[Federal Register Volume 60, Number 153 (Wednesday, August 9, 1995)]
[Proposed Rules]
[Pages 40539-40540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19688]



      
 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 60, No. 153 / Wednesday, August 9, 1995 / 
Proposed Rules  


[[Page 40539]]


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: Correction to notice of limited reopening of the comment 
period.

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

SUMMARY: This document contains corrections to the Notice of Limited 
Reopening of the Comment Period that was published Monday, July 31, 
1995, 60 FR 38974, FR Doc. 95-18737. The notice of limited reopening of 
the comment period requests public comment on possible options for 
defining the term ``substantial portion,'' which is used to determine 
coverage for certain petroleum producers and importers, and on possible 
modifications of the proposed definition of ``alternative fuel'' with 
respect to alcohol fuels and biodiesel. In addition, this notice 
announces DOE's receipt of new information regarding automakers' 
alternative fueled vehicle production plans for the near future.

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, SW., Washington, DC 
20585, (202) 586-6116.

SUPPLEMENTARY INFORMATION:

Need for Correction

    As published, the notice of limited reopening of the comment period 
contains errors in the sequence of text in Part II which may be 
confusing and, therefore, are in need of correction. The substance of 
Part II is unchanged.

Correction of Publication

    Accordingly, the publication on July 31, 1995, of the Notice of 
Limited Reopening of the Comment Period, which was the subject of FR 
Doc. 95-18737, is corrected by reprinting Part II, Definition of 
``Substantial Portion,'' beginning on page 38975, col. 1, and ending on 
page 38976, col. 2, in its entirety:

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 

[[Page 40540]]
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 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.
    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 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 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 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.

    \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.
---------------------------------------------------------------------------

    DOE also believes this gross revenue percentage comports with the 
terms of section 501(a)(2) of the Act, 42 U.S.C. 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 (section 
501(a)(2)(C)) and ``principal business'' which applies to other 
alternative fuel providers (section 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.\2\

    \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).
---------------------------------------------------------------------------

    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.
Thomas J. Gross,
Deputy Assistant Secretary for Transportation Technologies, Office of 
Energy Efficiency and Renewable Energy.
[FR Doc. 95-19688 Filed 8-8-95; 8:45 am]
BILLING CODE 6450-01-P