[Federal Register Volume 74, Number 198 (Thursday, October 15, 2009)]
[Rules and Regulations]
[Pages 52867-52873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-24778]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 /
Rules and Regulations
[[Page 52867]]
DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 452
RIN 1904-AB73
Production Incentives for Cellulosic Biofuels; Reverse Auction
Procedures and Standards
AGENCY: Office of Energy Efficiency and Renewable Energy, U.S.
Department of Energy.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Energy (DOE) today publishes a final rule
establishing the procedures and standards for reverse auctions of
production incentives for cellulosic biofuels pursuant to section 942
of the Energy Policy Act of 2005 (EPAct 2005).
DATES: This final rule is effective November 16, 2009.
FOR FURTHER INFORMATION CONTACT: Lawrence J. Russo, Jr., Office of
Biomass Program, U.S. Department of Energy, Mailstop EE-2E, Room 5H021,
1000 Independence Avenue, SW., Washington, DC 20585; (202) 586-5618 or
[email protected]; or Mr. Edward Myers, Office of the General
Counsel, U.S. Department of Energy, Mailstop GC-72, Room 6B-256, 1000
Independence Avenue, SW., Washington, DC 20585; (202) 586-3397 or
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background and Overview
II. Discussion of Comments and Modifications of Proposed Rule
A. Comments of Dupont Danisco Cellulosic Ethanol, LLC
B. Energy Independence and Security Act of 2007
C. Heating Value
D. Commercial Suitability
III. Regulatory Review
A. Executive Order 12866
B. National Environmental Policy Act
C. Regulatory Flexibility Act
D. Paperwork Reduction Act
E. Unfunded Mandates Reform Act of 1995
F. Treasury and General Government Appropriations Act, 1999
G. Executive Order 13132
H. Executive Order 12988
I. Treasury and General Government Appropriations Act, 2001
J. Executive Order 13211
K. Consultation
L. Congressional Notification
IV. Approval of the Office of the Secretary
I. Background and Overview
Section 942 of the Energy Policy Act of 2005, Pub. L. 109-58
(August 8, 2005), requires the Secretary of Energy (Secretary), in
consultation with the Secretary of Agriculture, the Secretary of
Defense, and the Administrator of the Environmental Protection Agency,
to establish an incentive program for the production of cellulosic
biofuels and to implement that program by means of a ``reverse
auction.'' Section 942(a) states that the purposes of the program are
to: ``(1) Accelerate deployment and commercialization of biofuels; (2)
deliver the first one billion gallons of annual cellulosic biofuel
production by 2015; (3) ensure biofuels produced after 2015 are cost
competitive with gasoline and diesel; and (4) ensure that small
feedstock producers and rural small businesses are full participants in
the development of the cellulosic biofuels industry.'' In order to
achieve these purposes, the Secretary is to award production incentives
on a per gallon basis to eligible entities by means of a reverse
auction. Under section 942, the auction is conducted annually until the
earlier of the first year that annual production of cellulosic biofuels
in the United States reaches one billion gallons or 10 years after
enactment of EPAct 2005.
In order to implement section 942, DOE is promulgating this final
rule establishing procedures for the reverse auction and standards for
making production incentive awards. The eligibility standards include
both pre-auction requirements which must be met prior to an entity's
participation in a reverse auction under section 942 and several post-
auction standards which must be met as a condition of receiving an
award. The post-auction standards are especially necessary if the
nation is to achieve the long-term goals of section 942, including
delivery of the first one billion gallons of annual cellulosic biofuel
production by the statutory deadline, and establishment of a biofuels
industry that is cost competitive with gasoline and diesel. The post-
auction standards are thus intended to ensure that successful bidders
make real and meaningful progress toward the production of cellulosic
biofuels in commercially significant quantities. DOE believes that as
successive auctions yield more and more production of cellulosic
biofuels, the nation will move closer to achieving section 942's long-
term national goal of a commercially viable production capability after
2015. In addition, by setting forth clear pre-auction and post-auction
standards, DOE believes that only the most serious entities will seek
to participate in each reverse auction.
II. Discussion of Comments and Modifications of Proposed Rule
A. Comments of Dupont Danisco Cellulosic Ethanol, LLC
On December 23, 2008, DOE published a Notice of Proposed Rulemaking
(NOPR) in the Federal Register, 73 FR 78663, proposing the issuance of
this rule and inviting public comment on the proposal. In response, DOE
received only one set of comments--from Dupont Danisco Cellulosic
Ethanol, LLC (Dupont Danisco).
Dupont Danisco offered the following recommendations:
[cir] Eligibility Criteria. Tighten the eligibility criteria for
bidders, including the addition of requirement that a bidder must have
previously demonstrated its refining technology in a pilot plant; that
DOE employ a review panel to qualify bidders; and that putative bidders
must submit pro forma financial statements.
[cir] Bidding Process. Adopt an anonymous iterative, open bidding
process and clarify whether bids are to cover one year or multiple
years and/or total volume production for a specific site or multiple
sites for a single entity. The comments recommend that the rule should
permit incentive awards that are site specific and for multiple years
and that a bidder also should be able to bid in subsequent years for
uncovered production volumes at the same site.
[cir] Bidder Defaults. Where the bidder defaults due to a failure
to fulfill annual production obligations, (a) only the
[[Page 52868]]
shortfall should be considered to be in default and only the dollar
value of the shortfall should be added to the amount of incentives
eligible in the next auction round; or, in the alternative, (b)
defaulted monies should be allocated to the next lowest \1\ non-winning
bidder in the auction in which the defaulting bidder won its award.
---------------------------------------------------------------------------
\1\ The commenter uses the term ``next highest bid'' but, given
the context of a reverse auction, we understand him to mean ``next
lowest bid.''
---------------------------------------------------------------------------
[cir] Force Majeure. DOE should provide a reasonable time extension
for performance by the successful bidder where there has been a delay
due to a force majeure event.
[cir] Transfer of Awards. Awards should be site specific but
transferable to entities producing at that site.
DOE agrees with the commenter that, as a condition of eligibility
for participation in reverse auctions under the rule, bidders should
have to demonstrate that the technologies which they employ have been
first demonstrated as effective processes for biofuels refining, and
the final rule incorporates this recommendation in the definition of
``eligible cellulosic biofuels production facility'' in section 452.2.
Likewise, DOE agrees that bidders must submit audited or pro forma
financial statements as a condition of eligibility, as reflected in
section 452.4(a)(2). These two modifications of the NOPR should help to
ensure that only capable and financially fit entities participate in
the reverse auctions. On the other hand, the rule does not adopt the
commenter's recommendation for the establishment of a review panel. The
review of bidders' qualifications is a governmental function. While DOE
may employ a panel to assist it in this review, in the manner suggested
by the commenter, DOE is not convinced of the need for it in this
situation.
DOE appreciates the commenter's recommendation for the adoption of
an anonymous, iterative bidding process. However, it is not clear at
this time that an iterative bidding process would improve the bidding
process or the quality of the bids received. It warrants noting that
DOE had specifically solicited public comment on the question of
potential benefits from use of such an open iterative bidding process
but, other than the single recommendation described above, received
none. Accordingly, DOE will carefully monitor the procedures adopted in
this final rule. Over time, DOE may reconsider whether an open
iterative bidding scheme would be helpful.
With respect to whether a bid is site specific and/or entity
specific, or whether a bid is to cover only a single year or multiple
years, DOE intends that each bid should identify a projected level of
production on a per gallon, site, entity, and year specific basis for a
six year production period. Bids thus must contain projections of
anticipated production volumes for each of the six years covered by the
bid. The final rule provides clarification of these matters in section
452.5(b). Additionally, DOE intends that a bidder should be able to bid
for additional incentives for uncovered production volumes in
subsequent years at the same site where an award has already been made.
Also see, section 452.5(b).
DOE has revised section 452.6 to address the question of force
majeure events. Section 452.6(b) contains language that would allow a
reasonable extension of time to be granted at DOE's discretion to
winning bidders to fulfill their obligations under their production
agreements with DOE.
Absent a force majeure event, however, the final rule provides, in
section 452.6(c) that a winning bidder must produce at least 50 percent
of its annual obligation under the production agreement in order to
avoid a default and the revocation of its award. Assuming that at least
50 percent of its annual obligation is produced in any calendar year
covered by the production agreement, any shortfall will be added to the
production obligation for the following year.
The final rule, however, adopts the commenter's alternate
recommendation as regards defaults, i.e., if there is still a shortfall
at the end of the last calendar year covered by the production
agreement, the shortfall will be allocated to the next best (lowest)
bidder in the auction round won by the bidder that is party to the
production agreement. If, however, the next best bidder fails to enter
into a production agreement with DOE within 30 days after being
notified of its award, the shortfall will be allocated instead to the
next reverse auction. See, section 452.5(d).
As proposed in the NOPR, DOE also agrees with the commenter that
awards should be site specific but transferable to eligible entities
that succeed to ownership of the site. Section 452.5(g) has been
revised to clarify this intent.
B. Energy Independence and Security Act of 2007
Title II of the Energy Independence and Security Act of 2007, Pub.
L. 110-140 (December 19, 2007) (EISA), directs the Administrator of the
Environmental Protection Agency (EPA) to revise that agency's
regulations implementing section 211(o)(1) of the Clean Air Act, 42
U.S.C. 7545(o), to ensure, inter alia, that transportation fuel sold or
introduced into commerce in the United States on an annual average
basis, contains at least a specified minimum volume of renewable fuel,
advanced biofuel, cellulosic biofuel, or biomass-based diesel. Pursuant
to EISA section 202, the minimum volume requirement for cellulosic
biofuel, as defined in EISA, is 1 billion gallons by the year 2013. The
term ``cellulosic biofuel'' is defined in section 201 of EISA as
``renewable fuel derived from any cellulose, hemicellulose, or lignin
that is derived from renewable biomass and that has lifecycle
greenhouse gas emissions, as determined by the Administrator, that are
at least 60 percent less than the baseline lifecycle greenhouse gas
emissions.''
To date, the Administrator of the EPA has not issued the
regulations required under section 202 of EISA. Nonetheless, DOE is
mindful that the EPA regulations, once promulgated, could affect
reverse auctions established by this final rule. In particular, if the
renewable fuel standard for ``cellulosic biofuel'' under EISA is
achieved, the last reverse auction required under section 942 of EPAct
2005 may occur in 2013, rather than 2015, the target provided under
EPAct for refining 1 billion gallons of cellulosic biofuels on an
annual basis. However, this presupposes that the ``cellulosic biofuel''
used to meet the renewable fuel standard under EISA also qualifies as
``cellulosic biofuels'' for purposes of this final rule.
That may not be the case, however. The definition of ``cellulosic
biofuel'' in section 201 of EISA is different from the definition used
in EPAct and this final rule. The final rule defines ``cellulosic
biofuel'' as ``any liquid fuel produced from cellulosic feedstocks''
and ``cellulosic feedstock means any lignocellulosic feedstock as
defined by EPAct, section 932(a)(2).'' Thus the final rule attempts to
be consistent with the definition used elsewhere in EPAct. In the
absence of final regulations implementing the renewable fuel standard
of EISA, the definitions established in the later-enacted legislation
cannot be imported to this final rule without the possibility that the
EPA regulations may further refine the statutory definitions.
Nevertheless, DOE retains discretion to later modify the definition
used in this final rule in order to make it consistent with the
regulations implementing EISA, if sound public
[[Page 52869]]
policy considerations support such a modification within the parameters
established by EPAct. After EPA promulgates its regulations
implementing section 202 of EISA, DOE will review this final rule to
determine whether it is feasible and appropriate to reconcile the terms
and definitions of both rules.
C. Heating Value
In an effort to treat all potential biofuels equally, section 452.5
of this final rule modifies the proposed rule by requiring bidders to
set forth their calculation of the fuel selected for their bids on a
gasoline equivalent volumetric basis using the lower heating Btu value
(LHV) of the fuel compared to the LHV of gasoline. Awards similarly
shall be issued on a gasoline equivalent volumetric basis. The gasoline
equivalent volumes are to be calculated by multiplying the gallons of
biofuels times the LHV of the fuel divided by 116,090 Btu per gallon
(the LHV of gasoline). An example, in the case of ethanol, would be 1
gallon of ethanol times 76,330 Btu per gallon (the LHV of ethanol)
divided by 116,090 (the LHV of gasoline). Consequently, 1 gallon of
ethanol would be 0.6575 gasoline equivalent gallons. A table with most
common fuels heating values can be found at: http://cta.ornl.gov/bedb/appendix_a/Lower Higher--Heating--Values--for--Various--Fuels.xls.
D. Commercial Suitability
This final rule modifies section 452.4(a)(2) of the proposed rule
by clarifying that bidders must demonstrate in their pre-auction
eligibility submissions that, in addition to other requirements set
forth in section 452.4, they will produce a cellulosic biofuel which
either currently is suitable for widespread general use as a
transportation fuel or, alternatively, that the cellulosic biofuel will
be suitable for such use in a timeframe and in sufficient volumes to
significantly contribute to the goal of 1 billion gallons of refined
cellulosic biofuel by the statutory deadline. Those pre-auction
eligibility submissions proposing fuels that are not currently widely
accepted and available as a transportation fuel also must describe a
clear path to achieving the status of an acceptable liquid
transportation cellulosic biofuel. This description may include, but is
not limited to the following:
Obtaining vehicle manufacturer(s) approval;
Obtaining EPA fuel registration(s);
Establishing standards for use, production, storage,
transportation, and retail dispensing; and,
Establishing a distribution/dispensing infrastructure.
Additionally, the pre-auction eligibility submissions must estimate the
costs and discuss the activities required for eventually
commercializing the proposed cellulosic biofuel.
III. Regulatory Review
A. Executive Order 12866
Today's rule has been determined to be a significant regulatory
action under Executive Order 12866, ``Regulatory Planning and Review,''
58 FR 51735 (October 4, 1993). Accordingly, this action was subject to
review under that Executive Order by the Office of Information and
Regulatory Affairs of the Office of Management and Budget (OMB).
Section 942 of EPAct 2005 provides that awards under the program
shall be limited to not more than $100 million in any one year. 42
U.S.C. 16251(d)(4). The possibility of awards at the $100 million level
makes this rulemaking economically significant under the Executive
Order. However, the level of funding provided by Congress for this
program, thus far, suggests it is unlikely DOE will award $100 million
in any one year. In fiscal year 2008, Congress appropriated $5.0
million to initiate the program. The President has requested no funding
for this program in his Fiscal Year 2010 budget.
The incentives awarded for the production of cellulosic biofuels
under this program constitute transfer payments. In this case, the
payments are from the Government to private entities, and they do not
affect total resources available to society. These transfers do not
involve costs and benefits, and thus no assessment of costs and
benefits is required by Executive Order 12866. See OMB Circular A-4, at
38 and 46. DOE expects the first auction will be held in late 2009 or
2010 and the last auction no later than 2015. As discussed in section
II. B. of this notice, the Renewable Fuel Standard administered by EPA
was amended by EISA to call for the production of 1 billion gallons of
cellulosic biofuel by the year 2013. If that goal is met, then the last
auction would occur in 2013.
The EPAct 2005 program for conducting reverse auctions to provide
incentives for production of cellulosic biofuels is one of several
actions Congress has taken to encourage the production of cellulosic
biofuels. As discussed, Congress has amended the Renewable Fuel
Standard to set specific targets for the production of cellulosic
biofuel, including 1 billion gallons by 2013. Congress also in EPAct
2005 and EISA authorized funding for research and development of
advanced biofuels and cellulosic biofuel. Current research and
development efforts, in combination with various methodologies that
could be funded using the procedures established in this regulation,
have the potential to realize alternatives that DOE believes can
achieve the production goals set in section 942 of EPAct 2005 and EISA.
B. National Environmental Policy Act
DOE has determined that this rule is covered under the Categorical
Exclusion found in the DOE's National Environmental Policy Act (NEPA)
regulations at paragraph A6 of Appendix A to Subpart D, 10 CFR part
1021, which applies to rulemakings that are strictly procedural. DOE
notes that the procedures proposed in this rule do not afford DOE
discretion to determine whether or how a facility will be constructed
or operated. DOE's prescribed role under section 942, that is, awarding
production incentives to the lowest bidder in a reverse auction, is
strictly procedural. Accordingly, neither an environmental assessment
nor an environmental impact statement is required for the rule or for
an award that DOE gives or proposes to give to a successful bidder. If
DOE subsequently proposes to take any additional actions with respect
to successful bidders, separate from the award of funds under section
942 of EPAct 2005, DOE will separately evaluate the need for NEPA
review of those new proposed actions.
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 rule under the provisions of the
Regulatory Flexibility Act and the procedures and policies published on
February 19, 2003. The rule will only affect biofuels
[[Page 52870]]
producers if they choose to participate in the reverse auction.
Moreover, the rule will provide an economic benefit without imposing
any regulatory requirements on producers of cellulosic biofuels. On the
basis of the foregoing, DOE certifies that this 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. This 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
Section 452.4(a) provides that entities that intend to participate
in a reverse auction must file a pre-auction eligibility submission.
The pre-auction eligibility submission must contain certain
information, including an implementation plan, as described above. This
information will be used by DOE to determine if an entity that files a
pre-auction eligibility submission will be accepted to participate in
the reverse auction.
In addition, section 452.4(c) provides that a bidder must submit a
progress report. The progress report must contain the additional
information described above. DOE will use this information to evaluate
the bidder's progress in the production of cellulosic biofuels. DOE has
submitted this collection of information to the Office of Management
and Budget for approval pursuant to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) and the procedures implementing that Act, 5
CFR 1320.1 et seq.
DOE estimates that the annual reporting and recordkeeping burden
for this collection of information will be 30 hours per year (10
bidders x 3 hours) at a total annual cost of $2250 (10 bidders x $225
per auction). Burden means the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a federal agency. An agency
may not conduct or sponsor, and a person is not required to respond to
a collection of information unless it displays a currently valid OMB
control number.
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 in any one year (adjusted annually for
inflation). 2 U.S.C. 1532(a) and (b). 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. 2 U.S.C. 1534.
This rule will not impose a Federal mandate on State, local, or
tribal governments or on the private sector. 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 rule that may affect family well being.
The rule 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.
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 States and carefully assess the
necessity for such actions. DOE has examined this 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 rule meets 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 rule under the OMB and DOE guidelines and has
concluded that it is consistent with applicable policies in those
guidelines.
[[Page 52871]]
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 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 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.
K. Consultation
Pursuant to section 942(c)(1) of EPAct 2005, DOE has consulted with
the Secretary of Agriculture, the Secretary of Defense, and the
Administrator of the Environmental Protection Agency prior to issuing
today's rule.
L. Congressional Notification.
As required by 5 U.S.C. 801, DOE will report to Congress
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is not a ``major rule''
as defined by 5 U.S.C. 804(2). DOE will submit the supporting analysis
to the Comptroller General in the U.S. Government Accountability Office
and make it available to each House of Congress.
IV. Approval of the Office of the Secretary
The issuance of this rule has been approved by the Office of the
Secretary.
List of Subjects in 10 CFR Part 452
Fuel, Grant programs, Recordkeeping and reporting requirements,
Renewable energy.
Issued in Washington, DC, on September 11, 2009.
Cathy Zoi,
Assistant Secretary, Energy Efficiency and Renewable Energy.
0
For the reasons stated in the preamble, DOE is amending chapter II of
title 10 of the Code of Federal Regulations by adding a new part 452 as
set forth below:
PART 452--PRODUCTION INCENTIVES FOR CELLULOSIC BIOFUELS
Sec.
452.1 Purpose and scope.
452.2 Definitions.
452.3 Solicitations.
452.4 Eligibility requirements.
452.5 Bidding procedures.
452.6 Incentive award terms and limitations.
Authority: 42 U.S.C. 7101 et seq.; 42 U.S.C. 16251.
Sec. 452.1 Purpose and scope.
(a) This part sets forth the standards, policies, and procedures
that the Department of Energy uses for receiving, evaluating, and
awarding bids in reverse auctions of production incentive payments for
cellulosic biofuels under section 942 of the Energy Policy Act of 2005
(42 U.S.C. 16251).
(b) Part 1024 of chapter X of title 10 of the Code of Federal
Regulations shall not apply to actions taken under this part.
Sec. 452.2 Definitions.
As used in this part:
Cellulosic biofuel means any liquid fuel produced from cellulosic
feedstocks.
Cellulosic feedstock means any lignocellulosic feedstock as defined
by EPAct, section 932(a)(2).
Commercially significant quantity means 10 million gallons or more
of cellulosic biofuels produced in one year.
DOE means the U.S. Department of Energy.
Eligible biofuels producer means a business association, including
but not limited to a sole proprietorship, partnership, joint venture,
corporation, or other business entity that owns and operates, or plans
to own and operate, an eligible cellulosic biofuels production facility
and that meets all other eligibility requirements that are conditions
on the receipt of production incentives under this part.
Eligible cellulosic biofuels production facility means a facility--
(1) Located in the United States (including U.S. territories and
possessions);
(2) Which meets all applicable Federal and State permitting
requirements;
(3) Employs a demonstrated refining technology; and
(4) Meets any relevant financial criteria established by the
Secretary.
EPAct 2005 means the Energy Policy Act of 2005, Public Law 109-58
(August 8, 2005).
Open window means the period during each reverse auction, as
specified in an associated solicitation, during which DOE accepts bids
for production incentives under this part.
Secretary means the Secretary of Energy.
Sec. 452.3 Solicitations.
The reverse auction process commences with the issuance of a
solicitation by DOE. DOE will publish a solicitation in the Federal
Register and shall post the solicitation on its website at
www.eere.energy.gov no later than 60 days before the bidding in a
reverse auction under this part commences. The solicitation shall:
(a) Invite interested persons and businesses to submit pre-
qualification statements;
(b) Set forth the terms on which bids will be accepted;
(c) Specify the open window for bidding; and
(d) Specify the date by which successful bidders will be required
to file pre-auction eligibility submissions.
Sec. 452.4 Eligibility requirements.
(a) Pre-auction eligibility submissions. (1) Entities that intend
to participate in a reverse auction, within the time period stated in
the relevant solicitation, must file a pre-auction eligibility
submission that provides all information requested in the applicable
solicitation to which it is responding, including an implementation
plan.
(2) Each pre-auction eligibility submission's implementation plan
must, at a minimum:
(i) Demonstrate that the filing party owns and operates or plans to
own and operate an eligible cellulosic biofuels production facility;
(ii) Identify the site or proposed site for the filing party's
eligible cellulosic biofuels production facility;
(iii) Demonstrate that the cellulosic biofuel to be produced for
purposes of receiving an award either currently is suitable for
widespread general use as a transportation fuel or will be suitable for
such use in a timeframe and in sufficient volumes to significantly
contribute to the goal of 1 billion gallons of refined cellulosic
biofuel by August 2015.
[[Page 52872]]
(iv) Provide audited or pro forma financial statements for the
latest 12 month period; and
(v) Identify one or more proposed sources of financing for the
construction or expansion of the filing party's eligible cellulosic
biofuels production facility.
(b) Notification of pre-auction eligibility status. DOE shall
notify each entity that files a pre-auction eligibility submission of
its acceptance or rejection no later than 15 days before the reverse
auction for which the submission was made. A DOE decision constitutes
final agency action and is conclusive.
(c) Progress reports. Within one year after the reverse auction in
which a bidder successfully competed, the bidder must submit a progress
report that includes all additional information required by the
solicitation in which the bidder submitted a successful bid and which
demonstrates that the bidder has:
(1) Acquired the site where its proposed eligible cellulosic
biofuels production facility is or will be located;
(2) Obtained secure financing commitments for the plant or
expansion thereof, as necessary to produce cellulosic biofuels; and
(3) Entered into a written engineering, procurement, and
construction (EPC) contract for design and construction of the eligible
cellulosic biofuels production facility; such EPC contract must provide
for completion of construction of the eligible cellulosic biofuels
production facility such that operations at the plant or plant
expansion will commence within three years of the reverse auction in
which the bidder successfully competed.
(d) Production agreement. Within 90 days after submission of its
progress report under paragraph (c) of this section, the successful
bidder must enter into an agreement with DOE which requires the bidder
to begin production of commercially significant quantities of
cellulosic biofuels, at the eligible cellulosic biofuels production
facility that was the subject of the relevant bid, not later than three
years from the date of the acceptance of the successful bid.
(e) Confirmation of continuing eligibility. After receiving the
progress report described in the paragraph (e) of the section and upon
confirmation by DOE that the successful bidder has entered into a
production agreement with DOE, as described in paragraph (d) of this
section, DOE will confirm to the bidder that it continues to meet the
eligibility requirements of this part.
(f) Contractual condition on eligibility. (1) As a condition of the
receipt of an award under this part, a successful bidder in a reverse
auction under this part must demonstrate that it has fulfilled the
terms of its production agreement entered into with DOE pursuant to
paragraph (d) of this section.
(2) As a condition of continuing to receive production incentive
payments under this part, a bidder that has entered into a production
agreement with DOE must annually submit to DOE, by a commercially
reasonable date specified by DOE, verification of the bidder's
production volumes for the prior calendar year. Within 90 days of the
submission of such verification, DOE shall notify the successful bidder
whether the bidder has fulfilled the terms of the production agreement
and shall make payment of any production incentive awards then
outstanding for the one year period covered by the verified data
submission.
Sec. 452.5 Bidding procedures.
DOE shall conduct an electronic reverse auction through a limited
duration single bid per producer auction process open only to pre-
auction eligible cellulosic biofuels producers. The following
procedures shall be used:
(a) DOE shall accept only electronic bids received from pre-auction
eligible cellulosic biofuels producers during the open window
established in the solicitation. The open window shall consist of a
single continuous period of at least four hours for each auction.
(b) Bids shall identify an estimated annual production amount from
an eligible cellulosic biofuels production facility on a per gallon,
site, entity, and year specific basis for a consecutive six year
production period. A bid also may be submitted for additional
incentives for uncovered production volumes at a site where an award
was made in an earlier auction round.
(c) All bids must set forth the methodology used to derive the
estimates of annual production volumes covered by the bid and the bid
shall be calculated on a gasoline equivalent volumetric basis using the
lower heating Btu value of the fuel compared to the lower heating Btu
value of gasoline.
(d) All bids will be confidential until 45 days after the close of
the window for submission of bids for the reverse auction.
(e) Bid evaluation and incentive awards selection procedures
include the following:
(1) After DOE evaluates the bids received during the open window,
it shall, within 45 days following the close of the open window for
submission of bids for the reverse auction, announce on DOE's website
and by direct mail the names of the successful bidders and the terms of
their bids.
(2) DOE shall issue awards for the bid production amounts beginning
with the bidder that submitted the bid for the lowest level of
production incentive on a per gallon basis.
(3) In the event of a tie among the lowest bids, preference will be
given to the lowest tied bidder based on DOE's evaluation of the extent
to which the tied bids meet the following criteria:
(i) Demonstrates outstanding potential for local and regional
economic development;
(ii) Includes agricultural producers or cooperatives of
agricultural producers as equity partners in the ventures; and
(iii) Has a strategic agreement in place to fairly reward feedstock
suppliers.
(4) In the event more than one lowest tied bid equally meets the
standards in paragraph (c)(3) of this section, the award will be
distributed equally on a per capita basis among those lowest tied
bidders meeting the standards.
Sec. 452.6 Incentive award terms and limitations.
(a) Amount of incentive. Subject to the availability of
appropriated funds and the limitations in paragraph (c) of this
section, an eligible cellulosic biofuels producer selected to receive
an award shall receive the amount of the production incentive on the
per gallon basis requested in the auction solicitation for each gallon
produced and sold by the entity during the first six years of operation
of its eligible cellulosic biofuels production facility.
(b) Failure to commence production. Except in the circumstance of a
force majeure event, as solely determined by DOE, failure by an
eligible cellulosic biofuels producer that made a successful bid to
commence production of cellulosic biofuels, at the eligible cellulosic
biofuels production facility that was the subject of the successful
bid, by the end of the third year after the close of submission of the
open window of bids for the reverse auction in which it submitted a
successful bid, shall result in immediate revocation of DOE's award to
that producer.
(c) Failure of the successful bidder to meet annual production
obligations. Except in the circumstance of a force majeure event, as
solely determined by DOE, a successful bidder's failure to produce at
least 50 percent of the volumes specified in its production agreement
by December 31 of any year covered by the bid shall result in immediate
revocation of DOE's award; if the successful bidder produces 50 percent
or more of the volumes set forth in the production agreement on an
[[Page 52873]]
annual basis by December 31 of any year covered by the agreement, any
production shortfall will be carried forward and added to the
successful bidder's production obligations for next year covered by the
agreement.
(d) Shortfalls remaining at the end of the production period. If,
for any reason, by December 31 of the last year of the production
agreement, the bidder has failed to produce the total production
volumes for all years covered by the agreement, any such remaining
shortfall shall be awarded to the bidder with the next lowest bid in
the auction round for which the award was made. If, however, the next
best bidder is unable to enter into a production agreement with DOE
within 30 days after being notified of its award, the shortfall shall
be allocated instead to the next reverse auction.
(e) Incentive award limitations. The following limits shall apply
to awards of cellulosic biofuels production incentives under this part:
(1) During the first four years after the commencement of the
program, the incentive shall be limited to $1.00 per gallon. For
purposes of this limitation, the program shall be deemed to have
commenced on the date that the first solicitation for a reverse auction
is issued;
(2) A per gallon cap over the remaining lifetime of the program of
$.95 per gallon provided that--
(i) This cap shall be lowered by $.05 each year commencing the
first year after annual cellulosic biofuels production in the United
States exceeds 1 billion gallons;
(ii) Not more than 25 percent of the funds committed within each
reverse auction shall be awarded to any single project;
(iii) Not more than $100 million in production incentives shall be
awarded in any one calendar year; and
(iv) Not more than $1 billion in production incentives shall be
awarded over the lifetime of the program.
(f) Participation in subsequent auctions. A successful bidder in a
reverse auction under this part may participate in subsequent reverse
auctions if the incentives sought will assist the addition of plant
production capacity for the eligible cellulosic biofuels production
facility associated with its previously successful bid.
(g) Transferability of awards. A production incentive award under
this part may be transferred to a successor entity at the same
production facility for which the award was made, provided that the
successor entity meets all eligibility requirements of this part,
including execution of an agreement with DOE to commence production of
cellulosic biofuels in commercially significant quantities not later
than three years of the date that bidding closes on the reverse auction
in which the predecessor entity submitted a successful bid.
[FR Doc. E9-24778 Filed 10-14-09; 8:45 am]
BILLING CODE 6450-01-P