[Federal Register: September 19, 2006 (Volume 71, Number 181)]
[Proposed Rules]
[Page 54771-54789]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19se06-9]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 54771]]
DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 490
RIN 1904-AB67
Alternative Fuel Transportation Program; Replacement Fuel Goal
Modification
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy (DOE or Department).
ACTION: Notice of proposed rulemaking (NOPR) and public hearing.
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SUMMARY: DOE proposes to modify the 2010 goal of 30 percent of U.S.
motor fuel production to be supplied by replacement fuels, established
in section 502(b)(2) of the Energy Policy Act of 1992 (EPAct 1992),
because it is not achievable. The Department has authority to review
the goal and to modify it, by rule, if it is not achievable, and in
doing so may change the percentage level for the goal and/or the
timeframe for achievement of the goal. The Department has determined
through its analysis that the 30 percent replacement fuel production
goal could potentially be met, not by 2010, but at a later date. The
Department consequently is proposing in this notice to keep the
replacement fuel goal of 30 percent originally provided in EPAct 1992
(section 502(b)(2)), but extend the date for achieving the goal to
2030.
DATES: Written comments (preferably provided electronically, but if not
possible, then eight copies) on the proposed modification must be
received by DOE on or before November 3, 2006; electronic copies of
comments may be submitted as described below.
Oral views, data, and arguments may be presented at the public
hearing, which will be held on October 3, 2006. The length of each oral
presentation is limited to 10 minutes. The public hearing will be held
at the U.S. Department of Energy, Room GJ-015, Forrestal Building, 1000
Independence Avenue, SW., Washington, DC 20585-0121. Requests to speak
at the hearing must be submitted to DOE no later than 4 p.m., September
26, 2006.
ADDRESSES: Written comments (eight copies) and requests to speak at the
public hearing should be addressed to: U.S. Department of Energy,
Office of Energy Efficiency and Renewable Energy, EE-2G, RIN 1904-AB67,
1000 Independence Avenue, SW., Washington, DC 20585-0121. E-mails may
be sent to: regulatory_info@afdc.nrel.gov. Comments may also be
submitted through the Federal Rulemaking Portal at http://www.regulations.gov.
DOE is currently using Microsoft Word.
Organizations are strongly encouraged to submit comments
electronically, to facilitate timely receipt of comments and ease
inclusion in the electronic docket.
Copies of this notice, the transcript from the hearing, and written
comments will be placed at the following Web site address: http://www.eere.energy.gov/vehiclesandfuels/epact/private_fleets.shtml.
Interested parties may also access these documents using a computer in
DOE's Freedom of Information (FOI) Reading Room, U.S. Department of
Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW.,
Washington, DC 20585-0121, (202) 586-3142, between the hours of 9 a.m.
and 4 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 notice.
FOR FURTHER INFORMATION CONTACT: To request a copy of this notice or
arrange on-site access to paper copies of other information in the
docket, or for further information, contact Mr. Dana V. O'Hara, Office
of Energy Efficiency and Renewable Energy (EE-2G), U.S. Department of
Energy, 1000 Independence Avenue, SW., Washington, DC 20585-0121; (202)
586-9171; regulatory_info@afdc.nrel.gov; or Mr. Chris Calamita, Office
of the General Counsel, U.S. Department of Energy, 1000 Independence
Avenue, SW., Washington, DC 20585-0121; (202) 586-9507.
SUPPLEMENTARY INFORMATION:
I. Introduction
II. Replacement Fuel Production Goal
III. Achievability of the Goal
IV. Goal Modification and Background
V. Goal Modification Analysis
VI. New Replacement Fuel Production Goal Proposal
VII. Opportunity for Public Comment
VIII. Regulatory Review
IX. Approval by the Office of the Secretary
I. Introduction
The Energy Policy Act of 1992 (EPAct 1992), Public Law 102-486,
established an interim goal of developing sufficient U.S. domestic
replacement fuel production capacity to replace 10 percent of projected
total motor fuel use by the year 2000 and a final goal of 30 percent by
the year 2010, with at least one half of such replacement fuels being
domestic fuels. Pursuant to EPAct 1992, DOE is required to review these
goals periodically and publish the results and provide opportunities
for public comments. If DOE determines that the goals are not
achievable, EPAct 1992 section 504(b) directs DOE to modify, by rule,
the percentage requirements and/or dates, so that the goals are
achievable. (42 U.S.C. 13254(b)) The Department believes that in order
for a goal to be achievable, there must be a reasonable expectation
that the desired level of replacement fuels production capacity will
develop within the relevant timeframe.
The purpose of this NOPR is to review the existing 2010 replacement
fuel production goal; determine whether the goal is achievable; and if
the goal is not achievable, propose a new replacement fuel production
goal. Today's NOPR also implements the March 6, 2006, order of the U.S.
District Court for Northern District of California to prepare and
publish a notice of proposed rulemaking to modify EPAct 1992's
replacement fuel production goal for 2010. See Center for Biological
Diversity v. U.S. Department of Energy et al., No. C 05-01526 WHA
(Order on Cross-Motions for Partial Summary Judgment).
II. Replacement Fuel Production Goal
A. Statutory Requirements
Section 502(a) of EPAct 1992 requires the Secretary of Energy
(Secretary) to establish a program to promote the development and use
of ``domestic replacement fuels'' and to ``promote the
[[Page 54772]]
replacement of petroleum fuels with replacement fuels to the maximum
extent practicable'' (42 U.S.C. 13252(a)). Section 502(b) establishes
production goals for replacement fuels (42 U.S.C. 13252(b)). The
relevant portions of 502(b) are:
(b) Development Plan and Production Goals--[T]he Secretary * * *
shall review appropriate information and--
* * * * *
(2) determine the technical and economic feasibility of
achieving the goals of producing sufficient replacement fuels to
replace, on an energy equivalent basis--
(A) at least 10 percent by the year 2000; and
(B) at least 30 percent by the year 2010, of the projected
consumption of motor fuel in the United States for each such year,
with at least one half of such replacement fuels being domestic
fuels;
42 U.S.C. 13252(b)(2) [emphasis added].
For the purposes of this NOPR, the ``replacement fuel production
goal'' or the ``goal'' refers to the 30 percent production goal by 2010
(42 U.S.C. 13252(b)(2)(B)), unless otherwise noted. DOE believes the 10
percent production goal was meant to be an ``interim'' milestone to
help gauge the progress to the 30 percent production goal. As noted
elsewhere in this NOPR, DOE has evaluated the status of the 2000
interim goal and determined that it was not met. Furthermore, DOE has
evaluated and proposes to determine that the 2010 goal is not
achievable. Adopting a revised interim goal would not assist DOE in
carrying out its obligation to revise the 2010 replacement fuel goal.
Moreover, DOE notes that the Court order referenced earlier instructs
DOE to ``publish a Notice of Proposed Rulemaking for a revised
replacement fuel goal.'' \1\ DOE, therefore, is proposing in this
notice to focus on the final goal in section 502(b)(2). In addition,
the analyses presented later in this notice nevertheless project
potential replacement fuel levels for the intervening years without
establishing a specific interim level or target date.
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\1\ The order issued on March 6, 2006, by the U.S. District
Court for Northern California instructs DOE to issue a revised
replacement fuel goal, not goals. See Center for Biological
Diversity v. U.S. Department of Energy et al., No. C 05-01526 WHA
(Order Re Timing of Relief).
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DOE will periodically evaluate the prospects for achieving the
replacement fuel goal proposed in today's notice, including tracking
the levels projected for intervening years, and will publish the
results of its evaluations as necessary.
Since 1992, DOE has taken a number of steps to implement EPAct's
replacement fuel programs. DOE coordinates various aspects of the
Federal fleets' efforts to comply with the vehicle acquisition
requirements established under section 303 of EPAct 1992 (42 U.S.C.
13212). DOE has promulgated and implemented regulations and guidance
for alternative fuel providers and State government fleets, which are
subject to the fleet provisions contained in sections 501 and 507(o)
(42 U.S.C. 13251 and 13257(o), respectively). DOE has also established
the Clean Cities Program, which supports public and private
partnerships that deploy alternative fueled vehicles (AFVs) and build
supporting infrastructure.
However, EPAct 1992 does not provide DOE the authority ``to mandate
marketing or pricing practices, policies or strategies for alternative
fuel, or to mandate the production or delivery of such fuels.'' (42
U.S.C. 13254(c)) Further, the Department's authority to require the use
of alternative fuels is limited.\2\
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\2\ Fleets are not required to use alternative or replacement
fuel in their AFVs (except for alternative fuel providers, which are
required by section 501(a)(4) of EPAct to use alternative fuel in
their AFVs.)
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B. Definitions
The term ``replacement fuel'' is defined by EPAct 1992 to mean
``the portion of any motor fuel that is methanol, ethanol, or other
alcohols, natural gas, liquefied petroleum gas, hydrogen, coal derived
liquids, fuels (other than alcohols) derived from biological materials,
electricity (including electricity from solar energy), ethers,'' or any
other fuel that the Secretary determines meets certain statutory
requirements. (42 U.S.C. 13211(14) (Emphasis added)).
The term ``alternative fuel'' is defined to include many of the
same types of fuels (such as ethanol, natural gas, hydrogen, and
electricity), but also includes certain ``mixtures'' of petroleum-based
fuels and other fuels as long as the ``mixture'' is ``substantially not
petroleum.'' (42 U.S.C. 13211(2) and 10 CFR 490.2).
Thus, a certain mixture might constitute an ``alternative fuel,''
but only the portion of the fuel that falls within the definition of
``replacement fuel'' would actually constitute a ``replacement fuel.''
For example, M85, a mixture of 85 percent methanol and 15 percent
gasoline, would, in its entirety, constitute an ``alternative fuel,''
but only the 85 percent that was methanol would constitute
``replacement fuel.'' Also by way of example, gasohol (a fuel blend
typically consisting of approximately 10 percent ethanol and 90 percent
gasoline) would not qualify as an ``alternative fuel'' because it is
not ``substantially not petroleum,'' but the 10 percent that is ethanol
would qualify as ``replacement fuel.''
Section 301(12) of EPAct 1992 defines ``motor fuel'' as ``any
substance suitable as fuel for a motor vehicle.'' The goals established
in section 502(b)(2) require that DOE evaluate the capacity of
producing sufficient replacement fuels to offset a certain percentage
of U.S. ``motor fuel'' consumption. Moreover, the term motor vehicle is
defined in EPAct 1992 section 301(13), through reference to 42 U.S.C.
7550(2), as a self-propelled vehicle that is designed for transporting
persons or property on a street or highway. Therefore, DOE, for the
purposes of Title V of EPAct 1992, has interpreted the term motor fuel
to include all fuels that are used in on-road vehicles. This includes
fuels used in light-, medium-, and heavy-duty on-road vehicles. (See
Private and Local Government Fleet Determination; Final Rule, 69 FR
4219, 4226 (January 29, 2004).)
C. Quantifying the Replacement Fuel Production Goals
The replacement fuel production goals contained in EPAct 1992 would
require significant increases in the production of replacement fuels,
which if used, would represent a substantial reduction in petroleum
motor fuel usage. The 2000 on-road motor fuel consumption in the U.S.
was about 10 million barrels per day (mbpd). Thus the 2000 goal of
producing sufficient fuel to replace 10 percent of total motor fuel
demand would have required the supply of 1 million barrels oil
equivalent per day of replacement fuels. The current U.S. production
capacity for ethanol, which currently is the most prevalent replacement
fuel, is roughly 0.16 million barrels of oil equivalent per day and
considerably less than the level of the 2000 goal. In 2010, the U.S. is
projected to consume over 12 mbpd of motor fuels and, therefore, the
production of 3.7 mbpd in replacement fuels would be required to
satisfy the goal of 30 percent replacement fuel.
To further put these figures in perspective, it is helpful to
consider the goals in relation to other energy sectors. For example, in
2010, achieving the EPAct 1992 goal would require the replacement of
over 3.7 million barrels of oil per day (7.3 quads \3\ of energy),
equivalent to 9 percent of the total projected domestic energy
consumption. (See the Energy Information
[[Page 54773]]
Administration's (EIA) Annual Energy Outlook (AEO) 2006,\4\ Tables A2
and A7.)
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\3\ One quad equals one quadrillion BTU, which is equivalent to
172.414 million barrels of crude oil.
\4\ The AEO is EIA's long-term forecast of energy supply,
demand, and prices, based on upon results from EIA's National Energy
Modeling System (NEMS). EIA is an independent statistical and
analytical agency within DOE.
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Moreover, the 2010 replacement fuel goal for motor fuels set forth
in EPAct 1992 is almost equivalent to the total energy demand for the
entire commercial sector (service-providing facilities and equipment of
business; Federal, State, and local governments; and other public and
private organizations), which is projected to account for 11.5 percent
of total energy consumption in 2010. The 30 percent goal also
represents the equivalent of twice as much energy as is projected to be
supplied by all renewable fuels across all sectors, and roughly the
equivalent to the total energy currently supplied by U.S. nuclear power
generating facilities. Achieving the existing statutory replacement
fuel goal also becomes more difficult each year as more vehicles are
placed in service and vehicle miles traveled increases. In this decade
alone, motor fuel demand is expected to increase by nearly 2.5 million
barrels per day (from 2000 to 2010).
Seen another way, in order to meet the existing 2010 goal, the U.S.
would need to replace, in the next three years, over 90 million of the
130 million light-duty passenger cars on the road today with AFVs
running 100 percent of the time on alternative fuels. Since there are
currently about six million AFVs in the U.S., meeting this goal would
require a 15-fold increase in AFVs within the next three years--
basically requiring nearly five years' worth of vehicle sales in only
three years, and every vehicle sold would have to be an AFV.
In discussing the United States' transportation energy issues,
Brazil is often suggested as a potential model to follow for petroleum
replacement. In 2004, Brazil was able to replace approximately 44
percent of its gasoline consumption (on a volume basis), or 34 percent
on an energy-adjusted basis, with ethanol. Brazil's transition to
ethanol began in the 1970s and has experienced a significant ramp-up
over the past 10 years. However, this level of replacement fuel does
not account for the large amount of diesel fuel consumed in Brazil, and
thus the total petroleum replacement provided by ethanol in Brazil is
much less than the 34 percent level reported above.
The fact that the U.S. already produces more ethanol than Brazil
annually (yet replaces less than 3 percent of its motor fuels) reveals
that this country's petroleum dependence is significantly larger than
Brazil's. It would take a considerable amount of time for the U.S. to
achieve similar results, on a percentage basis, given the time it would
take to develop the production capacity of the magnitude required to
reach the 30 percent level.
III. Achievability of the Goal
A. Statutory Requirements
Section 504(a) of EPAct 1992 requires DOE to periodically
``examine'' the goals established in section 502(b)(2) and determine
whether they should be modified. (42 U.S.C. 13254(a)) The examination
of the goals is to be made taking into account the program goals stated
under section 502(a), namely to promote the development and use of
``domestic replacement fuels'' and to ``promote the replacement of
petroleum fuels with replacement fuels to the maximum extent
practicable.''
As an initial matter, DOE notes that it is unaware of any analysis
or technical data that was used by Congress in 1992 as a basis for
setting the 10 percent and 30 percent replacement fuel goals set forth
in EPAct 1992. Thus, DOE is aware of no affirmative determination by
Congress or by any agency that, at the time they were set, the
statutory goals were reasonably achievable. Regardless, and as
described and discussed below, the Department periodically has
evaluated the feasibility of the goals.
B. Previous Analyses of the Existing Goals
1. Technical Report 14
Several previous efforts were made by the Department to analyze the
replacement fuel goal. The first effort was in 1996, as part of the
Assessment of Costs and Benefits of Flexible and Alternative Fuel Use
in the U.S. Transportation Sector, Technical Report Fourteen: Market
Potential and Impacts of Alternative Fuel Use in Light-Duty Vehicles: A
2000/2010 Analysis (U.S. Department of Energy, Office of Policy and
Office of Energy Efficiency and Renewable Energy, January 1996, report
number DOE/PO-0042), to be referred to as Technical Report 14. To
analyze the potential for replacement fuels, Technical Report 14 relied
upon the Alternative Fuels Trade Model (AFTM), a long-run static
equilibrium model that estimates prices and quantities that balance the
interrelated world oil and gas markets, given assumptions about supply,
demand, and costs. This model allows for comparisons between a baseline
or benchmark case against a modified case (the unconstrained case), or
even a series of modified cases.
Technical Report 14 estimated that overall replacement fuel use in
light-duty vehicles in 2010 would range from 12.4 percent to 45.8
percent assuming various policies measures are adopted and mature
alternative fuel industries are permitted to develop. Out of all of the
cases run (30 in total), two-thirds (20) resulted in replacement fuel
use of 30 percent or more of light-duty fuel use. (Technical Report 14
pp. 6-8 and 14-15). The higher penetration levels presented typically
occur when utilizing the EIA AEO 1994 reference case oil prices
(compared to Technical Report 14's other major cases which were run
under only low oil prices). The report projects most alternative fuels
and replacement fuels as being competitive with petroleum motor fuels
when the reference fuel prices are used. When low oil prices are used,
alternative fuel and replacement fuel use declines. The most
significant replacement fuel levels projected occur when greenhouse gas
(GHG) emissions are constrained. The scenarios constraining GHG
emissions result in higher levels of alternative fuels used because
typically most alternative fuels are less carbon-intensive than
petroleum fuels.
The benchmark cases evaluated project much lower levels of
replacement fuel use (less than 13 percent) and do not assume new
policies or mandates to facilitate replacement fuel use. The benchmark
cases also assume the existence of transitional barriers, which are not
present for the most part in the other scenarios evaluated. In the case
without transitional barriers or the ``unconstrained case,''
alternative fuel vehicles and alternative fuel infrastructure is
assumed to exist in sufficient numbers to allow significantly increased
levels of replacement fuel use, assuming they are otherwise cost-
competitive.
Overall, Technical Report 14 concluded that at least in 1996,
displacing 30 percent of light-duty motor fuel use appeared
theoretically feasible by 2010, assuming certain policies and market
conditions materialize. However, Technical Report 14 only considered
replacement fuels in the context of motor fuel demand by on-road light
duty vehicles. Light-duty fuel use in the U.S. is typically 75-80
percent of all motor fuel use, so achieving 30 percent replacement of
light-duty fuel use equates to replacing approximately 22-24 percent of
all motor fuel use.
[[Page 54774]]
2. EPAct 1992 Section 506 Report
The second major attempt by the Department to evaluate the
replacement fuel picture was made at the end of the last decade, in the
report Replacement Fuel and Alternative Fuel Vehicle Analysis Technical
and Policy Analysis, Pursuant to Section 506 of the Energy Policy Act
of 1992 (U.S. Department of Energy, Energy Efficiency and Renewable
Energy, Office of Transportation Technologies, December 1999 with
amendments September 2000), hereinafter section 506 report. The report
is available at http://www.eere.energy.gov/vehiclesandfuels/epact/pdfs/plf_docket/section506.pdf
.
The report concluded that it was unlikely that the 10 percent and
30 percent goals contained in EPAct 1992 would be achieved given the
limited statutory authorities provided to DOE and the relatively low
price of petroleum motor fuels that had occurred in the time since
EPAct 1992's passage. An addendum issued in 2000 indicated that
significantly higher oil prices (in the $30 per barrel range) might
lead to additional replacement fuel use, but would not alter the
original conclusion that achievement of the goals was unlikely.
Despite the conclusion concerning achievability, the report did not
take the additional step of making a determination under EPAct 1992
section 504(b) that the goals were not achievable; nor did the report
seek to revise the statutory replacement fuel goals. The report did
indicate DOE's continued support for alternative fuel and replacement
fuel programs, and concluded that alternative fuels could provide
significant benefits in terms of greenhouse gas emission reductions and
oil savings. Like Technical Report 14, the section 506 report indicated
that the 30 percent goal is achievable eventually if certain obstacles
are overcome, mainly that alternative and replacement fuels become more
price competitive with petroleum motor fuels. However, the report
highlights the significant lead-times necessary to get sufficient
vehicles on the road and the steep ramp-up that must occur to increase
the use of replacement fuels.
3. Transitional Alternative Fuels and Vehicles (TAFV) Model Report
The next report to consider the achievability of the replacement
fuel goals was the TAFV Model Report. See The Alternative Fuel
Transition: Results from the TAFV Model of Alternative Fuel Use in
Light-Duty Vehicles 1996-2000 (ORNL.TM2000/168) (September 17, 2000).
This report was completed shortly after the section 506 report. It
examined multiple pathways toward increased replacement and alternative
fuel use. The major difference between the TAFV report and earlier
reports is that it used a dynamic transitional model to analyze
potential replacement fuel pathways. Many of the earlier studies and
analyses used single-period equilibrium models and also assumed no
transitional barriers to increased alternative fuel and replacement
fuel use. The TAFV report includes a number of scenarios that assume no
transitional barriers but it also includes multiple pathways that do
include analysis of transitional barriers.
The TAFV report is instructive in that it highlights just how
difficult it will be to achieve the 30 percent replacement fuel
production goal. Of the policy options considered, only one achieves
the 30 percent goal in the 2010 timeframe and that case relies on a
retail sales mandate for alternative fuels (an option that is not
authorized by statute.) Of the cases reviewed both with and without
transitional barriers, replacement fuel levels achieved were less than
20 percent. Several other policy options led to increased use of
replacement fuel use but all of them required authority beyond that
currently afforded DOE. For example, these scenarios relied on a low-
GHG fuel subsidy or increased Corporate Average Fuel Economy (CAFE)
standards to lead to larger levels of replacement fuel use; however,
even in the high oil price case, the GHG fuel subsidy resulted in only
about 22 percent replacement fuel use by that year. Most of the other
policy options considered led to no more than 10 percent replacement
fuel use by 2010. The TAFV report also concluded that it was unlikely
the 2010 replacement fuel goal would be achieved without significant
policy changes, including incentives for the ``expansion of vehicle
production and fuel availability.''
Another important factor to consider is that the replacement fuel
levels projected in the TAFV report only considered light-duty fuel and
thus overstated the actual potential replacement fuel levels by about
25 percent. The report is available for review at: http://www.eere.energy.gov/vehiclesandfuels/epact/pdfs/plf_docket/tafv99report31a_ornltm.pdf
.
In summary, the section 506 report and TAFV 2000 Report both
concluded that it would be difficult and unlikely, but not impossible,
to achieve the 2010 replacement goal in EPAct 1992. In neither of these
reports issued in mid/late 2000 did DOE make a determination under
EPAct 1992 section 504(b) that the statutory replacement fuel goals
were not achievable--i.e., the determination that would have triggered
a statutory obligation to set a new, achievable, replacement fuel goal.
The Department chose to take a ``wait and see'' approach regarding the
need to revise the 2010 goal.
C. Current Review and Analysis of the Goal
In the development of this proposed rule, DOE evaluated the
prospects for achieving the replacement fuel goals set out in the
Energy Policy Act of 1992, which call for developing the capacity to
produce enough replacement fuels to offset 10 and 30 percent of the on-
highway motor fuels projected consumption for 2000 and 2010,
respectively. Based on actual data reported for 2000, the 10 percent
replacement fuel goal was not achieved. Replacement fuel use in that
year totaled about 4.7 billion gallons, or only about 2.9 percent of
the 162 billion gallons of on-highway motor fuel consumed. Of this
amount, oxygenates in the form of ethanol and Methyl Tertiary Butyl
Ether (MTBE) supplied about 92 percent of the replacement fuel
production. (See Transportation Energy Data Book--26th Edit., Table 2.3
(2006) (replacement fuel use) and FHWA Motor Fuel Use Report, Table MF-
21; http://199.79.179.101/ohim/hs00/mf.htm.)
Based on EIA's latest forecast (AEO 2006), replacement fuels
currently supply approximately 2.5 percent of the total motor fuel used
in on-road motor vehicles. The amount of replacement fuel used, as a
percent of total motor fuel consumed, has essentially been flat for the
past decade despite an increase in use of alternative and replacement
motor fuels. This is because the growth in replacement fuels has been
matched by the growth in petroleum motor fuels.
Additionally, the recently accelerated phase-out of MTBE as an
additive in gasoline has limited the total amount of replacement fuels
consumed since MTBE previously accounted for a significant portion of
these fuels. Because a gallon of MTBE contains more energy than a
gallon of ethanol, replacing MTBE with ethanol may result in more
gallons of ethanol used, but not in a higher replacement fuel level,
since the level of replacement (percentage) is calculated on an energy
content basis. This replacement of MTBE with ethanol partly explains
why replacement fuels have not garnered a larger share of the on-road
fuels market on an energy basis, even as ethanol use has increased
quite
[[Page 54775]]
significantly in the past several years, increasing from a level of
slightly more than 1 billion gallons in 2002 to 4 billion gallons in
2005.
The EIA AEO 2006 reference case projects that replacement fuels in
2010 will account for approximately 2.94 percent of total on-road motor
fuels, or approximately 5.7 billion gallons of gasoline equivalent
replacement fuel. As noted above, ethanol production is increasing
significantly but some of this increase is offset by the near complete
phase-out of MTBE expected by 2010. Given the short-term nature of the
2010 goal, it appears that ethanol would be the primary replacement
fuel option to consider. Some production capacity for ethanol now
exists, with increases in capacity projected over the next few years,
partly in response to the Renewable Fuel Standard established by the
Energy Policy Act of 2005. Ethanol can be used in low-level blends with
gasoline in conventional vehicles already on U.S. roads, and methods to
distribute ethanol already exist. The changes in distribution and
infrastructure needed for other fuels (e.g., gaseous fuels or
electricity) to make major contributions would be much longer term in
nature, and thus largely impractical for serious consideration before
2010. Therefore, ethanol in blends is expected to account for about 80
percent of the replacement fuels produced in 2010, with the remaining
balance made up of mostly natural gas and propane. Even in the AEO 2006
high price forecast, replacement fuels only account for slightly more
than 3 percent of total on-road motor fuel in 2010.
For replacement fuels to replace 30 percent of the motor fuel
produced in 2010, replacement fuel production would have to increase
more than 10-fold, to nearly 60 billion gallons. Even if extraordinary
measures were undertaken, replacement fuel production could not be
ramped up enough to meet the level required to achieve the 30 percent
replacement fuel goal in three years. By way of illustration, if all
the corn currently produced in the U.S. were used to produce ethanol,
the amount of ethanol produced would only be about 18 billion gallons
of gasoline equivalent, which constitutes only 9 percent of U.S. motor
fuels.
DOE therefore proposes to determine that the existing EPAct 1992
replacement fuel goal of 10 percent for 2000 was not met and that the
goal of 30 percent for 2010 is not achievable, considering all
information available and the economic and technical feasibility of
achieving the 2010 goal.
IV. Goal Modification and Background
A. Statutory Requirements
Section 504(b) requires ``[i]f, after analysis of information
obtained in connection with carrying out subsection [504](a) [which
requires periodic review of the replacement fuel goals] or section 502,
or other information, and taking into account the determination of
technical and economic feasibility made under section 502(b)(2), the
Secretary determines that goals described in section 502(b)(2),
including the percentage requirements or dates are not achievable, the
Secretary, in consultation with appropriate Federal agencies, shall, by
rule, establish goals that are achievable, for the purposes of this
title'' (42 U.S.C. 13254(b)). In modifying the goal, DOE may promulgate
an achievable goal by adjusting the level of the goal and/or adjusting
the timeframe of the goal.
The Department has proposed to determine that the EPAct 1992
replacement fuel goal of 30 percent by 2010 is not achievable. That
determination, if finalized, would require the Department to establish
a new goal, by rule which is achievable. Section 504 makes clear that
achievability of the goal is key, both for analysis of the goal as well
as modifying the goal. EPAct 1992, however, does not define
``achievable'' for the purpose of modifying the goal. Section 502(b)(2)
directs DOE to consider the technological and economic feasibility of
the statutory goal in determining the goal's achievability under the
initial review. The Department interprets the term to mean that in
order for a goal to be achievable, there must be a reasonable
expectation, based on technological and economic feasibility, that the
desired level of production capacity will be created within the
relevant timeframe.
B. Previous Rulemaking
Section 507(c) directed the Department to issue an Advanced Notice
of Proposed Rulemaking (ANOPR) that, in part, would evaluate the
progress toward achieving the replacement goal and assess the adequacy
and practicability of the goal. (42 U.S.C. 13257(c)) In response to
that directive, DOE issued an ANOPR on April 17, 1998 (63 FR 19372).
DOE conducted three public hearings (Minneapolis, Minnesota; Los
Angeles, California; and Washington, DC) and solicited written comments
from the public on the ANOPR. More than 110 interested parties
responded by providing written and oral comments. Comments were
received through July 16, 1998. DOE has reviewed all of these comments
and, in the following paragraphs, provides a summary of and DOE's
response to those comments relevant to the replacement fuel goal.
In the ANOPR, DOE requested comments on 23 specific questions
covering three broad areas: Replacement fuels, fleet requirements, and
urban transit buses. Only the first set of questions is relevant to
today's rulemaking. A detailed discussion of these comments was
previously provided in the notice of proposed rulemaking for the
Private and Local Government Fleet Determination, 68 FR 10320, 10326-
10328 (March 3, 2003).
The questions raised in the 1998 ANOPR addressed whether the
existing replacement fuel goal for 2010 was achievable, and if not,
what goal would be achievable; how DOE should determine achievability;
what should be done to maximize use of replacement fuels (such as
mandates and incentives); and how DOE should determine the impact of
replacement fuels.
Comments about the goal were received from more than 40 individuals
or entities, and primarily addressed whether the goal of replacing 30
percent of the U.S. motor fuel by 2010 was considered achievable. While
generally lacking specific goal levels and dates to inform today's
action, the comments did identify likely problems in achieving the
existing goal. Almost half of the comments received that explicitly
addressed this question regarded the goal as unachievable. By an even
wider margin, those submitting comments considered the goal
unachievable under present economic conditions, and many offered
suggestions as to what changes would be required to make the goal
feasible. Only one comment was received which suggested a specific
revised goal, while several others suggested that modifying the goal
would be as arbitrary as the original goal.
Comments received were in general agreement that the lack of
alternative fuel infrastructure, low petroleum fuel prices, and various
limitations on alternative fuel vehicle availability were key barriers
to achievement of EPAct 1992's 30 percent replacement fuel production
goal. Numerous comments were received suggesting a variety of
incentives (such as tax credits) to spur greater production and use of
replacement fuels. Virtually no comments were received suggesting
additional data relevant to the decision at hand, nor concerning how to
determine the impact of efforts to increase replacement fuel use.
[[Page 54776]]
C. Final Private and Local Determination/Court Decision
DOE previously addressed the issue of whether to revise the
replacement fuel production goal for 2010 contained in EPAct 1992 in
the context of its determination that an AFV acquisition mandate for
private and local government fleets was not necessary. (See 69 FR 4219;
January 29, 2004.) Section 507(e) directs the Department to consider
whether a fleet requirement program is ``necessary'' for the
achievement of the replacement fuel goals. (42 U.S.C. 13257(e)) As part
of the Department's decision under that directive, DOE stated in its
notice of final rulemaking that a private and local government fleet
rule would ``not appreciably increase the percentage of alternative
fuel and replacement fuel used by motor vehicles'' (69 FR 4220). DOE
further concluded that ``adoption of a revised goal would not impact
its determination that a private and local government rule * * * would
not provide any appreciable increase in replacement fuel use'' (69 FR
4221). DOE, therefore, did not revise the replacement fuel goal at the
time but indicated that it would continue to evaluate the need to
revise the statutory goal in the future.
Subsequent to the publication of the January 29, 2004, final rule,
DOE was sued in Federal court by the Center for Biological Diversity
and Friends of the Earth for failing to impose a private and local
government fleet acquisition mandate and for not revising the
replacement fuel production goal for 2010 as part of its determination.
On March 6, 2006, the U.S. District Court for the Northern District of
California invalidated DOE's final determination regarding the private
and local government fleet mandate and ordered DOE to revise the
replacement fuel production goal for 2010. (See Center for Biological
Diversity v. U.S. Department of Energy et al., No. C 05-01526 WHA
(Order on Cross-Motions for Partial Summary Judgment).) In its order,
the Court directed DOE to prepare notices of proposed rulemaking and
final rules on both the replacement fuel goal for 2010 and the private
and local government fleets determination. Today's notice fulfills the
Court's requirement that DOE ``shall publish a Notice of Proposed
Rulemaking for a revised replacement fuel goal by no later than
September 6, 2006.'' (See the Court's timeline order at p. 2 of the
order.) This is the initial step to a later rulemaking that DOE will
conduct to decide whether a private and local government fleet mandate
is necessary.
D. Advanced Energy Initiative
The President's Advanced Energy Initiative sets out an aggressive
course for reducing the Nation's dependence on foreign petroleum. This
initiative, announced in the President's State of the Union address in
January 2006, sets a national goal of replacing more than 75 percent of
the U.S. imports from foreign sources by 2025. The Advanced Energy
Initiative emphasizes technology developments as the key to reducing
energy dependence, including several in the area of replacement fuels.
These appear under the portion of the Initiative focused on ``Changing
the way we fuel our vehicles'', which indicates:
We can improve our energy security through greater use of
technologies that reduce oil use by improving efficiency, expansion
of alternative fuels from homegrown biomass, and development of fuel
cells that use hydrogen from domestic feedstocks.
The Advanced Energy Initiative is available on the White House Web
site at the following location: http://www.whitehouse.gov/stateoftheunion/2006/energy/
.
V. Goal Modification Analysis
Given the timeframe set by the Court, in this NOPR, the Department
has had to rely on the best information and data currently available.
The Department searched and reviewed relevant internal and external
reports, studies, and analyses on alternative and replacement fuel use
and projected production. The pertinent information was compiled to
assist in the development of an ``achievable goal.''
A. Approach
The Department has several options, in accordance with the
authority provided in section 504 of EPAct 1992. First, DOE could
modify the goal level to what it believed was achievable in the 2010
timeframe, probably around the 3 percent projected in the AEO 2006. DOE
estimates that given technical and other constraints in this short
timeframe, expanding production of replacement fuels much beyond 3
percent by 2010 is unlikely as previously discussed.
The other primary option would be to move the goal out in time,
since the potential contributions from replacement fuels increase over
time. A third option would be to combine the two primary options and
modify both the replacement fuel level and date. In analyzing the data,
DOE looked at all of these options. The Department evaluated credible
data, projections, and other information covering approximately the
next 25 years, to see what could be achievable. The Department's
evaluation and analysis went out to 2030, since that is the last date
for which credible input existed, particularly in the form of the AEO
2006.
In general, the analytical framework included only existing
statutory authorities and incentives in the development of the
technologies. The only exception was in DOE's Hydrogen, Fuel Cells and
Infrastructure Technologies Program (Hydrogen Program) which did
consider additional incentives and/or mandates in the future as is
discussed later in this section. Therefore, the primary variables in
the Department's analysis were projected technological and economical
improvements.
B. Building Blocks
The replacement fuel production goal proposed in this NOPR was
developed after careful consideration of existing market factors,
energy forecasts, and programs directed by the Department and its
national laboratories. Three combined building blocks were considered:
(1) The reference case projected by EIA in the AEO 2006; (2) the high
price case presented in the AEO 2006; and (3) projections from the DOE
programs conducting research and development (R&D) on replacement fuel
and vehicle technologies. The outcome of this effort is several
different cases under which varying levels of replacement fuel are
potentially achieved.
Each of these three combined building blocks includes a number of
smaller building blocks which were assembled to form the combined
building blocks. These building blocks include replacement fuel and
vehicle technologies, with projected contributions based on either the
high or reference prices from the AEO, or the DOE program development
projections. Some of the building blocks are relevant to all of the
scenarios, while others appear in a limited number of scenarios. As
indicated above, the Department evaluated data out through 2030, at
periodical intervals. In all cases, the highest levels of replacement
fuels appear in 2030. Below is a description of the building blocks and
``cases'' which were used to develop the four scenarios, described in
the subsequent section.
1. AEO 2006 Reference Case Description
The AEO 2006 reference case is the base case assembled by EIA. It
takes into account developments that are likely to occur as a result of
technologies and
[[Page 54777]]
policies that exist today. It does not account for potentially new
policies, or legislation. The reference case also includes a number of
other critical assumptions including economic growth rates and oil
prices. The AEO 2006 reference case assumes a U.S. economic growth rate
of 3 percent per year. Oil prices in this case are projected to
fluctuate from the high $40 range to mid $50 range and peak at $57 in
2030. The AEO indicates that the oil price projection in the reference
case represents EIA's ``current judgment regarding the expected
behavior of the Organization of Petroleum Exporting Countries (OPEC)
producers in the long term, adjusting production to keep world oil
prices in a range of $40 to $50 per barrel'' (AEO 2006, p. 206).
According to the reference case, potential replacement fuel levels
will grow from the 2005 level of 2.63 percent of total motor fuel use
to 8.65 percent in 2030. To arrive at a potential replacement figure,
DOE used the figures provided in the AEO 2006 but made the additional
assumption that all of the coal-to-liquid (CTL) fuels in the AEO 2006
figures are used in the transportation sector and count as replacement
fuels for purposes of section 502 of EPAct 1992. A significant portion
of CTL is expected to be used as jet fuel, so a somewhat smaller
portion than assumed here would probably be used for on road motor
vehicle transportation. In the reference case, the CTL fuels account
for slightly more than half of the total replacement fuels in 2030 or
about 4 percent. Realistically, DOE expects a portion of CTL fuels may
be used for non-transportation purposes (such as industrial.) However,
it is anticipated that the transportation sector is likely to represent
the highest-value use of these fuels. While it is unclear at this time
to what extent they will be supplied to non-transportation sectors, the
projected high-value of motor vehicle fuels would likely result in the
majority of CTL production being used as motor fuels the transportation
sector. Therefore, the figure used with the AEO 2006 reference case
description represents an upper bound for CTL fuel produced for the
transportation sector. (See below for additional discussion on CTL
fuels.) The other replacement fuels included in the reference case for
2030 are ethanol at slightly over 3 percent, biodiesel at less than a
quarter of a percent, and ``other alternative fuels'' at less than 1
percent. The ``other alternative fuels'' are discussed below. Hydrogen
use occurs in the AEO reference case but is minimal.
2. AEO 2006 High Price Case Description
The high price case makes ``more pessimistic assumptions for
worldwide crude oil and natural gas resources than in the reference
case'' (AEO 2006, p. 204). In particular, OPEC resources and production
capacity are projected to be lower in this case. As a result, oil
prices rise to nearly $90/barrel by 2030. Even in the high price case,
however, some of the projected prices are considerably lower than
today's levels and only rise to $70/barrel in 2013 and $80/barrel in
2018. The high oil price forecast for the next several years ranges
from $50 to $60. In this case, transportation energy demand also is
reduced because of high petroleum prices, which tend to encourage fuel
efficiency. At the same time, higher oil prices in general also
encourage more replacement fuel use. The result is that the replacement
fuel potential of the high price case is more than double the reference
case, rising to a level of almost 18 percent in 2030.
As in the reference case, CTL fuels account for a large share of
the total replacement fuels. Of the nearly 18 percent replacement fuel
level, CTL accounts for more than 11 percent with a total production
capacity of 1.69 million barrels per day. Thus, the CTL level more than
doubles from the reference case projection. As noted above, DOE assumes
that all of the CTL produced is used for transportation purposes and
therefore counts toward the replacement fuel goal provisions in section
502 of EPAct 1992. This represents an upper bound of the potential for
CTL since it is likely that not all the CTL produced will be used as a
transportation motor fuel. Ethanol production and the other alternative
fuels largely are unchanged from the reference case. However, gas-to-
liquid (GTL) fuels for the first time show up as a potential
replacement fuel, accounting for approximately 1.31 percent petroleum
replacement and providing about 0.19 million barrels of oil equivalent
production per day. GTL fuels are discussed in the Program Development
Case section below because DOE has an active program underway to
increase their potential.
3. DOE Program Development Case Description
The DOE program development case represents the potential
replacement fuel levels achieved if DOE is successful in accelerating
the introduction of technologies and new fuels through its R&D
programs. These levels are predicated on the respective programs
continuing existing R&D activities and the achievement of technology
goals/milestones that have been set. They also depend on economic
targets being achieved and market acceptance of the technologies and
fuels reviewed; however, for the most part, they do not rely upon new
policy or regulatory initiatives. Information to support these cases
came primarily from the relevant Energy Efficiency and Renewable Energy
and Fossil Energy programs, and included Government Performance and
Results Act (Pub. L. 103-62; August 3, 1993; GPRA) analyses and
recently released technical reports identifying potential contributions
of various fuel and vehicle technologies. (For more information
concerning GPRA analyses, see http://www1.eere.doe.gov/ba/pba/gpra_estimates/fy_07.html.
)
The GPRA analysis specifically was relied on for the figures used
for the Hydrogen Program and the fuel-efficiency savings rates
projected for the EERE's FreedomCAR and Vehicles Technologies Program
(FCVT). It should be noted that the GPRA figures are based on the AEO
2005 forecast and not AEO 2006 because it was not available when the
most recent GPRA analysis was conducted. In the case of hydrogen,
therefore, this means that the analysis presented here is based on last
year's AEO and thus probably understates the contribution of hydrogen
because oil prices (a major factor in determining alternative fuel use
levels) were much lower in AEO 2005. In the case of FCVT's fuel
efficiency savings, DOE calculated a savings rates based on last year's
GPRA report and applied this figure to AEO 2006's projection of on-road
motor fuel use.
The discussion below includes the programs and fuels that
contribute to the replacement fuel goal, including fuel efficiency
measures, ethanol, biodiesel, coal-to-liquid fuels, gas-to-liquid
fuels, hydrogen, other alternative fuels, and plug-in hybrid-electric
vehicles (PHEVs). In particular, the technologies and fuels for which
information was received from DOE program offices include fuel
efficiency measures, ethanol, gas-to-liquid fuels, hydrogen, and
electricity in PHEVs.
Section 504(b) of EPAct 1992 requires that the goal, as modified,
be achievable. (42 U.S.C. 13254(b)) As part of our determination as to
whether a goal would be achievable, the Department considered
technologies that are technically and economically feasible today. The
Department also considered technologies that currently may not be
technologically or economically feasible, but that we reasonably expect
to be technologically and economically feasible given the achievement
of
[[Page 54778]]
certain conditions in the timeframes necessary to contribute to the
goal. Thus, for any technology included in the analysis that is not now
considered technically and economically feasible, the discussion below
includes information on the conditions the Department considers
necessary for such technologies to be technologically and economically
feasible.
a. Energy Efficiency for Light-Duty, Medium-Duty, and Heavy-Duty
Vehicles
The EPAct 1992 replacement fuel goal does not directly take into
account improvements in fuel efficiency because the goal is measured in
terms of the percentage of motor fuels provided by replacement fuels.
Fuel efficiency improvements to motor vehicles, however, indirectly
contribute to the achievement of the replacement fuel goal contained in
EPAct 1992 by lowering total fuel consumption, resulting in a larger
percentage of petroleum replacement provided by a given amount of
replacement fuel. Moreover, fuel efficiency is an important objective
because it helps conserve all fuels whether they are petroleum or
replacement fuels and greater fuel efficiency can lower the cost to
consumers of operating motor vehicles. DOE, therefore, has an
aggressive R&D program that focuses on accelerating the development of
technologies that will greatly improve the fuel efficiency of on-road
vehicles including light-duty vehicles, commercial light trucks, and
heavy trucks and buses.
EERE's FCVT R&D program is leading to a comprehensive suite of new
technologies, including hybrid vehicle components, such as electric
motors; energy storage units, such as advanced batteries; and power
electronics. It also is working on advanced combustion systems,
advanced fuels, lightweight materials, and many other systems to
improve the fuel efficiency of today's conventionally-fueled vehicles
and pave the way for the advanced technology vehicles of tomorrow,
including fuel cell vehicles.
Through its efforts, FCVT expects to dramatically reduce oil
consumption by improving the fuel efficiency of personal vehicles, such
as passenger cars and light-duty trucks, and doubling the fuel
efficiency of commercial vehicles, while also developing the core
technologies needed for tomorrow's fuel cell hybrid vehicles. The fuel
savings provided by these efforts are expected to be significant. (As
discussed below in section VI, changes in the motor vehicle fleet take
many years to achieve because of the long replacement rates for motor
vehicles. These technology improvements and breakthroughs take a long
time to have an impact on petroleum consumption.)
Based on the GPRA analysis conducted by FCVT, DOE projects that
fuel efficiency improvements could offset as much as 3.04 million
barrels per day of petroleum by 2030. This figure was derived by
looking at the GPRA fiscal year 2007 savings rates and comparing them
to forecasted on-road petroleum consumption levels in the AEO 2006. A
major reason for the reduction in petroleum is the increased fuel
efficiency due to increased numbers of diesel-fueled and hybrid-
electric vehicles. The FCVT goals analysis indicates much higher levels
of these vehicles than forecasted by EIA, which typically relies upon
more modest improvements in technologies based upon historical
patterns. According to the GPRA analysis, by 2030 conventional gasoline
vehicles will only account for 37 percent of new vehicles sales while
they account for 80 percent in the AEO reference forecast. The reason
for the difference is the much higher level of market penetration
projected for new hybrid and diesel-fueled vehicles in the GPRA
analysis.
While there is a great deal of promise demonstrated by these
technologies, the Department recognizes that their achievement of the
levels proposed is not assured. The fuel savings described in this
document are specifically contingent on meeting every goal currently
set in the FCVT program. If milestones set by the programs are not met,
or if oil price levels turn out to be lower than those currently
incorporated into programmatic forecasts, there may be some reduction
in the penetration of these new technologies and the resulting fuel
savings. Further, we note that that the projected fuel savings
resulting from the FCVT program were not arrived at through the same
type of analysis used to establish fuel economy standards under the
National Highway Traffic Safety Administration (NHTSA's) fuel economy
rulemaking process. As such, the levels relied upon in this current
analysis should not be interpreted as levels that could be set as
standards under NHTSA's fuel economy program. Fuel economy standards
are set by NHTSA after analyzing vehicle manufacturers' specific
product plans and technology data. The level at which the fuel economy
standards are set must reflect a balancing of four statutory criteria:
technological feasibility, economic practicability, the need of the
nation to conserve energy, and the effects of other federal motor
vehicle standards on fuel economy. Thus, NHTSA must adhere to a
significantly different process when establishing standards, in
contrast to DOE's effort here to modify the replacement fuel goal.
Nevertheless, the Department believes that it has taken a reasonable
approach in relying upon technological improvement projections for the
purpose of today's rule.
As noted above, this level of petroleum reduction cannot be
directly reflected in the replacement fuel production goal proposed
because it offsets petroleum use but does not result in more
replacement fuel use. However, because it lowers the total amount of
petroleum used, it nevertheless permits replacement fuel production to
account for a higher percentage of motor vehicle fuel production than
would otherwise be achievable without the petroleum savings. Another
indirect benefit of the FCVT programs is the greater market penetration
of diesel-fueled vehicles. These vehicles will be increasingly
necessary if and when larger amounts of synthetic distillate fuels such
as CTL and GTL are to be used in the transportation sector.
b. Ethanol
Ethanol is a two-carbon straight-chain alcohol that is used as both
a near-neat fuel (i.e., as E85) and in low-level blends with gasoline
(at up to 10 percent ethanol by volume). Ethanol can be produced from a
variety of feedstocks, including ethylene, corn, sorghum, and biomass,
and using a variety of processing methods. By far, the most common
feedstock in the U.S. is corn; in other countries, such as Brazil,
sugarcane is the primary feedstock. In the corn process, the starch is
extracted from the feedstock and then hydrolyzed to sugar where
microorganisms (e.g., yeast) ferment it into ethanol. Ethanol is
produced from corn through the wet or dry mill process. The primary
production method in the U.S. is dry milling. About 75 percent of
ethanol is produced using dry milling (Renewable Fuels Association
2005). The ethanol from corn (and sorghum) process is fully
commercialized. At the end of 2005, the U.S. fuel ethanol capacity was
over 4 billion gallons from approximately 100 plants located primarily
in the Midwest. Most of the plants process corn or sorghum, but there
are several small facilities that process wastes, such as beer and
cheese whey.
Several organizations (including DOE) are working at developing
ethanol from biomass such as energy crops (e.g., switchgrass),
agricultural residues (e.g., corn stover) and forestry wastes. There
are no commercial biomass-to-ethanol (cellulosic) facilities currently
in
[[Page 54779]]
operation in the United States. However, DOE has a significant research
and development effort in the production of ethanol from biomass. The
U.S. Department of Agriculture (USDA) and DOE are also jointly working
on developing the technologies for energy crop development.
The DOE program has outlined a detailed plan for developing a cost-
effective technology by 2012, based on achieving an ethanol selling
price of $1.07/gallon from feedstocks costing $35/dry ton. The plan
does not analyze whether the target price of $1.07/gallon is
economically feasible, but instead identifies the technological
advancements and economic conditions necessary to yield the target
price at which ethanol is cost-competitive. In addition, the program is
evaluating or developing integrated bio-refineries that would produce
ethanol both biologically and thermochemically through gasification.
Finally, DOE and USDA are jointly working on technologies to drive down
the cost of biomass from roughly $50/dry ton today to $30-$35/dry ton
in 2012.
Significant amounts of ethanol use are projected in both the EIA
and the DOE Program Development Cases. In the reference case of the
2006 AEO, it is estimated that almost 7 billion gallons of ethanol are
produced in 2010 with just over 16 billion gallons being produced in
2030. The Program Development Case has much higher projections, with
10.7 billion gallons in 2010 and over 60 billion gallons in 2030.
c. Biodiesel
Biodiesel (methyl esters) is produced from biomass oils and fats
such as soybean oil, waste grease and palm oil. The oils or fats are
reacted with an alcohol, usually methanol, in the presence of a
catalyst. Both acidic and basic-catalysts are used, but most processes
use base catalysis by NaOH. Conversions of over 97 percent are common.
In addition to biodiesel, this process produces glycerin, a mix of
glycerol (1,2,3-propanetriol), water, and salts. The production of
biodiesel is a fully commercialized process, however, there is
considerable ongoing industrial development directed at improving the
efficiency of the process technology. The primary ongoing government
research efforts in this area are in the areas of air emissions,
compatibility with advanced engines, and development of additional
products from glycerin, as well as USDA's continued efforts to increase
corn yields.
Biodiesel use in the transportation sector was 75 million gallons
in 2005, a tripling of the 2004 levels. This growth is expected to
continue. Projections of the maximum biodiesel production were made for
the near-, mid- (2015) and longer-term (2030), in a 2004 report
published by the National Renewable Energy Laboratory (Biomass Oil
Analysis: Research Needs and Recommendations, National Renewable Energy
Laboratory, document NREL/TP-510-34796, June 2004). In the near-term,
if all biomass oils currently exported were converted to biodiesel,
over 1.6 billion gallons of biodiesel would be available. In 2015, it
is estimated that 3.5 billion gallons of biodiesel could be produced by
improving oil seed yields and using Conservation Reserve Program (CRP)
lands. In addition, 133 million gallons of biodiesel could be produced
from waste fats and oils, bringing the total to 3.6 billion gallons of
biodiesel. In the longer-term (i.e., 2030), the projected maximum
potential biodiesel almost triples over 2015 levels to 10 billion
gallons. According to the report, production of 10 billion gallons of
biodiesel could be produced by 2030, assuming:
A 25 percent improvement in oil crop yield (4 billion
gallons);
All wheat exports were displaced, freeing up 30 million
acres (3.1 billion gallons) for production of canola or other high oil
yield crops; and
Convert some fraction of soybean production to canola
production (3.1 billion gallons).
The AEO 2006 provides much lower estimates for biodiesel. In the
reference case, 190 million gallons of biodiesel are used in 2010,
rising to 340 million gallons in 2030.
d. Coal-to-Liquid (CTL) Fuels
Coal is the most abundant fossil fuel resource in the U.S. with
recoverable reserves estimated in 2005 at 267 billion tons. The
recoverable resource base provides approximately 250-year supply at
today's usage rates. The technology to produce CTL synthetic fuels has
been available for years, and the industry continues to make
incremental technological advances. Although the cost of production of
CTL is less than today's oil prices, there are other major barriers to
the use of coal to produce liquid fuels: Uncertainty of world oil
prices; high cost of production coupled with high initial capital cost,
and the long decision-to-production lead times. The threshold (or
hurdle) price of crude oil that is required to trigger large capital
investments is higher than what would otherwise be the case without
these market risks and barriers to entry and therefore could be higher
than the current cost of production. Depending on the processes used,
production facilities can produce synthetic gasoline or diesel fuels.
CTL plants commonly employ the Fischer-Tropsch process.\5\ CTL fuels
are clean, refined products requiring little if any additional refinery
processing, are fungible with petroleum products and, therefore, can
use the existing fuels distribution and end-use infrastructure, an
attribute that is not present in the case of most other replacement or
alternative fuels. (See testimony of Lowell Miller of DOE Fossil Energy
before the Senate Energy and Natural Resources Committee on April 24,
2006, http://fossil.energy.gov/news/testimony/2006/060424-C._Lowell_Miller_Testimony.html
and ``Development of Coal-to-Liquid Fuels'' DOE
report to Congress, June 2006.)
---------------------------------------------------------------------------
\5\ The Fischer-tropsch was invented by F. Fishcer and H.
Tropsch in Germany in 1923 for ``* * * coal liquefaction, based on
the catalytic conversion of synthesis gas (i.e., a mixture of
hydrogen and carbon monoxide) into a mainly liquid and some gaseous
hydrocarbones.l The hydrocarbons make from the synthesis gas are
mainly paraffins and olefins and are more easily refined into
gasoline and diesel fuel. In addition to hydrocarbons, some
oxygenated compounds, such as methanol, and produced from the
synthesis gas.'' Energy Deskbook, U.S. Department of Energy,
Document No. DOE/IR/05114-1, June 1982.
---------------------------------------------------------------------------
DOE's current research priorities do not include funding for
improving the processes used to make CTL fuels because the technology
is mature with evolutionary advances and incremental improvements and
therefore, Federal sponsorship of CTL technologies is not consistent
with the Research and Development Investment Criteria. According to the
AEO 2006, ``CTL is economically competitive at an oil price in the low
to mid-$40 per barrel range and a coal cost in the range of $1 to $2
per million BTU, depending on coal quantity and location.'' The AEO
2006 projects significant amounts of CTL fuels will be produced in the
next several decades, with the first production plants coming online as
early as 2011. A significant amount of the petroleum replacement
provided in each of the scenarios reviewed results from the
contribution by CTL.
In the AEO 2006 Reference Case, CTL replaces 0.76 million barrels
of oil per day in 2030. In the AEO 2006 High Price Case, CTL replaces
1.69 million barrels of oil per day in 2030. Thus, CTL fuels have the
potential to replace between 4-11 percent of total motor fuel, although
a significant portion might ultimately be used as jet fuel. It is
anticipated that some portion of the fuel produced from CTL processes
will be used outside the
[[Page 54780]]
transportation sector, although it is currently unclear how much.
Therefore, the analysis supporting the replacement fuel goal set in
today's notice and the figures presented here currently assume 100
percent contribution in the motor fuels market. (This issue was
specifically taken into account when adjusting total replacement fuel
levels in setting the proposed goal in section VI, below.) As better
production data is developed on stream of such plants, DOE may review
the goal accordingly. However, most if not all of the production stream
from such plants is expected to replace petroleum even if it is not
directly used in on-road applications and, therefore, CTL will have a
positive contribution to reducing oil use. In EIA's forecast, CTL
surpasses all other alternative transportation fuels in terms of
potential use.
e. Gas-to-Liquid (GTL) Fuels
Like CTL, GTL fuels are expected to contribute to transportation
motor fuel supply in the future. GTL fuels are produced by converting
natural gas reserves into synthetic petroleum fuels also using the
Fischer-Tropsch process. The primary product of this process,
accounting for 40-70 percent of the total yield, is a synthetic
distillate or diesel fuel that has zero sulfur, and is fully fungible
and compatible with existing liquid fuels and can be introduced into
the current petroleum infrastructure and supply system. The production
of GTL fuels currently is not economic in the U.S. due to high natural
gas prices, and its use is only expected to be cost-effective using
stranded natural gas as a feedstock. Stranded natural gas reserves are
those that would otherwise be abandoned because they cannot be
transported economically. Because of these factors, GTL provides far
less petroleum replacement potential than CTL and only becomes a factor
in the AEO forecast if oil reaches the levels forecast in the high
price case.
AEO 2006 states that GTL fuels are profitable when oil prices
exceed $25 a barrel and natural gas prices are $0.50-$1.00 per million
BTU. The AEO 2006 reference forecast projects domestic natural gas
prices to range from about $5 to $6 per million cubic feet range (a
thousand cubic feet is roughly equivalent to a million BTU) over the
next 25 years. Given this price range, the only viable natural gas that
can be used to produce GTL fuel is stranded natural gas. According to
the AEO, all of the GTL forecasted to be used is produced using
stranded natural gas reserves located in Alaska. Once converted to GTL,
the stranded Alaskan reserves could then be shipped via the Trans
Alaskan Pipeline System for incorporation into more conventional fuel
transportation and distribution methods. The AEO 2006 reference case
indicates that GTL has the potential to replace 0.19 million barrels of
oil per day in the high oil case. DOE's Fossil Energy input includes
similar levels of petroleum replacement for GTL, but also includes GTL
as viable in the reference case if certain technology goals are
realized.
DOE has conducted R&D to improve and refine the processes used to
produce GTL fuels, but no longer conducts this R&D because GTL is a
mature technology with incremental progress driven by market forces.
Current promising private sector efforts involve novel technology
approaches that have the potential to reduce the capital cost to
produce synthesis gas by over 25 percent, and also reduce the size of
production facilities so that modest-sized natural gas fields can be
exploited. Thus, DOE projects a slightly higher replacement level from
GTL fuels than provided in EIA's forecast. Fossil Energy's program
projects that GTL could replace 0.20 million barrels per day by 2030,
slightly more than the AEO 2006 high oil price case. Moreover, the
Fossil program projects that GTL is viable in the reference case and
that GTL could replace up to 0.15 million barrels per day by 2030 even
with lower oil prices.
Another important factor to consider is the potential for importing
GTL from foreign sources. EIA currently projects that in 2030 worldwide
GTL production will exceed 1.1 million barrels per day in its reference
case and 2.6 million barrels per day in the high oil price case. Some
of this production could be imported to the U.S. to offset petroleum
demand. However, the replacement fuel goal proposed in this notice does
not take into account these potential imports, and therefore likely
understates the total potential for GTL fuels to offset petroleum
demand.
f. Hydrogen
Hydrogen is the third most abundant element on the earth's surface,
found primarily in water and organic compounds, but requires very
energy intensive processes to isolate the Hydrogen in a form that can
be used for fuel. It can be produced from sources such as natural gas,
coal, gasoline, methanol, or biomass through the application of heat;
from bacteria or algae; through photosynthesis; or by using electricity
or sunlight to split water into hydrogen and oxygen. Because it is
abundant, can be produced from a variety of sources, and burns cleanly
or can be converted to electricity with little or no emissions, it has
been looked to as a potential replacement for petroleum.
DOE has an extensive R&D program focused on commercializing
hydrogen as a motor fuel for transportation. To realize the vision of
the President's Hydrogen Fuel Initiative, DOE's Hydrogen Program
supports R&D of transportation, stationary and portable hydrogen fuel
cell technologies in parallel with technologies for hydrogen production
and delivery infrastructure. The program is partnering with automotive
and energy companies to make the technology ready by 2015, thereby
enabling the availability of safe, affordable, and viable hydrogen fuel
cell vehicles and hydrogen fuel infrastructure to consumers by 2020.
The current focus is on addressing key technical challenges (for fuel
cells and hydrogen production, delivery, and storage) and institutional
barriers (such as hydrogen codes and standards to maximize safety, and
training and public awareness). Once technical and cost targets are
close to being met and the business case is established, policies and
programs with incentives may be warranted to facilitate the transition.
The Hydrogen Program is currently conducting basic and applied
research, technology development and learning demonstrations,
underlying safety research, systems analysis, and public outreach and
education activities. These activities include cost-shared, public-
private partnerships to address the high-risk, critical technology
barriers preventing widespread use of hydrogen as an energy carrier.
Public and private partners include automotive and power equipment
manufacturers, energy and chemical companies, electric and natural gas
utilities, building designers, standards development organizations,
other Federal agencies, State government agencies, universities,
national laboratories and other national and international stakeholder
organizations. The Hydrogen Program encourages the formation of
collaborative partnerships to conduct R&D and other activities that
support program goals.
DOE is funding R&D efforts that will provide the basis for the
near-, mid-, and long-term production, delivery, storage, and use of
hydrogen derived from diverse energy sources, including fossil fuel,
nuclear energy, and renewable sources. Distributed reforming of natural
gas, coal-derived liquids, and renewable liquid fuels (e.g., ethanol
and methanol) is likely to be the most efficient and economical way to
produce hydrogen in the transition to
[[Page 54781]]
large scale introduction of hydrogen fuel, but costs are still too
high.
The replacement fuel levels projected for hydrogen in this notice
are based on the GPRA analysis conducted for the Hydrogen Program for
fiscal year 2007. According to the GPRA analysis, the Hydrogen Program
assumes that all of the hydrogen produced in 2025 comes from natural
gas reforming with coal conversion to hydrogen not taking place until
2030. See GPRA (Mid-Term Benefits Analysis of EERE's Programs) p. 2-8.
The AEO 2006 reference case indicates that hydrogen could replace
several thousand barrels per day by 2030. The program development case
established by the Hydrogen Program indicates a much more aggressive
level of petroleum replacement at nearly a half a million barrels per
day by 2030. DOE acknowledges that reaching this higher level may
require the adoption of additional policy initiatives or incentives to
ease the transition to hydrogen fueled fuel cell vehicles.
g. Other Alternative Fuels
In the reference case, the ``other alternative fuels'' consist of
natural gas, liquefied petroleum gas, electricity, and methanol.
Currently, natural gas and liquefied propane are the two most common
alternative transportation fuels used (whereas ethanol is used
primarily as an oxygenate and in low level blends such as gasohol.)
They are primarily used in fleets because they require special vehicles
and infrastructure. Currently, these fuels account for only one-fifth
of the replacement fuels used in the U.S. and less than half a percent
of petroleum motor fuel use. These fuels (with the exception of
electricity derived from plug-in electric vehicles) are not treated
separately in the program development cases discussed elsewhere in this
notice because their use is not projected to increase significantly
during the period reviewed, and DOE does not have any active R&D
initiatives underway to significantly increase the use of these fuels
in the future.
DOE, however, has some regulatory requirements and demonstration
programs that include the use of these fuels, but DOE believes the
contributions resulting from these programs are largely represented in
the AEO reference case. Although small, the contribution from these
fuels is expected to double in the reference case, and their
contribution is reflected in the replacement fuel level proposed in
section VI. These other alternative fuels replace 0.12 million barrels
of oil per day in the reference case and 0.11 million barrels per day
in the high price case. Their percentage of use is reduced in the high
price case because higher energy prices lead to additional fuel
efficiency and less overall fuel consumption.
h. Technologies and Programs Not Considered in This Analysis
Electricity in Plug-in Hybrid-Electric Vehicles (PHEV)
A relatively new but promising technology, PHEVs are attracting
significant interest within the government and private industry. The
Administration's Advanced Energy Initiative identifies PHEVs as one of
the critical new technologies needed to offset petroleum fuel use. Like
currently-available hybrid electric vehicles (HEVs), plug-in hybrids
are very fuel efficient and can refuel using conventional fuels but
have the added advantage of being able to plug-in to the electric grid.
PHEVs which are currently being considered would have a driving range
in electric-only mode of 20-40 miles. This capability gives the
necessary driving range to satisfy most commuter trips and therefore
could offset a significant amount of petroleum motor fuel if utilized
by a large segment of the consumer market.
To bring this technology to market, the Advanced Energy Initiative
includes new research to develop advanced battery technologies such as
lithium-ion batteries, and advanced electric drive technologies. These
steps are necessary to provide the range and utility that consumers
demand. Simply adding more of the batteries used in currently-available
hybrid vehicles is not practical because of the cost and weight of
current batteries. DOE already has had much success in the area of
battery development, having developed the nickel metal hydride
batteries currently used by all commercially-available HEVs. Another
advantage of PHEV is that they represent a practical step toward
hydrogen fuel cell vehicles, because they will use some of the same
electric drive and power-management systems that PHEVs will use.
The savings from operating vehicles on electricity could be
significant. The Electric Power Research Institute (EPRI) believes the
fuel efficiency of plug-in hybrids could exceed 80 or more miles per
gallon, particularly in urban driving conditions. Because vehicles are
driven mostly during the day for commuter trips, plug-in hybrids can be
recharged at night using off-peak electric generation capacity. This
means that a significant number of plug-in hybrids could be phased-in
without requiring any new power plants. And because very little
generation is supplied by petroleum, almost all the electricity
supplied to these vehicles would offset petroleum use. EPRI estimates
that the national average price of operating a PHEV on electricity is
the equivalent of 75 cents per gallon. EPRI also estimates that because
half the cars on U.S. roads are driven less than 24 miles per day, that
PHEVs could reduce petroleum motor fuel consumption by 60 percent. As
new, more fuel-efficient power plants are developed, PHEVs would be
expected to become more energy efficient. However, the Department can
not at this time verify EPRI's projections.
At this time, the specific technology baseline/configuration
projected for PHEVs is still being developed. When combined with the
relatively recent development of this technology concept, this means
that there are no comprehensive estimates for potential replacement
fuel contributions from this technology. DOE currently is partnering
with industry to develop several initial configurations for evaluation
and analysis, but concludes it is premature to include any specific
contributions from PHEVs in the replacement fuel goal.
Other Federal Programs
In addition to the programs discussed above, there are numerous
other Federal programs encouraging replacement fuel production; e.g.,
the direct loan, loan guarantee, and grant programs for the purchase of
renewable energy systems and energy efficiency improvements
administered by the USDA under sec. 9006 of the Farm Security and Rural
Investment Act of 2002 (Pub. L. 107-171). Such programs combine public
and private contributions aimed at conserving and diversifying the
Nation's energy supply, including motor vehicle fuels. The Department
has not been able to quantify the impacts of such programs, but fully
anticipates that the programs will have a positive impact on increasing
the production capacity of replacement fuels in the timeframe of the
proposed goal. The Department requests comment on the possible
contributions from other Federal programs, other government activities
and private sector initiatives in achieving the proposed goal.
C. Replacement Fuel Scenarios
The previous section discussed the building blocks reviewed by the
Department. This section combines the various building blocks into
separate and distinct scenarios. Four scenarios were considered: (1)
The reference case projected by EIA in AEO 2006; (2) the high price
scenario presented in AEO
[[Page 54782]]
2006; (3) a combination of the AEO 2006 reference case with achievement
of program goals (designated as Program Developments); and (4) a
combination of the AEO 2006 high price case with Program Developments.
The different scenarios represent the potential bounds for proposing a
revised replacement fuel production goal under sections 502 and 504 of
EPAct 1992. The analysis performed looked at values for replacement
fuel penetrations in the 2020, 2025, and 2030 timeframes.
1. Reference Case
As discussed earlier, the reference case represents the base case,
or the most conservative approach to projecting potential replacement
fuel production. The total projected replacement fuel production level
by the year 2030 is approximately 8.65 percent in this scenario. This
level of petroleum replacement further assumes that all CTL fuel is
used for transportation purposes. Aside from this assumption, the most
noticeable difference between this scenario and the ones that include
the program development case is the relatively low amount of biofuels
that is projected to be used. (This is due to assumptions made about
technological progress of ethanol production technologies in the
program development case.) Results for this scenario are provided in
Figure 1.
Figure 1.--Summary of Results for Reference Case Scenario
[Note: Results in mbpd unless otherwise noted]
------------------------------------------------------------------------
Reference 2020 2025 2030
------------------------------------------------------------------------
On-Road Fuel Use \6\......................... 14.42 15.36 16.46
Additional Fuel Efficiency Savings (FCVT).... 0.00 0.00 0.00
On-Road Fuel Use w/Additional Fuel Efficiency 14.42 15.36 16.46
Savings.....................................
Ethanol...................................... 0.490 0.510 0.514
Biodiesel.................................... 0.02 0.02 0.02
Hydrogen/FCVs................................ 0.001 0.001 0.002
Coal to Liquids.............................. 0.23 0.58 0.76
Gas to Liquids............................... 0.00 0.00 0.00
Other Alternative Fuels...................... 0.10 0.11 0.12
Petroleum Use................................ 13.58 14.14 15.03
Total Replacement Fuel....................... 0.84 1.22 1.42
Portion Replacement Fuel..................... 5.83% 7.95% 8.65%
------------------------------------------------------------------------
2. High Price Case
The high price case, which predicts higher oil prices throughout
the forecast, indicates a potential for replacement fuel production
level that is double that in the reference case. By 2030, replacement
fuel production potentially accounts for 2.65 million petroleum
equivalent barrels per day, providing a replacement fuel production
level of 17.84 percent. The most notable changes in this forecast are
the reduction in total on-road fuel consumption, dropping from 16.46 to
14.86 million barrels a day as a result of reduced demand, and the
significant increase in potential CTL production, which increases from
a level of 0.76 million barrels a day in the reference case to 1.69
million barrels a day in the high price case. Results for this scenario
are provided in Figure 2.
---------------------------------------------------------------------------
\6\ On all summary results tables, the AEO 2006 cases have some
fuel efficiency savings built into the forecasts, as a result of
gradual improvements in vehicle technologies. The fuel efficency
savings reflected in the line below in each table represnt those
additional savings due to FCVT program developments.
Figure 2.--Summary of Results for High Price Case Scenario
[Note: Results in mbpd unless otherwise noted]
------------------------------------------------------------------------
High price 2020 2025 2030
------------------------------------------------------------------------
On-Road Fuel Use................. 13.20 13.97 14.86
Additional Fuel Efficiency 0.00 0.00 0.00
Savings (FCVT)..................
On-Road Fuel Use w/Additional 13.20 13.97 14.86
Fuel Efficiency Savings.........
Ethanol.......................... 0.537 0.600 0.622
Biodiesel........................ 0.0280 0.03 0.03
Hydrogen/FCVs.................... 0.001 0.001 0.002
Coal to Liquids.................. 0.29 0.81 1.69
Gas to Liquids................... 0.04 0.19 0.19
Other Alternative Fuels.......... 0.088 0.10 0.11
Petroleum Use.................... 12.21 12.24 12.21
Total Replacement Fuel........... 0.99 1.73 2.65
Portion Replacement Fuel......... 7.49% 12.37% 17.84%
------------------------------------------------------------------------
3. Reference Case With Program Developments
This scenario combined the reference case assumptions regarding
transportation energy demand with projections for successful DOE R&D
programs. As in the reference case discussed above, this case assumes
that all the CTL production capacity forecasted in the reference case
is used for transportation purposes. The reference case with program
developments further assumes additional fuel efficiency savings over
[[Page 54783]]
and above those included in the reference case based on the fuel
efficiency improvements and change in vehicle penetration rates
attributed to the R&D initiatives underway within FCVT. Each of the
other program initiatives discussed in this notice are factored into
this scenario so that estimates for replacement fuel production
potential of GTL, ethanol, biodiesel, and hydrogen are included. The
potential impact of combining these forecasts with the individual
program goals results in a replacement fuel production level potential
of 35.25 percent in 2030. The most significant differences from the two
previous forecasts (reference and high price stand-alone) are the
incorporation of additional fuel economy improvements and that biofuels
(ethanol and biodiesel) provide very large potential petroleum
replacement, accounting for roughly two-thirds of the total replacement
fuel in this scenario. The additional fuel efficiency improvements
represent over 3 mbpd savings by 2030. The two biofuels also combine to
replace more than 3.0 mbpd equivalent in this scenario. Results for
this scenario are provided in Figure 3.
Figure 3.--Summary of Results for Reference Case With Program
Development Scenario
[Note: Results in mbpd unless otherwise noted]
------------------------------------------------------------------------
Reference/program goals 2020 2025 2030
------------------------------------------------------------------------
On-Road Fuel Use................. 14.42 15.36 16.46
Additional Fuel Efficiency 0.55 1.11 3.04
Savings (FCVT)..................
On-Road Fuel Use w/Additional 13.88 14.25 13.42
Fuel Efficiency Savings.........
Ethanol.......................... 1.326 1.953 2.581
Biodiesel........................ 0.366 0.51 0.65
Hydrogen/FCVs.................... 0.001 0.16 0.47
Coal to Liquids.................. 0.23 0.58 0.76
Gas to Liquids................... 0.05 0.15 0.15
Other Alternative Fuels.......... 0.10 0.11 0.12
Petroleum Use.................... 11.81 10.79 8.64
Total Replacement Fuel........... 2.07 3.46 4.73
Portion Replacement Fuel......... 14.94% 24.27% 35.25%
------------------------------------------------------------------------
4. High Price Case With Program Developments
This scenario looked at the impact of the high price case
assumptions regarding transportation energy demand combined with the
Program Developments. It includes the same assumptions regarding CTL
use as discussed above. The program goal assumptions regarding
potential replacement fuels or petroleum reductions are the same as
used in the previous scenario. The major difference in this scenario is
that CTL production more than doubles due to higher oil prices. Ethanol
and biodiesel again demonstrate the potential to replace a significant
amount of petroleum. The higher oil prices, however, have the effect of
reducing overall on-road fuel use, which magnifies the potential
replacement fuel levels. The result in this scenario is a maximum
potential replacement fuel level of 47.06 percent. Results for this
scenario are provided in Figure 4.
Figure 4.--Summary of Results for High Price Case With Program
Development Scenario
[Note: Results in mbpd unless otherwise noted]
------------------------------------------------------------------------
High price/program goals 2020 2025 2030
------------------------------------------------------------------------
On-Road Fuel Use................. 13.20 13.97 14.86
Additional Fuel Efficiency 0.50 1.01 2.74
Savings (FCVT)..................
On-Road Fuel Use w/Additional 12.70 12.96 12.12
Fuel Efficiency Savings.........
Ethanol.......................... 1.326 1.953 2.58
Biodiesel........................ 0.37 0.506 0.645
Hydrogen/FCVs.................... 0.001 0.16 0.47
Coal to Liquids.................. 0.29 0.81 1.69
Gas to Liquids................... 0.05 0.15 0.20
Other Alternative Fuels.......... 0.088 0.10 0.11
Petroleum Use.................... 10.58 9.28 6.41
Total Replacement Fuel........... 2.12 3.68 5.70
Portion Replacement Fuel......... 16.71% 28.40% 47.06%
------------------------------------------------------------------------
D. DOE's VISION Model Analysis
To validate the results of its analysis, DOE used the VISION model
to look at the replacement fuel production levels suggested by the
different scenarios considered. The Replacement Fuel Goal is a
production capability goal. The purpose of the VISION Modeling exercise
was to verify the replacement fuel production levels were reasonable
given various potential vehicle mixes and fuel availability.
The VISION model, developed by DOE and Argonne National Laboratory,
is used regularly by the Department to support programmatic decision-
making in the area of transportation technologies. VISION has been used
for such activities as responding to Congressional inquiries,
projecting the oil reduction potential of advanced vehicle
technologies, estimating fuel efficiency improvements required to save
specific amounts of petroleum, and other similar tasks. VISION has a
number of capabilities including the ability to project light- and
heavy-vehicle stock, vehicle miles traveled (VMT), and energy
consumption by technology and fuel types. It can also
[[Page 54784]]
assess market penetration rates necessary to achieve certain
objectives, such as carbon reductions or petroleum reductions. In
addition, as with the AEO, VISION specifically addresses any
``rebound'' effects within transportation, such as where increased VMT
may result from lower operating costs due to efficiency improvements.
(For more information on VISION, see http://www.
[fxsp0]transportation.[fxsp0]anl.[fxsp0]gov/software/VISION/
index.[fxsp0]html).
The VISION model was used in this case to review the inputs assumed
in the different scenarios and verify the petroleum reduction savings,
as well as the vehicle mix necessary to use some of the fuels. In
particular, DOE was interested in whether sufficient light- and heavy-
duty vehicles, in particular flexible fueled and diesel-powered
vehicles would be available to use the mix of replacement fuels
evaluated. The VISION run provided information on the market
penetration of flexible fueled and diesel-powered vehicles that would
be needed to use the quantities of ethanol, biodiesel, and synthetic
diesel fuels (i.e., CTL fuels). Overall, the VISION Reference Case
scenario shows slightly higher numbers for diesel and hybrid electric
vehicles than the EIA baseline. Under the VISION runs, there are
significant differences between the Reference Case scenario and the
Reference Case with Program Developments scenario concerning projected
penetrations of FFVs, diesel vehicles, hybrid electric vehicles, and
fuel cell vehicles. This is as would be expected due to the number of
FFVs required to use the amount of ethanol projected by the Biomass
Program to be available in 2030, the number of diesels and HEVs to
demonstrate the petroleum savings due to fuel efficiency as projected
by FCVT, the number of diesels needed to use the levels projected of
diesel replacement fuels (biodiesel, GTL, CTL), and the number of FCVs
required to use the hydrogen projected by HFCIT. Overall, advanced
technology vehicles overall levels projected by VISION may require
additional mechanisms to be achieved. See below Figure 5 showing the
projections for new sales for all highway vehicles in 2030.
Figure 5.--VISION Model Comparison of 2030 Vehicle Sales Mix
----------------------------------------------------------------------------------------------------------------
VISION model,
VISION model, reference case
New LDV sales 2030 EIA reference reference case with program
(percent) (percent) developments
(percent)
----------------------------------------------------------------------------------------------------------------
Conventional Fueled............................................. 80.0 74.74 0.06
FFVs............................................................ 6.3 6.16 23.83
Diesel.......................................................... 6.3 9.24 22.43
CNG, EV et al................................................... 1.2 1.26 1.26
HEVs............................................................ 6.1 8.59 37.43
FCVs............................................................ 0.0 0.04 15.00
----------------------------------------------------------------------------------------------------------------
In particular, the VISION model was used to evaluate the
replacement fuel levels projected by DOE in the different scenarios.
The results matched very closely with those found by DOE and in most
cases VISION suggested slightly higher replacement fuel levels. Some
small differences occurred due to differences in assumptions about
overall petroleum consumption, efficiency gains, and heating values for
fuels. Figure 6 shows the comparison of results for the two of the
scenarios under the 2030 analysis, the reference case and the reference
case with program development scenarios.
Figure 6.--Comparison of Analysis and VISION Results for 2030
----------------------------------------------------------------------------------------------------------------
Reference case
Reference case with program Reference case
scenario Reference case development with program
Fuel/technology analysis scenario scenario development
(mmbd) VISION (mmbd) analysis scenario
(mmbd) VISION (mmbd)
----------------------------------------------------------------------------------------------------------------
Ethanol......................................... 0.514 0.53 2.58 2.65
Biodiesel....................................... 0.02 0.02 0.65 0.60
Hydrogen........................................ 0.002 0 0.47 0.37
Coal-to-Liquids................................. 0.76 0.76 0.76 0.76
Gas-to-Liquids.................................. 0 0 0.15 0.20
Other Alternative Fuels......................... 0.12 0.16 0.12 0.16
Plug-in Hybrid Electric Vehicles................ 0 0 0 0
---------------------------------------------------------------
Total Replacement Fuel Contribution......... 1.42 1.48 4.73 4.75
----------------------------------------------------------------------------------------------------------------
F. Other Issues
1. Domestic Content
Section 502(b)(2) of EPAct 1992 directs that of the replacement
fuels counted in the goal, at least half must be domestic replacement
fuels (42 U.S.C. 13252(b)(2)). This is not an issue for today's action
because nearly all of the replacement fuels analyzed are domestic in
nature. The only replacement fuels analyzed that showed potential for
being imported are gas-to-liquids, which represent a relatively small
contribution to the overall goals. In addition, the small amount of GTL
fuels included in the analysis was assumed to be based solely upon
domestic resources. Ethanol imports are also assumed to be small; none
is anticipated to be imported once cellulosic ethanol enters the
market. All biodiesel, coal-to-liquid fuels, and hydrogen are assumed
to be domestic. A
[[Page 54785]]
few of the other alternative fuels may be imported, but again, they
represent a very small portion of the overall replacement fuel
contributions. Thus, the overwhelming majority of the replacement fuels
included in the analyses are domestic in nature.
2. Greenhouse Gases
As part of its analysis of the replacement fuel levels considered
in this notice, DOE evaluated the overall greenhouse gas implications
of the various scenarios. This analysis was included for several
reasons. First, the Department felt such an analysis was needed to do a
complete job of addressing the major issues surrounding the goal.
Virtually all discussions of energy in contexts similar to this action
have addressed greenhouse gas implications, including those within
Congress. Second, section 502(a) specifically identifies ``reducing
greenhouse gas emissions'' as one of the overall goals of the
replacement fuel program (42 U.S.C. 13252(a)).
All scenarios show reduced carbon emissions over the reference
case. Carbon emissions are reduced because more fuel efficient vehicles
are used in these scenarios and the replacement fuels in general are
less carbon intensive than petroleum motor fuels. The exception is the
greenhouse gas emissions associated with CTL fuels if sequestration is
not used to capture the carbon during fuel production. EIA indicates
that there are currently no plans to sequester the carbon associated
with CTL production absent new policies or requirements. Therefore, the
Department has not assumed that such emissions will be sequestered.
Even with the increased emissions of GHG from CTL, the net effect of
the replacement fuel production goal proposed in today's notice is a
substantial reduction in greenhouse gas emissions.
The VISION model was used to project the life cycle greenhouse gas
emissions of the scenarios analyzed in this rulemaking. Since the
greenhouse gas emissions are dependent upon the mix of replacement
fuels produced (including the specific feedstocks used) and used and
this actual mix cannot be completely determined at this time, the
estimated greenhouse gas emissions are based on the projected fuel
composition for 2030. On a life-cycle basis, the goal will achieve a
reduction in greenhouse gas emissions of over 40 percent compared to
the reference case. The annual emissions will decrease from 846.5
million metric tons of carbon equivalent (MMTCe) from fuel mix
represented by the AEO 2006 reference case scenario, to just under 500
MMTCe from the fuel mix represented by the fuel mix that most closely
represents the AEO 2006 reference case with program development
scenario. This reduction is primarily due to the high utilization of
biofuels, which have significantly lower carbon emissions than
petroleum-based fuels, especially when derived from biomass. As noted
earlier, the exact carbon emissions cannot be pinpointed as the mix of
fuels may ultimately be different than that projected; however, it is
clear that significant reductions should be expected to occur.
VI. New Replacement Fuel Production Goal Proposal
A. Discussion of Proposed Goal of 30 Percent by 2030
In summarizing the analyses provided above, it appears that a new
replacement fuel goal in the range of just under 9 percent up to over
47 percent may be achievable in the 2030 timeframe. This wide range of
potential replacement fuel production capacity percentages required the
Department to carefully revisit the scenario assumptions to determine
if a more specific goal level could be proposed.
The first scenario (Reference Case) results in less than 9 percent
replacement fuel. For purposes of this rulemaking, the Department
believes it is conservative because it assumes relatively low oil
prices and no additional replacement fuel resulting from Program
Developments. Therefore the Department proposes to reject this scenario
for further consideration because it reflects what the Department
believes is an unlikely combination of events. The second scenario
(High Price Case) results in about 18 percent replacement fuel. The
Department believes this result, though still conservative because it
too assumes no Program Development contributions, is more likely than
the first scenario. Even if its higher oil prices do not materialize,
it is likely that at least some Program Development will make up the
difference.
The remaining other two scenarios (Reference Case with Program
Developments and High Price Case with Program Developments), range in
contribution from over 35 to about 47 percent. The Departments believes
the fourth scenario, High Price Case with Program Developments, may be
overly optimistic because it assumes an unlikely combination of events
(i.e., high oil prices and that all programs will meet their expected
goals). Therefore, the Department believes it cannot reasonably
conclude, at the present time, that the higher percentage level is
``achievable'' in 2030 within the current statutory requirements. In
addition, there was a specific assumption for CTL (namely that all CTL
fuels would be supplied to the transportation sector) which also
cautions for discounting the results to more reasonably achievable
levels.
The third scenario, which also incorporates the Program
Developments but assumes Reference Case oil prices, would result in
just over 35 percent replacement. Though more optimistic than the
second scenario in terms of the Program Development contribution, it is
less optimistic than fourth scenario in terms of oil prices.
The range in between the second and third scenarios is
approximately 18 to 35 percent. Based on the discussion above, the
Department believes at this time that this represents a reasonable
range for the modified replacement fuel goal. The Department strongly
believes that many of the programs will achieve their individual
technical goals. Therefore the Department selected a proposed goal a
few points above the mid-point of this range, 30 percent. The
Department proposes to determine that a goal of 30 percent replacement
fuel by 2030 is ``achievable'' within the meaning of EPAct 1992 section
504.
The Department believes this goal is ``achievable'' for the
following reasons. First, the proposed goal incorporates a portfolio of
different technologies. Some of these would be expected to ultimately
provide greater contributions, while others might provide lesser
contributions. On average, however, these variations would be expected
to balance each other out, leaving a goal still in this range. Also,
the Department is relying on the most recent fuel price projections
from EIA, which it considers to be the most reliable long-range
projections. However, it is possible that events that cannot be
predicted may have short-term and long-term impacts that could increase
fuel prices above the projections. This has been illustrated with
recent increases in fuel prices due to natural disasters and other
global events. Thus, it is entirely possible that contributions from
some of the replacement fuels could turn out to be higher than have
been included here, if petroleum prices end up significantly higher as
currently being experienced.
Furthermore, much of the replacement fuel contribution is
anticipated to come from fuels capable of being blended in with
conventional petroleum fuels (e.g. biofuels) or which are fungible with
conventional fuels (CTL, GTL). Thus, infrastructure obstacles to much
of the projected
[[Page 54786]]
replacement are expected to be minimized. Finally, this analysis has
primarily focused on domestic replacement fuels, thus excluding
imports. The requirement in section 502(b)(2) was that at least half of
the replacement needed to be by domestic motor fuels (42 U.S.C.
13252(b)(2)); however, the Department has shown scenarios where imports
of replacement fuels would probably not be required in order to achieve
the desired levels.
Electricity for plug-in hybrid-electric vehicles has not been
included in the estimates, due to the early development stage of the
technology, and the absence of credible estimates. Depending on the
success of this technology, there could be significant additional
contributions to reducing overall petroleum consumption through PHEV
efficiency improvements, plus additional replacement of petroleum with
electricity.
Therefore, the Department is proposing to extend the replacement
fuel production goal of 30 percent of U.S. motor fuels to 2030. While
this appears achievable for a number of reasons, including those above,
there are several additional reasons why the Department believes this
is the appropriate approach to take. First, when Congress passed EPAct
1992, it indicated that it believed the level of 30 percent replacement
fuel was appropriate. Current discussions within Congress are also
focusing toward this level using a similar time frame to the one
proposed here. (See S. 2025, H.R. 4409, S. 2747, and others.) Second,
this level of replacement fuel production and timeframe are both
consistent with the goals of the President's Advanced Energy
Initiative, announced in early 2006, which also incorporates a
portfolio of technologies to address our Nation's transportation energy
situation.
There are important reasons why a time frame extending out to 2030
is required to make major changes in motor fuel consumption patterns
and thus production levels--the lead-time for investments to begin and
bear fruit, and the retirement cycles for U.S. vehicles. Major
investments of capital are required to alter the U.S. supply of
transportation fuels. Because these investments are focused over the
entire operating life of a production facility (often 30 years),
potential investors need to have a high degree of certainty that their
investment will pay off through confidence that the cost of competing
fuels will be higher than the cost of fuels produced by the subject
plant far into the future.
Once the capital is raised, the plant must be built and reach full
operation, which can also easily take five years or more, depending on
the complexity and size of the production plant involved. When adding a
substantial number of new plants (such as cellulosic ethanol and coal-
to-liquid fuels) to meet the 30 percent replacement fuel goal, this
phase of constructing multiple plants and bringing them up to full
operating capacity could easily add five or even ten years to the date
of seeing major impacts on motor fuel consumption. Thus, it can easily
be 20 years from the date of initial investments until significant
market penetrations are seen.
Many of the investments anticipated in 1992 have only recently
begun. Recent high oil prices are beginning to spur more investment in
alternative and replacement fuels, but not fast enough to allow the
Department to set a 2010 replacement fuel production goal at levels any
higher than the AEO 2006 (~3 percent).
Although the replacement fuel goal is production based, production
is closely linked to consumption. On the vehicle side, a similar period
of lead-time is typically required to make a significant impact on U.S.
fuel consumption patterns. This is because it takes more than 25 years
to turn over the U.S. fleet of in-use vehicles. According to the 25th
Edition of the Transportation Energy Data Book (TEDB 25, U.S. DOE and
Oak Ridge National Laboratory, ORNL-6974, 2006), after 30 years,
approximately 93 percent of the 1990 model year vehicles are projected
to be retired, and slightly less than 96 percent of the 1990 model year
light trucks will have been scrapped. The median lifetime for 1990 cars
is now 16.9 years, and 15.5 years for 1990 light trucks. While the
truck numbers are relatively consistent (compared to 1970 and 1980
model years), the car numbers have increased substantially (from 11.5
years in 1970 and 12.5 years in 1980).
The effects of this can be seen by a U.S. vehicle population of 226
million in 2003, with annual new light-duty vehicle sales of
approximately 16.5-17 million/year (or approximately equal to 7 percent
of the size of the in-use fleet). Thus, any replacement fuel or higher
efficiency technology which requires actual replacement of vehicles
must be phased into the U.S. fleet of vehicles over a number of years
to eventually account for a significant portion of in-use vehicles.
(See TEDB, Tables 3.8, 3.9, 4.5, 4.6, and 8.1.) In summary, due to both
lead-times for investments and the time required to turn over nearly
all of the U.S. fleet of vehicles, a significant change in the
utilization of U.S. motor fuel consumption patterns could easily take
two decades.
The Department wishes to remind all interested parties that not all
of the factors influencing the likelihood of achieving this goal are in
the Department's control. Nor are they easy to predict more than 20
years into the future. The level of replacement fuel that actually
materializes could be substantially lower or higher than 30 percent due
to unforeseen and/or uncontrollable events, not the least of which
could be oil prices substantially higher of lower than currently
anticipated.
B. Relevance to the President's Advanced Energy Initiative
The President's initiative establishes a number of targets that are
relevant to the replacement fuel goal proposed in this notice. In the
area of biofuels, the initiative specifically calls for accelerating
research for cellulosic ethanol so that it is practical and cost-
effective by 2012. The ability to produce cellulosic ethanol at a price
that is competitive with conventional fuels is a critical step in
ensuring sufficient supplies of replacement fuels to offset future
growth in transportation motor fuels use. The replacement fuel
production goal of 30 percent in 2030 proposed in this notice assumes
large quantities of cellulosic ethanol will be produced. The initiative
also continues the Administration's hydrogen fuel initiative by funding
research and development to make hydrogen a viable transportation fuel.
The initiative also seeks to offset the growth in transportation
motor fuel demand through efforts to develop a variety of more fuel-
efficient light-, medium-, and heavy-duty vehicles. The fuel efficiency
effort includes work underway within DOE's FCVT Program through the
FreedomCAR and Fuel Partnership and the 21st Century Truck Partnership.
A central focus of these efforts is to accelerate the introduction of
high efficiency technologies such as PHEVs and advanced battery-powered
HEVs. Improvements made in these areas will not only help offset
petroleum motor fuels in the short and mid-term, but will pave the way
for fuel efficient fuel cell vehicles in the longer term. As
highlighted elsewhere in this notice, fuel efficiency improvements
indirectly contribute to the achievement of the replacement fuel goal
contained in EPAct 1992 by increasing the percentage of petroleum
replacement provided by a given amount of replacement fuel.
C. Future Analyses
The Department also intends to continue to review the replacement
fuel production goal, as necessary, under the
[[Page 54787]]
Replacement Fuel Program established under section 502(a) of EPAct
1992. As such, should any future review indicate that the replacement
fuel production goal, as modified, is not achievable, the Department
will again institute a rulemaking process to modify the goal to ensure
that it is consistent with the provisions of EPAct 1992.
VII. Opportunity for Public Comment
A. Participation in Rulemaking
Interested persons are invited to participate in this proceeding by
submitting written data, views, or comments with respect to the subject
set forth in this notice and the proposals made by DOE. All parties are
encouraged to provide analysis, data or other supporting documentation
to support their comments as appropriate. The Department encourages the
maximum level of public participation possible in this proceeding.
Individual consumers, representatives of consumer groups,
manufacturers, associations, coalitions, States or other government
entities, and others are encouraged to submit written comments on the
proposal. DOE also encourages interested persons to participate in the
public hearing announced at the beginning of this notice. Whenever
applicable, full supporting rationale, data and detailed analyses
should also be submitted.
B. Written Comment Procedures
Comments on this Notice may be submitted to the Department through
electronic or hardcopy means. DOE would appreciate an electronic copy
of the comments to the extent possible. Electronic copies should be e-
mailed to regulatory_info@afdc.nrel.gov, or may be submitted through
the Federal eRulemaking Portal at http://www.regulations.gov. DOE is
currently using Microsoft Word. If written (hardcopy) comments are
submitted, eight copies must be provided. The outside of the envelope,
and the comments themselves, must be marked with the designation
(Alternative Fuel Transportation Program: Replacement Fuel Goal, NOPR,
RIN 1904-AB67) and must be received by the date specified at the
beginning of this notice. In the event any person wishing to submit
written comments cannot provide eight copies, alternative arrangements
can be made in advance by calling Mr. Dana O'Hara at (202) 586-9171.
All comments received on or before the date specified at the
beginning of this notice of proposed rulemaking and other relevant
information will be considered by DOE before final action is taken on
the proposal. All comments submitted will be made available in the
electronic docket set up for this rulemaking. This docket will be
available on the worldwide Web at the following address: http://www.eere.energy.gov/vehiclesandfuels/epact/private_fleets.shtml.
Pursuant to the provisions of 10 CFR 1004.1, anyone submitting
information or data that he or she believes to be confidential and
exempt by law from public disclosure should submit one complete copy of
the document, as well as seven (7) copies, if possible, from which the
information has been deleted. DOE will make a determination as to the
confidentiality of the information and treat it accordingly.
C. Public Hearing Procedures
The time and place of the public hearing are set forth at the
beginning of this notice. DOE invites any person who has an interest in
this proceeding, or who is a representative of a group or class of
persons that 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 should 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 proceeding 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
he or she may be reached during the day. Each person selected to speak
at the public hearing will be notified as to the approximate time that
he or she will be speaking. A person wishing to speak should bring ten
copies of his or her statement to the hearing. In the event any person
wishing to speak at the hearing cannot meet this requirement,
alternative arrangements can be made in advance by calling Mr. Dana
O'Hara, at (202) 586-9171.
DOE reserves the right to select persons to be heard at the
hearing, 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 DOE 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 may, if time
allows, 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 the 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. The hearing may be canceled in the event no public
testimony has been scheduled in advance.
VIII. Regulatory Review
A. Review Under Executive Order 12866
This proposed regulatory action has been determined to be a
``significant regulatory action'' under Executive Order 12866,
Regulatory Planning and Review, 58 FR 51735 (October 4, 1993).
Accordingly, this action was subject to review under the Executive
Order by the Office of Information and Regulatory Affairs in the Office
of Management and Budget.
B. Review Under Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, requires
preparation of a regulatory flexibility analysis for any rule that is
likely to have a significant economic impact on a substantial number of
small entities. Today's action merely proposes a modified replacement
fuel goal, with no requirements imposed upon any parties. Therefore,
this action would not result in compliance costs on small entities.
Therefore, DOE certifies that today's proposed action will not have a
significant economic impact on a substantial number of small entities,
and accordingly, no initial regulatory flexibility analysis has been
prepared.
C. Review Under the Paperwork Reduction Act
No new recordkeeping requirements, subject to the Paperwork
Reduction Act, 44 U.S.C. 3501, et seq., would be imposed by today's
regulatory action.
D. Review Under the National Environmental Policy Act (NEPA)
10 CFR 1021.102(b) applies the requirements of the National
Environmental Policy Act to ``any DOE action affecting the quality of
the environment of the United States, its territories or possessions.''
Today's
[[Page 54788]]
action, however, is solely the proposal of a modified replacement fuel
goal, and not the imposition of any affirmative duty upon any party.
Therefore, no impact on the quality of the environment flows from
today's action, and thus the Department is not required to conduct an
analysis under NEPA.
The Department did conduct an initial greenhouse gas analysis
utilizing the VISION model, to determine the relative impact between
the proposed goal scenario (AEO 2006 reference case plus program goals)
and the baseline case (AEO 2006 reference case). This analysis can be
found in section V.F. 2 above.
E. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
Civil Justice Reform, 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation; and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by sections 3(a) and 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) Clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftsmanship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
sections 3(a) and 3(b) to determine whether they are met or it is
unreasonable to meet one or more of them. Executive Order 12988 does
not apply to this rulemaking notice because DOE is merely proposing to
modify the replacement fuel goal provided in section 502(b)(2) of EPAct
1992, and is not proposing any regulations that would impose any
requirements on any parties.
F. Review Under Executive Order 13132
Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999),
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have
implications of Federalism. Agencies are required to examine the
constitutional and statutory authority supporting any action that would
limit the policymaking discretion of the States and carefully assess
the necessity for such actions. DOE has examined today's proposed
modification of the replacement fuel goal and has determined that it
would not preempt State law and would not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
G. Review of Impact on State Governments--Economic Impact on States
Section 1(b)(9) of Executive Order 12866, Regulatory Planning and
Review, 58 FR 51735 (September 30, 1993), established the following
principle for agencies to follow in rulemakings: ``Wherever feasible,
agencies shall seek views of appropriate State, local, and tribal
officials before imposing regulatory requirements that might
significantly or uniquely affect those governmental entities. Each
agency shall assess the effects of Federal regulations on State, local,
and tribal governments, including specifically the availability of
resources to carry out those mandates, and seek to minimize those
burdens that uniquely or significantly affect such governmental
entities, consistent with achieving regulatory objectives. In addition,
agencies shall seek to harmonize Federal regulatory actions with
regulated State, local and tribal regulatory and other governmental
functions.''
Because DOE is merely proposing to modify the replacement fuel goal
under section 502(b)(2) of EPAct 1992, no significant impacts upon
State and local governments are anticipated. The position of State
fleets currently covered under the existing EPAct 1992 fleet program is
unchanged by this action.
H. Review of Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995, Public Law
104-4, requires each Federal agency to assess the effects of Federal
regulatory actions on State, local and tribal governments and the
private sector. The Act also requires a Federal agency to develop an
effective process to permit timely input by elected officials on a
proposed ``significant intergovernmental mandate,'' and requires an
agency plan for giving notice and opportunity for timely input to
potentially affected small governments before establishing any
requirements that might significantly or uniquely affect small
governments. On March 18, 1997, DOE published in the Federal Register a
statement of policy on its process for intergovernmental consultation
under the Act (62 FR 12820). The notice of proposed rulemaking
published today does not propose or contain any Federal mandate, so the
requirements of the Unfunded Mandates Reform Act do not apply.
I. Review of Treasury and General Government Appropriations Act, 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999, Public Law 105-277, requires Federal agencies to issue a
Family Policymaking Assessment for any proposed rule that may affect
family well-being. Today's notice of proposed rulemaking would not have
any impact on the autonomy or integrity of the family as an
institution. Accordingly, DOE has concluded that it is not necessary to
prepare a Family Policymaking Assessment.
J. Review of Treasury and General Government Appropriations Act, 2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by the Office of
Management and Budget (OMB). OMB's guidelines were published at 67 FR
8452 (February 22, 2002), and DOE's guidelines were published at 67 FR
62446 (October 7, 2002). DOE has reviewed today's notice under the OMB
and DOE guidelines, and has concluded that it is consistent with
applicable policies in those guidelines.
K. Review Under Executive Order 13175
Under Executive Order 13175, Consultation and Coordination with
Indian Tribal Governments, 65 FR 67249 (November 9, 2000), DOE is
required to consult with Indian tribal officials in development of
regulatory policies that have tribal implications. Today's notice would
not have such implications. Accordingly, Executive Order 13175 does not
apply to this notice.
L. Review Under Executive Order 13211
Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy, Supply,
[[Page 54789]]
Distribution, or Use, 66 FR 28355 (May 22, 2001) requires preparation
and submission to OMB of a Statement of Energy Effects for significant
regulatory actions under Executive Order 12866 that are likely to have
a significant adverse effect on the supply, distribution, or use of
energy. A mere modification to the replacement fuel goal under EPAct
1992 section 502(b)(2) does not require fleets, suppliers of energy, or
distributors of energy to do or to refrain from doing anything.
Consequently, DOE has concluded there is no need for a Statement of
Energy Effects.
IX. Approval by the Office of the Secretary
The issuance of the proposed rule for the replacement fuel goal
modification has been approved by the Office of the Secretary.
Issued in Washington, DC, on September 6, 2006.
Alexander A. Karsner,
Assistant Secretary, Energy Efficiency and Renewable Energy.
List of Subjects in 10 CFR Part 490
Administrative practice and procedure, Energy conservation, Fuel
economy, Gasoline, Motor vehicles, Natural gas, Penalties, Petroleum,
Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Department of Energy
is proposing to amend Chapter II of title 10 of the Code of Federal
Regulations as set forth below:
PART 490--ALTERNATIVE FUEL TRANSPORTATION PROGRAM
1. The authority citation for part 490 is revised to read as
follows:
Authority: 42 U.S.C. 7191 et seq.; 42 U.S.C. 13201, 13211,
13220, 13251 et seq.
2. In Sec. 490.1 of subpart A, paragraph (b) is revised to read as
follows:
Sec. 490.1 Purpose and Scope.
* * * * *
(b) The provisions of this subpart cover:
(1) The definitions applicable throughout this part;
(2) Procedures to obtain an interpretive ruling and to petition for
a generally applicable rule to amend this part; and
(3) The goal of the replacement fuel supply and demand program
established under section 502(a) of the Act (42 U.S.C. 13252(a)).
3. Subpart A is amended by adding Sec. 490.8 to read as follows:
Sec. 490.8 Replacement fuel production goal.
The goal of the replacement fuel supply and demand program
established by section 502(b)(2) of the Act (42 U.S.C. 13252(b)(2)) and
revised by DOE pursuant to section 504(b) of the Act (42 U.S.C.
13254(b)) is to achieve a production capacity of replacement fuels
sufficient to replace, on an energy equivalent basis, at least 30
percent of motor fuel consumption in the United States by the year
2030.
[FR Doc. E6-15516 Filed 9-18-06; 8:45 am]
BILLING CODE 6450-01-P