[Federal Register Volume 66, Number 8 (Thursday, January 11, 2001)]
[Rules and Regulations]
[Pages 2207-2211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-744]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 490

RIN 1904-AB-00


Alternative Fuel Transportation Program; Biodiesel Fuel Use 
Credit

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

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) adopts with changes an interim 
final rule published on May 19, 1999, to implement the Energy 
Conservation Reauthorization Act of 1998 (ECRA). This Act amended title 
III of the Energy Policy Act of 1992 (EPACT). ECRA allows fleets that 
are required to purchase alternative fueled vehicles under titles III 
and V of EPACT to meet these requirements, in part, through the use of 
biodiesel fuel use credits. The rule establishes procedures for fleets 
and covered persons to request credits for specified biodiesel fuel use 
and implements ECRA's credit eligibility and allocation provisions. The 
biodiesel fuel use credit gives fleets and covered persons, who are 
otherwise required under EPACT to purchase an alternative fueled 
vehicle, the option of purchasing and using 450 gallons of biodiesel in 
vehicles in excess of 8,500 pounds gross vehicle weight instead of 
acquiring an alternative fueled vehicle.

DATES: This final rule is effective February 12, 2001.

[[Page 2208]]


FOR FURTHER INFORMATION CONTACT: David Rodgers, Office of Energy 
Efficiency and Renewable Energy, EE-34, U.S. Department of Energy, 1000 
Independence Avenue, SW., Washington, DC 20585, (202) 586-9118.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background
II. Section-by-Section Discussion of Public Comments and Rule 
Provisions
    A. Section 490.703--Biodiesel Fuel Use Credit Allocation
    B. Section 490.704--Procedures and Documentation
    C. Section 490.705--Use of Credits
    D. Section 490.707--Increasing the Qualifying Volume of the 
Biodiesel Component
III. Regulatory and Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under Executive Order 12612
    C. Review Under the Regulatory Flexibility Act
    D. Review Under the National Environmental Policy Act
    E. Review Under the Paperwork Reduction Act
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Congressional Notification

I. Introduction and Background

    This notice of final rulemaking concludes a regulatory action that 
is mandated under section 7 of the Energy Conservation Reauthorization 
Act of 1998 (ECRA), Pub. L. No. 105-388. ECRA adds section 312 to title 
III of the Energy Policy Act of 1992 (EPACT), 42 U.S.C. 13211-13219. 
Section 312 allows titles III and V fleets and covered persons, that 
are required to acquire certain annual percentages of alternative 
fueled vehicles, to use biodiesel fuel use credits to meet, in part, 
these acquisition requirements. (Although title IV is included as one 
of the titles covered in ECRA, this inclusion appears to be a drafting 
error since title IV has no mandated acquisition requirements for 
fleets and covered persons.) DOE is required to allocate one credit to 
fleets and covered persons for using, in certain vehicles, 450 gallons 
(or ``qualifying volume'') of the biodiesel component of a motor fuel 
containing at least 20 percent biodiesel by volume.
    Additionally, the vehicles in which the fuel is used must weigh 
more than 8,500 pounds gross vehicle weight rating. Fleets and covered 
persons must own or operate these vehicles and the biodiesel fuel must 
be used in these vehicles if the fleets and covered persons are to 
receive credits. Credits will be allocated only for the biodiesel fuel 
purchased after the enactment of ECRA, i.e., November 13, 1998. The 
legislation prohibits the allocation of biodiesel fuel use credits for 
the purchase of biodiesel when the biodiesel is used in alternative 
fueled vehicles that are utilized to satisfy the EPACT alternative 
fueled vehicle purchase requirements, or when biodiesel fuel use is 
required by Federal or State law. With the exception of biodiesel fuel 
providers, allocated credits can be used to satisfy up to 50 percent of 
a fleet's or covered person's alternative fueled vehicles requirements. 
For biodiesel fuel providers, biodiesel credits can satisfy up to 100 
percent of the requirements.
    On May 19, 1999, DOE issued an interim final rule (64 FR 27169) 
that added a new subpart H to DOE's Alternative Fuel Transportation 
Program rules at 10 CFR part 490. The interim final rule became 
effective on June 18, 1999. The interim final rule established 
procedures for fleets that are required to purchase alternative fueled 
vehicles under titles III and V of EPACT to meet these requirements, in 
part, through the use of biodiesel fuel use credits. With changes, this 
final rule adopts the interim final rule.

II. Section-by-Section Discussion of Public Comment and Rule 
Provisions

    DOE received from 10 interested organizations comments on the 
interim final rule. Most commenters addressed essentially the same 
issues.

A. Section 490.703--Biodiesel Fuel Use Credit Allocation

    Five commenters all argued that there is no evidence that Congress 
intended to compel the use of biodiesel within the model year in which 
the biodiesel is purchased. It appears that the commenters wish to 
carry forward unused biodiesel to another model year or that they wish 
to sell excess purchases of biodiesel to other fleets. DOE believes 
that ECRA bases the allocation of biodiesel fuel use credits on 
biodiesel purchases. However, DOE points out that ECRA requires that 
the fuel must be purchased for use in the covered entities' vehicles to 
earn credits. Credits are earned when the fuel is purchased for use in 
the covered entities' vehicles, even though the fuel may be used at a 
later date. On this issue, DOE explained in the Preamble that ``[t]he 
use of biodiesel fuel credit to serve as the acquisition of one 
alternative fueled vehicle is restricted to the model year, or the 
fiscal year in the case of Federal fleets, in which the biodiesel is 
purchased and cannot be carried forward like alternative fueled vehicle 
acquisition credits generated under Subpart F.'' DOE reinforced this 
statement by citing language from the House of Representatives Commerce 
Committee Report 105-727. That report provided that credits ``may only 
be used by the fleet or covered person that earned the credits and only 
in the year that the credit is issued, so they cannot be traded or 
banked.'' H.R. Rep. No. 727, 105th Cong., 2d Sess., at 20 (1998). (See 
also the discussion under section 490.705.)
    Three commenters submitted similar comments on language contained 
in section 490.703 (b). That paragraph prohibits the allocation of 
biodiesel fuel use credits if: (1) the biodiesel is used in an 
alternative fueled vehicle; or (2) if the biodiesel fuel use is 
required by Federal or State law. They argue that there are certain 
circumstances where a covered fleet may want to acquire an alternative 
fueled vehicle (AFV) as a result of a local, State or Federal incentive 
program or policy, unrelated to EPACT AFV purchase requirements. 
Allowing fleets to count biodiesel fuel used in AFVs, provided those 
AFVs are not used to meet EPACT AFV requirements, according to one 
commenter, would increase the flexibility of covered fleets to 
integrate biodiesel fuel into their fuel mix. This commenter recommends 
that DOE amend the language in section 490.703(b) in two ways. First, 
that DOE clarify that the prohibition against allocating a credit for 
biodiesel fuel use in AFVs be restricted to only AFVs used to meet 
EPACT AFV purchase requirements. DOE agrees with this comment and has 
integrated it into the final regulatory language.
    Second, this commenter suggests that DOE delete the prohibition 
against allocating a credit where biodiesel fuel use is also used to 
meet other Federal or State requirements. DOE does not agree with this 
comment. The statutory language in ECRA states quite clearly that no 
credit can be allocated if the fuel is required by Federal or State 
law. This prohibition appears to be intended to prevent fleets from 
meeting both EPACT and other Federal and State requirements through the 
same biodiesel fuel use.

B. Section 490.704--Procedures and Documentation

    Eight commenters argued that the procedures and documentation 
requirements of section 490.704 should include only that information 
that is necessary to support the verification of the biodiesel fuel 
purchase. They claim that asking for information on vehicle make and 
model, vehicle model year and vehicle identification number does not 
relate to fuel purchases of biodiesel and could make reporting more 
onerous. Providing such information would

[[Page 2209]]

impose an unnecessary burden on the reporting entities. DOE agrees that 
requesting specific vehicle data may be burdensome, and believes that 
asking for such data may reduce the attractiveness of the biodiesel 
fuel use credit option. DOE has, therefore, revised the Annual 
Alternative Fuel Vehicle Acquisition Report For State Government and 
Alternative Fuel Provider Fleets (DOE/OTT/101 form). The revised form 
only requests that fleets claiming the biodiesel fuel use credit submit 
model year specific biodiesel purchases and that such fleets maintain 
records of those purchases for three years. The updated form is posted 
on the DOE's Office of Transportation Technologies website at http://www.ott.doe.gov/credits. It can also be obtained by calling the 
National Alternative Fuels Hotline at 1-800-423-1DOE.

C. Section 490.705--Use of Credits

    Most commenters argued that the language in Sections 705(a) and (b) 
is too narrow in limiting the biodiesel fuel use credit to fleets 
covered by section 490.201, section 490.302, section 490.307 and title 
III of EPACT. A consequence of narrowing the language, according to 
these commenters, is that the biodiesel fuel use credit regulation may 
not apply to certain private and municipal fleets if DOE adds these 
fleets to the Alternative Fuel Transportation Program. These commenters 
recommend expanding the regulatory language so that it applies to 
fleets or covered persons identified in EPACT titles III and V, rather 
than the specific sections in the regulation. DOE believes that the 
current regulatory language is appropriate. Specifically, DOE noted in 
the Preamble that these fleets would be covered if DOE decides to 
include them under this subpart in the Alternative Fuel Transportation 
Program. Section 490.701 also acknowledges that Title V fleets are 
covered under this subpart. However, DOE recognizes that the rule 
language could have been clearer. Therefore the language in sections 
705(a) and 705(b) has been amended to include references only to EPACT 
titles III and V.
    Seven commenters argued that section 490.705(a) should not restrict 
the allocation of a biodiesel fuel use credit to the model year in 
which it is generated. They also contended that fleets should be able 
to trade excess credits to other covered fleets or bank excess credits 
for future model years. One commenter asserts that this limitation will 
prevent over compliance and reduce the likelihood of achieving higher 
volumes and economies of scale in biodiesel production. Six commenters 
meanwhile, claim that DOE's reliance on the House of Representatives 
Commerce Committee Report 105-727 for this restriction is misplaced. 
They contend that this is not the intent of Congress, and that the 
restriction would have an adverse impact on the production, sale and 
use of biodiesel.
    Although DOE respects the commenters' views, DOE has not revised 
section 490.705. We believe that both the statutory language and the 
House of Representatives Commerce Committee Report support the 
restriction. Section 312(b)(1) of EPACT, as amended by ECRA, declares 
that a credit is to be allocated in the year in which the purchase of a 
qualifying volume of biodiesel is made. Furthermore, section 312(c) 
states that a credit under this section shall not be considered a 
credit as defined by section 508 of EPACT. DOE believes that this 
statutory view is supported by the House of Representatives Commerce 
Committee Report 105-727. It stated that biodiesel fuel use credits 
``may only be used by the fleet or covered person that earned the 
credits and only in the year the credit is issued, so they cannot be 
traded or banked.'' \1\ For these reasons, the rule cannot allow 
trading or banking of biodiesel fuel use credits. To avoid future 
questions on this issue, DOE has added to this section a new paragraph 
(d). Paragraph (d) specifically speaks to this prohibition.
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    \1\ H.R. Rep. No. 727, 105th Cong., 2d Sess. at 20 (1998).
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D. Section 490.707--Increasing the Qualifying Volume of the Biodiesel 
Component

    One commenter suggested that DOE annually publish in the Federal 
Register the ``qualifying volume,'' which is the amount of biodiesel 
purchases required to be allocated one biodiesel fuel use credit. As 
reflected in section 490.707, section 312(d) gives DOE authority, via 
rulemaking, to increase the qualifying volume. Since the qualifying 
volume is set at 450 gallons and cannot be changed except via a 
rulemaking process, DOE sees no reason to annually publish the 
qualifying volume in the Federal Register. Thus, DOE has not revised 
this section. Interested parties can be assured that the qualifying 
volume will stay at 450 gallons, unless DOE commences a rulemaking to 
increase it. If this happens, DOE will notify the public via a Federal 
Register notice. DOE will provide ample time and opportunity for the 
public to submit comments.

III. Regulatory and Procedural Requirements

A. Review Under Executive Order 12866

    Today's regulatory action has been determined not to be a 
``significant regulatory action'' under Executive Order 12866, 
``Regulatory Planning and Review,'' 58 FR 51735 (October 4, 1993). 
Accordingly, this rulemaking has not been reviewed by the Office of 
Information and Regulatory Affairs of the Office of Management and 
Budget.

B. Review Under Executive Order 13132

    Executive Order 13132 (64 FR 43255, August 10, 1999) requires 
agencies to develop an accountable process to ensure meaningful and 
timely input by State and local officials in the development of 
regulatory policies that have ``federalism implications.'' Policies 
that have federalism implications are defined in the Executive Order to 
include regulations that have ``substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government.'' On March 14, 2000, DOE published a 
statement of policy describing the intergovernmental consultation 
process it will follow in the development of such regulations (65 FR 
13735). DOE has examined today's rule and determined that it does not 
have a substantial direct effect on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
No further action is required by the Executive Order.

C. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires 
preparation of an initial regulatory flexibility analysis for every 
rule for which the law requires publication of a general notice of 
proposed rulemaking unless the agency certifies that the rule, if 
promulgated, will not have a significant economic impact on a 
substantial number of small entities. The Regulatory Flexibility Act's 
requirements do not apply to this final rule because a general notice 
of proposed rulemaking was not required by law. Accordingly, DOE did 
not prepare a regulatory flexibility analysis for this rule.

D. Review Under the National Environmental Policy Act

    The Department has determined that this rule is covered by 
categorical

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exclusion in paragraph A5 to subpart D, 10 CFR part 1021. Accordingly, 
neither an environmental assessment nor an environmental impact 
statement is required.

E. Review Under the Paperwork Reduction Act

    This final rule contains a collection of information that the 
Office of Management and Budget (OMB) reviews under the Paperwork 
Reduction Act of 1995. The Paperwork Reduction Act of 1995 (Pub. L. 
104-13, 44 U.S.C. Chapter 35) requires agencies to submit information 
collection requests for OMB review and approval. Accordingly, DOE 
submitted to OMB the interim final rule. DOE sought public comments on: 
(1) Whether the proposed collection of information is necessary, (2) 
the accuracy of DOE's estimate of the burden of the proposed 
information collection, (3) ways to enhance the quality, utility, and 
clarity of the information to be collected, and (4) ways to minimize 
the burden of the collection of information on those who choose to 
respond.
    As mentioned in this rule's Preamble, several entities submitted 
comments recommending that DOE only require information that is 
necessary to verify the biodiesel fuel purchase. In particular, they 
contended that DOE should not require information on vehicle make and 
model, vehicle model year and vehicle identification number. They 
opined that this information does not relate to fuel purchases of 
biodiesel and would impose an unnecessary burden on the reporting 
entities. DOE incorporated these recommendations into its information 
collection request to OMB.
    On October 25, 1999, DOE issued a Federal Register notice (64 FR 
57445) that announced that DOE had submitted to OMB a proposed 
information collection request for the collection of biodiesel purchase 
data from fleets participating in DOE's Alternative Fuel Transportation 
Program. No additional comments were received in response to the 
October 25, 1999, Federal Register notice. During the OMB review 
period, DOE issued interim reporting guidance and placed that guidance 
on DOE's Office of Transportation Technologies website at http://www.ott.doe.gov/credits.
    On February 2, 2000, OMB approved the biodiesel data collection and 
revised the Annual Alternative Fuel Vehicle Acquisition Report For 
State Government and Alternative Fuel Provider Fleets (DOE/OTT/101 
form, approved under OMB Control No. 1910-5101). Fleets claiming the 
biodiesel fuel use credit must submit to DOE model year specific 
biodiesel purchases and maintain records of those purchases for three 
years. The updated form is posted on the DOE's Office of Transportation 
Technologies website at http://www.ott.doe.gov/credits or can be 
obtained by calling the National Alternative Fuels Hotline at 1-800-
423-1DOE.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996) imposes on 
executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. Section 3(b) of Executive 
Order 12988 specifically requires that executive agencies make every 
reasonable effort to ensure that the regulation: (1) Clearly specifies 
the preemptive effect, if any; (2) clearly specifies any effect on 
existing Federal law or regulation; (3) provides a clear legal standard 
for affected conduct, while promoting simplification and burden 
reduction; (4) specifies the retroactive effect, if any; (5) adequately 
defines key terms; and (6) addresses other important issues affecting 
clarity and general draftsmanship under any guidelines issued by the 
Attorney General. Section 3(c) of Executive Order 12988 requires 
executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, this final rule meets the relevant standards of 
Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written assessment of the 
effects of any Federal mandate in a proposed or final agency rule that 
may result in the expenditure by State, local, and tribal governments, 
in the aggregate, or by the private sector, of $100 million in any one 
year. The Act also requires a Federal agency to develop an effective 
process to permit timely input by elected officers of State, local, and 
tribal governments on a proposed ``significant intergovernmental 
mandate.'' Additionally, it requires an agency plan for giving notice 
and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect small governments. The final rule 
published today does not contain any Federal mandate, so these 
requirements do not apply.

H. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress the 
promulgation of this rule prior to its effective date. The report will 
state that it has been determined that the rule is not a ``major rule'' 
as defined by 5 U.S.C. 801(2).

List of Subjects in 10 CFR Part 490

    Administrative practice and procedure, Energy conservation, Fuel, 
Motor vehicles.

    Issued in Washington, DC, on January 4, 2001.
Dan W. Reicher,
Assistant Secretary, Energy Efficiency and Renewable Energy.

    Accordingly, the interim final rule amending part 490 of title 10, 
chapter II, subchapter D of the Code of Federal Regulations, which was 
published at 64 FR 27169 on May 19, 1999, is adopted as a final rule 
with the following changes:

PART 490--ALTERNATIVE FUEL TRANSPORTATION PROGRAM

    1. The authority citation for part 490 is revised to read as 
follows:

    Authority: 42 USC. 7191, 13211-13212, 13220, 13235, 13251, 
13257, 13260-13263.

    2. Amend Sec. 490.703 by revising paragraph (b) to read as follows:


Sec. 490.703  Biodiesel fuel use credit allocation.

* * * * *
    (b) No credit shall be allocated under this subpart for a purchase 
of the biodiesel component of a fuel if the fuel is:
    (1) For use in alternative fueled vehicles which have been used to 
satisfy the alternative fueled vehicle acquisition requirements under 
Titles III and V of the Energy Policy Act of 1992; or
    (2) Required by Federal or State law.

    3. Amend Sec. 490.705 by revising paragraphs (a) and (b) and adding 
paragraph (d) to read as follows:


Sec. 490.705  Use of Credits.

    (a) At the request of a fleet or covered person allocated a credit 
under this subpart, DOE shall, for the model year

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in which the purchase of a qualifying volume is made, treat that 
purchase as the acquisition of one alternative fueled vehicle the fleet 
or covered person is required to acquire under titles III and V of the 
Energy Policy Act of 1992.
    (b) Except as provided in paragraph (c) of this section, credits 
allocated under this subpart may not be used to satisfy more than 50 
percent of the alternative fueled vehicle requirements of a fleet or 
covered person under titles III and V of the Energy Policy Act of 1992.
* * * * *
    (d) A fleet or covered person may not trade or bank biodiesel fuel 
credits.

[FR Doc. 01-744 Filed 1-10-01; 8:45 am]
BILLING CODE 6450-01-P