Alternative Fuel Transportation Program

SUMMARY: The Department of Energy today proposes rules required by the

Energy Policy Act of 1992 in order to implement statutorily-imposed

alternative fueled vehicle acquisition requirements that become

effective by operation of law on September 1, 1995, when model year

1996 begins. These statutory requirements apply to certain alternative

fuel providers and some State government vehicle fleets. The proposed

rules principally cover: (1) Required interpretations necessary for

affected entities to determine whether and to what extent the statutory

requirements apply; (2) required procedures for exemptions and

administrative remedies; and (3) a program of marketable credits to

reward whose who voluntarily acquire vehicles in excess of mandated

requirements or before the requirements take effect, and to allow use

of such credits in order to demonstrate compliance with those

requirements.

DATES: Written comments (8 copies and, if possible, a computer disk) on

the proposed rule must be received by the Department on or before May

1, 1995.

Oral views, data, and arguments may be presented at public hearings

which are scheduled as follows:

1. March 23, 1995, beginning at 9:30 a.m. in Chicago, Illinois.

2. March 30, 1995, beginning at 9:30 a.m. in Berkeley, California.

3. April 4, 1995, beginning at 9:30 a.m. in Washington, DC.

Requests to speak at a hearing should be submitted to the

Department no later than 4 p.m. on:

1. March 20, 1995 for the March 23, 1995 Chicago, Illinois,

hearing.

2. March 27, 1995 for the March 30, 1995 Berkeley, California,

hearing.

3. March 30, 1995 for the April 4, 1995 Washington, DC, hearing.

The length of each oral presentation is limited to 10 minutes.

ADDRESSES: Written comments (8 copies) and requests to speak at a

public hearing should be addressed to: U.S. Department of Energy,

Office of Energy Efficiency and Renewable Energy, EE-33, Docket Number

EE-RM-95-110, 1000 Independence Ave., SW, Washington, DC 20585, (202)

586-3012. The public hearings will be held at the following locations:

1. Chicago--University of Illinois at Chicago, Chicago Circle

Center Building (Student Union), Room 605 (6th floor), 750 S. Halsted

Street, Chicago, IL.

2. Berkeley--Lawrence Berkeley Laboratory, 1 Cyclotron Road,

Building 50 Auditorium, Berkeley, CA 94720.

The Lawrence Berkeley Laboratory (LBL) Shuttle stops at Center

Street and Shattuck Street as well as the BART station and downtown

public parking lots.

3. Washington, DC--U.S. Department of Energy, Forrestal Building,

Auditorium, 1000 Independence Avenue, SW, Washington, DC 20585.

Copies of transcripts from hearings and written comments may be

inspected and photocopied in the DOE Freedom of Information Reading

Room, Room 1E-190, (202) 586-6020, between the hours of 9:00 a.m. and

4:00 p.m. Monday through Friday, except Federal holidays.

For more information concerning public participation in this

rulemaking see the ``Opportunity for Public Comment'' section found in

the Supplementary Information section of this proposed rule.

FOR FURTHER INFORMATION CONTACT: For information concerning the

proposed rule: 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.

Josephine B. Patton, Esq., U.S. Department of Energy, Office of General

Counsel (GC-72), 1000 Independence Avenue SW., Washington, DC 20585.

(202) 586-9507.

For information concerning the public hearings and submitting

written comments: Andi Kasarsky, (202) 586-3012.

SUPPLEMENTARY INFORMATION:

I. Introduction

II. Section-By-Section Analysis

III. Opportunity for Public Comment

IV. Review Under Executive Order 12612

V. Review Under Executive Order 12778

VI. Review Under Executive Order 12866

VII. Review Under the Regulatory Flexibility Act

VIII. Review Under the Paperwork Reduction Act

IX. Review Under the National Environmental Policy Act

X. Impact on State Governments

I. Introduction

Pursuant to title V of the Energy Policy Act of 1992 (Act) (Pub. L.

102-486), the Department of Energy (Department or DOE) today proposes

rules required by law to implement statutorily-imposed alternative

fueled vehicle acquisition requirements that take effect by operation

of law on September 1, 1995, when model year 1996 begins. These

statutory requirements establish that specified percentages of vehicles

acquired by covered fleets must be alternative fueled vehicles. These

requirements apply to certain alternative fuel providers and some State

government fleets. The statutory percentages for model year 1996 are 30

percent for affected alternative fuel providers and 10 percent for

affected State government fleets, and these percentages increase over

time. This notice of proposed rulemaking principally covers: (1)

Required interpretations of statutory provisions essential for affected

entities to determine whether and to what extent the mandatory vehicle

acquisition requirements apply; (2) procedures for exemptions and

administrative remedies; and (3) a program of marketable credits to

reward voluntary acquisition of alternative fueled vehicles in excess

of mandatory requirements or before the requirements take effect, and

to allow use of such credits as an alternative means of compliance.

This notice also summarizes, and is accompanied by, a detailed cost

impact analysis for public review.

A. Background

A primary goal of the Energy Policy Act of 1992 (the Act) (Pub. L.

102-486) is to enact a comprehensive national energy policy that

strengthens U.S. energy security by reducing dependence on imported

oil. Currently, the United States consumes seven million barrels of oil

more per day than it produces. Section 502 of the Act (42 U.S.C. 13252)

provides goals of a 10 percent displacement in U.S. motor fuel

consumption by the year 2000 and a 30 percent displacement in U.S.

motor fuel consumption by the year 2010 through the production and

increased use of replacement fuels. Section 504 of the Act (42 U.S.C.

13254) allows the Secretary to revise these goals downward. According

to the latest projections by the Energy Information Administration, the

transportation sector will consume 13.1 million barrels per day of

petroleum in 2010. Of this total, about 7.4 million barrels per day of

petroleum are projected to be used by [[Page 10971]] light duty

vehicles. The Energy Information Administration also estimates that 65

percent of our total petroleum demand will be imported in 2010.

The greatest gains in displacing petroleum motor fuel consumption

by the year 2010 are expected to occur by replacing gasoline with

alternative fuels such as electricity, ethanol, hydrogen, methanol,

natural gas and propane, in a portion of the U.S. car and truck

population, which is projected to be in excess of 200 million vehicles

in the year 2010. Currently, alternative fueled vehicles comprise a

small fraction of the total U.S. vehicle stock. According to the Energy

Information Administration, of the 180 million light duty vehicles

registered in 1992, 250,000 were alternative fueled vehicles. Of this

total, about 221,000 were fueled by liquified petroleum gas (propane),

about 24,000 were fueled by compressed natural gas, and about 3,400

were fueled by methanol or ethanol. The remaining quantity of vehicles

was comprised of electric vehicles and vehicles fueled by liquified

natural gas. In 1994, it is expected that 300,000 alternative fueled

vehicles will be registered in the U.S. and that the proportion of

vehicles operating on each fuel will be approximately the same.

(Alternatives to Traditional Transportation Fuels: An Overview, DOE/

EIA-0585/0, 1994)

To enable the Act's displacement goals to be met, alternative fuels

must be readily accessible and motor vehicles that operate on these

alternative fuels must be available for purchase. Thus, two important

elements of reducing petroleum motor fuel consumption are: a nationwide

alternative fuels infrastructure and the availability of alternative

fueled vehicles for purchase at a reasonable cost by the general public

in a wide variety of vehicle types and fueling options.

B. Description of the Energy Policy Act Alternative Fuel Transportation

Program's Basic Provisions

1. General structure. Titles III, IV, V, and VI of the Act contain

the basic provisions for regulatory mandates and authorities, as well

as various financial incentives, all of which are aimed at displacing

substantial quantities of oil consumed by motor vehicles. Title III

contains general definitions which set forth legislatively mandated

policy essential to understanding: (1) What constitutes an alternative

fueled vehicle; (2) who must comply with regulatory mandates to acquire

such vehicles; and (3) the extent to which a regulated entity's

inventory of vehicles is subject to mandates to acquire alternative

fueled vehicles. Title III also sets forth mandatory requirements for

Federal fleet acquisitions of alternative fueled vehicles, which began

in fiscal year 1993.

Title IV includes a financial incentive program for states, a

public information program, and a program for certifying alternative

fuel technician training programs.

Title V provides for separate regulatory mandates for the purchase

of alternative fueled vehicles which apply to: (1) Alternative fuel

providers; (2) State government fleets; and (3) private and municipal

fleets. These mandates set forth annual percentages of new light duty

motor vehicle acquisitions which must be alternative fueled vehicles.

The minimum acquisition requirements are phased-in, escalating from

year to year until reaching a fixed percentage. The acquisition

schedules for alternative fuel providers and State governments

automatically take effect at the beginning of model year 1996. The

acquisition schedule for private and municipal fleets in section 507(a)

is a tentative schedule which may only take effect if confirmed in a

DOE rulemaking. Such a rulemaking could conclude that imposition of a

vehicle acquisition mandate on private and municipal fleets is not

appropriate.

Title V also allows for credits for new light duty alternative

fueled motor vehicles acquired beyond what is legally required. These

credits may be sold and used by other persons or fleets subject to a

vehicle acquisition mandate. Finally, title V contains investigative

and enforcement authorities including provisions for civil penalties

and, in certain circumstances, criminal fines for noncompliance with

the statutory mandates and implementing regulations.

Title VI of the Act contains a variety of authorities to promote

development and utilization of electric motor vehicles. More

specifically, subtitle A provides for a commercial demonstration

program, and subtitle B provides for an infrastructure and support

systems development program.

This notice of proposed rulemaking focuses principally on: (1) The

general definitions of title III applicable to alternative fuel

providers, state governments, and private and municipal fleets; (2)

procedures for obtaining interpretive rulings applying the regulations

to particular facts; (3) the title V vehicle acquisition mandates

applicable to alternative fuel providers and to state governments; (4)

the credit program applicable to alternative fuel providers, state

governments, and private and municipal fleets; and (5) the

investigative and enforcement authorities which also apply to

alternative fuel providers, state governments, and private and

municipal fleets. In a separate notice, the Department will be

proposing rules for the financial incentive program for States under

section 409 of the Act. 42 U.S.C. 13235.

As provided by section 507, DOE will be initiating a statutorily

required rulemaking to determine whether a fleet requirement program is

necessary for private and municipal fleets, 42 U.S.C. 13257. Section

507 contains complex requirements for making such a determination, and

it is not clear at this time what determination will be made.

Nevertheless, private persons (other than alternative fuel providers)

and municipal authorities may be interested in reviewing and commenting

on the proposed rules in the general subpart A and subpart F (credit

program) of this notice which could apply to private and municipal

fleet owners if the Department were to issue rules for a private and

municipal fleet requirement program.

With respect to alternative fuel providers, there is discretion in

section 501(b) of the Act to reduce the acquisition percentage

requirements to as low as 20 percent for model years 1997 and beyond,

and to extend the time to comply for up to two years. 42 U.S.C.

13251(b). The Department currently does not intend to exercise its

discretion under section 501(b). The Department seeks comment on the

conditions under which it should propose a rule to reduce the

percentage requirements. There is no similar provision in section 507

authorizing modifications to the vehicle acquisition mandate on state

governments. See 42 U.S.C. 13257(h), (o).

2. Who must comply and which vehicles are covered. The vehicle

acquisition mandate applicable to alternative fuel providers is set

forth in section 501 of the Act, 42 U.S.C. 13251. There are a series of

subsections in section 501 which, when read in conjunction with certain

definitions in section 301 of the Act, make the task of determining who

must comply and to what extent the vehicle inventory is affected a

complex matter.

The vehicle acquisition mandate applicable to states in section

507(o) of the Act, 42 U.S.C. 13257, also has to be read in conjunction

with the definitions in section 301. While it is clear that the mandate

in section 507(o) applies to state governments as distinguished from

municipal governments, determining the extent to which a State's

vehicle [[Page 10972]] inventory is subject to the mandate is also a

complex matter.

The beginning of an understanding of who must comply with the

regulatory mandates in title V, and of which vehicles are in the base

number against which the acquisition percentages are applied, lies in

the partially overlapping statutory definitions of the terms ``fleet''

and ``covered person.'' The statutory definition of ``fleet,'' in

section 301(9), provides that the term ``fleet'' means a group of 20 or

more light duty motor vehicles, used primarily in a metropolitan

statistical area or consolidated metropolitan statistical area, as

established by the Bureau of the Census, with a 1980 population of more

than 250,000, that are centrally fueled or capable of being centrally

fueled and are owned, operated, leased or otherwise controlled by a

governmental entity or other person who owns, operates, or otherwise

controls 50 or more such vehicles, by any person who controls such

person, by any person controlled by such person, and by any person

under common control with such person, except that such term does not

include--

(A) motor vehicles held for lease or rental to the general public;

(B) motor vehicles held for sale by motor vehicle dealers,

including demonstration vehicles;

(C) motor vehicles used for motor vehicle manufacturer product

evaluations or tests;

(D) law enforcement motor vehicles;

(E) emergency motor vehicles;

(F) motor vehicles acquired and used for military purposes that the

Secretary of Defense has certified to the Secretary must be exempt for

national security reasons;

(G) nonroad vehicles, including farm and construction motor

vehicles; or

(H) motor vehicles which under normal operations are garaged at

personal residences at night.

In the section-by-section analysis in part II of this Supplementary

Information, DOE explains proposed regulatory provisions related to the

above-quoted statutory definition of ``fleet.'' Among other things,

DOE: (1) Lists all of the relevant metropolitan statistical areas and

consolidated metropolitan statistical areas; (2) defines ``centrally

fueled'' and ``capable of being centrally fueled''; (3) discusses in

some detail how the provisions for aggregating vehicles are

interpreted; and (4) provides interpretive regulatory language for some

of the exclusions.

The word ``fleet,'' with all its complexities, is embedded in the

definition of the term ``covered person'' at section 301(5) which

provides that ``covered person'' means a person that owns, operates,

leases, or otherwise controls--

(A) a fleet that contains at least 20 motor vehicles that are

centrally fueled or capable of being centrally fueled, and are used

primarily within a metropolitan statistical area or a consolidated

metropolitan statistical area, as established by the Bureau of the

Census, with a 1980 population of 250,000 or more; and

(B) at least 50 motor vehicles within the United States.

The term ``fleet'' is used for making determinations with regard to

who must comply, and to what extent, with the vehicle acquisition

mandates in section 507 on state governments, private persons, and

municipal governments. The term ``covered person'' is used for making

such determinations with regard to the vehicle acquisition mandate on

alternative fuel providers in section 501 of the Act.

Under section 507, only a ``fleet'' is obligated to comply.

Congress appears to have used the word ``fleet'' rather than ``covered

person'' to limit the affected portion of the vehicle inventory to the

vehicles in the ``fleet.'' By contrast, under section 501(a), certain

``covered persons'' are obligated to comply, and consequently, the

section 501 vehicle acquisition mandate potentially applies to all

vehicles in the inventory throughout the United States and not just

those vehicles in a ``fleet'' of a ``covered person'' who is subject to

the mandate. 42 U.S.C. 13251. However, the potentially broad impact of

section 501(a) is heavily qualified by the succeeding subsections of

section 501, which limit the sweeping impact of section 501(a) both

with regard to who must comply and the extent of the affected vehicle

inventory.

Paragraph (a)(2) of section 501 limits application of the vehicle

acquisition mandate to a subset of covered persons consisting of:

(A) A covered person, whose principal business is producing,

storing, refining, processing, transporting, distributing, importing,

or selling at wholesale or retail any alternative fuel other than

electricity;

(B) A non-Federal covered person whose principal business is

generating, transmitting, importing, or selling at wholesale or retail

electricity; or

(C) A covered person--

(i) Who produces, imports, or produces and imports in combination,

an average of 50,000 barrels per day or more of petroleum; and

(ii) A substantial portion of whose business is production of

alternative fuels * * *.

Paragraph (a)(2) appears to be a description of alternative fuel

providers subject to the vehicle acquisition mandate. The proposed

regulations interpret the underscored phrase ``principal business.''

The statutory refinement of which ``covered persons'' must comply

and to what extent continues in subsection (a)(3) of section 501 which

provides that:

(A) In the case of a covered person described in paragraph (2) with

more than one affiliate, division, or other business unit, only an

affiliate, division, or business unit which is substantially engaged in

the alternative fuels business (as determined by the Secretary by rule)

shall be subject to this subsection.

(B) No covered person or affiliate, division, or other business

unit of such person whose principal business is--

(i) transforming alternative fuels into a product that is not an

alternative fuel; or

(ii) consuming alternative fuels as a feedstock or fuel in the

manufacture of a product that is not an alternative fuel shall be

subject to this subsection.

Paragraph (a)(3) of section 501 has two effects. First, it limits

the vehicle acquisition mandate of paragraph (a)(1) to the vehicles

owned, operated, leased, or otherwise controlled by certain affiliates,

divisions or other business of major energy producing corporations.

Second, it excludes from coverage those covered persons, affiliates,

divisions, or other business units that use an alternative fuel to

create a product other than an alternative fuel. It is possible when

the definitions of ``affiliate'' and ``covered person'' are applied to

an entity, it may be both. However, merely being an affiliate does not

necessarily mean that an entity must also be a covered person.

Section 501(a)(5) provides for petitions for exemption in certain

circumstances for alternative fuel providers who otherwise would have

to comply. The exemptions are available for those alternative fuel

providers who can show that alternative fuels are not available in the

operating area or that alternative fueled vehicles are not reasonably

available.

There is a parallel exemption provision applicable to State

governments in section 507(i). 42 U.S.C. 13257(i). That provision also

makes ``financial hardship'' a ground for exemption. However, section

507 does not define ``financial hardship,'' and the legislative history

is devoid of any guidance as to what circumstances would constitute

``financial hardship.'' The Department would welcome comments from

States making [[Page 10973]] recommendations as to how to interpret and

apply the term ``financial hardship'' in practice.

In the section-by-section analysis in part II of this Supplementary

Information, the Department systematically distinguishes between

proposed regulatory text that tracks the statutory language and

proposed regulatory text that represents what the Department is

proposing to add, such as, proposed procedures and interpretations.

Members of the public are particularly encouraged to comment on the

proposed regulations in the latter category. Members of the public are

reminded that many of the details of the complex program described in

this proposal are specified in the statute, and thus are not within the

Department's discretion to change.

3. Comparison to Environmental Protection Agency (EPA) Fleet

Requirement Program. As many State and local officials and members of

the public are undoubtedly aware, there is a fleet requirement program

under the provisions of the Clean Air Act, (42 U.S.C. 7401 et seq.),

that is somewhat similar to those in the Energy Policy Act of 1992.

Section 246 of the Clean Air Act requires each State in which there is

located all or part of an ozone non-attainment area classified as

extreme, severe, or serious under the Clean Air Act, or a carbon

monoxide non-attainment area with a design value at or above 16.0 parts

per million, to submit a state implementation plan revision

establishing a clean fuel vehicle program providing that, beginning in

model year 1998, certain percentages of covered fleet vehicles be clean

fuel vehicles operating on clean alternative fuels. 42 U.S.C. 7586.

Section 241 of the Clean Air Act contains definitions for the terms

``clean alternative fuel,'' ``covered fleet,'' and ``covered fleet

vehicle'' that contain some phrases later used in the definitions in

section 301 of the Energy Policy Act of 1992. Compare 42 U.S.C. 7581

with 42 U.S.C. 13211. For example, the definition of ``covered fleet

vehicle'' in section 241 refers to motor vehicles ``* * * in a covered

fleet which are centrally fueled (or capable of being centrally

fueled). * * *.'' [Emphasis added.] 42 U.S.C. 7581(6). That phraseology

is similar to the definitions of ``fleet'' and ``covered person'' in

section 301 of the Energy Policy Act of 1992 which refer to motor

vehicles ``* * * that are centrally fueled or capable of being

centrally fueled * * *.'' 42 U.S.C. 13211(5)(A), 13211(9).

While such similarities in statutory text are significant and

should not be ignored in formulating regulations, the differences

between the two pieces of legislation are more important. The critical

differences are: (1) The primary goal of the EPA program is to

significantly improve air quality through reduced emissions of

pollutants and the primary goal of the DOE program is to strengthen

national energy security by reducing dependence on imported oil; (2)

the lists of fuels enumerated in the definitions of ``clean alternative

fuel'' under section 241 of the Clean Air Act and of ``alternative

fuel'' under section 301 of the Energy Policy Act of 1992 are not

identical, and the Department's rulemaking discretion to add to the

section 301 list is limited by stringent statutory standards; (3) the

EPA program applies to fleets as small as 10 vehicles while 20 is the

minimum number of vehicles for a fleet as defined by section 301; (4)

the EPA program applies to light duty motor vehicles (up to 8,500 gross

vehicle weight rating) and heavy duty motor vehicles (up to 26,000

gross vehicle weight rating) while the DOE program applies only to

light duty motor vehicles; (5) the States will administer the EPA

program while DOE will directly administer the Energy Policy Act

program; and (6) the EPA program applies only to fleets in 22 ozone or

carbon monoxide nonattainment areas while the DOE program applies to

fleets in approximately 121 areas including both nonattainment and

attainment areas.

The Department recognizes that fleet owners and operators who are

subject to the EPA and the DOE fleet requirement programs would like to

use the same vehicles and fuels to comply with both. In order to

minimize differences, the Department has reviewed EPA's rulemaking

notice implementing its statutory provisions, 40 CFR part 88; 58 FR

64679 (December 9, 1993), and followed EPA's lead where legally

permissible and consistent with the Act's policy goals. Nevertheless,

there are some unavoidable differences that will constrain the options

of those fleet owners and operators interested in using the same

vehicles and fuels to comply simultaneously with both statutory

requirements. Where relevant, the Department identifies the basis for

those differences in parts of the Supplementary Information that follow

hereafter. Members of the public are invited to comment on ways the

Department could lawfully make it easier to comply with both statutory

requirements.

4. Reformulated gasoline. Although percentages can vary to a small

degree, it is the Department's understanding that reformulated gasoline

is comprised of over 90 percent petroleum on an energy equivalent

basis. Reformulated gasoline is an enumerated ``clean alternative

fuel'' in section 241 of the Clean Air Act. 42 U.S.C. 7581. It is not

mentioned at all in the definition of ``alternative fuel'' in section

301 of the Energy Policy Act of 1992. Section 301(2) provides that the

term ``alternative fuel'' means methanol, denatured ethanol, and other

alcohols; mixtures containing 85 percent or more (or such other

percentage, but not less than 70 percent, as determined by the

Secretary, by rule, to provide for cold start, safety, or vehicle

functions) by volume of methanol, denatured ethanol, and other alcohols

with gasoline, or other fuels; natural gas; liquified petroleum gas;

hydrogen; coal-derived liquid fuels; fuels (other than alcohol) derived

from biological materials; electricity (including electricity from

solar energy); and any other fuel the Secretary determines, by rule, is

substantially not petroleum and would yield substantial energy security

benefits and substantial environmental benefits.

Each of the above-underscored phrases sets forth limited authority

for the Department to add fuels to the definition of ``alternative

fuel.'' Under either authority, the Department must undertake notice

and comment rulemaking under the Administrative Procedure Act, 5 U.S.C.

Sec. 553, to add a fuel to the statutory list. The Department did not

include in today's proposal a provision adding reformulated gasoline to

the definition of ``alternative fuel.'' The percentage of petroleum in

reformulated gasoline, at least 90 percent of the total volume, is too

large to warrant proposing to make any of the necessary substantive

determinations described above. To the extent that reformulated

gasoline is an alcohol/gasoline mixture, it does not meet the minimum

70 percent alcohol volume requirement described above. To the extent

that reformulated gasoline is some other kind of mixture, the 90

percent petroleum volume precludes a determination that the mixture is

``substantially not petroleum'' and would ``substantially enhance

energy security.''

Members of the public are invited to comment on the Department's

determination not to propose a rule that would include reformulated

gasoline as an ``alternative fuel'' under section 301.

II. Section-By-Section Analysis

This part of the Supplementary Information discusses those

provisions of the proposed regulations that are not self-explanatory.

[[Page 10974]]

A. Subpart A--General Subpart

Definition of ``Fleet''

In order to promote easier understanding, DOE has divided the

statutory definition into two parts. The main paragraph in the

statutory definition appears in proposed Sec. 490.2 under the word

``fleet.'' This proposed regulatory definition of ``fleet'' cross

references proposed Sec. 490.3, that describes the categories of

vehicles excluded from the definition.

In the proposed definition of ``fleet,'' there is a cross reference

to proposed appendix A to subpart A which sets forth a list of

metropolitan statistical areas (MSAs) and consolidated metropolitan

statistical areas (CMSAs), as defined by the Bureau of the Census, with

the requisite 250,000 population as of the 1980 census. The statutory

definition of ``fleet'' does not state whether the list must be updated

in light of changes in the geographic areas designated by the Bureau of

the Census as MSAs and CMSAs which meet the 1980 population requirement

of the Act. The proposed rule allows DOE to update the list, but DOE

may delete this provision in the final rule to eliminate uncertainty.

Members of the public are invited to comment on this choice.

Consistent with the statutory language, the proposed definition

requires that there be a minimum of 20 light duty motor vehicles ``used

primarily'' in a relevant statistical area. DOE is proposing to

interpret those words to mean that the majority of the vehicles' total

miles are accumulated within a covered statistical area.

With regard to fleet fueling characteristics, the statutory and

proposed regulatory definition of ``fleet'' provide that the vehicles

be ``centrally fueled or capable of being centrally fueled.'' Proposed

Sec. 490.2 defines the term ``centrally fueled'' as meaning that a

vehicle is fueled 75 percent of the time at a location that is owned,

operated, or controlled by a fleet or covered person or is under

contract with the fleet or covered person.

It should be noted that simply because a fleet vehicle is not

centrally fueled does not mean it is exempt from counting, because the

statutory requirement covers those vehicles that are centrally fueled

or are capable of being centrally fueled. It is possible that a vehicle

that is not currently centrally fueled could be centrally fueled.

Therefore, an organization which has determined that its vehicles are

not centrally fueled must still determine if the vehicles are capable

of being centrally fueled. If the vehicles are, then the total of these

vehicles, i.e., those vehicles either centrally fueled or capable of

being centrally fueled, may result in a ``fleet'' or ``covered person''

that is subject to the acquisition requirements of the Act.

In determining whether 20 or more light duty motor vehicles within

a MSA or CMSA are centrally fueled or capable of being centrally

fueled, the organization must also consider situations where vehicles

that are centrally fueled or capable of being centrally fueled are

present in more than one location within the MSA or CMSA. The number of

vehicles at all locations that are centrally fueled or capable of being

centrally fueled must be totaled. For example, if a fleet or covered

person has 12 vehicles at location A that are centrally fueled or

capable of being centrally fueled and 10 vehicles at location B that

are also centrally fueled or capable of being centrally fueled, the

organization has 22 vehicles in a MSA or CMSA that are centrally fueled

or capable of being centrally fueled.

In providing that contract fueling is a method of being centrally

fueled, retail credit card purchases by themselves are not considered

to be a contractual refueling agreement. However, commercial fleet

credit cards are considered to be a contractual refueling agreement,

since they are intended as a special fuel arrangement for fleet

purchases alone. The intent of DOE's definition is to ensure that only

those fleet-based agreements which provide special fleet refueling

benefits at a particular facility or group of facilities would qualify

as central fueling. DOE does not intend the definition of ``centrally

fueled'' to pertain to fleet service card agreements which include a

wide network of fuel providers, unless the service card agreement

effectively operates as a commercial refueling arrangement between a

circumscribed subset of such refueling facilities and a given fleet

operator.

Proposed Sec. 490.2 defines the term ``capable of being centrally

fueled'' as meaning a vehicle can be refueled at least 75 percent of

its time at a location, that is owned, operated, or controlled by the

fleet or covered person, or is under contract with the fleet or covered

person. One method that DOE is proposing for determining central

fueling capability is whether 75 percent of a vehicle's total miles

traveled are derived from trips that are less than the operational

range of the vehicle. As defined by EPA, in its December 9, 1993,

Federal Register notice on the final rule for the definitions and

general provisions for the Clean Fuel Fleet Program, 58 FR 64684, the

operational range is the distance a vehicle is able to travel on a

round trip with a single refueling. The operational range should be no

less than 50 percent of the average range of the existing fleet and in

no instance should be less than 300 miles. It is important to note that

the fuel in question is the fuel that the vehicle currently operates

on. DOE believes that this proposed definition will allow fleets and

covered persons to easily determine which vehicles are ``capable of

being centrally fueled.'' DOE requests comment on this definition of

operational range, and on the operational range of alternative fueled

vehicles which may be required to comply with this program.

In defining the same phrase in 40 CFR 88.302-94, EPA provided that

the presence of one or more nonconforming vehicles in a fleet does not

exempt an entire fleet from the requirements of this program; those

vehicles that are capable of being centrally fueled will count towards

the 20-vehicle minimum fleet size. DOE agrees, but does not find a need

to include a phrase to this effect in the definition of ``capable of

being centrally fueled.''

The DOE proposed definition differs from the EPA definition of

``capable of being centrally fueled,'' at 40 CFR 88.302-94, because the

DOE proposed definition does not require that vehicles covered must be

capable of being centrally fueled 100 percent of the time. In

developing its definition, EPA had to consider the fueling

characteristics of both light duty and heavy duty vehicles. EPA amended

its proposed definition to reflect the 100 percent fueling requirement

based on the comments of heavy duty engine manufacturers, who argued

that vehicles purchased by heavy duty vehicle fleet operators in order

to comply with the Clean Fuel Fleet Program would have to be dedicated

to a single fuel that may not be widely available. It appears that if

the heavy duty vehicles had not been involved in the program that EPA

would have settled on the 75 percent figure. DOE did not take these

comments into consideration when developing the proposed definition

because the Act has no requirement for fleets to acquire heavy duty

vehicles. Thus, separate heavy duty vehicle fueling characteristics do

not have to be considered. DOE requests comment on whether the 75

percent level is appropriate.

DOE's proposed definition of ``capable of being centrally fueled''

is based on EPA's work. However, DOE requests comment as to whether

further editing is necessary to clarify the meaning of this phrase.

[[Page 10975]]

The statutory definition of ``fleet'' requires that a minimum of 20

vehicles be ``owned, operated, leased, or otherwise controlled by a

governmental entity or other person.'' The proposed regulatory

definition of ``fleet'' substantially tracks this language. However,

there is also a definition of ``lease'' in proposed Sec. 490.2 that

excludes rental agreements of less than 120 days. This provision is

consistent with the EPA regulations. As EPA explained, a person does

not have the same level of control over a vehicle lease for a short

period of time, and the 120-day period takes into account short term

variations in fleet operations and the number of fleet vehicles that

ought not to trigger the vehicle acquisition mandates. 58 FR at 64687.

DOE shares this view.

The proposed regulatory definition of ``fleet'' further tracks the

statutory definition by requiring that a person controls 50-light duty

motor vehicles regardless of where they are located. The proposed

definition of ``fleet'' uses the concept of ``control'' to establish

the guidelines for attributing vehicles to a ``fleet'' for the purposes

of determining whether the 50-vehicle minimum is satisfied. The concept

is used with regard to: (1) Control of vehicles; (2) control by another

person; (3) control of another person; and (4) being subject to common

control together with another person.

There is similar language in the definition of ``covered fleet''

which applies to the EPA fleet program requirement. EPA has promulgated

an elaborate definition of ``control'' in 40 CFR Sec. 88.302-94 which

reflects the various ways in which the concept of ``control'' is used

in the definition of ``covered fleet.'' The explanation of that

definition appears at 58 FR 64686-7. DOE is proposing to adopt EPA's

definition of ``control.''

Other Definitions

Proposed Sec. 490.2 defines the term ``after-market converted

vehicle'' as a new or used conventional fuel Original Equipment

Manufacturer vehicle that has been converted to operate on alternative

fuel by an after-market converter. This converter must be in compliance

with all Federal, state, and local laws at the time of conversion.

After-market converted vehicles differ from Original Equipment

Manufacturer converted vehicles with respect to which company

warranties the conversion and its components. In the case of an

Original Equipment Manufacturer converted vehicle, the vehicle is

converted prior to first sale by a manufacturer-authorized conversion

company under contract to the manufacturer to convert Original

Equipment Manufacturer vehicles, and is then offered by the Original

Equipment Manufacturer, with warranty coverage through the Original

Equipment Manufacturer, for sale to the general public. In the case of

an after-market converted vehicle, the conversion is performed by an

after-market converter, who provides the warranty for the vehicle

conversion and the conversion kit.

Proposed Sec. 490.2 defines the term ``alternative fuel''

consistent with the definition for that term in section 301 of the Act.

The text of the statutory definition of ``alternative fuel'' was quoted

earlier in this Supplementary Information section in a discussion of

reformulated gasoline. The terms of that definition do not restrict

``alternative fuels'' to fuels used only for transportation purposes.

However, section 501(a)(3)(B) of the Act specifically exempts certain

businesses that do not use ``alternative fuels'' for transportation

purposes. That provision is reflected in proposed Sec. 490.303(b) which

is discussed in detail below in this section-by-section analysis.

Proposed Sec. 490.2 defines the term ``covered person'' consistent

with the definition for that term in section 301 of the Act.

``Dealer demonstration vehicles'' are excluded from the definition

of ``fleet.'' Proposed Sec. 490.2 follows the EPA definition for the

term ``dealer demonstration vehicle'' found at 40 CFR Sec. 88.302-94

which defines ``dealer demonstration vehicle'' as meaning any vehicle

that is operated by a motor vehicle dealer solely for the purpose of

promoting motor vehicle sales, either on the sales lot or through other

marketing or sales promotions, or for permitting potential purchasers

to drive the vehicle for pre-purchase or pre-lease evaluation. The

intent of this definition is to exempt the vehicles held on the lot of

a motor vehicle dealer as stock from which potential purchasers or

lessees can choose. Vehicles held by dealers for their own business

purposes, such as shuttle buses, loaner vehicles, or other repair or

business-related vehicles are not exempt, unless they are also offered

for retail sale as part of the dealer stock or are rotated through the

fleet back to the dealer stock.

As required by section 301(8) of the Act, proposed Sec. 490.2

defines the term ``dual fueled vehicle,'' consistent with section

513(h)(1)(D) of the Motor Vehicle Information and Cost Savings Act, 15

U.S.C. Sec. 2013, as a motor vehicle that is capable of operating on

alternative fuel and on gasoline or diesel fuel. These include

flexible-fuel vehicles that operate on a mixture of an alternative fuel

and a petroleum-based fuel, and bi-fuel vehicles that can be switched

to operate on either an alternative fuel or a petroleum-based fuel. The

intent of this definition is to include all vehicles that are capable

of operating on an alternative fuel and a petroleum-based fuel,

regardless of what terminology is used to describe the vehicle. The

Department is aware that the terms ``bi-fuel'' and ``dual-fuel'' are

being used interchangeably to describe the same motor vehicle and does

not wish to further confuse the situation.

``Emergency vehicles'' are excluded from the definition of

``fleet.'' Proposed Sec. 490.2 adopts EPA's definition for the term

``emergency vehicle'' in 40 CFR Sec. 88.302-94 which defines

``emergency vehicle'' as meaning any vehicle that is legally authorized

by a governmental authority to exceed the speed limit to transport

people and equipment to and from situations in which speed is required

to save lives or property, such as a rescue vehicle, fire truck or

ambulance. These vehicles normally have red and/or blue flashing lights

and sirens. DOE is relying on the speed limit criterion because this is

the way that many states define ``emergency vehicles.'' The requirement

for legal authorization to exceed the speed limit may be problematic,

however, for localities that authorize certain utility vehicles to

exceed the speed limit in special circumstances. However, those

vehicles are not normally considered emergency vehicles in that their

primary function does not include exceeding the speed limit to

transport people and equipment to and from situations in which speed is

required to save lives or property. Their response to an emergency does

not usually require them to exceed the speed limit, and they are not

usually equipped with red and/or blue flashing lights and sirens for

use when exceeding the speed limit. Therefore, those vehicle types are

not considered excluded from the definition of ``fleet'' unless, on a

vehicle-by-vehicle basis, they are specifically and legally authorized

by a governmental authority to respond to emergencies as described

above.

``Law enforcement vehicles'' are excluded from the definition of

``fleet.'' Proposed Sec. 490.2 adopts EPA's definition of the term

``law enforcement vehicle'' found at 40 CFR Sec. 88.302-94 which

defines ``law enforcement vehicle'' as meaning any vehicle which is

primarily operated by a civilian or military police officer or sheriff,

or by personnel of the Federal Bureau of Investigation, the Drug

Enforcement [[Page 10976]] Administration, or other law enforcement

agencies of the Federal Government, or by state highway patrols,

municipal law enforcement, or other similar law enforcement agencies,

and which is used for the purpose of law enforcement activities

including, but not limited to, chase, apprehension, surveillance, or

patrol of people engaged in or potentially engaged in unlawful

activities. This definition is intended to clarify the difference

between law enforcement vehicles and vehicles used for other security

purposes. Under this definition, a vehicle is considered to be a law

enforcement vehicle and is exempt by virtue of its use for official law

enforcement purposes, as conveyed by local, state or federal government

mandate. Security vehicles do not usually comply with this definition,

and as such are not excluded from the definition of ``fleet'' unless

they are contracted by a law enforcement agency for the purposes

described above.

Proposed Sec. 490.2 defines the term ``lease'' to mean use of a

vehicle for transportation purposes pursuant to a rental contract or

similar arrangement, the term of such contract or similar arrangement

is for a period of 120 days or more, and such person has control over

the vehicle. This definition closely tracks EPA's definition of ``owned

or operated, leased or otherwise controlled by such person,'' found at

40 CFR Sec. 88.302-94. The intent of this definition is to include, for

compliance purposes, any vehicles controlled by a covered person,

whether by ownership or lease. The 120-day period is slightly longer

than a calendar season, and is intended to reflect the fact that the

leasing of vehicles can occur for short periods of time, including

seasonal uses, and that such short term, temporary leases should not be

subject to the conditions of the program. However, fleets and covered

persons leasing or renting a vehicle for more than 120 days must

include this vehicle in the company's total count of new light duty

motor vehicles acquired for the respective model year.

Proposed Sec. 490.2 defines the term ``model year'' for the

purposes of vehicle acquisition requirements as September 1 of the

previous calendar year through August 31. This definition closely

tracks EPA's definition of ``model year,'' found at 40 CFR Sec. 88.302-

94. For purposes of compliance, covered persons should compute their

vehicle acquisitions during the period beginning September 1 of each

year through August 31. This definition of model year coincides with

the period in which most automobile manufacturers introduce their new

annual models, which should facilitate compliance since fleets can make

their acquisition plans regarding alternative fueled vehicles when they

make plans for acquiring new model year vehicles. This definition is

intended to clarify which vehicles count toward the required annual

acquisitions under the program. This definition is also intended to

ensure that all fleets and covered persons acquire vehicles based on

the same annual period, which is important to facilitate enforcement of

the programs. Thus, any new vehicles that are acquired by a fleet or

covered person between September 1 and August 31 are counted and used

as the basis for determining the acquisition requirement of the same

year, and are considered of the same model year as the January that

falls between them.

``Motor vehicles held for lease or rental to the general public''

are excluded from the definition of ``fleet.'' Proposed Sec. 490.3

follows EPA's definition of this phrase found at 40 CFR Sec. 88.302-94

which defines ``motor vehicles held for lease or rental to the general

public'' as meaning a vehicle that is owned or controlled primarily for

the purpose of short-term rental or extended-term leasing, without a

driver, pursuant to a contract. According to this definition, the

vehicles must be owned primarily for the purpose of renting or leasing

them without a driver, effectively granting someone else control over

them in exchange for money or other compensation. In addition, this

exchange must be based on a contract. Thus, a firm cannot be found to

``lease'' its vehicles to its employees unless the vehicles are owned

primarily for leasing them to the general public and they are leased

pursuant to formal contracts which give control of the vehicle to the

lessee.

``Motor vehicles used for motor vehicle manufacturer product

evaluations and test'' are also excluded from the definition of

``fleet.'' Proposed Sec. 490.3 follows EPA's definition of the phrase

``vehicle used for motor vehicle manufacturer product evaluations and

tests'' at 40 CFR Sec. 88.302-94. There the phrase is defined to mean

vehicles that are owned and operated by a motor vehicle manufacturer,

or motor vehicle component manufacturer, or owned or held by a

university research department, independent testing laboratory, or

other such evaluation facility, solely for the purpose of evaluating

the performance of such vehicle for engineering, research and

development, or quality control reasons. It is the intent of this

provision to exclude vehicles which are part of a ``fleet'' used by an

Original Equipment Manufacturer for production control or quality

control reasons.

``Motor vehicles which under normal operations are garaged at

personal residences at night'' is another category of vehicles excluded

from the definition of ``fleet.'' Proposed Sec. 490.2 tracks the

language of section 301(h) of the Act.

Proposed Sec. 490.2 defines the term ``Original Equipment

Manufacturer Vehicle'' as meaning a vehicle engineered, designed and

produced by an Original Equipment Manufacturer. This term applies to

conventionally fueled Original Equipment Manufacturer vehicles as well

as to alternative fueled vehicles. Included in this definition are

vehicles that were conventionally fueled Original Equipment

Manufacturer vehicles, but were converted prior to sale by the Original

Equipment Manufacturer, through a contract with a conversion company,

to operate on an alternative fuel and which are covered under the

Original Equipment Manufacturer warranty.

Proposed Section 490.3 Excluded Vehicles

Proposed Sec. 490.3 sets forth the vehicles which may be excluded

when counting to determine whether there are a sufficient number of

vehicles to constitute a ``fleet'' as defined in proposed Sec. 490.2.

Some of the exclusions are categories capsulized in a term such as

``dealer demonstration vehicle,'' ``emergency vehicle,'' and ``law

enforcement vehicle.'' Those terms are defined in proposed Sec. 490.2

and are discussed above.

Proposed Section 490.4 General Information Inquiries

In other regulatory programs, DOE has learned that on occasion

representatives of regulated persons make informal inquiries, usually

by telephone, and need a quick response from the program office even if

the response is not binding on DOE. Proposed Sec. 490.4 would make this

device for obtaining information available to those who are subject to

regulation under part 490.

Proposed Section 490.5 Requests for an Interpretive Ruling

For those who want a more authoritative answer as to how the

Department intends to construe and apply its regulations to particular

factual situations, and for whom other procedures such as petitions for

exemption are irrelevant, proposed Sec. 490.5 would provide a useful

option. The uncertainties related to the complex provisions applicable

to determining who must comply and the extent of

[[Page 10977]] affected vehicle inventories prompted DOE to devise

proposed Sec. 490.5. Any interpretive ruling that the Department issues

would apply only to the person who requested it. However, the

Department will make copies of these rulings available for inspection

and copying in a public file in its Freedom of Information Reading Room

in the Forrestal Building at 1000 Independence Ave., SW, Washington, DC

20585.

Proposed Section 490.6 Petitions for Generally Applicable Rulemaking

Proposed Sec. 490.6 sets forth procedures for petitioning the

Department to issue new or amended rules of general applicability for

part 490. These procedures implement rights available to members of the

public under the Administrative Procedure Act. 5 U.S.C. 553(e).

Proposed Section 490.7 Relationship to Other Law

Proposed Sec. 490.7 makes a declaratory statement to avoid

arguments that provisions of part 490, by their silence, authorize

acquisition of vehicles or conversion of vehicles in a manner that does

not comply with other laws and regulations at the Federal, state, or

local level.

Subpart B--[Reserved]

Subpart C--Mandatory State Fleet Program

Proposed Section 490.201 Alternative Fueled Vehicle Acquisition

Mandate Schedule

Proposed Sec. 490.201 sets forth the requirements, subject to some

exemptions, for the percentage of new light duty motor vehicles for

State fleets that must be alternative fueled vehicles when acquired

under the Mandatory State Fleet Program. Beginning with the 1996 model

year, September 1, 1995, any state fleet that is covered under this

subpart must comply with these requirements, unless otherwise provided

in this subpart.

In cases where acquisition percentages result in something less

than a whole number, DOE is proposing that these fractions be rounded

up to the next whole number.

Proposed Section 490.202 Acquisitions Satisfying the Mandate

Proposed Sec. 490.202 provides in substance that an acquisition of

an alternative fueled vehicle, regardless of the year of manufacture,

counts toward satisfaction of the vehicle acquisition mandate. Such a

vehicle would be new to the fleet operator. Credits acquired under

subpart F also count toward satisfaction of the mandate.

Proposed Section 490.203 Light Duty Alternative Fueled Vehicle Plan

The Act provides an alternative means of compliance for States. In

lieu of a State meeting the acquisition requirements proposed by

Sec. 490.201 solely through acquisition of new State-owned vehicles, a

State may comply with a Light Duty Alternative Fueled Vehicle Plan

submitted by the State and approved by DOE. The Plan must demonstrate

that there will be a sufficient number of light duty motor vehicles by

State, local and private fleets, which in aggregate meet or exceed the

applicable vehicle percentage for any given year.

DOE is proposing that any acquisition or conversion of light duty

alternative fueled vehicles for a State may be part of the Plan,

irrespective of whether the vehicles are in the excluded categories of

vehicles in the definition of ``fleet'' as enumerated in proposed

Sec. 490.3. This allows for law enforcement vehicles, or other vehicles

otherwise excluded from the definition of ``fleet'' to be part of a

Light Duty Alternative Fueled Vehicle Plan.

DOE is proposing that, until a Plan is approved or unless DOE

grants an exemption, a State is subject to the fleet percentage

requirements in proposed Sec. 490.201. This will be equally true in

instances where a State plan participant (such as a municipality) fails

to fulfill its commitments under the Plan. However, if the State is

able to find a substitute participant, then the State may submit to DOE

for approval an amendment to the Plan.

DOE is proposing in paragraph (b) of this section to require States

to monitor and verify on an ongoing basis the implementation of its

Plan. This is to ensure that all participants in the Plan are indeed in

compliance, and that at the end of the model year, all requirements

will have been met. If for whatever reasons a participant is unable to

fulfill its commitments, the State should be able to find a substitute

participant before the end of the year.

Paragraph (c) proposes to require a State to submit to DOE, for

approval, its Light Duty Alternative Fueled Vehicle Plan no later than

the June 1 prior to the model year covered by the Plan. A State should

know by this deadline the number of light duty motor vehicles it plans

to acquire during the upcoming model year. DOE would like to receive

comments as to whether it is reasonable to require all Plans be

submitted by the June 1 prior to the model year.

Proposed Section 490.204 Process for Granting Exemptions

Section 507 (i)(1) of the Act provides three categories under which

a State may seek exemptions in whole or in part from the annual

acquisition percentages. A State may seek exemption if it can

demonstrate that--

(1) Alternative fuels that meet the normal requirements and

practices of the principal business of the State fleet are not

available in the area where the vehicles are to be operated; or

(2) Alternative fueled vehicles that meet the normal requirements

and practices of the principal business of the state fleet are not

reasonably available for acquisition because they are not offered for

acquisition commercially on reasonable terms and conditions in any of

the States; or

(3) The application of such requirements would pose an unreasonable

financial hardship.

Category 1 tracks section 507(i)(1) of the Act. Category 2 is based

on section 507(i)(1) and would preclude arguments that the physical

unavailability in a state is not a valid reason for exemption when a

vehicle can be ordered from somewhere else in the United States. Time

delays in delivery of alternative fueled vehicles are generally not

acceptable as an excuse. States must be cognizant of the possible

irregular manufacturer production schedules and considerably longer

lead times involved in the acquisition of alternative fueled vehicles

compared with conventional vehicles. It is the responsibility of the

state to plan and schedule its ordering and acquisitions of alternative

fueled vehicles so as to comply with the acquisition requirements for

each model year. Regarding category 3, section 507(i)(1) allows only

States, not alternative fuel providers, the right to seek an exemption

based on financial hardship. Proposed paragraph (d)(3) describes the

few items of information that a State must submit to DOE when

requesting an exemption based on financial hardship. (Earlier in this

Supplementary Information, States were invited to comment on how DOE

should interpret and apply the term ``financial hardship.'')

Proposed paragraph (g) provides that the Assistant Secretary for

Energy Efficiency and Renewable Energy may grant a request for

exemption. In order to keep the procedures simple, the Assistant

Secretary may act finally for the Department, and there is no

requirement to obtain the specific approval of the Secretary. If the

Assistant Secretary denies the request for exemption, proposed

paragraph (g) [[Page 10978]] further provides for a State right to

appeal to the Department's Office of Hearings and Appeals, whose

decision would be final for the purpose of judicial review. Further

discussion on the exemption process is found in section-by-section

analysis for the Alternative Fuel Provider Vehicle Acquisition Mandate.

The Act requires that the exemption process be reasonable and

simple. The DOE invites comments on the proposed process for States to

request exemptions, in whole or in part.

Proposed Section 490.205 Reporting Requirements

Proposed Sec. 490.205 will require each state that is subject to

the vehicle acquisition mandate to submit to DOE an annual report. This

report will assist DOE in determining if a state has met the

requirements of this subpart as well as to determine how successfully

the goals and requirements of this subpart are being met. For further

discussion on reporting requirements, see proposed section 490.309. DOE

invites comment as to the reasonableness of these reporting

requirements, as well as recommendations for additional, substitute or

reduced requirements which would achieve the desired results.

Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate

I. Background

The Alternative Fuel Provider Vehicle Acquisition Mandate is

intended to cover a broad range of alternative fuel providers in a

flexible, workable program that will allow for compliance in the most

economical fashion possible. The program allows alternative fuel

providers flexibility in the acquisition of new alternative fuel

vehicles via purchase, lease, or conversion, and in the geographical

placement of alternative fuel vehicles. It also provides a minimum of

restrictions on how the alternative fueled vehicles are to be used.

The program specifies the criteria for determining whether an

alternative fuel provider is covered and under what circumstances

exemptions from the program will be granted. Only those alternative

fuel providers who are classified as ``covered persons'' are subject to

the requirements of this proposed regulation and only that affiliate,

division, or other business unit which is substantially engaged in the

alternative fuels business may be subject to the acquisition mandate

requirements of the Act.

Proposed Section 490.300 Purpose and Scope

Proposed Sec. 490.300 defines the purpose and scope of part 490

Subpart D as implementing the statutory requirements of section 501 of

the Energy Policy Act of 1992, which sets forth a mandate for those

alternative fuel providers, who are classified as covered persons, to

acquire alternative fuel vehicles at an escalating percentage of their

new vehicle acquisitions.

Proposed Section 490.301 Definitions

Proposed Sec. 490.301 sets forth the definitions for part 490,

Subpart D.

Proposed Sec. 490.301 defines the term ``alternative fuels

business'' as meaning an activity undertaken to derive revenue from:

(1) Producing, storing, refining, processing, transporting,

distributing, importing, or selling at wholesale or retail any

alternative fuel other than electricity; or (2) generating,

transmitting, importing, or selling at wholesale or retail electricity.

This definition tracks the language of section 501(a)(2).

Proposed Sec. 490.301 provides definitions for the terms

``affiliate,'' ``division,'' and ``business unit'' which are used in

section 501 of the Act and proposed Secs. 490.303 and 490.304. The

first two are dictionary definitions. ``Business unit'' is defined to

make clear the grouping of business activities must be similar in

autonomy to affiliates and divisions.

Proposed Sec. 490.301 defines the term ``normal requirements and

practices'' as meaning the operating business practices and required

conditions under which the principal business of the covered person

operates. In a request for an interpretive ruling or in a civil penalty

proceeding, the burden would be on the fuel provider to show that

actions to acquire alternative fuel vehicles and/or obtain alternative

fuel are outside the normal practices of the covered person's principal

business.

Proposed Sec. 490.301 defines the term ``principal business'' as

meaning the largest sales-related gross revenue producing activity. If

an organization derives a plurality of gross revenue from sales-related

alternative fuels activity then the organization's principal business

is alternative fuels. As it is used above, plurality does not require

that over 50 percent of an organization's sales-related gross revenue

be based on activities related to alternative fuels. Sales-related in

this context means that the gross revenue does not come from

investments such as corporate stocks.

In determining whether an organization's principal business is

alternative fuels, the important criterion to look at is what is the

organization's single largest source of sales-related gross revenue.

For example, if an organization derives 35 percent of its sales-related

gross revenue from alternative fuels and the next largest single source

of sales-related gross revenue comprises 25 percent of the

organization's gross revenue, the organization's principal business is

alternative fuels.

Proposed Sec. 490.301 defines the term ``substantially engaged'' to

mean that a covered person, or affiliate, division, or other business

unit thereof, regularly derives sales-related gross revenue from an

alternative fuels business. To determine whether a covered person or

affiliate, division, or other business unit thereof is ``substantially

engaged'' in the alternative fuels business, it is important to look at

the involvement the covered person, affiliate, division, or other

business unit has with the alternative fuels business. Thus, only that

affiliate, division, or business unit that meets the substantially

engaged criteria, as defined above, is subject to the acquisition

requirements of this program.

The covered person is responsible for clearly defining the specific

affiliate, division, or other business unit that is substantially

engaged and is therefore subject to the acquisition requirements of

this rule. If this designation is not made or is not made clearly, DOE

will assume that the entire organization is subject to the acquisition

requirements of this rule and will enforce it as such.

Proposed Sec. 490.301 defines the term ``substantial portion'' to

mean that at least 2 percent of a covered person's refinery yield of

petroleum products is composed of alternative fuels. Alternative fuel

is as defined in proposed Sec. 490.2. This proposed definition was

formulated using reliable data compiled by the Energy Information

Administration and published in its Petroleum Supply Annual 1993,

Volume 1 (DOE/EIA-0340(93)/1). Table 19 provides aggregate data on

refinery yield for the Petroleum Administration for Defense districts

and can be readily verified.

The 2% threshold was chosen because it represents the average yield

for the production of alternative fuel by petroleum refiners as

reported by the Energy Information Administration. DOE believes that

the use of this percentage in the definition of ``substantial portion''

allows for the initial identification of that group of covered persons

described in Sec. 501(a)(2)(c) of the Act and provides a sound basis

for identifying those [[Page 10979]] affiliates, divisions, or other

business units of such covered persons which are substantially engaged

in the alternative fuel business.

The Department considered including some measure of the gross

revenue attributed to the production of alternative fuels as an

alternative in the definition of ``substantial portion.'' The first

measure that was considered was setting a minimum level of gross

revenue from the sale of alternative fuels that an organization would

have to equal or exceed to be classified as an alternative fuel

provider. The second measure that was considered was establishing a

minimum percentage, that reflects the percent of total gross revenue

attributed to the sale of alternative fuels, that an organization would

have to equal or exceed to be classified as an alternative fuel

provider. Unfortunately, the information available on these measures is

too fragmented to be the basis for proposed regulatory language. DOE

seeks comment on whether reliable information exists that would allow

establishment of a monetary measure (or any measure apart from the

measure in the proposed rule) for determining whether alternative fuels

production comprises a substantial portion of a company's business. DOE

also seeks comment recommending any other alternative definitions for

``substantial portion.''

Proposed Section 490.302 Vehicle Acquisition Mandate Schedule

Proposed Sec. 490.302 describes the vehicle acquisition schedule

that alternative fuel providers must comply with if they are classified

as covered persons. Proposed paragraph (a) requires that of the new

light duty motor vehicles acquired by alternative fuel providers, the

following percentages shall be alternative fueled vehicles for the

following model years:

(A) 30 percent for model year 1996.

(B) 50 percent for model year 1997.

(C) 70 percent for model year 1998.

(D) 90 percent for model year 1999 and thereafter. For example, if

an alternative fuel provider purchases or leases 50 light duty motor

vehicles in model year 1996, 30 percent, or 15, of the vehicles have to

be alternative fueled vehicles.

Proposed paragraph (b) states that, except as provided by

Sec. 490.304, these requirements apply to all new light duty vehicles

acquired by a ``covered person,'' not just those vehicles acquired for

the fleets which initially qualified the alternative fuel provider as a

``covered person.'' These requirements also apply regardless of where

the new vehicles are to be located. For example, if an alternative fuel

provider, which is a covered person, is acquiring new light duty motor

vehicles for a location that is not in a subject MSA or CMSA, the

required percentage of these vehicles must be alternative fueled

vehicles. The MSA/CMSA requirement is used for classifying ``covered

persons,'' not for determining how many light duty vehicles must be

alternative fueled vehicles. The provisions of proposed Sec. 490.302(b)

are not discretionary because they follow the wording of section

501(a)(1) of the Act. 42 U.S.C. 13251(a)(1).

Proposed paragraph (c) provides for rounding off to the next higher

number if application of a percent to the base number of new light duty

vehicles acquired results in a requirement to acquire a fraction of a

vehicle. This procedure is consistent with the statutory objective of

promoting the acquisition of alternative fuel vehicles.

Proposed paragraph (d) states that only acquisitions satisfying the

mandate, as described in proposed Sec. 490.305, and/or Alternative

Fueled Vehicle credits will be counted toward compliance with the

acquisition schedule in proposed paragraph (a).

Proposed Section 490.303 Who Must Comply

Proposed Sec. 490.303 gives an answer to the question: who is a

covered person that must comply? This proposed section tracks section

501(a)(2) of the Act. There are two components to this determination.

The first component involves determining whether the organization fits

the profile of an alternative fuel provider as provided by section

501(a)(2) of the Act. The second component eliminates from coverage

those alternative fuel providers whose principal business uses

alternative fuel to create a product that is not an alternative fuel.

Types of companies likely to be covered persons subject to the

alternative fuel providers mandate include, but are not limited to,

private and public electric and natural gas utilities; natural gas

distribution companies; pipeline companies; petroleum companies;

propane producers, distributors, and suppliers; methanol providers;

ethanol providers; and fuel transport companies.

Municipal utilities possessing the required fleet size, fueling

characteristics, and located within the specified geographical areas

are classified as alternative fuel providers under section

501(a)(2)(B). Therefore, they are expected to comply with the

requirements of the mandate under Sec. 490.302 and will not be subject

to any future municipal fleet mandate imposed by rule under section 507

of the Act.

If an organization produces, imports, or produces and imports in

combination, an average of 50,000 barrels per day or more of petroleum,

and regularly derives gross revenue from the production of alternative

fuels, that organization has a ``substantial portion'' of its business

in alternative fuels. To determine whether an organization has a

substantial portion of its business in alternative fuels it is

important to look at the organization's involvement in the alternative

fuels business, not just the amount of gross revenue from alternative

fuels production or the level of investment in alternative fuels

production. DOE's determination of whether an organization has a

substantial portion of its business in alternative fuels will be made

on a case-by-case basis. Comment is invited as to what criteria might

be used in making this determination.

Paragraph (b) of proposed Sec. 490.303 deals with covered persons

who are excluded from having to comply with this subpart. This section

tracks the language of section 501(a)(3)(B) of the Act. Two types of

covered persons may be excluded from the requirements of this

regulation: (1) Those who transform alternative fuels into a product

that is not an alternative fuel; and (2) those who consume alternative

fuels as a feedstock or fuel in the manufacture of a product that is

not an alternative fuel.

An example of an excluded person described in paragraph (b)(1)

would be a manufacturer of windshield washer fluid. The manufacturer

would be classified as an excluded person because it blends an

alternative fuel, methanol, in producing windshield washer fluid, which

is not an alternative fuel.

An example of an excluded person described in paragraph (b)(2)

would be a company that burns natural gas to provide a heat source for

a manufacturing operation.

An example of an excluded person under paragraphs (b)(1) and (b)(2)

would be an entity whose principal business is the production of

alcoholic beverages.

Proposed Section 490.304 Which New Light Duty Motor Vehicles Are

Covered

Under section 501(a)(3)(A) of the Act, if the covered person has

more than one affiliate, division, or other business unit, only the

vehicles of an affiliate, division, or business unit that is

``substantially engaged in the alternative fuels business'' are subject

to the vehicle acquisition mandate. Proposed Sec. 490.304 reflects the

provisions of [[Page 10980]] section 501(a)(3)(A), and should be read

in conjunction with the proposed definitions of ``affiliate,''

``division,'' and ``business unit'' in Sec. 490.301.

Proposed Section 490.305 Acquisitions Satisfying the Mandate

Proposed Sec. 490.305 deals with the three types of acquired

vehicles that will count toward compliance with proposed Sec. 490.302,

in addition to alternative fueled vehicle credits under Subpart F.

These categories provide flexibility for organizations in acquiring

vehicles to meet this regulation. An alternative fueled light duty

motor vehicle shall be considered newly acquired, regardless of model

year, if:

(a) The vehicle is an Original Equipment Manufacturer vehicle

capable of operating on alternative fuels and was not previously under

the control of the covered person; or

(b) The vehicle is an after-market converted vehicle and was not

previously under the control of the covered person; or

(c) The vehicle is an Original Equipment Manufacturer vehicle that

has been converted to operate on alternative fuels prior to the

vehicle's first use in service.

A vehicle that meets the description of paragraph (a) is one that

is manufactured by an Original Equipment Manufacturer to be capable of

operating on alternative fuels. For example, if a covered person

acquires a 1993 flex-fuel light duty motor vehicle during model year

1996, this vehicle is classified as being a new acquisition for that

organization.

A vehicle that meets the description of paragraph (b) is one that

has been converted by a licensed converter to be capable of operating

on alternative fuels. A vehicle that meets the description of paragraph

(c) is a vehicle that upon acquisition by the organization is taken to

a licensed converter for conversion to an alternative fueled vehicle

and is never intended to be operated solely on petroleum-based fuel. It

is important to note that section 507(j) of the Act states that no

fleet owner shall be required to acquire converted vehicles in order to

meet compliance with this or any fleet acquisition requirement.

Proposed Section 490.306 Vehicle Operation Requirements

Proposed Sec. 490.306 largely tracks the provisions of section

501(a)(4), which requires that all alternative fueled vehicles acquired

pursuant to section 501 be operated solely on alternative fuels, except

when these vehicles are operating in an area where alternative fuel is

not available.

Proposed Section 490.307 Option for Electric Utilities

Proposed Sec. 490.307 deals with the statutory option for electric

utilities. Proposed paragraph (a) tracks the provisions of section

501(c) of the Act, which provides that a covered person whose principal

business is generating, transmitting, importing, or selling, at

wholesale or retail, electricity has the option of delaying the

alternative fuel vehicle acquisition schedule in section 501(a) of the

Act until January 1, 1998, if that covered person intends to comply

with this regulation by acquiring electric motor vehicles. DOE

considered delaying the date that electric utilities would have to

start acquiring vehicles until the beginning of model year 1999 which

starts on September 1, 1998. But given that the California Air

Resources Board requires that 2 percent of all vehicles sold in

California by major auto producers be Zero Emission Vehicles, (emission

level currently only achievable by electric vehicles) starting

September 1, 1997, DOE decided not to propose a delay in the effective

date of the 30 percent alternative fueled vehicle acquisition

requirement. Also, the States of New York and Massachusetts have

enacted laws which adopt California standards and timetables.

Proposed paragraph (b) provides the date (January 1, 1996) by which

notification must be received by DOE for an electric utility to be

eligible for this delayed schedule. That date is dictated by section

501(c) of the Act. This notification should be in letter format and

must explain the utility's commitment to electric vehicles.

Proposed paragraph (c) describes the acquisition schedule that an

electric utility must comply with if the electric utility notifies the

Secretary by the required date.

Proposed Section 490.308 Process for Granting Exemptions

Proposed Sec. 490.308 deals with the requirements of section

501(a)(5) of the Act which provides for a simple and reasonable

exemption process for those covered persons seeking exemptions either

because alternative fuel is not available or alternative fueled

vehicles are not reasonably available. Proposed paragraph (a) describes

the procedure that a covered person needs to complete to receive an

exemption. The first category of exemption is if any covered person

demonstrates to the satisfaction of the Secretary that alternative

fuels that meet the normal requirements and practices of the principal

business of that person are not available in the area where the

vehicles are to be operated. The second category of exemption is if any

covered person demonstrates to the satisfaction of the Secretary that

alternative fueled vehicles that meet the normal requirements and

practices of the principal business of that person are not reasonably

available for acquisition because they are not offered for acquisition

commercially on reasonable terms and conditions in the United States.

These exemptions would be granted for one model year only. To receive

exemptions for additional model years, alternative fuel providers must

re-apply to the Secretary each year. Criteria for granting exemptions

will be based on documentation that specifically relates to the

availability of alternative fuels and alternative fueled vehicles.

To determine whether alternative fuel is ``not available,'' an

alternative fuel provider must map out the operating area and base of

operations for its fleet of vehicles. Next it must locate on the map

the alternative fueling facilities within its MSA or CMSA. Then, for

each vehicle, it must determine whether any location providing

alternative fuel is in the area in which the vehicle is operated. If

there is any location providing alternative fuel within the vehicle's

operating area, alternative fuel is available. If there are no

locations providing alternative fuel, for any alternative fuel that

meets the normal requirements and practices of the covered person's

principal business, within the vehicle's operating area, then

alternative fuel is ``not available.''

The Act requires that the exemption process be reasonable and

simple. DOE invites comment on the proposed process for exemptions, in

whole or in part.

It is anticipated that alternative fuel will be available and

accessible for almost all alternative fuel providers, and that it will

be difficult for fuel providers to prove that alternative fuel is not

available. Since alternative fuel providers stand to benefit greatly

from the expanded use of alternative fuels and the proliferation of

alternative fueled vehicles, it is also anticipated that they will help

accelerate the establishment of the alternative fuels infrastructure

and be less likely to seek exemptions based on alternative fuels being

``not available.''

To receive an exemption based on the criteria in subparagraph

(a)(2) a covered person must show that there are no alternative fueled

vehicles available for commercial acquisition on reasonable terms and

conditions in any State. The covered person also must show good faith

effort in attempting to obtain these vehicles. DOE requests comment on

the extent to which vehicle cost, either [[Page 10981]] initial cost or

life-cycle cost, should be considered in determining whether vehicles

are available on ``reasonable terms.''

If a covered person normally and historically acquires vehicles

from one automobile dealer or from one automobile manufacturer, but is

unable to acquire alternative fueled vehicles of the model type needed

from these same sources, this is not sufficient to qualify for an

exemption under subparagraph (a)(2) if appropriate alternative fueled

vehicles are available from other dealers or manufacturers. Having to

use another dealer or manufacturer is not classified as outside the

normal requirements and practices of the covered person, because the

same procedures that are currently being employed by the covered person

to obtain these vehicles can be used to obtain them from different

sources.

Having to wait slightly longer for delivery of alternative fueled

vehicles than for conventionally fueled vehicles is not a sufficient

reason for granting an exemption. If, however, the time delay will

result in a covered person violating the regulation, DOE will consider

the covered person to be in compliance with this regulation if the

delivery delay was through no fault of its own. Thus, if alternative

fueled vehicles are ordered during the model year with expectations

that they will be delivered by the end of the model year, but are not

delivered until the next model year, the covered person will be deemed

to be in compliance if it can provide DOE with proof of order date and

anticipated delivery schedule. On the other hand, if a covered person

orders alternative fueled vehicles and knows, at the time of the order,

that it will not be receiving these alternative fueled vehicles by the

end of the model year, it will be deemed to be in noncompliance and no

exemption will be granted.

Additionally, in determining whether alternative fueled vehicles

are reasonably available, a covered person must examine whether

alternative fueled vehicles of the appropriate type are available in

any alternative fuel configuration. Thus, the availability of the type

of vehicle a covered person needs that operates on the fuel that the

covered person provides is not the appropriate test for determining

whether alternative fueled vehicles are ``not reasonably available.''

The test for determining whether alternative fueled vehicles are ``not

reasonably available'' is whether there are alternative fueled vehicles

available that operate on any alternative fuel and meet the normal

requirements and practices of the business, including the vehicle

performance requirements of the business.

Proposed paragraph (b) sets forth the types of documentation in

support of exemption requests that should be provided to DOE.

Proposed paragraph (e) states that exemption determinations are

letter rulings binding for the covered person only and cannot be used

to establish a precedent for other exemption requests. DOE will review

each exemption request on a case-by-case basis.

In proposed paragraphs (f) and (g) DOE is proposing an

administrative remedy for those aggrieved by the initial decision of

the DOE Deciding Official, who will be the Assistant Secretary for

Energy Efficiency and Renewable Energy. In order to exhaust

administrative remedies, it will be necessary to appeal to DOE's Office

of Hearings and Appeals. This procedure has two virtues. It would be

less expensive than pursuing a judicial remedy immediately. It would

also ensure that DOE has made a record which is appropriate for

judicial review in the event a petition for review is filed in a

Federal court.

Proposed Section 490.309 Annual Reporting Requirements

Proposed Sec. 490.309 sets forth annual reporting requirements. An

annual report to verify regulation compliance is required of all

alternative fuel providers. Proposed paragraph (a) sets forth where and

by when annual reports should be sent.

Proposed paragraph (b) describes the required information that

would be included in this annual report. Most of the requirements are

self-explanatory; however, several of them deserve discussion for

clarification purposes.

Proposed subparagraph (b)(2) would require covered persons to

calculate the number of new light duty alternative fueled vehicles that

they are required to acquire. To determine this number, a covered

person would multiply the number entered for proposed subparagraph

(b)(1), by the acquisition percentage from Sec. 490.302 or Sec. 490.307

that applies for that model year. For example, in model year 1996, if

the number of new light duty motor vehicles acquired is 50, the number

of new light duty vehicles that are required to be acquired is 30

percent of 50, or 15 (50 x .3=15). The number of new light duty

alternative fueled vehicles acquired, added to the number of

alternative fueled vehicle credits applied, from proposed subparagraph

(b)(5), should be greater than or equal to the number calculated for

proposed subparagraph (b)(2).

Proposed paragraph (c) sets forth the procedure that a covered

person must follow if it is applying alternative fueled vehicle credits

against its acquisition requirements.

Consistent with the requirements of 5 CFR Part 1320.6(f), proposed

paragraph (d) would require that records related to this reporting

requirement be maintained and retained for a period of three years.

DOE seeks comment on the reporting requirements, especially

relating to the information that is requested to be included in the

report.

Subpart F--Alternative Fueled Vehicle Credit Program

Background

Section 508 of the Act requires DOE to establish an alternative

fueled vehicle credit program that will allocate alternative fueled

vehicle credits to a fleet or covered person that is required to

acquire alternative fueled vehicles under Title V of the Act if that

fleet or covered person acquires alternative fueled vehicles in excess

of the number that fleet or covered person is required to acquire or

acquires alternative fueled vehicles prior to the date that fleet or

covered person is required to acquire alternative fueled vehicles. An

alternative fueled vehicle credit may be used to comply with

alternative fuel provider or fleet program requirements in a later

year, or may be traded or sold for use to another fleet or covered

person who is required to acquire alternative fueled vehicles by Part

490.

The purpose of establishing a credit program is to provide

purchasing flexibility for the regulated fleet operators without

sacrificing the program's energy security goals. The general concept is

that some fleet operators may, at times, find it attractive to buy more

alternative fueled vehicles than required, if in doing so they can get

credit against future acquisition requirements, or can sell or transfer

the credits to another party. If the credits program is properly

implemented and managed, there will be no decrease in energy security

compared to a program based strictly on compliance through

acquisitions.

Both section 246(f) of the Clean Air Act (42 U.S.C. 7586(f)) and

section 508 of the Act (42 U.S.C. 13258) allow for awarding credits to

entities that initiate clean fuel vehicle or alternative fueled vehicle

programs sooner or in greater numbers than required. But the laws

differ in their goals: the goal of the Clean Air Act Amendments is to

improve air quality while the goal of the Act is energy security. Thus,

the credit [[Page 10982]] programs and implementing regulations

emanating from these acts also have different goals and objectives.

The EPA has a program called the Clean Fuel Fleet Credit Program

(40 CFR Sec. 88.304-94) that may be confused with the Department's

Alternative Fueled Vehicle Credit program. In the Clean Fuel Fleet

Credit program, a fleet owner obtains credits by implementing clean

fuel vehicles earlier, in greater numbers, or which meet more stringent

emission standards than those established by EPA. Clean Fuel Fleet

credits can also be obtained for Clean Fuel Vehicle purchases in

vehicle categories that are excluded from the Energy Policy Act

definition of ``fleet''. These credits are awarded based on a formula

that compares the clean fuel vehicle emissions with conventional

vehicle emissions. By contrast, under section 508 of the Energy Policy

Act, one credit is allocated for each alternative fueled vehicle

acquired in excess of the required number. Also, the Energy Policy

allocates one credit for each year the alternative fueled vehicle is

acquired before the required date.

Another area of difference between the two statutes is where they

allow credits to be traded. Under the Clean Air Act, credit trading is

only allowable within the same non-attainment area. For example, fleet

operators in the Baltimore non-attainment area can only buy, sell, or

trade credits with other fleet operators in the Baltimore area.

Congress appears to have concluded that it was not logical for non-

attainment areas to trade credits with other areas, because the air

quality in the area where credits were purchased and used would not be

improved as a result of this transaction. On the other hand, the Energy

Policy Act credits can be traded freely among those organizations that

are required to acquire alternative fueled vehicles, which are located

within the United States. However, there is an exception to this

trading provision, based upon the last sentence of section 508(d) of

the Act, which provides that vehicles representing credits generated or

transferred to alternative fuel providers operate solely on alternative

fuel. (42 U.S.C. 13258). This requirement is discussed under

Sec. 490.506 of this Supplementary Information. Because one of the

major goals of the Act is the reduction of our Nation's foreign oil

dependency, it makes little difference where in the United States this

reduction takes place.

Proposed Section 490.500 Purpose and Scope

Proposed Sec. 490.500 defines the purpose and scope of part 490

subpart F as implementing the statutory requirements of Section 508 of

the Act, which instructs the Secretary to allocate credits to fleets or

covered persons that acquire alternative fueled vehicles in excess of

the number required, or obtain alternative fueled vehicles prior to the

date when they are required to acquire alternative fueled vehicles.

Proposed Section 490.501 Applicability

Proposed Sec. 490.501 deals with the applicability of the credit

program to fleets and covered persons.

Proposed Section 490.502 Creditable Actions

Proposed Sec. 490.502 describes the actions associated with

allocation of alternative fueled vehicle credits by DOE. Proposed

paragraphs (a) and (b) are consistent with the language of section

508(a) of the Act, which authorizes the Secretary to allocate credits

to fleets or covered persons that acquire alternative fueled vehicles

in excess of the number they are required to acquire, or acquire

alternative fueled vehicles in advance of the date they are required

to. Once a fleet or covered person is required to acquire alternative

fueled vehicles the only way credits can be generated is by exceeding

their required acquisition number. For example, an alternative fueled

vehicle acquired in excess of the number required in model year 1996

cannot be claimed to be an early alternative fueled vehicle acquisition

for model year 1999. The excess alternative fueled vehicle will

generate 1 alternative fueled vehicle credit only, not 3 credits

because it was acquired 3 years in advance.

Additionally, DOE is proposing that one credit be allocated for the

acquisition of a light duty alternative fueled vehicle in a category

listed in proposed Sec. 490.3, such as motor vehicles held for lease or

rental to the general public, law enforcement vehicles, etc. Section

508(b) provides the statutory basis for this proposal because it refers

to the allocation of credits for the acquisition of alternative fueled

vehicles in excess of the number required. Therefore, the acquisition

of light duty alternative fueled vehicles in the excluded categories

constitutes the acquisition of alternative fueled vehicles in excess of

the number required qualifies for the allocation of credits. Because

these excluded vehicles are not required to be acquired they are not

eligible to earn credits for early acquisition which results in

multiple credits. Thus, DOE is proposing that the acquisition of these

vehicles in excess of the required number will generate only one credit

per vehicle.

It is reasonable to expect that any requirements placed on

alternative fueled vehicles which are acquired to comply with

alternative fuel provider or fleet program requirements would also

apply to vehicles that generate credits. For example, the Act requires

that alternative fuel providers operate their alternative fueled

vehicles solely on alternative fuels except when operating in an area

where the appropriate alternative fuel is unavailable. A net loss to

energy security goals would occur if a credit-generating vehicle, such

as an alternative fueled vehicle bought a year earlier than required by

an alternative fuel provider, did not also operate solely on

alternative fuel. This requirement applies only to those alternative

fueled vehicles that generate credits to be used by covered persons who

are alternative fuel providers. The Department is unaware of any

possible requirements which would apply to vehicles purchased to

demonstrate compliance and not to vehicles purchased for credits.

Therefore, DOE is proposing that any such requirements apply equally to

both types of vehicles.

The Department considered whether to allow the acquisition of

medium duty and heavy duty alternative fueled vehicles (those

alternative fueled vehicles with gross vehicle weight ratings of

greater than 8,500 lbs.), by covered persons and fleets, to generate

credits. Many medium duty and heavy duty vehicles are predominantly

urban use vehicles, such as transit buses and delivery trucks, and

could take advantage of the anticipated fueling infrastructure within

these urban areas. These vehicles possess larger capacity engines,

which consume significantly more fuel than light duty vehicles and

result in increased displacement of petroleum-based fuel. However,

paragraph (b) of section 508 provides that credits can only be

allocated for the acquisition of the same type of vehicles that are

required under the fleet mandates of Title V of the Act. The only type

of vehicles that are required to be acquired in Title V are light duty

vehicles. Thus, credits cannot be awarded for the acquisition of medium

duty and heavy duty vehicles because the Act does not require any fleet

or covered person to acquire them. [[Page 10983]]

Proposed Section 490.503 Credit Allocation

Proposed Sec. 490.503 deals with alternative fueled vehicle credit

allocation. Proposed paragraphs (a) and (b) are consistent with the

language of section 508(a) of the Act, which describes how credits are

to be allocated. Before alternative fueled vehicle credits are

allocated they must be applied for using the procedure described in

proposed Sec. 490.507.

Proposed paragraph (a) provides for the allocation of one credit

for each alternative fueled vehicle a fleet or covered person acquires

that exceeds the number of alternative fueled vehicles that fleet or

person is required to acquire. If a fleet or covered person is required

to acquire 10 alternative fueled vehicles in a model year and they

acquire 15 alternative fueled vehicles, they can apply for allocation

of five alternative fueled vehicle credits.

Proposed paragraph (b) provides for the allocation of one credit

per alternative fueled vehicle for each year the alternative fueled

vehicle is acquired in advance of the date the fleet or covered person

is required to acquire alternative fueled vehicles. These credits

cannot be allocated until the date that a fleet is required to acquire

alternative fueled vehicles. Thus, only covered persons and State

fleets are presently eligible for credit allocation. Until such time as

private and municipal fleets are required to acquire alternative fueled

vehicles, they cannot be allotted credits for early acquisition. At

that time, all alternative fueled vehicles acquired between October 24,

1992, and the start date of the private and municipal fleet mandate

would be eligible for credit allocation.

Proposed paragraph (c) provides for the allocation of credits to

alternative fuel providers and State governments for alternative fueled

vehicles acquired from October 24, 1992, the date the Energy Policy Act

was enacted.

Credit allocation is best explained by the following examples. In

the first example a covered person acquires 10 alternative fueled

vehicles in model year 1994 and 15 alternative fueled vehicles in model

year 1995. Because the covered person is not required to acquire

alternative fueled vehicles until model year 1996, each alternative

fueled vehicle acquired in model year 1994 will generate 2 credits and

each alternative fueled vehicle acquired in model year 1995 will

generate 1 credit. Thus, the covered person generates 35 credits

[(10 x 2)+(15 x 1)=35], which can be used against future alternative

fueled vehicle acquisition requirements or can be traded.

In the second example a state fleet acquires 50 alternative fueled

vehicles in model year 1995 and 15 alternative fueled vehicles in

excess of their required acquisition number in model year 1996. The

state generates 50 credits for acquiring alternative fueled vehicles

early and 15 credits for acquiring alternative fueled vehicles in

excess of their required number. If the state doesn't trade away or use

any credits, it will have 65 credits that it can use against future

acquisitions or can trade.

A database will be established that will keep a record of credit

allocations, trades and credit balances.

Proposed Section 490.504 Use of Alternative Fueled Vehicle Credits

Consistent with the language of section 508(c) of the Act, proposed

Sec. 490.504 states that a credit shall be treated as the acquisition

of a light duty alternative fueled vehicle. Each alternative fueled

vehicle credit will represent one light duty alternative fueled vehicle

and can be applied against the required alternative fueled vehicle

acquisition number for one model year only, designated by a fleet or

covered person, in lieu of the acquisition of a light duty alternative

fueled vehicle during that model year.

Proposed Section 490.505 Credit Accounts

Proposed Sec. 490.505 deals with Alternative Fueled Vehicle Credit

accounts. Proposed paragraph (a) states that DOE will establish a

credit account for each fleet or covered person who obtains an

alternative fueled vehicle credit.

Proposed paragraph (b) states that each fleet or covered person

will receive an annual credit account balance statement after the

receipt and recording of its annual activity report. This statement

will reflect the credit account activity that occurred in the previous

model year and can be used as proof of the credit balance for an

account.

DOE is considering whether to provide updated credit account

balance statements to fleets and covered persons upon request during

the year and is also considering whether to charge a nominal fee for

this service. These updated credit account balance statements would

provide written proof of a fleet or covered person's credit account

balance as of the date they are printed. These updated credit account

balance statements may be required of a credit seller by a credit

purchaser before proceeding with the credit transfer. Thus, the credit

seller can use this updated credit account balance statement to gain

independent private benefit.

The charging of a fee for this service is authorized under 31

U.S.C. 9701, which provides that each Federal government agency may

establish a charge for a service of a thing of value provided by the

agency if this service results in independent private benefit. This

charge must be fair and based on the costs to the Government, the value

of the service or thing to the recipient, public policy or interest

served, and other relevant facts. DOE asks for comments related to the

desirability of providing updated credit account balance statements and

what value a fleet or covered person would place on this service.

Proposed Section 490.506 Alternative Fuel Vehicle Credit Transfers

Proposed Sec. 490.506 deals with the transfer of alternative fueled

vehicle credits. Proposed paragraph (a)(1) states that any fleet may

transfer an alternative fueled vehicle credit to any other fleet, which

is required to acquire alternative fueled vehicles. In contrast,

proposed paragraph (a)(2) states that any fleet may transfer an

alternative fueled vehicle credit to an alternative fuel provider, who

is a covered person, if the fleet provides certification to the covered

person that the credit represents a vehicle that operates solely on

alternative fuel. This restriction on the transfer of credits from a

fleet to an alternative fuel provider, who is a covered person, is

necessary because of the vehicle operational requirement placed on

alternative fuel provider vehicles. 42 U.S.C. 13251(a)(4). Section

508(d) of the Energy Policy Act permits alternative fuel providers to

use credits only if these operational requirements are met. 42 U.S.C.

13258(d).

Proposed paragraph (c) states that proof of credit transfer should

be provided to DOE within seven days of the transfer date, and provides

for the use of a DOE form, or other written documentation containing

the dated signatures of the transferor and transferee. This provision

allows for the maintenance and verification of credit transfer

activity.

Proposed Section 490.507 Credit Activity Reporting Requirements

Proposed Sec. 490.507 describes the credit program's activity

reporting requirements. An annual report is required of all fleets or

covered persons who have generated or traded alternative fueled vehicle

credits to record and track their credit activity. Proposed paragraph

(a) sets forth where [[Page 10984]] and by when annual reports should

be sent.

Proposed paragraph (b) describes the required information that

would be included in this annual report. Most of the requirements are

self-explanatory, however, subparagraph (b)(4) deserves discussion for

clarification purposes.

Proposed subparagraph (b)(4) would only allow a fleet or covered

person to report either the number of alternative fueled vehicles

acquired in excess of acquisition requirements or the number of

alternative fueled vehicles acquired in advance of the start date of

the acquisition requirements, not both of them. Once the first model

year in which acquisition requirements apply has begun, credits can no

longer be earned for early acquisition of alternative fueled vehicles.

Subpart G--Investigations and Enforcement

Proposed Section 490.601 Powers of the Secretary

Proposed Sec. 490.601 sets forth the powers of the Secretary

provided specifically by section 513 of the Act. Some of these powers

(e.g., subpoenas for witnesses or documents) can be used either in a

investigative effort begun with orders to show cause or in connection

with a civil penalty proceeding.

Proposed Section 490.602 Special Orders

Proposed Sec. 490.602 tracks the provisions of section 505(b)(1) of

the Motor Vehicle Information and Cost Savings Act, 15 U.S.C.

Sec. 2005(b)(1). Those provisions are applicable under part 490 because

section 505(b)(1) is cross referenced in section 513 of the Act. Orders

under this section could be used to deal with a wide variety of

circumstances. One example would be the failure to submit a required

report. Another would be an order to show cause why civil penalty

proceedings should not be initiated for failure to comply with subparts

C, D, or F.

Proposed Section 490.603 Prohibited Acts

This proposed regulation tracks the language of section 511 of the

Act. 42 U.S.C. 13261.

Proposed Section 490.604 Penalties and Fines

This proposed regulation follows section 512 of the Act. 42 U.S.C.

Sec. 13262. The text reflects DOE conclusions with regard to which of

the subsections of section 512 provide for civil penalties and which

provide for criminal fines.

Proposed Section 490.605 Statement of Enforcement Policy

In rare instances, DOE may initiate enforcement with the object of

ensuring compliance and deterring future violations. This proposed

section indicates that DOE will not proceed with enforcement if there

is a satisfactory compliance agreement.

Proposed Section 490.606 Proposed Assessments and Orders

This proposed section provides for issuance of proposed assessments

of civil penalty and an order to pay which becomes a final order for

the Department if the recipient fails to appeal on a timely basis to

the Office of Hearings and Appeals.

Proposed Section 490.607 Appeals

This proposed section provides for administrative due process if

the recipient of a proposed assessment and order to pay wishes to

contest the basis therefore. The appeal must be filed in the Office of

Hearings and Appeals on or before 30 days from the date of the issuance

of a proposed assessment and order. Most of the applicable procedures

for the Office of Hearings and Appeals are in subpart H of 10 CFR part

205. In addition, paragraph (b) of proposed Sec. 490.607 provides that

the appellant has the ultimate burden of persuasion which is

appropriate because the appellant will in most cases have unequal

access to the relevant evidence (its own records). Paragraph (b) also

provides that a trial-type hearing on contested issues of fact may

occur only if the hearing officer concludes that cross examination will

materially assist in determining the facts in addition to the evidence

available in documentary form. There should not be extended hearings in

order to fill the record with evidence which is largely repetitious.

III. Opportunity for Public Comment

A. Participation in Rulemaking

Interested persons are invited to participate in this proposed

rulemaking by submitting written data, views, or comments with respect

to the subject set forth in this notice. The Department encourages the

maximum level of public participation possible in this rulemaking.

Individual consumers, representatives of consumer groups,

manufacturers, associations, coalitions, states or other government

entities, and others are urged to submit written comments on the

proposal. The Department also encourages interested persons to

participate in the public hearings to be held at the times and places

indicated at the beginning of this notice. Comments relating to the

energy security, environmental, or economic effects that might result

from the adoption of the proposals contained in this notice are

specifically invited and desired. Whenever applicable, full supporting

rationale, data and detailed analyses should also be submitted.

B. Written Comment Procedures

Written comments (eight copies) should be identified on the outside

of the envelope, and on the comments themselves, with the designation:

``Alternative Fuel Provider Vehicle Acquisition Mandate and Alternative

Fuel Vehicle Credit Program, NOPR, Docket Number EE-RM-95-110'' and

must be received by the date specified at the beginning of this notice.

In the event any person wishing to submit a written comment cannot

provide eight copies, alternative arrangements can be made in advance

by calling Andi Kasarsky at (202) 586-3012. Additionally, the

Department would appreciate an electronic copy of the comments to the

extent possible. The Department is currently using WordPerfect 5.1 for

DOS.

All comments received on or before the date specified at the

beginning of this notice and other relevant information will be

considered by DOE before final action is taken on the proposed rule.

All comments submitted will be available for examination in the Rule

Docket File in DOE's Freedom of Information Reading Room both before

and after the closing date for comments. In addition, a transcript of

the proceedings of the public hearings will be filed in the docket.

Pursuant to the provisions of 10 CFR 1004.11 any person submitting

information or data that is believed to be confidential, and which may

be exempt by law from public disclosure, should submit one complete

copy, as well as two copies from which the information claimed to be

confidential has been deleted. The Department of Energy will make its

own determination of any such claim and treat it according to its

determination.

C. Public Hearing Procedures

The time and place of the public hearings are indicated at the

beginning of this notice. The Department invites any person who has an

interest in the proposed regulation or who is a representative of a

group or class of persons which has an interest to make a request for

an opportunity to make an oral presentation at the hearing. Requests to

speak should be sent to the address or phone number indicated in the

ADDRESSES section of this notice and [[Page 10985]] be received by the

time specified in the DATES section of this notice.

The person making the request should briefly describe his or her

interest in the proceedings and, if appropriate, state why that person

is a proper representative of the group or class of persons that has

such an interest. The person also should provide a phone number where

they may be reached during the day. Each person selected to speak at a

public hearing will be notified as to the approximate time that they

will be speaking. They should bring ten copies of their statement to

the hearing. In the event any person wishing to testify cannot meet

this requirement, alternative arrangements can be made in advance with

Andi Kasarsky, (202) 586-3012.

The DOE reserves the right to select persons to be heard at the

hearings, to schedule their presentations, and to establish procedures

governing the conduct of the hearing. The length of each presentation

will be limited to ten minutes, or based on the number of persons

requesting to speak.

A Department official will be designated to preside at the hearing.

The hearing will not be a judicial or an evidentiary-type hearing, but

will be conducted in accordance with 5 U.S.C. 553 and Section 501 of

the Department of Energy Organization Act. 42 U.S.C. 7191. At the

conclusion of all initial oral statements, each person will be given

the opportunity to make a rebuttal statement. The rebuttal statements

will be given in the order in which the initial statements were made.

Any further procedural rules needed for the proper conduct of the

hearing will be announced by the Presiding Officer at the hearing.

If DOE must cancel a hearing, DOE will make every effort to publish

an advance notice of such cancellation in the Federal Register. Notice

of cancellation will also be given to all persons scheduled to speak at

the hearing. Hearing dates may be canceled in the event no public

testimony has been scheduled in advance.

IV. Review Under Executive Order 12612

Executive Order 12612, 52 FR 41685 (October 30, 1987), requires

that regulations, rules, legislation, and any other policy actions be

reviewed for any substantial direct effect on states, on the

relationship between the National Government and the States, or in the

distribution of power and responsibilities among various levels of

government. If there are substantial effects, then the Executive Order

requires a preparation of a federalism assessment to be used in all

decisions involved in promulgating and implementing policy action.

This proposed rule establishes an Alternative Fueled Vehicle Credit

Program under which states may generate credits if they obtain

alternative fueled vehicles in excess of their required quantity or if

they obtain alternative fueled vehicles prior to the date when they are

required and establishes a mandate for state fleets to acquire

alternative fuel vehicles. The allocation of credits is based on the

measurable actions of obtaining alternative fueled vehicles and is

available to fleets, that meet the requirements, throughout the United

States.

The granting of credits to states will be handled in the same

manner as the granting of credits to any other fleet operator. The

enforcement of the state fleet mandate will be handled in the same

manner as other mandate programs. States can also apply for a hardship

exemption which would exempt them from acquiring alternative fuel

vehicles in any given year.

The Department has determined that since states are treated the

same as any other fleet operator in the allocation of credits and in

the administration and enforcement of the fleet mandate, the proposed

rule will not have a substantial direct effect on the institutional

interests or traditional functions of States. In addition, the

provision for hardship exemptions included in the state fleet mandate

precludes any possible violation in the authority that the Federal

government has over States. Thus, preparation of a federalism

assessment is therefore unnecessary.

V. Review Under Executive Order 12778

Section 2 of Executive Order 12778 instructs each agency to adhere

to certain requirements in promulgating new regulations. These

requirements, set forth in section 2 (a) and (b)(2), include

eliminating drafting errors and needless ambiguity, drafting the

regulations to minimize litigation providing clear and certain legal

standards for affected legal conduct, and promoting simplification and

burden reduction. Agencies are also instructed to make every reasonable

effort to ensure that the regulation describes any administrative

proceeding to be available prior to judicial review and any provisions

for the exhaustion of administrative remedies. DOE certifies that the

proposed rule meets the requirements of section 2 (a) and (b)(2) of

Executive Order 12778.

VI. Review Under Executive Order 12866

This regulatory action has been determined to be a significant

regulatory action under Executive order 12866, Regulatory Planning and

Review, October 4, 1993. Accordingly, today's action was subject to

review under the Executive Order by the Office of Information and

Regulatory Affairs (OIRA). DOE concluded that the proposed rule would

not result in (1) an annual effect on the economy of $100 million or

more or (2) have significant adverse effects on competition,

employment, investment, productivity, innovation, or on the ability of

the United States-based enterprises to compete in domestic export

markets. OIRA requested that DOE prepare a cost analysis. In this

section of the Supplementary Information, DOE describes the assumptions

and main conclusions of that cost analysis. A copy of that cost

analysis is available for public inspection in the administrative

record on file in DOE's Freedom of Information Reading Room. DOE has

also placed in that file a copy of the notice of proposed rulemaking as

transmitted to OIRA, as well as exchanges of correspondence between DOE

and OIRA showing changes in the notice agreed to by the two agencies.

The cost analysis spans a 25-year time frame, from 1995 to 2020,

which included the incremental vehicle purchase cost and the cost

differential between alternative fuels and gasoline under five

different scenarios. The analysis examines the effects the proposed

rule will have on the acquisition of alternative fueled vehicles by

fuel providers and State fleets, exclusive of the effects of non-

mandated acquisition of vehicles by these and other fleets. In doing so

it assumes that no alternative fueled vehicles will be acquired by

these fleets prior to model year 1996. In actuality, these fleets

currently are acquiring alternative fueled vehicles--either because of

economics, State laws or business strategies--and will probably

continue to do so in the future. This assumption focuses the analysis

on the estimated costs to fuel providers and State fleets in complying

with the proposed regulation without distorting it in any substantial

way. Assumptions about the number of vehicles acquired, the operating

characteristics of those vehicles, fleet vehicle replacement rates,

current and future alternative fueled vehicle incremental costs, and

current and future retail fuel costs were based on previous analyses

undertaken by the Department. [[Page 10986]]

The costs to fuel providers and State fleets in complying with the

proposed rule varies depending upon vehicle type, fuel type and fuel

consumption, but in no case are the annual costs estimated to exceed

$61 million per year. More typically, the estimated annual costs are

approximately $25 million, decreasing to $10 million per year in later

years. In reaching these conclusions, the Department took into account

the fact that some alternative fuel providers may not operate vehicles

solely on the fuel they provide and may have to purchase other

alternative fuels at retail prices. Retail fuel prices for all

alternative fuels were used in the analysis. These prices have three

main components: (1) The wholesale fuel cost; (2) the cost of

transporting the fuel from production points to retail outlets; and (3)

the retail outlet mark-ups.

In one scenario, the annual costs to State fleets decreased to a

point where it is estimated that these fleets would incur savings as a

result of complying with the proposed rule. This scenario assumes that

the most popular alternative fueled vehicles will be flexible-fuel

vehicles that can operate on gasoline and/or methanol. Because the

proposed rule does not impose a fuel use requirement on State fleets,

it is logical to assume that States will choose to operate these

vehicles on the fuel which costs less at a certain point in time;

currently that fuel is gasoline. It is expected that the nominal

incremental cost for these vehicles, together with the fact that their

operation and refueling is identical to a gasoline-only version, should

make them very attractive to State fleet managers. The expected

popularity of these vehicles, combined with estimates that show

methanol prices falling below gasoline by model year 2001, result in

annual cost savings to State fleets, starting with model year 2005, in

the range of $400,000 to $1 million.

In order to provide commenters with a better understanding of the

effects of this proposal, the Department plans to make revisions and

improvements to its analysis before the close of the comment period. To

aid in this effort, the Department seeks comments on all aspects of its

analysis. In particular, the Department is interested in comment on the

following elements of the analysis: the retail and net-of-excise-tax

future price projections for gasoline and alternative fuels; the

assumption that alternative fueled vehicle purchases, that would result

in apparent life-cycle cost savings, would not occur in the absence of

this rule; and the assumption that the cost per gallon of gasoline

displaced falls as the amount of gasoline displaced increases. The

Department would also be interested in data that would aid in

estimating the extra refueling costs for ``covered persons'' whose

fleets use fuels other than the one they themselves provide, e.g., a

natural gas pipeline company whose alternative fueled vehicles operate

on methanol or ethanol.

VII. Review Under the Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, was

enacted by Congress to ensure that small entities do not face

significant negative economic impact as a result of Government

regulations. In instances where significant impacts are possible on a

substantial number of entities, agencies are required to perform a

regulatory flexibility analysis.

DOE has determined that this proposed rule will not have a

significant negative impact on a substantial number of small entities.

To be covered by this rulemaking, an organization must own, operate or

control at least 50 light duty motor vehicles, of which at least 20

light duty motor vehicles used primarily within a single MSA or CMSA

must be capable of being centrally fueled. An organization that fits

this description is usually not a small organization, but one of medium

size or larger.

VIII. Review Under the Paperwork Reduction Act

New information collection requirements subject to the Paperwork

Reduction Act, 44 U.S.C. 3501, et seq., and recordkeeping requirements

are proposed by this rulemaking. Accordingly, this notice has been

submitted to the Office of Management and Budget for review and

approval of paperwork requirements. The information DOE proposes to

collect as reporting requirements is necessary to determine whether an

organization is in compliance with the proposed regulation and whether

they are eligible for the allocation of alternative fueled vehicle

credits. The frequency of the information collection is annually and is

due four months after the end of the compliance period. It is estimated

the number of organizations submitting reports will be approximately

1000 for the years 1996 through 1999. The estimated number of

organizations who will be submitting reports after that date has not

been determined and is subject to the DOE decision on future

rulemakings.

The public reporting burden is estimated to average 12 hours per

response, including time for reviewing instructions, searching existing

data sources, gathering and maintaining the data needed, and completing

and retrieving the collection of information. The collection of

information contained in this proposed rule is considered the least

burdensome for the Department of Energy functions to comply with the

legal requirements and achieve program objectives. However, comments

are requested concerning the accuracy of the estimated paperwork

reporting burden.

IX. Review Under the National Environmental Policy Act

The provisions of this proposed rule would establish procedures for

the implementation of an Alternative Fuel Transportation Program to

assist in and monitor the progress of State fleet and certain

alternative fuel providers compliance activity. The proposed rule

provides for reporting procedures to demonstrate compliance with the

alternative fueled vehicle acquisition mandates as specified by Title V

of the Energy Policy Act of 1992, and includes proposed procedures for

interpretive rulings, exemption, appeals, and the approval process for

State plans.

The proposed rule would also establish and define the parameters

for who must comply, the parts of a vehicle inventory which are

affected by the acquisition mandates, the allocation of credits for

voluntary acquisitions, the investigation and enforcement in the

assessment of civil penalties, and the contents of a State's light duty

alternative fueled vehicle plan. Because of the foregoing non-

procedural parts of the proposed rule, the Department has determined

that preparation of an Environmental Assessment (EA) is appropriate.

The Department will complete the EA and any further analysis found to

be required prior to the issuance of a final rule.

X. Impact on State Governments

Section 1(b)(9) of Executive Order 12866 (``Regulatory Planning and

Review''), 58 FR 51735 (September 30, 1993) established the following

principle for agencies to follow in rulemakings: ``Wherever feasible,

agencies shall seek views of appropriate State, local, and tribal

officials before imposing regulatory requirements that might

significantly or uniquely affect those governmental entities. Each

agency shall assess the effects of Federal regulations on State, local,

and tribal governments, including specifically the availability of

resources to carry out those mandates, and seek to minimize those

burdens that uniquely or significantly affect such governmental

entities, consistent with achieving [[Page 10987]] regulatory

objectives. In addition, agencies shall seek to harmonize Federal

regulatory actions with regulated state, local and tribal regulatory

and other governmental functions.'' Executive Order 12875 (``Enhancing

Intergovernmental Partnership''), 58 FR 58093 (October 26, 1993)

provides for reduction or mitigation, to the extent allowed by law, of

the burden on State, local, and tribal governments of unfunded Federal

mandates not required by statute.

Section 507(o) of the Act explicitly prescribes the alternative

fueled vehicle acquisition mandate which is reflected in subpart C of

today's proposed regulations, but does not specifically authorize

appropriation of funds to defray the costs of compliance. However, it

is important to observe that the effect of the mandate is mitigated in

terms of its impacts and costs in a number of respects.

First, section 507(o) authorizes approval of acceptable alternative

State plans to comply with the acquisition mandate by enlisting the

voluntary commitments from other fleet operators with fleets that are

not subject to vehicle acquisition requirements under the Energy Policy

Act of 1992. Second, section 507(i) authorizes the Department to grant

exemptions from vehicle acquisition requirements for States in cases of

financial hardship. Third, Congress has authorized and appropriated

some fiscal year 1994 and fiscal year 1995 funds for financial

assistance to State alternative fuel transportation programs some of

which may include plans to fund the incremental costs of acquiring

alternative fueled vehicles. Section 409 of the Act specifically

authorizes financial assistance to States for this purpose. However,

the funds, even if exclusively used to pay for such incremental costs,

may not be sufficient to fund all such costs incurred by each State

annually.

The Department preliminarily estimates that, in the aggregate, the

costs to States in model year 1996 will be between $3.3 million and

$7.4 million. The annual aggregate costs should never exceed $13

million in FY 1995 dollars. A copy of the analysis which includes these

figures is in the public file in the DOE Freedom of Information Reading

Room and is available upon request from the information contact

identified at the outset of this notice. The Department does not have

estimates for each State. The Department would welcome comments from

State financial officials knowledgeable about near term State plans for

replacing existing vehicles so that DOE can refine its estimates of

incremental costs attributable solely to the section 507(o) mandate.

In developing today's notice of proposed rulemaking, the Department

consulted with a focus group of State officials from the National

Association of State Energy Officials which represents energy offices

in 53 States, territories and the District of Columbia. The principal

concern expressed by some of these officials was conflict between the

DOE program and similar programs operating under EPA or State

regulations. With respect to EPA, DOE has attempted to avoid

unnecessary differences between its proposed regulations and those

already promulgated by EPA. When asked for comments on a draft of

today's notice, EPA did not suggest any changes to eliminate or

mitigate unnecessary differences.

Earlier in this notice, DOE noted that the overlap between the

proposed regulations and the EPA regulations is limited because the DOE

program would apply in MSAs and CMSAs with a 1980 Bureau of Census

population of 250,000 or more and the EPA program applies only in non-

attainment areas. EPA has published a table, 59 FR 50043, listing the

22 non-attainment areas as follows:

States and Areas Affected by the Clean Fuel Fleet Program

------------------------------------------------------------------------

Affected area State(s)

------------------------------------------------------------------------

1. Atlanta........................................ Georgia.

2. Baltimore...................................... Maryland.

3. Baton Rouge.................................... Louisiana.

4. Beaumont-Port Arthur........................... Texas.

5. Boston-Lawrence-Worcester (Eastern Massachusetts, New

Massachusetts). Hampshire.

6. Chicago-Gary-Lake County....................... Illinois, Indiana.

7. Denver-Boulder................................. Colorado.

8. El Paso........................................ Texas.

9. Greater Connecticut............................ Connecticut.

10. Houston-Galveston-Brazoria.................... Texas.

11. Los Angeles-South Coast Air Basin............. California.

12. Milwaukee-Racine.............................. Wisconsin.

13. New York-Northern New Jersey-Long Island...... Connecticut, New

Jersey, New York.

14. Philadelphia-Wilmington-Trenton............... Delaware, Maryland,

New Jersey,

Pennsylvania.

15. Providence (All Rhode Island)................. Rhode Island.

16. Sacramento Metro.............................. California.

17. San Diego..................................... California.

18. San Joaquin Valley............................ California.

19. Southeast Desert Modified AQMA................ California.

20. Springfield (Western Massachusetts)........... Massachusetts.

21. Ventura County................................ California.

22. Washington (District of Columbia)............. Maryland, Virginia.

------------------------------------------------------------------------

As indicated above, 11 of these 22 areas have applications to opt

out of the EPA Clean Fuel Fleet Program which are still pending as of

the date of publication of this notice.

With respect to the State programs, DOE is unaware of any that

would be in conflict with the program proposed today. If DOE has

overlooked any such conflicts, State officials are invited to submit

comments explaining the conflicts.

List of Subjects in 10 CFR Part 490

Appeal procedures, Energy, Energy conservation, Fuel, Gasoline,

Motor vehicles, Oil imports, Petroleum, Recordkeeping and Reporting

requirements, and Utilities.

Issued in Washington, D.C. on February 2, 1995.

Christine A. Ervin,

Assistant Secretary, Energy Efficiency and Renewable Energy.

For the reasons set forth in the Preamble, Title 10, Chapter II,

Subchapter D, of the Code of Federal Regulations is proposed to be

amended by adding a new Part 490 as set forth below:

PART 490--ALTERNATIVE FUEL TRANSPORTATION PROGRAM

Subpart A--General Provision

Sec.

Sec. 490.1 Purpose and Scope.

Sec. 490.2 Definitions.

Sec. 490.3 Excluded vehicles.

Sec. 490.4 General information inquiries.

Sec. 490.5 Requests for an interpretive ruling.

Sec. 490.6 Petitions for general applicable rulemaking.

Sec. 490.7 Relationship to other law.

Appendix A to Subpart A of Part 490--Metropolitan Statistical Areas/

Consolidated Metropolitan Statistical Areas with 1980 Populations of

250,000 or More

Subpart B--[Reserved]

Subpart C--Mandatory State Fleet Program

Sec. 490.200 Purpose and scope.

Sec. 490.201 Alternative fueled vehicle acquisition mandate

schedule.

Sec. 490.202 Acquisitions satisfying the mandate.

Sec. 490.203 Light Duty Alternative Fueled Vehicle plan.

Sec. 490.204 Process for granting exemptions.

Sec. 490.205 Reporting requirements.

Sec. 490.206 Violations. [[Page 10988]]

Subpart D--Alternative Fuel Provider Vehicle Acquisition Mandate

Sec. 490.300 Purpose and scope.

Sec. 490.301 Definitions.

Sec. 490.302 Vehicle acquisition mandate schedule.

Sec. 490.303 Who must comply.

Sec. 490.304 Which new light duty motor vehicles are covered.

Sec. 490.305 Acquisitions satisfying the mandate.

Sec. 490.306 Vehicle operation requirements.

Sec. 490.307 Option for electric utilities.

Sec. 490.308 Process for granting exemptions.

Sec. 490.309 Annual reporting requirements.

Sec. 490.310 Violations.

Subpart E--[Reserved]

Subpart F--Alternative Fueled Vehicle Credit Program

Sec. 490.500 Purpose and scope.

Sec. 490.501 Applicability.

Sec. 490.502 Creditable actions.

Sec. 490.503 Credit allocation.

Sec. 490.504 Use of alternative fueled vehicle credits.

Sec. 490.505 Credit accounts.

Sec. 490.506 Alternative Fueled Vehicle Credit transfers.

Sec. 490.507 Credit activity reporting requirements.

Subpart G--Investigations and Enforcement.

Sec. 490.600 Purpose and scope.

Sec. 490.601 Powers of the Secretary.

Sec. 490.602 Special orders.

Sec. 490.603 Prohibited acts.

Sec. 490.604 Penalties and fines.

Sec. 490.605 Statement of enforcement policy.

Sec. 490.606 Proposed assessments and orders.

Sec. 490.607 Appeals.

Authority: 42 U.S.C. 7191, 13235, 13251, 13257, 13258, 13260-3.

Subpart A--General Provisions

Sec. 490.1 Purpose and Scope.

(a) The provisions of this part implement the alternative fuel

transportation program under titles III, IV, V, and VI of the Energy

Policy Act of 1992. (Pub. L. 102-486)

(b) The provisions of this subpart cover the definitions applicable

throughout this part and procedures to obtain an interpretive ruling

and to petition for a generally applicable rule to amend this part.

Sec. 490.2 Definitions.

The following definitions apply to this part--

Act means the Energy Policy Act of 1992 (Pub. L. 102-486) and any

amendments thereof.

After-Market Converted Vehicle means an Original Equipment

Manufacturer vehicle that is reconfigured by a conversion company,

which is not under contract to the Original Equipment Manufacturer, to

operate on an alternative fuel and whose conversion kit components are

under warranty of the conversion company.

Alternative Fuel means methanol, denatured ethanol, and other

alcohols; mixtures containing 85 percent or more by volume of methanol,

denatured ethanol, and other alcohols with gasoline or other fuels;

natural gas; liquefied petroleum gas; hydrogen; coal-derived liquid

fuels; fuels (other than alcohol) derived from biological materials;

and electricity (including electricity from solar energy).

Alternative Fueled Vehicle means a dedicated vehicle or a dual

fueled vehicle.

Assistant Secretary means the Assistant Secretary for Energy

Efficiency and Renewable Energy or any other DOE official to whom the

Assistant Secretary's duties under this part may be redelegated by the

Secretary.

Capable of Being Centrally Fueled means a vehicle can be refueled

at least 75 percent of its time at a location, that is owned, operated,

or controlled by the fleet or covered person, or is under contract with

the fleet or covered person for refueling purposes, including

commercial fleet credit card agreements.

Centrally Fueled means that the vehicle is fueled at least 75

percent of the time at a location that is owned, operated, or

controlled by the fleet or covered person, or is under contract with

the fleet or covered person for refueling purposes, including

commercial fleet credit card agreements.

Control means--

(1) When it is used in the context determining whether one person

controls another or whether two persons are under common control, means

any one or a combination of the following:

(i) A third person or firm has equity ownership of 51 percent or

more in each of two firms; or

(ii) Two or more firms have common corporate officers, in whole or

in substantial part, who are responsible for the day-to-day operation

of the companies; or

(iii) One firm leases, operates, supervises, or in 51 percent or

greater part owns equipment and/or facilities used by another person or

firm, or has equity ownership of 51 percent or more of another firm.

(2) When it is used to refer to the management of vehicles, means a

person has the authority to decide who can operate a particular

vehicle, and the purposes for which the vehicle can be operated.

(3) When it used to refer to the management of people, means a

person has the authority to direct the activities of another person or

employee in a precise situation, such as the workplace.

Covered Person means a person that owns, operates, leases, or

otherwise controls--

(1) A fleet, as defined by this section, that contains at least 20

light duty motor vehicles that are centrally fueled or capable of being

centrally fueled, and are used primarily within a metropolitan

statistical area or a consolidated metropolitan statistical area, as

established by the Bureau of the Census, with a 1980 population of

250,000 or more as set forth in Appendix A to this subpart or in a

Federal Register notice; and

(2) at least 50 light duty motor vehicles within the United States,

as defined by this section.

Dealer Demonstration Vehicle means any vehicle that is operated by

a motor vehicle dealer solely for the purpose of promoting motor

vehicle sales, either on the sales lot or through other marketing or

sales promotions, or for permitting potential purchasers to drive the

vehicle for pre-purchase or pre-lease evaluation.

Dedicated Vehicle means--

(1) A dedicated automobile as defined in section 513(h)(1)(C) of

the Motor Vehicle Information and Cost Savings Act (15 U.S.C.

2013(h)(1)(C)); or

(2) A motor vehicle, other than an automobile, that operates solely

on alternative fuel.

DOE means the Department of Energy.

Dual Fueled Vehicle means--

(1) A dual fueled automobile which is capable of operating on

alternative fuel and on gasoline or diesel fuel and as defined in

section 513(h)(1)(D) of the Motor Vehicle Information and Cost Savings

Act (15 U.S.C. Sec. 2013(h)(1)(D)); or

(2) A motor vehicle, other than an automobile, that is capable of

operating on alternative fuel and on gasoline or diesel fuel including

flexible-fuel vehicles that operate on a mixture of an alternative fuel

and a petroleum-based fuel or bi-fuel vehicles that can be switched to

operate on either an alternative fuel or a petroleum-based fuel.

Electric-hybrid Vehicle means a vehicle primarily powered by an

electric motor that draws current from rechargeable storage batteries,

fuel cells or other sources of electric current and also relies on a

non-electric source of power.

Electric Motor Vehicle means a motor vehicle primarily powered by

an electric motor that draws current from rechargeable storage

batteries, fuel cells, photovoltaic arrays, or other sources of

electric current and may include an electric-hybrid vehicle.

Emergency motor vehicle means any vehicle that is legally

authorized by a [[Page 10989]] government authority to exceed the speed

limit to transport people and equipment to and from situations in which

speed is required to save lives or property, such as a rescue vehicle,

fire truck or ambulance.

Fleet means, except as provided by Sec. 490.3, a group of 20 or

more light duty motor vehicles, used primarily in a metropolitan

statistical area or consolidated metropolitan statistical area, as

established by the Bureau of the Census as of December 31, 1992, with a

1980 Census population of more than 250,000 (listed in Appendix A to

this Subpart or in an annual notice in the Federal Register), that are

centrally fueled or capable of being centrally fueled, and are owned,

operated, leased, or otherwise controlled--

(1) By a person who owns, operates, leases, or otherwise controls

50 or more light duty motor vehicles within the United States and its

possessions and territories;

(2) By any person who controls such person;

(3) By any person controlled by such person; and

(4) By any person under common control with such person.

Law Enforcement Motor Vehicle means any vehicle which is primarily

operated by a civilian or military police officer or sheriff, or by

personnel of the Federal Bureau of Investigation, the Drug Enforcement

Administration, or other agencies of the Federal government, or by

state highway patrols, municipal law enforcement, or other similar

enforcement agencies, and which is used for the purpose of law

enforcement activities including, but not limited to, chase,

apprehension, surveillance, or patrol of people engaged in or

potentially engaged in unlawful activities.

Lease means the use and control of a motor vehicle for

transportation purposes pursuant to a rental contract or similar

arrangement with a term of 120 days or more.

Light Duty Motor Vehicle means a light duty truck or light duty

vehicle, as such terms are defined under section 216(7) of the Clean

Air Act (42 U.S.C. Sec. 7550(7)), having a gross vehicle weight rating

of 8,500 pounds or less.

Model Year means the period from September 1 of the previous

calendar year through August 31.

Motor Vehicle has the meaning given such term under section 216(2)

of the Clean Air Act (42 U.S.C. 7550(2)).

Original Equipment Manufacturer means a manufacturer that provides

the original design and materials for assembly and manufacture of its

product.

Original Equipment Manufacturer Vehicle means a vehicle engineered,

designed and produced by an Original Equipment Manufacturer.

Person means any individual, partnership, corporation, voluntary

association, joint stock company, business trust, Governmental entity,

or other legal entity in the United States except United States

Government entities.

Public Building means any closed structure owned, leased, or

controlled by a state, or any instrumentality of a state.

State means any of the 50 States, the District of Columbia, the

Commonwealth of Puerto Rico, and any other territory or possession of

the United States.

Sec. 490.3 Excluded vehicles.

When counting light duty motor vehicles for the purpose of

determining under this part whether a person has a fleet or whether

acquisitions are for addition to a fleet, the following vehicles are

excluded--

(a) Motor vehicles held for lease or rental to the general public,

including vehicles that are owned or controlled primarily for the

purpose of short-term rental or extended-term leasing, without a

driver, pursuant to a contract;

(b) Motor vehicles held for sale by motor vehicle dealers,

including demonstration motor vehicles;

(c) Motor vehicles used for motor vehicle manufacturer product

evaluations or tests, including but not limited to, light duty motor

vehicles owned or held by a university research department, independent

testing laboratory, or other such evaluation facility, solely for the

purpose of evaluating the performance of such vehicle for engineering,

research and development or quality control reasons;

(d) Law enforcement vehicles;

(e) Emergency motor vehicles;

(f) Motor vehicles acquired and used for purposes that the

Secretary of Defense has certified to DOE must be exempt for national

security reasons;

(g) Nonroad vehicles, including farm and construction motor

vehicles; and

(h) Motor vehicles which under normal operations are garaged at

personal residences at night.

Sec. 490.4 General information inquiries.

DOE responses to inquiries with regard to the provisions of this

part that are not filed in compliance with Secs. 490.5 or 490.6 of this

part constitute general information and the responses provided shall

not be binding on DOE.

Sec. 490.5 Requests for an interpretive ruling.

(a) Right to file. Any person who is or may be subject to this part

shall have the right to file a request for an interpretive ruling on a

question with regard to how the regulations apply to particular facts

and circumstances.

(b) How to file. A request for an interpretive ruling shall be

filed--

(1) With the Assistant Secretary;

(2) In an envelope labeled ``Request for Interpretive Ruling under

10 CFR Part 490;'' and

(3) By messenger or mail at the Office of Energy Efficiency and

Renewable Energy, EE-33, U.S. Department of Energy, 1000 Independence

Avenue, S.W., Washington, D.C. 20585 or at such other address as DOE

may provide by notice in the Federal Register.

(c) Content of request for interpretive ruling. At a minimum, a

request under this section shall--

(1) Be in writing;

(2) Be labeled ``Request for Interpretive Ruling Under 10 CFR Part

490;''

(3) Identify the name, address, telephone number, and any

designated representative of the person requesting the interpretive

ruling;

(4) State the facts and circumstances relevant to the request;

(5) Be accompanied by copies of relevant supporting documents, if

any;

(6) Specifically identify the pertinent regulations and the related

question on which an interpretive ruling is sought with regard to the

relevant facts and circumstances; and

(7) Contain any arguments in support of the terms of an

interpretation the requester is seeking.

(d) Public comment. DOE may give public notice of any request for

an interpretive ruling and invite public comment.

(e) Opportunity to respond to public comment. DOE may provide an

opportunity for any person who requested an interpretive ruling to

respond to public comments.

(f) Other sources of information. DOE may--

(1) Conduct an investigation of any statement in a request;

(2) Consider any other source of information in evaluating a

request for an interpretive ruling; and

(3) Rely on previously issued interpretive rulings dealing with the

same or a related issue.

(g) Informal conference. DOE, on its own initiative, may convene an

informal conference with the person requesting an interpretive ruling.

(h) Effect of an interpretive ruling. The authority of an

interpretive ruling shall be limited to the person requesting

[[Page 10990]] such ruling and shall depend on the accuracy and

completeness of the facts and circumstances on which the interpretive

ruling is based. An interpretive ruling by the Assistant Secretary

shall be final for DOE.

(i) Reliance on an interpretive ruling. No person who obtains an

interpretive ruling under this section shall be subject to an

enforcement action for civil penalties or criminal fines for actions

reasonably taken in reliance thereon, but a person may not act in

reliance on an interpretive ruling that is administratively rescinded

or modified, judicially invalidated, or its prospective effect is

overruled by statute or regulation.

(j) Denials of requests for an interpretive ruling. DOE shall deny

a request for an interpretive ruling if DOE determines that--

(1) There is insufficient information upon which to base an

interpretive ruling;

(2) The questions posed should be treated in a general notice of

proposed rulemaking under 42 U.S.C. 7191 and 5 U.S.C. 553(e);

(3) There is an adequate procedure elsewhere in this part for

addressing the question posed, such as a petition for exemption; or

(4) For other good cause.

(k) Public file. From time to time, DOE may file a copy of an

interpretive ruling in a public file labeled ``Interpretive Rulings

Under 10 CFR Part 490'' which shall be available during normal business

hours for public inspection at the DOE Freedom of Information Reading

Room at 1000 Independence Avenue, SW, Washington, DC 20585, or at such

other addresses as DOE may announce in a Federal Register notice.

Sec. 490.6 Petitions for generally applicable rulemaking.

(a) Right to file. Pursuant to 42 U.S.C. 7191 and 5 U.S.C. 553(e),

any person may file a petition for generally applicable rulemaking

under titles III, IV, and V of the Act with the DOE General Counsel.

(b) How to file. a petition for generally applicable rulemaking

under this section shall be filed by mail or messenger in an envelope

address to the Office of General Counsel, GC-1, U.S. Department of

Energy, 1000 Independence Avenue, S.W., Washington, D.C. 20585.

(c) Content of rulemaking petitions. A petition under this section

must--

(1) Be labeled ``Petition for Rulemaking Under 10 CFR Part 490'';

(2) Describe with particularity the terms of the rule being sought;

(3) Identify the provisions of law that direct, authorize, or

affect the issuance of the rules being sought; and

(4) Explain why DOE should not choose to make policy by precedent

through interpretive rulings, petitions for exemption, or other

adjudications.

(d) Determination upon rulemaking petitions. After considering the

petition and other information deemed to be appropriate, DOE may grant

the petition and issue an appropriate rulemaking notice, or deny the

petition because the rule being sought--

(1) Would be inconsistent with statutory law;

(2) Would establish a generally applicable policy that should be

left to case-by-case determinations;

(3) Would establish a policy inconsistent with the underlying

statutory purposes; or

(4) For other good cause.

Sec. 490.7 Relationship to other law.

Nothing in this part shall be construed to require or authorize

acquisition of, or conversion to, light duty alternative fueled motor

vehicles in violation of applicable regulations of the U.S.

Environmental Protection Agency, U.S. Department of Transportation, or

any State or local government agency.

Appendix A To Subpart A of Part 490

Metropolitan Statistical Areas/Consolidated Metropolitan

Statistical Areas With 1980 Populations of 250,000 or more

Albany-Schenectady-Troy MSA NY

Albuquerque MSA NM

Allentown-Bethlehem-Easton MSA PA

Appleton-Oshkosh-Neenah MSA WI

Atlanta MSA GA

Augusta-Aiken MSA GA-SC

Austin-San Marcos MSA TX

Bakersfield MSA CA

Baton Rouge MSA LA

Beaumont-Port Arthur MSA TX

Binghamton MSA NY

Birmingham MSA AL

Boise City MSA ID

Boston-Worcester-Lawrence CMSA MA-NH-ME-CT

Buffalo-Niagara Falls MSA NY

Canton-Massillon MSA OH

Charleston MSA SC

Charleston MSA WV

Charlotte-Gastonia-Rock Hill MSA NC-SC

Chattanooga MSA TN-GA

Chicago-Gary-Kenosha CMSA IL-IN-WI

Cincinnati-Hamilton CMSA OH-KY-IN

Cleveland-Akron CMSA OH

Colorado Springs MSA CO

Columbia MSA SC

Columbus MSA OH

Columbus MSA SC-GA-AL

Corpus Christi MSA TX

Dallas-Fort Worth CMSA TX

Davenport-Moline-Rock Island MSA IA-IL

Dayton-Springfield MSA OH

Daytona Beach MSA FL

Denver-Boulder-Greeley CMSA CO

Des Moines MSA IA

Detroit-Ann Arbor-Flint CMSA MI

El Paso MSA TX

Erie MSA PA

Eugene-Springfield MSA OR

Evansville-Henderson MSA IN-KY

Fort Wayne MSA IN

Fresno MSA CA

Grand Rapids-Muskegon-Holland MSA MI

Greensboro-Winston Salem-High Point MSA NC

Greenville-Spartanburg-Anderson MSA SC

Harrisburg-Lebanon-Carlisle MSA PA

Hartford MSA CT

Hickory-Morganton MSA NC

Honolulu MSA HI

Houston-Galveston-Brazoria CMSA TX

Huntington-Ashland MSA WV-KY-OH

Indianapolis MSA IN

Jackson MSA MS

Jacksonville MSA FL

Johnson City-Kingsport-Bristol MSA TN-VA

Kansas City MSA MO-KS

Knoxville MSA TN

Lakeland-Winter Haven MSA FL

Lancaster MSA PA

Lansing-East Lansing MSA MI

Las Vegas MSA NV-AZ

Lexington MSA KY

Little Rock-N. Little Rock MSA AR

Los Angeles-Riverside-Orange County CMSA CA

Louisville MSA KY-IN

Macon MSA GA

Madison MSA WI

McAllen-Edinburg-Mission MSA TX

Melbourne-Titusville-Palm Bay MSA FL

Memphis MSA TN-AR-MS

Miami-Fort Lauderdale CMSA FL

Milwaukee-Racine CMSA WI

Minneapolis-St. Paul MSA MN-WI

Mobile MSA AL

Modesto MSA CA

Montgomery MSA AL

Nashville MSA TN

New London-Norwich MSA CT-RI

New Orleans MSA LA

New York-N. New Jersey-Long Island CMSA NY-NJ-CT-PA

Norfolk-Virginia Beach-Newport News MSA VA-NC

Oklahoma City MSA OK

Omaha MSA NE-IA

Orlando MSA FL

Pensacola MSA FL

Peoria-Pekin MSA IL

Philadelphia-Wilmington-Atlantic City CMSA PA-NJ DE-MD

Phoenix-Mesa MSA AZ

Pittsburgh MSA PA

Portland-Salem CMSA OR-WA

Providence-Fall River-Warwick MSA RI-MA

Raleigh-Durham-Chapel Hill MSA NC

Reading MSA PA

Richmond-Petersburg MSA VA

Rochester MSA NY

Rockford MSA IL

Sacramento-Yolo CMSA CA

Saginaw-Bay City-Midland MSA MI

St. Louis MSA MO-IL

Salinas MSA CA

Salt Lake City-Ogden MSA UT

San Antonio MSA TX

San Diego MSA CA

San Francisco-Oakland-San Jose CMSA CA [[Page 10991]]

San Juan MSA PR

Santa Barbara-Santa Maria-Lompoc MSA CA

Scranton-Wilkes Barre-Hazleton MSA PA

Seattle-Tacoma-Bremerton CMSA WA

Shreveport-Bossier City MSA LA

Spokane MSA WA

Springfield MSA MA

Stockton-Lodi MSA CA

Syracuse MSA NY

Tampa-St. Petersburg-Clearwater MSA FL

Toledo MSA OH

Tucson MSA AZ

Tulsa MSA OK

Utica-Rome MSA NY

Washington-Baltimore CMSA DC-MD-VA-WV

West Palm Beach-Boca Raton MSA FL

Wichita MSA KS

York MSA PA

Youngstown-Warren MSA OH

Subpart B--[Reserved]

Subpart C--Mandatory State Fleet Program

Sec. 490.200 Purpose and scope.

This subpart sets forth rules implementing the provisions of

Section 507(o) of the Act which requires, subject to some exemptions,

that certain percentages of new light duty motor vehicles acquired for

state fleets be alternative fueled vehicles.

Sec. 490.201 Alternative fueled vehicle acquisition mandate schedule.

(a) Except as otherwise provided in this subpart, beginning with

model year 1996, the following percentages of new light duty motor

vehicles acquired annually for state government fleets, including

agencies thereof but excluding municipal fleets, shall be alternative

fueled vehicles;

(1) 10 percent of the vehicles acquired in model year 1996;

(2) 15 percent of the vehicles acquired in model year 1997;

(3) 25 percent of the vehicles acquired in model year 1998;

(4) 50 percent of the vehicles acquired in model year 1999; and

(5) 75 percent of the vehicles acquired in model year 2000 and

thereafter.

(b) Each State shall calculate its alternative fueled vehicle

acquisition requirements for the state government fleets, including

agencies thereof, by applying the alternative fueled vehicle

acquisition percentages for each model year to the total number of new

light duty motor vehicles to be acquired during that model year for

those fleets.

(c) If, when the mandated acquisition percentage of alternative

fueled vehicles is applied to the number of light duty motor vehicles

to be acquired by a fleet subject to this subpart, a number results

that requires the acquisition of a partial vehicle, an adjustment to

the acquisition number will be made by rounding the number of vehicles

up to the next whole number.

Sec. 490.202 Acquisitions satisfying the mandate.

In addition to the use of alternative fueled vehicle credits under

subpart F of this part, the following actions within a model year

qualify as acquisitions that count toward compliance with the new light

duty alternative fueled vehicle mandates by State fleets:

(a) The purchase or lease of an Original Equipment Manufacturer

vehicle, (regardless of model year of manufacture), capable of

operating on alternative fuels that was not previously in service in

the fleet; or

(b) The purchase or lease of an after-market converted vehicle

(regardless of model year of manufacture), that was not previously in

service in the fleet; or

(c) The conversion of a newly purchased Original Equipment

Manufacturer Vehicle (regardless of the model year of manufacture) to

operate on alternative fuels prior to its first use in service.

Sec. 490.203 Light Duty Alternative Fueled Vehicle Plan.

(a) General provisions. (1) In lieu of meeting its acquisition

requirements under Sec. 490.201 exclusively through State-owned

vehicles, a State may follow a Light Duty Alternative Fueled Vehicle

Plan approved by DOE under this section.

(2) Unless a fleet is exempt under Sec. 490.204, a State which does

not have an approved plan in effect under this section will be subject

to the State fleet acquisition percentage requirements of Sec. 490.201.

(3) In the event that a significant commitment under an approved

plan is not met by a participant of a plan, the State shall meet its

percentage requirements under Sec. 490.201 or submit to DOE an

amendment to the plan for DOE approval.

(4) Only voluntary acquisitions or conversions, or combinations

thereof, by state, local, and private fleets may be used to meet the

State's alternative fuel vehicle acquisition requirement under the

plan.

(5) Any acquisitions or conversions of light duty alternative

fueled vehicles by fleets within the State may be included within the

plan, irrespective of whether the vehicles are in excluded categories

in the definition of fleet set forth in Sec. 490.2 of this part.

(b) Required elements of a plan. Each plan must include the

following elements:

(1) Certification by the Governor, or the Governor's designee, that

the plan meets the requirements of this subpart;

(2) Identification of state, local and private fleets that will

participate in the plan;

(3) Number of new alternative fueled vehicles per plan participant,

either through conversion or acquisition;

(4) A written statement from each plan participant to assure

commitment;

(5) A statement of contingency measures by the State to offset any

failure to fulfill significant commitments by plan participants, in

order to meet the requirements of Sec. 490.201;

(6) A provision by the State to monitor and verify implementation

of the plan;

(7) A provision certifying that all acquisitions and conversions

under the plan are voluntary and will meet the requirements of Sec. 247

of the Clean Air Act, as amended (42 U.S.C. Sec. 7587) and all

applicable safety requirements.

(c) When to submit plan. Beginning with model year 1996, any State

wishing to submit a plan under this section must do so no later than

June 1 prior to the model year covered by such plan.

(d) Review and approval. DOE shall review and approve a plan which

meets the requirements of this subpart and is designed to achieve at a

minimum, the same number of alternative fueled vehicle acquisitions or

conversions as would be required under Sec. 490.201 within 60 days of

the date of receipt of the plan by DOE at the address in paragraph

(h)(1) of this section.

(e) Disapproval of plans. If DOE disapproves or requests a State to

submit additional information, the State may revise and resubmit the

plan to DOE within a reasonable time. States, however, must comply with

Sec. 490.201 until such time as the plan is approved.

(f) How a State may modify an approved plan. If a State determines

that it cannot successfully implement its plan, it may submit to DOE

for approval, at any time, the

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