Regulation of Fuels and Fuel Additives: Modifications to Renewable Fuel Standard and Diesel Sulfur Programs

Regulation of Fuels and Fuel Additives: Modifications to Renewable Fuel Standard and Diesel Sulfur Programs

Regulation of Fuels and Fuel Additives: Modifications to Renewable Fuel Standard and Diesel Sulfur Programs

Lisa P. Jackson
October 9, 2012

[Federal Register Volume 77, Number 195 (Tuesday, October 9, 2012)]
[Rules and Regulations]
[Pages 61281-61295]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23713]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2012-0223; FRL 9733-3]

Regulation of Fuels and Fuel Additives: Modifications to
Renewable Fuel Standard and Diesel Sulfur Programs

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: EPA is issuing this direct final rule to amend the definition
of heating oil in the Renewable Fuel Standard (``RFS'' or ``RFS2'')
program under section 211(o) of the Clean Air Act. This amendment will
expand the scope of renewable fuels that can generate Renewable
Identification Numbers (RINs) as heating oil to include fuel oil
produced from qualifying renewable biomass that will be used to
generate heat to warm buildings or other facilities where people live,
work, recreate, or conduct other activities. Fuel oils used to generate
process heat, power, or other functions will not be included in the
amended definition. Producers or importers of fuel oil that meets the
amended definition of heating oil will be allowed to generate RINs,
provided that the fuel oil meets the other requirements specified in
the RFS regulations. This amendment will not modify or limit fuel
included in the current definition of heating oil. EPA is also amending
the requirements under EPA's diesel sulfur program related to the
sulfur content of locomotive and marine diesel fuel produced by
transmix processors. These amendments will allow locomotive and marine
diesel fuel produced by transmix processors to meet a maximum 500 parts
per million (ppm) sulfur standard provided that; the fuel is used in
older technology locomotive and marine engines that do not require 15
ppm sulfur diesel fuel, the fuel is used outside of the Northeast Mid-
Atlantic Area, and the fuel is kept segregated from other fuel. These
amendments will provide significant regulatory relief for transmix
processors while having a neutral or net positive environmental impact.
EPA is also amending the fuel marker requirements for 500 ppm sulfur
locomotive and marine (LM) diesel fuel to address an oversight in the
original rulemaking where the regulations failed to incorporate
provisions described in the rulemaking preamble to allow for solvent
yellow 124 marker to transition out of the distribution system.

DATES: This rule is effective on December 10, 2012 without further
notice, unless EPA receives adverse comment or a public hearing request
by November 8, 2012. If EPA receives a timely adverse comment or a
hearing request on the rule or any specific portion of this rule, we
will publish a withdrawal of the rule or a specific portion of the rule
in the Federal Register informing the public that the rule or portions
of the rule with adverse comment will not take effect. If a public
hearing is requested, we will publish a notice in the Federal Register
announcing the date and location of the hearing at least 14 days prior
to the hearing.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2012-0223, by one of the following methods:
www.regulations.gov: Follow the on-line instructions for
submitting comments.
Email: a-and-r-docket@epa.gov, Attention Air and Radiation
Docket ID EPA-HQ-OAR-2012-0223.
Fax: 731-214-4051.
Mail: Air and Radiation Docket, Docket No. EPA-HQ-OAR-
2012-0223,

[[Page 61282]]

Environmental Protection Agency, Mailcode: 6406J, 1200 Pennsylvania
Avenue NW., Washington, DC 20460.
Hand Delivery: EPA Docket Center, EPA/DC, EPA West, Room
3334, 1301 Constitution Ave. NW., Washington, DC, 20460, Attention Air
and Radiation Docket, ID No. EPA-HQ-OAR-2012-0223. Such deliveries are
only accepted during the Docket's normal hours of operation, and
special arrangements should be made for deliveries of boxed
information.
Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2012-0223. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through www.regulations.gov or email. The
www.regulations.gov Web site is an ``anonymous access'' system, which
means EPA will not know your identity or contact information unless you
provide it in the body of your comment. If you send an email comment
directly to EPA without going through www.regulations.gov your email
address will be automatically captured and included as part of the
comment that is placed in the public docket and made available on the
Internet. If you submit an electronic comment, EPA recommends that you
include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses. For additional
information about EPA's public docket visit the EPA Docket Center
homepage at http://www.epa.gov/epahome/dockets.htm.
Docket: All documents in the docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, (e.g., CBI or other information
whose disclosure is restricted by statute). Certain other material,
such as copyrighted material, will be publicly available only in hard
copy. Publicly available docket materials are available either
electronically in www.regulations.gov or in hard copy at the Air and
Radiation Docket and Information Center, EPA, EPA West, Room 3334, 1301
Constitution Ave. NW., Washington, DC. The Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the Air Docket is (202) 566-
1742.

FOR FURTHER INFORMATION CONTACT: Kristien Knapp, Office of
Transportation and Air Quality, Mail Code: 6405J, U.S. Environmental
Protection Agency, 1200 Pennsylvania Avenue NW., 20460; telephone
number: (202) 343-9949; fax number: (202) 343-2800; email address:
knapp.kristien@epa.gov.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose

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.

B. Summary of Today's Rule

Amended Definition of Home Heating Oil
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).
Diesel Transmix Amendments
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.
Yellow Marker Amendments
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

[[Page 61283]]

to clarify the transition of the solvent yellow 124 marker out of
heating oil beginning June 1, 2014. After December 1, 2014, EPA will no
longer have any requirements with respect to the use of the SY 124
marker.

C. Costs and Benefits

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.

II. Why is EPA issuing a direct final rule?

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
Federal Register, we are publishing a separate document that will serve
as the proposal to adopt the provisions in this direct final rule if
adverse comments or a hearing request are filed on the rule or any
portion of the rule.\1\ We will not institute a second comment period
on this action. Any parties interested in commenting must do so at this
time. For further information about commenting on this rule, see the
ADDRESSES section of this document.
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\1\ The proposed rule contains all aspects of this direct final
rule and seeks comments. Additionally, this document also requests
comments on one issue that is not included in the direct final rule:
whether the amendments to the requirements for locomotive and marine
diesel fuel produced by transmix processors should be extended to
fuel used inside the Northeast Mid-Atlantic Area.
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III. Does this action apply to me?

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:

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NAICS codes
Category \a\ SIC codes \b\ Examples of potentially regulated parties
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Industry............................. 324110 2911 Petroleum refiners, importers.
Industry............................. 325193 2869 Ethyl alcohol manufacturers.
Industry............................. 325199 2869 Other basic organic chemical manufacturers.
Industry............................. Various Various Transmix Processors.
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............................. 454319 5989 Other fuel dealers.
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\a\ North American Industry Classification System (NAICS).
\b\ 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 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 FOR FURTHER INFORMATION CONTACT section above.

IV. What should I consider as I prepare my comments for EPA?

A. Submitting information claimed as CBI. Do not submit this
information to EPA through www.regulations.gov or email. Clearly mark
the part or all of the information that you claim to be CBI. For CBI
information in a disk or CD ROM that you mail to EPA, mark the outside
of the disk or CD ROM as CBI and then identify electronically within
the disk or CD ROM the specific information that is claimed as CBI. In
addition to one complete version of the comment that includes
information claimed as CBI, a copy of the comment that does not contain
the information claimed as CBI must be submitted for inclusion in the
public docket. Information so marked will not be disclosed except in
accordance with procedures set forth in 40 CFR part 2.
B. Tips for Preparing Your Comments. When submitting comments,
remember to:
Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
Explain why you agree or disagree. Suggest alternatives
and substitute language for your requested changes.
Describe any assumptions and provide any technical
information and/or data that you used.
If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
Provide specific examples to illustrate your concerns, and
suggest alternatives.
Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
Make sure to submit your comments by the comment period
deadline identified.
C. Docket Copying Costs. You may be charged a reasonable fee for
photocopying docket materials, as provided in 40 CFR part 2.

V. Amendments Under the Renewable Fuel Standard Program

A. Amended Definition of Heating Oil

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).\2\ This amendment will expand the scope of renewable fuels
that can generate Renewable Identification Numbers (``RINs'') as

[[Page 61284]]

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, as these fuels are not within the
scope of ``home heating oil'' as that term is used in the Energy
Independence and Security Act of 2007 (``EISA''), for the RFS program.
The amendment will not modify or limit fuel included in the current
definition of heating oil at 40 CFR 80.2(ccc).
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\2\ The Energy Independence and Security Act (EISA) of 2007
amended section 211(o) of the Clean Air Act (CAA), which was
originally added by the Energy Policy Act (EPAct) of 2005.
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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.''
\3\ Additional renewable fuel is defined as fuel that is produced from
renewable biomass and that is used to replace or reduce the quantity of
fossil fuel present in home heating oil or jet fuel.\4\ In essence,
additional renewable fuel has to meet all of the requirements
applicable to qualify it as renewable fuel under the regulations, with
the only difference being that it is blended into or is home heating
oil or jet fuel. This does not change the volume requirements of the
statute itself, however this can provide an important additional avenue
for parties to generate RINs for use by obligated parties, thus
promoting the overall cost-effective production and use of renewable
fuels.
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\3\ ``EISA changed the definition of `renewable fuel' to require
that it be made from feedstocks that qualify as `renewable biomass.'
EISA's definition of the term `renewable biomass' limits the types
of biomass as well as the types of land from which the biomass may
be harvested.'' Regulation of Fuels and Fuel Additives: Changes to
Renewable Fuel Standard Program, 75 FR 14670, 14681 (March 26,
2010).
\4\ See CAA sections 211(o)(1)(A) and (o)(5)(E).
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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 Sec. 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.\5\
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\5\ 75 FR 14670, 14687 (March 26, 2010).

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

[[Page 61285]]

in the RFS2 final rule, Congress did not define the term ``home heating
oil,'' and it does not have a fixed or definite commercial meaning. In
the RFS2 final rulemaking, EPA focused on whether the provision was
limited to heating oil actually used in homes. EPA noted that the term
home heating oil is usually used in the industry to refer to one type
of fuel, and not to a specific use for the fuel. Given this more
general usage of the term, and the practical barriers that would have
arisen if the term was defined as fuel actually used to heat homes, EPA
defined the scope of home heating oil in a more specific fashion by
identifying those types of fuel oils that are typically used to heat
homes. EPA determined this was a reasonable interpretation of an
ambiguous statutory provision that simplified implementation and
administration of the Act and promoted achievement of the goals of the
RFS program.
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.\6\
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\6\ This is different from other renewable fuels in the RFS
program, which are defined in terms of their use as transportation
fuel or jet fuel. See 40 CFR 80.1401, definitions of ``renewable
fuel'' and ``transportation fuel.''
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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.

B. Lifecycle Greenhouse Gas Assessment of the Amended Definition of
Heating Oil

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.\7\ In addition,
EPA has added several pathways since the final rule was published.
Expanding the definition of heating oil does not affect these prior
analyses.
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\7\ See Table 1 to 40 CFR 80.1426.
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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

[[Page 61286]]

related energy use and GHG emissions that were part of the lifecycle
determination for those fuel pathways.
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).\8\ These compounds are then either catalytically
or biochemically converted into the fuel product. In this case, the
vast majority of the energy is associated with breaking down the
feedstock into the set of intermediary compounds. The process used and
the energy needed for it does not vary based on the type of fuel that
is then produced from these intermediary compounds. The type of fuel
could affect the type of catalyst or biological process used to change
the intermediary compounds into the fuel product, but based on EPA
calculations and assessments developed as part of the RFS2
rulemaking,\9\ this will have no real impact on the energy used or the
GHG emissions associated with converting the biomass into a different
fuel product.
---------------------------------------------------------------------------

\8\ This describes the Fischer-Tropsch process. Other processes
rely on forming different sets of compounds from the biomass, and
then producing the fuel product from the set of compounds.
\9\ ``Regulation of Fuel and Fuel Additives; Changes to
Renewable Fuel Standard Program,'' 75 FR 14670, available at http://www.gpo.gov/fdsys/pkg/FR-2010-03-26/pdf/2010-3851.pdf. See also,
EPA's summary factsheet, ``EPA Lifecycle Analysis of Greenhouse Gas
Emissions from Renewable Fuels,'' available at http://www.epa.gov/otaq/renewablefuels/420f10006.pdf.
---------------------------------------------------------------------------

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 Sec. 80.1426 would apply to the expanded definition of heating
oil.

C. Additional Registration, Reporting, Product Transfer Document, and
Recordkeeping Requirements

1. Additional Requirements for the Amended 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.
a. Registration
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,
e.g., based on the facility's permitted capacity or actual peak
capacity. Additionally though, we are requiring producers of the
expanded fuel oil types to submit affidavits in support of their
registration, including a statement that the fuel will be used for the
purposes of heating interior spaces of homes or buildings to control
ambient climate for human comfort, and no other purpose. We also
require that producers submit secondary affidavits from the existing
end users to verify that the fuel is actually being used for a
qualifying purpose. We are also adopting new reporting, product
transfer documents (PTD), and recordkeeping requirements discussed
below that will be used as a means for verification that the qualifying
fuel is being used in an approved application. These requirements are
necessary to assure confidence that the fuel used to generate RINs is
actually used for a qualifying purpose because these types of fuel have
not previously been used as heating oil, and are not readily
identifiable by their physical characteristics. Without such

[[Page 61287]]

safeguards, EPA could not be confident that the fuel is used as heating
oil, and end users might not have adequate notice that the fuel must be
used as heating oil. EPA believes these requirements will place a small
burden on producers and end users, and greatly benefit the integrity of
the program.
b. Reporting, Product Transfer Documents and Recordkeeping Requirements
For the purpose of continued verification after registration, EPA
is adopting additional requirements for reporting in Sec.
80.1451(b)(1)(ii)(T), PTDs in Sec. 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.\10\ The additional product transfer document requirement
associated with the expanded definition of heating oil is that a PTD
must be prepared and maintained between the fuel oil producer and the
final end user for the legal transfer of title or custody of a specific
volume of fuel oil that is designated for use, and is actually used,
only for the purpose of heating interior spaces of buildings to control
ambient climate for human comfort. This additional PTD requirement
requires that the PTD used to transfer ownership or custody of the
renewable fuel must contain the statement: ``This volume of renewable
fuel is designated and intended to be used to heat interior spaces of
homes or buildings to control ambient climate for human comfort. Do NOT
use for process heat or any other purpose, pursuant to 40 CFR Sec.
80.1460(g).'' EPA believes that this PTD requirement will help to
ensure that each gallon of fuel oil that is transferred from the
producer to the end user is used for qualifying purposes under the
expanded definition of heating oil. If the fuel oil is sent to the end
user, but the fuel oil is not actually used to generate heat for
climate control purposes, but for some other non-qualifying purpose,
then the RINs that were generated for that fuel oil must be immediately
retired and reported under 40 CFR 80.1451. The additional recordkeeping
requirement is that producers are required to keep copies of the
contracts which describe the fuel oil under contract with each end
user. Consistent with existing regulations, producers are required to
maintain all documents and records submitted for registration,
reporting, and PTDs as part of the producer's recordkeeping
requirements. EPA believes the producer's maintenance of these records
will allow for continued tracking and verification that the end use of
the fuel oil is in compliance with the expanded definition of heating
oil.
---------------------------------------------------------------------------

\10\ EPA does not expect that the expanded definition of home
heating oil will result in an obligation on home owners or small
businesses. Based on our analysis of the market, qualifying fuel oil
is expected to be used in large industrial settings or apartment
buildings, not in individual homes. Therefore, EPA anticipates that
the information it is requiring would be readily available and
producible by these entities.
---------------------------------------------------------------------------

D. Additional Requirement for RIN Generation

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. See amended section 80.1426(a)(1)(iii).

VI. Amendments Related to Transmix

The final regulations for the nonroad diesel program were published
in the Federal Register on June 24, 2004.\11\ The provisions in the
nonroad diesel rule related to transmix processors were modified by the
Category 3 Marine diesel final rule that was published on April 30,
2010.\12\ This action amends the requirements for diesel fuel produced
by transmix processors. Below is a table listing the provisions that we
are amending. The following sections provide a discussion of these
amendments.
---------------------------------------------------------------------------

\11\ 69 FR 38958 (June 24, 2004).
\12\ 75 FR 22896 (April 30, 2010).

------------------------------------------------------------------------
Proposed amendments to the diesel
program section Description
------------------------------------------------------------------------
80.511(b)(4)...................... Amended to allow for the production
and sale of 500 ppm locomotive and
marine (LM) diesel fuel produced
from transmix past 2014.
80.513 (entire section)........... Amended to allow for the production
and sale of 500 ppm LM diesel fuel
produced from transmix past 2014.
80.572(d)......................... Amended to extend 500 ppm LM diesel
fuel label past 2012.
80.597(d)(3)(ii).................. Amended to include 500 ppm LM diesel
fuel in the list of fuels that an
entity may deliver or receive
custody of past June 1, 2014.
------------------------------------------------------------------------

[[Page 61288]]

A. Extension of the Diesel Transmix Provisions Outside of the Northeast
Mid-Atlantic Area and Alaska Beyond 2014

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 (e.g., maximum 3,000 ppm for jet fuel). The
presence of such high sulfur products in multi-product pipelines and
consequently in transmix constrains the ability of transmix processors
to produce a low sulfur distillate product.
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.\13\ Accordingly, the nonroad rule required that nonroad,
locomotive and marine (NRLM) diesel fuel must meet a 15 ppm sulfur
standard in parallel with the introduction of new sulfur-sensitive
emission control technology to NRLM equipment. Beginning June 1, 2014,
the nonroad diesel rule required that all NRLM diesel fuel produced by
refiners and importers must meet a 15 ppm sulfur standard. The nonroad
diesel rule included special provisions to allow the continued use of
500 ppm sulfur locomotive and marine (LM) diesel fuel produced from
transmix beyond 2014 in older technology engines as long as such
engines remained in the in-use fleet. These provisions along with other
now expired flexibilities in the diesel program were designed to
minimize and postpone the impacts on transmix processors of
transitioning to a condition where all highway, nonroad, locomotive,
and marine diesel engines can only operate on 15 ppm diesel fuel.\14\
The 500 ppm LM diesel transmix provisions were limited to areas outside
of the Northeast Mid-Atlantic Area (NEMA) and Alaska because it was
judged that the heating oil market in these areas would provide a
sufficient outlet for transmix distillate in these areas.\15\ Excluding
the NEMA area and Alaska also allowed us to exempt the NEMA area and
Alaska from the fuel marker provisions that are a part of the
compliance assurance regime. The continuation of the 500 ppm LM diesel
transmix provisions beyond 2014 (finalized in the nonroad rule) was
supported by ongoing recordkeeping, reporting, and fuel marker
provisions that were established to facilitate enforcement during the
phase in of the diesel sulfur program.\16\
---------------------------------------------------------------------------

\13\ Control of Emissions of Air Pollution from Nonroad Diesel
Engines and Fuel, Final Rule, 69 FR 38958 (June 24, 2004).
\14\ As discussed in the original nonroad diesel rulemaking, as
LM equipment is retired from service, the market for 500 ppm LM will
gradually diminish and eventually disappear. Given the long lifetime
of LM equipment (in many cases 40 years or more), we anticipate that
a market for 500 ppm LM will remain for a significant amount of
time. This phase-out time will also allow transmix processors to
transition to their >15ppm sulfur distillate product to other
markets (C3 marine, heating oil, process heat). It may also allow
sufficient time for the introduction of desulfurization equipment
that is suitable for use at transmix processing facilities.
\15\ The NEMA area is defined in 40 CFR 80.510(g)(1) as follows:
(1) Northeast/Mid-Atlantic Area, which includes the following States
and counties, through May 31, 2014: North Carolina, Virginia,
Maryland, Delaware, New Jersey, Connecticut, Rhode Island,
Massachusetts, Vermont, New Hampshire, Maine, Washington DC, New
York (except for the counties of Chautauqua, Cattaraugus, and
Allegany), Pennsylvania (except for the counties of Erie, Warren,
McKean, Potter, Cameron, Elk, Jefferson, Clarion, Forest, Venango,
Mercer, Crawford, Lawrence, Beaver, Washington, and Greene), and the
eight eastern-most counties of West Virginia (Jefferson, Berkeley,
Morgan, Hampshire, Mineral, Hardy, Grant, and Pendleton).
\16\ This included the now-completed phase-in of 15 ppm highway
diesel fuel and 15 ppm nonroad diesel fuel as well as the phase-out
of the small refiner and credits provisions for LM diesel fuel that
will be completed in 2014.
---------------------------------------------------------------------------

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.\17\ Our assessment based on input from
industry at the time indicated that incorporating the new C3 marine
fuel into the diesel program enforcement mechanisms while preserving
the 500 ppm diesel transmix flexibility could not be accomplished
without retaining significant existing burdens and introducing new
burdens on a broad number of regulated parties. We also concluded that
the new C3 marine diesel market would provide a sufficient outlet for
transmix processors distillate product in place of the 500 ppm LM
diesel market. Thus, we believed the 500 ppm LM diesel transmix
flexibility would no longer be needed after 2014. Hence, we requested
comment on whether we should eliminate the 500 ppm LM transmix
provisions in parallel with the implementation of the C3 marine diesel
sulfur requirement. This approach allowed for a significant reduction
in the regulatory burden on a large number of industry stakeholders
through the retirement of the diesel program's designate-and-track and
fuel marker requirements. All of the comments that we received on the
proposed rule were supportive of the approach. Consequently, we
finalized the approach in the C3 marine final rule that was published
on April 30, 2010.\18\
---------------------------------------------------------------------------

\17\ Control of Emissions From New Marine Compression-Ignition
Engines at or Above 30 Liters per Cylinder; Proposed Rule, 74 FR
44442 (August 28, 2009).
\18\ Control of Emissions From New Marine Compression-Ignition
Engines at or Above 30 Liters per Cylinder; Final Rule, 75 FR 22896
(April 30, 2010).
---------------------------------------------------------------------------

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.\19\ A parallel
petition for judicial review was filed with the U.S. Court of Appeals,
DC Circuit.\20\ The transmix processors stated that they were not aware
of the

[[Page 61289]]

changes to the 500 ppm LM transmix provisions until after they were
finalized. The petitioners also stated that they believe that the C3
marine market would not be a viable outlet for their distillate product
given the increased distribution costs compared to the 500 ppm LM
market. Based on the additional input that we received from transmix
processors and other stakeholders in the fuel distribution system
during our consideration of the petition, EPA believes that while the
increased costs for transportation of transmix distillate product could
be accommodated, there is no compelling reason not to extend the 500
ppm diesel transmix flexibility beyond 2014 if such costs can be
avoided or deferred without affecting the benefits from the diesel
sulfur program. A settlement agreement has been finalized between EPA
and the petitioners under which EPA would propose regulatory changes to
reintroduce the 500 ppm LM transmix diesel flexibility for legacy LM
equipment.\21\ The amendments to the diesel transmix provisions
contained in today's action are in accord with the settlement
agreement.
---------------------------------------------------------------------------

\19\ ``Petition to Reconsider Final Rule: Control of Emissions
from New Marine Compression Ignition Engines at or Above 30 Liters
per Cylinder; Final Rule,'' 75 FR 22,896 (April 30, 2010), Letter to
EPA Administrator Lisa Jackson dated June 29, 2010, from Chet
Thompson of Crowell and Moring LLP, on behalf of Allied Energy
Company, Gladieux Trading and Marketing, Insight Equity Acquisition
Partners, LP, Liquid Titan, LLC, and Seaport Refining and
Environmental, LLC.
\20\ Petition for Review, United States Court of Appeals for the
District of Columbia Circuit, Petitioners, Allied Energy Company,
Gladieux Trading and Marketing, Insight Equity Acquisition Partners,
LP, LiquidTitan, LLC, and Seaport Refining and Environmental LLC, v.
Respondent, U.S. Environmental Protection Agency, Case 10-1146,
Document 1252640, Filed 06/29/2010.
\21\ Notice of Proposed Settlement Agreement; Request for Public
Comment, 76 FR 56194 (September 12, 2011).
---------------------------------------------------------------------------

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 (NOX), volatile organic compounds (VOCs),
carbon monoxide (CO), as well as PM emissions that would otherwise be
associated with transporting transmix distillate product to the more
distant C3 market.
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.\22\ We
estimate that approximately 500 million gallons of distillate fuel per
year is produced from transmix.\23\ Assuming that all of the transmix
distillate product would be used as 500 ppm LM in older engines, we
estimate that an additional 70 tons of sulfate PM would be produced
annually compared to the use of 15 ppm diesel fuel.\24\ We believe that
a substantial fraction of transmix distillate product would be used as
heating oil and C3 diesel fuel regardless of whether the diesel
transmix provisions are extended. Also, as the older LM engines are
retired from service, the size of the potential 500 ppm LM market will
diminish until all LM engines must use 15 ppm diesel fuel. Therefore,
assuming that all transmix distillate product would be used as 500 ppm
LM provides an upper bound estimate of the potential impact on PM
emissions. We estimate on average that transmix processors would need
to ship their transmix distillate product an additional 150 miles by
tank truck to reach the C3 Emission Control Area (ECA) marine market as
compared to the 500 ppm LM market.\25\ This would result in an
additional 80 tons of PM emissions annually. Thus, the PM emissions
associated with transport to the C3 marine market are roughly equal to
the increased sulfate PM emissions associated with the continued use of
500 ppm LM. We estimate that the increased transport distances could
also result in an additional 2,200 tons of NOX, 220 tons of
VOC, and 650 tons of CO annually. Based on the above discussion, we
believe that the extension of the 500 ppm LM provisions beyond 2014
outside the NEMA area and Alaska would have a neutral or net positive
environmental impact.
---------------------------------------------------------------------------

\22\ This is based on our review of data on the sulfur levels of
transmix distillate product from various transmix processors.
\23\ Based on information provided by transmix processors, we
estimate that approximately 750 million gallons per year of transmix
is produced annually and that \2/3\ of the transmix-derived product
is distillate fuel and \1/3\ is gasoline.
\24\ Sulfate PM was converted to PM2.5 to allow a
comparison with PM2.5 from increased fuel transport
emissions.
\25\ There is no ability to ship transmix distillate product to
the C3 marine diesel market by pipeline.
---------------------------------------------------------------------------

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.\26\ Therefore, extending this
flexibility would reduce the overall burden on industry of compliance
with EPA's diesel sulfur program. Providing additional time for
transmix processors to evaluate how the C3 ECA marine market will
develop after 2014 would also facilitate a smoother transition for
transmix processors from the 500 ppm LM market as it gradually
disappears due to fleet turnover.
---------------------------------------------------------------------------

\26\ In the 2011 edition of ``Railroad Facts,'' the Association
of American Railroads reported that in 2010 approximately 35% of the
locomotive fleet was at least 21 years old.
---------------------------------------------------------------------------

B. Revised Diesel Transmix Provisions

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.\27\ In addition to
registering as a refiner and certifying that each batch of fuel
complies with the fuel quality requirements for 500 ppm LM diesel fuel,
producers of 500 ppm transmix distillate product would be required to
submit a compliance plan for approval by EPA. This compliance plan
would provide details on how the 500 ppm LM would be segregated through
to the ultimate consumer and its use limited to the legacy LM fleet.
The plan would be required to identify the entities that would handle
the fuel and the means of segregation. We believe that it is
appropriate to limit the number of entities that would be allowed to
handle the fuel between the producer and the ultimate consumer in order
to facilitate

[[Page 61290]]

EPA's compliance assurance activities.\28\ Based on conversations with
transmix processors, we believe that specifying that no more than 4
separate entities handle the fuel between the producer and the ultimate
consumer would not hinder the ability to distribute the fuel.\29\ The
plan would need to identify the ultimate consumers and include
information on how the product would be prevented from being used in
sulfur-sensitive equipment.
---------------------------------------------------------------------------

\27\ See 40 CFR 80.554(a)(4).
\28\ An entity is defined as any company that takes custody of
500 ppm LM diesel fuel.
\29\ In most cases, fewer entities would take custody of the
product. In many cases, only a single entity (a tank truck operator)
would be in the distribution chain between the transmix processor
and the ultimate consumer. However, we understand that as many as 4
separate entities may handle the product between the producer and
ultimate consumer if it is shipped by pipeline: the tank truck
operator to ship the product from the producer to the pipeline, the
pipeline operator, the product terminal that receives the fuel from
the pipeline, and another tank truck operator to ship the product to
the ultimate consumer from the terminal.
---------------------------------------------------------------------------

We understand that some transmix processors currently rely on
shipment by pipeline to reach the 500 ppm locomotive diesel market.\30\
As a result, the regulations allow 500 ppm LM to be shipped by pipeline
provided that it does not come into contact with distillate products
that have a sulfur content greater than 15 ppm. The compliance plan
would need to include information from the pipeline operator regarding
how this segregation would be maintained. Discussions with transmix
processors indicate that this requirement would not limit their ability
to ship 500 ppm LM by pipeline. If 500 ppm LM was shipped by pipeline
abutting 15 ppm diesel, the volume of 500 ppm LM delivered would likely
be slightly greater than that which was introduced into the pipeline as
a consequence of cutting the pipeline interface between the two fuel
batches into the 500 ppm LM batch. This small increase in 500 ppm LM
volume would be acceptable.
---------------------------------------------------------------------------

\30\ 500 ppm LM diesel fuel is shipped by a short dedicated
pipeline from a product terminal to a locomotive refueling facility.
---------------------------------------------------------------------------

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 of the determination of compliance with the now expired
volume balance requirements under 40 CFR 80.598(b)(9)(vii)(B). Industry
did not object to this requirement, and therefore, we believe that
limiting the volume swell of 500 ppm LM diesel fuel during shipment by
pipeline to 2 volume percent or less should provide sufficient
flexibility.
Product transfer documents (PTDs) for 500 ppm LM diesel are
required to indicate that the fuel must be distributed in compliance
with the approved compliance assurance plan. Entities in the
distribution chain for 500 ppm LM diesel fuel are required to keep
records on the volumes of the 500 ppm that they receive from and
deliver to each other entity. Based on input from fuel distributors,
keeping these records will be a minimal additional burden, as discussed
in section VIII.B. Such entities are also required to keep records on
how the fuel was transported and segregated. We would typically expect
that the volumes of 500 ppm LM delivered would be equal to or less than
those received unless shipment by pipeline occurred. Some minimal
increase in 500 ppm LM volume would be acceptable due to differences in
temperature between when the shipped and received volumes were measured
and interface cuts during shipment by pipeline. Entities that handle
500 ppm LM are required to calculate a balance of 500 ppm LM received
versus delivered/used on an annual basis. If the volume of fuel
delivered/dispensed is greater than that received, EPA would expect
that the records would indicate the cause. If an entity's evaluation of
their receipts and deliveries of 500 ppm LM fuel indicated
noncompliance with the product segregation requirements, the custodian
would be required to notify EPA. All entities in the 500 ppm LM
distribution chain are required to maintain the specified records for 5
years and provide them to EPA upon request.

VII. Amendments Related to the Marker Requirements for Locomotive and
Marine Fuel

Today's rule amends the regulatory provisions regarding the
transition in the fuel marker requirements for 500 ppm LM diesel fuel
in 2012 to address an oversight in the original rulemaking where the
regulations failed to incorporate provisions described in the
rulemaking preamble. Today's rule also amends the regulatory provisions
regarding the transition in the fuel marker requirements for heating
oil in 2014 to provide improved clarity.
The preamble in the nonroad diesel final rule stated that EPA
intended to allow 500 ppm LM diesel fuel containing greater than 0.10
milligrams per liter of solvent yellow 124 (SY124) to be present at any
location in the fuel distribution system (up to and including retail
and wholesale-purchaser-consumer storage tanks) until September 30,
2012.\31\ Although it was not explicitly stated in the preamble, it was
implied that additional time would be allowed for marked 500 ppm LM to
transition from the fuel tanks connected to locomotive and marine
engines, consistent with the approach taken regarding the
implementation of more stringent diesel fuel sulfur standards. However,
the nonroad diesel regulations are not consistent with the preamble and
do not provide the allowance for marked 500 ppm LM diesel fuel to
transition from fuel distribution and end-user tanks. 40 CFR 80.510(e)
requires that all 500 ppm LM diesel fuel delivered from a truck loading
rack located outside of the Northeast Mid-Atlantic (NEMA) area and
Alaska must contain at least 6 mg/liter of SY124 through May 31, 2012.
However, the regulatory text at 40 CFR 80.510(f) requires that
beginning June 1, 2012, any diesel fuel that contains 0.10 mg/liter of
SY124 must be designated as heating oil. Thus, the regulations as
currently written do not provide any transition time for marked LM fuel
that is present the distribution system as of May 31, 2012 to work its
way through the fuel distribution system downstream of the truck
loading rack and through the tanks connected to locomotive and marine
engines.
---------------------------------------------------------------------------

\31\ ``Control of Emissions for Air Pollution From Nonroad
Diesel Engines and Fuel; Final Rule,'' Section V.C.1.c., ``The
Period From June 1, 2012 Through May 31, 2014, 69 FR 39083, 39084
(June 29, 2004).
---------------------------------------------------------------------------

A number of locomotive and marine wholesale purchaser-consumers
have taken custody of marked 500 ppm LM diesel fuel that they will not
be able to consume prior to June 1, 2012. A number of fuel suppliers
also have inventories of 500 ppm LM diesel fuel on hand that they may
not be able to sell to LM diesel fuel users because such users are
concerned about clearing their tanks of marked LM diesel fuel by June
1, 2012. This new rule allows marked 500 ppm LM diesel fuel to
transition normally through the fuel distribution and use system,
consistent with the original intent of the nonroad diesel rule
preamble. Today's rule allows 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.
We are implementing a single transition date applicable at all
points in

[[Page 61291]]

the fuel distribution and use system rather than a separate date
applicable through retail and wholesale-purchaser-consumer (WPC)
facilities and another date applicable at all locations including the
tanks attached to locomotive and marine equipment because we believe
that a stepped compliance schedule is not necessary and a single
transition date provides the most flexibility for regulated parties. We
expect that the marker will typically transition out of retailer and
WPC LM diesel storage tanks well in advance of November 30, 2012. We
further expect that users of LM diesel fuel can coordinate with retail
and WPC facilities regarding deliveries of marked 500 ppm LM diesel
fuel to ensure that the fuel in storage tanks attached to LM equipment
is in compliance by November 30, 2012.
Today's rule also amends the regulation to clarify the transition
of the solvent yellow 124 marker out of heating oil beginning June 1,
2014. Specifically, today's rule amends the regulations to clarify that
after December 1, 2014, EPA will no longer have any requirements with
respect to the use of the solvent yellow 124 marker. This is consistent
with the intent expressed in our original nonroad diesel fuel
rulemaking. We do not believe these changes will adversely impact
emissions.

VIII. Statutory and Executive Order Reviews

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

Under Executive Order 12866 (58 CFR 51735 (October 4, 1993), this
action is a ``significant regulatory action.'' Accordingly, EPA
submitted this action to the Office of Management and Budget (OMB) for
review under Executive Orders 12866 and 13563 (76 FR 3821 (January 21,
2011) and any changes made in response to OMB recommendations have been
documented in the docket for this action.

B. Paperwork Reduction Act

The information collection requirements in this notice of proposed
rulemaking and direct final rule have been submitted for approval to
the Office of Management and Budget (OMB) under the Paperwork Reduction
Act, 44 U.S.C. 3501 et. seq. The Information Collection Request (ICR)
document prepared by EPA related to the amended heating oil definition
has been assigned EPA ICR number 2462.01 and the ICR document prepared
by EPA for diesel fuel produced by transmix producers has been assigned
EPA ICR number 2463.01. Supporting statements for these proposed ICRs
have been placed in the docket. The proposed information collections
are described in the following paragraphs.
This action contains recordkeeping and reporting (registration and
product transfer documentation) that may affect parties who produce or
import renewable fuels subject to the revised definition of heating
oil. EPA expects that very few parties will be subject to additional
recordkeeping and reporting. We estimate that up to 11 parties (i.e.,
RIN generators, consisting of up to 10 producers and one importer) may
be subject to the proposed information collection over the next several
years.\32\ We estimate an annual reporting burden of 21 hours per
respondent and an annual recordkeeping burden of 24 hours, yielding a
total per respondent burden of 45 hours.\33\ Burden means the total
time, effort, or financial resources expended by persons to generate,
maintain, retain, or disclose or provide information to or for a
Federal agency. This includes the time needed to review the
instructions; develop, acquire, install, and utilize technology and
systems for the purpose of collecting, validating, and verifying
information, processing and maintaining information, and disclosing and
providing information; adjust the existing ways to comply with any
previously applicable instructions and requirements; train personnel to
be able to respond to a collection of information; search data sources;
complete and review the collection of information; and transit or
otherwise disclose the information. Burden is as defined at 5 CFR
1320.3(b).
---------------------------------------------------------------------------

\32\ We project that the number of effected parties will remain
essentially constant over time.
\33\ This includes the time to train staff, formulate and
transmit responses, and other miscellaneous compliance related
activities.
---------------------------------------------------------------------------

This action also contains provisions related to diesel fuel that is
produced by transmix processors. We have proposed reporting
requirements that would apply to transmix processors (all of whom are
refiners) and other parties (such as carriers or distributors) in the
distribution chain who handle diesel fuel produced by transmix
producers. The collected data will permit EPA to: (1) Process
compliance plans from transmix producers; and (2) Ensure that diesel
fuel made from transmix meets the standards required under the
regulations at 40 CFR Part 80, and that the associated benefits to
human health and the environment are realized. We estimate that 25
transmix processors and 150 other parties may be subject to the
proposed information collection.\34\ We estimate an annual reporting
burden of 28 hours per transmix processor (respondent) and 8 hours per
other party (respondent); considering all respondents (transmix
producers and other parties) who would be subject to the proposed
information collection, the annual reporting burden, per respondent,
would be 11 hours. Burden means the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a Federal agency. This
includes the time needed to review the instructions; develop, acquire,
install, and utilize technology and systems for the purpose of
collecting, validating, and verifying information, processing and
maintaining information, and disclosing and providing information;
adjust the existing ways to comply with any previously applicable
instructions and requirements; train personnel to be able to respond to
a collection of information; search data sources; complete and review
the collection of information; and transit or otherwise disclose the
information. Burden is as defined at 5 CFR 1320.3(b).
---------------------------------------------------------------------------

\34\ This is based on current transmix production. Although the
total volume of transmix produced in the fuel distribution system
may decline in parallel with the projected decrease in overall
petroleum-based fuel use, we anticipate that the number of transmix
processors will remain essentially constant since their number is
dependent on the configuration of the petroleum-based fuel
distribution system.
---------------------------------------------------------------------------

The amendments to the fuel marker requirements for locomotive and
marine diesel fuel in today's rule do not contain any new recordkeeping
and reporting requirements.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR part 9.
To comment on the Agency's need for this information, the accuracy
of the provided burden estimates, and any suggested methods for
minimizing respondent burden, EPA has established a public docket for
this rule, which includes the ICRs described above, under Docket ID
number EPA-HQ-OAR-2012-0223. Submit any comments related to the ICR to
EPA and OMB. See the ADDRESSES section at the beginning of this notice
for where to submit comments to EPA. Send comments to OMB at the Office
of Information and

[[Page 61292]]

Regulatory Affairs, Office of Management and Budget, 725 17th Street
NW., Washington, DC 20503, Attention: Desk Office for EPA. Since OMB is
required to make a decision concerning the ICR between 30 and 60 days
after October 9, 2012, a comment to OMB is best assured of having its
full effect if OMB receives it by November 8, 2012.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of
a city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is
any not-for-profit enterprise which is independently owned and operated
and is not dominant in its field.
After considering the economic impacts of this action on small
entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. This final
rule will not impose any new requirements on small entities. The
amendments to the diesel transmix provisions would lessen the
regulatory burden on all affected transmix processors and provide a
source of lower cost locomotive and marine diesel fuel to consumers.
The relatively minor corrections and modifications this rule do not
impact small entities.

D. Unfunded Mandates Reform Act

This rule does not contain a Federal mandate that may result in
expenditures of $100 million or more for State, local, and tribal
governments, in the aggregate, or the private sector in any one year.
We have determined that this action will not result in expenditures of
$100 million or more for the above parties and thus, this rule is not
subject to the requirements of sections 202 or 205 of UMRA.
This rule is also not subject to the requirements of section 203 of
UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments. It only applies to
gasoline, diesel, and renewable fuel producers, importers, distributors
and marketers and makes relatively minor corrections and modifications
to the RFS2 and diesel sulfur regulations.

E. 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, as
specified in Executive Order 13132. This action only applies to
gasoline, diesel, and renewable fuel producers, importers, distributors
and marketers and makes relatively minor corrections and modifications
to the RFS2 and diesel sulfur regulations. Thus, Executive Order 13132
does not apply to this action.

F. Executive Order 13175 (Consultation and Coordination With Indian
Tribal Governments)

This rule does not have tribal implications, as specified in
Executive Order 13175 (65 FR 67249 (November 9, 2000)). It applies to
gasoline, diesel, and renewable fuel producers, importers, distributors
and marketers. This action makes relatively minor corrections and
modifications to the RFS2 and diesel sulfur regulations, and does not
impose any enforceable duties on communities of Indian tribal
governments. Thus, Executive Order 13175 does not apply to this action.

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

EPA interprets EO 13045 (62 FR 19885 (April 23, 1997)) as applying
only to those regulatory actions that concern health or safety risks,
such that the analysis required under section 5-501 of the EO has the
potential to influence the regulation. This action is not subject to EO
13045 because it does not establish an environmental standard intended
to mitigate health or safety risks.

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

This action is not a ``significant energy action'' as defined in
Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not
likely to have a significant adverse effect on the supply,
distribution, or use of energy. We have concluded that this rule is not
likely to have adverse energy effects because we do not anticipate
adverse energy effects related to the additional generation of RINs for
home heating oil or the reduced regulatory burden for transmix
processors. This rule will facilitate the use of 500 ppm sulfur
locomotive and marine (LM) diesel fuel, which contains the SY 124
marker that is already in the fuel distribution and use system
consistent with EPA's original intent. Today's action will avoid the
potential need to remove marked 500 ppm LM diesel fuel from the system
for reprocessing, and the associated increased costs and potential
disruption to the supply of LM diesel fuel.

I. National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so will be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
This action does not involve technical standards. Therefore, EPA
did not consider the use of any voluntary consensus standards.

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

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
Federal executive policy on environmental justice. Its main provision
directs Federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
EPA has determined that this rule will not have disproportionately
high and adverse human health or environmental effects on minority or
low-income

[[Page 61293]]

populations because it does not affect the level of protection provided
to human health or the environment. These amendments will not relax the
control measures on sources regulated by the RFS regulations and
therefore will not cause emissions increases from these sources. We
have determined that proposed amendments to the diesel transmix
provisions and marker provisions for locomotive and marine diesel fuel
under the diesel sulfur program would have a neutral or positive impact
on diesel vehicle emissions.\35\
---------------------------------------------------------------------------

\35\ See section VI and VII of today's notice for details of
this analysis.
---------------------------------------------------------------------------

K. Congressional Review Act

The Congressional Review Act, 5 U.S.C. 801 et. seq., as added by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to each House of the Congress and to the Comptroller
General of the United States. EPA will submit a report containing this
rule and other required information to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States
prior to publication of the rule in the Federal Register. A major rule
cannot take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
Sec. 804(2).

IX. Statutory Provisions and Legal Authority

Statutory authority for the rule finalized today can be found in
section 211 of the Clean Air Act, 42 U.S.C. 7545. Additional support
for the procedural and compliance related aspects of today's rule,
including the recordkeeping requirements, come from sections 114, 208,
and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).

List of Subjects in 40 CFR Part 80

Environmental protection, Administrative practice and procedure,
Agriculture, Air pollution control, Confidential business information,
Diesel fuel, Transmix, Energy, Forest and forest products, Fuel
additives, Gasoline, Imports, Labeling, Motor vehicle pollution,
Penalties, Petroleum, Reporting and recordkeeping requirements.

Dated: September 17,2012.
Lisa P. Jackson,
Administrator.
For the reasons set forth in the preamble, 40 CFR part 80 is
amended 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, 7542, 7545, and 7601(a).

Subpart I--[Amended]

0
2. Section 80.510 is amended by revising paragraph (f) to read as
follows:

Sec. 80.510 What are the standards and marker requirements for NRLM
diesel fuel and ECA marine fuel?

* * * * *
(f) Marking provisions. From June 1, 2012 through November 30,
2014:
(1) Except as provided for in paragraph (i) of this section, prior
to distribution from a truck loading terminal, all heating oil shall
contain six milligrams per liter of marker solvent yellow 124 from June
1, 2012 through May 31, 2014.
(2) All motor vehicle and NR diesel fuel shall be free of marker
solvent yellow 124, and all LM diesel fuel shall be free of marker
solvent yellow 124 beginning December 1, 2012.
(3) From June 1, 2012 through November 30, 2012, any diesel fuel
that contains greater than or equal to 0.10 milligrams per liter of
marker solvent yellow 124 shall be deemed to be either heating oil or
500 ppm sulfur LM diesel fuel and shall be prohibited from use in any
motor vehicle or nonroad diesel engine (excluding locomotive, or marine
diesel engines).
(4) From December 1, 2012 through November 30, 2014, any diesel
fuel that contains greater than or equal to 0.10 milligrams per liter
of marker solvent yellow 124 shall be deemed to be heating oil and
shall be prohibited from use in any motor vehicle or nonroad diesel
engine (including locomotive, or marine diesel engines).
(5) Except as provided for in paragraph (i) of this section, from
June 1, 2012 through November 30, 2014, any diesel fuel, other than jet
fuel or kerosene that is downstream of a truck loading terminal, that
contains less than 0.10 milligrams per liter of marker solvent yellow
124 shall be considered motor vehicle diesel fuel or NRLM diesel fuel,
as appropriate.
(6) Any heating oil that is required to contain marker solvent
yellow 124 pursuant to the requirements of this paragraph (f) must also
contain visible evidence of dye solvent red 164.
(7) Beginning December 1, 2014 there are no requirements or
restrictions on the use of marker solvent yellow 124 under this
subpart.
* * * * *

0
3. Section 80.511 is amended by revising paragraphs (b)(4) and (b)(10)
to read as follows:

Sec. 80.511 What are the per-gallon and marker requirements that
apply to NRLM diesel fuel, ECA marine fuel, and heating oil downstream
of the refiner or importer?

* * * * *
(b) * * *
(4) Except as provided in paragraphs (b)(5) through (8) of this
section, the per-gallon sulfur standard of Sec. 80.510(c) shall apply
to all NRLM diesel fuel beginning August 1, 2014 for all downstream
locations other than retail outlets or wholesale purchaser-consumer
facilities, shall apply to all NRLM diesel fuel beginning October 1,
2014 for retail outlets and wholesale purchaser-consumer facilities,
and shall apply to all NRLM diesel fuel beginning December 1, 2014 for
all locations. This paragraph (b)(4) does not apply to LM diesel fuel
produced from transmix or interface fuel that is sold or intended for
sale in areas other than those listed in Sec. 80.510(g)(1) or (g)(2),
as provided by Sec. 80.513(f).
* * * * *
(10) For the purposes of this subpart, on any occasion where a
distributor directly dispenses fuel into vehicles or equipment from a
mobile facility such as a tanker truck, the distributor shall be
treated as a retailer, and the mobile facility shall be treated as a
retail outlet.

0
4. Section 80.513 is amended as follows:
0
a. By revising the section heading.
0
b. By revising the introductory text.
0
c. By revising paragraph (e).
0
d. By adding a new paragraph (f).

Sec. 80.513 What provisions apply to facilities that process
transmix?

For purposes of this section, transmix means a mixture of finished
fuels, such as pipeline interface, that no longer meets the
specifications for a fuel that can be used or sold without further
processing. This section applies to refineries (or other facilities)
that produce diesel fuel from transmix by distillation or other
refining processes but do not produce diesel fuel by processing crude
oil. This section only applies to the volume of diesel fuel produced by
such a processor using these processes, and does not apply to any
diesel fuel produced by the

[[Page 61294]]

blending of blendstocks. For the purposes of this section, pipeline
interface means the mixture between different fuels that abut each
other during shipment by pipeline.
* * * * *
(e) From June 1, 2012 through June 1, 2014, NRLM diesel fuel
produced by a facility that processes transmix is subject to the
standards of Sec. 80.510(c), except that LM diesel fuel produced from
transmix is subject to the sulfur standard of Sec. 80.510(a). This
paragraph (e) does not apply to NRLM or LM diesel fuel that is sold or
intended for sale in the areas listed in Sec. 80.510(g)(1) or (g)(2).
(f) Beginning June 1, 2014, LM diesel fuel produced from transmix
is subject to the sulfur standard of Sec. 80.510(a), provided that the
conditions in this paragraph are satisfied. Diesel fuel produced from
transmix that does not meet the conditions in this paragraph is subject
to the sulfur standard in Sec. 80.510(c).
(1) The fuel must be produced from transmix.
(2) The fuel must not be sold or intended for sale in the areas
listed in Sec. 80.510(g)(1) or (g)(2).
(3) A facility producing 500 ppm LM diesel fuel must obtain
approval from the Administrator for a compliance plan. The compliance
plan must detail how the facility will segregate any 500 ppm LM diesel
fuel produced subject to the standards under Sec. 80.510(a) from the
producer through to the ultimate consumer from fuel having other
designations. The compliance plan must identify the entities that
handle the 500 ppm LM through to the ultimate consumer. No more than 4
separate entities shall handle the 500 ppm LM between the producer and
the ultimate consumer. The compliance plan must also identify all
ultimate consumers to whom the refiner supplies the 500 ppm LM diesel
fuel. The compliance plan must detail how misfueling of 500 ppm LM into
vehicles or equipment that require the use of 15 ppm diesel fuel will
be prevented.
(i) Producers of 500 ppm LM diesel fuel must be registered with EPA
under Sec. 80.597 prior to the distribution of any 500 ppm LM diesel
fuel after June 1, 2014.
(ii) Producers of 500 ppm LM must initiate a PTD that meets the
requirements in paragraph (f)(3)(iii) of this section.
(iii) All transfers of 500 ppm LM diesel fuel must be accompanied
by a PTD that clearly and accurately states the fuel designation; the
PTD must also meet all other requirements of Sec. 80.590.
(iv) Batches of 500 ppm LM may be shipped by pipeline provided that
such batches do not come into physical contact in the pipeline with
batches of other distillate fuel products that have a sulfur content
greater than 15 ppm.
(v) The volume of 500 ppm LM shipped via pipeline under paragraph
(f)(3)(iv) of this section may swell by no more than 2% upon delivery
to the next party. Such a volume increase may only be due to volume
swell due to temperature differences when the volume was measured or
due to normal pipeline interface cutting practices notwithstanding the
requirement under paragraph (f)(3)(iv) of this section.
(vi) Entities that handle 500 ppm LM must calculate the balance of
500 ppm LM received versus the volume delivered and used on an annual
basis.
(vii) The records required in this section must be maintained for
five years, by each entity that handles 500 ppm LM and be made
available to EPA upon request.
(4) All parties that take custody of 500 ppm LM must segregate the
product from other fuels and observe the other requirements in the
compliance plan approved by EPA pursuant to paragraph (f)(3) of this
section.

0
5. Section 80.572 is amended by revising the section heading and
paragraph (d) to read as follows:

Sec. 80.572 What labeling requirements apply to retailers and
wholesale purchaser-consumers of Motor Vehicle, NR, LM and NRLM diesel
fuel and heating oil beginning June 1, 2010?

* * * * *
(d) From June 1, 2010 and beyond, for pumps dispensing LM diesel
fuel subject to the 500 ppm sulfur standard of Sec. 80.510(a):

LOW SULFUR LOCOMOTIVE AND MARINE DIESEL FUEL (500 ppm Sulfur Maximum)
WARNING
Federal law prohibits use in nonroad engines or in highway vehicles or
engines.
* * * * *

0
6. Section 80.597 is amended by revising paragraph (d)(3)(ii) to read
as follows:

Sec. 80.597 What are the registration requirements?

* * * * *
(d) * * *
(3) * * *
(ii) Fuel designated as 500 ppm LM diesel fuel.
* * * * *

0
7. Section 80.598 is amended by revising paragraph (b)(9)(ii) to read
as follows:

Sec. 80.598 What are the designation requirements for refiners,
importers, and distributors?

* * * * *
(b) * * *
(9) * * *
(ii) Until June 1, 2014, any distillate fuel containing greater
than or equal to 0.10 milligrams per liter of marker solvent yellow 124
required under Sec. 80.510(d), (e), or (f) must be designated as
heating oil except that from June 1, 2010, through November 30, 2012,
it may also be designated as LM diesel fuel as specified under Sec.
80.510(e).
* * * * *

0
8. Section 80.601 is amended by revising paragraph (a)(2) to read as
follows:

Sec. 80.610 What acts are prohibited under the diesel fuel sulfur
program?

(a) * * *
(2) Beginning June 1, 2007, produce, import, sell, offer for sale,
dispense, supply, offer for supply, store or transport any diesel fuel
for use in motor vehicle or nonroad engines that contains greater than
0.10 milligrams per liter of solvent yellow 124, except for 500 ppm
sulfur diesel fuel sold, offered for sale, dispensed, supplied, offered
for supply, stored, or transported for use in LM. from June 1, 2010
through November 30, 2012 for use only in locomotive or marine diesel
engines that is marked under the provisions of Sec. 80.510(e).
* * * * *

0
9. Section 80.1401 is amended by revising the definition of ``Heating
Oil'' to read as follows:

Sec. 80.1401 Definitions.

* * * * *
Heating oil means either of the following:
(1) A 1, 2, or non-petroleum diesel meeting the
definition set forth in Sec. 80.2(ccc); or
(2) A fuel oil that, pursuant to Sec. Sec. 80.1450(b)(1)(ix) and
(d)(4), 80.1451(b)(1)(ii)(T), 80.1453(d) and 80.1454(b)(7), is
demonstrated to be used to heat interior spaces of homes or buildings
to control ambient climate for human comfort, is capable of flowing at
60 degrees Fahrenheit and 1 atmosphere of pressure, and is not used for
any other purpose.
* * * * *

0
10. Section 80.1426 is amended by revising paragraph (a)(1)(ii)
introductory text and adding (a)(1)(iii) to read as follows:

[[Page 61295]]

Sec. 80.1426 How are RINs generated and assigned to batches of
renewable fuel by renewable fuel producers or importers?

(a) * * *
(1) * * *
(ii) Is demonstrated to be produced from renewable biomass pursuant
to the reporting requirements of Sec. 80.1451 and the recordkeeping
requirements of Sec. 80.1454; and
* * * * *
(iii) Was produced in compliance with the registration requirements
of Sec. 80.1450, the reporting requirements of Sec. 80.1451, the
recordkeeping requirements of Sec. 80.1454, and all other applicable
regulations of this subpart M.
* * * * *

0
11. Section 80.1450 is amended by adding new paragraph (b)(1)(ix) to
read as follows:

Sec. 80.1450 What are the registration requirements under the RFS
program?

* * * * *
(b) * * *
(1) * * *
(ix) For a producer of fuel oil meeting paragraph (2) of the
definition of heating oil in Sec. 80.1401:
(A) An affidavit from the producer of the fuel oil stating that the
fuel oil for which RINs are generated will be sold for the purposes of
heating interior spaces of homes or buildings to control ambient
climate for human comfort, and no other purpose.
(B) Affidavits from existing final end users of the fuel oil
stating that the fuel oil for which RINs are generated is being used
for purposes of heating interior spaces of homes or buildings to
control ambient climate for human comfort, and no other purpose.
* * * * *

0
12. Section 80.1451 is amended by adding a new paragraph (b)(1)(ii)(T)
to read as follows:

Sec. 80.1451 What are the reporting requirements under the RFS
program?

* * * * *
(b) * * *
(1) * * *
(ii) * * *
(T) Producers of fuel oil that meets the paragraph (2) of the
definition of heating oil in Sec. 80.1401, shall report, on a
quarterly basis, all the following for each volume of fuel oil:
(1) Total volume of fuel oil produced and sold to end users, in
units of U.S. gallon, and the respective heating content of the fuel
oil, in units of BTU per U.S. gallon.
(2) Total volume of fuel oil for which RINs were generated, in
units of U.S. gallon, and the respective quantities of fuel oil sold to
end users, names and locations of the buildings in which the fuel oil
was used to heat interior spaces of those buildings to control ambient
climate for human comfort, and the RIN numbers assigned to each batch
of fuel oil.
(3) For each batch of transferred fuel oil for which RINs are
generated that the renewable fuel producer claims to meet paragraph (2)
of the definition of heating oil in Sec. 80.1401 and is sold for those
purposes, affidavits from the end user of the fuel that includes, but
not limited to, the following information:
(i) Quantity of fuel oil received from producer.
(ii) Quantity of fuel oil used for purposes of heating interior
spaces of homes or buildings to control ambient climate for human
comfort, and no other purpose.
(iii) Date the fuel oil was received from producer.
(iv) Blend level of the fuel oil in petroleum based fuel oil when
received (if applicable).
(v) Quantity of assigned RINs received with the renewable fuel, if
applicable.
(vi) Quantity of assigned RINs that the end user separated from the
renewable fuel, if applicable.
* * * * *

0
13. Section 80.1453 is amended by adding a new paragraph (d) to read as
follows:

Sec. 80.1453 What are the product transfer document (PTD)
requirements for the RFS program?

* * * * *
(d) For fuel oil meeting paragraph (2) of the definition of heating
oil in Sec. 80.1401, the PTD which is used to transfer ownership or
custody of the renewable fuel shall state: ``This volume of renewable
fuel is designated and intended to be used to heat interior spaces of
homes or buildings to control ambient climate for human comfort. Do NOT
use for process heat or any other purpose, pursuant to 40 CFR Sec.
80.1460(g).''

0
14. Section 80.1454 is amended by adding new paragraph (b)(7) to read
as follows:

Sec. 80.1454 What are the recordkeeping requirements under the RFS
program?

* * * * *
(b) * * *
(7) Copies of all contracts which describe the fuel oil under
contract with each end user.
* * * * *

0
15. Section 80.1460 is amended by adding a new paragraph (g).

Sec. 80.1460 What acts are prohibited under the RFS program?

* * * * *
(g) Failing to use a renewable fuel for its intended use. No person
shall use qualifying fuel oil that meets paragraph (2) of the
definition of heating oil in Sec. 80.1401 in an application other than
to heat interior spaces of homes or buildings to control ambient
climate for human comfort.
* * * * *
[FR Doc. 2012-23713 Filed 10-5-12; 8:45 am]
BILLING CODE 6560-50-P