Daily Rules, Proposed Rules, and Notices of the Federal Government
EPA is issuing a direct final rule to amend provisions in the renewable fuel standard (RFS) and diesel sulfur fuel programs. The RFS amendment changes the definition of home heating oil, and the diesel sulfur amendments provide additional flexibility for transmix processors who produce locomotive and marine diesel fuel, and allow solvent yellow 124 marker to transition out of the distribution system. EPA is taking this action under section 211 of the Clean Air Act.
This rule amends the definition of heating oil in 40 CFR 80.1401 in the renewable fuel standard (“RFS” or “RFS2”) program promulgated under section 211(o) of the Clean Air Act (CAA). This amendment will expand the scope of renewable fuels that can generate Renewable Identification Numbers (“RINs”) as “home heating oil” to include fuel oil that will be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. This rule will allow producers or importers of fuel oil that meets the amended definition of heating oil to generate RINs, provided that other requirements specified in the regulations are met. Fuel oils used to generate process heat, power, or other functions will not be approved for RIN generation under the amended definition of heating oil. The amendment will not modify, limit, or change fuel included in the current definition of heating oil at 40 CFR 80.2(ccc).
The diesel transmix amendments will reinstate an allowance for transmix processors to produce 500 ppm sulfur diesel fuel for use in older technology locomotive and marine diesel outside of the Northeast Mid-Atlantic Area after 2014. EPA's ocean-going vessels rule forbade this allowance beginning 2014 because a new stream of diesel, containing up to 1000 ppm sulfur, was introduced at that time, which we believed would provide a suitable outlet for transmix distillate product. Transmix processors stated that they were not aware of the changes to the 500-ppm LM transmix provisions until after they were finalized, and that the ocean-going vessels market would not be a viable outlet for their distillate product. Based on additional input that we received from transmix processors and other stakeholders in the fuel distribution system during our consideration of the petition, EPA believed that it would be appropriate to extend the 500-ppm diesel transmix flexibility beyond 2014. EPA finalized a settlement agreement and this DFR and NPRM are in accord with the settlement agreement. Our analysis indicates that extending this flexibility beyond 2014 will have a neutral or net beneficial effect on overall emissions.
The yellow marker amendments address an oversight in the original nonroad diesel rulemaking. In that rulemaking, the regulations failed to incorporate provisions described in the rulemaking preamble. The preamble made clear that EPA intended to allow 500 ppm locomotive marine (LM) diesel fuel containing greater than 0.10 milligrams per liter of Solvent Yellow 124 (SY124) time to transition out of the fuel distribution system. However, the regulations are not consistent with the preamble and did not provide this same allowance.
Specifically, the regulations as currently written do not provide any transition time for unmarked LM fuel delivered from a truck loading rack beginning June 1, 2012 to work its way through the fuel distribution system downstream of the truck loading rack. The yellow marker amendments will allow 500 ppm LM diesel fuel at any point in the fuel distribution and end use system to contain more than 0.10 milligrams per liter of SY 124 through November 30, 2012. This regulatory change will allow marked LM diesel fuel to transition normally through the LM fuel distribution and use system. Today's rule also amends the regulation
These three sets of amendments attempt to provide new opportunities for RIN generation under the RFS program and necessary flexibilities and transition periods for those affected by EPA's transmix and marker requirements. Therefore, EPA believes that these amendments will impose no new direct costs or burdens on regulated entities beyond the minimal costs associated with reporting and recordkeeping requirements. At the same time, EPA does not believe that any of these amendments will adversely impact emissions.
EPA is publishing this rule without a prior proposed rule because this may be viewed as a noncontroversial action that would not receive adverse comment. However, in the “Proposed Rules” section of today's
Entities potentially affected by this action include those involved with the production, distribution and sale of transportation fuels, including gasoline and diesel fuel, or renewable fuels such as ethanol and biodiesel, as well as those involved with the production, distribution and sale of other fuel oils that are not transportation fuel. Regulated categories and entities affected by this action include:
This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could be potentially regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria of Part 80, subparts D, E and F of title 40 of the Code of Federal Regulations. If you have any question regarding applicability of this action to a particular entity, consult the person in the preceding
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EPA is issuing a direct final rule to amend the definition of heating oil in 40 CFR 80.1401 in the renewable fuel standard (“RFS” or “RFS2”) program promulgated under section 211(o) of the Clean Air Act (CAA).
The RFS program requires the production and use of renewable fuel to replace or reduce the quantity of fossil fuel present in transportation fuel. Under EPA's RFS program this is accomplished by providing for the generation of RINs by producers or importers of qualified renewable fuel. RINs are transferred to the producers or importers of gasoline and diesel transportation fuel who then use the RINs to demonstrate compliance with their renewable fuel volume obligations. RINs also serve the function of credits under the RFS program.
Congress provided that EPA could also establish provisions for the generation of credits by producers of certain renewable fuel that was not used in transportation fuel, called “additional renewable fuel.”
EPA addressed the provision for additional renewable fuels in the RFS2 rulemaking, specifically addressing the category of “home heating oil.” EPA determined that this term was ambiguous, and defined it by incorporating the existing definition of heating oil at 40 CFR 80.2(ccc). EPA stated that:
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 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.
The existing definition of heating oil at 40 CFR 80.2(ccc) means “any #1, #2, or non-petroleum diesel blend that is sold for use in furnaces, boilers, stationary diesel engines, and similar applications and which is commonly or commercially known or sold as heating oil, fuel oil, or similar trade names, and that is not jet fuel, kerosene, or [Motor Vehicle, Non-Road, Locomotive and Marine (MVNRLM)] diesel fuel.” The existing definition of non-petroleum diesel at 40 CFR 80.2(sss) means a diesel fuel that contains at least 80 percent mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats. Thus, in order to generate RINs for home heating oil that is a non-petroleum diesel blend, the fuel must contain at least 80 percent mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, as well as meeting all other requirements of the RFS2 regulations. Since the promulgation of the RFS2 final rule, we have received a number of requests from producers to consider expanding the scope of the home heating oil provision to include additional fuel oils that are produced from qualifying renewable biomass but do not meet the regulatory definition of heating oil because they are not #1 or #2 diesel and do not contain at least 80 percent mono-alkyl esters. Parties raising this issue have suggested that limiting “home heating oil” to the fuel types defined in 40 CFR 80.2(ccc) disqualifies certain types of renewable fuel oils that could be used for home heating and that this limitation does not align with our reasoning in the preamble to take a broad interpretation of the term “home heating oil” in CAA section 211(o).
EPA has considered this issue further and is revising the definition of heating oil in the RFS2 program to expand the scope of fuels that can generate RINs as heating oil. EPA is revising the definition such that RINs also may be generated by renewable fuel that is fuel oil and is used to heat interior spaces of homes or buildings to control ambient climate for human comfort. This will not include fuel oils used to generate process heat, power, or other functions. The fuel oil must be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. The fuel oil must only be used in heating applications, where the sole purpose of the fuel's use is for heating and not for any other combined use such as process energy use. We are amending the existing definition of heating oil in 40 CFR 80.1401 to include fuel oils that are used in this way. This is in addition to the fuel oils currently included in the definition of heating oil at 40 CFR 80.2(ccc), and will not modify or limit the fuel included in the current definition.
EPA believes this expansion of the scope of the home heating oil provision is appropriate and authorized under CAA section 211(o). As EPA described
In the RFS2 rulemaking, EPA focused on the kinds of fuel oils that can be used to heat homes. The expansion of the definition adopted in this rulemaking will address two types of fuel oils not included in the current definition of heating oil. First, the amended definition will include additional fuel oils that are actually used to heat homes, even if they do not meet the current definition of heating oil. This is clearly within the scope of the statutory provision for home heating oil.
Second, the amended definition will include fuel oils that are used to heat facilities other than homes to control ambient climate for human comfort. Under the current definition of heating oil, a fuel oil meets the definition based on its physical properties and its use in furnaces, boilers, stationary diesel engines, and similar applications, not whether it is actually used to heat a home. The basic decision made in the RFS2 final rulemaking was to allow RIN generation for the group of fuel oils that are typically used for home heating purposes. Under the current definition the relationship of the fuel oil to heating homes is that the fuel oil is of the type that is typically used for and can be used for that purpose.
In the amended definition, qualifying fuel oils will be used for heating places where people live, work, or recreate, and not just their homes. It focuses more on what is getting heated—people—and not where the people are located. EPA believes this is a reasonable interpretation of the phrase “home heating oil,” while recognizing that it is not an obvious interpretation. This interpretation recognizes the ambiguity of the phrase used by Congress, which is not defined and does not have a clear and definite commercial meaning. It gives reasonable meaning to the term home heating oil, by limiting the additional fuel oils to fuel oils when used for heating of facilities that people will occupy, and excluding fuel oils when used for other purposes such as generation of energy used in the manufacture of products. It also focuses on the aspect of home that is important here—the heating of people—recognizing that EPA has already determined that fuel oil can be included in the scope of home heating oil even if it is not actually used to heat a home. This interpretation will also promote the purposes of the EISA and the RFS program. It will promote the purposes of the EISA in that it will increase the production and use of renewable fuels by introducing new sources of fuel producers to the RFS program. It will specifically promote the RFS programmatic goals by facilitating the generation of RINs for renewable fuels that reduce emissions of greenhouse gases compared to fossil fuels. For example, EPA has received information from Envergent Technologies (alliance of Ensyn and UOP/Honeywell) that such an expanded definition of heating oil would result in nearly immediate production of 3.5 million gallons from their existing facilities, with an additional projected production of up to 45 million gallons per year within 24 months following regulatory action. Based on this information from Envergent Technologies, application of the expanded definition of heating oil to the entire industry would result in the production of many more million additional gallons of renewable fuel.
EPA has also evaluated whether any revisions will need to be made to Table 1 to 40 CFR 80.1426 that lists the applicable D codes for each fuel pathway for use in generating RINs in the RFS2 regulations in light of the additional fuel oils included in the expanded definition of heating oil. As discussed below, EPA has determined that the applicable D code entries for heating oil in Table 1 to 40 CFR 80.1426 will continue to be appropriate and will not need to be revised in light of the expanded definition of heating oil.
Under the RFS program, EPA must assess lifecycle greenhouse gas (GHG) emissions to determine which fuel pathways meet the GHG reduction thresholds for the four required renewable fuel categories. The RFS program requires a 20% reduction in lifecycle GHG emissions for conventional renewable fuel (except for grandfathered facilities and volumes), a 50% reduction for biomass-based diesel or advanced biofuel, and a 60% reduction for cellulosic biofuel. For the final RFS2 rule, EPA assessed the lifecycle greenhouse gas emissions of multiple renewable fuel pathways and classified pathways based on these GHG thresholds, as compared to the EISA statutory baseline.
The fuel pathways consist of fuel type, feedstock, and production process requirements. GHG emissions are assessed at all points throughout the lifecycle pathway. For instance, emissions associated with sowing and harvesting of feedstocks and in the production, distribution and use of the renewable fuel are examples of what are accounted for in the GHG assessment. A full accounting of emissions is then compared with the petroleum baseline emissions for the transportation fuel being replaced. The lifecycle GHG emissions determination is one factor used to determine compliance with the regulations.
There are currently several fuel pathways that list heating oil as a fuel type with various types of feedstock and production processes used, qualifying the heating oil pathways as either biomass-based diesel, advanced, or cellulosic. The determinations for these different pathways were based on the current definition of heating oil. The pathways also include several types of distillate product including diesel fuel, jet fuel and heating oil.
The lifecycle calculations and threshold determinations are based on the GHG emissions associated with production of the fuel and processing of the feedstock. Converting biomass feedstocks such as triglycerides (if oils are used as feedstock) or hemi-cellulose, cellulose, lignin, starches, etc. (if solid biomass feedstock is used) into heating oil products and can be accomplished through either a biochemical or thermochemical process converting those molecules into a fuel product. The existing heating oil pathways were based on the current definition of the fuel, and were based on a certain level of processing to produce #1, #2, or a non-petroleum diesel blend and the
The main difference between the current definition of heating oil, which refers to #1, #2, or a non-petroleum diesel blend, and the expanded definition adopted in this rulemaking is that the expanded definition will include heavier types of fuel oil with larger molecules. Based on the type of conversion process, producing these heavier fuel oil products versus the #1, #2, or a non-petroleum diesel blend will affect the amount of energy used and therefore the GHG emissions from the process. There are two main paths for producing a fuel oil product from biomass. In one the biomass is converted into a biocrude which is further refined into lighter products. In this case producing a heavier fuel oil product will require less processing energy and have lower GHG emissions than converting the same feedstock into a #1, #2, or non-petroleum diesel blend.
In the other type of process the compounds in the biomass are changed into a set of intermediary products, such as hydrogen (H) and carbon monoxide (CO).
Based on these considerations, EPA believes the GHG emissions associated with producing the fuel oil included in the expanded definition will be the same or lower than the GHG emissions associated with producing #1, #2, or non-petroleum diesel blend. Therefore, EPA believes the prior life cycle analysis for heating oil support applying the existing pathways for fuel oil in the RFS2 regulations to the expanded definition of heating oil. Once the regulatory change to the definition of “heating oil” is final, all of the pathways currently applicable to heating oil under Table 1 to 40 CFR § 80.1426 would apply to the expanded definition of heating oil.
An important issue to address is how to implement such an expanded definition. As EPA recognized in the RFS2 rulemaking, fuel oils end up being used in a variety of different uses, where the fuel producer may have little knowledge at the time of production as to eventual use of the fuel. This is especially the case where the fuel oil is distributed in a fungible distribution system. EPA addressed this in the RSF2 rulemaking by defining home heating oil as a type of fuel with certain characteristics, irrespective of where it was used. This approach avoided the need to track the fuel to its actual use, and including the characteristics of the fuel in its definition in 40 CFR 80.1401, was adequate to retain a close tie to the concept underlying home heating oil.
The expansion of the definition raises this same issue but in a more significant way. While the expansion of the definition includes some limited physical characteristics that fuels oils will need to meet in order to qualify for generating RINs, it does not provide sufficient specificity to differentiate between those fuels oils used to heat buildings for climate control for human comfort and those used to generate process heat or other purposes. Therefore, for eligible fuel oils other than those qualifying under the existing definition in 40 CFR 80.2(ccc), EPA is requiring that the renewable fuel producer or importer have adequate documentation to demonstrate that the fuel oil volume for which RINs were generated was used to heat buildings for climate control for human comfort and meets the expanded definition of heating oil prior to generating RINs.
EPA recognizes that under the current definition of heating oil no tracking or other documentation of end use is required, and some heating oils that meet the current definition could end up being used for other purposes. However, in all cases the heating oil under the current definition has to have the physical or other characteristics that tie it to the type of fuel oil used to heat homes. In addition, because these fuel oils will qualify to generate RINs under the RFS program, it will likely lead to their use for heating of buildings, and not for generation of process heat. For the fuel oils included in the expanded definition, the tie to home heating oil will not be the physical characteristics of the fuel oil but instead its actual usage for heating for the purposes of climate control for human comfort.
In order to verify that the fuel oils are actually used to generate heat for climate control purposes, EPA is adopting the following registration, recordkeeping, product transfer document (PTD) and reporting requirements. These requirements will not apply to fuels qualifying under the existing 40 CFR 80.2(ccc) of the regulations. If RINs are generated for fuel oils under the expansion of the scope of home heating oil in today's rule, and those fuel oils are designated for but not actually used to generate heat for climate control purposes, but for some other purpose, all parties involved in either the generation, assignment, transfer or use of that RIN, including the end user of that fuel oil, are subject to and liable for violations of the RFS2 regulations and the CAA.
For the purpose of registration, EPA is allowing the producer of the expanded fuel oil types to establish their facility's baseline volume in the same manner as all other producers under the RFS program,
For the purpose of continued verification after registration, EPA is adopting additional requirements for reporting in § 80.1451(b)(1)(ii)(T), PTDs in § 80.1453(d), and recordkeeping in 40 CFR 80.1454(b), for the expanded fuel oil types.
The reporting, PTD, and recordkeeping requirements will help ensure that the expanded fuel oil types that are used to generate RINs are actually used in a qualifying application. For reporting, producers are required to file quarterly reports with EPA that identify certain information about the volume of fuel oil produced and used as heating oil. The additional reporting requirements stipulate that the producer of fuel oils submit affidavits to EPA reporting the total quantity of the fuel oils produced, the total quantity of the fuel oils sold to end users, and the total quantity of fuel oils sold to end users for which RINs were generated. Additionally, affidavits from each end user must be obtained by the producer and reported to EPA, describing the total quantity of fuel oils received from the producer, the total amount of fuel oil used for qualifying purposes, the date the fuel oil was received from the producer, the blend level of the fuel oil, quantity of assigned RINs received with the renewable fuel, and quantity of assigned RINs that the end user separated from the renewable fuel, if applicable.
We are also amending the regulatory text that describes the general requirements for how RINs are generated and assigned to batches of renewable fuel by renewable fuel producers and importers. This will explicitly clarify a requirement that always existed: that producers and importer of renewable fuel who generate RINs must comply with the registration requirements of 40 CFR 80.1450, the reporting requirements of 40 CFR 80.1451, the recordkeeping requirements of 40 CFR 80.1454, and all other applicable regulations of this subpart M. This is a generally applicable requirement—not specific to fuel meeting the definition of home heating oil.
The final regulations for the nonroad diesel program were published in the
Batches of different fuel products commonly abut each other as they are shipped in sequence by pipeline. When the mixture between two adjacent products is not compatible with either product, it is removed from the pipeline and segregated as transmix. Transmix typically is gathered for reprocessing at the end of the fuel distribution system far from a refinery. In addition to the long transportation distances to return transmix to a refinery for reprocessing, incorporating transmix into a refinery's feed also presents technical and logistical refining process challenges that typically make refinery reprocessing an unattractive option. Thus, transmix processers provide a valuable service in maintaining an efficient fuel distribution system. Transmix processing facilities handle very low volumes of fuel compared to a refinery and hence are limited to the use of a simple distillation tower and additional blendstocks to manufacture finished fuels. There is currently no desulfurization equipment which has been demonstrated to be suitable for application at a transmix processor facility. The cost of installing and operating a currently available desulfurization unit is too high in relation to the small volume of distillate fuel produced at transmix processing facilities. Some products shipped by pipeline such as jet fuel and heating oil are subject to relatively high sulfur specifications (
The engine emission standards finalized in the nonroad diesel rulemaking for new nonroad, locomotive, and Category 1 & 2 (C1 & C2) marine engines necessitates the use of sulfur-sensitive emissions control equipment which requires 15 ppm sulfur diesel fuel to function properly.
In the development of the proposed requirements for Category 3 (C3) marine engines, EPA worked with industry to evaluate how the enforcement provisions for the new 1,000-ppm C3 marine diesel fuel to be introduced in June of 2014 could be incorporated into existing diesel program provisions.
EPA received a petition from a group of transmix processors on June 29, 2010, requesting that the Agency reconsider and reverse the 2014 sunset date for the 500 ppm LM transmix flexibility.
Our analysis indicates that extending the 500 ppm LM flexibility beyond 2014 would have a neutral or net beneficial effect on overall vehicle emissions. The use of 500 ppm LM from transmix would be limited to older technology engines that do not possess sulfur-sensitive emissions control technology. We believe that the 500 ppm LM segregation and other associated requirements would prevent misfueling of sulfur-sensitive engines.
To evaluate the environmental consequences of extending the diesel transmix provisions, we compared the potential increase in sulfate particulate matter (PM) from the use of 500 ppm LM from transmix in older engines to the additional transportation emissions associated with shipment to the Category 3 (C3) marine market which might be deferred by allowing continued access to the 500 ppm LM market. Markets for locomotive and marine diesel tend to be nearer to transmix processing facilities than markets for C3 marine diesel. Therefore, extending the diesel transmix provisions would result in a reduction in nitrogen oxides (NO
Although some batches of transmix distillate product may approach the 500 ppm sulfur limit, we estimate that the average sulfur content of transmix distillate product would be no more than 300 ppm.
The extension of the 500 ppm LM transmix flexibility would defer additional transportation costs and provide a lower-cost fuel for use in older LM engines for many years to come given that the useful life of LM engines can exceed 40 years.
Industry stakeholders suggested alternative enforcement mechanisms to support the extended flexibility which would not necessitate reinstating and expanding the designate-and-track and fuel marker provisions that were retired by the C3 marine final rule. Reinstatement and expansion of these provisions would likely place an unacceptable burden on a large number of stakeholders, most of whom would not handle 500 ppm LM. The suggested alternative enforcement mechanism would impose minimal additional reporting and recordkeeping burdens only on the parties that produce, handle, and use 500 ppm LM. We believe that this alternative enforcement approach would meet the Agency's goals of ensuring that the pool of 500 ppm LM is limited to transmix distillate and that 500 ppm LM is not used in sulfur-sensitive emissions control equipment.
The compliance assurance provisions that we are using to support the extension of the diesel transmix flexibility are similar to those that were used to support the small refiner flexibilities in Alaska during the phase-in of EPA's diesel sulfur program.
We understand that some transmix processors currently rely on shipment by pipeline to reach the 500 ppm locomotive diesel market.
To provide an additional safeguard to ensure that volume of 500 ppm LM diesel fuel does not swell inappropriately, the volume increase during any single pipeline shipment must be limited to 2 volume percent or less. This limitation on volume swell to 2 volume percent or less is consistent with the limitation in 40 CFR 80.599 (b)(5) regarding the allowed swell in volume during the shipment of highway diesel fuel for the purposes