July 15, VIA

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1 July 15, 2013 VIA ELECTRONIC FILING EPA Docket Center, EPA West Building (Air Docket) Attention: Docket ID No. EPA-HQ-OAR U.S. Environmental Protection Agency Mail Code: Pennsylvania Avenue, NW Washington, DC VIA Re: Comments of the Renewable Fuels Association; Regulation of Fuels and Fuel Additives: RFS Pathways II and Technical Amendments to the RFS2 Standards; Proposed Rule (78 Fed. Reg. 36,042; Docket No: EPA-HQ-OAR ) Dear Mr. Sopata: The Renewable Fuels Association (RFA) is pleased to submit the following comments in response to the U.S. Environmental Protection Agency s (EPA) notice of proposed rulemaking: RFS Pathways II and Technical Amendments to the RFS2 Standards. 78 Fed. Reg. 36,042 (June 14, 2013). RFA is the leading trade association for America s ethanol industry. Its mission is to advance the development, production, and use of fuel ethanol by strengthening America s ethanol industry and raising awareness about the benefits of renewable fuels. Founded in 1981, RFA serves as the premier meeting ground for industry leaders and supporters. RFA s 300-plus members are working to help America become cleaner, safer, more energy secure, and economically vibrant. We applaud EPA for confirming that corn kernel fiber is crop residue, and believe the Agency has proposed a sensible and straightforward approach to RIN generation for renewable fuels derived from cellulosic biomass feedstocks. Several technologies to convert corn kernel fiber into cellulosic ethanol have been developed in recent years, and a number of existing ethanol plants have already adopted these technologies or are poised to integrate them in the near future. However, to date, uncertainty over the status of corn kernel fiber as a qualifying feedstock for the RFS2 has hampered broader adoption of these technologies and held back a potentially significant source of cellulosic biofuel RIN generation. Therefore, we urge EPA to finalize this rule (after considering our comments 1

2 below) as expeditiously as possible. The volumes of cellulosic ethanol produced from corn kernel fiber can meaningfully contribute to RFS2 cellulosic biofuel requirements in the near term. While RFA agrees with and strongly supports most of the amendments and technical changes proposed by EPA, we offer several recommendations that we believe would further improve the rule. Below are RFA s comments on specific aspects of the proposed rule. 1. RFA strongly supports the proposal to clarify that corn kernel fiber meets the existing definition of crop residue. The ethanol industry strongly backs EPA s proposal to confirm that corn kernel fiber is a crop residue, and thus renewable fuel produced from corn kernel fiber qualifies for cellulosic biofuel RIN (D3 or D7) generation. Crop residue is defined in of the RFS2 regulations as the biomass left over from the harvesting or processing of planted crops... (emphasis added). After initially proposing to only include biomass left over from harvesting, in the RFS2 final rule EPA noted that it agreed with public comments encouraging us to expand the definition of crop residue to include the materials left over after the processing of the crop into a useable resource, such as husks, seeds, bagasse, and roots. 1 Notably, EPA projected that crop residues such as sugarcane bagasse and sweet sorghum pulp would account for considerable volumes of cellulosic biofuel by Corn fiber, like bagasse and sweet sorghum pulp, also is derived from the processing of planted crops, and is commonly considered a crop residue or agricultural residue. A review of the scientific literature s treatment of agricultural or crop residues confirms that corn fiber is commonly understood to be a crop residue. Indeed, corn fiber is often mentioned alongside corn stover, bagasse, and other crop residues as potential feedstocks for cellulosic biofuel production. 3 EPA did not intend for crop residue to be limited to specific enumerated examples cited at various points in the pre-amble of the RFS2 final rule. Rather, any crop residue that meets the regulatory definition would qualify. EPA s broad approach to qualifying biomass is demonstrated in its response to comments on the RFS2 final rule. There, EPA declined to alter the definition of cellulosic biofuel to include specific examples of crop residues, noting 1 75 Fed. Reg. 14,692; see also RFS2 Summary and Analysis of Comments, Fed. Reg. 14, See, e.g., Arantes, Valdeir, and Jack N. Saddler. Cellulose Accessibility Limits the Effectiveness of Minimum Cellulase Loading on the Efficient Hydrolysis of Pretreated Lignocellulosic Substrates. Biotechnology for Biofuels 4.3 (2011): the agricultural residues (corn stover and corn fiber) required significantly lower protein loadings... ; Biswas, Atanu, Badal C. Saha, John W. Lawton, R. L. Shogren, and J. L. Willett. Process for Obtaining Cellulose Acetate from Agricultural By-products. Carbohydrate Polymers 64 (2006): Agricultural residues such as corn fiber, rice hulls and wheat straw can be used as abundant low-cost feedstock for production of fuel ethanol. 2

3 that the existing definition s reference to any cellulose, hemicellulose, or lignin made it clear that the crop residues cited by the commenter were included. 4 Clearly, corn kernel fiber is a crop residue and is cellulosic biomass. Thus, under the plain language of the regulations, ethanol derived from corn kernel fiber is covered under the existing pathway for cellulosic biomass from crop residue, is eligible to generate cellulosic biofuel RINs, and does not need to petition for a new pathway under of the regulations. Accordingly, we support EPA s confirmation that corn kernel fiber is crop residue. 2. We support EPA s proposal to allow 100% of the volume of renewable fuel produced from cellulosic feedstocks listed in to generate cellulosic biofuel RINs (D3 or D7). As acknowledged by EPA, no plant matter can ever consist entirely of cellulose, hemicellulose, and lignin. 5 In addition to cellulose, hemicellulose, and lignin, the feedstocks designated by EPA as cellulosic biomass may also contain small amounts of sugars, starches, proteins, lipids and other compounds. Because cellulosic biomass feedstocks are not entirely comprised of cellulosic material, there has been some confusion and uncertainty among cellulosic biofuel producers regarding proper RIN generation procedures. In response, EPA is proposing a practical and straightforward approach that allows 100% of the volume of renewable fuel produced from previously approved cellulosic feedstocks to generate cellulosic biofuel RINs (D3 or D7). RFA strongly supports this approach, as it is legally defensible, technically practical, and cost effective for biofuel producers. Further, we agree with EPA that this approach best supports Congress intent to...promote the use of cellulosic biofuel and achieve the associated greenhouse gas emissions reductions. 6 As noted in the proposal, EPA has already established a precedent for generating RINs in situations where the qualifying feedstock contains de minimis contaminants. We agree that the precedent established for separated food waste and the biogenic portions of separated MSW is applicable to crop residue and other cellulosic biomass feedstocks. Further, the existing language in (f) (i.e., In choosing an appropriate D Code, producers may disregard any incidental de minimis feedstock contaminants ) appears broadly applicable to all qualifying cellulosic biomass feedstocks. We agree with the Agency s determination that the approved cellulosic biomass feedstocks appearing in Table 1 to are likely to contain 80-95% cellulose, hemicellulose, and lignin and are therefore comprised predominantly of these compounds. EPA conducted a detailed literature review and analysis to determine that any non-cellulosic components of 4 See RFS2 Summary and Analysis of Comments, Fed. Reg. 36,045 6 Id. 3

4 cellulosic biomass feedstocks would be de minimis and incidental in nature. We also agree with EPA s determination that cellulosic biofuel produced via the biochemical process will be almost exclusively derived from the cellulosic and hemicellulosic portions of the feedstock, while the remaining lignin and non-cellulosic compounds will be left over. Thus, there is very little risk that renewable fuel produced from cellulosic biomass via the biochemical process will be derived from anything other than cellulose and hemicellulose. EPA s proposal is pragmatic from both a technical and economic standpoint. As the Agency clearly acknowledges, there is no ready test to identify the portion of fuel produced from non-cellulosic materials. 7 The analytical tools and methods that would be needed by commercial biofuel facilities to precisely, economically, and quickly determine the cellulosic content of a renewable fuel do not exist today. We concur that other methods that commercial facilities could conceivably use to estimate cellulosic content on a batch basis (e.g., mass balance) would be difficult and potentially time-consuming and expensive, with no clear regulatory benefit. The proposal states that EPA would apply this same treatment to new and emerging cellulosic feedstock pathways (i.e., pathways that have not yet been approved) based on a case-by-case evaluation. We agree this is the proper approach; if EPA determines that a new feedstock is comprised predominantly of cellulose, hemicellulose, and lignin, 100% of the volume of renewable fuel produced from that feedstock should qualify for cellulosic biofuel RIN generation. EPA seeks comment on two alternative approaches to RIN generation for cellulosic biomass feedstocks. While the ethanol industry strongly prefers the primary approach proposed by EPA, a second-best option would be the Cellulosic Content Threshold Approach. If EPA were to finalize this approach, we believe 80% is a reasonable threshold that strikes a proper balance between emphasis on the feedstock content having a higher actual cellulosic component and emphasis on promoting the volume of fuels that could be categorized as cellulosic biofuel. 8 If this approach was finalized in lieu of the primary proposed approach, it should be the responsibility of EPA to determine whether feedstocks meet the threshold based on published data and analysis. In the event no published information exists on particular feedstock, EPA should solicit submissions from individual producers. RFA is opposed to the second alternative approach, referred to as the Specified Percentage Approach. This approach would be most costly and burdensome for producers, and presents the most opportunity for RIN generation errors Fed. Reg. 36, Fed. Reg. 36,047 4

5 3. Any residual non-cellulosic components, including starch, remaining bound to corn kernel fiber should be considered de minimis, and 100% of the volume of renewable fuel produced from corn kernel fiber should qualify for cellulosic biofuel RIN generation. EPA asks for comment on whether the definition of crop residue should be altered to explicitly exclude the corn starch component. RFA is opposed to amending the definition because any residual corn starch remaining bound to the cellulosic corn kernel fiber would be incidental and de minimis. Further, bound starch would be technically and economically impractical to separate from the cellulosic matrix of the fiber. The starch content of corn kernel fiber (i.e., bran coat and tip cap) is typically 5-7% (dry weight), while cellulosic fiber represents 79-87% of the mass of these kernel fractions (Figure 1). The remainder of the mass of corn kernel fiber is comprised mostly of non-fermentable proteins, oils, and ash. Figure 1. Typical Composition of Yellow Dent Corn Source: Bunge North America 9 Similarly, distillers grains or whole stillage (which may be used as the feedstock for some post-fermentation corn kernel fiber conversion technologies) has been shown in the literature to contain just % starch (dry weight). 10 Thus, it is safe to assume that the renewable fuel produced from corn kernel fiber is predominantly derived from the cellulosic, hemicellulosic, and/or lignin components of the fiber, and that any renewable fuel produced from residual starch is de minimis. Given the analyses available in the literature, we think EPA s assertion that, in some cases, as much as 20% of the final fuel could be derived from corn starch is highly unlikely. However, elsewhere in the proposal EPA recommends allowing cellulosic biofuel RIN generation on 100% of the volume of renewable fuel derived from qualifying cellulosic feedstocks (including crop residue ) consisting of approximately 80-95% cellulose, hemicellulose, or lignin. 11 Because EPA is not proposing and should not propose to amend the definition of crop residue to exclude incidental bound starch found in corn kernel Kim, Younmi, et al. Effect of compositional variability of distillers grains on cellulosic ethanol production. Bioresource technology (2010): Fed. Reg. 36,045 5

6 fiber, the percentage threshold applied by EPA to establish de minimis contamination levels for other cellulosic feedstocks should also apply to corn kernel fiber. That is, given that corn kernel fiber is comprised of at least 80-95% cellulose, hemicellulose, and lignin, 100% of the volume of renewable fuel produced from corn kernel fiber should be allowed to generate D3 RINs. a. Though we do not believe it is necessary, EPA could consider asking producers who use corn kernel fiber to demonstrate annually via existing registration, reporting, and recordkeeping requirements that a minimum of 80% of the renewable fuel derived from corn kernel fiber comes from the cellulosic, hemicellulosic, or lignin components of the fiber. We are aware that some stakeholders have voiced concern about the presence of de minimis residual bound starch in corn kernel fiber and its implications for cellulosic biofuel RIN generation. While we believe these concerns are unfounded, we submit that EPA could easily monitor whether the renewable fuel produced from corn kernel fiber is in fact predominantly (i.e., more than 80%) derived from the cellulosic, hemicellulosic, and lignin components (if the Agency believed it was necessary to do so). To prove that renewable fuel production from the non-cellulosic portions of corn kernel fiber is truly de minimis, producers using corn kernel fiber could demonstrate annually via existing registration, reporting, and recordkeeping provisions that a minimum of 80% of the renewable fuel derived from corn kernel fiber comes from the cellulosic, hemicellulosic, or lignin components of the fiber. An initial demonstration that at least 80% of the renewable fuel comes from cellulose, hemicellulose, or lignin could be made via the updated registration requirements for producers adopting new renewable fuel processes. Per (d), a renewable fuel producer who modifies his facility to produce a new type of renewable fuel and associated D-code RIN must update his registration information and submit a copy of an updated independent engineering review at least 60 days prior to producing the new type of renewable fuel. Thus, if a facility that previously produced only corn starch ethanol and D6 RINs adopts a technology to convert corn kernel fiber to cellulosic ethanol (and generate D3 RINs), it must update its existing registration, including an updated third-party engineering review. Among other requirements, the updated third-party engineering review must include a detailed review of the renewable fuel producer s calculations used to determine V RIN of a representative sample of batches of each type of renewable fuel produced since the last registration. These calculations, along with feedstock analyses, process designs, and the other information required as part of the updated independent engineering review, could serve as the initial demonstration to EPA that the renewable fuel produced from corn kernel fiber feedstock is predominantly derived from cellulosic material. 6

7 Ongoing (e.g., annual) demonstrations could potentially be made via regular RIN generation reports, per (b)(1)(ii). Among other requirements, these reports require producers to detail, on a batch basis, the types and quantities of feedstocks used and the process(es) and feedstock(s) used and proportion of renewable volume attributable to each process and feedstock. In specifying the types and quantities of feedstocks used, producers could certify that the corn kernel fiber feedstock is predominantly (i.e., more than 80%) cellulose, hemicellulose, and lignin. Further, annual attest engagements could also be used for verification. In sum, numerous tools exist within the current RFS2 registration, reporting, and recordkeeping framework to verify that renewable fuel produced from corn kernel fiber is predominantly derived from the cellulosic, hemicellulosic, and lignin components of the fiber, and that any renewable fuel produced from residual starch is in fact de minimis. Moreover, in the unlikely event that buyers of D3 RINs and cellulosic ethanol from corn kernel fiber seek additional assurance about the feedstock composition or the proper generation of RINs, they may elect to participate in the pending voluntary RIN Quality Assurance Program (QAP). b. We strongly oppose the explicit exclusion of de minimis corn starch from the definition of crop residue. However, if EPA did pursue such an exclusion, the Agency should allow producers using corn kernel fiber to use one of two methods for RIN generation and assignment. Though we strongly oppose such an action, if EPA did decide for some reason to explicitly exclude de minimis corn starch from the definition of crop residue, the Agency should allow producers using corn kernel fiber to use one of two methods for RIN generation and assignment. The first allowable method would be the existing regulatory provisions governing RIN assignment for single batches of fuel derived from multiple feedstocks ( (f)(3)). This method would require individual producers to assign RINs based on specific determinations of the share of renewable fuel from corn kernel fiber that is derived from cellulose, hemicellulose, and lignin versus non-cellulosic components. The second option we propose would be less burdensome administratively; it would involve EPA setting a default cellulosic content percentage for corn kernel fiber. EPA could determine, for example, that the renewable fuel derived from corn kernel fiber comes from, on average, 94% cellulose, hemicellulose, and lignin. Thus, 94% of the volume of fuel produced from corn kernel fiber would be eligible to generate D3 RINs, while the remaining 6% would be eligible to generate D6 RINs. This approach would be similar to the Specified Percentage Approach discussed in V.A.4 of the proposal. 4. The use of corn kernel fiber as a renewable fuel feedstock will not meaningfully affect livestock and poultry feed markets. 7

8 We agree with EPA s finding that extracting the fiber from corn matter used to produce standard DDG would not have a significant effect on feed markets. 12 Removing the fiber from the corn kernel would slightly reduce the mass of the distillers grains, but the protein and fat content would be concentrated. This would make the resulting low-fiber co-product more valuable and nutritious for swine and poultry than conventional DDG. Additionally, it is common for buyers of conventional DDG to require that sellers do not exceed a maximum fiber content level. In other words, the fiber content of conventional DDG has been too high for certain users in some cases in the past, leading those buyers to specify fiber maximums in their contractual terms and conditions. A detailed analysis by Dr. Jerry Shurson (Attachment 1), of the Department of Animal Science at the University of Minnesota, found that feeding low fiber distillers grains (LF- DDG) to swine and poultry will have minimal effects on corn and soybean meal displacement ratios, while maintaining diet inclusion rates equal to current industry levels for typical DDGS. Dr. Shurson s analysis further concluded that fiber has a negative effect on energy value of corn-co-products for swine and poultry, and thus its partial removal has a positive effect on feeding value. Using LF-DDG in swine and poultry diets does not materially change the demand for corn and soybean meal relative to a case where conventional DDGS are fed (in fact, demand for soybean meal is slightly reduced). Similar results are found elsewhere in the scientific literature. Animal scientists from the University of Illinois-Champaign/Urbana determined that LF-DDG have increased nutritional value for poultry. 13 Likewise, scientists at Mississippi State University found that, Fiber separation from DDGS increases its nutritional value for poultry and swine diets. 14 EPA s proposal contemplates a hypothetical scenario in which LF-DDG saturates the swine and poultry feed market and spill[s] over into dairy and cattle feed markets. We think such a scenario is highly unlikely given that there is substantial room for LF-DDG growth in the swine and poultry markets. We agree with EPA s finding that demand for conventional DDG in the cattle and dairy sectors would create sufficient incentive to ensure that adequate supplies of conventional DDG remain available. 5. Producers of renewable fuels from feedstocks containing lower cellulosic content (i.e., less than 80%) could use (f)(3) to properly generate and assign RINs. Alternatively, EPA could adopt a bucket approach that would involve less administrative burden for both producers and the Agency. EPA seeks comment on RIN generation for renewable fuels from feedstocks that contain lower cellulosic content than the feedstocks discussed in the proposal. Current regulations Fed. Reg. 36,

9 already provide a method for assigning RINs to single batches that are comprised of a mixture of fuel types with different applicable D codes. RFA believes those provisions are appropriate for renewable fuels from feedstocks containing less than 80% cellulose, hemicellulose, or lignin. Alternatively, EPA could establish a bucket approach in which feedstocks that fit within a particular range of cellulose, hemicellulose, and lignin content would be assumed to have a specific cellulosic content for the purposes of RIN generation. 6. EPA s proposal to amend the definition of crop residue based on potential feedstock demand changes is arbitrary and unnecessary, and potentially restricts the usage of crop residues for biofuel production. RFA is opposed to the proposed amendment. EPA proposes to amend the definition of crop residue by adding a second sentence to the existing definition: Biomass is considered crop residue only if the use of that biomass for the production of renewable fuel has no significant impact on demand for the feedstock crop, products produced from that feedstock crop, and all substitutes for the crop and its products, nor any other impact that would result in a significant increase in direct or indirect GHG emissions. 15 It is an economic reality that increased use of a particular crop residue for biofuel production may result in higher value for the residue and may impact the overall value of the crop. Farmers base their planting decisions on potential net revenue per acre; thus, while the value of a crop residue may not be the primary reason the crop was planted, the residue s contribution to potential net revenue per acre could weigh in the farmer s cropland allocation decisions. Accordingly, the emergence of a market for a particular crop residue as a biofuel feedstock could positively impact prospective revenue per acre and impact planting decisions and cropland allocation. However, just because the value of a crop residue may have some influence on planting decisions does not mean the biofuel produced from that crop residue should be arbitrarily ruled out as qualifying for cellulosic biofuel RIN generation. That is, fuel from the crop residue may still easily surpass the 60% GHG reduction threshold necessary for D3 RIN generation even when market responses and additional direct or indirect GHG emissions are considered. As such, EPA s proposed language unnecessarily restricts the potential usage of crop residues for biofuel production. Further, the current regulations already include key criteria for determining the RIN eligibility of various feedstocks and biofuels. That is, feedstocks must meet the definition of renewable biomass and the biofuels produced from those feedstocks must reduce GHG emissions by specified amounts. EPA has already correctly determined that crop residues meet the 60% GHG threshold. We see no reason why EPA couldn t continue to evaluate whether specific new crop residues satisfy these requirements on a case-by-case basis (as Fed. Reg. 36,056 9

10 the Agency did with corn kernel fiber). Once EPA determines that a particular crop residue satisfies these requirements, it could add the feedstock to a table of approved crop residues (e.g., similar to Table IV.D.-1 of the proposal). Case-by-case evaluations obviate the need for amending the definition of crop residue. 7. RFA supports EPA s proposal to provide an alternative approach to applying RVP standard to a commingled mixture of E10 with approved gasoline additives, including butanol. However, the conditions for applying the alternative approach should be limited to whether blending an approved gasoline additive with E10 results in no net increase in RVP. EPA seeks comment on a potential alternative approach to applying RVP standards to commingled mixtures of E10 with approved fuels and fuel additives, such as 12%vol. butanol blends. The Agency suggests it could treat commingled mixtures of E10 and approved gasoline additives as being compliant with the RVP standard as long as there is no overall degradation of RVP and air quality impacts compared to what would occur if the separate components had not been blended. In other words, E10 with RVP of 10 psi could be blended with an approved gasoline additive with RVP of 9 psi, and EPA would treat the commingled blend as being compliant with RVP standards. EPA suggests this alternative could apply only if the commingled blend s RVP is no higher than the weighted average RVP of the separate components. We support the spirit and intent of the alternative approach to compliance with RVP standards and believe EPA s rationale is generally sound. However, we believe the condition requiring the RVP of the commingled blend to be no higher than the weighted average RVP of the separate components is unnecessary and would lead to confusion in the marketplace. Due to the nonlinear nature of RVP for some fuels and additives, it is unlikely that blenders and retailers could readily determine whether a certain commingled blend s RVP is equal to, or less than, the weighted average RVP of the individual components. RFA believes the conditions for applying the proposed alternative approach to RVP compliance should be limited to whether blending an approved gasoline additive with E10 results in no net increase in RVP (i.e., no increase beyond 10 psi). We further concur that EPA has the authority to regulate RVP in this manner, and we encourage EPA to pursue changes to the applicable regulations to facilitate the proposed RVP treatment. Finally, RFA questions whether it is reasonable to specify that only the retailer has an obligation to show that the specified conditions of the alternative approach have been satisfied. We can see potential scenarios where RVP-compliant E10 could be blended with an RVP-compliant approved gasoline additive upstream of the retailer. As such, EPA should consider simply specifying that the entity responsible for blending E10 with the approved gasoline additive would be responsible for demonstrating the specified conditions are met. 8. RFA supports the proposed revision to the definition of small refinery. 10

11 While we believe the small refinery exemption has outlived its useful life, we agree that EPA should revise the definition of small refinery to ensure exemptions from RFS2 obligations are granted only to truly small facilities. RFA supports EPA s proposal to specify that a small refinery exemption may apply only to facilities with throughput of 75,000 barrels per day (bpd) or less in 2006 and all subsequent years. This ensures facilities that may have expanded since 2006, and whose capacity may now exceed the 75,000 bpd threshold, are not allowed to seek a small refinery exemption from RFS2 obligations. 9. EPA s current threshold for defining small blenders of renewable fuels is far too low and should be raised to better reflect marketplace realities. EPA states that it has received feedback from a number of parties who believe the current small blender threshold of 125,000 gallons is far too low. RFA agrees with these parties. Discussions with renewable fuel producers and blenders have revealed that even the smallest renewable fuel blenders in the commercial marketplace typically handle several million gallons of renewable fuel per year. Based on conversations with industry, we believe a threshold in the range of 3-5 million gallons per year would be far more reasonable. 10. RFA supports the proposed changes to establishing an alternative reporting method for RIN buy and sell transactions. However, we believe EPA should clarify certain aspects of the proposed regulatory language. We strongly support the proposed addition of an alternative reporting method for RIN buy and sell transactions, as outlined in RFA believes many counterparties transacting RINs will utilize this alternative method, as it works most effectively with their existing formats for commercial documents and tracking systems. However, as currently written, it appears the alternative method would only be available for transfers of renewable fuel with assigned RINs. We believe the alternative reporting method should also be allowed in cases where renewable fuel is transferred with an appropriate number of separated RINs. We encourage EPA to revise the language in to include separated RINs that are transferring with a corresponding volume of renewable fuel. Further, we believe EPA should clarify if it intends to allow transactions entered via the alternative reporting method to be available in EMTS beyond the current 10-day transaction window. We believe a 15- or 20-day window may be most appropriate for these transactions. Further, we request that EPA consider allowing the buyer to accept pending sales transactions in EMTS based on shipment date and post-enter the date of the receipt of the fuel after RINs have been accepted. The intent of these recommendations is to prevent the expiration of perfectly valid transactions due simply to a time delay in shipping and receipt-of-fuel events. 11. To enhance transparency in the RIN market, EPA should consider disclosing company-level RVOs, information on RIN separations, the reason for 11

12 separations, RIN retirements, the reason for retirements, and information on the volume of RIN transactions by non-obligated parties who are not renewable fuel producers. RFA believes EPA could use this rulemaking to improve transparency around 1) the obligated parties use of RINs, and 2) participation in the RIN market by non-obligated third parties who are not renewable fuel producers. We believe EPA should provide to the public information on annual company-level renewable volume obligations (RVOs), monthly data on company-level RIN separations and RIN retirements, and monthly disclosure of RIN transactions by non-obligated third parties who are not renewable fuel producers. This information could be shared via EPA s existing EMTS data web site. 12. We support the proposed changes to , which would oblige foreign renewable fuel producers and foreign ethanol producers to the meet the same regulatory requirements as foreign RIN generators. RFA supports the proposed changes to While we believe the RIN system has worked effectively and efficiently to date, we agree that the amendments would strengthen the long-term fidelity of the program. The changes would improve EPA s oversight on renewable fuels produced outside of the U.S. that are ultimately used for RFS2 compliance. Under the registration, reporting, recordkeeping, and enforcement provisions of the current regulations, EPA has the ability to tightly monitor and oversee the activities of domestic renewable fuel facilities. However, EPA does not currently enjoy the same level of access to, and oversight on, foreign renewable fuel facilities. While the Agency has the resources and authority to verify operations at domestic renewable fuel facilities, it states in the proposal that monitoring of feedstock use and processing practices is a particular challenge for fuel produced at foreign facilities. We agree that the proposed amendments would allow EPA to gain a level of oversight on foreign renewable fuel producers that is more consistent with the current level of oversight on domestic renewable fuel producers and obligated parties. In other words, the proposed revisions would level the playing field in terms of regulatory oversight, and provide greater assurance that foreign-produced fuels are meeting all pertinent regulatory requirements. It should be noted that the provisions that EPA proposes to apply to foreign renewable fuel producers are already applicable to foreign RIN generators. The fact that foreign RIN generators are already complying with these provisions is proof that foreign entities can reasonably adopt the proposed requirements. Further, we support the proposal to prohibit importers from generating RINs for fuel imported from a foreign producer until the foreign fuel producer has satisfied the requirements of RFA supports the proposed revisions allowing a facility to use its nameplate capacity to establish its baseline volume for the purposes of registration. 12

13 RFA supports the proposed amendment allowing facilities to use nameplate capacity to establish baseline volumes. We agree that nameplate capacity should only be used to determine baseline volume in instances where an applicable permit does not exist, operations have not started (or there is less than one year of production records), and an exemption from the 20% GHG requirement is not being claimed. * * * * * Thank you again for the opportunity to comment. If you have any questions regarding our comments, please contact Geoff Cooper at gcooper@ethanolrfa.org or We look forward to working with EPA to ensure the continued success of the RFS2 program. Sincerely, Bob Dinneen President & CEO 13

14 Attachment 1 Impact of fiber removal from corn dried distillers grains with solubles (DDGS) on co-product feeding value and displacement ratios Dr. Jerry Shurson Department of Animal Science University of Minnesota December 1, 2011

15 Impact of fiber removal from corn dried distillers grains with solubles (DDGS) on co-product feeding value and displacement ratios Dr. Jerry Shurson Department of Animal Science University of Minnesota December 1, 2011 Executive Summary New ethanol and distillers grains production technologies affect the nutritional composition and feeding value of corn co-products to livestock and poultry. Traditional dried distillers grains with solubles (DDGS) has been widely accepted and used at relatively high dietary inclusion rates in the U.S. feed and animal industries, which has resulted in distillers grains diets becoming the new standard in animal feeds. Most recently, there is interest in understanding the impact of fiber and/or oil removal from DDGS in various animal feeds on corn and soybean meal usage with implications for estimating the potential impact of these coproducts on Indirect Land Use Change. At least four factors must be used to determine corn co-product displacement ratios. These include expected co-product use by species (dairy, beef, swine, and poultry) as a percentage of total production, actual co-product dietary inclusion rates for each animal species, any changes in feed conversion when corn co-products are fed, and substitution rates of corn co-products for various competing ingredients. Currently, the U.S. Environmental Protection Agency (EPA) expectations of co-product composition in 2022 are unclear. The EPA has not published any theoretical nutrient profiles or any nutritional details for corn coproducts they expect to be on the market in Furthermore, there are no published data on nutrient digestibility and recommended maximum dietary inclusion levels of these new coproducts for livestock and poultry. Therefore, it is impossible to predict the percentage of market share of each co-product, diet inclusion rates, and potential changes in feed conversion of the co-products evaluated in this analysis in the year Any assumptions made to do so are only speculation and can significantly bias the displacement ratios for corn, soybean meal, forages, and other ingredients. Therefore, the purpose of this report is to provide a realistic

16 comparison of the expected diet inclusion rates and changes in the amounts of feed ingredients replaced or added to achieve optimal animal performance when low fiber (LF)-DDGS and low fiber and oil (LFO)-DDGS are added to animal diets. Corn co-products are added to animal feeds primarily as an energy source, and secondarily as a protein (amino acid) and available phosphorus source. The results shown in this report indicate that adding LF-DDGS and LFO-DDGS to swine and poultry diets will have minimal effects on corn and soybean meal displacement ratios, while maintaining diet inclusion rates equal to current industry levels for typical DDGS. Fiber has a negative effect on energy value of corn-co-products for swine and poultry, thus its partial removal has a positive effect on feeding value. In other words, using LF-DDGS and LFO-DDGS in swine and poultry diets does not materially change the demand for corn and soybean meal relative to a case where conventional DDGS are fed (in fact, demand for soybean meal is slightly reduced). In contrast, very limited amounts of LF and LFO-DDGS, if any, would be used in dairy and beef cattle diets because the significant reduction in fiber dramatically reduces their energy value, and removing both fiber and substantial amounts of oil further reduces their feeding value for ruminants. Furthermore, LF-DDGS and LFO-DDGS contain relatively high levels of sulfur resulting in an additional constraint on their use in significant quantities in ruminant feeds. As the U.S. ethanol industry continues to produce more diverse corn co-products, their ultimate value and use will be based on their concentration of metabolizable and net energy, digestible protein (amino acids), and available phosphorus will determine diet inclusion rates for each animal species. Animal species that can obtain the greatest value from any corn coproduct will become the predominant users of a given co-product, whereas those species that can obtain little value or benefit from the nutritional composition of a co-product will be fed limited amounts, if any, and nutritionists will seek other co-products that provide greater value for those feeding applications. For this reason, the risk of assigning specific market shares and expected diet inclusion rates by species to predict their availability and use in 2022 is high if the goal is to realistically estimate their impacts on Indirect Land Use Change. However, it is reasonable to expect that if significant quantities of LF-DDGS and LFO-DDGS are produced in the U.S. ethanol industry in the future, they will be used predominantly in swine and poultry

17 diets to achieve their highest value in the marketplace, and as a result, will have minimal effects on corn and soybean meal displacement and Indirect Land Use Change. Introduction The purpose of this report is to provide the Renewable Fuels Association (RFA) an independent, scientific evaluation of the corn, soybean meal, and other feed ingredient displacement in animal feeds for new distillers co-products produced by using new ethanol production processes. Specifically, the focus of this evaluation is to compare the feeding value of corn co-products that contain low fiber (LF-DDGS) and low fiber and oil (LFO-DDGS) with typical DDGS (DDGS), high protein distillers grains (HP-DDG) produced from front-end fractionation, and de-oiled DDGS (DO-DDGS) produced from back-end oil extraction. By understanding diet composition changes in animal feeds, the increase or decrease in the amount of corn and soybean meal required in animal diets when various corn co-products are added at typical diet inclusion rates can be used to estimate the potential impact of corn coproducts on Indirect Land Use Change. Currently, the U.S. Environmental Protection Agency (EPA) expectations of co-product nutrient composition in 2022 are unclear. No theoretical nutrient profiles nor any nutritional details for corn co-products that the EPA expects to be on the market in 2022 have been published. EPA assumes that 70% of dry-grind ethanol plants will be using corn oil extraction technology and averaging 1.33 lbs. corn oil per bushel processed. Since corn contains approximately 3.9% oil (2.18 lbs per bushel), the expected oil content of de-oiled DDGS in EPA s scenario would be approximately 2.5 to 3.0%. In reality, most current corn oil extraction technologies are removing lbs. of corn oil per bushel processed, according to RFA. Furthermore, EPA assumes that 20% of dry grind ethanol plants will be using front-end fractionation in Although the current use of front-end fractionation technology is minimal in the U.S. ethanol industry, the primary co-product produced from this technology is HP-DDG. Therefore, this report describes estimated displacement ratios of new reduced fiber corn co-products (LF-DDGS and LFO-DDGS) relative to typical DDGS (10-11% corn oil, 26-28% crude protein), HP-DDG, and DO-DDGS in livestock and poultry feeds, based upon limited, if

18 any, scientific information available on the feeding value or maximum diet inclusion rates of these new corn co-products. Again, it is important to recognize that a direct comparison of these low fiber co-products to the co-products assumed by EPA in 2022 cannot be conducted because EPA does not provide theoretical nutritional information for the co-products in its modeling scenarios. Understanding the energy value of nutritional components of corn co-products for different animal species Typical DDGS is considered and used primarily as an energy ingredient in animal feeds, but also provides significant amounts of digestible protein and amino acids and digestible phosphorus. For purposes of this evaluation, the baseline diets for all species include current industry standards for diet inclusion rates of DDGS. The contribution of various nutrient components to the total energy value of a corn co-product varies significantly by animal species. Most of the energy value of corn co-products is derived from crude fat (ether extract), which contains approximately 2.25 times more energy per unit than starch. However, the fat content in DDGS can vary from 3 to 12% depending on the extent of fat extraction used in ethanol production processes. Starch also contributes to the energy value of corn co-products, but the starch content in DDGS is relatively low (2 to 8%), and it is believed that a portion of the residual starch is resistant starch, which is indigestible to the animal. Typical DDGS also contains a significant amount of fiber. The classic definition of fiber is the carbohydrate fractions that are not easily hydrolyzed to simple sugars in the digestive systems of mammalian species. Fiber is measured using a variety of chemical procedures including crude fiber, neutral detergent fiber, acid detergent fiber, non-starch polysaccharides, total dietary fiber (insoluble and soluble fiber). Depending on the fiber analysis method chosen, various carbohydrate fractions are represented or excluded in each measurement as shown in Figure 1.2.

19 The amount and type of specific carbohydrate fractions represented in fiber influences the energy value of fiber. This level of detail is not considered in this evaluation. In general, fiber is utilized as a significant energy source in ruminants (dairy and beef cattle), whereas it has substantially less energy value for non-ruminants (swine and poultry). However, recent studies in swine have shown that fiber in DDGS can be moderately digested, but digestibility is quite variable. Swine utilize fiber more effectively as an energy source than poultry. Therefore, fiber removal from DDGS will have a significant negative impact on energy value for ruminants, but have a positive impact on energy value for swine and poultry. In addition, ruminants require a minimum level of fiber in their diets in order to maintain proper rumen function. Along with crude fat and carbohydrates (starch and fiber), crude protein in excess of the animal s requirement can also contribute to the energy value to a feed ingredient, but the concentration of ash (minerals) reduces the energy value of co-products. Therefore, theoretically, if only fiber is removed from DDGS, the concentration of all other nutrient fractions should be increased and the energy value would decrease for ruminants, but increase for non-ruminants. An increase in the energy density of a feed ingredient results in less quantity required to provide a given level of calories to an animal. All feed ingredients are nothing more than packages of nutrients in various proportions and chemical forms. All feed ingredients have some value in livestock and poultry feeds, but the value can vary substantially by species (due to differences in the ability of

20 digestive systems to utilize the various forms of nutrients), the relative proportions of energy and essential nutrients relative to the animal s daily requirements, and the diet formulation method used. As the composition of distillers co-products change, due to the implementation of new processing technologies in the ethanol industry, there will be more diversity in their nutrient composition, and their use and value will vary by species. In other words, some coproducts will have very little value in diets for some species, whereas in other species, they will have considerable value. As new distiller s co-products enter the feed ingredient market, they will be valued relative to their contributions or displacement ratios for competing ingredients contributing significant amounts of energy, protein and amino acids, and phosphorus (the 3 most expensive components of animal feeds). Nutrient Composition Comparison of Corn Distiller s Co-products The nutrient composition of typical DDGS, DO-DDGS, and HP-DDG were obtained from recent studies (Anderson et al., 2011; Rochelle et al., 2011) that determined their actual energy values for swine and poultry. Average nutrient composition from 6 DDGS sources produced from ethanol plants using different processing technologies, 3 HP-DDG sources, and 1 DO-DDGS source are shown in Table 1 (Anderson et al., 2011). Nutrient composition of LF-DDGS and LFO- DDGS co-products was obtained from Quad County Corn Processors, a corn ethanol facility. No in vivo determinations of energy content of LF-DDGS and LFO-DDGS co-products have been published, and as a result, calculated estimates are used. For beef feedlot cattle, TDN was estimated to be 105%, 101%, 112%, 81%, and 78% for DDGS, DO-DDGS, HP-DDG, LF-DDGS, and LFO-DDGS, respectively. Similarly, using typical DDGS, DO-DDGS, and HP-DDG as references, ME content for swine was estimated to be 3,411, 3,285, 3,631, 3,631, and 3,411 kcal/kg (as-fed) for DDGS, DO-DDGS, HP-DDG, LF-DDGS, and LFO-DDGS respectively. Equations published by Rochelle et al. (2010) were used to estimate AME content of LF-DDGS and LFO-DDGS. The high sulfur content of LF-DDGS and LFO-DDGS is a concern in ruminant diets due to the potential for significant contributions to high total diet S concentrations which can lead to polioencephalomalacia (PEM).

21 Table 1. Analyzed nutrient composition and calculated TDN of selected corn co-products (DM basis). Item DDGS DO-DDGS HP-DDG LF-DDGS LFO-DDGS Moisture GE, kcal/kg 5,420 5,076 5,532 ND ND Swine ME, kcal/kg 3,790 3,650 4,035 ND ND Poultry AME N, kcal/kg 2,781 2,146 2,820 ND ND TDN, % Crude protein Arginine Cysteine Histidine Isoleucine Leucine Lysine Methionine Phenylalanine Threonine Tryptophan Valine Starch ND ND Crude fiber Total dietary fiber ND ND NDF ADF Cellulose ND ND Lignin ND ND Crude fat Ash Calcium, mg/kg Phosphorus, mg/kg 8,234 8,373 3,900 11,000 11,300 Sodium, mg/kg 1,536 3, ,000 2,100 Sulfur, mg/kg 8,231 9,772 7,738 18,300 25,900