[Federal Register Volume 69, Number 19 (Thursday, January 29, 2004)]
[Rules and Regulations]
[Pages 4219-4231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1923]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 490

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


Alternative Fuel Transportation Program; Private and Local 
Government Fleet Determination

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

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) is publishing this final rule 
pursuant to the Energy Policy Act of 1992 (EPAct). In this final rule, 
DOE announces that it is not adopting a regulatory requirement that 
owners and operators of certain private and local government fleets 
acquire alternative fueled vehicles. DOE's decision is based on its 
findings that such a requirement would not appreciably increase the 
percentage of alternative fuel and replacement fuel used by motor 
vehicles

[[Page 4220]]

in the United States and thus would make no more than a negligible 
contribution to the achievement of the replacement fuel goals set forth 
in EPAct. As a result of these findings, DOE is precluded from 
promulgating a regulatory requirement for private and local government 
fleets because such a rule is not ``necessary'' within the meaning of 
EPAct. The findings and conclusions reached in this document are 
consistent with those proposed in DOE's March 4, 2003, notice of 
proposed rulemaking.

EFFECTIVE DATE: This rule is effective March 1, 2004.

FOR FURTHER INFORMATION CONTACT: For information concerning this 
rulemaking: 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]. Copies of this final rule and supporting 
documentation for this rulemaking will be placed at the following Web 
site address: http://www.ott.doe.gov/epact/private_fleets.shtml. 
Interested persons also may 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.

SUPPLEMENTARY INFORMATION:

I. Introduction
II. Discussion of Public Comments
    A. Comments on Promulgating a Fleet Rule
    B. Comments on Revising the Replacement Fuel Goal
    C. Comments on Conducting an Environmental Assessment
III. Private and Local Government Fleet Determination
    A. Statutory Requirements
    B. Rationale for the Private and Local Government Fleet 
Determination
    C. Determination for Fleet Requirements Covering Urban Transit 
Bus and Law Enforcement Vehicles
IV. Replacement Fuel Goal
V. Review Under Executive Order 12988
VI. Review Under Executive Order 12866
VII. Review Under the Regulatory Flexibility Act
VIII. Review Under the Paperwork Reduction Act
IX. Review Under the National Environmental Policy Act
X. Review Under Executive Order 13132
XI. Review of Impact on State Governments--Economic Impact on States
XII. Review Under Unfunded Mandates Reform Act of 1995
XIII. Review Under Treasury and General Government Appropriations 
Act, 1999
XIV. Review Under Treasury and General Government Appropriations 
Act, 2001
XV. Review Under Executive Order 13175
XVI. Review Under Executive Order 13045
XVII. Review Under Executive Order 13211
XVIII. Congressional Notification
XIX. Approval by the Office of the Secretary

I. Introduction

    On March 4, 2003, DOE published a notice of proposed rulemaking 
(NOPR) announcing its proposed determination not to promulgate 
regulations requiring private and local government fleets to acquire 
alternative fueled vehicles (AFVs). See 68 FR 10320. In the same 
notice, DOE also stated that it intended to forgo a determination 
concerning the achievability of the replacement fuel goals contained in 
EPAct. The NOPR invited the public to submit written comments and 
announced that DOE also would hold a hearing to receive public comment. 
In response, five written comments were submitted, and four statements 
were given at the public hearing held on May 7, 2003. The final rule 
issued today summarizes the comments received by DOE, and includes 
DOE's responses.
    This final rule fulfills DOE's obligation under section 507(e) of 
EPAct (42 U.S.C. 13257(e)) to conduct a rulemaking to determine whether 
a private and local government fleet rule is necessary. DOE's final 
rule determines that a regulation requiring private and local 
government fleets to acquire AFVs is not ``necessary'' and, therefore, 
cannot be promulgated. The necessity determination is based on DOE's 
findings that a private and local government fleet vehicle acquisition 
mandate would not appreciably increase the percentage of alternative 
fuel or replacement fuel used in motor vehicles in the United States 
and thus would make no more than a negligible contribution to the 
achievement of EPAct's existing 2010 replacement fuel goal of 30 
percent, or of a revised replacement fuel goal were one adopted.
    The finding that the regulation by itself, if adopted, would not 
result in a meaningful increase in the percentage of alternative fuel 
or replacement fuel used by motor vehicles is based on the following 
factors. First and foremost, 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 in those 
fleets as a result of the mandate are too small to cause more than a 
negligible increase in the percentage of replacement fuel that is used 
as motor fuel. This is due in part to the limitations EPAct imposes on 
DOE's authority to promulgate a private and local government fleet AFV 
acquisition mandate. For example, a private and local government fleet 
program could only apply to light-duty vehicles (i.e., less than or 
equal to 8,500 lbs. gross vehicle weight rating (GVWR)) and fleets of 
sufficient size 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). It should be noted that automakers are already 
annually manufacturing several times the number of AFVs that would be 
required under this program. As a result, it is quite possible that a 
private and local government AFV acquisition mandate would not increase 
AFV production or sales at all, but rather would simply change the 
identity of the buyers of the vehicles. Therefore, increases in the 
production of AFVs due to the requirements of this fleet program are 
unlikely to occur.
    Second, EPAct is structured such that even fleets potentially 
covered by a fleet mandate may avoid some or all of the acquisition 
requirements, if they qualify for one of the numerous exemptions set 
forth in the statute. This situation would still be expected to be an 
issue even if manufacturers continue to manufacture large numbers of 
FFVs because, in addition to requiring the right volume of AFVs, 
implementation of a fleet mandate would require the availability of the 
right combinations of vehicle models and alternative fuel types to meet 
fleets' operational needs. Based on experience with its existing fleet 
programs, DOE has found that the availability of some important vehicle 
types continues to be limited.
    Third, even if DOE promulgated a private and local government fleet 
AFV acquisition mandate 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 does not give DOE 
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 given the current alternative fuel infrastructure and high 
alternative fuel costs relative to conventional motor fuels (despite 
availability of large total numbers of AFVs), market forces would 
prevent more than a very small increase in replacement fuel use in 
covered fleets, even if DOE were to impose a

[[Page 4221]]

private and local government fleet AFV vehicle acquisition requirement.
    In the March 2003 NOPR, DOE also indicated that it did not intend 
in this rulemaking to revise the replacement fuel goals in EPAct, which 
call for replacement fuels to make up 10 percent and 30 percent of the 
total motor fuel used in the U.S. by 2000 and 2010, respectively. 
``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 liquid fuels, fuels 
(other than alcohol) derived from biological materials, electricity 
(including electricity from solar energy), ethers,'' or any other fuel 
that the Secretary determines ``is substantially not petroleum and 
would yield substantial energy security benefits and substantial 
environmental benefits.'' ``Alternative fuel'' is defined to include 
many of the same types of fuels (such as methanol, ethanol, natural 
gas, liquid fuels domestically produced from natural gas, hydrogen and 
electricity), but also includes certain ``mixtures'' of alternative 
fuels blended with small portions of petroleum-based fuel and ``any 
other fuel the Secretary [of Energy] determines by rule, is 
substantially not petroleum and would yield substantial energy security 
benefits and substantial environmental benefits.'' (42 U.S.C. 13211) 
For example, a mixture of 85 percent methanol and 15 percent gasoline 
(by volume) 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 by volume), 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.''
    In carrying out the rulemaking proceeding contemplated in section 
507(e) of EPAct (42 U.S.C. 13257(e)), DOE is authorized to evaluate the 
replacement fuel goals and to modify them if they are not ``practicable 
and actually achievable * * * through implementation of * * * a fleet 
requirement program * * *'' and other means. DOE has concluded that it 
is not legally required to propose and finalize a revision of the 
replacement fuel goal as part of this rulemaking proceeding because, as 
indicated in the NOPR and in this final rule, the adoption of a revised 
goal would not impact its determination that a private and local 
government rule establishing a section 507(e) ``fleet requirements 
program'' would not provide any appreciable increase in replacement 
fuel use and is therefore not ``necessary'' within the meaning of 
section 507(e) of EPAct. DOE, however, will continue to evaluate this 
matter and may, if appropriate, modify the goals in the future. In the 
alternative, assuming arguendo that DOE is required to consider whether 
to revise the replacement fuel goal, DOE declines to revise for good 
cause, as explained below.
    In addition, apart from the terms of section 507(e), DOE declines 
to broaden the scope of this rulemaking to encompass goal revision 
under section 504 because it is not an appropriate time to initiate 
such a rulemaking. A review of the current status of replacement fuels 
and alternative fuels reveals that only about 3 percent of total motor 
fuel use is non-petroleum. The NOPR acknowledged that meeting the 2010 
goal of 30 percent would require extraordinary measures. DOE also 
expressed its belief that EPAct's replacement fuel goal is intended to 
establish an aggressive aspirational petroleum reduction target for the 
Federal government and the public. Based on its understanding of the 
purpose of the goal, DOE stated that it would be inappropriate and ill-
advised to propose revising the goal downward at a time when the 
Administration and Congress are considering (and in some cases, already 
implementing) the passage of major new energy initiatives. These 
initiatives, discussed in greater detail in today's final rule, could 
significantly impact transportation motor fuel use and would have an 
important influence on any future replacement fuel goal. Based on these 
factors, DOE has decided that initiating a rulemaking to modify the 
replacement fuel goal at this time is not appropriate.
    The final rule issued today addresses the March 4, 2003, NOPR and 
the comments received in response to it. It does not summarize the 
extensive actions that took place prior to March 4, 2003, with respect 
to this rulemaking. A detailed summary of those rulemaking proceedings 
is contained in the March 4, 2003, notice. In addition, DOE has 
established a Web site that contains information relating to this 
rulemaking activity. Persons interested in learning more about this 
rulemaking and its history should review the items contained on the Web 
site: http://www.ott.doe.gov/epact/private_fleets.shtml.

II. Discussion of Public Comments

    In response to DOE's NOPR, five written comments were submitted, 
and four statements were given at the public hearing. The American 
Automobile Leasing Association (AALA), Congressman Joe Barton (R-TX), 
the Center for Biological Diversity (Center), the Electric Drive 
Transportation Association (ETDA), and Mr. J.E. Barker (Fleet Manager, 
City of Gadsden, Alabama), submitted written comments. The following 
individuals or organizations provided statements at the public hearing: 
AALA, the National Association of Fleet Administrators (NAFA), and Nic 
van Vuuren (Hampton Roads Clean City Coordinator). Two individuals 
presented separate testimonies on behalf of NAFA at the public hearing. 
The comments and statements are available on DOE's Web site.
    These comments and statements can primarily be grouped according to 
whether they support or oppose DOE's proposed determination regarding 
adoption of a private and local government fleet mandate and the 
decision not to revise the replacement fuel goals contained in EPAct. 
However, the comments submitted by EDTA are not summarized below 
because they do not speak directly to the issues relevant to a 
determination under section 507(e) of EPAct. EDTA's comments instead 
urge DOE to support the adoption of incentives and to develop other 
programs that encourage the increased use of AFVs and alternative 
fuels.

A. Comments on Promulgating a Fleet Rule

    The coordinator for the Hampton Roads Clean Cities Coalition (Nic 
van Vuuren), Mr. J.E. Barker (Fleet Manager, City of Gadsden, Alabama), 
and the Center each submitted comments opposing the proposed 
determination not to promulgate a new fleet rule. Mr. van Vuuren stated 
that DOE's NOPR ignores the fact that fleet AFV programs, including a 
private and local government fleet mandate, were intended to be a 
``foundation for voluntary efforts,'' and were not expected by 
themselves to achieve the petroleum use reduction goals in EPAct. He 
also stated that the purpose of the replacement fuel goal in EPAct is 
not to achieve a specific percentage of petroleum replacement, but 
rather to further petroleum replacement in general. Therefore, he 
asserted that a private and local government fleet AFV acquisition 
requirement is necessary because it would contribute generally to 
petroleum replacement, even if it would not result in the achievement 
of the levels established in EPAct.
    As DOE indicated in the NOPR, the existing fleet programs generate 
demand

[[Page 4222]]

for AFVs and alternative fuels to some extent and, in fact, account for 
a significant share of the existing market for each. However, EPAct 
establishes a much higher bar than that before DOE can promulgate a 
private and local government fleet regulation. Under section 507(e) of 
EPAct, it is not enough that a private and local government fleet AFV 
acquisition mandate simply increase the level of alternative or 
replacement fuel used; rather, in order for a mandate to be promulgated 
DOE must find that the 2010 goal actually is achieved ``through 
implementation of such a fleet requirement program in combination with 
voluntary means and the application of other programs * * *.'' (42 
U.S.C. 13257(e)).
    As indicated in the NOPR, DOE estimates that implementation of the 
private and local government fleet AFV acquisition mandate could result 
in between 0.20-0.80 percent petroleum replacement. (See 68 FR 10339.) 
Several of the comments focused on the fact that the NOPR included an 
estimate that the private and local government fleet AFV acquisition 
mandate could potentially replace 1 percent of petroleum motor fuel 
use. However, the NOPR indicated that the 1 percent estimate overstates 
the potential impact that the program would have because the 1 percent 
estimate does not include motor fuel used in heavy-duty vehicles, 
primarily diesel fuel. If both light- and heavy-duty vehicle motor fuel 
use is considered, the maximum amount of replacement fuel use expected 
to result from a private and local government AFV acquisition mandate--
even if EPAct required the AFVs to use alternative fuel--is only about 
0.70-0.80 percent. While the Center questioned DOE's assertion that it 
could not require fuel use and expressed the view that DOE's fuel use 
projections were low, neither the Center nor any other commenter 
supplied any data or information to demonstrate that DOE's estimate was 
in error.
    In DOE's view, the high relative cost of most alternative fuels 
makes it unlikely that the adoption of a private and local government 
fleet regulation would lead other fleets to voluntarily adopt 
alternative fuel programs or that some local governments might, as the 
coordinator for Hampton Roads indicated, adopt fuel use programs to 
compliment the vehicle acquisition requirement. In fact, 
representatives of fleet associations vigorously contested the idea 
that their members would voluntarily participate in any programs as 
long as the threat of future mandates exists.
    The Center also submitted comments opposing DOE's proposed 
determination regarding whether to promulgate a private and local 
government fleet regulation. The Center commented that an AFV 
acquisition mandate for private and local government fleets ``will have 
a profound effect on the market for AFVs and alternative fuels.'' The 
Center asserted that a private and local government fleet regulation, 
if adopted, would significantly expand the number of AFVs acquired 
annually. However, the key consideration with respect to whether a 
private and local government fleet rule is necessary is not the number 
of AFVs that are acquired each year, but rather the resulting 
percentage of motor fuel use that will be replacement fuel. Thus, the 
number of AFVs that would be acquired under the program is largely 
irrelevant to the question of whether such a rule is ``necessary'' as 
that term is used in section 507(e).
    The Center also argued that even if the private and local 
government fleet rule only provided a 1 percent reduction in petroleum 
consumption, this would not be insignificant given the amount of oil 
the U.S. consumes. This comment appears to imply that DOE could adopt a 
private and local government fleet regulation regardless of the actual 
amount of replacement fuel use that might result, and that a 1 percent 
reduction would be sufficient to justify the rule. As indicated above, 
the 1 percent estimate was based on earlier estimates of the potential 
impact of a private and local government fleet rule and it did not take 
into account fuel used in heavy-duty vehicles. As explained in the 
NOPR, DOE's analysis indicates that a private and local government 
fleet AFV acquisition mandate would replace at best between 0.20-0.80 
percent of motor fuel consumption, with the probable amount toward the 
lower end of this range. (See 68 FR 10339.) In DOE's view, this amount 
of petroleum replacement is not sufficient to warrant such a program, 
and certainly is not enough to render the program ``necessary'' under 
the standards set forth in EPAct section 507(e).
    The Center also argued that DOE underestimates the potential impact 
that a private and local government fleet rule would have by 
incorrectly concluding in the March 4, 2003 NOPR that DOE does not have 
legal authority to require private and local government fleets to use 
alternative fuels in their AFVs. In the NOPR, DOE said the following:
    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 operate solely on alternative fuels except when operating 
in an area where the appropriate alternative fuel is unavailable.'' 
Section 507, which concerns private and local fleets, does not contain 
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 the use of alternative fuel in 
section 504(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 the 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 section 507 fleet program, and that in enacting 
section 507, Congress specifically intended to withhold that authority 
from the agency.

See 68 FR 10338.

    In evaluating the correctness of the foregoing statutory 
interpretation, DOE notes that the Center in its comments did not 
respond directly to the points that DOE made in the NOPR. The Center 
did not contest the relevance of either

[[Page 4223]]

DOE's textual comparison of sections 501 and 507 or the legislative 
history DOE quoted.
    The Center instead relies exclusively on the text of section 
507(g)(4) as the basis for its argument that DOE has authority under 
EPAct to require private and local government fleets to use alternative 
fuels in their AFVs. EPAct section 507(g)(4) reads as follows:

    A vehicle operating only on gasoline that complies with 
applicable requirements of the Clean Act Air shall not be considered 
an alternative fueled vehicle under subsection (b) or this 
subsection, except that the Secretary, as part of the rule under 
subsection (b) or this subsection, may determine that such vehicle 
should be treated as an alternative fueled vehicle for purposes of 
this section, for fleets subject to part C of title II of the Clean 
Air Act [42 U.S.C. 7581, et seq.], taking into consideration the 
impact on energy security and the goals stated in section 502(a).

(42 U.S.C. 13257(g)(4).) The Center appears to argue that section 
507(g)(4) authorizes DOE to prohibit--and that DOE should exercise this 
authority to prohibit--private and local government fleets from 
complying with an AFV acquisition mandate by acquiring dual fueled or 
flexible fueled AFVs if these vehicles are operated only on gasoline 
(even though dual fueled and flexible fueled vehicles are, by 
definition, capable of operating on gasoline or diesel).

    DOE believes that section 507(g)(4) is best read not as having the 
meaning ascribed to it by the Center, but rather as authorizing DOE to 
allow certain vehicles capable of (and thus necessarily) operating only 
on gasoline to be treated as AFVs for purposes of a fleet program 
promulgated under EPAct sections 507(b) and 507(g). The text, structure 
and context of section 507(g)(4) strongly militate against the 
construction of this section advanced by the Center, and in favor of 
DOE's construction.
    DOE reads section 507(g)(4) as imposing the general rule, which is 
consistent with EPAct's definition of an AFV, that vehicles capable of 
and thus necessarily operating only on gasoline ordinarily may not be 
counted as AFVs. However, section 507(g)(4) allows DOE to treat some 
such vehicles as AFVs for purposes of a section 507 fleet program if it 
determines to do so after taking into consideration the impacts on 
energy security and the goals stated in EPAct section 502(a). Section 
507(g)(4) thus was intended to allow DOE to mitigate the effect that a 
private and local government fleet rule otherwise might have on covered 
fleets under certain circumstances by expanding, not limiting, the 
vehicles that could be counted as AFVs for purposes of section 507. 
Therefore, DOE rejects the Center's argument that DOE mistakenly 
interpreted its authority under section 507(g)(4), and thus 
underestimated the amount of replacement fuel use that would result 
from a private and local government fleet program. If anything, DOE has 
overestimated resulting replacement fuel use by not accounting for the 
possibility that certain vehicles capable of operating solely on 
gasoline could be classified as AFVs for purposes of this program.
    The Clean Air Act (CAA) Title II, Part C (the part of the CAA cited 
in EPAct section 507(g)(4)) addresses clean fuel vehicles and clean 
fuel fleets. Significantly, vehicles powered only by reformulated 
gasoline can meet the requirements of this Part, so long as they meet 
certain emission requirements. However, reformulated gasoline is not 
listed in EPAct as an alternative fuel, and because it is 80-90 percent 
petroleum, DOE previously has determined (in the notice of final 
rulemaking that established 10 CFR Part 490) that it cannot be 
designated as an ``alternative fuel'' under EPAct because it is 
``substantially petroleum.'' Under EPAct section 301(2), DOE has the 
authority to add fuels to the statutory definition of ``alternative 
fuel'' only if, among other things, the fuel ``is substantially not 
petroleum'; the same is true with respect to ``replacement fuel'' under 
EPAct section 301(14).
    DOE interprets section 507(g)(4) as authorizing DOE to allow a 
vehicle capable of operating only on gasoline and complying with the 
applicable clean fuel vehicle requirements under Title II of the CAA to 
be treated as an AFV for purposes of a fleet program under section 507, 
notwithstanding the exclusion of reformulated gasoline and diesel from 
EPAct's definition of ``alternative fuel,'' and even though the vehicle 
otherwise could not be counted as an AFV for purposes of an EPAct fleet 
program. This interpretation makes sense because, among other reasons, 
section 507(g)(4) explicitly provides that DOE can make this allowance 
only for fleets subject to both the EPAct section 507 and CAA Title II 
fleet programs. Given this interpretation, section 507(g)(4) does not 
mean, as the Center claims, that DOE has underestimated the amount of 
replacement fuel use that would result from a private and local 
government fleet rule. Rather, section 507(g)(4) provides DOE with 
authority which, if exercised, would reduce, not increase, the amount 
of replacement fuel use resulting from a private and local government 
fleet rule. DOE's interpretation is further supported by the fact that 
section 507(g)(4) appears in section 507 among various other 
subsections the clear object of which is to relieve the potential 
burdens that a private and local government fleet rule would place on 
covered fleets.
    As DOE explained above, Congress displayed a willingness and 
ability to impose a fuel use requirement when and where it intended to 
do so, as it did in EPAct section 501. EPAct section 507(g)(4) does not 
contain any such explicit requirement. In light of the explicit terms 
with which Congress mandated fuel use in section 501, it would be 
incorrect to stretch the words of section 507(g)(4) to find a fuel use 
requirement, or an authorization for DOE to impose one.
    Moreover, it is difficult to understand how the Center's proposed 
interpretation even makes sense or could be administered in practice. 
Dual fueled vehicles are by definition capable of operating on either 
alternative fuel or on gasoline or diesel; yet at any particular time a 
dual fueled vehicle is ``operating only'' (to use the words of section 
507(g)(4)) on one particular fuel. Thus, if the Center's interpretation 
of section 507(g)(4) were to be adopted and DOE were to exercise its 
alleged authority to require covered fleets to use alternative fuels in 
their AFVs, a dual fueled vehicle would no longer be considered to be 
an AFV at any particular time it was operating on gasoline. Therefore, 
again under the Center's interpretation, the section potentially would 
prohibit (or authorize DOE to prohibit) a vehicle from being considered 
an AFV during any period in which it was in fact operated on gasoline, 
but allow the vehicle to be considered an AFV during any period of time 
when it was operated on an alternative fuel.
    This interpretation would make section 507(g)(4) impossible to 
administer in practice. The Center has not indicated how such a 
requirement could be enforced, nor how vehicles operating on 
alternative fuels some of the time and gasoline at other times would be 
counted. Similarly, the Center did not clarify how a dual fueled 
vehicle would be counted when it was not operating at all--i.e., when 
it was being garaged overnight. And since section 507(g)(4) speaks in 
terms of vehicles operated only on gasoline, its unclear how the Center 
would propose that DOE treat vehicles operating some or all of the time 
on diesel. Finally, the Center has not indicated if section 507(g)(4) 
should be interpreted as calling for the peculiar result of allowing 
dual fueled vehicles operating

[[Page 4224]]

all of the time on diesel to be counted as AFVs, but prohibiting dual 
fueled vehicles operating all of the time on gasoline from being 
counted as AFVs. Neither the Center nor any other commenter addressed 
these issues.
    Finally, DOE is of the view that it would be inappropriate, as a 
matter of policy, to interpret section 507(g)(4) as authorizing DOE to 
impose a broad restriction on the use of gasoline in dual fueled 
vehicles for the purposes of a section 507 fleet program. DOE's 
interpretation of section 507(g)(4) is in keeping with the purpose of 
section 507, which is to promote acquisition of AFVs as a means of 
achieving replacement fuel goals while protecting covered fleets from 
bearing unfair financial burdens. The Center's proposed interpretation 
would result in imposition on private and local fleet operators of an 
unfunded mandate in the form of the higher costs of purchasing 
alternative fuels. Unfunded regulatory mandates of this nature have 
been disfavored at least since the enactment of the Unfunded Mandates 
Reform Act of 1995.
    In summary, DOE believes its interpretation of section 507(g)(4) is 
both reasonable and consistent with the other sections of EPAct and 
with the Clean Air Act, and DOE declines to adopt the Center's proposed 
interpretation.
    Comments supporting DOE's decision not to promulgate a fleet 
mandate were submitted by the AALA, Congressman Joe Barton (R-TX), and 
NAFA. AALA and NAFA, which represent hundreds of individual fleets and 
businesses that would be potentially covered by a private and local 
government fleet AFV acquisition mandate, agreed with DOE's analysis 
regarding the impact that a private and local fleet AFV acquisition 
mandate would have on the achievement of EPAct's replacement fuel goals 
and supported DOE's determination that such a mandate is not necessary.
    AALA expressed the belief that the high cost of AFVs would make 
leasing costs prohibitive for many companies and that adoption of a 
fleet mandate would encourage more businesses to move away from leasing 
vehicles and toward employee-reimbursement programs, where employees 
operate their own vehicles and are reimbursed for expenses. EPAct 
excludes from its authorized fleet programs vehicles garaged at 
personal residences when not in use. Thus, AALA indicated that some 
fleets might also attempt to avoid having to comply with a private and 
local government fleet acquisition mandate by moving to employee 
reimbursement plans. AALA contended that this would not be conducive to 
cleaner air or energy efficiency because the vehicles owned and 
operated by employees would generally be less maintained, less fuel 
efficient, and more polluting than vehicles provided by leasing 
companies.
    NAFA's comments reiterated concerns expressed to DOE in earlier 
rulemaking proceedings regarding the high cost of AFVs relative to non-
AFVs, and the lack of supporting refueling infrastructure. Congressman 
Joe Barton, the Chairman of the Subcommittee on Energy and Air Quality 
of the U.S. House of Representatives Committee on Energy and Commerce, 
also submitted a short statement supporting DOE's proposed decision not 
to promulgate a fleet mandate and indicating his belief that efforts to 
increase the use of AFVs should be voluntary and market-oriented.

B. Comments on Revising the Replacement Fuel Goal

    The Center comments fault the March 4, 2003, NOPR on the ground 
that DOE did not propose a revision of the 30 percent replacement fuel 
goal established for the year 2010 pursuant to sections 507(e) and 504 
of EPAct. The Coordinator for the Hampton Roads Clean Cities Coalition 
also submitted comments arguing that DOE should have proposed a 
revision to the replacement fuel goals. In DOE's view, if an AFV 
acquisition mandate on private and local fleets under section 507(e) 
could make an appreciable contribution to achievement of a replacement 
fuel goal, there could be an obligation to consider revision of the 
existing 30 percent goal in this rulemaking. However, as explained in 
the NOPR and in this final rule (see section IV), DOE's analysis 
indicates that imposing such a vehicle acquisition mandate on private 
and local fleets would not appreciably increase the demand for and 
consumption of alternative fuels. Analysis of DOE's limited regulatory 
authority under title V of EPAct and existing market factors 
independently warrant a finding that a private and local fleet AFV 
acquisition mandate under section 507(e) is not ``necessary.'' 
Therefore, DOE is not required under section 507(e) to go further and 
revise EPAct replacement fuel goals.
    DOE recognizes that section 504 of EPAct provides for ``periodic'' 
examination and revision of the statutory replacement fuel goals 
originally established in section 502(b) for reasons other than the 
requirement to make a necessity determination under section 507(e) of 
EPAct. More specifically, section 504(a) provides for DOE to publish in 
the Federal Register a notice providing an opportunity for public 
comment on the results of ``periodic'' examination of the statutory 
replacement fuel goals. However, as the word ``periodic'' indicates, 
section 504(a) generally leaves to DOE's discretion how often the 
statutory goals should be reexamined. More importantly, under section 
504(b), DOE may only initiate a rulemaking proceeding to revise the 
statutory replacement fuel goals `` * * * after analysis of information 
in connection with carrying out subsection (a) * * *'' of section 504. 
In DOE's view, the pending legislative and the Administration proposals 
described in the March 4, 2003, NOPR (see 68 FR 10321) make it untimely 
to carry out a proceeding under subsection (a) of section 504. 
Furthermore, carrying out such a proceeding and broadening the scope of 
this rulemaking beyond section 507(e) would have likely delayed the 
issuance of this final rule.
    On the basis of the foregoing, DOE rejects the Center's claim that 
DOE violated sections 507(e) and 504 of EPAct when it omitted a 
proposal to revise the statutory replacement fuel goals and declines to 
expand the scope of this rulemaking beyond issues necessary to comply 
with section 507(e).

C. Comments on Conducting an Environmental Assessment

    The Center argues in its comments that DOE should have conducted an 
environmental assessment for its NOPR because this rulemaking does not 
qualify for application of the categorical exemption found in 10 CFR 
part 1021 at paragraph A.5 of appendix A to subpart D. Paragraph A.5 
applies to: ``Rulemaking (interpreting/amending), no change in 
environmental effect.'' The Center first argues that paragraph A.5 does 
not apply to this rulemaking because DOE did not propose to ``* * * 
interpret or amend an existing rule * * *''. In the alternative, the 
Center argues that this rulemaking does not qualify for application of 
this categorical exemption because `` * * * DOE's decision not to 
promulgate a private and municipal fleet rule has a significant 
detrimental impact on the human environment by withholding action that 
would reduce petroleum consumption and its attendant environmental 
damage.''
    DOE rejects the Center's first argument because this proceeding is 
a rulemaking to determine whether to amend 10 CFR part 490 by extending 
AFV acquisition mandates beyond alternative fuel providers under 
section

[[Page 4225]]

501 of EPAct and State government fleets under section 507(o) of EPAct 
to include mandates applicable to certain private and local government 
fleets under section 507(e) of EPAct. In DOE's view, the categorical 
exemption in paragraph A.5 applies to this rulemaking because DOE 
construes that exemption to cover rulemakings the purpose of which is 
to determine whether to amend an existing rule even if, as in this 
case, the rulemaking subsequently does not result in promulgation of 
amendatory language.
    DOE also rejects the Center's argument that imposition of an AFV 
acquisition mandate would result in appreciable reductions in petroleum 
consumption. For the reasons explained in section II.A of this 
Supplementary Information, DOE has found that such a mandate would not 
have the effect of appreciably reducing petroleum consumption. On that 
basis, DOE continues to be of the view that a rulemaking determination 
for or against amending part 490 to impose such a mandate is 
environmentally neutral. Moreover, this rulemaking maintains the status 
quo with respect to private and local government fleets because it does 
not impose any new obligations or prohibitions on these fleets. For 
these reasons, an environmental assessment is not necessary.

III. Private and Local Government Fleet Determination

A. Statutory Requirements

    Section 507(e) of EPAct directs DOE to determine whether private 
and local government fleets should be required to acquire AFVs. In this 
respect, the rulemaking process for a private and local government 
fleet rule is very different from DOE's 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 before it promulgated a fleet 
rule. (See 42 U.S.C. 13251.) The determination of whether to adopt 
regulations for private and local government fleets, however, is 
conditional and depends on DOE making several critical findings.
    Sections 507(e) and 507(g), read together, authorize DOE to 
promulgate a private and local government fleet AFV acquisition mandate 
only if DOE determines such a program is ``necessary.'' 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).)

    DOE believes that a determination of whether a private and local 
government fleet AFV acquisition mandate is ``necessary'' depends, in 
large part, on the following factors: the amount of replacement fuel 
use that would result if such a program was 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 Government Fleet Determination

1. Statutory Limitations
    While EPAct authorizes DOE to mandate AFV 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)), is limited in coverage only 
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, such as 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 requirements and practices of 
the principal business of the fleet owner are not available in the area 
in which the vehicles are to be operated,'' or for government fleets, 
if the requirements of the mandate ``would pose an unreasonable 
financial hardship.'' Section 507(g)(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 that fleet.''
    Taken together, these statutory exemptions would likely 
dramatically lower the number of fleets and fleet vehicles subject to a 
private and local government AFV acquisition mandate. With respect to 
local government fleets, a number of these otherwise covered fleets 
might be exempted, for example, 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, 
since 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.
    As explained in the NOPR and also in portions of the Supplementary 
Information for today's final rule, DOE lacks the authority under 
section 507 to require private and local government fleets to use 
alternative fuels in their AFVs. DOE's textual analysis of the statute 
and the legislative history provided in the NOPR (see 68 FR 10338) and 
above support its conclusion regarding its lack of authority to require 
fuel use. This lack of authority makes it doubtful that a fleet rule 
would have any appreciable impact on petroleum consumption. Many fleets 
might be compelled to buy AFVs, but would

[[Page 4226]]

operate the AFVs on petroleum-based fuels due to limited nature of the 
current alternative fuel infrastructure and the oftentimes high 
relative price of alternative fuels. DOE's experience with fleet 
programs demonstrates that vehicle acquisition requirements alone 
result in only a relatively small (in the context of overall U.S. fuel 
consumption) amount of petroleum replacement.
    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 in EPAct 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. As a result, it is quite possible that a private and local 
government AFV acquisition mandate would not increase AFV production or 
sales at all, but rather would simply change the identity of the buyers 
of the vehicles.
    In addition to all of the provisions discussed, Congress also 
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, 
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 in 
section 507(n), would likely result in many fleets potentially covered 
by the fleet rule being able to obtain relief from the rule's 
requirements.
    Title V of EPAct substantially limits the effectiveness of any 
private and local government fleet AFV acquisition program that might 
be promulgated under section 507. The nature of the exemption and 
petition procedures and the associated regulatory uncertainty undermine 
the potential effectiveness of a regulatory mandate to purchase 
significant numbers of AFVs. These factors support DOE's determination 
that a private and local government fleet program under section 507(g) 
would make no appreciable contribution to actual achievement of any 
replacement fuel goal and, therefore, is not ``necessary'' under the 
section 507(e) standard.
2. Analysis of Potential Replacement Fuel Use
    Available analyses further support DOE's conclusion that only a 
very small amount of alternative or replacement fuel use would result 
from a private and local government fleet program. Technical Report 14, 
discussed in the NOPR, 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).\1\ DOE's Section 506 Report \2\ 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 closer to a maximum of 1 percent. However, both 
these earlier reports include calculations based only upon the 
percentage of light-duty gasoline fuel use. For purposes of the goals 
contained in EPAct, DOE believes that fuel replacement should be 
considered in the context of all on-highway motor fuel use, including 
heavy-duty vehicle fuel use, because the goals contained in section 502 
of EPAct are to be considered in the context of the ``projected 
consumption of motor fuel in the United States.'' (42 U.S.C. 
13252(b)(2).) This section does not refer only to light-duty fuel use. 
The figures provided in these earlier reports, when adjusted to reflect 
the impact on all on-highway motor fuel use, show that a private and 
local government fleet rule--even with a fuel use requirement, which as 
noted above DOE does not have the authority to impose--would provide at 
most on the order of 0.7-0.8 percent motor fuel replacement. After 
taking into account the fact that DOE has no authority to mandate fuel 
use, DOE estimates that a private and local government fleet AFV 
acquisition mandate would likely provide only about 0.2 percent motor 
fuel replacement.
---------------------------------------------------------------------------

    \1\ 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) 
(1996).
    \2\ 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.
---------------------------------------------------------------------------

    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. DOE's experience with those 
programs now has shown that the number of fleets originally envisioned 
to be covered was far larger than the number of fleets covered in 
actual practice. DOE stated in the March 4, 2003, NOPR its belief that 
the figures in these reports probably overstate the potential impact of 
a private and local government fleet rule because they overestimate the 
total number of AFVs that would be acquired under such a program. This 
view is supported by analyses contained in a more recent DOE-supported 
report, 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, which incorporates 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

[[Page 4227]]

at 0.25 percent. Like Technical Report 14 and the Section 506 Report, 
these percentages were calculated based on the total fuel sales of the 
fuel used by light-duty vehicles only. Therefore, the contribution from 
a potential rule drops below 0.2 percent when evaluated as part of all 
on-highway motor fuel use.
    No commenter presented any persuasive analysis or data to counter 
or dispute the data and conclusions in Technical Report 14 or the 
Section 506 Report. The TAFV Model Report further supports the 
conclusions of the earlier reports. Therefore, DOE finds and concludes 
that a potential private and local fleet program under authority 
provided to DOE by EPAct section 507 would be expected to contribute, 
at best, an extremely small amount toward achievement of the 
replacement fuel goal (below 1 percent and likely below 0.2 percent of 
all on-highway motor fuel use). Even without the additional statutory 
limitations described above that EPAct places on such a private and 
local government fleet mandate, the contribution from such a mandate to 
the EPAct replacement fuel goals would be very small.
3. Infrastructure and Fuel Availability
    Throughout the proceedings associated with this rulemaking 
(including the advanced notice of proposed rulemaking and public 
workshops), numerous comments received by DOE expressed concern that 
the level of alternative fuel infrastructure is not adequate to support 
a private and local government fleet rule. In the NOPR, DOE noted that 
alternative fuel provider investments in alternative fuel 
infrastructure actually have slowed down in recent years. Shortly after 
EPAct's passage in 1992, 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 by 
the end of the 1990s. While the number of ethanol refueling stations 
has grown over the past few years, the total number of alternative fuel 
stations appears to have stalled or slightly declined. 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 has played a 
significant part in the reduced investment by utilities in alternative 
fuel stations and therefore in the lack of growth in the total number 
of alternative fuel stations.
    In the NOPR, DOE stated that the ethanol industry has made only a 
limited investment in building infrastructure for supplying E-85, the 
fuel used by ethanol FFVs, of which there are several million in 
service today. The ethanol industry has primarily focused its attention 
on supplying the gasohol and gasoline-oxygenate market. Consequently, 
today there are only approximately 180 fueling outlets nationwide that 
provide E-85. See AFDC Refueling Stations (http://www.afdc.doe.gov/refueling.html). Some efforts are underway to expand the number of E-85 
refueling sites. However, the number of E-85 stations would have to 
grow significantly to have a measurable impact on overall U.S. motor 
fuel consumption.
    As DOE explained in the NOPR, major energy suppliers, principally 
oil companies, have largely been unwilling to date 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. No 
commenter disputed the discussion in the NOPR regarding this issue. 
Thus, DOE does not expect that the major oil and fuel retailers would 
install the infrastructure necessary to support alternative fuel use by 
AFVs were DOE to promulgate a private and local government fleet 
mandate, 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 limited infrastructure would likely result in 
exemption requests and petitions to suspend any fleet requirement 
program DOE might impose under section 507(e), and DOE possibly 
granting these requests.
4. AFV 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 stands in stark contrast to when EPAct 
was enacted. In 1992, there were virtually no original equipment 
manufacturer (OEM) vehicles available that operated on alternative 
fuel. Consumers and fleets had to have existing gasoline vehicles 
converted by aftermarket shops if they wanted AFVs. The AFVs that are 
available today are built by auto manufacturers for two primary 
purposes: (1) To provide credits to automakers that can be used to meet 
the corporate average fuel economy (CAFE) standards; and, (2) to meet 
the needs of the fleets currently subject to fleet mandates.
    Automobile manufacturers are awarded CAFE credits as an incentive 
to develop AFVs. The sale of these vehicles in turn could potentially 
lead to the development of infrastructure to support alternative fuel 
use. Data available to DOE indicates that manufacturers currently offer 
over a million new flexible fuel vehicles (FFVs) each year (at 
virtually no incremental purchase price). Other AFVs (such as gaseous 
fuel vehicles) are available in significantly lower numbers, and 
generally combine for a total of less than 10,000 vehicles per year 
(often at incremental purchase prices of approximately $2000 to $8000).
    It should be noted that the total number of AFVs available each 
year is several times the number projected to be required to meet the 
annual acquisition requirements of a private and local government AFV 
fleet program. We believe such a fleet program would be unlikely to 
result in large numbers of additional AFVs being produced because most 
AFVs are manufactured as a result of the CAFE incentive provisions 
contained in the Alternative Motor Fuels Act of 1988 (AMFA) (49 U.S.C. 
32905), and the ability to earn additional credits is constrained. 
Therefore, DOE expects that, for the most part, imposition of a private 
and local government AFV fleet program would largely result in a shift 
of these already-available vehicles to fleets covered under this 
program. No commenter explained why a different outcome might 
reasonably be expected.
    DOE is also concerned that if it were to adopt a requirement for 
private and local government fleets to acquire AFVs, there may not 
necessarily be the right mix of vehicle types required by fleets. DOE 
explained this concern in the NOPR and no commenter offered any 
information or explanation why DOE's concern was not well-grounded. See 
68 FR at 10340. 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 modify their product 
plans and build the range of models and fuel type combinations required 
by fleets. It should be noted that section 504(c) of EPAct (42 U.S.C. 
13254(c)) expressly prohibits DOE from mandating the production of AFVs 
or to specify the types of AFVs that are made available.

[[Page 4228]]

Under the existing State government and alternative fuel provider fleet 
programs, DOE has been obliged to provide a number of exemptions to 
fleets that were unable to acquire AFVs that meet their ``normal 
requirements and practices.'' Unless automakers significantly expand 
their current offerings of AFVs, DOE likely would be forced to process 
and approve thousands of exemption requests each year made by private 
and local government fleets, thus further watering down the effect a 
private and local government fleet mandate would have in causing use of 
alternative fuels.
5. 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, this price 
differential will continue and will influence fleet owners and 
operators for the foreseeable future. DOE set forth this assumption in 
the NOPR, and no commenters offered any evidence or persuasive 
arguments to dispute it. See 68 FR at 10340. 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 ready access to sufficient alternative fuel 
infrastructure, the fuel cost differential of ethanol (in some 
geographic areas) is likely a contributing factor.
6. Summary of Determination
    DOE determines that a private and local government fleet AFV 
acquisition mandate under sections 507(e) and (g) of EPAct is not 
``necessary,'' and, therefore, DOE is precluded from imposing it. Such 
a mandate would make no appreciable contribution (from less than 0.2 
percent to a maximum of 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 the determinations set forth in 
section 507(e), both of which must be made in the affirmative before a 
private and local government fleet requirement program can be 
determined to be ``necessary'' and thus implemented. DOE cannot 
determine that the 2010 replacement fuel goal in EPAct (or a revised 
goal) will not be achieved ``without such a fleet requirement program'' 
because the existence of the fleet rule would have no appreciable 
impact (indeed almost no measurable impact at all) on the goal's 
achievement. For the same reason, DOE cannot determine that the 
replacement fuel goal can be achieved ``through implementation of such 
a fleet requirement program'' in combination with other means.
    DOE has come to these conclusions for all of the reasons explained 
above. To summarize, 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. In 
addition, 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, are: (1) Lack of ready access 
to sufficient alternative fuel infrastructure; (2) limited availability 
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 determines that a private 
and local government fleet requirement program is not ``necessary'' 
under the standards set forth in EPAct section 507(e) and, therefore, 
will not be promulgated.

C. Determination for Fleet Requirements Covering Urban Transit Bus 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)). Both section 507(k)(1) and 507(k)(2) limit DOE to 
only one rulemaking opportunity for implementing requirements for law 
enforcement and urban bus fleets.
    As discussed in the NOPR, DOE considered interpreting section 
507(k) to mean that law enforcement vehicle fleets and urban buses 
could be considered as part of the determination process under sections 
507(e) and (g) as to whether a private and local government fleet AFV 
acquisition mandate program is ``necessary.'' DOE, however, believes 
that EPAct only allows it to consider whether law enforcement fleets 
and urban buses should be covered by a fleet acquisition mandate after 
DOE has completed the rulemaking contemplated by sections 507(e) and 
(g), and only if DOE has determined that a private and local government 
fleet acquisition program is ``necessary.'' DOE does not believe that 
these programs can be considered as part of the rulemaking that section 
507(e) directs DOE to conduct regarding private and local government 
fleets. This view is supported by the fact that the provisions relating 
to law enforcement vehicles and urban buses require DOE to conduct 
separate rulemakings to consider whether to adopt these programs.
    DOE further interprets EPAct to prohibit 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.
    No commenter presented any persuasive argument as to why DOE's 
interpretation of sections 507(k), 507(e) and 507(g) as discussed in 
this section C of this Supplementary Information is incorrect. Thus, 
since DOE is not adopting a private and local government fleet 
requirement, it also is precluded from adopting a fleet requirement for 
law enforcement vehicles and urban buses.

IV. Replacement Fuel Goal

    DOE has decided not to modify the 2010 replacement fuel goal of 30 
percent in this final rule. As noted earlier, the process of 
determining whether to adopt

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an AFV acquisition mandate for private and local government 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.
    DOE has decided not to propose or finalize any revisions to the 
replacement fuel goal because, first, DOE does not believe that EPAct 
requires it to revise the petroleum replacement fuel goal in order to 
determine whether a private and local government fleet rule is 
``necessary.'' Revising the goal as part of this rulemaking would serve 
no purpose because, as indicated in the NOPR and in this final rule, 
the adoption of a revised goal would not impact DOE's determination 
that a private and local government fleet rule provides no appreciable 
increase in replacement fuel use. In addition, the limited regulatory 
authority under Title V of EPAct and existing market factors 
independently warrant a finding that an AFV acquisition mandate under 
section 507(e) is not ``necessary.'' Therefore, DOE is not required 
under section 507(e) to revise the EPAct 2010 percent replacement fuel 
goal, since it would not influence DOE's decision regarding whether or 
not to implement a private and local government fleet regulation.
    Second, DOE believes that revising the 2010 replacement fuel goal 
at this time would not serve the aims of EPAct to promote or encourage 
the use of replacement fuels. Congress 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 by 
2000, and a long-term goal of at least 30 percent by 2010, on a 
petroleum fuel energy equivalent basis. Neither the text of EPAct nor 
the legislative history explains why Congress chose these particular 
goals and dates. Nor does the text or legislative history 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 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. While these 
programs have increased the availability of AFVs and 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 replacement fuel 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 
currently considering 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 transportation efforts are focused on the goal of developing 
advanced motor vehicle technologies (such as hydrogen-based fuel cells) 
that could someday significantly offset demand for petroleum motor 
fuels. These efforts also support the shorter-term objective of more 
efficiently utilizing existing petroleum resources. These efforts, if 
fully supported with necessary enabling legislation and funding as DOE 
has proposed, offer the potential to achieve the long-term EPAct goal 
of replacing petroleum as the primary transportation fuel.
    In light of the momentum that these various efforts are gaining; 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 of alternative and replacement fuels; and in light of the 
possibility of new legislation 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 goal at this time. 
Therefore, DOE is not modifying 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 it appropriate, review and 
modify the 2010 replacement fuel goal pursuant to its authority in 
EPAct Title V.

V. 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 because DOE has determined that a private 
and local government fleet program is not ``necessary'' under sections 
507(e) and (g) of EPAct, and, therefore, DOE is not promulgating 
regulations to implement such a program.

VI. Review Under Executive Order 12866

    This regulatory action has been determined to be a ``significant

[[Page 4230]]

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).

VII. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et. seq.) requires 
preparation of a regulatory flexibility analysis for any rule that by 
law must be proposed for public comment, unless the agency certifies 
that the rule, if promulgated, will not have a significant economic 
impact on a substantial number of small entities. As required by 
Executive Order 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking'' (67 FR 63461, August 16, 2002), DOE published 
procedures and policies to ensure that the potential impacts of its 
draft rules on small entities are properly considered during the 
rulemaking process (68 FR 7990, February 19, 2003), and has made them 
available on the Office of General Counsel's Web site: http://www.gc.doe.gov. DOE reviewed today's final rule under the provisions of 
the Regulatory Flexibility Act and the procedures and policies 
published on February 19, 2003. DOE's negative determination under 
EPAct section 507(e) will not impose compliance costs on small 
entities. On the basis of the foregoing, DOE certifies that this final 
rule will not have a significant economic impact on a substantial 
number of small entities. Accordingly, DOE has not prepared a 
regulatory flexibility analysis for this rulemaking.

VIII. Review Under the Paperwork Reduction Act

    Because DOE has determined 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.

IX. Review Under the National Environmental Policy Act

    This rule determines that a regulatory requirement for the owners 
and operators of certain private and local government light-duty 
vehicle fleets to acquire AFVs 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 negative determination regarding the necessity for a 
private and local government fleet requirement program will not require 
any government entity or any member of the public to act or to refrain 
from acting. Accordingly, for this reason and reasons discussed in 
section II.C of the Supplementary Information, DOE has determined that 
its 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.

X. Review Under Executive Order 13132

    Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999), 
imposes 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 determination and 
determines that it will not preempt State law and will 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.

XI. 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 has determined that a private and local government 
fleet AFV program is not ``necessary'' under section 507(e) and, 
therefore, is not promulgating 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. Prior to issuance of its NOPR, DOE sought and 
considered the views of State and local officials. The March 4 NOPR 
contains a full discussion of these consultations. See 68 FR 10320.

XII. Review Under 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 final rule published today does not 
propose or contain any Federal mandate, so the requirements of the 
Unfunded Mandates Reform Act do not apply.

XIII. Review Under 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 action will 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.

XIV. 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

[[Page 4231]]

reviewed today's final rule under the OMB and DOE guidelines, and has 
concluded that it is consistent with applicable policies in those 
guidelines.

XV. 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 action would 
not have such implications. Accordingly, Executive Order 13175 does not 
apply to this final rule.

XVI. 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.

XVII. 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 
negative determination is a significant regulatory action, the 
finalization of this 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.

XVIII. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of today's rule prior to its effective date. The report 
will state that it has been determined that the rule is not a ``major 
rule'' as defined by 5 U.S.C. 804(2).

XIX. Approval by the Office of the Secretary

    The issuance of the final rule for the Private and Local Government 
Fleet Determination has been approved by the Office of the Secretary.

    Issued in Washington, DC, on January 23, 2004.
David K. Garman,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 04-1923 Filed 1-28-04; 8:45 am]
BILLING CODE 6450-01-P