[Federal Register Volume 68, Number 42 (Tuesday, March 4, 2003)]
[Proposed Rules]
[Pages 10320-10344]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4991]



[[Page 10319]]

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Part III





Department of Energy





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10 CFR Part 490



Office of Energy Efficiency and Renewable Energy; Alternative Fuel 
Transportation Program; Private and Local Government Fleet 
Determination; Proposed Rule

  Federal Register / Vol. 68, No. 42 / Tuesday, March 4, 2003 / 
Proposed Rules  

[[Page 10320]]


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DEPARTMENT OF ENERGY

10 CFR Part 490

[Docket No. EE-RM-FCVT-03-001]
RIN 1904-AA98


Office of Energy Efficiency and Renewable Energy; Alternative 
Fuel Transportation Program; Private and Local Government Fleet 
Determination

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

ACTION: Notice of proposed rulemaking (NOPR) and public hearing.

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SUMMARY: Pursuant to the Energy Policy Act of 1992 (EPAct), the 
Department of Energy proposes to determine that a regulatory 
requirement for the owners and operators of certain private and local 
government fleets to acquire alternative fueled vehicles is not 
``necessary,'' and thus cannot and should not be promulgated, because 
such a program would result in no appreciable increase in the 
percentage of alternative fuel and replacement fuel used by motor 
vehicles in the United States and thus would not appreciably contribute 
to the achievement of the replacement fuel goal set forth in section 
502(b)(2) of EPAct.

DATES: Written comments (eight copies and, if possible, an e-mail copy) 
on the proposed determination must be received by DOE on or before June 
2, 2003; electronic copies of comments may be sent to the e-mail 
address listed below.
    Oral views, data, and arguments may be presented at the public 
hearing, which will be held on May 7, 2003. The length of each oral 
presentation is limited to 10 minutes. The public hearing will be held 
at the U.S. Department of Energy Main Auditorium, Forrestal Building, 
1000 Independence Avenue, SW., Washington, DC 20585-0121. Requests to 
speak at the hearing must be submitted to DOE no later than 4 p.m. on 
April 22, 2003.

ADDRESSES: Written comments (eight copies) and requests to speak at the 
public hearing should be addressed to: U.S. Department of Energy, 
Office of Energy Efficiency and Renewable Energy, EE-2G, Docket Number 
EE-RM-FCVT-03-001, 1000 Independence Avenue, SW., Washington, DC 20585-
0121. E-mails may be sent to: [email protected].
    Copies of this notice, the transcript from the hearing, and written 
comments will be placed at the following website address: http://www.ott.doe.gov/epact/private_fleets.shtml. You may also access these 
documents using a computer in DOE's Freedom of Information (FOI) 
Reading Room, U.S. Department of Energy, Forrestal Building, Room 1E-
190, 1000 Independence Avenue, SW., Washington, DC 20585-0121, (202) 
586-3142, between the hours of 9 a.m. and 4 p.m., Monday through 
Friday, except Federal holidays. To request a copy of this notice or 
arrange on-site access to paper copies of other information in the 
docket, contact Mr. Dana V. O'Hara at the phone number or e-mail 
address below.
    For more information concerning public participation in this 
rulemaking see the ``Opportunity for Public Comment'' section found in 
the SUPPLEMENTARY INFORMATION section of this notice.

FOR FURTHER INFORMATION CONTACT: For information concerning this 
notice: Mr. Dana V. O'Hara, Office of Energy Efficiency and Renewable 
Energy (EE-2G), U.S. Department of Energy, 1000 Independence Avenue, 
SW., Washington, DC 20585-0121; (202) 586-9171; [email protected].

SUPPLEMENTARY INFORMATION:

I. Introduction
II. Previous Opportunities for Public Comment
III. Private and Local Government Fleet Determination
IV. Whether to Modify Replacement Fuel Goal
V. Opportunity for Public Comment
VI. Review Under Executive Order 12988
VII. Review Under Executive Order 12866
VIII. Review Under the Regulatory Flexibility Act
IX. Review Under the Paperwork Reduction Act
X. Review Under the National Environmental Policy Act
XI. Review Under Executive Order 13132
XII. Review of Impact on State Governments--Economic Impact on 
States
XIII. Review of Unfunded Mandates Reform Act of 1995
XIV. Review of Treasury and General Government Appropriations Act, 
1999
XV. Review of Treasury and General Government Appropriations Act, 
2001
XVI. Review Under Executive Order 13175
XVII. Review Under Executive Order 13045
XVIII. Review Under Executive Order 13211

I. Introduction

    Section 507(e) of EPAct states that ``* * * the Secretary shall . . 
. determine whether a fleet requirement program is necessary under this 
section'' with respect to certain private and local government vehicle 
fleets (42 U.S.C. 13257(e)). The Department of Energy (DOE) proposes to 
determine that it is not ``necessary'' to promulgate a regulation 
requiring these fleets to acquire alternative fueled vehicles (AFVs). 
DOE proposes this determination because implementation of a private and 
local government fleet rule program would not appreciably contribute to 
the achievement of EPAct's existing 2010 replacement fuel goal of 30 
percent, or of a revised replacement fuel goal were one to be adopted. 
DOE's review of EPAct, existing fleet programs, and the status of 
markets for alternative fuels and AFVs leads it to conclude that 
adopting a private and local government fleet rule would result in no 
appreciable increase in the percentage of alternative fuel and 
replacement fuel used by motor vehicles in the United States.
    This conclusion and DOE's proposed determination are based on two 
interrelated findings and reasons. First, DOE has concluded that the 
number of fleets that would be covered by a private and local 
government fleet mandate and the number of AFV acquisitions that would 
occur are too small to cause an appreciable increase in the percentage 
of replacement fuel that is used as motor fuel. This is because of the 
limitations placed by EPAct itself on DOE's authority to promulgate a 
private and local government fleet acquisition mandate. For example, 
and as will be explained below, a private and local government fleet 
program could only apply to light duty vehicles (i.e., less than 8,500 
lbs. gross vehicle weight rating (GVWR)), to fleets that are located in 
certain metropolitan areas, and could not apply to a number of excluded 
vehicle classes and types (e.g., rental vehicles, emergency vehicles, 
and vehicles garaged at residences overnight). Furthermore, EPAct 
requires that even fleets potentially covered by a fleet mandate may 
avoid some or all of its acquisition requirements if they fall within 
one of the numerous exemptions set forth in the statute.
    Second, even if a private and local government fleet acquisition 
mandate were adopted and substantial numbers of AFVs were acquired as a 
result, there is no assurance that the AFVs acquired by covered fleets 
would actually use replacement fuel. EPAct gives DOE no authority to 
require that vehicles acquired by private and local government fleets 
use any particular fuel. Moreover, DOE's experience with implementation 
of the Federal fleet, State fleet, and alternative fuel provider fleet 
programs required by EPAct leads DOE to conclude that as a result of 
the lack of alternative fuel infrastructure, lack of suitable AFV 
models, lack of reasonable vehicle prices, and high alternative fuel 
costs relative to conventional motor fuels, market forces would prevent 
appreciable increases in

[[Page 10321]]

replacement fuel use in covered fleets, even if DOE were to impose a 
private and local government fleet vehicle acquisition requirement 
pursuant to EPAct sections 507(e) and (g).
    DOE's proposed determination that a private and local government 
fleet regulatory program is not ``necessary'' under the standards set 
forth in EPAct section 507(e) and therefore cannot and should not be 
promulgated is also consistent with the view expressed in many of the 
comments DOE received during earlier stages of work that preceded 
issuance of this notice of proposed rulemaking. In these earlier 
stages, commenters (especially potentially covered fleets) expressed 
concerns regarding the lack of available fueling infrastructure and 
suitable AFV models. In addition, a number of alternative fuel 
proponents stated that the best means of increasing the introduction of 
AFVs and the use of alternative fuels would be to provide incentives 
for their use rather than adopting new mandates. These proponents urged 
DOE to support legislative initiatives that would provide incentives 
for the use of AFVs and alternative fuels. This Administration is in 
fact supporting the adoption of incentives for high-efficiency, 
advanced technology vehicles, which include AFVs. In addition, the 
President and DOE have proposed the FreedomCAR and Hydrogen Fuel 
Initiative, which is a major new initiative focused on significantly 
increasing the availability and use of non-petroleum motor fuels.
    In evaluating whether to propose adoption of a private and local 
government fleet rule under EPAct sections 507(e) and (g), DOE reviewed 
the status of progress toward achieving the current replacement fuel 
goal. Based on this review, DOE believes that extraordinary measures 
would be required to achieve the current goal of 30 percent petroleum 
replacement by 2010.
    At the same time, DOE takes note of the fact that Congress is 
widely expected to take up comprehensive legislation that may 
significantly affect our nation's energy future and may bear 
importantly not only on the achievability of the current goals but also 
on what any potential revised goals might be. In addition, the 
FreedomCAR and Hydrogen Fuel Initiative is focused on dramatically 
increasing the availability and use of replacement fuels and reducing 
reliance on petroleum as a motor fuel. In light of the momentum that 
this effort is engendering; in light of what DOE understands to be the 
principal purpose of EPAct's replacement fuel goals\1\--to keep the 
pressure on policymakers, industry and the public to engage in 
aggressive action to expand the use of alternative and replacement 
fuels; and in light of the likelihood of consideration and enactment of 
new legislation this Congress that would have a significant bearing on 
these issues, DOE has concluded that it should not make a determination 
under EPAct concerning the achievability of the 2010 goals at this 
time. Therefore DOE also is not proposing at this time to use its EPAct 
authority to seek to modify these goals. DOE will continue to evaluate 
this issue.
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    \1\ The replacement fuel goals call for a certain percentage of 
motor fuel demand to be supplied by ``replacement fuels.'' Because 
petroleum (i.e., gasoline and diesel) is the dominant fuel used for 
motor vehicles, the replacement fuel goals are sometimes referred to 
in this document as petroleum replacement goals. DOE notes that 
because the EPAct goals reference ``replacement fuel,'' they cannot 
be met by simply using less petroleum (such as through efficiency 
measures), but rather must be met by increasing the overall 
percentage of non-petroleum or replacement fuels that is used.
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A. Authority

    The issue DOE addresses in this notice of proposed rulemaking is 
whether a private and local government fleet requirement program is 
``necessary'' under EPAct section 507(e). That section states that a 
private and local government fleet program shall be promulgated if DOE 
determines such a program is ``necessary,'' and that such a program 
``shall be considered necessary'' only if DOE finds that ``the goal of 
replacement fuel use * * * is not expected to be actually achieved * * 
* without such a fleet requirement program'' and ``such goal is 
practicable and actually achievable * * * through implementation of 
such a fleet requirement program in combination with voluntary means 
and the application of other programs relevant to achieving such 
goals.''
    The statutory definitions of vehicles and fuels in EPAct are key to 
DOE's determination discussed in this notice. An ``alternative fuel 
vehicle'' is a ``dedicated vehicle or a dual fuel vehicle.'' (EPAct 
section 301(3)). A ``dual fuel'' vehicle is one ``capable of operating 
on alternative fuel and on gasoline or diesel fuel.'' (EPAct section 
301(8)(A)). The purchase of an AFV does not assure that ``alternative'' 
or ``replacement'' fuel will be used to operate the AFV. As discussed 
below, fleets are not required to use alternative or replacement fuel 
in their AFVs (except for alternative fuel providers, which are 
required to use alternative fuel in their AFVs by section 501(a)(4) of 
EPAct).
    ``Replacement fuel'' is defined by EPAct to mean ``the portion of 
any motor fuel that is methanol, ethanol, or other alcohols, natural 
gas, liquefied petroleum gas, hydrogen, coal derived liquified fuels, 
fuels (other than alcohol) derived from biological materials, 
electricity (including electricity from solar energy), ethers,'' or any 
other fuel that the Secretary determines meets certain statutory 
requirements. (42 U.S.C. 13211(14) (emphasis added)) ``Alternative 
fuel'' is defined to include many of the same types of fuels (such as 
methanol, natural gas, hydrogen and electricity), but also includes 
certain ``mixtures'' of petroleum-based fuel and other fuels. (10 CFR 
490.2 (2002) \2\) Thus, a certain mixture might constitute an 
``alternative fuel,'' but only the portion of the fuel that fell within 
the definition of ``replacement fuel'' would actually constitute 
``replacement fuel.'' For example, a mixture of 85 percent methanol and 
15 percent gasoline would, in its entirety, constitute ``alternative 
fuel,'' but only the 85 percent that was methanol would constitute 
``replacement fuel.'' Also by way of example, gasohol (a fuel blend 
typically consisting of approximately 10 percent ethanol and 90 percent 
gasoline), considered as a total fuel blend, would not qualify as an 
``alternative fuel,'' but the 10 percent that is ethanol would qualify 
as ``replacement fuel.''
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    \2\ EPAct defines ``alternative fuel'' (see 42 U.S.C. 13211(2)), 
but DOE has exercised its authority to modify, by regulation, this 
definition. Therefore, the currently effective definition of 
``alternative fuel'' is set forth at 10 CFR 490.2 (2002).
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    The rulemaking process for determining whether to promulgate a 
private and local government fleet rule is very different from the 
previous DOE rulemaking concerning State government and alternative 
fuel provider fleets. With that rule, DOE was not required to make any 
findings in order to promulgate a fleet rule; EPAct itself imposed the 
fleet program. The determination of whether to adopt AFV acquisition 
mandates for private and local government fleets, however, is 
conditional and depends on several critical findings by DOE. 
Regulations covering private and local government fleets, if adopted, 
in other respects would likely be similar to those already in place for 
State government and alternative fuel provider fleets. These 
regulations essentially require that a percentage of a covered fleet's 
annual acquisitions of light-duty vehicles must be AFVs. See 
Alternative Fuel Transportation Program, 10 CFR Part

[[Page 10322]]

490 (2002). Section 507(g) sets forth a tentative schedule for 
implementing a program for covered fleets that would be enforced if DOE 
were to promulgate a private and local government AFV acquisition 
mandate.
    In order to determine whether a fleet requirement program for 
private and local government fleets is ``necessary'' pursuant to 
section 507(e), DOE considered the number of fleets that likely would 
be covered by such a rule and the likely increase in the amount of 
replacement fuel that would be used by covered fleets as a result of 
the acquisition mandate. EPAct severely limits the universe of fleets 
that could be covered by a private and local government fleet rule. 
These limitations are described in the definitions, exceptions, and 
exemptions contained in the relevant sections of EPAct, as discussed 
below.
    A ``fleet'' is defined in section 301(9) of EPAct as follows:

    [T]he term ``fleet'' means a group of 20 or more light duty 
motor vehicles, used primarily in a metropolitan statistical area or 
consolidated metropolitan statistical area, as established by the 
Bureau of the Census, with a 1980 population of more than 250,000, 
that are centrally fueled or capable of being centrally fueled and 
are owned, operated, leased, or otherwise controlled by a 
governmental entity or other person who owns, operates, leases, or 
otherwise controls 50 or more such vehicles, by any person who 
controls such person, by any person controlled by such person, and 
by any person under common control with such person, except that 
such term does not include--
    (A) Motor vehicles held for lease or rental to the general 
public;
    (B) Motor vehicles held for sale by motor vehicle dealers, 
including demonstration motor vehicles;
    (C) Motor vehicles used for motor vehicle manufacturer product 
evaluations or tests;
    (D) Law enforcement motor vehicles;
    (E) Emergency motor vehicles;
    (F) Motor vehicles acquired and used for military purposes that 
the Secretary of Defense has certified to the Secretary must be 
exempt for national security reasons;
    (G) Nonroad vehicles, including farm and construction motor 
vehicles; or
    (H) Motor vehicles which under normal operations are garaged at 
personal residences at night.

The key limitations in this definition include: (1) Only light duty 
vehicles (i.e., vehicles less that 8,500 GVWR) are covered, and all 
medium-duty and heavy duty vehicles are excluded; (2) the vehicles must 
be part of a fleet of 20 vehicles used primarily in a large 
metropolitan area; (3) the vehicles must be centrally fueled or capable 
of being centrally fueled; (4) they must be owned or controlled by a 
local government or an entity that owns at least 50 such vehicles; (5) 
fleets of rental vehicles are excluded; (6) law enforcement and 
emergency vehicles are excluded; and (7) vehicles garaged at personal 
residences are excluded.
    Moreover, even if it is determined that a particular private or 
local government fleet constitutes a ``fleet'' under EPAct, the statute 
provides several exemptions. Section 507(i) allows a fleet to obtain an 
exemption from DOE for all or part of its fleet, from an otherwise 
applicable fleet mandate, on grounds of: (1) Non-availability of 
appropriate AFVs and alternative fuels; (2) non-availability of 
appropriate alternative fuels; and (3) with respect to local government 
entities, for a financial hardship.
    EPAct furthermore contains a petition provision in section 507(n). 
That section provides that ``[a]s part of the rule promulgated * * * 
pursuant to subsection * * * (g) of this section, the Secretary shall 
establish procedures for any fleet owner or operator or motor vehicle 
manufacturer to request that the Secretary modify or suspend a fleet 
requirement program * * * nationally, by region, or in an applicable 
fleet area because, as demonstrated by the petitioner, the 
infrastructure or fuel supply or distribution system for an applicable 
alternative fuel is inadequate to meet the needs of a fleet.'' As a 
result, even to the extent a fleet constitutes a ``fleet'' under the 
narrow EPAct definition, and does not otherwise qualify for one of the 
statutory exemptions, it could petition for relief or suspension of a 
fleet mandate for any one of several different reasons.
    Finally, AFV purchase requirements that DOE could impose under 
section 507(g) could only apply to the purchase of ``light duty motor 
vehicles.'' A light duty motor vehicle is defined as ``a light duty 
truck or light duty vehicle * * * having a gross vehicle weight rating 
of 8,500 pounds or less, before any after-market conversion to 
alternative fuel operation.'' See 10 CFR 490.2 (2002). Therefore, 
medium- and heavy-duty vehicles would not be covered by any mandatory 
section 507 private and local government fleet program.
    DOE originally estimated that about 2 million private and local 
government fleet vehicles would be covered under a fleet program, were 
one to be adopted, with AFV acquisitions eventually rising to about 
320,000 annually. As discussed below in Section III, however, DOE's 
original estimate of the number of fleet vehicles that would be covered 
under a private and local government fleet rule, and thus the number of 
annual AFV acquisitions resulting from such a rule, probably was far 
too high.
    The limitations on the potential contribution of a private and 
local government fleet program to the replacement fuel goal are 
discussed in Section III. In brief, however, one DOE report issued in 
1996 estimated that total fuel use from all fleets, including private 
and local government fleets, potentially covered by EPAct fleet 
programs to be approximately 1.2 percent of U.S. gasoline use. See 
Assessment of Costs and Benefits of Flexible and Alternative Fuel Use 
in the U.S. Transportation Sector, Technical Report Fourteen: Market 
Potential and Impacts of Alternative Fuel Use in Light-Duty Vehicles: A 
2000/2010 Analysis (DOE/PO-0042) (January 1996) [hereinafter Technical 
Report 14]. Similarly, a subsequent DOE report stated that, even if an 
AFV acquisition mandate for private and local government fleets was 
imposed, fleets covered by EPAct mandates would provide no more than 
about 1.5 percent replacement fuel use. These reports were issued 
before DOE had much experience with implementation and operation of 
EPAct Fleet programs. A more recent analysis (September 17, 2000), 
discussed in Section III of this notice of proposed rulemaking, 
indicated that replacement fuel use would increase only .25 percent if 
a private and local government rule was promulgated.
    Section 504(c) of EPAct limits DOE's authority to promote the use 
of replacement fuel. Specifically, DOE is precluded from promulgating 
rules that would mandate any of the following: ``production of 
alternative fueled vehicles or to specify, as applicable, the models, 
lines, or types of, or marketing or pricing practices, policies, or 
strategies for, vehicles subject to this Act.'' Section 504(c) also 
precludes rules that would ``mandate marketing or pricing practices, 
policies, or strategies for alternative fuels or to mandate the 
production or delivery of such fuels.'' Thus, DOE's authority under 
EPAct to promote the use of replacement fuels is primarily limited to 
the following: implementation of the limited fleet programs found in 
sections 303, 501 and 507; research and development (R&D) activities 
with industry under Title XX, subtitle B; and voluntary promotional 
efforts, such as those fostered by the Clean Cities Program under 
sections 405, 409, and 505.
    EPAct section 507 directs DOE to determine whether private and 
local government fleets should be required to acquire AFVs as they 
replace their existing stock of light-duty vehicles. Requirements for 
private and local government fleets, if adopted, would

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likely be similar to those mandated by EPAct (42 U.S.C. 13251, 
13257(o)) and already in place for State government and alternative 
fuel provider fleets. See Alternative Transportation Fuel Program, 10 
CFR part 490 (2002).
    EPAct authorizes DOE to conduct two separate rulemakings in order 
to determine whether to promulgate a private and local government fleet 
rule. First, section 507(b) allows for an early rulemaking, to be 
completed by December 15, 1996. As part of that rulemaking, section 
507(a)(3) of EPAct required DOE to publish an Advance Notice of 
Proposed Rulemaking (ANOPR). If no final rule was promulgated by 
December 15, 1996, then sections 507(b)(3)(c), and (e) require a later 
rulemaking to determine whether vehicle acquisition requirements are 
``necessary'' under the standards set forth in section 507(e) and 
should be imposed on private and local government fleets.
    The relevant guidance for determining whether a private and local 
government fleet rule should be implemented is set forth in EPAct 
section 507(e). This section states that DOE shall promulgate a private 
and local government fleet requirement program only if it determines 
that such a program is ``necessary.'' Section 507(e) further states 
that such a program is ``necessary'' if ``the Secretary finds that'' 
the replacement fuel goal, or a revised replacement fuel goal, ``is not 
expected to be actually achieved by 2010 * * * without such a fleet 
requirement program'' and the goal is practicable and achievable 
``through implementation of such a fleet requirement program in 
combination with voluntary means and the application of other programs 
relevant to achieving such goals.''
    Section 507(l) requires: ``In carrying out this section, the 
Secretary shall take into consideration energy security, costs, safety, 
lead time requirements, vehicle miles traveled annually, effect on 
greenhouse gases, technological feasibility, energy requirements, 
economic impacts, including impacts on workers and the impact on 
consumers (including users of the alternative fuel for purposes such as 
for residences, agriculture, process use and non-fuel purposes) and 
fleets, the availability of alternative fuels and alternative fueled 
vehicles, and other relevant factors.'' Section 507(e) is equally 
categorical in requiring DOE to promulgate a private and local fleet 
requirement program only upon a determination that such a program is 
``necessary'' to achieve the replacement fuel goal, and section 507(e) 
sets forth the criteria DOE is to apply in determining whether such a 
program is ``necessary.''
    It not clear that section 507(l) should be interpreted to apply to 
a rulemaking proceeding under section 507(e). Section 507(l) includes 
factors such as greenhouse gas and economic effects that have no 
bearing on a determination of ``necessity'' under section 507(e). 
Moreover, the section 507(l) factors seem geared to helping decide the 
proper contours of a fleet acquisition mandate once DOE has decided to 
promulgate such a program, rather than to the threshold determination 
of whether a program should be promulgated in the first place.
    Regardless, it is not necessary in this proceeding to determine 
whether section 507(l) is properly interpreted as applying to a section 
507(e) rulemaking proceeding. Even assuming that it does apply, 
consideration of the section 507(l) factors would not alter DOE's 
proposed determination that a private and local government fleet 
program is not ``necessary'' under section 507(e).
    As explained below, DOE proposes to determine that because 
implementation of a private and local government fleet AFV acquisition 
mandate would result in no appreciable increase in the use of 
replacement fuel, such a program is not ``necessary'' under the 
standard set forth in section 507(e). None of the section 507(l) 
factors could change the outcome of the analysis because they would not 
change the conclusion that there would be no appreciable increase in 
the use of replacement fuels. Therefore, even if all of the section 
507(l) factors pointed uniformly and strongly in favor of the 
implementation of a private and local government fleet mandate, and 
they do not, consideration of those factors could not and would not 
alter DOE's proposed determination that a fleet program is not 
``necessary'' because such a mandate still would not appreciably 
increase the use of replacement fuel.
    Section 507(m) of EPAct requires DOE to consult with the Secretary 
of Transportation (DOT) and Administrator of the Environmental 
Protection Agency (EPA) and other appropriate agencies in carrying out 
the requirements of section 507. DOE provided a pre-publication draft 
of today's notice of proposed rulemaking to DOT, EPA, and the Office of 
Management and Budget for their review.

B. Regulatory Time Line

    On August 7, 1996, and as required by EPAct sections 507(a) and 
(b), DOE published in the Federal Register an ANOPR to evaluate 
progress toward achievement of the replacement fuel goals in EPAct, 
identifying problems with achieving those goals, assess the adequacy 
and practicability of the goals, and consider actions needed to achieve 
the goals. See 61 FR 41031. DOE intended this notice to stimulate 
comments to assist DOE in making decisions concerning future rulemaking 
actions and non-regulatory initiatives to promote alternative fuels and 
AFVs. Three hearings were held to receive oral comments on the ANOPR. 
They were held on September 17, 1996, in Dallas, Texas; on September 
25, 1996, in Sacramento, California; and on October 9, 1996, in 
Washington, DC. A total of 70 persons spoke at the three hearings, and 
105 written comments were received by November 5, 1996.
    On April 23, 1997, DOE published in the Federal Register a Notice 
of Termination stating that DOE would not promulgate regulations to 
implement AFV requirements for private and local government fleets 
pursuant to the early rulemaking schedule of EPAct section 507(a)(1). 
See 62 FR 19701.
    On April 17, 1998, and for the purposes of EPAct sections 507(e), 
(g), and (k), DOE published in the Federal Register an ANOPR that asked 
for comments to assist DOE in making decisions concerning future 
rulemaking actions and non-regulatory initiatives to promote 
alternative fuels and alternative fueled vehicles. See 63 FR 19372. DOE 
held three hearings to receive oral comments on the ANOPR. They were 
held on May 20, 1998, in Los Angeles, California; on May 28, 1998, in 
Minneapolis, Minnesota; and on June 4, 1998, in Washington, DC. A total 
of 110 persons spoke at the three hearings, and/or submitted written 
comments.
    On January 12, 2000, consistent with section 507(h) of EPAct (42 
U.S.C. 13257(h)), DOE published in the Federal Register a notice, 
stating that it was extending by 90 days the January 1, 2000, deadline 
contained in section 507(e) in order to provide additional time for 
consultations with State and local officials, as required by Executive 
Order 13132. See 65 FR 1831. On July 20, 2000, DOE published in the 
Federal Register a notice stating that DOE was further delaying the 
section 507 rulemaking proceedings concerning private and local 
government fleets until after it had completed consultations with State 
and local government officials. See 65 FR 44987. DOE said that it was 
preserving the option of promulgating, at a later time, requirements 
for private and local government vehicle fleets. In the notice, DOE 
announced that it would hold three public workshops in order to discuss 
regulatory options and other

[[Page 10324]]

issues related to potential alternative fuel transportation 
requirements for private and local government fleets. In furtherance of 
its objective of consulting with affected State and local government 
officials, the first two workshops were open only to State and local 
officials. DOE held workshops on August 1, 2000 in Chicago, Illinois; 
on August 22, 2000 in Denver, Colorado; and on September 26, 2000 in 
Washington, DC.
    On January 2, 2002, EarthJustice, on behalf of the Center for 
Biological Diversity, Bluewater Network, and Sierra Club, filed a 
lawsuit in the U.S. District Court for the Northern District of 
California which, in addition to seeking redress of other grievances, 
sought to compel DOE to ``issue a proposed rule and final determination 
on the necessity of a private and municipal fleet program.'' On July 
26, 2002, the Court granted plaintiffs' motion for summary judgment on 
the issue of whether DOE had missed the deadline set forth in EPAct 
section 507(e) for completing the rulemaking; as a result, the Court 
ordered a September 26, 2002, hearing to determine a timetable for 
completing the rulemaking. See Center for Biological Diversity v. 
Abraham, et al., No. C 02-00027 (N.D. Calif., July 26, 2002) (order on 
motions for summary judgment). On September 27, 2002, the District 
Court ordered DOE to complete its proposed rulemaking by January 27, 
2003 and its final rule by November 27, 2003. See Center for Biological 
Diversity v. Abraham, et al., No. C 02-00027 (N.D. Calif., Sept. 27, 
2002). The Court subsequently granted a 30-day extension (to February 
26, 2003) of the deadline for DOE to complete work on this notice of 
proposed rulemaking.
    As required by section 507 of EPAct and the order of the U.S. 
District Court for the Northern District of California, DOE has issued 
today's notice of proposed rulemaking which proposes to determine that 
DOE should not promulgate regulatory requirements for private and local 
government fleets.

C. Program Background

    Titles III, IV, and V of EPAct are focused on promoting the use of 
non-petroleum motor fuels, including replacement fuels and alternative 
fuels, in the transportation sector. EPAct focused on the 
transportation sector because of its almost complete reliance on 
petroleum as a fuel source and its significant contribution to 
petroleum demand. The transportation sector is nearly 97 percent 
dependent on oil as a fuel and is a major reason the U.S. is so 
dependent on imported oil. See Center for Transportation Analysis, Oak 
Ridge National Laboratory, Transportation Energy Data Book Edition 22, 
p. 2-4 (Table 2.2) (ORNL 6967) (Sept. 2002) (www.ornl.gov) [hereinafter 
Energy Data Book]. The transportation sector's demand for oil has 
continued to grow while other sectors have become less reliant on oil. 
In 1973, the U.S. transportation sector accounted for 52 percent of 
total U.S. petroleum use (9.05 of 17.31 million barrels per day 
(mmbd)). Id. at p. 1-18 (Table 1.13). In 2001, transportation sector 
demand for petroleum accounted for roughly 67 percent of total U.S. 
petroleum demand and exceeded domestic production by 5.2 mmbd 
equivalent of oil. Id. at pp. 1-16 (Table 1.12), 1-18 (Table 1.13).
    The U.S. Energy Information Administration (EIA) has projected that 
transportation sector consumption of petroleum will rise to 19.22 mmbd 
by 2020. See EIA, Annual Energy Outlook 2002, p. 141 (Table A11) (DOE/
EIA-0383(2002)) (December 2001) [hereinafter AEO 2002]. In 2020, 
passenger cars and light-duty trucks, which are the primary focus of 
Titles III-V of EPAct, are expected to account for 59 percent of the 
total energy used by the transportation sector. Id. at p. 136 (Table 
A7). In 2020, it is projected that U.S. oil production will provide 
only about half the total energy needed to fuel light-duty vehicles. 
Id. at pp. 141 (Table A11), 136 (Table A7).
    As demand for transportation petroleum has grown, so too have U.S. 
petroleum imports. Dependence on imported petroleum was 41 percent when 
EPAct was enacted (6.96 mmbd), reached nearly 56 percent in 2001 (10.9 
mmbd), and is expected to reach 63 percent by 2020 (16.6 mmbd). See 
Energy Data Book at p. 1-16 (Table 1.12), and AEO 2002 at p. 141 (Table 
A11). Of net U.S. imports, members of the Organization of Petroleum 
Exporting Countries (OPEC) currently supply almost 50 percent, with 
Persian Gulf states supplying almost half of this amount. See EIA, 
Monthly Energy Review, Table 1.8 (November 2002) (http://www.eia.doe.gov/emeu/mer/txt/mer1-8). OPEC members now account for 
approximately 40 percent of world oil production, and 52 percent of the 
petroleum export market. See EIA, International Energy Outlook 2002 
Tables D4, 11; http://www.eia.doe.gov/oiaf/ieo/ [hereinafter IEO 2002]. 
According to the IEO 2002 (Table 11), OPEC's share of worldwide crude 
oil exports is projected to increase to 64 percent by 2020. Much of the 
oil controlled by OPEC is concentrated in the Middle East, which 
contains nearly two-thirds of the world's proven reserves. See IEO 2002 
Table 8.
    Reducing total petroleum use and reducing petroleum imports 
decrease our economy's vulnerability to oil price shocks. Reducing 
dependence on oil imports from unstable regions enhances our energy 
security and can reduce payments to nations that may be hostile to U.S. 
interests. In 2000, the annual U.S. trade deficit in oil reached $106 
billion. See AEO 2002 at p. 141 (Table A-11). Reducing the growth rate 
of oil use through conservation and use of non-petroleum motor fuels 
also relieves pressure on an already strained domestic refinery 
capacity, decreasing the likelihood of price volatility. Finally, 
conserving energy and using non-petroleum fuels, many of which are low 
in carbon intensity, help achieve the goal of decreasing greenhouse gas 
emissions.
    Reductions in the U.S. demand for petroleum can significantly 
affect worldwide oil demand because the U.S. accounts for one-fourth of 
total world oil consumption. See Energy Data Book at 1-5 (Table 1.4). 
The consumption of motor fuels by U.S. light-duty vehicles in 2000 
accounted for almost 10 percent of total world demand. As demand 
declines, prices for oil also are generally expected to decline. DOE 
has previously stated that a ``reasonable rule of thumb is that a 1 
percent decrease in U.S. petroleum demand will reduce world oil price 
by 0.5 percent, in the long-run.'' Short-term impacts are expected to 
be even greater. See Energy Efficiency and Renewable Energy, DOE, 
Replacement Fuel and Alternative Fuel Vehicle--Technical and Policy 
Analysis p. viii-ix (Dec. 1999--Amendments Sept. 2000); http://www.ccities.doe.gov/pdfs/section506.pdf [hereinafter Section 506 
Report] (issued pursuant to EPAct section 506).
    DOE manages a number of different programs that are aimed at 
reducing reliance on petroleum motor fuels. Part of this effort 
includes continued implementation of the programs contemplated under 
EPAct, including the fleet AFV acquisition programs for Federal, State 
government and fuel provider fleets (see below for discussion of EPAct 
Programs). These programs are primarily focused on the development and 
use of AFVs. DOE will continue efforts through its Clean Cities Program 
to encourage fleets to expand their use of alternative fuels and AFVs. 
These efforts involve primarily focusing on niche market fleets, but 
also include continued support for regulated fleets. DOE also plans to 
continue research programs involving replacement fuels, including 
biofuels, such as ethanol and

[[Page 10325]]

biodiesel, in order to make these fuels less costly and more widely 
used. The use of replacement fuels in fuel blends has a number of 
advantages that makes their increased use likely, including an ability 
to use the existing petroleum infrastructure, the ability to enable 
advanced engine control strategies, and relatively low costs compared 
with other immediate strategies.
    Most importantly, the President and DOE have recently announced the 
creation of the FreedomCAR and Hydrogen Fuel Initiative, which is 
intended to make clean and affordable automotive energy a reality for 
all consumers. This initiative is focused on the introduction of 
hydrogen as a transportation fuel for the future and involves a number 
of different DOE programs. These efforts complement work already done 
in the area of hybrid electric drive systems and fuel cells, and look 
to advance these technologies beyond their existing state. DOE is 
working with the EPA, industry, academia, State Energy Offices, and 
DOE's national laboratories to bring the promise of low-cost, clean, 
and efficient hydrogen energy to the market. Although it will be many 
years before hydrogen vehicles and fuels are widely available, steps 
must be taken today in order to make hydrogen possible for the future. 
At the same time, DOE will continue to work with its partners through 
R&D programs to improve current technologies in order to make them 
cleaner, more economical and more fuel-efficient.

D. Description of the Energy Policy Act's Alternative Fuel 
Transportation Programs

Alternative Fuel Provisions in the Energy Policy Act
    Titles III, IV, V, and VI of EPAct contain the basic provisions for 
various non-research alternative fuel-related programs, all of which 
are aimed at displacing motor vehicle petroleum consumption. (See 42 
U.S.C. 13211 et seq.) Title III contains definitions of (1) alternative 
fuel; (2) AFV; and (3) covered fleet. Title III also sets forth 
requirements for Federal fleet acquisitions of AFVs, which began in 
fiscal year 1993.
    Title IV authorizes, subject to the availability of appropriations, 
a financial incentive program for States, a public information program, 
and a program for certifying alternative fuel technicians. The public 
information program is intended to promote the use of AFVs and 
alternative fuels.
    Title V specified percentages of light duty vehicles acquired by 
State governments and alternative fuel providers that must be AFVs. The 
minimum acquisition requirements are phased-in, escalating from year to 
year until reaching a fixed percentage. Title V also gives DOE 
authority under specified conditions to impose by rule a similar 
mandate on private and local government fleets. Title V authorizes the 
allocation of credits to covered fleets that exceed their AFV 
acquisition requirements. These credits may be sold and used by other 
fleets that are subject to Title V vehicle acquisition mandates. It 
also contains investigative and enforcement authorities, including 
provisions for civil penalties and, in certain circumstances, criminal 
fines for noncompliance with the statutory mandates and implementing 
regulations. Finally, section 505 of Title V contains voluntary supply 
commitments that are covered by the Clean Cities Program.
    Title VI of the Act confers on DOE a variety of authorities to 
promote, subject to the availability of appropriations, development and 
utilization of electric motor vehicles. Subtitle A provides for a 
commercial demonstration program for electric motor vehicles, and 
Subtitle B provides for an infrastructure and support systems 
development program.
DOE Implementation of the Energy Policy Act
    Since 1992, DOE has taken a number of steps to implement EPAct's 
alternative fuel programs. DOE coordinates various aspects of the 
Federal fleets' efforts to comply with the vehicle acquisition 
requirements established under section 303. (42 U.S.C. 13212) DOE has 
promulgated and implemented regulations and guidance for alternative 
fuel providers and State government fleets, which are subject to the 
fleet provisions contained in sections 501 and 507(o), respectively. 
The implementation of the fleet regulations, in particular, has given 
DOE considerable experience in understanding the issues associated with 
fleet mandates.
    DOE also has experience with implementing voluntary alternative 
fuel programs. The Clean Cities Program (Clean Cities) (sections 405, 
409 and 505 of EPAct), is the primary means by which DOE promotes the 
use of alternative fuels. This program supports public and private 
partnerships that deploy AFVs and build supporting infrastructure. The 
Clean Cities Program has established the following relevant goals: (1) 
One million AFVs operating exclusively on alternative fuels by 2010; 
and, (2) one billion gasoline gallon equivalents per year used in AFVs 
by 2010.
    Unlike traditional command and control regulatory programs, Clean 
Cities takes a unique, voluntary approach to AFV development, working 
with coalitions of local stakeholders to help develop the AFV industry. 
The program thrives on strong local initiatives and a flexible approach 
to building alternative fuels markets, providing participants with 
options to address problems unique to their cities and fostering 
partnerships to help overcome them. There are currently more than 80 
local Clean Cities organizations around the country. From local 
businesses and municipal governments to regional air quality 
organizations and national alternative fuel companies, more than 4,400 
stakeholders have found the Clean Cities to be an effective route to 
building local alternative fuels markets.
    Many Clean Cities organizations have focused their efforts on 
marketing to niche markets. Niche market fleets offer the best 
opportunities for overcoming the barriers that often limit alternative 
fuel use. These barriers include limited refueling infrastructure, 
higher acquisition costs, and lower operational range for vehicles. 
High-mileage, centrally-fueled fleets are a good example of a niche 
market. High-mileage fleets consume larger quantities of fuel, so over 
time, fleet managers can benefit from the cost savings associated with 
alternative fuels that cost less than conventional fuels. Low-mileage, 
high-fuel-use vehicles--those that must often wait, idling, or those 
with repeated starts and stops, such as airplane tugs and airline 
baggage carts--are another niche market. Predictable routes and 
centralized refueling stations also facilitate scheduling and allow for 
overnight or off-hour refueling, leaving more time for scheduled stops 
during the workday. Considering these factors, alternative fuels in 
many niche applications make sense and can be economical today. With 
the many niche markets in communities across the country--taxis, 
delivery fleets, shuttle service and transit bus fleets, airport ground 
fleets, school bus fleets, and national park vehicles--market 
penetration for alternative fuels and vehicles is viable and can have 
an impact on alternative fuel growth.
    Additional details on the Clean Cities Program may be found on the 
world wide web at www.ccities.doe.gov. Details on DOE's existing fleet 
regulations may be found on the World Wide Web at http://www.ott.doe.gov/epact/.

[[Page 10326]]

Status of Alternative Fuel and Alternative Fueled Vehicle Markets
    According to the EIA, the number of AFVs on the road has more than 
doubled since EPAct's passage in 1992. See Energy Data Book at 9-3 
(Table 9.1), and EIA, Alternatives to Traditional Transportation Fuels 
2000 Table 1 (Sept. 2002) [hereinafter Transportation Fuels 2000] 
(www.eia.doe.gov/fuelalternate.html). As of 2002, EIA estimates that 
AFVs number slightly more than a half million vehicles, comprising a 
small fraction of the total U.S. vehicle stock. Id. Of the forecasted 
2002 total, approximately 281,000 will be fueled by liquefied petroleum 
gas (propane); 126,000 will be fueled by compressed natural gas; 5,900 
will be fueled by M85 (a blend of 85 percent methanol and 15 percent 
gasoline); 82,500 will be fueled by E85 (a blend of 85 percent ethanol 
and 15 percent gasoline); and almost 20,000 will be fueled by 
electricity. The remaining quantity of AFVs consists of a very small 
number of vehicles fueled by liquefied natural gas, M100 (100 percent 
methanol), and E100 (100 percent ethanol). Id. DOE estimates that 
approximately 20,000-25,000 new AFVs are acquired annually as a result 
of the Federal fleet requirements under section 303 of EPAct and the 
State and Alternative Fuel Provider Fleet Programs found in sections 
501 and 507(o).
    In addition to the vehicles described above, EIA estimates that by 
2000 there were approximately 2.6 million flexible fueled vehicles 
(FFVs) on U.S. roads capable of operating on ethanol blends of E85. 
Transportation Fuels 2000 at Table 1. An FFV is ``any motor vehicle 
engineered and designed to be operated on any mixture of two or more 
different fuels.'' 10 CFR 490.2. The number of FFVs is expected to grow 
significantly in future years as automakers continue to sell hundreds 
of thousands of these vehicles each year. EIA does not count most of 
these vehicles in its AFV figures above since these vehicles include 
cars and light trucks owned by non-fleet owners, who for the most part 
are not expected at this time to use ethanol in their vehicles. These 
vehicles, however, could use ethanol if the infrastructure becomes more 
widely available and fuel supplies are offered at a competitive price.
    When EPAct was enacted in 1992, EIA estimated that total 
alternative fuel and replacement fuel use accounted for approximately 
1.6 percent of total motor fuel consumption. This figure rose quickly 
to 2.2 percent in 1993 largely as a result of requirements under the 
Clean Air Act Amendments of 1990, which required the use of oxygenated 
and reformulated fuels. EIA has projected that, for 2002, the annual 
consumption of alternative fuels in alternative fuel vehicles will 
reach the equivalent of approximately 294 million gasoline gallons. 
Factored together with the use of replacement fuels such as ethanol and 
MTBE, the total amount of replacement fuel and alternative fuel 
consumption will displace the equivalent of approximately 4 billion 
gallons of gasoline. While encouraging, this figure represents only a 
small part (2.8 percent) of total 2002 on-road motor vehicle fuel 
consumption. Thus, despite the efforts of the past decade and 
significant improvements in the state of alternative fuel technology, 
alternative and replacement fuel use has grown relatively little.

II. Previous Opportunities for Public Comment

    Pursuant to the rulemaking process set out in sections 507(c)-(g) 
of EPAct, DOE issued an advanced notice of proposed rulemaking (ANOPR) 
and held a series of stakeholder workshops to discuss various options 
open to it for implementing a private and local government fleet 
program and in general how to encourage increased use of replacement 
fuel. Commenters also were asked to provide input on the replacement 
fuel goals contained in EPAct. The comments and public statements DOE 
received have informed the determination proposed today. The sections 
below describe the process used to solicit information, the different 
proposals made, and the input received. DOE notes that neither 
EarthJustice nor the other entities it represented in the lawsuit in 
Center for Biological Diversity v. Abraham filed written comments or 
provided testimony in response to the opportunities for public comment 
described below.

A. 1998 Advanced Notice of Proposed Rulemaking

    On April 17, 1998, DOE published in the Federal Register an ANOPR 
stating that DOE was beginning its process for determining whether to 
promulgate a rule imposing possible AFV acquisition requirements on 
private and local government fleets. See 63 FR 19372. Accordingly, DOE 
requested comments on a number of issues potentially relating to such a 
rule, arising from section 507(g) of EPAct, as well as relating to 
possible alternative fuel requirements for urban transit buses under 
section 507(k). In May and June of 1998, DOE held three public hearings 
in Minneapolis, MN; Los Angeles, CA; and Washington, DC. More than 110 
interested parties responded by providing written and verbal comments.
    The ANOPR requested comments on 23 questions within three broad 
areas: replacement fuel goals, fleet requirements, and urban transit 
buses. Many of the comments expressed during the public workshops 
included common themes and overlap among these three areas. Information 
related to the ANOPR and this rulemaking, in general, is located on the 
World Wide Web at http://www.ott.doe.gov/epact/private_fleets.shtml.
Discussion of Replacement Fuel Goals and Fleet Requirements
    More than 40 commenters addressed the question whether the goal of 
replacing 30 percent of the Nation's motor fuel by 2010 is achievable. 
Commenters also identified likely problems in achieving this goal. Less 
than half of the commenters who explicitly addressed this question 
regarded the goal as unachievable. Many of the commenters considered 
the goal unachievable under the then-present economic conditions, and 
many offered suggestions as to what changes would be required to make 
the goal feasible. Commenters were in general agreement that the lack 
of alternative fuel infrastructure, low petroleum fuel prices, and 
various limitations on AFV availability were key barriers to 
achievement of EPAct's 30 percent petroleum replacement goal and 
implementation of any new fleet rules. Many commenters cited the lack 
of an alternative fuel infrastructure as a significant barrier. One 
commenter said public access to most existing natural gas refueling 
sites in his area is either restricted or prohibited. Another commenter 
said supplies of alternative fuels themselves were inadequate at 
present.
    Two commenters pointed to the low prices of petroleum-derived fuels 
as an impediment to alternative fuel implementation. One commenter said 
that low petroleum prices implied that AFV fleet operators might never 
see a return on their investment. A related comment, noted that 
installation of an alternative fuel infrastructure could be a financial 
burden for small and independent fuel retailers and could be unfair to 
them.
    The cost of AFVs and the lack of selection among AFVs were 
mentioned by a number of commenters. Several commenters also mentioned 
that it was difficult to lease AFVs or acquire certified conversions. 
Two commenters said incremental costs of AFVs could

[[Page 10327]]

inhibit widespread acceptance of the vehicles and technology.
    Five comments identified the resale or residual value of AFVs as a 
barrier to fleets' acceptance of AFVs. Two of these comments urged 
government action to address this problem. One commenter stated that 
government purchase of AFVs at the end of their lease life or a resale 
price guarantee by the government was needed. The other said that 
government should establish a resale market (or surrogate), or create a 
residual value insurance pool for alternative fueled vehicles, 
analogous to resale value insurance that can be obtained for fleet 
vehicles.
    Commenters who opposed adoption of a private and local government 
fleet mandate questioned the benefits of or the justification for such 
a mandate, and suggested it would foster non-compliance and limit 
participation in voluntary programs. Several commenters questioned 
DOE's authority to promulgate a private and local government fleet 
rule. These comments argued that DOE had not yet demonstrated that a 
private and local government fleet rule was ``necessary'' or that 
meeting the EPAct fuel replacement goal through a fleet rule was 
economically achievable. One commenter said that DOE had not yet 
performed the cost/benefit analysis called for in section 507(l) of 
EPAct. Commenters also cited the draft Section 506 Report (section III 
below) which indicated that a private and local government fleet 
mandate would result in only 1.5 percent fuel displacement.
    Several commenters also asserted that much of the additional 
alternative fuel used under a fleet program would actually be imported, 
and hence promoting the use of such fuel would do little to meet the 
section 502(b)(2) provision that at least half of the replacement fuel 
used to meet EPAct's replacement fuel goals must consist of ``domestic 
fuels.'' They also believed that there was not currently a match 
between the AFVs available and vehicles which could meet the normal 
business requirements of the fleets that would be subject to the 
acquisition mandate. These commenters, and a few others stated the 30 
percent replacement fuel goal set forth in EPAct was arbitrary, and 
that any modified goal would be equally arbitrary. These commenters 
stated that DOE should concentrate on accelerating public information 
programs and increasing participation in voluntary programs, like Clean 
Cities and Clean Airports. In contrast, two commenters argued in favor 
of mandates, with one saying failure to impose them would indicate a 
lack of confidence in the alternative fuels industry.
    DOE's second question solicited input on what level of replacement 
fuel use is actually achievable, if the goal originally specified in 
EPAct is not feasible or achievable. Eight commenters responded to this 
question; only one provided an alternative numerical goal.
    DOE's third question asked for information on the practicality of 
EPAct's replacement fuel goals and whether they should be modified. In 
response, one commenter criticized the fundamental assumption that 
replacement fuel goals are needed. Several commenters said that some 
AFVs are not necessarily cleaner than gasoline-fueled vehicles and that 
current AFV models are more expensive to operate than their 
conventional fueled counterparts. Commenters urged DOE to consider the 
effects of current AFV programs on fleet economics, on progress toward 
reaching EPAct's replacement fuel goals, and to consider alternatives 
to mandates. Another commenter questioned the reasonableness of DOE's 
projections of the number of AFVs that would be necessary in the future 
to achieve the replacement fuel goals.
    DOE's fourth question asked commenters to describe the general 
outline, structure and implementation of a possible program that 
focused on fuel use instead of simply on vehicle acquisitions. Many 
commenters urged the adoption of an incentives-based program instead of 
new mandates. Other commenters, however, supported a new mandate. 
Nearly all commenters, including those opposed to mandates, thought 
that focusing on fuel use rather than vehicle acquisitions was a good 
idea. A number of commenters recommended replacement fuel programs that 
were based on or emphasized specific alternative fuels, even though DOE 
historically and uniformly has been of the view that it should remain 
fuel neutral in implementing EPAct's regulatory programs.
    Some commenters said that DOE should focus its efforts on programs 
already in place, especially the Clean Cities and Clean Airports 
Programs. One commenter thought that these programs, combined with the 
mandatory fleet programs already in place, constituted a sufficient 
replacement fuel program.
    DOE's next two questions concerned what other measures could be 
taken, in addition to or instead of an acquisition mandate, to further 
the achievement of the replacement fuel goals, and what types of 
incentives should be offered, what form should they take, and whom 
should they benefit. These questions drew the largest response from 
commenters. The overwhelming majority of commenters recommended the 
adoption of financial and non-financial incentives. There was an almost 
equal split between commenters that advocated measures other than 
mandates, and commenters that advocated measures in addition to 
mandates. One commenter, who advocated incentives in addition to 
mandates, said the adoption of incentives should precede mandates. 
Another commenter, who called for incentives instead of mandates, said 
that mandates should be imposed only if the adoption of incentives 
fails to elicit adoption of alternative fuels. Two commenters opposed 
incentives; one said they were inappropriate for uneconomic fuels and 
the other predicted they would not further significant petroleum 
replacement.
    A common theme among comments by State and local government 
representatives was that incentives also should be available to them. 
In addition, one commenter suggested linking incentives to actual 
alternative fuel use. Numerous commenters discussed how incentives 
could be funded. Commenters suggested a 1-cent-per-gallon tax on 
gasoline, as well as a tax, or import tariff, on foreign petroleum. One 
commenter called for additional taxes to be placed on all fuels 
produced from imported petroleum. Another commenter suggested that 
incentives be funded through the Transportation Trust Fund.
    Many commenters called for tax incentives, including credits for 
the acquisition of vehicles, fueling infrastructure investments, and 
alternative fuel use. One commenter noted that if tax incentives are 
adopted, they should be available for a sufficient period, with a 
specified phase-out date to facilitate business planning. In addition 
to tax credits, two commenters advocated direct grants for entities 
that could not take advantage of tax credits.
    Several commenters recommended of non-financial incentives, 
including granting AFVs access to high-occupancy vehicle (HOV) lanes or 
their own dedicated travel lanes, parking and toll preferences, relaxed 
vehicle inspection standards, lower vehicle registration fees, and 
lower sales taxes. DOE notes that while some such incentives already 
exist, additional incentives, including new tax credits, would either 
require new legislation from Congress or legislation or regulatory 
actions at the State and local government levels.
    Several comments suggested regulatory intervention in the vehicle

[[Page 10328]]

and fuel markets. One called for a requirement that conventional motor 
fuel station operators install alternative fuel storage and dispensing 
systems and sell alternative fuel(s) as a minimum of 10 percent of 
their annual sales by 2000, and a minimum of 30 percent by 2010. All of 
these suggestions call for actions that are outside of DOE's authority 
or are expressly prohibited by EPAct.
    Most commenters wanted fleets and other AFV owners and operators to 
be the primary targets of incentives. One commenter said that 
incentives should be targeted to small businesses and users, and not to 
large Original Equipment Manufacturers (OEMs). A few commenters thought 
that fuel providers should qualify for financial incentives as a way to 
encourage infrastructure development.
    Commenters favoring a program to encourage fuel use offered 
suggestions on how such a program could work. The general aim of these 
suggestions was to allow covered and potentially covered fleet 
operators greater flexibility in meeting requirements. Suggestions for 
such a program included providing acquisition credits for medium- and 
heavy-duty vehicles, extra credits for electric and dedicated 
alternative fueled vehicles, providing credits to non-covered fleets, 
and providing credits for alternative fuel use.
    Commenters voiced considerable support for tying credits (and other 
incentives) to the amount of alternative fuel(s) actually consumed by 
the vehicles. Several commenters suggested that emissions trading 
credits be granted to AFV operators who exceeded alternative fuel use 
requirements.
    DOE asked for guidance on how to factor in changes in oil price and 
availability into the decision-making process. Relatively few 
commenters addressed this question. Two pointed to a General Accounting 
Office study that estimated the benefits to the U.S. of using low-cost 
imported petroleum to be in the hundreds of billions of dollars, and to 
outweigh the benefits of alternative fuels. One commenter said that 
alternative fuel mandates, while they might reduce petroleum imports, 
could increase imports of other fuels. Two commenters suggested DOE 
consider the national defense and security costs of the country's 
current petroleum imports, one of them calling for excise taxes on 
petroleum that reflect its ``costs to society.''
    There were 15 responses to DOE's question about measures to 
encourage use of alternative fuels, rather than conventional fuels, in 
bi-fuel and FFVs. Three commenters recommended DOE simply require 
alternative fuel use in FFVs. One commenter argued that alternative 
fuel use in bi-fuel vehicles and FFVs at least 50 percent of the time 
should be sufficient to qualify these vehicles for EPAct compliance, 
while another recommended DOE establish a guideline that an AFV must 
operate at least 75 percent of the time on alternative fuel if the 
vehicle is to count toward an operator's compliance with EPAct.
    One commenter suggested that DOE add biodiesel and reformulated 
gasoline (RFG) to the list of alternative fuels specified in the EPAct. 
In the Final Rule for the Alternative Fuel Transportation Program 
promulgated on March 14, 1996, DOE added neat (or 100 percent) 
biodiesel to the definition of ``alternative fuel.'' Additionally, 
after enactment of section 7 of the Energy Conservation Reauthorization 
Act of 1998 (ECRA) (Pub. L. 105-388) which allowed covered fleets to 
earn acquisition credits by using biodiesel blends in medium- and 
heavy-duty vehicles, DOE issued regulations allowing credit in these 
circumstances as well. See 64 FR 27169 (May 19, 1999). However, DOE has 
consistently stated that it cannot add RFG to the definition of 
``alternative fuel'' because RFG is more than 80 percent petroleum, and 
therefore is not ``substantially not petroleum'' as required by EPAct 
section 301(2). See 61 FR 10622, 10630 (March 14, 1996) (notice of 
final rulemaking establishing 10 CFR Part 490).
    The final replacement fuel question on which DOE sought comments 
was how to estimate the impacts of replacement fuel. One commenter 
predicted that achievement of the 30 percent replacement fuel goal 
would create supply and price problems for current propane users in the 
agricultural, residential, and industrial sectors. This commenter 
predicted price increases of several hundred percent, and cited a DOE 
report that projected vehicle fuel demand for propane could go from 
35,000 barrels per day (bbl/day) to 1.7 million bbl/day, and imports 
could increase from 200,000 bbl/day to 1.7 million bbl/day. General 
Accounting Office report GAO/RCED-98-260, entitled Energy Policy Act: 
Including Propane as an Alternative Motor Fuel Will Have Little Impact 
on Propane Market, addressed this concern. The report asserted that 
EPAct's effects on the supply and price of propane would be minimal and 
the increase in overall price of propane, attributable to EPAct, would 
be negligible. It also stated that EPAct would have little effect on 
existing consumers of propane because the price increases will be so 
small.
    In the area of fleet requirements, DOE asked whether the AFV 
acquisition schedule in section 507(g) of EPAct should be adhered to, 
and if not, what alternative schedule should be used. Section 507(g) 
requires that if DOE promulgates an AFV acquisition mandate for private 
and local government fleets, annually escalating percentages of the 
light duty vehicles acquired by the covered fleets must be AFVs, 
beginning with 20 percent in model year 2002 and rising to 70 percent 
in model year 2005 and thereafter, although this section also gives DOE 
authority to change these years and percentages. Eight commenters spoke 
in favor of retaining the section 507(g) schedule, although one advised 
making the schedule applicable only to local government fleets and 
adopting incentives for these fleets. Several commenters supported 
adoption of a new mandate for local government fleets, including 
transit agencies, but not for private fleets. Six commenters opposed 
the schedule in section 507(g). Some commenters opposed any mandate, 
while others recommended a longer phase-in schedule.
    DOE received numerous comments in response to its question 
regarding what programs other than the fleet requirement program would 
maximize market penetration of alternative fuels and AFVs, and what 
market penetration these programs would induce. Many of these comments 
simply reiterated the call for incentives of various types. A number of 
commenters, however, said that a concerted effort to expand existing 
infrastructure would enable fleets to expand their use of AFVs. Though 
not responsive to the question, a number of commenters suggested 
expanding the existing fleet programs to cover medium- and heavy-duty 
vehicles. A few commenters also thought that the statutory geographical 
limitations on fleet programs should be removed.
    A number of commenters cited the Clean Cities Program as an 
effective means of expanding AFV use. Some called for the program to be 
expanded, in terms of the number of its participants, the areas it 
covers, and in funding. Commenters also recommended that Clean Cities 
coordinators receive training in how to seek Department of 
Transportation Congestion Mitigation and Air Quality (CMAQ) Improvement 
Program funds.
    A number of commenters urged continued Federal leadership in 
establishing the use of alternative fuels and alternative fueled 
vehicles. These commenters indicated that the Federal

[[Page 10329]]

Government must do a better job of meeting its own AFV acquisition 
requirements and using alternative fuels in its vehicles. DOE has 
worked closely with all the Federal agencies to maximize acquisitions 
of alternative fueled vehicles and increase the use of alternative 
fuels. DOE participated actively in the development of Executive Order 
13149, which strengthens the Federal Government's commitment to using 
AFVs and gives DOE a greater role in assisting Federal agencies 
compliance with EPAct's AFV acquisition requirements and report on 
their acquisitions.
    DOE's final question about fleet requirements asked how DOE should 
weigh the factors in section 507(l) of EPAct when deciding whether to 
promulgate a private and local government fleet program. Nine responses 
explicitly addressed this question. There was no clear consensus that 
DOE should accord the greatest weight to any particular factor. Four 
commenters mentioned economic factors: the impacts on fleets, workers, 
consumers (particularly non-transportation propane consumers); cost 
burdens the rule would impose on local governments; and fuel market 
impacts. One commenter said Congress did not intend that a fleet 
mandate be imposed if it would harm the economic well-being of 
businesses, workers, or consumers. This commenter also stated that the 
evidence suggests the costs of such a mandate would greatly exceed its 
benefits. Three commenters mentioned AFV availability as a concern that 
should be considered before DOE proposes any fleet AFV acquisition 
program. Another commenter said the unavailability of suitable vehicles 
had been regarded by Congress as sufficient reason to defer imposition 
of fleet mandates.
    A commenter raised the issue of environmental benefits of AFVs, 
saying Congress had not intended for acquisition mandates to be imposed 
on fleets if AFVs did not confer environmental benefits. The same 
commenter noted earlier that AFVs at one time had been automatically 
assumed to have lower environmental impacts than petroleum-fueled 
vehicles, but that the evidence had since showed this assumption to be 
false. This commenter also urged DOE to weigh vehicle safety and 
greenhouse gases in its consideration of a possible private and local 
government fleet program.
Discussion of Urban Transit Buses
    In the ANOPR, DOE asked for input on how it should determine if the 
inclusion of urban transit buses in the proposed rule would help meet 
the replacement fuel goals. Virtually all the commenters responding to 
this question took it as soliciting their opinion on whether an urban 
transit bus fleet rule should be promulgated. Eighteen commenters urged 
DOE to promulgate a mandate that urban transit bus operators acquire 
alternative fuel buses. A number of these comments suggested that this 
mandate could be adopted independent of a private fleet mandate. There 
was general agreement among supporters of a transit fleet mandate that 
transit buses were a good fit for alternative fuels.
    Nine commenters, six of them urban transit bus operators, opposed 
the imposition of an urban transit bus AFV mandate. Two of them 
described such a mandate as ``unfunded.'' One argued that imposition of 
such a requirement would be overly ambitious, financially burdensome, 
and could decrease urban transit bus ridership. Several commenters 
stated that requiring the acquisition of more expensive alternative 
fueled buses could lead to reduced ridership if transit agencies had to 
raise fares to pay for the buses. One commenter said transit riders 
already help reduce petroleum imports by not driving their own cars, 
and that DOE should recognize that the petroleum fuel consumed by urban 
transit buses is going to the ``highest use.'' Two commenters pointed 
out that an increasingly large percentage of new urban transit bus 
purchases are alternative fueled, and that alternative fuels have made 
impressive inroads in the urban transit bus sector. Two other 
commenters said these gains have been made without mandates, and 
voluntary adoption of alternative fueled urban transit buses should 
continue, as local funding and circumstances permit.
    DOE asked how it should quantify the impact on public transit 
properties of requiring them to acquire alternative fueled buses. 
Thirteen of the 15 respondents to this question spoke directly or 
indirectly to the issue of economics. All said that it would be a 
financial burden because of the higher cost of alternative fuel buses, 
the cost of installing the infrastructure (or the operational costs of 
off-site refueling), the cost of training maintenance personnel, and 
the costs (in some cases) of retrofitting large facilities to 
accommodate AFVs. One also pointed out that increasing (conventional) 
diesel engine efficiency had permitted a reduction in transit bus fuel 
consumption over the past 10 years.
    DOE asked for comment on whether an urban transit bus fleet 
mandate, if imposed, should apply to public and private urban transit 
bus operators, or only to public operators. By a substantial margin 
(nine to one), commenters favored applying the requirement equally to 
public and private operators.
    Two commenters commented on ways to address offset the economic 
penalties of owning and operating alternative fueled urban transit 
buses. One favored using a life-cycle cost approach, rather than 
emphasizing the first cost of vehicles and infrastructure. The other 
noted that CMAQ funds are available from the Department of 
Transportation and that other Federal funds are available to help 
finance alternative fueled bus purchases. This commenter urged DOE to 
work with the Federal Transit Administration (FTA) and the Federal 
Highway Administration to secure the maximum available funding for 
urban transit bus projects.
    In response to its question concerning what implementation 
schedule, if any, should be used for transit bus fleets, DOE received 
three comments advocating use of the schedule that is described in 
section 507(g) of EPAct, described above. One commenter called for an 
emphasis on fuel replacement, but offered no specific advice on how 
this objective should be accomplished. Eight comments suggested other 
schedules, mostly longer phase-in periods.
    DOE's final question about a potential AFV mandate for urban 
transit buses concerned the types of exemptions and exclusions it 
should provide transit agencies. Three transit properties called for 
exemption of all urban transit bus fleets irrespective of size. One 
commenter said participation of urban transit bus fleets should be 
based not on acquisition numbers, but on annual fuel use. Three other 
transit properties said exemptions should be based on the cost-
effectiveness and/or the technical applicability of alternative fueled 
urban transit bus operation for the fleet in question. Another 
commenter said that fleets with fewer than 100 buses should be exempted 
if an urban transit bus fleet rule were imposed.

B. Stakeholder Meetings--Fall 1998

    In the Fall of 1998, DOE held a series of informal meetings with 
stakeholder groups to supplement the formal hearings held in 
conjunction with the ANOPR several months earlier. These meetings were 
held because DOE was interested in expanding the scope of regulatory 
options that it was considering and in gauging stakeholder reactions. 
At these meetings, DOE discussed the issues affecting the development 
of the NOPR, including DOE's processes, requirements, and

[[Page 10330]]

authority. In addition to giving them a forum to respond to the options 
presented, DOE offered stakeholders an opportunity to identify key 
barriers to increased use of alternative fuels and to suggest possible 
solutions. Invitees included fuel providers, fleets (both public and 
private), regulatory agencies, technology research organizations, 
vehicle fuel systems providers, consulting firms, vehicle 
manufacturers, and related associations and coalitions.
    In connection with new stakeholder workshops, DOE developed several 
new potential regulatory options. These alternatives were raised as a 
way of soliciting comments on whether DOE could encourage or require 
fuel replacement in addition to or instead of requiring fleets to 
acquire AFVs. DOE developed these potential options because of its 
concern that simply adopting the fleet mandate authorized by section 
507(e) and (g) would not result in a significant increase in 
alternative fuel use or petroleum replacement. This focus on fuel use 
was also a potential way of responding to sentiments expressed in 
comments DOE received during ANOPR process.
    DOE developed these new options, in part, in response to the 
direction in EPAct section 507(a)(3) and 507(c) for DOE to evaluate 
``all actions needed to achieve [the replacement fuel] goals.'' This 
directive obviously did not limit the scope of DOE's analysis to only 
regulatory actions and policies that were within DOE's current legal 
authority to promulgate. As a result, DOE concluded that it should ask 
for comments on a number of different options without regard to whether 
those options or the other options commenters might offer were within 
DOE's statutory authority under EPAct.
    DOE's concern about fuel use arose in part from its experience in 
implementing the mandate for State government fleets under section 
507(o). Based on this experience, DOE believed that many State 
government fleets use alternative fuels a relatively small percentage 
of the time in their alternative fueled vehicles. With no requirement 
to use alternative fuels, many State fleets are acquiring FFVs and 
running them on gasoline. Many fleets prefer these vehicles because 
they have little or no incremental cost. At the same time, State fleets 
lack inducements to actually fuel their FFVs with alternative fuel. 
Reasons for this vary. For example, the existing infrastructure for 
ethanol is very localized and limited. Many States do not have any 
locations that provide ethanol. The ethanol industry is focusing its 
efforts on having ethanol blended into gasoline and RFG, and for the 
most part, has not focused on developing a widespread fueling 
infrastructure for E85. Additionally, ethanol, in general, costs more 
at the pump than gasoline. See Alternative Fuel Price Report 
(www.afdc.doe.gov/documents/pricereport/pricereports.html).
    A few State fleets make substantial use of alternative fuel. These 
States tend to be those where natural gas and/or propane is abundant, 
or where the Governor has publicly committed to using alternative 
fuels, such as California, New York, Texas and West Virginia. These 
States also tend to acquire dedicated alternative fueled vehicles as a 
larger portion of their new acquisitions.
    Because DOE's experience had shown that fleets will opt to fuel 
AFVs with gasoline or diesel rather than alternative fuels, DOE sought 
to identify ways to require or encourage local government and private 
fleets to use alternative fuel. DOE turned to the public comments it 
received in response to the ANOPR and on the proposed rule for the 
State and Alternative Fuel Provider Fleet Program. Commenters suggested 
a variety of ideas to DOE in these forums, including that DOE should 
mandate fuel use or provide credits for alternative fuel use. At the 
same time, a number of commenters stated that DOE does not have the 
authority to require fuel use. Many of the comments in favor of a fuel 
use requirement suggested that fleets should receive credits based on 
the amount of alternative fuel their vehicles used and that medium- and 
heavy-duty vehicles, because they use more fuel than light-duty 
vehicles, should receive multiple credits. Some commenters suggested 
that dedicated vehicles be awarded multiple credits or that dual-fueled 
vehicles should only receive half a credit.
    No efforts were made during the meetings to achieve consensus. 
Meetings ranged in size from approximately 15 to 40 representatives in 
attendance, and included a reasonably representative cross-section of 
stakeholders. DOE identified representatives from stakeholder groups 
and invited them to attend the stakeholder meetings. In some cases, an 
individual representing multiple stakeholders was invited (such as from 
an association), while in other cases, an individual representing a 
particular interest was invited (such as from a single company or 
government organization).
    The schedule for the meetings was as follows:

October 26, 1998--Private Fleets, Transit Bus Operators, and Medium-/
Heavy-Duty Fleets
October 27, 1998--Local and State Government Fleets
October 28, 1998--Electric Utilities and Fleets
October 30, 1998--Liquid Fuel Providers
November 2, 1998--Natural Gas Fuel Providers, Propane Fuel Providers 
and Fleets

    The meetings were held in Washington, DC. In addition, DOE held 
several informal meetings or discussions with automobile manufacturers 
outside of the stakeholder meetings, with the same purposes and 
information as the stakeholder meetings identified above. These 
consisted of the following:

October 6, 1998--American Honda Motor Company
October 29, 1998--Toyota Motor Corporation
November 9, 1998--Ford Motor Company
November 10, 1998--Chrysler Corporation
November 10, 1998--General Motors Corporation

    DOE began each meeting by discussing the replacement fuel goals, 
the authority to modify these goals, the possible regulatory options 
for a fleet requirement rule, and the additional statutory authority 
related to urban transit buses. DOE also presented four regulatory 
options that were under consideration at the time. These options were:

    Option 1--Proposing a rule based solely upon the AFV 
acquisition requirements identified within section 507(g);
    Option 2--Including all elements of Option 1, 
but adding a requirement that the alternative fueled vehicles must 
operate on alternative fuels wherever available;
    Option 3--Including all elements of Option 1, 
but adding a provision for the allocation of credits for actual use 
of replacement fuel; and
    Option 4--Proposing a replacement fuel program, focused 
on reducing fleet petroleum consumption by requiring fleets to 
reduce their light-duty fleet petroleum consumption through the use 
of replacement fuel.

    Most of the discussions at the stakeholder workshops focused on the 
specific approaches to developing a fleet rule. Some of the discussions 
also concerned to the replacement fuel goals.
    Many of the comments made during these meetings were similar to 
those made during the ANOPR process. Private fleets cited barriers to 
increased alternative fuel use, including the incremental price of many 
AFVs, the lack of sufficient infrastructure, increased operational 
costs of AFVs,

[[Page 10331]]

and the lack of established resale value for AFVs. Several commenters 
suggested ways of overcoming these barriers. Private fleets suggested 
providing incentives not only for the development of alternative fuels 
infrastructure, but for maintenance and training as well. Private 
fleets also favored imposing a moratorium on taxes of AFVs and/or 
alternative fuels.
    Private fleets also suggested that DOE investigate the possibility 
of making certain requirements conditional upon market events. For 
example, if AFV or alternative fuel prices came down to a certain level 
or infrastructure developed to a certain point, AFV acquisitions or 
alternative fuel use could then be required.
    Transit bus operators cautioned that their cost-effectiveness is 
closely tied to Federal Transit Authority funding policies. They also 
cautioned that anything that increases fares discourages overall 
ridership. For this reason, among others, transit bus operators opposed 
any mandates. Some stakeholders expressed support for including the 
transit bus industry in a private and local government fleet mandate. 
These stakeholders indicated that current new orders for alternative 
fuel transit buses are increasing. Some also indicated that transit 
buses are a very successful market niche for alternative fuels.
    Medium- and heavy-duty fleet stakeholders favored establishing non-
financial incentives at the local level and providing them to State and 
local government fleets alike. One suggested providing special curb 
access (non-ticketing zones) to alternative fuel delivery vehicles. 
These stakeholders generally believed that medium- and heavy-duty 
vehicles are a good fit for alternative fuel use, often better than 
light-duty vehicles. These stakeholders stated, however, that DOE 
should not require the acquisition of medium- and heavy-duty AFVs, but 
instead should provide credits for the use of alternative fuels by 
medium- and heavy-duty vehicles.
    Local government attendees identified a number of barriers to 
alternative fuel use. They said they have trouble justifying 
incremental purchase and higher operating costs for AFVs, especially 
for governments with severe fiscal constraints. Conversions were 
generally viewed as a cost-effective alternative to OEM product 
offerings. In some cases, a mandate, if too costly, might impede some 
local government agencies from fully completing their core missions. 
Several local government representatives also said that the Federal 
Government must lead first, before local governments can be expected to 
follow.
    Local governments offered a number of proposals to address 
barriers. While they saw financial incentives as critical to increasing 
alternative fuel use, a number of fleet managers also indicated their 
support for non-financial incentives. These included giving AFVs the 
right to use HOV lanes with and ``green'' parking spaces where AFVs 
would have receive preferential parking locations, possibly at reduced 
or no cost). Commenters also said that because heavy-duty vehicles use 
significantly more fuel than light-duty vehicles, their use should be 
strongly encouraged, and large numbers of credits should be provided 
for these vehicles (such as based upon a comparison of annual fuel 
use).
    State representatives provided information both in their capacity 
as government agencies interested in pursuing certain societal goals 
(such as increased energy security or improved environment) and in 
their capacity as the owners of fleets operating under the current AFV 
acquisition requirements. State fleets asserted that there needs to be 
a more explicit tie between energy and environment among the Federal 
agencies. For example, States (and others) would like to receive EPAct 
credit for alternative fuels dispensed from stations they build. They 
pointed out that States could make use of alternative fuels and AFVs by 
private entities a condition of receiving State contracts. State fleets 
already regulated under DOE's existing regulations were interested in 
finding out if other AFV-related programs (such as those discussed 
above) could be available to them.
    Electric utilities indicated that they would like to receive 
credits for putting infrastructure in place. They also expressed an 
interest in receiving credits for R&D commitments. Some of these 
commenters expressed the belief that many organizations (including the 
electric utilities) are acquiring vehicles slightly larger than 8500 
GVWR limit for light duty vehicles so as to avoid acquisition 
requirements, and that these practices are causing greater petroleum 
use by these fleets. Others, however, thought that AFV acquisition 
requirements should be extended to medium- and heavy-duty vehicles, to 
provide manufacturers with a greater incentive to make these vehicles 
available as alternative fueled vehicles. They also said that increased 
competition in the electric industry is forcing many utilities to re-
evaluate their electric vehicle (EV) programs, since they typically 
have not been cost-effective. This means that not only fleet purchases, 
but deployment, demonstration, R&D, infrastructure, and fleet 
assistance programs are coming under greater scrutiny.
    Liquid alternative fuel providers and petroleum providers seemed to 
support an approach similar to option number 4, the replacement fuel/
reduced fuel consumption approach. Overall, the oil industry asserted 
that there is little value in achieving a replacement fuel goal. These 
providers stated that there is a disconnect between projected or 
desired demand and actual demand for alternative fuels, which is 
seriously hindering development of the infrastructure. Fuel suppliers 
would also like to see some sort of credit for providing alternative 
fuel.
    The natural gas and propane providers comprised the largest 
stakeholder group and raised many issues and concerns. These providers 
said option 4 provided the most flexible method for fleets to comply 
with a fleet rule, while also avoiding the situation of having dual-
fueled vehicles not operating on alternative fuels. At the same time, 
several organizations said that an AFV acquisition program approach 
should not be completely abandoned.
    Many attendees asserted that including medium- and heavy-duty 
vehicles within an AFV acquisition program would be advisable, for 
several reasons. First, they would present significant opportunities 
for using larger quantities of alternative fuels. Second, this would 
close off a perceived way around the requirements for fleets 
(eliminating the chance to avoid requirements through acquisition of 
vehicles above the 8,500 lbs. GVWR level). In addition, there was 
significant interest in adding requirements for transit buses, due to 
the current success in this market as well as their potential for large 
consumption of alternative fuel.
    Most attendees felt that including any contribution from fuel 
efficiency would ``water down'' the contribution from alternative 
fuels, and was not really in keeping with the purpose of the 
alternative fuels portions of EPAct. At the same time, they felt it was 
important to keep the rule ``wide open'' for a variety of vehicle 
technologies, as well as for generation of credits by fleets that may 
not be covered.
    Several stakeholders voiced strong opinions that no matter which 
approach is ultimately adopted, enforcement must be made an integral 
part of the program, and must be seen as a program priority. Otherwise, 
many fleets were likely to disregard the requirements.

[[Page 10332]]

    Meetings and discussions with automobile manufacturers focused 
primarily upon presentation of DOE's authority, possible approaches, 
and issues. The manufacturers indicated their continuing interest in 
alternative fueled vehicles and their desire in being informed 
concerning development of the rule. As a whole, the automakers 
expressed interest in options that provided the maximum flexibility to 
the fleets. They also encouraged aggressive enforcement of the existing 
requirements for Federal, State, and alternative fuel provider fleets. 
Several automakers reemphasized that their corporate policies do not 
favor governmental mandates.

C. Public Workshops--August--September 2000

    Pursuant to its Notice of Intergovernmental Consultation, DOE 
conducted three public workshops (Argonne, IL; Golden, CO; and 
Washington, DC) and solicited written comments from the public 
concerning the replacement fuel goals and a potential private and local 
government fleet program. See 65 FR 44987 (July 20, 2000). These 
workshops were held to ensure that the requirements of Executive Order 
13132 (Federalism) (See 64 FR 43255 (August 10, 1999)) and DOE's 
statement of policy regarding intergovernmental consultation (DOE 
Statement of Policy) (See 65 FR 13735 (March 14, 2000)) were met. Under 
these directives, DOE must consult with State and local governments 
before issuing any proposed rule which would have substantial direct 
effects on the States, on the relationship between the Federal 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. To ensure that 
State and local government organizations had ample opportunities to 
respond, the first two workshops were limited primarily to those types 
of organizations, with Clean Cities coordinators also permitted. The 
Washington, DC workshop was open to all groups. A total of over 100 
interested persons attended, and 28 sets of written comments were 
received. Neither EarthJustice nor any of the entities it represents in 
the lawsuit that resulted in the court order compelling the issuance of 
this notice filed comments in those proceedings.
    Public workshops were held in Chicago, IL (August 1, 2000); Denver, 
CO (August 22, 2000); and Washington, DC (September 26, 2000). DOE once 
again took the opportunity to solicit input on a number of different 
options for implementing a private and local government fleet rule. 
Some of these options involved creative alternatives to the section 
507(e) mandate that DOE acknowledged might require new legislative 
authority for their adoption. The options presented at these workshops 
included:

Option 1--No Regulatory Requirement for Local Government and Private 
Fleets is Proposed
Option 2--The Local Government and Private Fleet AFV Acquisition 
Program as Provided by Section 507(g) of EPAct
Option 3--The Fleet Rewards Program
Option 4--The Replacement Fuel Program
Option 5--Extension of Flexible Options to Other Fleets
Option 6--An Alternative Fueled Urban Transit Bus Acquisition 
Program as Provided by Section 507(k) of EPAct

    The discussion that follows provides details concerning each of 
these options.
Option 1--No Regulatory Requirement for Local Government and Private 
Fleets Is Proposed
    Under this option, DOE indicated that it could decide that no 
requirement for local private and local government fleets should be 
promulgated.
Option 2--The Local Government and Private Fleet AFV Acquisition 
Program as Provided by Section 507(g) of EPAct
    Under this option, DOE would require certain private and local 
government fleets to acquire AFVs as a percentage of their new light-
duty vehicle acquisitions starting with Model Year 2002. The program 
was envisioned to parallel the existing program for State and 
alternative fuel provider fleets.
    DOE acknowledged that there were significant drawbacks to this 
option, primarily that it did not guarantee alternative fuel use or 
petroleum replacement. Because of the experiences with the similar 
programs for State and fuel provider fleets, as well as the Federal 
fleet, there was concern that this option would result in little actual 
alternative fuel use. DOE indicated that it had considered the option 
of promulgating a rule, based upon section 507(g), with a fuel use 
requirement, but stated at the time that it was doubtful that DOE had 
authority to require fuel use under section 507(g). For this reason, 
the options presented did not include a 507(g) rule with a fuel use 
requirement as had earlier been discussed as a possibility.
Option 3--The Fleet Rewards Program
    Under this option, DOE would craft a regulatory program that 
encouraged fuel use. Although the local government and private fleet 
market is very large, imposing AFV acquisition requirements on this 
market would not necessarily result in the expansion of alternative 
fuel use, nor the complementary expansion of the alternative fuel 
infrastructure necessary to permit that expansion. DOE again reiterated 
its belief that section 507(g) does not require the fleets to use 
alternative fuel in the AFVs they acquire. DOE indicated that it was 
considering adoption of a Fleet Rewards Program to fill this gap. Under 
this option, fleets could meet the requirements of 507(g) directly 
(through AFV acquisitions), or opt into the Fleet Rewards Program under 
which they could meet their requirements through a combination of 
voluntary AFV acquisitions and alternative fuel use.
    Under the Fleet Rewards Program, the number of light-duty vehicles 
acquired by a fleet in a model year would still serve as the basis for 
determining the potential proposed rule's requirements. As under the 
prior option, a specific percentage of the light-duty vehicles each 
covered fleet acquired would have to be AFVs. However, the Fleet 
Rewards Program would differ by allowing a fleet to take specific 
actions, called AFV-Equivalency actions, to achieve compliance with its 
AFV acquisition requirements while also encouraging the use of 
alternative fuel. Specifically, a fleet would receive AFV-Equivalency 
Credits for any size and class of AFV it acquired, and for each 500 
gasoline gallons equivalent (GGEs) of alternative fuel it consumed. 
Each AFV acquired by a fleet, regardless of size or class, would earn 
an AFV-Equivalency Credit. Each discrete use of 500 GGEs of alternative 
fuel would also earn an AFV-Equivalency Credit. Two AFV-Equivalency 
credits would be allocated for the acquisition of dedicated AFVs. The 
operation of an existing dedicated AFV in a fleet would also be 
eligible for AFV-Equivalency Credit.
Option 4--The Replacement Fuel Program
    For Option 4, DOE stated it was considering whether to design a 
program different from the 507(g) acquisition requirements, that was 
more tailored to achieving the overall goals of displacing petroleum 
through use of replacement fuel. Such a program might avoid the 
shortcomings of EPAct's existing approach toward fleets, which solely 
focuses on acquiring AFVs, but not on the use of alternative fuel.
    The Replacement Fuel Program would require fleets to reduce their 
light-duty vehicle petroleum usage by increasing the percentage of 
replacement fuel used by their light-duty vehicles. In order to use a 
sufficient amount of replacement

[[Page 10333]]

fuel, fleets would eventually need to acquire AFVs, even though AFV 
acquisitions themselves would not be specifically required. DOE 
proposed a possible compliance schedule that included certain 
percentages, which represented the portion of a fleet's light-duty fuel 
use that would have to be replacement fuel. The required replacement 
fuel portion of a fleet's light-duty vehicle fuel use would eventually 
rise to 50 percent. Another option that was presented included adopting 
a schedule that would rise to a maximum of 70 percent, which is the 
same as the top AFV acquisition percentage requirement set forth in 
section 507(g).
    As with other fleet programs, this option would include a credit 
program allowing fleets to bank or trade credits. However, since the 
Replacement Fuel Program would not be restricted to the credit program 
currently in place for State and alternative fuel provider fleets, the 
program could be designed to provide fuel providers with replacement 
fuel credits for installation of refueling stations, which they could 
then sell to organizations with requirements under the Replacement Fuel 
Program. Under this approach, there would also be a new opportunity for 
fuel blends to have a key role, since blends of replacement fuels with 
conventional fuels would greatly assist fleets in meeting their 
requirements. This option could include extending credit generation to 
non-covered fleets or to the general public.
Option 5--Extension of Flexible Options to Other Fleets
    Participants in the stakeholder groups discussion repeatedly asked 
DOE whether any of the optional program concepts (such as the Fleet 
Rewards Program) could be extended to fleets currently operating under 
the Alternative Fuel Transportation Program. The two types of fleets 
currently covered by this program are State government and alternative 
fuel provider fleets.
    Section 507(o) of EPAct required that DOE promulgate a rule 
requiring State fleets to acquire specified percentages of AFVs. The 
State program acquisition requirements started in model year 1996 
(ultimately modified to 1997) with percentages increasing through model 
year 2000 (modified to 2001) to a maximum of 75 percent. Because EPAct 
section 507(o) makes the State fleet AFV acquisition mandate program 
mandatory, DOE does not believe that it could extend the Fleet Rewards 
Program concept to State fleets.
    Likewise, section 501 of EPAct required DOE to promulgate a rule 
covering alternative fuel provider fleets. Again, the language in this 
section made it clear this was a mandatory program. Section 501 
specifies an AFV acquisition program, with requirements starting in 
model year 1996 (modified to 1997) and increasing to 90 percent or more 
of new acquisitions in model year 1999 (modified to 2000) and 
thereafter. Congress also provided one additional requirement on 
alternative fuel providers which was not imposed on any other fleet 
type: that their AFVs must operate on alternative fuels wherever the 
fuels are available. DOE believes it would be inappropriate to allow 
alternative fuel provider fleets to receive credits for using 
alternative fuels when they are already required by statute to do so.
    The Fleet Rewards Program option would only allow covered fleets to 
earn credits. The Replacement Fuel Program, on the other hand, would 
allow non-covered fleets to earn credits to provide additional 
flexibility, encourage additional persons to use alternative fuels, and 
possibly increase the overall use of alternative fuels.
Option 6--An Alternative Fueled Urban Transit Bus Acquisition Program 
as Provided by Section 507(k) of EPAct
    This option was previously discussed with stakeholders and in the 
ANOPR. DOE again solicited comments on whether it should adopt a fleet 
rule that included urban transit buses, as authorized under section 
507(k) of EPAct. DOE offered several different options for how transit 
operators could comply with a fleet requirement. One possible option 
would require that a portion of new bus acquisitions be alternative 
fuel buses, with percentages requirements similar to those contained in 
section 507(g) or perhaps rising to a maximum of only 50 percent. 
Another possible option would allow urban transit bus operators the 
opportunity to ``opt into'' the Fleet Rewards Program as an optional 
compliance path. Under this approach, urban transit bus operators might 
receive credit both for acquisitions of AFVs and for alternative fuel 
use. As with the light-duty vehicle program, the bus program would 
include a fair and appropriate AFV-Equivalency Credit program.
    DOE also discussed a Replacement Fuel Program for urban transit bus 
fleets. DOE requested comments on whether urban transit bus operators 
should have a separate Fleet Rewards or Replacement Fuel Program, or 
whether it should be a subset of a possible Fleet Rewards or 
Replacement Fuel Program for private and local government fleets.
Summary of Workshop Proceedings
    The first workshop was held on August 1, 2000 in Chicago, Illinois. 
Representatives from State government, city governments, and Clean 
Cities coalitions located in Illinois, Wisconsin, and Indiana were the 
primary attendees.
    Representatives at the workshop generally agreed that DOE should 
take steps to increase use of alternative fuels and reduce dependence 
on petroleum imports. A number of organizations indicated that 
additional efforts to promote the use of alternative fuels would likely 
not occur without government action. A number stated that many of the 
voluntary programs to promote use of alternative fuels have been 
developed in anticipation of new mandates. These organizations said 
that without additional mandates from DOE these efforts would stall.
    Representatives generally agreed that whatever mechanism DOE 
selects needs to be flexible and focus on fuel use. There seemed to be 
slightly more support for a fleet rewards-type concept, certainly more 
than for a straight 507(g) AFV acquisition mandate. The Replacement 
Fuel Program option also generated considerable interest and prompted 
many questions. Attendees also thought that DOE should gradually phase 
in any option it might select, whether requirements for private fleets 
could be promulgated separately from requirements for local government 
fleets, since the situations of private and local government fleets are 
very different.
    Some attendees at the workshop expressed concern about the level of 
refueling infrastructure--both its current and future availability, and 
what it will take to encourage the necessary investments by fuel 
retailers. Representatives from areas with relatively little refueling 
infrastructure were concerned about options focused on fuel use. 
Ethanol was singled out as a concern--there are many FFVs that could 
operate on it, but very few stations, and fuel cost has been high.
    Some commenters indicated that fleets are moving away from central 
refueling, which may make fuel records difficult to obtain for fuel 
use-based programs. In addition, even centrally-fueled fleets often do 
not keep records on a vehicle-by-vehicle basis, and therefore it may be 
difficult to determine which fuel is used in a light-duty vehicle and 
which in a medium-or heavy-duty vehicle. Commenters also continued to 
express concerns about vehicle availability.
    A number of local government organizations (especially cities) said

[[Page 10334]]

their fleets likely would oppose a mandatory program. Other 
organizations expressed significant concern that private fleets, and 
their representatives, would fight any requirements (including through 
court challenges). Other representatives indicated that DOE should 
simply ``get on with it,'' whatever DOE should decide to do.
    Organizations not supporting mandates stated that they supported 
incentives instead of mandates. Despite the fact that no large source 
of funds was expected to be available from DOE, organizations asked for 
DOE's assistance in applying for funds from other sources (e.g., CMAQ 
funds). In addition, several organizations indicated that incentives 
must be large enough to make them worth pursuing because small grants 
simply are not worth the time and expense required to secure them.
    Some attendees expressed interest in extending flexible options to 
other fleets, although there was concern regarding the administrative 
burden this would place on DOE and whether DOE would be able to obtain 
sufficient funding to implement such a program properly. Some attendees 
also expressed interest in transit buses, especially given their 
success as a niche market for alternative fuels, but most attendees 
acknowledged they could not provide detailed input on this issue.
    The second workshop was held in Denver, Colorado on August 22, 
2000. Representatives from State governments, city governments, and 
Clean Cities coalitions, plus one municipal utility attended. The 
largest number of representatives were from Colorado, but 
representatives from California, Louisiana, Kentucky, Kansas, Oklahoma, 
Arizona, Washington, Oregon, and Missouri attended as well.
    As at the Chicago workshop, the consensus was that DOE should take 
additional actions to increase demand for alternative fuels and to 
reduce petroleum imports. Additionally, attendees felt that energy 
goals (and any requirements that might grow out of them) needed to be 
closely tied to environmental goals, such as those from the Clean Air 
Act Amendments (Pub. L. 101-549). Attendees said that incentives were 
the key to building necessary infrastructure. Conversely, tax credits 
were viewed as too complex and of no real assistance for government 
fleets. One Clean Cities coordinator pointed out that a number of 
fleets joined the coalition because of potential future mandates, and 
that without additional mandates it was unlikely that fleets would 
continue to be interested in alternative fuels. Participants echoed the 
sentiment from the first meeting that regardless of which requirements 
are imposed, they should ramp up slowly to allow fleets time to plan 
their acquisitions or determine how to obtain fuel. Attendees again 
expressed concerns about the necessary infrastructure--not only the 
number of refueling sites but also maintenance and training 
requirements for stations as well as actually being able to reliably 
find the correct fuel. There was some frustration with the level of 
investment by fuel providers.
    Attendees generally favored the Replacement Fuel Program and the 
Fleet Rewards Program, the latter receiving the most support. There was 
general support for extending credits to non-covered fleets. Fleets 
already covered under the existing State and Alternative Fuel Provider 
Programs expressed an interest in participating in either the 
Replacement Fuel Program or the Fleet Rewards Program. A common theme 
was that fuel use should be encouraged or required. A very small number 
of attendees opposed any kind of new mandate. Several representatives 
addressed transit buses, emphasizing local air quality issues and the 
benefits of using alternative fuels in transit buses. Several attendees 
felt that there would be more overall support for a new regulatory 
program if transit buses were included.
    There was some general concern with the technical performance of 
AFVs. Many of these concerns were associated with earlier generation 
vehicles, including conversions. However, several commenters noted that 
there also had been problems with vehicles offered by OEMs.
    The last workshop was held in Washington, DC on September 26, 2000. 
Unlike the previous two workshops, attendees included not only 
representatives from State, city governments, and Clean Cities 
coalitions, but also from nongovernmental entities including transit 
operators, alternative fuels associations, vehicle manufacturers, fleet 
associations, and fuel providers.
    A number of attendees made specific points about the replacement 
fuel goals. Some said the replacement fuel goals covered by sections 
502 and 504 of EPAct were important to determining what path to take. 
Several attendees indicated that more data and analysis were required 
in order to make decisions. Others said it would be arbitrary for DOE 
to set a revised goal in the absence of this information. Some 
attendees identified the need for an overall plan incorporating all 
regulatory and voluntary programs and others suggested that a 
coordinated approach for implementation of programs between State, 
local, and Federal Government efforts is very important. For example, 
many participants believed DOE should be working more closely with EPA.
    Certain representatives asserted that environmental drivers for 
alternative fuels, while still important in the near-term would 
diminish in the future as petroleum vehicle technologies become 
cleaner. Attendees said flexibility was key element of all programs. 
Several attendees stated that they were looking to DOE to display 
leadership with respect to alternative fuels. Attendees had differing 
opinions on the subject of efficiency and its role within the goals and 
under fleet programs. Some felt that programs should address both 
efficiency and alternative fuels. Others felt that efficiency was not 
addressed within Title V of EPAct and therefore was outside of DOE's 
authority. Some attendees asserted that alternative fuel use would 
displace more petroleum than efficiency measures, at least on a per-
vehicle basis.
    The Washington, DC attendees also discussed the subject of barriers 
to greater utilization of alternative fuel and replacement fuel. First, 
they identified the following overall barriers: Vehicle incremental 
purchase costs, vehicle reliability and range, fuel costs, public/
private education and awareness, and infrastructure. Second, concerning 
vehicle costs, several participants indicated that it might help if 
they could use the General Services Administration buying schedule, or 
if all fleet purchases could be ``bundled'' to reduce costs through 
larger acquisitions. Third, attendees wanted DOE to work more closely 
with OEMs to ensure that AFVs meet covered fleet demand for 
performance, range, reliability, and design. For example, several fleet 
managers asserted that OEMs adding tanks in pickup beds to increase 
range was unacceptable, since it reduces pickup bed utility. R&D was 
also highlighted as a key need, especially since the OEMs are still 
spending many times more on R&D to improve petroleum-fueled vehicles 
than AFVs. Fourth, within infrastructure, attendees identified 
refueling availability and reliability, the need for trained 
technicians, maintenance facility costs, and the ability to have 
vehicles maintained at convenient facilities as key issues. Several 
fleet managers asserted that their costs would rise if a fleet AFV 
acquisition mandate were promulgated, not only because of increased 
costs to meet the vehicle or fuel acquisition requirements, but also 
for increased costs of maintenance and

[[Page 10335]]

to conduct planning and reporting. Fifth, attendees generally agreed on 
the need for incentives to help offset the costs of moving toward 
alternative fuels, especially the costs of infrastructure. Some stated 
that incentives should be adopted instead of mandates, while others 
said incentives were useful in conjunction with mandates.
    The attendees at the Washington, DC workshop also raised issues 
concerning education and outreach needs. First and foremost they saw, 
education and outreach programs as key activities, whether or not a 
fleet rule is proposed. They identified a major need to provide 
information to fleet operators and decision-makers. Second, they stated 
that education of personnel is also now more complicated, because of 
the need to train them on the aspects of complex, computer-controlled 
vehicles. Third, attendees asserted that most of the public does not 
understand the true affect of oil use, and how individual actions 
impact the Nation's energy security. Attendees argued that the general 
public hears about supply issues, but not about demand. They asserted 
that large vehicles (like sport utility vehicles and full-size pickup 
trucks) are often not actually needed by the drivers using them, but 
that the OEMs are selling these vehicles in large numbers. Attendees 
argued that until the general public understands the impacts of oil 
use, support for higher budgets (such as for local governments or 
incentives) to help AFV programs, and changes to the relative economics 
of oil and alternative fuels is unlikely.
    In contrast to the attendees at the first two workshops described 
above, attendees at the Washington, DC workshops had widely differing 
opinions on possible regulations. This wide divergence of opinions was 
primarily was due to the unrestricted attendance at the Washington 
workshop.
    While a number of attendees supported some form of regulatory 
action by DOE, several not only had a negative view of mandates, but 
also asserted that because of the substantial legal issues presented, 
virtually any mandate by DOE would be met with litigation. Of those who 
supported regulatory action, most supported a Replacement Fuel Rule, 
with some stating that the Fleet Rewards Program should be a fall-back 
position. Most attendees supported a flexible approach that focused on 
fuel use, and felt that vehicle acquisition programs do not result in 
alternative fuel use. Several commenters felt that unless DOE moved 
forward with some regulatory action, it would be sending a message that 
replacing petroleum is not important.
    Several attendees were interested in whether private fleets could 
be separated from local government fleets, so that different 
requirements could be imposed on each. Several State government 
representatives discussed the relationship between a potential private 
and local government rule and the existing fleet regulations because 
they were interested in opting into a Replacement Fuel Rule or Fleet 
Rewards Program.
    Attendees said enforcement of existing and future fleet programs 
was an issue. For any regulations put in place, commenters asserted 
that DOE must be committed to enforcing them to ensure that the program 
goals are being achieved.
Summary of Written Comments
    DOE received 28 sets of written comments in response to the notice 
for intergovernmental consultation, from equipment suppliers, local 
governments, alternative fuel organizations, Clean Cities coalitions 
and coordinators, and fleet management and leasing organizations, among 
others. These comments in many respects echo the remarks made at the 
three workshops. Some important themes run through these comments, and 
are summarized below.
    While most comments focused almost exclusively on a potential fleet 
requirement rule, a few key addressed the replacement fuel goals. A 
representative from a conversion company asserted that reducing the use 
of petroleum is important, and that incentives are needed for natural 
gas companies to provide public stations. The representative also 
stated that grants are needed for stations and equipment, but 
organizations trying to move things ahead are being penalized by 
matching requirements. One local government representative submitted a 
similar statement, arguing that DOE should focus on reducing the 
financial burden on fleets from AFV acquisition programs, through 
additional grants for vehicles and refueling infrastructure.
    An alternative fuel association representative stated that EPAct's 
energy security objectives are not being met under current conditions. 
This representative felt that the present regulatory framework is not 
effective in displacing petroleum, and that DOE should reform existing 
fleet programs by adding greater flexibility and multiple options. The 
representative also believed that DOE must realize EPAct's replacement 
fuel goals cannot be achieved solely through AFV acquisitions and 
alternative fuel use by private and local government fleets. This 
representative supported adoption of financial and non-financial 
incentives, including tax incentives and grant programs, especially for 
infrastructure.
    A representative for Clean Cities coalitions stated that its 
chapters strongly support fuel-neutral incentives. This representative 
said its chapter were working toward an initial appropriations target 
of $25-30 million to support AFV acquisitions, infrastructure 
construction, and educational programs. This additional funding would 
be used to increase alternative fuel use.
    One Northeastern State asserted that not achieving the replacement 
fuel goals set forth in EPAct is a function of policy limitations, not 
potential. The State said fleets are acquiring FFVs and dual-fuel 
vehicles, and thus gaining the capability of using alternative fuels, 
but operating them on gasoline. The State felt that DOE should keep the 
30 percent by 2010 replacement fuel goal in EPAct.
    The U.S. Conference of Mayors, an association representing 
potentially-covered fleets, stated that it strongly supports policies 
to promote use of alternative fuels, but does not support mandates. It 
suggested that DOE work with communities to support the use of 
alternative fuels. It also suggested that DOE work with EPA to develop 
a comprehensive policy integrating clean air objectives and EPAct 
goals. Its members adopted a resolution supporting reducing dependence 
on imported fossil fuels and increasing fuel diversity, as well as one 
indicating that widespread use of alternative fuels provides air 
quality, economic, and national security benefits. It said that Clean 
Cities has not provided sufficient funding to support widespread 
promotion and implementation of alternative fuel programs. Further, the 
resolution indicated that community leaders are committed to actively 
implementing AFV projects if adequate resources are available, and that 
the organization supports making alternative fuels a priority for the 
Nation, but calls upon the Federal government to provide sufficient 
funds. In addition, the National League of Cities expressed the concern 
that the proposals presented did not include sufficient information 
concerning costs to local governments and availability of 
infrastructure.
    An association representing vehicle dealers indicated that a 
successful local government or private fleet AFV acquisition program 
needs to try to reduce the cost differentials between

[[Page 10336]]

AFVs and powered vehicles for cost-sensitive fleet buyers. This could 
include tax credits, grant funding, access to Federal acquisition 
pricing, and an expansion of allowable vehicles to include hybrids. 
Cost and performance are key considerations for fleets, and alternative 
fuels must be comparable to, if not better than, conventional fuels. 
The association said that most available alternative fuels do not meet 
these criteria. Therefore, it opposed new mandates because there are 
still too many barriers to increased use of alternative fuels to make 
an AFV acquisition mandate practicable. The association suggested that 
DOE could scale back Clean Cities to focus on niche market fleets 
selected for high likelihood of success and reproducibility. The 
association said resale value of used AFVs was a big issue to dealers, 
who are the largest purchasers and resellers of used fleet vehicles. If 
AFVs are not well-accepted by the market, the impact on dealers could 
be disastrous, according to the association. It said that DOE should 
assist in guaranteeing a resale value floor.
    A member of an association of State fleet administrators suggested 
that programs need to provide incentives or accommodation for future 
technologies and current emerging technologies, especially high fuel 
economy vehicles. The commenter strongly urged a restructuring of the 
basic legislation to allow flexibility to recognize technologies that 
achieve the objectives of EPAct and the Clean Air Act Amendments.
    A large city government suggested creation of a voluntary 
incentive-based program, although it cautioned that DOE needs to 
determine whether this would meet DOE's objectives under EPAct. It felt 
that DOE needs to conduct cost and operational impacts analyses and 
seek long-term Federal funding to offset costs for local governments 
for operation and maintenance, repair facility retrofits, land 
acquisition, staffing, etc., and that DOE should also coordinate 
efforts with EPA. Specifically, it stated that DOE needs to assist 
local governments concerning technical issues, such as vehicle 
availability, performance, operational limitations, health and safety 
requirements, as well as lack of fueling infrastructure.
    One fuel producer asserted that if DOE chooses to seek to increase 
the use of alternative or replacement fuels through funding, it should 
be done in a fuel-neutral manner, providing equal funds for all 
alternative/replacement fuel. Under this approach, if a fuel does not 
require funding for refueling infrastructure, funds could be used to 
increase production. A Midwestern State argued that the two most 
critical aspects of reducing petroleum consumption are having AFVs 
available that meet consumer needs at prices comparable to conventional 
vehicles, and having alternative fuels readily available at prices 
comparable to conventional fuels. The State did not view raising the 
price of petroleum to high levels as the answer. From a fleet 
perspective, the State said efforts to provide incentives to 
manufacturers and fuel providers have not worked well, since the 
availability of vehicles and fuels is still relatively low and has 
grown very slowly.
    A second alternative fuel provider association voiced its 
preference for a comprehensive package of incentives that would 
encourage, not require, private fleets to use AFVs and alternative 
fuels. It also argued that energy security is an important national 
priority, and that the U.S. will not be able to protect itself from 
future oil supply disruptions unless it offsets petroleum demand with 
alternative fuel use. The association also asserted that more efficient 
vehicles were no substitute for AFVs in this regard. ``Even if more 
efficient vehicles were available in large numbers, it would take many 
years for them to replace the existing fleet of vehicles and have an 
impact on petroleum consumption * * *. Efforts to increase efficiency 
should be encouraged but should not be used to undermine the basic goal 
of Titles III-V of EPAct: replacing petroleum motor fuels with the use 
of alternative fuels.''
    This trade association also believed that the EPAct goal of 30 
percent replacement fuel use by 2010 was a high requirement, but that 
it is an important goal that should be retained. It commented that the 
markets covered by EPAct are too small, especially since medium- and 
heavy-duty vehicles are excluded, and are thus insufficient to create 
economies of scale that would cause vehicle owners not subject to an 
acquisition mandate to participate. In addition, it said that the 
government has been slow to enforce existing programs. It also 
mentioned FFVs as a problem, since due to the higher price of the 
fuels, there is no incentive for operators to use anything but 
gasoline. The association asserted that financial incentives would be 
key, especially to encourage voluntary alternative fuel use. It 
suggested that these could include tax incentives, increased funding 
for infrastructure projects, and a competitive grant program. It also 
said that market development, including building up international 
markets, identification of key market sectors, and coordination of AFV 
acquisitions among all types of government fleets should be pursued. 
Air quality and energy security criteria should be applied when 
providing Federal grants, and States should receive State 
implementation plan (air quality) credits for AFV programs. In 
addition, the trade association argued that funding for alternative 
fuel R&D is also required to improve vehicle efficiency, reduce 
emissions, reduce the cost and improve the reliability of fueling 
infrastructure, and demonstrate AFV systems in new applications. It 
said that education and outreach were required to improve public 
awareness of alternative fuels and their benefits.
    One Western State stated that a number of efforts should be pursued 
to reduce the barriers to alternative fuel use. For example, it said 
that the Federal Government should work with local organizations to 
more fully utilize existing refueling stations. It said that the 
Federal fleet should not put large numbers of ethanol FFVs into States 
where there is no ethanol refueling. Along with a county board of 
commissioners from another Western State and a California coastal city, 
it also encouraged DOE to improve grant programs, encourage legislation 
to help fleets for whom tax incentives do not work, encourage 
development of highly fuel-efficient vehicles, encourage the use of new 
technologies (e.g., hybrid vehicles), provide recommendations to 
Congress for encouraging use of AFVs and alternative fuels by the 
public, change current programs to be fuel-rather than AFV-based, and 
establish a reward program for organizations that exceed their 
requirements.
    A small Eastern State's agriculture department stated that it has 
been working with soybean organizations to support use of biodiesel in 
its State. It believed that the future of U.S. agriculture depends upon 
increasing the utilization of the Nation's renewable resources and that 
DOE should consider options that benefit the use of agricultural-based 
fuels, which can help energy security, the environment, and the 
agriculture sector.
    The fleets that would be potentially covered by new regulations 
were overwhelmingly opposed to the adoption of mandates. Most fleets 
expressed their support for alternative fuels but said that they have 
limited funding to pay for the added costs of many (especially local 
governments) such requirements. These fleets supported using incentives 
to encourage increased use of alternative fuels. A number of State 
representatives

[[Page 10337]]

expressed their interest in being included in a Replacement Fuel or 
Fleet Rewards Program. These fleets generally thought that it would be 
unfair and impracticable to set up two separate programs, one for 
covered State fleets, and another new one covering local government 
fleets.
    At least one commenter expressed an interest in drastically 
reworking the existing EPAct fleet programs in order to provide credits 
for infrastructure investments. Several commenters favored providing 
credits for petroleum-fueled hybrid electric vehicles. Most commenters 
supported a Fleet Rewards or Replacement Fuel Program. Very few 
commenters were in favor of adopting a fleet program of the type set 
forth in EPAct section 507(g) (i.e., an AFV acquisition only mandate). 
In fact, a number of commenters suggested that such a program would not 
result in significant petroleum replacement.
    Several comments addressed enforcement and potential loopholes. One 
commenter asserted that if DOE is not serious about enforcement it 
should not adopt new mandates. It also noted that fleets could break up 
their fleets into smaller units or develop employee vehicle ownership 
programs as a way of avoiding the mandates. Several comments questioned 
DOE's authority to promulgate any new regulations. One comment noted 
that EPAct's deadline for promulgating a private and local government 
fleet rule had lapsed.
    Only one organization addressed the issue of whether DOE had the 
legal authority to adopt a Fleet Rewards or Replacement Fuel Program. 
That organization asserted that DOE had authority under section 502 of 
EPAct to promulgate a Replacement Fuel Program but did not have that 
authority under section 507(g). The comments appear to assert that DOE 
has authority independent of section 507(g) to require fuel use 
regardless of the fleets that are covered.

D. November 2002 Meeting

    In November of 2002, representatives of the National Association of 
Fleet Administrators (NAFA) met with DOE officials to express their 
views on the private and local government fleet rulemaking. DOE stated 
at that time that it was working on a draft. NAFA representatives 
stated that its members are opposed to additional mandates, including 
requirements to purchase AFVs. With respect to the replacement fuel 
goal, NAFA expressed concern that DOE would establish a replacement 
fuel goal that would not accomplish any societal objective or any of 
the stated objectives of EPAct, but that was gerrymandered so that it 
would serve as the basis for DOE to establish an AFV acquisition 
mandate for private and local government fleets.

III. Private and Local Government Fleet Determination

A. Statutory Requirements

    EPAct section 507(e) directs DOE to determine whether private and 
local government fleets should be required to acquire AFVs. In this 
respect, the rulemaking process for the private and local government 
fleet rule is very different from the previous rulemaking on the State 
government and alternative fuel provider fleet rule. In the case of the 
State government and alternative fuel provider fleet rule, DOE was not 
required to make any findings in order to promulgate a fleet rule. The 
determination of whether to adopt regulations for private and local 
government fleets, however, is conditional and depends on DOE first 
making several critical findings. Regulations covering private and 
local government fleets, if adopted, would in other respects likely be 
similar to those already in place for State government and alternative 
fuel provider fleets. As described above, these regulations essentially 
require that a percentage of a covered fleet's annual acquisitions of 
light-duty vehicles must be AFVs. See Alternative Fuel Transportation 
Program, 10 CFR Part 490. Section 507(g) sets forth a tentative AFV 
acquisition schedule for private and local government fleets should DOE 
establish such a program.
    Section 507(e) sets forth the requirements for determining whether 
a private and local government fleet program is ``necessary.'' Section 
507(e)(1) states that:

    * * * Such a program shall be considered necessary and a rule 
therefor shall be promulgated if the Secretary [of Energy] finds 
that--(A) the goal of replacement fuel use described in section 
502(b)(2)(B), as modified under section 504, is not expected to be 
actually achieved by 2010, or such other date as is established 
under section 504, by voluntary means or pursuant to this title or 
any other law without such a fleet requirement program, taking into 
consideration the status of the achievement of the interim goal 
described in section 502(b)(2)(A), as modified under section 504; 
and (B) such goal is practicable and actually achievable within 
periods specified in section 502(b)(2), as modified under section 
504, through implementation of such a fleet requirement program in 
combination with voluntary means and the application of other 
programs relevant to achieving such goals.

(42 U.S.C. 13257(e)(1))

    The question addressed in this portion of this SUPPLEMENTARY 
INFORMATION is whether a fleet rule is ``necessary'' under the section 
507(e) standard. DOE believes that a determination of whether a fleet 
rule is ``necessary'' depends on the following factors: The amount of 
replacement fuel use that would result if such a program would adopted 
(i.e., whether it provides more than a very small percentage 
contribution to overall U.S. use of replacement fuels in motor 
vehicles); the level of certainty about the contribution such program 
might make; whether the replacement fuel use resulting from such a 
fleet rule could be encouraged through other means, including voluntary 
measures; and whether certain necessary market conditions (e.g., 
whether alternative fuel and suitable AFVs are sufficiently available) 
exist to support a new fleet rule.

B. Rationale for the Private and Local Fleet Determination

Statutory Limitations
    As described above, while EPAct authorizes DOE to mandate certain 
vehicle acquisitions, it severely limits the universe of fleets that 
would be covered by a private and local government fleet mandate, thus 
limiting the replacement fuel use that would result from such a 
program. The definition for ``fleet'' in EPAct section 301(9), (42 
U.S.C. 13211(9)), limits coverage to large, centrally-fueled fleets 
located in major metropolitan areas. Only those fleets that operate or 
own at least 50 or more light duty vehicles may be considered for 
coverage. In addition, the definition of fleet specifically excludes 
from coverage a number of vehicle types and classes (e.g., rental 
vehicles, emergency vehicles, demonstration vehicles, vehicles garaged 
at personal residences at night, etc.). Vehicles that tend to use 
larger amounts of fuel, medium- and heavy-duty vehicles, are also 
excluded from coverage.
    Even for potentially covered fleets, EPAct section 507(i) provides 
several opportunities for regulatory relief through exemptions for non-
availability of appropriate AFVs and alternative fuels. Specifically, 
any private and local government fleet rule ``shall provide for the 
prompt exemption'' by DOE of any fleet that demonstrates AFVs ``that 
meet the normal requirements and practices of the principal business of 
the fleet owner are not reasonably available for acquisition,'' 
alternative fuels ``that meet the normal requirement and practice of 
the principal business of the fleet owner are not available in the area 
in which the vehicles are to be

[[Page 10338]]

operated,'' or for government fleets, if the requirements of the 
mandate ``would pose an unreasonable financial hardship.'' Section 
507(a)(3) further reinforces these exemptions: ``Nothing in [Title V of 
EPAct] shall be construed as requiring any fleet to acquire alternative 
fueled vehicles or alternative fuels that do not meet the normal 
business requirements and practices and needs of the fleet.''
    Taken together, these statutory exemptions would likely 
dramatically lower the number of fleets and fleet vehicles subjects to 
a private and local government AFV acquisition mandate. The provision 
concerning state and local government might not be implicated by a 
majority of otherwise covered government fleets, since in times when 
local government budgets are particularly stretched and many local 
governments are required to cut services or raise taxes to maintain 
existing levels of service, there will be greater likelihood that 
petitions for exemption from hard-pressed local governments would be 
granted. Even if DOE were disinclined to grant such petitions, the 
prospects that these petitions must be considered would create a ``stop 
and go'' quality about the local government portion of a private and 
local government fleet requirement program.
    The ability of a private and local government fleet rule to affect 
petroleum consumption also depends, in significant part, on whether DOE 
can require covered fleets to use alternative or replacement fuels in 
addition to requiring that they acquire AFVs. DOE's experience with 
fleet programs demonstrates that vehicle acquisition requirements alone 
result in a relatively small (in the context of overall U.S. fuel 
consumption) amount of petroleum replacement. However, as will be 
explained below, DOE believes it does not have the authority, were it 
to promulgate a private and local government fleet mandate program, to 
require that the vehicles acquired use any particular fuel, including 
alternative fuels.
    The only explicit requirement for fuel use in EPAct is contained in 
section 501, which extends only to alternative fuel provider fleets. 
Section 501(a)(4) states that ``vehicles purchased pursuant to this 
section shall be operated solely on alternative fuels except when 
operating in an area where the appropriate alternative fuel is 
unavailable.'' Section 507, which concerns private and local government 
fleets, does not contain a similar provision, nor does it contain a 
provision either authorizing DOE to mandate fuel use or explicitly 
prohibiting DOE from mandating fuel use. Therefore, DOE recognizes that 
it may be argued that section 507's silence leaves the issue of 
imposing a requirement to use alternative fuel open to DOE rulemaking 
authority.
    However, DOE believes the more appropriate interpretation is that, 
because Congress specifically required use of alternative fuel in 
section 501(a)(4), but not in section 507, the omission was deliberate. 
As a result, DOE believes that Congress did not intend for DOE, when 
acting under section 507, to have authority to promulgate regulations 
containing a requirement that fleet vehicles use particular types of 
fuel.
    Although this textual analysis is sufficient to support DOE's 
determination that it should not impose a fuel use requirement under 
section 507(e) and (g), it also is worthwhile to revisit Congressman 
Philip Sharp's remarks when he called up the conference report on EPAct 
for House approval. Congressman Sharp was one of the key architects of 
EPAct, and the floor manager for the bill in the U.S. House of 
Representatives. Congressman Sharp said:

    Under section 501, covered persons must actually run their 
alternative fueled vehicles on alternative fuels when the vehicle is 
operating in an area where the fuel is available. This requirement 
was not included in the fleet requirement program under section 507, 
because the conferees were concerned that the alternative fuel 
providers might charge unreasonable fuel prices to the fleets that 
are not alternative fuel providers if such fleets were required to 
use the alternative fuel.

138 Cong. Rec. H11400 (October 5, 1992).

    Thus, Congressman Sharp's floor statement is fully consistent with 
DOE's interpretation that it does not have statutory authority to 
mandate fuel use under a section 507 fleet program, and that in 
enacting section 507, Congress specifically intended to withhold that 
authority from the agency.
    Finally, DOE is also limited in its authority to affect other 
market behavior. Section 504(c) precludes DOE from promulgating rules 
that would:

    * * * mandate the production of alternative fueled vehicles or 
to specify, as applicable, the models, lines, or types of, or 
marketing or pricing practices, policies, or strategies for, 
vehicles subject to this Act. Nothing in this Act shall be construed 
to give the Secretary authority to mandate marketing or pricing 
practices, policies, or strategies for alternative fuels or to 
mandate the production or delivery of such fuels.

(42 U.S.C. 13254(c))

    These limitations severely restrict DOE's opportunities to affect 
the use of replacement fuel, or to establish the market conditions 
necessary to support a private and local government fleet rule.
    In addition to all of these provisions, Congress furthermore 
enacted a petition provision in section 507(n). That section provides:

    As part of the rule promulgated * * * pursuant to subsection * * 
* (g) of this section, the Secretary shall establish procedures for 
any fleet owner or operator or motor vehicle manufacturer to request 
that the Secretary modify or suspend a fleet requirement program * * 
* nationally, by region, or in an applicable fleet area because, as 
demonstrated by the petitioner, the infrastructure or fuel supply or 
distribution system for an applicable alternative fuel is inadequate 
to meet the needs of a fleet. In the event that the Secretary 
determines that a modification or suspension of the fleet 
requirements program on a regional basis would detract from the 
nationwide character of any fleet requirement program established by 
rule or would sufficiently diminish the economies of scale for the 
production of alternative fueled vehicles or alternative fuels and 
thereafter the practicability and effectiveness of such program, the 
Secretary may only modify or suspend the program nationally. The 
procedures shall include provisions for notice and public hearings. 
The Secretary shall deny or grant the petition within 180 days after 
filing.

(42 U.S.C. 13257(n))

    Thus, even if DOE had authority to require alternative fuel use or 
could adopt an approach that awarded credits (e.g., Fleet Rewards) for 
fuel use, the ``normal requirements and practices'' provisions in 
sections 507(i)(1) and 507(g)(3), described above, and the petition 
procedure for modification or suspension of a fleet requirement program 
under section 507(n), would likely result in many fleets potentially 
covered by the fleet rule in the first instance being able to obtain 
relief from the rules requirements.
    Consequently, it is fair to say that there is an unusually high 
degree of regulatory uncertainty built into Title V of EPAct, and that 
Congress has substantially limited the effectiveness of any fleet 
program that might be promulgated under section 507. The nature of the 
exemption and petition procedures and the associated regulatory 
uncertainty would undermine the potential effectiveness of a regulatory 
mandate to purchase significant numbers of alternative fueled vehicles, 
and accordingly, support today's proposed finding that a private and 
local government fleet requirement program would make no appreciable 
contribution to actual achievement of

[[Page 10339]]

any replacement fuel goal and therefore is not ``necessary'' under the 
section 507(e) standard.
Analysis of Potential Replacement Fuel Use
    The limitations on the potential contributions of a private and 
local government fleet program identified above are supported by 
analyses conducted for and by DOE. In both Technical Report 14 and the 
Section 506 Report, estimates of the potential replacement fuel use 
from a private and local government fleet program were very similar. 
Technical Report 14 estimated total fuel use from all EPAct fleet 
programs to be approximately 1.2 percent of U.S. gasoline use (p. 63, 
Table III-21). The Section 506 Report was only slightly more 
optimistic, indicating that ``[a]lternative fuel use by EPACT covered 
fleets, even with the contingent mandates for private and local 
government fleets, is unlikely to provide more than about 1.5 percent 
replacement fuel use * * *'' Section 506 Report at p. 35 In either 
case, subtracting out the portion of replacement fuel use represented 
by the existing (Federal, State, and alternative fuel provider) fleet 
programs, would leave the potential private and local government fleet 
program contribution at closer to 1 percent. It should be noted that 
both reports chose to include calculations based only upon the 
percentage of light-duty fuel use, represented as solely gasoline at 
the time of these reports. Therefore, replacement fuel use from the 
private and local government fleet program when viewed as a percentage 
of all on-highway motor fuel use would be on the order of 0.7 to 0.8 
percent.
    Both the analyses in Technical Report 14 and the Section 506 Report 
were conducted before DOE had much experience with implementation and 
operation of the EPAct fleet programs. This experience has shown that 
the number of fleets originally envisioned to be covered was far larger 
than actually occurred.
    Estimates prepared by Oak Ridge National Laboratory indicated that 
approximately 380,000 AFVs would be acquired annually pursuant to the 
various AFV acquisition mandates in EPAct, if a private and local 
government fleet program were promulgated and once all EPAct programs 
reached their maximum mandated percentage requirements. (See TAFV Model 
Report, p. 25, and Technical Documentation of the Transitional 
Alternative Fuels and Vehicles TAFV Model, Model Version 1.0, ONRL, 
July 1997, table 10, pp. 32-33 (hereafter, TAFV Documentation)). More 
specifically, fleets covered by the current Federal Government, State 
Government, and Alternative Fuel Provider fleet programs were projected 
to require approximately 60,000 AFVs each year, while private and local 
government fleets were projected to require approximately 320,000 
vehicles each year. Based upon replacement rates of 3 years for private 
fleet cars, 4.5 years for private fleet light trucks, and 6.75 years 
for all local government light-duty vehicles, this equates to a total 
covered fleet vehicle population of approximately 1.87 million light-
duty fleet vehicles at the maximum AFV acquisition requirement of 70 
percent.
    The TAFV model, however, has proven to be incorrect for fleets 
currently subject to EPAct AFV acquisition requirements. That model 
estimated that the current EPAct fleet programs would result in 
approximately 60,000 AFV acquisitions annually, but DOE's experience 
with those programs shows that the covered fleets are acquiring closer 
to 20,000 to 25,000 AFVs per year. (See Federal Fleet and State and 
Fuel Provider programs at http://www.ott.doe.gov/epact.) Based on this 
experience, which DOE believes would likely be replicated with respect 
to private and local government fleets, the TAFV estimate of AFV 
acquisitions that would result from a private and local government 
fleet mandate probably is 2 to 2 \1/2\ times the actual level of AFV 
acquisitions that would result. Thus, annual AFV acquisitions resulting 
from a potential private and local government fleet AFV acquisition 
mandate probably would be in the neighborhood of 130,000 to 160,000, 
with total covered light-duty fleet vehicles of approximately 750,000. 
Similarly, DOE's experience has also been that fleets not required to 
use alternative fuel often tend to acquire FFVs or bi-fuel vehicles, 
and operate them on gasoline. There is no reason to believe the results 
would be any different with private and local government fleets.
    A more recent analysis, The Alternative Fuel Transition: Results 
from the TAFV Model of Alternative Fuel Use in Light-Duty Vehicles 
1996-2000 (ORNL.TM2000/168) (September 17, 2000) [hereinafter TAFV 
Model Report], http://pzl1.ed.ornl.gov/tafv99report31a_ornltm.pdf, 
appears to incorporate more realistic assumptions regarding these fleet 
programs. The TAFV Model Report states that, ``In particular, over all 
of the price scenarios, we find that the [private and local government 
fleet] rule increases the alternative fuel penetration in 2010 from 
0.12% (without the private and local government rule) to, at most, 
0.37% [with a private and local government rule] of total fuel sales.'' 
TAFV Model Report at p. 28 Thus, this analysis placed contributions 
from the private and local government fleet rule at 0.25 percent. 
Again, as with Technical Report 14 and the Section 506 Report, the 
percentages were based only upon fuel use by light-duty vehicles. 
Therefore, the contribution from a potential rule drops below 0.2 
percent when compared against all on-highway motor fuel use.
    Thus, a potential private and local fleet program under authority 
provided to DOE by EPAct would be expected to contribute, at best, an 
extremely small amount toward achievement of replacement fuel goals. 
Even without the statutory limitations in EPAct described above, such a 
contribution would still be very small.
Infrastructure and Fuel Availability
    During the ANOPR and public workshops, a number of commenters 
expressed their concern that alternative fuel infrastructure was not 
adequate to support a private and local government fleet rule. Since 
that time, it is DOE's view that fuel provider investments in 
alternative fuel infrastructure have in fact slowed down. In the early 
1990's, shortly after EPAct's passage, a significant number of natural 
gas and electric utilities entered the transportation fuels market, 
hoping to market alternative fuels to fleets subject to the Clean Air 
Act and EPAct. The number of alternative fuel stations, natural gas 
stations in particular, grew from little more than a handful to several 
thousand. The total number of alternative fuel stations, however, 
appears to have stalled or slightly declined in the past few years. See 
Department of Energy, Alternative Fuel Data Center, Refueling Stations 
(http://www.afdc.doe.gov/refuel/state_tot.shtml) (Dec. 2002) 
[hereinafter AFDC Refueling Stations].
    Restructuring in the utility industry and the lack of demand for 
alternative fuels have played a part in the reduced role of utilities 
in the development of these facilities. Under existing fleet mandates 
and voluntary programs, electric utilities have expressed their 
discouragement at the lack of EVs on the road. A private and local 
government fleet rule probably would not appreciably affect that 
calculus given the small percentage of vehicles covered fleets would 
seek to operate on those fuels. Therefore, it is DOE's view that, if it 
were to adopt an AFV acquisition requirement for private and local 
government fleets, there is no assurance

[[Page 10340]]

or even any demonstrable likelihood that utilities would invest in the 
infrastructure needed to support these fleets.
    The ethanol industry also has made only limited investment in 
building infrastructure for supplying E-85, the fuel used by ethanol 
FFVs, of which there are several million in service today. That 
industry has primarily focused its attention on supplying the gasohol 
and gasoline oxygenate market. DOE furthermore has concerns that if, in 
the future, the demand for ethanol blends increases as a result of 
market forces outside of any DOE mandate, there could be a lack of 
domestic ethanol to meet the demand for E-85. Today, there are only 
approximately 150 fueling outlets nationwide that provide E-85. See 
AFDC Refueling Stations.
    Major energy suppliers, principally oil companies, have been 
unwilling to invest in the alternative fuels market (or they have 
actively opposed it) and instead have primarily focused their attention 
on ensuring that gasoline and diesel fuels meet current and future 
environmental regulations. Thus, DOE does not expect that the major oil 
retailers would install infrastructure necessary to support a private 
and local government fleet rule given the extremely small amount of 
replacement fuel use that likely would result from such a mandate; 
certainly that infrastructure is not in place now. This lack of 
infrastructure is likely to result in exemption requests and petitions 
to suspend any fleet requirement program DOE might impose under section 
507(e), and DOE's granting of those requests.
Alternative Fueled Vehicle Availability
    Automakers have for several years now offered some variety of AFVs, 
including passenger cars, light-duty pickup trucks and vans. The 
availability of these vehicles is in stark contrast to when EPAct was 
passed. In 1992, there were virtually no OEM vehicles available that 
operated on alternative fuel. Consumers and fleets had to have an 
existing gasoline vehicle converted by an aftermarket shop if they 
wanted an AFV. The AFVs that are available today are built by auto 
manufacturers for two primary purposes: (1) To meet the needs of the 
fleets currently subject to fleet mandates; and, (2) to provide credits 
to automakers that can be used to meet the corporate average fuel 
economy (CAFE) standards. Automobile manufacturers are awarded CAFE 
credits as an incentive develop a fleet of AFVs that will in turn lead 
to the development of infrastructure to support alternative fuel use. 
Manufacturers currently offer up to a million new FFVs each year. Other 
AFVs are available in significantly lower numbers, generally on the 
order of 10,000 per year.
    DOE is concerned that if it adopts a requirement for private and 
local government fleets to acquire AFVs, there may not be an adequate 
supply of suitable AFVs available. The number of AFVs that likely would 
be acquired under a private and local government fleet mandate are, in 
DOE's view and based on the comments it has received, insufficient to 
create the market demand that would cause manufacturers to build 
sufficient numbers of AFVs, suitable for the covered fleets, at 
affordable prices. Under the existing State government and alternative 
fuel provider fleet programs, DOE has been obliged to provide 
exemptions to a number of fleets that are unable to acquire AFVs that 
meet their business needs. Unless automakers significantly expand their 
current offerings of AFVs, DOE likely would be forced to process and 
approve thousands of exemption requests each year.
    Because EPAct expressly prohibits DOE from mandating the production 
of AFVs or to specify the types of AFVs that are made available, there 
is little that DOE can do, outside of the voluntary efforts already 
underway with vehicle manufacturers, to ensure that adequate supplies 
suitable of AFVs would be available.
Alternative Fuel Costs and Alternative Fuel Use
    At the present time, the cost of some alternative fuels (such as 
biofuels) exceeds the cost of conventional motor fuel, and it is 
reasonable to assume that, absent changes in technology, in the supply 
of petroleum, or in policy as established by law, the price 
differential will continue and will influence fleet owners and 
operators for the foreseeable future. The likely effect of the price 
differential is predictable in light of DOE's experience in 
administering the State government fleet requirement program under 
section 507(o) of EPAct. Most State government fleets are acquiring 
significant numbers of FFVs and operating them lawfully using 
conventional motor fuels. Although this practice in part may be a 
function of lack of infrastructure, the fuel cost differential of 
ethanol is probably a significant contributing factor. There is no 
reason to assume that the result would be any different--and 
substantial reason to believe that the result would be exactly the 
same--if DOE were to impose a private and local government fleet 
requirement program under section 507(e).
Discussion of Previous Proposals
    DOE considered but ultimately has decided not to propose a Fleet 
Rewards or Replacement Fuel Program, or any of the tax credit, tax 
incentive, or other programs discussed in the earlier stages of this 
rulemaking proceeding. Many commenters supported these concepts, but 
few offered any arguments that DOE had authority to implement such 
programs under section 507(e). On the other hand, a number of comments 
did question whether DOE had sufficient legal authority to promulgate 
or implement them. DOE believes it has no legal authority under EPAct 
to promulgate the tax credit and tax incentive programs that were 
discussed by DOE and commenters, and believes it is doubtful DOE has 
authority to promulgate the other types of incentive programs 
discussed.
    One advantage of the Fleet Rewards program was that it did not 
require fuel use, so it was not an explicit fuel use requirement; it 
would have allowed fuel use credits to be used instead of requiring 
vehicle acquisitions. Therefore, the program would not have been an 
explicit fuel use mandate, which DOE believes it has no authority to 
promulgate. Even so, DOE still has serious doubt about its authority to 
adopt such a program under section 507 because EPAct only provides 
credits for vehicle acquisitions. Specifically, EPAct section 508 sets 
forth a detailed crediting system, but allows credits to be earned only 
for AFV acquisitions, not fuel use or some other action. Moreover, even 
if DOE did have authority to provide credits for fuel use, DOE believes 
that there would be little incentive for most fleets to choose this 
option, since they could comply by acquiring FFVs that have little or 
no incremental cost, and could operate them on gasoline.
    In any event, a Fleet Rewards or Replacement Fuel Program would be 
of little use unless it was accompanied by a mandate for vehicle 
acquisitions or fuel use; those programs would be alternative methods 
to comply with the mandates. Because DOE is proposing to determine that 
a private and local government program is not ``necessary'' and thus 
cannot and should not be promulgated, there is no reason or need for 
DOE to consider or propose adopting a Fleet Rewards or Replacement Fuel 
Program in this notice. Furthermore, coupling a Fleet Rewards or 
Replacement Fuel Program with a private and local government fleet AFV 
acquisition mandate would be extremely unlikely to change significantly 
the amount of estimated

[[Page 10341]]

alternative and replacement fuel use by covered fleets and thus would 
not alter the analysis described above as to whether a fleet program is 
``necessary.'' There is no evidence that the Fleet Rewards or 
Replacement Fuel Programs would result in enough fuel use to 
significantly change the economics and practicability of using 
alternative or replacement fuels, and therefore there is no evidence 
that such programs would affect covered fleets' willingness or ability 
to use alternative or replacement fuels to any appreciable degree.
Summary of Determination
    For the reasons stated in this part of the SUPPLEMENTARY 
INFORMATION, DOE proposes to determine that a private and local 
government fleet requirement rule under sections 507(e) and (g) of 
EPAct is not ``necessary,'' and therefore should not be imposed. Such a 
mandate would make no appreciable contribution (less than 0.2 to 0.8 
percent of on-highway motor fuel use) toward achievement of the 2010 
replacement fuel goal in EPAct section 502 or a revised goal, and even 
this extremely small contribution is highly uncertain. As a result, DOE 
cannot make either of the two determinations set forth in section 
507(e), both of which must be determined in the affirmative before a 
private and local government fleet requirement program can be 
determined to be ``necessary'' and thus implemented. At this time, DOE 
cannot determine that the 2010 replacement fuel goal in EPAct (or a 
revised goal) is not expected to be achieved ``without such a fleet 
requirement program,'' or that the replacement fuel goal can be 
achieved ``through implementation of such a fleet requirement program'' 
in combination with other means.
    First, there are the limitations in EPAct itself, which include: 
(1) Limitations on the coverage of a private and local government fleet 
requirement program to only certain light-duty vehicle fleets; (2) 
procedures allowing case-by-case exemptions; and (3) DOE's lack of 
authority to require alternative or replacement fuel use or to create 
an effective substitute regulatory program. Second, even if DOE imposed 
AFV acquisition requirements, market conditions will encourage covered 
fleets to file petitions seeking modification and/or suspension of the 
entire fleet requirement program and/or its application to specific 
fleets and vehicles. Those conditions, which are likely to persist for 
the foreseeable future, are: (1) Lack of an alternative fuel 
infrastructure; (2) unavailability of suitable AFVs; and (3) high 
alternative fuel costs (for certain fuels) relative to the costs of 
conventional motor fuels.
    On the basis of the foregoing, DOE today proposes to determine that 
a private and local government fleet requirement program is not 
``necessary'' under the standards set forth in EPAct section 507(e) and 
therefore cannot and should not be promulgated.

C. Determination for Fleet Requirements Covering Urban Transit Bus 
Option and Law Enforcement Vehicles

    Section 507(k)(1) of EPAct provides in relevant part: ``If the 
Secretary determines, by rule, that the inclusion of fleets of law 
enforcement motor vehicles in the fleet requirement program established 
under subsection (g) would contribute to achieving the [replacement 
fuel] goal described in section 502(b)(2)(B) * * * and the Secretary 
finds that such inclusion would not hinder the use of the motor 
vehicles for law enforcement purposes, the Secretary may include such 
fleets in such program * * *.'' (emphasis added). Section 507(k)(2) 
contains similar language with regard to new urban buses. 42 U.S.C. 
13257(k)(1) and (2).
    DOE considered whether to interpret section 507(k) to mean that law 
enforcement vehicle fleets and urban buses must be considered in making 
a determination under section 507(e) and (g) as to whether a private 
and local government fleet acquisition mandate program is ``necessary'' 
or, alternatively, whether a rulemaking to consider whether law 
enforcement fleets and urban buses should be covered by a fleet 
acquisition mandate only may follow completion of a rulemaking under 
section 507(e) and (g) that determines a private and local government 
fleet acquisition program is ``necessary'' and that promulgates such a 
program. In DOE's view, EPAct prohibits DOE from considering law 
enforcement vehicle fleets when making the ``necessary'' determination 
under sections 507(e) and (g) because such fleets are specifically 
excluded from the statutory definition of the term ``fleet'' (42 U.S.C. 
13211(9)). Similarly, it is DOE's view that EPAct prohibits DOE from 
considering urban buses when making the ``necessary'' determination 
under sections 507(e) and (g) because the statutory definition of the 
term ``fleet'' is limited to ``light duty vehicles'' which are vehicles 
no more than 8,500 lbs. GVWR, and under the definition of ``urban bus'' 
referenced in section 507(k) and contained in 40 CFR 86.093-2, most 
urban buses would not qualify as light duty vehicles.
    Furthermore, sections 507(k)(1) and (2) specifically refer to ``the 
fleet requirement program established under subsection (g).'' In DOE's 
view, the better interpretation of section 507(g) is that it did not in 
and of itself ``establish'' a fleet requirement program. That section 
merely sets forth a vehicle acquisition schedule that, in order to have 
any applicability or force at all, must be implemented by DOE with a 
rule promulgated pursuant to a determination under section 507(e) that 
a private and local government fleet rule is ``necessary.'' As a 
result, in order for section 507(k) to come into operation, a private 
and local government fleet program first must be ``established'' by DOE 
pursuant to the authority in sections 507(e) and (g). Although it is 
perhaps arguable that subsection (k) could be construed to merely refer 
to subsection (g) without the necessity for DOE to have first acted to 
establish a private and local fleet program under sections 507(e) and 
(g), this alternative interpretation is not as reasonable as DOE's 
interpretation in view of the text of the statutory definition of 
``fleet'' and the use of that term in subsection (g).
    Moreover, in DOE's view, this alternative interpretation is 
undesirable as a matter of policy. First of all, with respect to urban 
transit buses, during the earlier stages of this rulemaking some 
commenters argued that an AFV acquisition mandate should not be imposed 
on urban transit buses because the buses and their riders already were 
reducing petroleum consumption by the fact the riders were not using 
their personal cars. These commenters argued that imposing an AFV 
acquisition mandate could raise the cost of riding an urban transit 
bus, which could then reduce ridership and actually increase petroleum 
consumption by causing riders to return to driving their cars. DOE 
agrees with these concerns.
    Second, and with respect to law enforcement vehicles, EPAct already 
expresses a policy that such vehicles should not be considered 
``fleets.'' DOE believes that, as a matter of policy, it should not 
seek to impose mandates on law enforcement authorities until a mandate 
first was extended to other local governmental fleets, both because the 
numbers are insufficient to appreciably change the overall analysis of 
the necessity or desirability of a private and local government fleet 
mandate program, and because commenters generally did not support 
imposing mandates on such fleets. Therefore, on the basis of the 
foregoing, today's rulemaking notice does not address law enforcement 
fleets and urban buses under section 507(k).

[[Page 10342]]

IV. Whether To Modify Replacement Fuel Goal

    DOE has decided not to propose modification of the 2010 replacement 
fuel goal of 30 percent in this notice of proposed rulemaking. As noted 
earlier, the process of determining whether to adopt a regulatory 
requirement for private and local fleets depends on whether such a rule 
is ``necessary'' to achieve EPAct's petroleum replacement fuel goals. 
As part of the process of evaluating whether to propose AFV acquisition 
mandates for private and local government fleets pursuant to EPAct 
section 507, DOE reviewed the replacement fuel goals in EPAct section 
502 and considered whether to revise them, but decided for several 
reasons that it would not propose any such modifications.
    First of all, EPAct does not require DOE to revise the petroleum 
replacement fuel goal in order for DOE to determine whether a private 
and local government fleet rule is ``necessary.'' Although section 
507(e)(2) permits DOE to modify the replacement fuel goal in the 
context of making a private and local government fleet determination, 
the statute does not require the goals to be modified.
    Second, DOE believes it would not promote the right incentives or 
actions to propose modifications to the 2010 replacement fuel goal at 
this time. Congress in 1992 created by statute (in EPAct section 
502(b)(2)) an initial national goal of using replacement fuels for at 
least 10 percent of motor fuel used in the United States in 2000, and a 
long-term goal of at least 30 percent in 2010, on a petroleum fuel 
energy equivalent basis. EPAct's legislative history does not explain 
why Congress chose these particular goals and dates, nor does it 
provide any analysis supporting them. However, and in light of the 
overall purposes of EPAct, DOE believes that Congress set these 
particular goals to establish aggressive aspirational petroleum 
reduction targets for the Federal government and the public. Congress 
apparently intended to encourage action that would aggressively advance 
the availability and use of replacement fuels. DOE believes that the 
goals as set in EPAct were intended to encourage actions that would 
lead to significant increases in replacement fuel use.
    Since EPAct's enactment in late 1992, the Federal government has 
implemented a number of regulatory and voluntary programs in an effort 
to increase the use and availability of replacement fuels. These 
programs are discussed in more detail in the Introduction section of 
this SUPPLEMENTARY INFORMATION. While these programs have had a 
favorable impact on the environment and on the use of alternative fuels 
and replacement fuels, these programs have not had the desired effect 
of greatly increasing the availability or use of alternative and 
replacement fuels, or of causing the use of replacement fuels to become 
a viable alternative, on a large-scale basis, to the use of petroleum-
based fuels in vehicles. The result is that although the use of 
replacement and alternative fuels has increased since 1992, the overall 
use of these fuels relative to total petroleum consumption remains 
relatively small. In 1992, replacement fuels accounted for slightly 
less than 2 percent of total motor fuel consumption; by 2001, 
replacement fuels accounted for less than 3 percent. See Transportation 
Fuels 2000 at Table 10. Thus, to date, very little progress has been 
made toward achieving the aggressive goals established by EPAct and 
little progress will be made in the future without major new 
initiatives.
    At the same time, DOE takes note of the fact that Congress is 
widely expected to take up comprehensive legislation that may 
significantly affect our nation's energy future and may bear 
importantly not only on the achievability of the current goals but also 
on what any potential revised goals might be. Moreover, the President 
and DOE have proposed bold initiatives to dramatically increase the 
availability, use and commercial viability of replacement fuels in the 
transportation sector. DOE's primary efforts are focused on the long-
term goal of developing the technology and infrastructure to allow 
hydrogen to become a key motor vehicle fuel. These efforts, if fully 
supported with necessary enabling legislation and funding as DOE has 
proposed, offer the potential to achieve the long term goal of 
replacing petroleum as the primary transportation fuel.
    In light of the momentum that these various efforts are 
engendering; in light of what DOE understands to be the principal 
purpose of EPAct's replacement goals in section 502(b)(2)--to encourage 
policymakers, industry and the public to engage in aggressive action to 
expand the use off alternative and replacement fuels; and in light of 
the likelihood of consideration and enactment of new legislation by 
this Congress that would have significant bearing on these issues, DOE 
has concluded that it should not make a determination under EPAct 
concerning the achievability of the 2010 goals at this time. Therefore 
DOE is not at this time proposing to change the 2010 replacement fuel 
goal set forth in EPAct section 502(b)(2). DOE will continue to 
evaluate this issue and may in the future, if it considers appropriate, 
review and modify the 2010 replacement fuel goal pursuant to its 
authority in EPAct Title V.

V. Opportunity for Public Comment

A. Participation in Rulemaking

    Interested persons are invited to participate in this proceeding by 
submitting written data, views, or comments with respect to the subject 
set forth in this notice and the proposals made by DOE. DOE encourages 
the maximum level of public participation possible in this proceeding. 
Individual consumers, representatives of consumer groups, 
manufacturers, associations, coalitions, States or other government 
entities, and others are urged to submit written comments on the 
proposal. DOE also encourages interested persons to participate in the 
public hearing announced at the beginning of this notice. Whenever 
applicable, full supporting rationale, data and detailed analyses 
should also be submitted.

B. Written Comment Procedures

    Written comments (eight copies) should be identified on the outside 
of the envelope, and on the comments themselves, with the designation: 
``Alternative Fuel Transportation Program: Private and Local Government 
Fleet Determination, NOPR, Docket Number EE-RM-FCVT-03-001'' and must 
be received by the date specified at the beginning of this notice. In 
the event any person wishing to submit written comments and cannot 
provide eight copies, alternative arrangements can be made in advance 
by calling Mr. Dana O'Hara at (202) 586-9171. Additionally, DOE would 
appreciate an electronic copy of the comments to the extent possible. 
Electronic copies should be e-mailed to [email protected]. 
DOE is currently using Corel WordPerfect or Microsoft Word.
    All comments received on or before the date specified at the 
beginning of this notice of proposed rulemaking and other relevant 
information will be considered by DOE before final action is taken on 
the proposal. All comments submitted will be made available in the 
electronic docket set up for this rulemaking. This docket will be 
available on the World Wide Web at the following address--http://www.ott.doe.gov/epact/private_fleets.shtml. Pursuant to the provisions 
of 10 CFR 1004.1, anyone

[[Page 10343]]

submitting information or data that he or she believes to be 
confidential and exempt by law from public disclosure should submit one 
complete copy of the document, as well as seven (7) copies, if 
possible, from which the information has been deleted. DOE will make a 
determination as to the confidentiality of the information and treat it 
accordingly.

C. Public Hearing Procedures

    The time and place of the public hearing are set forth at the 
beginning of this notice. DOE invites any person who has an interest in 
this proceeding, or who is a representative of a group or class of 
persons that has an interest, to make a request for an opportunity to 
make an oral presentation at the hearing. Requests to speak should be 
sent to the address or phone number indicated in the ADDRESSES section 
of this notice and should be received by the time specified in the 
DATES section of this notice.
    The person making the request should briefly describe his or her 
interest in the proceeding and, if appropriate, state why that person 
is a proper representative of the group or class of persons that has 
such an interest. The person also should provide a phone number where 
he or she may be reached during the day. Each person selected to speak 
at the public hearing will be notified as to the approximate time that 
he or she will be speaking. A person wishing to speak should bring ten 
copies of his or her statement to the hearing. In the event any person 
wishing to speak at the hearing cannot meet this requirement, 
alternative arrangements can be made in advance by calling Mr. Dana 
O'Hara, at (202) 586-9171.
    DOE reserves the right to select persons to be heard at the 
hearing, to schedule their presentations, and to establish procedures 
governing the conduct of the hearing. The length of each presentation 
will be limited to ten minutes, or based on the number of persons 
requesting to speak.
    A DOE official will be designated to preside at the hearing. The 
hearing will not be a judicial or an evidentiary-type hearing, but will 
be conducted in accordance with 5 U.S.C. 553 and section 501 of the 
Department of Energy Organization Act. (42 U.S.C. 7191). At the 
conclusion of all initial oral statements, each person may, if time 
allows, be given the opportunity to make a rebuttal statement. The 
rebuttal statements will be given in the order in which the initial 
statements were made.
    Any further procedural rules needed for the proper conduct of the 
hearing will be announced by the Presiding Officer at the hearing.
    If DOE must cancel the hearing, DOE will make every effort to 
publish an advance notice of such cancellation in the Federal Register. 
Notice of cancellation will also be given to all persons scheduled to 
speak at the hearing. The hearing may be canceled in the event no 
public testimony has been scheduled in advance.

VI. 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. With regard to the review 
required by section 3(a), 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 3(b) to determine whether they are met or it is 
unreasonable to meet one or more of them. Executive Order 12988 does 
not apply to this rulemaking notice because DOE is not proposing any 
regulations and instead is proposing to determine that regulations are 
not ``necessary'' under section 507(e) and (g) of EPAct.

VII. Review Under Executive Order 12866

    This proposed regulatory action has been determined to be a 
``significant regulatory action'' under Executive Order 12866, 
Regulatory Planning and Review. See 58 FR 51735 (October 4, 1993). 
Accordingly, today's action was subject to review under the Executive 
Order by the Office of Information and Regulatory Affairs (OIRA). A 
draft of today's action and any other documents submitted to OIRA for 
review are a part of the rulemaking record and are available for public 
review as provided in the ADDRESSES section of this notice of proposed 
rulemaking.

VIII. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, Public Law 96-354, 5 U.S.C. 
601-612, requires preparation of a regulatory flexibility analysis for 
any rule that is likely to have a significant economic impact on a 
substantial number of small entities. The proposed negative 
determination under EPAct section 507(e) would not result in compliance 
costs on small entities. Therefore, DOE certifies that today's proposed 
determination will not have a significant economic impact on a 
substantial number of small entities, and accordingly, no initial 
regulatory flexibility analysis has been prepared.

IX. Review Under the Paperwork Reduction Act

    Because DOE has proposed not to promulgate requirements for private 
and local government fleets, no new record keeping requirements, 
subject to the Paperwork Reduction Act, 44 U.S.C. 3501, et seq., would 
be imposed by today's regulatory action.

X. Review Under the National Environmental Policy Act

    The proposed rule would determine that a regulatory requirement for 
the owners and operators of certain private and local government light-
duty vehicle fleets to acquire alternative fueled vehicles would make 
no appreciable contribution to actual achievement of the replacement 
fuel goal in EPAct or a revised goal, and therefore is not 
``necessary'' under EPAct section 507(e). The ``to its achievement. The 
negative determination regarding the necessity for a fleet requirement 
program would not require any government entity or any member of the 
public to act or to refrain from acting. Accordingly, DOE has 
determined that its proposed determination is covered under the 
Categorical Exclusion found at paragraph A.5 of Appendix A to Subpart 
D, 10 CFR Part 1021, which applies to rulemakings interpreting or 
amending an existing rule or regulation that does not change the 
environmental effect of the rule or regulation being interpreted or 
amended.

XI. Review Under Executive Order 13132

    Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999), 
imposes

[[Page 10344]]

certain requirements on agencies formulating and implementing policies 
or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions. DOE has examined today's proposed 
determination and has determined that it would not preempt State law 
and would 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.

XII. Review of Impact on State Governments--Economic Impact on States

    Section 1(b)(9) of Executive Order 12866, Regulatory Planning and 
Review, 58 FR 51735 (September 30, 1993), established the following 
principle for agencies to follow in rulemakings: ``Wherever feasible, 
agencies shall seek views of appropriate State, local, and tribal 
officials before imposing regulatory requirements that might 
significantly or uniquely affect those governmental entities. Each 
agency shall assess the effects of Federal regulations on State, local, 
and tribal governments, including specifically the availability of 
resources to carry out those mandates, and seek to minimize those 
burdens that uniquely or significantly affect such governmental 
entities, consistent with achieving regulatory objectives. In addition, 
agencies shall seek to harmonize Federal regulatory actions with 
regulated State, local and tribal regulatory and other governmental 
functions.''
    Because DOE is proposing to determine that a private and local 
government fleet AFV program is not ``necessary'' under section 507(e) 
and therefore is not proposing the promulgation of such a program, no 
significant impacts upon State and local governments are anticipated. 
The position of State fleets currently covered under the existing EPAct 
fleet program is unchanged by this action. Before reaching these 
conclusions, DOE sought and considered the views of State and local 
officials. DOE's efforts in this regard are discussed above in the 
portion of this SUPPLEMENTARY INFORMATION describing the workshops DOE 
conducted on various options for implementing a fleet program.

XIII. Review of Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4, requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local and tribal governments and the 
private sector. The Act also requires a Federal agency to develop an 
effective process to permit timely input by elected officials on a 
proposed ``significant intergovernmental mandate,'' and 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. On March 18, 1997, DOE published in the Federal Register a 
statement of policy on its process for intergovernmental consultation 
under the Act (62 FR 12820). The notice of proposed rulemaking 
published today does not propose or contain any Federal mandate, so the 
requirements of the Unfunded Mandates Reform Act do not apply.

XIV. Review of Treasury and General Government Appropriations Act, 1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999, Public Law 105-277, requires Federal agencies to issue a 
Family Policymaking Assessment for any proposed rule that may affect 
family well-being. Today's notice of proposed rulemaking and proposed 
determination would not have any impact on the autonomy or integrity of 
the family as an institution. Accordingly, DOE has concluded that it is 
not necessary to prepare a Family Policymaking Assessment.

XV. Review of Treasury and General Government Appropriations Act, 2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516, note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by OMB. OMB's guidelines 
were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines 
were published at 67 FR 62446 (October 7, 2002). DOE has reviewed 
today's notice under the OMB and DOE guidelines, and has concluded that 
it is consistent with applicable policies in those guidelines.

XVI. Review Under Executive Order 13175

    Under Executive Order 13175 (Consultation and Coordination with 
Indian Tribal Governments), 65 FR 67249 (November 9, 2000), DOE is 
required to consult with Indian tribal officials in development of 
regulatory policies that have tribal implications. Today's notice and 
proposed determination would not have such implications. Accordingly, 
Executive Order 13175 does not apply to this notice and proposed 
determination.

XVII. Review Under Executive Order 13045

    Executive Order 13045 (Protection of Children from Environmental 
Health Risks and Safety Risks), 62 FR 19885 (April 23, 1997) contains 
special requirements that apply to certain rulemakings that are 
economically significant under Executive Order 12866. Today's action is 
not economically significant. Accordingly, Executive Order 13045 does 
not apply to this rulemaking.

XVIII. Review Under Executive Order 13211

    Executive Order 13211 (Actions Concerning Regulations That 
Significantly Affect Energy, Supply, Distribution, or Use), 66 FR 28355 
(May 22, 2001) requires preparation and submission to OMB of a 
Statement of Energy Effects for significant regulatory actions under 
Executive Order 12866 that are likely to have a significant adverse 
effect on the supply, distribution, or use of energy. A determination 
that a private and local government fleet AFV acquisition program is 
not ``necessary'' under EPAct section 507(e) does not require private 
and local government fleets, suppliers of energy, or distributors of 
energy to do or to refrain from doing anything. Thus, although today's 
proposed negative determination is a significant regulatory action, if 
finalized the determination will not have a significant adverse impact 
on the supply, distribution, or use of energy. Consequently, DOE has 
concluded there is no need for a Statement of Energy Effects.

    Issued in Washington, DC, on February 26, 2003.
David K. Garman,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 03-4991 Filed 3-3-03; 8:45 am]
BILLING CODE 6450-01-P