Alternative Fuel Transportation Program

SUMMARY: This document contains corrections to the Notice of Limited

Reopening of the Comment Period that was published Monday, July 31,

1995, 60 FR 38974, FR Doc. 95-18737. The notice of limited reopening of

the comment period requests public comment on possible options for

defining the term ``substantial portion,'' which is used to determine

coverage for certain petroleum producers and importers, and on possible

modifications of the proposed definition of ``alternative fuel'' with

respect to alcohol fuels and biodiesel. In addition, this notice

announces DOE's receipt of new information regarding automakers'

alternative fueled vehicle production plans for the near future.

FOR FURTHER INFORMATION CONTACT: Mr. Kenneth R. Katz, Program Manager,

Office of Energy Efficiency and Renewable Energy (EE-33), U.S.

Department of Energy, 1000 Independence Avenue, SW., Washington, DC

20585, (202) 586-6116.

SUPPLEMENTARY INFORMATION:

Need for Correction

As published, the notice of limited reopening of the comment period

contains errors in the sequence of text in Part II which may be

confusing and, therefore, are in need of correction. The substance of

Part II is unchanged.

Correction of Publication

Accordingly, the publication on July 31, 1995, of the Notice of

Limited Reopening of the Comment Period, which was the subject of FR

Doc. 95-18737, is corrected by reprinting Part II, Definition of

``Substantial Portion,'' beginning on page 38975, col. 1, and ending on

page 38976, col. 2, in its entirety:

II. Definition of ``Substantial Portion''

Section 501(a)(2) of the Energy Policy Act of 1992 (the ``Act'')

defines the class of alternative fuel providers potentially subject to

the alternative fueled vehicle acquisition requirements to include

persons who: (1) Qualify as a ``covered person'' under section 301(5)

of the Act, 42 U.S.C. 13211(5), and (2) produce or import an average of

50,000 barrels per day or more of petroleum and ``a substantial portion

of whose business is producing alternative fuels.'' 42 U.S.C.

13251(a)(2)(C). Thus, the term ``substantial portion'' is a key

statutory determinant of whether a covered person that produces or

imports petroleum is an alternative fuel provider required by the Act

to acquire alternative fueled vehicles.

However, even if an entity meets all of the qualifications for a

section 501(a)(2)(C) alternative fuel provider, including the

``substantial portion'' test, it nevertheless may be excepted from the

vehicle acquisition requirements under section 501(a)(3) or exempted by

DOE under section 501(a)(5). Under section 501(a)(3)(A), the vehicle

acquisition requirements only apply to an affiliate, division or

business unit of a covered person who is substantially engaged in the

alternative fuels business. See proposed Sec. 490.304. Moreover, under

section 501(a)(3)(B), the vehicle acquisition requirements do not apply

to any entity whose principal business is transforming alternative fuel

into a product other than alternative fuel or consuming such fuel to

manufacture a product that is not an alternative fuel. Under section

501(a)(5), DOE may exempt alternative fuel providers from the vehicle

acquisition requirements if they can show either that (1) alternative

fuels that meet their normal business requirements and practices are

not available; or (2) that alternative fueled vehicles that meet their

normal business requirements and practices are not offered for purchase

or lease on reasonable terms and conditions. See proposed Sec. 490.308.

In the February 28, 1995 notice of proposed rulemaking, DOE

proposed to define the term ``substantial portion'' to mean that at

least two percent of a covered person's refinery yield of petroleum

products is composed of alternative fuels. See proposed Sec. 490.301.

DOE explained that it chose the two percent of refinery yield threshold

because it represented the average yield for the production of

alternative fuels by petroleum refiners, as reported by the Energy

Information Administration. 60 FR 10978.

The notice of proposed rulemaking also explained that in developing

the proposed definition of ``substantial portion,'' the Department had

considered, as an alternative, basing the definition on the portion of

the gross revenue an entity derives from the production of alternative

fuels. Ultimately, DOE did not propose a gross revenue threshold

because the information needed to support that alternative was more

fragmented than that available to support the two percent of refinery

yield criterion, and DOE believed the percent of refinery yield

criterion would adequately define the class of petroleum producers and

importers who are ``covered persons'' under the Act. 60 FR 10979.

Nevertheless, DOE asked for comment on whether reliable information

exists that would allow establishment of a revenue measure for

determining whether alternative fuels production comprises a

substantial portion of a company's business, and it solicited

suggestions for any other alternative definitions of ``substantial

portion.'' 60 FR 10979.

DOE received many comments on the definition of ``substantial

portion.'' Some commenters supported DOE's proposed definition of

``substantial portion,'' agreeing that if at least two percent of a

refinery's product yield is composed of an alternative fuel, the fuel

provider should have to meet the Act's acquisition requirements.

However, most comments on this issue criticized the two percent of

refinery yield as being too low a threshold. Some commenters stated

that the two percent refinery yield of petroleum products threshold

would impose vehicle acquisition requirements on many refineries that

only produce alternative

[[Page 40540]]

fuels (principally propane) as incidental by-products of the refining

process. Several commenters recommended that DOE modify the rule to

provide that at least 10 percent of a covered person's refinery yield

of petroleum products must be composed of alternative fuels before that

person would be deemed to have a ``substantial portion'' of its

business involved in the production of alternative fuels. Other

commenters urged DOE to adopt a definition of ``substantial portion''

that would be the same as the ``principal business'' criterion used in

section 501(a)(2) for defining other categories of alternative fuel

providers.

A few of the commenters recommended that DOE adopt a percentage of

gross revenue derived from the sale of alternative fuels as the basis

for the definition of ``substantial portion.'' They pointed out that

gross revenue is the measure used for determining whether other

alternative fuel providers are ``covered persons'' because their

``principal business'' is in alternative fuels. In their view, if gross

revenue can be used to determine whether an entity's principal business

involves alternative fuels, it also should be used for determining

whether a petroleum producer or importer has a substantial portion of

its business in the production of alternative fuels.

After carefully reviewing all of the comments received on this

issue, DOE thinks that a percentage of gross revenue derived from the

sale of alternative fuels may be a better measure of an entity's

involvement in the alternative fuels business than is the percentage of

refinery yield of petroleum products included in the proposed rule's

definition of ``substantial portion.'' As pointed out by some

commenters, a gross revenue measure can be applied to all producers and

importers of petroleum, unlike the percent of refinery yield criterion

which focuses solely on refining operations.

Despite the lack of comprehensive, publicly available information

about petroleum producers' and importers' revenue sources on a product-

by-product basis, DOE has been able to collect enough information about

their sales of alternative fuels to frame a possible definition of

``substantial portion'' based on percent of gross revenue derived from

alternative fuels.

One option DOE is considering is whether to define ``substantial

portion'' to mean that at least 30 percent of the annual gross revenue

of a covered person is derived from the sale of alternative fuels. This

percentage of gross revenue appears to be an appropriate gross revenue

threshold for two reasons. First, available information shows that

major U.S. energy producing companies historically derive at least 30

percent of their annual gross revenue from the sale of alternative

fuels.\1\ Major energy producers are typically consolidated or

integrated companies that are involved in oil and gas exploration, oil

and gas production or importing, petroleum refining and marketing,

transportation of products, other energy operations (coal, nuclear and

other energy) and nonenergy businesses (primarily chemicals). Second,

this definition would exclude from the class of covered persons subject

to the vehicle acquisition requirements those refiners who produce

alternative fuels only as an incidental by-product of the refining

process. Refiners are typically involved only in petroleum refining and

marketing operations.

\1\ Sources used were: Energy Information Administration's

Performance Profiles of Major Energy Producers, 1993 (DOE/EIA-0206);

Moody's 1994 Industrial Manual; 1995 U.S.A. Oil Industry Directory;

and Standard & Poor's 1994 Register--Corporations.

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DOE also believes this gross revenue percentage comports with the

terms of section 501(a)(2) of the Act, 42 U.S.C. 13251(a)(2). If the

term ``substantial portion'' were defined to include a percentage of

gross revenue derived from alternative fuels that was higher than 30

percent, the distinction in the Act between ``substantial portion''

which applies to covered petroleum producers and importers (section

501(a)(2)(C)) and ``principal business'' which applies to other

alternative fuel providers (section 501(a)(2) (A) and (B)) would be

rendered meaningless. As noted in the preamble to the notice of

proposed rulemaking, alternative fuels constitute an entity's

``principal business'' if the entity derives a plurality of its gross

revenue from sales of alternative fuels, and a plurality may be less

than 50 percent. 60 FR 10978. Therefore, DOE believes that 30 percent

of gross revenue from alternative fuels may constitute a reasonable

basis for the definition of ``substantial portion.''

This possible interpretation of ``substantial portion'' also

appears to be consistent with the underlying intent of Congress with

regard to petroleum-related entities. That intent was to apply the

alternative fueled vehicle acquisition requirements only to major

energy producers and importers.\2\

\2\ The conference report on the Energy Policy Act of 1992

states that ``the intent of section 501(a)(1) is not to cover all

affiliates or divisions of the many large energy companies which

have some, but not all, of their corporate units engaged in

alternative fuels operations. For example, the oil and gas

production affiliate or division of a major energy company described

in 501(a)(1)(C) would be covered; so might a propane pipeline unit

or a natural gas processing division, if the ``substantially

engaged'' test is met. But an oil tanker division, a gasoline

marketing affiliate, or a petrochemical unit whose major operations

are the production of plastics, for example, would not be covered *

* *.'' H.R. Rep. 1018, 102d Cong., 2d Sess. 387 (1992).

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DOE requests comments from interested members of the public on this

possible option for defining ``substantial portion'' or any alternative

options they would like DOE to consider. DOE is particularly interested

in receiving data or analysis that are relevant to this issue.

Thomas J. Gross,

Deputy Assistant Secretary for Transportation Technologies, Office of

Energy Efficiency and Renewable Energy.

[FR Doc. 95-19688 Filed 8-8-95; 8:45 am]

BILLING CODE 6450-01-P