2010-17987. Production Incentives for Cellulosic Biofuels: Notice of Program Intent

AGENCY:

Office of Energy Efficiency and Renewable Energy, Department of Energy (DOE).

ACTION:

Notice of Program Intent.

SUMMARY:

The Department of Energy (DOE) today gives notice that the Office of Biomass Program, in the Office of Energy Efficiency and Renewable Energy, intends to conduct a Reverse Auction pursuant to section 942 of the Energy Policy Act of 2005 (EPAct 2005). Through this notice, biofuels producers and other interested parties are invited to submit pre-auction eligibility information in accordance with the process described below.

DATES:

Pre-auction eligibility information must be received by September 20, 2010.

ADDRESSES:

E-mail pre-auction eligibility information to [e-mail] between July 22, 2010 through September 20, 2010.

FOR FURTHER INFORMATION CONTACT:

Questions may be directed to: Mr. Neil Rossmeissl, Office of the Biomass Program, U.S. Department of Energy, Mailstop EE-2E, Room 5H021, 1000 Independence Avenue, SW., Washington, DC 20585; [phone] or at [e-mail]; or Ms. Liz Moore, U.S. Department of Energy, 1617 Cole Boulevard, Golden, CO 80401-3393, [phone] or [e-mail].

SUPPLEMENTARY INFORMATION:

I. Background and Overview

II. Discussion of Pre-Auction Eligibility Process

A. Invitation To Participate

B. Pre-Auction Eligibility Statement

C. Eligibility

III. Reverse Auction Process

A. Eligibility

B. Open Timeframe

IV. Post-Auction Requirements and Information for Successful Bidders

I. Background and Overview

As stated in 10 CFR part 452, “Production Incentives for Cellulosic Biofuels; Reverse Auction Procedures and Standards,” (74 FR 52867, October 15, 2009) (“Final Rule”), Section 942 of the EPAct 2005, Public Law 109-58 (August 8, 2005), requires the Secretary of Energy (Secretary), in consultation with the Secretary of Agriculture, the Secretary of Defense, and the Administrator of the Environmental Protection Agency, to establish an incentive program for the production of cellulosic biofuels and to implement that program by means of a “reverse auction.” Through this Notice of Program Intent (“Notice”), DOE is initiating the reverse auction process by inviting interested parties to submit pre-auction eligibility statements. DOE will notify each party that submits a pre-auction eligibility statement of its acceptance or rejection. Only eligible parties will be invited to submit bids for the reverse auction. Approximately $4,600,000 in incentives will be available from this reverse auction.

II. Discussion of Pre-Auction Eligibility Process

A. Invitation To Participate

All interested parties are invited to submit pre-auction eligibility statements. Pre-auction eligibility statements must be submitted to [e-mail] between July 22, 2010 through September 20, 2010, no later than 5 p.m. Mountain Time. Section 452.4(b) of the Final Rule provides that “DOE shall notify each entity that files a pre-auction eligibility submission of its acceptance or rejection no later than 15 days before the reverse auction for which the submission was made. A DOE decision constitutes final agency action and is conclusive.”

B. Pre-Auction Eligibility Statement

A pre-auction eligibility statement will, at a minimum:

(i) Demonstrate that the filing party owns and operates or plans to own and operate an eligible cellulosic biofuels production facility;

(ii) Identify the site or proposed site for the filing party's eligible cellulosic biofuels production facility;

(iii) Demonstrate that the cellulosic biofuel to be produced for purposes of receiving an award either currently is suitable for widespread general use as a transportation fuel or will be suitable for such use in a timeframe and in sufficient volumes to significantly contribute to the goal of 1 billion gallons of refined cellulosic biofuel by August 2015.

(iv) Provide audited or pro forma financial statements for the latest 12 month period; and

(v) Identify one or more proposed sources of financing for the construction or expansion of the filing party's eligible cellulosic biofuels production facility.

DOE will provide the format for the pre-auction eligibility statement. It may be obtained by request from [e-mail] or from the corresponding postings on http://www.eere.energy.gov or http://www.grants.gov. Where the applicant provides audited financial statements to satisfy (iv) above, the statements must be audited by an independent firm. At the applicant's discretion, a narrative may be included to address any of the above requirements. This attachment must not exceed three pages when printed on 8.5″ by 11″ paper with 1 inch margins (top, bottom, left, and right), single spaced, with font not smaller than 11 point.

C. Eligibility

As defined in the Final Rule, eligible cellulosic biofuels production facility means a facility—

• Located in the United States (including U.S. territories and possessions);
• Which meets all applicable Federal and State permitting requirements; and
• Employs a demonstrated refining technology.

An eligible cellulosic biofuels production facility must also be operational and producing the eligible cellulosic biofuel no later than three years after the bid is submitted to the reverse auction. Facilities must have the capacity to produce a minimum of 10 million gallons per year of cellulosic biofuel. Incentives are specific to a facility. If the facility should change ownership during the course of the award period, the incentive will be paid to the new owner of the facility, if the successor entity meets all eligibility requirements.

For the cellulosic biofuel to be eligible under this program, bidders must also demonstrate that they will produce a cellulosic biofuel which either currently is suitable for widespread general use as a transportation fuel or, alternatively, that the cellulosic biofuel will be suitable for such use in a timeframe and in sufficient volumes to significantly contribute to the goal of 1 billion gallons of refined cellulosic biofuel by the statutory deadline. This description may include, but is not limited to the following:

• Obtaining vehicle manufacturer(s) approval;
• Obtaining EPA fuel registration(s);
• Establishing standards for use, production, storage, transportation, and retail dispensing; and
• Establishing a distribution/dispensing infrastructure.

Additionally, the pre-auction eligibility statements must estimate the costs and discuss the activities required for eventually commercializing the proposed cellulosic biofuel.

The pre-auction eligibility statements must also calculate the lower heating BTU value (LHV) of the proposed cellulosic value as compared to gasoline on a volumetric equivalent basis. A table with the most common fuels heating values can be found at: http://cta.ornl.gov/​bedb/​appendix_​a/​Lower-Higher_​Heating_​Values_​for_​Various_​Fuels.xls. Incentives will be scaled proportionately to the energy content of the cellulosic biofuel.

An eligible biofuels producer must either own and operate or plan to own and operate an eligible cellulosic biofuels facility. The awards are site specific; an eligible biofuels producer cannot transfer the incentive to another facility. The producer will be responsible for satisfying all terms and conditions of the incentive award, including but not limited to, reporting requirements to DOE.

III. Reverse Auction Process

A. Eligibility

Bids will only be accepted from bidders who were notified of their eligibility by DOE after submitting acceptable pre-auction eligibility statements. In addition to being notified of their acceptance into the bidding pool, bidders will be notified of the process by which bids will be accepted via a funding opportunity announcement (FOA) to be published at http://www.grants.gov. Bids that are not consistent with the information submitted in the pre-auction eligibility statements will be rejected.

B. Open Timeframe

The specific bidding window will be identified in the published FOA. It is anticipated that the bidding window will occur during September 2010. The reverse auction will be conducted via a closed bid process and only the final bid received from a bidder will be considered.

IV. Post-Auction Requirements and Information for Successful Bidders

Successful bidders will be required to adhere to all criteria described in the Final Rule as well as the Terms and Conditions that will be contained within the Assistance Agreement award executed by DOE. These requirements include, but are not limited to, the following:

• Progress Reports,
• Production Agreements,
• Confirmation of Continuing Eligibility, and
• Contractual Condition on Eligibility.

Post-Auction Requirements are identified in the Final Rule and will be available in the published FOA.

Issued in Golden, CO on July 15, 2010.

Jamie Harris,

Director, Office of Acquisition and Financial Assistance, Golden Field Office.