Page 76806]]
Table IV.A-1--Cellulosic Biofuel Pathways for Use in Generating RINs
----------------------------------------------------------------------------------------------------------------
Production process
Fuel type Feedstock requirements D-Code
----------------------------------------------------------------------------------------------------------------
Ethanol.......................... Cellulosic Biomass from crop Any................ 3 (cellulosic
residue, slash, pre-commercial biofuel).
thinnings and tree residue, annual
covercrops, switchgrass, and
miscanthus; cellulosic components
of separated yard waste;
cellulosic components of separated
food waste; and cellulosic
components of separated MSW.
Cellulosic Diesel, Jet Fuel and Cellulosic Biomass from crop Any................ 7 (cellulosic
Heating Oil. residue, slash, pre-commercial diesel).
thinnings and tree residue, annual
covercrops, switchgrass, and
miscanthus; cellulosic components
of separated yard waste;
cellulosic components of separated
food waste; and cellulosic
components of separated MSW.
Cellulosic Naphtha............... Cellulosic Biomass from crop Fischer-Tropsch 3 (cellulosic
residue, slash, pre-commercial process. biofuel).
thinnings and tree residue, annual
covercrops, switchgrass, and
miscanthus; cellulosic components
of separated yard waste;
cellulosic components of separated
food waste; and cellulosic
components of separated MSW.
----------------------------------------------------------------------------------------------------------------
Of the five facilities that we currently believe could contribute
to the volume of commercially available cellulosic biofuel in 2011,
four would produce alcohols from cellulosic biomass and one would
produce diesel from cellulosic biomass. None of the facilities we have
evaluated would produce cellulosic naphtha through a Fischer-Tropsch
process. In 2011 the primary biofuel Range fuels has indicated will be
produced from their facility is methanol. While there is currently no
pathway for cellulosic methanol to generate RINs, Range has engaged EPA
in discussion regarding the addition of a pathway for cellulosic
methanol.
Two of the facilities shown in Table II.A.4-1, KL Energy and Range
Fuels, intend to use wood as the primary feedstock. The only types of
wood that are currently allowed as a valid feedstock are those derived
from various types of waste. If either of these two companies choose to
use trees from a tree plantation instead of qualifying waste wood, its
pathway would not fall into the any of the pathways currently listed in
Table 1 to Sec. 80.1426. However, as described more fully in Section
V.A, we are currently evaluating the lifecycle GHG impacts of biofuel
made from pulpwood, including wood from tree plantations. If such a
pathway is determined to meet the 60% GHG threshold required for
cellulosic biofuel, it will be added to Table 1 to Sec. 80.1426 and
producers can then make use of it to generate cellulosic RINs.
As described in Section II.A, Range Fuels will begin making
predominantly methanol, and no approved pathway currently exists under
the RFS program to generate RINs for methanol. However, Range has been
in discussions with EPA concerning a petition under Sec. 80.1416 for
the generation of RINs for methanol made from woody biomass as well as
the generation of cellulosic RINs for the portion of biodiesel made
from cellulosic methanol. These pathways are similar to pathways we
have modeled in the past. For the purposes of projecting cellulosic
volumes for 2011, we believe that the methanol from Range Fuels has the
potential for being approved for generation of cellulosic RINs and is
therefore appropriate for being included in the volumes that we believe
are potentially attainable in 2011.
B. Cellulosic Feedstocks
Cellulosic biofuel technologies are different from other biofuel
technologies because they convert the cellulose and other very
difficult to convert compounds into biofuels. Unlike grain feedstocks
where the major carbohydrate is starch (very simply combined sugars),
lignocellulosic biomass is composed mainly of cellulose (40-60%) and
hemicellulose (20-40%).\18\ Cellulose and hemicellulose are made up of
sugars linked together in long chains called polysaccharides. Once
hydrolyzed, they can be fermented into ethanol. The remainder of
cellulosic feedstocks consists primarily of lignin, a complex polymer
which serves as a stiffening and hydrophobic (water-repelling) agent in
cell walls. Currently, lignin cannot be fermented into ethanol, but
could be burned as a by-product to generate electricity.
Thermochemical, pyrolysis and depolymerization processing, however, can
convert some or even most of the lignin, in addition to the cellulosic
and hemicellulose, into biofuels.
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\18\ DOE. ``Biomass Program: ABC's of Biofuels''. Accessed at:
http://www1.eere.energy.gov/biomass/abcs_biofuels.html#content.
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C. Emerging Technologies
When evaluating the array of biofuel technologies which could
produce one or more fuels from cellulosic feedstocks that could qualify
under RFS2, we found that it is helpful to organize them into fuel
technology categories. Organizing them into categories eases the task
of understanding the technologies, and also simplifies our evaluation
of these technologies because similar technologies likely have similar
cost and lifecycle impacts. The simplest organization is by the fuel
produced. However, we frequently found that additional subdivisions
were also helpful. Table IV.C-1 provides a list of technologies, the
fuels produced, and a list of many of the companies which we learned
are pursuing the technology (or something very similar to the
technology listed in the category). EPA is currently tracking the
progress of more than 100 cellulosic biofuel projects, many of which
are not listed in the following table. The inclusion of a specific
company in the table or technical discussion that follows should not be
interpreted as an endorsement of the listed company. The cellulosic
biofuel industry continues to progress at a rapid pace and many
companies not listed in this assessment may still produce significant
volumes of cellulosic fuel in future years.
[[Page 76807]]
Table IV.C-1--List of Technology Categories, the Fuels Produced Through Each Type of Technology, and the
Companies Pursuing Them
----------------------------------------------------------------------------------------------------------------
Technology category Technology Fuels produced Companies
----------------------------------------------------------------------------------------------------------------
Biochemical................... Enzymatic Hydrolysis.. Ethanol............... Abengoa, AE Fuels, DuPont
Danisco, Florida Crystals,
Gevo, Poet, ICM, Iogen, BPI,
Energy, Fiberight, KL Energy.
Acid Hydrolysis....... Ethanol............... Agresti, Arkenol, Blue Fire,
Pencor, Pangen, Raven Biofuels.
Dilute Acid, Steam Ethanol............... Verenium, BP, Central Minnesota
Explosion of Ethanol Coop.
Cellulose.
Consolidated Ethanol............... Mascoma, Qteros.
Bioprocessing (one
step hydrolysis and
fermentation) of
Cellulose.
Conversion of Ethanol, Gasoline, Jet Terrabon, Swift Fuels.
Cellulose via Fuel, Diesel Fuel.
carboxylic acid.
One step Conversion of Diesel, Jet Fuel or Bell Bioenergy, LS9.
Cellulose to Naphtha.
distillate.
Thermochemical................ Thermochemical/Fischer Diesel Fuel and Choren, Flambeau River Biofuels,
Tropsch. Naphtha. Baard, Clearfuels, Gulf Coast
Energy, Rentech, TRI, Nature's
Fuel.
Thermochemical/Fischer DME................... Chemrec, New Page.
Tropsch.
Thermochemical/ Ethanol............... Range Fuels, Pearson
Catalytic conversion Technologies, Fulcrum
of syngas to alcohols. Bioenergy, Enerkem, and Gulf
Coast Energy.
Hybrid........................ Thermochemical w/ Ethanol............... Coskata, INEOS Bio, Lanzatech.
Biochemical catalyst.
Acid Hydrolysis of Ethanol, Other Zeachem.
cellulose to alcohols.
intermediate;
hydrogenation using
Thermochemical syngas
from non-cellulose
fraction.
Depolymerization.............. Catalytic Diesel, Jet Fuel or Cello Energy, Covanta, Green
Depolymerization of Naphtha. Power.
Cellulose.
Pyrolysis of Cellulose Diesel, Jet Fuel, or Envergent (UOP/Ensyn),
Gasoline. Dynamotive, Petrobras, Univ. of
Mass, KIOR.
Other......................... Catalytic Reforming of Gasoline.............. Virent.
Sugars from Cellulose.
----------------------------------------------------------------------------------------------------------------
Of the technologies listed above, many of them are considered to be
``second generation'' biofuels or new biofuel technologies capable of
meeting either the advanced biofuel or cellulosic biofuel RFS standard.
The following sections describe specific companies and the new biofuel
technologies which the companies have developed or are developing. This
summary is not meant to be a comprehensive list of all new biofuel
technologies, but rather a description of some of the more prominent of
the new biofuel technologies that serve to provide a sense of the
technology categories listed above. The process technology summaries
are based on information provided by the respective companies. EPA has
not been able to confirm all of the information, statements, process
conditions, and the process flow steps necessary for any of these
processes and companies.
1. Biochemical
Biochemical conversion refers to a broad grouping of processes that
use biological organisms to convert cellulosic feedstocks into
biofuels. While no two processes are identical, many of these processes
follow a similar basic pathway to convert cellulosic materials to
biofuel. The general process of most biochemical cellulosic biofuel
processes consists of five main steps: Feedstock handling,
pretreatment, hydrolysis, fermentation/fuel conversion, and
distillation/separation. The feedstock handling step reduces the
particle size of the incoming feedstock and removes any contaminants
that may negatively impact the rest of the process. In the pretreatment
step the structure of the lignin and hemicellulose is disrupted,
usually using some combination of heat, pressure, acid, or base, to
allow for a more effective hydrolysis of the cellulosic material to
simple sugars. In the hydrolysis stage the cellulose and any remaining
hemicellulose is converted into simple sugars, usually using an enzyme
or strong acid. In the fermentation or fuel conversion step, the simple
sugars are converted to the desired fuel by a biological organism. In
the final step the fuel that is produced is separated from the water
and other byproducts by distillation or some other means. A basic
diagram of the biochemical conversion process can be found in Figure
IV.C.1-1 below.
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\19\ Image From: http://www.afdc.energy.gov/afdc/ethanol/production_cellulosic.html.
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[[Page 76809]]
While this diagram shows the production of ethanol from cellulosic
biomass, it is possible to use the same process to produce other fuels
or specialty chemicals using different biological organisms.
The following sections will discuss each of these steps in greater
detail, some of the variations to this general process, and some of the
advantages and disadvantages of the biochemical process of producing
biofuel from cellulosic materials as compared to other fuel production
processes.
Three of the five companies that EPA believes may produce
cellulosic biofuel in 2011 plan to use a biochemical process to produce
biofuels. All three of these companies, Dupont Danisco Cellulosic
Ethanol, Fiberight, and KL energy, all plan to use an enzymatic
hydrolysis. One of the biggest appeals of the biochemical pathway is
the relatively low capital costs of these projects compared to other
cellulosic biofuel facilities. Biochemical projects are also less
dependent on economies of scale for profitability, making smaller and
less capital intensive commercial facilities more feasible.
a. Feedstock Handling
The first step of the biochemical conversion process is to insure
that the biomass stream can be utilized by the rest of the conversion
process. This most often takes the form of size reduction, either by
grinding or chipping as appropriate for the type of biomass. While this
is a relatively simple process it is essential to allow the following
steps of the process to function as designed. It is also a potentially
energy intensive process. It may be possible for biofuel producers to
purchase cellulosic material that is already of the appropriate size,
however we believe that in the near term this is unlikely and most
biofuel producers will have to invest in equipment to reduce the size
of the material they receive as needed for their process. In coming
years, as the market for cellulosic materials expands, purchasing
feedstock that has already been ground or chipped may be possible and
cost effective, as these processes increase the density of this
material and may reduce transportation costs. While this may provide
financial benefits for the cellulosic biofuel producer, it will not
impact the lifecycle green house gas emissions of the process.
In addition to size reduction, steps must also be taken to remove
any material from the feedstock that might be detrimental to the fuel
production process. Contaminants in the feedstock, such as dirt, rocks,
plastics, metals, and other non-biogenic materials, would at best
travel through the fuel production process unchanged, resulting in
reduced fuel production capacity. Depending on the type of contaminant
they may also be converted to undesired byproducts that must be
separated from the fuel. They could also be toxic to the biological
organisms being used to convert the sugars to fuel, necessitating a
shut down and restart of the plant. Any of these scenarios would result
in a significant cost to the fuel producer. Feedstocks such as
agricultural residues, wood chips, or herbaceous or woody energy crops
are likely to contain far fewer contaminants than more heterogeneous
feedstocks such as municipal solid waste (MSW).
b. Biomass Pretreatment
The purpose of the biomass pretreatment stage is to disrupt the
structure of the cellulosic biomass to allow for the hydrolysis of the
cellulose and hemicellulose into simple sugars. The ideal pretreatment
stage would allow for a high conversion of the cellulose and
hemicellulose to simple sugars, minimize the degradation of these
sugars to undesired forms that reduce fuel yields and inhibit
fermentation, not require especially large or expensive reaction
vessels, and be a relatively robust and simple process. No single
biomass pretreatment method has yet been discovered that meets all of
these goals, but rather a variety of options are being used by various
cellulosic fuel producers, each with their own strengths and
weaknesses. Dilute acid pretreatment and alkaline pretreatment are two
methods currently being used that attack the hemicellulose and lignin
portions of the cellulosic biomass respectively. Other methods, such as
steam explosion and ammonia fiber expansion, seek to use high
temperature and pressure, followed by rapid decompression to disrupt
the structure of the cellulosic biomass and allow for a more efficient
hydrolysis of the cellulose and hemicellulose to simple sugars. Each of
these methods is discussed in more detail in a technical memo that has
been added to the docket.\20\ The cost and characteristics of the
cellulosic feedstock being processed is likely to have a significant
impact on the pretreatment process that is used.
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\20\ Wyborny, Lester. ``In-Depth Assessment of Advanced Biofuels
Technologies.'' Memo to the docket, November 17, 2010.
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c. Hydrolysis
In the hydrolysis step the cellulose and any remaining
hemicellulose are converted to simple sugars. There are two main
methods of hydrolysis: acid hydrolysis and enzymatic hydrolysis. Acid
hydrolysis is the oldest technology for the conversion of cellulosic
feedstock to ethanol and can only be used following an acid
pretreatment process. An alternative method is to use a combination of
enzymes to perform the hydrolysis after the biomass has been
pretreated. This process is potentially more effective at hydrolyzing
pretreated biomass but in the past has not been economically feasible
due to the prohibitively high cost of the enzymes. The falling cost of
these enzymes in recent years has made the production of cellulosic
biofuels using enzymatic hydrolysis possible. The lignin is largely
unaffected by the hydrolysis and fuel production steps but is carried
through these processes until it is separated out in the fuel
separation step and burned for process energy or sold as a co-product.
i. Acid Hydrolysis
Acid hydrolysis is a technique that has been used for over 100
years to convert cellulosic feedstocks into fuels. In the acid
hydrolysis process the lignin and cellulose portions of the feedstock
that remain after the hemicellulose has been dissolved, hydrolyzed, and
separated during the dilute acid pretreatment process is treated with a
second acid stream. This second acid treatment uses a less concentrated
acid than the pretreatment stage but at a higher temperature, as high
as 215 [deg]C. This treatment hydrolyzes the cellulose into glucose and
other six-carbon sugars that are then fed to biological organisms to
produce the desired fuel. It is necessary to hydrolyze the
hemicellulose and cellulose in two separate steps to prevent the
conversion of the pentose sugars that result from the hydrolysis of the
hemicellulose from being further converted into furfural and other
chemicals. This would not only reduce the total production of sugars
from the cellulosic feedstock, but also inhibit the production of fuel
from the sugars in later stages of the process.
The acidic solution containing the sugars produced as a result of
the hydrolysis reaction must also be treated so that this stream can be
fed to the biological organisms that will convert these sugars into
fuel. In order to operate an acid hydrolysis process cost effectively
the acid must be recovered, not simply neutralized. Methods currently
being used to recover this acid include membrane separation and
continuous ion exchange. The advantages of using an acid hydrolysis are
that this process is well understood
[[Page 76810]]
and capable of producing high sugar yields from a wide variety of
feedstocks. Capital costs are high however, as materials compatible
with the acidic streams must be extensively utilized. The high
temperatures necessary for acid hydrolysis also result in considerable
energy costs.
ii. Enzymatic Hydrolysis
The enzymatic hydrolysis process uses enzymes, rather than acids,
to hydrolyze the cellulose and any remaining hemicellulose from the
pretreatment process. This process is much more versatile than the acid
hydrolysis and can be used in combination with any of the pretreatment
processes described above, provided that the structure of the
lignocellulosic feedstock has been disrupted enough to allow the
enzymes to easily access the hemicellulose and cellulose. After the
feedstock has gone through pretreatment a cocktail of cellulose enzymes
is added. These enzymes can be produced by the cellulosic biofuel
producer or purchased from enzyme producers such as Novozymes,
Genencor, and others. The exact mixture of enzymes used in the
enzymatic hydrolysis stage can vary greatly depending on which of the
pretreatment stages is used as well as the composition of the
feedstock.
The main advantages of the enzymatic hydrolysis process are a
result of the mild operating conditions. Because no acid is used,
special materials are not required for the reaction vessels. Enzymatic
hydrolysis is carried out at relatively low temperatures, usually
around 50[deg] C, and atmospheric pressure and therefore has low energy
requirements. These conditions also result in less undesired reactions
that would reduce the production of sugars and potentially inhibit fuel
production. Enzymatic hydrolysis works best with a uniform feedstock,
such as agricultural residues or energy crops, where the concentration
and combination of enzymes can be optimized for maximum sugar
production. If the composition of the feedstock varies daily, as can be
the case with fuel producers utilizing MSW or other waste streams, or
even seasonally, it will be more difficult to ensure that the correct
enzyme cocktail is being used to carry out the hydrolysis as
efficiently as possible. The main hurdle to using an enzymatic
hydrolysis has been and continues to be the costs of the enzymes.
Recent advances by companies that produce enzymes for the hydrolysis of
cellulosic materials have resulted in a drastic cost reduction of these
enzymes. If, as many researchers and cellulosic biofuel producers
expect, the cost of these enzymes continues to fall it is likely that
enzymatic hydrolysis will be a lower cost option than acid hydrolysis.
d. Fuel Production
After the cellulosic biomass has been hydrolyzed to simple sugars,
this sugar solution is converted to fuel by biological organisms. In
some biochemical fuel production processes the sugars produced from the
fermentation of the hemicellulose, which are mainly five-carbon sugars,
are converted to fuel in a separate reactor and with a different set of
organisms than the sugars produced from the cellulose hydrolysis, which
are mainly six-carbon sugars. Others processes, however, produce fuel
from the five and six-carbon sugars in the same reaction vessel.
A wide range of biological organisms can be used to convert the
simple sugars into fuel. These include yeasts, bacteria, and other
microbes, some of which are naturally occurring and others that have
been genetically modified. The ideal biological organism converts both
five and six-carbon sugars to fuel with a high efficiency, is able to
tolerate a range of conditions, and is adaptable to process sugar
streams of varying compositions that may result from variations in
feedstock. Many cellulosic biofuel producers have their own proprietary
organism or organisms optimized to produce the desired fuel from their
unique combination of feedstock, pretreatment and hydrolysis processes,
and fuel conversion conditions. Other cellulosic fuel producers license
these organisms from biotechnology companies who specialize in their
discovery and production.
The different biological organisms being considered for cellulosic
biofuel production are capable of producing many different types of
fuels. Most cellulosic biofuel producers are working with organisms
that produce ethanol. In many ways this is the simplest fuel to produce
from lignocellulosic biomass as the production of ethanol from simple
sugars is a well understood process. Others intend to produce butanol
or other alcohols that have higher energy content. Butanol has the
potential to be blended into gasoline in greater concentrations than
ethanol and therefore has a potentially greater market as well as value
due to its higher energy content. Yields for butanol, however, are
currently lower per ton of feedstock than ethanol.
Other cellulosic biofuel producers intend to produce hydrocarbon
fuels very similar to gasoline, diesel, and jet fuel. These fuels
command a higher price than alcohols, have a greater energy density,
and can potentially be blended into conventional gasoline and diesel
for use in any conventional vehicles without strict blending limits.
They could also be transported by existing pipelines and utilize the
same infrastructure as the petroleum industry. Some of the processes
being researched by fuel producers result in a single compound, such as
iso-octane, that would need to be blended into petroleum gasoline in
order to be used as transportation fuel, while others produce a range
of hydrocarbons very similar to those found in gasoline or diesel fuel
refined from petroleum and could potentially be used in conventional
vehicles without blending. The yields of fuel produced by these
organisms through biochemical processes are currently significantly
lower than those processes that produce ethanol and other alcohols.
e. Fuel Separation
In the fuel separation stage the fuel produced is separated from
the water, lignin, any un-reacted hemicellulose and cellulose, and any
other compounds remaining after the fuel production stage. The
complexity of this stage is highly dependent on the type of fuel
produced. For processes producing hydrocarbon fuels this stage can be
as simple as a settling tank, where the hydrocarbons are allowed to
float to the top and are removed. Recovering the ethanol is a much more
difficult task. To recover the ethanol, a distillation process, nearly
identical to that used in the grain ethanol industry, is used. The
ethanol solution is first separated from the solids before being sent
to a distillation column called a beer column. The overheads of the
beer column are fed to a second distillation column, called a rectifier
for further separation. The rectifier produces a stream with an ethanol
content of approximately 96%. A molecular sieve unit is then used to
dehydrate this stream to produce fuel grade ethanol with purity greater
than 99.5%. Gasoline, natural gasoline, or some other approved
denaturant is then added to the ethanol before the fuel is stored.
After the fuel has been recovered the remaining lignin and solids are
dried and either burned on site to provide process heat and electricity
or sold as a byproduct of the fuel production process. The waste water
is either recycled or sent to a water treatment facility.
The distillation of ethanol is a very energy intensive process and
new technologies, such as membrane separation, are being developed that
[[Page 76811]]
could potentially reduce the energy intensity, and thus the cost, of
the ethanol dehydration process.
f. Process Variations
While the process described above outlines the general biochemical
process used by many cellulosic biofuel producers, there are several
prominent variations being pursued. These variations usually seek to
simplify the biochemical fuel production process by combining several
steps into a single step or using other means to reduce the capital or
operating costs of the process. Simultaneous Saccharification and
Fermentation (SSF), Simultaneous Saccharification and Co-Fermentation
(SSCF), Consolidated Bio-Processing (CBP), and Single Step Fuel
Production are all production methods being developed by various
biofuel production companies to combine two or more of the steps
outlined above. These process variations are discussed in more detail
in the aforementioned technical memo to the docket. These modifications
are usually enabled by a proprietary technology or biological organism
that makes these changes possible.
g. Current Status of Biochemical Conversion Technology
The biochemical cellulosic fuel production industry is currently
transitioning from an industry consisting mostly of small scale
research and optimization focused facilities to one capable of
producing fuel at a commercial scale. Companies such as Iogen, DuPont
Danisco Cellulosic Ethanol, Fiberight and KL Energy are just beginning
to market the fuel they are producing at their first small scale
commercial fuel production facilities. Many other facilities, including
some large scale facilities capable of producing tens of millions of
gallons of fuel are planned to come online starting in 2012 and in the
following years.
There are many factors that are likely to continue to drive the
expansion of the cellulosic biofuel industry. The mandates put into
place by the RFS2 program have created a demand for cellulosic
biofuels, and higher crude oil prices can also make cellulosic biofuels
more economically attractive. The biochemical production process also
has several important benefits including relatively low capital costs,
highly selective fuel production, and flexibility in the type of fuel
produced.
While the poor worldwide economy and tight credit markets has had a
negative impact on the biofuel industry as a whole, the cellulosic
biofuel producers utilizing biochemical processes have not been as hard
hit as many others in the industry. This is partially due to the
relatively low capital costs of biochemical production plants as a
result of the relative simplicity and mild operating conditions of
these plants. Several companies have been able to purchase distressed
grain ethanol plants and are in the process of modifying them to
produce cellulosic ethanol, further reducing the capital costs of their
initial facilities. Another advantage that biochemical processes have
over other cellulosic fuel production processes is their high
selectivity in the fuels they produce. Unlike chemical catalysts, which
often produce a range of products and byproducts, biological organisms
often produce a single type of fuel, which leads to very high fuel
production rates per unit of sugar. Finally, there is a potential to
further decrease the production costs of cellulosic biofuels using
biochemical processes. Unlike other production methods such as
gasification which are relatively mature technologies, biochemical
production of fuels from cellulosic feedstock is a young technology.
One of the major costs of the biochemical fuel production processes
currently are the enzymes. Great strides have been made recently in
reducing the cost of these enzymes, and as the price of enzymes
continues to fall so will the operating costs of biochemical fuel
production processes.
h. Path to Commercialization
While there are many promising qualities of the biochemical fuel
production process, we have identified several different aspects of the
process which can be further improved. The pretreatment process can be
improved to speed the conversion of cellulose and hemicellulose to
simple sugars and to minimize the production of other undesired
compounds, especially those that may inhibit the fuel production
process. The ability of the biological fuel production organisms to
process a wide range of both five and six carbon sugars can also be
improved. Both these improvements will increase the fuel yield per ton
of cellulosic feedstock, reducing the operating costs of the process.
Finally, the enzyme production process can be further optimized, which
would lower the price for enzymes and improve the economics of
hydrolyzing cellulose to sugars.
Another opportunity for improvement would be the profitable
utilization of the lignin portion of the cellulosic feedstock. Unlike
some of the other cellulosic biofuel production processes, the
biochemical process does not convert the lignin to fuel. Cellulosic
feedstock can contain up to 40% lignin, depending on the type of
feedstock used, so the effective utilization of this lignin is an
important component of the profitability of the biochemical process.
One option for the use of the lignin is to burn it to provide process
heat and electricity, as well as excess electricity to the grid. While
this would provide value for the lignin, it would require fairly
expensive boilers and turbines that increase the capital cost of the
facility. If the lignin cannot be used as part of the fuel production
process it may be able to be marketed as a solid fuel with high energy
density and low carbon intensity.
These various improvements to cellulosic biofuel plants would make
biochemical processes more cost-competitive with petroleum and other
cellulosic biofuels. For more details on the potential cost impacts of
these improvements, see the aforementioned technical memo which has
been added to the docket of this rule.
2. Thermochemical
Thermochemical conversion involves biomass being broken down into
syngas (primarily CO and H2) using heat and upgraded to
fuels using a combination of heat and pressure in the presence of
catalysts.\21\ For generating the syngas, thermochemical processes
partially oxidize biomass in the presence of a gasifying agent, usually
air, oxygen, and/or steam. It is important to note that these
processing steps are also applicable to other feedstocks (e.g., coal or
natural gas); the only difference is that a renewable feedstock is used
(i.e., biomass) to produce cellulosic biofuel. The cellulosic biofuel
produced can be mixed alcohols, an optimized process to produce only
one alcohol such as ethanol, or it can be diesel fuel and naphtha. A
thermochemical unit can also complement a biochemical processing plant
to enhance the economics of an integrated biorefinery by converting
lignin-rich, non-fermentable material left over from high-starch or
cellulosic feedstocks conversion.\22\ Compared to corn ethanol or
biochemical cellulosic ethanol plants, the use of biomass gasification
may allow for greater flexibility to utilize different biomass
feedstocks at a
[[Page 76812]]
specific plant. Mixed biomass feedstocks may also be used, based on
availability of long-term suppliers, seasonal availability, harvest
cycle, and costs.
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\21\ US. DOE. Technologies: Processing and Conversion. Accessed
at: http://www1.eere.energy.gov/biomass/processing_conversion.html
on October 28, 2008.
\22\ EERE, DOE, Thermochemical Conversion, & Biochemical
Conversion, Biomass Program Thermochemical R&D. http://www1.eere.energy.gov/biomass/thermochemical_conversion.html. http://www1.eere.energy.gov/biomass/biochemical_conversion.html.
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The general steps of the gasification thermochemical process
include: Feedstock handling, gasification, gas cleanup and
conditioning, fuel synthesis, and separation. Refer to Figure IV.C.2-1
for a schematic of the thermochemical cellulosic ethanol production
process through gasification. For greater detail on the thermochemical
mixed-alcohols route, refer to NREL technical documentation.\23\
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\23\ Aden, Andy, Mixed Alcohols from Woody Biomass--2010, 2015,
2022, National Renewable Energy Laboratory (NREL), September 23,
2009.
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[[Page 76813]]
Figure IV.C.2-2 is a block diagram of a biomass to liquids (BTL)
process which produces diesel fuel and naphtha through a thermochemical
process.
[GRAPHIC] [TIFF OMITTED] TR09DE10.004
[[Page 76814]]
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The first step in a thermochemical plant is feedstock size
reduction. The particle size requirement for a thermochemical process
is around 10-mm to 100-mm in diameter.\24\ Once the feed is ground to
the proper size, flue gases from the char combustor and tar reformer
catalyst regenerator dry the feed from the as-received moisture level
of around 30% to 50% moisture to the level required by the gasifier.
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\24\ Lin Wei, Graduate Research Assistant, Lester O. Pordesimo,
Assistant Professor Willam D. Batchelor, Professor, Department of
Agricultural and Biological Engineering, Mississippi State
University, MS 39762, USA, Ethanol Production from Wood: Comparison
of Hydrolysis Fermentation and Gasification Biosynthesis, Paper
Number: 076036, Written for presentation at the 2007 ASABE Annual
International Meeting. Minneapolis Convention Center, Minneapolis,
MN, 17-20 June 2007.
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The dried, ground feedstock is fed to a gasification reactor for
producing syngas. There are two general classes of gasifiers: Partial
oxidation (POX) and indirect gasifiers. Partial oxidation
gasifiers (directly-heated gasifiers) use the exothermic reaction
between oxygen and organics to provide the heat necessary to
devolatilize biomass and to convert residual carbon-rich chars.
Indirect gasifiers use steam to accomplish gasification through heat
transfer from a hot solid or through a heat transfer surface. Either
the byproduct char and/or a portion of the product gas can be combusted
with air (external to the gasifier itself) to provide the energy
required for gasification. The raw syngas produced from either type of
gasifier has a low to medium energy content which consists mainly of
CO, H2, CO2, H2O, N2, and
hydrocarbons.
Once the biomass is gasified and converted to syngas, the syngas
must be cleaned and conditioned, as minor components of tars, sulfur,
nitrogen oxides, alkali metals, and particulates have the potential to
negatively affect the syngas conversion steps. Therefore, unwanted
impurities are removed in a gas cleanup step and the gas composition is
further modified during gas conditioning. Because this step is a
necessary part of the thermochemical process, thermochemical plants are
good candidates for processing municipal solid waste (MSW) which may
contain a significant amount of toxic material. Gas conditioning steps
include sulfur polishing to remove trace levels of H2S and a
water-gas shift reaction to adjust the final H2/CO ratio for
optimized fuel synthesis.
After cleanup and conditioning, the ``clean'' syngas is comprised
of essentially CO and H2. The syngas is then converted into
a liquid fuel by a catalytic process. The fuel producer has the choice
of producing diesel fuel or alcohols from syngas by optimizing the type
of catalyst used and the H2/CO ratio. Diesel fuel has
historically been the primary focus of such processes by using a
Fischer Tropsch reactor, as it produces a high quality distillate
product.
A carefully integrated conventional steam cycle produces process
heat and electricity (excess electricity is exported). Pre-heaters,
steam generators, and super-heaters generate steam that drives turbines
on compressors and electrical generators. The heat balance around a
thermochemical unit or thermochemical combined unit must be carefully
designed and tuned in order to avoid unnecessary heat losses.\25\ These
facilities greatly increase the thermal efficiency of these plants, but
they add to the very high capital costs of these technologies.
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\25\ S. Phillips, A. Aden, J. Jechura, and D. Dayton, National
Renewable Energy Laboratory, Golden, Colorado 80401-3393, T.
Eggeman, Neoterics International, Inc., Thermochemical Ethanol via
Indirect Gasification and Mixed Alcohol Synthesis of Lignocellulosic
Biomass, Technical Report, NREL/TP-510-41168, April 2007.
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a. Ethanol Based on a Thermochemical Platform
Conceptual designs and techno-economic models have been developed
for ethanol production via mixed alcohol synthesis using catalytic
processes. The proposed mixed alcohol process produces a mixture of
ethanol along with higher normal alcohols (e.g., n-propanol, n-butanol,
and n-pentanol). The by-product higher normal alcohols have value as
commodity chemicals and fuel additives.
The liquid from the low-pressure separator is dehydrated in vapor-
phase molecular sieves, producing the dehydrated mixed alcohol feed
into a methanol/ethanol overhead stream and a mixed, higher molecular
weight alcohol bottom stream. The overhead stream is further separated
into a methanol stream and an ethanol stream.
Two companies which are pursuing ethanol based on a thermochemical
route are Range Fuels and Enerkem. Range Fuels completed construction
of their first commercial facility in Soperton, Georgia in the first
quarter of 2010 and began the production of cellulosic biofuel in the
third quarter of 2010. In the first phase of operation. Range will use
wood chips as a feedstock but they also plan to investigate the
possibility of using other non-food biomass. In its initial phase, the
Range plant is expected to produce up to 4 million gallons per year of
primarily methanol as well as a small quantity of ethanol which they
intend to sell into the transportation fuel market. After the company
is confident in its operations, Range will begin efforts to expand the
plant and add additional reaction capacity to increase production of
ethanol and other alcohols.
Enerkem is pursuing cellulosic ethanol production via the
thermochemical route. The Canadian-based company was recently announced
as a recipient of a $50 million grant from DOE to build a woody
biomass-to-ethanol plant in Pontotoc, MS. The U.S. plant is not
scheduled to come online until 2012, but Enerkem's 1.3 MGY
demonstration plant in Westbury, Quebec is currently operational.
According to the company, plant construction in Westbury started in
October 2007 and it began producing syngas in late 2009. After the
successful testing of the syngas unit, Enerkem added methanol
production capabilities and began producing methanol in 2010. The last
step for the Westbury plant will be for Enerkem to add a reactor to
convert the methanol to ethanol and other higher order alcohols. While
it is unclear at this time whether any cellulosic ethanol will be
produced in 2011, Enerkem has informed EPA that they do not intend to
export any cellulosic fuel to the United States. If Enerkem does export
some of its cellulosic biofuel to the U.S., however, it could be used
to help to enable refiners meet the 2011 cellulosic biofuel standard.
b. Diesel and Naphtha Production Based on a Thermochemical Platform
The cleaned and water-shifted syngas is sent to the Fischer Tropsch
(FT) reactor where the carbon monoxide and hydrogen are reacted over a
catalyst. Current FT catalysts include iron-based catalysts and cobalt-
based catalysts. The FT reactor creates a syncrude, which is a variety
of hydrocarbons that boil over a wide distillation range (a mix of
heavy and light hydrocarbons) which are separated into various
components based on their vapor pressure. The primary products
resulting from this separation are liquid petroleum gas (LPG), naphtha,
distillate, and wax fractions. The heavier compounds are hydrocracked
to maximize the production of diesel fuel. Conversely, the naphtha
material is very low in octane; thus, it would either have to be
upgraded, blended down with high octane blendstocks (i.e., ethanol), or
upgraded to a higher octane blendstock to have much value for use in
gasoline.
Choren is a European company which is pursuing a thermochemical
[[Page 76815]]
technology for producing diesel fuel and naphtha. The principal aspect
of Choren's process is their patented three-stage gasification reactor
which includes low temperature gasification, high temperature
gasification, and endothermic entrained bed gasification. Choren
designed its gasification reactor with three stages to more fully
convert the feedstock to syngas. Choren will be building a commercial
plant in Freiberg/Saxony, Germany that is expected to be operational in
2011 or 2012. Initially, the plant will use biomass from nearby
forests, the wood-processing industry, and straw from farmland.
Although any fuel produced in 2011 by its Freiberg/Saxony plant and
marketed commercially would most likely be used in Europe, it is
possible that some of that fuel could be exported to the U.S. Choren is
also planning to build a commercial thermochemical/biomass-to-liquids
(BTL) plant in the U.S. after their Freiberg/Saxony plant is
operational in Germany.
Baard Energy is a U.S. company which plans on utilizing a
thermochemical technology for producing diesel fuel and naphtha. Baard,
however, plans on primarily combusting coal and cofiring biomass with
the coal. Cofiring the biomass with the coal will make their first
plant more like the coal-to-liquids plants which are operating today,
which may help to convince investors that this technology is already
tested. Baard's coal and biomass-to-liquids plant is not expected to be
operational until at least 2012.
One challenge for the companies pursing the thermochemical route is
the significant capital costs associated with these technologies. The
capital costs are very high because there are two significant reactors
required for each plant--the gasification reactor and the syngas-to-
fuel reactor. Additionally, the syngas must be cleaned to protect the
catalysts used in the downstream syngas-to-fuel reactor which requires
additional capital costs. However, because of this cleaning step, this
technology is a very good candidate for processing MSW which may
contain toxic compounds. When considering the cost savings for not
having to pay the tipping fees at municipal dumping grounds, MSW
feedstocks may avoid almost all the purchase costs for MSW feedstocks
which would significantly help offset the high capital costs.
3. Hybrid Thermochemical/Biochemical Processes
Hybrid technologies include process elements involving both the
gasification stage of a typical thermochemical process, as well as the
fermentation stage of a typical biochemical process and therefore
cannot be placed easily into either category. For more specific
information regarding either biochemical processes or thermochemical,
please see Sections IV.C.1 and IV.C.2 respectively. Currently, there
are several strategies for the production of ethanol through hybrid
processes. These strategies are differentiated by the order in which
the thermochemical and biochemical steps take place within the process,
as well as how the intermediate products from each step are used.
While we do not expect significant commercial production from
hybrid processes in 2011, there are several companies pursing this
approach for the future. Examples of the first process strategy,
described in Section IV.C.3.a below, include both INEOS Bio and
Coskata. As of December 4, 2009 INEOS Bio (along with partner New
Planet Energy) has been selected for a $50MM DOE grant for the
construction of an 8 MGPY plant in River County, Florida. This plant is
projected to finish construction in late 2011. Coskata is currently
running a 40,000 gallon per year pilot plant that became operational in
2009 in Madison, Pennsylvania. Coskata is targeting to design and build
a 50 MGPY commercial plant that it expects to be operational in 2012. A
company currently pursuing the second process strategy, described in
Section IV.C.3.b below, is Zeachem Inc. Zeachem is currently
constructing a 250 KGPY demonstration plant in Boardman, Oregon. They
have received a $25MM DOE grant and expect to have a full commercial
production facility operational in 2013.
a. Biochemical Step Following Thermochemical Step
One hybrid strategy involves the gasification of all feedstock
material to syngas before being processed into ethanol using a
biochemical fermenter. After gasification, the syngas stream is cooled
and bubbled into a fermenter containing modified microorganisms,
usually bacteria or yeast. This fermenter replaces the typical
catalysts found after gasification in a traditional thermochemical
process. Unlike traditional fermentation (which break down C5 and C6
sugars), these microorganisms are engineered to convert the carbon
monoxide and hydrogen contained in the syngas stream directly into
ethanol. After fermentation, the effluent water/ethanol stream from the
fermenter is separated similarly to a biochemical process, usually
using a combination of distillation and molecular sieves. The separated
water can then be recycled back into the fermentation stage of the
process. Typical yields of ethanol are predicted to be in the 100-120
gallon per ton range.
Since gasification converts all carbonaceous feedstock material to
a uniform syngas before fermentation, there is a higher flexibility of
feedstock choices than if these materials were to be fermented
directly. In addition, processing incoming feedstock with gasification
does not require the addition of enzymes or acid hydrolysis necessary
in a biochemical process to aid in the breakdown of cellulosic
materials. Fermenting syngas also captures all available carbon
contained in the feedstock, including lignin that would not be
processed in a typical biochemical fermentation. However, more energy
is lost as waste heat as well as secondary carbon dioxide production in
the gasification process than would be lost for biochemical feedstock
preparation. Using a fermenter in a hybrid process replaces the
catalyst needed in a typical thermochemical process. These
microorganisms allow for a higher variation of the incoming syngas
stream properties, avoid the necessity of a water-shift reaction
preceding traditional catalytic conversion, and are able to operate at
lower temperatures and pressures than those required for a catalytic
conversion to ethanol. Microorganisms, unlike a catalyst, are also
self-sustaining and do not require periodic replacement. They are;
however, susceptible to bacterial and viral infections which requires
periodic cleaning of the fermentation reactors.
b. Concurrent Biochemical and Thermochemical Steps
Another hybrid production strategy involves gasification of the
typically unfermentable feedstock fraction (lignin) concurrently with a
typical fermentation step for the cellulose and hemicellulose fraction.
These steps are subsequently combined in a hydrogenation reaction of
the lignin-based syngas with the product of the fermented stream. The
feedstock first undergoes acid hydrolysis to break down the cellulose
and hemicellulose. Before fermentation, the unfermentable portion of
feedstock (lignin, ash and other residue) is fractioned and sent to a
gasifier. Concurrently, the hydrolyzed cellulose and hemicellulose is
fermented using an acetogen microorganism. These acetogens occur
naturally, and therefore do not have to be modified for this process.
These acetogens convert both five-carbon and six-carbon sugars from the
hydrolized
[[Page 76816]]
feedstock to acetic acid. This reaction creates no carbon dioxide,
unlike traditional fermentation using yeast, preserving the maximum
amount of carbon for the finished fuel. The acetic acid stream then
undergoes esterification to create ethyl acetate. Meanwhile, the syngas
stream from the gasification of lignin and other residue is separated
into its carbon monoxide and hydrogen components. The carbon monoxide
stream can be further combusted to provide process heat or energy. The
hydrogen stream is combined with the ethyl acetate in a hydrolysis
reaction to form ethanol. Acetic acid and ethyl acetate also form the
precursors to many other chemical compounds and therefore may be sold
in addition to ethanol or further converted to other compounds for sale
in the chemicals market. Typical yields for this technology are
predicted in the 130-150 gallon per ton range.
4. Pyrolysis and Depolymerization
Pyrolysis and depolymerization are technologies which are capable
of creating biofuels from cellulose by either thermally or
catalytically breaking them down into molecules which fall within the
boiling range of transportation fuels. Pyrolysis technologies are
usually thought of as being primarily a thermal technology, however,
newer pyrolysis technologies are being developed which are attempting
to integrate the use of some catalysts. These are all unique processes,
typically with single companies developing the technologies, so they
are discussed separately below.
a. Pyrolysis Diesel Fuel and Gasoline
Pyrolysis oils, or bio-oils, are produced by thermally cracking
cellulosic biomass at lower temperatures than the gasification process,
thus producing a liquid instead of a synthesis gas.\26\ The reaction
can occur either with or without the use of catalysts, but it occurs
without any additional oxygen being present. The resulting oil which is
produced must have particulates and ash removed in filtration to create
a homogenous ``dirty'' crude oil type of product. This dirty crude oil
must be further upgraded to hydrocarbon fuels via hydrotreating and
hydrocracking processing, which reduces its total oxygen content and
cracks the heaviest of the hydrocarbon compounds. While one of the
finished fuels produced by the pyrolysis process is diesel fuel, a
significant amount of gasoline would likely be produced as well. There
are two main reaction pathways currently being explored: A two step
pyrolysis pathway, and a one step pyrolysis pathway.
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\26\ DOE EERE Biomass Program. ``Thermochemical Conversion
Processes: Pyrolysis'' http://www1.eere.energy.gov/biomass/thermochemical_processes.html, November 6, 2008.
---------------------------------------------------------------------------
The simplest technology used for the two-step pyrolysis approach is
called fast pyrolysis. The fast pyrolysis technology uses sand in a
fluidized bed to transform bio-fuels into bio-oil. This is purely a
thermal process, where the sand's (or other solid's) role is to
transfer heat to the biomass. For two reasons, the bio-oils from fast
pyrolysis technologies must be upgraded. First, fast pyrolysis oil is
unstable, acidic, viscous and may separate itself into two phases so it
must be immediately upgraded or it will begin to degrade and
repolymerize. The second issue is that pyrolysis bio-oil must be
upgraded or it won't meet transportation fuel specifications.
Another approach to fast pyrolysis being pursued by several
companies would be to substitute a catalyst in place of sand and the
catalyst would be able to stabilize the resulting bio-oil in addition
to helping depolymerize the biomass to liquids. Although the resulting
bio-oil is stable, it still has to be upgraded into a transportation
fuel, since it would still have a high level of oxygenated compounds.
The National Renewable Energy Laboratory (NREL) is working on a
``hot filtration'' technology that is intended to stabilize bio-oil
created using the fast pyrolysis process for a very long period of time
(years). This would allow the bio-oil to be stored and transported to
an upgrading facility without significant degradation.
It may be possible to use a sophisticated catalyst (instead of
sand) in a single step pyrolysis reaction to create pyrolysis oils that
exhibit much improved bio-oil properties. The catalysts would not only
be able to help depolymerize cellulosic feedstocks, but they produce a
bio-oil which could possibly be used directly as transportation fuel.
Thus, a second upgrading step may not be necessary. The difficulty
encountered by this technology is that catalysts which have been used
in the one step process are relatively expensive and they degrade
quickly due to the metals which are present in the biomass. Development
work on the two-step and one-step pyrolysis processes is ongoing.
Dynamotive Energy Systems Corporation is a Canadian company which
uses fast pyrolysis to convert dry waste biomass and energy crops into
different products including bio-oil. The bio-oil produced is polar due
to its high oxygen content and it contains up to 25% water which is
intimately mixed and does not easily separate into another phase with
time. Since the bio-oil contains significant amounts of both oxygen and
water, it is not directly useable as fuel in conventional vehicles and
would have to be converted via another catalytic conversion processing
step. The additional catalytic step envisioned by Dynamotive to upgrade
the bio-oil into a transportation fuel would combust the material into
a synthesis gas which would then be converted into diesel fuel or bio-
methanol via a catalytic reaction (the BTL process). The diesel fuel
produced is expected to be compatible with existing petroleum diesel
fuels.
Dynamotive has two small demonstration plants. One demonstration
plant is located in Guelph, Ontario, Canada and its capacity is 66,000
dry tons of biomass a year with an energy output equivalent to 130,000
barrels of oil. The other demonstration plant is located in West Lorne
Ontario, Canada. Dynamotive continues to work on a technology for
converting its bio-oil to transportation fuels, although they have not
announced plans for building such a facility due to funding limits.
While Dynamotive is expected to continue to sell its fuel into the
chemicals market, it would be possible for Dynamotive to set up an
agreement with a refining company which could upgrade its bio-oil to a
2 fuel oil or diesel fuel using existing refinery hardware so
that the fuel would qualify under the RFS2 program and contribute to
meeting the 2011 cellulosic biofuel standard.
Envergent is a company formed through a joint venture between
Honeywell's UOP and the Ensyn Corporation. Although Ensyn has been
using fast pyrolysis for more than a decade to produce specialty
chemicals, UOP is relying on its decades of experience developing
refining technologies to convert the pyrolysis oils into transportation
fuels. Envergent is also working with U.S. National laboratories to
further their technology. Based on their current technology and
depending on the feedstock processed, about 70% of the feedstock is
converted into liquid products. The gasoline range products produced
are high in octane, while the diesel fuel products are low in cetane.
Envergen estimates that if it was able to procure cellulosic feedstocks
at $70 per ton, their technology would be competitive with 2
fuel oil produced from crude oil priced at about $40 per barrel.
Envergent is licensing this technology as well as working with a U.S.
oil company
[[Page 76817]]
to test out this technology in a commercial setting in the U.S.
Petrobras is a Brazilian oil company also working to develop a
pyrolysis technology. Because of Petrobas' work in this area (and other
areas on biofuels), a Memorandum of Understanding was signed by United
States' Secretary of State and Brazil's External Relations Minister on
March 9, 2007 to advance the cooperation on biofuels. A second
Memorandum of Understanding was signed by PETROBRAS and NREL in
September 2008 aimed at collaborating to maximize the benefit of their
respective institutional interests in second generation biofuels.
Petrobras is also negotiating a Cooperation Agreement with NREL to
develop a two step pyrolysis route to produce biofuels from
agricultural wastes such as sugar cane bagasse, wood chips or corn
stover. Petrobras is optimistic that a catalytic pyrolysis technology
can be developed that will produce a stable bio-oil (pyrolysis oil).
Petrobras is also hopeful that a one-step pyrolysis technology can be
developed to convert biomass directly to transportation fuels, but
believes that the two step process may be more economically attractive.
b. Catalytic Depolymerization
There are several companies pursuing catalytic depolymerization
including Covanta, Cello Energy and Green Power.
Covanta is currently operating 45 energy-from-waste facilities
which annually convert 20 million tons of municipal solid waste
materials into 9 million megawatt hours of electricity and 10 billion
pounds of steam, which is sold to a variety of industries. Covanta has
secured license rights to a catalytic depolymerization technology
developed by AlphaKat GmbH. Covanta constructed an AlphaKat
demonstration plant in West Wareham, Massachusetts designed to process
45 tons of waste per day into renewable diesel fuel. If successful, the
total liquid fuel production capacity of this demonstration plant will
be 1 million gallons per year. This plant started up in mid-2010 and
after experimenting with the technology to further understand its
capabilities, Covanta expects to use the liquid distillate fuel
produced from this demonstration plant within its own plant as heating
oil and nonroad diesel fuel.
The Cello-Energy process is also a catalytic depolymerization
technology. At moderate pressure and temperature, the Cello-Energy
process catalytically removes the oxygen and minerals from the
hydrocarbons that comprise finely ground cellulose. This results in a
mixture of short chain (3, 6 and 9 carbon) hydrocarbon compounds. These
short chain hydrocarbon compounds are polymerized to form compounds
that boil in the diesel boiling range, though the process can also be
adjusted to produce gasoline or jet fuel. The resulting diesel fuel
meets the ASTM standards, is in the range of 50 to 55 cetane and
typically contains a very low concentration of sulfur.
The Cello process is reported to be on the order of 82% efficient
at converting the feedstock energy content into the energy content of
the product, which is very high compared to most of today's biochemical
and thermochemical processes which are on the order of 50% efficient or
less. Because of the simplicity of the process, the capital costs are
very low. A 50 million gallon per year plant is claimed to only incur a
total cost of $45 million. Because of its high efficiency in converting
feedstocks into liquid fuel, the production and operating costs are
also estimated to be very low.
In December 2008, Cello completed construction of a 20 million
gallon per year commercial demonstration plant. However, they are still
working to resolve process issues that have arisen upon scaleup from
their pilot plant. However, we are doubtful that Cello will be able to
produce any volume of cellulosic biofuel in 2011 as described more
fully in Section II.
The Green Power process catalytically depolymerizes cellulosic
feedstocks at moderate temperatures into liquid hydrocarbon fuels. The
proposed feedstock is municipal solid waste (MSW) or other waste
material such as animal waste, plastics, agriculture residue, woody
biomass and sewage waste. The feedstock is first ground to a size finer
than 5 mm. The feedstock is placed along with a catalyst, some lime
which serves as a neutralizing agent, and some fuel which provides a
liquid medium, into a reactor and heated to around 350 degrees Celsius.
As described by the company, this technology may fit the description
for catalyzed pyrolysis reactions described above, but we have
categorized this as a separate catalytic depolymerization technology
due to its unique features. In the reactor, the feedstock is
catalytically converted to liquid fuels which primarily fall within the
gasoline and diesel fuel boiling ranges, although these fuels may need
further upgrading. The liquid fuels are separated from any solids which
are present and are distilled into typical fuel streams including
naphtha, diesel fuel, kerosene, and fuel oil. According to publically
available information about this technology, the process reportedly
produces 120 gallons per ton of feedstock introduced into the process.
A light hydrocarbon gas, which is mostly methane, is also produced, but
this gas is expected to be burned in a turbine to generate electricity
and the waste heat would be used for heating the process. Some carbon
dioxide may also be formed and released from the process.
Greenpower completed construction of a demonstration plant located
in Fife, Washington in March of 2008. Greenpower is working on
obtaining additional funding and an air permit through the State of
Washington Environmental Office. While we do not expect that Greenpower
will have its plant operational in 2011, it is possible that
outstanding issues could be resolved to allow this company to produce
renewable fuel that could help refiners comply with the cellulosic
biofuel volume standard for 2011.
5. Catalytic Reforming of Sugars to Gasoline
Virent Biorefining is pursuing a process called ``Bioforming''
which functions similar to the gasoline reforming process used in the
refining industry. Hence, this is a significantly different technology
than the other cellulosic biofuel technologies discussed above. While
refinery-based catalytic reforming technologies raise natural
gasoline's octane value and produces aromatic compounds, Bioforming
reforms biomass-derived sugars into hydrocarbons for blending into
gasoline and diesel fuel. The process operates at moderate temperatures
and pressures. In March of 2010, Virent announced that they had begun
operating a larger pilot plant capable of producing about 30 gallons
per day of high octane naphtha. Commercialization of the Virent process
is expected to occur sometime after 2011.
For this technology to become a cellulosic biofuel technology, it
will be necessary to link this reforming technology with a technology
which breaks cellulose down into starch or sugars. In parallel with its
Bioforming work, Virent is working on a technology to break down
cellulose into sugars upstream of its technology which reforms sugars
to gasoline.
V. Changes to RFS Regulations
EPA proposed two revisions to the general RFS program regulations.
First, we proposed to allow the generation of ``delayed RINs'' for fuel
produced between July 1, 2010 and December 31, 2010 using certain fuel
pathways that were not in Table 1 to Sec. 80.1426 on July
[[Page 76818]]
1, 2010, but which could possibly be added after July 1 if they are
determined to meet the applicable GHG reduction thresholds. Under the
proposal, delayed RINs could be generated only if the pathways were
indeed approved, and only for quantities reflecting fuel produced
between July 1, 2010 and the effective date of a new RIN-generating
pathway. In a previous action, we finalized the provision for delayed
RINs for application only to biodiesel produced from canola oil through
transesterification using natural gas or biomass for process
energy.\27\ In today's action we are modifying the delayed RINs
provision to make it more broadly applicable to other renewable fuel
production pathways.
---------------------------------------------------------------------------
\27\ 75 FR 59622, September 28, 2010.
---------------------------------------------------------------------------
The second program modification that we proposed would establish
procedures and evaluation criteria for petitions requesting EPA
authorization of an aggregate compliance approach to renewable biomass
verification for feedstocks grown in foreign countries, akin to that
applicable to crops and crop residue grown within the U.S. In today's
rule we are finalizing amendments to the RFS regulations to implement
this provision.
A. Delayed RIN Generation for New Pathways
For the March 26, 2010 RFS2 final rule (75 FR 14670), we attempted
to evaluate and model the lifecycle GHG emissions associated with as
many renewable fuel production pathways as possible so that producers
and importers of qualifying renewable fuels could generate RFS2 RINs
beginning on July 1, 2010. However, we were not able to complete the
evaluation of all pathways that we had planned. In the preamble to the
final RFS2 rule we announced our intention to complete the evaluation
of three specific pathways after release of the RFS2 final rule: grain
sorghum ethanol, pulpwood biofuel, and palm oil biodiesel (see Section
V.C of the RFS2 final rule, 75 FR 14796). To this list we later added
biodiesel produced from canola oil as this biofuel was produced under
RFS1 and was also expected to participate in the RFS2 program at the
program's inception.
In the NPRM associated with today's final action, we proposed a new
regulatory provision that could potentially allow RINs to be generated
for fuel produced on or after July 1, 2010 representing these four fuel
pathways even though they were not in Table 1 to Sec. 80.1426 as of
July 1, 2010. Under this proposed provision, RINs could be generated
only if the pathways were indeed approved as valid RIN-generating
pathways, and only for volumes of fuel produced between July 1, 2010
and the effective date of a new RIN-generating pathway added to Table 1
to Sec. 80.1426. Somewhat different procedures were proposed for the
generation of delayed RINs for volumes for which RINs had never been
generated, and those for which RINs with a D code of 6 had been
generated pursuant to Sec. 80.1426(f)(6) by a grandfathered facility.
In a final rule published on September 28, 2010, we finalized
regulatory provisions for these ``delayed RINs'' only for application
to biodiesel produced from canola oil through transesterification using
natural gas or biomass for process energy, since that action added only
this one new pathway to Table 1 to Sec. 80.1426. In that final action
we also discussed many of the comments received in response to the
proposed provision for delayed RINs, our response to relevant comments,
and the resulting modifications we made to the regulatory provisions.
However, we deferred for future consideration one set of comments
related to delayed RINs in the September 28, 2010 final rule which
established a new RIN-generating pathway for biodiesel produced from
canola oil. In response to the NPRM, two commenters requested that the
provision for delayed RINs be made applicable to pathways other than
the four we proposed, such as pathways utilizing camelina and winter
barley. We agree with these commenters that the delayed RINs provision
should not necessarily be limited to fuel produced by grain sorghum
ethanol, pulpwood biofuel, palm oil biodiesel, or canola oil biodiesel
(assuming they are ultimately approved for RIN generation). As the
commenters suggested the same rationale that justifies authorization of
delayed RINs for these pathways could also justify the authorization of
delayed RINs for other pathways that were commercially viable at the
start of the RFS2 program, but which EPA was unable to address in time
for RINs to be generated at the start of the program. Therefore,
today's final rule does not limit the applicability of the delayed RINs
provision to any particular pathways, but does include general
limitations that will ensure that the provision is limited in scope to
address difficulties related to RFS2 program startup. Among other
provisions, in today's rule we are specifying that the delayed RINs
provision is limited to biofuel pathways in use as of July 1, 2010 for
the primary purpose of producing transportation fuel, heating oil, or
jet fuel for commercial sale. We believe that this criterion, among
others discussed below, will properly define those pathways for which
fuel producers should be accorded flexibility in light of EPA's
inability to finalize its assessments in time for RFS2 start-up, and
for which sufficient information likely existed as of July 1, 2010, for
EPA to make lifecycle GHG emissions determinations.
The modified provisions will apply equally to EPA approvals of new
pathways directly in response to petitions submitted pursuant to Sec.
80.1416, and to those pathways that EPA approves through rulemaking.
This could include the three pathways that were identified in the RFS2
final rule (grain sorghum ethanol, pulpwood biofuel, palm oil
biodiesel) if they are determined to meet the GHG thresholds, or any
other biofuel produced from a pathway that was in use as of July 1,
2010 for the primary purpose of producing transportation fuel, heating
oil, or jet fuel for commercial sale. However, since the delayed RINs
provision is intended to address program startup issues, we have
included provisions in this final rule to ensure that the availability
of the provision will be of limited duration and applicability as
described below.
We proposed that delayed RINs would be limited to pathways that are
approved by December 31, 2010. Under the proposal, delayed RINs would
have only been available for volume produced or imported in 2010. Since
we are modifying the delayed RINs provision to make it applicable to
other biofuel pathways in addition to the four we proposed, we believe
it would be appropriate to allow additional time for producers and
importers of biofuels produced as of July 1, 2010 through pathways not
included in Table 1 to Sec. 80.1426 to both satisfy the eligibility
requirements of the delayed RINs provision, and to utilize it.
Accordingly, today's rule makes delayed RINs available for volumes
produced or imported by eligible parties in either 2010 or 2011. If we
approve pathways for sorghum ethanol, pulpwood biofuel, or palm oil
biodiesel in time for delayed 2010 and/or 2011 RINs to be used for RFS2
compliance, we will specifically add those pathways to the delayed RINs
provisions at Sec. 80.1426(g) in our final actions adding those fuel
pathways to Table 1 to Sec. 80.1426. Fuels produced in 2010 or 2010
through other pathways that EPA adds to Table 1 to Sec. 80.1426 or
approves pursuant to Sec. 80.1416 will be eligible for delayed RINs
if:
[[Page 76819]]
(1) EPA finds that the pathway was in use as of July 1, 2010 for
the primary purpose of producing transportation fuel, heating oil, or
jet fuel for commercial sale, and
(2) A complete petition seeking approval of the pathway is
submitted to EPA pursuant to Sec. 80.1416 by January 31, 2011.
These requirements are intended to limit the availability of delayed
RINs to RIN-generating pathways that could have participated in the
RFS2 program at its inception, and for which producers and importers
have taken reasonable and timely measures to seek EPA approval action.
We believe, for example, that parties should not be accorded the
flexibility to issue delayed RINs if they have not actively pursued EPA
approval of their pathways in timely manner pursuant to the petition
process in Sec. 80.1416, and has therefore limited the delayed RINs
provision to those pathways for which complete petitions are submitted
to EPA by January 31, 2011.
The NPRM approach envisioned that all RINs with a D code of 6 that
are retired, and all delayed RINs that are generated, must be
designated as 2010 RINs. However, since we are allowing delayed RINs to
be generated for volumes produced in both 2010 and 2011, we believe
that this requirement would no longer be appropriate. Therefore, we
have modified the delayed RINs provision so that the generation year
associated with delayed RINs must correspond to the year in which the
corresponding volume was produced. Delayed RINs generated to represent
volume produced in 2010 must be designated as 2010 RINs and delayed
RINs generated to represent volume produced in 2011 must be designated
as 2011 RINs. Delayed RINs that are generated as 2010 RINs will be
valid for use in complying with the standards for calendar years 2010
or 2011, according to Sec. 80.1427(a)(6) and under the rollover
restrictions provided at Sec. 80.1427(a)(5). Likewise, delayed RINs
that are generated as 2011 RINs will be valid for use in complying with
the standards for calendar years 2011 or 2012. Since delayed RINs can
only be generated for volumes produced or imported in 2010 or 2011, and
a RIN is only valid for compliance for two compliance years, all
delayed RINs will be invalid for compliance with the requirements of
calendar year 2013 and later.
EPA recognizes that the delayed RINs provision may not provide all
biofuel producers the opportunity to generate RINs for all of their
biofuel produced on and after July 1, 2010 if, for instance, a new RIN-
generating pathway is not approved until after December 31, 2011. EPA
has structured the delayed RINs provision in an attempt to reduce the
impact of EPA's delay on such parties, while maintaining as closely as
possible the relationship of RINs to actual fuel production. Limiting
the delayed RINs provision to qualifying fuel produced in 2010 and 2011
appropriately ties the provision to program start-up, and is consistent
with the 2-year valid life of RINs. Nevertheless, EPA expects that it
will be able to complete its lifecycle assessments of pathways for
which petitions are submitted by January 31, 2010 in time for producers
using such pathways to avail themselves of the delayed RINs provision
as structured in today's final rule.
Today's delayed RIN provision also provides that all requirements
that apply under the RFS2 rules with respect to identifying fuels for
which RINs may be generated, the generation and use of RINs, and
recordkeeping and reporting, also apply in the context of delayed RINs
unless specifically provided otherwise in Sec. 80.1426(g). For
example, the existing recordkeeping provisions will require parties to
maintain documents related to the production and transfer of the
volumes of renewable fuel for which they are generating delayed RINs.
The required records are necessary to document that the volumes of fuel
for which delayed RINs are generated qualify as renewable fuel under
the RFS2 program, e.g., that the fuel was produced using feedstocks
that meet the definition of renewable biomass, and using feedstocks,
process energy, and processes that conform to the applicable pathway in
Table 1 to Sec. 80.1426 or approved pursuant to Sec. 80.1416.
Furthermore, the requirements concerning the transfer of renewable fuel
for which parties are generating delayed RINs is necessary to ensure
that the fuel was, in fact, transferred by the delayed RIN-generating
party.
B. Aggregate Compliance Approach for Renewable Biomass From Foreign
Countries
As part of the NPRM, we proposed new regulatory provisions to
establish procedures for submitting petitions to request EPA
authorization of an aggregate compliance approach to renewable biomass
verification for feedstocks grown in foreign countries,\28\ akin to
that applicable to planted crops and crop residue from existing
agricultural land within the U.S. In the NPRM, we referenced the
preamble discussion in the final RFS2 regulations in which we indicated
that, while we did not have sufficient data at the time to make a
finding that the aggregate compliance approach adopted for
domestically-grown crops and crop residues would be appropriate for
foreign-grown feedstocks, we would consider applying the aggregate
compliance approach for renewable biomass on a country by country basis
if adequate land use data becomes available.
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\28\ 75 FR 42238, 42262, July 20, 2010.
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In the NPRM, EPA proposed a process by which entities might
petition EPA for approval of the aggregate compliance approach for
renewable fuel feedstocks either in a foreign country as a whole or in
a specified geographical area within a country. The proposed
regulations would have allowed petitioners to request authorization of
the aggregate compliance approach for specific feedstocks or for all
planted crops and crop residue, and EPA sought comment on these
options. The proposed regulations also included a general criterion and
a number of considerations that EPA would use in evaluating petitions,
and specified a list of elements that would be required in a petition.
The preamble to the proposed rule included a description of the process
by which EPA proposed to make decisions concerning any petitions
received.
EPA received a number of comments on the proposal and is finalizing
an approach similar to that which was proposed, with some significant
modifications, as described below.
1. Criteria and Considerations
In developing the proposed regulations, EPA relied substantially on
the approach we used to determine that an aggregate compliance approach
was appropriate for planted crops and crop residue from U.S.
agricultural land. EPA is finalizing an approach similar to that which
was proposed and that which was applied to planted crops and crop
residue from U.S. agricultural land. Petition approval for application
of the aggregate compliance approach will be based on a finding by EPA
that such an approach can provide reasonable assurance that planted
crops and crop residue from a given foreign country meet the definition
of renewable biomass and will continue to meet the definition of
renewable biomass, as demonstrated through the submission of credible,
reliable and verifiable data. Based on our experience in making a
comparable finding for U.S.-grown crops and crop residues, we are
finalizing a number of more specific
[[Page 76820]]
factors that EPA will consider when determining whether this finding
should be made, as described below.
Whether there has been a reasonable identification of the
``2007 baseline area of land,'' defined as the total amount of
cropland, pastureland, and land that is equivalent to U.S. Conservation
Reserve Program land in the country in question that was actively
managed or fallow and nonforested on December 19, 2007, taking into
account the definitions of terms such as ``cropland,'' ``pastureland,''
``planted crop,'' and ``crop residue'' included in the final RFS2
regulations.
Whether information on the total amount of cropland,
pastureland, and land that is equivalent to U.S. Conservation Reserve
Program land in the country in question for years preceding and
following calendar year 2007 shows that the 2007 baseline area of land
is not likely to be exceeded in the future.
Whether economic considerations, legal constraints,
historical land use and agricultural practices and other factors show
that it is likely that producers of planted crops and crop residue will
continue to use agricultural land within the 2007 baseline area of land
identified into the future, as opposed to clearing and cultivating land
not included in the 2007 baseline area of land.
Whether there is a reliable method to evaluate on an
annual basis whether the 2007 baseline area of land is being or has
been exceeded.
Whether a credible and reliable entity has been identified
to conduct data gathering and analysis, including annual identification
of the aggregate amount of cropland, pastureland, and land that is
equivalent to U.S. Conservation Reserve Program land, that is needed
for an annual EPA evaluation of the aggregate compliance approach, and
whether the data, analyses, and methodologies are publicly available.
Whether the ministry (or ministries) or department(s) of
the national government with primary expertise in agricultural land use
patterns, practices, data, and statistics of the country in question
supports the petition and have verified in writing the accuracy and
veracity of the information submitted in the petition and agreed to
review and verify the data submitted on an annual basis to facilitate
EPA's annual assessment of the 2007 baseline area of land.
EPA requested comments on the proposed general criteria and
specific considerations for approving the aggregate compliance approach
for non-domestically grown feedstocks. EPA received a number of
comments in support of the proposed general criteria, stating that EPA
has outlined a straightforward, science-based approach that is
necessary to avoid unfairly disadvantaging foreign renewable fuel
producers and to ensure availability of adequate supplies of renewable
fuel. Commenters noted that the establishment of a petition process for
applying the aggregate compliance approach to foreign grown feedstocks
levels the playing field for foreign renewable fuel producers and
ensures that the U.S. government is not posing a barrier to trade
contrary to its WTO obligations. EPA also received comments in
opposition of the proposed petition process that stated that the U.S.
aggregate compliance approach is not sound, and that the data that
would be relied on to establish the aggregate compliance approach for
foreign feedstocks would be even less reliable than that used by EPA to
support its finding for the domestic aggregate compliance approach. EPA
also received comments arguing that the use of foreign feedstocks and
importation of foreign renewable fuels should be disallowed under the
RFS2 program.
EPA believes that the aggregate compliance approach for renewable
biomass is an appropriate tool that, in the right circumstances, can
fully ensure that the EISA renewable biomass requirements are satisfied
while easing the burden on renewable fuel producers and their feedstock
suppliers. The logic for the approach is described in the preamble to
the RFS2 rule. EPA believes that in applying the criteria adopted today
for assessing petitions for application of the aggregate approach to
foreign countries, and considering the factors specified in the rule,
that EPA will be able to properly identify situations where the
aggregate compliance approach can be appropriately applied in foreign
countries. The public will have an opportunity to review petitions, and
to apprise EPA of any concerns regarding the data relied upon, or the
logic and rationale for application of the aggregate compliance
approach to a particular country.
EPA also believes that establishing the aggregate compliance
approach petition process for planted crops and crop residue from
foreign countries is appropriate and fair since the renewable biomass
verification process is currently streamlined for producers using U.S.
planted crops and crop residue, and EPA believes that it should clarify
the process and substantive considerations needed to extend this
streamlined compliance approach to foreign planted crops and crop
residue. The aggregate compliance approach petition process for planted
crops and crop residue from foreign countries is intended to provide
foreign renewable fuel producers with a similar level of streamlining
for qualification of renewable biomass as provided to domestic
producers.
EPA disagrees with the commenter that argues that the use of
foreign feedstocks and importation of foreign fuels should be
disallowed, as nothing in the Clean Air Act (CAA) prevents foreign
products from being used towards meeting the RFS2 requirements.
2. Applicability of the Aggregate Approach
The aggregate compliance approach for domestic agricultural
feedstocks applies to all planted crops and crop residue that could be
used in renewable fuel production from existing agricultural land in
the U.S. EPA solicited comment on whether the rules establishing the
aggregate compliance approach petition process for foreign feedstocks
should allow petitions and EPA approval for a single, or limited
number, of feedstocks, or for a limited geographic area within a
country, or whether we should only allow petitions and EPA approval at
the national level and for all planted crops and crop residue.
The proposed rule spoke generally of ``feedstocks,'' and we
received one comment in support of our proposed approach to allow
petitions to be submitted for specific feedstocks. In particular, the
commenter argued that the reduced regulatory burden on U.S.-grown corn
should be extended to Brazilian-grown sugarcane. We believe that the
rationale underlying the comment is not fully accurate, as the
aggregate compliance approach in the U.S. applies to all planted crops
and crop residue, not just corn. Upon further consideration, EPA
believes that it is highly unlikely that data and analysis could
support application of the aggregate approach to feedstocks other than
crops and crop residue. Furthermore, we believe that the same data and
analysis would be needed to justify application of the aggregate
compliance approach to individual crops as would be needed to justify
its application to all planted crops and crop residue within a given
geographic area. Thus, it would be most efficient, and most consistent
with the current approach in the U.S., to authorize the aggregate
compliance approach for all planted crops and crop residue within a
geographic area at one time, rather than on a crop-by-crop basis. This
approach will simplify the regulations, as it permits EPA to specify
the data,
[[Page 76821]]
analyses and considerations related specifically to supporting the
aggregate compliance approach for those types of feedstock. We have
therefore modified the final rule to specify that petitions and EPA
approval will apply to all planted crops and crop residue from existing
agricultural land in a foreign country.
Several commenters supported the application of the aggregate
compliance approach petition process on a national basis, but not for a
geographical subset of a foreign country. These commenters argued that
applying the process on a national basis is fair because it is
consistent with the U.S. aggregate approach, which was applied on a
national level. Furthermore, the commenters argue that geographical
subsets should not be allowed because doing so would promote ``cherry
picking'' of data by private parties to show that a certain region is
not experiencing conversion of forest and ecologically sensitive lands,
even when on a national level, those lands are decreasing. Commenters
also argue that local governments do not have the enforcement
capability and land management policies that national governments have.
In contrast, one commenter believed that parties should be able to
petition for the aggregate compliance approach to apply to specific
geographical regions within a foreign country, citing data from Brazil
implying that almost all sugarcane is harvested from a certain region
and therefore the aggregate compliance approach could successfully be
applied to that region only.
EPA agrees with those commenters that believe that the aggregate
compliance approach petition process should be allowed only at the
national level. Applying the petition process on the national level is
consistent with the U.S. approach and will therefore harmonize
application of the approach where it has been approved. Moreover, EPA
believes that national-scale land use data is typically the most
reliable and transparent, and can more easily be confirmed by the
national government. Furthermore, national level data most accurately
reflects the broader effects of renewable fuel feedstock production on
land use patterns.
3. Data Sources
To make the aggregate compliance determination for U.S.
agricultural lands, EPA obtained USDA data from three independently
gathered national land use data sources (the Farm Service Agency (FSA)
Crop History Data, the USDA Census of Agriculture (2007), and the
satellite-based USDA Crop Data Layer (CDL)). Please see Section
II.C.4.c.iii of the preamble to the final RFS2 rule (75 FR 14701 (March
26, 2010)) for a more detailed description of the data sources used.
Using these data sources, EPA was able to assess the area of land
(acreage) available in 2007 in the United States for production of
crops and crop residues that meet the CAA definition of renewable
biomass. In the case of a petition to apply the aggregate compliance
approach in a foreign country, when considering the information and
data submitted by the petitioner, EPA proposed and is finalizing a
requirement that data supporting the petition be credible, reliable and
verifiable. EPA will evaluate such information on a case-by-case basis,
but expects that data supporting petitions will be at least as
credible, reliable, and verifiable as the USDA data used to make the
determination for U.S. agricultural land.
EPA noted in the preamble to the proposed rule that when evaluating
whether the data relied on are credible, reliable, and verifiable, EPA
would take into account whether the data is submitted by, generated by,
or approved by the national government of the foreign country in
question, as well as how comprehensive and accurate the data source is.
In the proposal, EPA noted that it is important for the national
government of the country seeking consideration to be involved in the
petitioning and data submittal process, and sought comment on whether
participation by a foreign government should be specifically required.
Commenters generally supported requiring the national government's
involvement in providing and/or verifying the data used in both the
initial petition and in the annual reassessments, but most did not
believe that the national government itself needed to be the
petitioner. EPA agrees that, in order to ensure a robust and credible
data set and analysis, the national government of the country from
which the petition is submitted should be involved in the petition
process and the annual validation, but need not be the party actually
submitting the petition. Thus, in today's final rule, EPA is requiring
that the appropriate ministry or department within the national
government submit a letter confirming that they have reviewed and
verified the petition and the data supporting it, and that the data
support a finding that planted crops and crop residue from the country
meet the definition of renewable biomass and will continue to do so.
Furthermore, EPA is requiring that the responsible national government
ministry or department will review and verify the data submitted on an
annual basis to facilitate EPA's annual evaluation of the 2007 baseline
area of land in that country.
Additionally, EPA indicated in the preamble to the proposed rule
that it intended to take into consideration whether the data is
publically available, whether the data collection and analysis
methodologies and information on the primary data source are available
to EPA, and whether the data has been generated, analyzed, and/or
approved or endorsed by an independent third party. Commenters
generally agreed that data used to support a petition must be publicly
available and transparent. EPA agrees that this is highly preferable,
so EPA will consider this factor in determining whether to grant a
petition. Several commenters suggested that complete transparency
requires the data itself as well as the data analysis conducted and
methodology used by the petitioner to be made available to the public.
EPA agrees that information that is not privileged should be made
publicly available, and will publish petitioners' data sources,
statistical methodologies and analyses in the public rulemaking docket
as part of the public notice and comment process to the extent
permissible by law (see below for a more detailed description of the
public participation process).
EPA also proposed to take into account the quality of the data that
is available on an annual basis for EPA's annual assessments of any
approved aggregate compliance approach, as well as whether the
petitioner has identified an entity who will provide to EPA an analysis
of the data updates each year following EPA's approval of the aggregate
compliance approach for that country. EPA believes that the data and
analyses used for the annual assessments of any approved aggregate
compliance approach must be just as robust and transparent as the data
used to establish the original baseline amount of agricultural land.
Some commenters argue that the national government should be required
to play a role in the ongoing land use tracking. As described above,
EPA believes it is important to have the involvement of the national
government in reviewing the data and analyses for the annual
assessments. Other commenters argue that the annual verification should
be conducted wholly by an independent third party to ensure accuracy
and objectively. EPA has addressed these comments in Section V.B.4.
below.
Furthermore, EPA proposed to consider agricultural land use trends
[[Page 76822]]
from several years preceding 2007, as well as the years following 2007
to the time the petition is submitted in order to evaluate whether or
not it is likely that a 2007 baseline would be exceeded in the future.
We also proposed that petitioners submit historical land use data for
the land in question, such as satellite data, aerial photography,
census data, agricultural surveys or agricultural economic modeling
data. EPA did not receive specific comments on the consideration of
agricultural land use trends or on the requirement to submit data on
historical land use trends. EPA believes that this information would be
useful in assessing whether the 2007 baseline area of land would likely
be exceeded in the future. Thus, as explained further in Section V.B.4
below, EPA is finalizing that, when evaluating petitions, we will take
into consideration historical agricultural land use trends in the
country in question, and we are requiring that petitioners submit
historical land use data for the land in question.
Finally, EPA proposed to consider whether there are laws in place
in the country for which the petition was submitted that might prohibit
or incentivize the clearing of new agricultural lands, and proposed to
consider the efficacy of these laws. EPA also proposed to assess
whether any market factors are expected to drive an increase in the
demand for agricultural land in the country for which the petition was
submitted. Commenters generally supported EPA's consideration of these
factors when evaluating petitions, and thus EPA will take them into
account when assessing petitions. For further discussion of this issue,
see Section V.B.4 which follows.
4. Petition Submission
EPA proposed a requirement that all submittals, including the
petition, supporting documentation, and annual data and analyses, be
submitted in English. One commenter argued that the components of the
petition should be submitted both in English and in the original
language. We agree that it would be useful and reasonable for EPA to
receive and make available to the public the petition and all
supporting documents in English and their original language (if not
English) in order to verify translation, particularly of technical
texts and data. Therefore we are finalizing a requirement that all
petitions and supporting documentation should be submitted in English
and their original language.
EPA also proposed that petitioners submit specified information as
part of their formal petition submission package, or explain why such
information is not necessary for EPA to consider their petition. EPA is
finalizing the list of information that will be required, absent an
explanation by the petitioner as to why any of the information is not
necessary, with modifications to reflect that petitions will be
considered only for all planted crops and crop residue from foreign
countries in their entirety.
First, petitioners will need to submit an assessment of the total
amount of land that is cropland, pastureland, or land equivalent to
USDA's Conservation Reserve Program land that was cleared or cultivated
prior to December 19, 2007, and that was actively managed or fallow and
nonforested on that date. For example, in assessing the amount of total
existing agricultural land in the U.S. on the enactment date of EISA,
EPA used FSA Crop History data to show that there were 402 million
acres of agricultural land existing in the U.S. in 2007.
As part of the assessment, the petitioner will be required to
submit to EPA land use data that demonstrates that the proposed 2007
baseline area of land is agricultural land that was cleared or
cultivated prior to December 19, 2007 and that was actively managed or
fallow and nonforested on that date. The data may include satellite
imagery or data, aerial photography, census data, agricultural surveys,
and/or agricultural economic modeling data. As mentioned above, the FSA
crop history data used for the U.S. aggregate compliance approach
determination consists of annual records of farm-level land use data
that includes all cropland and pastureland in the U.S. EPA also
considered USDA Census of Agriculture data, which consists of a full
census of the U.S. agricultural sector once every five years, as well
as the USDA National Agricultural Statistics Service (NASS) Crop Data
Layer (CDL), which is based on satellite data.
In establishing the total amount of existing agricultural land for
the U.S. aggregate compliance approach determination, EPA relied on the
RFS2 definitions of the relevant terms, including planted crops, crop
residue, and agricultural land, which is defined as consisting of
cropland, pastureland and Conservation Reserve Program (CRP) \29\ land.
In the proposal, EPA recognized that the CRP is only applicable to U.S.
agricultural land, and thus solicited comment on whether the final
rules should allow EPA to consider land that is equivalent or similar
to US CRP land as existing agricultural land for purposes of RFS2-
compliant feedstock cultivation in a foreign country, and whether EPA
should be able to make such a determination in the context of a
petition for application of the aggregate approach to a foreign
country. Commenters noted that EPA should consider foreign land
categories similar to CRP. EPA agrees, and has modified the final
regulation to include specific references to ``land that is equivalent
to U.S. Conservation Reserve Program'' land. One commenter also
suggested that EPA consider lands falling outside of the definition of
``existing agricultural land,'' including degraded land and land not
under primary forest. However, EPA disagrees that the types of land
considered should extend beyond those that are equivalent to the land
types identified in the final RFS2 definition of ``existing
agricultural land.'' If the land in question does not meet the RFS2
definitions of ``cropland'' or ``pastureland'' in 40 CFR 80.1401, or it
is not equivalent to CRP land, then it is not ``existing agricultural
land'' from which crops or crop residue that meet the definition of
``renewable biomass'' can be obtained. Therefore, they will not be
counted towards the total amount of existing agricultural land in a
petition for application of the aggregate approach to a foreign
country.
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\29\ The CRP program is administered by U.S. Department of
Agriculture's Farm Service Agency and provides technical and
financial assistance to eligible farmers and ranchers to address
soil, water, and related natural resource concerns on their lands in
an environmentally beneficial and cost-effective manner.
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Second, EPA proposed that the petitioner would also be required to
provide to EPA historical land use data, covering the years from prior
to 2007 to the current year. For the U.S. aggregate compliance approach
determination, EPA analyzed the FSA Crop History data from the years
2005 through 2007 and the USDA Census of Agriculture from 1997 through
2007, finding that there was an overall trend of contraction of
agricultural land utilization in the U.S. Commenters generally
supported this requirement. EPA believes that this will be useful
information in considering the likelihood that the 2007 baseline area
of land is likely to be exceeded in the future, and is finalizing a
requirement that petitioners submit historical land use data as part of
their petition.
Third, EPA proposed that the petitioner would need to provide a
description of any applicable laws, agricultural practices, economic
considerations, or other relevant factors that had or may have an
effect on agricultural land use within the foreign country. For the
U.S. aggregate
[[Page 76823]]
compliance approach determination, EPA took into account the CAA
renewable fuel obligations, the unsuitability and high cost of
developing previously undeveloped land for agricultural purposes, as
well as projected increases in crop yields on existing agricultural
land. Commenters supported the relevance of this type of information to
EPA's action on a petition for application of the aggregate approach to
a foreign country. Furthermore, another commenter recommended that EPA
consider the efficacy and enforcement of any applicable laws that may
have an effect on the use of the land in question. EPA agrees, and has
modified this element in the final rule to require the submission of
information regarding the efficacy and enforcement of relevant laws.
One commenter suggested that EPA take into consideration the
limitations on feedstock growth posed by local climate and soil
quality. EPA understands that in some circumstances poor soil quality
could be a factor that influences land use practices and, in
particular, whether existing croplands continue to be used for crop
production as opposed to former forestland. One of the factors
identified for EPA consideration in today's rule is whether historical
land use and agricultural practices and/or other factors show that it
is likely that producers will continue to use agricultural land within
the 2007 baseline area of land. In addition, one of the required
submission elements is ``agricultural practices, economic
considerations or other relevant factors that had or may have an effect
on the use of agricultural land.'' Thus, EPA believes that the
considerations raised by the commenter can and will be considered by
EPA in evaluating petition submittals. EPA urges the commenter to
participate in the public notice and comment process that all petitions
submitted to EPA will be subject to (see discussion of this subject in
Section V.B.5), and to provide any information on these issues that the
commenter believes may be appropriate for EPA evaluation at that time.
Among the ``other relevant factors'' that a petitioner must
consider, there are a variety of environmental conditions or
circumstances that may be relevant. For instance:
Local variability in weather
Availability and quality of fresh water as supplied by snow
pack, rain, runoff and inundations
Frost and icing
Severe winds and fires
Hail and sleet
Extended periods of rain or drought
Other extreme events
Predictions on the seasonal to interannual (El Nino/La Nina) are
available to improve the information included in the petition. Weather
and water predictions may also be important for shorter term supply
management and volume production analyses.
Finally, EPA proposed and is finalizing that the petitioner be
required to provide a plan describing an entity who will, on a
continuing yearly basis, conduct any data gathering and analysis
necessary to assist EPA in its annual assessment of any approved
aggregate approach. Additionally, EPA proposed that the plan would
describe the data, the data source, and the schedule on which the data
would be updated and made available to EPA and the public. One
commenter argued that the annual verification should be conducted or
reviewed by an independent third party financed by the petitioner
through an escrow account. EPA believes that review of the initial and
annual data by a qualified independent third party would add
credibility and reliability to the process, but does not believe it
should be required. EPA believes that providing notice through the
Federal Register and opportunity for public comment on each petition
submitted afford the public ample time to analyze and comment on the
data submitted by the petitioner. Furthermore, EPA is adding a
requirement, described above, for participation in the process by the
national government of the country for which a petition is submitted,
and EPA will thoroughly scrutinize the information submitted in the
petition prior to making any assessment. Therefore, EPA is not
finalizing a requirement that the petition and the annual updates be
analyzed by an independent third party, but EPA is reiterating that
participation by an independent third party would add credibility to a
petition and to annual evaluations.
5. Petition Process
EPA proposed to provide an opportunity for public comment on
petitions for approval of an aggregate compliance approach for a
foreign country. EPA proposed to publish a Federal Register notice
informing the public of incoming petitions, with information on how to
view the petitions and any supporting information. Additionally, EPA
proposed to then accept public comment on the petition. Once the public
comment period closes, EPA proposed to make an assessment, taking into
account the information submitted in the petition as well as the
comments received, and then publish a decision in the Federal Register
to either approve or deny the petitioner's request.
EPA proposed that, if the petition has been approved, the Federal
Register notice will specify an effective date at which time producers
using the specified feedstocks from the specified areas identified in
EPA's approval will be subject to the aggregate compliance approach
requirements in 40 CFR 80.1454(g) in lieu of the otherwise applicable
individualized renewable biomass recordkeeping and reporting
requirements. For the final rule, EPA has made a minor modification to
the regulatory language in 40 CFR 80.1454(g) to clarify the
recordkeeping requirements from which renewable fuel producers are
exempted if their feedstocks are subject to the aggregate compliance
approach. Producers using feedstocks subject to the aggregate
compliance approach are exempted from the renewable biomass
recordkeeping requirements in 40 CFR 80.1454(g)(2), but remain subject
to the recordkeeping requirements related to feedstocks in 40 CFR
80.1454(b).
EPA sought and received comments on this proposed petition process.
Most commenters agree that each petition submitted should be subject to
public notice and comment procedures. Several commenters argued that
although there should be a public notice and comment period, it should
not cause undue delays in reviewing and publishing a decision on the
petitions. One commenter requested that 60 days be provided for public
review of the incoming petitions. Another commenter also requested that
EPA specify a timeline for the public comment process and the types of
issues that will be addressed during the process.
EPA agrees that public notice and comment is necessary and
important, and is maintaining that process in today's final rule.
Furthermore, EPA intends that decisions on petitions will be made
within an amount of time that is reasonable, yet sufficient to conduct
a thorough analysis of the incoming data. EPA concurs that 60 days is a
reasonably practical amount of time for public review and analysis of
the petition and associated data, so today's rule provides for a 60 day
comment period on each petition submitted.
EPA does not agree with the comment that the public comments should
be restricted to certain issues. EPA will evaluate all comments
received to determine if they are relevant to its determination. The
petitions and the supporting data will be included in the rulemaking
docket in their entirety
[[Page 76824]]
(excepting only material that is claimed to be confidential business
information or which is otherwise privileged), and the public may
comment on any aspect of the petitions or the supporting information.
A commenter argued that the public notice and comment procedure
should be included in the regulatory language, and that any and all
data and calculations in the petitions should be available to the
public. EPA generally agrees, and has included provisions concerning
public notice and comment in the final regulatory language.
Furthermore, EPA will make available in the docket all information
submitted in support of each petition unless the material is claimed to
be confidential business information or is otherwise legally prohibited
from disclosure.
Additionally, EPA proposed three circumstances that could lead EPA
to withdraw its approval of the aggregate compliance approach for a
foreign country. We received one comment that argued that EPA must
withdraw its approval under the three circumstances identified in the
proposed regulations at Sec. 80.1457(e)(1)(i)-(iii). Although we
generally agree that the three circumstances identified will likely
lead EPA to withdraw its approval, we believe it is best to allow EPA
the discretion to evaluate these circumstances on a case-by-case basis.
Therefore, we have retained in the final rule the provision stating
that EPA ``may'' withdraw its approval in the circumstances identified,
in which case producers using planted crops or crop residue from the
country in question would be subject to the individual recordkeeping
and reporting requirements under Sec. Sec. 80.1454(g) and 80.1451(d)
beginning July 1 of the following year.
Finally, EPA requested comment on whether the burden associated
with the proposed petition process is reasonable, and how it might be
minimized while still remaining adequately robust. One commenter noted
that the burden of the petition process is reasonable as proposed, and
could be made more stringent while remaining reasonable. EPA believes
the level of burden associated with the proposed petition process was
reasonable and appropriate and believes that the requirements set forth
in today's final rule do not significantly alter the proposed level of
burden.
VI. Annual Administrative Announcements
In the RFS2 final rule, we stated our intent to make two
announcements each year:
Set the price for cellulosic biofuel waiver credits that will
be made available to obligated parties in the event that we reduce the
volume of cellulosic biofuel below the applicable volume specified in
the Clean Air Act (CAA), and
Announce the results of our annual assessment of the aggregate
compliance approach for U.S. planted crops and crop residue.
The biofuel waiver credit price being announced today was calculated in
accordance with the specifications in Sec. 80.1456(d). Since the
manner in which EPA calculates the waiver credit price is precisely set
forth in EPA regulations (which were issued through a notice-and-
comment process), and since some of the variables necessary to compute
the price have only recently become available, EPA did not propose a
waiver credit price for comment. Similarly, because EPA's assessment of
the aggregate compliance approach announced today was conducted using
data sources, methodology, and criteria that were identified and
explained in the preamble to the RFS2 final rule, it was not necessary
to present a preliminary annual assessment for comment in the NPRM.
A. 2011 Price for Cellulosic Biofuel Waiver Credits
Section 211(o)(7)(D) of the CAA requires that whenever EPA sets the
applicable volume of cellulosic biofuel at a level lower than that
specified in the Act, EPA is to provide a number of cellulosic credits
for sale that is no more than the EPA-determined applicable volume.
Congress also specified the formula for calculating the price for such
waiver credits: Adjusted for inflation, the credits must be offered at
the price of the higher of 25 cents per gallon or the amount by which
$3.00 per gallon exceeds the average wholesale price of a gallon of
gasoline in the United States.\30\ The inflation adjustment is for
years after 2008. EPA regulations provide that the inflation adjustment
is calculated by comparing the most recent Consumer Price Index for Al
Urban Consumers (CPI-U) for the ``All Items'' expenditure category as
provided by the Bureau of Labor Statistics that is available at the
time EPA sets the cellulosic biofuel standard to the comparable value
that was reported soonest after December 31, 2008.\31\
---------------------------------------------------------------------------
\30\ More information on wholesale gasoline prices can be found
on the Department of Energy's (DOE), Energy Information
Administration's (EIA) Web site at: http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103B00002&f=M.
\31\ See U.S. Department of Labor, Bureau of Labor Statistics
(BLS), Consumer Price Index Web site at: http://www.bls.gov/cpi/.
---------------------------------------------------------------------------
In contrast to its directions to EPA for setting the price of a
cellulosic biofuel waiver credit, Congress afforded the Agency
considerable flexibility in designing regulations specifying the
permissible uses of the credits. The CAA states that EPA regulations
``shall include such provisions, including limiting the credits' uses
and useful life, as the Administrator deems appropriate to assist
market liquidity and transparency, to provide appropriate certainty for
regulated entities and renewable fuel producers, and to limit any
potential misuse of cellulosic biofuel credits to reduce the use of
other renewable fuels, and for such other purposes as the Administrator
determines will help achieve the goals of this subsection.'' The final
RFS2 provides a detailed discussion of how we designed the provisions
for cellulosic biofuel waiver credits in keeping with the statutory
language. In short, 2011 cellulosic biofuel waiver credits (or ``waiver
credits'') are only available for the 2011 compliance year. Waiver
credits will only be made available to obligated parties, and they are
nontransferable and nonrefundable. Further, obligated parties may only
purchase waiver credits up to the level of their cellulosic biofuel RVO
less the number of cellulosic biofuel RINs that they own. A company
owning cellulosic biofuel RINs and cellulosic waiver credits may use
both types of credits if desired to meet their RVOs, but unlike RINs
obligated parties are not permitted to carry waiver credits over to the
next calendar year. Obligated parties may not use waiver credits to
meet a prior year deficit obligation. Finally, unlike cellulosic
biofuel RINs which may also be used to meet an obligated party's
advanced and total renewable fuel obligations, waiver credits may only
be used to meet a cellulosic biofuel RVO. An obligated party will still
need to additionally and separately acquire RINs to meet their advanced
biofuel and total renewable fuel obligations.
For the 2011 compliance period, since the applicable volume of
cellulosic biofuel used to set the annual cellulosic biofuel standard
is lower than the volume for 2011 specified in the CAA, we are making
cellulosic waiver credits available to obligated parties for end-of-
year compliance should they need them at a price of $1.13 per gallon-
RIN. To calculate this price, EPA first determined the average
wholesale
[[Page 76825]]
(refinery gate) price of gasoline using the most recent 12 months of
data available from the EIA Web site on September 30, 2010. Based on
this data, we calculated an average price of gasoline for the period
July 2009 to June 2010 of $1.97. In accordance with the Act, we then
calculated the difference of the inflation-adjusted value of $3.00, or
$3.10, and $1.97, which yielded $1.13. Next, we compared the value of
$1.13 to the inflation-adjusted value of $0.25, or $0.26. The Act
requires EPA to use the greater of these two values as the price for
cellulosic biofuel waiver credits.
The derivation of this value is more fully explained in a
memorandum submitted to the docket for this rulemaking,\32\ and a more
complete description of the statutory requirements and their
application can be found in the RFS2 final rule.\33\ The price for the
2012 compliance period, if necessary, will be set when we announce the
2012 cellulosic biofuel standard.
---------------------------------------------------------------------------
\32\ See memo to docket number EPA-HQ-OAR-2010-0133 from Scott
Christian, on the subject of ``Calculating the price for cellulosic
biofuel waiver credits for compliance year 2011,'' dated October 20,
2010.
\33\ 75 FR 14726-14728.
---------------------------------------------------------------------------
B. Assessment of the Domestic Aggregate Compliance Approach
In order to implement the renewable biomass requirements under the
RFS2 program as set forth in the CAA, EPA established general
requirements for renewable fuel producers to keep records on the types
and feedstocks they use to produce their fuel, including specific
records related to the land from which the feedstocks were harvested or
otherwise obtained, if they generate RINs for the fuel produced from
such feedstocks. We also established requirements for renewable fuel
producers to report on their feedstocks on a quarterly basis. Similar
requirements apply to importers who generate RINs for fuel produced
outside of the U.S.
In response to comments we received on the RFS2 NPRM, we also
finalized a separate approach for renewable fuel producers who use
planted crops and crop residue from U.S. agricultural land. Producers
who use such renewable biomass need not maintain documentation about
the specific land from which the feedstocks are harvested, relieving
them of the individual recordkeeping and reporting requirements. To
enable this approach, EPA established a baseline number of acres for
U.S. agricultural land in 2007 (the year of EISA enactment) and
determined that as long as this baseline number of acres was not
exceeded, it was unlikely that new land outside of the 2007 baseline
would be devoted to crop production based on historical trends and
economic considerations. We therefore provided that renewable fuel
producers using planted crops or crop residue from the U.S. as
feedstock in renewable fuel production need not comply with the
individual recordkeeping and reporting requirements related to
documenting that their feedstocks are renewable biomass, unless EPA
determines through annual evaluations that the 2007 baseline acreage of
agricultural land has been exceeded.
In the final RFS2 regulations, we stated that EPA will make a
finding concerning whether the 2007 baseline amount of U.S.
agricultural land has been exceeded in a given year and will publish
this finding in the Federal Register by November 30 of the same year.
If the baseline is found to have been exceeded, then producers using
U.S. planted crops and crop residue as feedstocks for renewable fuel
production would be required to comply with individual recordkeeping
and reporting requirements to verify that their feedstocks are
renewable biomass. We also stated that if, at any point, EPA finds that
the total agricultural land is greater than 397 million acres, EPA will
conduct further investigations regarding the validity of the aggregate
compliance approach.
Based on data provided by the USDA Farm Service Agency (FSA) and
Natural Resources Conservation Service (NRCS), we have estimated that
U.S. agricultural land reached approximately 398 million acres in 2010,
and thus did not exceed the 2007 baseline acreage.\34\ However, this
total acreage estimate is greater than the 397 million acre trigger
point for further investigation, therefore EPA, with the help of USDA,
will look further into the relevant data and review the factors related
to U.S. agricultural land use over the coming months.
---------------------------------------------------------------------------
\34\ See memo to docket number EPA-HQ-OAR-2010-0133 from Megan
Brachtl, on the subject of ``USDA data used for 2010 U.S.
agricultural land determination,'' dated November 9, 2010.
---------------------------------------------------------------------------
The data and methodologies employed to make this determination are
described below.
1. Methodology
To set the 2007 baseline acreage for U.S. agricultural land in the
RFS2 final rulemaking, we used USDA's Farm Service Agency's (FSA's)
crop history data for 2007, which was the most complete, consistent,
and reliable dataset available to EPA. From the FSA crop history data
total acreage of 404.3 million acres, we subtracted 2.75 million acres,
which represented the amount of land enrolled in USDA's Grasslands
Reserve Program (GRP) and Wetlands Reserve Program (WRP), neither of
which qualifies as existing agricultural land. We therefore established
the 2007 baseline amount of existing U.S. agricultural land at 402
million acres. This is the amount of land we determined was available
for the production of planted crops and crop residue in 2007 that would
satisfy the renewable biomass provisions of the CAA.
To calculate the 2010 U.S. agricultural land acreage estimate, we
followed a similar calculation methodology. We started with FSA crop
history data for 2010, from which we derived a total estimated acreage
of 401.6 million acres. We then subtracted the amount of land estimated
to be participating in the GRP and WRP by the end of Fiscal Year 2010,
3.6 million acres, to yield an estimate of approximately 398.0 million
acres of U.S. agricultural land in 2010. The USDA data used to make
this calculation can be found in the docket to this rule.
In the preamble to the final RFS2 rule, we indicated that we would
monitor total U.S. agricultural land annually using FSA crop history
data as a primary determinant and USDA's satellite-based crop data
layer (CDL) analyses as a secondary source to validate our annual
assessment. The CDL data for 2009 were released at the beginning of
2010, and the CDL data for 2010 is similarly expected in early 2011.
Because the schedule for the release of 2010 data falls after the date
by which the RFS2 regulations state the annual U.S. agricultural land
acreage determination must be made, we will use the 2009 and 2010 data,
as appropriate and feasible, to validate our 2010 assessment, as
discussed below.
2. Further Investigation
EPA stated in the final RFS2 rule that if we find that the total
land used for the production of crops is greater than 397 million
acres, we will conduct further investigations regarding the validity of
the aggregate compliance approach. Because we estimate that total U.S.
agricultural land acreage in 2010 was approximately 398 million acres,
further inquiry into the aggregate compliance approach is warranted.
This inquiry, to be carried out by EPA with assistance from USDA, will
utilize other agricultural data, including USDA's 2009 and 2010 CDL
data to the extent feasible, to validate the data used to make the U.S.
agricultural land
[[Page 76826]]
determination for 2010. We will also consider potential uncertainties
in the data used to make our determination. We anticipate that this
investigation will be completed well before the deadline for publishing
next year's agricultural land acreage determination.
VII. Comments Outside the Scope of This Rulemaking
In their comments responding to the NPRM, a number of parties used
the opportunity to raise concerns that were not directly related to the
issues and provisions we were addressing in the NPRM, such as setting
the cellulosic biofuel standard, the proposed provision for delayed
RINs, and the proposed provision for aggregate compliance for renewable
biomass from foreign countries. Neither did these comments address
setting the price for cellulosic biofuel credits or EPA's annual
evaluation of the U.S. aggregate compliance approach for renewable
biomass. Instead, they addressed issues associated with the following:
EPA's petition process in Sec. 80.1416 for approving new fuel
pathways
EPA's ongoing lifecycle GHG assessment for grain sorghum
EPA's economic analyses related to expanded biofuels use and
the impact of tax credits and tariffs
Possible legislative amendments and possible EPA actions
favored by commenters that would promote biofuel use
Some commenters also made requests for clarification of key definitions
while others suggested modifications to the provisions regarding the
use of cellulosic biofuel waiver credits. While we are taking these
comments under consideration as we continue to implement the RFS2
program, these comments are outside the scope of today's action, and we
are not providing substantive responses to them at this time.
VIII. Public Participation
Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on July 20, 2010 (75 FR 42238), and we considered these
comments in developing the final rule. Comments and responses for
issues raised in the public comments are included throughout this
preamble.
IX. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993),
this action is a ``significant regulatory action'' because it raises
novel legal or policy issues. Accordingly, EPA submitted this action to
the Office of Management and Budget (OMB) for review under EO 12866 and
any changes made in response to OMB recommendations have been
documented in the docket for this action.
The economic impacts of the RFS2 program on regulated parties,
including the impacts of the required volumes of renewable fuel, were
already addressed in the RFS2 final rule promulgated on March 26, 2010
(75 FR 14670). This action sets the percentage standards applicable in
2011 based on the volumes that were analyzed in the RFS2 final rule or,
for cellulosic biofuel, on a lower volume that reflects EPA's
projection of cellulosic biofuel production volumes for 2011. The
delayed RINs provision and the petition process for applying an
aggregate approach to foreign-grown crops and crop residue have no
adverse economic impact on regulated parties since they would either
relieve a current restriction related to generation of RINs, or would
reduce recordkeeping burdens for parties successfully utilizing the
petition process. The announcement of cellulosic biofuel waiver credit
price and EPA's annual assessment of the U.S. aggregate compliance
approach also impose no adverse economic impact. The availability of
cellulosic biofuel waiver credits provides increased flexibility to
regulated parties, at a price established by a formula set forth in the
CAA.
B. Paperwork Reduction Act
This rule contains new information collection requirements which
will be submitted for approval to the Office of Management and Budget
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. These
information collection requirements are not enforceable until OMB
approves them. The EPA ICR number 2398.02.
Specifically, this rule has a petition provision that EPA will use
to authorize renewable fuel producers using foreign-grown feedstocks to
use an aggregate approach to comply with the renewable biomass
verification provisions, similar to that applicable to producers using
crops and crop residue grown in the United States. See discussion in
Section V.B. For this authorization, foreign based entities may
petition EPA for approval of the aggregate compliance approach for
crops and crop residue in a foreign country. If approved by EPA, such a
petition will allow crops and crop residue produced in the foreign
country to be counted as feedstock to make renewable fuel under the
RFS2 program without the otherwise applicable recordkeeping
requirements. Other provisions in this regulation will not impose any
new information collection burdens on regulated entities beyond those
already required under RFS2. The RFS2 information collections are
identified by the following OMB control numbers: 2060-0637 (expiring
March 31, 2013) and 2060-0640 (expiring July 31, 2013).
The information collection related to this final rule is required
in order for EPA to evaluate and act on the petitions. Respondents may
assert claims of business confidentiality (CBI) for any or all of the
information they submit. We do not believe that most respondents will
characterize the information they submit to us under this information
collection as CBI. However, any information claimed as confidential
will be treated in accordance with 40 CFR Part 2 and established Agency
procedures. Information that is received without a claim of
confidentiality may be made available to the public without further
notice to the submitter under 40 CFR 2.203.
EPA estimates that there will be a total of 15 respondents
(petitioners), each submitting one petition, for a total of 15
responses (petitions). The estimated burden annual burden, assuming 15
respondents, will be 200 hours and annual cost is estimated at $14,197.
On a per respondent basis, EPA estimates a total annual hour burden per
respondent of 13.33 hours and a total annual cost burden per respondent
is $946.43. Burden is defined at 5 CFR 1320.3(b).
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities
[[Page 76827]]
include small businesses, small organizations, and small governmental
jurisdictions.
For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of
a city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is
any not-for-profit enterprise which is independently owned and operated
and is not dominant in its field.
After considering the economic impacts of today's rule on small
entities, we certify that this action will not have a significant
economic impact on a substantial number of small entities. This rule
sets the annual standards for four types of renewable fuel, modifies
the regulatory provision for the generation of delayed RINs, and
establishes a process for parties to petition EPA to allow an aggregate
approach to compliance with the renewable biomass provision for
foreign-grown crops and crop residue that would be similar to that used
in the U.S. Today's action also includes two administrative
announcements: The price in 2011 for cellulosic biofuel waiver credits,
and the results of EPA's annual assessment of the U.S. aggregate
compliance approach. The impacts of the RFS2 program on small entities
were already addressed in the RFS2 final rule promulgated on March 26,
2010 (75 FR 14670), and today's action does not impose any additional
requirements or burdens on small entities.
D. Unfunded Mandates Reform Act
This action contains no Federal mandates under the provisions of
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C.
1531-1538 for State, local, or tribal governments or the private
sector. The action imposes no enforceable duty on any State, local or
tribal governments or the private sector. Therefore, this action is not
subject to the requirements of sections 202 or 205 of the UMRA.
This action is also not subject to the requirements of section 203
of UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.
E. Executive Order 13132: Federalism
This rule does not have federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. Thus, Executive Order 13132 does
not apply to this rule.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications, as specified in
Executive Order 13175 (65 FR 67249, November 9, 2000). This rule does
not have tribal implications, as this rule will be implemented at the
Federal level and impose compliance costs only on transportation fuel
refiners, blenders, marketers, distributors, importers, and exporters.
Tribal governments would be affected only to the extent they purchase
and use regulated fuels. Thus, Executive Order 13175 does not apply to
this action.
G. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying
only to those regulatory actions that concern health or safety risks,
such that the analysis required under section 5-501 of the EO has the
potential to influence the regulation. This action is not subject to EO
13045 because it does not establish an environmental standard intended
to mitigate health or safety risks and because it implements specific
standards established by Congress in statutes.
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy.
I. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
This action does not involve technical standards. Therefore, EPA is
not considering the use of any voluntary consensus standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
EPA has determined that this rule will not have disproportionately
high and adverse human health or environmental effects on minority or
low-income populations because it does not affect the level of
protection provided to human health or the environment. This action
does not relax the control measures on sources regulated by the RFS2
regulations and therefore will not cause emissions increases from these
sources.
K. Congressional Review Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2) and therefore it is not subject to the Congressional Review Act.
Therefore, this rule will be effective on the date of publication.
[[Page 76828]]
X. Statutory Authority
Statutory authority for the rule finalized today can be found in
section 211 of the Clean Air Act, 42 U.S.C. 7545. Additional support
for the procedural and compliance related aspects of today's rule,
including the recordkeeping requirements, come from Sections 114, 208,
and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).
List of Subjects in 40 CFR Part 80
Environmental protection, Air pollution control, Diesel fuel, Fuel
additives, Forest and forest products, Gasoline, Oil imports, Labeling,
Motor vehicle pollution, Penalties, Petroleum, Reporting and
recordkeeping requirements.
Dated: November 24, 2010.
Lisa P. Jackson,
Administrator.
0
For the reasons set forth in the preamble, 40 CFR part 80 is amended as
follows:
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
0
1. The authority citation for part 80 continues to read as follows:
Authority: 42 U.S.C. 7414, 7542, 7545, and 7601(a).
0
2. Section 80.1405 is amended by revising paragraph (a) to read as
follows:
Sec. 80.1405 What are the Renewable Fuel Standards?
(a) Renewable Fuel Standards for 2011.
(1) The value of the cellulosic biofuel standard for 2011 shall be
0.003 percent.
(2) The value of the biomass-based diesel standard for 2011 shall
be 0.69 percent.
(3) The value of the advanced biofuel standard for 2011 shall be
0.78 percent.
(4) The value of the renewable fuel standard for 2011 shall be 8.01
percent.
* * * * *
0
3. Section 80.1426 is amended by revising paragraph (g) to read as
follows:
Sec. 80.1426 How are RINs generated and assigned to batches of
renewable fuel by renewable fuel producers or importers?
* * * * *
(g) Delayed RIN generation.
(1) Parties who produce or import renewable fuel may elect to
generate delayed RINs to represent renewable fuel volumes that have
already been transferred to another party if those renewable fuel
volumes meet all of the following requirements.
(i) The renewable fuel volumes can be described by a new pathway
that has been added to Table 1 to Sec. 80.1426, or approved by
petition pursuant to Sec. 80.1416, after July 1, 2010.
(A) For new pathways that EPA approves in response to petitions
submitted pursuant to Sec. 80.1416, complete petitions must be
received by EPA by January 31, 2011.
(B) [Reserved]
(ii) The renewable fuel volumes can be described by a pathway that:
(A) Is biodiesel that is made from canola oil through
transesterification using natural gas or biomass for process energy; or
(B) EPA has determined was in use as of July 1, 2010, for the
primary purpose of producing transportation fuel, heating oil, or jet
fuel for commercial sale.
(iii) The renewable fuel volumes were not designated or intended
for export from the 48 contiguous states plus Hawaii by the renewable
fuel producer or importer, and the producer or importer of the
renewable fuel volumes does not know or have reason to know that the
volumes were exported from the 48 contiguous states plus Hawaii.
(2) When a new pathway is added to Table 1 to Sec. 80.1426 or
approved by petition pursuant to Sec. 80.1416, EPA will specify in its
approval action the effective date on which the new pathway becomes
valid for the generation of RINs and whether the fuel in question meets
the requirements of paragraph (g)(1)(ii) of this section.
(i) The effective date for the pathway describing biodiesel that is
made from canola oil through transesterification using natural gas or
biomass for process energy is September 28, 2010.
(ii) [Reserved]
(3) Delayed RINs can only be generated to represent renewable fuel
volumes produced in the 48 contiguous states plus Hawaii or imported
into the 48 contiguous states plus Hawaii between July 1, 2010, and the
earlier of either of the following dates:
(i) The effective date (identified pursuant to paragraph (g)(2) of
this section) of the new pathway through which the fuel in question was
produced; or
(ii) December 31, 2011.
(4) Delayed RINs must be generated no later than 60 days after the
effective date (identified pursuant to paragraph (g)(2) of this
section) of the pathway by which the fuel in question was produced.
(5) A party authorized pursuant to paragraph (g)(1) of this section
to generate delayed RINs, and electing to do so, who generated RINs
pursuant to 80.1426(f)(6) for fuel produced through a pathway described
in paragraph (g)(1) of this section, and transferred those RINs with
renewable fuel volumes between July 1, 2010 and the effective date
(identified pursuant to paragraph (g)(2) of this section) of that
pathway, must retire a number of gallon-RINs prior to generating
delayed RINs.
(i) The number of gallon-RINs retired by a party pursuant to this
paragraph must not exceed the number of gallon-RINs originally
generated by the party to represent fuel described in paragraph (g)(1)
of this section that was produced in the 48 contiguous states plus
Hawaii or imported into the 48 contiguous states plus Hawaii, and
transferred to another party, between July 1, 2010 and the earlier of
either of the following dates:
(A) The effective date (identified pursuant to paragraph (g)(2) of
this section) of the new pathway through which the fuel in question was
produced; or
(B) December 31, 2011.
(ii) Retired RINs must have a D code of 6.
(iii) Retired RINs must have a K code of 2.
(iv) Retired RINs must have been generated in the same year as the
gallon-RINs originally generated by the party to represent fuel
described in paragraph (g)(1) of this section.
(A) For gallon-RINs originally generated in 2010 to represent fuel
described in paragraph (g)(1) of this section, the generation year of
retired RINs shall be 2010.
(B) For gallon-RINs originally generated in 2011 to represent fuel
described in paragraph (g)(1) of this section, the generation year of
retired RINs shall be 2011.
(6) For parties that retire RINs pursuant to paragraph (g)(5) of
this section, the number of delayed gallon-RINs generated shall be
equal to the number of gallon-RINs retired in accordance with paragraph
(g)(5) of this section.
(7) A party authorized pursuant to paragraph (g)(1) of this section
to generate delayed RINs, and electing to do so, who did not generate
RINs pursuant to Sec. 80.1426(f)(6) for renewable fuel produced in the
48 contiguous states plus Hawaii or imported into the 48 contiguous
states plus Hawaii between July 1, 2010 and the effective date
(identified pursuant to paragraph (g)(2) of this section) of a new
pathway for the fuel in question, may generate a number of delayed
gallon-RINs for that renewable fuel in accordance with paragraph (f) of
this section.
(i) The standardized volume of fuel (Vs) used by a party
to determine the RIN volume (VRIN) under paragraph (f) of
this section shall be the standardized
[[Page 76829]]
volume of the fuel described in paragraph (g)(1)(i) of this section
that was produced in the 48 contiguous states plus Hawaii or imported
into the 48 contiguous states plus Hawaii by the party, and transferred
to another party, between July 1, 2010 and the earlier of either of the
following dates:
(A) The effective date (identified pursuant to paragraph (g)(2) of
this section) of the new pathway through which the fuel in question was
produced; or
(B) December 31, 2011.
(ii) [Reserved]
(8) The renewable fuel for which delayed RINs are generated must be
described by a pathway that satisfies the requirements of paragraph
(g)(1) of this section.
(9) All delayed RINs generated by a renewable fuel producer or
importer must be generated within EMTS on the same date.
(10) The generation year of delayed RINs as designated in EMTS
shall be the year that the renewable fuel volumes they represent were
either produced or imported into the 48 contiguous states plus Hawaii.
(i) For renewable fuel volumes produced or imported in 2010, the
generation year of delayed RINs shall be 2010 and the production date
specified in EMTS shall be 07/01/2010.
(ii) For renewable fuel volumes produced or imported in 2011, the
generation year of delayed RINs shall be 2011 and the production date
specified in EMTS shall be 01/01/2011.
(11) Delayed RINs shall be generated as assigned RINs in EMTS with
a batch number that begins with ``DRN'', and then immediately separated
by the RIN generator.
(12) The D code that shall be used in delayed RINs shall be the D
code which corresponds to the new pathway.
(13) Except as provided in this paragraph (g), all other provisions
in this Subpart M that pertain to the identification of fuels for which
RINs may be generated, the generation and use of RINs, and
recordkeeping and reporting, are also applicable to delayed RINs.
0
4. Section 80.1454 is amended as follows:
0
a. By revising paragraph (g) introductory text.
0
b. By revising paragraph (g)(1).
0
c. By revising paragraph (g)(2) introductory text.
Sec. 80.1454 What are the recordkeeping requirements under the RFS
Program?
* * * * *
(g) Aggregate compliance with renewable biomass requirement. Any
producer or RIN-generating importer of renewable fuel made from planted
crops or crop residue from existing U.S. agricultural land as defined
in Sec. 80.1401, or from planted crops or crop residue from existing
agricultural land in a country covered by a petition approved pursuant
to Sec. 80.1457, is covered by the aggregate compliance approach and
is not subject to the recordkeeping requirements for planted crops and
crop residue at Sec. 80.1454(g)(2) unless EPA publishes a finding that
the 2007 baseline amount of agricultural land in the U.S. has been
exceeded or, for the aggregate compliance approach in a foreign
country, that the withdrawal of EPA approval of the aggregate
compliance approach is warranted pursuant to Sec. 80.1457(e).
(1) EPA will make findings concerning whether the 2007 baseline
amount of agricultural land in the U.S. or other country covered by a
petition approved pursuant to Sec. 80.1457 has been exceeded and will
publish these findings in the Federal Register by November 30 of the
year preceding the compliance period.
(2) If EPA finds that the 2007 baseline amount of agricultural land
in the U.S. or other country covered by a petition approved pursuant to
Sec. 80.1457 has been exceeded, beginning on the first day of July of
the compliance period in question any producer or RIN-generating
importer of renewable fuel made from planted crops or crop residue in
the country for which such a finding is made must keep all the
following records:
* * * * *
0
5. Section 80.1457 is added to read as follows:
Sec. 80.1457 Petition process for aggregate compliance approach for
foreign countries.
(a) EPA may approve a petition for application of the aggregate
compliance approach to planted crops and crop residue from existing
agricultural land in a foreign country if EPA determines that an
aggregate compliance approach will provide reasonable assurance that
planted crops and crop residue from the country in question meet the
definition of renewable biomass and will continue to meet the
definition of renewable biomass, based on the submission of credible,
reliable, and verifiable data.
(1) As part of its evaluation, EPA will consider all of the
following:
(i) Whether there has been a reasonable identification of the
``2007 baseline area of land,'' defined as the total amount of
cropland, pastureland, and land that is equivalent to U.S. Conservation
Reserve Program land in the country in question that was actively
managed or fallow and nonforested on December 19, 2007.
(ii) Whether information on the total amount of cropland,
pastureland, and land that is equivalent to U.S. Conservation Reserve
Program land in the country in question for years preceding and
following calendar year 2007 shows that the 2007 baseline area of land
identified in paragraph (a)(1)(i) of this section is not likely to be
exceeded in the future.
(iii) Whether economic considerations, legal constraints,
historical land use and agricultural practices and other factors show
that it is likely that producers of planted crops and crop residue will
continue to use agricultural land within the 2007 baseline area of land
identified in paragraph (a)(1)(i) of this section into the future, as
opposed to clearing and cultivating land not included in the 2007
baseline area of land.
(iv) Whether there is a reliable method to evaluate on an annual
basis whether the 2007 baseline area of land identified in paragraph
(a)(1)(i) of this section is being or has been exceeded.
(v) Whether a credible and reliable entity has been identified to
conduct data gathering and analysis, including annual identification of
the aggregate amount of cropland, pastureland, and land that is
equivalent to U.S. Conservation Reserve Program land, needed for the
annual EPA evaluation specified in Sec. 80.1454(g)(1), and whether the
data, analyses, and methodologies are publicly available.
(2) [Reserved]
(b) Any petition and all supporting materials submitted under
paragraph (a) of this section must be submitted both in English and its
original language (if other than English), and must include all of the
following or an explanation of why it is not needed for EPA to consider
the petition:
(1) Maps or electronic data identifying the boundaries of the land
for which the petitioner seeks approval of an aggregate compliance
approach.
(2) The total amount of land that is cropland, pastureland, or land
equivalent to U.S. Conservation Reserve Program land within the
geographic boundaries specified in paragraph (b)(1) of this section
that was cleared or cultivated prior to December 19, 2007 and that was
actively managed or fallow and nonforested on that date, and
(3) Land use data that demonstrates that the land identified in
paragraph (b)(1) of this section is cropland, pastureland or land
equivalent to U.S. Conservation Reserve Program land that was cleared
or cultivated prior to December 19, 2007, and that was
[[Page 76830]]
actively managed or fallow and nonforested on that date, which may
include any of the following:
(i) Satellite imagery or data.
(ii) Aerial photography.
(iii) Census data.
(iv) Agricultural survey data.
(v) Agricultural economic modeling data.
(4) Historical land use data for the land within the geographic
boundaries specified in paragraph (b)(1) of this section to the current
year, which may include any of the following:
(i) Satellite imagery or data.
(ii) Aerial photography.
(iii) Census data.
(iv) Agricultural surveys.
(v) Agricultural economic modeling data.
(5) A description of any applicable laws, agricultural practices,
economic considerations, or other relevant factors that had or may have
an effect on the use of agricultural land within the geographic
boundaries specified in paragraph (b)(1) of this section, including
information regarding the efficacy and enforcement of relevant laws and
regulations.
(6) A plan describing how the petitioner will identify a credible
and reliable entity who will, on a continuing basis, conduct data
gathering, analysis, and submittal to assist EPA in making an annual
determination of whether the criteria specified in paragraph (a) of
this section remains satisfied.
(7) A letter, signed by a national government representative at the
ministerial level or equivalent, confirming that the petition and all
supporting data have been reviewed and verified by the ministry (or
ministries) or department(s) of the national government with primary
expertise in agricultural land use patterns, practices, data, and
statistics, that the data support a finding that planted crops and crop
residue from the specified country meet the definition of renewable
biomass and will continue to meet the definition of renewable biomass,
and that the responsible national government ministry (or ministries)
or department(s) will review and verify the data submitted on an annual
basis to facilitate EPA's annual evaluation of the 2007 baseline area
of land specified in Sec. 80.1454(g)(1) for the country in question.
(8) Any additional information the Administrator may require.
(c) EPA will issue a Federal Register notice informing the public
of receipt of any petition submitted pursuant to this section and will
provide a 60-day period for public comment. If EPA approves a petition
it will issue a Federal Register notice announcing its decision and
specifying an effective date for the application of the aggregate
compliance approach to planted crops and crop residue from the country.
Thereafter, the planted crops and crop residue from the country will be
covered by the aggregate compliance approach set forth in Sec.
80.1454(g), or as otherwise specified pursuant to paragraph (d) of this
section.
(d) If EPA grants a petition to establish an aggregate compliance
approach for planted crops and crop residue from a foreign country, it
may include any conditions that EPA considers appropriate in light of
the conditions and circumstances involved.
(e)(1) EPA may withdraw its approval of the aggregate compliance
approach for the planted crops and crop residue from the country in
question if:
(i) EPA determines that the data submitted pursuant to the plan
described in paragraph (b)(6) of this section does not demonstrate that
the amount of cropland, pastureland and land equivalent to U.S.
Conservation Reserve Program land within the geographic boundaries
covered by the approved petition does not exceed the 2007 baseline area
of land;
(ii) EPA determines based on other information that the criteria
specified in paragraph (a) of this section is no longer satisfied; or
(iii) EPA determines that the data needed for its annual evaluation
has not been collected and submitted in a timely and appropriate
manner.
(2) If EPA withdraws its approval for a given country, then
producers using planted crops or crop residue from that country will be
subject to the individual recordkeeping and reporting requirements of
Sec. 80.1454(b) through (d) in accordance with the schedule specified
in Sec. 80.1454(g).
[FR Doc. 2010-30296 Filed 12-8-10; 8:45 am]
BILLING CODE 6560-50-P