[Federal Register Volume 60, Number 146 (Monday, July 31, 1995)]
[Proposed Rules]
[Pages 38974-38977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18737]



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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 490

[Docket No. EE-RM-95-110A]
RIN 1904-AA64


Alternative Fuel Transportation Program

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

ACTION: Notice of limited reopening of the comment period.

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SUMMARY: On February 28, 1995, the Department of Energy (DOE) published 
a notice of proposed rulemaking (60 FR 10970) to implement statutorily-
required alternative fueled vehicle acquisition requirements applicable 
to certain alternative fuel providers and State government fleets under 
sections 501 and 507(o) of the Energy Policy Act of 1992 (Act), 
respectively. Public hearings were held in three cities and the 60-day 
public comment period closed on May 1, 1995. The principal purpose of 
this notice is to reopen the comment period for 30 days in order to 
solicit comments on: options for defining the term ``substantial 
portion'' which is used to determine coverage for certain petroleum 
producers and importers; and options for modifying the proposed 
definition of ``alternative fuel'' with respect to alcohol fuels and 
biodiesel. In addition, this document announces DOE's receipt of new 
information regarding automakers' alternative fueled vehicle production 
plans for the near future.

DATES: Written comments (11 copies) on the issues presented in this 
notice must be received by the Department on or before August 30, 1995.

ADDRESSES: Written comments (11 copies) should be addressed to: U.S. 
Department of Energy, Office of Energy Efficiency and Renewable Energy, 
EE-33, Docket No. EE-RM-95-110A, 1000 Independence Ave., SW, 
Washington, DC 20585, (202-586-3012).
    Docket: Supporting information used in developing the proposed rule 
and written comments received on the Notice of Proposed Rulemaking are 

[[Page 38975]]
contained in Docket No. EE-RM-95-110A. This Docket is available for 
examination in DOE's Freedom of Information Reading Room, 1E-090, 
Forrestal Building, 1000 Independence Avenue, S.W., Washington, D.C. 
20585, 202-586-6020, between 9 a.m. and 4 p.m., Monday through Friday, 
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Mr. Kenneth R. Katz, Program Manager, 
Office of Energy Efficiency and Renewable Energy (EE-33), U.S. 
Department of Energy, 1000 Independence Avenue, S.W., Washington, DC 
20585, (202) 586-6116.

SUPPLEMENTARY INFORMATION:

I. Introduction

    On February 28, 1995, DOE published a notice of proposed rulemaking 
on implementation of statutorily-required alternative fueled vehicle 
acquisition requirements applicable to certain alternative fuel 
providers and State government fleets. Since the close of the 60-day 
comment period on that notice of proposed rulemaking, the Department 
has been reviewing the public comments. As a result of this review, the 
Department is now considering several policy options that are 
sufficiently different from the terms of the notice of proposed 
rulemaking to warrant an additional, focused opportunity for public 
comment.
    On June 12, 1995, the Department published a notice reopening the 
record for additional public comment on options being considered for 
providing more lead time between the date the final rule is promulgated 
and the date the obligation to comply begins. 60 F.R. 30795. Today the 
Department publishes a notice reopening the record for additional 
public comment on issues relating to the definitions of ``substantial 
portion'' and ``alternative fuel.'' In addition, the Department is 
taking this opportunity to give notice of the receipt of new 
information regarding the availability of alternative fueled vehicles.
II. Definition of ``Substantial Portion''

    Section 501(a)(2) of the Energy Policy Act of 1992 (the ``Act'') 
defines the class of alternative fuel providers potentially subject to 
the alternative fueled vehicle acquisition requirements to include 
persons who: (1) qualify as a ``covered person'' under section 301(5) 
of the Act, 42 U.S.C. 13211(5), and (2) produce or import an average of 
50,000 barrels per day or more of petroleum and ``a substantial portion 
of whose business is producing alternative fuels.'' 42 U.S.C. 
13251(a)(2)(C). Thus, the term ``substantial portion'' is a key 
statutory determinant of whether a covered person that produces or 
imports petroleum is an alternative fuel provider required by the Act 
to acquire alternative fueled vehicles.
    However, even if an entity meets all of the qualifications for a 
section 501(a)(2)(C) alternative fuel provider, including the 
``substantial portion'' test, it nevertheless may be excepted from the 
vehicle acquisition requirements under section 501(a)(3) or exempted by 
DOE under section 501(a)(5). Under section 501(a)(3)(A), the vehicle 
acquisition requirements only apply to an affiliate, division or 
business unit of a covered person who is substantially engaged in the 
alternative fuels business. See proposed Sec. 490.304. Moreover, under 
section 501(a)(3)(B), the vehicle acquisition requirements do not apply 
to any entity whose principal business is transforming alternative fuel 
into a product other than alternative fuel or consuming such fuel to 
manufacture a product that is not an alternative fuel. Under section 
501(a)(5), DOE may exempt alternative fuel providers from the vehicle 
acquisition requirements if they can show either that (1) alternative 
fuels that meet their normal business requirements and practices are 
not available; or (2) that alternative fueled vehicles that meet their 
normal business requirements and practices are not offered for purchase 
or lease on reasonable terms and conditions. See proposed Sec. 490.308.
    In the February 28, 1995 notice of proposed rulemaking, DOE 
proposed to define the term ``substantial portion'' to mean that at 
least two percent of a covered person's refinery yield of petroleum 
products is composed of alternative fuels. See proposed Sec. 490.301. 
DOE explained that it chose the two percent of refinery yield threshold 
because it represented the average yield for the production of 
alternative fuels by petroleum refiners, as reported by the Energy 
Information Administration. 60 FR 10978.
    The notice of proposed rulemaking also explained that in developing 
the proposed definition of ``substantial portion,'' the Department had 
considered, as an alternative, basing the definition on the portion of 
the gross revenue an entity derives from the production of alternative 
fuels. Ultimately, DOE did not propose a gross revenue threshold 
because the information needed to support that alternative was more 
fragmented than that available to support the two percent of refinery 
yield criterion, and DOE believed the percent of refinery yield 
criterion would adequately define the class of petroleum producers and 
importers who are ``covered persons'' under the Act. 60 FR 10979. 
Nevertheless, DOE asked for comment on whether reliable information 
exists that would allow establishment of a revenue measure for 
determining whether alternative fuels production comprises a 
substantial portion of a company's business, and it solicited 
suggestions for any other alternative definitions of ``substantial 
portion.'' 60 FR 10979.
    DOE received many comments on the definition of ``substantial 
portion.'' Some commenters supported DOE's proposed definition of 
``substantial portion,'' agreeing that if at least two percent of a 
refinery's product yield is composed of an alternative fuel, the fuel 
provider should have to meet the Act's acquisition requirements. 
However, most comments on this issue criticized the two percent of 
refinery yield as being too low a threshold. Some commenters stated 
that the two percent refinery yield of petroleum products threshold 
would impose vehicle acquisition requirements on many refineries that 
only produce alternative fuels (principally propane) as incidental by-
products of the refining process. Several commenters recommended that 
DOE modify the rule to provide that at least 10 percent of a covered 
the percent of refinery yield criterion which focuses solely on 
refining operations.
    Despite the lack of comprehensive, publicly available information 
about petroleum producers' and importers' revenue sources on a product-
by-product basis, DOE has been able to collect enough information about 
their sales of alternative fuels to frame a possible definition of 
``substantial portion'' based on percent of gross revenue derived from 
alternative fuels.
    One option DOE is considering is whether to define ``substantial 
portion'' to mean that at least 30 percent of the annual gross revenue 
of a covered person is derived from the sale of alternative fuels. This 
percentage of gross revenue appears to be an appropriate gross revenue 
threshold for two reasons. First, available information shows that 
major U.S. energy producing companies historically derive at least 30 
percent of their annual gross revenue from the sale of alternative 
fuels.1 Major energy producers are typically consolidated or 
integrated companies that are involved in oil and gas 

[[Page 38976]]
exploration, oil and gas production or importing, petroleum refining 
and marketing, transportation of products, other energy operations 
(coal, nuclear and other energy) and nonenergy businesses (primarily 
chemicals). Second, this definition would exclude from the class of 
covered persons subject to the vehicle acquisition person's refinery 
yield of petroleum products must be composed of alternative fuels 
before that person would be deemed to have a ``substantial portion'' of 
its business involved in the production of alternative fuels. Other 
commenters urged DOE to adopt a definition of ``substantial portion'' 
that would be the same as the ``principal business'' criterion used in 
section 501(a)(2) for defining other categories of alternative fuel 
providers.

    \1\ Sources used were: Energy Information Administration's 
Performance Profiles of Major Energy Producers, 1993 (DOE/EIA-0206); 
Moody's 1994 Industrial Manual; 1995 U.S.A. Oil Industry Directory; 
and Standard & Poor's 1994 Register--Corporations.
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    A few of the commenters recommended that DOE adopt a percentage of 
gross revenue derived from the sale of alternative fuels as the basis 
for the definition of ``substantial portion.'' They pointed out that 
gross revenue is the measure used for determining whether other 
alternative fuel providers are ``covered persons'' because their 
``principal business'' is in alternative fuels. In their view, if gross 
revenue can be used to determine whether an entity's principal business 
involves alternative fuels, it also should be used for determining 
whether a petroleum producer or importer has a substantial portion of 
its business in the production of alternative fuels.
    After carefully reviewing all of the comments received on this 
issue, DOE thinks that a percentage of gross revenue derived from the 
sale of alternative fuels may be a better measure of an entity's 
involvement in the alternative fuels business than is the percentage of 
refinery yield of petroleum products included in the proposed rule's 
definition of ``substantial portion.'' As pointed out by some 
commenters, a gross revenue measure can be applied to all producers and 
importers of petroleum, unlike the requirements those refiners who 
produce alternative fuels only as an incidental by-product of the 
refining process. Refiners are typically involved only in petroleum 
refining and marketing operations.
    DOE also believes this gross revenue percentage comports with the 
terms of section 501(a)(2) of the Act, 42 U.S.C. Sec. 13251(a)(2). If 
the term ``substantial portion'' were defined to include a percentage 
of gross revenue derived from alternative fuels that was higher than 30 
percent, the distinction in the Act between ``substantial portion'' 
which applies to covered petroleum producers and importers 
(Sec. 501(a)(2)(C)) and ``principal business'' which applies to other 
alternative fuel providers (Sec. 501(a)(2)(A) and (B)) would be 
rendered meaningless. As noted in the preamble to the notice of 
proposed rulemaking, alternative fuels constitute an entity's 
``principal business'' if the entity derives a plurality of its gross 
revenue from sales of alternative fuels, and a plurality may be less 
than 50 percent. 60 FR 10978. Therefore, DOE believes that 30 percent 
of gross revenue from alternative fuels may constitute a reasonable 
basis for the definition of ``substantial portion.''
    This possible interpretation of ``substantial portion'' also 
appears to be consistent with the underlying intent of Congress with 
regard to petroleum-related entities. That intent was to apply the 
alternative fueled vehicle acquisition requirements only to major 
energy producers and importers.
    DOE requests comments from interested members of the public on this 
possible option for defining ``substantial portion'' or any alternative 
options they would like DOE to consider. DOE is particularly interested 
in receiving data or analysis that are relevant to this issue.

III. Definition of ``Alternative Fuel''

    Section 301(2) of the Energy Policy Act,\2\ 42 U.S.C. 13211, 
defines the term ``alternative fuel'' to mean ``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 requirements relating to cold 
start, safety or vehicle functions) 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; 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.''

    \2\ The conference report on the Energy Policy Act of 1992 
states that ``the intent of section 501(a)(1) is not to cover all 
affiliates or divisions of the many large energy companies which 
have some, but not all, of their corporate units engaged in 
alternative fuels operations. For example, the oil and gas 
production affiliate or division of a major energy company described 
in 501(a)(1)(C) would be covered; so might a propane pipeline unit 
or a natural gas processing division, if the ``substantially 
engaged'' test is met. But an oil tanker division, a gasoline 
marketing affiliate, or a petrochemical unit whose major operations 
are the production of plastics, for example, would not be covered. . 
. .'' H.R. Rep. 1018, 102d Cong., 2d Sess. 387 (1992).
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A. Alcohol Blends

    In proposed Sec. 490.2, DOE defined ``alternative fuel'' to include 
mixtures containing 85 percent or more by volume of methanol, denatured 
ethanol, and other alcohols. However, the proposal did not decrease the 
alcohol percentage to no less than 70 percent as authorized by section 
301(2) of the Act. DOE received comments requesting that the definition 
of ``alternative fuel'' include alcohol blends down to no less than 70 
percent alcohol by volume. These comments point out that automobile 
manufacturers' winter test programs have shown that lower level alcohol 
blends are required for improved cold start performance in winter 
conditions and are recommended in Owners' Manuals. Some comments also 
point out that recent cold weather testing by American Automobile 
Manufacturers Association (AAMA) members on alcohol blends indicates 
that the cold start threshold (the lowest temperature at which a 
vehicle will start) can be lowered by 10-15 degrees Fahrenheit by 
decreasing the alcohol content from 85% down to 70%. However, none of 
these commenters submitted test data to support their request to lower 
the minimum alcohol percentage.
    DOE recognizes the concerns that these commenters have with the 
cold start capability of alcohol-fueled vehicles in winter conditions. 
DOE, therefore, invites interested persons to provide additional data, 
reports and analyses that are relevant to this matter. DOE will 
evaluate any information it receives in response to this invitation and 
decide whether to amend the proposed definition of ``alternative fuel'' 
to include a lower alcohol percentage as provided in section 301(2).

B. Biodiesel

    Many commenters requested that biodiesel be included in the 
Department's regulatory definition of ``alternative fuel.'' As 
described in the comments, biodiesel is produced from vegetable oils, 
such as soybean oil, which are biological materials. The commenters 
stated that biodiesel offers significant reduction in harmful tailpipe 
emissions of hydrocarbons, carbon monoxide and particulate matter; is 
essentially free of sulfur and harmful aromatics; and is non-toxic and 
biodegradable. These commenters also submitted information to show that 
biodiesel can be made wholly from domestic products, and that it has a 
positive energy balance in its production process. 

[[Page 38977]]

    After carefully reviewing all of the comments on this issue, it 
appears that neat (or 100 percent) biodiesel is already covered in the 
statutory and proposed regulatory definitions of ``alternative fuel'' 
which refer to any ``fuel, other than alcohol, that is derived from 
biological materials.'' The Department, therefore, is considering 
amending the proposed definition of ``alternative fuel'' specifically 
to include neat biodiesel. DOE requests interested members of the 
public to submit views and information relating to this possible 
revision to the definition of the term ``alternative fuel.'' It is 
noted that a DOE interpretation of ``alternative fuel'' to include neat 
biodiesel would not relieve biodiesel manufacturers from other federal 
or state regulatory requirements or modify automobile manufacturer 
warranty requirements with respect to motor fuels.
    Many commenters also urged DOE to include mixtures or blends of 
biodiesel in the definition of ``alternative fuel.'' The issue of 
including biodiesel mixtures or blends comprised of more than 20 
percent biodiesel is currently under study. However, this subject is 
complex and will require significantly more data and information, and a 
separate, future rulemaking, before DOE can make a determination as to 
whether to include them in the definition of ``alternative fuel.''

IV. Automobile Manufacturers' Alternative Fueled Vehicle Production 
Plans

    On May 25, 1995, representatives of DOE met with representatives of 
the American Automobile Manufacturers Association (AAMA). This meeting 
was one in a series of periodic meetings that have been held between 
the DOE and the AAMA since 1993 to exchange information on subjects of 
mutual interest. At this meeting, the automobile manufacturers' 
representatives presented DOE with publicly available information about 
each company's upcoming alternative fueled vehicle production plans.
    Both Ford and Chrysler provided to DOE a one-page list of their 
alternative fueled vehicle offerings for Model Years 1995 and 1996. 
Ford also provided a copy of a presentation that was delivered on May 
2, 1995, at the 6th Annual Alternative Vehicle Fuels Market Fair & 
Symposium in Austin, Texas. This presentation included detailed 
information regarding when Ford alternative fueled vehicles could be 
ordered and when deliveries can be expected.
    Although Chrysler representatives did not provide DOE with 
documentation of its plans, they did state that Chrysler will begin 
taking orders for its dedicated compressed natural gas line of trucks 
and full-size vans (utilizing the 5.2L engine) in June 1995, with 
deliveries scheduled to begin in August 1995. Chrysler plans to begin 
taking orders for dedicated compressed natural gas minivans (using the 
3.3L engine) during the last quarter of 1995, with anticipated 
deliveries scheduled to begin in the first quarter of 1996. Chrysler 
representatives also stated that an electric minivan may be available 
in calendar year 1997.
    General Motors (GM) representatives stated that GM does not plan to 
manufacture any alternative fueled vehicles for Model Year 1996. 
However, GM does plan on making alternative fueled vehicles in Model 
Year 1997. According to a May 11, 1995, press release that GM provided, 
all of the model year 1997 Chevrolet S-series and GMC Sonoma 4-cylinder 
light duty pickup trucks will be produced as flexible-fuel vehicles, 
which can operate on ethanol, gasoline, or a combination of the two 
fuels. These trucks are scheduled for production beginning in the 
summer of 1996. GM also indicated that customers can currently order 
vehicles in several models and engine families that are powered by 
gaseous fuel compatible engines. These engines can be converted to 
operate on propane or natural gas. According to GM, the engine families 
that are gaseous fuel compatible and the vehicles that they power are 
the 4-cylinder 2.2L (Corsica), the 4.3L V-8 (Caprice), and the 6.0L V-8 
and 7.0L V-8 (Topkick, Kodiak and School Bus).
    Copies of the written information provided to DOE at this meeting 
have been entered into the public docket for this rulemaking.

    Issued in Washington, DC, July 26, 1995.
Christine A. Ervin,
Assistant Secretary, Energy Efficiency and Renewable Energy
[FR Doc. 95-18737 Filed 7-28-95; 8:45 am]
BILLING CODE 6450-01-P