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Correspondence Management System

Control Number: AX-13-001-1431
Printing Date: October 22, 2013 11 :32:29
Citizen Information
Citizen/Originator: Greco, Ill, Robert L.
Organization:
American Petroleum Institute
Address:
1220 L Street, NW, Washington, DC 20005-4070
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401_127_a General Correspondence Files Record copy
Daily Reading File - Request for Reconsideration of EPA's Final Rulemaking "Regulation of
Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Final Rule" issued on August 15,
2013 (Docket ID No. EPA-HQ-OAR-2012-0546)
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Page 1of2

CREW FOIA 2014-006851-0001231

Robert L. Greco, III

Group Director
Downstream & Industry Operations

1220 L Street. :-;w

Washington. DC 20005-4070

USA
Telephone
Fax
Email
www.api org

202-682-8167
202-682-805 J
greco@api.org

October 11, 2013

The Honorable Gina McCarthy
Administrator
United States Environmental Protection Agency
1200 Pennsylvania Avenue, NW
Washington, DC 20460

Re:
Request for Reconsideration of EPA 's Final Rulemaking "Regulation of Fuels and Fuel
Additives: 2013 Renewable Fuel Standards; Final Rule" issued on August 15, 2013 (Docket ID No.
EPA-HQ-OAR-2012-0546).
Dear Administrator McCarthy:
The American Petroleum Institute ("API") submits this petition for administrative reconsideration of the
final rule entitled "Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Final Rule"
published at 78 Federal Register 49794 (August 15, 2013) pursuant to section 307(d)(7)(B) of the Clean Air
Act, 42 U.S.C. 7607(d)(7)(B). It was impracticable for API to raise the objections raised in this petition
during the public comment period - because they became known after the period for public comment
(indeed, only when EPA published the final rule) - and these objections are of central relevance to the
outcome of the rule.
API is a national trade association representing more than 500 companies involved in all aspects of the oil
and natural gas industry, including those that are the obligated parties under the Renewable Fuel Standard
("RFS"). Our industry supports the use of biofuels, but the RFS is unrealistic and unworkable and should be
repealed by Congress. EPA's implementation of the program contributes to the problem, and the 2013
Final Rule is no exception.
Three specific issues in the rulemaking to establish the 2013 standards merit reconsideration: (1) EPA failed
to use the October 2012 EIA information regarding gasoline and diesel production estimates for 2013 and
instead improperly relied on EIA information from 2013, after the compliance period began; (2) EPA's
methodology to establish the cellulosic standard in 2013 continues to be flawed, and information clearly
available to the Agency before the rule was finalized exposes this flawed methodology; and (3) EPA granted
a small refiner exemption that improperly and retroactively raised the obligation for other obligated
parties.
Use of New EIA Data
EPA failed to use the October 2012 EIA information regarding gasoline and diesel production estimates for
2013, even though the Agency proposed using this data set. Instead, EPA's final rule used EIA information

CREW FOIA 2014-006851-0001232

from 2013 - after the compliance period began. EPA did not propose this new methodology to set the
standards, and API could not have raised its objections with this approach in the comment period.
Clean Air Act Section 211(o)(3) states:
(3) Applicable percentages
(A} Provision of estimate of volumes of gasoline sales
Not later than October 31 of each of calendar years 2005 through 2021, the Administrator of the Energy
Information Administration shall provide to the Administrator of the Environmental Protection Agency an
estimate, with respect to the following calendar year, of the volumes of transportation fuel, biomass-based
diesel, and cellulosic biofuel projected to be sold or introduced into commerce in the United States.
(B} Determination of applicable percentages
{i}!n general Not later than November 30 of each of calendar years 2005 through 2021, based on the
estimate provided under subparagraph {A), the Administrator of the Environmental Protection
Agency shall determine and publish in the Federal Register, with respect to the following calendar
year, the renewable fuel obligation that ensures that the requirements of paragraph (2) are met.
EPA's Proposed Rule states

"The Act requires EPA to base the standards on an EIA estimate of the amount of gasoline and diesel that will
be sold or introduced into commerce for that year. The four separate renewable fuel standards for 2013 are
based on the gasoline, ethanol, diesel, and biodiesel consumption volumes projected by EIA. [Footnote: Letter,
Adam Sieminski, Administrator, U.S. Energy Information Administration, to Lisa P. Jackson, Administrator, U.S.
EPA, October 18, 2012.}

The Clean Air Act directs EPA to set the subsequent year's standards based on the EIA estimate due October
31. EPA has no discretionary authority to use other subsequent estimates, and EPA gave no indication in
the Proposed Rule that the Agency would consider using other estimates. It was not appropriate for EPA to
solicit EIA for a revised fuel demand estimate, and it was improper for EPA to set the volume obligations
based on the new information.
EPA acknowledges the tardiness of the rule, and explains that its delay is the rationale for using more up to
date information. Conventional wisdom might suggest that the most up-to-date transportation fuel
demand information will render the most accurate results, but, in reality, this assumption founders.
Obligated parties must acquire the proper number of RINs to demonstrate compliance. Regulatory
certainty before January 1 of the compliance year is needed for efficient planning and logistics
purposes. The 2013 RFS proposed rule which was published late on February 7, 2013 included an RFS total
renewable standard of 9.63%; the final rule published on August 15, 2013 revised that standard to
9.74%. This change can have material impact on obligated parties' compliance plans.
1

"Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Proposed Rule." Federal Register Vol. 78,
No. 26 (February 7, 2013): 9302

CREW FOIA 2014-006851-0001233

Due to the forward-looking projections required by statute, the RFS will always have inherent variability
with respect to the transportation demand projections (see chart below). Congress recognized the need for
regulatory certainty by requiring final rules by November 30, regardless of future changes in transportation
demand. EPA acted outside its scope of authority in establishing RFS requirements that were based on
information made available so late into the compliance period. EPA placed the May gth EIA information in
the docket on August 15th, raising additional concerns that the Agency is acting in a manner that total
disregards obligated parties' need for regulatory certainty and only complicates compliance.

2%

Actual vs. STEO projection % change

0%

-2%
-4%
-6%

-8%

2008

2009
Gasoline

2010

2011

2012

Gasoline + Distillate
Based on October STEO and EIA data on actual fuel consumption

EPA's Cellulosic Biofuel Methodology

API provided comment to the Proposed Rule to establish the 2013 cellulosic standard stating that the
proposed cellulosic standard was aspirational, arbitrary, and out of touch with reality. EPA has apparently
not changed its "self-fulfilling prophesy" approach as EPA has failed to adopt a neutral methodology in the
proposed or final rules. The final 2013 requirements are volumetrically lower than what was proposed, yet
the Proposed Rule and Final Rule are equally unrealistic considering that the final was published so late in
the year. New information now available clearly demonstrates that EPA's methodology and process used
to develop the final 2013 standards were flawed and merit reconsideration. The information recently made
available is regarding the capability of the KiOR facility in Columbus, Mississippi to meet its share of EPA's
projected cellulosic production.
EPA finalized a cellulosic biofuel requirement that presumes a capability by KiOR to produce 3 to 4 million
physical gallons (5 to 6 million ethanol equivalent gallons) of cellulosic biofuel. EPA supports this estimate
with the fact that KiOR's Columbus, Mississippi facility began production in March 2013; and on May gth the

CREW FOIA 2014-006851-0001234

company projected total 2013 production in the range of 3 to 5 million physical gallons. The May 9th
conference call statement from KiOR President and CEO Fred Cannon below provides additional context:

"we expect that total fuel production during the second quarter will range between 300,000 &
500,000 gallons, keeping us on track to fall within our projected production range of 3 million to 5
million gallons for 2013.
EPA EMTS data show about 5,000 physical gallons were produced in March; and continuous production was
apparently not achieved as evidenced by the lack of cellulosic RIN regeneration in April or May. EMTS
shows an additional 68,000 physical gallons were produced in June, far short of KiOR's projected 300,000 to
500,000 gallons second quarter production. KiOR's inability to ramp up to meet its production goal for the
2"d quarter of 2013, combined with the miniscule 1st quarter 2013 volume raises serious doubt that the
company will meet its earlier projection of production for the entire 2013 calendar year.
In EPA's discussion of the viability of INEO's production facility, the Final Rule notes that initial production
was announced on July 31, indicating EPA did continue to track individual cellulosic producer progress
immediately prior to finalizing the rule. Yet, EPA's own EMTS data available in late July showed KiOR
production estimates from May were no longer realistic. EPA apparently continued to rely on public
statements from KiOR made in May that were clearly outdated.
Immediately after EPA made a pre-publication version of the final 2013 standards available, KiOR held a
conference call on August 3th to discuss second quarter results. The company announced expectations to
produce 1 to 2 million gallons of cellulosic biofuel in 2013, and to achieve normal, steady-state optimal
operations at the Columbus facility in the first half of 2014. The news indicates that EPA either did not
continue to track KiOR's progress, or that EPA did continue to monitor progress but intended to set
aspirational standards. It is additionally concerning that EPA appears to be inconsistent in evaluating
individual cellulosic facilities, selectively using information that increases the standard.
API has some concerns with EPA's use of cellulosic producer information obtained in the compliance
period. However, very little cellulosic biofuel has been produced and unlike our concerns with the use of
more recent EIA information raised earlier, obligated parties likely would not have behaved differently in
the first 8.5 months of the year to comply with the cellulosic standard. API does not take position in this
petition on the appropriateness of using cellulosic producer information obtained in the compliance period;
the most recent information merely demonstrates how EPA continues to implement the standard with a
flawed methodology, which is the basis for requiring reconsideration. EPA needs to use a more accurate
methodology such as basing the volume on actual cellulosic production, rather than using selectively
chosen, optimistic projections from companies when history shows are consistently wrong.

CREW FOIA 2014-006851-0001235

EPA should immediately reconsider the cellulosic biofuel standard and use a methodology that takes
neutral aim at accuracy, as directed by the U.S. Court of Appeals for the D.C Circuit. API continues to
recommend using three months of actual cellulosic production.
KiOR's ability to produce even the revised 1 to 2 million gallon estimate for 2013 is far from certain. On
1
August 20 h, a class action complaint was filed with the U.S. District Court; Southern District of Texas
seeking to recover damages from KiOR's alleged violations of the Securities Exchange Act. The complaint
claims that KiOR: "continued to falsely reassure investors that the company remained on track to achieve
commercially meaningful biofuel production levels at the Columbus facility." While the lawsuit was only
recently filed and will likely not be settled or decided for some time, EPA should be following these
developments when considering how it will establish a methodology that aims at accuracy when developing
projections for 2014 and beyond. API raised concerns for several years that potential cellulosic producers'
volume estimates and timeframes have historically been overly-optimistic, and KiOR is no exception.
Most recently, EPA made EMTS data available for August 2013 which show that no D3 or D7 RINs were
generated in this month, indicating that companies have not achieved steady state production of cellulosic
biofuels. This information also lends further credibility to the API suggested methodology of using three
consecutive months of producer data in setting the standard.
Small Refiner Exemption
The Clean Air Act allows for small refiner exemptions and/ or extensions based on an EIA study, or on a case
by case basis as determined by EPA. EPA's timeliness in rulemaking development is critical to the
implementation of the small refiner provisions. In the Final Rule, EPA references the following statements
made in the Final Rule establishing the 2011 standards:

"EPA believes the Act is best interpreted to require issuance of a single annual standard in November that is applicable
in the following calendar year, thereby providing advance notice and certainty to obligated parties regarding their
regulatory requirements. Periodic revisions to the standards to reflect waivers issued to small refineries or refiners
would be inconsistent with the statutory text, and would introduce an undesirable level of uncertainty for obligated
parties"
API agrees with the statement above, and reiterates the need for regulatory certainty. Although EPA
indicated in the proposal that the Agency believed it could continue to consider exemptions on a case-bycase basis, obligated parties were expecting prompt finalization of the rule, which would have limited the
period of uncertainty. EPA should not have reallocated the exempted party's obligation across the rest of
the industry, especially when it was too far into the compliance period to be changing the required
compliance for the first 8.5 months of the year.
Retroactive Rulemakings
The 2013 RFS Final Rule indicated that EPA would extend the deadline for companies to demonstrate
compliance with the 2013 RVO standards. API welcomes the change, but not for the reason EPA identified.

CREW FOIA 2014-006851-0001236

Not only does the text of the 2013 RFS Final Rule as published in the August 15, 2013 Federal Register
indicate that EPA expects to be late in issuing the final 2014 standard, it, in effect, shows that the Agency
expects to be as much as six months late! It increasingly appears that EPA will not meet the November 30,
2013 deadline for finalizing the 2014 RFS standards. The Agency should strive to issue the rules on time.
Effectively stating in August 2013 that an annual rulemaking (which should by now be a routine process)
could take another 10 months to promulgate is a tacit admission that the agency isn't concerned about
issuing timely RFS rules.
EPA's habitual delays in promulgating the annual RFS standards are unacceptable and fundamentally unfair.
Obligated parties need this information ahead of the compliance year - as the Clean Air Act clearly requires
EPA to do - in order to make operational, logistics, and investment decisions. If EPA is unwilling or unable
to meet the statutorily required dates, API may seek judicial assistance in enforcing the deadlines.
Furthermore, the uncertainties created by the ethanol blendwall in 2013 and beyond are enormous, and
EPA is only adding to the uncertainty with retroactive rules.
Conclusion
The issues outlined above collectively show that EPA is not effectively implementing the RFS, and the
Agency's 2013 Final Rule continues the pattern of overly aggressive implementation of an unrealistic
mandate. The ethanol blendwall remains our industry's biggest concern with the RFS, and EPA continues to
exacerbate the problem. EPA not only fails to use its discretionary authority to mitigate the problem but,
as described in this petition, EPA exceeds its authority in ways that only advance the timing and severity of
the ethanol blendwall. EPA should expeditiously grant this petition.
We appreciate your attention to these issues, and look forward to your response. If you have any questions
regarding this petition, please don't hesitate to contact us.
Sincerely,

Robert L. Greco, Ill

Group Director, Downstream & Industry Operations

cc: Chris Grundler

CREW FOIA 2014-006851-0001237

Correspondence Management System

Control Number: AX-13-001-1436
Printing Date: October 22, 2013 02:45:01
Citizen Information
Citizen/Originator: Blackburn, Jennifer
Organization:
National Sorghum Producers
Address:
4201 North Interstate 27, Lubbock, TX 79403

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404-141-02-01_141 _b Controlled and Major Corr. Record copy of the offices of Division
Directors and other personnel.
Renwable Fuel Standards as a means to reduce dependence upon foreign oil, to reduce
greenhouse gasses, and to create domestic jobs through the development of a domestic
industry .. Volume requirements for 2014 should reflect that intent through supporting
continued investment in domestic production, especially of advanced biofuels.
DX-Respond directly to this citizen's questions, statements, or concerns
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CREW FOIA 2014-006851-0001238

October 18, 2013

Administrator Gina McCarthy
Environmental Protection Agency
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460
Dear Administrator McCarthy:
As the Environmental Protection Agency moves to set 2014 Renewable Volume Obligations, National
Sorghum Producers would like to express strong support for continued growth in the renewable fuels
sector for both traditional and advanced biofuels.
Sorghum feedstocks join a small but increasingly diverse set of biofuels and emerging production
technologies, which will increase the volume of available advanced biofuels beyond the two current
major sources of advanced biofuels: biomass-based diesel and Brazilian sugar cane-based ethanol.
Grain sorghum-based ethanol production using biogas and combined heat and power (CHP) was
approved as a pathway in early 2013 and is expected to produce approximately 50 million gallons in
2014. Additionally, NSP currently has a pending pathway application before the EPA for sorghum oil and
has a plant waiting on approval to start producing biodiesel using this oil, and NSP expects 2.5 million
gallons, equivalent to 3.75 million RINs, of sorghum oil-based biodiesel to be produced in 2014.
NSP also currently has pending pathway applications for biomass and sweet sorghum with hopes to
begin production in early 2015. Both feedstocks represent new and growing production capacity that
could be impacted by the precedent set with EPA's 2014 volume requirements for advanced biofuels.
NSP urges the EPA to approve a volume level for advanced biofuels in 2014 that reflects current
advanced biofuels production. NSP also requests consideration is given to the sorghum capacity
currently projected to be produced in 2014 and 2015, plus any predictable increases in other advanced
biofuels during that timeframe. Current production of domestic advanced biofuels suggest an
appropriate volume should be well above the 2.75 billion gallon 2013 volume requirement which will be
met this year, largely by domestic producers, and closer to the 2014 level of 3.75 billion gallons in
statute.

4201 North Interstate 27 Lubbock, Texas 79403 phone: (806) 749-3478 fax: (806) 749-9002
www.sorghumgrowers.com

CREW FOIA 2014-006851-0001239

Further, NSP urges the EPA to carefully calibrate its attempts to deal with current blend wall concerns to
also support the near-term and long-term investments in sorghum based ethanol production and other
advanced biofuels underway today. Setting an RVO for advanced biofuels that doesn't provide for
current production and continuing growth will put a damper on current and future investment in
advanced biofuels.
Congress established the RFS as a means to reduce dependence upon foreign oil, to reduce greenhouse
gasses, and to create domestic jobs through the development of a domestic industry. Volume
requirements for 2014 should reflect that intent through supporting continued investment in domestic
production, especially of advanced biofuels.
Sincerely,

Chairman, National Sorghum Producers

JS:jb
cc: USDA Secretary of Agriculture Tom Vilsack

CREW FOIA 2014-006851-0001240