[Federal Register Volume 71, Number 122 (Monday, June 26, 2006)]
[Proposed Rules]
[Pages 36225-36231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-9998]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 451

RIN 1904-AB62


Renewable Energy Production Incentives

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Energy (DOE) Office of Energy Efficiency and 
Renewable Energy today proposes to amend its regulations for the 
Renewable Energy Production Incentives (REPI) program to incorporate 
changes made to the enabling statute by section 202 of the Energy 
Policy Act of 2005. The REPI program provides for production incentive 
payments to owners or operators of qualified renewable energy 
facilities, subject to the availability of appropriations. The 
statutory changes that DOE is proposing to implement through amendments 
to Part 451 relate primarily to allocation of available funds between 
owners or operators of two categories of qualified facilities, 
incorporation of additional ownership categories, extension of the 
eligibility window and program termination date, and expansion of 
applicable renewable energy technologies. In addition to the changes 
required by the Energy Policy Act of 2005 (EPAct 2005), DOE is 
modifying the method for accrued energy accounting in light of the new 
law. DOE also is taking this opportunity to make minor changes to 
update the regulations.

DATES: Public comments on this proposed rule will be accepted until 
July 26, 2006.

ADDRESSES: You may submit comments, identified by RIN 1904-AB62, by any 
of the following methods:
    1. Federal eRulemaking Portal: http://www.regulations.gov. Follow 
the instructions for submitting comments.
    2. E-mail to [email protected]. Include RIN 1904-AB62 in 
the subject line of the e-mail. Please include the full body of your 
comments in the text of the message or as an attachment.
    3. Mail: Address the comments to Teresa Carroll, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, EE-2K, 1000 
Independence Avenue, SW., Washington, DC 20585. Comments should be 
identified on the outside of the envelope and on the documents 
themselves with the designation ``REPI NOPR, RIN 1904-AB62.'' Due to 
potential delays in DOE's receipt and processing of mail sent through 
the U.S. Postal Service, we encourage respondents to submit comments 
electronically to ensure timely receipt.
    You may obtain copies of comments received by DOE by contacting 
Teresa Carroll of the Office of Energy Efficiency and Renewable Energy 
at the address and telephone number given in the FOR FURTHER 
INFORMATION CONTACT section below.

FOR FURTHER INFORMATION CONTACT: Daniel Beckley, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, EE-2K, 1000 
Independence Avenue, SW., Washington, DC 20585, (202) 586-7691. For 
questions regarding the administrative file maintained for this 
rulemaking, contact Teresa Carroll, U.S. Department of Energy, Office 
of Energy Efficiency and Renewable Energy, EE-2K, 1000 Independence 
Avenue, SW., Washington, DC 20585, (202) 586-6477.

SUPPLEMENTARY INFORMATION:

I. Background
II. Description of Rule Amendments
III. Opportunity for Public Comment
IV. Regulatory Review
V. Approval of the Office of the Secretary

I. Background

    The Energy Policy Act of 1992, Pub. L. 102-486, established the 
REPI program to encourage production of electric energy by State-owned 
(or political subdivisions of a State) entities and non-profit electric 
cooperative utilities using certain renewable energy resources. Subject 
to availability of appropriations, DOE was authorized to pay 1.5 cents, 
adjusted annually for inflation, to facility owners or operators for 
each kilowatt-hour of electric energy produced by qualified renewable 
energy facilities. As specified in the statute as originally enacted, 
the first energy production year was fiscal year 1994 and a ten-year 
eligibility window was prescribed. Therefore, DOE did not accept 
applications for the REPI program after September 30, 2003. Qualified 
facility owners are eligible for payment for ten successive years 
beginning with the first year for which an energy payment is made. As a 
result, incentive payments were expected to continue through 2013. DOE 
has continued to make incentive payments, based on available 
appropriations, to those applicants whose ten successive years of 
participation in the program have not expired.

[[Page 36226]]

    Section 202 of EPACT 2005 (Pub. L. 109-58) modifies the REPI 
program by: (a) Extending the eligibility window, (b) extending the 
termination date for the program, (c) increasing the number of 
renewable energy technologies eligible under the program, (d) 
broadening the category of qualified owners, and (e) altering the 
procedure for determining payment distributions if insufficient funds 
are appropriated to make full incentive payments for all approved 
applications. This proposed rule would amend the current REPI program 
regulations (10 CFR Part 451) to implement these statutory amendments. 
Additionally, this proposed rule would modify the method of 
incorporating accrued energy into pro rata calculations when 
insufficient funds are appropriated to cover all qualified kilowatt-
hours. DOE is proposing the accrued methodology change to avoid 
inequity or unfairness that it believes may otherwise result from the 
new funds distribution method specified by the new law.
    The changes made by EPACT 2005 reinforce the program as it has been 
conducted by DOE for over 12 years and do not alter its basic 
structure. Consequently, the rule amendments that DOE is proposing 
today are limited to changes needed to implement EPACT 2005 and to 
revise provisions that have become outdated since DOE initially 
implemented the program in 1995.

II. Description of Rule Amendments

    Section 451.1 (Purpose and scope). In describing the purpose and 
scope of the REPI program, DOE proposes to revise references to the 
types of organizations that qualify for payment by: (a) Substituting 
the EPACT 2005 term ``not-for-profit'' for ``non-profit'' when 
referring to electric cooperative utilities; (b) describing public 
utilities by reference to section 115 of the Internal Revenue Service 
Code; (c) citing State, Commonwealth, U.S. territory or possession, and 
the District of Columbia as eligible facility owners as indicated in 
EPACT 2005; and (d) including as eligible recipients Indian tribal 
governments and Native corporations, as required by EPACT 2005.
    Section 451.2 (Definitions). DOE proposes to add a definition of 
``ocean,'' which was made an eligible renewable energy source by EPACT 
2005. Because the REPI program is available only for renewable energy 
generated in the United States, DOE is proposing to define the term 
``ocean'' to mean the parts of the Atlantic Ocean (including the Gulf 
of Mexico) and the Pacific Ocean that are contiguous to the United 
States coastline and from which energy may be derived through 
application of tides, waves, currents, thermal differences, or other 
means.
    DOE also proposes a definition for the term ``biomass.'' The 
proposed definition codifies the broad interpretation of the term that 
has been used by the program to date, and which EPACT 2005 implicitly 
recognizes by including landfill gas and livestock methane among the 
technologies included in the definition of qualified renewable energy 
facility (42 U.S.C. 13317(b)).
    DOE proposes to add a definition for the term ``date of first 
use.'' This proposed definition would accommodate the new statutory 
language regarding use of permits to establish first use (42 U.S.C. 
13317(d)) and add clarity to the Part 451 provisions discussing time of 
first use.
    DOE proposes to update the existing definition of ``Deciding 
Official'' to reflect DOE's designation of the Manager of the Golden 
Field Office as the Deciding Official shortly after the REPI program 
was established.
    DOE proposes to replace the definition of ``non-profit electrical 
cooperative'' with the term ``not-for-profit electrical cooperative'' 
in Sec.  451.2 to conform to the change in terminology made by EPACT 
2005.
    DOE also proposes to add definitions for ``Indian tribal 
government'' and for ``Native corporation.'' Section 202 of EPACT 2005 
amends 42 U.S.C. 13317(b) to include Indian tribal governments and 
subdivisions thereof among the owners of qualified renewable energy 
facilities, but it does not define the term ``Indian tribal 
government.'' DOE proposes to define ``Indian tribal government'' to 
mean the governing body of an Indian tribe as defined in section 4 of 
the Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450b). This definition of ``Indian tribe'' is incorporated into Title 
XXVI of the Energy Policy Act of 1992 by section 503 of EPACT 2005 
(amending 25 U.S.C. 3501). The proposed definition of ``Native 
corporation'' follows section 202(b)(1) of EPACT 2005, which adopts the 
definition of the term in section 3 of the Alaska Native Claims 
Settlement Act (43 U.S.C. 1602).
    DOE proposes to amend the definition of ``renewable energy source'' 
to include ``ocean'' as a qualified renewable source. The ocean, as 
well as landfill gas and livestock methane captured by DOE's proposed 
definition of ``biomass,'' were added by section 202(b)(1) of EPACT 
2005 to the list of eligible sources of energy.
    DOE proposes to amend the definition of ``State'' to specifically 
reference Commonwealths, consistent with section 202(b)(1) of EPACT 
2005.
    Section 451.4 (What is a qualified renewable energy facility). DOE 
proposes five changes to this section to conform to the EPACT 2005 
amendments: (a) The description of owner qualifications includes Indian 
tribal governments and Native corporations; (b) the date on which a 
renewable energy facility must first be used is extended to 2016; (c) a 
designated date of first use is provided for facilities placed in 
operation after the expiration date for new applicants specified in the 
statute as originally enacted and prior to the first fiscal year of 
energy production receiving payment under this proposed rule; (d) ocean 
energy is added to the provisions describing the conversion of non-
qualified facilities; and (e) U.S. territorial waters are included as 
an acceptable facility location.
    In regard to the date of first use, DOE notes that nearly one year 
and ten months elapsed between expiration of the original eligibility 
period for new facilities (September 30, 2003) and the extension of the 
eligibility period enacted by EPACT 2005 (August 8, 2005). DOE 
interprets the extension to apply to the interim period without 
interruption. As a result, qualifying facilities for which date of 
first use occurred in fiscal years 2004 (October 1, 2003-September 30, 
2004) and 2005 (October 1, 2004-September 30, 2005) become eligible 
participants. Those facilities for which date of first use and 
subsequent energy production occur in fiscal year 2005 may apply for 
payment from fiscal year 2006 available funds as provided under these 
proposed rule amendments. Facilities with date of first use in fiscal 
year 2004 are deemed to have a date of first use of October 1, 2004, 
and may apply for fiscal year 2005 energy production under these same 
rule amendments. For the latter applicants, fiscal year 2004 energy 
production will be disregarded and fiscal year 2005, assuming 
application for payment for qualifying energy produced therein is made, 
will be deemed the first year of the ten-year eligibility period for 
payments.
    Section 451.5 (Where and when to apply). DOE proposes to eliminate 
the special provision, at Sec.  451.5(b)(2), regarding the application 
period for the program's initial 1994 fiscal year because it is no 
longer applicable. In its place, DOE is proposing a new paragraph 
(b)(2) that would provide an extended application submission period for 
owners or operators of facilities

[[Page 36227]]

whose date of first use occurs during the period October 1, 2003, and 
September 30, 2005.
    Section 451.8 (Application content requirements). DOE proposes 
changes to the required content of each annual application for payment 
that are made necessary by other proposed rule amendments. Because DOE 
proposes to maintain a permanent record of accrued energy for each 
participant, the submission of accrued energy totals, currently 
required by Sec.  451.8 (h), would no longer be required with each 
annual application. Proposed Sec.  451.8 (i) identifies supporting 
materials to be submitted by entities claiming date of first use based 
on receipt of construction permits. Because the Federal Government has 
adopted electronic funds transfer as the preferred method for financial 
transactions with commercial and institutional entities, DOE proposes 
to remove the option to select other methods of payment from Sec.  
451.8 (j). Lastly, DOE proposes to substitute the new statutory term 
``not-for-profit'' for ``non-profit'' when referring to an electrical 
cooperative.
    Section 451.9 (Procedures for processing applications.) To conform 
to EPACT 2005 requirements, DOE proposes several amendments in the 
procedures for processing applications. As specified in EPACT 2005, 
available funds will be divided in a 60:40 ratio between two categories 
of eligible renewable energy facility types. The composition of the 60 
percent category corresponds to Tier 1 under the existing regulations 
except for the addition of ocean energy as a qualifying technology. The 
40 percent category will be identical to the prior Tier 2. Also as 
specified in EPACT 2005, the rule adds the provision to allow the 
Secretary to modify the 60:40 distribution for any given year, provided 
that Congress is notified of the reasons for such change. DOE 
anticipates that this option would be employed primarily in the event 
that one of the two categories of payment has excess available funds 
for the year under the standard distribution ratio, while the other has 
insufficient funds.
    DOE also proposes to amend the provisions dealing with incentive 
payments when there are insufficient funds to make payments for all 
qualifying energy. Under both the existing and proposed amended rule, 
the total qualified electrical energy consists of (a) the energy 
produced in the most recent year and (b) the accrued energy (which is 
the qualified energy produced in all preceding years for which payment 
was not made). To more fairly accommodate the change to the 60:40 funds 
allocation, DOE proposes to amend the process for partial payment 
calculations. After funds have been determined to be insufficient and 
the 60:40 allocations have been made to the respective categories, the 
amended rule would require DOE to calculate potential payments, on a 
pro rata basis if necessary, based on the prior year's energy 
production. Excess funds in either of the 60 percent or 40 percent 
categories would be reallocated to the category still insufficiently 
funded and pro rata calculations based on prior year energy would 
continue. If funding is not exhausted by this first set of 
calculations, remaining funds are allocated to the two categories on a 
60:40 basis and a second set of calculations is undertaken based on 
accrued energy. Under this approach, recent annual energy competes for 
energy payments with recent annual energy, and accrued energy competes 
with accrued energy. To support its accrued energy calculations, DOE 
would maintain a record of each applicant's accrued energy total.
    To illustrate, assume applicants A and B have equivalent eligible 
facilities that produced 100 kWh of qualified energy in the prior year 
and that A has no accrued energy and B has 200 kWh accrued energy 
total. Under the existing rule, B's energy basis for all calculations 
would be 300 kWh, while A's would be 100 kWh and B would receive three 
times the energy payment of A regardless of the funding levels. Under 
the proposed amended process, if available funds were sufficient to 
make payments for the total qualified energy, B (with total energy 
basis of 300 kWh) would receive three times the payment of A as before. 
If funds were sufficient to make payments for only part (or all) of the 
prior year energy production, A and B (each with prior year energy 
basis of 100 kWh) would receive equal payments as determined by pro 
rata calculations. If funds were sufficient to exceed prior year energy 
payments, but insufficient to make full accrued energy payments, B 
(with accrued energy basis of 200 kWh) would receive an additional 
payment as determined by pro rata calculations, while A (with accrued 
energy basis of zero) would receive no further payment.
    DOE believes that this proposed method of accounting for accrued 
energy would be more equitable for all program participants in view of 
the potential for both payment categories to be subject to pro rata 
calculations in any given year. Without this proposed amendment, 
applicants with several years in the REPI program and large accrued 
energy backlogs, who have already received multiple REPI payments, 
would be weighted more heavily than newer applicants who have 
facilities producing equal annual energy, but have zero or small 
accrued energy backlogs. This would have had minor effect in the 
original program where the two categories, or tiers, were paid 
successively and Tier 1 was fully compensated or nearly so. Under these 
prior conditions, pro rata calculations affected small percentages of 
the total qualified electrical energy and/or a small fraction of 
program participants. Under the new 60:40 funding division and with the 
60 percent and 40 percent categories being considered in parallel, 
insufficient funding and pro rata calculations may occur for both 
categories and, therefore, apply to all participants. This could result 
in accrued energy having excessive influence on funding distributions. 
DOE's proposed amendment would require DOE to consider annual energy 
first, and accrued energy thereafter, when making pro rata 
calculations. DOE believes the proposed approach is consistent with the 
legislation. Both the statute as originally enacted and the amendments 
prescribed in EPACT 2005 describe a REPI program based on annual energy 
production and annual incentive payments, and neither includes 
provisions for addressing backlog or accrued energy. Accrued energy was 
introduced in DOE's implementation of the REPI program to allow for 
potential payment of backlogged unpaid energy in the event that 
available funding exceeded the total payments needed for qualified 
annual energy production.
    The proposed amendment would not alter the 60:40 division between 
categories and would not change DOE's continued recording and 
recognition of accrued energy totals. The proposed provisions would 
alter slightly, and more equitably, funding distribution within each 
category, while maintaining the 60:40 legislative intent. DOE 
emphasizes that, irrespective of the method used to calculate incentive 
payments, no owner or operator should assume that all, or any, accrued 
energy will ultimately receive incentive payments.

III. Opportunity for Public Comment

    Interested persons are invited to participate in this rulemaking by 
submitting data, views, or comments with respect to the proposed rule. 
Written comments should be submitted to the address given in the 
ADDRESSES section of this notice of proposed rulemaking and must be 
received by the date given in the DATES section of this notice. 
Comments should be identified

[[Page 36228]]

on the outside of the envelope and on the documents themselves with the 
designation ``REPI NOPR, RIN 1904-AB62.'' Due to potential delays in 
DOE's receipt and processing of mail sent through the U.S. Postal 
Service, we encourage respondents to submit comments electronically to 
ensure timely receipt. All written comments received will be available 
for public inspection as part of the administrative record on file for 
this rulemaking maintained by the Office of Energy Efficiency and 
Renewable Energy at the address provided at the beginning of this 
notice of proposed rulemaking.
    Pursuant to the provisions of 10 CFR 1004.11, any person submitting 
information which that person believes to be confidential and which may 
be exempt by law from public disclosure, should submit one complete 
copy of the document, as well as two copies from which the information 
claimed to be confidential has been deleted. DOE reserves the right to 
determine the confidential status of the information and to treat it 
according to its determination.
    DOE has determined that this rulemaking does not raise the kinds of 
substantial issues or impacts that, pursuant to 42 U.S.C. 7191, would 
require DOE to provide an opportunity for oral presentation of views, 
data and arguments. Therefore, DOE has not scheduled a public hearing 
on these proposed amendments to Part 451. DOE may reconsider this 
determination based on the written comments it receives.

IV. Regulatory Review

A. Executive Order 12866

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

B. National Environmental Policy Act

    DOE has determined that this proposed rule is covered under the 
Categorical Exclusion found in the Department's National Environmental 
Policy Act regulations at paragraph A.6 of Appendix A to Subpart D, 10 
CFR Part 1021, which applies to rulemakings that are strictly 
procedural. Accordingly, neither an environmental assessment nor an 
environmental impact statement is required.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial 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 53461 (August 16, 2002), DOE published 
procedures and policies on February 19, 2003, to ensure that the 
potential impacts of its rules on small entities are properly 
considered during the rulemaking process (68 FR 7990). DOE has made its 
procedures and policies available on the Office of General Counsel's 
Web site: http://www.gc.doe.gov.
    DOE has reviewed today's proposed procedures under the provisions 
of the Regulatory Flexibility Act and the procedures and policies 
published on February 19, 2003. These proposed amendments revise DOE's 
regulations for its program for making production incentive payments to 
owners or operators of qualified renewable energy facilities, subject 
to the availability of appropriations. The regulations are procedural 
in nature and affect only entities that choose to apply for incentive 
payments under the program. The proposed procedures will not have a 
significant economic impact on any class of entities. On the basis of 
the foregoing, DOE certifies that the proposed procedures, if 
implemented would 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. DOE's 
certification and supporting statement of factual basis will be 
provided to the Chief Counsel for Advocacy of the Small Business 
Administration pursuant to 5 U.S.C. 605(b).

D. Paperwork Reduction Act

    This proposed rule would not impose any new collection of 
information subject to review and approval by the Office of Management 
and Budget (OMB) under the Paperwork Reduction Act (PRA), 44 U.S.C. 
3501 et seq.

E. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally 
requires Federal agencies to examine closely the impacts of regulatory 
actions on State, local, and tribal governments. Subsection 101(5) of 
title I of that law defines a Federal intergovernmental mandate to 
include any regulation that would impose upon State, local, or tribal 
governments an enforceable duty, except a condition of Federal 
assistance or a duty arising from participating in a voluntary Federal 
program. Title II of that law requires each Federal agency to assess 
the effects of Federal regulatory actions on State, local, and tribal 
governments, in the aggregate, or to the private sector, other than to 
the extent such actions merely incorporate requirements specifically 
set forth in a statute. Section 202 of that title requires a Federal 
agency to perform a detailed assessment of the anticipated costs and 
benefits of any rule that includes a Federal mandate which may result 
in costs to State, local, or tribal governments, or to the private 
sector, of $100 million or more. Section 204 of that title requires 
each agency that proposes a rule containing a significant Federal 
intergovernmental mandate to develop an effective process for obtaining 
meaningful and timely input from elected officers of State, local, and 
tribal governments.
    These proposed procedures would not impose a Federal mandate on 
State, local or tribal governments. The proposed rule would not result 
in the expenditure by State, local, and tribal governments in the 
aggregate, or by the private sector, of $100 million or more in any one 
year. Accordingly, no assessment or analysis is required under the 
Unfunded Mandates Reform Act of 1995.

F. Treasury and General Government Appropriations Act, 1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any proposed rule that may affect family 
well being. The proposed rule 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.

G. 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

[[Page 36229]]

States and carefully assess the necessity for such actions. DOE has 
examined this proposed rule 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. No further action is required by 
Executive Order 13132.

H. 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 section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. DOE has completed the 
required review and determined that, to the extent permitted by law, 
the proposed procedures meet the relevant standards of Executive Order 
12988.

I. 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.

J. Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to the 
OMB, a Statement of Energy Effects for any proposed significant energy 
action. A ``significant energy action'' is defined as any action by an 
agency that promulgated or is expected to lead to promulgation of a 
final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of the Office of 
Information and Regulatory Affairs (OIRA), as a significant energy 
action. For any proposed significant energy action, the agency must 
give a detailed statement of any adverse effects on energy supply, 
distribution, or use should the proposal be implemented, and of 
reasonable alternatives to the action and their expected benefits on 
energy supply, distribution, and use. Today's regulatory action would 
not have a significant adverse effect on the supply, distribution, or 
use of energy and is therefore not a significant energy action. 
Accordingly, DOE has not prepared a Statement of Energy Effects.

V. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of today's Notice 
of Proposed Rulemaking. Issued in Washington, DC, on June 19, 2006.

List of Subjects in 10 CFR Part 451

    Electric utilities, Grant programs, Renewable energy.

Alexander A. Karsner,
Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons set forth in the preamble, DOE proposes to amend 
part 451 of title 10, chapter II of the Code of Federal Regulations as 
follows:

PART 451--RENEWABLE ENERGY PRODUCTION INCENTIVES

    1. The authority citation for part 451 is revised to read as 
follows:

    Authority: 42 U.S.C. 7101, et seq.; 42 U.S.C. 13317.

    2. Section 451.1(a) is revised to read as follows:


Sec.  451.1  Purpose and scope.

    (a) The provisions of this part cover the policies and procedures 
applicable to the determinations by the Department of Energy (DOE) to 
make incentive payments, under the authority of 42 U.S.C. 13317, for 
electric energy generated in a qualified renewable energy facility 
owned by: A not-for-profit electric cooperative; a public utility 
described in section 115 of the Internal Revenue Code of 1986; a State, 
Commonwealth, territory or possession of the United States, the 
District of Columbia, or political subdivision thereof; an Indian 
tribal government or subdivision thereof; or a Native corporation as 
defined in section 3 of the Alaskan Native Claims Settlement Act (43 
U.S.C. 1602).
* * * * *
    3. Section 451.2 is amended by:
    a. Adding in alphabetical order new definitions of ``Biomass,'' 
``Date of first use,'' ``Indian tribal government,'' ``Native 
corporation,'' ``Not-for-profit electrical cooperative,'' and 
``Ocean''.
    b. Revising the definitions of ``Closed loop biomass,'' ``Deciding 
Official,'' ``Renewable energy source'' and ``State.''
    c. Removing the definition of ``Nonprofit electrical cooperative.''
    The revisions and additions read as follows:


Sec.  451.2  Definitions.

* * * * *
    Biomass means biologically generated energy sources such as heat 
derived from combustion of plant matter, or from combustion of gases or 
liquids derived from plant matter, animal wastes, or sewage, or from 
combustion of gases derived from landfills, or hydrogen derived from 
these same sources.
    Closed-loop biomass means any organic material from a plant which 
is planted exclusively for purposes of being used at a qualified 
renewable energy facility to generate electricity.
    Date of first use means, at the option of the facility owner, the 
date of the first kilowatt-hour sale, the date of completion of 
facility equipment testing, or the date when all approved permits 
required for facility construction are received.
    Deciding Official means the Manager of the Golden Field Office of 
the Department of Energy (or any DOE official to whom the authority of 
the Manager of the Golden Field Office may be redelegated by the 
Secretary of Energy).
* * * * *

[[Page 36230]]

    Indian tribal government means the governing body of an Indian 
tribe as defined in section 4 of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450b).
    Native corporation has the meaning set forth in the Alaska Native 
Claims Settlement Act (25 U.S.C. 1602).
* * * * *
    Not-for-profit electrical cooperative means a cooperative 
association that is legally obligated to operate on a not-for-profit 
basis and is organized under the laws of any State for the purpose of 
providing electric service to its members.
    Ocean means the parts of the Atlantic Ocean (including the Gulf of 
Mexico) and the Pacific Ocean that are contiguous to the United States 
coastline and from which energy may be derived through application of 
tides, waves, currents, thermal differences, or other means.
* * * * *
    Renewable energy source means solar heat, solar light, wind, ocean, 
geothermal heat, and biomass, except for--
    (1) Heat from the burning of municipal solid waste; or
    (2) Heat from a dry steam geothermal reservoir which--
    (i) Has no mobile liquid in its natural state;
    (ii) Is a fluid composed of at least 95 percent water vapor; and
    (iii) Has an enthalpy for the total produced fluid greater than or 
equal to 2.791 megajoules per kilogram (1200 British thermal units per 
pound).
    State means the District of Columbia, Puerto Rico, and any of the 
States, Commonwealths, territories, and possessions of the United 
States.
    4. Section 451.4 is amended by:
    a. Revising paragraphs (a)(2) and (a)(3) and adding new paragraphs 
(a)(4) and (a)(5).
    b. Revising paragraph (e).
    c. Adding the word ``ocean'' after the word ``wind'' in paragraphs 
(f)(1) and (f)(2).
    d. Adding the words ``or in U.S. territorial waters'' after the 
word ``State'' in paragraph (g).
    The revisions and additions read as follows:


Sec.  451.4  What is a qualified renewable energy facility.

* * * * *
    (a) * * *
    (2) A public utility described in section 115 of the Internal 
Revenue Code of 1986;
    (3) A not-for-profit electrical cooperative;
    (4) An Indian tribal government or subdivision thereof; or
    (5) A Native corporation.
* * * * *
    (e) Time of first use. The date of the first use of a newly 
constructed renewable energy facility, or a facility covered by 
paragraph (f) of this section, must occur during the inclusive period 
beginning October 1, 1993, and ending on September 30, 2016. For 
facilities whose date of first use occurred in the period October 1, 
2003, through September 30, 2004, the time of first use shall be deemed 
to be October 1, 2004.
* * * * *
    5. Section 451.5 is amended by revising paragraphs (b)(1) and 
(b)(2) to read as follows:


Sec.  451.5  Where and when to apply.

* * * * *
    (b) * * *
    (1) An application for an incentive payment for electric energy 
generated and sold in a fiscal year must be filed during the first 
quarter (October 1 through December 31) of the next fiscal year, except 
as provided in paragraph (2) of this section.
    (2) For facilities whose date of first use occurred in the period 
October 1, 2003, through September 30, 2005, applications for incentive 
payments for electric energy generated and sold in fiscal year 2005 
must be filed by August 31, 2006.
* * * * *


Sec.  451.6  [Amended]

    6. Section 451.6 is amended by adding the word ``consecutive'' 
before the words ``fiscal years'' in the first sentence, and in the 
last sentence, by removing the date ``2013'' and adding in its place 
the date ``2026''.
    7. Section 451.8 is amended by:
    a. Removing the comma after the word ``owner,'' where it is first 
used in paragraph (a).
    b. Removing paragraph (h) and redesignating (i) as paragraph (h).
    c. Revising redesignated paragraph (h).
    d. Adding a new paragraph (i).
    e. Revising paragraph (j).
    f. Removing the word ``nonprofit'' and adding in its place the term 
``not-for-profit'' in paragraph (m).
    The revisions and additions read as follows:


Sec.  451.8  Application content requirements.

* * * * *
    (h) The total amount of electric energy for which payment is 
requested, including the net electric energy generated in the prior 
fiscal year, as determined according to paragraph (f) or (g) of this 
section;
    (i) Copies of permit authorizations if the date of first use is 
based on permit approvals and this is the initial application;
    (j) Instructions for payment by electronic funds transfer;
* * * * *
    8. Section 451.9 is amended by revising paragraphs (c), (d), and 
(e) to read as follows:


Sec.  451.9  Procedures for processing applications.

* * * * *
    (c) DOE determinations. The Assistant Secretary for Energy 
Efficiency and Renewable Energy shall determine the extent to which 
appropriated funds are available to be obligated under this program for 
each fiscal year. Subject to paragraph (e) of this section and upon 
evaluating each application and any other relevant information, DOE 
shall further determine:
    (1) Eligibility of the applicant for receipt of an incentive 
payment, based on the criteria for eligibility specified in this part;
    (2) The number of kilowatt-hours to be used in calculating a 
potential incentive payment, based on the net electric energy generated 
from a qualified renewable energy source at the qualified renewable 
energy facility and sold during the prior fiscal year;
    (3) The number of kilowatt-hours to be used in calculating a 
potential additional incentive payment, based on the total quantity of 
accrued energy generated during prior fiscal years;
    (4) The amounts represented by 60% of available funds and by 40% of 
available funds; and
    (5) Whether justification exists for altering the 60:40 payment 
ratio specified in paragraph (e) of this section.
    (d) Calculating payments. Subject to the provisions of paragraph 
(e) of this section, potential incentive payments under this part shall 
be determined by multiplying the number of kilowatt-hours determined 
under Sec.  451.9(c)(2) by 1.5 cents per kilowatt-hour, and adjusting 
that product for inflation for each fiscal year beginning after 
calendar year 1993 in the same manner as provided in section 
29(d)(2)(B) of the Internal Revenue Code of 1986, except that in 
applying such provisions, calendar year 1993 shall be substituted for 
calendar year 1979. Using the same procedure, a potential additional 
payment shall be determined for the number of kilowatt-hours determined 
under paragraph (c)(3) of this section. If the sum of these calculated 
payments does not exceed the funds determined to be available by the 
Assistant Secretary for Energy Efficiency and Renewable Energy under 
Sec.  451.9(c), DOE shall

[[Page 36231]]

make payments to all qualified applicants.
    (e) Insufficient funds. If funds are not sufficient to make full 
incentive payments to all qualified applicants, DOE shall--
    (1) Calculate potential incentive payments, if necessary on a pro 
rata basis, not to exceed 60% of available funds to owners or operators 
of qualified renewable energy facilities using solar, wind, ocean, 
geothermal, and closed-loop biomass technologies based on prior year 
energy generation;
    (2) Calculate potential incentive payments, if necessary on a pro 
rata basis, not to exceed 40% of available funds to owners or operators 
of all other qualified renewable energy facilities based on prior year 
energy generation;
    (3) If the amounts calculated in paragraphs (e)(1) and (2) of this 
section result in one owner group with insufficient funds and one with 
excess funds, allocate excess funds to the owner group with 
insufficient funds and calculate additional incentive payments, on a 
pro rata basis if necessary, to such owners or operators based on prior 
year energy generation.
    (4) If potential payments calculated in paragraphs (e)(1), (2), and 
(3) of this section do not exceed available funding, allocate 60% of 
remaining funds to paragraph (e)(1) recipients and 40% to paragraph 
(e)(2) recipients and calculate additional incentive payments, if 
necessary on a pro rata basis, to owners or operators based on accrued 
energy;
    (5) If the amounts calculated in paragraph (e)(4) of this section 
result in one owner group with insufficient funds and one with excess 
funds, allocate excess funds to the owner group with insufficient funds 
and calculate additional incentive payments, on a pro rata basis if 
necessary, to such owners or operators based on accrued energy.
    (6) Notify Congress if potential payments resulting from paragraphs 
(e)(3) or (5) of this section will result in alteration of the 60:40 
payment ratio;
    (7) Make incentive payments based on the sum of the amounts 
determined in paragraphs (e)(1) through (5) of this section for each 
applicant;
    (8) Treat the number of kilowatt-hours for which an incentive 
payment is not made as a result of insufficient funds as accrued energy 
for which future incentive payment may be made; and
    (9) Maintain a record of each applicant's accrued energy.
* * * * *
 [FR Doc. E6-9998 Filed 6-23-06; 8:45 am]
BILLING CODE 6450-01-P