[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Rules and Regulations]
[Pages 15322-15324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8364]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 538

[Docket No. NHTSA-98-3433]
RIN 2127-AG63


Manufacturing Incentives for Alternative Fuel Vehicles

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation (DOT).

ACTION: Denial of petition for reconsideration.

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SUMMARY: This document denies a petition for reconsideration of the 
agency's decision to set a 200 mile minimum driving range for dual 
fueled passenger automobiles other than electric vehicles.

FOR FURTHER INFORMATION CONTACT: The following persons at the National 
Highway Traffic Safety Administration, 400 Seventh Street, S.W, 
Washington, DC 20590.
    For non-legal issues: Ms. Henrietta L. Spinner, Consumer Programs 
Division, Office of Planning and Consumer Programs, National Highway 
Traffic Safety Administration, 400 Seventh Street SW, Washington, DC 
20590, (202) 366-4802.
    For legal issues: Otto Matheke, Office of the Chief Counsel, NCC-
20, telephone (202) 366-5253, facsimile (202) 366-3820.

SUPPLEMENTARY INFORMATION:

I. Establishment of a Minimum Driving Range for Dual Fueled 
Passenger Automobiles

    On April 2, 1996, NHTSA published a final rule in the Federal 
Register (61 FR 14507) establishing a minimum driving range for dual 
fueled passenger automobiles other than electric vehicles. The rule 
also established gallons equivalent measurements for gaseous fuels 
other than natural gas and eliminated provisions relating to the 
granting of alternative range requirements for alternative fueled 
passenger automobiles not powered by electricity.
    The agency promulgated this rule in response to amendments in the 
Energy Policy Act of 1992 (EPACT) (Pub. L. 102-486) that expanded the 
number of alternative fuels in the corporate average fuel economy 
(CAFE) law, now recodified as Chapter 329 of title 49, U.S.C. As 
amended, section 32901(c) requires dual fueled passenger automobiles to 
meet specified criteria, including meeting a minimum driving range, in 
order to qualify for special treatment under sections 32905 and 32906 
in the calculation of their fuel economy for purposes of the CAFE 
standards.
    One change made by EPACT concerning driving ranges was that, under 
section 32901(c), the minimum driving range set by NHTSA for dual 
fueled passenger automobiles other than electric passenger automobiles 
could not be less than 200 miles. The EPACT amendments also provided 
that the agency may not, in response to petitions from manufacturers, 
set an alternative range for a particular model or models that is lower 
than 200 miles, except for electric passenger automobiles.
    The EPACT amendments necessitated amending part 538. In the final 
rule, the agency established gallons equivalent measurements for the 
wider range of alternative fuels included in the EPACT amendments and 
deleted provisions relating to the establishment of alternative minimum 
driving ranges for non-electric alternative-fueled passenger 
automobiles. In regard to the minimum driving range, NHTSA concluded 
that both the text and the legislative history of these amendments 
indicated that the agency was required to set a minimum driving range 
of not less than 200 miles for all dual fueled passenger automobiles 
other than electric passenger automobiles.

II. Petition for Reconsideration of the Minimum Driving Range

    On May 24, 1996, the agency received a petition from the National 
Biodiesel Board (NBB) requesting reconsideration of NHTSA's decision to 
set a minimum driving range of 200 miles for all dual fueled passenger 
automobiles other than electric vehicles.
    NBB requested that the agency (1) clarify the status of biodiesel 
as an alternative fuel, (2) adopt a definition of dual fueled vehicles 
to include vehicles operating on a mixture of alternative fuel and 
gasoline or diesel fuel, and (3) find that a passenger vehicle 
operating on a mixture of alternative fuel and gasoline or diesel fuel 
has satisfied the minimum driving range requirement of 200 miles if the 
alternative fuel component of the mixture in the vehicle's fuel system 
would propel the

[[Page 15323]]

passenger automobile a distance of 200 miles.
    The agency notes that the three points raised by NBB in its 
petition are outside of the scope of the rulemaking NBB asks the agency 
to reconsider. The April 2, 1996 final rule did not address the 
definition of alternative fuels, alternative fuel vehicle, or prescribe 
the manner in which an alternative fuel passenger automobile may meet 
the minimum driving range. Therefore, each of these issues may be more 
properly viewed as a request for interpretation rather than a request 
for reconsideration. The agency has, however, examined NBB's requests 
and will address them below.

III. Response To Petition for Reconsideration

    The petitioner's first request essentially asked that the agency 
confirm that biodiesel is an alternative fuel. NBB contends that 
biodiesel is an alternative fuel, that its status as an alternative 
fuel was recognized by Congress when the EPACT amendments were adopted, 
and that NHTSA should amend Section 538.4(a) to include biodiesel and 
neat biodiesel as alternative fuels.

    Part 538.4(a) reads as follows:
    538.4  Definitions.
    (a) Statutory terms. (1) The terms alternative fuel, alternative 
fueled automobile, and dual fueled automobile, are used as defined 
in 49 U.S.C. 32901(a).

NBB requests that 538.4(a) be amended to repeat the statutory 
definitions incorporated by reference and further seeks to have an 
explanatory parenthetical added to the definition of alternative fuel 
as set forth in section 32901(a)(1)(I), 49 U.S.C. 32901(a)(1)(I). This 
section defines alternative fuel as ``fuels (except alcohol) derived 
from biological materials * * * '' NBB requests that the parenthetical 
``(including neat biodiesel)'' be inserted in this definition following 
the phrase ``biological materials.''
    NHTSA regards such an amendment as unnecessary. The agency notes 
that neat biodiesel, which is a fuel entirely derived from biological 
materials, is already within the definition of an alternative fuel 
under section 32901(a)(1)(I). The agency also notes that elsewhere in 
NBB's petition, NBB contends that biodiesel blends such as B20, a 
mixture of 20% biodiesel and 80% petroleum derived diesel, should be 
accorded the status of an alternative fuel. Section 32901(a)(1)(K) 
grants the agency the authority to designate as alternative fuels ``any 
other fuel * * * that is not substantially petroleum and that would 
yield substantial energy security and environmental benefits.'' Thus, 
the agency may, by regulation, establish that certain fuels are 
alternative fuels when such a determination is appropriate. However, 
B20 is substantially derived from petroleum. NHTSA concludes that to 
deem B20 as an alternative fuel would be in direct contravention of 
Chapter 329. Biodiesel that is derived entirely from organic material 
(neat biodiesel) is, under section 32901(a)(1)(I), clearly an 
alternative fuel and NHTSA believes that the existing definition and 
regulations leave no doubt on this point. Biodiesel blends which are 
substantially petroleum, such as B20, are not alternative fuels under 
section 32901(a)(1)(K) and the agency cannot deem them as such. As 
NBB's petition does not seek clarification regarding other biodiesel 
blends, NHTSA will not presently exercise its authority to establish 
the concentration at which these fuels are not substantially derived 
from petroleum.
    The petitioner also requests that NHTSA issue regulations 
establishing that vehicles operating on a mixture of an alternative 
fuel and a petroleum based fuel are alternative fuel vehicles. In 
support of its request, NBB asserts that in regulations issued pursuant 
to the Alternative Fuel Transportation Program, the Department of 
Energy (DOE) has recognized that dual fueled vehicles operating on a 
mixture of alternative and petroleum fuels are dual fueled vehicles.
    The agency notes that EPACT broadened the scope of the incentives 
contained in Chapter 329, encouraging the production of alternative 
fuel vehicles, as part of a national effort to reduce the dependence of 
the United States on petroleum based fuels. While other statutory 
schemes may recognize that vehicles operating on a mixture of 
alternative fuels and petroleum are alternative fuel vehicles, NHTSA 
concludes that such vehicles do not qualify as alternative fuel 
vehicles for the purposes of Chapter 329. Section 32901(a)(2) defines 
an alternative fuel vehicle as either a dedicated vehicle or a dual 
fueled vehicle. Dedicated vehicles are defined in section 32901(a)(7) 
as automobiles that operate only on an alternative fuel. Dual fueled 
vehicles are defined in section 32901(a)(8) as follows:

    (8) dual fueled automobile means an automobile that--
    (A) is capable of operating on alternative fuel and on gasoline 
or diesel fuel;
    (B) provides equal or superior energy efficiency, as calculated 
for the applicable model year during fuel economy testing for the 
United States Government, when operating on alternative fuel as when 
operating on gasoline or diesel fuel;
    (C) for model years 1993-1995 for an automobile capable of 
operating on a mixture of an alternative fuel and gasoline or diesel 
fuel and if the Administrator of the Environmental Protection Agency 
decides to extend the application of this subclause, for an 
additional period ending not later than the end of the last model 
year to which section 32905(b) and (d) of this title applies, 
provides equal or superior energy efficiency, as calculated for the 
applicable model year during fuel economy testing for the 
Government, when operating on a mixture of alternative fuel and 
gasoline or diesel fuel containing exactly 50 percent gasoline or 
diesel fuel as when operating on gasoline or diesel fuel; and
    (D) for a passenger automobile, meets or exceeds the minimum 
driving range prescribed under subsection (c) of this section.

Examination of this section compels the conclusion that Congress 
intended that for the purposes of Chapter 329's incentive program that 
dual fueled vehicles are, with one limited exception, vehicles 
operating either on an alternative fuel or a petroleum fuel but not on 
a mixture of the two. Subsection (A) describes a vehicle that operates 
on a petroleum or alternative fuel but not a mixture of both. 
Subsection (B) limits dual fuel vehicles to those vehicles that offer 
equal or superior energy efficiency when operating on an alternative 
fuel, thereby indicating that the two modes of operation are exclusive. 
Subsection (C) indicates that vehicles operating on a mixture of 
alternative fuel and gasoline or diesel fuel may only be considered as 
dual fueled automobiles for the 1993-1995 model years (unless extended 
by the Administrator of the Environmental Protection Agency to the 2004 
model year) when such vehicles offer equal or superior energy 
efficiency when operating on a 50/50 mix of alternative fuel and diesel 
fuel or gasoline. Therefore, the statutory text of section 32901(a)(8) 
indicates that Congress did not intend to make incentives available for 
dual fueled vehicles operating on a mix of fuels except under the 
limited circumstances enunciated in 32901(a)(8)(C). As the period set 
by Congress in which such vehicles could be considered as dual fueled 
vehicles has expired and the EPA has not extended this period by 
regulation, NHTSA concludes that under Chapter 329 a dual fueled 
vehicle is one that is capable of operating on either an alternative 
fuel or gasoline or diesel fuel but not a mixture of both 
simultaneously. This is not to say, however, that a vehicle using a 
fuel that is composed of gasoline or diesel fuel and an alternative 
fuel cannot be a dual

[[Page 15324]]

fueled vehicle; under section 32901(a)(1)(K) a mix of gasoline or 
diesel fuel and another substance may be an alternative fuel if it is 
not substantially petroleum and yields substantial environmental and 
energy benefits.
    NBB's petition also requests that NHTSA determine that a vehicle 
operating on a mix of biodiesel and diesel fuel be deemed to have met 
the minimum driving range requirement of 200 miles if the biodiesel 
fuel portion of the mixture in the vehicle's fuel tank would propel the 
vehicle that distance. As noted above, the agency concludes that 
Congress did not intend that vehicles operating on a mixture of 
alternative and petroleum fuel be eligible as alternative fuel vehicles 
under Chapter 329's incentive program unless that mix is itself an 
alternative fuel. NBB contends that the energy content of the 
alternative fuel is the relevant criteria for determining range and 
further argues that there is no practical difference between a vehicle 
operating on a 30 percent biodiesel mix and one with two separate fuel 
systems where the biodiesel tank holds 30 percent of the total fuel 
capacity. In the latter case, NBB submits, the vehicle would clearly 
meet the range requirement if the biodiesel propelled it 200 miles. If, 
according to NBB, the vehicle that mixes the two fuels in one tank 
cannot be deemed to meet the range requirement, the purposes of the 
incentive program will be frustrated and lead to an unequitable result. 
However, NBB's argument fails in that a vehicle operating on a mixture 
of 30 percent biodiesel and 70 percent diesel is not using an 
alternative fuel. In the absence of data demonstrating otherwise, such 
a fuel is substantially petroleum and therefore not an alternative fuel 
under section 32901(a)(1). The passenger automobile operating with a 
dual fuel system would, however, qualify as a dual fueled passenger 
automobile if it could reach 200 miles on 100 percent biodiesel because 
such a fuel is an alternative fuel.
    In response to the petition, the agency has reconsidered its 
decision to set a 200 mile minimum driving range for non-electric dual 
fueled passenger automobiles when operating on an alternative fuel. As 
explained below, the agency is, on reconsideration, reaffirming that 
decision.
    The petition raises points that are beyond the scope of the final 
rule establishing the 200 mile minimum driving range. The agency has 
nonetheless examined the merits of the petitioner's requests and 
concludes that the relief requested would have been denied even if it 
had been within the scope of the final rule. NHTSA concludes that the 
existing text of part 538 and the statutory definitions incorporated 
therein by reference include neat biodiesel as an alternative fuel. The 
agency also concludes that vehicles operating simultaneously on a 
mixture of an alternative fuel and gasoline or diesel fuel are not dual 
fueled vehicles for the purposes of Chapter 329's incentive program 
unless that mixture qualifies as an alternative fuel under section 
32901(a)(1)(K). Similarly, NHTSA also concludes that a dual fueled 
passenger automobile may not meet the range requirements simply by 
virtue of having a percentage of alternative fuel that may propel it 
200 miles. The range requirement may only be met by passenger 
automobiles that may travel the required distance while being propelled 
by a fuel or a fuel mixture that is, by itself, an alternative fuel as 
defined by Congress or by NHTSA regulation. Accordingly, the agency is 
denying the petition.

    Issued on: March 26, 1998.
L. Robert Shelton,
Associate Administrator for Safety Performance Standards.
[FR Doc. 98-8364 Filed 3-30-98; 8:45 am]
BILLING CODE 4910-59-P