EPA is proposing - Petroleum Equipment Institute

Section 202(e) of EISA provides that for any calendar year in which the projectedvolume of cellulosic biofuel production is less than the minimum applicable volumerequired by the statute, EPA will waive a portion of the cellulosic biofuel standard byusing the projected volume as the basis for setting the applicable standard. In this event,EISA also allows but does not require EPA to reduce the required volume of advancedbiofuel and total renewable fuel. The process of projecting the volume of cellulosicbiofuel that may be produced in the next year, and the associated process of determiningwhether and to what degree the advanced biofuel and total renewable fuel requirementsshould be lowered, will involve considerations that extend beyond the simple calculationbased on gasoline demand that was used to set the annual standards under RFS1. As aresult, we believe that this process should be subject to a notice-and-comment rulemakingprocess. Moreover, since we must make these determinations every year for applicationto the following year, we expect to conduct these rulemakings every year.In determining whether the advanced biofuel and/or total renewable fuel volumerequirements should also be adjusted downward in the event that projected volumes ofcellulosic biofuel fall short of the statutorily required volumes, we believe it would beappropriate to allow excess advanced biofuels to make up some or all of the shortfall incellulosic biofuel. For instance, if we determined that sufficient biomass-based dieselwas available, we could decide that the required volume of advanced biofuel need not belowered, or that it should be lowered to a smaller degree than the required cellulosicbiofuel volume. We would then lower the total renewable fuel volume to the samedegree that we would lower the advanced biofuel volume. We do not believe it would beappropriate to lower the advanced biofuel standard but not the total renewable standard,as this would allow conventional biofuels to effectively be used to meet the standardsCongress specifically set for cellulosic and advanced biofuels.If EPA reduces the required volume of cellulosic biofuel, EPA must offer anumber of credits no greater than the reduced cellulosic biofuel standard. EISA dictatesthe cost of these credits and ties them to inflation. The Act also dictates that we mustpromulgate regulations on the use of these credits and offers guidance on how thesecredits may be offered and used. We propose that their uses will be very limited. Thecredits would not be allowed to be traded or banked for future use, but would be allowedto meet the cellulosic biofuel standard, advanced biofuel standard and total renewablefuel standard. Further discussion of the implementation of these provisions can be foundin Section III.I.8. Proposed Standards for 2010Once the RFS2 program is implemented, we expect to conduct a notice-andcommentrulemaking process each year in order to determine the appropriate standardsapplicable in the following year. We therefore intend to issue an NPRM in the spring anda final rule by November 30 of each year as required by statute.30