[Federal Register Volume 65, Number 90 (Tuesday, May 9, 2000)]
[Proposed Rules]
[Pages 26805-26808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11046]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 538

[Docket No.: NHTSA-2000-7087]


Automotive Fuel Economy Manufacturing Incentives for Alternative 
Fuel Vehicles

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

ACTION: Request for comments.

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SUMMARY: This document seeks comments to assist the National Highway 
Traffic Safety Administration (NHTSA) in the study of the success of 
the policy of providing corporate average fuel economy (CAFE) 
incentives for ``dual-fuel'' alternative fuel and gaseous dual-fuel 
vehicles and whether the agency should extend the incentive program for 
four years beyond MY 2004. Comments received in response to this 
document will be used to assist NHTSA in completing a study and issuing 
a report to Congress on or before September 30, 2000.

DATES: Comments must be received on or before June 8, 2000.

ADDRESSES: Comments to this document must refer to the docket number 
and notice number set forth above and be submitted (preferably two 
copies) to: U.S. Department of Transportation, Docket Management, Room 
PL-401, 400 Seventh Street, S.W., Washington, D.C. 20590. Docket hours 
are 9 a.m. to 5 p.m. Monday through Friday.

FOR FURTHER INFORMATION CONTACT: The following persons at the National 
Highway Traffic Safety Administration, 400 Seventh Street, S.W., 
Washington, D.C. 20590: For non-legal issues: Mr. Lawrence Fleming, 
Consumer Programs Division, Office of Planning and Consumer Programs, 
NPS-32, Room 5320, telephone (202) 366-4936, facsimile (202) 493-2290. 
For legal issues: Otto Matheke, Office of the Chief Counsel, NCC-20, 
Room 5219, telephone (202) 366-5263, facsimile (202) 366-3820.

SUPPLEMENTARY INFORMATION: Corporate average fuel economy (CAFE) is the 
fuel economy, expressed in miles per gallon, of a manufacturer's fleet 
of: (1) Passenger cars, or (2) light trucks under 8,500 lbs. gross 
vehicle weight rating. Each manufacturer's average fuel economy is 
determined by the Environmental Protection Agency in accordance with 
procedures set forth in 49 U.S.C. 32904 and is calculated by computing 
the weighted fuel economy average of various model types of a 
manufacturer in a particular model year. The MY 2000 CAFE standard is 
27.5 mpg for passenger cars and 20.7 mpg for light trucks. Failure to 
comply with the standard for either passenger car or light truck fleets 
in any given model year results in civil penalties of $5.50 for each 
tenth of a mile per gallon per vehicle. (49 U.S.C. 32912(b)).
    Manufacturers can earn ``credits'' to offset deficiencies in their 
CAFE performance. Specifically, when the average fuel economy of the 
vehicles manufactured by a manufacturer in a particular model year 
exceeds the average fuel economy standard, the manufacturer earns 
credits. The number of credits a manufacturer earns is determined by 
multiplying the number of tenths of a mile per gallon by which the 
manufacturer exceeded the fuel economy standard in that model year 
times the number of vehicles they manufactured in that model year. 
These credits can be applied to any of the three consecutive model 
years immediately after, or if a carry-back plan is approved under 
32903(b), before the model year for which the credits are earned. For a 
variety of reasons, credits are highly valued by manufacturers and 
provide a significant incentive to exceed the applicable standards for 
a given model year.
    The Alternative Motor Fuels Act of 1988 (``AMFA'; Pub. L. 100-94, 
October 14, 1988) was enacted with the primary purpose of encouraging 
the development and use of methanol, ethanol and natural gas as 
transportation fuels and to promote the production of alternate fuel 
vehicles (AFVs) by auto manufacturers. To this end, AMFA contains 
provisions that allow for special treatment of vehicle fuel economy 
calculations for dedicated alternative fuel vehicles and dual-fuel 
vehicles that meet specified requirements. Passenger automobiles and 
light trucks that are eligible for special fuel economy calculations 
are ``dedicated'' and designed to operate exclusively on methanol or 
ethanol in composition of 70 percent or more or on natural gas; or 
``flexible fuel'' vehicles that have the capability to operate on 
either conventional petroleum or a blend of alcohols in conjunction 
with either gasoline or diesel; or on natural gas. These vehicles also 
must meet energy efficiency and minimum driving range requirements. A 
manufacturer producing alternative fuel vehicles that meet energy 
efficiency and minimum driving range requirements may be able to raise 
their overall fleet fuel economy performance by manufacturing these 
vehicles.
    AMFA directs the Secretary of Transportation to conduct a study and 
issue a report on the success of the policy of providing CAFE 
incentives for alternative dual-fuel vehicles by assessing alternative 
fuel use; cost and availability; the availability and affordability of 
vehicles capable of operating on either alternative or conventional 
fuel; the effect these vehicles have on the environment; energy 
conservation; and other relevant factors. This document seeks 
information and data that will assist the agency in conducting its 
assessment.

1. Statutory Background

    Section 6 of AMFA amended the fuel economy provisions of Title V of 
the Motor Vehicle Information and Cost Savings Act by adding a new 
section 513 that contains incentives for the manufacture of vehicles 
designed to operate on alternative fuels, including dual-fuel vehicles. 
Dual-fuel vehicles are generally defined as one of two classes that 
operate on either alternative fuel and gasoline or diesel fuel, or 
those capable of operating on natural gas or either gasoline or diesel 
fuel. Section 513(h) specifically defined a ``dual energy@ automobile 
as one that meets a minimum driving range and:


[[Page 26806]]


    (i) Which is capable of operating on alcohol and on gasoline or 
diesel fuel;
    (ii) Which provides equal or superior energy efficiency, as 
calculated for the applicable model year during fuel economy testing 
for the Federal Government, while operating on alcohol as it does 
while operating on gasoline or diesel fuel; [and]
    (iii) Which* * * provides equal or superior energy efficiency, 
as calculated for the applicable model year during fuel economy 
testing for the Federal Government, while operating on a mixture of 
alcohol and gasoline or diesel fuel containing exactly 50 percent 
gasoline or diesel fuel as it does while operating on gasoline or 
diesel fuel as those vehicles capable of operating on alcohol and on 
either gasoline or diesel fuel, or those capable of operating on 
natural gas and on either gasoline or diesel fuel [.].

A ``natural gas dual energy'' automobile was defined as a vehicle that 
met specified minimum driving range, and:

    (i) Which is capable of operating on natural gas and on gasoline 
or diesel fuel; [and]
    (ii) Which provides equal or superior energy efficiency, as 
calculated for the applicable model year during fuel economy testing 
for the Federal Government, while operating on natural gas as it 
does while operating on gasoline or diesel fuel [.].

    The Energy and Policy Act of 1992 added new provisions of Section 
513 of the Motor Vehicle Information and Cost Savings Act. In addition, 
the definition of alternative fuel was expanded to include liquefied 
petroleum gas, hydrogen, liquid fuels derived from coal and biological 
materials, electricity and any other fuel that the Secretary of 
Transportation determines to be substantially non-petroleum based and 
have environmental and energy security benefits. The law also revised 
terminology by replacing ``dual energy'' and ``natural gas dual 
energy'' with ``alternative fueled vehicles'' in order to more 
appropriately reflect the expanded list of fuels.
    Beginning in MY 1993, manufacturers of AFVs that met the minimum 
driving range and energy efficiency criteria could qualify for special 
treatment in the calculation of their CAFE by computing the weighted 
average of fuel economy while operating on gasoline or diesel fuel and 
when operating on the alcohol after dividing the alcohol fuel economy 
by a factor of 0.15. For instance, a dedicated AFV that would achieve 
15 mpg fuel economy while operating on alcohol would have a CAFE 
calculated as follows:

FE=(1/0.15)(15)=100 miles per gallon

    For alternative dual-fuel vehicles, an assumption is made that the 
vehicles would operate 50% of the time on the alternative fuel and 50% 
of the time operating on conventional fuel, resulting in a fuel economy 
that is based on a harmonic average of alternative and conventional 
fuel. The fuel economy for an alternative dual-fuel model is calculated 
by dividing 1.0 by the sum of 0.5 divided by the fuel economy as 
measured on the conventional fuel and 0.5 divided by the fuel economy 
as measured on the alternative fuel, using the 0.15 volumetric 
conversion factor. For example, for an alternative dual-fueled model 
that achieves 15 miles per gallon operating on an alcohol fuel and 25 
mpg on the conventional fuel, the resulting CAFE value would be:

1/((0.5/ 25)+(0.5/100))=40 miles per gallon

    The CAFE calculated values for a natural gas alternative fuel 
vehicle are arrived at in similar fashion. For the purposes of this 
calculation, the fuel economy is equal to the weighted average of the 
vehicle fuel economy while operating on natural gas and while operated 
on either gasoline or diesel fuel. Section 32905(c) specifies the 
energy equivalency of 100 cubic feet of natural gas to be equal to 
0.823 gallons of gasoline, with the gallon equivalent of natural gas to 
be considered to have a fuel content equal to 0.15 gallons of fuel. The 
applicability of these special mileage calculation procedures is for 
vehicles manufactured for sale in MY 1993 through MY 2004, and the 
maximum allowable increase in a manufacturer's fleet average fuel 
economy attributed to these dual-fuel vehicles is 1.2 miles per gallon.
    Section 32905(g) stipulates that the Secretary of Transportation 
(the Secretary), in consultation with the Secretary of Energy and the 
Administrator of the Environmental Protection Agency, shall submit a 
report to the Committee on Commerce, Science and Transportation and 
Governmental Affairs of the Senate, and the Committee on Energy and 
Commerce of the House of Representatives, a report containing the 
results of the study of the success of this alternative fuel vehicle 
mileage credit incentive policy and make recommendations whether to 
extend the program for up to an additional four (4) model years, with a 
maximum allowable increase in average fuel economy for a manufacturer 
attributed to dual-fuel vehicles of 0.9 miles per gallon. In 
preparation of this study and report, the Secretary is to consider the 
following factors:

    (i) [T]he availability to the public of alternative fueled 
automobiles, and alternative fuels;
    (ii) energy conservation and energy security;
    (iii) environmental considerations; and
    (iv) other relevant factors.

    Upon completion of the study and report, the Secretary shall either 
promulgate a final rule that extends the incentive program for up to 
four additional model years, or issue public notice of the decision to 
terminate the incentive program with appropriate justification. The 
final rule or regulatory decision must be issued no later than December 
31, 2001.

2. The Intent of the Alternative Motor Fuels Act of 1988 and the 
Basis for Evaluation of the Study and Report

    It is clear that in creating special CAFE incentives for 
alternative fuel vehicles in AMFA and EPACT amendments, Congress 
intended to foster the commercialization of alternative fuels used for 
transportation and to further the development of the alternative fuel 
production, supply and distribution infrastructure. While AMFA has 
provisions for special CAFE calculations for both dedicated and dual-
fuel vehicles, the statutory language directs that the study and report 
to Congress only assess the policy of providing CAFE incentives for 
dual-fuel vehicles and not dedicated AFVs. Accordingly, information on 
dedicated AFVs will be included in the study only as it pertains to 
evaluating the policy of providing CAFE mileage credits for dual-fuel 
vehicles.
    It should be noted that while the Energy Policy Act of 1992 
expanded the definition of alternative fuels to include liquefied 
petroleum gas, hydrogen, electrically powered and others, the 
rulemaking procedures for implementing the provisions of AMFA were 
already in process by the time these other energy source fuels were 
classified as ``alternative'' fuels, and the final rule implementing 
the related provisions of AMFA has procedures for CAFE credit 
calculations for alcohol and compressed natural gas powered vehicles 
only (ref: 59 FR 39368; August 3, 1994).
    In executing the study and preparing the report, NHTSA will 
specifically attempt to evaluate the effect of the incentives upon the 
acceptance of alternative fuels as measured by the change in fuel use 
for light vehicle transportation. NHTSA will also examine the change in 
the number of vehicles that operate on alternative fuels manufactured 
since the 1993 model year and evidence, if any, that associates the 
design, development and production of these vehicles to the incentives 
offered in fuel economy calculations. Wherever possible, the costs and 
benefits to both consumers and industry will be

[[Page 26807]]

analyzed as well as the impact upon energy security and the 
environment.

3. Questions and Comments

    To assess the impacts of the CAFE incentives program as described 
above, NHTSA, in coordination with the Environmental Protection Agency 
and the Department of Energy, seeks specific information and relevant 
comments. Set forth below are questions organized under three 
categories to facilitate collection of data and relevant information: 
(1) The automobile industry; (2) the fuel industry; and (3) general 
interest. NHTSA invites comments and input from all interested parties 
on any of the questions listed in this document. The information sought 
by the agency will assist in the preparation of the study and report to 
Congress on the effect of CAFE incentives for dual-fuel and gaseous 
dual-fuel vehicles and the agency's determination on whether to 
continue the program with a reduced maximum attributed allowance 
through the 2008 model year. In providing a comment on a particular 
matter or in responding to a particular question, interested parties 
are requested to provide any relevant factual information to support 
their conclusions or opinions, including but not limited to statistical 
and cost data or marketing studies, and the source of such information. 
Wherever used, the terms ``sale'', ``production'' and ``design'' 
pertain to passenger cars and light trucks up to 8,500 lbs. gross 
vehicle weight rating that are manufactured either domestically or 
imported for sale in the United States and U.S. Territories and 
possessions, including lease sales, fleet sales, etc.
    NHTSA requests information and comments to the following questions:

(A) Questions/Issues Primarily Related to Automobile Manufacturers

    1. How and to what extent has the AMFA CAFE incentives program 
affected manufacturers' decisions to design, manufacture and sell dual-
fuel alcohol and natural gas powered vehicles and other alternative 
fuel vehicles? Specifically for MY 1993 through MY 2000, list all the 
alternative fuel vehicles that are offered for sale and for each 
vehicle line, indicate whether credits were a major factor, a minor 
factor, or of little or no consideration to the company's decision to 
offer an alternative fuel vehicle.
    2. What was/is the price differential for offering alcohol and 
compressed natural gas powered dual-fuel vehicles and other alternative 
fuel vehicles versus conventionally fueled models? Please provide 
examples of manufacturers' suggested retail price of applicable 
alternative fuel vehicle models versus the retail price of their 
conventional fuel counterpart models.
    3. Using the response to Question 2, what was/is the ``dollar 
value'' of each AMFA qualifying vehicle, defined as the savings 
generated by avoiding CAFE penalties less the expenses associated with 
design and manufacturing of these alternative fuel vehicles?
    4. What was/is the cost differential (on a per vehicle basis) to 
produce alcohol and compressed natural gas powered dual-fuel vehicles 
and other alternative fuel vehicles versus conventionally fueled 
models?
    5. What new technologies have been specifically developed and 
implemented in order to accommodate the use of methanol/ethanol or 
natural gas to qualify for the fuel economy calculation benefit? What 
is the attributed cost of each of the technologies?
    6. Have there been performance or durability problems associated 
with operating vehicles on methanol/ethanol or natural gas? If yes, 
please specify the nature (e.g., materials degradation due to 
incompatibility of oxygenated fuels, cold start and driveability 
issues, etc.) and the extent of the problems.
    7. What efforts have manufacturers taken, or plan to take, to 
market dual-fuel or other alternative fuel vehicles to fleet operators? 
What information relative to performance or durability has been or will 
be provided by the fleet operators to the automobile manufacturer?
    8. What initiatives have manufacturers and dealers taken to educate 
consumers about vehicles' capability to operate on an alternative fuel? 
Please provide any available owner's manual information, dealer 
bulletins, or other point of sale literature that is relevant.
    9. What are the auto manufacturers' plans for MY 2001 through MY 
2008 relative to the AMFA CAFE incentive program? How would the 
decision to extend the maximum allowable mileage increase at 0.9 mpg as 
prescribed by AMFA effect manufacturers' product strategy? Conversely, 
what effect would a decision not to extend the provision beyond MY 2004 
have on manufacturers' product plans?

(B) Questions/Issues Primarily Related to Fuel Producers, Distributors 
and Retailers

    1. How has the AMFA CAFE program affected the fuel industry's 
production and sales of alternative fuels from 1993 through 2000?
    2. How has the AMFA CAFE program directly affected the number of 
alternative fuel refueling sites from 1993 through the present time?
    3. How will the fuel industry's projected plans for production and 
distribution be affected by the decision to either continue or 
discontinue a vehicle-specific incentive program beyond 2004?
    4. Does the fuel industry believe that changes to the 
infrastructure as a result of considerations other than/in addition to 
the AMFA CAFE credits program would be warranted in order to improve an 
alternative fuels infrastructure? Please recommend any possible changes 
other than AMFA CAFE incentives that would facilitate further 
development of that infrastructure.
    5. What efforts have been made by the fuel industry and other 
groups to educate consumers and promote the use of methanol/ethanol or 
compressed natural gas as an alternative fuel?

(C) Questions/Issues of General Interest

    1. How difficult is it for consumers to find fueling locations for, 
and availability information on, alternative fuels? How do they seek 
alternative fuel locations?
    2. What are the most common consumer complaints regarding problems 
or concerns related to the use of the dual-fuel vehicles or 
availability of the alternative fuels?
    3. Assuming an ample supply of alternative fuels and vehicles, 
would consumers be willing to use alternative fuels over conventional 
ones? Please provide the basis for this response.
    4. What changes would be necessary to improve consumer awareness 
and acceptance of alternative fuel vehicles?
    5. What other efforts could government or industry take to increase 
the use of alternative fuels?
    6. Is there any information available on the approximate percentage 
of vehicle mileage for which a owner/driver of a dual-fuel vehicle uses 
the alternative fuel versus gasoline or diesel fuel? If so, should the 
``50/50 split'' used in the credit calculation formula be revised to a 
value that more closely represents actual alternative fuel use?
    7. Are there companion programs necessary to ensure that vehicles 
manufactured for purposes of complying with the CAFE requirement are 
actually using alternative fuels?
    8. Has the AMFA CAFE program affected the total use of methanol/
ethanol and compressed natural gas use? If so, how?
    9. What changes could be made to this program, either from the 
vehicle production aspect or the fuel industry

[[Page 26808]]

aspect, that would be perceived as an even greater incentive to 
produce, distribute and market alternative fuels in the future?
    10. In addition to energy conservation, energy security, 
environmental considerations, and the availability of alternative fuel 
vehicles and alternative fuels to the public, what other factors should 
be considered in the evaluation of the policy of providing additional 
CAFE credits for dual-fuel vehicles?
    11. Do you believe the policy of providing additional CAFE credits 
for dual-fuel vehicles should be continued? Please explain the basis 
for your position.
    NHTSA solicits public comments on this document. It is requested 
but not required that two copies be submitted.

How Do I Prepare and Submit Comments?

    Your comments must be written and in English. To ensure that your 
comments are correctly filed in the Docket, please include the Docket 
number of this document in your comments.
    Your primary comments must not be more than 15 pages long (49 CFR 
553.21). However, you may attach additional documents to your primary 
comments. There is no limit on the length of the attachments.
    Please send two paper copies of your comments to Docket Management 
or submit them electronically. The mailing address is: U. S. Department 
of Transportation, Docket Management, Room PL-401, 400 Seventh Street, 
SW, Washington, DC 20590. If you submit your comments electronically, 
log onto the Dockets Management System website at http://dms.dot.gov 
and click on ``Help and Information'' or ``Help/Info'' to obtain 
instructions.

How Can I Be Sure That My Comments Were Received?

    If you wish Docket Management to notify you upon its receipt of 
your comments, enclose a self-addressed, stamped postcard in the 
envelope containing your comments. Upon receiving your comments, Docket 
Management will return the postcard by mail.

How Do I Submit Confidential Business Information?

    If you wish to submit any information under claim of 
confidentiality, send three copies of your complete submission, 
including the information you claim to be confidential business 
information, to the Chief Counsel, NCC-01, National Highway Traffic 
Safety Administration, Room 5219, 400 Seventh Street, SW, Washington, 
DC 20590. Include a cover letter supplying the information specified in 
our confidential business information regulation (49 CFR Part 512).
    In addition, send two copies from which you have deleted the 
claimed confidential business information to Docket Management, Room 
PL-401, 400 Seventh Street, SW, Washington, DC 20590.

Will the Agency Consider Late Comments?

    NHTSA will consider all comments that Docket Management receives 
before the close of business on the comment closing date indicated 
above under DATES. To the extent possible, NHTSA will also consider 
comments that Docket Management receives after that date.
    Please note that even after the comment closing date, NHTSA will 
continue to file relevant information in the Docket as it becomes 
available. Further, some people may submit late comments. Accordingly, 
we recommend that you periodically check the Docket for new material.

How Can I Read the Comments Submitted by Other People?

    You may read the comments by visiting Docket Management in person 
at Room PL-401, 400 Seventh Street, SW, Washington, DC from 9:00 a.m. 
to 5:00 p.m., Monday through Friday.
    You may also see the comments on the Internet by taking the 
following steps:
    (1) Go to the Docket Management System (DMS) Web page of the 
Department of Transportation (http://dms.dot.gov/search/)
    (2) On that page, click on ``search''.
    (3) On the next page (http://dms.dot.gov/search/) type in the four 
digit Docket number shown at the beginning of this Notice. Click on 
``search''.
    (4) On the next page, which contains Docket summary information for 
the Docket you selected, click on the desired comments. You may also 
download the comments.

    Authority: (49 U.S.C. 32905(g); delegation of authority at 49 
CFR 1.50 and 49 CFR 501.8)

    Issued on: April 27, 2000.
Stephen R. Kratzke,
Associate Administrator for Safety Performance Standards.
[FR Doc. 00-11046 Filed 5-8-00; 8:45 am]
BILLING CODE 4910-59-P