[Federal Register Volume 73, Number 247 (Tuesday, December 23, 2008)]
[Proposed Rules]
[Pages 78663-78670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30500]
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DEPARTMENT OF ENERGY
10 CFR Part 452
RIN 1904-AB73
Production Incentives for Cellulosic Biofuels; Reverse Auction
Procedures and Standards
AGENCY: Office of Energy Efficiency and Renewable Energy, U.S.
Department of Energy.
ACTION: Notice of proposed rulemaking (NOPR) and opportunity for
comment.
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SUMMARY: The Department of Energy (DOE) today publishes a proposed rule
to establish the procedures and standards for reverse auctions of
production incentives for cellulosic biofuels pursuant to section 942
of the Energy Policy Act of 2005 (EPAct 2005).
DATES: Public comment on this proposed rule will be accepted until
January 22, 2009.
ADDRESSES: You may submit comments, identified by RIN 1904-AB73, by any
of the following methods:
1. Federal eRulemaking Portal: http:/www.regulations.gov. Follow
the instructions for submitting comments.
2. E-mail to [email protected]. Include RIN 1904-AB73 in the
subject line of the e-mail. Please include the full body of your
comments in the text of the message or as an attachment.
3. Mail: Address written comments to James Spaeth, U.S. Department
of Energy, 1617 Cole Blvd., Golden, CO 80401.
If you submit information that you believe to be exempt by law from
public disclosure, you should submit one complete copy, as well as one
copy from which the information claimed to be exempt by law from public
disclosure has been deleted. DOE is responsible for the final
determination with regard to disclosure or nondisclosure of the
information and for treating it accordingly under the DOE Freedom of
Information Act regulations at 10 CFR 1004.11.
Due to potential delays in DOE's receipt and processing of mail
sent through the U.S. Postal Service, we encourage respondents to
submit comments electronically to ensure timely receipt.
You may obtain copies of comments submitted in response to this
notice of proposed rulemaking by contacting Mr. James Spaeth.
FOR FURTHER INFORMATION CONTACT: Mr. James Spaeth, U.S. Department of
Energy, 1617 Cole Blvd., Golden, CO 80401; (303) 275-4771;
[email protected]; or Mr. Edward Myers, Office of the General
Counsel, U.S. Department of Energy, Mailstop GC-72, Room 6B-256, 1000
Independence Avenue, SW., Washington, DC 20585; (202) 586-3397 or
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
II. Discussion of Proposed Rule
III. Regulatory Review
IV. Approval by the Office of the Secretary
I. Background
Section 942 of the Energy Policy Act of 2005, Public Law No. 109-58
(August 8, 2005), requires the Secretary of Energy (Secretary), in
consultation with the Secretary of Agriculture, the Secretary of
Defense, and the Administrator of the Environmental Protection Agency,
to establish an incentive program for the production of cellulosic
biofuels and to implement that program by means of a ``reverse
auction.'' Section 942(a) states that the purposes of the program are
to: ``(1) Accelerate deployment and commercialization of biofuels; (2)
deliver the first 1 billion gallons of annual cellulosic biofuel
production by 2015; (3) ensure biofuels produced after 2015 are cost
competitive with gasoline and diesel; and (4) ensure that small
feedstock producers and rural small businesses are full participants in
the development of the cellulosic biofuels industry.'' In order to
achieve these purposes, the Secretary is to award production incentives
on a per gallon basis to eligible entities by means of a reverse
auction. Under section 942, the first reverse auction is required
annually until the earlier of the first year that annual production of
cellulosic biofuels in the United States reaches 1 billion gallons or
10 years after enactment of EPAct 2005, i.e., August 8, 2015.
However, pursuant to section 202 of the Energy Independence and
Security Act of 2007 (Pub. L. 110-140) (EISA), the Administrator of the
Environmental Protection Agency is required to issue regulations that
implement certain Renewable Fuel Standards, including regulations to
ensure that transportation fuel sold or introduced into commerce in the
United States (except in noncontiguous States or territories), on an
annual average basis, contains at least 1 billion gallons of cellulosic
biofuel by calendar year 2013. Consequently, if the Renewable Fuel
Standard for cellulosic biofuel under EISA is achieved, the last
reverse auction under section 942 of EPAct 2005 would occur in 2013.
II. Discussion of Proposed Rule
A. Overview
The proposed rule would establish procedures for the reverse
auction and standards for making production incentive awards. The
eligibility standards include both pre-auction requirements which must
be met prior to an entity's participation in a reverse auction under
section 942 and several post-auction standards which must be met as a
condition of receiving an award. The post-auction standards are
especially necessary if the Nation is to achieve the long-term goals of
section 942, including delivery of the first one billion gallons of
annual cellulosic biofuel production by 2015, and
[[Page 78664]]
establishment of a biofuels industry after 2015 that is cost
competitive with gasoline and diesel. The post-auction standards are
thus intended to ensure that successful bidders make real and
meaningful progress toward the production of cellulosic biofuels in
commercially significant quantities. DOE believes that as successive
auctions yield more and more production of cellulosic biofuels, the
Nation will move closer to achieving section 942's long-term national
goal of a commercially viable production capability after 2015. In
addition, by setting forth clear pre-auction and post-auction
standards, DOE believes that only the most serious entities will seek
to participate in each reverse auction.
More particularly, section 452.2 of the proposed rule defines key
terms used in the proposed regulations. Section 452.3 describes the
proposed rule's pre-auction eligibility standards, reverse auction
procedures, and post-auction standards that must be met as a condition
of receiving production incentive awards. Section 452.4 sets forth
proposed terms of and limitations on the incentive production awards
that will be issued under the program.
B. Definitions
Section 942 of EPAct 2005 defines ``cellulosic biofuels'' as ``any
fuel that is produced from cellulosic feedstocks.'' 42 U.S.C.
16251(b)(1). Because the incentives authorized by section 942 are based
on a gallon measure, DOE proposes in section 452.2 of the regulations
to refine the statutory definition of ``cellulosic biofuel'' by
requiring the production of a liquid fuel. Additionally, the proposed
rule would define ``cellulosic feedstock'' as any lignocellulosic
feedstock as so defined by EPAct, section 932(a)(2). This serves to
make the proposed rule consistent with and complementary to the
Department's existing Bioenergy Program under section 932 of EPAct and
supports the Renewable Fuels Standard for biofuels originally in EPAct
2005, section 1501, which was enhanced by the Energy Independence and
Security Act of 2007.
As explained above, the goals of section 942 include the delivery
of the first one billion gallons of annual cellulosic biofuel
production by 2015 and establishment of a biofuels industry after 2015
that is cost competitive with gasoline and diesel. In addition, section
942(c)(4)(C) requires that, as a condition of receiving an award,
successful bidders must enter into an agreement with the Secretary to
begin production of cellulosic biofuels not later than three years
after the date of the reverse auction in which they participated.
Taking the aforementioned goals together with the contractual
requirement of section 942(c)(4)(C), DOE proposes to require successful
bidders to commit to production of a commercially significant quantity
within three years of the reverse auction in which they submitted their
successful bid. This requirement is necessary if the Nation is to be
able to achieve delivery of the first one billion gallons of annual
cellulosic biofuel production by 2015 and the establishment of a
commercially viable cellulosic biofuels production capability after
2015. Accordingly, ``Commercially Significant Quantity'' is defined in
the proposed rule as 10 million or greater gallons of cellulosic
biofuels produced in one year. This volume is an estimate of the volume
necessary to operate a commercial scale refinery at approximately 60
percent of nameplate capacity; it is a level adequate to make such a
facility commercially viable and is based on the size (15 to 20 million
gallons per year) of commercial scale corn ethanol biorefineries when
they were first commercialized. See, Funding Opportunity Announcement
(FOA) DE-PS36-06GO96016, ``Commercial Demonstration of an Integrated
Biorefinery System for Production of Liquid Transportation Biofuels,
Biobased Chemicals, Substitutes for Petroleum-based Feedstocks and
Products, and Biomass-based Heat/Power.''
Two other proposed definitions similarly reflect DOE's intent to
assure that the goals of section 942 are achieved. First, ``eligible
biofuels producer'' is defined as a business association, including but
not limited to a sole proprietorship, partnership, joint venture,
corporation, or other business entity that owns and operates, or plans
to own and operate, an eligible cellulosic biofuels production facility
and that meets all other eligibility requirements that are conditions
on the receipt of production incentives under this part. These
eligibility requirements are discussed in Section II.C.
Secondly, DOE proposes to define the term ``eligible cellulosic
biofuels production facility'' as a facility that: (1) Is or will be
located in the United States (including U.S. territories and
possessions); (2) meets or will meet all applicable Federal and State
permitting requirements; and (3) meets any financial criteria
established by the Secretary.
DOE encourages interested persons to submit comments on the above
definitions and to make recommendations regarding other terms that may
warrant definition in the final rule.
C. Reverse Auction Procedures and Eligibility Requirements
Solicitations. Under the proposed rule, the reverse auction process
commences with DOE's issuance of a solicitation. DOE proposes to issue
the solicitation by publication in the Federal Register and by posting
the solicitation on its Web site at http://www.eere.energy.gov no later
than 60 days before the reverse auction. The solicitation would invite
interested persons and businesses to file eligibility submissions, as
described herein, and set forth the terms on which bids will be
accepted.
Eligibility. As discussed above, the proposed rule includes both
pre-auction and post-auction eligibility requirements intended to
ensure that the goals of section 942 are met. The result is a three-
step eligibility process. First, the proposed rule would require
entities seeking to participate in a reverse auction to make a pre-
auction eligibility submission that includes an implementation plan
demonstrating at a minimum that they own and operate, or plan to own
and operate, an eligible cellulosic biofuels production facility;
identifies the site or proposed site for the facility; identifies one
or more proposed sources of financing for the construction or expansion
of the facility; and provides any other additional information
specified in the applicable solicitation. The proposed rule would
require the pre-auction eligibility submission, including the
implementation plan, at a time to be specified in the solicitation
prior to the reverse auction.
Second, the proposed rule would require that, within one year of a
reverse auction, the successful bidder(s) submit a progress report. The
progress report must demonstrate that the successful bidder has
acquired the site where its proposed eligible cellulosic biofuels
production facility will be located; it has obtained secure financing
commitments for the facility's construction or expansion thereof; a
licensed construction/design firm has entered into a written
engineering, procurement, and construction (EPC) agreement for design
and construction of the facility or facility expansion; and the EPC
agreement provides for completion of the facility or facility expansion
such that production operations at the facility are likely to be
completed in order to commence production of commercially significant
quantities within three years of the date of the reverse auction.
[[Page 78665]]
Third, as a condition of receiving the award, the proposed rule
would require the successful bidder, within 90 days after the reverse
auction, to enter into an agreement with the Secretary to begin
production of commercially significant quantities of cellulosic biofuel
in an eligible cellulosic biofuels production facility within three
years of the date of the reverse auction in which it made a successful
bid. The successful bidder must fulfill the terms of its agreement or
else lose the award.
Upon meeting the above three eligibility requirements on a timely
basis, including the timely commencement of production in commercially
significant quantities, the successful bidder will begin to receive
production incentives on a volumetric basis, as per the terms of its
bid. DOE believes that these three eligibility requirements are
necessary in order to make meaningful progress toward the goals of
section 942 and to meet the requirements of a production agreement with
the Secretary, entered into pursuant to section 942(c)(4)(C) of EPAct
2005.
Notification of Eligibility Status. The proposed rule provides that
all parties who make pre-auction eligibility submissions will be
notified by DOE of their eligibility status no later than 15 days
before the relevant reverse auction. Similarly, all successful bidders
will be duly notified of the acceptability of their progress reports
and contract submissions in the second and third steps of eligibility
determinations required under the proposed rule.
Bidding Procedures. The proposed rule provides that following DOE's
review of pre-auction eligibility submissions and notifications of pre-
auction eligibility status, DOE will conduct an electronic reverse
auction through a limited duration single bid auction process open only
to eligible biofuels producers. The proposed rule would require bids to
be submitted electronically to a Web site specified in the
solicitation. The ``open window'' period for bid submissions would
consist of a single continuous, minimum four-hour period for each
auction. Eligible biofuels producers would submit their electronic bids
for production incentives, as specified in DOE's regulations and the
relevant solicitation. Only electronic bids received from pre-auction
eligible biofuels producers during the open window period would be
accepted. The proposed rule would require bids to specify a desired
level of production incentive on a per gallon basis and an estimated
annual production amount in gallons.
Bid Evaluation and Incentive Awards Selection and Notification. The
proposed rule provides that DOE will review the bids received during
the open window period and, within 45 days following the close of the
open window for submission of bids, announce on its Web site and by
direct mail the names of the successful bidders and the terms of their
bids. As required by section 942(c)(4)(A)(iii) of EPAct 2005, the
proposed rule states that DOE will issue awards for the bid production
amounts beginning with the bidder that submitted the bid for the lowest
level of production incentive on a per gallon basis.
DOE encourages comments and recommendations regarding the
advisability of using the above-described electronic single bidding
process or, alternatively, whether the reverse auction would be
improved by use of an open iterative process allowing eligible entities
to submit multiple bids in real-time during the open window period of
the live auction. In particular, DOE is interested in comments as to
whether a transparent iterative process, where several rounds of bids
are posted, would tend to increase economic efficiency by driving down
the production incentives to a market-clearing level. DOE also invites
comments regarding the optimum duration of the open window period for
bidding.
Statutory Priorities. Section 942(e) of EPAct 2005 requires the
Secretary to give award priority to projects that: ``(1) Demonstrate
outstanding potential for local and regional economic development; (2)
include agricultural producers or cooperatives of agricultural
producers as equity partners in the ventures; and (3) have a strategic
agreement in place to fairly reward feedstock suppliers.'' 42 U.S.C.
16251(e).
In order to implement this statutory priority scheme in a manner
that also complies with the statutory requirement to issue awards
beginning with the eligible entity that submits a bid for lowest level
of production incentive, DOE proposes to use the priorities in section
942(e) as a tie-breaker device. Specifically, the proposed rule
provides in section 452.5(c)(3) that in the event of a tie among the
lowest bids, preference will be given to the lowest tied bidder based
on DOE's evaluation of the extent to which of the tied bids best meets
one or more of the three statutory priority standards. In the event
more than one lowest tied bid is found to meet the priority standards
to an equal extent, section 452.5(c)(4) of the proposed rule states
that the award will be distributed equally on a per capita basis among
such bidders.
For example, assume the available funds for section 942 incentive
awards pursuant to congressional appropriations under a solicitation
and reverse auction are $2,500,000; assume further that there are two
pre-qualified lowest bidders, both of which are agricultural producers.
Assume further that these two bidders submitted identical low bids of
$.65 per gallon and the two bidders meet the statutory preference
standards to the same extent; but one of these bidders (Bidder A)
sought an incentive for 10,000,000 gallons of biofuels production,
while the other (Bidder B) sought an incentive for 5,000,000 gallons of
biofuels production. The total production incentive sought under these
circumstances for Bidder A is $6,500,000 and the total production
incentive sought by Bidder B is $3,250,000. Under these assumed facts,
DOE intends to make half of the appropriated funds ($1,250,000)
available for awards to each of the two lowest successful bidders.
Bidder A would not receive a greater award than Bidder B even though
its bid was based on double the production of Bidder B. This approach
would distribute incentives on the widest scale among lowest successful
bidders that qualify for statutory preferences.
DOE invites comments on its proposed method for determining the
successful bid. DOE is particularly interested in knowing whether it
would be advisable to apply the statutory priorities not as a tie
breaker device but as a pre-qualification preference or evaluation
point preference. With respect to the tie breaker approach proposed in
this NOPR, DOE is interested in receiving comments from the public
about the proposed prorating of awards among successful bids that meet
the statutory priority standards. DOE invites public comment on whether
it would be preferable for DOE to make a determination of which bidder
among those who have tied best meets the statutory priority standards,
thereby obviating the need to prorate awards. DOE is concerned that the
auction process could be ``gamed,'' i.e., there is a potential for
undisclosed business or investment interests to ``front'' a bidder that
qualifies for a statutory priority to the disadvantage of other bidders
that do not qualify for a statutory priority. DOE encourages parties to
comment on the likelihood of such abuses and how to best prevent them.
[[Page 78666]]
D. Incentive Award Terms and Limitations
1. Amount of Incentive. As required by section 942(c)(4)(B) of
EPAct 2005 and subject to appropriations, the proposed rule states that
an auction participant selected to receive an award shall receive the
amount of the production incentive on the per gallon basis requested in
the auction solicitation for each gallon produced and sold by the
entity during the first six years of operation.
2. Failure to Commence Production. As discussed above, the proposed
rule provides in section 452.4(d) that a successful bidder must enter
into an agreement with DOE under which the successful bidder agrees to
begin production of cellulosic biofuels not later than three years
after the date of the reverse auction in which it submitted a
successful bid. This is a statutory requirement contained in section
942(c)(4)(C) of EPAct 2005. Section 452.6(b) of the proposed rule
provides that failure of a successful bidder to fulfill the terms of
this agreement by actually commencing production of commercially
significant quantities of cellulosic biofuels within three years after
the date of the auction shall result in the immediate revocation of the
award. DOE invites comments and recommendations concerning the
appropriateness of this remedy.
3. Limitations. Section 942(d) of EPAct 2005 establishes five types
of limitations on the cellulosic biofuels production incentives,
including: (1) A per gallon amount determined by the Secretary may be
awarded during the first four years of the program; (2) a declining per
gallon cap on the incentives awarded over the remaining lifetime of the
program, to be established by the Secretary, so that cellulosic
biofuels produced after the first year of annual cellulosic biofuels
production in the United States in excess of one billion gallons are
cost competitive with gasoline and diesel; (3) not more than 25 percent
of the funds committed within each reverse auction may be awarded to
any one project; (4) not more than $100 million may be awarded in any
one year; and (5) not more than $1 billion may be awarded over the
lifetime of the program.
The proposed rule would implement the foregoing limitations at
section 452.6(c). In particular, the proposed rule provides that the
first of the above limitations shall be $1.00 per gallon during the
first four years of the program. For these purposes, the program would
be deemed to have commenced on the date that the first solicitation for
a reverse auction is issued. DOE's intent is to create an incentive for
early commencement of operations that yield commercially significant
production volumes in the near term. Because the second limitation
described above (the declining per gallon cap) will result in lower
incentive awards in years after the first four years of the program, an
earlier program commencement date should hasten the period during which
the higher limitation ceiling will be available. However, DOE solicits
comments and recommendations regarding its selection of the program
commencement date.
4. Transferability of Awards. The proposed rule would permit awards
to be transferred to successor entities that meet all eligibility
requirements for the program, as set forth in the proposed rule, and
enter into an agreement with the Secretary to commence production
within three years of the date of the reverse auction. DOE encourages
interested persons to submit comments and recommendations regarding
these proposed transferability restrictions. In addition, DOE requests
comments regarding any other transfer-related issues. For example,
should awards (including the right to the awards and the underlying
obligation to commence production within three years of the auction) be
transferable at all? If the awards should be transferable, should the
awards be transferable prior to the time that production commences?
Should the awards be transferable to entities not engaged in the
production of cellulosic biofuels, i.e., should DOE permit the creation
of a securitized interest and secondary market in production incentive
awards, or should DOE (as proposed in this NOPR) only permit entities
actually engaged in cellulosic ethanol production to receive the
awards?
III. Regulatory Review
A. Executive Order 12866
Today's proposed rule has been determined to be a significant
regulatory action under Executive Order 12866, ``Regulatory Planning
and Review,'' 58 FR 51735 (October 4, 1993). Accordingly, this action
was subject to review under that Executive Order by the Office of
Information and Regulatory Affairs of the Office of Management and
Budget (OMB).
B. National Environmental Policy Act
DOE has determined that this proposed rule is covered under the
Categorical Exclusion found in the DOE's National Environmental Policy
Act (NEPA) regulations at paragraph A6 of Appendix A to Subpart D, 10
CFR Part 1021, which applies to rulemakings that are strictly
procedural. DOE notes that the procedures proposed in this NOPR do not
afford DOE discretion to determine whether or how a facility will be
constructed or operated. DOE's prescribed role under section 942, that
is, awarding production incentives to the lowest bidder in a reverse
auction, is strictly procedural. Accordingly, neither an environmental
assessment nor an environmental impact statement is required for the
proposed rule or for an award that DOE gives or proposes to give to a
successful bidder. If DOE subsequently proposes to take any additional
actions with respect to successful bidders, separate from the award of
funds under section 942 of EPAct 2005, DOE will separately evaluate the
need for NEPA review of those new proposed actions.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis for any rule
that by law must be proposed for public comment, unless the agency
certifies that the rule, if promulgated, will not have a significant
economic impact on a substantial number of small entities. As required
by Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process (68 FR 7990). DOE has made its
procedures and policies available on the Office of General Counsel's
Web site: http://www.gc.doe.gov.
DOE has reviewed today's proposed rule under the provisions of the
Regulatory Flexibility Act and the procedures and policies published on
February 19, 2003. The proposed rule will only affect biofuels
producers if they choose to participate in the reverse auction.
Moreover, the proposed rule would provide an economic benefit without
imposing any regulatory requirements on producers of cellulosic
biofuels. On the basis of the foregoing, DOE certifies that this
proposed rule would not have a significant economic impact on a
substantial number of small entities. Accordingly, DOE has not prepared
a regulatory flexibility analysis for this rulemaking. This
certification and supporting statement of factual basis will be
provided to the Chief Counsel for Advocacy of the Small
[[Page 78667]]
Business Administration pursuant to 5 U.S.C. 605(b).
D. Paperwork Reduction Act
Proposed section 452.4(a) provides that entities that intend to
participate in a reverse auction must file a pre-auction eligibility
submission. The pre-auction eligibility submission must contain certain
information, including an implementation plan, as described above. This
information will be used by DOE to determine if an entity that files a
pre-auction eligibility submission will be accepted to participate in
the reverse auction.
In addition, proposed section 452.4(c) provides that a bidder must
submit a progress report. The progress report must contain the
additional information described above. DOE will use this information
to evaluate the bidder's progress in the production of cellulosic
biofuels. DOE has submitted this collection of information to the
Office of Management and Budget for approval pursuant to the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the procedures
implementing that Act, 5 CFR 1320.1 et seq.
DOE estimates that the annual reporting and recordkeeping burden
for this collection of information will be 30 hours per year (10
bidders x 3 hours) at a total annual cost of $2250 (10 bidders x $225
per auction). Burden means the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a federal agency. An agency
may not conduct or sponsor, and a person is not required to respond to
a collection of information unless it displays a currently valid OMB
control number.
Interested parties are invited to submit comments to OMB addressed
to: Department of Energy Desk Officer, Office of Information and
Regulatory Affairs, OMB, 725 17th Street, NW., Washington, DC 20503.
Persons submitting comments to OMB also are requested to send a copy to
the DOE contact person at the address given in the ADDRESSES section of
this notice. OMB is particularly interested in comments on (1) The
necessity of the proposed information collection requirements,
including whether the information will have practical utility; (2) the
accuracy of DOE's estimates of the burden; (3) ways to enhance the
quality, utility, and clarity of the information to be maintained; and
(4) ways to minimize the burden of the requirements on respondents.
E. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally
requires Federal agencies to examine closely the impacts of regulatory
actions on State, local, and tribal governments. Subsection 101(5) of
title I of that law defines a Federal intergovernmental mandate to
include any regulation that would impose upon State, local, or tribal
governments an enforceable duty, except a condition of Federal
assistance or a duty arising from participating in a voluntary federal
program. Title II of that law requires each Federal agency to assess
the effects of Federal regulatory actions on State, local, and tribal
governments, in the aggregate, or to the private sector, other than to
the extent such actions merely incorporate requirements specifically
set forth in a statute. Section 202 of that title requires a Federal
agency to perform a detailed assessment of the anticipated costs and
benefits of any rule that includes a Federal mandate which may result
in costs to State, local, or tribal governments, or to the private
sector, of $100 million or more in any one year (adjusted annually for
inflation). 2 U.S.C. 1532(a) and (b). Section 204 of that title
requires each agency that proposes a rule containing a significant
Federal intergovernmental mandate to develop an effective process for
obtaining meaningful and timely input from elected officers of State,
local, and tribal governments. 2 U.S.C. 1534.
This proposed rule would not impose a Federal mandate on State,
local, or tribal governments or on the private sector. Accordingly, no
assessment or analysis is required under the Unfunded Mandates Reform
Act of 1995.
F. Treasury and General Government Appropriations Act, 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule that may affect family
wellbeing. The proposed rule 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.
G. Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions. DOE has examined this proposed rule and has
determined that it would not preempt State law and would not have a
substantial direct effect on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government. No further
action is required by Executive Order 13132.
H. Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation; and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by section 3(a), section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) Clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftsmanship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. DOE has completed the
required review and determined that, to the extent permitted by law,
the proposed rule meets the relevant standards of Executive Order
12988.
I. Treasury and General Government Appropriations Act, 2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency
[[Page 78668]]
pursuant to general guidelines issued by OMB.
OMB's guidelines were published at 67 FR 8452 (February 22, 2002),
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002).
DOE has reviewed today's proposed rule under the OMB and DOE guidelines
and has concluded that it is consistent with applicable policies in
those guidelines.
J. Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to OMB,
a Statement of Energy Effects for any proposed significant energy
action. A ``significant energy action'' is defined as any action by an
agency that promulgated or is expected to lead to promulgation of a
final rule, and that: (1) Is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any proposed significant energy action,
the agency must give a detailed statement of any adverse effects on
energy supply, distribution, or use should the proposal be implemented,
and of reasonable alternatives to the action and their expected
benefits on energy supply, distribution, and use. Today's regulatory
action would not have a significant adverse effect on the supply,
distribution, or use of energy and is therefore not a significant
energy action. Accordingly, DOE has not prepared a Statement of Energy
Effects.
K. Consultation
Pursuant to section 942(c)(1) of EPAct 2005, DOE will consult with
the Secretary of Agriculture, the Secretary of Defense, and the
Administrator of the Environmental Protection Agency prior to issuing a
final rule.
IV. Approval of the Office of the Secretary
The issuance of this proposed rule has been approved by the Office
of the Secretary.
List of Subjects in 10 CFR Part 452
Fuel, Grant programs, Recordkeeping and reporting requirements,
Renewable energy.
Issued in Washington, DC, on December 11, 2008.
Steven G. Chalk,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable
Energy.
For the reasons stated in the preamble, DOE proposes to amend
chapter II of title 10 of the Code of Federal Regulations by adding a
new part 452 as set forth below:
PART 452--PRODUCTION INCENTIVES FOR CELLULOSIC BIOFUELS
Sec.
452.1 Purpose and scope.
452.2 Definitions.
452.3 Solicitations.
452.4 Eligibility requirements.
452.5 Bidding procedures.
452.6 Incentive award terms and limitations.
Authority: 42 U.S.C. 7101 et seq.; 42 U.S.C. 16251.
Sec. 452.1 Purpose and scope.
(a) This part sets forth the standards, policies, and procedures
that the Department of Energy uses for receiving, evaluating, and
awarding bids in reverse auctions of production incentive payments for
cellulosic biofuels under section 942 of the Energy Policy Act of 2005
(42 U.S.C. 16251).
(b) Part 1024 of chapter X of title 10 of the Code of Federal
Regulations shall not apply to actions taken under this part.
Sec. 452.2 Definitions.
Cellulosic biofuels means any liquid fuel produced from cellulosic
feedstocks.
Cellulosic feedstock means any lignocellulosic feedstock as defined
by EPAct 2005, section 932(a)(2).
Commercially significant quantity means 10 million gallons or more
of cellulosic biofuels produced in one year.
DOE means the U.S. Department of Energy.
Eligible biofuels producer means a business association, including
but not limited to a sole proprietorship, partnership, joint venture,
corporation, or other business entity that owns and operates, or plans
to own and operate, an eligible cellulosic biofuels production facility
and that meets all other eligibility requirements that are conditions
on the receipt of production incentives under this part.
Eligible cellulosic biofuels production facility means a facility--
(1) Located in the United States (including U.S. territories and
possessions);
(2) Which meets all applicable Federal and State permitting
requirements; and
(3) Meets any financial criteria established by the Secretary.
EPAct 2005 means the Energy Policy Act of 2005, Public Law 109-58
(August 8, 2005).
Open window means the period during each reverse auction, as
specified in an associated solicitation, during which DOE accepts bids
for production incentives under this part.
Secretary means the Secretary of Energy.
Sec. 452.3 Solicitations.
The reverse auction process commences with the issuance of a
solicitation by DOE. DOE will publish a solicitation in the Federal
Register and shall post the solicitation on its Web site at http://www.eere.energy.gov no later than 60 days before the bidding in a
reverse auction under this part commences. The solicitation shall:
(a) Invite interested persons and businesses to submit pre-
qualification statements;
(b) Set forth the terms on which bids will be accepted;
(c) Specify the open window for bidding; and
(d) Specify the date by which successful bidders will be required
to file pre-auction eligibility submissions.
Sec. 452.4 Eligibility requirements.
(a) Pre-auction eligibility submissions. (1) Entities that intend
to participate in a reverse auction, within the time period stated in
the relevant solicitation, must file a pre-auction eligibility
submission that provides all information requested in the applicable
solicitation to which it is responding, including an implementation
plan.
(2) Each pre-auction eligibility submission's implementation plan
must, at a minimum:
(i) Demonstrate that the filing party owns and operates or plans to
own and operate an eligible cellulosic biofuels production facility;
(ii) Identify the site or proposed site for the filing party's
eligible cellulosic biofuels production facility; and
(iii) Identify one or more proposed sources of financing for the
construction or expansion of the filing party's eligible cellulosic
biofuels production facility.
(b) Notification of pre-auction eligibility status. DOE shall
notify each entity that files a pre-auction eligibility submission of
its acceptance or rejection no later than 15 days before the reverse
auction for which the submission was made. A DOE decision constitutes
final agency action and is conclusive.
[[Page 78669]]
(c) Progress reports. Within one year after the reverse auction in
which a bidder successfully competed, the bidder must submit a progress
report that includes all additional information required by the
solicitation in which the bidder submitted a successful bid and which
demonstrates that the bidder has:
(1) Acquired the site where its proposed eligible cellulosic
biofuels production facility is or will be located;
(2) Obtained secure financing commitments for the plant or
expansion thereof, as necessary to produce cellulosic biofuels; and
(3) Entered into a written engineering, procurement, and
construction (EPC) contract for design and construction of the eligible
cellulosic biofuels production facility; such EPC contract must provide
for completion of construction of the eligible cellulosic biofuels
production facility such that operations at the plant or plant
expansion will commence within three years of the reverse auction in
which the bidder successfully competed.
(d) Production agreement. Within 90 days after submission of its
progress report under paragraph (c) of this section, the successful
bidder must enter into an agreement with DOE which requires the bidder
to begin production of commercially significant quantities of
cellulosic biofuels, at the plant or plant expansion that was the
subject of the relevant bid, not later than three years from the date
of the acceptance of the successful bid.
(e) Confirmation of continuing eligibility. After receiving the
progress report under paragraph (c) of this section and upon
confirmation by DOE that the successful bidder has entered into a
production agreement with DOE, as described in paragraph (d) of this
section, DOE will confirm to the bidder that it continues to meet the
eligibility requirements of this part.
(f) Contractual condition on eligibility. (1) As a condition of the
receipt of an award under this part, a successful bidder in a reverse
auction under this part must demonstrate that it has fulfilled the
terms of its production agreement entered into with DOE pursuant to
paragraph (d) of this section.
(2) As a condition of continuing to receive production incentive
payments under this part, a bidder that has entered into a production
agreement with DOE must annually submit to DOE, by a commercially
reasonable date specified by DOE, verification of the bidder's
production volumes for the prior calendar year. Within 90 days of the
submission of such verification, DOE shall notify the successful bidder
whether the bidder has fulfilled the terms of the production agreement
and shall make payment of any production incentive awards then
outstanding for the one year period covered by the verified data
submission.
Sec. 452.5 Bidding procedures.
DOE shall conduct an electronic reverse auction through a limited
duration single bid per producer auction process open only to pre-
auction eligible cellulosic biofuels producers. The following
procedures shall be used:
(a) DOE shall accept only electronic bids received from pre-auction
eligible cellulosic biofuels producers during the open window
established in the solicitation. The open window shall consist of a
single continuous period of at least four hours for each auction.
(b) Bids must specify:
(1) A desired level of production incentive on a per gallon basis.
(2) An estimated annual production amount in gallons.
(3) All bids will be confidential until 45 days after the close of
the window for submission of bids for the reverse auction.
(c) Bid evaluation and incentive awards selection.
(1) After DOE evaluates the bids received during the open window,
it shall, within 45 days following the close of the open window for
submission of bids for the reverse auction, announce on DOE's Web site
and by direct mail the names of the successful bidders and the terms of
their bids.
(2) DOE shall issue awards for the bid production amounts beginning
with the bidder that submitted the bid for the lowest level of
production incentive on a per gallon basis.
(3) In the event of a tie among the lowest bids, preference will be
given to the lowest tied bidder based on DOE's evaluation of the extent
to which the tied bids meet the following criteria:
(i) Demonstrates outstanding potential for local and regional
economic development;
(ii) Includes agricultural producers or cooperatives of
agricultural producers as equity partners in the ventures; and
(iii) Has a strategic agreement in place to fairly reward feedstock
suppliers.
(4) In the event more than one lowest tied bid equally meets the
standards in paragraph (c)(3) of this section, the award will be
distributed equally on a per capita basis among those lowest tied
bidders meeting the standards.
Sec. 452.6 Incentive award terms and limitations.
(a) Amount of incentive. Subject to the availability of
appropriated funds and the limitations in paragraph (c) of this
section, an eligible cellulosic biofuels producer selected to receive
an award shall receive the amount of the production incentive on the
per gallon basis requested in the auction solicitation for each gallon
produced and sold by the entity during the first six years of operation
of its eligible cellulosic biofuels production facility.
(b) Failure to commence production. Failure by an eligible
cellulosic biofuels producer that made a successful bid to commence
production of cellulosic biofuels, at the eligible cellulosic biofuels
production facility that was the subject of the successful bid, by the
end of the third year after the close of submission of the open window
of bids for the reverse auction in which it submitted a successful bid,
shall result in immediate revocation of DOE's award to that producer.
(c) Incentive award limitations. The following limits shall apply
to awards of cellulosic biofuels production incentives under this part:
(1) During the first four years after the commencement of the
program, the incentive shall be limited to $1.00 per gallon. For
purposes of this limitation, the program shall be deemed to have
commenced on the date that the first solicitation for a reverse auction
is issued;
(2) A per gallon cap over the remaining lifetime of the program of
$.95 per gallon provided that--
(i) This cap shall be lowered by $.05 each year commencing the
first year after annual cellulosic biofuels production in the United
States exceeds one billion gallons;
(ii) Not more than 25 percent of the funds committed within each
reverse auction shall be awarded to any single project;
(iii) Not more than $100 million in production incentives shall be
awarded in any one calendar year; and
(iv) Not more than $1 billion in production incentives shall be
awarded over the lifetime of the program.
(d) Participation in subsequent auctions. A successful bidder in a
reverse auction under this part may participate in subsequent reverse
auctions if the incentives sought will assist the addition of plant
production capacity for the eligible cellulosic biofuels production
facility associated with its previously successful bid.
(e) Transferability of awards. A production incentive award under
this part may be transferred to a successor entity that meets all
eligibility requirements of this part, including execution of an
agreement with DOE to commence production of cellulosic
[[Page 78670]]
biofuels in commercially significant quantities not later than three
years of the date that bidding closes on the reverse auction in which
the predecessor entity submitted a successful bid.
[FR Doc. E8-30500 Filed 12-22-08; 8:45 am]
BILLING CODE 6450-01-P