[Federal Register Volume 61, Number 51 (Thursday, March 14, 1996)]
[Rules and Regulations]
[Pages 10622-10661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5702]
[[Page 10621]]
_______________________________________________________________________
Part II
Department of Energy
_______________________________________________________________________
Office of Energy Efficiency and Renewable Energy
_______________________________________________________________________
10 CFR Part 490
Alternative Fuel Transportation Program; Final Rule
Federal Register / Vol. 61, No. 51 / Thursday, March 14, 1996 / Rules
and Regulations
[[Page 10622]]
DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 490
[Docket No. EE-RM-95-110]
RIN 1904-AA64
Alternative Fuel Transportation Program
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy (DOE).
ACTION: Final rule.
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SUMMARY: The Department of Energy is today publishing a final rule
required by the Energy Policy Act of 1992 to implement statutorily-
imposed alternative fueled vehicle acquisition requirements that apply
to certain alternative fuel providers and some State government vehicle
fleets. The rule principally covers: interpretations necessary for
affected entities to determine whether and to what extent the statutory
requirements apply; procedures for exemptions and administrative
remedies; and a program of marketable credits to reward those who
voluntarily acquire vehicles in excess of mandated requirements or
before the requirements take effect, and to allow use of such credits
in order to demonstrate compliance with those requirements.
EFFECTIVE DATE: This rule is effective April 15, 1996.
FOR FURTHER INFORMATION CONTACT: Kenneth R. Katz, Program Manager,
Office of Energy Efficiency and Renewable Energy (EE-33), U.S.
Department of Energy, 1000 Independence Avenue SW., Washington, DC
20585, (202) 586-6116.
SUPPLEMENTARY INFORMATION:
I. Introduction
II. Provision of Lead Time to States and Covered Fuel Providers
III. Section-by-Section Discussion of Comments and Rule Provisions
A. Subpart A--General Subpart
B. Subpart B--[Reserved]
C. Subpart C--Mandatory State Fleet Program
D. Subpart D--Alternative Fuel Provider Acquisition Mandate
E. Subpart E--[Reserved]
F. Subpart F--Alternative Fueled Vehicle Credit Program
G. Subpart G--Investigations and Enforcement
IV. Review Under Executive Order 12612
V. Review Under Executive Order 12778
VI. Review Under Executive Order 12866
VII. Review Under the Regulatory Flexibility Act
VIII. Review Under the Paperwork Reduction Act
IX. Review Under the National Environmental Policy Act
X. Impact on State Governments
I. Introduction
This notice of final rulemaking concludes a regulatory action that
is mandated under the Energy Policy Act of 1992 (the Act), Pub. L. 102-
486. That Act provides for a comprehensive national energy policy for
strengthening U.S. energy security by reducing dependence on imported
oil. Titles III, IV, V, and VI of the Act contain regulatory
requirements and authorities, as well as various financial incentives
aimed at displacing substantial quantities of oil consumed by motor
vehicles. This rulemaking implements alternative fueled vehicle (AFV)
acquisition requirements imposed by Congress in sections 501 and 507(o)
of the Act on certain alternative fuel providers and some State
government fleets. 42 U.S.C. 13251, 13257(o).
On February 28, 1995, the Department of Energy (DOE) published a
notice of proposed rulemaking under sections 501 and 507(o) of the Act.
60 FR 10970. Public hearings were held in three cities with the 60-day
public comment period closing on May 1, 1995. DOE received
approximately 200 comments on the notice of proposed rulemaking.
DOE's notice of proposed rulemaking incorporated the statutory
acquisition schedules for alternative fuel providers and State fleets.
It further stated that, as provided in the Act, those schedules would
take effect at the beginning of model year 1996. 60 F.R. 10971. Many
commenters argued that DOE could not require compliance with the Act's
acquisition schedules in model year (``MY'') 1996 because it had failed
to promulgate final regulations by certain deadlines set forth in the
Act. They stated that imposing the requirements in MY 1996 would
deprive them of lead time that Congress intended them to have to
prepare to comply with the AFV acquisition requirements. After
considering these comments, DOE published a notice in the Federal
Register on June 12, 1995, reopening the rulemaking record for receipt
of comment on various options DOE was considering to give States and
covered fuel providers lead time to prepare to comply with the vehicle
acquisition requirements. 60 FR 30795. DOE received approximately 80
comments on this issue.
On July 31, 1995, DOE published a second notice of limited
reopening of the comment period. The principal purpose of this notice
was to invite public comment on options for defining the term
``substantial portion,'' which is used in section 501(a) of the Act to
determine coverage for certain petroleum producers and importers, and
on options for modifying the proposed definition of ``alternative
fuel'' with respect to alcohol fuels and biodiesel. Notice of limited
reopening, 60 FR 38974, corrected 60 FR 40539 (August 9, 1995). In
response to this reopening of the comment period, DOE received
approximately 20 additional comments.
In response to comments from members of the public and State
officials, and consistent with the Act, DOE has modified the proposed
rule in a variety of ways. The principal modifications, which are
explained in detail later in this Supplementary Information, are: (1) A
one-year shift in the statutory alternative fueled vehicle acquisition
schedules; (2) an automatic exemption to allow time for a State to
apply for and obtain approval of an Alternative State Plan for State
fleets; (3) a revised definition of the statutory term ``substantial
portion'' that omits small refiners from acquisition requirements and
includes large, integrated producers and importers; (4) the addition of
neat biodiesel to the list of ``alternative fuels''; and (5) a
provision for the allocation of credits to State government fleets and
covered fuel providers for newly acquired medium and heavy duty
alternative fueled vehicles.
A. Background
A primary goal of the Energy Policy Act of 1992 is to enact a
comprehensive national energy policy that strengthens U.S. energy
security by reducing dependence on imported oil. Currently, the United
States consumes seven million barrels of oil more per day than it
produces. Section 502 of the Act (42 U.S.C. 13252) provides goals of a
10 percent displacement in U.S. motor fuel consumption by the year 2000
and a 30 percent displacement in U.S. motor fuel consumption by the
year 2010 through the production and increased use of replacement
fuels. Section 504 of the Act (42 U.S.C. 13254) allows the Secretary to
revise these goals downward. According to the latest projections by the
Energy Information Administration, the transportation sector will
consume 13.1 million barrels per day of petroleum in 2010. Of this
total, about 7.4 million barrels per day of petroleum are projected to
be used by light duty vehicles. The Energy Information Administration
also estimates that 65 percent of our total
[[Page 10623]]
petroleum demand will be imported in 2010.
The greatest gains in displacing petroleum motor fuel consumption
by the year 2010 are expected to occur by replacing gasoline with
alternative fuels such as electricity, ethanol, hydrogen, methanol,
natural gas and propane, in a portion of the U.S. car and truck
population, which is projected to be in excess of 200 million vehicles
in the year 2010. Currently, alternative fueled vehicles comprise a
small fraction of the total U.S. vehicle stock. According to the Energy
Information Administration, of the 180 million light duty vehicles
registered in 1992, 250,000 were alternative fueled vehicles. Of this
total, about 221,000 were fueled by liquified petroleum gas (propane),
about 24,000 were fueled by compressed natural gas, and about 3,400
were fueled by methanol or ethanol. The remaining quantity of vehicles
was comprised of electric vehicles and vehicles fueled by liquified
natural gas. In 1994, it was expected that 300,000 alternative fueled
vehicles will be registered in the U.S. and that the proportion of
vehicles operating on each fuel will be approximately the same.
(Alternatives to Traditional Transportation Fuels: An Overview, DOE/
EIA-0585/O, 1994)
To enable the Act's displacement goals to be met, alternative fuels
must be readily accessible and motor vehicles that operate on these
alternative fuels must be available for purchase. Thus, two important
elements of reducing petroleum motor fuel consumption are: a nationwide
alternative fuels infrastructure and the availability of alternative
fueled vehicles for purchase at a reasonable cost by the general public
in a wide variety of vehicle types and fueling options.
B. Description of the Energy Policy Act Alternative Fuel Transportation
Program's Basic Provisions
1. General Structure
Titles III, IV, V, and VI of the Act contain the basic provisions
for regulatory mandates and authorities, as well as various financial
incentives, all of which are aimed at displacing substantial quantities
of oil consumed by motor vehicles. Title III contains general
definitions which set forth legislatively mandated policy essential to
understanding: (1) What constitutes an alternative fueled vehicle; (2)
who must comply with regulatory mandates to acquire such vehicles; and
(3) the extent to which a regulated entity's inventory of vehicles is
subject to mandates to acquire alternative fueled vehicles. Title III
also sets forth mandatory requirements for Federal fleet acquisitions
of alternative fueled vehicles, which began in fiscal year 1993.
Title IV includes a financial incentive program for States, a
public information program, and a program for certifying alternative
fuel technician training programs.
Title V provides for separate regulatory mandates for the purchase
of alternative fueled vehicles which apply to: (1) Alternative fuel
providers; (2) State government fleets; and (3) private and municipal
fleets. These mandates set forth annual percentages of new light duty
motor vehicle acquisitions which must be alternative fueled vehicles.
The minimum acquisition requirements are phased-in, escalating from
year to year until reaching a fixed percentage. The acquisition
schedules for alternative fuel providers and State governments were to
take effect at the beginning of model year 1996. The acquisition
schedule for private and municipal fleets in section 507(a) is a
tentative schedule which may only take effect if confirmed in a DOE
rulemaking. Such a rulemaking could conclude that imposition of a
vehicle acquisition mandate on private and municipal fleets is not
appropriate. Title V also allows for credits for alternative fueled
motor vehicles acquired beyond what is legally required. These credits
may be sold and used by other persons or fleets subject to a vehicle
acquisition mandate. Finally, title V contains investigative and
enforcement authorities including provisions for civil penalties and,
in certain circumstances, criminal fines for noncompliance with the
statutory mandates and implementing regulations.
Title VI of the Act contains a variety of authorities to promote
development and utilization of electric motor vehicles. More
specifically, subtitle A provides for a commercial demonstration
program, and subtitle B provides for an infrastructure and support
systems development program.
This notice of final rulemaking principally implements the title V
vehicle acquisition mandates applicable to alternative fuel providers
and to State governments.
2. Comparison to Environmental Protection Agency (EPA) Fleet
Requirement Program
The Clean Air Act, 42 U.S.C. 7401 et. seq., established a fleet
vehicle acquisition program that is somewhat similar to those in the
Energy Policy Act of 1992. Section 246 of the Clean Air Act requires
each State in which there is located all or part of an ozone non-
attainment area classified as extreme, severe, or serious under the
Clean Air Act, or a carbon monoxide non-attainment area with a design
value at or above 16.0 parts per million, to submit a State
implementation plan revision establishing a clean fuel vehicle program
providing that, beginning in model year 1998, certain percentages of
covered fleet vehicles must be clean fuel vehicles operating on clean
alternative fuels. 42 U.S.C. Sec. 7586. Section 241 of the Clean Air
Act contains definitions for the terms ``clean alternative fuel,''
``covered fleet,'' and ``covered fleet vehicle'' that contain some
phrases later used in the definitions in section 301 of the Energy
Policy Act of 1992.
While there are these similarities in statutory text that should
not be ignored by DOE in formulating its regulations, there are
critical differences between the two pieces of legislation: (1) The
primary goal of the EPA program is to significantly improve air quality
through reduced emissions of pollutants, and the primary goal of the
DOE program is to strengthen national energy security by reducing
dependence on imported oil; (2) the lists of fuels enumerated in the
definitions of ``clean alternative fuel'' under section 241 of the
Clean Air Act and of ``alternative fuel'' under section 301 of the
Energy Policy Act of 1992 are not identical, and the Department's
rulemaking discretion to add to the section 301 list is limited by
stringent statutory standards; (3) the EPA program applies to fleets as
small as 10 vehicles while 20 is the minimum number of vehicles for a
fleet as defined by section 301; (4) the EPA program applies to light
duty motor vehicles (up to 8,500 gross vehicle weight rating) and heavy
duty motor vehicles (up to 26,000 gross vehicle weight rating) while
the DOE program applies only to light duty motor vehicles; (5) the
States will administer the EPA program while DOE will directly
administer the Energy Policy Act program; and (6) the EPA program
applies only to fleets in certain ozone or carbon monoxide non-
attainment areas while the DOE program applies nationwide.
DOE has attempted in this rule to minimize the compliance burden on
fleet owners and operators who are subject to both the EPA and the DOE
fleet acquisition requirements. In particular, DOE has adopted many of
the definitions and interpretations of similar terms that EPA published
on December 9, 1993 (58 FR 64679). However, the different statutory
provisions and goals of the Energy Policy Act have prevented DOE from
adopting EPA's provisions in every instance. The most notable instance
of
[[Page 10624]]
divergence from EPA's regulations is the definition of the terms
``centrally fueled'' and ``capable of being centrally fueled'' in
Subpart A. Those definitions are explained in the section-by-section
discussion in this Supplementary Information.
With regard to burden of compliance, it is important to note that
the overlap between this final rule and EPA regulations is limited. The
EPA program applies only in certain nonattainment areas. In a final
program rule published on September 30, 1994, EPA identified 22
nonattainment areas covered by the Clean Fuel Fleet Program. 59 FR
50043. EPA officials have reported to DOE that California and Texas,
which contain 9 of the 22 areas, have submitted applications to ``opt
out'' of the Clean Fuel Fleet Program. In addition, EPA expects the
eastern States that are members of the Ozone Transport Commission to
opt out of the program in order to participate in a 49-State Low
Emission Vehicle Program that is being developed.
Thus, while irreconcilable differences in the Clean Air Act and the
Energy Policy Act prevent total congruence in implementing regulations,
the few different provisions in this final rule are not expected to
significantly impact many affected fleets.
II. Provision of Lead Time to States and Covered Fuel Providers
The Act required DOE to issue regulations implementing the
alternative fuel provider acquisition requirements in section 501(a) by
January 1, 1994, 20 months before the start of MY 1996 (beginning on
September 1, 1995). In addition, the Act required DOE to promulgate a
rule to implement the requirements for State government fleets in
section 507(o) by April 24, 1994, 16 months before the acquisition
requirements became effective in MY 1996. DOE was unable to meet the
statutory deadlines for promulgation of rules to implement sections 501
and 507(o) of the Act. The Act, which was enacted on October 24, 1992,
contained a multitude of new responsibilities, including the
alternative fueled vehicle acquisition mandates in title V. DOE was
forced to prioritize its implementation of these responsibilities, and
it periodically reported to Congress on the status of its
implementation progress. See, for example, U.S. Department of Energy,
Energy Policy Act of 1992: Implementation Status Report (Oct. 24,
1994). Although implementation of the alternative fueled vehicle
acquisition requirements was given a high priority for action, the
Administration's request for additional funds in fiscal year 1993 for
this purpose was not approved.
Many public comments on the notice of proposed rulemaking stated
that lead time was needed between promulgation of final rules by DOE
and compliance with the vehicle acquisition requirements. On June 12,
1995, DOE reopened the rulemaking record for receipt of comment on
various options it was considering for providing lead time to covered
fuel providers and States, which would allow sufficient time for them
to prepare to comply with the vehicle acquisition requirements. These
options included amending the statutory vehicle acquisition schedule,
staying enforcement, or some combination of amending the schedule and
staying enforcement. The notice specifically requested comment on the
statutory authority of DOE to amend or stay enforcement of the
acquisition schedules. See 60 F.R. 30796.
A. Summary of the Lead Time Provisions in the Final Rule
The final rule provisions related to providing lead time to States
and covered persons are summarized as follows:
Model Year 1996. To provide lead time for States and covered fuel
providers to prepare to comply with the vehicle acquisition
requirements, the acquisition schedules in Sec. 409.201 (for State
government fleets) and Sec. 490.302 (for alternative fuel providers)
have been revised to begin in MY 1997. The AFV acquisition requirements
for MY 1997, which starts on September 1, 1996, must be met by August
31, 1997 (the end of the model year).
Model Year 1997. Except for States that choose to comply with an
alternative plan under Sec. 490.203, DOE may provide lead time to
States and covered fuel providers in MY 1997, on a case-by-case basis,
using the exemption procedures set forth in Sec. 490.204 (for States)
and Sec. 490.308 (for fuel providers). Exemptions will be granted to
any State or covered person able to demonstrate that it cannot comply
with the MY 1997 vehicle acquisition requirements because of DOE's
failure to promulgate regulations by the statutory deadlines. An
automatic exemption is provided in Sec. 490.203(h) to allow time for a
State government fleet to apply for and obtain approval of a Light Duty
Alternative Fueled Vehicle Plan.
Acquisition Level in MY 1997. DOE has reduced the required
acquisition percentages in the alternative fueled vehicle acquisition
schedules in Sec. 490.201 and Sec. 490.302 by one model year. Thus,
States and covered persons are required to acquire vehicles in MY 1997
at the statutory percentage for MY 1996; in MY 1998 at the MY 1997
statutory percentage; and so on.
Credits for MY 1996 Acquisitions. DOE has revised Sec. 490.503(b)
and (c) to provide that credits will be allocated for alternative
fueled vehicles acquired on or after October 24, 1992, and before
September 1, 1996, the beginning of MY 1997. Those purchases are early-
acquired vehicles.
B. Discussion of Lead Time
1. Comments Against Providing Lead Time
Many commenters, principally producers and suppliers of alternative
fuel and alternative fueled vehicles and related equipment, argued that
because the Act's requirements are relatively straightforward and have
been known since October 24, 1992, DOE need not provide lead time to
entities subject to the vehicle acquisition requirements, except as a
matter of equity in particular instances. Other commenters stated that
Congress expressly contemplated the need for delaying or reducing the
acquisition requirements when it enacted section 501(b). They argued
that because section 501(b) authorizes DOE to delay or modify the
requirements only for MY 1997 and later, DOE may not delay or reduce
the acquisition requirements for MY 1996. In addition, they stated that
because section 507(o) does not contain any provision allowing DOE to
delay or modify State purchase obligations, DOE may not delay or reduce
the State fleet acquisition requirements.
Some commenters stated that a delay of the vehicle acquisition
mandates would jeopardize investments they have made in the production
of alternative fueled vehicles or elements of alternative fuels
infrastructure.
2. Comments for Providing Lead Time
Many commenters, principally covered fuel providers and fleet
operators, argued that they are entitled to at least the amount of lead
time provided in sections 501(a) and 507(o) for fuel providers and
States, respectively. Some commenters made the additional argument that
Congress intended the acquisition requirements to take effect at the
beginning of a model year. In their view, DOE is required to delay the
statutory vehicle acquisition requirements until MY 1998 to provide
regulated entities the amount of time the Act provides between
promulgation of rules and compliance. Some commenters stated that
section 507(l) of the Act (42 U.S.C. 13257(l)), which
[[Page 10625]]
includes lead time requirements among various factors DOE shall take
into consideration in carrying out section 507, constitutes express
authority for DOE to delay the vehicle acquisition requirements for
State fleets and covered fuel providers.
One commenter also argued that DOE can and should grant fuel
providers a general exemption from the MY 1996 requirements, under
section 501(a)(5) of the Act, because alternative fueled vehicles
meeting the normal requirements and practices of covered entities will
not be reasonably available by MY 1996. In essence, this commenter
argued that because limited types or models of alternative fueled
vehicles will be available to satisfy fleet needs, all covered persons
should be relieved of the MY 1996 acquisition requirements.
Most of the comments favoring delay of the acquisition mandates
contained only general statements about the need for lead time.
However, commenters stated that many State government fleets and
covered persons cannot acquire alternative fueled vehicles in MY 1996
because their vehicle acquisition processes are too far advanced.
Commenters also stated that lead time was needed to discuss costs and
options with affected fleet managers, obtain vehicle and fueling
facility cost estimates, prepare budgets, identify funding mechanisms,
obtain approval of budgets, prepare specifications for vehicles and
fueling facilities, issue solicitations for bids, and provide training
for persons engaged in the fueling, operation, and repair of the
alternative fueled vehicles.
3. DOE Response to Public Comments on Lead Time
DOE does not agree with comments stating that DOE is not required
to, and should not, provide any lead time to allow States and covered
fuel providers to prepare to comply with the vehicle acquisition
mandates. Although regulated entities have had notice of the Act's
basic requirements since enactment in 1992, the Act provides for DOE to
promulgate rules filling in essential substantive, procedural, and
interpretive details before the statutory vehicle acquisition
requirements take effect. It is true that there is no express link in
the Act between the deadline dates for promulgation of rules and the
dates that the vehicle acquisition schedules take effect. Nevertheless,
the structure of the Act, including a hiatus between these dates,
indicates Congress's intent that regulated entities would have some
lead time between promulgation of final regulations and the effective
date of the vehicle acquisition requirements to comprehend the
programmatic requirements as fully defined by DOE, to apply for
applicable exemptions if appropriate, and otherwise plan and execute
pre-compliance activities.
DOE recognizes that section 501(b), which allows DOE to reduce or
delay the acquisition requirements for fuel providers (but not States)
in MY 1997 and thereafter, can be read as an implicit limitation on DOE
discretion to modify the statutory acquisition schedule for alternative
fuel providers because it is silent with respect to MY 1996. Similarly,
DOE recognizes that the silence in section 507(o) with regard to
modifying the schedule for State fleets can be interpreted as a lack of
authority to provide relief for MY 1996 or to provide limited exemption
to accommodate the right of a State to apply for approval of an
alternative compliance plan. However, both section 501 and 507(o) are
premised upon timely promulgation of regulations, and neither of these
provisions address what DOE should do in the event that it proved
impossible to promulgate on time. In order to make the necessary
adjustments, DOE is choosing to read section 501 and 507(o) without
drawing negative implications of lack of authority to deal with
problems caused by late promulgation that Congress could have
anticipated but omitted to address.1
\1\ At the same time, it is noted that DOE does not interpret
section 507(1), 42 U.S.C. 13257(1), as express authority to delay
the acquisition requirements for States and covered fuel providers.
Section 507(1), which applies only to decisions under that section,
has no applicability to the fuel provider mandate in section 501 of
the Act. As applied to the State program, section 507(1) directs DOE
to consider a variety of factors when it has discretion to consider
them. DOE has heeded this provision in preparing this final rule.
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DOE is not persuaded by the comments that it is required by the Act
to provide lead time to States and covered fuel providers in the amount
of the exact number of months in the Act between the deadline for
promulgation of final regulations and the date the statutory
acquisition schedules take effect. As pointed out above, the text of
the Act does not expressly link these dates. Moreover, the statutory
provisions making up the structure of the Act indicate that Congress
was not wedded to any fixed period of lead time. For example, the Act
provides different amounts of lead time for States (16 months) and
covered fuel providers (20 months). It also allows States to submit
alternative compliance plans at the end of the 12 month period provided
for submitting such a plan. In such a case, a State would only have a
few months lead time at most between DOE approval of plans and
compliance with the MY 1996 acquisition requirements (beginning
September 1, 1995). It is unlikely that the drafters of the Act thought
that States, some of which have biennial budgets, would need
significantly less time than fuel providers to prepare to comply with
the MY 1996 vehicle acquisition requirements. Moreover, the small
amount of lead time that a State with an alternative compliance plan
might have suggests that Congress did not think that 16 months, let
alone 20 months, of lead time is a necessity. It also is significant
that the statutory provision on alternative compliance plans for
States, section 507(o)(2), expressly provides for a 12 month period
beginning on the date of the promulgation of final regulations under
section 507(o). That language shows that Congress used very precise
words when it wanted to create a fixed lead time period. The omission
of similar expressed language in section 501 and 507(o)(2) implies that
Congress did not intend to establish an absolute amount of lead time
prior to State and fuel provider compliance with the vehicle
acquisition requirements.
Because MY 1996 has already begun, it is not possible for DOE to
both provide adequate lead time and require compliance with the
statutory MY 1996 acquisition requirements. DOE must, as a matter of
administrative necessity, relieve regulated entities from the MY 1996
requirements and determine a lead time period that is appropriate in
this situation. For the reasons stated hereafter, DOE has concluded
that it will best effectuate the Act's vehicle acquisition mandates
with an unconditional one-model year delay, combined with an automatic
exemption to allow a State to apply for and obtain approval of an
alternative compliance plan, and the case-by-case provision of lead
time through the exemption processes in the rule.
With some exemptions, such as States opting to develop alternative
compliance plans, States and fuel providers should be able to acquire
alternative fueled vehicles through their normal procurement processes.
States with annual budgets commonly will approve their fiscal year 1997
budgets in the summer of 1996. Model year 1997 begins on September 1,
1996, and States have until August 31, 1997 to meet their MY 1997
vehicle acquisition requirements. Assuming that State contracts for new
vehicles are awarded by the end of 1996, State agencies will have
several months to select and place orders for new vehicles in MY 1997.
As
[[Page 10626]]
explained in the discussion of Sec. 490.204, States that have biennial
budget cycles and cannot comply using their normal procurement
procedures will be granted exemptions from the requirements.
The record shows that covered fuel providers have a shorter and
more flexible procurement process than States.2 The record is
devoid of specific information showing that fuel providers generally
cannot comply by the end of MY 1997 through their normal procurement
processes. The commenters' desire for more time than most fuel
providers are likely to need is more than outweighed by the potential
damage to the interests of automakers and others who in reliance on the
Act have invested in alternative fueled vehicle production capacity or
other aspects of alternative fuel infrastructure, and who commented
critically on the policy options for providing lead time.
\2\ The Western States Petroleum Association, referring to a
National Association of Fleet Administrators study, stated that most
fleets make acquisition plans in July and August for October
delivery. (Comment No. 35, p. 9). The American Petroleum Institute
indicated that typically orders must be placed in August or early
September to obtain delivery in October. (Comment No. 147, p. 26).
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The rulemaking record also shows that alternative fueled vehicles
and alternative fuels will be widely available in MY 1997.
Manufacturers of alternative fueled vehicles and conversion kits and
alternative fuel equipment manufacturers and suppliers stated in their
comments that they have been preparing to meet the increased demand for
their products and services flowing from the vehicle acquisition
mandates. Although limited types of OEM vehicles will be available in
MY 1996, information supplied by automobile manufacturers shows a
growing capacity and a desire to meet demand for alternative fueled
vehicles in MY 1997. See, e.g., production plans described in the
second notice of limited reopening, 60 FR 38974, at 38977. DOE also
received comments from companies in the after-market conversion
business which stated that they are anticipating demand for their
products and services.
Although alternative fuels and alternative fueled vehicles will be
widely available in MY 1997, comprehensive information does not exist
on the precise quantities that will be available and whether they will
match fleets' needs. Undoubtedly, some fleets will not be able to
acquire alternative fueled vehicles in MY 1997 that meet their normal
requirements and practices. For example, the record shows that
currently few Original Equipment Manufacturer (OEM) alternative fueled
vehicles are offered in the compact size range. In addition, most OEM
alternative fueled vehicles are only available in one alternative fuel
configuration. Similarly, although alternative fueling sites exist and
are growing in number in many urban markets, alternative fueling
infrastructure is lacking in other areas.
However, the fact that some covered persons and fleets will not be
able to acquire alternative fueled vehicles or alternative fuels that
meet their needs in MY 1997 does not justify a longer unconditional
delay of the vehicle acquisition requirements. Congress was aware that,
initially, alternative fueled vehicles and alternative fuels would not
be available in sufficient amounts and types to satisfy the needs of
every covered person and fleet. Anticipating the possibility of uneven
availability of vehicles and fuel, Congress provided that exemptions
must be granted to both covered fuel providers (section 501(a)(5)) and
State fleets (section 507(i)) if alternative fuels or alternative
fueled vehicles that meet their normal requirements and practices are
not available. States also are eligible for an exemption if compliance
would produce an unreasonable financial hardship. DOE will use these
exemption processes, included as Sec. 490.204 and Sec. 490.308, to
provide additional lead time to covered fuel providers and States that
are unable to comply with the acquisition requirements in MY 1997
because of DOE's delay in promulgating a final rule.
DOE expects the criteria for granting exemptions will be flexible
enough to respond to exemption requests received in MY 1997 based on
inadequate lead time. For example, DOE would likely find unreasonable
financial hardship justifying an exemption for any State that cannot
meet the MY 1997 requirements by following its regular budget and
procurement processes (e.g., a State with a biennial budget). A whole
or partial exemption also would likely be granted under Sec. 490.204
if, despite a good faith effort, a State was unable to complete an
alternative compliance plan in time to comply in MY 1997. DOE also will
apply the criteria and documentation requirements in Sec. 490.308
flexibly in reviewing requests by covered fuel providers who show they
need additional lead time to comply.
C. Discussion of Adjustments to Vehicle Acquisition Levels
DOE invited public comment on the question of whether, at the end
of the lead time period, States and covered persons should be required
to acquire vehicles at the percentage levels set forth in the statutory
schedules for MY 1997 and after, or whether DOE should defer each step
of the statutory schedules by the lead time period.
1. Comments
Most commenters favoring a delay of the acquisition requirements
also favored lowering the acquisition percentages at the end of the
lead time period, with the effect of deferring each step of the
acquisition schedule by the period of the postponement of the initial
requirement. These commenters argued that if DOE required compliance
with the applicable statutory model year percentage at the end of the
lead time period, it would upset the Act's scheme for the gradual
``ramping up'' of alternative fueled vehicle purchases and the orderly
development of the alternative fuel infrastructure.
Many of the commenters opposing delay urged DOE to require
compliance with the MY 1997 statutory percentage in MY 1997. These
commenters also argued that if DOE delayed compliance for one year, it
should require States and covered fuel providers to make up the MY 1996
requirements in subsequent years. In this way, they argued, DOE could
satisfy the congressional intent that there be some lead time for
covered persons, while at the same time keeping the programs on track
with respect to overall vehicle acquisitions.
2. Response to Comments
DOE agrees with the commenters who argued that the Act's gradual
``ramping up'' scheme would be upset if DOE enforced the statutory MY
1997 vehicle acquisition percentages in MY 1997, after having delayed
the start of compliance by one year in order to provide lead time to
covered fuel providers and States. The statutory percentages for the
first year of compliance, MY 1996, are 10 percent for States and 30
percent for covered fuel providers. The MY 1997 alternative fueled
vehicle acquisition percentages are 15 percent for States and 50
percent for covered fuel providers.
DOE believes that the difference between the first and second year
requirements under the statutory schedules is significant and that it
would be inconsistent with the statutory framework to require covered
fuel providers and States to comply with the MY 1997 acquisition
levels, which Congress established for the second year of the
acquisition mandates, in what has become the first year of the program.
Further, having decided to require
[[Page 10627]]
compliance in MY 1997 at the MY 1996 statutory percentages, DOE
concludes that it is necessary to reduce future year percentages by one
model year in order to preserve the statutory scheme of gradually
increasing the acquisition requirements over a period of years.
Some comments pointed out that although section 501(b) permits DOE
to reduce the acquisition percentage requirements for covered fuel
providers for MY 1997 and thereafter, there is no comparable provision
in section 507(o) that permits DOE to lower the percentages for State
government fleets. There is no legislative history that explains the
different treatment of fuel providers and States, but some commenters
speculated that Congress did not include a provision permitting DOE to
lower the percentages for State fleets because the percentages in
section 507(o) are much lower than for fuel providers in the early
years of the program. In any event, DOE does not interpret the Act's
provisions to prevent it from making adjustments that are consistent
with Congress' evident intent to provide lead time to covered fuel
providers and States before requiring compliance with the mandates.
D. Discussion of Giving Credits for Alternative Fueled Vehicle
Acquisitions in MY 1996.
Several commenters stated that covered persons and fleets that have
made plans to comply with the acquisition requirements in MY 1996 would
be penalized if DOE delayed the compliance schedule and did not award
them credits for alternative fueled vehicle acquisitions in MY 1996.
DOE agrees. The final rule provides that the acquisition of alternative
fueled vehicles by covered persons and State fleets will be treated as
early-acquired vehicles, which are eligible for one credit for each
year they are acquired before they are required to be acquired.
Awarding credits for MY 1996 vehicle acquisitions will avoid any
disadvantage that otherwise would be experienced by State government
fleets and covered persons. It also creates an incentive for covered
persons and fleets to acquire alternative fueled vehicles in MY 1996,
which will further the petroleum displacement and air quality goals of
the Act.
III. Section-By-Section Discussion of Comments and Rule Provisions
This section of the Supplementary Information responds to
significant comments on specific rule provisions. It also contains
explanatory material for some rule provisions that were not the subject
of public comment in order to provide interpretive guidance (mostly
drawn from the preamble to the notice of proposed rulemaking) to States
and persons that must comply with this part. Most changes from the
notice of proposed rulemaking are explained in this section. However,
some nonsubstantive changes, such as the renumbering of paragraphs and
changes to clarify the meaning of rule provisions, are not discussed.
A. Subpart A--General Subpart
Definition of ``Fleet,'' ``Centrally Fueled,'' and ``Capable of Being
Centrally Fueled''
To promote easier understanding, DOE has divided the statutory
definition of ``fleet'' into two parts. The main paragraph in the
statutory definition appears in Sec. 490.2 under the word ``fleet.''
This regulatory definition of ``fleet'' cross references Sec. 490.3,
which describes the categories of vehicles excluded by statute from the
definition.
Section 301(9) of the Act limits the term ``fleet'' to vehicles
used primarily in a metropolitan statistical area (MSA) or consolidated
metropolitan statistical area (CMSA) with a 1980 population of more
than 250,000. Consistent with the Act, the definition of ``fleet'' in
Sec. 490.2 cross references Appendix A to subpart A, which sets forth a
list of MSAs and CMSAs with 1980 Bureau of the Census population of
250,000 or more. Appendix A was generated from information in ``The
Statistical Abstract of the United States, 1993,'' which lists all of
the MSAs and CMSAs, as defined by the Office of Management and Budget
(OMB) as of December 31, 1992, with a Bureau of Census population of
250,000 or more as of 1991. This document also gives the 1980 Census
populations for these areas. The MSAs and CMSAs included in Appendix A
are those statistical areas, as defined by OMB at the end of 1992, that
have 1980 Census populations of 250,000 or more.
One commenter objected to the inclusion of a city in Appendix A
because its 1980 population was less than 250,000. The city and
surrounding area were subsequently classified as an MSA, prior to
October 24, 1992, based on census data. DOE has not removed the MSA
from the list because, as shown in the Bureau of the Census' 1993
statistical abstract, the area now classified as an MSA had a 1980
population greater than 250,000.
The statutory definition of ``fleet'' does not specify whether the
list must be updated in light of changes in the geographic areas
designated by the Bureau of the Census as MSAs and CMSAs which meet the
1980 population requirement of the Act. Comments were received as to
whether DOE should update the Appendix A list to add new MSAs/CMSAs
that had a 1980 population of 250,000. The majority of these comments
were against adding areas to the list because of the uncertainty that
updating might cause. DOE does not interpret section 301(9) of the Act
to require it to update the list of MSA/CMSAs, and in light of these
comments, has decided not to update the Appendix A list in the future.
A few comments urged DOE to remove areas from the list in Appendix
A if their populations have fallen below 250,000 since 1980. DOE has
not adopted this recommendation because the language of section 301(9)
of the Act, 42 U.S.C. 13211(9), is unambiguous in including all areas
having a 1980 population of 250,000, as determined by the Bureau of the
Census, in the definition of ``fleet.''
Consistent with the statutory language, the definition of ``fleet''
requires that there be a minimum of 20 light duty motor vehicles ``used
primarily'' in a relevant statistical area. As discussed below under
``Other Definitions,'' DOE interprets ``used primarily'' to mean that
the majority (i.e., over 50 percent) of each vehicle's total annual
miles are accumulated within a covered statistical area.
The statutory and regulatory definitions of ``fleet'' also provide
that the vehicles be ``centrally fueled or capable of being centrally
fueled.'' As discussed more fully below, Sec. 490.2 defines the term
``centrally fueled'' to mean that a vehicle is fueled at least 75
percent of the time at a location that is owned, operated, or
controlled by a fleet or covered person, or is under contract with the
fleet or covered person for refueling purposes. Vehicles that do not
meet the 75% centrally fueled criterion are excluded from the vehicles
counted to determine whether a ``fleet'' exists, and they are excluded
from the base used to calculate a covered fuel provider's or State
fleet's alternative fueled vehicle acquisition requirements. The Act
does not make the centrally fueled criterion applicable to the actual
operation of fleet vehicles. As explained elsewhere in this
Supplementary Information, section 501(a)(4) of the Act requires
alternative fueled vehicles acquired by covered fuel providers to be
operated solely on alternative fuels, except when operating in areas
where alternative fuel is not available. The Act does not establish
operational requirements for State government fleets subject to the
acquisition requirements.
It should be noted that the statutory requirement covers those
vehicles that
[[Page 10628]]
are centrally fueled or are capable of being centrally fueled. It is
possible that a vehicle that is not currently centrally fueled could be
centrally fueled. Therefore, an organization which has determined that
its vehicles are not centrally fueled must still determine if the
vehicles are capable of being centrally fueled. If the vehicles are so
capable, then the total vehicles either centrally fueled or capable of
being centrally fueled may result in a ``fleet'' or ``covered person''
that is subject to the acquisition requirements of the Act.
In determining whether 20 or more light duty motor vehicles within
a MSA or CMSA are centrally fueled or capable of being centrally
fueled, the organization must also consider situations where vehicles
that are centrally fueled or capable of being centrally fueled are
present in more than one location within the MSA or CMSA. The number of
vehicles at all locations that are centrally fueled or capable of being
centrally fueled must be totaled. For example, if a fleet or covered
person has 12 vehicles at location A that are centrally fueled or
capable of being centrally fueled and 10 vehicles at location B that
are also centrally fueled or capable of being centrally fueled, the
organization has 22 vehicles in a MSA or CMSA that are centrally fueled
or capable of being centrally fueled.
Relying upon EPA's determination that ``contract fueling'' is one
method of establishing whether fleet vehicles are centrally fueled, DOE
noted in the notice of proposed rulemaking that retail credit card
purchases by themselves are not considered to be a contractual
refueling agreement. However, the notice concluded, as did EPA, that
commercial fleet credit cards are considered to be a contractual
refueling agreement, since they are intended as a special fuel
arrangement for fleet purchases alone. The intent of DOE's proposed
definition was to ensure that only those fleet-based agreements which
provide special fleet refueling benefits at a particular facility or
group of facilities would qualify as central fueling.
Several commenters brought to DOE's attention that EPA had modified
its determination regarding the role that fleet payment methods play in
establishing whether fleet vehicles are centrally fueled or capable of
being centrally fueled. In a September 30, 1994, Federal Register
notice (59 FR 50068), EPA states that it ``will no longer recommend
that States look to the payment method as a key indicator of the
presence or absence of central fueling.'' In its place EPA recommends
that ``States look at the actual refueling patterns used by fleet
operators.'' DOE has deleted the reference to credit card agreements
from its definitions of ``centrally fueled'' and ``capable of being
centrally fueled'' to be consistent with EPA.
Section 490.2 defines the terms ``centrally fueled'' and ``capable
of being centrally fueled'' to mean a vehicle is or can be refueled at
least 75 percent of its time at a location, that is owned, operated, or
controlled by the fleet or covered person, or is under contract with
the fleet or covered person for refueling purposes. The method that DOE
is requiring for determining central fueling capability is whether 75
percent of a vehicle's total annual miles traveled are derived from
trips that are less than the operational range of the vehicle. As
defined by EPA, in its December 9, 1993, Federal Register notice (58 FR
64684) on the final rule for the definitions and general provisions for
the Clean Fuel Fleet Program, the operational range is the distance a
vehicle is able to travel on a round trip with a single refueling.
The DOE definitions differ from the EPA definitions of ``centrally
fueled'' and ``capable of being centrally fueled,'' at 40 CFR 88.302-
94, because the DOE definitions do not require that vehicles covered
must be capable of being centrally fueled 100 percent of the time. DOE
received comments, principally from representatives of natural gas and
propane producers and marketers that supported the 75 percent central
fueling standard in DOE's proposed definitions of ``centrally fueled''
and ``capable of being centrally fueled.'' Some of these commenters
stated that a 100 percent standard would allow fleets to easily avoid
the requirements by redefining vehicle missions and operating zones.
Other commenters, principally representatives of covered fuel providers
and fleet administrators, recommended that DOE adopt a 100 percent
central fueling definition. Most of these commenters argued that DOE
should adopt the EPA definition to minimize confusion and regulatory
burdens on fleets required to comply with both programs.
After considering the comments, DOE decided to retain the 75
percent central fueling standard in the final rule. DOE's decision to
not adopt EPA's definition of ``centrally fueled'' is rooted in
statutory differences between the Clean Fuel Fleet Program,
administered by EPA, and the Department's Alternative Fuel
Transportation Program.
EPA's program applies in certain non-attainment areas with the goal
of improving the air quality in those areas. EPA's explanation of its
final rule shows that EPA did not look favorably on the inclusion of
dual-fueled vehicles in the Clean Fuel Fleet Program. EPA concluded
that the purchase of flexible-fuel or dual-fueled vehicles would
achieve significantly less emissions reduction than dedicated
alternative fueled vehicles, which operate on a single type of fuel. 60
FR 64681. EPA expressly acknowledged that, by adopting a 100 percent
refueling standard, fewer vehicles would be covered by its program.
By contrast, DOE's Alternative Fuel Transportation Program applies
throughout the Nation, and its primary goal is to reduce the nation's
dependence on petroleum as a transportation fuel. DOE's program, as it
applies to covered fuel providers, is not limited to fleets operating
in large metropolitan statistical areas. ``Alternative fueled vehicle''
is defined in section 301(2) of the Act to include a dual fueled
vehicle. This shows that Congress anticipated that alternative fuels
would not be available to all covered vehicles all of the time. This is
also reflected in section 501(a)(4), which requires alternative fueled
vehicles acquired by covered fuel providers to operate solely on
alternative fuels except when operating in an area where the
appropriate alternative fuel is unavailable. 42 U.S.C.
Sec. 13251(a)(4).
DOE believes that allowing the use of all types of alternative
fueled vehicles, not just dedicated vehicles, provides flexibility to
fleet operators in acquiring vehicles that meet their normal
requirements and practices. This is especially important during the
initial years of the program, when the fueling infrastructure for
alternative fueled vehicles will not be fully developed.
In addition, vehicles acquired under DOE's program are required to
operate on fuels that are ``substantially not petroleum.'' See section
301(2) of the Act (definition of ``alternative fuel''). By contrast,
EPA's Clean Fuel Fleet Program may include vehicles that use
reformulated gasoline and clean diesel fuel. The greater availability
of reformulated gasoline and clean diesel makes the 100 percent
refueling standard more reasonable in the EPA program.
In summary, DOE believes a 100 percent standard for the definition
of ``centrally fueled'' and ``capable of being centrally fueled'' would
unduly compromise the Energy Policy Act's goals of displacing petroleum
and fostering development of an alternative fuels infrastructure.
The statutory definition of ``fleet'' requires that a minimum of 20
vehicles
[[Page 10629]]
be ``owned, operated, leased, or otherwise controlled by a governmental
entity or other person.'' 42 U.S.C. 13211(9). Section 490.2 contains a
definition of ``lease'' that excludes vehicles under rental agreements
of less than 120 days. This provision is consistent with the EPA
regulations. As EPA explained, a person does not have the same level of
control over a vehicle lease for a short period of time, and the 120-
day period takes into account short term variations in fleet operations
and the number of fleet vehicles that ought not to trigger the vehicle
acquisition mandates. 58 FR at 64687.
The statutory definition of ``fleet'' uses the concept of
``control'' to establish the guidelines for attributing vehicles to a
fleet for the purposes of determining whether the 50-vehicle minimum is
satisfied. There is similar language in the definition of ``covered
fleet'' which applies to the EPA fleet program requirement. EPA has
promulgated a definition of ``control'' (40 CFR Sec. 88.302-94), which
DOE has adopted with slight modifications to omit language not relevant
to DOE's program.
Other Definitions
Acquire. The Department was asked to define the term ``acquire'' by
a few commenters. They were uncertain as to whether the term referred
to ordering a vehicle, paying for a vehicle, or taking possession of a
vehicle. In Sec. 490.2, the Department defines ``acquire'' to mean
taking into possession or control, which is a dictionary definition.
Thus, a vehicle is acquired when it is taken into possession or
control.
After-Market Converted Vehicle. Section 490.2 defines the term
``after-market converted vehicle'' as a new or used conventional fuel
Original Equipment Manufacturer vehicle that has been converted to
operate on alternative fuel by an after-market converter. This
converter must be in compliance with all Federal, State, and local laws
at the time of conversion. After-market converted vehicles differ from
Original Equipment Manufacturer converted vehicles with respect to
which company warrants the conversion and its components. In the case
of an Original Equipment Manufacturer converted vehicle, the vehicle is
converted prior to first sale by a manufacturer or conversion company
under contract to the manufacturer to convert Original Equipment
Manufacturer vehicles, and is then offered by the Original Equipment
Manufacturer, with warranty coverage through the Original Equipment
Manufacturer, for sale to the general public. In the case of an after-
market converted vehicle, the conversion is performed by an after-
market converter, who provides the warranty for the vehicle conversion
and the conversion kit.
Alternative Fuel. Section 490.2 defines the term ``alternative
fuel'' consistent with the definition of that term in section 301 of
the Act.
Several commenters requested that propane (liquefied petroleum gas)
be removed from the list of fuels in the definition of ``alternative
fuel'' in Sec. 490.2. The definition of this term tracks section 301(2)
of the Act, which lists fuels that are alternative fuels and grants the
Secretary the authority to add fuels to the definition of ``alternative
fuel'', by rule, if they meet certain conditions. However, section
301(2) does not authorize the Secretary to delete any fuel listed in
the statutory definition. Thus, the Department has not removed
liquefied petroleum gas (or propane) from the definition of
``alternative fuel.''
Many commenters requested that biodiesel, and biodiesel blends, be
included in the Department's regulatory definition of ``alternative
fuel'' because biodiesel is a fuel ``(other than alcohol) derived from
biological materials.'' As described in the comments, biodiesel is
produced from vegetable oils, such as soybean oil, which are biological
materials. The commenters also stated that biodiesel offers significant
reduction in harmful tailpipe emissions of hydrocarbons, carbon
monoxide and particulate matter; is essentially free of sulfur and
harmful aromatics; and is non-toxic and biodegradable. These commenters
also submitted information to show that biodiesel can be made wholly
from domestic products, and that it has a positive energy balance in
its production process.
After carefully reviewing all of the comments on this issue, the
Department included in its July 31, 1995 Federal Register notice its
tentative conclusion that neat (or 100 percent) biodiesel meets the
criteria in section 301(2) for an alternative fuel; namely, that it is
a fuel, other than alcohol, that is derived from biological materials.
Several comments were received in support of this designation. No
comments were received in opposition to this position. For the reasons
set forth in the July 31 notice, the Department has revised the
definition of ``alternative fuel'' in section 490.2 to include neat
biodiesel. It is noted, however, that a DOE interpretation of
``alternative fuel'' to include neat biodiesel does not relieve
biodiesel manufacturers from any Federal, State, local government, or
automobile manufacturer requirements that may apply to the production
and use of biodiesel for motor fuel.
In its July 31, 1995 notice, DOE stated that it did not intend to
include mixtures or blends of biodiesel in the definition of
``alternative fuel'' in this rulemaking. DOE stated that more study is
required before a determination on biodiesel blends can be made. After
reviewing all of the comments on this issue, DOE has concluded than an
additional rulemaking proceeding is required to develop the information
needed to reach a conclusion on which, if any, mixtures or blends of
biodiesel should be included in the definition of ``alternative fuel.''
One commenter stated that neat biodiesel may not be the only
biologically derived fuel that can be classified as an ``alternative
fuel,'' and requested clarification that the inclusion of neat
biodiesel in the definition would not preclude other biologically
derived fuels from receiving this designation. The Department is not
currently aware of any other biologically derived fuels that are not
already included in the definition of ``alternative fuel.'' However, if
DOE were asked to designate another biologically derived fuel as an
alternative fuel, the fuel would be evaluated on its merits to
determine if it meets the criteria for an alternative fuel.
In its July 31, 1995, Federal Register notice, the Department
invited interested persons to submit data, reports and analyses in
support of previous requests that DOE revise the definition of
``alternative fuel'' to include alcohol blends containing no less than
70 percent alcohol by volume. In response, the Department received two
submissions containing information relevant to this issue. These
submissions show that decreasing the level of alcohol can improve the
cold start ability of alcohol fueled vehicles. The data shows that by
decreasing the level of alcohol to 70%, some vehicles are able to start
in weather 11 degrees F colder than they were previously able. But the
data and reports of field operation of these vehicles also show that
vehicles operating on 85% blends of ethanol or methanol can start in
winter conditions if certain procedures are followed and certain
precautions taken. These precautions and procedures are recommended for
cold-start of vehicles irrespective of what fuels they operate on. In
addition, it appears that several different combinations of non-alcohol
components with varying Reid Vapor Pressures are capable of providing
cold
[[Page 10630]]
start performance at the automakers' target temperature.
After carefully analyzing the information that has been submitted,
the Department has concluded that it needs additional information
before it can determine that 70 percent alcohol blends are required for
the cold-start of alcohol fueled vehicles. Therefore, the definition of
``alternative fuel'' in this rule retains the statutory 85 percent
standard for alcohol fuels. A separate rulemaking, initiated by DOE or
following a petition filed pursuant to Sec. 490.6 of this part, will
permit the issues related to lowering the alcohol percentage to be
fully explored.
DOE received many comments arguing that reformulated gasoline
should be added to the list of fuels included in the definition of ``
alternative fuel'' in Sec. 490.2. Commenters stated that use of
reformulated gasoline contributes to reduction of air pollutants and,
because of its increased oxygen content, displaces petroleum. Some of
these commenters argued that reformulated gasoline meets the statutory
test of being ``substantially not petroleum.'' Some commenters argued
that including reformulated gasoline in the definition of ``alternative
fuel'' would be consistent with Congress' allowance of reformulated
gasoline under EPA's clean fuel fleet program. One commenter argued
that use of reformulated gasoline should be permitted in air quality
non-attainment areas, but not elsewhere, in order to reduce the
regulatory burden on fleets in those areas. Other commenters stated
that allowing reformulated gasoline in the DOE program would help
industry recoup its investment in the production and marketing of
reformulated gasoline to meet air quality goals. Some commenters
recommended that DOE should seek amendment of the Energy Policy Act to
correct the omission of reformulated gasoline from the list of fuels
included in the statutory definition of ``alternative fuel.''
DOE also received many comments opposed to including reformulated
gasoline in the definition of ``alternative fuel'' in Sec. 490.2. These
commenters argued that reformulated gasoline is substantially petroleum
in composition, and that recognizing it as an alternative fuel would
not contribute to development of non-petroleum fueling and vehicle
technologies. Commenters stated that although reformulated gasoline is
a low-cost way to reduce hydrocarbon emissions, its use will not
significantly further the Act's petroleum displacement goals.
The Department adheres to its view that reformulated gasoline does
not meet the Act's criteria for designation as an ``alternative fuel.''
The percentage of petroleum in reformulated gasoline is too large to
warrant finding that it is ``substantially not petroleum,'' which is
required for classifying a fuel as an ``alternative fuel'' under
section 301(2) of the Act. The notice of proposed rulemaking stated
that reformulated gasoline is comprised of over 90 percent petroleum. A
commenter who represents the petroleum industry disputed this figure,
and stated that reformulated gasoline only contains 83 percent
petroleum. Even assuming that the commenter's figure of 83 percent is
correct, that percent petroleum volume is still too large to warrant a
determination that reformulated gasoline is ``substantially not
petroleum.''
Several comments were received requesting that low-sulphur diesel
and clean diesel be included as alternative fuels. The Department has
not adopted these recommendations because low-sulphur diesel and clean
diesel are fuels comprised almost totally of petroleum, and thus,
cannot be considered to be substantially not petroleum.
Covered Person. Section 490.2 defines the term ``covered person''
consistent with the definition of that term in section 301 of the Act.
Dealer Demonstration Vehicles. No comments were received on the
definition of ``dealer demonstration vehicle.'' Section 490.2 follows
the EPA definition of the term ``dealer demonstration vehicle'' found
at 40 CFR Sec. 88.302-94. EPA defines ``dealer demonstration vehicle''
as any vehicle that is operated by a motor vehicle dealer solely for
the purpose of promoting motor vehicle sales, either on the sales lot
or through other marketing or sales promotions, or for permitting
potential purchasers to drive the vehicle for pre-purchase or pre-lease
evaluation. Vehicles held by dealers for their own business purposes,
such as shuttle buses, loaner vehicles, or other repair or business-
related vehicles are not exempt, unless they are also offered for
retail sale as part of the dealer stock or are rotated through the
fleet back to the dealer stock.
Dedicated Vehicle. The notice of proposed rulemaking included the
statutory definition of ``dedicated vehicle'' in section 301(6) of the
Act, 42 U.S.C. 13211(6). Section 301(6) provides that a dedicated
vehicle is either: (i) a ``dedicated automobile'' as defined in section
513(h)(1)(C) of the Motor Vehicle Information and Cost Savings Act,
codified at 49 U.S.C. 32901(a)(7), or (ii) a motor vehicle, other than
an automobile, that operates solely on alternative fuel.
DOE received no public comments on the proposed definition of
``dedicated vehicle.'' Nevertheless, in the final rule DOE has revised
the portion of the definition relating to a ``dedicated automobile'' to
include the language of the cross-referenced statute, as a convenience
for regulated entities. As defined in the Motor Vehicle Information and
Cost Savings Act, a ``dedicated automobile'' means ``an automobile that
operates only on alternative fuel.'' 49 U.S.C. 32901(a)(7) (emphasis
added). DOE interprets the word ``automobile,'' as used in the
definition of ``dedicated automobile'' and incorporated by reference in
section 301(6), to mean an ``automobile,'' as that term is defined in
section 501(1) of the Motor Vehicle Information and Cost Savings Act,
codified at 49 U.S.C. 32901(a)(3). DOE has added a definition of
``automobile'' to Sec. 490.2, which is adapted from and is intended to
have the same meaning as ``automobile'' defined in section 501(1) of
the Motor Vehicle Information and Cost Savings Act.
Dual Fueled Vehicle. Section 301(8) of the Act, 42 U.S.C. 13211(8)
defines ``dual fueled vehicle'' as: (i) a dual fueled automobile, as
such term is defined in section 513(h)(1)(D) of the Motor Vehicle
Information and Cost Savings Act, or (ii) a motor vehicle, other than
an automobile, that is capable of operating on alternative fuel and is
capable of operating on gasoline or diesel fuel. DOE included the
statutory definition in the proposed rule, with slight modifications to
make clear that term includes all vehicles that are capable of
operating on an alternative fuel and on gasoline or diesel fuel,
including those commonly referred to as ``bi-fuel,'' flexible fuel,''
and ``dual fuel'' vehicles.
DOE received public comment on the proposed definition of ``dual
fueled'' vehicle. One commenter urged DOE to adopt definitions of
``dual fuel vehicle'' and ``flexible fuel vehicle'' in regulations
published by EPA for its Clean Fuel Fleet Program (59 FR 50042, Sept.
30, 1994). DOE cannot adopt this recommendation in its entirety because
of differences in the underlying statutes. The Clean Air Act
establishes clean alternative fuel standards for flexible fuel vehicles
and dual fuel vehicles, 42 U.S.C. 7581. EPA has, in implementing
regulations, defined the term ``dual fuel vehicle'' to mean a ``bi-fuel
vehicle'' (i.e., one that is engineered and designed to be operated on
two fuels, but not a mixture of two or more different fuels) and the
term ``flexible
[[Page 10631]]
fuel vehicle'' to mean a vehicle that is engineered and designed to be
operated on any mixture of two or more different fuels. 59 FR 50045. By
contrast, section 301(3) of the Act defines an ``alternative fueled
vehicle'' to mean a ``dedicated vehicle'' or a ``dual fueled vehicle.''
Thus, if DOE were to adopt EPA's definition of ``dual fuel vehicle,''
flexible fuel vehicles would be excluded from the definition of
``alternative fueled vehicle,'' and the acquisition of such vehicles
would not count for compliance purposes under the Act. There is nothing
in the text of the Act or its legislative history that indicates an
intent to exclude flexible fuel vehicles from DOE's Alternative Fuel
Transportation Program. A flexible fuel vehicle, authorized by the
manufacturer to operate on an alternative fuel and on gasoline or
diesel, clearly fits within the definition of ``dual fueled vehicle''
in section 301(8).
In response to the comments, DOE has made several changes in the
regulatory text to clarify that the statutory term ``dual fueled
vehicle'' includes flexible fuel vehicles. The definition of ``dual
fueled vehicle'' in Sec. 490.2 has been revised to expressly include
flexible fuel vehicles. A definition of ``flexible fuel vehicle'' has
been added to Sec. 490.2. The term is defined as ``any motor vehicle
engineered and designed to operate on any mixture of two or more
different fuels.'' This definition is taken from EPA's regulation on
clean-fuel vehicles, 40 CFR 88.102-94. The definition of ``alternative
fueled vehicle'' in Sec. 490.2 also has been revised to clarify that
flexible fuel vehicles are included.
Several commenters asked the Department to clarify whether vehicles
that are capable of operating on neat biodiesel and diesel can be
considered dual-fueled vehicles. A bi-fuel vehicle that is authorized
by the vehicle manufacturer to be operated on neat biodiesel or diesel
would meet the definition of a dual-fueled vehicle. A flexible fuel
vehicle that is authorized by the vehicle manufacturer to be operated
on neat biodiesel or diesel also would meet the definition of a dual-
fueled vehicle. These vehicles would meet this definition principally
because they are capable of operating on an ``alternative fuel'' as
defined by section 301(2) of the Act, in addition to being operated on
a petroleum-based fuel. As explained earlier in the discussion of the
definition of ``alternative fuel,'' DOE has concluded that an
additional rulemaking is needed to reach a conclusion on which, if any,
mixtures of biodiesel should be included in the definition of
``alternative fuel.'' Consequently, until such a rulemaking designates
a mixture of biodiesel and diesel as an alternative fuel, a vehicle
powered by such a mixture or conventional diesel would not qualify as a
``dual fueled vehicle.''
Emergency Motor Vehicles. Section 490.2 adopts EPA's definition for
the term ``emergency vehicle'' in 40 CFR Sec. 88.302-94. EPA defines
``emergency vehicle'' to mean any vehicle that is legally authorized by
a governmental authority to exceed the speed limit to transport people
and equipment to and from situations in which speed is required to save
lives or property, such as a rescue vehicle, fire truck or ambulance.
These vehicles normally have red and/or blue flashing lights and
sirens. DOE is relying on the speed limit criterion because this is the
way that many States define ``emergency vehicles.''
The Department received comments from utilities asking DOE to
determine that vehicles used for emergency restoration of utility
service are covered by the definition of ``emergency motor vehicles.''
These vehicles are not normally considered emergency motor vehicles
because their primary function does not include exceeding the speed
limit to transport people and equipment to and from situations in which
speed is required to save lives or property. For this reason, they are
not usually equipped with red and/or blue flashing lights and sirens.
Emergency power restoration vehicles are not excluded from the
definition of ``fleet'' unless, on a vehicle-by-vehicle basis, they are
specifically and legally authorized by a governmental authority to
exceed speed limits when responding to emergencies.
Law Enforcement Motor Vehicles. Section 490.2 adopts EPA's
definition of the term ``law enforcement vehicle'' found at 40 CFR
Sec. 88.302-94. EPA defines ``law enforcement vehicle'' to mean any
vehicle which is primarily operated by a civilian or military police
officer or sheriff, or by personnel of the Federal Bureau of
Investigation, the Drug Enforcement Administration, or other law
enforcement agencies of the Federal Government, or by State highway
patrols, municipal law enforcement, or other similar law enforcement
agencies, and which is used for the purpose of law enforcement
activities including, but not limited to, chase, apprehension,
surveillance, or patrol of people engaged in or potentially engaged in
unlawful activities.
This definition is intended to clarify the difference between law
enforcement motor vehicles and vehicles used for other security
purposes. Under this definition, a vehicle is considered to be a law
enforcement motor vehicle by virtue of its use for official law
enforcement purposes, as authorized by local, State or Federal
government authority. Private security vehicles are not excluded from
the definition of ``fleet'' unless, through a contract or other
arrangement, they are used by a law enforcement agency for the purposes
described above.
One commenter inquired whether vehicles operated by a State
corrections department and used for transport of prisoners or for
administrative duties would be considered a ``law enforcement motor
vehicle.'' DOE concludes that these vehicles are law enforcement motor
vehicles because State corrections departments are engaged in law
enforcement activities.
Lease. No comments critical of the definition of ``lease'' were
received. Section 490.2 defines the term ``lease'' to mean use of a
vehicle for transportation purposes pursuant to a rental contract or
similar arrangement, and the term of such contract or similar
arrangement is for a period of 120 days or more. This definition
closely tracks EPA's definition of ``owned or operated, leased or
otherwise controlled by such person,'' found at 40 CFR Sec. 88.302-94.
Light Duty Vehicle. One commenter inquired whether a vehicle's
gross vehicle weight rating is to be determined before or after
conversion to operate on alternative fuel. DOE has determined that the
gross vehicle weight rating applies to newly acquired vehicles prior to
conversion and has amended the definition of the term ``light duty
motor vehicle'' to reflect this determination.
Model Year. No comments critical of the definition of ``model
year'' were received. Section 490.2 defines the term ``model year'' for
the purposes of vehicle acquisition requirements as September 1 of the
previous calendar year through August 31. This definition closely
tracks EPA's definition of ``model year,'' found at 40 CFR Sec. 88.302-
94. The model year, thus defined, coincides with the period in which
most automobile manufacturers introduce their new annual models, which
should facilitate compliance since covered persons and State fleets can
make their acquisition plans regarding alternative fueled vehicles when
they make plans for acquiring new model year vehicles. For compliance
purposes, the definition of model year is important to ensure that all
fleets and covered persons acquire vehicles based on the same annual
period. Thus, any new vehicles that are acquired by a fleet or covered
person between September 1 and August 31 of
[[Page 10632]]
the next year are counted and used as the basis for determining the
acquisition requirement of the same year.
Motor Vehicle. The notice of proposed rulemaking included the
definition of ``motor vehicle'' in section 301(13) of the Act, 42
U.S.C. 13211(13), which incorporates the definition of ``motor
vehicle'' in section 216(2) of the Clean Air Act, 42 U.S.C. 7550(2). In
this rule, DOE has included the text of section 216(2) so that
regulated entities will not have to consult another source for the
meaning of this term. A comment was received that requested that non-
road vehicles be expressly excluded from the definition of ``motor
vehicle.'' The Department has amended the definition of ``motor
vehicle'' to make clear that non-road vehicles are excluded. A
definition of ``non-road vehicle,'' which is drawn from section 412(b)
of the Act, has been added to this section.
Non-road Vehicle. This term is defined to mean a vehicle not
licensed for on-road use, including vehicles used principally for
industrial, farming or commercial use, for rail transportation, at an
airport, for marine purposes and other vehicles.
Original Equipment Manufacturer Vehicle. Section 490.2 defines the
term ``Original Equipment Manufacturer Vehicle'' to mean a vehicle
engineered, designed, produced and warranted by an Original Equipment
Manufacturer. This term applies to conventionally fueled Original
Equipment Manufacturer vehicles as well as to alternative fueled
vehicles. Included in this definition are vehicles that were
conventionally fueled Original Equipment Manufacturer vehicles, but
were converted prior to sale by the Original Equipment Manufacturer,
through a contract with a conversion company, to operate on an
alternative fuel and which are covered under the Original Equipment
Manufacturer warranty. The proposed definition did not reference
Original Equipment Manufacturer warranties. This omission was pointed
out by a commenter, and it is corrected in this rule.
Used Primarily. The definitions of the terms ``fleet'' and
``covered person'' include the requirement that a vehicle must be
``used primarily'' within a metropolitan statistical area to be
included in a ``fleet.'' In response to comments requesting
clarification the Department has defined ``used primarily'' to mean
that a majority (i.e., over 50 percent) of a vehicle's total annual
miles are accumulated within a covered metropolitan statistical or
consolidated metropolitan statistical area.
Section 490.3 Excluded Vehicles
Section 490.3 sets forth the categories of vehicles that are not
counted in determining the existence of a ``fleet'' as defined in
Sec. 490.2. Some of the exclusions are discrete categories defined in
Sec. 490.2, including ``dealer demonstration vehicle,'' ``emergency
vehicle,'' and ``law enforcement vehicle.''
The statutory definition of ``fleet'' also excludes motor vehicles
held for lease or rental to the general public; motor vehicles used for
motor vehicle manufacturer product evaluations or tests; motor vehicles
which under normal operations are garaged at personal residences at
night; and motor vehicles that the Secretary of Defense certifies must
be exempt for national security reasons. This latter category was not
subject to public comment and is self-explanatory. The other
categories, however, either were subject to comment or require some
explanation.
DOE has adopted EPA's interpretation of ``motor vehicles held for
lease or rental to the general public.'' EPA interprets the phrase to
mean a vehicle that is owned or controlled primarily for the purpose of
short-term rental or extended-term leasing, without a driver, pursuant
to a contract. 40 CFR Sec. 88.302-94. Under this definition, a firm
will not be found to ``lease'' its vehicles to its employees unless the
vehicles are owned primarily for leasing them to the general public and
they are leased pursuant to formal contracts which give control of the
vehicle to the lessee. No critical comments were received on this
interpretation.
DOE also has adopted EPA's interpretation of ``motor vehicles used
for motor vehicle manufacturer product evaluations and tests,'' which
are excluded from the definition of ``fleet.'' Section 490.3 follows
EPA's definition of the phrase ``vehicle used for motor vehicle
manufacturer product evaluations and tests'' at 40 CFR Sec. 88.302-94.
It is the intent of this provision to exclude vehicles which are used
by an Original Equipment Manufacturer for production control or quality
control reasons. No critical comments were received on this
interpretation.
DOE has only partially adopted EPA's definition of ``motor vehicles
which under normal operations are garaged at personal residences at
night.'' The notice of proposed rulemaking included this statutory
language in Sec. 490.2. A number of commenters criticized DOE for not
adopting all of EPA's definitions, and one commenter specifically urged
DOE to adopt EPA's definition of this phrase. EPA defined the nearly
identical statutory language to mean ``a vehicle that, when it is not
in use, is normally parked at the personal residence of the individual
who usually operates it, rather than at a central refueling,
maintenance, and/or business location.'' 40 CFR Sec. 88.302-94. EPA
concluded that the words ``at night'' in section 241(6) of the Clean
Air Act did not preclude extending the exclusion to persons who work at
night. 58 FR 64679, 64690. DOE believes that this is a reasonable
interpretation of the statutory phrase and, in light of the comments
urging consistency in definitions, has decided to adopt the EPA
language in Sec. 490.2.
A few commenters also pointed out that some vehicles that are
garaged at personal residences of employees overnight are in fact
centrally fueled, and they urged DOE not to exclude such vehicles from
a ``fleet.'' EPA, in its definition, did not exclude a vehicle that was
in fact centrally fueled, because the relevant Clean Air Act provision
refers only to a vehicle which ``is capable of being centrally
fueled.'' 58 FR 64679, 64690. By contrast, the definition of ``fleet''
in section 301(9) of the Act excludes a vehicle garaged at a personal
residence from the definition, regardless of whether it is centrally
fueled or capable of being centrally fueled. Therefore, DOE has not
adopted that portion of EPA's definition.
Fleet operators and covered persons should subtract vehicles in
these excluded categories from the total number of new light duty
vehicles to be acquired in a model year to determine the basis for
calculating the number of alternative fueled vehicles they are required
to acquire in the model year.
Example: A covered person is going to acquire 105 new light duty
vehicles in model year 1997. Of these 105 vehicles, five are
vehicles in excluded categories. To determine how many alternative
fueled vehicles must be acquired the covered person shall make the
following calculation: [(Number of new light duty vehicles to be
acquired)--(Number of new light duty vehicles in excluded
categories)] x (Acquisition percentage for that model year). In
this example, the covered person is required to acquire 30
alternative fueled vehicles in model year 1997 {[(105)-(5)] x
(.30) = 30}.
Section 490.5 Requests for an Interpretive Ruling
Section 490.5 establishes a process for States and covered persons
to obtain DOE interpretive rulings as to how the Department intends to
construe and apply its regulations to particular factual situations,
and for whom other procedures such as petitions for
[[Page 10633]]
exemption are irrelevant. One commenter objected to this provision,
stating that it will lead to inconsistencies in implementation. DOE
does not agree with this comment. Publicly available interpretive
rulings should promote uniformity in implementation, even though any
interpretive ruling that the Department issues would apply only to the
person who requested it.
Section 490.7 Relationship to Other Law
Section 490.7 makes a declaratory statement to avoid arguments that
provisions of part 490, by implication, authorize acquisition of
vehicles, conversion of vehicles, or use of fuels as motor fuel in a
manner that does not comply with other Federal, State, or local laws.
B. Subpart B--[Reserved]
C. Subpart C--Mandatory State Fleet Program
Section 490.201 Alternative Fueled Vehicle Acquisition Mandate
Schedule
Section 490.201 sets forth the requirements, subject to some
exemptions, for the percentage of new light duty motor vehicles that
must be alternative fueled vehicles when acquired for State fleets
under the Mandatory State Fleet Program.
In response to comments that inquired about what would happen if a
State agency grew in size or moved its vehicle operations to one of the
MSAs listed in Appendix A to subpart A, the Department has added
paragraph (d). Paragraph (d) states that if, in the future, a State
agency becomes subject to this subpart because it owns, operates or
controls a fleet, the State agency shall start acquiring alternative
fueled vehicles according to the schedule percentage in effect for the
next model year. For example, if a State agency first owns, operates or
controls a fleet in model year 1998, then for model year 1999, 25
percent of the State agency's new light duty motor vehicles acquired
for its fleet should be alternative fueled vehicles. However, paragraph
(d) also recognizes that, in some cases, State agencies that are newly
required to acquire alternative fueled vehicles may qualify under
section 490.204 for an exemption or reduction of the acquisition
percentage. One commenter questioned the rounding convention in the
proposed rule for calculating acquisition requirements. After
reconsidering this issue, DOE has revised paragraph (c) to provide for
rounding up or down to the next whole number, depending on whether the
fraction is equal to or greater than one half or is less than one half.
Section 490.202 Acquisitions Satisfying the Mandate
Section 490.202 provides in substance that an acquisition of an
alternative fueled vehicle, regardless of the year of manufacture,
counts toward satisfaction of the vehicle acquisition mandate. Such a
vehicle would be new to the fleet operator. Credits acquired under
subpart F also count toward satisfaction of the mandate.
DOE received many comments opposed to the proposed rule's
requirement that new vehicles must be converted before they are placed
into service in a fleet. The Department has revised Sec. 490.202(a) to
allow States and State agencies to convert newly acquired Original
Equipment Manufacturer vehicles within four months after vehicle
acquisition. The basis for the 4-month period for conversion of newly
acquired vehicles is explained in the discussion of Sec. 490.305 in
this Supplementary Information section. Section 490.305 applies to
covered fuel providers, but its provisions are the same as those in
Sec. 490.202. Many fuel providers also objected to the proposal to
require vehicles to be converted prior to being placed into service in
a fleet and, to avoid redundancy, DOE addresses all of the comments on
this issue in the discussion of Sec. 490.305.
The Department would prefer that these vehicles be converted in the
same model year that they are acquired, but realizes that this is not
always possible. Thus, a vehicle acquired in MY 1997 could be converted
during MY 1998 (beginning on September 1, 1997), and count towards
compliance in MY 1997, if the conversion occurred within four months of
the vehicle's acquisition. However, those conversions could not be
counted for compliance with the MY 1998 requirements.
A few comments pointed out that the proposed rule did not include
any statement about a State not being required to acquire converted
vehicles, as provided in section 507(j) of the Act. The Department has
not revised the rule in response to these comments because it sees no
need to restate the statutory provision in this final rule.
Many commenters requested that the Department allow the conversion
of vehicles already in service in a fleet to count towards compliance
once the rule goes into effect. The proposed rule would not have
allowed the conversion of existing fleet vehicles to count. Upon
further analysis, the Department has decided that is was correct in not
allowing these vehicles to count towards compliance. Section 507(o)
specifically refers to ``* * * percentages of new light duty motor
vehicles acquired annually * * *'' 42 U.S.C. 13257(o) (emphasis added).
The Act's focus on vehicles new to the regulated entity indicates a
congressional intent to regulate inventory turnover and stimulate
production of new alternative fueled vehicles. Conversion of existing
fleet vehicles could seriously undermine those goals.
Although conversion of an existing fleet vehicle does not qualify
as an acquisition under the Act, DOE (as explained in the discussion of
Sec. 490.502 in Subpart F) will allocate credits for motor vehicles
that were purchased or leased by regulated entities on or after October
24, 1992, and converted to alternative fueled vehicles before the
effective date of the applicable acquisition requirements. For purposes
of calculating credits, DOE will not apply the four-month time limit to
conversions that occurred before the effective date of this rule.
Section 490.203 Light Duty Alternative Fueled Vehicle Plan
The Act provides an alternative means of compliance for States. In
lieu of a State meeting the acquisition requirements of Sec. 490.201
solely through State acquisitions, a State may comply with a Light Duty
Alternative Fueled Vehicle Plan submitted by the State and approved by
DOE. Under such an alternative compliance plan, a State may satisfy its
acquisition requirements with the voluntary participation of non-
covered State, municipal, and private fleets. However, section
507(o)(2)(A) of the Act states that any State plan must provide for the
acquisition of light duty motor vehicles by State, local and private
fleets, which in aggregate meet or exceed the applicable vehicle
percentage for any given model year.
Section 490.203(3) provides that any acquisition of light duty
alternative fueled vehicles for a State may be part of the Plan,
irrespective of whether the vehicles are in the categories of vehicles
excluded from the definition of ``fleet,'' as enumerated in Sec. 490.3.
This allows for law enforcement vehicles, or other vehicles excluded
from the definition of ``fleet'' to be part of a Light Duty Alternative
Fueled Vehicle Plan.
Unless covered by an exemption, a State is subject to the
requirements in Sec. 490.201. A State also may be required to comply
with the requirements of Sec. 490.201 if a State plan participant (such
as a municipality) fails to fulfill its commitments under the Plan.
However, if the State is able to find a
[[Page 10634]]
substitute participant, then the State may submit to DOE for approval
an amendment to the Plan.
Paragraph (b) of this section requires States to monitor and verify
on an ongoing basis the implementation of its Plan. This is to ensure
that all participants in the Plan are indeed in compliance, and that at
the end of the model year, all requirements will have been met. If for
whatever reasons a participant is unable to fulfill its commitments,
the State is obligated to find a substitute participant before the end
of the year.
Paragraph (c) establishes a general requirement that a State must
submit to DOE, for approval, its Light Duty Alternative Fueled Vehicle
Plan no later than the June 1 prior to the model year(s) covered by the
Plan. However, because section 507(o)(2)(A) of the Act specifies that
States may submit their Plan to the Department within 12 months after
final rule promulgation, DOE will not require States to submit a Plan
for model year 1996, and a plan for model year 1997 may be submitted by
March 14, 1997. After MY 1997, the Department believes that a State
should know by June 1 the number and type of light duty motor vehicles
it plans to acquire during the upcoming model year and should have
begun the procurement process for these vehicles.
A few commenters requested that States opting to comply through
these alternative compliance plans be allowed to use gallons of
petroleum displaced, instead of alternative fueled vehicles acquired,
as the measure of compliance. DOE has not adopted this recommendation
because section 507(o)(2)(A) requires each State alternative compliance
plan to provide for the acquisition of light duty motor vehicles ``in
numbers greater than or equal to the number of State alternative fueled
vehicles required pursuant to [the acquisition schedule in section
507(o)(1)].'' Thus, DOE may not adopt a petroleum displacement
standard, in lieu of requiring alternative fueled vehicle acquisitions,
for compliance under State alternative compliance plans.
Other comments asked DOE to clarify the meaning of ``voluntary''
acquisition. DOE has determined that ``voluntary'' acquisition occurs
when an entity, that is not required by the Act to acquire alternative
fueled vehicles, acquires alternative fueled vehicles. Because
municipalities and private companies, other than those determined to be
covered persons subject to the requirements under section 501, are not
currently required to acquire alternative fueled vehicles, any
acquisition of alternative fueled vehicles by these entities would be
voluntary. In addition, the acquisition of alternative fueled vehicles
by a State agency that is not an operator of a ``fleet,'' because it
does not operate at least 20 vehicles in any of the MSAs/CMSAs found in
Appendix A to subpart A, would be voluntary. The acquisition of
vehicles in categories of excluded vehicles under Sec. 490.3 also would
be voluntary.
A few comments raised the possibility of double counting of
vehicles by private and local government fleets, when and if they are
required to acquire alternative fueled vehicles under a future
rulemaking under section 507 (b) or (g) of the Act. The possibility of
the future allocation of credits for acquisitions by municipal and
private fleets depends upon a DOE finding, by rule, that a municipal or
private fleet program is necessary to meet the Act's fuel replacement
goals. 42 U.S.C. 13257 (b), (e), (f). DOE has not begun a rulemaking to
determine whether to make such a finding. Initiation of such a program
is not a foregone conclusion. Therefore, participation in a State
alternative compliance plan will not conflict with any present, and
possibly future, compliance obligations under the Act.
Section 490.204 Process for Granting Exemptions
Section 507(i)(1) of the Act provides that a State may seek
exemptions in whole or in part from the annual acquisition percentages
in three situations. As interpreted in this final rule, a State may
seek exemption if it can demonstrate that--
(1) Alternative fuels that meet the normal requirements and
practices of the principal business of the State fleet are not
available from fueling sites that will allow the fleet to be centrally
fueled in the area where the vehicles are to be operated; or
(2) Alternative fueled vehicles that meet the normal requirements
and practices of the principal business of the State fleet are not
available for sale or lease commercially on reasonable terms and
conditions within the State; or
(3) The application of such requirements would pose an unreasonable
financial hardship.
Categories 1 and 2 basically track section 507(i)(1) (A) and (B) of
the Act. DOE is aware that all domestic Original Equipment
Manufacturers sell or lease vehicles to fleets exclusively through
their dealerships, the only exception being fleet sales to the Federal
government. Other Original Equipment Manufacturers, such as vehicle
manufacturers that do not belong to the American Automobile
Manufacturers Association, sell or lease their vehicles directly to the
customer without the benefit of a motor vehicle dealer network.
Thus, to receive an exemption based on vehicle unavailability, a
State must show that no Original Equipment Manufacturer can deliver
alternative fueled vehicles to a State fleet on reasonable terms and
conditions that meet the normal requirements and practices of the
principal business of the fleet. An applicant for an exemption must
establish vehicle unavailability by submitting documentation from
vehicle manufacturers or from motor vehicle dealers, as appropriate to
its situation. Documentation requirements are explained in the
discussion of Sec. 490.308 in this Supplementary Information section.
Comments received from State and local governments and fleet
managers regarding the process for granting exemptions because of the
unavailability of alternative fueled vehicles or alternative fuels are
addressed in the discussion of Sec. 490.308, which deals with
exemptions for covered alternative fuel providers. The same statutory
criteria apply to granting exemptions to State government fleets (under
Sec. 490.204) and to covered fuel providers (under Sec. 490.308) when
alternative fueled vehicles or alternative fuels are not available.
Therefore, there is no need to duplicate the discussion of the comments
and the approach that DOE will take in granting exemptions in these
situations.
Regarding category 3, section 507(i)(1)(C) allows States to request
an exemption based on unreasonable financial hardship. Some commenters
requested clarification as to what qualifies as unreasonable financial
hardship. Many of these same commenters suggested the circumstances
that should qualify as a financial hardship. Some commenters
recommended using a life-cycle cost analysis to determine financial
hardship and provided the cost premium and payback period that should
be used. One State provided a formula and specific examples of how to
use the formula in different circumstances. Some commenters recommended
that a financial hardship exemption be granted if an alternative fueled
vehicle's initial cost was some factor greater than the cost of a
conventionally fueled vehicle. A commenter recommended tying a
financial hardship exemption to the national inflation rate. Other
commenters suggested that financial hardship should be recognized if
the
[[Page 10635]]
requirements cause more than a specified percentage increase in the
total fleet's annual budget. Another commenter suggested that if a
State is required to build a fueling facility, a financial hardship
exemption should be granted.
The Department has carefully reviewed all of the comments on this
issue and has concluded that ``unreasonable financial hardship,'' as
used in section 507(i)(1)(C) of the Act, must be determined on a case-
by-case basis. The relevant conditions in States, such as the
availability and cost of alternative fuel, will vary at any point in
time. Therefore, it is not possible to determine now, by rule, that all
States will experience unreasonable financial hardship at some time in
the future if, for example, the cost of alternative fueled vehicles is
a certain percentage or amount above the cost of conventionally-fueled
vehicles.
DOE will evaluate financial hardship exemption requests in light of
the budget constraints in the applicant State. For example, some States
have multi-year budgets, and funding for the acquisition of alternative
fueled vehicles may be insufficient in some model year. That is a
situation in which DOE would likely grant at least a partial exemption
from the requirements based on financial hardship.
DOE received comments requesting confirmation that partial
exemptions may be granted and how they might affect future vehicle
purchases. In response, the Department added paragraph (d) which states
that exemptions may be granted in whole or in part to a State. When
granting an exemption in part, DOE may, depending upon the
circumstances, completely relieve a State from a portion of the vehicle
acquisition requirements for a model year or require a State to acquire
all or some of the exempted vehicles in future years.
Paragraph (g) provides that the Assistant Secretary for Energy
Efficiency and Renewable Energy shall grant or deny a request for
exemption within 45 days. In order to keep the procedures simple, the
Assistant Secretary may act finally for the Department, and there is no
requirement to obtain the specific approval of the Secretary. If the
Assistant Secretary denies the request for exemption, paragraph (h)
further provides that a State may appeal to the Department's Office of
Hearings and Appeals, whose decision would be final for the purpose of
judicial review. Further discussion on the exemption process is found
in section-by-section analysis for the Alternative Fuel Provider
Vehicle Acquisition Mandate.
Section 490.205 Reporting Requirements
Section 490.205 requires each State that is subject to the vehicle
acquisition mandate to submit an annual report to DOE. This report will
assist DOE to determine if a State has met the requirements of this
subpart as well as how successfully the goals and requirements of this
subpart are being met. One commenter suggested that DOE should require
States and fuel providers to report whether a vehicle is dedicated or
dual-fueled and the type of fuel the vehicle is capable of operating
on. The Department has adopted this recommendation, in new
subparagraphs (b)(5) (iv) and (v), because it agrees that this
information is needed to assist DOE in carrying out its
responsibilities under title V.
DOE received several comments regarding the definition of a State
fleet. Some of these comments suggested specific agencies' fleets that
should be included in a State fleet. The most common suggestion was
that State university and college fleets should be included. Other
comments suggested characteristics of agencies for the purpose of
determining whether the fleets of these agencies should be classified
as a State fleet. A few of the comments suggested that the
determination of which agencies are to be included in a State fleet be
left up to each individual State.
Based on these comments, DOE has decided to allow each State to
determine for itself which agencies operate or control a State fleet
for reporting purposes. However, DOE will expect States to follow the
common understanding of what constitutes a ``State agency.'' State
agencies are usually authorized and funded by the State legislature,
receive funding from the State budget, or are situated on State
property. Examples of agencies that DOE expects to be classified as
State agencies are departments, offices and divisions of State
government, State colleges and universities, port authorities, and
other State entities.
In addition to allowing States to determine initially which
agencies are State agencies, DOE is giving States some leeway in how
they report the alternative fueled vehicle acquisitions of the State
agencies. Although DOE would prefer one report from each State that
aggregates the State's alternative fueled vehicle acquisitions, it is
aware that some States may have difficulty aggregating these numbers
due to the unique structure of each State. In place of one aggregate
report for a State, a State may assign a limited number of State
agencies the task of preparing the individual reports for many other
State agencies. For example, a State division of general services might
prepare and submit the report for its fleet along with reports from the
State universities and the State port authority. The State would then
submit these separate reports to DOE as its annual report. DOE believes
these reporting options will lessen the burden on the States.
For further discussion on reporting requirements, see section
490.309.
D. Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate
1. Which Alternative Fuel Providers Must Comply With the Alternative
Fueled Vehicle Acquisition Mandate
The Energy Policy Act of 1992 defines the class of alternative fuel
providers potentially subject to the alternative fueled vehicle
acquisition requirements to include persons who qualify as a ``covered
person'' under section 301(5) of the Act, 42 U.S.C. 13211(5), and fall
within one of the categories of covered alternative fuel providers in
section 501(a)(2). 42 U.S.C. 13251(a)(2). The term ``covered person''
is defined in section 301(5) to mean a person that owns, operates,
leases, or otherwise controls a ``fleet'' (defined at Sec. 490.2) and a
total of at least 50 motor vehicles within the United States. Paragraph
(a)(2) of section 501 describes the categories of covered persons
subject to the requirements as follows:
(A) A covered person, whose principal business is producing,
storing, refining, processing, transporting, distributing, importing,
or selling at wholesale or retail any alternative fuel other than
electricity;
(B) A non-Federal covered person whose principal business is
generating, transmitting, importing, or selling at wholesale or retail
electricity; or
(C) A covered person--
(i) Who produces, imports, or produces and imports in combination,
an average of 50,000 barrels per day or more of petroleum; and
(ii) A substantial portion of whose business is producing
alternative fuels.
42 U.S.C. 13251(a)(2). The final rule interprets the phrase ``principal
business'' at Sec. 490.301.
As illustrated in the Appendix to this Supplementary Information,
even if an entity meets all of the qualifications for a covered
alternative fuel provider under section 501(a)(2), it nevertheless may
be excepted from the vehicle acquisition requirements under section
501(a)(3) or exempted by DOE under section 501(a)(5). Under section
501(a)(3)(A), the vehicle acquisition
[[Page 10636]]
requirements only apply to an affiliate, division or business unit of a
covered person that is substantially engaged in the alternative fuels
business. See Sec. 490.304 (see also Sec. 490.301 for definition of
``substantially engaged''). Moreover, under section 501(a)(3)(B), the
vehicle acquisition requirements do not apply to any entity whose
principal business is transforming alternative fuel into a product
other than alternative fuel or consuming such fuel to manufacture a
product that is not an alternative fuel. Under section 501(a)(5), DOE
may exempt alternative fuel providers from the vehicle acquisition
requirements if they can show either that (1) alternative fuels that
meet their normal business requirements and practices are not
available; or (2) that alternative fueled vehicles that meet their
normal business requirements and practices are not offered for purchase
or lease on reasonable terms and conditions. See Sec. 490.308.
The term ``substantial portion'' in section 501(a)(2)(C) is a key
statutory determinant of whether a covered person that produces or
imports petroleum is an alternative fuel provider required to acquire
alternative fueled vehicles. Section 490.301 defines the term
``substantial portion'' to mean that at least 30 percent of a covered
person's annual gross revenue is derived from the sale of alternative
fuels. This definition is different from the one included in DOE's
notice of proposed rulemaking.
In its notice of proposed rulemaking, DOE defined the term
``substantial portion'' to mean that at least two percent of a covered
person's refinery yield of petroleum products is composed of
alternative fuels. DOE explained that it chose the two percent of
refinery yield threshold because it represented the average yield for
the production of alternative fuels by petroleum refiners, as reported
by the Energy Information Administration. 60 FR 10978. DOE received
many comments that criticized the proposed definition of ``substantial
portion.'' They argued that the two percent of refinery yield was too
low a threshold for classifying an entity as a ``covered person.'' Some
commenters stated that the two percent refinery yield of petroleum
products would impose vehicle acquisition requirements on many
refineries that only produce alternative fuels as incidental by-
products of the refining process, and that the alternative fuel so
produced is not sold as motor fuel. A few of the comments recommended
that DOE adopt a percentage of gross revenue derived from the sale of
alternative fuels as the basis for the definition of ``substantial
portion.'' They pointed out that gross revenue is the measure used for
determining whether other alternative fuel providers are ``covered
persons'' because their principal business is in alternative fuels. In
their view, if gross revenue is used to determine whether an entity's
principal business involves alternative fuels, it also should be used
for determining whether a petroleum producer or importer has a
substantial portion of its business in the production of alternative
fuels.
After reviewing these comments, DOE published a notice on July 31,
1995, reopening the comment period to receive public comments on
alternative definitions of the term ``substantial portion.'' 60 F.R.
38974 (corrected 60 FR 40539, Aug. 9, 1995). DOE stated that it was
persuaded by the comments that a percentage of gross revenue derived
from the sale of alternative fuels may be a better measure of an
entity's involvement in the alternative fuels business than is a
percentage of refinery yield of petroleum products. As pointed out by
some commenters, a gross revenue measure can be applied to all
producers and importers of petroleum, unlike the percent of refinery
yield measure which focuses solely on refining operations.
DOE also invited public comment specifically on the alternative of
defining ``substantial portion'' to mean that at least 30 percent of
the annual gross revenue of a covered person is derived from the sale
of alternative fuels. DOE stated that this percentage of gross revenue
appeared to be an appropriate gross revenue threshold for two reasons.
First, available information shows that major U.S. energy producing
companies historically derive at least 30 percent of their annual gross
revenue from the sale of alternative fuels. Major energy producers are
typically consolidated or integrated companies that are involved in oil
and gas exploration, oil and gas production or importing, petroleum
refining and marketing, transportation of products, other energy
operations (coal, nuclear and other energy) and non-energy businesses
(primarily chemicals). Second, this definition would exclude from the
class of covered persons subject to the vehicle acquisition
requirements those refiners involved only in petroleum refining and
marketing operations and that produce alternative fuels as an
incidental by-product of the refining process. DOE specifically
requested interested persons to submit data or analysis relevant to
this issue.
DOE received approximately 20 comments on the notice inviting
comment on possible alternative definitions of ``substantial portion.''
Two commenters argued strenuously that DOE should adhere to the 2% of
refinery yield threshold for determining which companies are covered
persons. In their view, the 30% gross revenue threshold will exempt too
many refineries and, thus, compromise the Act's goal of reducing the
nation's dependency on foreign oil. Several petroleum refiners and
marketers expressed support for the 30% gross revenue threshold. They
stated that the 30% gross revenue test properly describes the class of
producers and importers of petroleum that Congress intended to be
covered alternative fuel providers.
Several other commenters stated that a 30% of gross revenue
threshold is still too expansive. Their principal argument is that
Congress intended the alternative fueled vehicle mandates to apply only
to entities that deal directly in alternative fuels that are intended
for use as motor fuel. One commenter, for example, argued that any
definition of ``substantial portion'' must exclude materials that are
not sold directly as transportation fuel, such as non-compressed
natural gas or other materials that must be chemically or physically
altered to be used as transportation fuel. Another commenter stated
that the sale of a commodity such as natural gas does not constitute
the sale of an ``alternative fuel'' for transportation purposes. This
commenter further stated that because even compressed natural gas has
several uses, only the sale of compressed natural gas for use in the
storage compartment of a motor vehicle would constitute the sale of
``alternative fuel'' under the Act.
After reviewing the comments on this issue and having analyzed the
statutory text and its legislative history, DOE has concluded for a
variety of reasons that the Act may not be interpreted to limit the
alternative fueled vehicle acquisition mandate to entities that deal
directly in alternative fuel which is intended for use as motor fuel.
First, section 301 defines ``alternative fuel'' to include various
materials, including natural gas and electricity, but it does not limit
the term to fuel produced or handled for transportation purposes. In
this regard, it is significant that ``natural gas,'' rather than
``compressed natural gas'' is included in the definition of
``alternative fuel.'' Second, section 501(a), which imposes the
alternative fueled vehicle acquisition requirements on fuel providers,
does not expressly
[[Page 10637]]
limit coverage to entities that deal in alternative fuel for
transportation purposes. Third, the exemptions provided in section
501(a)(3)(B) necessarily imply that Congress did not intend to limit
the vehicle acquisition requirements to entities that directly deal in
motor fuels. That section exempts entities whose principal business is
``transforming alternative fuels into a product that is not an
alternative fuel'' or ``consuming alternative fuels as a feedstock or
fuel in the manufacture of a product that is not an alternative fuel.''
These exemptions show that Congress expressly addressed the question of
whether there should be an exemption based upon the use of an
``alternative fuel.'' The specification of the two particular
exemptions based upon use in a section that elaborately details
exceptions implies that Congress did not intend to create, or authorize
DOE to create, an exception for all uses of alternative fuels other
than transportation purposes.
In addition, the legislative history of the Act is contrary to the
interpretation recommended by the petroleum company commenters. The
most authoritative source regarding Congress' intent in enacting
section 501 is the Conference Report on the Act. That report's only
discussion of title V of the Act, the alternative fuels title, deals
with precisely this issue:
``The intent of section 501(a)(1) is not to cover all affiliates or
divisions of the many large energy companies which have some, but not
all, of their corporate units engaged in alternative fuels operations.
``For example, the oil and gas production affiliate or division of
a major energy company described in 501(a)(1)(C) would be covered; so
might a propane pipeline unit or a natural gas processing division, if
the 'substantially engaged' test is met.
``But an oil tanker division, a gasoline marketing affiliate, or a
petrochemical unit whose major operations are the production of
plastics, for example, would not be covered.
``The Secretary has broad discretion to define the coverage of this
provision. For example, he may in his discretion exempt some crude oil-
related operations of an oil and gas production affiliate (but not the
gas-related operations), or the petrochemical operations of a covered
methanol unit (but not the methanol-related business).''
H.R. Rep. 102-1018, 102d Cong., 2d Sess. 387 (1992).
There is no relevant Senate report language. However, the House
report on H.R. 776 contains the following explanation of the fuel
provider alternative fueled vehicle acquisition mandate, which sheds
additional light on the question of whether Congress intended to limit
the terms ``substantial portion'' and ``alternative fuel'' to fuels
only used for transportation purposes:
``The program applies to firms owning, for example, natural gas
pipelines or methanol plants. Their ready access to alternative fuel
supplies and their profit motive for developing a growing AFV market
makes them an excellent starting point for a successful transition to
alternative fuels.''
H.R. Rep. 102-474, 102d Cong., 2d Sess. 187 (1992).
Thus, the relevant conference and committee reports clearly show
that Congress foresaw coverage of some oil and gas production
affiliates, propane pipeline units, and natural gas processing
divisions.
The commenters arguing for a limiting interpretation of
``substantial portion'' or ``alternative fuel'' neither relied on any
phrase in the statutory text, nor cited any parts of the above-
referenced legislative reports, to support their narrow interpretation
of these terms. They relied almost entirely upon floor statements of
individual Members of Congress, quoted out of context, which only show
that those Members expected the Act to stimulate the development of an
alternative fueled vehicle market by various incentives and mandates
designed to encourage the replacement of gasoline with alternative
transportation fuels. None of the floor statements show an intent to
limit the term ``alternative fuel'' to transportation fuel, or
``substantial portion'' to fuel providers exclusively in the
alternative transportation fuel business. In comparison to the above-
discussed statutory text and report language, the relevance of these
floor statements to this question is marginal at best.
A few commenters argued that besides limiting ``covered persons''
to entities that directly deal in motor fuel, DOE should adopt a
percentage of gross revenue that is higher than 30 percent. One
commenter argued that if 30 percent of gross revenue represents the
lowest expected alternative fuel activity of major energy producers,
then the gross revenue percentage included in the definition of
``substantial portion'' should be raised to exceed the average of all
major energy producers. However, none of the comments provided
information that contradicts DOE's conclusion that major energy
companies historically derive at least 30 percent of their gross
revenue from the sale of alternative fuels. For the reasons given in
its July 31, 1995 notice (60 FR 38974), DOE concludes that 30 percent
of annual gross revenue derived from the sale of alternative fuels
satisfies the ``substantial portion'' test contained in section
501(a)(2)(C)(ii) of the Act.
A few commenters objected to a percentage of gross revenue measure
to determine ``substantial portion'' on the ground that it would be
more complicated to implement than other measures. One of their main
concerns was that DOE may require covered companies to disclose
confidential information or institute new accounting systems. DOE does
not foresee such a result; instead, it believes coverage can be
determined from existing public documents. As several commenters
requested, this determination will normally be made using information
found in an annual report or an annual Form 10-K report filed with the
Securities and Exchange Commission by covered persons.
2. Section-by-Section Discussion
This section discusses comments on specific provisions of subpart
D. DOE has also included explanations of some provisions that were not
the subject of comment where it believes explanations will assist
regulated entities to comply with this subpart. Some nonsubstantive
changes from the notice of proposed rulemaking, such as renumbering of
rule provisions and nonsubstantive language changes, are not discussed.
Section 490.301 Definitions
Affiliate, Business Unit, and Division. Section 490.301 provides
definitions for the terms ``affiliate,'' ``division,'' and ``business
unit'' which are used in section 501 of the Act. The first two are
dictionary definitions. ``Business unit'' is defined to make clear the
grouping of business activities must be similar in autonomy to
affiliates and divisions. Based on comments, language has been added to
the definitions of ``business unit'' and ``division'' to include the
concept of control. One commenter argued that ``affiliate'' should be
defined as an entity below the covered person in a corporate structure.
DOE has not changed the definition to adopt this narrow interpretation
of the meaning of ``affiliate'' because there is no reason to believe
that Congress intended DOE to define ``affiliate'' at variance with
normal usage.
Alternative Fuels Business. Section 490.301 contains a definition
of the term ``alternative fuels business'' which tracks the language of
section 501(a)(2). No comments specifically critical of this definition
were received.
Normal Requirements and Practices. Section 490.301 defines the term
[[Page 10638]]
``normal requirements and practices'' to mean the operating business
practices and required conditions under which the principal business of
the covered person operates. Several comments were received on this
definition. They are addressed in the discussion of section 490.308,
which deals with exemptions based on the unavailability of alternative
fuel or alternative fueled vehicles.
Principal Business. No comments specifically critical of this
definition were received. Section 490.301 defines the term ``principal
business'' to mean the largest sales-related gross revenue producing
activity. If an organization derives a plurality of gross revenue from
sales-related alternative fuels activity, then the organization's
principal business is alternative fuels. Sales-related in this context
means that the gross revenue does not come from investments such as
corporate stocks. As it is used above, plurality does not require that
over 50 percent of an organization's sales-related gross revenue be
based on activities related to alternative fuels. For example, if an
organization derives 35 percent of its sales-related gross revenue from
alternative fuels and the next largest single source of sales-related
gross revenue comprises 25 percent of the organization's gross revenue,
the organization's principal business is alternative fuels.
Substantially Engaged. Section 490.301 defines the term
``substantially engaged'' to mean that a covered person, or affiliate,
division, or other business unit thereof, regularly derives sales-
related gross revenue from an alternative fuels business. To determine
whether a covered person or affiliate, division, or other business unit
thereof is ``substantially engaged'' in the alternative fuels business,
it is important to look at the involvement the covered person,
affiliate, division, or other business unit has with the alternative
fuels business. Thus, only that affiliate, division, or business unit
that meets the substantially engaged criteria is subject to the
acquisition requirements of this program. A comment was received that
asked DOE not to include business units engaged in alternative fuel
production activities that are incidental to a company's principal
business in this definition. An example given was of a covered fuel
provider whose principal business is manufacturing denatured ethanol,
but which also operates a chain of camping stores that regularly sells
one-liter bottles of propane for use with camping stoves. The
Department would not consider that division to be substantially engaged
in the alternative fuels business if the sale of propane contributes
only an incidental or insignificant amount of the gross revenue of the
chain of stores. DOE does not think this type of situation is likely to
arise. Business units of covered persons that already have been
determined to be in the alternative fuels business, and which regularly
derive revenue from an alternative fuel business, will normally be
substantially engaged in alternative fuels. If rare situations arise in
which that is not the case, DOE can address them through case-by-case
interpretations. Nonetheless, in light of the comment, DOE has revised
the definition of ``substantially engaged'' to clarify that a business
unit will not be subject to acquisition requirements if it only derives
a negligible amount of revenue from alternative fuels.
The covered person is responsible for clearly defining the specific
affiliate, division, or other business unit that is substantially
engaged and is therefore subject to the acquisition requirements of
this rule. If this designation is not made or is not made clearly, DOE
will assume that the entire organization is subject to the acquisition
requirements of this rule and will enforce it as such.
Section 490.302 Vehicle Acquisition Mandate Schedule
Section 490.302 sets forth the schedule for the acquisition of
light duty motor vehicles which alternative fuel providers must comply
with if they are classified as covered persons subject to the
requirements.
One commenter argued that calendar years should be used instead of
model years in the schedule in paragraph (a). Section 501 specifically
requires acquisition on a model year basis. The Department has not
changed the time frame for vehicle acquisition.
Paragraph (b) states that, except as provided by section 490.304,
these requirements apply to all new light duty vehicles acquired by
those business units of covered persons that are substantially engaged
in the alternative fuels business, not just those vehicles acquired for
the fleets which initially qualified the alternative fuel provider as a
subject ``covered person.'' These requirements also apply regardless of
where the new vehicles are to be located. For example, if an
alternative fuel provider, that is a covered person, is acquiring new
light duty motor vehicles for locations that are not within MSAs or
CMSAs, these vehicles must be added to those to be acquired for the
subject MSA/CMSAs before applying the applicable percentage in
paragraph (a) to determine how many of these vehicles must be
alternative fueled vehicles.
DOE received many requests to narrow the acquisition requirements
to only vehicles acquired for use by fleets in the MSA/CMSAs listed in
Appendix A to subpart A. Some commenters stated that DOE has
misinterpreted the Act's requirements for ``covered persons'' by
concluding that all new light duty vehicles acquired by covered fuel
providers must be included in the base for determining the number of
alternative fueled vehicles to be acquired in a model year, regardless
of whether the vehicles will be operated in fleets in MSAs/CMSAs. These
commenters argued that because Congress defined ``covered person'' as a
person that owns or otherwise controls a ``fleet,'' which in turn is
defined to include only vehicles operated in an MSA or CMSA, Congress
intended the MSA/CMSA to be the basic defining criteria for the
acquisition requirements. These commenters also discerned no reason why
Congress would impose a greater burden on fuel providers than on
States. ``Covered person,'' in their view, is simply used in the Act as
a convenient way of referring to covered fuel providers.
Electric utilities argued that the acquisition requirements should
be limited, as a matter of policy, to fleets operated in MSAs/CMSAs.
These commenters stated that forcing covered utilities to purchase
alternative fueled vehicles in rural areas, where the alternative fuels
infrastructure does not exist, is impractical and likely to undermine
development of alternative fueled fleets in urban areas. They stated
that there are not likely to be enough electric vehicles to supply both
areas, and electric vehicles are not suited for operation in many rural
areas because of climate, terrain, and vehicle operational
requirements.
DOE does not agree with comments arguing that it has misconstrued
the provisions of the Act. Section 501(a) states unambiguously that the
acquisition schedules apply to ``the new light duty motor vehicles
acquired by a covered person.'' By contrast, the phrase ``for a fleet''
is used throughout section 507 in reference to the vehicle acquisition
mandates for State, local, and private fleets. The phrase ``for a
fleet'' is not found in section 501. DOE also disagrees with commenters
who stated that Congress could not have intended to impose different
acquisition requirements on States and alternative fuel providers. The
legislative history shows that Congress included a fuel provider
mandate because of fuel
[[Page 10639]]
providers' ``ready access to alternative fuel supplies.'' See Report on
H.R. 776, The Comprehensive National Energy Policy Act, H.R. Rep. 102-
474, 102 Cong. 2d Sess. 197 (1992).
DOE has not, therefore, revised paragraph (b) of Sec. 490.302 as
requested by these commenters. Nevertheless, DOE recognizes the
legitimate concerns of covered persons about acquisition of alternative
fueled vehicles in areas outside of the MSAs/CMSAs listed in Appendix A
of subpart A. DOE believes the Act and the final rule provide adequate
means of providing relief from the requirements when it is justified.
As discussed in connection with Sec. 490.308, section 501(a)(5) of the
Act prescribes a ``simple and reasonable'' process for granting an
exemption from the acquisition requirements if either alternative
fueled vehicles or alternative fuels that meet ``the normal
requirements and practices of the principal business of [the covered
person]'' are not available in the area in which the vehicles are to be
operated. 42 U.S.C. 13251(a)(5). In revising Sec. 490.308, DOE has
added a central fueling criterion and simplified the process for
obtaining an exemption for any covered person whose vehicles are
located outside of MSAs/CMSAs. An exemption will be granted if the
covered person can show that central fueling does not meet the normal
requirements and practices of that person's principal business. In
areas outside of MSAs/CMSAs, the covered person is not required to map
the location of vehicles operational areas and alternative fuel sites
if facts can otherwise be presented to establish that central fueling
is incompatible with its normal requirements and practices.
One commenter questioned the rounding convention in the proposed
rule for calculating acquisition requirements. After reconsidering this
issue, DOE has revised paragraph (c) to provide for rounding up or down
to the next whole number, depending on whether the fraction is greater
or equal to one half or is less than one half.
In response to comments that inquired about what would happen if an
alternative fuel provider grew in size or moved its vehicle operations
to one of the MSAs listed in Appendix A to subpart A, the Department
has added paragraph (e). Paragraph (e) states that if, in the future,
an alternative fuel provider first becomes a covered person subject to
the requirements, the fuel provider shall start acquiring alternative
fueled vehicles the next model year according to the schedule
percentage in effect for that model year. If an alternative fuel
provider is newly classified as a covered person in model year 1997,
then for model year 1998, 50 percent of the covered person's new light
duty motor vehicles must be alternative fueled vehicles. However, DOE
expects that some newly classified covered persons will qualify for at
least a partial exemption under Sec. 490.308 during the start-up
period.
Section 490.303 Who Must Comply
This section tracks section 501(a)(2) of the Act. The criteria for
determining which fuel providers are ``covered persons'' subject to the
vehicle acquisition mandate are discussed at the beginning of the
discussion of subpart F in this Supplementary Information section.
As stated in the notice of proposed rulemaking, municipal gas and
electric utilities possessing the required fleet size, fueling
characteristics, and located within the specified geographical areas
are classified as covered persons under section 501(a)(2)(B).
Therefore, they are expected to comply with the requirements of the
mandate under Sec. 490.302; they will not be subject to any future
municipal fleet mandate imposed by rule under section 507 of the Act.
No public comments critical of this interpretation were received.
The Department received comments seeking clarification regarding
the coverage of holding companies and their subsidiaries and
affiliates. For the purposes of compliance the Department considers the
holding company to be the ``covered person'' and the individual
companies that it owns to be its affiliates. However, once DOE
determines that a holding company is a covered person subject to the
vehicle acquisition mandate, DOE will permit the holding company to
choose to comply with its acquisition requirements either: (1) By
assuming sole responsibility for the holding company's compliance; or
(2) by choosing to have its affiliates which are substantially engaged
in the alternative fuels business assume the responsibility and report
their alternative fueled vehicle acquisitions as separate ``covered
persons.'' Holding companies may prefer one option over the other, and
DOE does not want to inhibit these holding companies in choosing among
options.
Paragraph (b) of Sec. 490.303 describes those covered persons who
are excluded by section 501(a)(3)(B) of the Act from having to comply
with this subpart. Two categories of covered persons are excluded from
the requirements of this regulation: (1) Those who transform
alternative fuels into a product that is not an alternative fuel; and
(2) those who consume alternative fuels as a feedstock or fuel in the
manufacture of a product that is not an alternative fuel.
An example of an excluded person described in paragraph (b)(1)
would be a manufacturer of windshield washer fluid. The manufacturer
would be classified as an excluded person because it blends an
alternative fuel, methanol, in producing windshield washer fluid, which
is not an alternative fuel. An example of an excluded person described
in paragraph (b)(2) would be a company that burns natural gas to
provide a heat source for a manufacturing operation. An example of an
excluded person under both paragraphs (b)(1) and (b) (2) would be an
entity whose principal business is the production of alcoholic
beverages.
Section 490.304 Which New Light Duty Motor Vehicles Are Covered
Under section 501(a)(3)(A) of the Act, if a covered person has more
than one affiliate, division, or other business unit, only an
affiliate, division, or business unit that is ``substantially engaged
in the alternative fuels business'' is subject to the vehicle
acquisition mandate. Section 490.304 reflects the provisions of section
501(a)(3)(A), and should be read in conjunction with the definitions of
``affiliate,'' ``division,'' and ``business unit'' in Sec. 490.301.
Comments which opposed the application of the acquisition schedule
to all new light duty motor vehicles acquired by a covered person are
discussed in the analysis of section 490.302.
Section 490.305 Acquisitions Satisfying the Mandate
Section 490.305 defines the four categories of alternative fueled
vehicle acquisitions that will count toward compliance with section
490.302, including the application of alternative fueled vehicle
credits under Subpart F. These categories provide flexibility for
organizations in acquiring vehicles to meet this regulation. An
alternative fueled light duty motor vehicle shall be considered to be
new, regardless of the model year it was manufactured, if:
(1) The vehicle is an Original Equipment Manufacturer vehicle
capable of operating on alternative fuels and was not previously under
the control of the covered person; or
(2) The vehicle is an after-market converted vehicle and was not
previously under the control of the covered person; or
(3) The vehicle is an Original Equipment Manufacturer vehicle that
has been converted to operate on alternative fuels within four months
[[Page 10640]]
after it comes under the control of the covered person.
A vehicle that meets the description of paragraph (1) is one that
is manufactured by an Original Equipment Manufacturer to be capable of
operating on alternative fuels. For example, if a covered person
acquires a 1994 model year flex-fuel light duty motor vehicle during
model year 1997, this vehicle is classified as being a new acquisition
for that organization. A vehicle that meets the description of
paragraph (2) is one that has been converted to be capable of operating
on alternative fuels before it is acquired by a covered person.
DOE received many comments, from both covered persons subject to
this subpart and States, on its proposal that an Original Equipment
Manufacturer vehicle must be converted prior to its first use in
service in order to be counted for compliance. The majority of these
commenters felt that this requirement was too burdensome on fleet
owners and would result in many vehicles sitting idle while awaiting
conversion. The comments also stated that because delivery schedules
for both vehicles and conversion equipment are unpredictable, it may be
difficult to schedule vehicle conversions to occur when the fleets
would require them. Other comments stated that many fleet operators
break-in a vehicle for up to 1,000 miles in order to determine whether
the vehicle has reliability problems, and that they would engage in the
same break-in period before converting a vehicle to alternative fuel
use. It also was stated that some fleet managers take delivery of
vehicles before deciding which specific vehicles to convert.
Most of the comments received on this issue recommended a specific
time-frame within which the vehicles should be allowed to be converted.
The time-frames recommended ranged from 60 days to 2 years. Various
reasons were provided in support of the specific time-frames, including
that time was needed for conversion equipment to be certified,
scheduling and completing vehicle conversion, and vehicle inspection.
Various time-frames were attributed to each activity (1 to 2 months for
some activities) as well as estimates of the compound effect a possible
delay would have on the total time needed to convert a vehicle.
After analyzing all these comments, DOE has determined that a four
month time period after vehicle acquisition should provide sufficient
time for a fleet to convert a vehicle to operate on alternative fuels.
None of the comments contained information showing that four months is
not an adequate time period for a general requirement. In addition, the
Department's experience with Federal fleet vehicle conversions shows
that a four month time period is more than sufficient to allow for the
conversion of vehicles. All Federal vehicles that were converted in
this program had their conversions completed within a three month time
period.
Many commenters requested the Department to allow the conversion of
vehicles already in service in fleets to count towards compliance once
the rule goes into effect. The notice of proposed rulemaking would not
have allowed the conversion of existing vehicles to count and, after
analyzing the comments, DOE has concluded that conversion of existing
fleet vehicles is not permitted by the Act. Section 501 of the Act
specifically refers to ``* * * new light duty motor vehicles acquired
by a covered person * * *'' 42 U.S.C. 13254(a). As explained in the
discussion of Sec. 490.202 of this Supplementary Information section,
the Department has interpreted this section to mean that vehicles,
regardless of the date of manufacture, must be newly acquired by the
covered person or State in order to count as acquisitions.
A few comments pointed out that the proposed rule did not include
any statement about a fleet operator not being required to acquire
converted vehicles, as provided in section 507(j) of the Act. The
Department has not revised the rule in response to these comments
because it sees no need to restate the statutory provision in this
final rule.
Section 490.306 Vehicle Operation Requirements
Section 490.306 tracks section 501(a)(4) of the Act, which requires
that all alternative fueled vehicles acquired pursuant to section 501
be operated solely on alternative fuels, except when these vehicles are
operating in an area where alternative fuel is not available. DOE
received several comments requesting clarification of whether electric-
hybrid vehicles would be considered to be operating solely on
alternative fuels. In Sec. 490.2, an electric-hybrid vehicle is defined
as ``a vehicle primarily powered by an electric motor that draws
current from rechargeable storage batteries, fuel cells or other
sources of electric current and also relies on a non-electric source of
power.'' DOE also notes that the definition of an electric motor
vehicle in section 601 of the Act may include an electric-hybrid
vehicle. Thus, by definition, an electric-hybrid vehicle is considered
to be an electric vehicle. Many electric-hybrid vehicles are designed
with a non-electric power source which operates on an alternative fuel,
such as a natural gas turbine or a hydrogen fuel cell. DOE recognizes
that some electric-hybrid vehicles may be designed to operate on
gasoline or diesel engines, but in almost all cases these engines
provide supplementary power to the vehicle, while the electricity
generator provides the vast majority of the power to the vehicle's
electric drivetrain. Therefore, the use of these vehicles in a covered
person's fleet meets the requirement for operating solely on
alternative fuels.
The Department also received comments seeking clarification as to
whether fuel providers that operate dual-fueled vehicles will comply
with this section. Inclusion of dual-fueled vehicles in the definition
of ``alternative fueled vehicle'' in section 301 and the qualifying
phrase in section 501(a)(4) of the Act, show that Congress recognized
that some fuel providers may operate in areas where alternative fuels
are not available and that if dual-fueled vehicles are used in these
territories, they may have to refuel on a petroleum-based fuel. It is
clear that, under the Act, the operation of a vehicle on petroleum-
based fuel is allowable as long as the dual-fueled vehicle refuels on
alternative fuel when it travels in an area where alternative fuel is
available.
Section 490.307 Option for Electric Utilities
Section 490.307 deals with the statutory option available to
electric utilities. Paragraph (a) tracks the provisions of section
501(c) of the Act, which provides that a covered person whose principal
business is generating, transmitting, importing, or selling, at
wholesale or retail, electricity has the option of delaying the
alternative fuel vehicle acquisition schedule in section 501(a) of the
Act until January 1, 1998, if that covered person intends to comply
with this regulation by acquiring electric motor vehicles.
DOE received several inquiries as to whether a combination utility,
i.e., a utility that provides both natural gas and electricity, would
be allowed to comply as two separate entities, thereby allowing the
electric side of the utility to apply for the electric utility option.
These comments stated that many combination utilities support both
electric vehicle and natural gas vehicle market development and wish to
comply with the acquisition requirements by acquiring both kinds of
vehicles. The comments stated that the proposed rule appeared to
require combination utilities to choose one type of vehicle only to
comply with their
[[Page 10641]]
acquisition requirements, even though it may be contrary to the
strategic plans of that utility.
The Department has decided to allow the electric affiliate,
division or business unit of a combination utility to apply for a delay
in the implementation of its vehicle acquisition schedule until January
1, 1998. Section 490.307 has been revised to reflect this change by
adding the words ``or its affiliate, division or business unit'' in
paragraphs (a)-(c) and by including these words in new paragraph (d).
In such circumstances, a schedule delay would be granted to that
portion of the utility whose business is the production, generation,
distribution or transmission of electricity.
Paragraph (b) contains the acquisition schedule that an electric
utility, or its affiliate, division or other business unit must comply
with if the Secretary is notified by the required date.
Many commenters argued that if an electric utility, having chosen
the electric utility option, is unable despite a good faith effort to
acquire suitable or sufficient numbers of electric vehicles to meet its
requirements, DOE should grant that utility a full or partial exemption
for the applicable model year. These commenters supported a case-by-
case exemption process that requires utilities to make a showing of
``good faith'' efforts to comply. Some commenters stated that it would
be appropriate to ``roll over'' compliance obligations to succeeding
model years in certain situations (e.g., the inability of automobile
manufacturers to produce sufficient numbers of electric vehicles.)
However, they stated that rolling over requirements would not be
appropriate in other situations (e.g., vehicles that meet the normal
business requirements of the fleet operator are not available).
DOE has added paragraph (c) to clarify that electric utilities that
choose the electric utility option may apply for an exemption under
Sec. 490.308 if alternative fueled vehicles or alternative fuels that
meet their normal requirements and practices are not available.
Many of the electric utility commenters also urged DOE to
categorically provide that an electric utility that chooses to comply
with electric vehicles will never be required to purchase another type
of alternative fueled vehicle to satisfy the acquisition mandate. They
argued that Congress intended that the fuel of choice for covered fuel
providers should be the fuel that fuel provider deals in or sells. They
stated that inclusion of the electric utility option shows that
Congress intended to allow electric utilities to comply with electric
vehicles only. They argued that if an electric utility is ultimately
unable to meet the acquisition schedule, it would be inequitable and
contrary to the Act for DOE to require the utility to acquire some
other type of alternative fueled vehicle. Not only would this force
electric utilities to create a market for a competitor's fuel, it would
require them to divert investment capital away from development of an
electric vehicle market.
DOE is generally sympathetic to these arguments, but the utility
commenters did not identify any statutory text or legislative history
to support their suggestion for a categorical exemption. Nevertheless,
in DOE's view, these arguments may be relevant to requests for
exemptions under Sec. 490.308 from the acquisition requirements on the
basis that non-electric alternative fueled vehicles do not meet the
``normal requirements and practices'' of their principal business. If
utilities can successfully argue that this is generally true, then DOE
is prepared to issue an appropriate interpretive rule.
Comment was received inquiring what would happen to the acquisition
schedule of an electric utility, or its affiliate, division or other
business unit if it chooses to rescind its election of the electric
utility option. In response, DOE has added paragraph (d), which
provides that an electric utility, or its affiliate, division or other
business unit will have to comply with the acquisition schedule in
Sec. 490.302, unless otherwise exempt, if it rescinds its election of
the option.
Section 490.308 Process for Granting Exemptions
Section 490.308 implements the requirements of section 501(a)(5) of
the Act, which provides for a simple and reasonable exemption process
for those covered persons seeking exemptions either because alternative
fuel is not available or alternative fueled vehicles are not reasonably
available. Paragraph (a) describes the procedure that a covered person
needs to complete to receive an exemption.
Paragraph (b) contains the criteria for exemption, as interpreted
by DOE. The first category of exemption is if any covered person
demonstrates to the satisfaction of DOE that alternative fuels that
meet the normal requirements and practices of the principal business of
the covered person's fleet are not available from fueling sites that
will allow the fleet to maintain its centrally fueled character in the
area where the vehicles are to be operated. The second category of
exemption is if any covered person demonstrates to the satisfaction of
DOE that alternative fueled vehicles that meet the normal requirements
and practices of the principal business of that person are not
available for sale or lease on reasonable terms and conditions in any
State included in a MSA/CMSA in which the fleet operates.
These exemptions would be granted for one model year only. To
receive exemptions for additional model years, alternative fuel
providers must reapply to the Department each year. Exemption decisions
will be based on documentation that relates to the criteria for
determining the availability of alternative fuels and alternative
fueled vehicles.
DOE received many comments on the process for obtaining an
exemption when either alternative fuels or alternative fueled vehicles
that meet the normal requirements and practices of the principal
business are not available. Because the statutory criteria for granting
exemptions on these grounds are identical for State government fleets
and covered persons, DOE consolidates here its summary of the comments
of both States and covered fuel providers.
a. Discussion of alternative fuel availability. Most of the
comments on unavailability of fuel focused on the explanation of
Sec. 490.204(a)(1) and Sec. 490.308(a)(1) in the preamble of the notice
of proposed rulemaking, rather than on the text of the proposed rule
provisions. In the notice of proposed rulemaking, DOE explained the
process for determining fuel availability as follows:
[A]n alternative fuel provider must map out the operating area
and base of operations for its fleet of vehicles. Next, it must
locate on the map the alternative fueling facilities within its MSA
or CMSA. Then, for each vehicle, it must determine whether any
location providing alternative fuel is in the area in which the
vehicle is operated. If there is any location providing alternative
fuel within the vehicle's operating area, alternative fuel is
available. If there are no locations providing alternative fuel, for
any alternative fuel that meets the normal requirements and
practices of the covered person's principal business, within the
vehicle's operating area, then alternative fuel is ``not
available.'' 60 F.R. 10980.
Many commenters argued that this explanation of the fuel
availability exemption did not take into account other factors that
must be considered in determining fuel availability. For example,
commenters argued that alternative fuel should not be considered to be
available if--
(1) it is not readily deliverable to motor vehicles because it is
not of the proper composition for motor fuel, or there are no
dispensers of the fuel;
[[Page 10642]]
(2) it is not available at convenient locations and times, or the
fueling facility does not provide the same range of services; or
(3) fueling at an alternative fueling facility significantly
increases the fueling time.
DOE believes these are factors that are properly considered in
determining whether fuel is available that meets ``the normal
requirements and practices'' of the principal business of the covered
person or fleet. DOE will consider factors such as these when
determining whether to grant or deny a request for an exemption because
alternative fuel is not available.
DOE will, to the extent consistent with its statutory
responsibilities, defer to reasonable fleet operators' judgments about
the alternative fueled vehicles and alternative fuels that best meet
their needs. DOE offers the following example to illustrate this:
A State government fleet operator reasonably determines that
vans are the only available vehicles that meet its normal business
requirements and practices. In searching for alternative fueled
vans, the State fleet operator determines that only CNG-powered vans
are available, but CNG is not available in the fleet's operating
area. However, ethanol fueling facilities are available in the
fleet's operating area. Because the State fleet operator has
determined that no ethanol vans are available, it can apply for an
exemption. DOE is likely to grant an exemption under paragraph
(b)(1) for this situation.
Numerous commenters, including many electric utilities, stated that
the proposed exemption requirements would force them to operate
alternative fueled vehicles in rural areas that lack the refueling
infrastructure or are otherwise unsuited to alternative fueled vehicle
use because of terrain, climate, and other factors. Some commenters
argued that an alternative fuel site located near the far edge of a
vehicle's operating range is not a suitable refueling location for the
fleet. Several commenters stated that the requirement of mapping
operating areas and fueling sites is burdensome and impractical. One
commenter argued that if an alternative fuel facility is not available
that allows the fleet to maintain its centrally fueled characteristics,
an exemption should be granted. Other commenters recommended that DOE
revise the rule to specify a distance in miles, beyond which
alternative fuel would be deemed ``unavailable.''
In response to these comments, DOE has revised Sec. 490.308 to
state, in paragraph (b)(1), that alternative fuel is not available if
it cannot be obtained from fueling sites that permit central fueling of
the covered person's fleet. Paragraph (c)(2) provides that a covered
person that operates light duty vehicles outside of the MSAs/CMSAs
listed in Appendix A of Subpart A is not required to map the vehicle
operation zones and alternative fuel site locations if it can otherwise
show that central fueling does not meet the normal requirements and
practices of its principal business.
DOE notes that some of the comments which criticized the proposed
exemption provision reflect a misunderstanding of Sec. 490.306, which
incorporates the Act's requirement that alternative fueled vehicles
owned or controlled by covered persons must operate solely on
alternative fuels. As explained in the discussion of Sec. 490.306, that
requirement does not apply when vehicles are operating in areas where
the appropriate alternative fuel is not available.
b. Discussion of alternative fueled vehicle availability. To
receive an exemption based on the criteria in subparagraph (b)(2), the
covered person (or State fleet operator under Sec. 490.204) must show
that alternative fueled vehicles that meet the normal practices and
requirements of its principal business are not available for commercial
acquisition on reasonable terms and conditions for each MSA/CMSA that
they operate a fleet in, within any of the States a MSA/CMSA comprises.
For example, a covered person operating a fleet in the Louisville MSA
(KY-IN) would have to show that no alternative fueled vehicle that
meets the needs of its fleet are available in Kentucky or Indiana on
reasonable terms and conditions.
Covered fuel providers having vehicles outside of MSAs/CMSAs, which
are centrally fueled or capable of central fueling, must show that
alternative fueled vehicles that meet the normal requirements and
practices of their principal business are not commercially available on
reasonable terms within the States those vehicles operate in.
Many commenters asked for clarification of the factors that DOE
will take into account when determining whether vehicles are
commercially available on reasonable terms and conditions. Some
commenters pointed out that fleets procure vehicles in regular cycles,
and in the case of States, sometimes multi-year cycles. In addition,
the availability of alternative fueled vehicles produced by automobile
manufacturers is limited, and delivery dates are sometimes uncertain.
As a result, States and covered persons claim they may be unable to
acquire alternative fueled vehicles during the model year in which they
are required, even if they have acted in good faith and taken
reasonable steps to meet their requirements. Many electric utilities
submitted comments expressing concern about the consequences of being
unable, despite a good faith effort, to obtain electric vehicles to
satisfy their requirements. See discussion of Sec. 490.307.
DOE will examine each request, and supporting documentation, to
determine whether the State fleet or covered person has acted in good
faith and taken reasonable steps to acquire vehicles for the model year
in question. DOE will take into account the terms and conditions of any
contracts or agreements a State fleet or covered person has entered
into to obtain alternative fueled vehicles, as well as purchase orders
placed by States and covered persons. For this determination, terms and
conditions refer to stipulations, provisions, limitations, and
prerequisites that are included in the contracts or agreements that
enable the covered person to acquire motor vehicles.
If a fleet operator has ordered alternative fueled vehicles during
a model year with a reasonable expectation that they would be delivered
by the end of the model year, DOE will grant an exemption for that
model year if the vehicles are not delivered in time to satisfy the
requirement. Those vehicles would not then count as acquisitions in the
model year in which they were delivered. On the other hand, DOE may not
grant an exemption if it determines that a fleet or covered person has
not made a good faith effort to acquire alternative fueled vehicles for
a model year.
In the case of fuel providers, including utilities choosing the
electric utility option under Sec. 490.307, DOE will take into account
steps the covered person has taken to help develop a market for
alternative fueled vehicles that use the fuel that they provide.
Some commenters stated that requiring a State or covered person to
inquire about alternative fueled vehicle availability from every dealer
in a State is onerous. These commenters stated that the paperwork
burden and the time involved in this process would be excessive. The
Department does not wish to impose an undue paperwork burden on those
States and fuel providers that are required to acquire alternative
fueled vehicles under this program. To lessen the burden, DOE will only
require a State or fuel provider to submit documentation from Original
Equipment Manufacturers showing that
[[Page 10643]]
alternative fueled vehicles meeting its normal requirement and
practices will not be available directly or through any dealer in a
particular State. Returning to the above example of a covered person
operating a fleet in the Louisville MSA, the covered person needs to
provide documentation that shows that Original Equipment Manufacturers
will not provide alternative fueled vehicles that meet its normal
requirements and practices either directly or through a dealer in
Kentucky or Indiana. Thus, the final rule only requires a covered
person to submit documentation from a limited number of sources showing
vehicle unavailability, as opposed to documentation from every dealer
in a State. The Department believes that this will greatly simplify the
process for States and covered persons in determining the availability
of alternative fueled vehicles that meet their normal requirements and
practices.
DOE has added paragraph (e) to clarify that an exemption may be
granted in whole or in part. One situation in which a partial waiver
(e.g., exempting a fleet from model year requirements, but requiring
some or all of the vehicles to be acquired in the next model year) may
be appropriate is when a fleet or covered person cannot acquire
vehicles in time to satisfy a model year's requirements.
Some commenters sought clarification or offered recommendations
concerning the meaning of ``normal requirements and practices'' when
used in determining whether alternative fueled vehicles are available.
Several commenters argued that the range, safety, performance
characteristics, maintainability, cost, cargo capacity and passenger
capacity should be factors included in making that determination. One
commenter stated, for example, that a utility which normally purchases
subcompact cars for reading meters should not be required to purchase
luxury class vehicles if subcompacts are not available. DOE agrees that
all of these factors may be considered in determining whether
alternative fueled vehicles are available that meet the normal
requirements and practices of a State fleet's or covered person's
business.
If a covered person normally acquires vehicles from one automobile
dealer or from one automobile manufacturer, but is unable to acquire
alternative fueled vehicles of the model type needed from these same
sources, this is not sufficient to qualify for an exemption under
subparagraph (b)(2), if appropriate alternative fueled vehicles are
available from other dealers or manufacturers. Having to use another
dealer or manufacturer will not be considered to be outside the normal
requirements and practices of the covered person. The same procedures
that are currently being employed by the covered person to obtain these
vehicles can be used to obtain them from different sources.
Paragraph (b) sets forth the types of documentation in support of
exemption requests that should be provided to DOE.
Section 490.309 Annual Reporting Requirements
Section 490.309 sets forth annual reporting requirements. An annual
report to verify regulation compliance is required of all covered
alternative fuel providers. Paragraph (a) sets forth where and by when
annual reports should be sent.
Paragraph (b) describes the information that must be included in
this annual report. One commenter suggested that DOE should require
States and fuel providers to report whether a vehicle is dedicated or
dual-fueled and the type of fuel the vehicle is capable of operating
on. The Department has determined that this information is necessary
for administering title V of the Act, including monitoring compliance
with the vehicle acquisition requirements. Thus, section 490.309(b)(5)
(iv) and (v) have been added.
Subparagraph (b)(2) requires covered persons to report the number
of new light duty alternative fueled vehicles that they are required to
acquire by section 490.302 or 490.307. To determine this number, a
covered person would multiply the number entered for subparagraph
(b)(1), by the acquisition percentage from section 490.302 or 490.307,
whichever applies for that model year. For example, if the number of
new light duty motor vehicles acquired by a covered person in MY 1998
is 50, the number of new light duty vehicles that are required to be
acquired is 50 percent of 50, or 25 (50 x .5=25). The number of new
light duty alternative fueled vehicles acquired, added to the number of
alternative fueled vehicle credits applied, from subparagraph (b)(4),
should be equal to or greater than the number calculated for
subparagraph (b)(2).
Paragraph (c) sets forth the procedure that a covered person must
follow if it is applying alternative fueled vehicle credits against its
acquisition requirements.
Consistent with the requirements of 5 CFR Part 1320.6(f), paragraph
(d) would require that records related to this reporting requirement be
maintained and retained for a period of three years.
E. Subpart E--Reserved
F. Subpart F--Alternative Fueled Vehicle Credit Program
Background
Section 508 of the Act requires DOE to establish an alternative
fueled vehicle credit program that will allocate alternative fueled
vehicle credits to a fleet or covered person that is required to
acquire alternative fueled vehicles under title V of the Act. Credits
are to be given to a fleet or covered person that acquires alternative
fueled vehicles in excess of the number that fleet or covered person is
required to acquire, or that acquires alternative fueled vehicles prior
to the date that fleet or covered person is required to acquire
alternative fueled vehicles. An alternative fueled vehicle credit may
be used to comply with alternative fuel provider or fleet program
requirements in a later year, or it may be traded to another fleet or
covered person who is required to acquire alternative fueled vehicles
by Part 490.
The purpose of establishing a credit program is to provide
purchasing flexibility for the regulated fleet operators without
sacrificing the program's energy security goals. The general concept is
that some fleet operators may, at times, find it attractive to buy more
alternative fueled vehicles than required, if in doing so they can get
credit against future acquisition requirements, or can sell or transfer
the credits to another party. If the credit program is properly
implemented and managed, there will be no decrease in energy security
compared to a program based strictly on compliance through
acquisitions.
Subject to a restriction on fuel use that must accompany a credit
transferred to a covered fuel provider, alternative fueled vehicle
credits can be traded freely among any of the organizations in the
United States that are required to acquire alternative fueled vehicles.
Because a major goal of the Act is the reduction of our Nation's
dependency on foreign oil, it makes little difference where in the
United States this reduction takes place. This distinguishes the DOE
credit program from credit trading under EPA's Clean Fuel Vehicle
program, which limits trading to transfers within the ``non-
attainment'' areas.
The one restriction on trading is based upon the last sentence of
section 508(d) of the Act, which provides that vehicles generating
credits which are transferred to alternative fuel providers must
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operate solely on alternative fuel, except when operating in an area
where the appropriate alternative fuel is unavailable. 42 U.S.C.
13258(d). This requirement is explained in the discussion of
Sec. 490.506 in this Supplementary Information.
Section 490.502 Creditable Actions
Section 490.502 describes the actions for which DOE will allocate
alternative fueled vehicle credits pursuant to section 508 of the Act.
Section 508(a) of the Act authorizes the allocation of credits to
fleets or covered persons that acquire alternative fueled vehicles in
excess of the number they are required to acquire, or that acquire
alternative fueled vehicles in advance of the date they are required to
be acquired. However, after the Act's alternative fueled vehicle
acquisition requirements become effective under this part, the only way
a fleet or covered person can generate credits is by acquiring
alternative fueled vehicles exceeding the number of vehicles required
to be acquired, calculated as applicable under Sec. 490.201 or
Sec. 490.302. Credits can no longer be allocated for early
acquisitions. For example, an alternative fueled vehicle acquired in
excess of the number required in model year 1997 cannot be claimed to
be an early acquired alternative fueled vehicle for model year 1999.
The excess alternative fueled vehicle will generate 1 alternative
fueled vehicle credit only, not 2 credits because it was acquired 2
years in advance.
Under this provision, the acquisition of alternative fueled
vehicles excluded from acquisition determinations by Sec. 490.3, such
as motor vehicles held for lease or rental to the general public,
emergency vehicles and law enforcement vehicles, will generate credits
that can be used to satisfy the State fleet and alternative fuel
provider acquisition requirements. Similarly, acquisition of
alternative fueled vehicles exceeding 8,500 pounds gross vehicle weight
(i.e., medium and heavy duty vehicles) also will generate credits.
Section 508(b) of the Act provides the statutory basis for this policy
because it refers to the allocation of credits for the excess or early
acquisition of alternative fueled vehicles in excess of the number of
vehicles a fleet or covered person is required to acquire. Credits are
not limited to alternative fueled vehicles that qualify as acquisitions
under the vehicle acquisition mandates for States and fuel providers.
The allowance of credits for the acquisition of medium and heavy
duty alternative fueled vehicles reflects a change from the notice of
proposed rulemaking. In the notice of proposed rulemaking, DOE
discussed whether to allow the acquisition of medium duty and heavy
duty alternative fueled vehicles to generate credits. DOE stated that
many medium duty and heavy duty vehicles are predominantly urban use
vehicles, such as transit buses and delivery trucks, and could take
advantage of the anticipated fueling infrastructure within these urban
areas. DOE also stated that these vehicles possess larger capacity
engines, which consume significantly more fuel than light duty vehicles
and result in increased displacement of petroleum-based fuel and
greater energy security. However, while recognizing these potential
benefits from giving credit for such acquisitions, DOE stated that the
Act prevented allocating credits for the acquisition of medium and
heavy duty vehicles because section 508(b) provides that a credit shall
be allocated for the same ``type'' vehicle as the excess vehicle or
earlier acquired vehicle. The term ``type'' is not defined in the Act,
and nothing in the legislative history of the Act explains it. In the
notice, DOE proposed the interpretation that because the only type of
vehicles that are required to be acquired by title V are light duty
vehicles, credits could not be given for the acquisition of medium and
heavy duty alternative fueled vehicles. See 60 F.R. at 10982.
a. Comments critical of the Department's proposed interpretation.
The Department's proposed interpretation of section 508(b) of the Act,
as applied to allocating credits for the acquisition of medium and
heavy duty vehicles, was the subject of much criticism in public
comments. Commenters argued that the proposed interpretation was not
required by the text of the Act, and that other interpretations would
better further the goals of the Act.
Several commenters pointed out that ``alternative fueled vehicle,''
as defined in section 301(3) of the Act, is not limited to motor
vehicles weighing 8,500 or fewer pounds gross vehicle weight.
Commenters also stated that the term ``class,'' not ``type,'' is
commonly used to distinguish vehicles by weight. Therefore, if Congress
had intended to restrict credits to acquisition of light duty vehicles,
it would not have used the term ``type'' to impose such a restriction.
In support of this argument, commenters noted that the term ``type'' is
used in section 302(a) of the Act to distinguish dedicated and dual
fueled vehicles. Some commenters argued that the statutory language
would have been a peculiarly indirect way for Congress to limit
allocation of credits to acquisition of light duty vehicles. Congress
could have provided that credits shall only be allocated for the
acquisition of light duty alternative fueled vehicles. Or, as one
commenter pointed out, Congress could simply have stated that DOE shall
only allocate credits for early or excess acquisitions. Instead,
section 508(b) states that ``credits shall be allocated for the same
type vehicle as the excess vehicle or earlier acquired vehicle.''
Commenters also argued that although Congress decided not to
require the acquisition of medium and heavy duty vehicles as part of
the mandates, the concerns that influenced that decision are not
present when a State or covered person voluntarily acquires an
alternative fueled medium or heavy duty vehicle. Engine manufacturers
stated that medium and heavy duty vehicles were exempted from the Act's
alternative fueled vehicle acquisition requirements because most heavy
duty engines are not capable of operating on flexible fueling, and the
alternative fueling infrastructure is not developed widely enough to
meet the needs of such dedicated fuel vehicles. Another commenter
suggested that the study of heavy duty vehicles acquired by Federal
government fleets, mandated by section 302(a)(4) of the Act, indicates
that Congress favored including heavy duty vehicles but thought that
more information was needed before requiring States and covered persons
to acquire heavy duty vehicles. Thus, in their view, there is no
inconsistency in limiting the acquisition mandates to light duty
vehicles and allocating credits for the voluntary acquisition of medium
and heavy duty vehicles.
Commenters also argued that interpreting the term ``type'' to
foreclose allocation of credits to acquisition of medium and heavy duty
vehicles would be contrary to the Act's petroleum displacement and air
quality goals. Commenters supplied additional information and reasons
to show that allocating credits for the acquisition of medium and heavy
duty vehicles will promote the goals of the Act. These commenters
stated that allowing credit for the acquisition of medium and heavy
duty alternative fueled vehicles will increase the availability of
alternative fueled vehicles, allow fleets increased flexibility in
acquiring vehicles, and advance the state of alternative fueled vehicle
technology. The California Energy Commission commented that its
extensive experience in alternative fuel infrastructure development
shows that it is critical to have a high volume of alternative fuel
available immediately to achieve the economies of scale needed for
alternative fuels to compete with
[[Page 10645]]
conventional fuels. Another commenter stated that high alternative fuel
usage is needed to permit fleets to offset the higher initial cost of
alternative fueled vehicles. It was argued that allowing credits for
the acquisition of medium and heavy duty vehicles, which use much more
fuel than light duty vehicles, will promote development of the fueling
infrastructure that is essential for covered persons and fleets. Other
commenters stated that the use of alternative fuels in medium and heavy
duty vehicles will contribute to the air quality goals in section 502
of the Act because heavy duty vehicles emit high levels of pollution
when operating on petroleum-based fuels.
b. Response to comments and explanation of the final rule. DOE
agrees with the commenters who argued that interpreting the word
``type'' to restrict allocation of credits to acquisition of light duty
vehicles produces a result that does less to further the Acts's
petroleum displacement and other goals than would allowing credits for
the acquisition of medium and heavy duty vehicles. DOE also is
persuaded that allocating credits for medium and heavy duty vehicle
acquisitions would not be inconsistent with Congress' decision to
exclude medium and heavy duty vehicles from the alternative fueled
vehicle acquisition mandates.
However, DOE is obligated to give effect to the statutory text, and
section 508(b) states that a ``credit shall be allocated for the same
type vehicle as the excess or earlier acquired vehicle.'' Although
commenters suggested various alternative interpretations of this
statutory language, DOE has concluded that none of the commenters'
proposed interpretations is satisfactory. Some commenters suggested
that ``type'' could refer to the Act's requirement that covered
alternative fuel providers must operate vehicles solely on alternative
fuel, except when operating in areas where such fuel is not available.
They suggested that DOE could interpret the type of vehicle restriction
to require that a vehicle which generated a credit must be operated
solely on alternative fuel after the credit's transfer. This
interpretation is unsatisfactory because section 508(d) already
expressly attaches the alternative fuel operation requirement to
credits generated by fuel provider acquisitions. Other commenters
suggested that ``type'' could refer to the type of alternative fuel
used by the vehicle. However, this distinction makes no sense in the
context of the State and alternative fuel provider mandates because
sections 501 and 507(o) are ``fuel neutral,'' i.e., they contain no
distinctions based on type of alternative fuels. Some commenters argued
that the type of vehicle restriction could be interpreted to permit
allocating more credits for alternative fueled vehicles that consume a
large amount of alternative fuel. However, section 508(b) expressly
provides that one credit shall be allocated for the acquisition of
alternative fueled vehicles; thus, multiple credits for vehicles that
consume a large amount of alternative fuel is not permitted.
The statutory text allows one plausible interpretation of the type
of vehicle restriction, which could be applied to address a situation
that might arise under title V of the Act. Unlike sections 501 and
507(o) of the Act, which set forth light duty vehicle acquisition
requirements for States and covered fuel providers, section 507(k)(2)
of the Act authorizes DOE, by rule, to require inclusion of new urban
buses in a private or municipal fleet vehicle acquisition program
established under section established under section 507 (a) or (g). The
type of vehicle restriction in section 508 could apply to prevent a
covered private or municipal fleet operator from satisfying a
requirement to acquire an urban bus with a credit that was generated by
the acquisition of a light duty vehicle. The allocation of a credit for
the acquisition of a light duty vehicle in that situation would
undermine the petroleum displacement and air quality goals of the Act.
If DOE proposes a private and municipal fleet program in the future,
DOE may propose amendments to subpart F in order to reflect the
``type'' of vehicle restriction. Experience under the Alternative Fuel
Transportation Program may reveal other possible applications of the
type of vehicle restriction in section 508(b). In that event, DOE will
give effect to this language through case-by-case application of the
statutory provision or by proposing an amendment of these regulations.
In summary, it is not clear what Congress intended by including the
type of vehicle restriction in section 508. However, after
reconsidering this issue, DOE has concluded that whatever that
statutory language means, it cannot be interpreted to mean that credits
may not be allocated for the acquisition of medium and heavy duty
vehicles under this part. Therefore, Sec. 490.502 has been revised to
treat the acquisition of new medium and heavy duty vehicles the same as
vehicles excluded under the section 490.3. Both involve the acquisition
of an alternative fueled vehicle in addition to the number of
alternative fueled vehicles that a fleet is required to acquire. Thus,
both should generate credit.
The Department received comments requesting that credits be
allocated for conversions of fleet vehicles to alternative fueled
vehicles before the effective date of the acquisition requirements.
These commenters argued that they had been converting vehicles since
1992, believing that they would receive credits for these conversions
pursuant to section 508 of the Act.
DOE can accommodate these comments to a limited extent because its
discretion to allocate credits for conversions that occur prior to the
effective date of the acquisition requirements is limited by the terms
of the Act. Section 508(a) provides, in relevant part, that DOE shall
allocate a credit to a fleet or covered person that ``acquires an
alternative fueled vehicle * * * before the date that fleet or covered
person is required to acquire an alternative fueled vehicle under
[title V].'' 42 U.S.C. 13258(a). It is clear from this statutory text
that an alternative fueled vehicle must be acquired by a fleet or
covered person subject to the Act's acquisition requirements in order
for a credit to be allocated for that vehicle. The conversion of a
vehicle already in service in a fleet on October 24, 1992, the
effective date of the Act, would not satisfy this acquisition
requirement. In addition, there is no statutory provision authorizing
DOE to allocate credits for the acquisition of alternative fueled
vehicles prior to the effective date of the Act.
Thus, DOE will allocate credits to a State fleet or covered person
subject to the acquisition requirements only if it purchased or leased
a motor vehicle on or after October 24, 1992, and converted it to an
alternative fueled vehicle before the effective date of the applicable
acquisition requirements. For purposes of calculating credits for early
acquisition of these vehicles, DOE will consider the date of the
conversion to be the acquisition date. Paragraph (c) of Sec. 490.502
has been added to make clear that the four-month time limit on
conversions, established by Sec. 490.202(a)(3) and Sec. 490.305(a)(3)
of this rule, shall not be applied retroactively to any conversion that
occurred before the date this rule takes effect.
Some commenters recommended that DOE should award credits based on
the amount of petroleum displaced, rather than for the early or excess
acquisition of an alternative fueled vehicle. These commenters argued
that awarding credits based on the amount of petroleum displaced will
encourage the use of more alternative fuel than the
[[Page 10646]]
current proposal. Again, section 508 of the Act does not allow DOE to
adopt this recommendation. Section 508 states that credits shall be
awarded for the acquisition of alternative fueled vehicles by fleets
and covered persons that are required to acquire alternative fueled
vehicles. By implication, therefore, DOE may not award credits based on
the amount of petroleum displaced.
Several commenters requested that DOE award credits to fleets not
currently subject to acquisition mandates, such as fuel provider,
private, municipal and State agency fleets that, although not required
to obtain vehicles, voluntarily have chosen to acquire alternative
fueled vehicles. These commenters argue that awarding credits to these
fleets would increase acquisitions of alternative fueled vehicles,
which will boost petroleum displacement and aid in the development of a
market for alternative fuels and alternative fueled vehicles. The
Department agrees that the voluntary acquisition of alternative fueled
vehicles by these fleets would result in increased petroleum
displacement and bolster the alternative fuels market. However, section
508(a) states unambiguously that ``the Secretary shall allocate a
credit to a fleet or covered person that is required to acquire an
alternative fueled vehicle * * *'' 42 U.S.C. 13258(a) (emphasis added).
Thus, a fleet or covered person must be required by the Act to acquire
alternative fueled vehicles before credits can be allocated to them.
Non-mandated fleets are not eligible to earn credits.
Section 490.503 Credit Allocation
Section 490.503 deals with alternative fueled vehicle credit
allocation. Paragraphs (a) and (b) are consistent with the language of
section 508(a) of the Act, which describes how credits are to be
allocated. Before alternative fueled vehicle credits are allocated a
covered person or fleet must apply for them using the procedure
described in Sec. 490.507.
Paragraph (a) provides for the allocation of one credit for each
alternative fueled vehicle a fleet or covered person acquires that
exceeds the number of light duty alternative fueled vehicles that fleet
or person is required to acquire. Thus, if a fleet or covered person is
required to acquire 10 light duty alternative fueled vehicles in a
model year and it acquires 15 alternative fueled vehicles, it can apply
for allocation of five alternative fueled vehicle credits.
Paragraph (b) provides for the allocation of one credit for each
year an alternative fueled vehicle is acquired in advance of the date
the fleet or covered person is required to acquire alternative fueled
vehicles. For State fleets and covered persons, excluding States that
elect to submit an alternative plan under Sec. 490.203 and those
covered persons that choose the electric utility option provided by
Sec. 490.307, the requirements shall take effect on September 1, 1996,
the beginning of MY 1997. States that comply through alternative plans
approved by DOE may be exempt from MY 1997 requirements, in which case
the acquisition requirements will take effect for them on September 1,
1997, the beginning of MY 1998. For those covered persons that have
taken the electric utility option provided by Sec. 490.307, the
effective date is January 1, 1998. Credits will be awarded for the
acquisition of light, medium, and heavy duty alternative fueled
vehicles, and for alternative fueled vehicles excluded by Sec. 490.3,
prior to these dates.
Private and municipal fleets are not required by this rule to
acquire alternative fueled vehicles. If DOE later establishes a private
and municipal fleet program through rulemaking under section 507 (b) or
(g) of the Act, all alternative fueled motor vehicles newly acquired
between October 24, 1992 and the start date of the private and local
fleet mandate would be eligible for credit allocation at the rate of
one credit for each year an alternative fueled vehicle is acquired in
advance of the effective dates of those mandates.
Several commenters suggested that dedicated vehicles should receive
double the credits of dual-fuel or flexible-fuel vehicles. DOE does not
have the statutory authority to allocate credits in this manner.
Section 508(b) of the Act provides for the allocation of credits for
``alternative fueled vehicles'' acquired by fleets and covered persons
subject to the Act's requirements, and it does not differentiate
between dedicated and dual-fuel vehicles. This is consistent with the
definition of ``alternative fueled vehicle'' in section 301(3), which
includes both dedicated and dual-fuel vehicles.
Credit allocation is best explained by the following examples.
Example 1. A covered person acquires 10 alternative fueled
vehicles in MY 1994 and 15 alternative fueled vehicles in MY 1995.
The covered person acquires no alternative fueled vehicles in MY
1996. Because the covered person is not required to acquire
alternative fueled vehicles until MY 1997, each alternative fueled
vehicle acquired in MY 1994 will generate 3 credits and each
alternative fueled vehicle acquired in MY 1995 will generate 2
credits. Thus, the covered person generates 60 credits
[(10 x 3)+(15 x 2)=60], which can be used against that person's
future alternative fueled vehicle acquisition requirements or can be
traded to other covered persons or fleets.
Example 2. An electric utility that has chosen the option
provided by Sec. 490.507 acquires 10 electric vehicles in each of
calendar years 1993 through 1997. Since the electric utility is not
required to acquire alternative fueled vehicles until January 1,
1998, credits are generated on a calendar year basis for the early
acquisition of alternative fueled vehicles. Thus each electric
vehicle acquired in calendar year 1993 will earn 5 credits because
it was acquired 5 years early. Similar logic ensues for acquisitions
in subsequent years. Thus, the electric utility generates 150
credits [(10 x 5)+(10 x 4)+(10 x 3)+(10 x 2)+(10 x 1)=150] for the
acquisition of 50 electric vehicles from 1993 to 1997. These credits
can be used against the utility's future alternative fueled vehicle
acquisition requirements or can be traded.
Example 3. A State fleet acquires 20 alternative fueled vehicles
in model years 1995 and 1996. Thus, the State has earned 60 credits
prior to the start of the program [(20 x 2)+(20 x 1)]=60. The State
fleet also plans to acquire 20 alternative fueled vehicles in model
years 1997 and 1998. The State fleet regularly acquires 100 new
light duty vehicles each year. For model years 1997 and 1998 the
State fleet's acquisition requirements are 10 and 15 alternative
fueled vehicles, respectively. If the State actually acquires 20
alternative fueled vehicles in model years 1997 and 1998, it will
have acquired 10 vehicles in excess of its requirement for model
year 1997 and 5 vehicles in excess of its requirement for model year
1998. These excess acquisitions would earn the State fleet 10 and 5
credits, respectively. Thus, the State fleet has earned credits for
both early and excess acquisitions of alternative fueled vehicles.
The total number of credits the State fleet will have earned for
model years 1995 through 1998 is 75 (60+10+5)=75. These credits can
be used against the State fleet's future alternative fueled vehicle
acquisition requirements or can be traded.
DOE will establish a computer database that will serve as a record
of credit allocations, trades and credit balances.
Section 490.504 Use of Alternative Fueled Vehicle Credit
No comments specifically critical of this section were received.
However, the Office of Management and Budget requested that
Sec. 490.504 be revised to clarify that one credit represents the
acquisition of one alternative fueled vehicle in a model year for which
a fleet or covered person is required to acquire alternative fueled
vehicles. Each alternative fueled vehicle credit will represent one
alternative fueled vehicle and can be applied against the alternative
fueled vehicle acquisition requirements for one model year only, as
designated by the fleet or covered person. Section 490.504 has been
revised accordingly.
[[Page 10647]]
Section 490.505 Credit Accounts
Section 490.505 deals with Alternative Fueled Vehicle Credit
accounts. Paragraph (a) states that DOE will establish a credit account
for each fleet or covered person who obtains an alternative fueled
vehicle credit. Paragraph (b) states that each fleet or covered person
will receive an annual credit account balance statement after the
receipt and recording of its annual activity report.
In the proposed rule, DOE indicated that it was considering
providing updated credit account balance statements to fleets and
covered persons upon request during the year. These updated credit
account balance statements would constitute proof of a fleet or covered
person's credit account balance as of the date they were printed. These
statements may be required of a credit seller by a credit purchaser
before proceeding with the credit transfer. DOE asked for comment on
whether credit account balance statements should be provided for a
charge. Several comments were received on this issue, all opposing a
fee for these statements. DOE has decided to provide these statements
at no cost to the requestor, but it may in the future decide to limit
the number of reports that will be provided free of charge. DOE will
provide notice, by publication in the Federal Register, and directly to
affected State fleets and covered persons, if it later finds that it is
necessary to limit the number of statements that it will provide free
of charge.
Section 490.506 Alternative Fuel Vehicle Credit Transfers
No comments specifically critical of this section were received.
Section 490.506 deals with the transfer of alternative fueled vehicle
credits. Paragraph (a) states that any fleet or covered person may
transfer an alternative fueled vehicle credit to any fleet required to
acquire alternative fueled vehicles, or to a covered person if the
transferor certifies to the covered person that the vehicle which
generated the credit will operate solely on alternative fuel, except
when the vehicle is operated in an area where the appropriate
alternative fuel is unavailable. This restriction on the transfer of
credits to a covered person is required by section 508(d) of the Act.
42 U.S.C. 13258(d).
Paragraph (b) states that proof of credit transfer should be
provided to DOE within thirty days of the transfer date, and provides
for the use of a DOE form, or other written documentation containing
the dated signatures of the transferor and transferee. This is a change
from a proposed requirement to report credit transfers within seven
days. Seven days was criticized as being insufficient time by
commenters.
Section 490.507 Credit Activity Reporting Requirements
Section 490.507 describes the credit program's activity reporting
requirements. An annual report is required of all fleets or covered
persons who have generated or traded alternative fueled vehicle credits
to record and track their credit activity. One commenter urged DOE to
drop the reporting requirement, and only require the retention of
credit activity records. DOE has not adopted this recommendation
because the credit reports are essential for monitoring compliance with
the vehicle acquisition requirements. Reporting will also aid the
development of an alternative fueled vehicle credit market.
Paragraph (a) sets forth where and by when annual reports should be
sent. Paragraph (b) describes the required information that would be
included in this annual report. Subparagraph (b)(1) allows a fleet or
covered person to report either the number of alternative fueled
vehicles acquired in excess of acquisition requirements for the model
year or the number of alternative fueled vehicles acquired in advance
of the start date of the acquisition requirements. Except for covered
persons that choose that electric utility option or States that elect
to submit an alternative compliance plan, States and covered persons
subject to section 501 of the Act can no longer earn credits for early
acquisition of alternative fueled vehicles after September 1, 1996, the
beginning of model year 1997.
G. Subpart G--Investigations and Enforcement
This subpart elicited few public comments. The only specific
recommendation received was a request that DOE add a provision that
would give States 90 days advance notice of its intent to bring an
action to enforce compliance with the Act's alternative fueled vehicle
acquisition requirements. DOE agrees that such advance notice would
generally be desirable for both States and covered persons. However,
there may be some situations where it would not be appropriate, such as
the repeated, willful refusal to comply with the acquisition
requirements. Thus, DOE has added a sentence to Sec. 490.605, Statement
of Enforcement Policy, which states that DOE normally will not commence
an enforcement action against a person subject to the acquisition
requirements without giving that person notice of its intent 90 days
before the beginning of an enforcement proceeding.
IV. Review Under Executive Order 12612
Executive Order 12612, 52 FR 41685 (October 30, 1987), requires
that regulations, rules, legislation, and any other policy actions be
reviewed for any substantial direct effect on States, on the
relationship between the National Government and the States, or in the
distribution of power and responsibilities among various levels of
government. If there are substantial effects, then the Executive Order
requires a preparation of a Federalism assessment to be used in all
decisions involved in promulgating and implementing policy action.
This rule implements the alternative fueled vehicle acquisition
requirements in section 507(o) of the Act, which apply to State
government fleets. It also establishes an Alternative Fueled Vehicle
Credit Program under which States may generate credits if they obtain
alternative fueled vehicles in excess of their required quantity or if
they obtain alternative fueled vehicles prior to the date when they are
required to acquire alternative fueled vehicles. The allocation of
credits is based on the measurable actions of obtaining alternative
fueled vehicles and is available to fleets, that meet the requirements,
throughout the United States.
The granting of credits to States will be handled in the same
manner as the granting of credits to any other covered fleet operator.
The enforcement of the State fleet mandate will be handled in the same
manner as other mandate programs. States can also apply for a hardship
exemption which would exempt them from acquiring alternative fueled
vehicles in any given year.
The Department has determined that since States are treated the
same as any other fleet operator in the allocation of credits and in
the administration and enforcement of the fleet mandate, the final rule
will not have a substantial direct effect on the institutional
interests or traditional functions of States. In addition, the
provision for hardship exemptions included in the State fleet mandate
precludes any impermissible expansion of the authority that the Federal
government has over States.
Section X of this Supplementary Information addresses the potential
costs to States of this final rule.
[[Page 10648]]
V. Review Under Executive Order 12778
Section 2 of Executive Order 12778 instructs each agency to adhere
to certain requirements in promulgating new regulations. These
requirements, set forth in sections 2(a) and (b)(2), include
eliminating drafting errors and needless ambiguity, drafting the
regulations to minimize litigation by providing clear and certain legal
standards for affected legal conduct, and promoting simplification and
burden reduction. Agencies are also instructed to make every reasonable
effort to ensure that the regulation describes any administrative
proceeding to be available prior to judicial review and any provisions
for the exhaustion of administrative remedies. DOE certifies that this
rule meets the requirements of sections 2(a) and (b)(2) of Executive
Order 12778.
VI. Review Under Executive Order 12866
Today's regulatory action was subject to review under Executive
Order 12866, Regulatory Planning and Review (October 4, 1993) by the
Office of Information and Regulatory Affairs (OIRA). Although DOE
concluded that the final rule would not result in (1) an annual effect
on the economy of $100 million or more or (2) have significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of the United States-based enterprises to
compete in domestic export markets, OIRA nevertheless determined this
rulemaking to be a significant regulatory action under the Executive
Order and requested that DOE prepare a cost analysis. A copy of that
cost analysis is in the administrative record on file in DOE's Freedom
of Information Reading Room.
The cost analysis that was performed for the proposed rule spans,
the 25-year time frame from 1995 to 2020 , and it includes the
incremental vehicle purchase cost and the cost differential between
alternative fuels and gasoline under five different scenarios. The
analysis examines the effects the rule will have on the acquisition of
alternative fueled vehicles by fuel providers and State fleets,
exclusive of the effects of non-mandated acquisition of vehicles by
these and other fleets. In doing so it assumes that no alternative
fueled vehicles will be acquired by these fleets prior to model year
1996. In actuality, these fleets currently are acquiring alternative
fueled vehicles--either because of economics, State laws or business
strategies--and will probably continue to do so in the future.
Assumptions about the number of vehicles acquired, the operating
characteristics of those vehicles, fleet vehicle replacement rates,
current and future alternative fueled vehicle incremental costs, and
current and future retail fuel costs were based on previous analyses
undertaken by the Department. The analysis did not include estimates of
the effects of any Federal and State tax incentives for the acquisition
of alternative fueled vehicles.
The cost analysis of the proposed rule shows that the costs to fuel
providers and State fleets in complying with the rule varies depending
upon vehicle type, fuel type and fuel consumption, but in no case would
the estimated annual costs exceed $61 million per year. More typically,
under the various scenarios, the estimated annual costs are
approximately $25 million, decreasing to $10 million per year in later
years.
The Department sought comments on all aspects of its analysis. In
particular, the Department requested comment on the following elements
of the analysis: the retail and net-of-excise-tax future price
projections for gasoline and alternative fuels; the assumption that
alternative fueled vehicle purchases, that would result in apparent
life-cycle cost savings, would not occur in the absence of this rule;
and the assumption that the cost per gallon of gasoline displaced falls
as the amount of gasoline displaced increases and data that would aid
in estimating the extra refueling costs for covered persons whose
fleets use fuels other than the one they themselves provide.
Several comments were received on the Department's cost analysis.
The comments were centered on the estimated fuel and vehicle costs that
were included in the analysis. Commenters claimed that the estimated
prices for gasoline were high while the estimated prices for
alternative fuel were low. These commenters also stated that the
incremental alternative fueled vehicle prices included in the cost
analysis were low. Another commenter stated that the projected cost of
gasoline was understated in DOE's cost analysis because it did not
include energy security and environmental costs. A few commenters
stated that DOE did not consider the additional costs of operating
alternative fueled vehicles, such as the time and labor required for
travel to refueling sites and the extra cost of more frequent
refueling.
One commenter submitted an especially detailed critique of the
Department's cost analysis. This commenter's main criticism was that
DOE did not conduct a sensitivity analysis using a range of plausible
fuel and vehicle cost assumptions. This commenter performed a
sensitivity analysis of DOE's ``gaseous fuel vehicle dominant
scenario'' by analyzing additional cases that used increased fuel and
vehicle cost assumptions. This analysis utilized EIA fuel cost data for
some of these cases. Based on the sensitivity analysis, this commenter
argued that the net present value of the overall costs of the proposed
rule is likely to exceed $100 million annually, for a few years, using
moderate price assumptions. Thus, the commenter concluded that DOE is
required to perform a full-scale economic impact analysis under
Executive Order 12866.
DOE found this comment to be generally helpful for evaluating the
costs of the proposed rule, although it disagrees that compliance with
the rule will impose costs on States and fuel providers that exceed
$100 million annually. First, the comment that the rule requires a full
assessment of costs and benefits was based on calculations of cost
using undiscounted values. Applying a discount rate is a standard
aspect of commonly accepted cost impact analyses. Had this commenter
used any reasonable discount rate, its cost analysis would have shown
the costs to be less than $100 million dollars in any one year. Second,
this commenter also calculated the costs for one of the most costly
scenarios included in the DOE cost analysis, the gaseous fueled vehicle
dominant scenario. This scenario assumes that natural gas vehicles will
represent 75 percent of the new alternative fueled vehicles, LPG
(propane) will represent 15 percent, and methanol flexible fuel
vehicles will represent 10 percent of vehicles required to be acquired
annually under the rule. Scenarios included in DOE's analysis that
project dominant use of flexible fueled vehicles, which are believed
more likely for State government fleets, result in much lower costs.
While plausible estimates of the future costs of fuel and
alternative fueled vehicles may differ, the greatest uncertainty about
the future costs of the rule stems from the difficulty of predicting
the choices of vehicles and fuels that will be made by covered States
and fuel providers. In reconsidering the cost analysis in light of the
comments, DOE has conducted (and placed in the record of the
rulemaking) a supplemental cost analysis that estimates the costs that
would result if fleets chose to meet their requirements by acquiring
vehicles that operate exclusively one fuel. Although
[[Page 10649]]
some fleets are not expected to acquire vehicles that operate
exclusively on one fuel, the analysis is useful for estimating the
range of possible costs. Analyses were performed for acquisitions
comprised exclusively of methanol, ethanol, natural gas or propane
vehicles. The supplemental cost analysis uses EIA fuel cost estimates
and current wholesale fuel prices, together with the most current
information in DOE's possession on fleet size, incremental vehicle
cost, vehicle turnover and fuel consumption. In conducting the
supplemental analysis, DOE did not consider the additional costs of
operating alternative fueled vehicles (e.g., the time and labor
required for travel to refueling sites and the extra cost of more
frequent refueling). DOE acknowledges that there may be additional
operational costs associated with the operation of some types of
alternative fueled vehicles. However, it is not feasible, at a
reasonable cost, to quantify such costs because of the uniqueness of
each fleet's operational characteristics (e.g., geographic location,
fuel cost, labor rate, etc.)
The results of DOE's supplemental analysis show that over the first
5 years of the program, the costs to State and fuel provider fleets
together could range from a low of $5 million per year if alcohol
fueled AFVs are acquired, up to a maximum total cost of $75 million per
year if AFVs using gaseous fuels are acquired (occurring during the
fifth year of the program when acquisition requirements reach their
highest level). After the first five years of the program, DOE expects
that economies of scale will result in steadily decreasing alternative
fueled vehicle incremental costs.
VII. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, was
enacted by Congress to ensure that small entities do not face
significant negative economic impact as a result of Government
regulations. In instances where significant impacts are possible on a
substantial number of entities, agencies are required to perform a
regulatory flexibility analysis.
DOE has determined that this rule will not have a significant
negative impact on a substantial number of small entities. To be
covered by this rulemaking, an organization must own, operate or
control at least 50 light duty motor vehicles, of which at least 20
light duty motor vehicles used primarily within a single MSA or CMSA
must be capable of being centrally fueled. An organization that fits
this description is usually not a small organization.
VIII. Review Under the Paperwork Reduction Act
New information collection requirements subject to the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq., and recordkeeping requirements
are included by this rulemaking. Accordingly, this notice has been
submitted to the Office of Management and Budget for review and
approval of paperwork requirements. The information DOE will collect
through the reporting requirements in the rule is necessary to
determine whether an organization is in compliance with the regulation
and whether they are eligible for the allocation of alternative fueled
vehicle credits. The frequency of the information collection is
annually and is due four months after the end of the compliance period
(the model year). It is estimated the number of organizations
submitting reports will be approximately 1000 for the years 1997
through 1999. The estimated number of organizations who will be
submitting reports after that date has not been determined.
The public reporting burden is estimated to average 12 hours per
response, including time for reviewing instructions, searching existing
data sources, gathering and maintaining the data needed, and completing
and retrieving the collection of information. The collection of
information contained in this rule is considered the least burdensome
for the Department of Energy functions to comply with the legal
requirements and achieve program objectives.
IX. Review Under the National Environmental Policy Act
This rule establishes procedures for the implementation of an
Alternative Fuel Transportation Program, which are required to assist
in and monitor the progress of State fleet and certain alternative fuel
providers compliance activity. The rule provides for reporting
procedures to demonstrate compliance with the alternative fueled
vehicle acquisition mandates as specified by title V of the Energy
Policy Act of 1992, and it includes procedures for interpretive
rulings, exemption, appeals, and the approval process for State plans.
The rule also establishes and defines the parameters for who must
comply, the parts of a vehicle inventory which are affected by the
acquisition mandates, the allocation of credits for voluntary
acquisitions, the investigation and enforcement in the assessment of
civil penalties, and the contents of a State's light duty alternative
fueled vehicle plan. Because of the foregoing non-procedural parts of
the rule, the Department has prepared an Environmental Assessment (EA).
The EA assesses the environmental effects of the alternative fueled
vehicle acquisitions required by this rule and compares these effects
to that of a no action alternative, whereby fleets would continue to
purchase conventionally fueled vehicles. The EA finds that the
alternative fueled vehicle acquisitions required by the rule would
decrease State and alternative fuel provider fleet emissions of non-
methane organic gases, carbon monoxide, nitrogen oxides, particulate
matter and carbon dioxide for all scenarios examined. The reduction of
these pollutants on a vehicle-by-vehicle comparison is sizeable.
However, because the number of alternative fueled vehicles compared to
the country's total population is small, the magnitude of these
beneficial environmental effects are small. A less than 3% decrease in
cumulative emissions from all highway vehicles in the U.S. is estimated
at the end of the 25-year study period in 2020. However, the vehicles
acquired due to this program and the associated emissions improvements
would be concentrated in metropolitan areas.
For each of the pollutant-scenario combinations, the results show a
reduction in the emission levels. When the emissions from year 2020 are
compared with 1993 National Mobile Source Emissions, the reductions
range from 0.001% for NOX in the Gaseous Fuel Dominant Scenario to
0.15% for CO in the Gaseous Fuel Dominant with EVs Scenario and the New
Technology Dominant Scenario. When the emissions from the entire 25-
year study period are compared with 1993 National Mobile Source
Emissions, the reductions range from 0.02% for NOX in the Gaseous
Fuel Dominant Scenario to 2.53% for CO in the Gaseous Fuel Dominant
with EVs Scenario.
Based on the analysis in the Environmental Assessment, the
Department has determined that the implementation of the Alternative
Transportation Program does not constitute a major Federal action
significantly affecting the quality of the human environment, within
the meaning of the NEPA. Therefore, the preparation of an Environmental
Impact Statement is not required and the Department today is publishing
a Finding of No Significant Impact elsewhere in this issue.
[[Page 10650]]
X. Impact on State Governments
Section 1(b)(9) of Executive Order 12866 (``Regulatory Planning and
Review''), 58 FR 51735 (September 30, 1993) established the following
principle for agencies to follow in rulemakings: ``Wherever feasible,
agencies shall seek views of appropriate State, local, and tribal
officials before imposing regulatory requirements that might
significantly or uniquely affect those governmental entities. Each
agency shall assess the effects of Federal regulations on State, local,
and tribal governments, including specifically the availability of
resources to carry out those mandates, and seek to minimize those
burdens that uniquely or significantly affect such governmental
entities, consistent with achieving regulatory objectives. In addition,
agencies shall seek to harmonize Federal regulatory actions with
regulated State, local and tribal regulatory and other governmental
functions.'' Executive Order 12875 (``Enhancing Intergovernmental
Partnership''), 58 FR 58093 (October 26, 1993) provides for reduction
or mitigation, to the extent allowed by law, of the burden on State,
local, and tribal governments of unfunded Federal mandates not required
by statute.
Title II of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-
4, requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and tribal governments and the
private sector, other than to the extent such actions merely
incorporate requirements specifically set forth in a statute. Section
202 of that title requires a Federal agency to perform a detailed
assessment of the anticipated costs and benefits of any rule that
includes a Federal mandate which may result in costs to State, local,
or tribal governments, or to the private sector, of $100 million or
more. Section 204 of that title requires each agency that proposes a
rule containing a significant Federal intergovernmental mandate to
develop an effective process for obtaining meaningful and timely input
from elected officers of State, local, and tribal governments. The
Department estimates that, in the aggregate, the costs to States in
model year 1997 will be between $3.3 million and $7.4 million. The
annual aggregate costs to the States should never exceed $13 million in
FY 1995 dollars. The annual aggregate costs to State, local, and tribal
governments and the private sector should never exceed $100 million in
FY 1995 dollars. Therefore, preparation of a formal unfunded mandate
analysis is not required. Because the rule does not contain a
significant intergovernmental mandate, the procedural requirements in
section 204 also do not apply to this rulemaking. However, DOE invited
written comments and held three public hearings on the proposed rule.
DOE received numerous comments and oral testimony from State elected
officials and representatives of State executive offices and agencies
with an interest in the subject of this rulemaking.
Section 507(o) of the Act explicitly prescribes the alternative
fueled vehicle acquisition mandate for States which is reflected in
subpart C of the regulation. Although the Act does not specifically
authorize appropriation of funds to fully defray the costs of
compliance, the costs and impact of the mandate are mitigated in a
number of respects.
First, section 507(o) authorizes approval of acceptable alternative
State plans to comply with the acquisition mandate by enlisting
voluntary commitments from other fleet operators with fleets that are
not subject to vehicle acquisition requirements under the Energy Policy
Act of 1992. This gives States flexibility in developing a strategy for
meeting the Act's vehicle acquisition percentages.
Second, section 507(i) authorizes the Department to grant
exemptions from vehicle acquisition requirements for States in cases of
financial hardship, in addition to exemptions when alternative fuel and
alternative fueled vehicles are not available.
Third, Congress has authorized DOE to provide financial assistance
to States for alternative fuel transportation programs. Section 409 of
the Act specifically authorizes DOE to provide technical and financial
assistance to States for this purpose. No funds have been appropriated
yet for the section 409 program. However, DOE is currently developing a
program to provide funds to States, some of which could be used to
offset the incremental cost of obtaining alternative fueled vehicles
required by this rule.
In developing this rule, the Department consulted with a focus
group of State officials from the National Association of State Energy
Officials which represents energy offices in 53 States, territories and
the District of Columbia. The principal concern expressed by some of
these officials was the potential for conflict between the DOE program
and similar programs operating under EPA or State regulations. With
respect to EPA, DOE has attempted to avoid unnecessary differences
between its regulations and those already promulgated by EPA.
It is important that the overlap between the regulations and the
EPA regulations is limited because the DOE program would apply in MSAs
and CMSAs with a 1980 Bureau of Census population of 250,000 or more,
and the EPA program applies only in non-attainment areas. Of the 22
non-attainment areas identified by EPA (59 FR 50043), nine areas in
California and Texas are included in applications those States have
filed with EPA to opt out of the EPA Clean Fuel Fleet Program. Those
applications were pending as of the date of publication of this notice.
In addition, DOE has been advised that EPA expects those areas within
the Ozone Transport Commission (located in the Eastern United States)
to be included in State requests to opt out of the program upon
inception of the 49-State Low Emission Vehicle Program.
List of Subjects in 10 CFR Part 490
Appeal procedures, Energy, Energy conservation, Fuel, Gasoline,
Motor vehicles, Oil imports, Petroleum, Recordkeeping and Reporting
requirements, and Utilities.
Issued in Washington, DC on March 5, 1996.
Brian T. Castelli,
Chief-of-Staff, Energy Efficiency and Renewable Energy.
BILLING CODE 6450-01-P
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BILLING CODE 6450-01-C
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For the reasons set forth in the Preamble, Title 10, Chapter II,
Subchapter D, of the Code of Federal Regulations is amended by adding a
new Part 490 as set forth below:
PART 490--ALTERNATIVE FUEL TRANSPORTATION PROGRAM
Subpart A--General Provisions
Sec.
490.1 Purpose and scope.
490.2 Definitions.
490.3 Excluded vehicles.
490.4 General information inquiries.
490.5 Requests for an interpretive ruling.
490.6 Petitions for generally applicable rulemaking.
490.7 Relationship to other law.
Appendix A to Subpart A of Part 490--Metropolitan Statistical Areas/
Consolidated Metropolitan Statistical Areas with 1980 Populations of
250,000 or More
Subpart B--[Reserved]
Subpart C--Mandatory State Fleet Program
490.200 Purpose and scope.
490.201 Alternative fueled vehicle acquisition mandate schedule.
490.202 Acquisitions satisfying the mandate.
490.203 Light Duty Alternative Fueled Vehicle plan.
490.204 Process for granting exemptions.
490.205 Reporting requirements.
490.206 Violations.
Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate
490.300 Purpose and scope.
490.301 Definitions.
490.302 Vehicle acquisition mandate schedule.
490.303 Who must comply.
490.304 Which new light duty motor vehicles are covered.
490.305 Acquisitions satisfying the mandate.
490.306 Vehicle operation requirements.
490.307 Option for electric utilities.
490.308 Process for granting exemptions.
490.309 Annual reporting requirements.
490.310 Violations.
Subpart E--[Reserved]
Subpart F--Alternative Fueled Vehicle Credit Program
490.500 Purpose and scope.
490.501 Applicability.
490.502 Creditable actions.
490.503 Credit allocation.
490.504 Use of alternative fueled vehicle credits.
490.505 Credit accounts.
490.506 Alternative fueled vehicle credit transfers.
490.507 Credit activity reporting requirements.
Subpart G--Investigations and Enforcement
490.600 Purpose and scope.
490.601 Powers of the Secretary.
490.602 Special orders.
490.603 Prohibited acts.
490.604 Penalties and fines.
490.605 Statement of enforcement policy.
490.606 Proposed assessments and orders.
490.607 Appeals.
Authority: 42 U.S.C. 7191, 13211, 13235, 13251, 13257, 13258,
13260-3.
Subpart A--General Provisions
Sec. 490.1 Purpose and Scope.
(a) The provisions of this part implement the alternative fuel
transportation program under titles III, IV, V, and VI of the Energy
Policy Act of 1992. (Pub. L. 102-486)
(b) The provisions of this subpart cover the definitions applicable
throughout this part and procedures to obtain an interpretive ruling
and to petition for a generally applicable rule to amend this part.
Sec. 490.2 Definitions.
The following definitions apply to this part--
Acquire means to take into possession or control.
Act means the Energy Policy Act of 1992 (Pub. L. 102-486) and any
amendments thereof.
After-Market Converted Vehicle means an Original Equipment
Manufacturer vehicle that is reconfigured by a conversion company,
which is not under contract to the Original Equipment Manufacturer, to
operate on an alternative fuel and whose conversion kit components are
under warranty of the conversion company.
Alternative Fuel means methanol, denatured ethanol, and other
alcohols; mixtures containing 85 percent or more by volume of methanol,
denatured ethanol, and other alcohols with gasoline or other fuels;
natural gas; liquefied petroleum gas; hydrogen; coal-derived liquid
fuels; fuels (other than alcohol) derived from biological materials
(including neat biodiesel); and electricity (including electricity from
solar energy).
Alternative Fueled Vehicle means a dedicated vehicle or a dual
fueled vehicle (including a flexible fuel vehicle as defined by this
section).
Assistant Secretary means the Assistant Secretary for Energy
Efficiency and Renewable Energy or any other DOE official to whom the
Assistant Secretary's duties under this part may be redelegated by the
Secretary.
Automobile means a 4-wheeled vehicle propelled by conventional
fuel, or by alternative fuel, manufactured primarily for use on public
streets, roads, and highways (except a vehicle operated only on a rail
line), and rated at
(1) Not more than 6,000 pounds gross vehicle weight; or
(2) More than 6,000, but less than 10,000 pounds gross vehicle
weight, if the Secretary of Transportation has decided, by rule, that
the vehicle meets the criteria in section 501(1) of the Motor Vehicle
Information and Cost Savings Act, as amended, 49 U.S.C. 32901(a)(3).
Capable of Being Centrally Fueled means a vehicle can be refueled
at least 75 percent of its time at the location that is owned,
operated, or controlled by the fleet or covered person, or is under
contract with the fleet or covered person for refueling purposes.
Centrally Fueled means that a vehicle is fueled at least 75 percent
of the time at a location that is owned, operated, or controlled by the
fleet or covered person, or is under contract with the fleet or covered
person for refueling purposes.
Control--
(1) When it is used to determine whether one person controls
another or whether two persons are under common control, means any one
or a combination of the following:
(i) A third person or firm has equity ownership of 51 percent or
more in each of two firms; or
(ii) Two or more firms have common corporate officers, in whole or
in substantial part, who are responsible for the day-to-day operation
of the companies; or
(iii) One person or firm leases, operates, or supervises 51 percent
or more of the equipment and/or facilities of another person or firm;
owns 51 percent or more of the equipment and/or facilities of another
person or firm; or has equity ownership of 51 percent or more of
another person or firm.
(2) When it is used to refer to the management of vehicles, means a
person has the authority to decide who can operate a particular
vehicle, and the purposes for which the vehicle can be operated.
Covered Person means a person that owns, operates, leases, or
otherwise controls--
(1) A fleet, as defined by this section, that contains at least 20
light duty motor vehicles that are centrally fueled or capable of being
centrally fueled, and are used primarily within a metropolitan
statistical area or a consolidated metropolitan statistical area, as
established by the Bureau of the Census, with a 1980 population of
250,000 or more (as set forth in Appendix A to this subpart) or in a
Federal Register notice; and
(2) at least 50 light duty motor vehicles within the United States.
Dealer Demonstration Vehicle means any vehicle that is operated by
a motor
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vehicle dealer solely for the purpose of promoting motor vehicle sales,
either on the sales lot or through other marketing or sales promotions,
or for permitting potential purchasers to drive the vehicle for pre-
purchase or pre-lease evaluation.
Dedicated Vehicle means--
(1) An automobile that operates solely on alternative fuel; or
(2) A motor vehicle, other than an automobile, that operates solely
on alternative fuel.
DOE means the Department of Energy.
Dual Fueled Vehicle means--
(1) An automobile that meets the criteria for a dual fueled
automobile as that term is defined in section 513(h)(1)(C) of the Motor
Vehicle Information and Cost Savings Act, 49 U.S.C. 32901(a)(8); or
(2) A motor vehicle, other than an automobile, that is capable of
operating on alternative fuel and on gasoline or diesel fuel; or
(3) A flexible fuel vehicle.
Electric-hybrid Vehicle means a vehicle primarily powered by an
electric motor that draws current from rechargeable storage batteries,
fuel cells or other sources of electric current and also relies on a
non-electric source of power.
Electric Motor Vehicle means a motor vehicle primarily powered by
an electric motor that draws current from rechargeable storage
batteries, fuel cells, photovoltaic arrays, or other sources of
electric current and may include an electric-hybrid vehicle.
Emergency Motor Vehicle means any vehicle that is legally
authorized by a government authority to exceed the speed limit to
transport people and equipment to and from situations in which speed is
required to save lives or property, such as a rescue vehicle, fire
truck or ambulance.
Fleet means a group of 20 or more light duty motor vehicles,
excluding certain categories of vehicles as provided by section 490.3,
used primarily in a metropolitan statistical area or consolidated
metropolitan statistical area, as established by the Bureau of the
Census as of December 31, 1992, with a 1980 Census population of more
than 250,000 (listed in Appendix A to this Subpart), that are centrally
fueled or capable of being centrally fueled, and are owned, operated,
leased, or otherwise controlled--
(1) By a person who owns, operates, leases, or otherwise controls
50 or more light duty motor vehicles within the United States and its
possessions and territories;
(2) By any person who controls such person;
(3) By any person controlled by such person; and
(4) By any person under common control with such person.
Flexible Fuel Vehicle means any motor vehicle engineered and
designed to be operated on any mixture of two or more different fuels.
Law Enforcement Motor Vehicle means any vehicle which is primarily
operated by a civilian or military police officer or sheriff, or by
personnel of the Federal Bureau of Investigation, the Drug Enforcement
Administration, or other enforcement agencies of the Federal
government, or by State highway patrols, municipal law enforcement, or
other similar enforcement agencies, and which is used for the purpose
of law enforcement activities including, but not limited to, chase,
apprehension, and surveillance of people engaged in or potentially
engaged in unlawful activities.
Lease means the use and control of a motor vehicle for
transportation purposes pursuant to a rental contract or similar
arrangement with a term of 120 days or more.
Light Duty Motor Vehicle means a light duty truck or light duty
vehicle, as such terms are defined under section 216(7) of the Clean
Air Act (42 U.S.C. Sec. 7550(7)), having a gross vehicle weight rating
of 8,500 pounds or less, before any after-market conversion to
alternative fuel operation.
Model Year means the period from September 1 of the previous
calendar year through August 31.
Motor Vehicle means a self-propelled vehicle, other than a non-road
vehicle, designed for transporting persons or property on a street or
highway.
Non-road Vehicle means a vehicle not licensed for on-road use,
including such vehicles used principally for industrial, farming or
commercial use, for rail transportation, at an airport, or for marine
purposes.
Original Equipment Manufacturer means a manufacturer that provides
the original design and materials for assembly and manufacture of its
product.
Original Equipment Manufacturer Vehicle means a vehicle engineered,
designed, produced and warranted by an Original Equipment Manufacturer.
Person means any individual, partnership, corporation, voluntary
association, joint stock company, business trust, Governmental entity,
or other legal entity in the United States except United States
Government entities.
State means any of the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, and any other territory or possession of
the United States.
Used Primarily, as utilized in the definition of ``fleet,'' means
that a majority of a vehicle's total annual miles are accumulated
within a covered metropolitan or consolidated metropolitan statistical
area.
Sec. 490.3 Excluded vehicles.
When counting light duty motor vehicles to determine under this
part whether a person has a fleet or to calculate alternative fueled
vehicle acquisition requirements, the following vehicles are excluded--
(a) Motor vehicles held for lease or rental to the general public,
including vehicles that are owned or controlled primarily for the
purpose of short-term rental or extended-term leasing, without a
driver, pursuant to a contract;
(b) Motor vehicles held for sale by motor vehicle dealers,
including demonstration motor vehicles;
(c) Motor vehicles used for motor vehicle manufacturer product
evaluations or tests, including but not limited to, light duty motor
vehicles owned or held by a university research department, independent
testing laboratory, or other such evaluation facility, solely for the
purpose of evaluating the performance of such vehicle for engineering,
research and development or quality control reasons;
(d) Law enforcement vehicles;
(e) Emergency motor vehicles;
(f) Motor vehicles acquired and used for purposes that the
Secretary of Defense has certified to DOE must be exempt for national
security reasons;
(g) Nonroad vehicles; and
(h) Motor vehicles which, when not in use, are normally parked at
the personal residences of the individuals that usually operate them,
rather than at a central refueling, maintenance, or business location.
Sec. 490.4 General information inquiries.
DOE responses to inquiries with regard to the provisions of this
part that are not filed in compliance with Secs. 490.5 or 490.6 of this
part constitute general information and the responses provided shall
not be binding on DOE.
Sec. 490.5 Requests for an interpretive ruling.
(a) Right to file. Any person who is or may be subject to this part
shall have the right to file a request for an interpretive ruling on a
question with regard to how the regulations apply to particular facts
and circumstances.
(b) How to file. A request for an interpretive ruling shall be
filed--
(1) With the Assistant Secretary;
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(2) In an envelope labeled ``Request for Interpretive Ruling under
10 CFR Part 490;'' and
(3) By messenger or mail at the Office of Energy Efficiency and
Renewable Energy, EE-33, U.S. Department of Energy, 1000 Independence
Avenue, S.W., Washington, D.C. 20585 or at such other address as DOE
may provide by notice in the Federal Register.
(c) Content of request for interpretive ruling. At a minimum, a
request under this section shall--
(1) Be in writing;
(2) Be labeled ``Request for Interpretive Ruling Under 10 CFR Part
490;''
(3) Identify the name, address, telephone number, and any
designated representative of the person requesting the interpretive
ruling;
(4) State the facts and circumstances relevant to the request;
(5) Be accompanied by copies of relevant supporting documents, if
any;
(6) Specifically identify the pertinent regulations and the related
question on which an interpretive ruling is sought with regard to the
relevant facts and circumstances; and
(7) Contain any arguments in support of the terms of an
interpretation the requester is seeking.
(d) Public comment. DOE may give public notice of any request for
an interpretive ruling and invite public comment.
(e) Opportunity to respond to public comment. DOE may provide an
opportunity for any person who requested an interpretive ruling to
respond to public comments.
(f) Other sources of information. DOE may--
(1) Conduct an investigation of any statement in a request;
(2) Consider any other source of information in evaluating a
request for an interpretive ruling; and
(3) Rely on previously issued interpretive rulings dealing with the
same or a related issue.
(g) Informal conference. DOE, on its own initiative, may convene an
informal conference with the person requesting an interpretive ruling.
(h) Effect of an interpretive ruling. The authority of an
interpretive ruling shall be limited to the person requesting such
ruling and shall depend on the accuracy and completeness of the facts
and circumstances on which the interpretive ruling is based. An
interpretive ruling by the Assistant Secretary shall be final for DOE.
(i) Reliance on an interpretive ruling. No person who obtains an
interpretive ruling under this section shall be subject to an
enforcement action for civil penalties or criminal fines for actions
reasonably taken in reliance thereon, but a person may not act in
reliance on an interpretive ruling that is administratively rescinded
or modified, judicially invalidated, or its prospective effect is
overruled by statute or regulation.
(j) Denials of requests for an interpretive ruling. DOE shall deny
a request for an interpretive ruling if DOE determines that--
(1) There is insufficient information upon which to base an
interpretive ruling;
(2) The questions posed should be treated in a general notice of
proposed rulemaking under 42 U.S.C. 7191 and 5 U.S.C. 553;
(3) There is an adequate procedure elsewhere in this part for
addressing the question posed such as a petition for exemption; or
(4) For other good cause.
(k) Public file. DOE may file a copy of an interpretive ruling in a
public file labeled ``Interpretive Rulings Under 10 CFR Part 490''
which shall be available during normal business hours for public
inspection at the DOE Freedom of Information Reading Room at 1000
Independence Avenue, SW, Washington, DC 20585, or at such other
addresses as DOE may announce in a Federal Register notice.
Sec. 490.6 Petitions for generally applicable rulemaking.
(a) Right to file. Pursuant to 42 U.S.C. 7191 and 5 U.S.C. 553(e),
any person may file a petition for generally applicable rulemaking
under titles III, IV, and V of the Act with the DOE General Counsel.
(b) How to file. A petition for generally applicable rulemaking
under this section shall be filed by mail or messenger in an envelope
addressed to the Office of General Counsel, GC-1, U.S. Department of
Energy, 1000 Independence Avenue, S.W., Washington, D.C. 20585.
(c) Content of rulemaking petitions. A petition under this section
must--
(1) Be labeled ``Petition for Rulemaking Under 10 CFR Part 490'';
(2) Describe with particularity the terms of the rule being sought;
(3) Identify the provisions of law that direct, authorize, or
affect the issuance of the rules being sought; and
(4) Explain why DOE should not choose to make policy by precedent
through interpretive rulings, petitions for exemption, or other
adjudications.
(d) Determination upon rulemaking petitions. After considering the
petition and other information deemed to be appropriate, DOE may grant
the petition and issue an appropriate rulemaking notice, or deny the
petition because the rule being sought--
(1) Would be inconsistent with statutory law;
(2) Would establish a generally applicable policy in an area that
should be left to case-by-case determinations;
(3) Would establish a policy inconsistent with the underlying
statutory purposes; or
(4) For other good cause.
Sec. 490.7 Relationship to other law.
(a) Nothing in this part shall be construed to require or authorize
sale of, or conversion to, light duty alternative fueled motor vehicles
in violation of applicable regulations of any Federal, State or local
government agency.
(b) Nothing in this part shall be construed to require or authorize
the use of a motor fuel in violation of applicable regulations of any
Federal, State, or local government agency.
Appendix A To Subpart A of Part 490
Metropolitan Statistical Areas/Consolidated Metropolitan
Statistical Areas With 1980 Populations of 250,000 or more
Albany-Schenectady-Troy MSA NY
Albuquerque MSA NM
Allentown-Bethlehem-Easton MSA PA
Appleton-Oshkosh-Neenah MSA WI
Atlanta MSA GA
Augusta-Aiken MSA GA-SC
Austin-San Marcos MSA TX
Bakersfield MSA CA
Baton Rouge MSA LA
Beaumont-Port Arthur MSA TX
Binghamton MSA NY
Birmingham MSA AL
Boise City MSA ID
Boston-Worcester-Lawrence CMSA MA-NH-ME-CT
Buffalo-Niagara Falls MSA NY
Canton-Massillon MSA OH
Charleston MSA SC
Charleston MSA WV
Charlotte-Gastonia-Rock Hill MSA NC-SC
Chattanooga MSA TN-GA
Chicago-Gary-Kenosha CMSA IL-IN-WI
Cincinnati-Hamilton CMSA OH-KY-IN
Cleveland-Akron CMSA OH
Colorado Springs MSA CO
Columbia MSA SC
Columbus MSA OH
Columbus MSA GA-AL
Corpus Christi MSA TX
Dallas-Fort Worth CMSA TX
Davenport-Moline-Rock Island MSA IA-IL
Dayton-Springfield MSA OH
Daytona Beach MSA FL
Denver-Boulder-Greeley CMSA CO
Des Moines MSA IA
Detroit-Ann Arbor-Flint CMSA MI
Duluth MSA MN-WI
El Paso MSA TX
Erie MSA PA
Eugene-Springfield MSA OR
Evansville-Henderson MSA IN-KY
Fort Wayne MSA IN
Fresno MSA CA
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Grand Rapids-Muskegon-Holland MSA MI
Greensboro-Winston Salem-High Point MSA NC
Greenville-Spartanburg-Anderson MSA SC
Harrisburg-Lebanon-Carlisle MSA PA
Hartford MSA CT
Hickory-Morganton MSA NC
Honolulu MSA HI
Houston-Galveston-Brazoria CMSA TX
Huntington-Ashland MSA WV-KY-OH
Indianapolis MSA IN
Jackson MSA MS
Jacksonville MSA FL
Johnson City-Kingsport-Bristol MSA TN-VA
Johnstown MSA PA
Kalamazoo-Battle Creek MSA MI
Kansas City MSA MO-KS
Knoxville MSA TN
Lakeland-Winter Haven MSA FL
Lancaster MSA PA
Lansing-East Lansing MSA MI
Las Vegas MSA NV-AZ
Lexington MSA KY
Little Rock-N. Little Rock MSA AR
Los Angeles-Riverside-Orange County CMSA CA
Louisville MSA KY-IN
Macon MSA GA
Madison MSA WI
McAllen-Edinburg-Mission MSA TX
Melbourne-Titusville-Palm Bay MSA FL
Memphis MSA TN-AR-MS
Miami-Fort Lauderdale CMSA FL
Milwaukee-Racine CMSA WI
Minneapolis-St. Paul MSA MN-WI
Mobile MSA AL
Modesto MSA CA
Montgomery MSA AL
Nashville MSA TN
New London-Norwich MSA CT-RI
New Orleans MSA LA
New York-N. New Jersey-Long Island CMSA NY-NJ-CT-PA
Norfolk-Virginia Beach-Newport News MSA VA-NC
Oklahoma City MSA OK
Omaha MSA NE-IA
Orlando MSA FL
Pensacola MSA FL
Peoria-Pekin MSA IL
Philadelphia-Wilmington-Atlantic City CMSA PA-NJ DE-MD
Phoenix-Mesa MSA AZ
Pittsburgh MSA PA
Portland-Salem CMSA OR-WA
Providence-Fall River-Warwick MSA RI-MA
Raleigh-Durham-Chapel Hill MSA NC
Reading MSA PA
Richmond-Petersburg MSA VA
Rochester MSA NY
Rockford MSA IL
Sacramento-Yolo CMSA CA
Saginaw-Bay City-Midland MSA MI
St. Louis MSA MO-IL
Salinas MSA CA
Salt Lake City-Ogden MSA UT
San Antonio MSA TX
San Diego MSA CA
San Francisco-Oakland-San Jose CMSA CA
San Juan MSA PR
Santa Barbara-Santa Maria-Lompoc MSA CA
Scranton-Wilkes Barre-Hazleton MSA PA
Seattle-Tacoma-Bremerton CMSA WA
Shreveport-Bossier City MSA LA
Spokane MSA WA
Springfield MSA MA
Stockton-Lodi MSA CA
Syracuse MSA NY
Tampa-St. Petersburg-Clearwater MSA FL
Toledo MSA OH
Tucson MSA AZ
Tulsa MSA OK
Utica-Rome MSA NY
Washington-Baltimore CMSA DC-MD-VA-WV
West Palm Beach-Boca Raton MSA FL
Wichita MSA KS
York MSA PA
Youngstown-Warren MSA OH
Subpart B--[Reserved]
Subpart C--Mandatory State Fleet Program
Sec. 490.200 Purpose and scope.
This subpart sets forth rules implementing the provisions of
Section 507(o) of the Act which requires, subject to some exemptions,
that certain percentages of new light duty motor vehicles acquired for
State fleets be alternative fueled vehicles.
Sec. 490.201 Alternative fueled vehicle acquisition mandate schedule.
(a) Except as otherwise provided in this part, of the new light
duty motor vehicles acquired annually for State government fleets,
including agencies thereof but excluding municipal fleets, the
following percentages shall be alternative fueled vehicles for the
following model years;
(1) 10 percent for model year 1997;
(2) 15 percent for model year 1998;
(3) 25 percent for model year 1999;
(4) 50 percent for model year 2000; and
(5) 75 percent for model year 2001 and thereafter.
(b) Each State shall calculate its alternative fueled vehicle
acquisition requirements for the State government fleets, including
agencies thereof, by applying the alternative fueled vehicle
acquisition percentages for each model year to the total number of new
light duty motor vehicles to be acquired during that model year for
those fleets.
(c) If the calculation performed under paragraph (b) of this
section produces a number that requires the acquisition of a partial
vehicle, an adjustment to the acquisition number will be made by
rounding the number of vehicles down the next whole number if the
fraction is less than one half and by rounding the number of vehicles
up to the next whole number if the fraction is equal to or greater than
one half.
(d) A State fleet that first becomes subject to this part after
model year 1997 shall acquire alternative fueled vehicles in the next
model year at the percentage applicable to that model year according to
the schedule in paragraph (a) of this section, unless the State is
granted an exemption or reduction of the acquisition percentage
pursuant to the procedures and criteria in section 490.204.
Sec. 490.202 Acquisitions satisfying the mandate.
The following actions within a model year qualify as acquisitions
for the purpose of compliance with the requirements of section 490.201
of this part:
(a) The purchase or lease of an Original Equipment Manufacturer
light duty vehicle (regardless of the model year of manufacture),
capable of operating on alternative fuels that was not previously under
control of the State or State agency;
(b) The purchase or lease of an after-market converted light duty
vehicle (regardless of model year of manufacture), that was not
previously under control of the State or State agency;
(c) The conversion of a newly purchased or leased light duty
vehicle to operate on alternative fuels within four months after the
vehicle is acquired for a State fleet; and
(d) The application of alternative fueled vehicle credits allocated
under subpart F of this part.
Sec. 490.203 Light Duty Alternative Fueled Vehicle Plan.
(a) General Provisions. (1) In lieu of meeting its requirements
under section 490.201 exclusively with acquisitions for State fleets, a
State may follow a Light Duty Alternative Fueled Vehicle Plan that has
been approved by DOE under this section.
(2) Any Light Duty Alternative Fueled Vehicle Plan must provide for
voluntary acquisitions or conversions, or combinations thereof, by
State, local, and private fleets that equal or exceed the State's
alternative fuel vehicle acquisition requirement under section 490.201.
(3) Any acquisitions of light duty alternative fueled vehicles by
participants in the State plan may be included for purposes of
compliance, irrespective of whether the vehicles are in excluded
categories set forth in section 490.3 of this part.
(4) Except as provided in paragraph (h) of this section or except
for a fleet exempt under section 490.204, a State that does not have an
approved plan in effect under this section is subject to the State
fleet acquisition percentage requirements of section 490.201.
(5) If a significant commitment under an approved plan is not met
by a participant of a plan, the State shall
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meet its percentage requirements under section 490.201 or submit to DOE
an amendment to the plan for DOE approval.
(b) Required elements of a plan. Each plan must include the
following elements:
(1) Certification by the Governor, or the Governor's designee, that
the plan meets the requirements of this subpart;
(2) Identification of State, local and private fleets that will
participate in the plan;
(3) Number of new alternative fueled vehicles to be acquired by
each plan participant;
(4) A written statement from each plan participant to assure
commitment;
(5) A statement of contingency measures by the State to offset any
failure to fulfill significant commitments by plan participants, in
order to meet the requirements of section 490.201;
(6) A provision by the State to monitor and verify implementation
of the plan;
(7) A provision certifying that all acquisitions and conversions
under the plan are voluntary and will meet the requirements of Sec. 247
of the Clean Air Act, as amended (42 U.S.C. 7587) and all applicable
safety requirements.
(c) When to submit plan. (1) For model year 1997, a State shall
submit its plan on or before March 14, 1997.
(2) Beginning with model year 1998, a State shall submit its plan
to DOE no later than June 1 prior to the first model year covered by
such plan.
(d) Review and approval. DOE shall review and approve a plan which
meets the requirements of this subpart within 60 days of the date of
receipt of the plan by DOE at the address in paragraph (g)(1) of this
section.
(e) Disapproval of plans. If DOE disapproves or requests a State to
submit additional information, the State may revise and resubmit the
plan to DOE within a reasonable time.
(f) How a State may modify an approved plan. If a State determines
that it cannot successfully implement its plan, it may submit to DOE
for approval, at any time, the proposed modifications with adequate
justifications.
(g) Where to submit plans. (1) A State shall submit to DOE an
original and two copies of the plan and shall be addressed to the U.S.
Department of Energy, Office of Energy Efficiency and Renewable Energy,
EE-33, 1000 Independence Ave., SW., Washington, DC 20585, or to such
other address as DOE may announce in a Federal Register notice.
(2) Any requests for modifications shall also be sent to the
address in paragraph (g)(1) of this section.
(h) MY 1997 Exemption. (1) On or after September 1, 1996, a State
shall be deemed automatically exempt from section 490.201 (a)(1) until
DOE makes a final determination on a timely application to approve a
plan for model year 1997 under this section if the State:
(i) Has submitted the application; or
(ii) Has sent a written notice to the Assistant Secretary, at the
address under paragraph (g)(1) of this section, that it will file such
an application on or before March 14, 1997.
(2) During the period of an automatic exemption under this
paragraph, a State may procure light duty motor vehicles in accordance
with its normal procurement policies.
Sec. 490.204 Process for granting exemptions.
(a) To obtain an exemption, in whole or in part, from the vehicle
acquisition mandate in section 490.201 of this part, a State shall
submit to DOE a written request for exemption, along with supporting
documentation which must demonstrate that--
(1) Alternative fuels that meet the normal requirements and
practices of the principal business of the State fleet are not
available from fueling sites that would permit central fueling of fleet
vehicles in the area in which the vehicles are to be operated; or
(2) Alternative fueled vehicles that meet the normal requirements
and practices of the principal business of the State fleet are not
available for purchase or lease commercially on reasonable terms and
conditions in the State; or
(3) The application of such requirements would pose an unreasonable
financial hardship.
(b) Requests for exemption may be submitted at any time and must be
accompanied with supporting documentation.
(c) Exemptions are granted for one model year only, and they may be
renewed annually, if supporting documentation is provided.
(d) Exemptions may be granted in whole or in part. When granting an
exemption in part, DOE may, depending upon the circumstances,
completely relieve a State from complying with a portion of the vehicle
acquisition requirements for a model year, or it may require a State to
acquire all or some of the exempted vehicles in future model years.
(e) If a State is seeking an exemption under--
(1) Paragraph (a)(1) of this section, the types of documentation
that are to accompany the request must include, but are not limited to,
maps of vehicle operation zones and maps of locations providing
alternative fuel; or
(2) Paragraph (a)(2) of this section, the types of documentation
that are to accompany the request must include, but are not limited to,
alternative fueled vehicle purchase or lease requests, a listing of
vehicles that meet the normal practices and requirements of the State
fleet, and any other documentation that exhibits good faith efforts to
acquire alternative fueled vehicles; or
(3) Paragraph (a)(3) of this section, it must submit a statement
identifying what portion of the alternative fueled vehicle acquisition
requirement should be subject to the exemption and describing the
specific nature of the financial hardship that precludes compliance.
(f) Requests for exemption shall be addressed to the U.S.
Department of Energy, Office of Energy Efficiency and Renewable Energy,
EE-33, 1000 Independence Ave., SW., Washington, DC 20585, or to such
other address as DOE may announce in a Federal Register notice.
(g) The Assistant Secretary shall provide to the State, within 45
days of receipt of a request that complies with this section, a written
determination as to whether the State's request has been granted or
denied.
(h) If the Assistant Secretary denies an exemption, in whole or in
part, and the State wishes to exhaust administrative remedies, the
State must appeal within 30 days of the date of the determination,
pursuant to 10 CFR part 1003, subpart C, to the Office of Hearings and
Appeals, U.S. Department of Energy, 1000 Independence Ave., SW.,
Washington, DC 20585. The Assistant Secretary's determination shall be
stayed during the pendency of an appeal under this paragraph.
Sec. 490.205 Reporting requirements.
(a) Any State subject to the requirements of this subpart must file
an annual report for each State fleet on or before the December 31
after the close of the model year, beginning with model year 1997. The
State annual report may consist of a single State report or separately
prepared State agency reports.
(b) The report shall include the following information:
(1) Number of new light duty motor vehicles acquired for the fleet
by a State during the model year;
(2) Number of new light duty alternative fueled vehicles that are
required to be acquired during the model year;
[[Page 10658]]
(3) Number of new light duty alternative fueled vehicle
acquisitions by the State during the model year;
(4) Number of alternative fueled vehicle credits applied against
acquisition requirements;
(5) For each new light duty alternative fueled vehicle
acquisition--
(i) Vehicle make and model;
(ii) Model year;
(iii) Vehicle identification number;
(iv) Dedicated or dual-fueled (including flexible fuel); and
(v) Type of alternative fuel the vehicle is capable of operating
on; and
(6) Number of light duty alternative fueled vehicles acquired by
municipal and private fleets during the model year under an approved
Light Duty Alternative Fueled Vehicle Plan (if applicable).
(c) If credits are applied against vehicle acquisition
requirements, then a credit activity report, as described in subpart F
of this part, must be submitted with the report under this section to
DOE.
(d) Records shall be maintained and retained for a period of three
years.
(e) All reports, marked ``Annual Report,'' shall be sent to the
Office of Energy Efficiency and Renewable Energy, U.S. Department of
Energy, EE-33, 1000 Independence Ave., SW, Washington, DC, 20585, or
such other address as DOE may provide by notice in the Federal
Register.
Sec. 490.206 Violations.
Violations of this subpart are subject to investigation and
enforcement under subpart G of this part.
Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate
Sec. 490.300 Purpose and Scope.
This subpart implements section 501 of the Act, which requires,
subject to some exemptions, that certain annual percentages of new
light duty motor vehicles acquired by alternative fuel providers must
be alternative fueled vehicles.
Sec. 490.301 Definitions.
In addition to the definitions found in section 490.2, the
following definitions apply to this subpart--
Affiliate means a person that, directly or indirectly, controls, is
controlled by, or is under common ownership or control of a person
subject to vehicle acquisition requirements in this part.
Alternative Fuels Business means activities undertaken to derive
revenue from--
(1) Producing, storing, refining, processing, transporting,
distributing, importing, or selling at wholesale or retail any
alternative fuel other than electricity; or
(2) Generating, transmitting, importing, or selling at wholesale or
retail electricity.
Business Unit means a semi-autonomous major grouping of activities
for administrative purposes and organizational structure within a
business entity and that is controlled by or under control of a person
subject to vehicle acquisition requirements in this part.
Division means a major administrative unit of an enterprise
comprising at least several enterprise units or constituting a complete
integrated unit for a specific purpose and that is controlled by or
under control of a person subject to vehicle acquisition requirements
in this part.
Normal Requirements and Practices means the operating business
practices and required conditions under which the principal business of
a person subject to vehicle acquisition requirements in this part
operates.
Principal Business means the sales-related activity that produces
the greatest gross revenue.
Substantial Portion means that at least 30 percent of the annual
gross revenue of a covered person is derived from the sale of
alternative fuels.
Substantially Engaged means that a covered person, or affiliate,
division, or other business unit thereof, regularly derives more than a
negligible amount of sales-related gross revenue from an alternative
fuels business.
Sec. 490.302 Vehicle acquisition mandate schedule.
(a) Except as provided in section 490.304 of this part, of the
light duty motor vehicles newly acquired by a covered person described
in section 490.303 of this part, the following percentages shall be
alternative fueled vehicles for the following model years:
(1) 30 percent for model year 1997.
(2) 50 percent for model year 1998.
(3) 70 percent for model year 1999.
(4) 90 percent for model year 2000 and thereafter.
(b) Except as provided in section 490.304 of this part, this
acquisition schedule applies to all light duty motor vehicles that a
covered person newly acquires for use within the United States.
(c) If, when the mandated acquisition percentage of alternative
fuel vehicles is applied to the number of new light duty motor vehicles
to be acquired by a covered person subject to this subpart, a number
results that requires the acquisition of a partial vehicle, an
adjustment will be made to the required acquisition number by rounding
down to the next whole number if the fraction is less than one half and
by rounding up the number of vehicles to the next whole number if the
fraction is equal to or greater than one half.
(d) Only acquisitions satisfying the mandate, as defined by section
490.305, count toward compliance with the acquisition schedule in
paragraph (a) of this section.
(e) A covered person that is first subject to the acquisition
requirements of this part after model year 1997 shall acquire
alternative fueled vehicles in the next model year at the percentage
applicable to that model year, according to the schedule in paragraph
(a) of this section, unless the covered person is granted an exemption
or reduction of the acquisition percentage pursuant to the procedures
and criteria in section 490.308.
Sec. 490.303 Who must comply.
(a) Except as provided by paragraph (b) of this section, a covered
person must comply with the requirements of this subpart if that person
is--
(1) A covered person whose principal business is producing,
storing, refining, processing, transporting, distributing, importing or
selling at wholesale or retail any alternative fuel other than
electricity; or
(2) A covered person whose principal business is generating,
transmitting, importing, or selling, at wholesale or retail,
electricity; or
(3) A covered person--
(i) Who produces, imports, or produces and imports in combination,
an average of 50,000 barrels per day or more of petroleum; and
(ii) A substantial portion of whose business is producing
alternative fuels.
(b) This subpart does not apply to a covered person or affiliate,
division, or other business unit of such person whose principal
business is--
(1) transforming alternative fuels into a product that is not an
alternative fuel; or
(2) consuming alternative fuels as a feedstock or fuel in the
manufacture of a product that is not an alternative fuel.
Sec. 490.304 Which new light duty motor vehicles are covered.
(a) General rule. Except as provided in paragraph (b) of this
section, the vehicle acquisition mandate schedule in section 490.302 of
this part applies to all light duty motor vehicles newly acquired for
use within the United States by a covered person described in section
490.303 of this part.
(b) Exception. If a covered person has more than one affiliate,
division, or
[[Page 10659]]
other business unit, then section 490.302 of this part only applies to
light duty motor vehicles newly acquired by an affiliate, division, or
other such business unit which is substantially engaged in the
alternative fuels business.
Sec. 490.305 Acquisitions satisfying the mandate.
The following actions within the model year qualify as acquisitions
for the purpose of compliance with the requirements of section 490.302
of this part--
(a) The purchase or lease of an Original Equipment Manufacturer
light duty vehicle (regardless of the model year of manufacture),
capable of operating on alternative fuels that was not previously under
the control of the covered person;
(b) The purchase or lease of an after-market converted light duty
vehicle (regardless of the model year of manufacture), that was not
previously under the control of the covered person; and
(c) The conversion of a newly purchased or leased light duty
vehicle to operate on alternative fuels within four months after the
vehicle is acquired by a covered person; and
(d) The application of alternative fueled vehicle credits allocated
under subpart F of this part.
Sec. 490.306 Vehicle operation requirements.
The alternative fueled vehicles acquired pursuant to section
490.302 of this part shall be operated solely on alternative fuels,
except when these vehicles are operating in an area where the
appropriate alternative fuel is unavailable.
Sec. 490.307 Option for Electric Utilities.
(a) A covered person or its affiliate, division, or business unit,
whose principal business is generating, transmitting, importing, or
selling, at wholesale or retail, electricity has the option of delaying
the vehicle acquisition mandate schedule in section 490.302 until
January 1, 1998, if the covered person intends to comply with this
regulation by acquiring electric motor vehicles.
(b) If a covered person or its affiliate, division, or business
unit, whose principal business is generating, transmitting, importing,
or selling at wholesale or retail electricity has notified the
Department as required by the Act, of its intent to acquire electric
motor vehicles, the following percentages of new light duty motor
vehicles acquired shall be alternative fueled vehicles for the
following time periods:
(1) 30 percent from January 1, 1998 to August 31, 1998.
(2) 50 percent for model year 1999.
(3) 70 percent for model year 2000.
(4) 90 percent for model year 2001 and thereafter.
(c) Any covered person or its affiliate, division, or business
unit, that chooses the option provided by this section may apply for an
exemption from the vehicle acquisition mandate in accordance with
section 490.308 of this regulation.
(d) Any covered person or its affiliate, division, or business
unit, that chooses to rescind its election of the option provided in
this section shall be required, unless otherwise exempt, to acquire
alternative fueled vehicles in accordance with the vehicle acquisition
schedule in section 490.302.
Sec. 490.308 Process for granting exemptions.
(a) To obtain an exemption from the vehicle acquisition mandate in
this subpart, a covered person, or its affiliate, division, or business
unit which is subject to section 490.302 of this part, shall submit a
written request for exemption to the Office of Energy Efficiency and
Renewable Energy, U.S. Department of Energy, EE-33, 1000 Independence
Ave., SW., Washington, DC 20585, or such other address as DOE may
publish in the Federal Register, along with the supporting
documentation required by this section.
(b) A covered person requesting an exemption must demonstrate
that--
(1) Alternative fuels that meet the normal requirements and
practices of the principal business of the covered person are not
available from fueling sites that would permit central fueling of that
person's vehicles in the area in which the vehicles are to be operated;
or
(2) Alternative fueled vehicles that meet the normal requirements
and practices of the principal business of the covered person are not
available for purchase or lease commercially on reasonable terms and
conditions in any State included in a MSA/CMSA that the vehicles are
operated in.
(c) Documentation. (1) Except as provided in paragraph (c) (2) of
this section, if a covered person is seeking an exemption under
paragraph (b)(1) of this section, the types of documentation that are
to accompany the request include, but are not limited to, maps of
vehicle operation zones and maps of locations providing alternative
fuel.
(2) If a covered person seeking an exemption under paragraph (b)(1)
of this section operates light duty vehicles outside of the areas
listed in Appendix A of subpart A, and central fueling of those
vehicles does not meet the normal requirements and practices of that
person's business, then that covered person shall only be required to
justify in a written request why central fueling is incompatible with
its business.
(3) If a covered person is seeking an exemption under paragraph
(b)(2) of this section, the types of documentation that are to
accompany the request include, but are not limited to, alternative
fueled vehicle purchase or lease requests, a listing of vehicles that
meet the normal practices and requirements of the covered person and
any other documentation that exhibits good faith efforts to acquire
alternative fueled vehicles.
(d) Exemptions are granted for one model year only and may be
renewed annually, if supporting documentation is provided.
(e) Exemptions may be granted in whole or in part. When granting an
exemption in part, DOE may, depending upon the circumstances,
completely relieve a covered person from complying with a portion of
the vehicle acquisition requirements for a model year, or it may
require a covered person to acquire all or some of the exempted
vehicles in future model years.
(f) The Assistant Secretary shall provide to the covered person
within 45 days after receipt of a request that complies with this
section, a written determination as to whether the State's request has
been granted or denied.
(g) If a covered person is denied an exemption, that covered person
may file an appeal within 30 days of the date of determination,
pursuant to 10 CFR part 1003, subpart C, with the Office of Hearings
and Appeals, U.S. Department of Energy, 1000 Independence Ave, SW,
Washington, DC 20585. The Assistant Secretary's determination shall be
stayed during the pendency of an appeal under this paragraph.
Sec. 490.309 Annual reporting requirements.
(a) If a person is required to comply with the vehicle acquisition
schedule in section 490.302 or section 490.307, that person shall file
an annual report under this section, on a form obtainable from DOE,
with the Office of Energy Efficiency and Renewable Energy, U.S.
Department of Energy, EE-33, 1000 Independence Ave., SW., Washington,
DC 20585, or such other address as DOE may publish in the Federal
Register, on or before the December 31 after the close of the
applicable model year.
(b) This report shall include the following information--
(1) Number of new light duty motor vehicles acquired by the covered
person
[[Page 10660]]
in the United States during the model year;
(2) Number of new light duty alternative fueled vehicles that are
required to be acquired during the model year;
(3) Number of new light duty alternative fueled vehicle
acquisitions in the United States during the model year;
(4) Number of alternative fueled vehicle credits applied against
acquisition requirements;
(5) For each new light duty alternative fueled vehicle
acquisition--
(i) Vehicle make and model;
(ii) Model year;
(iii) Vehicle Identification Number;
(iv) Dedicated or dual-fueled (including flexible fuel); and
(v) Type of alternative fuel the vehicle is capable of operating
on.
(c) If credits are applied against alternative fueled vehicle
acquisition requirements, then a credit activity report, as described
in subpart F, must be submitted with the report under this section to
DOE.
(d) Records shall be maintained and retained for a period of three
years.
Sec. 490.310 Violations.
Violations of this subpart are subject to investigation and
enforcement under subpart G of this part.
Subpart E--[Reserved]
Subpart F--Alternative Fueled Vehicle Credit Program
Sec. 490.500 Purpose and Scope.
This subpart implements the statutory requirements of section 508
of the Act, which provides for the allocation of credits to fleets or
covered persons who acquire alternative fueled vehicles in excess of
the number they are required or obtain alternative fueled vehicles
before the model year when they are first required to do so under this
part.
Sec. 490.501 Applicability.
This subpart applies to all fleets and covered persons who are
required to acquire alternative fueled vehicles by this part.
Sec. 490.502 Creditable actions.
A fleet or covered person becomes entitled to alternative fueled
vehicle credits by--
(a) Acquiring alternative fueled vehicles, including those in
excluded categories under section 490.3 of this part and those
exceeding 8,500 gross vehicle weight rating, in excess of the number of
alternative fueled vehicles that fleet or covered person is required to
acquire in a model year when acquisition requirements apply; or
(b) Acquiring alternative fueled vehicles, including those in
excluded categories under section 490.3 of this part and those
exceeding 8,500 gross vehicle weight rating, in model years before the
model year when that fleet or covered person is first required to
acquire alternative fueled vehicles.
(c) For purposes of this subpart, a fleet or covered person that
acquired a motor vehicle on or after October 24, 1992, and converted it
to an alternative fueled vehicle before April 15, 1996, shall be
entitled to a credit for that vehicle notwithstanding the time limit on
conversions established by sections 490.202(a)(3) and 490.305(a)(3) of
this part.
Sec. 490.503 Credit allocation.
(a) Based on annual credit activity report information, as
described in section 490.507 of this part, DOE shall allocate one
credit for each alternative fueled vehicle a fleet or covered person
acquires that exceeds the number of alternative fueled vehicles that
fleet or person is required to acquire in a model year when acquisition
requirements apply.
(b) If an alternative fueled vehicle is acquired by a fleet or
covered person in a model year before the first model year that fleet
or person is required to acquire alternative fueled vehicles by this
part, as reported in the annual credit activity report, DOE shall
allocate one credit per alternative fueled vehicle for each year the
alternative fueled vehicle is acquired before the model year when
acquisition requirements apply.
(c) DOE shall allocate credits to fleets and covered persons under
paragraph (b) of this section only for alternative fueled vehicles
acquired on or after October 24, 1992.
Sec. 490.504 Use of alternative fueled vehicle credits.
At the request of a fleet or covered person in an annual report
under this part, DOE shall treat each credit as the acquisition of an
alternative fueled vehicle that the fleet or covered person is required
to acquire under this part. Each credit shall count as the acquisition
of one alternative fueled vehicle in the model year for which the fleet
or covered person requests the credit to be applied.
Sec. 490.505 Credit accounts.
(a) DOE shall establish a credit account for each fleet or covered
person who obtains an alternative fueled vehicle credit.
(b) DOE shall send to each fleet and covered person an annual
credit account balance statement after the receipt of its credit
activity report under section 490.507.
Sec. 490.506 Alternative fueled vehicle credit transfers.
(a) Any fleet or covered person that is required to acquire
alternative fueled vehicles may transfer an alternative fueled vehicle
credit to--
(1) A fleet that is required to acquire alternative fueled
vehicles; or
(2) A covered person subject to the requirements of this part, if
the transferor provides certification to the covered person that the
credit represents a vehicle that operates solely on alternative fuel.
(b) Proof of credit transfer may be on a form provided by DOE, or
otherwise in writing, and must include dated signatures of the
transferor and transferee. The proof should be received by DOE within
30 days of the transfer date to the Office of Energy Efficiency and
Renewable Energy, U.S. Department of Energy, EE-33, 1000 Independence
Ave., SW, Washington, DC 20585 or such other address as DOE publishes
in the Federal Register.
Sec. 490.507 Credit activity reporting requirements.
(a) A covered person or fleet applying for allocation of
alternative fueled vehicle credits must submit a credit activity report
by the December 31 after the close of a model year to the Office of
Energy Efficiency and Renewable Energy, U.S. Department of Energy, EE-
33, 1000 Independence Ave, SW, Washington, DC 20585 or other such
address as DOE may publish in the Federal Register.
(b) This report must include the following information:
(1) Number of alternative fueled vehicle credits requested for:
(i) alternative fueled vehicles acquired in excess of required
acquisition number; and
(ii) alternative fueled vehicles acquired in model years before the
first model year the fleet or covered person is required to acquire
vehicles by this part.
(2) Purchase of alternative fueled vehicle credits:
(i) Credit source; and
(ii) Date of purchase;
(3) Sale of alternative fueled vehicle credits:
(i) Credit purchaser; and
(ii) Date of sale.
Subpart G--Investigations and Enforcement
Sec. 490.600 Purpose and scope.
This subpart sets forth the rules applicable to investigations
under titles
[[Page 10661]]
III, IV, V, and VI of the Act and to enforcement of section 501,
503(b), 507 or 508 of the Act, or any regulation issued under such
sections.
Sec. 490.601 Powers of the Secretary.
For the purpose of carrying out titles III, IV, V, and VI of the
Act, DOE may hold such hearings, take such testimony, sit and act at
such times and places, administer such oaths, and require by subpena
the attendance and testimony of such witnesses and the production of
such books, papers, correspondence, memoranda, contracts, agreements,
or other records as the Secretary of Transportation is authorized to do
under section 505(b)(1) of the Motor Vehicle Information and Cost
Savings Act (15 U.S.C. 2005(b)(1)).
Sec. 490.602 Special orders.
(a) DOE may require by general or special orders that any person--
(1) File, in such form as DOE may prescribe, reports or answers in
writing to specific questions relating to any function of DOE under
this part; and
(2) Provide DOE access to (and for the purpose of examination, the
right to copy) any documentary evidence of such person which is
relevant to any function of DOE under this part.
(b) File under oath any reports and answers provided under this
section or as otherwise prescribed by DOE, and file such reports and
answers with DOE within such reasonable time and at such place as DOE
may prescribe.
Sec. 490.603 Prohibited acts.
It is unlawful for any person to violate any provision of section
501, 503(b), or 507 of the Act, or any regulations issued under such
sections.
Sec. 490.604 Penalties and Fines.
(a) Civil penalties. Whoever violates section 490.603 of this part
shall be subject to a civil penalty of not more than $5,000 for each
violation.
(b) Willful violations. Whoever willfully violates section 490.603
of this part shall pay a criminal fine of not more than $10,000 for
each violation.
(c) Repeated violations. Any person who knowingly and willfully
violates section 490.603 of this part, after having been subjected to a
civil penalty for a prior violation of section 490.603 shall pay a
criminal fine of not more than $50,000 for each violation.
Sec. 490.605 Statement of enforcement policy.
DOE may agree not to commence an enforcement proceeding, or may
agree to settle an enforcement proceeding, if the person agrees to come
into compliance in a manner satisfactory to DOE. DOE normally will not
commence an enforcement action against a person subject to the
acquisition requirements of this part without giving that person notice
of its intent to enforce 90 days before the beginning of an enforcement
proceeding.
Sec. 490.606 Proposed assessments and orders.
DOE may issue a proposed assessment of, and order to pay, a civil
penalty in a written statement setting forth supporting findings of
violation of the Act or a relevant regulation of this part. The
proposed assessment and order shall be served on the person named
therein by certified mail, return-receipt requested, and shall become
final for DOE if not timely appealed pursuant to section 490.607 of
this part.
Sec. 490.607 Appeals.
(a) In order to exhaust administrative remedies, on or before 30
days from the date of issuance of a proposed assessment and order to
pay, a person must appeal a proposed assessment and order to the Office
of Hearings and Appeals, U.S. Department of Energy, 1000 Independence
Avenue, SW., Washington, DC 20585.
(b) Proceedings in the Office of Hearings and Appeals shall be
subject to subpart F of 10 CFR part 1003 except that--
(1) Appellant shall have the ultimate burden of persuasion;
(2) Appellant shall have right to a trial-type hearing on contested
issues of fact only if the hearing officer concludes that cross
examination will materially assist in determining facts in addition to
evidence available in documentary form; and
(3) The Office of Hearings and Appeals may issue such orders as it
may deem appropriate on all other procedural matters.
(c) The determination of the Office of Hearings and Appeals shall
be final for DOE.
[FR Doc. 96-5702 Filed 3-13-96; 8:45 am]
BILLING CODE 6450-01-P
