Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program

 
CONTENT

Federal Register: March 26, 2010 (Volume 75, Number 58)

Rules and Regulations

Page 14669-14904

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr26mr10-9

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Part II

Book 2 of 2 Books

Pages 14669-15320

Environmental Protection Agency

40 CFR Part 80

Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel

Standard Program; Final Rule

Page 14670

ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 80

EPA-HQ-OAR-2005-0161; FRL-9112-3

RIN 2060-A081

Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel

Standard Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

SUMMARY: Under the Clean Air Act Section 211(o), as amended by the

Energy Independence and Security Act of 2007 (EISA), the Environmental

Protection Agency is required to promulgate regulations implementing changes to the Renewable Fuel Standard program. The revised statutory requirements specify the volumes of cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that must be used in transportation fuel. This action finalizes the regulations that implement the requirements of EISA, including the cellulosic, biomass- based diesel, advanced biofuel, and renewable fuel standards that will apply to all gasoline and diesel produced or imported in 2010. The final regulations make a number of changes to the current Renewable

Fuel Standard program while retaining many elements of the compliance and trading system already in place. This final rule also implements the revised statutory definitions and criteria, most notably the new greenhouse gas emission thresholds for renewable fuels and new limits on renewable biomass feedstocks. This rulemaking marks the first time that greenhouse gas emission performance is being applied in a regulatory context for a nationwide program. As mandated by the statute, our greenhouse gas emission assessments consider the full lifecycle emission impacts of fuel production from both direct and indirect emissions, including significant emissions from land use changes. In carrying out our lifecycle analysis we have taken steps to ensure that the lifecycle estimates are based on the latest and most up-to-date science. The lifecycle greenhouse gas assessments reflected in this rulemaking represent significant improvements in analysis based on information and data received since the proposal. However, we also recognize that lifecycle GHG assessment of biofuels is an evolving discipline and will continue to revisit our lifecycle analyses in the future as new information becomes available. EPA plans to ask the

National Academy of Sciences for assistance as we move forward. Based on current analyses we have determined that ethanol from corn starch will be able to comply with the required greenhouse gas (GHG) threshold for renewable fuel. Similarly, biodiesel can be produced to comply with the 50% threshold for biomass-based diesel, sugarcane with the 50% threshold for advanced biofuel and multiple cellulosic-based fuels with their 60% threshold. Additional fuel pathways have also been determined to comply with their thresholds. The assessment for this rulemaking also indicates the increased use of renewable fuels will have important environmental, energy and economic impacts for our Nation.

DATES: This final rule is effective on July 1, 2010, and the percentage standards apply to all gasoline and diesel produced or imported in 2010. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of July 1, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID

No. EPA-HQ-OAR-2005-0161. All documents in the docket are listed in the http://www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, 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 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: macallister.julia@epa.gov, or Assessment and Standards

Division Hotline; telephone number (734) 214-4636; E-mail address asdinfo@epa.gov.

SUPPLEMENTARY INFORMATION:

General Information

I. Does This Final Rule 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. Regulated categories include:

NAICS \1\

Category

codes

SIC \2\ codes

Examples of potentially regulated entities

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

\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 final action. Other types of entities not listed in the table could also be regulated. To determine whether your activities would be regulated by this final action, you should carefully examine the applicability criteria in 40

CFR part 80. If you have any questions regarding the applicability of this final action to a

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particular entity, consult the person listed in the preceding section.

Outline of This Preamble

I. Executive Summary

A. Summary of New Provisions of the RFS Program 1. Required Volumes of Renewable Fuel 2. Standards for 2010 and Effective Date for New Requirements a. 2010 Standards b. Effective Date 3. Analysis of Lifecycle Greenhouse Gas Emissions and Thresholds for Renewable Fuels a. Background and Conclusions b. Fuel Pathways Considered and Key Model Updates Since the

Proposal c. Consideration of Fuel Pathways Not Yet Modeled 4. Compliance with Renewable Biomass Provision 5. EPA-Moderated Transaction System 6. Other Changes to the RFS Program

B. Impacts of Increasing Volume Requirements in the RFS2 Program

II. Description of the Regulatory Provisions

A. Renewable Identification Numbers (RINs)

B. New Eligibility Requirements for Renewable Fuels 1. Changes in Renewable Fuel Definitions a. Renewable Fuel b. Advanced Biofuel c. Cellulosic Biofuel d. Biomass-Based Diesel e. Additional Renewable Fuel f. Cellulosic Diesel 2. Lifecycle GHG Thresholds 3. Renewable Fuel Exempt From 20 Percent GHG Threshold a. General Background of the Exemption Requirement b. Definition of Commenced Construction c. Definition of Facility Boundary d. Proposed Approaches and Consideration of Comments i. Comments on the Proposed Basic Approach ii. Comments on the Expiration of Grandfathered Status e. Final Grandfathering Provisions i. Increases in Volume of Renewable Fuel Produced at

Grandfathered Facilities Due to Expansion ii. Replacements of Equipment iii. Registration, Recordkeeping and Reporting 4. New Renewable Biomass Definition and Land Restrictions a. Definitions of Terms i. Planted Crops and Crop Residue ii. Planted Trees and Tree Residue iii. Slash and Pre-Commercial Thinnings iv. Biomass Obtained From Certain Areas at Risk From Wildfire v. Algae b. Implementation of Renewable Biomass Requirements i. Ensuring That RINs Are Generated Only For Fuels Made From

Renewable Biomass ii. Whether RINs Must Be Generated For All Qualifying Renewable

Fuel c. Implementation Approaches for Domestic Renewable Fuel i. Recordkeeping and Reporting for Feedstocks ii. Approaches for Foreign Producers of Renewable Fuel

(1) RIN-Generating importers

(2) RIN-Generating foreign producers iii. Aggregate Compliance Approach for Planted Crops and Crop

Residue From Agricultural Land

(1) Analysis of Total Agricultural Land in 2007

(2) Aggregate Agricultural Land Trends Over Time

(3) Aggregate Compliance Determination d. Treatment of Municipal Solid Waste (MSW)

C. Expanded Registration Process for Producers and Importers 1. Domestic Renewable Fuel Producers 2. Foreign Renewable Fuel Producers 3. Renewable Fuel Importers 4. Process and Timing

D. Generation of RINs 1. Equivalence Values 2. Fuel Pathways and Assignment of D Codes a. Producers b. Importers c. Additional Provisions for Foreign Producers 3. Facilities With Multiple Applicable Pathways 4. Facilities That Co-Process Renewable Biomass and Fossil Fuels 5. Facilities That Process Municipal Solid Waste 6. RINless Biofuel

E. Applicable Standards 1. Calculation of Standards a. How Are the Standards Calculated? b. Standards for 2010 2. Treatment of Biomass-Based Diesel in 2009 and 2010 a. Shift in 2009 Biomass-Based Diesel Compliance Demonstration to 2010 b. Treatment of Deficit Carryovers, RIN Rollover, and RIN Valid

Life For Adjusted 2010 Biomass-Based Diesel Requirement 3. Future Standards

F. Fuels That Are Subject to the Standards 1. Gasoline 2. Diesel 3. Other Transportation Fuels

G. Renewable Volume Obligations (RVOs) 1. Designation of Obligated Parties 2. Determination of RVOs Corresponding to the Four Standards 3. RINs Eligible To Meet Each RVO 4. Treatment of RFS1 RINs Under RFS2 a. Use of RFS1 RINs To Meet Standards Under RFS2 b. Deficit Carryovers From the RFS1 Program to RFS2

H. Separation of RINs 1. Nonroad 2. Heating Oil and Jet Fuel 3. Exporters 4. Requirement to Transfer RINs With Volume 5. Neat Renewable Fuel and Renewable Fuel Blends Designated as

Transportation Fuel, Heating Oil, or Jet Fuel

I. Treatment of Cellulosic Biofuel 1. Cellulosic Biofuel Standard 2. EPA Cellulosic Biofuel Waiver Credits for Cellulosic Biofuel 3. Application of Cellulosic Biofuel Waiver Credits

J. Changes to Recordkeeping and Reporting Requirements 1. Recordkeeping 2. Reporting 3. Additional Requirements for Producers of Renewable Natural

Gas, Electricity, and Propane 4. Attest Engagements

K. Production Outlook Reports

L. What Acts Are Prohibited and Who Is Liable for Violations?

III. Other Program Changes

A. The EPA Moderated Transaction System (EMTS) 1. Need for the EPA Moderated Transaction System 2. Implementation of the EPA Moderated Transaction System 3. How EMTS Will Work 4. A Sample EMTS Transaction

B. Upward Delegation of RIN-Separating Responsibilities

C. Small Producer Exemption

D. 20% Rollover Cap

E. Small Refinery and Small Refiner Flexibilities 1. Background--RFS1 a. Small Refinery Exemption b. Small Refiner Exemption 2. Statutory Options for Extending Relief 3. The DOE Study/DOE Study Results 4. Ability To Grant Relief Beyond 211(o)(9) 5. Congress-Requested Revised DOE Study 6. What We're Finalizing a. Small Refinery and Small Refiner Temporary Exemptions b. Case-by-Case Hardship for Small Refineries and Small Refiners c. Program Review 7. Other Flexibilities Considered for Small Refiners a. Extensions of the RFS1 Temporary Exemption for Small Refiners b. Phase-in c. RIN-Related Flexibilities

F. Retail Dispenser Labeling for Gasoline With Greater Than 10

Percent Ethanol

G. Biodiesel Temperature Standardization

IV. Renewable Fuel Production and Use

A. Overview of Renewable Fuel Volumes 1. Reference Cases 2. Primary Control Case a. Cellulosic Biofuel b. Biomass-Based Diesel c. Other Advanced Biofuel d. Other Renewable Fuel 3. Additional Control Cases Considered

B. Renewable Fuel Production 1. Corn/Starch Ethanol a. Historic/Current Production b. Forecasted Production Under RFS2 2. Imported Ethanol 3. Cellulosic Biofuel a. Current State of the Industry b. Setting the 2010 Cellulosic Biofuel Standard c. Current Production Outlook for 2011 and Beyond d. Feedstock Availability i. Urban Waste ii. Agricultural and Forestry Residues iii. Dedicated Energy Crops

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iv. Summary of Cellulosic Feedstocks for 2022 4. Biodiesel & Renewable Diesel a. Historic and Projected Production i. Biodiesel ii. Renewable Diesel b. Feedstock Availability

C. Biofuel Distribution 1. Biofuel Shipment to Petroleum Terminals 2. Petroleum Terminal Accommodations 3. Potential Need for Special Blendstocks at Petroleum Terminals for E85 4. Need for Additional E85 Retail Facilities

D. Ethanol Consumption 1. Historic/Current Ethanol Consumption 2. Increased Ethanol Use Under RFS2 a. Projected Gasoline Energy Demand b. Projected Growth in Flexible Fuel Vehicles c. Projected Growth in E85 Access d. Required Increase in E85 Refueling Rates e. Market Pricing of E85 Versus Gasoline 3. Consideration of >10% Ethanol Blends

V. Lifecycle Analysis of Greenhouse Gas Emissions

A. Introduction 1. Open and Science-Based Approach to EPA's Analysis 2. Addressing Uncertainty

B. Methodology 1. Scope of Analysis a. Inclusion of Indirect Land Use Change b. Models Used c. Scenarios Modeled 2. Biofuel Modeling Framework & Methodology for Lifecycle

Analysis Components a. Feedstock Production i. Domestic Agricultural Sector Impacts ii. International Agricultural Sector Impacts b. Land Use Change i. Amount of Land Area Converted and Where ii. Type of Land Converted iii. GHG Emissions Associated With Conversion

(1) Domestic Emissions

(2) International Emissions iv. Timeframe of Emission Analysis v. GTAP and Other Models c. Feedstock Transport d. Biofuel Processing e. Fuel Transportation f. Vehicle Tailpipe Emissions 3. Petroleum Baseline

C. Threshold Determination and Assignment of Pathways

D. Total GHG Reductions

E. Effects of GHG Emission Reductions and Changes in Global

Temperature and Sea Level

VI. How Would the Proposal Impact Criteria and Toxic Pollutant

Emissions and Their Associated Effects?

A. Overview of Impacts

B. Fuel Production & Distribution Impacts of the Proposed

Program

C. Vehicle and Equipment Emission Impacts of Fuel Program

D. Air Quality Impacts 1. Particulate Matter a. Current Levels b. Projected Levels Without RFS2 Volumes c. Projected Levels With RFS2 Volumes 2. Ozone a. Current Levels b. Projected Levels Without RFS2 Volumes c. Projected Levels With RFS2 Volumes 3. Air Toxics a. Current Levels b. Projected Levels i. Acetaldehyde ii. Formaldehyde iii. Ethanol iv. Benzene v. 1,3-Butadiene vi. Acrolein vii. Population Metrics 4. Nitrogen and Sulfur Deposition a. Current Levels b. Projected Levels

E. Health Effects of Criteria and Air Toxics Pollutants 1. Particulate Matter a. Background b. Health Effects of PM 2. Ozone a. Background b. Health Effects of Ozone 3. NOXand SOX a. Background b. Health Effects of NOX c. Health Effects of SOX 4. Carbon Monoxide 5. Air Toxics a. Acetaldehyde b. Acrolein c. Benzene d. 1,3-Butadiene e. Ethanol f. Formaldehyde g. Peroxyacetyl Nitrate (PAN) h. Naphthalene i. Other Air Toxics

F. Environmental Effects of Criteria and Air Toxic Pollutants 1. Visibility 2. Atmospheric Deposition 3. Plant and Ecosystem Effects of Ozone 4. Environmental Effects of Air Toxics

VII. Impacts on Cost of Renewable Fuels, Gasoline, and Diesel

A. Renewable Fuel Production Costs 1. Ethanol Production Costs a. Corn Ethanol b. Cellulosic Ethanol i. Feedstock Costs ii. Production Costs for Cellulosic Biofuels c. Imported Sugarcane Ethanol 2. Biodiesel and Renewable Diesel Production Costs a. Biodiesel b. Renewable Diesel

B. Biofuel Distribution Costs 1. Ethanol Distribution Costs 2. Cellulosic Distillate and Renewable Diesel Distribution Costs 3. Biodiesel Distribution Costs

C. Reduced U.S. Refining Demand

D. Total Estimated Cost Impacts 1. Refinery Modeling Methodology 2. Overall Impact on Fuel Cost

VIII. Economic Impacts and Benefits

A. Agricultural and Forestry Impacts 1. Biofuel Volumes Modeled 2. Commodity Price Changes 3. Impacts on U.S. Farm Income 4. Commodity Use Changes 5. U.S. Land Use Changes 6. Impact on U.S. Food Prices 7. International Impacts

B. Energy Security Impacts 1. Implications of Reduced Petroleum Use on U.S. Imports 2. Energy Security Implications a. Effect of Oil Use on Long-Run Oil Price, U.S. Import Costs, and Economic Output b. Short-Run Disruption Premium From Expected Costs of Sudden

Supply Disruptions c. Costs of Existing U.S. Energy Security Policies 3. Combining Energy Security and Other Benefits 4. Total Energy Security Benefits

C. Benefits of Reducing GHG Emissions 1. Introduction 2. Derivation of Interim Social Cost of Carbon Values 3. Application of Interim SCC Estimates to GHG Emissions

Reductions

D. Criteria Pollutant Health and Environmental Impacts 1. Overview 2. Quantified Human Health Impacts 3. Monetized Impacts 4. What Are the Limitations of the Health Impacts Analysis?

E. Summary of Costs and Benefits

IX. Impacts on Water

A. Background 1. Agriculture and Water Quality 2. Ecological Impacts 3. Impacts to the Gulf of Mexico

B. Upper Mississippi River Basin Analysis 1. SWAT Model 2. AEO 2007 Reference Case 3. Reference Cases and RFS2 Control Case 4. Case Study 5. Sensitivity Analysis

C. Additional Water Issues 1. Chesapeake Bay Watershed 2. Ethanol Production and Distribution a. Production b. Distillers Grain With Solubles c. Ethanol Leaks and Spills From Fueling Stations 3. Biodiesel Plants 4. Water Quantity 5. Drinking Water

X. Public Participation

XI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Act 1. Overview 2. Background 3. Summary of Potentially Affected Small Entities 4. Reporting, Recordkeeping, and Compliance 5. Related Federal Rules 6. Steps Taken To Minimize the Significant Economic Impact on

Small Entities a. Significant Panel Findings b. Outreach With Small Entities (and the Panel Process) c. Panel Recommendations, Proposed Provisions, and Provisions

Being Finalized i. Delay in Standards ii. Phase-in iii. RIN-Related Flexibilities iv. Program Review

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v. Extensions of the Temporary Exemption Based on a Study of

Small Refinery Impacts vi. Extensions of the Temporary Exemption Based on

Disproportionate Economic Hardship 7. Conclusions

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

XII. Statutory Provisions and Legal Authority

I. Executive Summary

Through this final rule, the U.S. Environmental Protection Agency is revising the National Renewable Fuel Standard program to implement the requirements of the Energy Independence and Security Act of 2007

(EISA). EISA made significant changes to both the structure and the magnitude of the renewable fuel program created by the Energy Policy

Act of 2005 (EPAct). The EISA fuel program, hereafter referred to as

RFS2, mandates the use of 36 billion gallons of renewable fuel by 2022--a nearly five-fold increase over the highest volume specified by

EPAct. EISA also established four separate categories of renewable fuels, each with a separate volume mandate and each with a specific lifecycle greenhouse gas emission threshold. The categories are renewable fuel, advanced biofuel, biomass-based diesel, and cellulosic biofuel. There is a notable increase in the mandate for cellulosic biofuels in particular. EISA increased the cellulosic biofuel mandate to 16 billion gallons by 2022, representing the bulk of the increase in the renewable fuels mandate.

EPA's proposed rule sought comment on a multitude of issues, ranging from how to interpret the new definitions for renewable biomass to the Agency's proposed methodology for conducting the greenhouse gas lifecycle assessments required by EISA. The decisions presented in this final rule are heavily informed by the many public comments we received on the proposed rule. In addition, and as with the proposal, we sought input from a wide variety of stakeholders. The Agency has had multiple meetings and discussions with renewable fuel producers, technology companies, petroleum refiners and importers, agricultural associations, lifecycle experts, environmental groups, vehicle manufacturers, states, gasoline and petroleum marketers, pipeline owners and fuel terminal operators. We also have worked closely with other Federal agencies and in particular with the Departments of Energy and Agriculture.

This section provides an executive summary of the final RFS2 program requirements that EPA is implementing as a result of EISA. The

RFS2 program will replace the RFS1 program promulgated on May 1, 2007

(72 FR 23900).\1\ Details of the final requirements can be found in

Sections II and III, with certain lifecycle aspects detailed in Section

V.

\1\ To meet the requirements of EPAct, EPA had previously adopted a limited program that applied only to calendar year 2006.

The RFS1 program refers to the general program adopted in the May 2007 rulemaking.

This section also provides a summary of EPA's assessment of the environmental and economic impacts of the use of higher renewable fuel volumes. Details of these analyses can be found in Sections IV through

IX and in the Regulatory Impact Analysis (RIA).

A. Summary of New Provisions of the RFS Program

Today's notice establishes new regulatory requirements for the RFS program that will be implemented through a new subpart M to 40 CFR part 80. EPA is maintaining several elements of the RFS1 program such as regulations governing the generation, transfer, and use of Renewable

Identification Numbers (RINs). At the same time, we are making a number of updates to reflect the changes brought about by EISA 1. Required Volumes of Renewable Fuel

The RFS program is intended to require a minimum volume of renewable fuel to be used each year in the transportation sector. In response to EPAct 2005, under RFS1 the required volume was 4.0 billion gallons in 2006, ramping up to 7.5 billion gallons by 2012. Starting in 2013, the program also required that the total volume of renewable fuel contain at least 250 million gallons of fuel derived from cellulosic biomass.

In response to EISA, today's action makes four primary changes to the volume requirements of the RFS program. First, it substantially increases the required volumes and extends the timeframe over which the volumes ramp up through at least 2022. Second, it divides the total renewable fuel requirement into four separate categories, each with its own volume requirement. Third, it requires, with certain exceptions applicable to existing facilities, that each of these mandated volumes of renewable fuels achieve certain minimum thresholds of GHG emission performance. Fourth, it requires that all renewable fuel be made from feedstocks that meet the new definition of renewable biomass including certain land use restrictions. The volume requirements in EISA are shown in Table I.A.1-1.

BILLING CODE 6560-50-P

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GRAPHIC

TIFF OMITTED TR26MR10.414

BILLING CODE 6560-50-C

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As shown in the table, the volume requirements are not exclusive, and generally result in nested requirements. Any renewable fuel that meets the requirement for cellulosic biofuel or biomass-based diesel is also valid for meeting the advanced biofuel requirement. Likewise, any renewable fuel that meets the requirement for advanced biofuel is also valid for meeting the total renewable fuel requirement. See Section V.C for further discussion of which specific types of fuel may qualify for the four categories shown in Table I.A.1-1. 2. Standards for 2010 and Effective Date for New Requirements

While EISA established the renewable fuel volumes shown in Table

I.A.1-1, it also requires that the Administrator set the standards based on these volumes each November for the following year based in part on information provided from the Energy Information Agency (EIA).

In the case of the cellulosic biofuel standard, section 211(o)(7)(D) of

EISA specifically requires that the standard be set based on the volume projected to be available during the following year. If the volume is lower than the level shown in Table I.A.1-1, then EISA allows the

Administrator to also lower the advanced biofuel and total renewable fuel standards each year accordingly. Given the implications of these standards and the necessary judgment that can't be reduced to a formula akin to the RFS1 regulations, we believe it is appropriate to set the standards through a notice-and-comment rulemaking process. Thus, for future standards, we intend to issue an NPRM by summer and a final rule by November 30 of each year in order to determine the appropriate standards applicable in the following year. However, in the case of the 2010 standards, we are finalizing them as part of today's action. a. 2010 Standards

While we proposed that the cellulosic biofuel standard would be set at the EISA-specified level of 100 million gallons for 2010, based on analysis of information available at this time, we no longer believe the full volume can be met. Since the proposal, we have had detailed discussions with over 30 companies that are in the business of developing cellulosic biofuels and cellulosic biofuel technology. Based on these discussions, we have found that many of the projects that served as the basis for the proposal have been put on hold, delayed, or scaled back. At the same time, there have been a number of additional projects that have developed and are moving forward. As discussed in

Section IV.B.3, the timing for many of the projects indicates that while few will be able to provide commercial volumes for 2010, an increasing number will come on line in 2011, 2012, and 2013. The success of these projects is then expected to accelerate growth of the cellulosic biofuel industry out into the future. EIA provided us with a projection on October 29, 2009 of 5.04 million gallons (6.5 million ethanol-equivalent gallons) of cellulosic biofuel production for 2010.

While our company-by-company assessment varies from EIA's, as described in Section IV.B.3., and actual cellulosic production volume during 2010 will be a function of developments over the course of 2010, we nevertheless believe that 5 million gallons (6.5 million ethanol equivalent) represents a reasonable, yet achievable level for the cellulosic standard for 2010. While this is lower than the level specified in EISA, no change to the advanced biofuel and total renewable fuel standards is warranted. With the inclusion of an energy- based Equivalence Value for biodiesel and renewable diesel, 2010 compliance with the biomass-based diesel standard will be more than enough to ensure compliance with the advanced biofuel standard for 2010.

Today's rule also includes special provisions to account for the 2009 biomass-based diesel volume requirements in EISA. As described in the NPRM, in November 2008 we used the new total renewable fuel volume of 11.1 billion gallons from EISA as the basis for the 2009 total renewable fuel standard that we issued under the RFS1 regulations.\2\

While this approach ensured that the total mandated renewable fuel volume required by EISA for 2009 was used, the RFS1 regulatory structure did not provide a mechanism for implementing the 0.5 billion gallon requirement for biomass-based diesel nor the 0.6 billion gallon requirement for advanced biofuel. As we proposed, and as is described in more detail in Section II.E.2, we are addressing this issue in today's rule by combining the 2010 biomass-based diesel requirement of 0.65 billion gallons with the 2009 biomass based diesel requirement of 0.5 billion gallons to require that obligated parties meet a combined 2009/2010 requirement of 1.15 billion gallons by the end of the 2010 compliance year. No similar provisions are required in order to fulfill the 2009 advanced biofuel volume mandate.

\2\ 73 FR 70643, November 21, 2008

The resulting 2010 standards are shown in Table I.A.2-1. These standards represent the fraction of a refiner's or importer's gasoline and diesel volume which must be renewable fuel. Additional discussion of the 2010 standards can be found in Section II.E.1.b.

Table I.A.2-1--Standards for 2010

Cellulosic biofuel.........................................

0.004%

Biomass-based diesel.......................................

1.10%

Advanced biofuel...........................................

0.61%

Renewable fuel.............................................

8.25%

b. Effective Date

Under CAA section 211(o) as modified by EISA, EPA is required to revise the RFS1 regulations within one year of enactment, or December 19, 2008. Promulgation by this date would have been consistent with the revised volume requirements shown in Table I.A.1-1 that begin in 2009 for certain categories of renewable fuel. As described in the NPRM, we were not able to promulgate final RFS2 program requirements by December 19, 2008.

Under today's rule, the transition from using the RFS1 regulatory provisions regarding registration, RIN generation, reporting, and recordkeeping to using comparable provisions in this RFS2 rule will occur on July 1, 2010. This is the start of the 1st quarter following completion of the statutorily required 60-day Congressional Review period for such a rulemaking as this. This will provide adequate lead time for all parties to transition to the new regulatory requirements, including additional time to prepare for RFS2 implementation for those entities who may find it helpful, especially those covered by the RFS program for the first time. In addition, making the transition at the end of the quarter will help simplify the recordkeeping and reporting transition to RFS2. To facilitate the volume obligations being based on the full year's gasoline and diesel production, and to enable the smooth transition from the RFS1 to RFS2 regulatory provisions,

Renewable Identification Numbers (RINs--which are used in the program for both credit trading and for compliance demonstration) that were generated under the RFS1 regulations will continue to be valid for compliance with the RFS2 obligations. Further discussion of transition issues can be found in Sections II.A and II.G.4, respectively.

According to EISA, the renewable fuel obligations applicable under

RFS2 apply on a calendar basis. That is, obligated parties must determine their

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renewable volume obligations (RVOs) at the end of a calendar year based on the volume of gasoline or diesel fuel they produce during the year, and they must demonstrate compliance with their RVOs in an annual report that is due two months after the end of the calendar year.

For 2010, today's rule will follow this same general approach. The four RFS2 RVOs for each obligated party will be calculated on the basis of all gasoline and diesel produced or imported on and after January 1, 2010, through December 31, 2010. Obligated parties will be required to demonstrate by February 28 of 2011 that they obtained sufficient RINs to satisfy their 2010 RVOs. We believe this is an appropriate approach as it is more consistent with Congress' provisions in EISA for 2010, and there is adequate lead time for the obligated parties to achieve compliance.

The issue for EPA to resolve is how to apply the four volume mandates under EISA for calendar year 2010. These volume mandates are translated into applicable percentages that obligated parties then use to determine their renewable fuel volume obligations based on the gasoline and diesel they produce or import in 2010. There are three basic approaches that EPA has considered, based on comments on the proposal. The first is the approach adopted in this rule--the four RFS2 applicable percentages are determined based on the four volume mandates covered by this rule, and the renewable volume obligation for a refiner or importer will be determined by applying these percentages to the volume of gasoline and diesel fuel they produce during calendar year 2010. Under this approach, there is no separate applicable percentage under RFS1 for 2010, however RINs generated in 2009 and 2010 under RFS1 can be used to meet the four volume obligations for 2010 under the RFS2 regulations. Another option, which was considered and rejected by EPA, is much more complicated--(1) determine an RFS1 applicable percentage based on just the total renewable fuel volume mandate, using the same total volume for renewable fuel as used in the first approach, and require obligated parties to apply that percentage to the gasoline produced from January 1, 2010 until the effective date of the RFS2 regulations, and (2) determine the four RFS2 applicable percentages as discussed above, but require obligated parties to apply them to only the gasoline and diesel in 2010 after the effective date of the RFS2 regulations. Of greater concern than its complexity, the second approach fails to ensure that the total volumes for three of the volume mandates are met for 2010. In effect EPA would be requiring that obligated parties use enough cellulosic biofuel, biomass-based diesel, and advanced biofuel to meet approximately 75% of the total volumes required for these fuels under EISA. While the total volume mandate under EISA for renewable fuel would likely be met, the other three volumes mandates would only be met in part. The final option would involve delaying the RFS2 requirements until January 1, 2011, which would avoid the complexity of the second approach, but would be even less consistent with EISA's requirements.

The approach adopted in this rule is clearly the most consistent with EISA's requirement of four different volume mandates for all of calendar year 2010. In addition, EPA is confident that obligated parties have adequate lead-time to comply with the four volume requirements under the approach adopted in this rule. The volume requirements are achieved by obtaining the appropriate number of RINs from producers of the renewable fuel. The obligated parties do not need lead time for construction or investment purposes, as they are not changing the way they produce gasoline or diesel, do not need to design to install new equipment, or take other actions that require longer lead time. Obtaining the appropriate amount of RINs involves contractual or other arrangements with renewable fuel producers or other holders of RINs. Obligated parties now have experience implementing RFS1, and the actions needed to comply under the RFS2 regulations are a continuation of these kinds of RFS1 activities. In addition, an adequate supply of RINs is expected to be available for compliance by obligated parties. RFS1 RINs have been produced throughout 2009 and continue to be produced since the beginning of 2010. There has been and will be no gap or lag in the production of

RINS, as the RFS1 regulations continue in effect and require that renewable fuel producers generate RINs for the renewable fuel they produce. These 2009 and 2010 RFS1 RINs will be available and can be used towards the volume requirements of obligated parties for 2010.

These RFS1 RINS combined with the RFS2 RINs that will be generated by renewable fuel producers are expected to provide an adequate supply of

RINs to ensure compliance for all of the renewable volume mandates. For further discussion of the expected supply of renewable fuel, see section IV.

In addition, obligated parties have received adequate notice of this obligation. The proposed rule called for obligated parties to meet the full volume mandates for all four volume mandates, and to base their volume obligation on the volume of gasoline and diesel produced starting January 1, 2010. While the RFS2 regulations are not effective until after January 1, 2010, the same full year approach is being taken for the 2010 volumes of gasoline and diesel. Obligated parties have been on notice based on EPA's proposal, discussions with many stakeholders during the rulemaking, the issuance of the final rule itself, and publication of this rule in the Federal Register. As discussed above, there is adequate time for obligated parties to meet their 2010 volume obligations by the spring of 2011.

This approach does not impose any retroactive requirements. The obligation that is imposed under the RFS2 regulations is forward looking--by the spring of 2011, when compliance is determined, obligated parties must satisfy certain volume obligations. These future requirements are calculated in part based on volumes of gasoline and diesel produced prior to the effective date of the RFS2 regulations, but this does not make the RFS2 requirement retroactive in nature. The

RFS2 regulations do not change in any way the legal obligations or requirements that apply prior to the effective date of the RFS2 regulations. Instead, the RFS2 requirements impose new requirements that must be met in the future. There is adequate lead time to comply with these RFS2 requirements, and they achieve a result that is more consistent with Congress' goals in establishing 4 volume mandates for calendar year 2010, and for these reasons EPA is adopting this approach for calendar year 2010.

Parties that intend to generate RINs, own and/or transfer them, or use them for compliance purposes after July 1, 2010 will need to register or re-register under the RFS2 provisions and modify their information technology (IT) systems to accommodate the changes we are finalizing today. As described more fully in Section II, these changes include redefining the D code within the RIN that identifies which standard a fuel qualifies for, adding a process for verifying that feedstocks meet the renewable biomass definition, and calculating compliance with four standards instead of one. EPA's registration system is available now for parties to complete the registration process. Further details on this process can be found elsewhere in today's preamble as well as at http://www.epa.gov/otaq/regs/fuels/

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fuelsregistration.htm. Parties that produce motor vehicle, nonroad, locomotive, and marine (MVNRLM) diesel fuel but not gasoline will be newly obligated parties and may be establishing IT systems for the RFS program for the first time. 3. Analysis of Lifecycle Greenhouse Gas Emissions and Thresholds for

Renewable Fuels a. Background and Conclusions

A significant aspect of the RFS2 program is the requirement that the lifecycle GHG emissions of a qualifying renewable fuel must be less than the lifecycle GHG emissions of the 2005 baseline average gasoline or diesel fuel that it replaces; four different levels of reductions are required for the four different renewable fuel standards. These lifecycle performance improvement thresholds are listed in Table I.A.3- 1. Compliance with each threshold requires a comprehensive evaluation of renewable fuels, as well as the baseline for gasoline and diesel, on the basis of their lifecycle emissions. As mandated by EISA, the greenhouse gas emissions assessments must evaluate the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions form land use changes) related to the full lifecycle, including all stages of fuel and feedstock production, distribution and use by the ultimate consumer.

Table I.A.3-1--Lifecycle GHG Thresholds Specified in EISA

Percent Reduction from Baseline

Renewable fuel \a\.........................................

20

Advanced biofuel...........................................

50

Biomass-based diesel.......................................

50

Cellulosic biofuel.........................................

60

\a\ The 20% criterion generally applies to renewable fuel from new facilities that commenced construction after December 19, 2007.

It is important to recognize that fuel from the existing capacity of current facilities and the capacity of all new facilities that commenced construction prior to December 19, 2007 (and in some cases prior to December 31, 2009) are exempt, or grandfathered, from the 20% lifecycle requirement for the Renewable Fuel category. Therefore, EPA has in the discussion below emphasized its analysis on those plants and fuels that are likely to be used for compliance with the rule and would be subject to the lifecycle thresholds. Based on the analyses and approach described in Section V of this preamble, EPA is determining that ethanol produced from corn starch at a new facility (or expanded capacity from an existing) using natural gas, biomass or biogas for process energy and using advanced efficient technologies that we expect will be most typical of new production facilities will meet the 20% GHG emission reduction threshold compared to the 2005 baseline gasoline. We are also determining that biobutanol from corn starch meets the 20% threshold. Similarly, EPA is making the determination that biodiesel and renewable diesel from soy oil or waste oils, fats and greases will exceed the 50% GHG threshold for biomass-based diesel compared to the 2005 petroleum diesel baseline. In addition, we have now modeled biodiesel and renewable diesel produced from algal oils as complying with the 50% threshold for biomass-based diesel. EPA is also determining that ethanol from sugarcane complies with the applicable 50% GHG reduction threshold for advanced biofuels. The modeled pathways

(feedstock and production technology) for cellulosic ethanol and cellulosic diesel would also comply with the 60% GHG reduction threshold applicable to cellulosic biofuels. As discussed later in section V, there are also other fuels and fuel pathways that we are determining will comply with the GHG thresholds.

Under EISA, EPA is allowed to adjust the GHG reduction thresholds downward by up to 10% if necessary based on lifecycle GHG assessment of biofuels likely to be available. Based on the results summarized above, we are not finalizing any adjustments to the lifecycle GHG thresholds for the four renewable fuel standard categories.

EPA recognizes that as the state of scientific knowledge continues to evolve in this area, the lifecycle GHG assessments for a variety of fuel pathways are likely to be updated. Therefore, while EPA is using its current lifecycle assessments to inform the regulatory determinations for fuel pathways in this final rule, as required by the statute, the Agency is also committing to further reassess these determinations and lifecycle estimates. As part of this ongoing effort, we will ask for the expert advice of the National Academy of Sciences, as well as other experts, and incorporate their advice and any updated information we receive into a new assessment of the lifecycle GHG emissions performance of the biofuels being evaluated in this final rule. EPA will request that the National Academy of Sciences evaluate the approach taken in this rule, the underlying science of lifecycle assessment, and in particular indirect land use change, and make recommendations for subsequent lifecycle GHG assessments on this subject. At this time we are estimating this review by the National

Academy of Sciences may take up to two years. As specified by EISA, if

EPA revises the analytical methodology for determining lifecycle greenhouse gas emissions, any such revision will apply to renewable fuel from new facilities that commence construction after the effective date of the revision. b. Fuel Pathways Considered and Key Model Updates Since the Proposal

EPA is making the GHG threshold determination based on a methodology that includes an analysis of the full lifecycle, including significant emissions related to international land-use change. As described in more detail below and in Section V of this preamble, EPA has used the best available models for this purpose, and has incorporated many modifications to its proposed approach based on comments from the public and peer reviewers and developing science. EPA has also quantified the uncertainty associated with significant components of its analyses, including important factors affecting GHG emissions associated with international land use change. As discussed below, EPA has updated and refined its modeling approach since proposal in several important ways, and EPA is confident that its modeling of

GHG emissions associated with international land use is comprehensive and provides a reasonable and scientifically robust basis for making the threshold determinations described above. As discussed below, EPA plans to continue to improve upon its analyses, and will update it in the future as appropriate.

Through technical outreach, the peer review process, and the public comment period, EPA received and reviewed a significant amount of data, studies, and information on our proposed lifecycle analysis approach.

We incorporated a number of new, updated, and peer-reviewed data sources in our final rulemaking analysis including better satellite data for tracking land use changes and improved assessments of N2O impacts from agriculture. The new and updated data sources are discussed further in this section, and in more detail in Section V.

We also performed dozens of new modeling runs, uncertainty analyses, and sensitivity analyses which are leading to greater confidence in our results. We have updated our analyses in conjunction with, and based on, advice from experts from government,

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academia, industry, and not for profit institutions.

The new studies, data, and analysis performed for the final rulemaking impacted the lifecycle GHG results for biofuels in a number of different ways. In some cases, updates caused the modeled analysis of lifecycle GHG emissions from biofuels to increase, while other updates caused the modeled emissions to be reduced. Overall, the revisions since our proposed rule have led to a reduction in modeled lifecycle GHG emissions as compared to the values in the proposal. The following highlights the most significant revisions. Section V details all of the changes made and their relative impacts on the results.

Corn Ethanol: The final rule analysis found less overall indirect land use change (less land needed), thereby improving the lifecycle GHG performance of corn ethanol. The main reasons for this decrease are:

Based on new studies that show the rate of improvement in crop yields as a function of price, crop yields are now modeled to increase in response to higher crop prices. When higher crop yields are used in the models, less land is needed domestically and globally for crops as biofuels expand.

New research available since the proposal indicates that the corn ethanol production co-product, distillers grains and solubles

(DGS), is more efficient as an animal feed (meaning less corn is needed for animal feed) than we had assumed in the proposal. Therefore, in our analyses for the final rule, domestic corn exports are not impacted as much by increased biofuel production as they were in the proposal analysis.

Improved satellite data allowed us to more finely assess the types of land converted when international land use changes occur, and this more precise assessment led to a lowering of modeled GHG impacts. Based on previous satellite data, the proposal assumed cropland expansion onto grassland would require an amount of pasture to be replaced through deforestation. For the final rulemaking analysis we incorporated improved economic modeling of demand for pasture area and satellite data which indicates that pasture is also likely to expand onto existing grasslands. This reduced the GHG emissions associated with an amount of land use change.

However, we note that not all modeling updates necessarily reduced predicted GHG emissions from land use change. As one example, since the proposal a new version of the GREET model (Version 1.8C) has been released. EPA reviewed the new version and concluded that this was an improvement over the previous GREET release that was used in the proposal analysis (Version 1.8B). Therefore, EPA updated the GHG emission factors for fertilizer production used in our analysis to the values from the new GREET version. This had the result of slightly increasing the GHG emissions associated with fertilizer production and thus slightly increasing the GHG emission impacts of domestic agriculture.

For the final rule, EPA has analyzed a variety of corn ethanol pathways including ethanol made from corn starch using natural gas, coal, and biomass as process energy sources in production facilities utilizing both dry mill and wet mill processes. For corn starch ethanol, we also considered the technology enhancements likely to occur in the future such as the addition of corn oil fractionation or extraction technology, membrane separation technology, combined heat and power and raw starch hydrolysis.

Biobutanol from corn starch: In addition to ethanol from corn starch, for this final rule, we have also analyzed bio-butanol from corn starch. Since the feedstock impacts are the same as for ethanol from corn starch, the assessment for biobutanol reflects the differing impacts due to the production process and energy content of biobutanol compared to that of ethanol.

Soybean Biodiesel: The new information described above for corn ethanol also leads to lower modeled GHG impacts associated with soybean biodiesel. The revised assessment predicts less overall indirect land use change (less land needed) and less impact from the land use changed that does occur (due to updates in types of converted land assumed). In addition, the latest IPCC guidance indicates reduced domestic soybean

N2O emissions, and updated USDA and industry data show reductions in biodiesel processing energy use and a higher co-product credit, all of which further reduced the modeled soybean biodiesel lifecycle GHG emissions. This has resulted in a significant improvement in our assessment of the lifecycle performance of soybean biodiesel as compared to the estimate in the proposal.

Biodiesel and Renewable Diesel from Algal Oil and Waste Fats and

Greases: In addition to biodiesel from soy oil, biodiesel and renewable diesel from algal oil (should it reach commercial production) and biodiesel from waste oils, fats and greases have been modeled. These feedstock sources have little or no land use impact so the GHG impacts associate with their use in biofuel production are largely the result of energy required to produce the feedstock (in the case of algal oil) and the energy required to turn that feedstock into a biofuel.

Sugarcane Ethanol: Sugarcane ethanol was analyzed considering a range of technologies and assuming alternative pathways for dehydrating the ethanol prior to its use as a biofuel in the U.S. For the final rule, our analysis also shows less overall indirect land use change

(less land needed) associated with sugarcane ethanol production. For the proposal, we assumed sugarcane expansion in Brazil would result in cropland expansion into grassland and lost pasture being replaced through deforestation. Based on newly available regional specific data from Brazil, historic trends, and higher resolution satellite data, in the final rule, sugarcane expansion onto grassland is coupled with greater pasture intensification, such that there is less projected impact on forests. Furthermore, new data provided by commenters showed reduced sugarcane ethanol process energy, which also reduced the estimated lifecycle GHG impact of sugarcane ethanol production.

Cellulosic Ethanol: We analyzed cellulosic ethanol production using both biochemical (enzymatic) and thermo-chemical processes with corn stover, switchgrass, and forestry thinnings and waste as feedstocks.

For cellulosic diesel, we analyzed production using the Fischer-Tropsch process. For the final rule, we updated the cellulosic ethanol conversion rates based on new data provided by the National Renewable

Energy Laboratory (NREL.) As a result of this update, the gallons per ton yields for switchgrass and several other feedstock sources increased in our analysis for the final rule, while the predicted yields from corn residue and several other feedstock sources decreased slightly from the NPRM values. In addition, we also updated our feedstock production yields based on new work conducted by the Pacific

Northwest National Laboratory (PNNL). This analysis increased the tons per acre yields for several dedicated energy crops. These updates increased the amount of cellulosic ethanol projected to come from energy crops. While the increase in crop yields and conversion efficiency reduced the GHG emissions associated with cellulosic ethanol, there remains an increased demand for land to grow dedicated energy crops; this land use impact resulted in increased GHG emissions with the net result varying by the type of cellulosic feedstock source.

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We note that several of the renewable fuel pathways modeled are still in early stages of development or commercialization and are likely to continue to develop as the industry moves toward commercial production. Therefore, it will be necessary to reanalyze several pathways using updated data and information as the technologies develop. For example, biofuel derived from algae is undergoing wide ranging development. Therefore for now, our algae analyses presume particular processes and energy requirements which will need to be reviewed and updated as this fuel source moves toward commercial production.

For this final rule we have incorporated a statistical analysis of uncertainty about critical variables in our pathway analysis. This uncertainty analysis is explained in detail in Section V and is consistent with the specific recommendations received through our peer review and public comments on the proposal. The uncertainty analysis focused on two aspects of indirect land use change--the types of land converted and the GHG emission associated with different types of land converted. In particular, our uncertainty analysis focused on such specific sources of information as the satellite imaging used to inform our assessment of land use trends and the specific changes in carbon storage expected from a change in land use in each geographic area of the world modeled. We have also performed additional sensitivity analyses including analysis of two yield scenarios for corn and soy beans to assess the impact of changes in yield assumptions.

This uncertainty analysis provides information on both the range of possible outcomes for the parameters analyzed, an estimate of the degree of confidence that the actual result will be within a particular range (in our case, we estimated a 95% confidence interval) and an estimate of the central tendency or midpoint of the GHG performance estimate.

In the proposal, we considered several options for the timeframe over which to measure lifecycle GHG impacts and the possibility of discounting those impacts. Based on peer review recommendations and other comments received, EPA is finalizing its assessments based on an analysis assuming 30 years of continued emission impacts after the program is fully phased in by 2022 and without discounting those impacts.

EPA also notes that it received significant comment on our proposed baseline lifecycle greenhouse gas assessment of gasoline and diesel

(``petroleum baseline''). While EPA has made several updates to the petroleum analysis in response to comments (see Section V for further discussion), we are finalizing the approach based on our interpretation of the definition in the Act as requiring that the petroleum baseline represent an average of the gasoline and diesel fuel (whichever is being replaced by the renewable fuel) sold as transportation fuel in 2005.

As discussed in more detail later, the modeling results developed for purposes of the final rule provide a rich and comprehensive base of information for making the threshold determinations. There are numerous modeling runs, reflecting updated inputs to the model, sensitivity analyses, and uncertainty analyses. The results for different scenarios include a range and a best estimate or mid-point. Given the potentially conservative nature of the base crop yield assumption, EPA believes the actual crop yield in 2022 may be above the base yield; however we are not in a position to characterize how much above it might be. To the extent actual yields are higher, the base yield modeling results would underestimate to some degree the actual GHG emissions reductions compared to the baseline.

In making the threshold determinations for this rule, EPA weighed all of the evidence available to it, while placing the greatest weight on the best estimate value for the base yield scenario. In those cases where the best estimate for the base yield scenario exceeds the reduction threshold, EPA judges that there is a good basis to be confident that the threshold will be achieved and is determining that the bio-fuel pathway complies with the applicable threshold. To the extent the midpoint of the scenarios analyzed lies further above a threshold for a particular biofuel pathway, we have increasingly greater confidence that the biofuel exceeds the threshold.

EPA recognizes that certain commenters suggest that there is a very high degree of uncertainty associated in particular with determining international indirect land use changes and their emissions impacts, and because of this EPA should exclude any calculation of international indirect land use changes in its lifecycle analysis. Commenters say EPA should make the threshold determinations based solely on modeling of other sources of lifecycle emissions. In effect, commenters argue that the uncertainty of the modeling associated with international indirect land use change means we should use our modeling results but exclude that part of the results associated with international land use change.

For the reasons discussed above and in more detail in Section V,

EPA rejects the view that the modeling relied upon in the final rule, which includes emissions associated with international indirect land use change, is too uncertain to provide a credible and reasonable scientific basis for determining whether the aggregate lifecycle emissions exceed the thresholds. In addition, as discussed elsewhere, the definition of lifecycle emissions includes significant indirect emissions associated with land use change. In deciding whether a bio- fuel pathway meets the threshold, EPA has to consider what it knows about all aspects of the lifecycle emissions, and decide whether there is a valid basis to find that the aggregate lifecycle emissions of the fuel, taking into account significant indirect emissions from land use change meets the threshold. Based on the analyses conducted for this rule, EPA has determined international indirect land use impacts are significant and therefore must be included in threshold compliance assessment.

If the international land use impacts were so uncertain that their impact on lifecycle GHG emissions could not be adequately determined, as claimed by commenters, this does not mean EPA could assume the international land use change emissions are zero, as commenters suggest. High uncertainty would not mean that emissions are small and can be ignored; rather it could mean that we could not tell whether they are large or small. If high uncertainty meant that EPA were not able to determine that indirect emissions from international land use change are small enough that the total lifecycle emissions meet the threshold, then that fuel could not be determined to meet the GHG thresholds of EISA and the fuel would necessarily have to be excluded from the program.

In any case, that is not the situation here as EPA rejects commenters' suggestion and does not agree that the uncertainty over the indirect emissions from land use change is too high to make a reasoned threshold determination. Therefore biofuels with a significant international land use impact are included within this program. c. Consideration of Fuel Pathways Not Yet Modeled

Not all biofuel pathways have been directly modeled for this rule.

For example, while we have modeled cellulosic biofuel produced from corn

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stover, we have not modeled the specific GHG impact of cellulosic biofuel produced from other crop residues such as wheat straw or rice straw. Today, in addition to finalizing a threshold compliance determination for those pathways we specifically modeled, in some cases, our technical judgment indicates other pathways are likely to be similar enough to modeled pathways that we are also assured these similar pathways qualify. These pathways include fuels produced from the same feedstock and using the same production process but produced in countries other than those modeled. The agricultural sector modeling used for our lifecycle analysis does not predict any soybean biodiesel or corn ethanol will be imported into the U.S., or any imported sugarcane ethanol from production in countries other than Brazil.

However, these rules do not prohibit the use in the U.S. of these fuels produced in countries not modeled if they are also expected to comply with the eligibility requirements including meeting the thresholds for

GHG performance. Although the GHG emissions of producing these fuels from feedstock grown or biofuel produced in other countries has not been specifically modeled, we do not anticipate their use would impact our conclusions regarding these feedstock pathways. The emissions of producing these fuels in other countries could be slightly higher or lower than what was modeled depending on a number of factors. Our analyses indicate that crop yields for the crops in other countries where these fuels are also most likely to be produced are similar or lower than U.S. values indicating the same or slightly higher GHG impacts. Agricultural sector inputs for the crops in these other countries are roughly the same or lower than the U.S. pointing toward the same or slightly lower GHG impacts. If crop production were to expand due to biofuels in the countries where the models predict these biofuels might additionally be produced would tend to lower our assessment of international indirect impacts but could increase our assessment of the domestic (i.e., the country of origin) land use impacts. EPA believes, because of these offsetting factors along with the small amounts of fuel potentially coming from other countries, that incorporating fuels produced in other countries will not impact our threshold analysis. Therefore, fuels of the same fuel type, produced from the same feedstock using the same fuel production technology as modeled fuel pathways will be assessed the same GHG performance decisions regardless of country of origin. These pathways also include fuels that might be produced from similar feedstock sources to those already modeled and which are expected to have less or no indirect land use change. In such cases, we believe that in order to compete economically in the renewable fuel marketplace such pathways are likely to be at least as energy efficient as those modeled and thus have comparable lifecycle GHG performance. Based on these considerations, we are extending the lifecycle results for the fuel pathways already modeled to 5 broader categories of feedstocks. This extension of lifecycle modeling results is discussed further in Section V.C.

We have established five categories of biofuel feedstock sources under which modeled feedstock sources and feedstock sources similar to those modeled are grouped and qualify on the basis of our existing modeling. These are: 1. Crop residues such as corn stover, wheat straw, rice straw, citrus residue. 2. Forest material including eligible forest thinnings and solid residue remaining from forest product production. 3. Annual cover crops planted on existing crop land such as winter cover crops. 4. Separated food and yard waste including biogenic waste from food processing. 5. Perennial grasses including switchgrass and miscanthus.

The full set of pathways for which we have been able to make a compliance decision are described in Section V.

Threshold determinations for certain other pathways were not possible at this time because sufficient modeling or data is not yet available. In some of these cases, we recognize that a renewable fuel is already being produced from an alternative feedstock. Although we have the data needed for analysis, we did not have sufficient time to complete the necessary lifecycle GHG impact assessment for this final rule. We will model and evaluate additional pathways after this final rule on the basis of current or likely commercial production in the near-term and the status of current analysis at EPA. EPA anticipates modeling grain sorghum ethanol, woody pulp ethanol, and palm oil biodiesel after this final rule and including the determinations in a rulemaking within 6 months. Our analyses project that they will be used in meeting the RFS2 volume standard in the near-term. During the course of the NPRM comment period, EPA received detailed information on these pathways and is currently in the process of analyzing these pathways.

We have received comments on several additional feedstock/fuel pathways, including rapeseed/canola, camelina, sweet sorghum, wheat, and mustard seed, and we welcome parties to utilize the petition process described in Section V.C to request EPA to examine additional pathways.

We anticipate there could be additional cases where we currently do not have information on which to base a lifecycle GHG assessment perhaps because we are not yet aware of potential unique plant configurations or operations that could result in greater efficiencies than assumed in our analysis. In many cases, such alternative pathways could have been explicitly modeled as a reasonably straightforward extension of pathways we have modeled if the necessary information had been available. For example, while we have modeled specific enhancements to corn starch ethanol production such as membrane separation or corn oil extraction, there are likely other additional energy saving or co-product pathways available or under development by the industry. It is reasonable to also consider these alternative energy saving or co-product pathways based upon their technical merits.

Other current or emerging pathways may require new analysis and modeling for EPA to fully evaluate compliance. For example, fuel pathways with feedstocks or fuel types not yet modeled by EPA may require additional modeling and, it follows, public comment before a determination of compliance can be made.

Therefore, for those fuel pathways that are different than those pathways EPA has listed in today's regulations, EPA is establishing a petition process whereby a party can petition the Agency to consider new pathways for GHG reduction threshold compliance. As described in

Section V.C, the petition process is meant for parties with serious intention to move forward with production via the petitioned fuel pathway and who have moved sufficiently forward in the business process to show feasibility of the fuel pathway's implementation. In addition, if the petition addresses a fuel pathway that already has been determined to qualify as one or more types of renewable fuel under RFS

(e.g., renewable fuel, or advanced biofuel), the pathway must have the potential to result in qualifying for a renewable fuel type for which it was not previously qualified. Thus, for example, the Agency will not undertake any additional review for a party wishing to get a modified

LCA value for a

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previously approved fuel pathway if the desired new value would not change the overall pathway classification.

The petition must contain all the necessary information on the fuel pathway to allow EPA to effectively assess the lifecycle performance of the new fuel pathway. See Section V.C for a full description. EPA will use the data supplied via the petition and other pertinent data available to the Agency to evaluate whether the information for that fuel pathway, combined with information developed in this rulemaking for other fuel pathways that have been determined to exceed the threshold, is sufficient to allow EPA to evaluate the pathway for a determination of compliance. We expect such a determination would be pathway specific. For some fuel pathways with unique modifications or enhancements to production technologies in pathways otherwise modeled for the regulations listed today, EPA may be able to evaluate the pathway as a reasonably straight-forward extension of our current assessments. In such cases, we would expect to make a decision for that specific pathway without conducting a full rulemaking process. We would expect to evaluate whether the pathway is consistent with the definitions of renewable fuel types in the regulations, generally without going through rulemaking, and issue an approval or disapproval that applies to the petitioner. We anticipate that we will subsequently propose to add the pathway to the regulations. Other current or emerging fuel pathways may require significant new analysis and/or modeling for EPA to conduct an adequate evaluation for a compliance determination (e.g., feedstocks or fuel types not yet included in EPA's assessments for this regulation). For these pathways, EPA would give notice and seek public comment on a compliance determination under the annual rulemaking process established in today's regulations. If we make a technical determination of compliance, then we anticipate the fuel producer will be able to generate RINs for fuel produced under the additional pathway following the next available quarterly update of the

EPA Moderated Transaction System (EMTS). EPA will process those petitions as expeditiously as possible for those pathways which are closer to the commercial production stage than others. In all events, parties are expected to begin this process with ample lead time as compared to their commercial start dates. Further discussion of this petition process can be found in Section V.C.

We note again that the continued work of EPA and others is expected to result in improved models and data sources, and that re-analysis based on such updated information could revise these determinations.

Any such reassessment that would impact compliance would necessarily go through rulemaking and would only be applicable to production from future facilities after the revised rule was finalized, as required by

EISA. 4. Compliance With Renewable Biomass Provision

EISA changed the definition of ``renewable fuel'' to require that it be made from feedstocks that qualify as ``renewable biomass.''

EISA's definition of the term ``renewable biomass'' limits the types of biomass as well as the types of land from which the biomass may be harvested. The definition includes:

Planted crops and crop residue from agricultural land cleared prior to December 19, 2007 and actively managed or fallow on that date.

Planted trees and tree residue from tree plantations cleared prior to December 19, 2007 and actively managed on that date.

Animal waste material and byproducts.

Slash and pre-commercial thinnings from non-federal forestlands that are neither old-growth nor listed as critically imperiled or rare by a State Natural Heritage program.

Biomass cleared from the vicinity of buildings and other areas at risk of wildfire.

Algae.

Separated yard waste and food waste.

In today's rule, EPA is finalizing definitions for the many terms included within the definition of renewable biomass. Where possible,

EPA has adhered to existing statutory, regulatory or industry definitions for these terms, although in some cases we have altered definitions to conform to EISA's statutory language, to further the goals of EISA, or for ease of program implementation. For example, EPA is defining ``agricultural land'' from which crops and crop residue can be harvested for RIN-generating renewable fuel production as including cropland, pastureland, and land enrolled in the Conservation Reserve

Program. An in-depth discussion of the renewable biomass definitions can be found in Section II.B.4.

In keeping with EISA, under today's final rule, renewable fuel producers may only generate RINs for fuels made from feedstocks meeting the definition of renewable biomass. In order to implement this requirement, we are finalizing three potential mechanisms for domestic and foreign renewable fuel producers to verify that their feedstocks comply with this requirement. The first involves renewable biomass recordkeeping and reporting requirements by renewable fuel producers for their individual facilities. As an alternative to these individual recordkeeping and reporting requirements, the second allows renewable fuel producers to form a consortium to fund an independent third-party to conduct an annual renewable biomass quality-assurance survey, based on a plan approved by EPA. The third is an aggregate compliance approach applicable only to crops and crop residue from the U.S. It utilizes USDA's publicly available agricultural land data as the basis for an EPA determination of compliance with the renewable biomass requirements for these particular feedstocks. This determination will be reviewed annually, and if EPA finds it is no longer warranted, then renewable fuel producers using domestically grown crops and crop residue will be required to conduct individual or consortium-based verification processes to ensure that their feedstocks qualify as renewable biomass. These final provisions are described below, with a more in-depth discussion in Section II.B.4.

For renewable fuel producers using feedstocks other than planted crops or crop residue from agricultural land that do not choose to participate in the third-party survey funded by an industry consortium, the final renewable biomass recordkeeping and reporting provisions require that individual producers obtain documentation about their feedstocks from their feedstock supplier(s) and take the measures necessary to ensure that they know the source of their feedstocks and can demonstrate to EPA that they have complied with the EISA definition of renewable biomass. Specifically, EPA's renewable biomass reporting requirements for producers who generate RINs include a certification on renewable fuel production reports that the feedstock used for each renewable fuel batch meets the definition of renewable biomass.

Additionally, producers will be required to include with their quarterly reports a summary of the types and volumes of feedstocks used throughout the quarter, as well as maps of the land from which the feedstocks used in the quarter were harvested. EPA's final renewable biomass recordkeeping provisions require renewable fuel producers to

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maintain sufficient records to support their claims that their feedstocks meet the definition of renewable biomass, including maps or electronic data identifying the boundaries of the land where the feedstocks were produced, documents tracing the feedstocks from the land to the renewable fuel production facility, other written records from their feedstock suppliers that serve as evidence that the feedstock qualifies as renewable biomass, and for producers using planted trees or tree residue from tree plantations, written records that serve as evidence that the land from which the feedstocks were obtained was cleared prior to December 19, 2007 and actively managed on that date.

Based on USDA's publicly available agricultural land data, EPA is able to establish a baseline of the aggregate amount of U.S. agricultural land (meaning cropland, pastureland and CRP land in the

United States) that is available for the production of crops and crop residues for use in renewable fuel production consistent with the definition of renewable biomass. EPA has determined that, in the aggregate this amount of agricultural land (land cleared or cultivated prior to EISA's enactment (December 19, 2007) and actively managed or fallow, and nonforested on that date) is expected to, at least in the near term, be sufficient to support EISA renewable fuel obligations and other foreseeable demands for crop products, without clearing and cultivating additional land. EPA also believes that economic factors will lead farmers to use the ``agricultural land'' available for crop production under EISA rather than bring new land into crop production.

As a result, EPA is deeming renewable fuel producers using domestically-grown crops and crop residue as feedstock to be in compliance with the renewable biomass requirements, and those producers need not comply with the recordkeeping and quarterly reporting requirements as established for the non[dash]crop-based biomass sector.

However, EPA will annually review USDA data on lands in agricultural production to determine if these conclusions remain valid. If EPA determines that the 2007 baseline amount of eligible agricultural land has been exceeded, EPA will publish a notice of that finding in the

Federal Register. At that point, renewable fuel producers using planted crops or crop residue from agricultural lands would be subject to the same recordkeeping and reporting requirements as other renewable fuel producers. 5. EPA-Moderated Transaction System

We introduced the EPA Moderated Transaction System (EMTS) in the

NPRM as a new method for managing the generation of RINs and transactions involving RINs. EMTS is designed to resolve the RIN management issues of RFS1 that lead to widespread RIN errors, many times resulting in invalid RINs and often tedious remedial procedures to resolve those errors. It is also designed to address the added RIN categories, more complex RIN generation requirements, and additional volume of RINs associated with RFS2. Commenters broadly support EMTS and most stated that its use should coincide with the start of RFS2; however, many commenters expressed concerns over having sufficient time to implement the new system. In today's action, we are requiring the use of EMTS for all RFS2 RIN generations and transactions beginning

July 1, 2010. EPA has utilized an open process for the development of

EMTS since it was first introduced in the NPRM, conducting workshops and webinars, and soliciting stakeholder participation in its evaluation and testing. EPA pledges to work with the regulated community, as a group and individually, to ensure EMTS is successfully implemented. EPA anticipates that with this level of assistance, regulated parties will not experience significant difficulties in transitioning to the new system, and EPA believes that the many benefits of the new system warrant its immediate use. 6. Other Changes to the RFS Program

Today's final rule also makes a number of other changes to the RFS program that are described in more detail in Sections II and III below, including:

Grandfathering provisions: Renewable fuel from existing facilities is exempt from the lifecycle GHG emission reduction threshold of 20% up to a baseline volume for that facility that will be established at the time of registration. As discussed in Section

II.B.3, the exemption from the 20% GHG threshold applies only to renewable fuel that is produced from facilities which commenced construction on or before December 19, 2007, or in the case of ethanol plants that use natural gas or biodiesel for process heat, on or before

December 31, 2009.

Renewable fuels produced from municipal solid waste (MSW):

The new renewable biomass definition in EISA modified the ability for

MSW-derived fuels to qualify under the RFS program by restricting it to

``separated yard waste or food waste.'' We are finalizing provisions that would allow certain portions of MSW to be included as renewable biomass, provided that reasonable separation has first occurred.

Equivalence Values: We are generally maintaining the provisions from RFS1 that the Equivalence Value for each renewable fuel will be based on its energy content in comparison to ethanol, adjusted for renewable content. The cellulosic biofuel, advanced biofuel, and renewable fuel standards can be met with ethanol-equivalent volumes of renewable fuel. However, since the biomass-based diesel standard is a

``diesel'' standard, its volume must be met on a biodiesel-equivalent energy basis.

Cellulosic biofuel waiver credits: If EPA reduces the required volume of cellulosic biofuel according to the waiver provisions in EISA, EPA will offer a number of credits to obligated parties no greater than the reduced cellulosic biofuel standard. These waiver credits are not allowed to be traded or banked for future use, and are only allowed to be used to meet the cellulosic biofuel standard for the year that they are offered. In response to concerns expressed in comments on the proposal, we are implementing certain restrictions on the use of these waiver credits. For example, 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 2010 compliance period, since the cellulosic standard is lower than the level otherwise required by EISA, we are making cellulosic waiver credits available to obligated parties for end-of-year compliance should they need them at a price of $1.56 per gallon-RIN.

Obligated fuels: EISA expanded the program to cover

``transportation fuel'', not just gasoline. Therefore, under RFS2, obligated fuel volumes will include all gasoline and all MVNRLM diesel fuel. Other fuels such as jet fuel and fuel intended for use in ocean- going vessels are not obligated fuels under RFS2. However, renewable fuels used in jet fuel or heating oil are valid for meeting the renewable fuel volume mandates. Similarly, while we are not including natural gas, propane, or electricity used in transportation as obligated fuels at this time, we will allow renewable forms of these fuels to qualify under the program for generating RINs.

B. Impacts of Increasing Volume Requirements in the RFS2 Program

The displacement of gasoline and diesel with renewable fuels has a wide

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range of environmental and economic impacts. As we describe in Sections

IV-IX, we have assessed many of these impacts for the final rule. It is difficult to ascertain how much of these impacts might be due to the natural growth in renewable fuel use due to market forces as crude oil prices rise versus what might be forced by the RFS2 standards.

Regardless, these assessments provide important information on the wider public policy considerations related to renewable fuel production and use, climate change, and national energy security. Where possible, we have tried to provide two perspectives on the impacts of the renewable fuel volumes mandated in EISA--both relative to the RFS1 mandated volumes, and relative to a projection from EIA (AEO 2007) of renewable fuel volumes that would have been expected without EISA.

Based on the results of our analyses, when fully phased in by 2022, the increased volume of renewable fuel required by this final rule in comparison to the AEO 2007 forecast would result in 138 million metric tons fewer CO2-equivalent GHG emissions (annual average over 30 years), the equivalent of removing 27 million vehicles from the road today.

At the same time, increases in emissions of hydrocarbons, nitrogen oxides, particulate matter, and other pollutants are projected to lead to increases in population-weighted annual average ambient PM and ozone concentrations, which in turn are anticipated to lead to up to 245 cases of adult premature mortality. The air quality impacts, however, are highly variable from region to region. Ambient PM2.5is likely to increase in areas associated with biofuel production and transport and decrease in other areas; for ozone, many areas of the country will experience increases and a few areas will see decreases.

Ethanol concentrations will increase substantially; for the other modeled air toxics there are some localized impacts, but relatively little impact on national average concentrations. We note that the air quality modeling results presented in this final rule do not constitute the ``anti-backsliding'' analysis required by Clean Air Act section 211(v). EPA will be analyzing air quality impacts of increased renewable fuel use through that study and will promulgate appropriate mitigation measures under section 211(v), separate from this final action.

In addition to air quality, there are also expected to be adverse impacts on both water quality and quantity as the production of biofuels and their feedstocks increase.

In addition to environmental impacts, the increased volumes of renewable fuels required by this final rule are also projected to have a number of other energy and economic impacts. The increased renewable fuel use is estimated to reduce dependence on foreign sources of crude oil, increase domestic sources of energy, and diversify our energy portfolio to help in moving beyond a petroleum-based economy. The increased use of renewable fuels is also expected to have the added benefit of providing an expanded market for agricultural products such as corn and soybeans and open new markets for the development of cellulosic feedstock industries and conversion technologies. Overall, however, we estimate that the renewable fuel standards will result in significant net benefits, ranging between $16 and $29 billion in 2022.

Table I.B-1 summarizes the results of our impacts analyses of the volumes of renewable fuels required by the RFS2 standards in 2022 relative to the AEO2007 reference case and identifies the section where you can find further explanation of it. As we work to implement the requirements of EISA, we will continue to assess these impacts. These are the annual impacts projected in 2022 when the program is fully phased in. Impacts in earlier years would differ but in most cases were not able to be modeled or assessed for this final rule.

Table I.B-1--Impact Summary of the RFS2 Standards in 2022 Relative to the AEO2007 Reference Case (2007 Dollars)

Category

Impact in 2022

Section discussed

Emissions and Air Quality

GHG Emissions............................ -138 million metric tons................... V.D.

Non-GHG Emissions (criteria and toxic

-1% to +10% depending on the pollutant..... VI.A. pollutants).

Nationwide Ozone......................... +0.12 ppb population-weighted seasonal max VIII.D. 8 hr average.

Nationwide PM2.5......................... +0.002 [mu]g/m\3\ population-weighted

VIII.D. annual average PM2.5.

Nationwide Ethanol....................... +0.409 [mu]g/m\3\ population-weighted

VI.D. annual average.

Other Nationwide Air Toxics.............. -0.0001 to -0.023 [mu]g/m\3\ population-

VI.D. weighted annual average depending on the pollutant.

PM2.5-related Premature Mortality........ 33 to 85 additional cases of adult

VIII.D. mortality (estimates vary by study).

Ozone-related Premature Mortality........ 36 to 160 additional cases of adult

VIII.D. mortality (estimates vary by study).

Other Environmental Impacts

Loadings to the Mississippi River from

Nitrogen: +1,430 million lbs. (1.2%)....... IX. the Upper Mississippi River Basin.

Phosphorus: +132 million lbs. (0.7%).......

Fuel Costs

Gasoline Costs........................... -2.4[cent]/gal............................. VII.D.

Diesel Costs............................. -12.1 [cent]/gal........................... VII.D.

Overall Fuel Cost........................ -$11.8 Billion............................. VII.D.

Gasoline and Diesel Consumption.......... -13.6 Bgal................................. VII.C.

Food Costs

Corn..................................... +8.2%...................................... VIII.A.

Soybeans................................. +10.3%..................................... VIII.A.

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Food..................................... +$10 per capita............................ VIII.A.

Economic Impacts

Energy Security.......................... +$2.6 Billion.............................. VIII.B.

Monetized Health Impacts................. -$0.63 to -$2.2 Billion.................... VIII.D.

GHG Impacts (SCC) \a\.................... +$0.6 to $12.2 Billion (estimates vary by

VIII.C.

SCC assumption).

Oil Imports.............................. -$41.5 Billion............................. VIII.B

Farm Gate Food........................... +$3.6 Billion.............................. VIII.A.

Farm Income.............................. +$13 Billion (+36%)........................ VIII.A.

Corn Exports............................. -$57 Million (-8%)......................... VIII.A.

Soybean Exports.......................... -$453 Million (-14%)....................... VIII.A.

Total Net Benefits \b\................... +$13 to $26 Billion (estimates vary by SCC VIII.F. assumption).

\a\ The models used to estimate SCC values have not been exercised in a systematic manner that would allow researchers to assess the probability of different values. Therefore, the interim SCC values should not be considered to form a range or distribution of possible or likely values. See Section VIII.D for a complete summary of the interim SCC values.

\b\ Sum of Overall Fuel Costs, Energy Security, Monetized Health Impacts, and GHG Impacts (SCC).

II. Description of the Regulatory Provisions

While EISA made a number of changes to CAA section 211(o) that must be reflected in the RFS program regulations, it left many of the basic program elements intact, including the mechanism for translating national renewable fuel volume requirements into applicable standards for individual obligated parties, requirements for a credit trading program, geographic applicability, treatment of small refineries, and general waiver provisions. As a result, many of the regulatory requirements of the RFS1 program will remain largely or, in some cases, entirely unchanged. These provisions include the distribution of RINs, separation of RINs, use of RINs to demonstrate compliance, provisions for exporters, recordkeeping and reporting, deficit carryovers, and the valid life of RINs.

The primary elements of the RFS program that we are changing to implement the requirements in EISA fall primarily into the following seven areas:

(1) Expansion of the applicable volumes of renewable fuel.

(2) Separation of the volume requirements into four separate categories of renewable fuel, with corresponding changes to the RIN and to the applicable standards.

(3) New definitions of renewable fuel, advanced biofuel, biomass- based diesel, and cellulosic biofuel.

(4) New requirement that renewable fuels meet certain lifecycle emission reduction thresholds.

(5) New definition of renewable biomass from which renewable fuels can be made, including certain land use restrictions.

(6) Expansion of the types of fuels that are subject to the standards to include diesel.

(7) Inclusion of specific types of waivers for different categories of renewable fuels and, in certain circumstances, EPA-generated credits for cellulosic biofuel.

EISA does not change the basic requirement under CAA 211(o) that the RFS program include a credit trading program. In the May 1, 2007 final rulemaking implementing the RFS1 program, we described how we reviewed a variety of approaches to program design in collaboration with various stakeholders. We finally settled on a RIN-based system for compliance and credit purposes as the one which met our goals of being straightforward, maximizing flexibility, ensuring that volumes are verifiable, and maintaining the existing system of fuel distribution and blending. RINs represent the basic framework for ensuring that the statutorily required volumes of renewable fuel are used as transportation fuel in the U.S. Since the RIN-based system generally has been successful in meeting the statutory goals, we are maintaining much of its structure under RFS2.

This section describes the regulatory changes we are finalizing to implement the new EISA provisions. Section III describes other changes to the RFS program that we considered or are finalizing, including an

EPA-moderated RIN trading system that provides a context within which all RIN transfers will occur.

A. Renewable Identification Numbers (RINs)

Under RFS2, each RIN will continue to represent one gallon of renewable fuel in the context of demonstrating compliance with

Renewable Volume Obligations (RVO), consistent with our approach under

RFS1, and the RIN will continue to have unique information similar to the 38 digits in RFS1. However in the EPA Moderated Transaction System

(EMTS), RIN detail information will be available but generally hidden during transactions. In general the codes within the RIN will have the same meaning under RFS2 as they do under RFS1, with the exception of the D code which will be expanded to cover the four categories of renewable fuel defined in EISA.

As described in Section I.A.2, the RFS2 regulatory program will go into effect on July 1, 2010, but the 2010 percentage standards issued as part of today's rule will apply to all gasoline and diesel produced or imported on or after January 1, 2010. As a result, some 2010 RINs will be generated under the RFS1 requirements and others will be generated under the RFS2 requirements, but all RINs generated in 2010 will be valid for meeting the 2010 annual standards. Since RFS1 RINs and RFS2 RINs will differ in the meaning of the D codes, we are implementing a mechanism for distinguishing between these two categories of RINs in order to appropriately apply them to the standards. In short, we are requiring the use of D codes under RFS2 that do not overlap the values for the D codes under RFS1. Table II.A-1 describes the D code definitions we are finalizing in today's action.

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Table II.A-1--Final D Code Definitions

D value

Meaning under RFS1

Meaning under RFS2

1...................................... Cellulosic biomass ethanol..... Not applicable. 2...................................... Any renewable fuel that is not Not applicable. cellulosic biomass ethanol. 3...................................... Not applicable................. Cellulosic biofuel. 4...................................... Not applicable................. Biomass-based diesel. 5...................................... Not applicable................. Advanced biofuel. 6...................................... Not applicable................. Renewable fuel. 7...................................... Not applicable................. Cellulosic diesel.

Under this approach, D code values of 1 and 2 are only relevant for

RINs generated under RFS1, and D code values of 3, 4, 5, 6, and 7 are only relevant for RINs generated under RFS2. As described in Section

I.A.2, the RFS1 regulations will apply in January through June of 2010, while the RFS2 regulations will become effective on July 1, 2010. RINs generated under RFS1 regulations in the first three months of 2010 can be used for meeting the four 2010 standards applicable under RFS2. To accomplish this, these RFS1 RINs will be subject to the RFS1/RFS2 transition provisions wherein they will be deemed equivalent to one of the four RFS2 RIN categories using their RR and/or D codes. See Section

II.G.4 for further description of how RFS1 RINs will be used to meet standards under RFS2. The determination of which D code will be assigned to a given batch of renewable fuel is described in more detail in Section II.D.2 below.

Table II.A-1 includes one D code corresponding to each of the four renewable fuel categories defined in EISA, and an additional D code of 7 corresponding to the unique, additional type of renewable fuel called cellulosic diesel. As described in the NPRM, a diesel fuel product produced from cellulosic feedstocks that meets the 60% GHG threshold could qualify as either cellulosic biofuel or biomass-based diesel. The

NPRM described two possible approaches to this unique category of renewable fuel: 1. Have the producer of the cellulosic diesel designate their fuel up front as either cellulosic biofuel with a D code of 3, or biomass- based diesel with a D code of 4, limiting the subsequent potential in the marketplace for the RIN to be used for just one standard or the other. 2. Have the producer of the cellulosic diesel designate their fuel with a new cellulosic D code of 7, allowing the subsequent use of the

RIN in the marketplace interchangeably for either the cellulosic biofuel standard or the biomass-based diesel standard.

We are finalizing the second option. By creating an additional D code of 7 to represent cellulosic diesel RINs, we believe its value in the marketplace will be maximized as it will be priced according to the relative demand for cellulosic biofuel and biomass-based diesel RINs.

For instance, if demand for cellulosic biofuel RINs is higher than demand for biomass-based diesel RINs, then cellulosic diesel RINs will be priced as if they are cellulosic biofuel RINs. Not only does this approach benefit producers, but it allows obligated parties the flexibility to apply a RIN with a D code of 7 to either their cellulosic biofuel RVO or their biomass-based diesel RVO, depending on the number of RINs they have acquired to meet these two obligations. It also helps the functionality of the RIN program by helping protect against the potential for artificial RIN shortages in the marketplace for one standard or the other even though sufficient qualifying fuel was produced.

Under RFS2, each batch-RIN generated will continue to uniquely identify not only a specific batch of renewable fuel, but also every gallon-RIN assigned to that batch. Thus the RIN will continue to be defined as follows:

RIN: KYYYYCCCCFFFFFBBBBBRRDSSSSSSSSEEEEEEEE

Where:

K = Code distinguishing assigned RINs from separated RINs

YYYY = Calendar year of production or import

CCCC = Company ID

FFFFF = Facility ID

BBBBB = Batch number

RR = Code identifying the Equivalence Value

D = Code identifying the renewable fuel category

SSSSSSSS = Start of RIN block

EEEEEEEE = End of RIN block

B. New Eligibility Requirements for Renewable Fuels

Aside from the higher volume requirements, most of the substantive changes that EISA makes to the RFS program affect the eligibility of renewable fuels in meeting one of the four volume requirements.

Eligibility is determined based on the types of feedstocks that are used, the land that is used to grow feedstocks for renewable fuel production, the processes that are used to convert those feedstocks into fuel, and the lifecycle greenhouse gas (GHG) emissions that are emitted in comparison to the gasoline or diesel that the renewable fuel displaces. This section describes these eligibility criteria and how we are implementing them for the RFS2 program. 1. Changes in Renewable Fuel Definitions

Under the previous Renewable Fuel Standards (RFS1), renewable fuel was defined generally as ``any motor vehicle fuel that is used to replace or reduce the quantity of fossil fuel present in a fuel mixture used to fuel a motor vehicle''. The RFS1 definition included motor vehicle fuels produced from biomass material such as grain, starch, fats, greases, oils, and biogas. The definition specifically included cellulosic biomass ethanol, waste derived ethanol, and biodiesel, all of which were defined separately. (See 72 FR 23915).

The definitions of renewable fuels under today's rule (RFS2) are based on the new statutory definition in EISA. Like the previous rules, the definitions in RFS2 include a general definition of renewable fuel, but unlike RFS1, we are including a separate definition of ``Renewable

Biomass'' which identifies the feedstocks from which renewable fuels may be made.

Another difference in the definitions of renewable fuel is that

RFS2 contains three subcategories of renewable fuels: (1) Advanced

Biofuel, (2) Cellulosic Biofuel and (3) Biomass-Based Diesel. Each must meet threshold levels of reduction of greenhouse gas emissions as discussed in Section II.B.2. The specific definitions and how they differ from RFS1 follow below. a. Renewable Fuel

``Renewable Fuel'' is defined as fuel produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel present in a transportation fuel. The definition of ``Renewable

Fuel'' now refers to ``transportation fuel'' rather than referring to motor vehicle fuel.

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``Transportation fuel'' is also defined, and means fuel used in motor vehicles, motor vehicle engines, nonroad vehicles or nonroad engines

(except for ocean going vessels). Also renewable fuel now includes heating fuel and jet fuel.

Given that the primary use of electricity, natural gas, and propane is not for fueling vehicles and engines, and the producer generally does not know how it will be used, we cannot require that producers or importers of these fuels generate RINs for all the volumes they produce as we do with other renewable fuels. However, we are allowing fuel producers, importers and end users to include electricity, natural gas, and propane made from renewable biomass as a RIN-generating renewable fuel in RFS only if they can identify the specific quantities of their product which are actually used as a transportation fuel,. This may be possible for some portion of renewable electricity and biogas since many of the affected vehicles and equipment are in centrally-fueled fleets supplied under contract by a particular producer or importer of natural gas or propane. A producer or importer of renewable electricity or biogas who documents the use of his product in a vehicle or engine through a contractual pathway would be allowed to generate RINs to represent that product, if it met the definition of renewable fuel.

(This is also discussed in Section II.D.2.a) b. Advanced Biofuel

``Advanced Biofuel'' is a renewable fuel other than ethanol derived from corn starch and for which lifecycle GHG emissions are at least 50% less than the gasoline or diesel fuel it displaces. Advanced biofuel would be assigned a D code of 5 as shown in Table II.A-1.

While ``Advanced Biofuel'' specifically excludes ethanol derived from corn starch, it includes other types of ethanol derived from renewable biomass, including ethanol made from cellulose, hemicellulose, lignin, sugar or any starch other than corn starch, as long as it meets the 50% GHG emission reduction threshold. Thus, even if corn starch-derived ethanol were made so that it met the 50% GHG reduction threshold, it will still be excluded from being defined as an advanced biofuel. Such ethanol while not an advanced biofuel will still qualify as a renewable fuel for purposes of meeting the standards. c. Cellulosic Biofuel

Cellulosic biofuel is renewable fuel derived from any cellulose, hemicellulose, or lignin each of which must originate from renewable biomass. It must also achieve a lifecycle GHG emission reduction of at least 60%, compared to the gasoline or diesel fuel it displaces.

Cellulosic biofuel is assigned a D code of 3 as shown in Table II.A-1.

Cellulosic biofuel in general also qualifies as both ``advanced biofuel'' and ``renewable fuel''.

The definition of cellulosic biofuel for RFS2 is broader in some respects than the RFS1 definition of ``cellulosic biomass ethanol''.

That definition included only ethanol, whereas the RFS2 definition of cellulosic biofuels includes any biomass-to-liquid fuel such as cellulosic gasoline or diesel in addition to ethanol. The definition of

``cellulosic biofuel'' in RFS2 differs from RFS1 in another significant way. The RFS1 definition provided that ethanol made at any facility-- regardless of whether cellulosic feedstock is used or not--may be defined as cellulosic if at such facility ``animal wastes or other waste materials are digested or otherwise used to displace 90% or more of the fossil fuel normally used in the production of ethanol.'' This provision was not included in EISA, and therefore does not appear in the definitions pertaining to cellulosic biofuel in the final rule. d. Biomass-Based Diesel

``Biomass-based diesel'' includes both biodiesel (mono-alkyl esters) and non-ester renewable diesel (including cellulosic diesel).

The definition of biodiesel is the same very broad definition of

``biodiesel'' that was in EPAct and in RFS1, and thus, it includes any diesel fuel made from biomass feedstocks. However, EISA added three restrictions. First, EISA requires that such fuel be made from renewable biomass. Second, its lifecycle GHG emissions must be at least 50% less than the diesel fuel it displaces. Third, the statutory definition of ``Biomass-based diesel'' excludes renewable fuel derived from co-processing biomass with a petroleum feedstock. In our proposed rule, we sought comment on two options for how co-processing could be treated. The first option considered co-processing to occur only if both petroleum and biomass feedstock are processed in the same unit simultaneously. The second option considered co-processing to occur if renewable biomass and petroleum feedstock are processed in the same unit at any time; i.e., either simultaneously or sequentially. Under the second option, if petroleum feedstock was processed in the unit, then no fuel produced from such unit, even from a biomass feedstock, would be deemed to be biomass-based diesel.

We selected the first option to be used in the final rule. Under this approach, a batch of fuel qualifying for the D code of 4 that is produced in a processing unit in which only renewable biomass is the feedstock for such batch, will meet the definition of ``Biomass-Based

Diesel. Thus, serial batch processing in which 100% vegetable oil is processed one day/week/month and 100% petroleum the next day/week/month could occur without the activity being considered ``co-processing.''

The resulting products could be blended together, but only the volume produced from vegetable oil will count as biomass-based diesel. We believe this is the most straightforward approach and an appropriate one, given that it would allow RINs to be generated for volumes of fuel meeting the 50% GHG reduction threshold that is derived from renewable biomass, while not providing any credit for fuel derived from petroleum sources. In addition, this approach avoids the need for potentially complex provisions addressing how fuel should be treated when existing or even mothballed petroleum hydrotreating equipment is retrofitted and placed into new service for renewable fuel production or vice versa.

Under today's rule, any fuel that does not satisfy the definition of biomass-based diesel only because it is co-processed with petroleum will still meet the definition of ``Advanced Biofuel'' provided it meets the 50% GHG threshold and other criteria for the D code of 5.

Similarly it will meet the definition of renewable fuel if it meets a

GHG emission reduction threshold of 20%. In neither case, however, will it meet the definition of biomass-based diesel.

This restriction is only really an issue for renewable diesel and biodiesel produced via the fatty acid methyl ester (FAME) process. For other forms of biodiesel, it is never made through any sort of co- processing with petroleum.\3\ Producers of renewable diesel must therefore specify whether or not they use ``co-processing'' to produce the fuel in order to determine the correct D code for the RIN.

\3\ The production of biodiesel (mono alkyl esters) does require the addition of methanol which is usually derived from natural gas, but which contributes a very small amount to the resulting product.

We do not believe that this was intended by the statute's reference to ``co-processing'' which we believe was intended to address only renewable fats or oils co-processed with petroleum in a hydrotreater to produce renewable diesel.

e. Additional Renewable Fuel

The statutory definition of ``additional renewable fuel'' specifies fuel produced

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from renewable biomass that is used to replace or reduce fossil fuels used in heating oil or jet fuel. EISA indicates that EPA may allow for the generation of credits for such additional renewable fuel that will be valid for compliance purposes. Under the RFS program, RINs operate in the role of credits, and RINs are generated when renewable fuel is produced rather than when it is blended. In most cases, however, renewable fuel producers do not know at the time of fuel production

(and RIN generation) how their fuel will ultimately be used.

Under RFS1, only RINs assigned to renewable fuel that was blended into motor vehicle fuel (i.e., highway fuel) are valid for compliance purposes. We therefore created special provisions requiring that RINs be retired if they were assigned to renewable fuel that was ultimately blended into nonroad fuel. The new EISA provisions regarding additional renewable fuel make the RFS1 requirement for retiring RINs unnecessary if renewable fuel is blended into heating oil or jet fuel. As a result, we have modified the regulatory requirements to allow RINs assigned to renewable fuel blended into heating oil or jet fuel in addition to highway and nonroad transportation fuels to continue to be valid for compliance purposes. From a regulatory standpoint, there is no difference between renewable fuels used for transportation purposes, versus heating oil and jet fuels.

EISA uses the term ``home heating oil'' in the definition of

``additional renewable fuel.'' The statute does not clarify whether the term should be interpreted to refer only to heating oil actually used in homes, or to all fuel of a type that can be used in homes. We note that the term ``home heating oil'' is typically used in industry in the latter manner, to refer to a type of fuel, rather than a particular use of it, and the term is typically used interchangeably in industry with heating oil, heating fuel, home heating fuel, and other terms depending on the region and market. We believe this broad interpretation based on typical industry usage best serves the goals and purposes of the statute. If EPA interpreted the term to apply only to heating oil actually used in homes, we would necessarily require tracking of individual gallons from production through ultimate use in use in homes in order to determine eligibility of the fuel for RINs. Given the fungible nature of the oil delivery market, this would likely be sufficiently difficult and potentially expensive so as to discourage the generation of RINs for renewable fuels used as home heating oil.

This problem would be similar to that which arose under RFS1 for certain renewable fuels (in particular biodiesel) that were produced for the highway diesel market but were also suitable for other markets such as heating oil and non-road applications where it was unclear at the time of fuel production (when RINs are typically generated under the RFS program) whether the fuel would ultimately be eligible to generate RINs. Congress eliminated the complexity with regards to non- road applications in RFS2 by making all fuels used in both motor vehicle and nonroad applications subject to the renewable fuel standard program. We believe it best to interpret the Act so as to also avoid this type of complexity in the heating oil context. Thus, under today's regulations, RINs may be generated for renewable fuel used as ``heating oil,'' as defined in existing EPA regulations at 80.2(ccc). In addition to simplifying implementation and administration of the Act, this interpretation will best realize the intent of EISA to reduce or replace the use of fossil fuels, f. Cellulosic Diesel

In the proposed rule, we sought comment on how diesel made from cellulosic feedstocks should be considered. Specifically, a diesel fuel product produced from cellulosic feedstocks that meets the 60% GHG threshold could qualify as either cellulosic biofuel or biomass-based diesel. Based on comments received, and as discussed previously in

Section II.A, today's rule requires the cellulosic diesel producer to categorize their product as cellulosic diesel with a D code of 7. It can then be traded in the marketplace and used for compliance with either the biomass-based diesel standard or the cellulosic biofuel standard. 2. Lifecycle GHG Thresholds

As part of the new definitions that EISA creates for cellulosic biofuel, biomass-based diesel, advanced biofuel, and renewable fuel,

EISA also sets minimum performance measures or ``thresholds'' for lifecycle GHG emissions. These thresholds represent the percent reduction in lifecycle GHGs that is estimated to occur when a renewable fuel displaces gasoline or diesel fuel. Table II.B.2-1 lists the thresholds established by EISA.

Table II.B.2-1--Lifecycle GHG Thresholds in EISA

Percent reduction from a 2005 gasoline or diesel baseline

Renewable fuel.................................................

20%

Advanced biofuel...............................................

50%

Biomass-based diesel...........................................

50%

Cellulosic biofuel.............................................

60%

There are also special provisions for each of these thresholds:

Renewable fuel: The 20% threshold only applies to renewable fuel from new facilities that commenced construction after December 19, 2007, with an additional exemption from the 20% threshold for ethanol plants that commenced construction in 2008 or 2009 and are fired with natural gas, biomass, or any combination thereof. Facilities not subject to the 20% threshold are ``grandfathered.'' See Section II.B.3 below for a complete discussion of grandfathering. Also, EPA can adjust the 20% threshold to as low as 10%, but the adjustment must be the minimum possible, and the resulting threshold must be established at the maximum achievable level based on natural gas fired corn-based ethanol plants.

Advanced biofuel and biomass-based diesel: The 50% threshold can be adjusted to as low as 40%, but the adjustment must be the minimum possible and result in the maximum achievable threshold taking cost into consideration. Also, such adjustments can be made only if it is determined that the 50% threshold is not commercially feasible for fuels made using a variety of feedstocks, technologies, and processes.

Cellulosic biofuel: Similarly to advanced biofuel and biomass-based diesel, the 60% threshold applicable to cellulosic biofuel can be adjusted to as low as 50%, but the adjustment must be the minimum possible and result in the maximum achievable threshold taking cost into consideration. Also, such adjustments can be made only if it is determined that the 60% threshold is not commercially feasible for fuels made using a variety of feedstocks, technologies, and processes.

Our analyses of lifecycle GHG emissions, discussed in detail in

Section V, identified a range of fuel pathways that are capable of complying with the GHG performance thresholds for each of these separate fuel standards. Thus, we have determined that the GHG thresholds in Table II.B.2-1 should not be adjusted. Further discussion of this determination can be found in Section V.C.

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3. Renewable Fuel Exempt From 20 Percent GHG Threshold

After considering comments received, the Agency has decided to implement the proposed option for interpreting the grandfathering provisions that provide an indefinite exemption from the 20 percent GHG threshold for renewable fuel facilities which have commenced construction prior to December 19, 2007. For these facilities, only the baseline volume of renewable fuel is exempted. For ethanol facilities which commenced construction after that date and which use natural gas, biofuels or a combination thereof, we proposed that such facilities would be ``deemed compliant'' with the 20 percent GHG threshold. The exemption for such facilities is conditioned on construction being commenced on or before December 31, 2009, and is specific only to facilities which produce ethanol only, per language in EISA. The exemption would continue indefinitely, provided the facility continues to use natural gas and/or biofuel. This section provides the background and summary of the original proposal, and the reasons for the selection of this option. a. General Background of the Exemption Requirement

EISA amends section 211(o) of the Clean Air Act to provide that renewable fuel produced from new facilities which commenced construction after December 19, 2007 must achieve at least a 20% reduction in lifecycle greenhouse gas emissions compared to baseline lifecycle greenhouse gas emissions.\7\ Facilities that commenced construction before December 19, 2007 are ``grandfathered'' and thereby exempt from the 20% GHG reduction requirement.

For facilities that produce ethanol and for which construction commenced after December 19, 2007, section 210 of EISA states that

``for calendar years 2008 and 2009, any ethanol plant that is fired with natural gas, biomass, or any combination thereof is deemed to be in compliance with the 20% threshold.'' Since all renewable fuel production facilities that commenced construction prior to the date of

EISA enactment are covered by the more general grandfathering provision, this exemption can only apply to those facilities that commenced construction after enactment of EISA, and before the end of 2009. We proposed that the statute be interpreted to mean that fuel from such qualifying facilities, regardless of date of startup of operations, would be exempt from the 20% GHG threshold requirement for the same time period as facilities that commence construction prior to

December 19, 2007, provided that such plants commence construction on or before December 31, 2009, complete such construction in a reasonable amount of time, and continue to burn only natural gas, biomass, or a combination thereof. Most commenters generally agreed with our proposal, while other commenters argued that the exemption was only meant to last for a two-year period. As we noted in the NPRM, we believe that it would be a harsh result for investors in these new facilities, and would be generally inconsistent with the energy independence goals of EISA, to interpret the Act such that these facilities would only be guaranteed two years of participation in the

RFS2 program. In light of these considerations, we continue to believe that it is an appropriate interpretation of the Act to allow the deemed compliant exemption to continue indefinitely with the limitations we proposed. Therefore we are making final this interpretation in today's rule. b. Definition of Commenced Construction

In defining ``commence'' and ``construction'', we proposed to use the definitions of ``commence'' and ``begin actual construction'' from the Prevention of Significant Deterioration (PSD) regulations, which draws upon definitions in the Clean Air Act. (40 CFR 52.21(b)(9) and

(11)). Specifically, under the PSD regulations, ``commence'' means that the owner or operator has all necessary preconstruction approvals or permits and either has begun a continuous program of actual on-site construction to be completed in a reasonable time, or entered into binding agreements which cannot be cancelled or modified without substantial loss.'' Such activities include, but are not limited to,

``installation of building supports and foundations, laying underground pipe work and construction of permanent storage structures.'' We proposed adding language to the definition that is currently not in the

PSD definition with respect to multi-phased projects. We proposed that for multi-phased projects, commencement of construction of one phase does not constitute commencement of construction of any later phase, unless each phase is ``mutually dependent'' on the other on a physical and chemical basis, rather than economic.

The PSD regulations provide additional conditions beyond addressing what constitutes commencement. Specifically, the regulations require that the owner or operator ``did not discontinue construction for a period of 18 months or more and completed construction within a reasonable time.'' (40 CFR 52.21(i)(4)(ii)(c)). While ``reasonable time'' may vary depending on the type of project, we proposed that for

RFS2 a reasonable time to complete construction of renewable fuel facilities be no greater than 3 years from initial commencement of construction. We sought comment on this time frame.

Commenters generally agreed with our proposed definition of commenced construction. Some commenters felt that the 3 year time frame was not a ``reasonable time'' to complete construction in light of the economic difficulties that businesses have been and will likely continue to be facing. We recognize that there have been extreme economic problems in the past year. Based on historical data which show construction of ethanol plants typically take about one year, we believe that the 3-year time frame allows such conditions to be taken into account and that it is an appropriate and fair amount of time to allow for completion. Therefore, we are not extending the amount of time that constitutes ``reasonable'' to five years as was suggested. c. Definition of Facility Boundary

We proposed that the grandfathering and deemed compliant exemptions apply to ``facilities.'' Our proposed definition of this term is similar in some respects to the definition of ``building, structure, facility, or installation'' contained in the PSD regulations in 40 CFR 52.21. We proposed to modify the definition, however, to focus on the typical renewable fuel plant. We proposed to describe the exempt

``facilities'' as including all of the activities and equipment associated with the manufacture of renewable fuel which are located on one property and under the control of the same person or persons.

Commenters agreed with our proposed definition of ``facility'' and we are making that definition final today. d. Proposed Approaches and Consideration of Comments

We proposed one basic approach to the exemption provisions and sought comment on five additional options. The basic approach would provide an indefinite extension of grandfathering and deemed compliant status but with a limitation of the exemption from the 20% GHG threshold to a baseline volume of renewable fuel. The five additional options for which we sought

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comment were: (1) Expiration of exemption for grandfathered and

``deemed compliant'' status when facilities undergo sufficient changes to be considered ``reconstructed''; (2) Expiration of exemption 15 years after EISA enactment, industry-wide; (3) Expiration of exemption 15 years after EISA enactment with limitation of exemption to baseline volume; (4) ``Significant'' production components are treated as facilities and grandfathered or deemed compliant status ends when they are replaced; and (5) Indefinite exemption and no limitations placed on baseline volumes. i. Comments on the Proposed Basic Approach

Generally, commenters supported the basic approach in which the volume of renewable fuel from grandfathered facilities exempt from the 20% GHG reduction threshold would be limited to baseline volume. One commenter objected to the basic approach and argued that the statute's use of the word ``new'' and the phrase ``after December 19, 2007'' provided evidence that facilities which commenced construction prior to that date would not ever be subject to the threshold regardless of the volume produced from such facilities. In response, we note first that the statute does not provide a definition of the term ``new facilities'' for which the 20% GHG threshold applies. We believe that it would be reasonable to include within our interpretation of this term a volume limitation, such that a production plant is considered a new facility to the extent that it produces renewable fuel above baseline capacity. This approach also provides certainty in the marketplace in terms of the volumes of exempt fuel, and a relatively straightforward implementation and enforcement mechanism as compared to some of the other alternatives considered. Furthermore, EPA believes that the Act should not be interpreted as allowing unlimited expansion of exempt facilities for an indefinite time period, with all volumes exempt, as suggested by the commenter. Such an approach would likely lead to a substantial increase in production of fuel that is not subject to any GHG limitations, which EPA does not believe would be consistent with the objectives of the Act.

We solicited comment on whether changes at a facility that resulted in an increase in GHG emissions, such as a change in fuel or feedstock, should terminate the facility's exemption from the 20 percent GHG threshold. Generally, commenters did not support such a provision, pointing out that there are many variations within a plant that cannot be adequately captured in a table of fuel and feedstock pathways as we proposed (see 74 FR 24927). Implementing such a provision would create questions of accounting and tracking that would need to be evaluated on a time-consuming case-by-case basis. For example, if a switch to a different feedstock or production process resulted in less efficiency, facilities may argue that they are increasing energy efficiency elsewhere (e.g. purchasing waste heat instead of burning fuel onsite to generate steam). We would then need to assess such changes to track the net energy change a plant undergoes. Given the added complexity and difficulty in carrying out such an option, we have decided generally not to implement it. There is an exception, however, for ``deemed compliant'' facilities. These facilities achieve their status in part by being fired only by natural gas or biomass, or a combination thereof. Today's rule provides, as proposed, that these facilities will lose their exemption if they switch to a fuel other than natural gas, biomass, or a combination thereof, since these were conditions that

Congress deemed critical to granting them the exemption from the 20%

GHG reduction requirement.

We also solicited comment on whether we should allow a 10% tolerance on the baseline volume for which RINs can be generated without complying with the 20% GHG reduction threshold to allow for increases in volume due to debottlenecking. Some favored this concept, while others argued that the tolerance should be set at 20 percent.

After considering the comments received, we have decided that a 10%

(and 20%) level is not appropriate for this regulation for the following reasons: (1) We have decided to interpret the exemption of the baseline volume of renewable fuel from the 20 percent requirement as extending indefinitely. Any tolerance provided could, therefore, be present in the marketplace for a considerable time period; (2) increases in volume of 10% or greater could be the result of modifications other than debottlenecking. Consistent with the basic approach we are taking today towards interpreting the grandfathering and deemed compliant provisions, we believe that the fuel produced as a result of such modifications comes from ``new facilities'' within the meaning of the statute, and should be subject to the 20% GHG reduction requirement; (3) we are allowing baseline volume to be based on the maximum capacity that is allowed under state and federal air permits.

With respect to the last reason, facilities that have been operating below the capacity allowed in their state permits would be able to claim a baseline volume based on the maximum capacity. As such, these facilities may indeed be able to increase their volume by 10 to 20 percent by virtue of how their baseline volume is defined. We believe this is appropriate, however, since their permits should reflect their design, and the fuel resulting from their original pre-EISA (or pre- 2010, for deemed compliant facilities) design should be exempt from the 20% GHG reduction requirement. Nevertheless, we recognize and agree with commenters that some allowances should be made for minor changes brought about by normal maintenance which are consistent with the proper operation of a facility. EPA is not aware of a particular study or analysis that could be used as a basis for picking a tolerance level reflecting this concept, We believe, however, that the value should be relatively small, so as not to encourage plant expansions that are unrelated to debottlenecking. We believe that a 5% tolerance level is consistent with these considerations, and have incorporated that value in today's rule. ii. Comments on the Expiration of Grandfathered Status

Commenters who supported an expiration of the exemption did so because of concerns that the proposed approach of providing an indefinite exemption would not provide any incentives to bring these plants into compliance with current standards. They also objected to plants being allowed an indefinite period beyond the time period when it could be expected that they would have paid off their investors. The commenters argued that the cost of operation for such plants would be less than competing plants that do have to comply with current standards; as such, commenters opposed to the basic approach felt an indefinite exemption would be a subsidy to plants that will never comply with the 20 percent threshold level. The renewable fuels industry, on the other hand, viewed the options that would set an expiration date (either via cumulative reconstruction, or a 15-year period from date of enactment) as harsh, particularly if the lifecycle analysis results make it costly for existing facilities to meet the 20% threshold. Some also argued that no such temporal limitation appears in the statute.

We considered such comments, but in light of recent lifecycle analyses we conducted in support of this rule we have concluded that many of the current

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technology corn ethanol plants may find it difficult if not impossible to retrofit existing plants to comply with the 20 percent GHG reduction threshold. In addition, the renewable fuels industry viewed the alternative proposals that would set an expiration date (either via cumulative reconstruction, or a 15-year period from date of enactment) as harsh, particularly if the lifecycle analysis results make it costly for existing facilities to meet the 20% threshold. Given the difficulty of meeting such threshold, owners of such facilities could decide to shut down the plant. Given such implications of meeting the 20 percent threshold level for existing facilities we have chosen not to finalize any expiration date. e. Final Grandfathering Provisions

For the reasons discussed above, the Agency has decided to proceed with the proposed baseline volume approach, rather than the expiration options. We hold open the possibility, therefore, of revisiting and reproposing the exemption provision in a future rulemaking to take such advances into account. Ending the grandfathering exemption after its usefulness is over would help to streamline the ongoing implementation of the program.

The final approach adopted today is summarized as follows: i. Increases in volume of renewable fuel produced at grandfathered facilities due to expansion

For facilities that commenced construction prior to December 19, 2007, we are defining the baseline volume of renewable fuel exempt from the 20% GHG threshold requirement to be the maximum volumetric capacity of the facility that is allowed in any applicable state air permit or

Federal Title V operating permit.\4\ We had proposed in the NPRM that nameplate capacity be defined as permitted capacity, but that if the capacity was not stipulated in any federal, state or local air permit, then the actual peak output should be used. We have decided that since permitted capacity is the limiting condition, by virtue of it being an enforceable limit contained in air permits, that the term ``nameplate capacity'' is not needed. In addition, we are allowing a 5% tolerance as discussed earlier. Therefore, today's rule defines permitted capacity as 105% of the maximum permissible volume output of renewable fuel allowed under operating conditions specified in all applicable preconstruction, construction and operating permits issued by regulatory authorities (including local, regional, state or a foreign equivalent of a state, and federal permits). If the capacity of a facility is not stipulated in such air permits, then the grandfathered volume is 105% of the maximum annual volume produced for any of the last five calendar years prior to 2008. Volumes greater than this amount which may typically be due to expansions of the facility which occur after December 19, 2007, will be subject to the 20% GHG reduction requirement if the facility wishes to generate RINs for the incremental expanded volume. The increased volume will be considered as if produced from a ``new facility'' which commenced construction after December 19, 2007. Changes that might occur to the mix of renewable fuels produced within the facility are irrelevant--they remain grandfathered as long as the overall volume falls within the baseline volume. Thus, for example, if an ethanol facility changed its operation to produce butanol, but the baseline volume remained the same, the fuel so produced would be exempt from the 20% GHG reduction requirement.

\4\ Volumes also include expansions to existing facilities, provided that the construction for such expansion commences prior to

December 19, 2007. In such instances, the total volume from the original facility plus the additional volume due to expansion is grandfathered.

The baseline volume will be defined as above for deemed compliant facilities (those ethanol facilities fired by natural gas or biomass or a combination thereof that commenced construction after December 19, 2007 but before January 1, 2010) with the exception that if the maximum capacity is not stipulated in air permits, then the exempt volume is the maximum annual peak production during the plant's first three years of operation. In addition, any production volume increase that is attributable to construction which commenced prior to December 31, 2009 would be exempt from the 20% GHG threshold, provided that the facility continued to use natural gas, biomass or a combination thereof for process energy. Because deemed compliant facilities owe their status to the fact that they use natural gas, biomass or a combination thereof for process heat, their status will be lost, and they will be subject to the 20% GHG threshold requirement, at any time that they change to a process energy source other than natural gas and/or biomass. Finally, because EISA limits deemed compliant facilities to ethanol facilities, if there are any changes in the mix of renewable fuels produced by the facility, only the ethanol volume remains grandfathered. We had solicited comment on whether fuels other than ethanol could also be deemed compliant. Based on comments received and additional consideration to this matter, we decided that because the Act does not authorize EPA to allow fuels other than ethanol, the deemed compliant provisions will apply only to facilities producing that fuel.

Volume limitations contained in air permits may be defined in terms of peak hourly production rates or a maximum annual capacity. If they are defined only as maximum hourly production rates, they will need to be converted to an annual rate. Because assumption of a 24-hour per day production over 365 days per year (8,760 production hours) may overstate the maximum annual capacity we are requiring a conversion rate of 95% of the total hours in a year (8,322 production hours) based on typical operating ``uptime'' of ethanol facilities.

The facility registration process (see Section II.C) will be used to define the baseline volume for individual facilities. Owners and operators must submit information substantiating the permitted capacity of the plant, or the maximum annual peak capacity if the maximum capacity is not stipulated in a federal, state or local air permit, or

EPA Title V operating permit. Copies of applicable air permits which stipulate the maximum annual capacity of the plant, must be provided as part of the registration process. Subsequent expansions at a grandfathered facility that results in an increase in volume above the baseline volume will subject the increase in volume to the 20% GHG emission reduction threshold (but not the original baseline volume).

Thus, any new expansions will need to be designed to achieve the 20%

GHG reduction threshold if the facility wants to generate RINs for that volume. Such determinations will be made on the basis of EPA-defined fuel pathway categories that are deemed to represent such 20% reduction.

EPA enforcement personnel commented that claims for an exemption from the 20% GHG reduction requirement should be made promptly, so that they can be verified with recent supporting information. They were concerned, in particular, that claims for exempt status could be made many years into the future for facilities that may or may not have concluded construction within the required time period, but delayed actual production of renewable fuel due to market conditions or other reasons. EPA believes that this comment has merit, and has included a requirement in Section 80.1450(f) of the final rule for registration of facilities claiming an exemption from the 20% GHG reduction requirement by May 1,

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2013. This provision does not require actual fuel production, but simply the filing of registration materials that assert a claim for exempt status. It will benefit both fuel producers, who will likely be able to more readily collect the required information if it is done promptly, and EPA enforcement personnel seeking to verify the information. However, given the potentially significant implications of this requirement for facilities that may qualify for the exemption but miss the registration deadline, the rule also provides that EPA may waive the requirement if it determines that the submission is verifiable to the same extent as a timely-submitted registration. ii. Replacements of Equipment

If production equipment such as boilers, conveyors, hoppers, storage tanks and other equipment are replaced, it would not be considered construction of a ``new facility'' under this option of today's final rule--the baseline volume of fuel would continue to be exempt from the 20% GHG threshold. We sought comment on an approach that would require that if coal-fired units are replaced, that the replacement units must be fired with natural gas or biofuel for the product to be eligible for RINs that do not satisfy the 20% GHG threshold. Some commenters supported such an approach. We agreed, however, with other commenters who point out that the language in EISA provides for an indefinite exemption for grandfathered facilities.

While we interpret the statute to limit the exemption to the baseline volume of a grandfathered facility, we do not interpret the language to allow EPA to require that replacements of coal fired units be natural gas or biofuel. Thus replacements of coal fired equipment will not affect the facility's grandfathered status. iii. Registration, Recordkeeping and Reporting

Facility owner/operators will be required to provide evidence and certification of commencement of construction. Such certification will require copies of all applicable air permits that apply to the construction and operation of the facility. Owner/operators must provide annual records of process fuels used on a BTU basis, feedstocks used and product volumes. For facilities that are located outside the

United States (including outside the Commonwealth of Puerto Rico, the

U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the

Northern Mariana Islands) owners will be required to provide certification as well. Since the definition of commencement of construction includes having all necessary air permits, we will require that facilities outside the United States certify that such facilities have obtained all necessary permits for construction and operation required by the appropriate national and local environmental agencies. 4. New Renewable Biomass Definition and Land Restrictions

As explained in Section I, EISA lists seven types of feedstock that qualify as ``renewable biomass.'' EISA limits not only the types of feedstocks that can be used to make renewable fuel, but also the land that these renewable fuel feedstocks may come from. Specifically,

EISA's definition of renewable biomass incorporates land restrictions for planted crops and crop residue, planted trees and tree residue, slash and pre-commercial thinnings, and biomass from wildfire areas.

EISA prohibits the generation of RINs for renewable fuel made from feedstock that does not meet the definition of renewable biomass, which includes not meeting the associated land restrictions. The following sections describe EPA's interpretation of several key terms related to the definition of renewable biomass, and the approach in today's rule to implementing the renewable biomass requirements. a. Definitions of Terms

EISA's renewable biomass definition includes a number of terms that require definition. The following sections discuss EPA's definitions for these terms, which were developed with ease of implementation and enforcement in mind. We have made every attempt to define these terms as consistently with other federal statutory and regulatory definitions as well as industry standards as possible, while keeping them workable for purposes of program implementation. i. Planted Crops and Crop Residue

The first type of renewable biomass described in EISA is planted crops and crop residue harvested from agricultural land cleared or cultivated at any time prior to December 19, 2007, that is either actively managed or fallow, and nonforested. We proposed to interpret the term ``planted crops'' to include all annual or perennial agricultural crops that may be used as feedstock for renewable fuel, such as grains, oilseeds, and sugarcane, as well as energy crops, such as switchgrass, prairie grass, and other species, providing that they were intentionally applied to the ground by humans either by direct application as seed or nursery stock, or through intentional natural seeding by mature plants left undisturbed for that purpose. We received numerous comments on our proposed definition of ``planted crops,'' largely in support of our proposed definition. However, some commenters noted that ``microcrops,'' such as duckweed, a flowering plant typically grown in ponds or tanks, are also being investigated for used as renewable fuel feedstocks. These microcrops are typically grown in a similar manner to algae, but cannot be categorized as algae since they are relatively more complex organisms. EPA's proposed definition would have unintentionally excluded microcrops such as duckweed through the requirement that planted crops be ``applied to the ground.'' After considering comments received, EPA does not believe that there is any basis under EISA for excluding from the definition of renewable biomass crops such as duckweed that are applied to a tank or pond for growth rather than to the soil. As with other planted crops, these ponds or tanks must be located on existing ``agricultural land,'' as described below, to qualify as renewable biomass under EISA. Therefore, including such microcrops within the definition of renewable biomass will not result in the direct loss of forestland or other ecologically sensitive land that Congress sought to protect through the land restrictions in the definition of renewable biomass. Doing so will further the objectives of the statute of promoting the development of emerging technologies to produce clean alternatives to petroleum-based fuels, and to further U.S. energy independence.

For these reasons, we are finalizing our proposed definition of

``planted crops,'' with the inclusion of provisions allowing for the growth of ``microcrops'' in ponds or tanks that are located on agricultural land. Our final definition also includes a reference to

``vegetative propagation,'' in which a new plant is produced from an existing vegetative structure, as one means by which planted crops may reproduce, since this is an important method of reproduction for microcrops such as duckweed. The final definition of ``planted crops'' includes all annual or perennial agricultural crops from existing agricultural land that may be used as feedstock for renewable fuel, such as grains, oilseeds, and sugarcane, as well as energy crops, such as switchgrass, prairie grass, duckweed and other species (but not including algae species or planted trees), providing that they

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were intentionally applied by humans to the ground, a growth medium, or a pond or tank, either by direct application as seed or plant, or through intentional natural seeding or vegetative propagation by mature plants introduced or left undisturbed for that purpose. We note that because EISA contains specific provisions for planted trees and tree residue from tree plantations, our final definition of planted crops in

EISA excludes planted trees, even if they may be considered planted crops under some circumstances.

We proposed that ``crop residue'' be limited to the residue, such as corn stover and sugarcane bagasse, left over from the harvesting of planted crops. We sought comment on including biomass from agricultural land removed for purposes of invasive species control or fire management. We received many comments supporting the inclusion of biomass removed from agricultural land for purposes of invasive species control and/or fire management. We believe that such biomass is typically removed from agricultural land for the purpose of preserving or enhancing its value in agricultural crop production. It may be removed at the time crops are harvested, post harvest, periodically

(e.g., for pastureland) or during extended fallow periods. We agree with the commenters that this material is a form of biomass residue related to crop production, whether or not derived from a crop itself, and, therefore, are modifying the proposed definition of ``crop residue'' to include it. We also received comments encouraging us to expand the definition of crop residue to include materials left over after the processing of the crop into a useable resource, such as husks, seeds, bagasse and roots. EPA agrees with these comments and has altered the final definition to cover such materials. Based on comments received, our final definition of ``crop residue'' is the biomass left over from the harvesting or processing of planted crops from existing agricultural land and any biomass removed from existing agricultural land that facilitates crop management (including biomass removed from such lands in relation to invasive species control or fire management), whether or not the biomass includes any portion of a crop or crop plant.

Our proposed regulations restricted planted crops and crop residue to that harvested from existing agricultural land, which, under our proposed definition, includes three land categories--cropland, pastureland, and Conservation Reserve Program (CRP) land. We proposed to define cropland as land used for the production of crops for harvest, including cultivated cropland for row crops or close-grown crops and non-cultivated cropland for horticultural crops. We proposed to define pastureland as land managed primarily for the production of indigenous or introduced forage plants for livestock grazing or hay production, and to prevent succession to other plant types. We also proposed that CRP land, which is administered by USDA's Farm Service

Agency, qualify as ``agricultural land'' under RFS2.

EPA received numerous comments on our proposed definition of existing agricultural land. Generally, commenters were in support of our definition of ``cropland'' and its inclusion in the definition of existing agricultural land. Additionally, commenters generally did not object to CRP lands or pastureland being included in the definition of agricultural land. Based on our consideration of comments received on the proposed rule, EPA is including cropland, pastureland and CRP land in the definition of existing agricultural land, as proposed.

We sought comment in the proposal on whether rangeland should be included as agricultural land under RFS2. Rangeland is land on which the indigenous or introduced vegetation is predominantly grasses, grass-like plants, forbs or shrubs and which--unlike cropland or pastureland--is predominantly managed as a natural ecosystem. EPA received a number of comments concerning whether rangeland should be included in the definition of existing agricultural land under RFS2.

Some commenters urged EPA to expand the definition of existing agricultural land to include rangeland, arguing that rangelands could serve as important sources of renewable fuel feedstocks. Many of these commenters argued that, although it is generally less intensively managed than cropland, rangeland is nonetheless actively managed through control of brush or weed species, among other practices. In contrast, other commenters argued against the inclusion of rangeland, contending that the potential conversion of rangeland into cropland for growing renewable biomass would lead to losses of carbon, soil, water quality, and biodiversity.

Under EISA, renewable biomass includes crops and crop residue from agricultural land cleared or cultivated at any time prior to the enactment of EISA that is either ``actively managed of fallow'' and nonforested. In determining whether rangeland should be considered existing agricultural land under this provision, EPA must decide if rangeland qualifies as ``actively managed or fallow.'' EPA believes that the term ``actively managed'' is best interpreted by reference to the type of material and practices that this provision addresses-- namely crops and residue associated with growing crops. We think it is appropriate to inquire whether the type of management involved in a land type is consistent with that which would occur on land where crops are harvested. Thus, while we acknowledge that some types of rangeland are managed to a certain degree, the level of ``active management'' that is typically associated with land dedicated to growing agricultural crops is far more intensive than the types of management associated with rangeland. For example, rangeland is rarely tilled, fertilized or irrigated as croplands and, to a lesser degree, pasturelands, are. Furthermore, since rangeland encompasses a wide variety of ecosystems, including native grasslands or shrublands, savannas, wetlands, deserts and tundra, including it in the definition of agricultural land would increase the risk that these sensitive ecosystems would become available under EISA for conversion into intensively managed mono-culture cropland. Finally, the conversion of relatively undisturbed rangeland to the production of annual crops could in some cases lead to large releases of GHGs stored in the soil, as well as a loss of biodiversity, both of which would be contrary to

EISA's stated goals. For these reasons, EPA is not including rangeland in the definition of ``existing agricultural land'' in today's final rule.

We proposed to include in our definition of existing agricultural land the requirement that the land was cleared or cultivated prior to

December 19, 2007, and that, since December 19, 2007, it has been continuously actively managed (as agricultural land) or fallow, and nonforested. We proposed to interpret the phrase ``that is actively managed or fallow, and nonforested'' as meaning that land must have been actively managed or fallow, and nonforested, on December 19, 2007, and continuously thereafter in order to qualify for renewable biomass production. We received extensive comments on this interpretation. Many commenters suggested an interpretation of the requirement that agricultural land be ``actively managed'' to mean that the land had to be ``actively managed'' at the time EISA was passed on December 17, 2007, such that the amount of land available for biofuel feedstock production was established at that point

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and would not diminish over time. Other commenters supported our proposed interpretation, which would mean that the amount of land available for biofuel feedstock production could diminish over time if parcels of land cease to be actively managed at any point, thus taking them out of contention for biofuel feedstock cultivation. Some commenters argued that this interpretation is contrary to Congress' intent and the basic premise of the RFS program since, over time, it could lead to a reduction in the amount of renewable biomass available for use as renewable fuel feedstocks, while the statutorily required volumes of renewable fuel increase over time. These commenters further argue that the active management provision should be interpreted as a

``snapshot'' of agricultural land existing and actively managed on

December 19, 2007. Under this interpretation, the land that was cleared or cultivated prior to December 19, 2007 and was actively managed on that date, would be eligible for renewable biomass production indefinitely.

We agree that the goal of the EISA and RFS program, to increase the presence of renewable fuels in transportation fuel, will be better served by interpreting the ``actively managed or fallow'' requirement in the renewable biomass definition as applying to land actively managed or fallow on December 19, 2007, rather than interpreting this requirement as applying beginning on December 19, 2007 and continuously thereafter. In addition, by simplifying the requirement in this fashion, there will be significantly less burden on regulated parties in ensuring that their feedstocks come from qualifying lands. For these reasons, we are modifying the definition of existing agricultural land so that the ``active management'' requirement is satisfied for those that were cleared or cultivated and actively managed or fallow, and non-forested on December 19, 2007.

Further, we proposed and are finalizing that ``actively managed'' means managed for a predetermined outcome as evidenced by any of the following: Sales records for planted crops, crop residue, or livestock; purchasing records for land treatments such as fertilizer, weed control, or reseeding; a written management plan for agricultural purposes; documentation of participation in an agricultural program sponsored by a Federal, state or local government agency; or documentation of land management in accordance with an agricultural certification program. While we received comments indicating that including a definitive checklist of required evidential records would be helpful to have explicitly identified in the regulations, we are not doing so in order to maintain flexibility, as feedstock producers may vary in the types of evidence they can readily obtain to show that their agricultural land was actively managed. We are adding, however, a clarification that the records must be traceable to the land in question. For example, it will not be sufficient to have a receipt for seed purchase if there is not additional evidence indicating that the seed was applied to the land which is claimed as existing agricultural land.

The term ``fallow'' is generally used to describe cultivated land taken out of production for a finite period of time. We proposed and sought comment on defining fallow to mean agricultural land that is intentionally left idle to regenerate for future agricultural purposes, with no seeding or planting, harvesting, mowing, or treatment during the fallow period. We also proposed and sought comment on requiring documentation of such intent. We received many comments that supported our proposed definition of fallow. We also received comments indicating that EPA should set a time limit for land to qualify as fallow (as opposed to abandoned for agricultural purposes). We have decided not to include a time limit for land to qualify as ``fallow'' because we understand that agricultural land may be left fallow for many different purposes and for varying amounts of time. Any particular timeframe that

EPA might choose for this purpose would be somewhat arbitrary. Further,

EISA does not indicate a time limit on the period of time that qualifying land could be fallow, so EPA does not believe that it would be appropriate to do so in its regulations. Therefore, EPA is finalizing its proposed definition of ``fallow.''

Finally, in order to define the term ``nonforested'' as used in the definition of ``existing agricultural land,'' we proposed first to define the term ``forestland'' as generally undeveloped land covering a minimum area of one acre upon which the predominant vegetative cover is trees, including land that formerly had such tree cover and that will be regenerated. We also proposed that forestland would not include tree plantations. ``Nonforested'' land under our proposal would be land that is not forestland.

We received many comments on our proposed definition of forestland.

Some commenters urged EPA to broaden the definition of ``forestland'' to include tree plantations, arguing that plantations are well-accepted as a subset of forestland. Others advocated that EPA should make every effort to distinguish between tree plantations and forestland so as not to run the risk of allowing native forests to be converted into less diverse tree plantations from which trees could be harvested for renewable fuel production. For today's final rule, EPA is including tree plantations as a subset of forestland since it is commonly understood as such throughout the forestry industry. Under EISA, renewable biomass may include ``slash and pre-commercial thinnings'' from non-federal forestlands, and ``planted trees and tree residue'' from actively managed tree plantations on non-federal land. One effect under EISA of the modification from the proposed rule to include tree plantations as a subset of forestland is to allow pre-commercial thinnings and slash, in addition to planted trees and tree residue, harvested from tree plantations to serve as qualifying feedstocks for renewable fuel production. EPA believes it is appropriate to include pre-commercial thinnings and slash from actively managed tree plantations as renewable biomass, consistent with the EISA provision allowing harvested trees and tree residue from tree plantations to qualify as renewable biomass. Another effect of including the tree plantations as a kind of forestland is that, since crops and crop residue must come from land that was ``non-forested'' as of the date of

EISA enactment, a tract of land managed as a tree plantation on the date of EISA enactment could not be converted to cropland for the production of feedstock for RIN-generating renewable fuel. EPA believes that this result in keeping with Congressional desire to avoid the conversion of new lands to crop production for renewable fuel production.

Additionally, EPA received comments indicating that, in order to be consistent with existing statutory and/or regulatory definitions of

``forestland,'' EPA should exclude tree covered areas in intensive agricultural crop production settings, such as fruit orchards, or tree- covered areas in urban settings such as city parks from the definition of forestland. EPA agrees that these types of land cannot be characterized as ``forestland,'' and is thus excluding them from the definition. EPA's final definition of forestland is ``generally undeveloped land covering a minimum of 1 acre upon which the primary vegetative species is trees, including land that formerly had such tree cover and that will be regenerated and tree plantations.

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Tree covered areas in intensive agricultural crop production settings, such as fruit orchards, or tree-covered areas in urban settings such as city parks, are not considered forestland.'' ii. Planted Trees and Tree Residue

The definition of renewable biomass in EISA includes planted trees and tree residue from actively managed tree plantations on non-federal land cleared at any time prior to December 19, 2007, including land belonging to an Indian tribe or an Indian individual, that is held in trust by the United States or subject to a restriction against alienation imposed by the United States.

We proposed to define the term ``planted trees'' to include not only trees that were established by human intervention such as planting saplings and artificial seeding, but also trees established from natural seeding by mature trees left undisturbed for such a purpose.

Some commenters disagreed with our inclusion of naturally seeded trees in our definition of ``planted trees.'' They argue that an area which is managed for natural regeneration of trees is more akin to a natural forest than a tree plantation, and that the difference between the two types of land should be clear in order to distinguish between the two and to avoid the effective conversion of natural forests to tree plantations under EISA. EPA agrees that the inclusion of natural reseeding in the definition of ``planted trees'' would make distinguishing between tree plantations and forests difficult or impossible, thus negating the separate restrictions that Congress placed on the two types of land. On the other hand, EPA believes that trees that are naturally seeded and grown together with hand- or machine-planted trees in a tree plantation should not categorically be excluded from qualifying as renewable biomass. Such natural reseeding may occur after planting the majority of trees in a tree plantation, and may be consistent with the management plan for a tree plantation.

EPA has decided, therefore, to modify its proposed definition of

``planted tree'' to be trees harvested from a tree plantation. The term

``tree plantation'' is defined as a stand of no less than 1 acre composed primarily of trees established by hand- or machine-planting of a seed or sapling, or by coppice growth from the stump or root of a tree that was hand- or machine-planted.'' The net effect is that as long as a tree plantation consists ``primarily'' of trees that were hand- or machine planted (or derived therefrom, as described below), then all trees from the tree plantation, including those established from natural seeding by mature trees left undisturbed for such a purpose, will qualify as renewable biomass.

We also received a number of comments suggesting that EPA broaden the definition of planted trees to include other methods of tree regeneration, such as coppice (the production of new stems from stumps or roots), that are frequently used in the forestry industry to regenerate tree plantations. EPA believes that ``planted'' implies direct human intervention, and that allowing stump-growth from the stump or roots of a tree that was hand- or machine-planted is consistent with this concept. Therefore, today's final rule broadens the concept of ``planted trees'' from a tree plantation to include ``a tree established by hand- or machine-planting of a seed or sapling, or by coppice growth from the stump or root of a tree that was hand- or machine-planted.'' This new language will appear in the definition of

``tree plantation.''

In the NPRM, we proposed to define a ``tree plantation'' as a stand of no fewer than 100 planted trees of similar age and comprising one or two tree species, or an area managed for growth of such trees covering a minimum of one acre. We received numerous comments on our definition of tree plantation. Several commenters urged EPA to define tree plantation more broadly by using the definition from the Dictionary of

Forestry--``a stand composed primarily of trees established by planting or artificial seeding,'' However, this definition does not provide sufficiently clear guidelines for determining whether a given parcel of land would be considered a tree plantation rather than a natural forest. Since trees are considered renewable biomass under RFS2 only if they are harvested from tree plantations, we believe that our proposed definition was clearer and more easily applied in the field.

Accordingly, EPA has not adopted the definition of this term from the

Dictionary of Forestry. Other commenters argued that there is no technical justification for limiting the number of species or number of trees in a plantation, and that many tree plantations include a variety of species. EPA believes that there is merit in these comments.

Accordingly, EPA is finalizing a broadened definition of ``tree plantation,'' by removing the limitations on the number and species of trees. EPA is defining tree plantation as ``a stand of no less than 1 acre composed primarily of trees established by hand- or machine- planting of a seed or sapling, or by coppice growth from the stump or root of a tree that was hand- or machine-planted.''

We proposed to apply similar management restrictions to tree plantations as would apply to existing agricultural land and also to interpret the EISA language as requiring that to qualify as renewable biomass for renewable fuel production under RFS2, a tree plantation must have been cleared at any time prior to December 19, 2007, and continuously actively managed since December 19, 2007. Consistent with our final position regarding actively managed existing agricultural land, we are defining the term ``actively managed'' in the context of tree plantations as managed for a predetermined outcome as evidenced by any of the following that must be traceable to the land in question:

Sales records for planted trees or slash; purchasing records for seeds, seedlings, or other nursery stock together with other written documentation connecting the land in question to these purchases; a written management plan for silvicultural purposes; documentation of participation in a silvicultural program sponsored by a Federal, state or local government agency; documentation of land management in accordance with an agricultural or silvicultural product certification program; an agreement for land management consultation with a professional forester that identifies the land in question; or evidence of the existence and ongoing maintenance of a road system or other physical infrastructure designed and maintained for logging use, together with one of the above-mentioned documents. Silvicultural programs such as those of the Forest Stewardship Council, the

Sustainable Forestry Initiative, the American Tree Farm System, or USDA are examples of the types of programs that could indicate actively managed tree plantations. As with the definition of ``actively managed'' as it applies to crops from existing agricultural lands, we received extensive comments on this interpretation. As with our final position for crops from existing agricultural lands, we are interpreting the ``active management'' requirement for tree plantations to apply on the date of EISA's enactment, December 19, 2007. Those tree plantations that were cleared or cultivated and actively managed on

December 19, 2007 are eligible for the production of planted trees, tree residue, slash and pre-commercial thinnings for renewable fuel production.

In lieu of the term ``tree residue,'' we proposed to use the term

``slash'' in our regulations as a more descriptive, but otherwise synonymous, term. According

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to the Dictionary of Forestry (1998, p. 168), a source of commonly understood industry definitions, slash is ``the residue, e.g., treetops and branches, left on the ground after logging or accumulating as a result of a storm, fire, girdling, or delimbing.'' We also proposed to clarify that slash can include tree bark and can be the result of any natural disaster, including flooding. We received comments in support of this additional inclusion and are expanding the definition of

``slash'' to include tree bark and residue resulting from natural disaster, including flooding. We received general support for our proposal to substitute our definition of ``slash'' for ``tree residue,'' however, several commenters argued that our definition of slash is too narrow to be substituted for ``tree residue,'' which should include woody residues from saw mills and paper mills that process planted trees from tree plantations. EPA agrees that the term

``residue'' should include this material. Therefore, EPA is expanding the definition of ``tree residue'' to include residues from processing planted trees at lumber and paper mills, but is limiting it to the biogenically derived portion of the residues that can be traced back to feedstocks meeting the definition of renewable biomass (i.e. planted trees and tree residue from actively managed tree plantations on non- federal land cleared at any time prior to December 19, 2007). RINs may only be generated for the fraction of fuel produced that represents the biogenic portion of the tree residue, using the procedures described in

ASTM test method D-6866. Thus, if the tree residues are mixed with chemicals or other materials during processing at the lumber or paper mills, producers may only generate RINs for the portion of the mixture that is actually derived from planted trees. EPA's final definition of

``tree residue'' is ``slash and any woody residue generated during the processing of planted trees from actively managed tree plantations for use in lumber, paper, furniture or other applications, providing that such woody residue is not mixed with similar residue from trees that do not originate in actively managed tree plantations. iii. Slash and Pre-Commercial Thinnings

The EISA definition of renewable biomass includes slash and pre- commercial thinnings from non-federal forestlands, including forestlands belonging to an Indian tribe or an Indian individual, that are held in trust by the United States or subject to a restriction against alienation imposed by the United States. However, EISA excludes slash and pre-commercial thinnings from forests or forestlands that are ecological communities with a global or State ranking of critically imperiled, imperiled, or rare pursuant to a State Natural Heritage

Program, old growth forest, or late successional forest.

As described in Sec. II.B.4.a.i of this preamble, our definition of

``forestland'' is generally undeveloped land covering a minimum of 1 acre upon which the primary vegetative species is trees, including land that formerly had such tree cover and that will be regenerated and tree plantations. Tree-covered areas in intensive agricultural crop production settings, such as fruit orchards or tree-covered areas in urban setting such as city parks, are not considered forestland. Also as noted in Sec. III.B.4.a.ii of this preamble, we are adopting the definition of slash listed in the Dictionary of Forestry, with the addition of tree bark and residue resulting from natural disaster, including flooding.

As for ``pre-commercial thinnings,'' the Dictionary of Forestry defines the act of such thinning as ``the removal of trees not for immediate financial return but to reduce stocking to concentrate growth on the more desirable trees.'' Because what may now be considered pre- commercial may eventually be saleable as renewable fuel feedstock, we proposed not to include any reference to ``financial return'' in our definition, but rather to define pre-commercial thinnings as those trees removed from a stand of trees in order to reduce stocking to concentrate growth on more desirable trees. Additionally, we proposed to include diseased trees in the definition of pre-commercial thinnings due to the fact that they can threaten the integrity of an otherwise healthy stand of trees, and their removal can be viewed as reducing stocking to promote the growth of more desirable trees. We sought comment on whether our definition of pre-commercial thinnings should include a maximum diameter and, if so, what the appropriate maximum diameter should be. We received comments on our proposed definition of pre-commercial thinnings that were generally supportive of our proposed definition. Many commenters argued that EPA should not use a maximum tree diameter as a basis for defining pre-commercial thinning as tree diameter varies greatly by forest type and location, making any diameter limitation EPA might set arbitrary. EPA agrees with this assessment. Commenters also argued that pre-commercial thinnings may include other non-tree vegetative material that is removed to promote and improve tree growth. EPA is attempting to utilize standard industry definitions to the extent practicable, and believes that the proposed definition of pre-commercial thinnings, based largely on the Dictionary of Forestry definition with the addition of other vegetative material removed to promote tree growth, is appropriate. Therefore, we are finalizing the proposed definition of ``pre-commercial thinnings,'' with the addition of the phrase ``or other vegetative material that is removed to promote tree growth.''

We proposed that the State Natural Heritage Programs referred to in

EISA are those comprising a network associated with NatureServe, a non- profit conservation and research organization. Individual Natural

Heritage Programs collect, analyze, and distribute scientific information about the biological diversity found within their jurisdictions. As part of their activities, these programs survey and apply NatureServe's rankings, such as critically imperiled (S1), imperiled (S2), and rare (S3) to species and ecological communities within their respective borders. NatureServe meanwhile uses data gathered by these Natural Heritage Programs to apply its global rankings, such as critically imperiled (G1), imperiled (G2), or vulnerable (the equivalent of the term ``rare,'' or G3), to species and ecological communities found in multiple States or territories. We proposed and sought comment on prohibiting slash and pre-commercial thinnings from all forest ecological communities with global or State rankings of critically imperiled, imperiled, or vulnerable (``rare'' in the case of State rankings) from being used for renewable fuel for which RINs may be generated under RFS2.

We proposed to use data compiled by NatureServe and published in special reports to identify ``ecologically sensitive forestland.'' The reports listed all forest ecological communities in the U.S. with a global ranking of G1, G2, or G3, or with a State ranking of S1, S2, or

S3, and included descriptions of the key geographic and biologic attributes of the referenced ecological community. We proposed that the document be incorporated by reference into the definition of renewable biomass in the final RFS2 regulations (and updated as appropriate through notice and comment rulemaking). The document would identify specific ecological communities from which slash and pre-commercial thinnings could not be used as feedstock for the production of renewable fuel that would qualify for RINs under RFS2. Draft versions of the

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document containing the global and State rankings were placed in the docket for the proposed rule.

EPA received several comments on our proposed interpretation of

EISA's State Natural Heritage Program requirement and the reports listing G1-G3 and S1-S3 ecological communities. Several commenters argued that while EISA authorizes EPA to exclude slash and pre- commercial thinnings from S1-3 and G1 and G2 communities, it does not authorize the exclusion of biomass from G3 communities, which are designated as ``vulnerable,'' not ``critically imperiled, imperiled or rare,'' as EISA requires. The commenters further argue that there is little or no environmental benefit to adding G3 communities to the list of lands unavailable for renewable fuel feedstock production, and that their inclusion limits the availability of forest-derived biomass. EPA agrees with these comments, and has drafted today's final rule so as not to specifically exclude from the definition of renewable biomass slash and pre-commercial thinnings from G3-ranked ``vulnerable'' ecological communities to qualify as renewable biomass for purposes of

RFS2. We are interpreting EISA's language to exclude from the definition of renewable biomass any biomass taken from ecological communities in the U.S. with Natural Heritage Programs global ranking of G1 or G2, or with a State ranking of S1, S2, or S3. We are including in today's rulemaking docket (EPA-HQ-OAR-2005-0161) the list of ecological communities fitting this description.

To complete the definition of ``ecologically sensitive forestland,'' we proposed to include old growth and late successional forestland which is characterized by trees at least 200 years old. We received comments on this proposed definition recommending that EPA not use a single tree age in the define old growth and late-successional forests, as this criterion does not apply to all types of forests.

While EPA understands that there are a number of criteria for determining whether a forest is old growth and that the criteria differ depending on the type of forest, for purposes of the RFS2 rule, EPA seeks to use definitive criteria that can be applied by non- professionals. EPA is finalizing the definition of ``old growth'' as proposed. iv. Biomass Obtained From Certain Areas at Risk From Wildfire

The EISA definition of renewable biomass includes biomass obtained from the immediate vicinity of buildings and other areas regularly occupied by people, or of public infrastructure, at risk from wildfire.

We proposed to clarify in the regulations that ``biomass'' is organic matter that is available on a renewable or recurring basis, and that it must be obtained from within 200 feet of buildings, campgrounds, and other areas regularly occupied by people, or of public infrastructure, such as utility corridors, bridges, and roadways, in areas at risk of wildfire.

Furthermore, we proposed to define ``areas at risk of wildfire'' as areas located within--or within one mile of--forestland, tree plantations, or any other generally undeveloped tract of land that is at least one acre in size with substantial vegetative cover. We sought comment on two possible implementation alternatives for identifying areas at risk of wildfire. The first proposed alternative would incorporate into our definition of ``areas at risk of wildfire'' any communities identified as ``communities at risk'' and covered by a community wildfire protection plan (CWPP). Communities at risk are defined through a process within the document, ``Field Guidance--

Identifying and Prioritizing Communities at Risk'' (National

Association of State Foresters, June 2003). CWPPs are developed in accordance with ``Preparing a Community Wildfire Protection Plan--A

Handbook for Wildland-Urban Interface Communities'' (Society of

American Foresters, March 2004) and certified by a State Forester or equivalent. We sought comment on incorporating by reference into the final RFS2 regulations a list of ``communities at risk'' with an approved CWPP. We also sought comment on a second implementation approach, which would incorporate into our definition of ``areas at risk of wildfire'' any areas identified as wildland urban interface

(WUI) land, or land in which houses meet wildland vegetation or are mixed with vegetation. We noted that SILVIS Lab, in the Department of

Forest Ecology and Management and the University of Wisconsin, Madison, has, with funding provided by the U.S. Forest Service, mapped WUI lands based on the 2000 Census and the U.S. Geological Survey National Land

Cover Data (NLCD), and we sought comment on how best to use this map.

We received comments on the proposal and on the two proposed alternative options for identifying areas at risk of wildfire. A number of commenters argued that EPA should define ``areas at risk of wildfire'' using an existing definition of WUI from the Healthy Forests

Restoration Act (Pub. L. 108-148). Many commenters recommended that EPA include both lands covered by a CWPP as well as lands meeting the

Healthy Forests Restoration Act definition of WUI in order to maximize the amount of land available for biomass feedstock and to encourage the removal of hazardous fuel for wildfires. EPA understands that very few communities that might be eligible for a CWPP actually have one in place, due to the numerous administrative steps that must be taken in order to have a CWPP approved, so the option of defining areas at risk of wildfire exclusively by reference to a list of communities with an approved CWPP would be underinclusive of all lands that a professional forester would consider to be at risk of wildfire. Furthermore, EPA believes that the statutory definition of WUI from the Healthy Forests

Restoration Act (Pub. L. 108-148) is too vague using directly in implementing the RFS2 program. If EPA used this WUI definition, individual plots of land would have to be assessed by a professional forester on a case-by-case basis in order to determine if they meet the

WUI definition, creating an expensive burden for landowners seeking to sell biomass from their lands as renewable fuel feedstocks.

In light of the comments received and the need for a simple way for landowners and renewable fuel producers to track the status of particular plots of land, for the final rule we are identifying ``areas at risk of wildfire'' as those areas identified as wildland urban interface. Those areas are depicted and mapped at http:// silvis.forest.wisc.edu/Library/WUILibrary.asp. The electronic WUI map is a readily accessible reference tool that was prepared by experts in the field of identifying areas at risk of wildfire, and is thus an ideal reference for purposes of implementing RFS2. EPA has included in the rulemaking docket instructions on using the WUI map to find the status of a plot of land. v. Algae

EISA specifies that ``algae'' qualify as renewable biomass. EPA did not propose a definition for this term. A number of commenters have requested clarification, specifically asking whether cyanobacteria

(also known as blue-green algae), diatoms, and angiosperms are within the definition. Technically, the term ``algae'' has recently been defined as ``thallophytes (plants lacking roots, stems and leaves) that have chlorophyll a as their primary photosynthetic pigment and lack a sterile covering of

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cells around the reproductive cells.'' \5\ Algae are relatively simple organisms that are virtually ubiquitous, occurring in freshwater, brackish water, saltwater, and terrestrial habitats. When present in water, they may be suspended, or grow attached to various substrates.

They range in size from unicellular to among the longest living organisms (e.g. sea kelp). There is some disagreement among scientists as to whether cyanobacteria should be considered bacteria or algae.

Some consider them to be bacteria because of their cellular organization and biochemistry. However, others find it more significant that they contain chlorophyll a, which differs from the chlorophyll of bacteria which are photosynthetic, and also because free oxygen is liberated in blue-green algal photosynthesis but not in that of the bacteria.\6\ EPA believes that it furthers the purposes of EISA to interpret the term ``algae'' in EISA broadly to include cyanobacteria, since doing so will make available another possible feedstock for renewable fuel production that will further the energy independence and greenhouse gas reduction objectives of the Act. Further, EPA expects that cyanobacteria used in biofuel production would be cultivated, as opposed to harvested, and therefore that there would be no significant impact from use of cyanobacteria for biofuel production on naturally occurring algal populations. Diatoms are generally considered by the scientific community to be algae,\7\ and, consistent with this general scientific consensus, EPA interprets the EISA definition of algae to include them. Microcrop angiosperms, however, do not meet the definition of algae, even if they live in an aquatic habitat, since they are relatively more complex organisms than the algae. A discussion of microcrop angiosperms is included above in the discussion of

``planted crops and crop residue.''

\5\ Phycology, Robert Edward Lee, Cambridge University Press, 2008, page 3.

\6\ See, generally, Introduction to the Algae. Structure and

Reproduction, by Harold C. Bold and Michael J. Wynne, Prentice-Hall

Inc. 1978, page 31.

\7\ See id.

b. Implementation of Renewable Biomass Requirements

Our proposed approach to the treatment of renewable biomass under

RFS2 was intended to define the conditions under which RINs can be generated as well as the conditions under which renewable fuel can be produced or imported without RINs. Our proposed and final approaches to both of these areas are described in more detail below. i. Ensuring That RINs Are Generated Only for Fuels Made From Renewable

Biomass

The effect of adding EISA's definition of renewable biomass to the

RFS program is to ensure that renewable fuels are only eligible for the program if made from certain feedstocks, and if some of those feedstocks come from certain types of land. In the context of our regulatory program, this means that RINs could only be generated if it can be established that the feedstock from which the fuel was made meets EISA's definitions of renewable biomass include land restrictions. Otherwise, no RINs could be generated to represent the renewable fuel produced or imported. The EISA language does not distinguish between domestic renewable fuel feedstocks and renewable fuel feedstocks that come from abroad, so our final rule requires similar feedstock affirmation and recordkeeping requirements for both

RIN-generating domestic renewable fuel producers and RIN-generating foreign producers or importers.

We acknowledge that incidental contaminants can be introduced into feedstocks during cultivation, transport or processing. It is not EPA's intent that the presence of such contaminants should disqualify the feedstock as renewable biomass. The final regulations therefore stipulate that the term ``renewable biomass'' includes incidental contaminants related to customary feedstock production and transport that are present in feedstock that otherwise meets the definition if such incidental contaminants are impractical to remove and occur in de minimus levels. By ``related to customary feedstock production and transport,'' we refer to contaminants related to crop production, such as soil or residues related to fertilizer, pesticide and herbicide applications to crops, as well as contaminants related to feedstock transport, such as nylon rope used to bind feedstock materials. It would also include agricultural contaminants introduced to the feedstock during sorting or shipping, such as miscellaneous sorghum grains present in a load of corn kernels. However, contamination is not related to customary feedstock production and transport, so such feedstocks would not qualify, and in particular, any hazardous waste or toxic chemical contaminant in feedstock would disqualify the feedstock as renewable biomass. ii. Whether RINs Must Be Generated for All Qualifying Renewable Fuel

Under RFS1, virtually all renewable fuel is required to be assigned a RIN by the producer or importer. This requirement was developed and finalized in the RFS1 rulemaking in order to address stakeholder concerns, particularly from obligated parties, that the number of available RINs should reflect the total volume of renewable fuel used in the transportation sector in the U.S. and facilitate program compliance. EISA has dramatically increased the mandated volumes of renewable fuel that obligated parties must ensure are produced and used in the U.S. At the same time, EISA makes it more difficult for renewable fuel producers to demonstrate that they have fuel that qualifies for RIN generation by restricting qualifying renewable fuel to that made from ``renewable biomass.'' The inclusion of such restrictions under RFS2 may mean that, in some situations, a renewable fuel producer would prefer to forgo the benefits of RIN generation to avoid the cost of ensuring that its feedstocks qualify for RIN generation. If a sufficient number of renewable fuel producers acted in this way, it could lead to a situation in which not all qualifying fuel is assigned RINs, thus resulting in a shortage of RINs in the market that could force obligated parties into non-compliance even though biofuels are being produced and used. Another possible outcome would be that the demand for and price of RINs would increase significantly, making compliance by obligated parties more costly and difficult than necessary and raising prices for consumers.

With these concerns in mind, EPA proposed to preserve in RFS2 the

RFS1 requirement that RINs be generated for all qualifying renewable fuel. We also proposed that renewable fuel producers maintain records showing that they utilized feedstocks made from renewable biomass if they are generating RINs, or, if they are not generating RINs, that they did not use feedstocks that qualify as renewable biomass. However, we considered this matter further, and we realize that the implication of these proposed requirements is that renewable fuel producers would be caught in the untenable position of being forced to participate in the RFS2 program (register, keep records, etc.) even if they are unable to generate RINS because their feedstocks do not meet the definition of renewable biomass. We received many comments on the proposed requirement to generate RINs for all qualifying renewable fuel. Most

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commenters argued that the requirement to keep records for non- qualifying renewable fuels was excessively onerous and served little purpose for the program.

After considering the comments received, EPA has determined that this requirement would be overly burdensome and unreasonable for producers. The burden stems from the requirement that producers prove that their feedstocks do not qualify if they are not generating RINs.

If the data did not exist or could not be obtained, producers could not produce the fuel, even if no RINs would be generated. Thus, for the final rule, EPA is requiring only that producers that do generate RINs have the requisite records (as discussed in section II.B.4.c.i. of this preamble) documenting that their fuel is produced from feedstocks meeting the definition of renewable biomass. Non-RIN generating producers need not maintain any paperwork related to their feedstocks and their origins.

Although EPA is not requiring that RINs be generated for all qualifying renewable fuel, EPA is seeking to avoid situations where biofuels are produced, but RINs are not made available to the market for compliance. EPA received comments requesting that we consider a provision in which any volume of renewable fuel for which RINs were not generated would be an obligated volume for that producer, to serve as a disincentive for those producers who might not generate RINs in order to avoid the RFS program requirements. While EPA is not finalizing this provision in today's rule, we may consider a future rulemaking to promulgate a provision such as this if we find that EISA volumes are not being met due to producers declining to generate RINs for their qualifying renewable fuel. We also note that it is ultimately the availability of qualifying renewable fuel, as determined in part by the number of RINs in the marketplace, that will determine the extent to which EPA should issue a waiver of RFS requirements on the basis of inadequate domestic supply. It is in the interest of renewable fuel producers to avoid a situation where a waiver of the EISA volume requirements appears necessary. EPA encourages renewable fuel producers to generate RINs for all fuel that is made from feedstocks meeting the definition of renewable biomass and that meets the GHG emissions reduction thresholds set out in EISA. Please see section II.D.6 for additional discussion of this issue. c. Implementation Approaches for Domestic Renewable Fuel

Consistent with RFS1, renewable fuel producers will be responsible for generating Renewable Identification Numbers (RINs) under RFS2. In order to determine whether or not their fuel is eligible for generating

RINs, renewable fuel producers will generally need to have at least basic information about the origin of their feedstocks, to ensure they meet the definition of renewable biomass. In the proposal, EPA described and sought comment on several approaches for implementing the land restrictions on renewable biomass contained in EISA.

The proposed approach for ensuring that producers generate RINs properly was that EPA would require that renewable fuel producers obtain documentation about their feedstocks from their feedstock supplier(s) and take the measures necessary to ensure that they know the source of their feedstocks and can demonstrate to EPA that they fall within the EISA definition of renewable biomass. EPA would require renewable fuel producers who generate RINs to affirm on their renewable fuel production reports that the feedstock used for each renewable fuel batch meets the definition of renewable biomass. EPA would also require renewable fuel producers to maintain sufficient records to support these claims. Specifically, we proposed that renewable fuel producers who use planted crops or crop residue from existing agricultural land, or who use planted trees or slash from actively managed tree plantations, would be required to have copies of their feedstock producers' written records that serve as evidence of land being actively managed (or fallow, in the case of agricultural land) since

December 2007, such as sales records for planted crops or trees, livestock, crop residue, or slash; a written management plan for agricultural or silvicultural purposes; or, documentation of participation in an agricultural or silvicultural program sponsored by a Federal, state or local government agency. In the case of all other biomass, we proposed to require renewable fuel producers to have, at a minimum, written records from their feedstock supplier that serve as evidence that the feedstock qualifies as renewable biomass.

We sought comment on this approach generally as well as other methods of verifying renewable fuel producers' claims that feedstocks qualify as renewable biomass. EPA received extensive comments on the proposed approach. Many affected parties argued that the proposed approach would pose an unnecessary recordkeeping burden on both feedstock and renewable fuel producers when, in practice, new lands will not be cleared, at least in the near future, for purposes of growing renewable fuel feedstocks. Commenters argued that individual recordkeeping was onerous, when compliance with the renewable biomass requirements could be determined through the use of existing data and third-party programs. Commenters contend that the recordkeeping and feedstock tracking requirements are particularly arduous for corn, soybeans and other agricultural crops that are used as renewable fuel feedstocks due to both the maturity and the highly fungible nature of those feedstock systems. In contrast, other commenters argued that recordkeeping and reporting requirements are necessary to ensure that feedstocks are properly verified as renewable biomass to prevent undesirable impacts on natural ecosystems and wildlife habitat globally.

We also sought comment on the possible use under EISA of non- governmental, third-party verification programs used for certifying and tracking agricultural and forest products from point of origin to point of use both within the U.S. and outside the U.S. We examined third- party organizations that certify specific types of biomass from croplands and organizations that certify forest lands, including the

Roundtable on Sustainable Palm Oil, the Basel Criteria for Responsible

Soy Production, the Roundtable on Sustainable Biofuels (RSB) and the

Better Sugarcane Initiative (BSI). Additionally, we examined the work of the international Soy Working Group, the Brazilian Association of

Vegetable Oil Industries (ABIOVE) and Brazil's National Association of

Grain Exporters (ANEC), Greenpeace, Verified Sustainable Ethanol initiative, the Sustainable Agriculture Network (SAN), the Forest

Stewardship Council (FSC), American Tree Farm program and Sustainable

Forestry Initiative (SFI). We proposed not to solely rely on any existing third-party verification program to implement the land restrictions on renewable biomass under RFS2 for several reasons. These programs are limited in the scope of products they certify, the acreage of land certified through third parties in the U.S. covers only a small portion of the total available land estimated to qualify for renewable biomass production under the EISA definition, and none of the existing third-party systems had definitions or criteria that perfectly match the land use definitions

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and restrictions contained in the EISA definition of renewable biomass.

We received several comments indicating that producers would like to use evidence of their participation in these types of programs to prove that their feedstocks meet the definition of renewable biomass.

Others argued that while, at this time, the requirements of third-party programs may not encompass all of the restrictions and requirements of

EISA's renewable biomass definition, the programs may alter their criteria in the future to parallel EISA's requirements. EPA agrees that this is a possibility and, in the future, will consider the use of these programs in order to simplify compliance with the renewable biomass requirements. We encourage fuel producers to work to identify changes to such programs that could allow them to be used as a viable compliance option.

In the proposal, EPA also acknowledged that land restrictions contained within the definition of renewable biomass may not, in practice, result in a significant change in agricultural practices, since biomass from nonqualifying lands may still be used for non-fuel

(e.g., food) purposes. Therefore, we sought comment on a stakeholder suggestion to establish a baseline level of production of biomass feedstocks such that reporting and recordkeeping requirements would be triggered only when the baseline production levels of feedstocks used for biofuels were exceeded. Additionally, EPA offered as an alternative the use of existing satellite and aerial imagery and mapping software and tools to implement the renewable biomass provisions of EISA. We received numerous comments in support of these options. Commenters argued that USDA collects and maintains ample data on land use that EPA could use to demonstrate that, due to increasing crop yields and other considerations, agricultural land acreage will not expand, at least in the near term, to accommodate the increased renewable fuel obligations of RFS2.

EPA also sought comment on an additional alternative in which EPA would require renewable fuel producers to set up and administer a company-wide quality assurance program that would create an additional level of rigor in the implementation scheme for the EISA land restrictions on renewable biomass. EPA is not finalizing this company- wide quality assurance program approach, but rather, is encouraging the option for an industry-wide quality assurance program, as described in the following section, to be administered. i. Recordkeeping and Reporting for Feedstocks

After considering the comments we received on the proposed approach, EPA is finalizing reporting and recordkeeping requirements comparable to those in the approach we discussed in the proposed rule for all categories of renewable biomass, with the exception of planted crops and crop residue from agricultural land in the United States, which will be covered by the aggregate compliance approach discussed below in Section II.B.4.c.iii. EPA believes that these requirements on the fuel producer utilizing feedstocks other than crops and crop residue are necessary to ensure that the definition of renewable biomass is being met, and to allow feedstocks to be traced from their original producer to the renewable fuel production facility.

Furthermore, we believe that, in most cases, feedstock producers will already have or will be able to easily generate the specified documentation for renewable fuel producers necessary to provide them with adequate assurance that the feedstock in question meets the definition of renewable biomass.

Under today's rule, all renewable fuel producers must maintain written records from their feedstock suppliers for each feedstock purchase that identify the type and amount of feedstocks and where the feedstock was produced and that are sufficient to verify that the feedstock qualifies as renewable biomass. Specifically, renewable fuel producers must maintain maps and/or electronic data identifying the boundaries of the land where the feedstock was produced, product transfer documents (PTDs) or bills of lading tracing the feedstock from that land to the renewable fuel production facility, and other written records that serve as evidence that the feedstock qualifies as renewable biomass. We believe the maps or electronic data can be easily generated using existing Web-based information.

Producers using planted trees and tree residue from tree plantations must maintain additional documentation that serves as evidence that the tree plantation was cleared prior to December 19, 2007, and actively managed as a tree plantation on December 19, 2007.

This documentation must consist of the following types of records which must be traceable to the land in question: Sales records for planted trees or slash; purchasing records for fertilizer, weed control, or reseeding, including seeds, seedlings, or other nursery stock together with other written documentation connecting the land in question to these purchases; a written management plan for silvicultural purposes; documentation of participation in a silvicultural program sponsored by a Federal, state or local government agency; or documentation of land management in accordance with a silvicultural product certification program; an agreement for land management consultation with a professional forester that identifies the land in question; or evidence of the existence and ongoing maintenance of a road system or other physical infrastructure designed and maintained for logging use. There are many existing programs, such as those administered by USDA and independent third-party certifiers, that could be used as documentation that verifies that feedstock from certain land qualifies as renewable biomass. For example, many tree plantation owners already participate in a third-party certification program such as FSC or SFI. Written proof of participation by a tract of land in a program of this type on

December 19, 2007 would be sufficient to show that a tree plantation was cleared prior to that date and that it was actively managed on that date. The tree plantation owner would need to send copies of this documentation to the renewable fuel producer when supplying them with biomass that will be used as a renewable fuel feedstock.

We anticipate that the recordkeeping requirements will result in renewable fuel producers amending their contracts and modifying their supply chain interactions to satisfy the requirement that producers have documented assurance and proof about their feedstock's origins.

Enforcement will rely in part on EPA's review of renewable fuel production reports and attest engagements of renewable fuel producers' records. EPA will also consult other data sources, including any data made available by USDA, and may conduct site visits or inspections of feedstock producers' and suppliers' facilities.

The reporting requirements for renewable biomass in today's final rule include, as proposed, include an affirmation by the renewable fuel producer for each batch of renewable fuel for which they generate RINs that the feedstocks used to produce the batch meet the definition of renewable biomass. Additionally, the final reporting requirements include a quarterly report to be sent to EPA by each renewable fuel producer that includes a summary of the types and volumes of feedstocks used throughout the quarter, as well as electronic data or maps identifying the land from which those feedstocks were harvested.

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Producers need not provide duplicate maps if purchasing feedstocks multiple times from one plot of land; producers may cross-reference the previously submitted map. Producers will also be required to keep records tracing the feedstocks from the land to the renewable fuel production facility, other written records from their feedstock suppliers that serve as evidence that the feedstock qualifies as renewable biomass, and for producers using planted trees or tree residue from tree plantations, written records that serve as evidence that the land from which the feedstocks were obtained was cleared prior to December 19, 2007 and actively managed on that date. These requirements will apply to renewable fuel producers using feedstocks from foreign sources (unless special approvals are granted in the future, as described below), or from domestic sources, except for planted crops or crop residue (discussed below).

This approach will be integrated into the existing registration, recordkeeping, reporting, and attest engagement procedures for renewable fuel producers. It places the burden of implementation and enforcement on renewable fuel producers rather than bringing feedstock producers and suppliers directly under EPA regulation, minimizing the number of regulated parties under RFS2.

EPA also sought comment on, and is finalizing as an option, an alternative approach in which EPA allows renewable fuel producers and renewable fuel feedstock producers and suppliers to develop a quality assurance program for the renewable fuel production supply chain, similar to the model of the successful Reformulated Gasoline Survey

Association. While individual renewable fuel producers may still choose to comply with the individual renewable biomass recordkeeping and reporting requirements rather than participate in a quality assurance program, we believe that this preferred alternative could be less costly than an individual compliance demonstration, and it would add a quality assurance element to RFS2. Those participating renewable fuel producers would be presumed to be in compliance with the renewable biomass requirements unless and until the quality assurance program finds evidence to the contrary. Under today's rule, renewable fuel producers must choose either to comply with the individual renewable biomass recordkeeping and reporting described above, or they must participate in the quality assurance program.

The quality assurance program must be carried out by an independent auditor funded by renewable fuel producers and feedstock suppliers. The program must consist of a verification program for participating renewable fuel producers and renewable feedstock producers and handlers designed to provide independent oversight of the feedstock handling processes that are required to determine if a feedstock meets the definition of renewable biomass. Under this option, a participating renewable fuel producer and its renewable feedstock suppliers and handlers would have to participate in the funding of an organization which arranges to have an independent auditor conduct a program of compliance surveys. The compliance audit must be carried out by an independent auditor pursuant to a detailed survey plan submitted to EPA for approval by November 1 of the year preceding the year in which the alternative compliance program would be implemented. The compliance survey program plan must include a statistically supportable methodology for the survey, the locations of the surveys, the frequency of audits to be included in the survey, and any other elements that EPA determines are necessary to achieve the same level of quality assurance as the individual recordkeeping and reporting requirements included in the RFS2 regulations.

Under this alternative compliance program, the independent auditor would be required to visit participating renewable feedstock producers and suppliers to determine if the biomass they supply to renewable fuel producers meets the definition of renewable biomass. This program would be designed to ensure representative coverage of participating renewable feedstock producers and suppliers. The auditor would generate and report the results of the surveys to EPA each calendar quarter. In addition, where the survey finds improper designations or handling, the renewable fuel producers would be responsible for identifying and addressing the root cause of the problem. The renewable fuel producers would have to take corrective action to retire the appropriate number of invalid RINs depending on the violation. EPA received comments from a number of parties who were supportive of this option as an alternative and less-burdensome way of ensuring that renewable fuel feedstocks meet the definition of renewable biomass. EPA believes this option to be an efficient and effective means of implementing and enforcing the renewable biomass requirements of EISA, and has therefore included it as a compliance option in today's final rule. ii. Approaches for Foreign Producers of Renewable Fuel

The EISA renewable biomass language does not distinguish between domestic renewable fuel and fuel feedstocks and renewable fuel and fuel and feedstocks that come from abroad. EPA proposed that foreign producers of renewable fuel that is exported to the U.S. be required to meet the same compliance obligations as domestic renewable fuel producers, as well as some additional measure, discussed in Section

II.C., designed to facilitate EPA enforcement in other countries. These proposed obligations include facility registration and submittal of independent engineering reviews (described in Section II.C below), and reporting, recordkeeping, and attest engagement requirements. The proposal also would have included for foreign producers the same obligations that domestic producers have for verifying that their feedstock meets the definition of renewable biomass, such as certifying on each renewable fuel production report that their renewable fuel feedstock meets the definition of renewable biomass and working with their feedstock suppliers to ensure that they receive and maintain accurate and sufficient documentation in their records to support their claims.

(1) RIN-Generating Importers

EPA proposed to allow importers to generate RINs for renewable fuel they are importing into the U.S. only if the foreign producer of that renewable fuel had not already done so. Under the proposal, in order to generate RINs, importers would need to obtain information from the registered foreign producers concerning the point of origin of their fuel's feedstock and whether it meets the definition of renewable biomass. Therefore, we proposed that in the event that a batch of foreign-produced renewable fuel does not have RINs accompanying it when it arrives at a U.S. port, an importer must obtain documentation that proves that the fuel's feedstock meets the definition of renewable biomass (as described in Section II.B.4.a. of this preamble) from the fuel's producer, who must have registered with the RFS program and conducted a third-party engineering review. With such documentation, the importer could generate RINs prior to introducing the fuel into commerce in the U.S.

We sought comment on this proposed approach and whether and to what extent the approaches for ensuring

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compliance with the EISA's land restrictions by foreign renewable fuel producers should differ from the proposed approach for domestic renewable fuel producers. We received comments on the proposed implementation option for importers of foreign renewable fuel. Some argue that the proposed recordkeeping requirements for imported fuel were overly burdensome. On the other hand, others argued that importers, similarly to domestic producers, should be required to obtain information that can serve as evidence that the feedstocks meet the definition of renewable biomass, in order to avoid fraud. Some commenters also argued that importers should be able to generate RINs for fuel imported from foreign producers that are not registered with

EPA under the RFS2 program.

For the final rule, EPA is requiring that importers may only generate RINs for renewable fuel if the foreign producer has not already done so. The foreign producers must be registered with EPA under the RFS2 program, and must have conducted an independent engineering review. Furthermore, we are requiring that importers obtain from the foreign producer and maintain in their records written documentation that serves as evidence that the renewable fuel for which they are generating RINs was made from feedstocks meeting the definition of renewable biomass. The foreign producer that originally generated the fuel must ensure that these feedstock records are transferred with each batch of fuel and ultimately reach the RIN- generating importer. A requirement that importers maintain these renewable biomass records is consistent with the renewable biomass recordkeeping requirements imposed on domestic producers of renewable fuel.

(2) RIN-Generating Foreign Producers

Foreign producers that intend to generate RINs would be required to designate renewable fuel intended for export to the U.S. as such, segregate the volume until it reaches the U.S., and post a bond to ensure that penalties can be assessed in the event of a violation, as discussed in Section II.D.2.b. Similarly to domestic producers of renewable fuel, foreign producers must obtain and maintain written documentation from their feedstock providers that can serve as evidence that their feedstocks meet the definition of renewable biomass. Foreign producers may also develop a quality assurance program for their renewable fuel production supply chain, as described above. However, while domestic renewable fuel producers using crops or crop residues may rely on the aggregate compliance approach described below to ensure that their feedstocks are renewable biomass, this approach is not available at this time to foreign renewable fuel producers, as described below.

EPA believes that the renewable biomass recordkeeping provisions are necessary in order for EPA to ensure that RINs are being generated for fuel that meets EISA's definition of renewable fuel. Just as for domestic producers, foreign producers must maintain evidence that the fuel meets the GHG reduction requirements and is made from renewable biomass. iii. Aggregate Compliance Approach for Planted Crops and Crop Residue

From Agricultural Land

In light of the comments received on the proposed renewable biomass recordkeeping requirements and implementation options, EPA sought assistance from USDA in determining whether existing data and data sources might suggest an alternative method for verifying compliance with renewable biomass requirements associated with the use of crops and crop residue for renewable fuel production. Taking into consideration publicly available data on agricultural land available from USDA and USGS as well as expected economic incentives for feedstock producers, EPA has determined that an aggregate compliance approach is appropriate for certain types of renewable biomass, namely planted crops and crop residue from the United States.

Under the aggregate compliance approach, EPA is determining for this rule the total amount of ``existing agricultural land'' in the

U.S. (as defined above in Section II.B.4.a.) at the enactment date of

EISA, which is 402 million acres. EPA will monitor total agricultural land annually to determine if national agricultural land acreage increases above this 2007 national aggregate baseline. Feedstocks derived from planted crops and crop residues will be considered to be consistent with the definition of renewable biomass and renewable fuel producers using these feedstocks will not be required to maintain specific renewable biomass records as described below unless and until

EPA determines that the 2007 national aggregate baseline is exceeded.

If EPA finds that the national aggregate baseline is exceeded, individual recordkeeping and reporting requirements as described below will be triggered for renewable fuel producers using crops and crop residue. We believe that the aggregate approach will fully ensure that the EISA renewable biomass provisions related to crops and crop residue are satisfied, while also easing the burden for certain renewable fuel producers and their feedstock suppliers vis-[agrave]-vis verification that their feedstock qualifies as renewable biomass.

As discussed in more detail below, there are five main factors supporting the aggregate compliance approach we are taking for planted crops and crop residue. First, EPA is using data sets that allow us to obtain an appropriately representative estimate of the agricultural lands available under EISA for the production of crops and crop residue as feedstock for renewable fuel production. Second, USDA data indicate an overall trend of agricultural land contraction. These data, together with EPA economic modeling, suggest that 2007 aggregate baseline acreage should be sufficient to support EISA renewable fuel obligations and other foreseeable demands for crop products, at least in the near term, without clearing and cultivating additional land. Third, EPA believes that existing economic factors for feedstock producers favor more efficient utilization practices of existing agricultural land rather than converting non-agricultural lands to crop production.

Fourth, if, at any point, EPA finds that the total amount of land in use for the production of crops including crops for grazing and forage is equal or greater than 397 million acres (i.e. within 5 million acres of EPA's established 402 million acre baseline), EPA will conduct further investigations to evaluate whether the presumption built into the aggregate compliance approach remains valid. Lastly, EPA has set up a trigger mechanism that in the event there are more than the baseline amount of acres of cropland, pastureland and CRP land in production, renewable fuel producers will be required to meet the same individual or consortium-based recordkeeping and reporting requirements applicable to RIN-generating renewable fuel producers using other feedstocks.

Taken together, these factors give EPA high confidence that the aggregate compliance approach for domestically grown crops and crop residues meets the statutory obligation to ensure feedstock volumes used to meet the renewable fuel requirements also comply with the definition of renewable biomass.

(1) Analysis of Total Agricultural Land in 2007

As described in Section II.B.4.a. above, EPA is defining ``existing agricultural land'' for purposes of the

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EISA land use restrictions on crops and crop residue to include cropland, pastureland and CRP land that was cleared and actively managed or fallow and nonforested on the date of EISA enactment. To determine the aggregate total acreage of existing agricultural land for the aggregate compliance approach on the date of EISA enactment, EPA obtained from USDA data representing total cropland (including fallow cropland), pastureland, and CRP land in 2007 from three independently gathered national land use data sources (discussed in further detail below): The Farm Service Agency (FSA) Crop History Data, the USDA

Census of Agriculture (2007), and the satellite-based USDA Crop Data

Layer (CDL). In addition, CRP acreage is provided by FSA's annually published ``Conservation Reserve Program: Summary and Enrollment

Statistics.'' By definition, the cropland, pastureland, and CRP land included in these data sources for 2007 were cleared or cultivated on the date of EISA enactment (December 19, 2007) and, consistent with the principles set forth in Section II.4.a.i, would be considered

``actively managed'' or fallow and nonforested on that date. These categories of lands include those from which traditional crops, such as corn, soy, wheat and sorghum, would likely be grown. Therefore quantification of cropland, pastureland, and CRP land from these data sources represents a reasonable assessment of the acreage in the United

States that is available under the Act for the production of crops and crop residues that could satisfy the definition of renewable biomass in

EISA.

Conservation Reserve Program Data. FSA reports CRP enrollment acreage each year in the publication ``Conservation Reserve Program:

Summary and Enrollment Statistics.'' The CRP program includes the general CRP, the Conservation Reserve Enhancement Program (CREP), and the Farmable Wetlands Program (FWP). The Wetlands Reserve Program (WRP) and Grasslands Reserve Program (GRP) are not under CRP and are not included in the total agricultural land figure in this rulemaking. The 2007 CRP acreage was 36.7 million acres. This is an exact count of acreage within the CRP program in 2007.

Farm Service Agency Crop History Data. The FSA maintains annual records of field-level land use data for all farms enrolled in FSA programs. Almost all national cropland and pastureland is reported through FSA and recorded in this data set. We used the ``Cropland'' category to determine total agricultural land. Pastureland is reported by farms under the category ``Cropland'' as cropland used for grazing and forage under the crop type ``mixed forage.'' Timber land and any grazed native grass was removed from the ``Cropland'' category, because these land types represent either forestland or rangeland, which are not within the definition of existing agricultural land. CRP lands and other conservation program lands are also reported as cropland. Because

GRP and WRP lands are not within the definition of ``existing agricultural land'' as defined in today's regulations, they were also subtracted from the ``Cropland'' category total. FSA Crop History Data show that there was 402 million acres of agricultural land, as defined here, in the U.S. in 2007 (See Table II.B.4-1).

Table II.B.4-1--Total U.S. Agricultural Land in 2007 From USDA Data

Sources

FSA crop

Agricultural

Land category

history data

census data

Cropland and Pastureland................

365

367

CRP Land................................

37

37

Total Land..........................

402

404

USDA Census of Agriculture. USDA conducts a full census of the U.S. agricultural sector once every five years. The data are available for the U.S., each of the 50 States, and for each county. The most recent census available is the 2007 Census of Agriculture. For the purpose of this rulemaking, USDA provided EPA total acreage and 95% confidence intervals for the Census category ``Total Cropland,'' which includes the sub-categories ``Harvested cropland,'' ``Cropland used only for pasture and grazing,'' and ``Other cropland.'' WRP and GRP acreage are included in ``Other cropland,'' so, for purposes of this rulemaking, they were subtracted from the sub-category number (see above). The analysis excluded the ``Permanent rangeland and pasture'' category, as the pasture data cannot be separated from rangeland in this category.

Total CRP acreage in 2007 was added to ``Total cropland.'' With these adjustments, the Census of Agriculture showed 404 million acres (95% confidence range 401-406 million acres) of existing agricultural land as defined in today's rule, in the U.S. in 2007 (See Table II.B.4-1).

Crop Data Layer. The USDA National Agricultural Statistics Service

(NASS) Crop Data Layer (CDL) is a raster, geo-referenced, crop-specific land cover data layer suitable for use in geographic information systems (GIS) analysis. Based on satellite data, the CDL has a ground resolution of 56 meters and was verified using FSA surveys. The CDL covers 21 major agricultural states for 2007 and therefore cannot be used to determine a 2007 national aggregate agricultural land baseline.

There will be full coverage of the 48 contiguous states for 2009, and the CDL can be used for analysis validation purposes during monitoring.

From 2010 onward, it coverage of the 48 contiguous states will be dependent on available funding. GIS analyses of the CDL will include all cropland and pastureland data for each state. To ensure that non- pasture grasslands are not included in the final sum, all areas of the

``Grassland herbaceous'' category from the U.S. Geological National

Land Cover Data layer (NLCD) that overlap the CDL layers are removed from the total agricultural land number. Producer and user accuracies

\8\ are available for the CDL crop categories.

\8\ ``Producer Accuracy'' indicates the probability that a groundtruth pixel will be correctly mapped and measures errors of omission; ``User Accuracy'' indicates the probability that a pixel from the classification actually matches the groundtruth data and measures errors of omission.

Primary Data Source Selection for Aggregate Compliance Approach.

EPA has determined that the FSA Crop History Data will be used as the data set on which the total existing agricultural land baseline will be based for the aggregate compliance approach. The FSA Crop History Data is the only complete data set for 2007 that is collected annually, enabling EPA to monitor agricultural land expansion or

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contraction from year to year using a consistent data set. The total existing agricultural land value derived from FSA Crop History Data rests within the 95% confidence interval of the 2007 Census of

Agriculture and is only 2 million acres less than the Census of

Agriculture point estimate. The Census of Agriculture provides slightly fuller coverage than the FSA Crop History Data due to the nature of the data collection; however, given that both data collection systems have consistent and long-standing methodologies, the disparity between the two should remain approximately constant. Therefore, the FSA Crop

History Data will provide a consistent data set for analyzing any expansion or contraction of total national agricultural land in the

U.S.

During its annual monitoring, EPA will use the FSA Crop History

Data and the CDL analyses as a secondary source to validate our annual assessment. In years when the Census of Agriculture is updated, this data will also be used to validate our annual assessment. Other data sources, such as the annual NASS Farms, Land in Farms and Livestock

Operations may also be useful as secondary data che