Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

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VII. Impacts on Cost of Renewable Fuels and Gasoline This section examines the impact on fuel costs resulting from the growth in renewable fuel use between a base year of 2004 and 2012. We note that based on analyses conducted by the Energy Information Administration (EIA), renewable fuels will be used in gasoline and diesel fuel in excess and independent of the RFS requirements. As such, the changes in the use of renewable fuels and their related cost impacts are not directly attributable to the RFS rule. Rather, our analysis assesses the broader fuels impacts of the growth in renewable fuel use in the context of corresponding changes to the makeup of gasoline. These fuel impacts include the elimination of the reformulated gasoline (RFG) oxygen standard which has resulted in the refiners ceasing to use the gasoline blendstock methyl tertiary butyl ether (MTBE) and replacing it with ethanol. We also expect that by ending the use of MTBE that the former MTBE feedstock, isobutylene, will be reused to produce increased volumes of alkylate, a moderate to high octane gasoline blendstock. Thus, in this analysis, we are assessing the impact on the cost of gasoline and diesel fuel of increased use of renewable fuels, the cost savings resulting from the phase out of MTBE and the increased cost due to the production of alkylate. As discussed in section II., we chose to analyze a range of renewable fuels use. In the case of ethanol’s use in gasoline, the lower end of this range is based on the minimum renewable fuel volume requirements in the Act, and the higher end is based on AEO 2006. At both ends of this range, we assume that biodiesel consumption will be the level estimated in AEO 2006. We analyzed the projected fuel consumption scenario and associated program costs in 2012, the year that the RFS is fully phased-in. The volumes of renewable fuels consumed in 2012 at the two ends of the range are summarized in Table VII-1. Table VII-1 Renewable Fuels Volumes Used in Cost Analysis Renewable Fuels Consumption in 2012 (Billion Gallons) Low High Corn Ethanol 6.95 9.35 Cellulosic Ethanol 0.25 0.25 Biodiesel 0.30 0.30 Total Biofuel Consumption 7.5 9.90 We have estimated an average corn ethanol production cost of $1.20 per gallon in 2012 (2004 dollars) in the case of 7.5 billion gallons per year (bill gal/yr) and $1.26 per gallon in the case of 9.9 bill gal/yr. For cellulosic ethanol, we estimate it will cost approximately $1.65 in 2012 (2004 dollars) to produce a gallon of ethanol using corn stover as a cellulosic feedstock. In this analysis, however, we assume that the cellulosic requirement will be met by corn-based ethanol produced by energy sourced from biomass (animal and - 134 -
other waste materials as discussed in Section III.B of this preamble) and costing the same as corn based ethanol produced by conventional means. We estimated production costs for soy-derived biodiesel of $2.06 per gallon in 2004 and $1.89 per gal in 2012. For yellow grease derived biodiesel, we estimate an average production cost of $1.19 per gallon in 2004 and $1.10 in 2012. The impacts on overall gasoline costs with and without fuel consumption subsidies resulting from the increased use of ethanol and the corresponding changes to the other aspects of gasoline were estimated for both of these cases. The 7.5 bill gal/yr case would result in increased total costs which range from 0.33 cents to 0.41 cents per gallon depending on assumptions with respect to ethanol use in RFG and butane control constraints. The 9.9 bill gal/yr case would result in increased total costs which range from 0.93 to 1.05 cents per gallon. The actual cost at the fuel pump, however, will be decreased due the effect of State and Federal tax subsidies for ethanol. Taking this into consideration results in “at the pump” decreased costs (cost savings) ranging from 0.82 to 0.89 cents per gallon for the 7.5 bill gal/yr case and “at the pump” decreased costs ranging from 0.98 to 1.08 cents per gallon for the 9.9 bill gal/yr case. We ask for comment on these derived costs as well as on the analysis methodology used to derive these costs, and refer the reader to Section 7 of the DRIA which contains much more detail on the cost analysis used to develop these costs. A. Renewable Fuel Production and Blending Costs 1. Ethanol Production Costs a. Corn Ethanol A significant amount of work has been done in the last decade on surveying and modeling the costs involved in producing ethanol from corn, to serve business and investment purposes as well as to try to educate energy policy decisions. Corn ethanol costs for our work were estimated using a model developed by USDA in the 1990s that has been continuously updated by USDA. The most current version was documented in a peerreviewed journal paper on cost modeling of the dry-grind corn ethanol process 59 , and it produces results that compare well with cost information found in surveys of existing plants. 60 We made some minor modifications to the USDA model to allow scaling of the plant size, to allow consideration of plant energy sources other than natural gas, and to adjust for energy prices in 2012, the year of our analysis. The cost of ethanol production is most sensitive to the prices of corn and the primary co-product, DDGS. Utilities, capital, and labor expenses also have an impact, although to a 59 Kwaitkowski, J.R., McAloon, A., Taylor, F., Johnston, D.B., Industrial Crops and Products 23 (2006) 288-296 60 Shapouri, H., Gallagher, P., USDA’s 2002 Ethanol Cost-of-Production Survey (published July 2005) - 135 -
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The Administrator signed the follow
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Ave., NW, Washington DC. This Docke
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Table of contents: I. Background A.
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C. Requirements for Producers and I
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G. Executive Order 13045: Protectio
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The increased use of renewable fuel
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establish the applicable national v
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Today's proposal outlines the full
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enewable fuel feedstock market pric
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Unlike VOC and NOx, emissions of CO
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These renewable feedstocks are then
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5. Potential Water Quality Impacts
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enewable fuel volume which each par
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certain volume of renewable fuel. E
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est practices would have the option
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As stated, the renewable fuel stand
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enewable fuel volumes in the calcul
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For illustrative purposes, we have
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These credit provisions have meanin
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Stdi = The RFS program standard for
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gasoline. The Act is unclear on whe
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. Ethanol Made From Any Feedstock I
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generate thermal energy used to pro
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animal wastes, including poultry fa
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limit this program solely to a stra
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presence of the denaturant. For ins
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First, doing so could create an inc
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For purposes of this preamble, the
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capability for all of the small ref
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trading program, without any per ga
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obligated parties. However, there i
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particular importance for 2013 and
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have to significantly change their
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The D code would identify cellulosi
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Another case in which a RIN may not
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Section IV. In the context of demon
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equired volumes shown in Table I.B-
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We request comment on the valid lif
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e used for current year compliance.
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equirements by roughly 10 to 30 per
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4. Provisions For Exporters Of Rene
Page 83 and 84: Previous-year RINs: RINs that came
Page 85 and 86: a. Responsibilities Of Renewable Fu
Page 87 and 88: another, in electronic or paper for
Page 89 and 90: e a one-to-one correspondence betwe
Page 91 and 92: Parent batch Actual volume (gal) Ba
Page 93 and 94: should also have the right to separ
Page 95 and 96: 3. Distribution Of Separated RINs O
Page 97 and 98: obligated parties to exercise marke
Page 99 and 100: Our proposed program is designed to
Page 101 and 102: As discussed in Section III.D, it i
Page 103 and 104: additional enforcement burdens plac
Page 105 and 106: B. Requirements for Obligated Parti
Page 107 and 108: fuel and containing identifying inf
Page 109 and 110: We request comment on our proposed
Page 111 and 112: We also request comment on our prop
Page 113 and 114: The refiner or importer would be li
Page 115 and 116: Plant Feedstock Corn a Table VI.A.1
Page 117 and 118: Leading the Midwest in ethanol prod
Page 119 and 120: EPA forecasts ethanol production to
Page 121 and 122: As shown in Table VI.A.2-1 and Figu
Page 123 and 124: 3. Current Ethanol and MTBE Consump
Page 125 and 126: Oxygenate Use (Bgal) 4.5 4.0 3.5 3.
Page 127 and 128: change from the 2004 base case. 53
Page 129 and 130: per gallon to biodiesel produced fr
Page 131 and 132: ased on the assumption that the ble
Page 133: Modifications to the rail, barge, t
Page 137 and 138: elatively small fraction of the tot
Page 139 and 140: production costs using prices for s
Page 141 and 142: the capital cost of making the nece
Page 143 and 144: information on biodiesel freight co
Page 145 and 146: For further details on RVP reductio
Page 147 and 148: assuming only that blending of etha
Page 149 and 150: costs). At a $70 per barrel crude o
Page 151 and 152: gasoline use scenarios will cost th
Page 153 and 154: the incentive to blend in ethanol b
Page 155 and 156: supporting this rulemaking. We hope
Page 157 and 158: We base our estimates of fuel quali
Page 159 and 160: Table VIII.A.1.b-2 Effect of MTBE a
Page 161 and 162: pre-1998 model year onroad diesel e
Page 163 and 164: 1. Primary Analysis The national em
Page 165 and 166: Table VIII.B.1-4 Annual Emissions N
Page 167 and 168: RFG due to the absence of an RVP wa
Page 169 and 170: increase in ambient ozone levels is
Page 171 and 172: developing a model of secondary org
Page 173 and 174: IX. Impacts On Fossil Fuel Consumpt
Page 175 and 176: intended to help fuel producers est
Page 177 and 178: efficiency and to reduce air emissi
Page 179 and 180: combined those displacement indexes
Page 181 and 182: 3. Displacement Indexes (DI) The di
Page 183 and 184: Table IX.C.1-1 Fossil fuel impacts
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as on the exports of agricultural p
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which may change in response to an
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X. Agricultural Sector Economic Imp
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XI. Public Participation We request
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ways to comply with any previously
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small refiner under this proposal.
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meet these criteria to be considere
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“economically significant” as d
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40 CFR Part 80 is proposed to be am
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(b) Renewable Fuel Standard for 200
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(2) The term “Renewable fuel” i
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RFStdi = Renewable Fuel Standard in
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a party’s renewable volume obliga
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(a) YYYY is the calendar year in wh
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(ii) The value for EEEEEE in an ext
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(2) A deficit is calculated accordi
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(a) (1) Any party that exports any
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(e) If a refiner is complying on an
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calendar year; however, disqualific
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§80.76, if such information has no
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(1) A summary report of the annual
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(4) Reports shall be submitted on f
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(1) Fail to acquire sufficient RINs
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(b) The following attest procedures
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(B) That the RFS-FRGAS remained seg
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EPA employees or EPA contractors, f
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(iv) Determine the date and time th
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(ii) Be licensed as a Certified Pub
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