[Federal Register Volume 60, Number 39 (Tuesday, February 28, 1995)]
[Proposed Rules]
[Pages 10970-10995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4764]



      

[[Page 10969]]

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Part III





Department of Energy





_______________________________________________________________________



Office of Energy Efficiency and Renewable Energy



_______________________________________________________________________



10 CFR Part 490



Alternative Fuel Transportation Program; Proposed Rule

  Federal Register / Vol. 60, No. 39 / Tuesday, February 28, 1995 / 
Proposed Rules   
[[Page 10970]] 

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: Notice of Proposed Rulemaking and Public Hearings.

-----------------------------------------------------------------------

SUMMARY: The Department of Energy today proposes rules required by the 
Energy Policy Act of 1992 in order to implement statutorily-imposed 
alternative fueled vehicle acquisition requirements that become 
effective by operation of law on September 1, 1995, when model year 
1996 begins. These statutory requirements apply to certain alternative 
fuel providers and some State government vehicle fleets. The proposed 
rules principally cover: (1) Required interpretations necessary for 
affected entities to determine whether and to what extent the statutory 
requirements apply; (2) required procedures for exemptions and 
administrative remedies; and (3) a program of marketable credits to 
reward whose 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.

DATES: Written comments (8 copies and, if possible, a computer disk) on 
the proposed rule must be received by the Department on or before May 
1, 1995.
    Oral views, data, and arguments may be presented at public hearings 
which are scheduled as follows:
    1. March 23, 1995, beginning at 9:30 a.m. in Chicago, Illinois.
    2. March 30, 1995, beginning at 9:30 a.m. in Berkeley, California.
    3. April 4, 1995, beginning at 9:30 a.m. in Washington, DC.
    Requests to speak at a hearing should be submitted to the 
Department no later than 4 p.m. on:
    1. March 20, 1995 for the March 23, 1995 Chicago, Illinois, 
hearing.
    2. March 27, 1995 for the March 30, 1995 Berkeley, California, 
hearing.
    3. March 30, 1995 for the April 4, 1995 Washington, DC, hearing.
    The length of each oral presentation is limited to 10 minutes.

ADDRESSES: Written comments (8 copies) and requests to speak at a 
public hearing should be addressed to: U.S. Department of Energy, 
Office of Energy Efficiency and Renewable Energy, EE-33, Docket Number 
EE-RM-95-110, 1000 Independence Ave., SW, Washington, DC 20585, (202) 
586-3012. The public hearings will be held at the following locations:
    1. Chicago--University of Illinois at Chicago, Chicago Circle 
Center Building (Student Union), Room 605 (6th floor), 750 S. Halsted 
Street, Chicago, IL.
    2. Berkeley--Lawrence Berkeley Laboratory, 1 Cyclotron Road, 
Building 50 Auditorium, Berkeley, CA 94720.
    The Lawrence Berkeley Laboratory (LBL) Shuttle stops at Center 
Street and Shattuck Street as well as the BART station and downtown 
public parking lots.
    3. Washington, DC--U.S. Department of Energy, Forrestal Building, 
Auditorium, 1000 Independence Avenue, SW, Washington, DC 20585.
    Copies of transcripts from hearings and written comments may be 
inspected and photocopied in the DOE Freedom of Information Reading 
Room, Room 1E-190, (202) 586-6020, between the hours of 9:00 a.m. and 
4:00 p.m. Monday through Friday, except Federal holidays.
    For more information concerning public participation in this 
rulemaking see the ``Opportunity for Public Comment'' section found in 
the Supplementary Information section of this proposed rule.

FOR FURTHER INFORMATION CONTACT: For information concerning the 
proposed rule: Mr. 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. 
Josephine B. Patton, Esq., U.S. Department of Energy, Office of General 
Counsel (GC-72), 1000 Independence Avenue SW., Washington, DC 20585. 
(202) 586-9507.
    For information concerning the public hearings and submitting 
written comments: Andi Kasarsky, (202) 586-3012.

SUPPLEMENTARY INFORMATION:

I. Introduction
II. Section-By-Section Analysis
III. Opportunity for Public Comment
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

    Pursuant to title V of the Energy Policy Act of 1992 (Act) (Pub. L. 
102-486), the Department of Energy (Department or DOE) today proposes 
rules required by law to implement statutorily-imposed alternative 
fueled vehicle acquisition requirements that take effect by operation 
of law on September 1, 1995, when model year 1996 begins. These 
statutory requirements establish that specified percentages of vehicles 
acquired by covered fleets must be alternative fueled vehicles. These 
requirements apply to certain alternative fuel providers and some State 
government fleets. The statutory percentages for model year 1996 are 30 
percent for affected alternative fuel providers and 10 percent for 
affected State government fleets, and these percentages increase over 
time. This notice of proposed rulemaking principally covers: (1) 
Required interpretations of statutory provisions essential for affected 
entities to determine whether and to what extent the mandatory vehicle 
acquisition requirements apply; (2) procedures for exemptions and 
administrative remedies; and (3) a program of marketable credits to 
reward voluntary acquisition of alternative fueled vehicles in excess 
of mandatory requirements or before the requirements take effect, and 
to allow use of such credits as an alternative means of compliance. 
This notice also summarizes, and is accompanied by, a detailed cost 
impact analysis for public review.

A. Background

    A primary goal of the Energy Policy Act of 1992 (the Act) (Pub. L. 
102-486) 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 [[Page 10971]] light duty 
vehicles. The Energy Information Administration also estimates that 65 
percent of our total 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 is 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-0585/0, 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 
automatically 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 new light duty 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 proposed rulemaking focuses principally on: (1) The 
general definitions of title III applicable to alternative fuel 
providers, state governments, and private and municipal fleets; (2) 
procedures for obtaining interpretive rulings applying the regulations 
to particular facts; (3) the title V vehicle acquisition mandates 
applicable to alternative fuel providers and to state governments; (4) 
the credit program applicable to alternative fuel providers, state 
governments, and private and municipal fleets; and (5) the 
investigative and enforcement authorities which also apply to 
alternative fuel providers, state governments, and private and 
municipal fleets. In a separate notice, the Department will be 
proposing rules for the financial incentive program for States under 
section 409 of the Act. 42 U.S.C. 13235.
    As provided by section 507, DOE will be initiating a statutorily 
required rulemaking to determine whether a fleet requirement program is 
necessary for private and municipal fleets, 42 U.S.C. 13257. Section 
507 contains complex requirements for making such a determination, and 
it is not clear at this time what determination will be made. 
Nevertheless, private persons (other than alternative fuel providers) 
and municipal authorities may be interested in reviewing and commenting 
on the proposed rules in the general subpart A and subpart F (credit 
program) of this notice which could apply to private and municipal 
fleet owners if the Department were to issue rules for a private and 
municipal fleet requirement program.
    With respect to alternative fuel providers, there is discretion in 
section 501(b) of the Act to reduce the acquisition percentage 
requirements to as low as 20 percent for model years 1997 and beyond, 
and to extend the time to comply for up to two years. 42 U.S.C. 
13251(b). The Department currently does not intend to exercise its 
discretion under section 501(b). The Department seeks comment on the 
conditions under which it should propose a rule to reduce the 
percentage requirements. There is no similar provision in section 507 
authorizing modifications to the vehicle acquisition mandate on state 
governments. See 42 U.S.C. 13257(h), (o).
    2. Who must comply and which vehicles are covered. The vehicle 
acquisition mandate applicable to alternative fuel providers is set 
forth in section 501 of the Act, 42 U.S.C. 13251. There are a series of 
subsections in section 501 which, when read in conjunction with certain 
definitions in section 301 of the Act, make the task of determining who 
must comply and to what extent the vehicle inventory is affected a 
complex matter.
    The vehicle acquisition mandate applicable to states in section 
507(o) of the Act, 42 U.S.C. 13257, also has to be read in conjunction 
with the definitions in section 301. While it is clear that the mandate 
in section 507(o) applies to state governments as distinguished from 
municipal governments, determining the extent to which a State's 
vehicle [[Page 10972]] inventory is subject to the mandate is also a 
complex matter.
     The beginning of an understanding of who must comply with the 
regulatory mandates in title V, and of which vehicles are in the base 
number against which the acquisition percentages are applied, lies in 
the partially overlapping statutory definitions of the terms ``fleet'' 
and ``covered person.'' The statutory definition of ``fleet,'' in 
section 301(9), provides that the term ``fleet'' means a group of 20 or 
more light duty motor vehicles, used primarily in a metropolitan 
statistical area or consolidated metropolitan statistical area, as 
established by the Bureau of the Census, with a 1980 population of more 
than 250,000, that are centrally fueled or capable of being centrally 
fueled and are owned, operated, leased or otherwise controlled by a 
governmental entity or other person who owns, operates, or otherwise 
controls 50 or more such vehicles, by any person who controls such 
person, by any person controlled by such person, and by any person 
under common control with such person, except that such term does not 
include--
    (A) motor vehicles held for lease or rental to the general public;
    (B) motor vehicles held for sale by motor vehicle dealers, 
including demonstration vehicles;
    (C) motor vehicles used for motor vehicle manufacturer product 
evaluations or tests;
    (D) law enforcement motor vehicles;
    (E) emergency motor vehicles;
    (F) motor vehicles acquired and used for military purposes that the 
Secretary of Defense has certified to the Secretary must be exempt for 
national security reasons;
    (G) nonroad vehicles, including farm and construction motor 
vehicles; or
    (H) motor vehicles which under normal operations are garaged at 
personal residences at night.
    In the section-by-section analysis in part II of this Supplementary 
Information, DOE explains proposed regulatory provisions related to the 
above-quoted statutory definition of ``fleet.'' Among other things, 
DOE: (1) Lists all of the relevant metropolitan statistical areas and 
consolidated metropolitan statistical areas; (2) defines ``centrally 
fueled'' and ``capable of being centrally fueled''; (3) discusses in 
some detail how the provisions for aggregating vehicles are 
interpreted; and (4) provides interpretive regulatory language for some 
of the exclusions.
    The word ``fleet,'' with all its complexities, is embedded in the 
definition of the term ``covered person'' at section 301(5) which 
provides that ``covered person'' means a person that owns, operates, 
leases, or otherwise controls--
    (A) a fleet that contains at least 20 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; and
    (B) at least 50 motor vehicles within the United States.
    The term ``fleet'' is used for making determinations with regard to 
who must comply, and to what extent, with the vehicle acquisition 
mandates in section 507 on state governments, private persons, and 
municipal governments. The term ``covered person'' is used for making 
such determinations with regard to the vehicle acquisition mandate on 
alternative fuel providers in section 501 of the Act.
    Under section 507, only a ``fleet'' is obligated to comply. 
Congress appears to have used the word ``fleet'' rather than ``covered 
person'' to limit the affected portion of the vehicle inventory to the 
vehicles in the ``fleet.'' By contrast, under section 501(a), certain 
``covered persons'' are obligated to comply, and consequently, the 
section 501 vehicle acquisition mandate potentially applies to all 
vehicles in the inventory throughout the United States and not just 
those vehicles in a ``fleet'' of a ``covered person'' who is subject to 
the mandate. 42 U.S.C. 13251. However, the potentially broad impact of 
section 501(a) is heavily qualified by the succeeding subsections of 
section 501, which limit the sweeping impact of section 501(a) both 
with regard to who must comply and the extent of the affected vehicle 
inventory.
    Paragraph (a)(2) of section 501 limits application of the vehicle 
acquisition mandate to a subset of covered persons consisting of:
    (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 production of 
alternative fuels * * *.
    Paragraph (a)(2) appears to be a description of alternative fuel 
providers subject to the vehicle acquisition mandate. The proposed 
regulations interpret the underscored phrase ``principal business.''
    The statutory refinement of which ``covered persons'' must comply 
and to what extent continues in subsection (a)(3) of section 501 which 
provides that:
    (A) In the case of a covered person described in paragraph (2) with 
more than one affiliate, division, or other business unit, only an 
affiliate, division, or business unit which is substantially engaged in 
the alternative fuels business (as determined by the Secretary by rule) 
shall be subject to this subsection.
    (B) No covered person or affiliate, division, or other business 
unit of such person whose principal business is--
    (i) transforming alternative fuels into a product that is not an 
alternative fuel; or
    (ii) consuming alternative fuels as a feedstock or fuel in the 
manufacture of a product that is not an alternative fuel shall be 
subject to this subsection.
    Paragraph (a)(3) of section 501 has two effects. First, it limits 
the vehicle acquisition mandate of paragraph (a)(1) to the vehicles 
owned, operated, leased, or otherwise controlled by certain affiliates, 
divisions or other business of major energy producing corporations. 
Second, it excludes from coverage those covered persons, affiliates, 
divisions, or other business units that use an alternative fuel to 
create a product other than an alternative fuel. It is possible when 
the definitions of ``affiliate'' and ``covered person'' are applied to 
an entity, it may be both. However, merely being an affiliate does not 
necessarily mean that an entity must also be a covered person.
    Section 501(a)(5) provides for petitions for exemption in certain 
circumstances for alternative fuel providers who otherwise would have 
to comply. The exemptions are available for those alternative fuel 
providers who can show that alternative fuels are not available in the 
operating area or that alternative fueled vehicles are not reasonably 
available.
    There is a parallel exemption provision applicable to State 
governments in section 507(i). 42 U.S.C. 13257(i). That provision also 
makes ``financial hardship'' a ground for exemption. However, section 
507 does not define ``financial hardship,'' and the legislative history 
is devoid of any guidance as to what circumstances would constitute 
``financial hardship.'' The Department would welcome comments from 
States making [[Page 10973]] recommendations as to how to interpret and 
apply the term ``financial hardship'' in practice.
    In the section-by-section analysis in part II of this Supplementary 
Information, the Department systematically distinguishes between 
proposed regulatory text that tracks the statutory language and 
proposed regulatory text that represents what the Department is 
proposing to add, such as, proposed procedures and interpretations. 
Members of the public are particularly encouraged to comment on the 
proposed regulations in the latter category. Members of the public are 
reminded that many of the details of the complex program described in 
this proposal are specified in the statute, and thus are not within the 
Department's discretion to change.
    3. Comparison to Environmental Protection Agency (EPA) Fleet 
Requirement Program. As many State and local officials and members of 
the public are undoubtedly aware, there is a fleet requirement program 
under the provisions of the Clean Air Act, (42 U.S.C. 7401 et seq.), 
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 be clean 
fuel vehicles operating on clean alternative fuels. 42 U.S.C. 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. Compare 42 U.S.C. 7581 
with 42 U.S.C. 13211. For example, the definition of ``covered fleet 
vehicle'' in section 241 refers to motor vehicles ``* * * in a covered 
fleet which are centrally fueled (or capable of being centrally 
fueled). * * *.'' [Emphasis added.] 42 U.S.C. 7581(6). That phraseology 
is similar to the definitions of ``fleet'' and ``covered person'' in 
section 301 of the Energy Policy Act of 1992 which refer to motor 
vehicles ``* * * that are centrally fueled or capable of being 
centrally fueled * * *.'' 42 U.S.C. 13211(5)(A), 13211(9).
    While such similarities in statutory text are significant and 
should not be ignored in formulating regulations, the differences 
between the two pieces of legislation are more important. The critical 
differences are: (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 22 ozone or 
carbon monoxide nonattainment areas while the DOE program applies to 
fleets in approximately 121 areas including both nonattainment and 
attainment areas.
    The Department recognizes that fleet owners and operators who are 
subject to the EPA and the DOE fleet requirement programs would like to 
use the same vehicles and fuels to comply with both. In order to 
minimize differences, the Department has reviewed EPA's rulemaking 
notice implementing its statutory provisions, 40 CFR part 88; 58 FR 
64679 (December 9, 1993), and followed EPA's lead where legally 
permissible and consistent with the Act's policy goals. Nevertheless, 
there are some unavoidable differences that will constrain the options 
of those fleet owners and operators interested in using the same 
vehicles and fuels to comply simultaneously with both statutory 
requirements. Where relevant, the Department identifies the basis for 
those differences in parts of the Supplementary Information that follow 
hereafter. Members of the public are invited to comment on ways the 
Department could lawfully make it easier to comply with both statutory 
requirements.
    4. Reformulated gasoline. Although percentages can vary to a small 
degree, it is the Department's understanding that reformulated gasoline 
is comprised of over 90 percent petroleum on an energy equivalent 
basis. Reformulated gasoline is an enumerated ``clean alternative 
fuel'' in section 241 of the Clean Air Act. 42 U.S.C. 7581. It is not 
mentioned at all in the definition of ``alternative fuel'' in section 
301 of the Energy Policy Act of 1992. Section 301(2) provides that the 
term ``alternative fuel'' means methanol, denatured ethanol, and other 
alcohols; mixtures containing 85 percent or more (or such other 
percentage, but not less than 70 percent, as determined by the 
Secretary, by rule, to provide for cold start, safety, or vehicle 
functions) by volume of methanol, denatured ethanol, and other alcohols 
with gasoline, or other fuels; natural gas; liquified petroleum gas; 
hydrogen; coal-derived liquid fuels; fuels (other than alcohol) derived 
from biological materials; electricity (including electricity from 
solar energy); and any other fuel the Secretary determines, by rule, is 
substantially not petroleum and would yield substantial energy security 
benefits and substantial environmental benefits.
    Each of the above-underscored phrases sets forth limited authority 
for the Department to add fuels to the definition of ``alternative 
fuel.'' Under either authority, the Department must undertake notice 
and comment rulemaking under the Administrative Procedure Act, 5 U.S.C. 
Sec. 553, to add a fuel to the statutory list. The Department did not 
include in today's proposal a provision adding reformulated gasoline to 
the definition of ``alternative fuel.'' The percentage of petroleum in 
reformulated gasoline, at least 90 percent of the total volume, is too 
large to warrant proposing to make any of the necessary substantive 
determinations described above. To the extent that reformulated 
gasoline is an alcohol/gasoline mixture, it does not meet the minimum 
70 percent alcohol volume requirement described above. To the extent 
that reformulated gasoline is some other kind of mixture, the 90 
percent petroleum volume precludes a determination that the mixture is 
``substantially not petroleum'' and would ``substantially enhance 
energy security.''
    Members of the public are invited to comment on the Department's 
determination not to propose a rule that would include reformulated 
gasoline as an ``alternative fuel'' under section 301.

II. Section-By-Section Analysis

    This part of the Supplementary Information discusses those 
provisions of the proposed regulations that are not self-explanatory. 
[[Page 10974]] 

A. Subpart A--General Subpart

Definition of ``Fleet''

    In order to promote easier understanding, DOE has divided the 
statutory definition into two parts. The main paragraph in the 
statutory definition appears in proposed Sec. 490.2 under the word 
``fleet.'' This proposed regulatory definition of ``fleet'' cross 
references proposed Sec. 490.3, that describes the categories of 
vehicles excluded from the definition.
    In the proposed definition of ``fleet,'' there is a cross reference 
to proposed appendix A to subpart A which sets forth a list of 
metropolitan statistical areas (MSAs) and consolidated metropolitan 
statistical areas (CMSAs), as defined by the Bureau of the Census, with 
the requisite 250,000 population as of the 1980 census. The statutory 
definition of ``fleet'' does not state 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. The proposed rule allows DOE to update the list, but DOE 
may delete this provision in the final rule to eliminate uncertainty. 
Members of the public are invited to comment on this choice.
    Consistent with the statutory language, the proposed definition 
requires that there be a minimum of 20 light duty motor vehicles ``used 
primarily'' in a relevant statistical area. DOE is proposing to 
interpret those words to mean that the majority of the vehicles' total 
miles are accumulated within a covered statistical area.
    With regard to fleet fueling characteristics, the statutory and 
proposed regulatory definition of ``fleet'' provide that the vehicles 
be ``centrally fueled or capable of being centrally fueled.'' Proposed 
Sec. 490.2 defines the term ``centrally fueled'' as meaning that a 
vehicle is fueled 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.
    It should be noted that simply because a fleet vehicle is not 
centrally fueled does not mean it is exempt from counting, because the 
statutory requirement covers those vehicles that 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, then the total of these 
vehicles, i.e., those 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.
    In providing that contract fueling is a method of being centrally 
fueled, retail credit card purchases by themselves are not considered 
to be a contractual refueling agreement. However, 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 definition is 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. DOE does not intend the definition of ``centrally 
fueled'' to pertain to fleet service card agreements which include a 
wide network of fuel providers, unless the service card agreement 
effectively operates as a commercial refueling arrangement between a 
circumscribed subset of such refueling facilities and a given fleet 
operator.
    Proposed Sec. 490.2 defines the term ``capable of being centrally 
fueled'' as meaning a vehicle 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. One method that DOE is proposing for determining central 
fueling capability is whether 75 percent of a vehicle's total 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 on the final rule for the definitions and 
general provisions for the Clean Fuel Fleet Program, 58 FR 64684, the 
operational range is the distance a vehicle is able to travel on a 
round trip with a single refueling. The operational range should be no 
less than 50 percent of the average range of the existing fleet and in 
no instance should be less than 300 miles. It is important to note that 
the fuel in question is the fuel that the vehicle currently operates 
on. DOE believes that this proposed definition will allow fleets and 
covered persons to easily determine which vehicles are ``capable of 
being centrally fueled.'' DOE requests comment on this definition of 
operational range, and on the operational range of alternative fueled 
vehicles which may be required to comply with this program.
    In defining the same phrase in 40 CFR 88.302-94, EPA provided that 
the presence of one or more nonconforming vehicles in a fleet does not 
exempt an entire fleet from the requirements of this program; those 
vehicles that are capable of being centrally fueled will count towards 
the 20-vehicle minimum fleet size. DOE agrees, but does not find a need 
to include a phrase to this effect in the definition of ``capable of 
being centrally fueled.''
    The DOE proposed definition differs from the EPA definition of 
``capable of being centrally fueled,'' at 40 CFR 88.302-94, because the 
DOE proposed definition does not require that vehicles covered must be 
capable of being centrally fueled 100 percent of the time. In 
developing its definition, EPA had to consider the fueling 
characteristics of both light duty and heavy duty vehicles. EPA amended 
its proposed definition to reflect the 100 percent fueling requirement 
based on the comments of heavy duty engine manufacturers, who argued 
that vehicles purchased by heavy duty vehicle fleet operators in order 
to comply with the Clean Fuel Fleet Program would have to be dedicated 
to a single fuel that may not be widely available. It appears that if 
the heavy duty vehicles had not been involved in the program that EPA 
would have settled on the 75 percent figure. DOE did not take these 
comments into consideration when developing the proposed definition 
because the Act has no requirement for fleets to acquire heavy duty 
vehicles. Thus, separate heavy duty vehicle fueling characteristics do 
not have to be considered. DOE requests comment on whether the 75 
percent level is appropriate.
    DOE's proposed definition of ``capable of being centrally fueled'' 
is based on EPA's work. However, DOE requests comment as to whether 
further editing is necessary to clarify the meaning of this phrase. 
[[Page 10975]] 
    The statutory definition of ``fleet'' requires that a minimum of 20 
vehicles be ``owned, operated, leased, or otherwise controlled by a 
governmental entity or other person.'' The proposed regulatory 
definition of ``fleet'' substantially tracks this language. However, 
there is also a definition of ``lease'' in proposed Sec. 490.2 that 
excludes 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. 
DOE shares this view.
    The proposed regulatory definition of ``fleet'' further tracks the 
statutory definition by requiring that a person controls 50-light duty 
motor vehicles regardless of where they are located. The proposed 
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. The concept 
is used with regard to: (1) Control of vehicles; (2) control by another 
person; (3) control of another person; and (4) being subject to common 
control together with another person.
    There is similar language in the definition of ``covered fleet'' 
which applies to the EPA fleet program requirement. EPA has promulgated 
an elaborate definition of ``control'' in 40 CFR Sec. 88.302-94 which 
reflects the various ways in which the concept of ``control'' is used 
in the definition of ``covered fleet.'' The explanation of that 
definition appears at 58 FR 64686-7. DOE is proposing to adopt EPA's 
definition of ``control.''
Other Definitions
    Proposed Sec. 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 
warranties 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-authorized 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.
    Proposed Sec. 490.2 defines the term ``alternative fuel'' 
consistent with the definition for that term in section 301 of the Act. 
The text of the statutory definition of ``alternative fuel'' was quoted 
earlier in this Supplementary Information section in a discussion of 
reformulated gasoline. The terms of that definition do not restrict 
``alternative fuels'' to fuels used only for transportation purposes. 
However, section 501(a)(3)(B) of the Act specifically exempts certain 
businesses that do not use ``alternative fuels'' for transportation 
purposes. That provision is reflected in proposed Sec. 490.303(b) which 
is discussed in detail below in this section-by-section analysis.
    Proposed Sec. 490.2 defines the term ``covered person'' consistent 
with the definition for that term in section 301 of the Act.
    ``Dealer demonstration vehicles'' are excluded from the definition 
of ``fleet.'' Proposed Sec. 490.2 follows the EPA definition for the 
term ``dealer demonstration vehicle'' found at 40 CFR Sec. 88.302-94 
which defines ``dealer demonstration vehicle'' as meaning 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. The 
intent of this definition is to exempt the vehicles held on the lot of 
a motor vehicle dealer as stock from which potential purchasers or 
lessees can choose. 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.
     As required by section 301(8) of the Act, proposed Sec. 490.2 
defines the term ``dual fueled vehicle,'' consistent with section 
513(h)(1)(D) of the Motor Vehicle Information and Cost Savings Act, 15 
U.S.C. Sec. 2013, as a motor vehicle that is capable of operating on 
alternative fuel and on gasoline or diesel fuel. These include 
flexible-fuel vehicles that operate on a mixture of an alternative fuel 
and a petroleum-based fuel, and bi-fuel vehicles that can be switched 
to operate on either an alternative fuel or a petroleum-based fuel. The 
intent of this definition is to include all vehicles that are capable 
of operating on an alternative fuel and a petroleum-based fuel, 
regardless of what terminology is used to describe the vehicle. The 
Department is aware that the terms ``bi-fuel'' and ``dual-fuel'' are 
being used interchangeably to describe the same motor vehicle and does 
not wish to further confuse the situation.
    ``Emergency vehicles'' are excluded from the definition of 
``fleet.'' Proposed Sec. 490.2 adopts EPA's definition for the term 
``emergency vehicle'' in 40 CFR Sec. 88.302-94 which defines 
``emergency vehicle'' as meaning 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 requirement 
for legal authorization to exceed the speed limit may be problematic, 
however, for localities that authorize certain utility vehicles to 
exceed the speed limit in special circumstances. However, those 
vehicles are not normally considered emergency vehicles in that 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. Their response to an emergency does 
not usually require them to exceed the speed limit, and they are not 
usually equipped with red and/or blue flashing lights and sirens for 
use when exceeding the speed limit. Therefore, those vehicle types are 
not considered excluded from the definition of ``fleet'' unless, on a 
vehicle-by-vehicle basis, they are specifically and legally authorized 
by a governmental authority to respond to emergencies as described 
above.
    ``Law enforcement vehicles'' are excluded from the definition of 
``fleet.'' Proposed Sec. 490.2 adopts EPA's definition of the term 
``law enforcement vehicle'' found at 40 CFR Sec. 88.302-94 which 
defines ``law enforcement vehicle'' as meaning 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 [[Page 10976]] 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 vehicles and vehicles used for other security 
purposes. Under this definition, a vehicle is considered to be a law 
enforcement vehicle and is exempt by virtue of its use for official law 
enforcement purposes, as conveyed by local, state or federal government 
mandate. Security vehicles do not usually comply with this definition, 
and as such are not excluded from the definition of ``fleet'' unless 
they are contracted by a law enforcement agency for the purposes 
described above.
    Proposed Sec. 490.2 defines the term ``lease'' to mean use of a 
vehicle for transportation purposes pursuant to a rental contract or 
similar arrangement, the term of such contract or similar arrangement 
is for a period of 120 days or more, and such person has control over 
the vehicle. 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. The intent of this definition is to include, for 
compliance purposes, any vehicles controlled by a covered person, 
whether by ownership or lease. The 120-day period is slightly longer 
than a calendar season, and is intended to reflect the fact that the 
leasing of vehicles can occur for short periods of time, including 
seasonal uses, and that such short term, temporary leases should not be 
subject to the conditions of the program. However, fleets and covered 
persons leasing or renting a vehicle for more than 120 days must 
include this vehicle in the company's total count of new light duty 
motor vehicles acquired for the respective model year.
    Proposed Sec. 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. For purposes of compliance, covered persons should compute their 
vehicle acquisitions during the period beginning September 1 of each 
year through August 31. This definition of model year coincides with 
the period in which most automobile manufacturers introduce their new 
annual models, which should facilitate compliance since fleets can make 
their acquisition plans regarding alternative fueled vehicles when they 
make plans for acquiring new model year vehicles. This definition is 
intended to clarify which vehicles count toward the required annual 
acquisitions under the program. This definition is also intended to 
ensure that all fleets and covered persons acquire vehicles based on 
the same annual period, which is important to facilitate enforcement of 
the programs. Thus, any new vehicles that are acquired by a fleet or 
covered person between September 1 and August 31 are counted and used 
as the basis for determining the acquisition requirement of the same 
year, and are considered of the same model year as the January that 
falls between them.
    ``Motor vehicles held for lease or rental to the general public'' 
are excluded from the definition of ``fleet.'' Proposed Sec. 490.3 
follows EPA's definition of this phrase found at 40 CFR Sec. 88.302-94 
which defines ``motor vehicles held for lease or rental to the general 
public'' as meaning 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. According to this definition, the 
vehicles must be owned primarily for the purpose of renting or leasing 
them without a driver, effectively granting someone else control over 
them in exchange for money or other compensation. In addition, this 
exchange must be based on a contract. Thus, a firm cannot 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.
    ``Motor vehicles used for motor vehicle manufacturer product 
evaluations and test'' are also excluded from the definition of 
``fleet.'' Proposed Sec. 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. There the phrase is defined to mean 
vehicles that are owned and operated by a motor vehicle manufacturer, 
or motor vehicle component manufacturer, or 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. It is the intent of this 
provision to exclude vehicles which are part of a ``fleet'' used by an 
Original Equipment Manufacturer for production control or quality 
control reasons.
    ``Motor vehicles which under normal operations are garaged at 
personal residences at night'' is another category of vehicles excluded 
from the definition of ``fleet.'' Proposed Sec. 490.2 tracks the 
language of section 301(h) of the Act.
    Proposed Sec. 490.2 defines the term ``Original Equipment 
Manufacturer Vehicle'' as meaning a vehicle engineered, designed and 
produced 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.
Proposed Section 490.3  Excluded Vehicles
    Proposed Sec. 490.3 sets forth the vehicles which may be excluded 
when counting to determine whether there are a sufficient number of 
vehicles to constitute a ``fleet'' as defined in proposed Sec. 490.2. 
Some of the exclusions are categories capsulized in a term such as 
``dealer demonstration vehicle,'' ``emergency vehicle,'' and ``law 
enforcement vehicle.'' Those terms are defined in proposed Sec. 490.2 
and are discussed above.
Proposed Section 490.4  General Information Inquiries
    In other regulatory programs, DOE has learned that on occasion 
representatives of regulated persons make informal inquiries, usually 
by telephone, and need a quick response from the program office even if 
the response is not binding on DOE. Proposed Sec. 490.4 would make this 
device for obtaining information available to those who are subject to 
regulation under part 490.
Proposed Section 490.5  Requests for an Interpretive Ruling
    For those who want a more authoritative answer 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 
exemption are irrelevant, proposed Sec. 490.5 would provide a useful 
option. The uncertainties related to the complex provisions applicable 
to determining who must comply and the extent of 
[[Page 10977]] affected vehicle inventories prompted DOE to devise 
proposed Sec. 490.5. Any interpretive ruling that the Department issues 
would apply only to the person who requested it. However, the 
Department will make copies of these rulings available for inspection 
and copying in a public file in its Freedom of Information Reading Room 
in the Forrestal Building at 1000 Independence Ave., SW, Washington, DC 
20585.
Proposed Section 490.6  Petitions for Generally Applicable Rulemaking
    Proposed Sec. 490.6 sets forth procedures for petitioning the 
Department to issue new or amended rules of general applicability for 
part 490. These procedures implement rights available to members of the 
public under the Administrative Procedure Act. 5 U.S.C. 553(e).
Proposed Section 490.7  Relationship to Other Law
    Proposed Sec. 490.7 makes a declaratory statement to avoid 
arguments that provisions of part 490, by their silence, authorize 
acquisition of vehicles or conversion of vehicles in a manner that does 
not comply with other laws and regulations at the Federal, state, or 
local level.

Subpart B--[Reserved]

Subpart C--Mandatory State Fleet Program

Proposed Section 490.201  Alternative Fueled Vehicle Acquisition 
Mandate Schedule
    Proposed Sec. 490.201 sets forth the requirements, subject to some 
exemptions, for the percentage of new light duty motor vehicles for 
State fleets that must be alternative fueled vehicles when acquired 
under the Mandatory State Fleet Program. Beginning with the 1996 model 
year, September 1, 1995, any state fleet that is covered under this 
subpart must comply with these requirements, unless otherwise provided 
in this subpart.
    In cases where acquisition percentages result in something less 
than a whole number, DOE is proposing that these fractions be rounded 
up to the next whole number.
Proposed Section 490.202  Acquisitions Satisfying the Mandate
    Proposed Sec. 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.
Proposed 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 proposed by 
Sec. 490.201 solely through acquisition of new State-owned vehicles, a 
State may comply with a Light Duty Alternative Fueled Vehicle Plan 
submitted by the State and approved by DOE. The Plan must demonstrate 
that there will be a sufficient number of light duty motor vehicles by 
State, local and private fleets, which in aggregate meet or exceed the 
applicable vehicle percentage for any given year.
    DOE is proposing that any acquisition or conversion of light duty 
alternative fueled vehicles for a State may be part of the Plan, 
irrespective of whether the vehicles are in the excluded categories of 
vehicles in the definition of ``fleet'' as enumerated in proposed 
Sec. 490.3. This allows for law enforcement vehicles, or other vehicles 
otherwise excluded from the definition of ``fleet'' to be part of a 
Light Duty Alternative Fueled Vehicle Plan.
    DOE is proposing that, until a Plan is approved or unless DOE 
grants an exemption, a State is subject to the fleet percentage 
requirements in proposed Sec. 490.201. This will be equally true in 
instances where 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 substitute participant, then the State may submit to DOE 
for approval an amendment to the Plan.
    DOE is proposing in paragraph (b) of this section to require 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 should be able to find a substitute 
participant before the end of the year.
    Paragraph (c) proposes to require a State to submit to DOE, for 
approval, its Light Duty Alternative Fueled Vehicle Plan no later than 
the June 1 prior to the model year covered by the Plan. A State should 
know by this deadline the number of light duty motor vehicles it plans 
to acquire during the upcoming model year. DOE would like to receive 
comments as to whether it is reasonable to require all Plans be 
submitted by the June 1 prior to the model year.
Proposed Section 490.204  Process for Granting Exemptions
    Section 507 (i)(1) of the Act provides three categories under which 
a State may seek exemptions in whole or in part from the annual 
acquisition percentages. 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 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 
reasonably available for acquisition because they are not offered for 
acquisition commercially on reasonable terms and conditions in any of 
the States; or
    (3) The application of such requirements would pose an unreasonable 
financial hardship.
    Category 1 tracks section 507(i)(1) of the Act. Category 2 is based 
on section 507(i)(1) and would preclude arguments that the physical 
unavailability in a state is not a valid reason for exemption when a 
vehicle can be ordered from somewhere else in the United States. Time 
delays in delivery of alternative fueled vehicles are generally not 
acceptable as an excuse. States must be cognizant of the possible 
irregular manufacturer production schedules and considerably longer 
lead times involved in the acquisition of alternative fueled vehicles 
compared with conventional vehicles. It is the responsibility of the 
state to plan and schedule its ordering and acquisitions of alternative 
fueled vehicles so as to comply with the acquisition requirements for 
each model year. Regarding category 3, section 507(i)(1) allows only 
States, not alternative fuel providers, the right to seek an exemption 
based on financial hardship. Proposed paragraph (d)(3) describes the 
few items of information that a State must submit to DOE when 
requesting an exemption based on financial hardship. (Earlier in this 
Supplementary Information, States were invited to comment on how DOE 
should interpret and apply the term ``financial hardship.'')
    Proposed paragraph (g) provides that the Assistant Secretary for 
Energy Efficiency and Renewable Energy may grant a request for 
exemption. 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, proposed 
paragraph (g) [[Page 10978]] further provides for a State right to 
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.
    The Act requires that the exemption process be reasonable and 
simple. The DOE invites comments on the proposed process for States to 
request exemptions, in whole or in part.
Proposed Section 490.205  Reporting Requirements
    Proposed Sec. 490.205 will require each state that is subject to 
the vehicle acquisition mandate to submit to DOE an annual report. This 
report will assist DOE in determining if a state has met the 
requirements of this subpart as well as to determine how successfully 
the goals and requirements of this subpart are being met. For further 
discussion on reporting requirements, see proposed section 490.309. DOE 
invites comment as to the reasonableness of these reporting 
requirements, as well as recommendations for additional, substitute or 
reduced requirements which would achieve the desired results.

Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate

I. Background
    The Alternative Fuel Provider Vehicle Acquisition Mandate is 
intended to cover a broad range of alternative fuel providers in a 
flexible, workable program that will allow for compliance in the most 
economical fashion possible. The program allows alternative fuel 
providers flexibility in the acquisition of new alternative fuel 
vehicles via purchase, lease, or conversion, and in the geographical 
placement of alternative fuel vehicles. It also provides a minimum of 
restrictions on how the alternative fueled vehicles are to be used.
    The program specifies the criteria for determining whether an 
alternative fuel provider is covered and under what circumstances 
exemptions from the program will be granted. Only those alternative 
fuel providers who are classified as ``covered persons'' are subject to 
the requirements of this proposed regulation and only that affiliate, 
division, or other business unit which is substantially engaged in the 
alternative fuels business may be subject to the acquisition mandate 
requirements of the Act.
Proposed Section 490.300  Purpose and Scope
    Proposed Sec. 490.300 defines the purpose and scope of part 490 
Subpart D as implementing the statutory requirements of section 501 of 
the Energy Policy Act of 1992, which sets forth a mandate for those 
alternative fuel providers, who are classified as covered persons, to 
acquire alternative fuel vehicles at an escalating percentage of their 
new vehicle acquisitions.
Proposed Section 490.301  Definitions
    Proposed Sec. 490.301 sets forth the definitions for part 490, 
Subpart D.
    Proposed Sec. 490.301 defines the term ``alternative fuels 
business'' as meaning an activity 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. 
This definition tracks the language of section 501(a)(2).
    Proposed Sec. 490.301 provides definitions for the terms 
``affiliate,'' ``division,'' and ``business unit'' which are used in 
section 501 of the Act and proposed Secs. 490.303 and 490.304. 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.
    Proposed Sec. 490.301 defines the term ``normal requirements and 
practices'' as meaning the operating business practices and required 
conditions under which the principal business of the covered person 
operates. In a request for an interpretive ruling or in a civil penalty 
proceeding, the burden would be on the fuel provider to show that 
actions to acquire alternative fuel vehicles and/or obtain alternative 
fuel are outside the normal practices of the covered person's principal 
business.
    Proposed Sec. 490.301 defines the term ``principal business'' as 
meaning 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. 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. Sales-related in 
this context means that the gross revenue does not come from 
investments such as corporate stocks.
    In determining whether an organization's principal business is 
alternative fuels, the important criterion to look at is what is the 
organization's single largest source of sales-related gross revenue. 
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.
    Proposed Sec. 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, as defined above, is subject to the acquisition 
requirements of this program.
    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.
    Proposed Sec. 490.301 defines the term ``substantial portion'' to 
mean that at least 2 percent of a covered person's refinery yield of 
petroleum products is composed of alternative fuels. Alternative fuel 
is as defined in proposed Sec. 490.2. This proposed definition was 
formulated using reliable data compiled by the Energy Information 
Administration and published in its Petroleum Supply Annual 1993, 
Volume 1 (DOE/EIA-0340(93)/1). Table 19 provides aggregate data on 
refinery yield for the Petroleum Administration for Defense districts 
and can be readily verified.
    The 2% threshold was chosen because it represents the average yield 
for the production of alternative fuel by petroleum refiners as 
reported by the Energy Information Administration. DOE believes that 
the use of this percentage in the definition of ``substantial portion'' 
allows for the initial identification of that group of covered persons 
described in Sec. 501(a)(2)(c) of the Act and provides a sound basis 
for identifying those [[Page 10979]] affiliates, divisions, or other 
business units of such covered persons which are substantially engaged 
in the alternative fuel business.
    The Department considered including some measure of the gross 
revenue attributed to the production of alternative fuels as an 
alternative in the definition of ``substantial portion.'' The first 
measure that was considered was setting a minimum level of gross 
revenue from the sale of alternative fuels that an organization would 
have to equal or exceed to be classified as an alternative fuel 
provider. The second measure that was considered was establishing a 
minimum percentage, that reflects the percent of total gross revenue 
attributed to the sale of alternative fuels, that an organization would 
have to equal or exceed to be classified as an alternative fuel 
provider. Unfortunately, the information available on these measures is 
too fragmented to be the basis for proposed regulatory language. DOE 
seeks comment on whether reliable information exists that would allow 
establishment of a monetary measure (or any measure apart from the 
measure in the proposed rule) for determining whether alternative fuels 
production comprises a substantial portion of a company's business. DOE 
also seeks comment recommending any other alternative definitions for 
``substantial portion.''
Proposed Section 490.302  Vehicle Acquisition Mandate Schedule
    Proposed Sec. 490.302 describes the vehicle acquisition schedule 
that alternative fuel providers must comply with if they are classified 
as covered persons. Proposed paragraph (a) requires that of the new 
light duty motor vehicles acquired by alternative fuel providers, the 
following percentages shall be alternative fueled vehicles for the 
following model years:
    (A) 30 percent for model year 1996.
    (B) 50 percent for model year 1997.
    (C) 70 percent for model year 1998.
    (D) 90 percent for model year 1999 and thereafter. For example, if 
an alternative fuel provider purchases or leases 50 light duty motor 
vehicles in model year 1996, 30 percent, or 15, of the vehicles have to 
be alternative fueled vehicles.
    Proposed paragraph (b) states that, except as provided by 
Sec. 490.304, these requirements apply to all new light duty vehicles 
acquired by a ``covered person,'' not just those vehicles acquired for 
the fleets which initially qualified the alternative fuel provider as a 
``covered person.'' These requirements also apply regardless of where 
the new vehicles are to be located. For example, if an alternative fuel 
provider, which is a covered person, is acquiring new light duty motor 
vehicles for a location that is not in a subject MSA or CMSA, the 
required percentage of these vehicles must be alternative fueled 
vehicles. The MSA/CMSA requirement is used for classifying ``covered 
persons,'' not for determining how many light duty vehicles must be 
alternative fueled vehicles. The provisions of proposed Sec. 490.302(b) 
are not discretionary because they follow the wording of section 
501(a)(1) of the Act. 42 U.S.C. 13251(a)(1).
    Proposed paragraph (c) provides for rounding off to the next higher 
number if application of a percent to the base number of new light duty 
vehicles acquired results in a requirement to acquire a fraction of a 
vehicle. This procedure is consistent with the statutory objective of 
promoting the acquisition of alternative fuel vehicles.
    Proposed paragraph (d) states that only acquisitions satisfying the 
mandate, as described in proposed Sec. 490.305, and/or Alternative 
Fueled Vehicle credits will be counted toward compliance with the 
acquisition schedule in proposed paragraph (a).
Proposed Section 490.303  Who Must Comply
    Proposed Sec. 490.303 gives an answer to the question: who is a 
covered person that must comply? This proposed section tracks section 
501(a)(2) of the Act. There are two components to this determination. 
The first component involves determining whether the organization fits 
the profile of an alternative fuel provider as provided by section 
501(a)(2) of the Act. The second component eliminates from coverage 
those alternative fuel providers whose principal business uses 
alternative fuel to create a product that is not an alternative fuel.
    Types of companies likely to be covered persons subject to the 
alternative fuel providers mandate include, but are not limited to, 
private and public electric and natural gas utilities; natural gas 
distribution companies; pipeline companies; petroleum companies; 
propane producers, distributors, and suppliers; methanol providers; 
ethanol providers; and fuel transport companies.
    Municipal utilities possessing the required fleet size, fueling 
characteristics, and located within the specified geographical areas 
are classified as alternative fuel providers under section 
501(a)(2)(B). Therefore, they are expected to comply with the 
requirements of the mandate under Sec. 490.302 and will not be subject 
to any future municipal fleet mandate imposed by rule under section 507 
of the Act.
    If an organization produces, imports, or produces and imports in 
combination, an average of 50,000 barrels per day or more of petroleum, 
and regularly derives gross revenue from the production of alternative 
fuels, that organization has a ``substantial portion'' of its business 
in alternative fuels. To determine whether an organization has a 
substantial portion of its business in alternative fuels it is 
important to look at the organization's involvement in the alternative 
fuels business, not just the amount of gross revenue from alternative 
fuels production or the level of investment in alternative fuels 
production. DOE's determination of whether an organization has a 
substantial portion of its business in alternative fuels will be made 
on a case-by-case basis. Comment is invited as to what criteria might 
be used in making this determination.
    Paragraph (b) of proposed Sec. 490.303 deals with covered persons 
who are excluded from having to comply with this subpart. This section 
tracks the language of section 501(a)(3)(B) of the Act. Two types of 
covered persons may be 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 paragraphs (b)(1) and (b)(2) 
would be an entity whose principal business is the production of 
alcoholic beverages.
Proposed Section 490.304  Which New Light Duty Motor Vehicles Are 
Covered
    Under section 501(a)(3)(A) of the Act, if the covered person has 
more than one affiliate, division, or other business unit, only the 
vehicles of an affiliate, division, or business unit that is 
``substantially engaged in the alternative fuels business'' are subject 
to the vehicle acquisition mandate. Proposed Sec. 490.304 reflects the 
provisions of [[Page 10980]] section 501(a)(3)(A), and should be read 
in conjunction with the proposed definitions of ``affiliate,'' 
``division,'' and ``business unit'' in Sec. 490.301.
Proposed Section 490.305  Acquisitions Satisfying the Mandate
    Proposed Sec. 490.305 deals with the three types of acquired 
vehicles that will count toward compliance with proposed Sec. 490.302, 
in addition to 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 newly acquired, regardless of model 
year, if:
    (a) 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
    (b) The vehicle is an after-market converted vehicle and was not 
previously under the control of the covered person; or
    (c) The vehicle is an Original Equipment Manufacturer vehicle that 
has been converted to operate on alternative fuels prior to the 
vehicle's first use in service.
    A vehicle that meets the description of paragraph (a) 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 1993 flex-fuel light duty motor vehicle during model year 
1996, this vehicle is classified as being a new acquisition for that 
organization.
    A vehicle that meets the description of paragraph (b) is one that 
has been converted by a licensed converter to be capable of operating 
on alternative fuels. A vehicle that meets the description of paragraph 
(c) is a vehicle that upon acquisition by the organization is taken to 
a licensed converter for conversion to an alternative fueled vehicle 
and is never intended to be operated solely on petroleum-based fuel. It 
is important to note that section 507(j) of the Act states that no 
fleet owner shall be required to acquire converted vehicles in order to 
meet compliance with this or any fleet acquisition requirement.
Proposed Section 490.306  Vehicle Operation Requirements
    Proposed Sec. 490.306 largely tracks the provisions of section 
501(a)(4), 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.
Proposed Section 490.307  Option for Electric Utilities
    Proposed Sec. 490.307 deals with the statutory option for electric 
utilities. Proposed 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 
considered delaying the date that electric utilities would have to 
start acquiring vehicles until the beginning of model year 1999 which 
starts on September 1, 1998. But given that the California Air 
Resources Board requires that 2 percent of all vehicles sold in 
California by major auto producers be Zero Emission Vehicles, (emission 
level currently only achievable by electric vehicles) starting 
September 1, 1997, DOE decided not to propose a delay in the effective 
date of the 30 percent alternative fueled vehicle acquisition 
requirement. Also, the States of New York and Massachusetts have 
enacted laws which adopt California standards and timetables.
    Proposed paragraph (b) provides the date (January 1, 1996) by which 
notification must be received by DOE for an electric utility to be 
eligible for this delayed schedule. That date is dictated by section 
501(c) of the Act. This notification should be in letter format and 
must explain the utility's commitment to electric vehicles.
    Proposed paragraph (c) describes the acquisition schedule that an 
electric utility must comply with if the electric utility notifies the 
Secretary by the required date.
Proposed Section 490.308  Process for Granting Exemptions
    Proposed Sec. 490.308 deals with 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. Proposed paragraph (a) describes 
the procedure that a covered person needs to complete to receive an 
exemption. The first category of exemption is if any covered person 
demonstrates to the satisfaction of the Secretary that alternative 
fuels that meet the normal requirements and practices of the principal 
business of that person are not available 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 the Secretary that 
alternative fueled vehicles that meet the normal requirements and 
practices of the principal business of that person are not reasonably 
available for acquisition because they are not offered for acquisition 
commercially on reasonable terms and conditions in the United States. 
These exemptions would be granted for one model year only. To receive 
exemptions for additional model years, alternative fuel providers must 
re-apply to the Secretary each year. Criteria for granting exemptions 
will be based on documentation that specifically relates to the 
availability of alternative fuels and alternative fueled vehicles.
    To determine whether alternative fuel is ``not available,'' an 
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.''
    The Act requires that the exemption process be reasonable and 
simple. DOE invites comment on the proposed process for exemptions, in 
whole or in part.
    It is anticipated that alternative fuel will be available and 
accessible for almost all alternative fuel providers, and that it will 
be difficult for fuel providers to prove that alternative fuel is not 
available. Since alternative fuel providers stand to benefit greatly 
from the expanded use of alternative fuels and the proliferation of 
alternative fueled vehicles, it is also anticipated that they will help 
accelerate the establishment of the alternative fuels infrastructure 
and be less likely to seek exemptions based on alternative fuels being 
``not available.''
    To receive an exemption based on the criteria in subparagraph 
(a)(2) a covered person must show that there are no alternative fueled 
vehicles available for commercial acquisition on reasonable terms and 
conditions in any State. The covered person also must show good faith 
effort in attempting to obtain these vehicles. DOE requests comment on 
the extent to which vehicle cost, either [[Page 10981]] initial cost or 
life-cycle cost, should be considered in determining whether vehicles 
are available on ``reasonable terms.''
    If a covered person normally and historically 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 (a)(2) if appropriate alternative fueled 
vehicles are available from other dealers or manufacturers. Having to 
use another dealer or manufacturer is not classified as outside the 
normal requirements and practices of the covered person, because 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.
    Having to wait slightly longer for delivery of alternative fueled 
vehicles than for conventionally fueled vehicles is not a sufficient 
reason for granting an exemption. If, however, the time delay will 
result in a covered person violating the regulation, DOE will consider 
the covered person to be in compliance with this regulation if the 
delivery delay was through no fault of its own. Thus, if alternative 
fueled vehicles are ordered during the model year with expectations 
that they will be delivered by the end of the model year, but are not 
delivered until the next model year, the covered person will be deemed 
to be in compliance if it can provide DOE with proof of order date and 
anticipated delivery schedule. On the other hand, if a covered person 
orders alternative fueled vehicles and knows, at the time of the order, 
that it will not be receiving these alternative fueled vehicles by the 
end of the model year, it will be deemed to be in noncompliance and no 
exemption will be granted.
    Additionally, in determining whether alternative fueled vehicles 
are reasonably available, a covered person must examine whether 
alternative fueled vehicles of the appropriate type are available in 
any alternative fuel configuration. Thus, the availability of the type 
of vehicle a covered person needs that operates on the fuel that the 
covered person provides is not the appropriate test for determining 
whether alternative fueled vehicles are ``not reasonably available.'' 
The test for determining whether alternative fueled vehicles are ``not 
reasonably available'' is whether there are alternative fueled vehicles 
available that operate on any alternative fuel and meet the normal 
requirements and practices of the business, including the vehicle 
performance requirements of the business.
    Proposed paragraph (b) sets forth the types of documentation in 
support of exemption requests that should be provided to DOE.
    Proposed paragraph (e) states that exemption determinations are 
letter rulings binding for the covered person only and cannot be used 
to establish a precedent for other exemption requests. DOE will review 
each exemption request on a case-by-case basis.
    In proposed paragraphs (f) and (g) DOE is proposing an 
administrative remedy for those aggrieved by the initial decision of 
the DOE Deciding Official, who will be the Assistant Secretary for 
Energy Efficiency and Renewable Energy. In order to exhaust 
administrative remedies, it will be necessary to appeal to DOE's Office 
of Hearings and Appeals. This procedure has two virtues. It would be 
less expensive than pursuing a judicial remedy immediately. It would 
also ensure that DOE has made a record which is appropriate for 
judicial review in the event a petition for review is filed in a 
Federal court.
Proposed Section 490.309  Annual Reporting Requirements
    Proposed Sec. 490.309 sets forth annual reporting requirements. An 
annual report to verify regulation compliance is required of all 
alternative fuel providers. Proposed paragraph (a) sets forth where and 
by when annual reports should be sent.
    Proposed paragraph (b) describes the required information that 
would be included in this annual report. Most of the requirements are 
self-explanatory; however, several of them deserve discussion for 
clarification purposes.
    Proposed subparagraph (b)(2) would require covered persons to 
calculate the number of new light duty alternative fueled vehicles that 
they are required to acquire. To determine this number, a covered 
person would multiply the number entered for proposed subparagraph 
(b)(1), by the acquisition percentage from Sec. 490.302 or Sec. 490.307 
that applies for that model year. For example, in model year 1996, if 
the number of new light duty motor vehicles acquired is 50, the number 
of new light duty vehicles that are required to be acquired is 30 
percent of 50, or 15 (50 x .3=15). The number of new light duty 
alternative fueled vehicles acquired, added to the number of 
alternative fueled vehicle credits applied, from proposed subparagraph 
(b)(5), should be greater than or equal to the number calculated for 
proposed subparagraph (b)(2).
    Proposed 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), proposed 
paragraph (d) would require that records related to this reporting 
requirement be maintained and retained for a period of three years.
    DOE seeks comment on the reporting requirements, especially 
relating to the information that is requested to be included in the 
report.

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 if that 
fleet or covered person acquires alternative fueled vehicles in excess 
of the number that fleet or covered person is required to acquire or 
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 may be traded or sold for use 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 credits program is properly 
implemented and managed, there will be no decrease in energy security 
compared to a program based strictly on compliance through 
acquisitions.
    Both section 246(f) of the Clean Air Act (42 U.S.C. 7586(f)) and 
section 508 of the Act (42 U.S.C. 13258) allow for awarding credits to 
entities that initiate clean fuel vehicle or alternative fueled vehicle 
programs sooner or in greater numbers than required. But the laws 
differ in their goals: the goal of the Clean Air Act Amendments is to 
improve air quality while the goal of the Act is energy security. Thus, 
the credit [[Page 10982]] programs and implementing regulations 
emanating from these acts also have different goals and objectives.
    The EPA has a program called the Clean Fuel Fleet Credit Program 
(40 CFR Sec. 88.304-94) that may be confused with the Department's 
Alternative Fueled Vehicle Credit program. In the Clean Fuel Fleet 
Credit program, a fleet owner obtains credits by implementing clean 
fuel vehicles earlier, in greater numbers, or which meet more stringent 
emission standards than those established by EPA. Clean Fuel Fleet 
credits can also be obtained for Clean Fuel Vehicle purchases in 
vehicle categories that are excluded from the Energy Policy Act 
definition of ``fleet''. These credits are awarded based on a formula 
that compares the clean fuel vehicle emissions with conventional 
vehicle emissions. By contrast, under section 508 of the Energy Policy 
Act, one credit is allocated for each alternative fueled vehicle 
acquired in excess of the required number. Also, the Energy Policy 
allocates one credit for each year the alternative fueled vehicle is 
acquired before the required date.
    Another area of difference between the two statutes is where they 
allow credits to be traded. Under the Clean Air Act, credit trading is 
only allowable within the same non-attainment area. For example, fleet 
operators in the Baltimore non-attainment area can only buy, sell, or 
trade credits with other fleet operators in the Baltimore area. 
Congress appears to have concluded that it was not logical for non-
attainment areas to trade credits with other areas, because the air 
quality in the area where credits were purchased and used would not be 
improved as a result of this transaction. On the other hand, the Energy 
Policy Act credits can be traded freely among those organizations that 
are required to acquire alternative fueled vehicles, which are located 
within the United States. However, there is an exception to this 
trading provision, based upon the last sentence of section 508(d) of 
the Act, which provides that vehicles representing credits generated or 
transferred to alternative fuel providers operate solely on alternative 
fuel. (42 U.S.C. 13258). This requirement is discussed under 
Sec. 490.506 of this Supplementary Information. Because one of the 
major goals of the Act is the reduction of our Nation's foreign oil 
dependency, it makes little difference where in the United States this 
reduction takes place.
Proposed Section 490.500  Purpose and Scope
    Proposed Sec. 490.500 defines the purpose and scope of part 490 
subpart F as implementing the statutory requirements of Section 508 of 
the Act, which instructs the Secretary to allocate credits to fleets or 
covered persons that acquire alternative fueled vehicles in excess of 
the number required, or obtain alternative fueled vehicles prior to the 
date when they are required to acquire alternative fueled vehicles.
Proposed Section 490.501  Applicability
    Proposed Sec. 490.501 deals with the applicability of the credit 
program to fleets and covered persons.
Proposed Section 490.502  Creditable Actions
    Proposed Sec. 490.502 describes the actions associated with 
allocation of alternative fueled vehicle credits by DOE. Proposed 
paragraphs (a) and (b) are consistent with the language of section 
508(a) of the Act, which authorizes the Secretary to allocate credits 
to fleets or covered persons that acquire alternative fueled vehicles 
in excess of the number they are required to acquire, or acquire 
alternative fueled vehicles in advance of the date they are required 
to. Once a fleet or covered person is required to acquire alternative 
fueled vehicles the only way credits can be generated is by exceeding 
their required acquisition number. For example, an alternative fueled 
vehicle acquired in excess of the number required in model year 1996 
cannot be claimed to be an early alternative fueled vehicle acquisition 
for model year 1999. The excess alternative fueled vehicle will 
generate 1 alternative fueled vehicle credit only, not 3 credits 
because it was acquired 3 years in advance.
    Additionally, DOE is proposing that one credit be allocated for the 
acquisition of a light duty alternative fueled vehicle in a category 
listed in proposed Sec. 490.3, such as motor vehicles held for lease or 
rental to the general public, law enforcement vehicles, etc. Section 
508(b) provides the statutory basis for this proposal because it refers 
to the allocation of credits for the acquisition of alternative fueled 
vehicles in excess of the number required. Therefore, the acquisition 
of light duty alternative fueled vehicles in the excluded categories 
constitutes the acquisition of alternative fueled vehicles in excess of 
the number required qualifies for the allocation of credits. Because 
these excluded vehicles are not required to be acquired they are not 
eligible to earn credits for early acquisition which results in 
multiple credits. Thus, DOE is proposing that the acquisition of these 
vehicles in excess of the required number will generate only one credit 
per vehicle.
    It is reasonable to expect that any requirements placed on 
alternative fueled vehicles which are acquired to comply with 
alternative fuel provider or fleet program requirements would also 
apply to vehicles that generate credits. For example, the Act requires 
that alternative fuel providers operate their alternative fueled 
vehicles solely on alternative fuels except when operating in an area 
where the appropriate alternative fuel is unavailable. A net loss to 
energy security goals would occur if a credit-generating vehicle, such 
as an alternative fueled vehicle bought a year earlier than required by 
an alternative fuel provider, did not also operate solely on 
alternative fuel. This requirement applies only to those alternative 
fueled vehicles that generate credits to be used by covered persons who 
are alternative fuel providers. The Department is unaware of any 
possible requirements which would apply to vehicles purchased to 
demonstrate compliance and not to vehicles purchased for credits. 
Therefore, DOE is proposing that any such requirements apply equally to 
both types of vehicles.
    The Department considered whether to allow the acquisition of 
medium duty and heavy duty alternative fueled vehicles (those 
alternative fueled vehicles with gross vehicle weight ratings of 
greater than 8,500 lbs.), by covered persons and fleets, to generate 
credits. 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. These vehicles possess larger capacity engines, 
which consume significantly more fuel than light duty vehicles and 
result in increased displacement of petroleum-based fuel. However, 
paragraph (b) of section 508 provides that credits can only be 
allocated for the acquisition of the same type of vehicles that are 
required under the fleet mandates of Title V of the Act. The only type 
of vehicles that are required to be acquired in Title V are light duty 
vehicles. Thus, credits cannot be awarded for the acquisition of medium 
duty and heavy duty vehicles because the Act does not require any fleet 
or covered person to acquire them. [[Page 10983]] 
Proposed Section 490.503  Credit Allocation
    Proposed Sec. 490.503 deals with alternative fueled vehicle credit 
allocation. Proposed 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 they must be applied for using the procedure described in 
proposed Sec. 490.507.
    Proposed 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 alternative fueled vehicles that fleet or 
person is required to acquire. If a fleet or covered person is required 
to acquire 10 alternative fueled vehicles in a model year and they 
acquire 15 alternative fueled vehicles, they can apply for allocation 
of five alternative fueled vehicle credits.
    Proposed paragraph (b) provides for the allocation of one credit 
per alternative fueled vehicle for each year the alternative fueled 
vehicle is acquired in advance of the date the fleet or covered person 
is required to acquire alternative fueled vehicles. These credits 
cannot be allocated until the date that a fleet is required to acquire 
alternative fueled vehicles. Thus, only covered persons and State 
fleets are presently eligible for credit allocation. Until such time as 
private and municipal fleets are required to acquire alternative fueled 
vehicles, they cannot be allotted credits for early acquisition. At 
that time, all alternative fueled vehicles acquired between October 24, 
1992, and the start date of the private and municipal fleet mandate 
would be eligible for credit allocation.
    Proposed paragraph (c) provides for the allocation of credits to 
alternative fuel providers and State governments for alternative fueled 
vehicles acquired from October 24, 1992, the date the Energy Policy Act 
was enacted.
    Credit allocation is best explained by the following examples. In 
the first example a covered person acquires 10 alternative fueled 
vehicles in model year 1994 and 15 alternative fueled vehicles in model 
year 1995. Because the covered person is not required to acquire 
alternative fueled vehicles until model year 1996, each alternative 
fueled vehicle acquired in model year 1994 will generate 2 credits and 
each alternative fueled vehicle acquired in model year 1995 will 
generate 1 credit. Thus, the covered person generates 35 credits 
[(10 x 2)+(15 x 1)=35], which can be used against future alternative 
fueled vehicle acquisition requirements or can be traded.
    In the second example a state fleet acquires 50 alternative fueled 
vehicles in model year 1995 and 15 alternative fueled vehicles in 
excess of their required acquisition number in model year 1996. The 
state generates 50 credits for acquiring alternative fueled vehicles 
early and 15 credits for acquiring alternative fueled vehicles in 
excess of their required number. If the state doesn't trade away or use 
any credits, it will have 65 credits that it can use against future 
acquisitions or can trade.
    A database will be established that will keep a record of credit 
allocations, trades and credit balances.
Proposed Section 490.504  Use of Alternative Fueled Vehicle Credits
    Consistent with the language of section 508(c) of the Act, proposed 
Sec. 490.504 states that a credit shall be treated as the acquisition 
of a light duty alternative fueled vehicle. Each alternative fueled 
vehicle credit will represent one light duty alternative fueled vehicle 
and can be applied against the required alternative fueled vehicle 
acquisition number for one model year only, designated by a fleet or 
covered person, in lieu of the acquisition of a light duty alternative 
fueled vehicle during that model year.
Proposed Section 490.505  Credit Accounts
    Proposed Sec. 490.505 deals with Alternative Fueled Vehicle Credit 
accounts. Proposed paragraph (a) states that DOE will establish a 
credit account for each fleet or covered person who obtains an 
alternative fueled vehicle credit.
    Proposed 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. This statement 
will reflect the credit account activity that occurred in the previous 
model year and can be used as proof of the credit balance for an 
account.
    DOE is considering whether to provide updated credit account 
balance statements to fleets and covered persons upon request during 
the year and is also considering whether to charge a nominal fee for 
this service. These updated credit account balance statements would 
provide written proof of a fleet or covered person's credit account 
balance as of the date they are printed. These updated credit account 
balance statements may be required of a credit seller by a credit 
purchaser before proceeding with the credit transfer. Thus, the credit 
seller can use this updated credit account balance statement to gain 
independent private benefit.
    The charging of a fee for this service is authorized under 31 
U.S.C. 9701, which provides that each Federal government agency may 
establish a charge for a service of a thing of value provided by the 
agency if this service results in independent private benefit. This 
charge must be fair and based on the costs to the Government, the value 
of the service or thing to the recipient, public policy or interest 
served, and other relevant facts. DOE asks for comments related to the 
desirability of providing updated credit account balance statements and 
what value a fleet or covered person would place on this service.
Proposed Section 490.506  Alternative Fuel Vehicle Credit Transfers
    Proposed Sec. 490.506 deals with the transfer of alternative fueled 
vehicle credits. Proposed paragraph (a)(1) states that any fleet may 
transfer an alternative fueled vehicle credit to any other fleet, which 
is required to acquire alternative fueled vehicles. In contrast, 
proposed paragraph (a)(2) states that any fleet may transfer an 
alternative fueled vehicle credit to an alternative fuel provider, who 
is a covered person, if the fleet provides certification to the covered 
person that the credit represents a vehicle that operates solely on 
alternative fuel. This restriction on the transfer of credits from a 
fleet to an alternative fuel provider, who is a covered person, is 
necessary because of the vehicle operational requirement placed on 
alternative fuel provider vehicles. 42 U.S.C. 13251(a)(4). Section 
508(d) of the Energy Policy Act permits alternative fuel providers to 
use credits only if these operational requirements are met. 42 U.S.C. 
13258(d).
    Proposed paragraph (c) states that proof of credit transfer should 
be provided to DOE within seven 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 provision 
allows for the maintenance and verification of credit transfer 
activity.
Proposed Section 490.507  Credit Activity Reporting Requirements
    Proposed Sec. 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. Proposed paragraph 
(a) sets forth where [[Page 10984]] and by when annual reports should 
be sent.
    Proposed paragraph (b) describes the required information that 
would be included in this annual report. Most of the requirements are 
self-explanatory, however, subparagraph (b)(4) deserves discussion for 
clarification purposes.
    Proposed subparagraph (b)(4) would only allow a fleet or covered 
person to report either the number of alternative fueled vehicles 
acquired in excess of acquisition requirements or the number of 
alternative fueled vehicles acquired in advance of the start date of 
the acquisition requirements, not both of them. Once the first model 
year in which acquisition requirements apply has begun, credits can no 
longer be earned for early acquisition of alternative fueled vehicles.

Subpart G--Investigations and Enforcement

Proposed Section 490.601  Powers of the Secretary
    Proposed Sec. 490.601 sets forth the powers of the Secretary 
provided specifically by section 513 of the Act. Some of these powers 
(e.g., subpoenas for witnesses or documents) can be used either in a 
investigative effort begun with orders to show cause or in connection 
with a civil penalty proceeding.
Proposed Section 490.602  Special Orders
    Proposed Sec. 490.602 tracks the provisions of section 505(b)(1) of 
the Motor Vehicle Information and Cost Savings Act, 15 U.S.C. 
Sec. 2005(b)(1). Those provisions are applicable under part 490 because 
section 505(b)(1) is cross referenced in section 513 of the Act. Orders 
under this section could be used to deal with a wide variety of 
circumstances. One example would be the failure to submit a required 
report. Another would be an order to show cause why civil penalty 
proceedings should not be initiated for failure to comply with subparts 
C, D, or F.
Proposed Section 490.603  Prohibited Acts
    This proposed regulation tracks the language of section 511 of the 
Act. 42 U.S.C. 13261.
Proposed Section 490.604  Penalties and Fines
    This proposed regulation follows section 512 of the Act. 42 U.S.C. 
Sec. 13262. The text reflects DOE conclusions with regard to which of 
the subsections of section 512 provide for civil penalties and which 
provide for criminal fines.
Proposed Section 490.605  Statement of Enforcement Policy
    In rare instances, DOE may initiate enforcement with the object of 
ensuring compliance and deterring future violations. This proposed 
section indicates that DOE will not proceed with enforcement if there 
is a satisfactory compliance agreement.
Proposed Section 490.606  Proposed Assessments and Orders
    This proposed section provides for issuance of proposed assessments 
of civil penalty and an order to pay which becomes a final order for 
the Department if the recipient fails to appeal on a timely basis to 
the Office of Hearings and Appeals.
Proposed Section 490.607  Appeals
    This proposed section provides for administrative due process if 
the recipient of a proposed assessment and order to pay wishes to 
contest the basis therefore. The appeal must be filed in the Office of 
Hearings and Appeals on or before 30 days from the date of the issuance 
of a proposed assessment and order. Most of the applicable procedures 
for the Office of Hearings and Appeals are in subpart H of 10 CFR part 
205. In addition, paragraph (b) of proposed Sec. 490.607 provides that 
the appellant has the ultimate burden of persuasion which is 
appropriate because the appellant will in most cases have unequal 
access to the relevant evidence (its own records). Paragraph (b) also 
provides that a trial-type hearing on contested issues of fact may 
occur only if the hearing officer concludes that cross examination will 
materially assist in determining the facts in addition to the evidence 
available in documentary form. There should not be extended hearings in 
order to fill the record with evidence which is largely repetitious.

III. Opportunity for Public Comment

A. Participation in Rulemaking

    Interested persons are invited to participate in this proposed 
rulemaking by submitting written data, views, or comments with respect 
to the subject set forth in this notice. The Department encourages the 
maximum level of public participation possible in this rulemaking. 
Individual consumers, representatives of consumer groups, 
manufacturers, associations, coalitions, states or other government 
entities, and others are urged to submit written comments on the 
proposal. The Department also encourages interested persons to 
participate in the public hearings to be held at the times and places 
indicated at the beginning of this notice. Comments relating to the 
energy security, environmental, or economic effects that might result 
from the adoption of the proposals contained in this notice are 
specifically invited and desired. Whenever applicable, full supporting 
rationale, data and detailed analyses should also be submitted.

B. Written Comment Procedures

    Written comments (eight copies) should be identified on the outside 
of the envelope, and on the comments themselves, with the designation: 
``Alternative Fuel Provider Vehicle Acquisition Mandate and Alternative 
Fuel Vehicle Credit Program, NOPR, Docket Number EE-RM-95-110'' and 
must be received by the date specified at the beginning of this notice. 
In the event any person wishing to submit a written comment cannot 
provide eight copies, alternative arrangements can be made in advance 
by calling Andi Kasarsky at (202) 586-3012. Additionally, the 
Department would appreciate an electronic copy of the comments to the 
extent possible. The Department is currently using WordPerfect 5.1 for 
DOS.
    All comments received on or before the date specified at the 
beginning of this notice and other relevant information will be 
considered by DOE before final action is taken on the proposed rule. 
All comments submitted will be available for examination in the Rule 
Docket File in DOE's Freedom of Information Reading Room both before 
and after the closing date for comments. In addition, a transcript of 
the proceedings of the public hearings will be filed in the docket.
    Pursuant to the provisions of 10 CFR 1004.11 any person submitting 
information or data that is believed to be confidential, and which may 
be exempt by law from public disclosure, should submit one complete 
copy, as well as two copies from which the information claimed to be 
confidential has been deleted. The Department of Energy will make its 
own determination of any such claim and treat it according to its 
determination.

C. Public Hearing Procedures

    The time and place of the public hearings are indicated at the 
beginning of this notice. The Department invites any person who has an 
interest in the proposed regulation or who is a representative of a 
group or class of persons which has an interest to make a request for 
an opportunity to make an oral presentation at the hearing. Requests to 
speak should be sent to the address or phone number indicated in the 
ADDRESSES section of this notice and [[Page 10985]] be received by the 
time specified in the DATES section of this notice.
    The person making the request should briefly describe his or her 
interest in the proceedings and, if appropriate, state why that person 
is a proper representative of the group or class of persons that has 
such an interest. The person also should provide a phone number where 
they may be reached during the day. Each person selected to speak at a 
public hearing will be notified as to the approximate time that they 
will be speaking. They should bring ten copies of their statement to 
the hearing. In the event any person wishing to testify cannot meet 
this requirement, alternative arrangements can be made in advance with 
Andi Kasarsky, (202) 586-3012.
    The DOE reserves the right to select persons to be heard at the 
hearings, to schedule their presentations, and to establish procedures 
governing the conduct of the hearing. The length of each presentation 
will be limited to ten minutes, or based on the number of persons 
requesting to speak.
    A Department official will be designated to preside at the hearing. 
The hearing will not be a judicial or an evidentiary-type hearing, but 
will be conducted in accordance with 5 U.S.C. 553 and Section 501 of 
the Department of Energy Organization Act. 42 U.S.C. 7191. At the 
conclusion of all initial oral statements, each person will be given 
the opportunity to make a rebuttal statement. The rebuttal statements 
will be given in the order in which the initial statements were made.
    Any further procedural rules needed for the proper conduct of the 
hearing will be announced by the Presiding Officer at the hearing.
    If DOE must cancel a hearing, DOE will make every effort to publish 
an advance notice of such cancellation in the Federal Register. Notice 
of cancellation will also be given to all persons scheduled to speak at 
the hearing. Hearing dates may be canceled in the event no public 
testimony has been scheduled in advance.

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 proposed rule 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 and establishes a mandate for state fleets to acquire 
alternative fuel 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 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 fuel 
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 proposed 
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 possible violation in the authority that the Federal 
government has over States. Thus, preparation of a federalism 
assessment is therefore unnecessary.

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 section 2 (a) and (b)(2), include 
eliminating drafting errors and needless ambiguity, drafting the 
regulations to minimize litigation 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 the 
proposed rule meets the requirements of section 2 (a) and (b)(2) of 
Executive Order 12778.

VI. Review Under Executive Order 12866

    This regulatory action has been determined to be a significant 
regulatory action under Executive order 12866, Regulatory Planning and 
Review, October 4, 1993. Accordingly, today's action was subject to 
review under the Executive Order by the Office of Information and 
Regulatory Affairs (OIRA). DOE concluded that the proposed 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 requested that DOE prepare a cost analysis. In this 
section of the Supplementary Information, DOE describes the assumptions 
and main conclusions of that cost analysis. A copy of that cost 
analysis is available for public inspection in the administrative 
record on file in DOE's Freedom of Information Reading Room. DOE has 
also placed in that file a copy of the notice of proposed rulemaking as 
transmitted to OIRA, as well as exchanges of correspondence between DOE 
and OIRA showing changes in the notice agreed to by the two agencies.
    The cost analysis spans a 25-year time frame, from 1995 to 2020, 
which included the incremental vehicle purchase cost and the cost 
differential between alternative fuels and gasoline under five 
different scenarios. The analysis examines the effects the proposed 
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. This assumption focuses the analysis 
on the estimated costs to fuel providers and State fleets in complying 
with the proposed regulation without distorting it in any substantial 
way. 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. [[Page 10986]] 
    The costs to fuel providers and State fleets in complying with the 
proposed rule varies depending upon vehicle type, fuel type and fuel 
consumption, but in no case are the annual costs estimated to exceed 
$61 million per year. More typically, the estimated annual costs are 
approximately $25 million, decreasing to $10 million per year in later 
years. In reaching these conclusions, the Department took into account 
the fact that some alternative fuel providers may not operate vehicles 
solely on the fuel they provide and may have to purchase other 
alternative fuels at retail prices. Retail fuel prices for all 
alternative fuels were used in the analysis. These prices have three 
main components: (1) The wholesale fuel cost; (2) the cost of 
transporting the fuel from production points to retail outlets; and (3) 
the retail outlet mark-ups.
    In one scenario, the annual costs to State fleets decreased to a 
point where it is estimated that these fleets would incur savings as a 
result of complying with the proposed rule. This scenario assumes that 
the most popular alternative fueled vehicles will be flexible-fuel 
vehicles that can operate on gasoline and/or methanol. Because the 
proposed rule does not impose a fuel use requirement on State fleets, 
it is logical to assume that States will choose to operate these 
vehicles on the fuel which costs less at a certain point in time; 
currently that fuel is gasoline. It is expected that the nominal 
incremental cost for these vehicles, together with the fact that their 
operation and refueling is identical to a gasoline-only version, should 
make them very attractive to State fleet managers. The expected 
popularity of these vehicles, combined with estimates that show 
methanol prices falling below gasoline by model year 2001, result in 
annual cost savings to State fleets, starting with model year 2005, in 
the range of $400,000 to $1 million.
    In order to provide commenters with a better understanding of the 
effects of this proposal, the Department plans to make revisions and 
improvements to its analysis before the close of the comment period. To 
aid in this effort, the Department seeks comments on all aspects of its 
analysis. In particular, the Department is interested in 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. The 
Department would also be interested in data that would aid in 
estimating the extra refueling costs for ``covered persons'' whose 
fleets use fuels other than the one they themselves provide, e.g., a 
natural gas pipeline company whose alternative fueled vehicles operate 
on methanol or ethanol.

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 proposed 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, but one of medium 
size or larger.

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 proposed 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 proposes to 
collect as reporting requirements is necessary to determine whether an 
organization is in compliance with the proposed 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. It is estimated 
the number of organizations submitting reports will be approximately 
1000 for the years 1996 through 1999. The estimated number of 
organizations who will be submitting reports after that date has not 
been determined and is subject to the DOE decision on future 
rulemakings.
    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 proposed rule is considered the least 
burdensome for the Department of Energy functions to comply with the 
legal requirements and achieve program objectives. However, comments 
are requested concerning the accuracy of the estimated paperwork 
reporting burden.

IX. Review Under the National Environmental Policy Act

    The provisions of this proposed rule would establish procedures for 
the implementation of an Alternative Fuel Transportation Program to 
assist in and monitor the progress of State fleet and certain 
alternative fuel providers compliance activity. The proposed 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 includes proposed procedures for 
interpretive rulings, exemption, appeals, and the approval process for 
State plans.
    The proposed rule would also establish and define 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 proposed rule, the Department has determined 
that preparation of an Environmental Assessment (EA) is appropriate. 
The Department will complete the EA and any further analysis found to 
be required prior to the issuance of a final rule.

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 [[Page 10987]] 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.
    Section 507(o) of the Act explicitly prescribes the alternative 
fueled vehicle acquisition mandate which is reflected in subpart C of 
today's proposed regulations, but does not specifically authorize 
appropriation of funds to defray the costs of compliance. However, it 
is important to observe that the effect of the mandate is mitigated in 
terms of its impacts and costs in a number of respects.
    First, section 507(o) authorizes approval of acceptable alternative 
State plans to comply with the acquisition mandate by enlisting the 
voluntary commitments from other fleet operators with fleets that are 
not subject to vehicle acquisition requirements under the Energy Policy 
Act of 1992. Second, section 507(i) authorizes the Department to grant 
exemptions from vehicle acquisition requirements for States in cases of 
financial hardship. Third, Congress has authorized and appropriated 
some fiscal year 1994 and fiscal year 1995 funds for financial 
assistance to State alternative fuel transportation programs some of 
which may include plans to fund the incremental costs of acquiring 
alternative fueled vehicles. Section 409 of the Act specifically 
authorizes financial assistance to States for this purpose. However, 
the funds, even if exclusively used to pay for such incremental costs, 
may not be sufficient to fund all such costs incurred by each State 
annually.
    The Department preliminarily estimates that, in the aggregate, the 
costs to States in model year 1996 will be between $3.3 million and 
$7.4 million. The annual aggregate costs should never exceed $13 
million in FY 1995 dollars. A copy of the analysis which includes these 
figures is in the public file in the DOE Freedom of Information Reading 
Room and is available upon request from the information contact 
identified at the outset of this notice. The Department does not have 
estimates for each State. The Department would welcome comments from 
State financial officials knowledgeable about near term State plans for 
replacing existing vehicles so that DOE can refine its estimates of 
incremental costs attributable solely to the section 507(o) mandate.
    In developing today's notice of proposed rulemaking, 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 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 proposed regulations and those 
already promulgated by EPA. When asked for comments on a draft of 
today's notice, EPA did not suggest any changes to eliminate or 
mitigate unnecessary differences.
    Earlier in this notice, DOE noted that the overlap between the 
proposed 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. EPA has published a table, 59 FR 50043, listing the 
22 non-attainment areas as follows:

        States and Areas Affected by the Clean Fuel Fleet Program       
------------------------------------------------------------------------
                   Affected area                          State(s)      
------------------------------------------------------------------------
1. Atlanta........................................  Georgia.            
2. Baltimore......................................  Maryland.           
3. Baton Rouge....................................  Louisiana.          
4. Beaumont-Port Arthur...........................  Texas.              
5. Boston-Lawrence-Worcester (Eastern               Massachusetts, New  
 Massachusetts).                                     Hampshire.         
6. Chicago-Gary-Lake County.......................  Illinois, Indiana.  
7. Denver-Boulder.................................  Colorado.           
8. El Paso........................................  Texas.              
9. Greater Connecticut............................  Connecticut.        
10. Houston-Galveston-Brazoria....................  Texas.              
11. Los Angeles-South Coast Air Basin.............  California.         
12. Milwaukee-Racine..............................  Wisconsin.          
13. New York-Northern New Jersey-Long Island......  Connecticut, New    
                                                     Jersey, New York.  
14. Philadelphia-Wilmington-Trenton...............  Delaware, Maryland, 
                                                     New Jersey,        
                                                     Pennsylvania.      
15. Providence (All Rhode Island).................  Rhode Island.       
16. Sacramento Metro..............................  California.         
17. San Diego.....................................  California.         
18. San Joaquin Valley............................  California.         
19. Southeast Desert Modified AQMA................  California.         
20. Springfield (Western Massachusetts)...........  Massachusetts.      
21. Ventura County................................  California.         
22. Washington (District of Columbia).............  Maryland, Virginia. 
------------------------------------------------------------------------

    As indicated above, 11 of these 22 areas have applications to opt 
out of the EPA Clean Fuel Fleet Program which are still pending as of 
the date of publication of this notice.
    With respect to the State programs, DOE is unaware of any that 
would be in conflict with the program proposed today. If DOE has 
overlooked any such conflicts, State officials are invited to submit 
comments explaining the conflicts.

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, D.C. on February 2, 1995.
Christine A. Ervin,
Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons set forth in the Preamble, Title 10, Chapter II, 
Subchapter D, of the Code of Federal Regulations is proposed to be 
amended by adding a new Part 490 as set forth below:

PART 490--ALTERNATIVE FUEL TRANSPORTATION PROGRAM

Subpart A--General Provision

Sec.
Sec. 490.1  Purpose and Scope.
Sec. 490.2  Definitions.
Sec. 490.3 Excluded vehicles.
Sec. 490.4 General information inquiries.
Sec. 490.5 Requests for an interpretive ruling.
Sec. 490.6 Petitions for general applicable rulemaking.
Sec. 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

Sec. 490.200 Purpose and scope.
Sec. 490.201 Alternative fueled vehicle acquisition mandate 
schedule.
Sec. 490.202 Acquisitions satisfying the mandate.
Sec. 490.203 Light Duty Alternative Fueled Vehicle plan.
Sec. 490.204 Process for granting exemptions.
Sec. 490.205 Reporting requirements.
Sec. 490.206 Violations. [[Page 10988]] 

Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate

Sec. 490.300 Purpose and scope.
Sec. 490.301 Definitions.
Sec. 490.302 Vehicle acquisition mandate schedule.
Sec. 490.303 Who must comply.
Sec. 490.304 Which new light duty motor vehicles are covered.
Sec. 490.305 Acquisitions satisfying the mandate.
Sec. 490.306 Vehicle operation requirements.
Sec. 490.307 Option for electric utilities.
Sec. 490.308 Process for granting exemptions.
Sec. 490.309  Annual reporting requirements.
Sec. 490.310  Violations.

Subpart E--[Reserved]

Subpart F--Alternative Fueled Vehicle Credit Program

Sec. 490.500  Purpose and scope.
Sec. 490.501  Applicability.
Sec. 490.502  Creditable actions.
Sec. 490.503  Credit allocation.
Sec. 490.504  Use of alternative fueled vehicle credits.
Sec. 490.505  Credit accounts.
Sec. 490.506  Alternative Fueled Vehicle Credit transfers.
Sec. 490.507  Credit activity reporting requirements.

Subpart G--Investigations and Enforcement.

Sec. 490.600  Purpose and scope.
Sec. 490.601  Powers of the Secretary.
Sec. 490.602  Special orders.
Sec. 490.603  Prohibited acts.
Sec. 490.604  Penalties and fines.
Sec. 490.605  Statement of enforcement policy.
Sec. 490.606  Proposed assessments and orders.
Sec. 490.607  Appeals.

    Authority: 42 U.S.C. 7191, 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--
    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; 
and electricity (including electricity from solar energy).
    Alternative Fueled Vehicle means a dedicated vehicle or a dual 
fueled vehicle.
    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.
    Capable of Being Centrally Fueled means a vehicle 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, including 
commercial fleet credit card agreements.
    Centrally Fueled means that the 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, including 
commercial fleet credit card agreements.
    Control means--
    (1) When it is used in the context determining 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 firm leases, operates, supervises, or in 51 percent or 
greater part owns equipment and/or facilities used by another person or 
firm, or has equity ownership of 51 percent or more of another 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.
    (3) When it used to refer to the management of people, means a 
person has the authority to direct the activities of another person or 
employee in a precise situation, such as the workplace.
    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, 
as defined by this section.
    Dealer Demonstration Vehicle means 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.
    Dedicated Vehicle means--
    (1) A dedicated automobile as defined in section 513(h)(1)(C) of 
the Motor Vehicle Information and Cost Savings Act (15 U.S.C. 
2013(h)(1)(C)); 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) A dual fueled automobile which is capable of operating on 
alternative fuel and on gasoline or diesel fuel and as defined in 
section 513(h)(1)(D) of the Motor Vehicle Information and Cost Savings 
Act (15 U.S.C. Sec. 2013(h)(1)(D)); or
    (2) A motor vehicle, other than an automobile, that is capable of 
operating on alternative fuel and on gasoline or diesel fuel including 
flexible-fuel vehicles that operate on a mixture of an alternative fuel 
and a petroleum-based fuel or bi-fuel vehicles that can be switched to 
operate on either an alternative fuel or a petroleum-based fuel.
    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 [[Page 10989]] 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, except as provided by Sec. 490.3, a group of 20 or 
more light duty motor vehicles, 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 or in an annual notice in the Federal Register), 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.
    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 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, surveillance, or patrol 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.
    Model Year means the period from September 1 of the previous 
calendar year through August 31.
    Motor Vehicle has the meaning given such term under section 216(2) 
of the Clean Air Act (42 U.S.C. 7550(2)).
    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 and produced 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.
    Public Building means any closed structure owned, leased, or 
controlled by a state, or any instrumentality of a state.
    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.


Sec. 490.3  Excluded vehicles.

    When counting light duty motor vehicles for the purpose of 
determining under this part whether a person has a fleet or whether 
acquisitions are for addition to a fleet, 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, including farm and construction motor 
vehicles; and
    (h) Motor vehicles which under normal operations are garaged at 
personal residences at night.


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;
    (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 
[[Page 10990]] 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(e);
    (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. From time to time, 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 
address 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 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.

    Nothing in this part shall be construed to require or authorize 
acquisition of, or conversion to, light duty alternative fueled motor 
vehicles in violation of applicable regulations of the U.S. 
Environmental Protection Agency, U.S. Department of Transportation, or 
any 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 SC-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
El Paso MSA TX
Erie MSA PA
Eugene-Springfield MSA OR
Evansville-Henderson MSA IN-KY
Fort Wayne MSA IN
Fresno MSA CA
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
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 [[Page 10991]] 
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 subpart, beginning with 
model year 1996, the following percentages of new light duty motor 
vehicles acquired annually for state government fleets, including 
agencies thereof but excluding municipal fleets, shall be alternative 
fueled vehicles;
    (1) 10 percent of the vehicles acquired in model year 1996;
    (2) 15 percent of the vehicles acquired in model year 1997;
    (3) 25 percent of the vehicles acquired in model year 1998;
    (4) 50 percent of the vehicles acquired in model year 1999; and
    (5) 75 percent of the vehicles acquired in model year 2000 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, when the mandated acquisition percentage of alternative 
fueled vehicles is applied to the number of light duty motor vehicles 
to be acquired by a fleet subject to this subpart, a number results 
that requires the acquisition of a partial vehicle, an adjustment to 
the acquisition number will be made by rounding the number of vehicles 
up to the next whole number.


Sec. 490.202  Acquisitions satisfying the mandate.

    In addition to the use of alternative fueled vehicle credits under 
subpart F of this part, the following actions within a model year 
qualify as acquisitions that count toward compliance with the new light 
duty alternative fueled vehicle mandates by State fleets:
    (a) The purchase or lease of an Original Equipment Manufacturer 
vehicle, (regardless of model year of manufacture), capable of 
operating on alternative fuels that was not previously in service in 
the fleet; or
    (b) The purchase or lease of an after-market converted vehicle 
(regardless of model year of manufacture), that was not previously in 
service in the fleet; or
    (c) The conversion of a newly purchased Original Equipment 
Manufacturer Vehicle (regardless of the model year of manufacture) to 
operate on alternative fuels prior to its first use in service.


Sec. 490.203  Light Duty Alternative Fueled Vehicle Plan.

    (a) General provisions. (1) In lieu of meeting its acquisition 
requirements under Sec. 490.201 exclusively through State-owned 
vehicles, a State may follow a Light Duty Alternative Fueled Vehicle 
Plan approved by DOE under this section.
    (2) Unless a fleet is exempt under Sec. 490.204, a State which does 
not have an approved plan in effect under this section will be subject 
to the State fleet acquisition percentage requirements of Sec. 490.201.
    (3) In the event that a significant commitment under an approved 
plan is not met by a participant of a plan, the State shall meet its 
percentage requirements under Sec. 490.201 or submit to DOE an 
amendment to the plan for DOE approval.
    (4) Only voluntary acquisitions or conversions, or combinations 
thereof, by state, local, and private fleets may be used to meet the 
State's alternative fuel vehicle acquisition requirement under the 
plan.
    (5) Any acquisitions or conversions of light duty alternative 
fueled vehicles by fleets within the State may be included within the 
plan, irrespective of whether the vehicles are in excluded categories 
in the definition of fleet set forth in Sec. 490.2 of this part.
    (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 per plan participant, 
either through conversion or acquisition;
    (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 Sec. 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. Sec. 7587) and all 
applicable safety requirements.
    (c) When to submit plan. Beginning with model year 1996, any State 
wishing to submit a plan under this section must do so no later than 
June 1 prior to the model year covered by such plan.
    (d) Review and approval. DOE shall review and approve a plan which 
meets the requirements of this subpart and is designed to achieve at a 
minimum, the same number of alternative fueled vehicle acquisitions or 
conversions as would be required under Sec. 490.201 within 60 days of 
the date of receipt of the plan by DOE at the address in paragraph 
(h)(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. States, however, must comply with 
Sec. 490.201 until such time as the plan is approved.
    (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. Until the modifications are approved, the State must 
comply with Sec. 490.201.
    (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.
    (2) Any requests for modifications shall also be sent to the 
address in paragraph (g)(1) of this section. [[Page 10992]] 


Sec. 490.204  Process for granting exemptions.

    (a) To obtain an exemption, in whole or in part, from the vehicle 
mandates of this subpart, a State shall submit to DOE a written request 
for exemption, along with supporting documentation which demonstrates 
that--
    (1) Alternative fuels that meet the normal requirements and 
practices of the principal business of the state fleet are not 
available 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 
reasonably available for acquisition because they are not offered for 
sale or lease commercially on reasonable terms and conditions in any of 
the States; or
    (3) The application of such requirements would pose an unreasonable 
financial hardship.
    (b) Requests for exemption may be submitted on an ongoing basis and 
must be accompanied with supporting documentation.
    (c) DOE shall grant exemptions for one model year only, and they 
may be renewed annually if supporting documentation is provided.
    (d) 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 at 
acquiring 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.
    (e) 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.
    (f) The Assistant Secretary shall provide to the State within 30 
days a written determination as to whether the State's request has been 
granted or denied.
    (g) 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 205, subpart D, 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 
submit a report on or before the December 31 after the close of the 
model year, beginning with model year 1996.
    (b) The report shall include the following information:
    (1) Number of new light duty motor vehicles acquired by a state 
during the model year;
    (2) Number of new light duty alternative fueled vehicles that must 
be acquired in the model year;
    (3) Number of new light duty alternative fueled vehicles acquired 
by a State during the model year;
    (4) Number of alternative fueled vehicle credits transferred to or 
from the State during the model year;
    (5) Number of alternative fueled vehicle credits applied against 
acquisition requirements;
    (6) For each new light duty alternative fueled vehicle acquired--
    (i) Vehicle make and model;
    (ii) Model year; and
    (iii) Vehicle identification number;
    (7) 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.
    (d) Records shall be maintained and retained for a period of three 
years from the start of this program.
    (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 newly 
acquired 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 Sec. 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 the subject 
person.
    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.
    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.
    Normal Requirements and Practices means the operating business 
practices and required conditions under which the principal business of 
the covered person operates.
    Principal Business means the sales-related activity that produces 
the greatest gross revenue.
    Substantial Portion means that at least 2 percent of a covered 
person's refinery yield of petroleum products is composed of 
alternative fuels.
    Substantially Engaged means that a covered person, or affiliate, 
division, or other business unit thereof, regularly derives sales-
related gross revenue from an alternative fuels business.


Sec. 490.302  Vehicle acquisition mandate schedule.

    (a) Except as provided in Sec. 490.304 of this part, of the light 
duty motor vehicles newly acquired by a covered [[Page 10993]] person 
described in Sec. 490.303 of this part, the following percentages shall 
be alternative fueled vehicles for the following model years:
    (1) 30 percent for model year 1996.
    (2) 50 percent for model year 1997.
    (3) 70 percent for model year 1998.
    (4) 90 percent for model year 1999 and thereafter.
    (b) Except as provided in Sec. 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 
up the number of vehicles to the next whole number.
    (d) Only acquisitions satisfying the mandate, as defined by 
Sec. 490.305, and use of alternative fueled vehicle credits acquired 
under subpart F of this part count toward compliance with the 
acquisition schedule in paragraph (a) of this section.


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;
    (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 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 Sec. 490.302 of 
this part applies to all new light duty motor vehicles acquired by a 
covered person described in Sec. 490.303 of this part.
    (b) Exception. If a covered person has more than one affiliate, 
division, or other business unit, then Sec. 490.302 of this part only 
applies to new light duty motor vehicles acquired by an affiliate, 
division, or other such business unit--
    (1) Which is substantially engaged in the alternative fuels 
business; but
    (2) This subpart does not apply to the vehicles of an affiliate, 
division, or other business unit whose principal business is either 
transforming alternative fuels into a product that is not an 
alternative fuel or consumes alternative fuel as a feedstock or fuel in 
the manufacture of a product that is not an alternative fuel.


Sec. 490.305  Acquisitions satisfying the mandate.

    In addition to the use of alternative fueled vehicle credits under 
subpart F of this part, the following actions within the model year 
qualify as acquisitions for the purpose of compliance with the 
requirements of Sec. 490.302 of this part--
    (a) The purchase or lease of an Original Equipment Manufacturer 
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; or
    (b) The purchase or lease of an after-market converted vehicle 
(regardless of the model year of manufacture), that was not previously 
under the control of the covered person; or
    (c) The conversion of a newly acquired Original Equipment 
Manufacturer vehicle (regardless of the model year of manufacture) to 
operate on alternative fuels prior to its first use in service.


Sec. 490.306  Vehicle operation requirements.

    The alternative fueled vehicles acquired pursuant to Sec. 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 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 Sec. 490.302 until January 1, 1998, if the covered person 
intends to comply with this regulation by acquiring electric motor 
vehicles.
    (b) Notification Date. If an electric utility intends to use the 
option under this section, the electric utility must notify the 
Department of its intent to do so. The notification must be postmarked 
no later than December 31, 1995 and must be sent to the Office of 
Energy Efficiency and Renewable Energy, EE-33, 1000 Independence 
Avenue, S.W., Washington, D.C. 20585 or such other addresses as DOE may 
provide in a Federal Register notice.
    (c) If a covered person whose principal business is generating, 
transmitting, importing, or selling at wholesale or retail electricity 
has notified the Department by December 31, 1995, of their intent to 
acquire electric motor vehicles, the following percentages of new light 
duty motor vehicles acquired shall be alternative fueled vehicles for 
the following model years:
    (1) 30 percent for model year 1998.
    (2) 50 percent for model year 1999.
    (3) 70 percent for model year 2000.
    (4) 90 percent for model year 2001 and thereafter.


Sec. 490.308  Process for granting exemptions.

    (a) To obtain an exemption from the vehicle acquisition mandate in 
Sec. 490.302 of this part, a covered person, or its affiliate, 
division, or business unit which is subject to Sec. 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 
supporting documentation which demonstrates that--
    (1) Alternative fuels that meet the normal requirements and 
practices of the principal business of that person are not available 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 that person are not offered 
for purchase or lease commercially on reasonable terms and conditions 
in the United States.
    (b) Documentation
    (1) If a covered person is seeking an exemption under paragraph 
(a)(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 is seeking an exemption under paragraph 
(a)(2) of this section, the types of documentation that are to 
accompany the request include, but are not limited to, alternative 
fueled vehicle purchase requests, a listing of [[Page 10994]] vehicles 
that meet the normal practices and requirements of the covered person 
and any other documentation that exhibits good faith efforts at 
acquiring alternative fueled vehicles.
    (c) Except as provided by paragraph (e) of this section, exemption 
determination shall be made in a letter ruling by the Assistant 
Secretary.
    (d) Exemptions are granted for one model year only and may be 
renewed, if supporting documentation is provided, annually.
    (e) Exemption determinations are binding for the covered person 
only and cannot be used to set precedent for other exemption requests.
    (f) If a covered person is denied an exemption and believes that it 
meets the criteria established in paragraph (a) of this section, that 
covered person may file a request for relief with the Office of 
Hearings and Appeals, U.S. Department of Energy, 1000 Independence Ave, 
SW, Washington, DC 20585.
    (g) Requests for relief will be processed utilizing the procedures 
codified at 10 CFR part 205, Subpart D.


Sec. 490.309  Annual reporting requirements.

    (a) If a person is required to comply with the vehicle acquisition 
mandate schedule in Sec. 490.302 or Sec. 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 model 
year beginning with model year 1996.
    (b) This report shall include the following information--
    (1) Number of new light duty motor vehicles acquired in the United 
States during the model year;
    (2) Number of new light duty alternative fueled vehicles that are 
required to be acquired;
    (3) Number of new light duty alternative fueled vehicles acquired 
in the United States during the model year;
    (4) Number of alternative fueled vehicle credits transferred to or 
from a covered person during the model year;
    (5) Number of alternative fueled vehicle credits applied against 
acquisition requirements;
    (6) For each new light duty alternative fueled vehicle acquired--
    (i) Vehicle make and model;
    (ii) Model year; and
    (iii) Vehicle Identification Number.
    (c) If credits are applied against alternative fueled vehicle 
acquisition requirements, as reported in the annual report, then a 
credit activity report, as described in subpart F, must be submitted 
with this report 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 Fuel 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 fuel vehicles prior 
to the date when they are 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 fuel vehicles by this Part.


Sec. 490.502  Creditable actions.

    A fleet or covered person becomes entitled to alternative fuel 
vehicle credits by--
    (a) Acquiring alternative fuel vehicles that qualify under 
Sec. 490.305 and Sec. 490.202, as applicable, in excess of the number 
that fleet or covered person is required to acquire in a model year 
when acquisition requirements apply; or
    (b) Acquiring alternative fueled vehicles in model years prior to 
the model year when that fleet or covered person is first required to 
acquire alternative fueled vehicles.


Sec. 490.503  Credit allocation.

    (a) Based on annual credit activity report information, as 
described in Sec. 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; or
    (b) In the event that an alternative fueled vehicle is acquired by 
a fleet or covered person in a model year prior to the model year when 
acquisition requirements first apply, 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 
paragraphs (a) or (b) of this section for alternative fueled vehicles 
acquired 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 a 
light duty alternative fueled vehicle that is counted in determining 
compliance with specific annual alternative fueled vehicle acquisition 
requirements of this part.


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 or covered person an annual credit 
account balance statement after the receipt of its credit activity 
report under Sec. 490.507.


Sec. 490.506  Alternative fueled vehicle credit transfers.

    (a) Any fleet which is required to acquire alternative fueled 
vehicles may transfer an alternative fueled vehicle credit to--
    (1) Any other fleet which is required to acquire alternative fueled 
vehicles.
    (2) An alternative fuel provider which is a covered person, if the 
fleet provides certification to the covered person that the credit 
represents a vehicle that operates solely on alternative fuel.
    (b) Any alternative fuel provider which is a covered person 
required to acquire alternative fueled vehicles may transfer its 
alternative fueled vehicle credits to any other fleet or covered person 
required to acquire alternative fueled vehicles.
    (c) Proof of credit transfer may be on a form provided by DOE, or 
otherwise in writing, including dated signatures of the transferor and 
transferee. The proof should be received by DOE within 7 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 may be provided by notice 
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 December 31 after the close of a model year to the Office of Energy 
Efficiency and Renewable [[Page 10995]] 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) Included in this report should be the following information:
    (1) Number of new light duty motor vehicles acquired;
    (2) Number of new light duty alternative fueled vehicles acquired;
    (3) Number of alternative fueled vehicles that are required to be 
acquired;
    (4) 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 year prior to 
model year in which alternative fueled vehicle acquisition requirements 
first apply;
    (5) Purchase of alternative fueled vehicle credits:
    (i) Credit source; and
    (ii) Date of Purchase;
    (6) 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 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 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. Sec. 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 Sec. 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 Sec. 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 Sec. 490.603 of this part, after having been subjected to a 
civil penalty for a prior violation of Sec. 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.


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 Sec. 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 H of 10 CFR part 205 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. 95-4764 Filed 2-27-95; 8:45 am]
BILLING CODE 6450-01-P