[Federal Register Volume 84, Number 208 (Monday, October 28, 2019)]
[Proposed Rules]
[Pages 57677-57685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23379]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2019-0136; FRL-10001-36-OAR]


Renewable Fuel Standard Program: Standards for 2020 and Biomass-
Based Diesel Volume for 2021, and Response to the Remand of the 2016 
Standards; Supplemental Notice of Proposed Rulemaking

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: In a July 29, 2019 notice of proposed rulemaking, 
Environmental Protection Agency (EPA) proposed percentage standards for 
four categories of renewable fuel that would apply to obligated parties 
in 2020 under the Renewable Fuel Standard. This action takes into 
consideration certain comments received in response to the proposed 
rule. Based on these comments and additional information, EPA is 
issuing a supplemental proposal and requests comment on adjustments to 
the percentage standards for 2020 that result from the amended 
definitions of two of the terms used to calculate the percentage 
standards. We are proposing to project the volume of gasoline and 
diesel that will be exempt in 2020 due to small refinery exemptions 
based on a three-year average of the relief recommended by the 
Department of Energy (DOE). From 2016-2018 the relief recommended by 
the DOE would have resulted in a reduction to the renewable volume 
obligation of approximately 770 million RINs per year. The amended 
definitions proposed in this rule would effectively increase the 
percentage standards that apply to non-exempt obligated parties to 
offset future small refinery exemptions and help ensure that the 
required volumes are met.

DATES: 
    Comments: Comments must be received on or before November 29, 2019.
    Public Hearing: EPA will hold a public hearing will be held on 
October 30, 2019, at the location noted below under ADDRESSES. The 
hearing will begin at 9:00 a.m. and end when all parties present who 
wish to speak have had an opportunity to do so. Parties wishing to 
testify at the hearing should notify the contact person listed under 
FOR FURTHER INFORMATION CONTACT by October 24, 2019. Additional 
information regarding the hearing appears below under SUPPLEMENTARY 
INFORMATION.

ADDRESSES: You may send your comments, identified by Docket ID No. EPA-
HQ-OAR-2019-0136, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov 
(our preferred method) Follow the online instructions for submitting 
comments.
     Mail: U.S. Environmental Protection Agency, EPA Docket 
Center, Office of Air and Radiation Docket, Mail Code 28221T, 1200 
Pennsylvania Avenue NW, Washington, DC 20460.
     Hand Delivery/Courier: EPA Docket Center, WJC West 
Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. 
The Docket Center's hours of operations are 8:30 a.m.-4:30 p.m., 
Monday-Friday (except Federal Holidays).
    Instructions: All submissions received must include the Docket ID 
No. for this rulemaking. Comments received may be posted without change 
to https://www.regulations.gov, including any personal information 
provided. For the full EPA public comment policy, information about CBI 
or multimedia submissions, and general guidance on making effective 
comments, please visit http://www.epa.gov/dockets/commenting-epa-dockets.
    Hearing: The hearing will be held at the following location: Ann 
Arbor Marriott Ypsilanti at Eagle Crest, 1275 S. Huron St., Ypsilanti, 
MI 48197 (telephone number (734) 487-2000). A complete set of documents 
related to the proposal will be available for public inspection through 
the Federal eRulemaking Portal: http://www.regulations.gov, Docket ID 
No. EPA-HQ-OAR-2019-0136. Documents can also be viewed at the EPA 
Docket Center, located at 1301 Constitution Avenue NW, Room 3334, 
Washington, DC between 8:30 a.m. and 4:30 p.m., Monday through Friday, 
excluding legal holidays.

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; for questions regarding this 
proposed action, email address: RFS-Rulemakings@epa.gov; for 
information regarding the public hearing and to register for the public 
hearing, email address: RFS-Hearing@epa.gov.

SUPPLEMENTARY INFORMATION: Entities potentially affected by the July 
29, 2019,

[[Page 57678]]

proposed rule,\1\ should it become final, are those involved with the 
production, distribution, and sale of transportation fuels, including 
gasoline and diesel fuel or renewable fuels such as ethanol, biodiesel, 
renewable diesel, and biogas. Potentially regulated categories include:
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    \1\ 84 FR 36762 (July 29, 2019).

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                                                NAICS \1\                     Examples of potentially regulated
                  Category                        codes       SIC \2\ codes                entities
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Industry...................................          324110            2911  Petroleum Refineries.
Industry...................................          325193            2869  Ethyl alcohol manufacturing.
Industry...................................          325199            2869  Other basic organic chemical
                                                                              manufacturing.
Industry...................................          424690            5169  Chemical and allied products
                                                                              merchant wholesalers.
Industry...................................          424710            5171  Petroleum bulk stations and
                                                                              terminals.
Industry...................................          424720            5172  Petroleum and petroleum products
                                                                              merchant wholesalers.
Industry...................................          221210            4925  Manufactured gas production and
                                                                              distribution.
Industry...................................          454319            5989  Other fuel dealers.
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\1\ North American Industry Classification System (NAICS).
\2\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to engage in activities 
that may be affected by this action. Other types of entities not listed 
in the table could also be affected. To determine whether your entity 
would be affected by this action, you should carefully examine the 
applicability criteria in 40 CFR part 80. If you have any questions 
regarding the applicability of this action to a particular entity, 
consult the person listed in the FOR FURTHER INFORMATION CONTACT 
section.
    Hearing: The public hearing will provide interested parties the 
opportunity to present data, views, or arguments concerning the 
proposal (which can be found at https://www.epa.gov/renewable-fuel-standard-program/regulations-and-volume-standards-under-renewable-fuel-standard). EPA may ask clarifying questions during the oral 
presentations but will not respond to the presentations at that time. 
Written statements and supporting information submitted during the 
comment period will be considered with the same weight as any oral 
comments and supporting information presented at the public hearing. 
Written comments must be received by the last day of the comment 
period, as specified in this notice.

Outline

I. Overview
II. Consideration of Proposed Adjustments to the Percentage Standard 
Calculations for 2020
    A. Proposed Changes to the Projected Volume of Gasoline and 
Diesel for Exempt Small Refineries
    B. Projecting the Exempted Volume of Gasoline and Diesel in 2020
    C. Example Calculation of Proposed Percentage Standards for 2020
III. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs
    C. Paperwork Reduction Act (PRA)
    D. Regulatory Flexibility Act (RFA)
    E. Unfunded Mandates Reform Act (UMRA)
    F. Executive Order 13132: Federalism
    G. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    H. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    J. National Technology Transfer and Advancement Act (NTTAA)
    K. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
IV. Statutory Authority

I. Overview

    On July 29, 2019, EPA proposed ``Renewable Fuel Standard Program: 
Standards for 2020 and Biomass-Based Diesel Volume for 2021, Response 
to the Remand of the 2016 Standards, and Other Changes'' (``the July 29 
proposal''). We proposed reductions in the statutory volume targets for 
cellulosic biofuel, advanced biofuel, and total renewable fuel using 
the cellulosic waiver authority in Clean Air Act (CAA) section 
211(o)(7)(D). We also proposed percentage standards that would apply to 
obligated parties in 2020 for each of the four categories of renewable 
fuel (cellulosic biofuel, biomass-based diesel, advanced biofuel, and 
total renewable fuel) based on the proposed volumes and a projection of 
the volume of gasoline and diesel used in the U.S. in 2020.\2\
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    \2\ See 84 FR 36762 (July 29, 2019).
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    In response to the July 29 proposal, a number of stakeholders 
provided comments on the proposed percentage standards for 2020.\3\ 
Some of these parties requested that we change our interpretation of 
two terms used to calculate the percentage formula: The amount of 
gasoline projected to be produced by exempt small refineries and small 
refiners (collectively, ``exempt small refineries''), and the amount of 
diesel projected to be produced by exempt small refineries. Rather than 
interpreting these terms to refer to the projected production of 
gasoline and diesel produced by refineries that have been exempted from 
their 2020 RFS obligations at the time the 2020 annual rule is 
finalized, many commenters stated that EPA should instead project the 
volumes of gasoline and diesel that will be exempted for the 2020 
compliance year and use these projected volumes in calculating the 
percentage standards for 2020. In the July 29 proposal, we informed the 
public that these issues were beyond the scope of that proposal.\4\ On 
further consideration, we are issuing this supplemental proposal of a 
method to address these issues.
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    \3\ See, e.g., comments from the Renewable Fuels Association 
(Docket Item No. EPA-HQ-OAR-2019-0136-0281).
    \4\ See 84 FR 36797 and fn. 165 (July 29, 2019).
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    Since the July 29 proposal, EPA has granted small refinery 
exemptions (``SREs'') for 31 small refineries for the 2018 compliance 
year.\5\ We believe these comments and the 2018 SREs are germane to our 
approach for calculating the percentage standards for 2020. In light of 
this additional information, and

[[Page 57679]]

in order to give all stakeholders an opportunity to consider potential 
changes to the calculation of the percentage standards, we are issuing 
this supplemental proposal. We are proposing to amend the definitions 
of ``GEi'' and ``DEi'' in the RFS percentage 
standard formula at 40 CFR 80.1405(c) to represent the projected 
volumes of exempt gasoline and diesel in the compliance year (in this 
case 2020), regardless of whether EPA has adjudicated exemption 
petitions by the time of the final rule establishing the percentage 
standards for that compliance year. These changes are intended to help 
ensure that the renewable fuel volumes established in the action that 
we take with regard to the July 29 proposal and this supplemental 
proposal (the ``final rule'') are achieved. We request additional 
comment on this proposed change. This action does not solicit comment 
on any other aspect of the formula at 40 CFR 80.1405(c) or the July 29 
proposal, nor are we soliciting comment on increasing the required 
volume of renewable fuel to account for the reductions in the required 
renewable fuel volumes that resulted from SRE decisions issued prior to 
the 2020 compliance year.
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    \5\ EPA also denied SRE requests from 6 small refineries. 
Petitions from 3 parties were declared ineligible or withdrawn, and 
2 petitions were pending at the time EPA issued this supplemental 
proposal. More information about the number of SREs granted and the 
volume of RINs not required to be retired as a result of those 
exemptions can be found at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
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II. Consideration of Proposed Adjustments to the Percentage Standard 
Calculations for 2020

    In the July 29 proposal, we proposed percentage standards for each 
of the four categories of renewable fuel based on the volumes that 
resulted from the exercise of the cellulosic waiver authority and 
projections of the volume of gasoline and diesel used in the U.S. in 
2020.\6\ We received comments on that proposal suggesting that, in 
determining the percentage standards for 2020, we should project the 
volume of gasoline and diesel produced by small refineries that will be 
exempted from their renewable volume obligations in 2020.\7\ In light 
of these comments and the recent SREs, we are proposing new definitions 
for two of the terms used in calculating the percentage standards for 
2020 to account for the projected volume of gasoline and diesel 
produced by small refineries that will be exempted from their renewable 
volume obligations in 2020.
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    \6\ See Section VIII of the July 29 proposal for more detail on 
the proposed percentage standard calculations.
    \7\ See, e.g., comments from the Renewable Fuels Association 
(Docket Item No. EPA-HQ-OAR-2019-0136-0281).
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A. Proposed Changes to the Projected Volume of Gasoline and Diesel for 
Exempt Small Refineries

    The renewable fuel standards are expressed as volume percentages 
and those volume percentages are used by each obligated party to 
determine their Renewable Volume Obligations (RVOs). These percentage 
standards are calculated by EPA using the volumes of renewable fuel 
established in the annual rules following any reductions made using the 
cellulosic waiver authority and/or the general waiver authority. The 
formulas used to calculate the percentage standards applicable to 
producers and importers of gasoline and diesel are provided in 40 CFR 
80.1405(c). The formulas rely on estimates of the volumes of gasoline 
and diesel fuel, for both highway and nonroad uses, which are projected 
to be used in the year in which the standards will apply. The formula 
for the percentage standard calculation for total renewable fuel, 
including the definitions of the terms, is shown below. The formulas 
for the other three percentage standards follow the same format, with 
the numerator of the fraction replaced with the annual volume of 
cellulosic biofuel, biomass-based diesel, and advanced biofuel, 
respectively.
[GRAPHIC] [TIFF OMITTED] TP28OC19.000

Where:

StdRF,i = The renewable fuel standard for year i, in 
percent.
RFVRF,i = Annual volume of renewable fuel required by 42 
U.S.C. 7545(o)(2)(B) for year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48 
contiguous states and Hawaii, in year i, in gallons.
Di = Amount of diesel projected to be used in the 48 
contiguous states and Hawaii, in year i, in gallons.
RGi = Amount of renewable fuel blended into gasoline that 
is projected to be consumed in the 48 contiguous states and Hawaii, 
in year i, in gallons.
RDi = Amount of renewable fuel blended into diesel that 
is projected to be consumed in the 48 contiguous states and Hawaii, 
in year i, in gallons.
GSi = Amount of gasoline projected to be used in Alaska 
or a U.S. territory, in year i, if the state or territory has opted-
in or opts-in, in gallons.
RGSi = Amount of renewable fuel blended into gasoline 
that is projected to be consumed in Alaska or a U.S. territory, in 
year i, if the state or territory opts-in, in gallons.
DSi = Amount of diesel projected to be used in Alaska or 
a U.S. territory, in year i, if the state or territory has opted-in 
or opts-in, in gallons.
RDSi = Amount of renewable fuel blended into diesel that 
is projected to be consumed in Alaska or a U.S. territory, in year 
i, if the state or territory opts-in, in gallons.
GEi = The amount of gasoline projected to be produced by 
exempt small refineries and small refiners, in year i, in gallons in 
any year they are exempt per Sec. Sec.  80.1441 and 80.1442.
DEi = The amount of diesel fuel projected to be produced 
by exempt small refineries and small refiners in year i, in gallons, 
in any year they are exempt per Sec. Sec.  80.1441 and 80.1442.

    Historically, EPA has interpreted the terms referring to the amount 
of gasoline and diesel projected to be produced by exempt small 
refineries (terms GEi and DEi in the equation 
above) to refer to the amount of gasoline and diesel projected to be 
produced by small refineries that have already been granted exemptions 
from their obligations prior to issuing the final rule for the relevant 
compliance year.\8\ As a result of this interpretation, any SREs 
granted after we issue the annual rule containing the percentage 
standards for that year effectively reduces the required volume of 
renewable fuel for that year. For example, in August 2019 we granted 31 
SREs for the 2018 compliance year after the percentage standards for 
2018 had been established.\9\ These SREs reduced the obligated volume 
of gasoline and diesel for 2018 by 13.42 billion gallons, effectively 
reducing the required volume of total renewable fuel for 2018 by 1.43 
billion RINs.
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    \8\ See, e.g., 84 FR 36797 (July 29, 2019).
    \9\ The percentage standards for 2018 were established in 
December 2017 (82 FR 58486, December 12, 2017).
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    In comments on the July 29 proposal, many commenters requested that 
EPA adopt a different interpretation of the terms for the amount of 
gasoline and diesel projected to be produced by exempt small refineries 
in the existing

[[Page 57680]]

percentage standard formula.\10\ Many commenters requested that these 
terms should refer to a projection of the exempted volume of gasoline 
and diesel produced by small refineries, regardless of whether EPA had 
already adjudicated such exemption petitions by the time of the final 
rule. These commenters argued that this interpretation of the 
regulations is reasonable and better implements the statutory 
requirement that EPA must ``ensure'' the renewable fuel volumes are 
met. Some commenters suggested that adjusting the percentage standards 
formula is more important now than in earlier years of the program as 
we have recently granted exemptions for more significant volumes of 
gasoline and diesel, resulting in applicable volumes that are not being 
met at the time of compliance.\11\
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    \10\ See, e.g., comments from the Renewable Fuels Association 
(Docket Item No. EPA-HQ-OAR-2019-0136-0281).
    \11\ See, e.g., comments from Growth Energy (Docket Item No. 
EPA-HQ-OAR-2019-0136-0312).
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    The comments described above raise issues similar to those raised 
by a pending petition for administrative reconsideration.\12\ That 
petition, filed by parties who also commented on the July 29 proposal, 
also asked EPA to reconsider our approach to accounting for exempted 
volumes through the formula at 40 CFR 80.1405(c). In response to this 
petition, EPA is undertaking a process to reconsider this issue; 
however, we are doing so under our inherent authority to revise or 
amend a rulemaking.\13\
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    \12\ ``Petition for Reconsideration of 40 CFR 80.1405(c), EPA 
Docket No. EPA-HQ-OAR-2005-0161, promulgated in 75 FR 14670 (Mar. 
26, 2010); Petition for Reconsideration of Periodic Reviews for the 
Renewable Fuel Standard Program, 82 FR 58364 (Dec. 12, 2017)'' (June 
4, 2018).
    \13\ The petition asserted that reconsideration was required 
under CAA section 307(d)(7)(B). Consistent with caselaw and recent 
representations by the petitioners, we do not believe that the 
reconsideration criteria under CAA section 307(d)(7)(B) have been 
met; we instead are treating the petition as a petition to revise or 
amend a rulemaking. See EPA's Sur-Reply in Opp. To Petr's Mot. to 
Lift Stay of Proceedings, D.C. Cir. No. 18-1154, ECF No. 1807187, 3 
(Sept. 19, 2019); Petr's Reply in Further Support of Their Mot. to 
Lift Stay of Proceedings, D.C. Cir. No. 18-1154, ECF No. 1806347, 3 
n.1 (Sept. 12, 2019); Pet. for Rev., D.C. Cir. No. 19-1201, ECF No. 
1808877, 2 n.2 (Sept. 27, 2019). Regardless, we note that we are 
providing notice and a public hearing followed by a 30-day comment 
period, consistent with CAA section 307(d) procedures. We also take 
no position today on whether this administrative petition and the 
related judicial petitions meet the ``grounds arising after'' 
requirements, under CAA section 307(b)(1) and relevant caselaw, to 
challenge prior EPA rulemakings.
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    We are proposing to change the definitions of the two terms in the 
percentage standard formula at 40 CFR 80.1405(c), GEi and 
DEi, to represent a projection of the exempted volume of 
gasoline and diesel, regardless of whether we have adjudicated 
exemptions for that year by the time of the final rule establishing the 
percentage standards for the four renewable fuel types. We propose that 
the term ``GEi'', representing the volume of exempt 
gasoline, be defined as ``the total amount of gasoline projected to be 
exempt in year i, in gallons, per Sec. Sec.  80.1441 and 80.1442.'' We 
similarly propose that the term ``DEi'', representing the 
volume of exempt diesel, be defined as ``the total amount of diesel 
projected to be exempt in year i, in gallons, per Sec. Sec.  80.1441 
and 80.1442.''
    While the statute does not specifically require EPA to redistribute 
exempted volumes in this manner, we believe that this is a reasonable 
interpretation of our authority pursuant to the statute under Chevron 
v. NRDC,\14\ especially in light of our authority to ``ensure'' that 
the renewable fuel volumes are met.\15\ We also acknowledge that this 
supplemental proposal, if finalized, would reflect a change in policy 
direction as described in FCC v. Fox.\16\
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    \14\ Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 
U.S. 837, 842-44 (1984).
    \15\ See CAA section 211(o)(2)(A)(i), (2)(A)(iii)(I), (3)(B)(i); 
see also CAA section 301(a).
    \16\ FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 
(2009).
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    We believe the newly proposed definitions are a reasonable measure 
to appropriately account for volumes that may become exempted after the 
promulgation of the final rule establishing the percentage standards 
and furthers Congressional intent to ``ensure'' the renewable fuel 
volumes are met. In other words, should we grant SREs without 
accounting for them in the percentage formula, those exemptions would 
effectively reduce the volumes of renewable fuel required by the RFS 
program, potentially impacting the volume of renewable fuel used in the 
U.S. By contrast, were we to adopt this proposed change to the 
percentage standards for 2020, the percentage standard for each 
category of renewable fuel would increase (see Section II.C for example 
calculations). These higher percentage standards would have the effect 
of ensuring that the required volumes of renewable fuel are met when 
small refineries are granted exemptions from their 2020 obligations, 
provided EPA's projection of the amount of gasoline and diesel produced 
by exempt small refineries in 2020 is accurate. We acknowledge the 
uncertainty in the projection, a topic we discuss further in the next 
section.
    We also believe that accounting in the percentage formula for a 
projection of volumes that would be exempted after the final rule is 
particularly appropriate where those volume are projected to constitute 
a significant portion of the total volume of obligated fuel as 
established in the final rule. This has occurred in recent years but 
did not occur in the first years of the program when we first 
established the regulatory definitions and interpretations.
    We solicit comment on other formulations of these definitions in 
order to accurately describe our intent that these terms represent a 
projection of the volume of gasoline and diesel produced by exempt 
small refineries, regardless of whether EPA had already adjudicated 
those exemptions by the time of the final rule.

B. Projecting the Exempted Volume of Gasoline and Diesel in 2020

    Adoption of the proposed revised definitions of the terms referring 
to the amount of gasoline and diesel produced by exempt small 
refineries, as discussed in Section II.A, would require that we 
determine how to project the exempted volumes of these fuels in 2020. 
Although subject to uncertainty, this projection would affect the 
percentage standards and thus the actual volume of renewable fuel 
required to be used in 2020. If we over-project the volume of gasoline 
and diesel produced by exempt small refineries in 2020, the actual 
required volumes of renewable fuel will be higher than the volumes used 
in calculating the percentage standards. By contrast, if we under-
project the volume of exempted gasoline and diesel, the actual required 
volumes of renewable fuel will be lower than the volumes used in 
calculating the percentage standards.
    We acknowledge that there is uncertainty with projecting the 
exempted volume for 2020, as petitions for 2020 SREs have not yet been 
submitted to or evaluated by the Department of Energy (DOE) or EPA. EPA 
independently evaluates SRE petitions while taking DOE's recommendation 
into account and has discretion to provide relief that is different 
than the DOE recommendation. In 2020 we anticipate granting partial 
exemptions where such exemptions are appropriate. This is an approach 
we could have taken in response to recommendations from DOE in recent 
years, which included partial exemption recommendations on some 
applications. We therefore believe it is appropriate to consider the 
exempt volumes of gasoline and diesel in previous years had EPA 
followed DOE's recommendations without deviation. We believe the 
approach described

[[Page 57681]]

above is appropriate for two independent reasons.
    First, in prior years, EPA has taken different approaches in 
evaluating petitions. For instance, in the EPA final action, the August 
9, 2019, Memorandum Decision, we granted or denied 36 then-pending SRE 
petitions for the 2018 compliance year.\17\ We granted full exemptions 
to petitioners where DOE either recommended full or 50% relief. That 
is, in cases where DOE found a small refinery experienced either 
disproportionate impacts or viability impairment, EPA found the small 
refinery experienced disproportionate economic hardship and granted a 
full exemption. By contrast, in earlier years of the program, we denied 
petitions and provided no exemption in certain cases where DOE 
recommended a 50% exemption, finding that disproportionate economic 
hardship existed only where the small refinery experienced both 
disproportionate impacts and viability impairment.\18\ The proposed 
approach to projection, then, takes a middle ground between these prior 
approaches, and is a reasonable estimate of the aggregate expected 
exempted volume in 2020.
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    \17\ ``Decision on 2018 Small Refinery Exemption Petitions,'' 
Memorandum from Anne Idsal, Acting Assistant Administrator, Office 
of Air and Radiation to Sarah Dunham, Director, Office of 
Transportation and Air Quality. August 9, 2019 (``August 9 
Memorandum Decision'').
    \18\ See, e.g., Hermes Consol., LLC v. EPA, 787 F.3d 568, 575 
(D.C. Cir. 2015).
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    Second, this approach approximates our intended approach for 
adjudicating 2020 SRE petitions. The statute directs EPA to make an 
independent decision as to SRE petitions based on DOE's recommendation 
and other economic factors. While final decisions on 2020 SREs must 
await EPA's receipt and adjudication of those petitions, we generally 
have the statutory authority to issue a final decision consistent with 
DOE's recommendation following our own review and analysis.\19\ This 
reading of the statute is consistent with congressional guidance to DOE 
\20\ and EPA.\21\ Consistent with that guidance and since 2014, DOE has 
also recommended 50% exemptions as it deemed appropriate.
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    \19\ EPA retains the authority to deviate from DOE's 
recommendation based upon ``other economic factors,'' refinery-
specific information, and other persuasive evidence that EPA should 
reach a different outcome. See CAA section 211(o)(9)(B)(ii).
    \20\ See Consolidated Appropriations Act, 2016, Public Law 114-
113 (2015), Explanatory Statement to Senate amendment to H.R. 2029 
Military Construction and Veterans Affairs and Related Agencies 
Appropriations Act, 2016, Division D-Energy and Water Development 
and Related Agencies Appropriations Act, 2016, available at https://docs.house.gov/meetings/RU/RU00/20151216/104298/HMTG-114-RU00-20151216-SD005.pdf. Congress in this Statement directed DOE, under 
certain circumstances, ``to recommend to the EPA Administrator a 50 
percent waiver of RFS requirements for the [small refinery] 
petitioner.'' Id. at 35.
    \21\ S. Rep. 114-281. See also Consolidated Appropriations Act, 
2019, Public Law 116-6 (2019), H. Rep. 116-9 at 741, continuing the 
directive contained in Senate Report 114-281. A recent Senate Report 
reiterated: ``The [Environmental Protection] Agency is reminded 
that, regardless of the Department of Energy's recommendation, 
additional relief may be granted if the Agency believes it is 
warranted.'' Sen. Rep. 116-123, Department of the Interior, 
Environment, and Related Agencies Appropriations Bill, 2020, Report 
Accompanying Sen. 2580, at 87-88 (Sept. 26, 2019) (again 
``continu[ing] the directive contained in Senate Report 114-281 
related to small refinery relief''), available at https://www.congress.gov/116/crpt/srpt123/CRPT-116srpt123.pdf. This 
guidance, read together with that discussed in the previous 
footnote, supports the interpretation that DOE has authority to 
recommend partial exemptions for particular small refineries, and 
that EPA has discretion, to the extent supported by the record 
before it, either to accept that recommendation and grant a partial 
exemption, or to depart from that recommendation.
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    We acknowledge that in the August 9 Memorandum Decision, we stated 
that the ``best interpretation'' of the statute was that EPA should 
either grant or deny petitions in full, and ``not grant partial 
relief.'' Specifically, we observed that the statute provided for 
exemptions as an ``extension of the exemption under subparagraph (A)'', 
where subparagraph (A) stated that the RFS program requirements ``shall 
not apply to small refineries under calendar year 2011.'' \22\ We had 
implemented the statutory pre-2011 exemption as a full exemption for 
all qualifying small refineries. Thus, we concluded that, under this 
interpretation, ``when Congress authorized the Administrator to provide 
an `extension' of that exemption for the reason of [disproportionate 
economic hardship], Congress intended that extension to be a full, and 
not partial, exemption.'' \23\
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    \22\ CAA section 211(o)(9)(B); CAA section 211(o)(9)(A).
    \23\ August 9 Memorandum Decision at 2.
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    We believe, however, that this is not the only reasonable way to 
adjudicate exemption petitions. Had Congress spoken directly to the 
issue of the amount of relief EPA could provide to small refineries, 
EPA would be bound by that directive. However, the statute is silent 
with respect to EPA's authority to issue partial exemptions. Nothing in 
the statute directly addresses this issue. No statutory language exists 
characterizing the scope of an exemption; there are no terms employed 
such as ``partial'' or ``full.''
    We think there is another reasonable reading of this provision of 
the statute besides the one articulated in the August 9 Memorandum 
Decision. Again, there we stated that we could provide full relief to 
small refineries for which DOE recommends 50% relief.\24\ At the same 
time, it is also reasonable to construe the statute to allow EPA to 
issue partial exemptions.\25\
---------------------------------------------------------------------------

    \24\ It could also be appropriate for EPA to deny an exemption 
in some cases where DOE recommends 50% relief, as we did in earlier 
years of the program.
    \25\ EPA solicits comment on whether the interpretation set 
forth in the August 9 Memorandum Decision is indeed the ``best'' 
interpretation. EPA notes in this regard that the ultimate question 
is whether the statutory interpretation under which it operates is a 
reasonable one.
---------------------------------------------------------------------------

    Notably, EPA may determine that only partial relief is warranted 
based on a particular small refinery's circumstances. In that case, it 
is reasonable for the level of relief that EPA grants to reflect that 
determination. Nowhere does Congress indicate that EPA must take an 
all-or-nothing approach. Specifically, nothing obligates EPA to provide 
full relief where we find that only partial relief is warranted.
    For purposes of making the projection of the aggregate exempted 
volume of gasoline and diesel in 2020, we propose to adopt this 
interpretation of the statute, under which EPA has the authority to 
grant a partial exemption to a small refinery under appropriate 
circumstances.\26\ Were we to finalize this approach, we would, in 
projecting the exempted volume, depart from the interpretation taken in 
the August 9 Memorandum Decision, under which EPA ``shall either grant 
or deny petitions for small refinery hardship in full, and not grant 
partial relief.'' \27\ We propose to adopt this new approach for 
several reasons. As already noted, this new policy would allow EPA to 
ensure that the level of relief that it grants reflect the 
determination it makes as to whether full or partial relief is 
appropriate based on a particular small refinery's disproportionate 
economic hardship. This allows EPA to more precisely calibrate its RFS 
policy, and to strike an appropriate balance between furthering the 
production and use of renewable fuels while granting relief to small 
refineries that meet the statutory criteria. This balance, moreover, is 
also appropriate in light of the above-cited recent Congressional 
direction.\28\ Furthermore, we note again that even were EPA to deviate 
from this policy in

[[Page 57682]]

adjudicating 2020 SRE petitions,\29\ this approach to projection 
nonetheless provides a reasonable estimate of the aggregate exempted 
volume at this time. All projections are inherently uncertain, but this 
projection reflects a reasonable projection of the future.
---------------------------------------------------------------------------

    \26\ See Chevron, 467 U.S. at 842-44.
    \27\ August 9 Memorandum Decision at 2. See FCC, 556 U.S. at 
515.
    \28\ See supra notes 20 and 21.
    \29\ For instance, EPA may deviate from DOE's recommendation 
where we find that other economic factors compel a different outcome 
than what DOE recommended. Other factors, such as judicial 
resolution of pending decisions or subsequent Congressional 
direction, could also potentially affect EPA's SRE policy going 
forward.
---------------------------------------------------------------------------

    Further, although we acknowledge the difficulty of making a precise 
projection,\30\ this inherent uncertainty does not preclude us from 
taking the approach set forth in this supplemental proposal. To the 
extent our prior statements suggested we did not believe such a 
projection was appropriate, we propose to change course.\31\ The 
statute impliedly contemplates EPA's authority to make this projection, 
as it requires EPA to promulgate standards by November 30 of the prior 
year to ``ensure[ ]'' that the renewable fuel volumes are met,\32\ but 
authorizes small refineries to petition for an exemption based on 
disproportionate economic hardship ``at any time.'' \33\ This 
projection, moreover, is hardly unique in the RFS program as Congress 
required EPA to make numerous projections to implement the program.\34\
---------------------------------------------------------------------------

    \30\ See EPA's Br., Doc No. 1757157, D.C. Cir. No. 17-1258, AFPM 
v. EPA (Oct. 25, 2018).
    \31\ See FCC, 556 U.S. at 515.
    \32\ CAA section 211(o)(3)(B)(i).
    \33\ CAA section 211(o)(9)(B)(i).
    \34\ See, e.g., CAA section 211(o)(7)(D) (projection of the 
volume of cellulosic biofuel production); (o)(3)(A) (projection of 
the volumes of transportation fuel, biomass-based diesel, and 
cellulosic biofuel).
---------------------------------------------------------------------------

    Today's approach, moreover, avoids the problems we previously 
identified with projecting small refinery exemptions. Notably, we are 
projecting the aggregate exempted volume in 2020. We thus need not 
wrestle with the difficulties of predicting precisely which refineries 
will apply or the economic circumstances of specific refineries in 
2020. We only need to estimate the total exempted volume. Moreover, we 
retain authority to adjust the standards as appropriate should our 
approach to 2020 small refinery exemptions significantly change from 
what we anticipate it will be as it is set forth here.\35\ Finally, we 
have the benefit of additional experience administering the RFS 
program, knowledge of the relatively high levels of exempted volumes in 
prior years, and a proposed approach for how we intend to adjudicate 
2020 small refinery exemption petitions that allows us to anticipate 
with a high degree of probability that there will be a non-zero 
aggregate exempted volume as a result of those petitions. Each of these 
developments independently support making a non-zero projection of the 
exempted volume in 2020.
---------------------------------------------------------------------------

    \35\ See, e.g., Ams. for Clean Energy v. EPA, 864 F.3d 691, 718 
(D.C. Cir. 2017) (upholding EPA's authority to promulgate late 
renewable fuel requirements so long as EPA reasonably balances the 
burdens and benefits of its approach).
---------------------------------------------------------------------------

    To project the exempted volume under this methodology, it is 
instructive to look back at what the exempted volumes of gasoline and 
diesel in previous years would have been had EPA followed DOE's 
recommendations, including granting partial exemptions. These volumes, 
along with the Renewable Volume Obligation (RVO) that would have been 
exempted, are shown in Table II.B-1.

  Table II.B-1--Estimated Exempted Volume of Gasoline and Diesel and Estimated RVO Exempted by Compliance Year
                                         Following DOE's Recommendations
----------------------------------------------------------------------------------------------------------------
                                                 Estimated exempted    Estimated exempted       Estimated RVO
                Compliance year                  volume of gasoline     volume of diesel      exempted (million
                                                  (million gallons)     (million gallons)           RINs)
----------------------------------------------------------------------------------------------------------------
2015..........................................                 1,590                 1,450                   290
2016..........................................                 2,450                 1,930                   440
2017..........................................                 5,650                 3,870                  1020
2018..........................................                 4,620                 3,270                   840
----------------------------------------------------------------------------------------------------------------

    As demonstrated in Table II.B-1, the volume of gasoline and diesel 
that would have been exempted if EPA had followed DOE's recommendations 
has varied significantly in previous years. This is because there are 
many factors that affect the number of SREs that are granted in a given 
year and those factors are inherently difficult to estimate with 
precision. We believe that it is appropriate to use an average volume 
of the gasoline and diesel that would have been exempted over a three-
year period as our projection of gasoline and diesel that will be 
exempted in 2020, rather than the volume of gasoline and diesel that 
would have been exempted in any single year, as it helps to average out 
the effects of unique events or market circumstances that occurred in 
individual years in the past that may or may not occur in 2020.
    We propose to project the volume of gasoline and diesel that will 
be exempted in 2020 per the proposed definitions described in Section 
II.A consistent with our current intention for evaluating the 2020 SRE 
petitions. While we cannot predict with certainty the approach that we 
will in fact take once we have received and reviewed petitions, at this 
time, we anticipate our evaluation will result in an exempted volume 
that is on the aggregate consistent with DOE's recommendations. The 
average volume of these fuels that would have been exempted in 2016-
2018 if EPA had followed DOE's recommendations is 4,240 and 3,020 
million gallons, for gasoline and diesel fuel, respectively. These 
exempted volumes would have resulted in an average reduction to the RVO 
of approximately 770 million RINs. This projection of exempted gasoline 
and diesel would effectively increase the percentage standards that 
apply to obligated parties to offset future SREs and help ensure that 
the required volumes are met.
    We also request comment on an alternative approach using the 
average volume of gasoline and diesel that would have been exempted 
from 2015-2017 (3,230 and 2,420 million gallons, respectively, 
resulting in an average reduction to the RVO of approximately 580 
million RINs) as our projection for the exempted volumes of gasoline 
and diesel in 2020. We note that if for any reason we anticipate a 
different approach to evaluating SRE petitions by the time of the final 
rule, we may also consider adjusting our methodology for projecting the 
exempt volumes of gasoline and diesel accordingly.

C. Example Calculation of Proposed Percentage Standards for 2020

    As described in Section II.A, the calculation of the applicable 
percentage

[[Page 57683]]

standards would differ from that described in the July 29 proposal only 
in the definition and values of those terms representing projections of 
gasoline and diesel production by exempt small refineries. Rather than 
being assigned a value of zero as in the July 29 proposal, they would 
be assigned a value equal to our projection of the exempted volume of 
gasoline and diesel as discussed in Section II.B in accordance with our 
proposed definitions for GEi and DEi.
    The values of all the variables used to calculate the applicable 
percentage standards are shown in Table II.C-1 for both the proposed 
approach to estimating 2020 SREs as well as the alternative on which we 
are seeking comment. All formulas for calculating the percentage 
standards are provided in 40 CFR 80.1405(c), subject to this action's 
proposed revision.

                   Table II.C-1--Example Values for Terms in Calculation of 2020 Standards 36
                                                [Billion gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                                  Alternative
                                                                             Proposed values    values based on
                                                                             based on average   average of 2015-
                Term                              Description                  of 2016-2018      2017 estimated
                                                                                estimated          exemptions
                                                                                exemptions
----------------------------------------------------------------------------------------------------------------
RFVCB..............................  Required volume of cellulosic biofuel               0.54               0.54
RFVBBD.............................  Required volume of biomass-based                    2.43               2.43
                                      diesel.
RFVAB..............................  Required volume of advanced biofuel..               5.04               5.04
RFVRF..............................  Required volume of renewable fuel....              20.04              20.04
G..................................  Projected volume of gasoline.........             142.49             142.49
D..................................  Projected volume of diesel...........              56.77              56.77
RG.................................  Projected volume of renewables in                  14.58              14.58
                                      gasoline.
RD.................................  Projected volume of renewables in                   2.48               2.48
                                      diesel.
GS.................................  Projected volume of gasoline for opt-                  0                  0
                                      in areas.
RGS................................  Projected volume of renewables in                      0                  0
                                      gasoline for opt-in areas.
DS.................................  Projected volume of diesel for opt-in                  0                  0
                                      areas.
RDS................................  Projected volume of renewables in                      0                  0
                                      diesel for opt-in areas.
GE.................................  Projected volume of exempt gasoline..               4.24               3.23
DE.................................  Projected volume of exempt diesel....               3.02               2.42
----------------------------------------------------------------------------------------------------------------

    As described in Section II.B, the values for GE and DE in Table 
II.C-1 do not represent the SREs actually granted in the years cited, 
but rather the SREs that would have been granted had EPA followed, 
without deviation, the recommendations received from DOE following 
their independent assessment of the information provided by each small 
refinery. We updated the projected volumes of total gasoline and 
diesel, and the renewable fuels contained within them, since the July 
29 proposal to use volumes derived from values in the September 2019 
version of EIA's Short-Term Energy Outlook. An estimate of fuel 
consumed in Alaska, derived from the June 28, 2019, release of EIA's 
State Energy Data System and based on the 2017 volumes contained 
therein, was subtracted from the nationwide volumes. The required 
volumes of renewable fuel used in Table II.C-1 are based on the July 29 
proposal. These volumes have not been updated to reflect data available 
since the July 29 proposal; however, we intend to adjust these volumes 
to account for more recent information in the final rule.
---------------------------------------------------------------------------

    \36\ See ``Calculation of supplemental proposed % standards for 
2020'' in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    Using the volumes shown in Table II.C-1, we have calculated two 
versions of revised proposed applicable percentage standards for 2020 
as shown in Table II.C-2. We have also included the percentage 
standards from the July 29 proposal.

                               Table II.C-2--Example Percentage Standards for 2020
----------------------------------------------------------------------------------------------------------------
                                                                                                  Alternative
                                                                             Proposed values    values based on
                                                          Proposed values    based on average   average of 2015-
                                                           in the July 29      of 2016-2018      2017 estimated
                                                              proposal          estimated          exemptions
                                                             (percent)          exemptions         (percent)
                                                                                (percent)
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel.....................................               0.29               0.31               0.31
Biomass-based diesel...................................               1.99               2.08               2.06
Advanced biofuel.......................................               2.75               2.88               2.85
Renewable fuel.........................................              10.92              11.46              11.35
----------------------------------------------------------------------------------------------------------------

    The percentage standards in the final rule will depend upon not 
only the value of projected volume of exempt gasoline and diesel, which 
could differ from those used above, but also the projected volumes of 
gasoline and diesel produced by all refineries as well as the volume 
requirements for renewable fuel. Our determination of all of these 
values will be informed by the comments we received on the July 29 
proposal and this supplemental proposal, as well as other information 
that may become available.

[[Page 57684]]

III. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted 
to the Office of Management and Budget (OMB) for review. Any changes 
made in response to OMB recommendations have been documented in the 
docket.

B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs

    This action is expected to be an Executive Order 13771 regulatory 
action. There are no quantified cost estimates for this supplemental 
proposed rule because it does not change the applicable volumes 
proposed in the July 29 proposal.

C. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden 
under the PRA. OMB has previously approved the information collection 
activities contained in the existing regulations and has assigned OMB 
control numbers 2060-0637 and 2060-0640. The proposed revisions will 
not impose new or different reporting requirements on regulated parties 
than already exist for the RFS program.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, the impact of concern is any significant 
adverse economic impact on small entities. An agency may certify that a 
rule will not have a significant economic impact on a substantial 
number of small entities if the rule relieves regulatory burden, has no 
net burden, or otherwise has a positive economic effect on the small 
entities subject to the rule.
    The small entities directly regulated by the RFS program are small 
refiners, which are defined at 13 CFR 121.201. This supplemental 
proposed rule does not change the applicable volumes proposed in the 
July 29 proposal. Nor does it change the compliance flexibilities 
currently offered to small entities under the RFS program (including 
the SRE provisions we continue to implement). We have therefore 
concluded that this action will have no net regulatory burden for 
directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or 
more as described in UMRA, 2 U.S.C. 1531-1538, and does not 
significantly or uniquely affect small governments.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

G. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. This action will be implemented at the Federal 
level and affects transportation fuel refiners, blenders, marketers, 
distributors, importers, exporters, and renewable fuel producers and 
importers. Tribal governments will be affected only to the extent they 
produce, purchase, or use regulated fuels. Thus, Executive Order 13175 
does not apply to this action.

H. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that EPA has reason to believe may disproportionately affect children, 
per the definition of ``covered regulatory action'' in section 2-202 of 
the Executive Order. This action is not subject to Executive Order 
13045 because it implements specific standards established by Congress 
in statutes (CAA section 211(o)) and does not concern an environmental 
health risk or safety risk.

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

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy. The RFS program and this rule are 
designed to achieve positive effects on the nation's transportation 
fuel supply, by increasing energy independence and security and 
lowering lifecycle GHG emissions of transportation fuel.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    EPA believes that this action does not have disproportionately high 
and adverse human health or environmental effects on minority 
populations, low income populations, and/or indigenous peoples, as 
specified in Executive Order 12898 (59 FR 7629, February 16, 1994). 
This regulatory action does not affect the level of protection provided 
to human health or the environment by applicable air quality standards. 
This action does not relax the control measures on sources regulated by 
the RFS regulations.

IV. Statutory Authority

    Statutory authority for this action comes from sections 114, 203-
05, 208, 211, and 301 of the Clean Air Act, 42 U.S.C. 7414, 7522-24, 
7542, 7545, and 7601.

List of Subjects in 40 CFR Part 80

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports, 
Oil imports, Petroleum, Renewable fuel.

    Dated: October 15, 2019.
Andrew R. Wheeler,
Administrator.
    For the reasons set forth in the preamble, EPA proposes to amend 40 
CFR part 80 as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

    Authority:  42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart M--Renewable Fuel Standard

0
2. Amend Sec.  80.1405 by revising the equation in paragraph (c) 
definitions of GEi and DEi to read as follows:


Sec.  80.1405  What are the Renewable Fuel Standards?

* * * * *
    (c) * * *
    GEi = The total amount of gasoline projected to be 
exempt in year i, in gallons, per Sec. Sec.  80.1441 and 80.1442.

[[Page 57685]]

    DEi = The total amount of diesel fuel projected to be 
exempt in year i, in gallons, per Sec. Sec.  80.1441 and 80.1442.
* * * * *
[FR Doc. 2019-23379 Filed 10-25-19; 8:45 am]
 BILLING CODE 6560-50-P


