E9-14849. Regulation of Fuels and Fuel Additives: Modifications to Renewable Fuel Standard Program Requirements

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

EPA is finalizing amendments to the Renewable Fuel Standard program requirements. Following publication of the May 1, 2007, final rule promulgating the Renewable Fuel Standard regulations, EPA discovered a number of technical errors and areas within the regulations that could benefit from clarification or modification. In parallel proposed and direct final rules published on October 8, 2008, EPA proposed to amend the regulations to make the appropriate corrections, clarifications and modifications. However, EPA received adverse comment on several provisions in the parallel proposed and direct final rules and, on November 26, 2008, withdrew those provisions from the direct final rule that drew adverse comment. In today's action, EPA is addressing the comments received on the portions of the direct final rule that were withdrawn and is finalizing those withdrawn provisions with minor clarifying changes.

DATES:

This final rule is effective on August 24, 2009.

ADDRESSES:

EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2005-0161. All documents in the docket are listed on the http://www.regulations.gov Web site. 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, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through http://www.regulations.gov or in hard copy at the Air and Radiation Docket, ID No. EPA-HQ-OAR-2005-0161, 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 [phone], and the telephone number for the Air and Radiation Docket is [phone].

FOR FURTHER INFORMATION CONTACT:

Meg McCarthy, Compliance and Innovative Strategies Division, Office of Transportation and Air Quality (6406J), Environmental Protection Agency, 1200 Pennsylvania Avenue, NW., 20460; telephone number: [phone]; fax number: [phone]; e-mail address: [e-mail].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

Entities potentially affected by this action include those involved with the production, importation, distribution and sale of gasoline motor fuel or renewable fuels such as ethanol and biodiesel. Regulated categories and entities affected by this action include:

Category	NAICS codes a	SIC codes b	Examples of potentially regulated parties
Industry	324110	2911	Petroleum refiners, importers.
Industry	325193	2869	Ethyl alcohol manufacturers.
Industry	325199	2869	Other basic organic chemical manufacturers.
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.
a North American Industry Classification System (NAICS).
b 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 action. This table lists the types of entities that EPA is now aware could be potentially regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria of part 80, subpart K of title 40 of the Code of Federal Regulations. If you have any question regarding applicability of this action to a particular entity, consult the person in the preceding FOR FURTHER INFORMATION CONTACT section above.

II. Renewable Fuel Standard Program Amendments

EPA issued final regulations implementing the Renewable Fuel Standard Program on May 1, 2007. EPA subsequently identified a number of technical errors and ambiguities in the regulations and, in parallel proposed and direct final rules published on October 2, 2008, proposed to amend the regulations to correct these deficiencies. EPA received adverse comment on certain of the proposed changes, so, on November 26, 2008, formally withdrew the portions of the direct final rule that were the subject of adverse comment. Those provisions consisted of amendments to 40 CFR 80.1129(b)(1) and 80.1129(b)(8) (providing that a party with a small refinery or small refiner exemption may only separate RINs that have been assigned to a volume of renewable fuel that the party blends into motor vehicle fuel), 40 CFR 80.1129(b)(4) (providing that any party may separate the RINs from renewable fuel that it produces or markets for use in motor vehicles, or uses in motor vehicles without further blending), and 40 CFR 80.1131(a)(8) and 80.1131(b)(4) (changing the location in the RFS regulations of a provision stating that a RIN that is transferred to two or more parties is considered an invalid RIN unless EPA in its sole discretion determines that some portion of these RINs is valid). EPA published a parallel proposed rule (73 FR 57274) on the same day as the direct final rule. The proposed rule invited comment on the substance of the direct final rule and indicated that a second comment period would not be offered on the proposal in the event that portions of the direct final rule were withdrawn in response to adverse comment. In this action, we are responding to the comments received on the portions of the direct final rule that were withdrawn, and we are finalizing the proposed technical corrections with minor clarifying changes.

A. Separating RINs: Parties With Small Refiner or Small Refinery Exemption

EPA proposed the addition of 40 CFR 80.1129(b)(8) and a conforming change to 80.1129(b)(1) to clarify that a party with a small refinery or small refiner exemption may only separate Renewable Identification Numbers (RINs) that have been assigned to a volume of renewable fuel that the party blends into motor vehicle fuel.

In response to this proposed amendment, EPA received a comment which stated that the proposed 80.1129(b)(8) would result in the provision being overly broad. The comment further articulated a concern that EPA has mistakenly concluded that all refiners who have received either a small refiner exemption under 40 CFR 80.1142 or a small refinery exemption under 40 CFR 80.1141 are not obligated parties under the RFS program, and therefore, that those refiners may only separate RINs that have been assigned to volumes of renewable fuel that the refiner blends into motor vehicle fuel. Refiners who have received the small refinery exemption either are not obligated parties because they do not operate other non-exempt refineries or they are obligated parties because they do operate other non-exempt refineries. The commenter argued that the proposed technical amendment to add 40 CFR 80.1129(b)(8), as written, applies to both groups, but that it should apply only to the former group of refiners and not the latter.

EPA agrees with the comment and has added a clause to the final amendment to 40 80.1129(b)(8) to clarify our intention. Thus, the final rule states that it applies only to parties that have received a small refinery or small refiner exemption and who are “not otherwise obligated parties.”

B. Separating RINs for Renewable Fuel Designated for Use as Motor Vehicle Fuel and Used as Motor Vehicle Fuel

EPA proposed changes to 40 CFR 80.1129(b)(4) in order to clarify that any party, not just renewable fuel producers or importers, may separate the RINs from renewable fuel when it designates that fuel for use in motor vehicles and the renewable fuel is used in motor vehicles in that designated form.

EPA received a comment on 80.1129(b)(4) which stated that that regulation should clarify that EPA intends the provision to apply to motor vehicle fuel used in its neat form, deposited directly into a motor vehicle fuel supply tank as motor vehicle fuel. In response, EPA confirms that the provision was originally meant to apply to neat renewable fuel that is designated for use as motor vehicle fuel, and is used as motor vehicle fuel in its designated form. In other words, the provision applies to neat renewable fuel that is directly used as motor vehicle fuel and is not blended any further. For purposes of the RFS program, “neat renewable fuel” is defined in 80.1101(p) as “a renewable fuel to which only de minimis amounts of conventional gasoline or diesel have been added.” Under the RFS program, denatured ethanol is considered neat renewable fuel, as is denatured ethanol with only an additional de minimis quantity of gasoline added. In the case of biodiesel, a biodiesel producer would be authorized under 80.1129(b)(4) to separate RINs for B100 or B99 that it designates as motor vehicle fuel, providing that the fuel is in fact used that way.

In contrast, any party that blends ethanol with more than a de minimis additional amount of gasoline beyond what is used for denaturing, or blends biodiesel with 20 volume percent or more of conventional diesel must separate any RINs assigned to that volume of renewable fuel, as required under 80.1129(b)(2). Biodiesel blends in which conventional diesel constitutes less than 20 volume percent and more than one percent are ineligible for RIN separation under any circumstances, as specified in 80.1129(b)(2) and (b)(5). As noted in the preamble to the final RFS regulations, it is EPA's understanding that in the vast majority of cases, biodiesel is blended with diesel in biodiesel concentrations of 80 volume percent or less. Therefore, EPA did not anticipate that this restriction would operate to significantly restrict biodiesel blending for fuel production, while it would afford some measure of protection against the possibility that renewable fuel producers could hold back RINs from obligated parties for the purpose of driving up their price. However, we may revisit this issue in a future RFS rulemaking since circumstances may change such that biodiesel blends of 81 percent or greater begin to be used more commonly as motor vehicle fuel.

In the proposed technical amendments, EPA proposed to expand the parties eligible to separate RINS for neat renewable fuel to include any party that produces, imports, owns, sells or uses such fuel. EPA is finalizing the proposed change to 80.1129(b)(4) and, in response to comment, is clarifying that this section applies only to neat renewable fuel.

In addition, EPA is making conforming amendments to 80.1151(b)(5) and 80.11129(b)5)(ii) to reflect the expanded applicability of 80.1129(b)(4).

C. Duplicate RINs

EPA proposed changes to 40 CFR 80.1131(a)(8) and 80.1131(b)(4), which consisted of changing the location in the RFS regulations of a provision stating that a RIN that is transferred to two or more parties is considered an invalid RIN unless EPA in its sole discretion determines that some portion of these RINs is valid.

EPA received a comment which stated that EPA should not invalidate all duplicate RINs, but, rather, the party transferring duplicate RINs should be required to take appropriate actions such as notifying all parties who have received the duplicate RINs, determine which RINs are valid and which are invalid, and transfer replacement RINs to those parties that received invalid RINs.

In response, EPA believes that if duplicate RINs are not made automatically invalid, problems associated with the duplicate RINs may be compounded downstream from the original duplication. For example, additional downstream transfers of duplicate RINs could occur if transferees are confused about which RINs are valid and which are not. EPA believes this type of confusion is minimized by automatically invalidating all RINs for which duplicates have been identified, and giving EPA sole discretion to determine if any of the duplicate RINs are valid. Since EPA received no comment on its proposed relocation of this provision within the RFS program regulations, EPA is finalizing the technical amendments to 40 CFR 80.1131(a)(8) and 80.1131(b)(4) as proposed.

III. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

Under Executive Order 12866, (58 FR 51735 (October 4, 1993)) the Agency must determine whether the regulatory action is “significant” and therefore subject to OMB review and the requirements of the Executive Order. The Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

It has been determined that this action is not a “significant regulatory action” under the terms of Executive Order 12866 and is therefore not subject to OMB review. This final rule simply makes minor technical changes to the RFS regulations and modifies certain requirements to make them less burdensome for regulated parties.

B. Paperwork Reduction Act

This action does not impose any new information collection burden. This action makes minor technical corrections to the regulations and modifies certain requirements to lessen the burden on related parties while maintaining the overall goals of the program. None of the changes in the rule require any additional information collection burdens. The Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulations 40 CFR part 80, subpart K, under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060-0600. 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 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.

In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule. This action makes minor technical corrections to the regulations and modifies certain requirements to lessen the burden on regulated parties. Thus, after considering the economic impacts of today's final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act

This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. This action makes minor technical corrections to the RFS regulations and modifies certain provisions to lessen the requirements for regulated parties. As a result, this rule will have the overall effect of reducing the burden of the RFS regulations on regulated parties. Thus, this rule is not subject to the requirements of sections 202 or 205 of UMRA.

This rule 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. It only applies to gasoline and renewable fuel producers, importers, distributors and marketers and makes minor corrections and modifications to the RFS regulations.

E. Executive Order 13132 (Federalism)

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications.” “Policies that have Federalism implications” is defined in the Executive Order to include regulations that 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.”

This final 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. This action makes minor technical corrections and certain modifications that lessen the burden on related parties. Thus, Executive Order 13132 does not apply to this rule.

F. Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments)

This final rule does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). It applies to gasoline and renewable fuel producers, importers, distributors and marketers. This action makes minor corrections and modifications to the RFS regulations, and does not impose any enforceable duties on communities of Indian tribal governments. 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.

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use

This rule is not subject to Executive Order 13211 (66 FR 18355 (May 22, 2001)), because it is not a significant regulatory action under Executive Order 12866.

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 did not consider 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 final 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. These technical amendments do not relax the control measures on sources regulated by the RFS 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).

List of Subjects in 40 CFR Part 80

• Environmental protection
• Fuel additives
• Gasoline
• Imports
• Motor vehicle pollution
• Reporting and recordkeeping requirements

Dated: June 18, 2009.

Lisa P. Jackson,

Administrator.

40 CFR Part 80 is amended as follows:

PART 80-REGULATION OF FUEL AND FUEL ADDITIVES

1. The authority citation for part 80 continues to read as follows:

Authority: 42 U.S.C. 7414, 7542, 7545, and 7601(a).

2. Section 80.1129 is amended as follows:

a. By revising paragraph (b)(1).

b. By revising paragraph (b)(4).

c. By revising paragraph (b)(5)(ii).

d. By adding paragraph (b)(8).

§ 80.1129

Requirements for separating RINs from volumes of renewable fuel.

* * * * *

(b) * * *

(1) Except as provided in paragraphs (b)(6) and (b)(8) of this section, a party that is an obligated party according to § 80.1106 must separate any RINs that have been assigned to a volume of renewable fuel if they own that volume.

* * * * *

(4) Any party that produces, imports, owns, sells or uses a volume of neat renewable fuel may separate any RINs that have been assigned to that volume of neat renewable fuel if the party designates the neat renewable fuel as motor vehicle fuel, and the neat renewable fuel is used as a motor vehicle fuel.

(5) * * *

(ii) This paragraph (b)(5) shall not apply to any party meeting the requirements of paragraph (b)(4) of this section.

* * * * *

(8) For a party that has received a small refinery exemption under § 80.1141 or a small refiner exemption under § 80.1142, and who is not otherwise an obligated party, during the period of time that the small refinery or small refiner exemption is in effect the party may only separate RINs that have been assigned to volumes of renewable fuel that the party blends into motor vehicle fuel in accordance with paragraph (b)(2) of this section.

* * * * *

3. Section 80.1131 is amended by adding paragraph (a)(8) and removing paragraph (b)(4) to read as follows:

§ 80.1131

Treatment of invalid RINs.

(a) * * *

(8) In the event that the same RIN is transferred to two or more parties, all such RINs will be deemed to be invalid, unless EPA in its sole discretion determines that some portion of these RINs is valid.

* * * * *

4. Section 80.1151 is amended by revising paragraph (b)(5) to read as follows:

§ 80.1151

What are the recordkeeping requirements under the RFS program?

* * * * *

(b) * * *

(5) Records related to the production, importation, ownership, sale or use of any volume of neat renewable fuel that any party designates as motor vehicle fuel and uses as motor vehicle fuel.

* * * * *