# Alternative Fuel Transportation Program

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A95-4764

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** February 28, 1995
- **Citation:** 60 FR 10970

## Text

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 othe

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A95-4764. Public record. Not legal advice.