[Federal Register Volume 75, Number 73 (Friday, April 16, 2010)]
[Proposed Rules]
[Pages 20085-20109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8278]
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DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
7 CFR Part 4288
RIN 0570-AA75
Subpart B--Advanced Biofuel Payment Program
AGENCY: Rural Business-Cooperative Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Business-Cooperative Service (Agency) is proposing
to establish a payment program for producers of advanced biofuels to
support existing advanced biofuel production and to encourage new
production of advanced biofuels. The Agency would enter into contracts
with advanced biofuel producers to pay such producers for the
production of eligible advanced biofuels. To be eligible for payments,
advanced biofuels must be produced from renewable biomass, excluding
corn kernel starch, in a biorefinery located in the United States.
DATES: Written comments on the proposed rule must be received on or
before May 17, 2010. The comment period for the information collection
under the Paperwork Reduction Act of 1995 continues through June 15,
2010.
ADDRESSES: You may submit comments to this proposed rule by any of the
following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Submit written comments via the U.S. Postal Service
to the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW.,
Washington, DC 20250-0742.
Hand Delivery/Courier: Submit written comments via Federal
Express Mail or other courier service requiring a street address to the
Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington,
DC 20024.
All written comments will be available for public inspection during
regular work hours at the 300 7th Street, SW., 7th Floor address listed
above.
FOR FURTHER INFORMATION CONTACT: Diane Berger, USDA Rural Development,
1400 Independence Ave., SW., Room 6865, STOP 3225, Washington, DC
20250. Telephone: (202) 260-1508. Fax: (202) 720-2213. E-mail:
[email protected].
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been reviewed under Executive Order (EO)
12866 and has been determined to be economically significant by the
Office of Management and Budget. The EO defines a ``significant
regulatory action'' as one that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect, in a material way, the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or Tribal governments or
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in this EO.
The Agency conducted a benefit-cost analysis to fulfill the
requirements of Executive Order 12866. The Agency has identified
potential benefits to the advanced biofuel producer and to the Agency.
While unable to quantify any costs or benefits associated with this
rulemaking, the Agency believes that the overall effect of the rule may
be beneficial.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public
Law 104-4 establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector. Under section 202 of the UMRA,
Rural Development generally must prepare a written statement, including
a cost-benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local, or Tribal
governments, in the aggregate, or to the private sector of $100 million
or more in any one year. When such a statement is needed for a rule,
section 205 of UMRA generally requires Rural Development to identify
and consider a reasonable number of
[[Page 20086]]
regulatory alternatives and adopt the least costly, more cost-
effective, or least burdensome alternative that achieves the objectives
of the rule.
This proposed rule contains no Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local, and
Tribal governments or the private sector. Thus, this rule is not
subject to the requirements of sections 202 and 205 of the UMRA.
National Environmental Policy Act/Environmental Impact Statement
This renewable energy program under Title IX of the 2008 Farm Bill
has been operated on an interim basis through the issuance of a Notice
of Contract Proposal (NOCP). During this initial round of applications,
the Agency conducted National Environmental Policy Act (NEPA) reviews
on each individual application for funding. No significant
environmental impacts were reported. As expected, these applications
were not from any concentrated grouping of applicant facilities, but
represented a wide variety of applicants for a diverse range of
renewable energy proposals. Taken collectively, the applications show
no potential for significant adverse cumulative effects.
The Agency is preparing a programmatic environmental assessment
(PEA), pursuant to 7 CFR subpart 1940-G, to analyze the environmental
effects to air, water, and biotic resources; land use; historic and
cultural resources, and greenhouse gas emissions affected by the
Section 9005 proposed rule. The purpose of the PEA is to assess the
overall environmental impacts of the programs related to the
Congressional goals of advancing biofuels production for the purposes
of energy independence and green house gas emission reductions. The
impact analyses will be national in scope but will draw upon site-
specific data from advanced biofuel facilities funded under Sections
9003, 9004, and 9005 NOFA's (or NOCP's) for FY 2008 and/or FY 2009 as
reasonable assumptions for the types of facilities, feedstocks, and
impacts likely to be funded under the proposed rulemaking for FY 2010-
FY 2012. Site-specific NEPA documents prepared for those facilities
funded under Sections 9003 and 9004 in FY 2008 and/or 2009 will be
utilized, as well, to forecast likely impacts under the proposed rules.
Qualitative analyses of likely programmatic impacts beyond the FY 2012
program expiration date will be provided, as appropriate. The draft PEA
will be made available to the public for comment on the USDA Rural
Business Service's Web site by May 3, 2010, and all comments will be
addressed as part of any revision of the PEA, or prior to the
publication of any Finding of No Significant Impact (FONSI).
Executive Order 12988, Civil Justice Reform
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this rule: (1) All State and
local laws and regulations that are in conflict with this rule will be
preempted; (2) no retroactive effect will be given this rule; and (3)
administrative proceedings in accordance with the regulations of the
Department of Agriculture's National Appeals Division (7 CFR part 11)
must be exhausted before bringing suit in court challenging action
taken under this rule unless those regulations specifically allow
bringing suit at an earlier time.
Executive Order 13132, Federalism
It has been determined, under Executive Order 13132, Federalism,
that this proposed rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in the proposed rule will not have a substantial
direct effect on States or their political subdivisions or on the
distribution of power and responsibilities among the various government
levels.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally
requires an agency to prepare a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements under the
Administrative Procedure Act or any other statute unless the agency
certifies that the rule will not have an economically significant
impact on a substantial number of small entities. Small entities
include small businesses, small organizations, and small governmental
jurisdictions.
In compliance with the RFA, Rural Development has determined that
this action will not have an economically significant impact on a
substantial number of small entities. Rural Development made this
determination based on the fact that this regulation only impacts those
who choose to participate in the Program. Small entity applicants will
not be affected to a greater extent than large entity applicants.
The entities affected by the Program are biorefineries. The Agency
received approximately 180 applications in fiscal year 2009, and
approved 160 entities for participation. In assessing whether these
entities are small businesses, the Agency notes that there is no unique
Small Business Administration (SBA) definition for biorefineries,
because biorefineries are found in a number of North American Industry
Classification System (NAICS) codes. The majority of existing
biorefineries produce biodiesel, and for these biorefineries, the small
business definition is 1,000 employees. Based on Agency experience and
in-house knowledge of the fiscal year 2009 applicants and using 1,000
employees as the definition of small business, the majority of
biorefineries applying in fiscal year 2009 would be classified as small
businesses. The Agency expects this to continue to be true as the
Program continues.
The average cost to a biorefinery to participate in the Program is
estimated to be approximately $500. This cost is not expected to impose
an economically significant impact on these small entities. Because of
this minimal cost, the Agency does not believe that the cost of
applying and participating will dissuade a small business from seeking
to participate in this program. Further, biorefineries are expected to
realize more in payments than in costs for participating in the
program. Thus, participating biorefineries will be able to recoup this
expense, although small biorefineries are likely to take longer to
recoup the expense because they will be producing less advanced
biofuel. Also, this regulation only affects biorefineries that choose
to participate in the program. Lastly, the program is open to all
eligible producers.
Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
The regulatory impact analysis conducted for this proposed rule
meets the requirements for Actions Concerning Regulations That
Significantly Affect Energy Supply Distribution and Use, Executive
Order No. 13211, which states that an agency undertaking regulatory
actions related to energy supply, distribution, or use is to prepare a
Statement of Energy Effects. This analysis does not find that this
proposed rule will have any adverse impacts on energy supply,
distribution or use.
Section 9005 payments will be made to existing biorefineries. These
payments will likely increase quantities of renewable energy produced
from domestic feedstock. While an increase in advanced biofuels will
likely displace the use of petroleum-based liquid and gaseous fuels,
the volumes supported by
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this program will not disrupt U.S. energy supply. On the contrary,
increased biofuels from domestic feedstock will diversify
transportation fuels in the U.S. and replace petroleum imports.
Replacing imported petroleum with biofuels from domestic feedstock will
reduce the risk of potential disruption in supply or spike in prices
from relying on foreign oil imports. The reduction in risks will
improve our energy security and stabilize our energy supply.
In sum, because the regulatory impacts analysis does not find that
this proposed rule will have any adverse impacts on energy supply,
distribution or use, a Statement of Energy Effects was not prepared.
Executive Order 12372, Intergovernmental Review of Federal Programs
This Program is not subject to Executive Order 12372,
Intergovernmental Review of Federal Programs, because the Program
involves no construction and therefore no mitigation or planning
activities are involved.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This executive order imposes requirements on Rural Development in
the development of regulatory policies that have Tribal implications or
preempt Tribal laws. Rural Development has determined that the proposed
rule does not have a substantial direct effect on one or more Indian
Tribe(s) or on either the relationship or the distribution of powers
and responsibilities between the Federal Government and the Indian
Tribes. Thus, the proposed rule is not subject to the requirements of
Executive Order 13175.
Programs Affected
This Program is listed in the Catalog of Federal Domestic
Assistance under Number 10.867.
Paperwork Reduction Act
The information collection requirements contained in the Notice of
Funding Availability for the Section 9005 Advanced Biofuels Payments
Program published on June 12, 2009, were approved by the Office of
Management and Budget under emergency clearance procedures and assigned
OMB Control Number 0570-0057. As noted in the June 12, 2009 notice, the
Agency sought emergency clearance to comply with the time frames
mandated by a Presidential Memorandum in order to implement the Program
as quickly as possible, and that providing for public comment under the
normal procedure would unduly delay the provision of benefits
associated with this Program and be contrary to the public interest.
Now, however, in accordance with the Paperwork Reduction Act of 1995,
the Agency is seeking OMB approval for three years of the reporting and
recordkeeping requirements contained in this proposed rule and hereby
opens a 60-day public comment period.
Title: Advanced Biofuels Producer Payment Program.
Type of Request: New collection.
Abstract: Rural Development is providing payments to eligible
producers of advanced biofuels to support and ensure an expanding
production of advanced biofuels.
The collection of information is vital to Rural Development to make
wise decisions regarding the eligibility of advanced biofuels producers
and their products in order to ensure compliance with the provisions of
this Program and to ensure that the payments are made to eligible
producers and advanced biofuels and is necessary in order to implement
this Program.
Advanced biofuel producers seeking to participate in the Program
must enroll in the Program by submitting an Agency-approved
application. This application requires the advanced biofuel producer to
provide information on the applicant; the applicant's biorefineries at
which the advanced biofuels are produced, including location and
quantities produced and a description of the business; the types and
quantities of renewable biomass feedstock being used to produce the
advanced biofuels; and the amount of eligible advanced biofuels
produced at each biorefinery in the 12 months prior to the first day of
the sign-up period for the fiscal year for which the annual application
is being submitted. Applicants are also required to submit
documentation to support the amount of eligible advanced biofuels
reported in the form and to certify the information provided, including
that the advanced biofuels are eligible advanced biofuels and that the
renewable biomass feedstock used to produce the advanced biofuels are
eligible biomass feedstock. Applicants must submit authoritative
evidence documenting production of advanced biofuels, and the
eligibility of the advanced biofuels.
The information contained in the application will be used by the
Agency to determine whether the advanced biofuel producer is eligible
to participate in the Program and whether the advanced biofuel being
produced is eligible for payments under the Program. The same Agency-
approved application form will also be used by the Agency to sign-up
advance biofuel producers in subsequent fiscal years (FY) and to obtain
information to help determine payment rates.
Before being accepted into the Program, the advanced biofuel
producer must also furnish the Agency all required certifications, as
applicable, and furnish access to the advanced biofuel producer's
records required by the Agency to verify compliance with program
provisions. The required certifications, which must be completed and
provided by an accredited independent third party, depend on the type
of biofuel produced.
Once an advanced biofuel producer has been approved to participate
in the Program, the producer and the Agency enter into an Agency-
approved contract. All contracts will be reviewed at least annually to
ensure compliance with the contract and ensure the integrity of the
program.
Once the contract is signed, the advanced biofuel producer will
submit, preferably on a quarterly basis, an Agency-approved form to
request payment. This form requires the advanced biofuel producer to
provide information on the types and quantities of advanced biofuels
produced in each quarter and on the types and quantities of renewable
feedstock used to produce those advanced biofuels. In addition, the
advanced biofuel producer will report cumulative production of advanced
biofuels and the use of renewable biomass feedstock for all advanced
biofuel biorefineries. The information for each advanced biofuel
biorefinery is to be provided cumulatively and on an individual
advanced biofuel biorefinery basis. This information is required in
order for the Agency to determine the payments to be made to the
eligible producers each quarter and to track the quantities of advanced
feedstock for which payments have been made.
The following estimates are based on the average over the first
three years the Program is in place.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 0.8 hour per response.
Respondents: Advanced biofuels producers.
Estimated Number of Respondents: 302.
Estimated Number of Responses per Respondent: 9.4.
Estimated Number of Responses: 2,842.
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Estimated Total Annual Burden (hours) on Respondents: 2,273.
Copies of this information collection may be obtained from Cheryl
Thompson, Regulations and Paperwork Management Branch, Support Services
Division, U.S. Department of Agriculture, Rural Development, STOP 0742,
1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling
(202) 692-0043.
Comments
Comments are invited on: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
Rural Development, including whether the information will have
practical utility; (b) the accuracy of the new Rural Development
estimate of the burden of the proposed collection of information,
including the validity of the methodology and assumptions used; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on those who are to respond, including through the use of
appropriate automated, electronic, mechanical, or other technological
collection techniques or other forms of information technology.
Comments may be sent to Cheryl Thompson, Regulations and Paperwork
Management Branch, U.S. Department of Agriculture, Rural Development,
STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All
responses to this proposed rule will be summarized and included in the
request for OMB approval. All comments will also become a matter of
public record.
E-Government Act Compliance
Rural Development is committed to complying with the E-Government
Act, to promote the use of the Internet and other information
technologies to provide increased opportunities for citizen access to
Government information and services, and for other purposes.
I. Background
Rural Development administers a multitude of Federal programs
benefitting rural America, ranging from housing and community
facilities to infrastructure and business development. Its mission is
to increase economic opportunity and improve the quality of life in
rural communities by providing leadership, infrastructure, venture
capital, and technical support that can support rural communities,
helping them prosper.
To achieve its mission, Rural Development provides financial
support (including direct loans, grants, and loan guarantees) and
technical assistance to help enhance the quality of life and provide a
support for economic development in rural areas. The Food,
Conservation, and Energy Act of 2008 (2008 Farm Bill) contains several
sections under which Rural Development will provide financial
assistance for the production and use of biofuels. This proposed rule
addresses Section 9005 of the 2008 Farm Bill, which authorizes the
Secretary of Agriculture to ``make payments to eligible producers to
support and ensure an expanding production of advanced biofuels'' by
entering into contracts for the production of advanced biofuels to both
support existing advanced biofuel production and encourage new
production.
Section 9005 of the Farm Security and Rural Investment Act of 2002
as added by the Food Conservation and Energy Act of 2008, authorizes
the Secretary of Agriculture to ``make payments to eligible producers
to support and ensure an expanding production of advanced biofuels'' by
entering into contracts for the production of advanced biofuels to both
support existing advanced biofuel production and encourage new
production. To be eligible for payments, advanced biofuels produced
must be derived from renewable biomass, excluding corn kernel starch,
in a biorefinery located in the United States.
Under the proposed rule, the sign-up period for new and current
producers of advanced biofuels is October 1 to October 31 of the fiscal
year for which payment is sought, unless otherwise announced by the
Agency in a Federal Register notice. An executed contract remains valid
until the end of the program (September 30, 2012), or terminated by
either the Agency or participating party. All contracts will be
reviewed at least annually to ensure compliance with the contract and
ensure the integrity of the program. Applicants will update production
amounts annually during the solicitation process.
Payment rates under the proposed rule are determined based on the
size of the facility and whether production is ``base'' or
``incremental.'' Base production is defined as a facility's existing
level of production; any subsequent production that is in excess of the
base amount is considered to be incremental. Under the proposed rule,
to encourage more production of advanced biofuels, the payment rate for
the incremental production will be five times greater than the payment
rate for base production. The proposed rule provides that the base and
incremental rates will be calculated on a British Thermal Unit basis.
The Agency is also considering an approach to offer different
payment rates based on their lifecycle greenhouse gas (GHG) emissions.
This approach would offer a significantly higher payment rate for
biofuels that are demonstrated to significantly reduce GHGs emissions
relative to the conventional fuels that they replace; biofuels that do
not demonstrate significant GHG reductions would receive the lower
payment rate. For example, in the case of liquid biofuels, fuels that
have been certified as advanced biofuels, cellulosic biofuels, or bio-
based diesel under EPA's Renewable Fuels Standard achieve lifecycle GHG
reductions of at least 50 percent relative to conventional liquid fuels
and so would qualify for the higher payment rate. We request comments
on this approach as an alternative to the proposed rule text, including
comments on how such an alternative should be drafted to best address
the goal of lifecycle GHG reductions. Please provide analytical support
for comments provided in response to this request.
Because there is no limit on the number of advanced biofuels
producers that enter this program, the actual payment rates will be
determined based on the number of eligible applications received each
year.
Consistent with the authorizing legislation, the goal of this
program is to encourage the expansion of the country's production
capacity of advanced biofuels. To help meet this goal, the program
would be open to all producers of advanced biofuels given the
difficulty of determining the types or technologies that will
ultimately create the foundation of this industry at this early stage
of development of the industry. In addition, given that the biofuels
industry is very capital intensive, the Agency is proposing multi-year
contracts to enable advanced biofuels producers the assurance of a
multi-year revenue stream. This approach is consistent with the goal of
creating a stable industry. Finally, the Agency is proposing a two-
tiered payment approach under which incremental production is paid at a
significantly higher rate than base production in order to balance the
interests of encouraging new production while providing stability to
existing production. With respect to all of these points, the Agency
welcomes feedback from the public during the comment period.
The Agency views this program in conjunction with its other
renewable
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energy programs in the context of an overall Federal renewable energy
strategy. The goal of this strategy is to foster the development of a
strong, expanding, and economically sustainable group of renewable
energy industries in the United States to supply an increasing share of
the country's energy needs. The success of these industries will depend
on their ability to produce energy sources that meet the demands of the
country's energy markets. These markets are driven by a number of
factors including the price of oil and other fossil fuels, developments
in technologies, the acceptance of the public, the capacity of
distribution systems, and the impact of government regulation such as
the renewable fuels standard.
The Advanced Biofuels Payment Program is one part of Rural
Development's contribution to the Department of Agriculture's renewable
energy efforts that support the overall Federal renewable energy
strategy. This program provides stability and incentives to maintain
and grow the advanced biofuels industry.
The development of the advanced biofuels industry will take a
strong partnership between the Federal government and the private
sector to generate the capital needed to construct and operate these
facilities to meet the future energy needs of the country. This program
provides funding stability that will assist these advanced biofuels
producers to attract the private capital they need to continue
expansion of this industry.
II. Discussion of Proposed Rule for Advanced Biofuel Payment Program
On June 12, 2009, the Agency published a Notice, Contract Proposal
for Payments to Eligible Advanced Biofuel Producers [74 FR 27998].
(This Notice is referred to in this preamble as the Section 9005 NOCP.)
While the Section 9005 NOCP provided requirements for participation in
Fiscal Year 2009, most of its provisions are applicable to Fiscal Year
2010 and beyond and, thus, have been carried forward into this proposed
rule.
This section describes the Advanced Biofuel Payment Program, first
by presenting a brief overview of how the Program will work, then by
the overall organization of the Program, and lastly by presenting a
section-by-section description. In developing this Program, the Agency
relied heavily on the predecessor Bioenergy Program (7 CFR Part 1424),
although there are some differences between the two programs. For
example, under the Bioenergy Program, payments were made for the
production of ethanol and biodiesel from eligible commodities
including, but not limited to, barley; corn; grain sorghum; oats; rice;
wheat; soybeans; switchgrass; fats, oils, and greases (including
recycled fats, oils and greases) derived from an agricultural product;
and any animal byproduct. In contrast, under the Section 9005 Program,
payments will be made to producers of advanced biofuel and biogas,
which is fuel derived from renewable biomass, other than corn kernel
starch (cellulose, hemicellulose, or lignin, sugar and starch; waste
material, including crop residue, other vegetative waste material,
animal waste, food waste, and yard waste; vegetable oil and animal fat,
etc.). Another example is that the Section 9005 Program requires the
biorefinery to have at least 51 percent U.S. ownership; the Bioenergy
Program did not have this requirement.
By relying on this predecessor program, the Agency believes that
the proposed Advanced Biofuel Payment Program is within the guidance of
its authorizing statute and will facilitate participation from those
producers already familiar with the Bioenergy Program.
A. Program Overview
As noted earlier in this preamble, the Section 9005 Program will
make payments to eligible producers for the production of eligible
advanced biofuels. Participation in the Program requires advanced
biofuel producers to follow the following three steps:
1. Producers submit form RD 4288-1, ``Advanced Biofuel Payment
Program Annual Application'' along with applicable permits,
registrations etc. Currently, the application form requires the
producer to complete the base amount and project the incremental amount
for the fiscal year.
2. If the producer meets the eligibility requirements, a contract
(form RD 4288-2) will be issued. An executed contract remains valid
until the end of the program (September 30, 2012), or until terminated
by either the Agency or participating party. The Agency will review all
contracts at least annually to ensure compliance with the contract and
ensure the integrity of the program.
3. The producer must submit form RD 4288-3, ``Advanced Biofuel
Payment Program--Payment Request'' with documentation verifying the
actual amount produced.
Therefore, each fiscal year, current, participating producers
complete steps 1 and 3 above. If a producer is new to the Program, the
producer must complete steps 1 through 3. The sign-up period for both
new and current participating producers is October 1 to October 31 of
the fiscal year for which payment is sought, unless otherwise announced
by the Agency in a Federal Register notice.
Each fiscal year, the Agency will notify each eligible applicant of
the program payment the applicant may expect to receive for that fiscal
year. A producer will only be paid for the advanced biofuels identified
in the application submitted during the sign-up period and which are
actually produced during the fiscal year. If the producer starts
producing a new advanced biofuel or changes the type of advanced
biofuel during the fiscal year, the producer will not receive any
payments for those new advanced biofuels. However, during each sign-up
period, a producer can identify new advanced biofuels and production
levels compared to the previous year.
To ensure compliance with the Section 9005, the Agency will conduct
a number of oversight and monitoring activities, including site visits
and records review. By conducting such activities, the Agency will be
verifying production and feedstock eligibility, the portion of the
advanced biofuel eligible for payment, and certificate of analyses
records. If the Agency discovers any misrepresentation or fraud by a
producer, it may suspend payment, terminate the contract, or debar the
producer from participation in any Federal program.
B. Overall Organization of the Advanced Biofuel Payments Program Rule
The proposed Advanced Biofuel Payment Program is divided into four
sets of sections, which are described in the following paragraphs.
General Provisions. This set of sections in Subpart B of Part 4288
of title 7 of the CFR (hereafter referred to as Subpart B) contains
provisions general to the administration of the Advanced Biofuel
Payment Program. It covers the purpose and scope of the Program (Sec.
4288.101), definitions (Sec. 4288.102), reviews and appeals (Sec.
4288.103), compliance with other Federal, State, and local laws (Sec.
4288.104), oversight and monitoring (Sec. 4288.105), forms,
regulations, and instructions (Sec. 4288.106), and exception authority
(Sec. 4288.107).
Eligibility Provisions. This set of sections of Subpart B contains
provisions addressing the eligibility of applicants (Sec. 4288.110)
and biofuels (Sec. 4288.111), and the notification process that the
Agency will use to inform the public of its eligibility
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decisions (Sec. 4288.112). This section concludes with requirements
for records required to document payment requests (Sec. 4288.113).
Enrollment Provisions. This set of sections contains the provisions
associated with enrolling in the Program (Sec. 4288.120) and on
contracts and their termination (Sec. 4288.121). Figure 1 illustrates
the basic steps for initially enrolling in the Program.
Payment Provisions. This set of sections contains the provisions
associated with applying for and receiving payments under the Program.
Figure 2 illustrates the basic steps for payment applications. Section
4288.130 covers payment application provisions, while Sec. Sec.
4288.131 through 4288.136 cover procedures associated with determining
payment amounts and adjustments, payment liability, refunds and
interest payments, unauthorized assistance and offsets, and remedies.
This section concludes with provisions addressing the succession and
transfer of ownership of biorefineries participating in the Program
(Sec. 4288.137).
There is no competition for available funding. Assistance is based
on total requests received and funding available. Each eligible
applicant will receive a pro rata share of available funding based on
the applicant's production compared to the total production for all
eligible applicants.
BILLING CODE 3410-XY-P
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[GRAPHIC] [TIFF OMITTED] TP16AP10.000
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[GRAPHIC] [TIFF OMITTED] TP16AP10.001
BILLING CODE 3410-XY-C
C. Discussion of Sections
Section A--General Provisions
Purpose and Scope (Sec. 4288.101)
Paragraph (a) defines the purpose, which is to support and ensure
an expanding production of advanced biofuels by providing payments to
eligible advanced biofuel producers. Paragraph (b) identifies the
scope, which lays out the terms and conditions an advanced biofuel
producer must meet in order to obtain payments from the Agency for
eligible advanced biofuel production under the Advanced Biofuel Payment
Program. This section also states that additional terms and conditions
may be provided in the Program contract and the payment agreement
prescribed by the Agency.
Definitions (Sec. 4288.102)
This section presents the definitions used in this subpart B,
including terms that are specified in the 2008 Farm Bill. The
definitions contained in this section are found in the Section 9005
NOCP, with revisions to the definitions of base production and
incremental production necessary to implement the proposed rule and to
the definitions for larger producers and smaller producers. As
discussed below, there are four key definitions associated with this
rule.
Two of the key definitions are advanced biofuel and renewable
biomass. Both terms are defined in the Food, Conservation, and Energy
Act of 2008.
With regard to the definition of advanced biofuel, the Agency notes
that the statute requires payments to be made for ``advanced
biofuels,'' which are fuels derived from renewable biomass
[[Page 20093]]
(other than corn kernel starch). The Agency understands the definition
to apply to solid, liquid, or gaseous fuels that are final products and
not to intermediary components or products that are used in the
production of the final advanced biofuel product. Therefore, the Agency
is proposing that this rulemaking only applies to producers of solid,
liquid, or gaseous advanced biofuels that are final products and not to
producers of intermediary components and products used in the
production of a final advanced biofuel product (see Sec.
4288.111(a)(2) and (3)).
In addition, in order to be eligible for payment under this
Program, the Agency is proposing that if the advanced biofuel is used
on-site, the producer must be able to verify the quantity of advanced
biofuel being consumed on-site using an Agency-approved system (see
Sec. 4288.111(a)(4)).
While many advanced biofuels are used in the transportation market,
there are other end use markets for advanced biofuels. For example,
biogas can be used for the production of electricity and replacing
petroleum-based gases, such as natural gas, for both mobile and
stationary uses. It is the Agency's intent to make the Section 9005
program available to all eligible advanced biofuels, regardless of the
end use market. The Agency, however, does expect that the majority of
advanced biofuels participating in this program would be used as
transportation fuels, thus furthering the goals of the Renewable Fuels
Standard mandate. Lastly, the Agency notes that the Section 9005
program is different from the REAP because the REAP program is used to
construct facilities, which may include biorefineries, and to make
energy efficiency improvements, while the Section 9005 program will
make payments to producers for the advanced biofuels produced.
With regard to the definition of renewable biomass, the Agency
notes that the definition of renewable biomass provides for a wide
range of feedstock to be used in the production of advanced biofuel.
For example, sunflower seeds can be used to produce long-chain
hydrocarbons; algae and jatropha can be used to produce biodiesel;
forest mass can be used to produce alcohols and methanol; and
switchgrass can be used to produce ethanol. The only feedstock
specifically excluded from the statutory definition of advanced
biofuels is corn kernel starch. Further, the Agency points out that
both second generation (biochemical) advanced biofuels and third
generation (thermochemical) advanced biofuels are eligible for
participation in the Program.
The third and fourth key definitions are base production and
incremental production. As discussed later in this preamble, the Agency
is proposing that payments be made based on both a biorefinery's
existing level of production and for increases above the biorefinery's
existing level of production. This requires the Agency to define a
biorefinery's ``existing level of production.'' This is referred to in
the rule as the biorefinery's base production.
Base production. For the Section 9005 rule, the Agency is proposing
to determine an advanced biofuel biorefinery's base production using
one of two methods, as applicable, which are the same as two of the
methods found in the Section 9005 (NOCP). These two methods are:
If the biorefinery has been in existence for 12 months or
more prior to the first day of the sign-up period for the fiscal year
(i.e., October 1) for which payment under this Program is sought, the
biorefinery's base production for the sign-up fiscal year will be equal
to the quantity of eligible advanced biofuel produced at the advanced
biofuel biorefinery in the 12 months immediately preceding the first
day of the sign-up period. For example, for Fiscal Year 2011, the base
production for a biorefinery would be the quantity of eligible advanced
biofuel produced from October 1, 2009, through September 30, 2010.
If the biorefinery has been in existence less than 12
months prior to the first day of the sign-up period for the fiscal year
for which payment under this Program is sought or if the biorefinery
will begin producing on or after October 1 of the sign-up fiscal year,
the biorefinery's base production for the sign-up fiscal year will be
equal to the quantity projected to be produced by the biorefinery's
producer as reported in Form RD 4288-1, ``Advanced Biofuel Payment
Program Annual Application.''
Incremental production. The fourth key definition is incremental
production. As proposed, a biorefinery's incremental production is the
quantity of eligible advanced biofuel produced at the biorefinery that
is in excess of that biorefinery's base production. However, for a
biorefinery that has been in existence less than 12 months before
October 1 of the sign-up fiscal year or that begins producing eligible
advanced biofuels on or after October 1 of the sign-up fiscal year,
there is no incremental production; all production for that sign-up
fiscal year will be considered base production and the biorefinery's
producer would receive payment at the base production payment rate for
that fiscal year. In subsequent fiscal years, the advance biofuel
producer for such a biorefinery would be eligible for both base and
incremental production payments.
Lastly, the Agency is revising the definitions for ``larger
producers'' and ``smaller producers'' to clarify the calculation of the
amount of advanced biofuel a producer is producing. In the NOCP, the
determination of whether a producer was a larger producer or smaller
producer did not address the situation where a producer owned more than
one advanced biofuel biorefinery. In making this calculation, the
Agency will determine the refining capacity of an advanced biofuel
producer based on the production of advanced biofuel at all of the
advanced biofuel biorefineries in which the producer has 50 percent or
more ownership.
Review or Appeal Rights (Sec. 4288.103)
This section provides the legal basis for a person to seek a review
of an adverse Agency decision under this subpart. When the Agency makes
an adverse decision, a person may seek a review of an Agency decision
or appeal to the National Appeals Division in accordance with 7 CFR
part 11. This provision is the same as found in the Section 9005 NOCP.
Compliance With Other Laws and Regulations (Sec. 4288.104)
This section states that advanced biofuel producers must comply
with other applicable Federal, State, and local laws including, but not
limited to, Equal Employment Opportunity Act, Title VI of the Civil
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, The
Age Discrimination Act of 1975, the American with Disabilities Act of
1990, and 7 CFR part 1901, subpart E. This includes collection and
maintenance of race, sex, and national origin data of the recipient's
employee.
Furthermore, producers must comply with equal opportunity and
nondiscriminatory requirements in accordance with 7 CFR 15d. The Agency
will not discriminate against an applicant on the basis of race, color,
religion, national origin, sex, sexual orientation, marital status,
familial status, disability, or age (provided that the applicant has
the capacity to contract); on the basis of whether all or part of the
applicant's income derives from public assistance program; or whether
the applicant has in good faith exercised any right under the Consumer
Credit Protection Act.
[[Page 20094]]
Oversight and Monitoring (Sec. 4288.105)
The provisions in this section, which are substantively the same as
found in the Section 9005 NOCP, cover how the Agency will enforce the
terms of this Program, including site visits (which the Agency will
conduct as frequently as necessary to ensure compliance with the
provisions of this Program) and examination of records. In order to
ensure the integrity of the Program, the Agency reserves the right to
verify, as frequently as necessary, all payment applications and
subsequent payments made under paragraph (a) of this section.
Enforcement of this Program includes, but will not necessarily be
limited to, three key Program aspects as described below. The Agency is
focusing on these three areas because they are key to ensuring the
integrity of the Program.
Production and feedstock verification. The Agency will
review producer records to verify the type and amount of biofuel
produced and the type and amount of feedstocks used.
Blending verification. The Agency will review the
producer's certificates of analysis and feedstock records to verify the
portion of the advanced biofuel eligible for payment.
Certificate of Analysis. The Agency will review the
producer records to ensure that each certificate of analysis has been
issued by a qualified, independent third party.
This section also states that all eligible advanced biofuel
producers participating in the Program must make available to the
Agency for inspection, at one place and at a reasonable time, all
books, papers, records, contracts, scale tickets, settlement sheets,
invoices, written price quotations, and other documents related to the
Program that is within the control of the producer (Sec. 4288.105(b)).
In addition, these records must be maintained by the producer for not
less than three years from each Program payment date. These records are
required in order for the Agency to ensure compliance with the Program
and that all payments are made appropriately.
Forms, Regulations, and Instructions (Sec. 4288.106)
This section states that all forms, regulations, instructions, and
other materials related to the Program may be obtained from any USDA
Rural Development State Office, Rural Energy Coordinator, and the USDA
Rural Development Web site at: http://www.rurdev.usda.gov/rbs/busp/9005Biofuels.htm. The Agency notes that this link may change in the
future.
Exception Authority (Sec. 4288.107)
This section identifies that condition under which the
Administrator may make, on a case-by-case basis, exceptions to any
requirement or provision of this subpart. The proposed provisions are
the same as found in 7 CFR 4280, subpart B, for the renewable energy
systems and energy efficiency improvements program.
Section B--Eligibility
This section addresses the eligibility requirements for advanced
biofuel producers and their biofuels, notifications of the Agency's
eligibility determinations, and payment record requirements.
Applicant Eligibility (Sec. 4288.110)
This section identifies the requirements for applicant eligibility
and conditions under which an otherwise eligible advanced biofuel
producer may be found to be ineligible for participation in the
Program. The requirements for applicant eligibility in this section are
the same as those in the Section 9005 NOCP, except that the Agency has
added provisions to clarify the eligibility of applicants that are
subsidiaries and has clarified that public bodies and educational
institutions are not eligible for this Program.
To be eligible for this Program, an applicant must be an eligible
producer, which is defined as a producer of advanced biofuels (Sec.
4288.102). This is a statutory requirement. Any applicant that
generates biogas from an anaerobic digester, including those located on
a farm, would be eligible if all other program requirements are met.
Lastly, applicants will be required to meet the following
citizenship requirements, as applicable:
If the applicant is an individual, the applicant must be a
citizen or national of the United States (U.S.), the Republic of Palau,
the Federated States of Micronesia, the Republic of the Marshall
Islands, or American Samoa, or must reside in the U.S. after legal
admittance for permanent residence.
If the applicant is an entity other than an individual,
the applicant must be at least 51 percent owned by persons who are
either citizens or nationals of the United States (U.S.), the Republic
of Palau, the Federated States of Micronesia, the Republic of the
Marshall Islands, or American Samoa, or legally admitted permanent
residents residing in the U.S. However, this requirement is not
applicable if the entity is composed solely of members of an immediate
family. In such instances, if at least one of the immediate family
members is a citizen or national as described above, then the entity is
eligible to participate in this program. Immediate family is being
defined as: Individuals who are closely related by blood, marriage, or
adoption, or live within the same household, such as a spouse, domestic
partner, parent, child, brother, sister, aunt, uncle, grandparent,
grandchild, niece, or nephew.
If the applicant is a subsidiary, the parent entity or the
entities that have an ownership in that applicant must also be at least
51 percent owned by persons who are either citizens or nationals of the
United States (U.S), the Republic of Palau, the Federated States of
Micronesia, the Republic of the Marshall Islands, or American Samoa, or
legally admitted permanent residents residing in the U.S.
If an applicant does not meet the citizenship requirement, the
applicant is not eligible for this program. While this citizenship
requirement is not required by statute, it is consistent with the
Agency's other programs. As found in Section III of this preamble, the
Agency is seeking comment on this requirement.
To make its determination as to whether or not the applicant is
eligible for participation, the Agency will review the application to
determine if the information submitted is sufficient to determine if
the applicant is eligible. If the Agency determines that the submitted
information is insufficient to make this determination, the Agency will
notify the applicant, in writing, as soon as practicable after receipt
of the application, as to what additional information is needed and a
timeframe in which to provide the information (Sec. 4288.110(b)). The
Agency is requesting that applicants supply information in a timely
fashion in order to setup the payment amounts each fiscal year and to
estimate expected payments to each participating producer.
If the additional information is received within the specified
timeframe, the Agency will determine the applicant's eligibility for
the upcoming fiscal year. However, if the additional information is not
received by the Agency within the specified timeframe, the Agency will
not consider the applicant any further for the year in which the
applicant has submitted its application form. Such an applicant may
reapply to participate in the Program during the next sign-up period.
As noted above, this section also contains three conditions under
which the Agency may determine that an advanced biofuel producer is no
longer eligible to participate in the Advanced
[[Page 20095]]
Biofuel Payment Program (Sec. 4288.110(c)). These conditions, which
are the same as in the Section 9005 NOCP, are necessary for ensuring
the integrity of the Program. The three conditions are where the
producer:
Refuses to allow the Agency to verify any information
provided by the producer under this subpart, including information for
determining applicant eligibility, advanced biofuel eligibility, and
application payments;
Fails to meet any of the conditions set out in this
subpart, in the contract, or in other Program documents; or
Fails to comply with all applicable Federal, State, or
local laws.
Biofuel Eligibility (Sec. 4288.111)
This section identifies four criteria that a biofuel must meet in
order to be eligible for payment under this Program (Sec.
4288.111(a)). These four criteria notwithstanding, flared gases would
not be eligible for payments under this Program.
First. The biofuel must meet the definition of advanced biofuel. As
noted earlier in this preamble, this requirement is based on the
authorizing statute that payments are to be made for advanced biofuel.
Second. As discussed earlier in this preamble under the discussion
on the definition of advanced biofuel, the biofuel must be a solid,
liquid, or gaseous advanced biofuel.
Third. The biofuel must be a final product and not an intermediary
component or product to the biofuel. As stated earlier in this
preamble, the Agency understands the definition of advanced biofuel
applies to solid, liquid, and gaseous fuels that are final products and
not to intermediary components or products used in the production of
the final advanced biofuel product. We do not believe it is consistent
with the Program to pay for both the intermediary components or
products and the end product; this would be essentially paying twice
for the same advanced biofuel. Therefore, the Agency is proposing that
only advanced biofuels that are final products are eligible for payment
under this Program, and that production of intermediary components and
products are not eligible for payment under this Program. This
provision was not specifically articulated in the Section 9005 NOCP.
Fourth. As discussed earlier in this preamble under the discussion
on the definition of advanced biofuel, if the advanced biofuel is used
on-site, the producer must be able to verify the quantity of advanced
biofuel being used on-site using an Agency-approved system.
The Agency notes that, as proposed, the biofuel may be produced in
a biorefinery located in either a rural or non-rural area. This is
different from the Section 9005 NOCP, which required that the biofuel
be produced in a biorefinery located in a rural area in order to be
eligible for payment. Lastly, as found in Section III of this preamble,
the Agency is seeking public comment on whether this program should
limit payments to only those eligible advanced biofuels produced at a
biorefinery located in a rural area.
As for when determining applicant eligibility, if the Agency
determines that there is insufficient information provided to determine
if a biofuel is an eligible advanced biofuel, the Agency will notify
the applicant, in writing, as soon as practicable after receipt of the
application, as to what additional information is needed and a
timeframe in which to provide the information (Sec. 4288.111(b)). If
the applicant provides the requested information to the Agency within
the specified timeframe, the Agency will determine the biofuel's
eligibility for the upcoming fiscal year.
If the applicant does not provide the requested information to the
Agency within the specified timeframe, the biofuel will not be eligible
for payment in the upcoming fiscal year. The applicant may elect to
include such biofuels during the next sign-up period. The Agency notes
that determination by the Agency that a biofuel is ineligible or that
information is insufficient to make an eligibility determination does
not affect the status of other biofuels included in the application
form.
Eligibility Notifications (Sec. 4288.112)
This section presents the process that the Agency will use to
notify applicants of its decisions concerning applicant and biofuel
eligibility. It also addresses notifications concerning subsequent
Agency determinations regarding producer and biofuel eligibility.
With regard to applicant eligibility (Sec. 4288.112(a)), if the
Agency determines that an applicant is eligible for participation in
the Program, the Agency will notify the applicant, in writing, as soon
as practicable after receipt of the application and will assign the
applicant a contract number.
If the Agency determines that an applicant or a biofuel is
ineligible (Sec. 4288.112(b)), the Agency will notify the applicant,
in writing, as soon as practicable after receipt of the application,
and will include the reason(s) for the Agency's determination that the
applicant or biofuel was determined to be ineligible.
Lastly, Sec. 4288.112(c) states that the Agency will notify a
producer, in writing, whenever the Agency determines that the producer
or the producer's biofuel(s) are subsequently determined by the Agency
to be ineligible.
Because any finding of ineligibility is an adverse decision, the
applicant/producer, as applicable, would have the right to appeal such
a decision, as provided in Sec. 4288.103.
The Agency notes that the Section 9005 NOCP addressed notifying the
applicant concerning applicant eligibility. The Agency is specifically
including in the proposed rule the notification process concerning
biofuel eligibility and subsequent ineligibility determinations to more
clearly identify its intent to communicate such findings to the
producer.
Payment Record Requirements (Sec. 4288.113)
This section identifies records that an advanced biofuel producer
approved for participation in the Advanced Biofuel Payment Program must
maintain in order to be eligible to receive payments under this
subpart. The records required in the proposed rule are identified in
more detail than those identified in the Section 9005 NOCP, but the
intent in either case is to ensure that sufficient records are
maintained by participating advanced biofuel producers to ensure the
integrity of the Program and to allow the Agency to conduct its
oversight and monitoring responsibilities. These records are:
The type and amount of eligible renewable biomass used in
the production of advanced biofuel;
The quantity of advanced biofuel produced from eligible
renewable biomass at each advanced biofuel biorefinery;
The quantity of eligible renewable biomass used at each
advanced biofuel biorefinery to produce the advanced biofuel; and
All other records required to establish Program
eligibility and compliance.
The advanced biofuel producer is required to maintain these records
for each fiscal year and each fiscal year quarter for each advanced
biofuel biorefinery for which the producer has requested payment under
this Program. As noted earlier, these records must be maintained by the
producer for not less than three years from each Program payment date.
The Agency is proposing these records to be kept because they are
needed by the Agency in order to verify
[[Page 20096]]
that payments made to each producer are in compliance with the
provisions of this subpart.
Section C--Enrollment Provisions
In order to participate in the Advanced Biofuel Payment Program, a
producer of advanced biofuels must be approved by the Agency and enter
into a contract with the Agency. The process for enrolling and
continued participation in the Advanced Biofuel Payment Program is
presented in this subpart. The provisions for enrolling in the Program
(Sec. 4288.120) are consistent with those found in the Section 9005
NOCP. The contract provisions (Sec. 4288.121), while consistent with
the contract identified in the Section 9005 NOCP, are described more
specifically in the proposed rule than in the Section 9005 NOCP.
Enrollment (Sec. 4288.120)
To enroll in the Advanced Biofuel Payment Program, a producer must
submit a completed enrollment application (Form RD 4288-1) to the
Agency. This form requests information on the advanced biofuel
producer; the advanced biofuel biorefineries in which the producer has
50 percent or more ownership and at which the advanced biofuels are
produced, including location and quantities produced; the types and
quantities of renewable biomass feedstock being used to produce the
advanced biofuels; and the amount of eligible advanced biofuels
produced at each biorefinery in the 12 months prior to the first day of
the sign-up period for the fiscal year for which the enrollment
application is being submitted. Applicants are required to submit with
this form documentation to support the amount of eligible advanced
biofuels reported in the form. The form also requires the advanced
biofuel producer to certify the information provided, including that
the advanced biofuels are eligible advanced biofuels and that the
renewable biomass feedstock used to produce the advanced biofuels are
eligible biomass feedstock. The Agency will identify in an annual
Federal Register notice where this form is to be submitted.
All applicants, except those that are individuals, are required to
have a Dun and Bradstreet Universal Numbering System (DUNS) number. The
DUNS number is a nine-digit identification number, which uniquely
identifies business entities. A DUNS number can be obtained at no cost
via a toll-free request line at 1-866-705-5711 or online at http://fedgov.dnb.com/webform.
The first time a producer submits Form RD 4288-1, the Agency will
make its determination as to whether or not the producer is eligible to
participate. If an advanced biofuel producer is determined to be
ineligible, the Agency will notify the producer, in writing, as soon as
practicable after receipt of the application, of its determination.
After the first year a producer is enrolled in the Program, the
producer must submit to the Agency Form RD 4288-1 in each subsequent
sign-up period in order to receive payments for the corresponding
fiscal year (Sec. 4288.120(a)(1)). For example, Producer A's first
year of participation is FY 2010. In order to receive payments in FY
2011, Producer A must submit Form RD 4288-1 during the sign-up period
for FY 2011 in order to be eligible to receive payments during FY 2011.
Eligible advanced biofuel producers may submit Form RD 4288-1
during a fiscal year's sign-up period even if the advanced biofuel
biorefinery is scheduled to start producing advanced biofuel in the
upcoming fiscal year.
If a participating producer fails to submit Form RD 4288-1 during a
fiscal year's applicable sign-up period, the producer's contract will
be terminated and the producer will be ineligible to receive payments
for that fiscal year (Sec. 4288.120(a)(1)). Such a producer must
reapply, and sign a new contract, to participate in the Program for the
next fiscal year.
In addition to the application form, applicants must also submit
the appropriate certifications for the type(s) of advanced biofuels for
which they are seeking payment. These certifications, which must be
completed and provided by an accredited independent third-party, are
those the Agency believes are necessary to ensure that the biofuels
being produced are of sufficient quality for sale and use in the
marketplace. The certifications producers are required to submit, which
are the same as identified in the Section 9005 NOCP (unless otherwise
noted), depend on the type of biofuel produced, as summarized below.
For alcohol, a copy of either the Alcohol Fuel Producers
Permit (TTB F 5110.74) or the registration of Distilled Spirits Plant
(TTB F 5110.41) and Operating Permit (TTB F 5110.25).
For hydrous ethanol, if the advanced biofuel producer is
the hydrous ethanol producer, an affidavit, acceptable to the Agency,
from the distiller stating that the applicable hydrous ethanol produced
is distilled and denatured for fuel use according to ATF requirements,
and that the distiller will not include the applicable ethanol in any
payment requests that the distiller may make under this Program.
For hydrous ethanol, if the advanced biofuel producer is
the distiller that upgrades hydrous ethanol to anhydrous ethyl alcohol,
an affidavit, acceptable to the Agency, from the hydrous ethanol
producer stating that the hydrous ethanol producer will not include the
applicable ethanol in any payment requests that may be made under this
Program.
For biodiesel, biomass-based diesel, and liquid
hydrocarbons derived from biomass, a self-certification by the producer
that the producer, the advanced biofuel biorefinery, and the biofuel
meet the definition of each term as defined in Sec. 4288.102, the
applicable registration requirements under the Energy Independence and
Security Act and the Clean Air Act, the applicable regulations of the
U.S. Environmental Protection Agency and Internal Revenue Service, and
quality requirements per applicable ASTM International standards (e.g.,
ASTM D6751) and commercially acceptable quality standards of the local
market. The advanced biofuel producer shall also provide the Renewable
Identification Number (RIN) for each advanced biofuel and BQ-9000
certification.
For gaseous advanced biofuel, certification that the
biofuel meets commercially acceptable pipeline quality standards of the
local market; that the flow meters used to determine the quantity of
advanced biofuel produced are industry standard and properly calibrated
by a third party professional; and that the readings have been taken by
a qualified individual. The certification provisions for gaseous
advanced biofuel have been modified from those in the Section 9005 NOCP
to include certification associated with the flow meters and the
readings.
In addition, for woody biomass feedstocks, the applicant must
submit documentation that the woody biomass feedstock cannot be used as
a higher value wood-based product.
Participating producers who enroll and project increased advanced
biobased production and all producers enrolling in the program for the
first time must submit with their application documentation to support
their production projections in the enrollment application. Such
documentation may include historical production data, production
capacity of the biorefinery, and evidence of ability to distribute
final product, including distribution networks and contracts for
purchase of final product.
Lastly, applicants will also be required to submit three additional
[[Page 20097]]
forms, which are standard Agency requirements for such financial
assistance. These three forms, which are the same as found in the
Section 9005 NOCP, are submitted once when the applicant first applies
for the Program. These three forms will be submitted, as needed, each
time an applicant re-enrolls in the program. The three forms are:
RD Instruction 1940-Q, Exhibit A-1, ``Certification for
Contracts, Grants and Loans'';
SF-LLL, ``Disclosure of Lobbying Activities''; and
RD 400-4, ``Assurance Agreement''.
Applicants would be required to submit the application form during
the sign-up period, which is October 1 through October 31 of the fiscal
year for which payment under the Advanced Biofuel Payment Program is
sought, unless the Agency otherwise announces in a Federal Register
notice (Sec. 4288.120(b)). For example, for Fiscal Year 2011, the
sign-up period is October 1 through October 31, 2010. As another
illustration, a producer with a new biorefinery that is expected to
become operational in June 2011 must enroll that biorefinery in the
Program during Fiscal Year 2011's sign-up period (i.e., October 1
through October 31, 2010) to be eligible to receive Program payments on
that new production during Fiscal Year 2011. If the producer does not
enroll this biorefinery between October 1 and October 31, 2010, the
producer would have to wait until October 2011 to enroll the
biorefinery to receive payments for Fiscal Year 2012.
Contract (Sec. 4288.121)
If an advanced biofuel producer is determined eligible to receive
payments, the eligible advanced biofuel producer must then enter into a
contract with the Agency using Form RD 4288-2, ``Advanced Biofuel
Payment Program Contract,'' (or successor form(s)) in order to
participate in this Program. The Agency will forward Form RD 4288-2 to
the advanced biofuel producer. The advanced biofuel producer must agree
to the terms and conditions of the contract, sign, date, and return it
to the Agency within the time provided by the Agency.
Once a contract has been signed, it will remain in force through
the end of the contract period unless it is terminated in writing by
the Agency. All contracts will be reviewed at least annually to ensure
compliance with the contract and ensure the integrity of the program.
Contracts may be terminated under any one of the following conditions:
At the mutual agreement of the parties;
In accordance with applicable Program notices and
regulations;
The advanced biofuel producer withdraws from the Program
and so notifies the Agency, in writing;
The advanced biofuel producer fails to submit Form RD
4288-1 during a sign-up period;
The Program is discontinued or not funded;
All of a participating advanced biofuel producer's
advanced biofuel biorefineries no longer exist or no longer produce any
eligible advanced biofuel; or
The Agency determines that the advanced biofuel producer
is ineligible for participation.
Section D--Payment Provisions
This section presents the procedures the Agency will use in making
payments to eligible advanced biofuel producers under the Advanced
Biofuel Payment Program, how the Agency will calculate those payments,
how those payments may be adjusted, including refunds to the Agency.
This subpart also addresses payment liability, unauthorized assistance
and offsets, and succession and loss of control associated with making
payments under the Advanced Biofuel Payment Program.
Payment Applications (Sec. 4288.130)
An advanced biofuel producer participating in the Advanced Biofuel
Payment Program must submit a payment application form (Form RD 4288-3,
``Advanced Biofuel Payment Program Application'' or successor form(s))
to the Agency in order to receive payments under this Program (Sec.
4288.130(a)). The provisions in the section are essentially the same as
found in the Section 9005 NOCP.
Each participating producer is requested to submit payment
applications on a quarterly basis. Along with each payment application,
the producer is required to:
Certify with respect to the accuracy of the information
provided;
Furnish the Agency such certification, and access to such
records, as the Agency considers necessary to verify compliance with
Program provisions; and
Provide documentation, as requested by the Agency, of the
net production of advanced biofuel at all advanced biofuel
biorefineries during the relevant quarters.
As noted above, producers are being requested, but are not being
required, to submit payment applications on a quarterly basis. This
allows a participating producer to submit a payment application that
covers multiple consecutive quarters. For example, after each quarter
has ended, Producer A may submit a payment application for the first
quarter, a second payment application for the second and third
quarters, and a third payment application for the fourth quarter.
Producer B may submit a payment application for the first and second
quarters after the end of the second quarter and a second payment
application for the third and fourth quarters after the end of the
fourth quarter.
The Agency strongly encourages participating producers to submit
payment applications quarterly for several reasons. First, the Agency
does not believe that it is reasonable to have eligible advanced
biofuel producers wait up to a full year to receive their payments when
production occurs throughout the year. Providing payments on a more
frequent basis provides these producers with a more useful income
stream. Second, these producers are likely to be submitting quarterly
tax payments. Providing payments on a quarterly basis would be more
consistent with current accounting activities. Third, receiving payment
applications on a quarterly basis allows the Agency to better manage
its workload and to process applications more efficiently than waiting
until the end of the year.
Upon receipt of a payment application, the Agency will review the
application to determine whether or not it is eligible for payment
(Sec. 4288.130(b)). In making this determination, the Agency will
consider whether the advanced biofuel producer has a valid contract
with the Agency for this Program, whether the biofuel for which payment
is sought is an eligible advanced biofuel under this Program, and the
completeness and accuracy of the calculations provided in the payment
application.
If, in reviewing a payment application, the Agency determines that
additional documentation is required in order for the Agency to
complete its review of the application, the eligible advanced biofuel
producer would be required to submit such additional supporting
documentation as requested by the Agency. For example, a producer
provides with the payment application an internal spreadsheet that they
utilized to track production. In this situation, the Agency may request
the producer to submit sales receipts to verify the numbers reported in
the spreadsheet. If the producer does not provide the requested
information to the
[[Page 20098]]
Agency within the required time period, the Agency will not process the
payment application and, as a result, the producer will not receive
payment for that quarter.
Whenever the Agency determines that a payment application, or any
portion thereof, is ineligible for payment, the Agency will notify the
advanced biofuel producer, in writing, as soon as practicable after
receipt of the payment application and provide the basis for the
Agency's determination of ineligibility (Sec. 4288.130(c)).
Lastly, the Agency will specify where to submit payment
applications in an annual notice published in the Federal Register. The
payment applications must be submitted no later than 4:30 p.m. local
time on the last day of the calendar month following the quarter for
which payment is being requested. Neither complete nor incomplete
applications received after this date and time will be considered,
regardless of the postmark on the application.
Any payment application form received by the Agency after October
31 of the calendar year for the preceding fiscal year will be
ineligible and the Agency will not make payment to the producer. For
example, if Producer A submits a payment application covering the third
and fourth quarters of Fiscal Year 2011 after October 31, 2011, the
producer will not receive any payment for the advanced biofuel produced
in the third and fourth quarters of Fiscal Year 2011. The Agency is
including this provision because it needs to obligate funds for
accounting purposes and for determining the funds that will be carried
over to the next fiscal year for the Program.
In all instances, if the actual deadline for payment applications
falls on a weekend or a Federally-observed holiday, the deadline is the
next Federal business day.
Payment Provisions (Sec. 4288.131)
This section covers basic provisions associated with the
calculation of payment under the Advanced Biofuel Payment Program.
Paragraph (a) addresses how the Agency will determine payment rates,
paragraph (b) addresses how the Agency will establish the value of each
contract; paragraph (c) addresses payment amounts; and paragraph (d)
addresses other payment provisions. The provisions in these paragraphs
are essentially the same as found in the Section 9005 NOCP.
The basics steps in determining payment to producers as addressed
paragraphs (a) through (c) of this section and are outlined below.
These six steps will be performed each fiscal year.
Step 1. Determine the quantity of eligible advanced biofuel subject
to payment each fiscal year, including both base production quantity
and incremental production quantity. This determination will be made
for both smaller producers and larger producers.
Step 2. Determine the British Thermal Unit (BTU) content of each of
the four advanced biofuel quantities determined under Step 1.
Step 3. Determine the amount of funds available for payment for
smaller producers and for larger producers.
Step 4. Determine the payment rates for base production and for
incremental production for both smaller producers and larger producers
based on the results of Steps 2 and 3.
Step 5. Assign expected payments to each producer based on the
results of Step 4 and the base and incremental production in the
application.
Step 6. Make payments to each participating advanced biofuel
producer each quarter.
The following paragraphs address each of these steps in more
detail.
Paragraph (a)(1) of this section addresses the quantity of
production that will be eligible for payment. Using information
submitted in Form RD 4288-1, from each participating advanced biofuel
producer and the information from the previous fiscal year's Form RD
4288-3 from each participating producer, the Agency will determine each
producer's base production and incremental production. The Agency will
make this calculation for both smaller producers and for larger
producers. (The distinction between smaller and larger producers is
based on the requirement in the 2008 Farm Bill that the Agency limit
the amount of funds available to large producers (i.e., those that
produce 150,000,000 or more gallons) to 5 percent of program funds.
Small producers (i.e., those that produce less than 150,000,000
gallons) would receive the remaining funds.) This will result in the
following four quantities being determined:
Base production quantity for smaller producers;
Incremental production quantity for smaller producers;
Base production quantity for larger producers; and
Incremental production quantity for larger producers.
When determining these quantities, the Agency will use the
documentation submitted with the enrollment application to determine
whether the documentation supports the estimated production reported by
the producer. If the Agency determines that the documentation does not
support the estimated production, the Agency may reduce the production
estimates for the purposes of calculating the payment rate. Because a
producer will be paid for its actual production, such an adjustment
does not affect the quantity of production for which the producer will
be paid, but will affect the payment rate. The Agency may adjust a
producer's estimated production in order to avoid the potential
overestimation of production which has led to a program funds remaining
at the end of the fiscal year.
Paragraph (a)(2) of this section addresses advanced biofuels that
are blended with ineligible feedstocks (e.g., fossil gasoline or
methanol, corn kernel starch). In determining the four quantities under
paragraph (a)(1) of this section, if an advanced biofuel is blended
with ineligible feedstocks, only the quantity of advanced biofuel being
produced from eligible feedstocks will be used, as described below, in
determining the payment rates and for which payments will be made. In
other words, it is important to note that only advanced biofuels
eligible for payment under this Program will be included in these
calculations.
Paragraph (a)(3) of this section addresses the conversion of the
base production and the incremental production into BTUs determined
under Sec. 4288.131(a)(1) and (a)(2). The Agency will make these
conversions using factors published by the Energy Information
Administration (or successor organization). If the Energy Information
Administration does not publish such conversion factor for a specific
type of advanced biofuel, the Agency will use a conversion factor
developed by another appropriate entity. If no such conversion factor
exists, the Agency will establish and use a conversion formula as
appropriate until such time as the Energy Information Administration or
other appropriate entity publishes a conversion factor for said
advanced biofuel. The Agency will then calculate the total eligible
BTUs across all eligible applications.
The Agency is converting the production amounts to BTUs in order to
develop a common measure for all types of advanced biofuels that are
eligible for this Program. Previously, almost all biofuels were
liquids, where a measure such as gallons provided a useful and simple
measure. Currently, however, there are many more types of advanced
biofuels that are not liquids (e.g., biogases) where a typical measure
is cubic feet, not gallons. Thus, it is difficult to compare quantities
of the different biofuels being produced based
[[Page 20099]]
on common measures such as gallons and cubic feet. Therefore, the
Agency is proposing to convert all production into the common measure
of BTUs. The Agency believes that this is a reasonable methodology for
comparing biofuels and treats all eligible advanced biofuels and their
producers fairly and equally.
Paragraph (a)(4) addresses the funds that will be available for the
Program. As specified in the statute, ``[o]f the funds provided for
each fiscal year, not more than 5 percent of the funds shall be made
available to eligible producers for production at facilities with a
total refining capacity exceeding 150,000,000 gallons per year.'' Thus,
at least 95 percent of the funds provided each year will be made
available to eligible producers whose total refining capacity is 150
million gallons or less. Keeping these percentages in mind, the Agency
will determine how much money will be available for the Program each
fiscal year for smaller producers (i.e., those whose total refining
capacity is 150 million gallons or less) and how much will be available
for larger producers (i.e., those whose total refining capacity is
greater than 150 million gallons). The authorizing statute provides
both mandatory and discretionary funding for this Program, and allows
for funds to be carried over from one fiscal year to the next.
Therefore, each fiscal year, the Agency will determine how much of
funding is available to make payments, and how much will be available
to smaller producers and to larger producers. The Agency will announce
these amounts each fiscal year in a Federal Register notice.
Paragraph (a)(5) addresses the calculation of payment rates. As
proposed, the Agency would calculate payment rates based on the
quantity of BTUs calculated under paragraph (a)(3) and the amount of
funds available as determined under paragraph (a)(4). The Agency will
calculate a payment rate for base production and a payment rate for
incremental production. Separate rates will be calculated for smaller
producers and larger producers.
In setting these payment rates, the Agency will set the incremental
production rates at a value that is 5 times higher than their
respective base production rates. The Agency is doing this in order to
encourage growth in the advanced biofuel industry. These rates will be
calculated such that all funds allocated for a fiscal year will be
distributed for that fiscal year if base production and incremental
production quantities projected at the beginning of the fiscal year are
met.
Once the Agency has determined the payment rates, it will calculate
a fiscal year value for each eligible producer based on the payment
rates and the base production and incremental production across a
producer's advanced biofuel biorefineries that are identified in Form
RD 4288-1 for that fiscal year (see Sec. 4288.131(b)). This
calculation will take place each fiscal year because the base and
incremental production and available funds will change every year.
After calculating the fiscal year value, the Agency will notify the
producer, in writing, of the estimated payment to the producer for that
fiscal year.
Paragraph (c) addresses payments to eligible advanced biofuel
producers. The Agency will make payments to an eligible advanced
biofuel producer, assuming the availability of funds, based on that
producer's quantity of BTUs produced from eligible advanced biofuels
and the applicable base and incremental production payment rates.
Provided the payment application forms are submitted on a quarterly
basis, these payments will also be made on a quarterly basis. The
Agency will not pay a producer more than the expected payment
established under Sec. 4288.131(b).
Lastly, paragraph (d) of this section addresses six additional
payment provisions, the first three of which are the same as found in
the Section 9005 NOCP.
First. Paragraph (d)(1) states that advanced biofuel producers will
be paid on the basis of the amount of eligible renewable energy content
of the advanced biofuels only if the producer provides sufficient
documentation, including a Certificate of Analysis for the Agency to
determine the eligible renewable energy content for which payment is
being requested, and quantity produced through such documentation as,
but not limited to, records of sale and calibrated flow meter records.
This provision puts producers on notice concerning the need for
sufficient documentation for the Agency to make payments under this
Program.
Second. Paragraph (d)(2) states that the Agency will make payment
to only one eligible advanced biofuel producer per advanced biofuel
biorefinery. This provision is intended to ensure that payment is made
only once for the same biofuel produced at a biorefinery. Where
multiple applications are received for the same biorefinery, the Agency
will make payment to only one of the applicants. For example, if
Producer A and Producer B both submit applications for advanced biofuel
produced at Biorefinery C, the Agency will make only one payment to
either Producer A or Producer B. It is the responsibility of such
advanced biofuel producers to identify to the Agency to whom the
payment will be made. As another example, if Biorefinery D's legal
business structure is a partnership, the Agency will make payment to
only one individual for Biorefinery D. In all cases where there are
multiple owners, it is the owners' responsibility to determine how the
received payment will be split.
Third. Paragraph (d)(3) states that, subject to other provisions of
this section, advanced biofuel producers will be paid any sum due
subject to the requirements and refund provisions of this subpart.
Fourth. Paragraph (d)(4) states that biorefineries signed up for
payments in a fiscal year that either have been in existence less than
12 months prior to that fiscal year or begin production in that fiscal
year (e.g., signed up in October 2010 for Fiscal Year 2011 and begin
production in Fiscal Year 2011) are eligible only for payment at the
base production rate. Such biorefineries become eligible for base and
incremental production payments in subsequent fiscal years. This
provision, not specifically stated in the Section 9005 NOCP, clarifies
how the Agency will make payments to such biorefineries and their
producers.
Fifth. Paragraph (d)(5) states that if an advanced biofuel producer
transfers any production capacity for one biorefinery to another, such
transferred production capacity shall be considered base production for
the biorefinery to which the production was transferred. This provision
is intended to prevent producers from shifting production from one
biorefinery to another and receiving the higher incremental production
payment rate at the biorefinery to which the production was
transferred. In such situations, there is no actual increase in the
quantity of advanced biofuels being produced and thus it would be
inconsistent with the Program's goal to apply the incremental
production payment rate to such transferred production.
Sixth. A producer will only be paid for the advanced biofuels
identified in the application submitted during the sign-up period and
which are actually produced during the fiscal year. If the producer
starts producing a new advanced biofuel or changes the type of advanced
biofuel during the fiscal year, the producer will not receive any
payments for those new advanced biofuels. However, during each sign-up
period, a producer can identify new advanced biofuels and production
levels compared to the previous year.
The Agency notes that paragraph (d)(5) better states its intent
that the corresponding provision in the Section
[[Page 20100]]
9005 NOCP, which stated ``An advanced biofuel biorefinery's base
production cannot be transferred to another advanced biofuel
biorefinery.'' It is not the Agency's intent to prohibit the industry
from moving its production capacity between biorefineries, but to
address how payments will be made for base production and for
incremental production.
Payment Adjustments (Sec. 4288.132)
Under this section, which is the same as found in the Section 9005
NOCP, the Agency will adjust the payments otherwise payable to the
advanced biofuel producer if there is a difference between the amount
actually produced and the amount determined by the Agency to be
eligible for payment. For example, if the Agency finds that it has
underpaid a producer, the Agency will correct the underpayment. The
Agency may have underpaid a producer, for example, by making an
incorrect conversion that underestimates the BTUs for the quantity of
advanced biofuel produced. If, on the other hand, the Agency finds that
it has overpaid a producer, the Agency may collect such overpayments
from the producer. Such overpayments may have occurred, for example,
because the Agency overestimated the BTUs for the quantity of advanced
biofuel produced or because the Agency determines, for example, that an
advanced biofuel originally identified as being eligible is discovered
to have not been eligible for payment. If the Agency determines that
overpayments were made as the result of fraud or other intentional
misrepresentation by a producer, the Agency may seek penalties against
the producer as provided under Sec. 4288.134.
Payment Liability (Sec. 4288.133)
This section, which is the same as found in the Section 9005 NOCP,
states that any payment, or portion thereof, made under this subpart
must be made without regard to questions of title under State law and
without regard to any claim or lien against the advanced biofuel, or
proceeds thereof, in favor of the owner or any other creditor except
agencies of the U.S. Government.
Refunds and Interest Payments (Sec. 4288.134)
Under this section, otherwise eligible producers who are found by
the Agency to be ineligible may be required to refund payments made to
that producer under this Program. If the Agency suspects fraudulent
representation through its oversight and monitoring activities under
Sec. 4288.105(a), it will be referred to the Office of Inspector
General for appropriate action. This section also addresses how
interest on such refunds would be handled. With the exception of the
addition of a provision concerning payments to producers who win an
appeal of an adverse decision, the provisions in this section are the
same as found in the Section 9005 NOCP.
Paragraph (a) of this section identifies the situations that would
result in an otherwise eligible producer becoming an ineligible
producer. These situations are where a producer has:
Made any fraudulent representation; or
Misrepresented any material fact affecting a Program
determination.
The Agency may determine that an advanced biofuel producer is
ineligible for participation in the Program. Such producers may appeal
this determination. If the producer wins this appeal (i.e., the
producer is eligible for participation in the Program), the Agency will
make such appropriate and applicable payments to the producer from any
Program funds that remain from the fiscal year in which the original
Agency adverse decision was made (Sec. 4288.134(b)). The Agency points
out, however, that there may be no funds or insufficient funds from
which to make payment.
Where payments have been made to an entity determined by the Agency
to be ineligible, such payments must be refunded to the Agency (Sec.
4288.134(c)). Such refunds must include interest and any other sums as
may become due including, but not necessarily limited to, any interest,
penalties, and administrative costs as determined appropriate under 31
CFR 901.9.
When a refund is due, the entity must pay it promptly. If the
refund is not paid promptly, the Agency may use all remedies available
to it to collect the refund, including Treasury offset under the Debt
Collection Improvement Act of 1996, financial judgment against the
producer, and referral to the Department of Justice (Sec.
4288.134(d)).
Refund payments that are received late will be assessed a late
payment interest in accordance with provisions and rates as established
by the United States Treasury (Sec. 4288.134(e)). The interest charged
will be established by the United States Treasury and will accrue from
the date such payments were made to the date of repayment. The Agency,
however, may waive the accrual of interest or damages if the Agency
determines that the cause of the erroneous payment was not due to any
action of the advanced biofuel producer.
Lastly, paragraph (f) of this section states that any producer or
person engaged in an act prohibited by this section and any producer or
person receiving payment under this subpart would be jointly and
severally liable for any refund due under this subpart and for related
charges.
Unauthorized Assistance and Offsets (Sec. 4288.135)
This section, which is not found in the Section 9005 NOCP,
addresses the procedures the Agency will use to collect unauthorized
assistance made to advanced biofuel producers (Sec. 4288.135(a)). To
illustrate ``unauthorized assistance,'' consider a producer who
manufactures an advanced biofuel made from the blending of 100 percent
eligible feedstock. This producer applies for the Program and is
determined by the Agency to be eligible to participate. The producer
submits an application request and payment is made by the Agency. After
payment is made, the Agency conducts a site visit at the producer's
biorefinery. During that visit, the Agency finds that the advanced
biofuel for which payment was made was being produced from feedstock of
which only 5 percent is eligible feedstock. Thus, the payment made is
incorrect; it is higher than it should have been and the excess amount
paid constitutes ``unauthorized assistance.''
If the recipient fails to pay the Agency the unauthorized
assistance plus other sums due under this section, the Agency reserves
the right to offset that amount against Program payments (Sec.
4288.135(b)).
As stated in paragraph (a) of this section, the Agency will seek to
collect from recipients all unauthorized assistance made under this
Program. The basic process the Agency will use is summarized below.
First. When the Agency determines that unauthorized assistance has
been made to an advanced biofuel producer under this Program, the
Agency will send a demand letter to the producer. The demand letter
will:
Specify the amount of unauthorized assistance, including
any accrued interest to be repaid, and the standards for imposing
accrued interest;
State the amount of penalties and administrative costs to
be paid, the standards for imposing them and the date on which they
will begin to accrue;
Provide detailed reason(s) why the assistance was
determined to be unauthorized;
State the amount is immediately due and payable to the
Agency;
Describe the rights the producer has for seeking review or
appeal of the
[[Page 20101]]
Agency's determination pursuant to 7 CFR part 11;
Describe the Agency's available remedies regarding
enforced collection, including referral of debt delinquent after due
process for Federal salary, benefit and tax offset under the Department
of Treasury Offset Program; and
Provide an opportunity for the producer to meet with the
Agency and to provide to the Agency facts, figures, written records, or
other information that might refute the Agency's determination.
A producer who receives a demand letter can meet with the Agency to
discuss the letter and will have the opportunity to provide information
to refute the Agency's findings. Because the producer may need
additional time to assemble the necessary documentation, the producer
may request additional time before this meeting occurs. Interest and
other charges will continue to accrue pursuant to the initial demand
letter during any extension period unless the terms of the demand
letter are modified in writing by the Agency.
If the producer agrees with the Agency's determination or will pay
the amount in question, the Agency may allow a reasonable period of
time (usually not to exceed 90 days) for the producer to arrange for
repayment. The amount due will be the unauthorized payments made plus
interest accrued beginning on the date of the demand letter at the
interest rate stipulated until the date paid unless otherwise agreed,
in writing, by the Agency.
In those instances where such producers cannot repay the
unauthorized assistance within a reasonable period of time, the Agency
will convert the unauthorized assistance amount to a loan provided the
following three conditions are met:
The producer did not provide false information;
It would be highly inequitable to require prompt repayment
of the unauthorized assistance; and
Failure to collect the unauthorized assistance immediately
will not adversely affect the Agency's interests.
Such loans will be at the Treasury interest rate in effect on the
date the financial assistance was provided and consistent with the term
length of the promissory note. In all cases, the receivable will be
amortized per a repayment schedule satisfactory to the Agency that has
the producer pay the unauthorized assistance as quickly as possible,
but in no event will the amortization period exceed fifteen (15) years.
The producer will be required to execute a debt instrument to evidence
this receivable, and the best security position practicable in a manner
which will adequately protect the Agency's interest during the
repayment period will be taken as security.
Producers who receive a demand letter may file an appeal according
to the procedures specified in Sec. 4288.103. All appeal provisions
will be concluded before proceeding with further actions.
The Agency will treat any failure by a producer to make payment for
unauthorized assistance as a debt that can be collected by an
Administrative offset, unless written agreements to repay such debt as
an alternative to administrative offset is agreed to between the Agency
and the producer. A producer who wishes to reach a written agreement to
repay the debt as an alternative to administrative offset must submit a
written proposal for repayment of the debt, which must be received by
the Agency within 20 calendar days of the date the notice was delivered
to the debtor. In response, the Agency will notify the debtor in
writing whether the proposed agreement is acceptable. In exercising its
discretion, the Agency will balance the Government's interest in
collecting the debt against fairness to the debtor.
When the Agency receives a debtor's proposal for a repayment
agreement, the offset is stayed until the debtor is notified as to
whether the proposed agreement is acceptable. If a Government payment
will be made before the end of the fiscal year and the review is not
yet completed, the offset will be taken after 30 days, even when a
review is requested. The amount of the debt and interest will be
withheld from payment to the debtor, but not applied against the debt
until the stay expires. If withheld funds are later determined not to
be subject to offset, they will promptly be paid to the debtor without
interest. Administrative offsets will be taken against delinquent
debtors requesting reviews that are pending final determination by the
Review Officer. However, a review and appeal will also include the
adequacy of any proposed written repayment agreement.
Remedies (Sec. 4288.136)
This section, which is different from the provisions found in the
Section 9005 NOCP, identifies the steps the Agency will take in
instances of misrepresentation or fraud by a producer. Such steps are
suspension of payment, contract termination, and debarment from
participation in any Federal program.
Succession and Loss of Control of Biorefineries and Production (Sec.
4288.137)
This section addresses conditions under which transfer of a
biorefinery under an Advanced Biofuel Payment Program contract may be
transferred from one person to another without a loss of payment (Sec.
4288.137(a)). Such a transfer of control provision is common to other
Rural Business-Cooperative Service programs. This section also
addresses the loss of control of a biorefinery (Sec. 4288.137(b)).
Both provisions are the same as found in the Section 9005 NOCP.
An entity who becomes the eligible advanced biofuel producer for a
biorefinery under contract under this subpart must first request
permission from the Agency to succeed to the Program contract. The
Agency may grant this request if the Agency determines that the new
entity is an eligible producer and permitting such succession would
serve the purposes of the Program. In other words, the new entity must
meet the same requirements as the old entity. If appropriate, the
Agency may require the consent of the previous eligible advanced
biofuel producer to such succession.
The Agency will make payments only for eligible advanced biofuels
produced at a biorefinery that is owned or controlled by an eligible
advanced biofuel producer with a valid contract. If payments are made
to an advanced biofuel producer for production at a biorefinery no
longer owned or controlled by said producer or to an otherwise
ineligible advanced biofuel producer, the Agency will demand full
refund of all such payments.
III. Request for Comments
The Agency is requesting comments on the overall program being
proposed. The Agency is especially interested in comments on the
following areas:
1. If entities do not sell the advanced biofuel, but use the
biofuel for internal purposes, should these entities be entitled to
Program payments? If so, how should the on-site usage be verified?
2. Whether the proposed rule is following the intent of the
Program.
3. The appropriateness of the proposed payment rates.
4. Should the program allow entities that do not meet the proposed
citizenship requirements (Sec. 4288.110(a)) of at least 51 percent
domestic ownership to participate, including those entities owned
entirely by immediate family members where only one of the family
members meets the
[[Page 20102]]
citizenship requirements? Please be sure to provide rationale for your
position.
5. Should advanced biofuels produced at biorefineries that are
located in non-rural areas be eligible for payments under the Program?
Please be sure to provide rationale for your position.
6. As proposed, the applicant eligibility requirement for entities
would require the entity to be at least 51 percent owned by persons who
are either U.S. citizens or nationals unless the entity is owned solely
by members of an immediate family. In such instance, if at least one of
the immediate family members is a citizen or national, then the entity
is eligible. The Agency is requesting comment on whether this exception
should require more than one member of the immediate family be a U.S.
citizen or national and, if so, how many or what percentage. Please be
sure to provide rationale for your position.
7. The Agency is considering an approach to offer different payment
rates based on the advanced biofuels' lifecycle greenhouse gas (GHG)
emissions. This approach would offer a significantly higher payment
rate for biofuels that are demonstrated to significantly reduce GHGs
emissions relative to the conventional fuels that they replace;
biofuels that do not demonstrate significant GHG reductions would
receive the lower payment rate. For example, in the case of liquid
biofuels, fuels that have been certified as advanced biofuels,
cellulosic biofuels, or bio-based diesel under EPA's Renewable Fuels
Standard achieve lifecycle GHG reductions of at least 50 percent
relative to conventional liquid fuels and so would qualify for the
higher payment rate. The Agency requests comments on this approach as
an alternative to the proposed rule text, including comments on how
such an alternative should be drafted to best address the goal of
lifecycle GHG reductions. Please provide analytical support for
comments provided in response to this request.
The Agency is particularly interested in the views of program
applicants and interested stakeholders.
Submit comments as indicated in the DATES and ADDRESSES sections.
List of Subjects in 7 CFR Part 4288
Administrative practice and procedure, Energy--advanced biofuel,
Renewable biomass, Reporting and recordkeeping.
For the reasons set forth in the preamble, title 7, Chapter XLII of
the code of Federal Regulations, is proposed to be amended by adding
part 4288 as follows:
CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND UTILITIES SERVICE,
DEPARTMENT OF AGRICULTURE
PART 4288-PAYMENT PROGRAMS
Subpart A [Reserved]
Subpart B-Advanced Biofuel Payments
Section A--General Provisions
Sec.
4288.101 Purpose and scope.
4288.102 Definitions.
4288.103 Review or appeal rights.
4288.104 Compliance with other laws and regulations.
4288.105 Oversight and monitoring.
4288.106 Forms, regulations, and instructions.
4288.107 Exception authority.
4288.108-4288.109 [Reserved]
Section B--Eligibility Provisions
4288.110 Applicant eligibility.
4288.111 Biofuel eligibility.
4288.112 Eligibility notifications.
4288.113 Payment record requirements.
4288.114--4288.119 [Reserved]
Section C-Enrollment Provisions
4288.120 Enrollment.
4288.121 Contract.
4288.122--4288.129 [Reserved]
Section D--Payment Provisions
4288.130 Payment applications.
4288.131 Payment provisions.
4288.132 Payment adjustments.
4288.133 Payment liability.
4288.134 Refunds and interest payments.
4288.135 Unauthorized payments and offsets.
4288.136 Remedies.
4288.137 Succession and loss of control of facilities and
production.
4288.138-4288.200 [Reserved]
Authority: 5 U.S.C. 301.
Section A-General Provisions
Sec. 4288.101 Purpose and scope.
(a) Purpose. The purpose of this subpart is to support and ensure
an expanding production of advanced biofuels by providing payments to
eligible advanced biofuel producers.
(b) Scope. This subpart sets forth, subject to the availability of
funds as provided herein, or as may be limited by law, the terms and
conditions an advanced biofuel producer must meet to obtain payments
under this Program from the United States Department of Agriculture for
eligible advanced biofuel production. Additional terms and conditions
may be set forth in the Program contract and payment agreement
prescribed by the Agency.
Sec. 4288.102 Definitions.
The definitions set forth in this section are applicable for all
purposes of program administration under this subpart.
Advanced biofuel. A fuel that is derived from renewable biomass,
other than corn kernel starch, to include:
(1) Biofuel derived from cellulose, hemicellulose, or lignin;
(2) Biofuel derived from sugar and starch (other than ethanol
derived from corn kernel starch);
(3) Biofuel derived from waste material, including crop residue,
other vegetative waste material, animal waste, food waste, and yard
waste;
(4) Diesel-equivalent fuel derived from renewable biomass,
including vegetable oil and animal fat;
(5) Biogas (including landfill gas and sewage waste treatment gas)
produced through the conversion of organic matter from renewable
biomass;
(6) Butanol or other alcohols produced through the conversion of
organic matter from renewable biomass; or
(7) Other fuel derived from cellulosic biomass.
Advanced biofuel producer. An individual, corporation, company,
foundation, association, labor organization, firm, partnership,
society, joint stock company, group of organizations, or non-profit
entity that produces and sells an advanced biofuel. An entity that
blends or otherwise combines advanced biofuels into a blended biofuel
is not considered an advanced biofuel producer under this Program.
Agency. The Rural Business and Cooperative Service on behalf of the
U.S. Department of Agriculture.
Alcohol. Anhydrous ethyl alcohol manufactured in the United States
and its territories and sold either:
(1) For fuel use, rendered unfit for beverage use, produced at a
biorefinery and in a manner approved by ATF for the production of
alcohol for fuel; or
(2) As denatured alcohol used by blenders and refiners and rendered
unfit for beverage use.
Alcohol producer. An advanced biofuel producer authorized by ATF to
produce alcohol.
ATF. The Bureau of Alcohol, Tobacco, Firearms, and Explosives of
the United States Department of Justice.
Base production. The quantity of eligible advanced biofuels
produced at an advanced biofuel biorefinery as determined by the Agency
under one of the following paragraphs as applicable.
(1) If the biorefinery has been in existence for 12 months or more
prior to the first day of the sign-up period for the
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fiscal year for which payment under this Program is sought, the
biorefinery's base production for each sign-up fiscal year will be
equal to the quantity of eligible advanced biofuel produced at the
advanced biofuel biorefinery in the 12 months immediately preceding the
first day of the sign-up period.
(2) If the biorefinery has been in existence less than 12 months
prior to the first day of the sign-up period for the fiscal year for
which payment under this Program is sought or if the biorefinery will
begin producing on or after October 1 of the sign-up fiscal year, the
biorefinery's base production for the sign-up fiscal year will be equal
to the quantity projected to be produced by the biorefinery's producer
as reported in the enrollment application.
Biodiesel. A mono alkyl ester, manufactured in the United States
and its territories, that meets the requirements of the appropriate
ASTM International standard.
Biofuel. Fuel derived from renewable biomass.
Biorefinery. A facility (including equipment and processes) that
converts renewable biomass into biofuels and biobased products and may
produce electricity.
Certificate of analysis. A document approved by the Agency that
certifies the quality and purity of the advanced biofuel being
produced. The document must be from a qualified, independent third
party.
Contract. An Agency-approved form, signed by the eligible advanced
biofuel producer and the Agency, that defines the terms and conditions
for participating in and receiving payment under this Program.
Eligible advanced biofuel producer. A producer of advanced biofuels
that meets all requirements of Sec. 4288.110 of this subpart.
Eligible renewable biomass. Renewable biomass, as defined in this
section, excluding corn kernel starch.
Eligible renewable energy content. That portion of an advanced
biofuel's energy content derived from eligible renewable biomass
feedstock. The energy content from any portion of the biofuel, whether
from, for example, blending with another fuel or a denaturant, that is
derived from a non-eligible renewable biomass feedstock (e.g., corn
kernel starch) is not eligible for payment under this Program.
Enrollment application. An Agency-approved form submitted by
advanced biofuel producers for participation in this Program.
Ethanol. Anhydrous ethyl alcohol manufactured in the United States
and its territories and sold either
(1) For fuel use, and which has been rendered unfit for beverage
use and produced at a biorefinery approved by the ATF for the
production of ethanol for fuel, or
(2) As denatured ethanol used by blenders and energy refiners,
which has been rendered unfit for beverage use.
Ethanol producer. An advanced biofuel producer authorized by ATF to
produce ethanol.
Flared gas. The burning of unwanted gas through a pipe (also called
a flare). Flaring is a means of disposal used when the operator cannot
transport the gas to market or convert to electricity and cannot use
the gas for any other purpose.
Fiscal Year (FY). A 12-month period beginning each October 1 and
ending September 30 of the following calendar year.
Immediate family. Individuals who are closely related by blood,
marriage, or adoption, or live within the same household, such as a
spouse, domestic partner, parent, child, brother, sister, aunt, uncle,
grandparent, grandchild, niece, or nephew.
Incremental production. The quantity of eligible advanced biofuel
produced at an advanced biofuel biorefinery that is in excess of that
biorefinery's base production, except for advanced biofuel
biorefineries that either have been in existence less than 12 months
prior to October 1 of the sign-up fiscal year or begin producing
eligible advanced biofuels on or after October 1 of the sign-up fiscal
year. For such biorefineries, all production in the sign-up fiscal year
will be considered base production.
Larger producer means an eligible advanced biofuel producer with a
refining capacity exceeding 150,000,000 gallons of advanced biofuel per
year from all of the advanced biofuel facilities in which the producer
has 50% or more ownership.
Payment application. An Agency-approved form submitted by an
eligible advance producer to the Agency in order to receive payment
under this Program.
Quarter. The Federal fiscal time period for any fiscal year as
follows:
(1) 1st Quarter: October 1 through December 31;
(2) 2nd Quarter: January 1 through March 31;
(3) 3rd Quarter: April 1 through June 30; and
(4) 4th Quarter: July 1 through September 30.
Renewable biomass.
(1) Materials, pre-commercial thinnings, or invasive species from
National Forest System land and public lands (as defined in section 103
of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1702))
that:
(i) Are byproducts of preventive treatments that are removed to
reduce hazardous fuels; to reduce or contain disease or insect
infestation; or to restore ecosystem health;
(ii) Would not otherwise be used for higher-value products; and
(iii) Are harvested in accordance with applicable law and land
management plans and the requirements for old-growth maintenance,
restoration, and management direction of paragraphs (e)(2), (e)(3), and
(e)(4) and large-tree retention of paragraph (f) of section 102 of the
Healthy Forests Restoration Act of 2003 (16 U.S.C. 6512); or
(2) Any organic matter that is available on a renewable or
recurring basis from non-Federal land or land belonging to an Indian or
Indian Tribe that is held in trust by the United States or subject to a
restriction against alienation imposed by the United States, including:
(i) Renewable plant material, including feed grains; other
agricultural commodities; other plants and trees; and algae; and
(ii) Waste material, including crop residue; other vegetative waste
material (including wood waste and wood residues); animal waste and
byproducts (including fats, oils, greases, and manure); and food waste
and yard waste.
Sign-up period. The time period during which the Agency will accept
enrollment applications.
Smaller producer. An eligible advanced biofuel producer with a
refining capacity of 150,000,000 gallons or less of advanced biofuel
per year from all of the advanced biofuel facilities in which the
producer has 50% or more ownership.
State. Any of the 50 States of the United States, the Commonwealth
of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands, the Republic of Palau,
the Federated States of Micronesia, and the Republic of the Marshall
Islands.
USDA. The United States Department of Agriculture.
Sec. 4288.103 Review or appeal rights.
A person may seek a review of an Agency decision or appeal to the
National Appeals Division in accordance with 7 CFR part 11 of this
title.
Sec. 4288.104 Compliance with other laws and regulations.
(a) Advanced biofuel producers must comply with other applicable
Federal,
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State, and local laws, including, but not limited to, the Equal
Employment Opportunity Act, Title VI of the Civil Rights Act of 1964,
Section 504 of the Rehabilitation Act of 1973, The Age Discrimination
Act of 1975, the American with Disabilities Act of 1990, and 7 CFR part
1901, subpart E. This includes collection and maintenance of race, sex,
and national origin data of the recipient's employee.
(b) Producers must comply with equal opportunity and
nondiscriminatory requirements in accordance with 7 CFR 15d. Rural
Development will not discriminate against an applicant on the bases of
race, color, religion, national origin, sex, sexual orientation,
marital status, familial status, disability, or age (provided that the
applicant has the capacity to contract); to the fact that all or part
of the applicant's income derives from public assistance program; or to
the fact that the applicant has in good faith exercised any right under
the Consumer Credit Protection Act.
Sec. 4288.105 Oversight and monitoring.
(a) Verification. The Agency reserves the right to verify all
payment applications and subsequent payments made under this subpart,
as frequently as necessary, to ensure the integrity of the Program. The
Agency will conduct site visits as necessary.
(1) Production and feedstock verification. The Agency will review
producer records to verify the type and amount of biofuel produced and
the type and amount of feedstocks used.
(2) Blending verification. The Agency will review the producer's
certificates of analysis and feedstock records to verify the portion of
the advanced biofuel eligible for payment.
(3) Certificate of Analysis. The Agency will review the producer
records to ensure that each certificate of analysis has been issued by
a qualified, independent third party.
(b) Records. For the purpose of verifying compliance with the
requirements of this subpart, each eligible advanced biofuel producer
shall make available at one place at a reasonable time for examination
by representatives of USDA, all books, papers, records, contracts,
scale tickets, settlement sheets, invoices, written price quotations,
and other documents related to the Program that is within the control
of such advanced biofuel producer for not less than three years from
each Program payment date.
Sec. 4288.106 Forms, regulations, and instructions.
Copies of all forms, regulations, instructions, and other materials
related to this Program may be obtained from the USDA Rural Development
State Office, Rural Energy Coordinator and the USDA Rural Development
Web site at http://www.rurdev.usda.gov.
Sec. 4288.107 Exception authority.
The Administrator may, on a case-by-case basis, make an exception
to any requirement or provision of this subpart that is not
inconsistent with any authorizing statute or applicable law, if the
Administrator determines that application of the requirement or
provision would adversely affect the USDA's interest.
Sec. 4288.108-4288.109 [Reserved]
Section B--Eligibility Provisions
Sec. 4288.110 Applicant eligibility.
Section B represents the requirements associated with advanced
biofuel producer eligibility, biofuel eligibility, eligibility
notifications, and payment record requirements. To be eligible for this
Program, the applicant must meet the requirements specified in
paragraph (a) of this section and must provide additional information
as may be requested by the Agency under paragraph (b) of this section.
Public bodies and educational institutions are not eligible for this
Program.
(a) Eligible producer. The applicant must be an advanced biofuel
producer, as defined in Sec. 4288.102, and must meet one of the
following citizenship requirements:
(1) If the applicant is an individual, the applicant must be a
citizen or national of the United States (U.S.), the Republic of Palau,
the Federated States of Micronesia, the Republic of the Marshall
Islands, or American Samoa, or must reside in the U.S. after legal
admittance for permanent residence.
(2) If the applicant is an entity other than an individual, the
applicant must be at least 51 percent owned by persons who are either
citizens or nationals of the United States (U.S.), the Republic of
Palau, the Federated States of Micronesia, the Republic of the Marshall
Islands, or American Samoa, or legally admitted permanent residents
residing in the U.S. This paragraph is not applicable if the entity is
owned solely by members of an immediate family. In such instance, if at
least one of the immediate family members is a citizen or national, as
defined in paragraph (b)(2)(i) of this section, then the entity is
eligible.
(3) If the applicant is a subsidiary, the parent entity or the
entities that have an ownership in that applicant must also be at least
51 percent owned by persons who are either citizens or nationals of the
United States (U.S), the Republic of Palau, the Federated States of
Micronesia, the Republic of the Marshall Islands, or American Samoa, or
legally admitted permanent residents residing in the U.S.
(b) Eligibility determination. The Agency will determine an
applicant's eligibility for participation in this Program. If an
applicant's original submittal is not sufficient to verify an
applicant's eligibility, the Agency will notify the applicant, in
writing, as soon as practicable after receipt of the application. This
notification will identify, at a minimum, the additional information
being requested to enable the Agency to determine the applicant's
eligibility and a timeframe in which to supply the information.
(1) If the applicant provides the requested information to the
Agency within the specified timeframe, the Agency will determine the
applicant's eligibility for the upcoming fiscal year.
(2) If the applicant does not provide the requested information to
the Agency within the specified timeframe, the Agency will not consider
the applicant any further for participation in the upcoming fiscal
year. Such applicants may elect to enroll during the next sign-up
period.
(c) Ineligibility determination. An otherwise eligible producer
will be determined to be ineligible if the producer:
(1) Refuses to allow the Agency to verify any information provided
by the advanced biofuel producer under this subpart, including
information for determining applicant eligibility, advanced biofuel
eligibility, and application payments;
(2) Fails to meet any of the conditions set out in this subpart, in
the contract, or in other Program documents; or
(3) Fails to comply with all applicable Federal, State, or local
laws.
Sec. 4288.111 Biofuel eligibility.
To be eligible for this Program, a biofuel must meet the
requirements specified in paragraph (a) of this section and the
biofuel's producer must provide additional information as may be
requested by the Agency under paragraph (b) of this section.
Notwithstanding the provisions of paragraph (a) of this section, for
the purposes of this subpart, flared gases are not eligible.
(a) Eligible advanced biofuel. The biofuel must:
(1) Meet the definition of advanced biofuel;
(2) Be a solid, liquid, or gaseous advanced biofuel;
(3) Be a final product; and
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(4) If the biofuel is used on-site, there must be an Agency-
approved system to verify the quantity of biofuel used on-site.
(b) Eligibility determination. The Agency will determine a
biofuel's eligibility for payment under this Program. If an applicant's
original submittal is not sufficient to verify a biofuel's eligibility,
the Agency will notify the applicant, in writing, as soon as
practicable after receipt of the application. This notification will
identify, at a minimum, the additional information being requested to
enable the Agency to determine the biofuel's eligibility and a
timeframe in which to supply the information.
(1) If the applicant provides the requested information to the
Agency within the specified timeframe, the Agency will determine the
biofuel's eligibility for the upcoming fiscal year.
(2) If the applicant does not provide the requested information to
the Agency within the specified timeframe, the biofuel will not be
eligible for payment under this Program in the upcoming fiscal year.
Applicants may elect to include such biofuels in the application form
submitted during the next sign-up period.
Sec. 4288.112 Eligibility notifications.
(a) Applicant eligibility. If an applicant is determined by the
Agency to be eligible for participation, the Agency will notify the
applicant, in writing, as soon as practicable after receipt of the
application and will assign the applicant a contract number.
(b) Ineligibility notifications. If an applicant or a biofuel is
determined by the Agency to be ineligible, the Agency will notify the
applicant, in writing, as soon as practicable after receipt of the
application, as to the reason(s) the applicant or biofuel was
determined to be ineligible. Such applicant will have appeal rights as
specified in this subpart.
(c) Subsequent ineligibility determinations. If at any time a
producer or an advanced biofuel is determined to be ineligible, the
Agency will notify the producer in writing of its determination.
Sec. 4288.113 Payment record requirements.
To be eligible for Program payments, an advanced biofuel producer
must maintain records for all relevant FY's and FY quarters for each
advanced biofuel biorefinery indicating:
(a) The type and quantity of eligible renewable biomass used in the
production of advanced biofuel;
(b) The quantity of advanced biofuel produced from eligible
renewable biomass at each advanced biofuel biorefinery;
(c) The quantity of eligible renewable biomass used at each
advanced biofuel biorefinery to produce the advanced biofuel; and
(d) All other records required to establish Program eligibility and
compliance.
Sec. Sec. 4288.114-4288.119 [Reserved]
Section C--Enrollment Provisions
Sec. 4288.120 Enrollment.
In order to participate in the Program, a producer of advanced
biofuels must be approved by the Agency and enter into a contract with
the Agency. The process for enrolling in the Program is presented in
this section. Advanced biofuel producers who expect to produce eligible
advanced biofuels at any time during a fiscal year must enroll in the
Program as described in this section.
(a) Enrollment. To enroll in the Program, an advanced biofuel
producer must submit to the Agency a completed enrollment application
during the applicable sign-up period, as specified in paragraph (b) of
this section. An original, signed hard copy of the enrollment
application must be submitted as specified in the annual Federal
Register notice for this program. All applicants, except those that are
individuals, are required to have a Dun and Bradstreet Universal
Numbering System (DUNS) number.
(1) Eligible advanced biofuel producers must submit enrollment
applications during each sign-up period in order to continue
participating in this Program. If a participating producer fails to
submit the enrollment application during a fiscal year's applicable
sign-up period, the producer's contract will be terminated and the
producer will be ineligible to receive payments for that fiscal year.
Such a producer must reapply, and sign a new contract, to participate
in the Program for future fiscal years.
(2) Eligible advanced biofuel producers may submit an enrollment
application during a fiscal year's sign-up period even if the advanced
biofuel biorefinery is scheduled to start producing advanced biofuel in
that fiscal year.
(3) The producer must furnish the Agency all required
certifications before acceptance into the Program, and furnish access
to the advanced biofuel producer's records required by the Agency to
verify compliance with Program provisions. The required certifications
depend on the type of biofuel produced. Certifications specified in
paragraphs (a)(1)(i) through (iv) of this section are to be completed
and provided by an accredited independent, third-party.
(i) Alcohol. For alcohol producers with authority from ATF to
produce alcohol, copies of either
(A) The Alcohol Fuel Producers Permit (TTBF F 5110.74) or
(B) The registration of Distilled Spirits Plant (TTB F 5110.41) and
Operating Permit (TTB F 5110.25).
(ii) Hydrous ethanol. For hydrous ethanol that is upgraded by
another distiller to anhydrous ethyl alcohol, the increased ethanol
production is eligible for payment one time only. If the advanced
biofuel producer entering into this agreement is:
(A) The hydrous ethanol producer, then the advanced biofuel
producer shall include with the contract an affidavit, acceptable to
the Agency, from the distiller stating that the:
(i) Applicable hydrous ethanol produced is distilled and denatured
for fuel use according to ATF requirements, and
(ii) Distiller will not include the applicable ethanol in any
payment requests that the distiller may make under this Program.
(B) The distiller that upgrades hydrous ethanol to anhydrous ethyl
alcohol, then the advanced biofuel producer shall include with the
contract an affidavit, acceptable to the Agency, from the hydrous
ethanol producer stating that the hydrous ethanol producer will not
include the applicable ethanol in any payment requests that may be made
under this Program.
(iii) Biodiesel, biomass-based diesel, and liquid hydrocarbons
derived from biomass. For these fuels, the advanced biofuel producer
shall self-certify that the producer, the advanced biofuel biorefinery,
and the biofuel meet the definitions of these terms as defined in Sec.
4288.102, the applicable registration requirements under the Energy
Independence and Security Act and the Clean Air Act and under the
applicable regulations of the U.S. Environmental Protection Agency and
Internal Revenue Service, and the quality requirements per applicable
ASTM International standards (e.g., ASTM D6751) and commercially
acceptable quality standards of the local market. The advanced biofuel
producer shall also provide the Renewable Identification Number (RIN)
for each advanced biofuel and BQ-9000 certification.
(iv) Gaseous advanced biofuel. For gaseous advanced biofuel
producers, certification that the biofuel meets commercially acceptable
pipeline quality standards of the local market; that the flow meters
used to determine
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the quantity of advanced biofuel produced are industry standard and
properly calibrated by a third party professional; and that the
readings have been taken by a qualified individual.
(v) Woody biomass feedstock. Document that any and all woody
biomass feedstock cannot be used as a higher value wood-based product.
(4) Supporting documentation. Each participating advanced biofuel
producer that is projecting an increase in production from the previous
fiscal year and each new applicant must submit documentation to support
the production estimates reported in the enrollment application. Such
documentation includes, but is not limited to:
(i) Historical production data;
(ii) Production capacity of the biorefinery; and
(iii) Evidence of ability to distribute final product, including
distribution networks and contracts for purchase of final product.
(5) Additional forms. Applicants must submit the forms specified in
this paragraph with the enrollment application when applying for
participation under this subpart and as needed when re-enrolling in the
program.
(i) RD Instruction 1940-Q, Exhibit A-1, ``Certification for
Contracts, Grants and Loans''.
(ii) SF-LLL, ``Disclosure of Lobbying Activities''.
(iii) RD 400-4, ``Assurance Agreement''.
(b) Sign-up period. The sign-up period is October 1 to October 31
of the fiscal year for which payment is sought, unless otherwise
announced by the Agency in a Federal Register notice.
Sec. 4288.121 Contract.
Advanced biofuel producers determined to be eligible to receive
payments must then enter into a contract with the Agency in order to
participate in this Program.
(a) Contract. The Agency will forward the contract to the advanced
biofuel producer. The advanced biofuel producer must agree to the terms
and conditions of the contract, sign, date, and return it to the Agency
within the time provided by the Agency.
(b) Length of contract. Once signed, a contract will remain in
effect through the end of the contract period unless terminated as
specified in paragraph (c) of this section.
(c) Contract review. All contracts will be reviewed at least
annually to ensure compliance with the contract and ensure the
integrity of the program.
(d) Contract termination. Contracts under this Program will be
terminated in writing by the Agency. Contracts may be terminated under
any one of the following conditions:
(1) At the mutual agreement of the parties;
(2) In accordance with applicable Program notices and regulations;
(3) The advanced biofuel producer withdraws from the Program and so
notifies the Agency, in writing;
(4) The advanced biofuel producer fails to submit the enrollment
application during a sign-up period;
(5) The Program is discontinued or not funded;
(6) All of a participating advanced biofuel producer's advanced
biofuel biorefineries no longer exist or no longer produce any eligible
advanced biofuel; or
(7) The Agency determines that the advanced biofuel producer is
ineligible for participation.
Sec. Sec. 4288.122-4288.129 [Reserved]
Section D--Payment Provisions
Sec. 4288.130 Payment applications.
Section D identifies the process and procedures the Agency will use
to make payments to eligible advanced biofuel producers. In order to
receive payments under this Program, eligible advanced biofuel
producers with valid contracts must submit a payment application, as
required under paragraph (a) of this section. The Agency will review
the payment application and, if necessary, may request additional
information, as specified under paragraph (b) of this section.
(a) Applying for payment. To apply for payments under this subpart
during a fiscal year, an eligible advanced biofuel producer must:
(1) After a quarter has been completed, submit a payment
application covering one or more quarters;
(2) Certify that the request is accurate;
(3) Furnish the Agency such certification, and access to such
records, as the Agency considers necessary to verify compliance with
Program provisions; and
(4) Provide documentation as requested by the Agency of the net
production of advanced biofuel at all advanced biofuel biorefineries
during the relevant quarters.
(b) Review of payment applications. The Agency will review each
payment application it receives to determine if it is eligible for
payment.
(1) Review factors. Factors that the Agency will consider in
reviewing payments applications include, but are not necessarily
limited to:
(i) Contract validity. Whether the entity submitting the payment
application has a valid contract with the Agency under this Program;
(ii) Biofuel eligibility. Whether the biofuel for which payment is
sought is an eligible advance biofuel; and
(iii) Calculations. Whether the calculations for determining the
requested payment are complete and accurate.
(2) Additional documentation. If the Agency determines additional
information is required for the Agency to complete its review of a
payment application, eligible advanced biofuel producers shall submit
such additional supporting documentation as requested by the Agency. If
the producer does not provide the requested information within the
required time period, the Agency will not make payment.
(c) Payment application eligibility. The Agency will notify the
advanced biofuel producer, in writing, as soon as practicable after the
payment application, whenever the Agency determines that a payment
application, or any portion thereof, is ineligible for payment and the
basis for the Agency's determination of ineligibility.
(d) Submittal information. Eligible advanced biofuel producers must
submit payment applications as specified in the annual Federal Register
notice for this program no later than 4:30 p.m. on the last day of the
calendar month following the quarter for which payment is being
requested. Neither complete or incomplete applications received after
this date and time will be considered, regardless of the postmark on
the application.
(1) Any payment application form that is received by the Agency
after October 31 of the calendar year for the preceding fiscal year is
ineligible for payment.
(2) If the actual deadline falls on a weekend or a Federally-
observed holiday, the deadline is the next Federal business day.
Sec. 4288.131 Payment provisions.
Payments to advanced biofuel producers for eligible advanced
biofuel production will be determined in accordance with the provisions
of this section.
(a) Determination of payment rate. Each fiscal year, the Agency
will establish payment rates for both base and incremental production
of eligible advanced biofuels for both smaller producers and larger
producers using the procedures specified in paragraphs (a)(1) through
(5) of this section. These rates will be applied to the actual quantity
of eligible advanced biofuel produced when making payments to
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eligible advanced biofuel producers, as described below.
(1) Based on the information provided in each eligible enrollment
application, the Agency will determine base and incremental eligible
advanced biofuel production for both smaller producers and larger
producers. If the Agency determines that the amount of advanced biofuel
production reported in an enrollment application is not supported by
the documentation submitted with the enrollment application, the Agency
may reduce the production estimates reported in the enrollment
application.
(2) If an applicant is blending its advanced biofuel using
ineligible feedstocks (e.g., fossil gasoline or methanol, corn kernel
starch), only the quantity of advanced biofuel being produced from
eligible feedstocks will be used in determining the payment rates and
for which payments will be made.
(3) For each combination of production type (base, incremental) and
producer size (smaller, larger--over 150 million equivalent gallons of
production), the Agency will convert the base and incremental
production determined to be eligible under paragraph (a)(1) into
British Thermal Unit (BTU) equivalent using factors published by the
Energy Information Administration (or successor organization). If the
Energy Information Administration does not publish such conversion
factor for a specific type of advanced biofuel, the Agency will use a
conversion factor developed by another appropriate entity. If no such
conversion factor exists, the Agency will establish and use a
conversion formula as appropriate, that it publishes in the Federal
Register, until such time as the Energy Information Administration or
other appropriate entity publishes a conversion factor for said
advanced biofuel. The Agency will then calculate the total eligible
BTUs across all eligible applications.
(4) For each fiscal year, the Agency will determine the amount of
Program funds available to smaller Producers and to larger producers in
the fiscal year.
(5) For each fiscal year, the Agency will determine the base
production and incremental production payment rates ($/BTU) for smaller
producers and for larger producers. For both smaller producers and
larger producers, the incremental production payment rate will be 5
times higher than their respective base production rate, unless
otherwise specified in a notice published in the Federal Register.
These rates will be calculated such that all of the funds allocated
will be distributed in the fiscal year.
(b) Fiscal year payment. Using the payment rates and the base and
incremental production determined under paragraph (a) of this section
for each advanced biofuel biorefinery, the Agency will calculate each
fiscal year an expected payment for each eligible advanced biofuel
producer for that fiscal year using Equation 2 (see below). Each fiscal
year, the Agency will notify each advanced biofuel producer, in
writing, of the expected payment to be made to the producer for that
fiscal year.
[GRAPHIC] [TIFF OMITTED] TP16AP10.002
Where:
EPFY = expected payment for the fiscal year
BPPR = base production payment rate, $/BTU
BP = projected eligible base production, BTUs
IPPR = incremental production payment rate, $/BTU
IP = projected eligible incremental production, BTUs
(c) Payment amount. Each eligible advanced biofuel producer will be
paid for the actual amount of BTUs produced in a quarter from advanced
biofuels identified in the enrollment applications for that fiscal year
and that have been determined by the Agency as being eligible for
payment. The Agency will not pay a producer more than the expected
payment established under paragraph (b) for that fiscal year.
(d) Other payment provisions. The following provisions apply.
(1) Advanced biofuel producers will be paid on the basis of the
amount of eligible renewable energy content of the advanced biofuels
only if the producer provides documentation sufficient, including a
Certificate of Analysis, for the Agency to determine the eligible
renewable energy content for which payment is being requested, and
quantity produced through such documentation as, but not limited to,
records of sale and calibrated flow meter records.
(2) Payment will be made to only one eligible advanced biofuel
producer per advanced biofuel biorefinery.
(3) Subject to other provisions of this section, advanced biofuel
producers shall be paid any sum due subject to the requirements and
refund provisions of this subpart.
(4) Biorefineries that are signed up for payments in a fiscal year
and that either have been in existence less than 12 months prior to
that fiscal year or begin production in that fiscal year (e.g., signed
up in October 2010 for Fiscal Year 2011 and begin production in Fiscal
Year 2011) are eligible only for payment at the base production rate.
Such biorefineries become eligible for base and incremental production
payments in subsequent fiscal years.
(5) If an advanced biofuel producer transfers any production
capacity for one biorefinery to another, such transferred production
capacity shall be considered base production for the biorefinery to
which the production was transferred.
(6) A producer will only be paid for the advanced biofuels
identified in the application submitted during the sign-up period and
which are actually produced during the fiscal year. If the producer
starts producing a new advanced biofuel or changes the type of advanced
biofuel during the fiscal year, the producer will not receive any
payments for those new advanced biofuels. However, during each sign-up
period, a producer can identify new advanced biofuels and production
levels compared to the previous year.
Sec. 4288.132 Payment adjustments.
The Agency will adjust the payments otherwise payable to the
advanced biofuel producer if there is a difference between the amount
actually produced and the amount determined by the Agency to be
eligible for payment.
Sec. 4288.133 Payment liability.
Any payment, or portion thereof, made under this subpart shall be
made without regard to questions of title under State law and without
regard to any claim or lien against the advanced biofuel, or proceeds
thereof, in favor of the owner or any other creditor except agencies of
the U.S. Government.
Sec. 4288.134 Refunds and interest payments.
An eligible advanced biofuel producer who receives payments under
this subpart may be required to refund such payments as specified in
this section. If the Agency suspects fraudulent representation through
its site visits and records inspections under Sec. 4288.105(b), it
will be referred to the Office of Inspector General for appropriate
action.
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(a) An eligible advanced biofuel producer receiving payments under
this subpart shall become ineligible if the Agency determines the
advanced biofuel producer has:
(1) Made any fraudulent representation; or
(2) Misrepresented any material fact affecting a Program
determination.
(b) If an Agency determination that a producer is not eligible for
participation under this subpart is appealed and overturned, the Agency
will make appropriate and applicable payments to the producer from
Program funds, to the extent such funds are available, that remain from
the fiscal year in which the original adverse Agency decision was made.
(c) All payments made to an entity determined by the Agency to be
ineligible shall be refunded to the Agency with interest and other such
sums as may become due, including, but not limited to, any interest,
penalties, and administrative costs as determined appropriate under 31
CFR 901.9.
(d) When a refund is due, it shall be paid promptly. If a refund is
not made promptly, the Agency may use all remedies available to it,
including Treasury offset under the Debt Collection Improvement Act of
1996, financial judgment against the producer, and referral to the
Department of Justice.
(e) Late payment interest shall be assessed on each refund in
accordance with the provisions and rates as established by the United
States Treasury.
(1) Interest charged by the Agency under this subpart shall be
established by the United States Treasury. Such interest shall accrue
from the date such payments were made to the date of repayment.
(2) The Agency may waive the accrual of interest or damages if the
Agency determines that the cause of the erroneous payment was not due
to any action of the advanced biofuel producer.
(f) Any advanced biofuel producer or person engaged in an act
prohibited by this section and any advanced biofuel producer or person
receiving payment under this subpart shall be jointly and severally
liable for any refund due under this subpart and for related charges.
Sec. 4288.135 Unauthorized assistance and offsets.
When unauthorized assistance has been made to an advanced biofuel
producer under this Program, the Agency reserves the right to collect
from the recipient the sum that is determined to be unauthorized. If
the recipient fails to pay the Agency the unauthorized assistance plus
other sums due under this section, the Agency reserves the right to
offset that amount against Program payments.
(a) Unauthorized assistance. The Agency will seek to collect from
recipients all unauthorized assistance made under this Program using
the procedures specified in paragraphs (a)(1) through (4) of this
section.
(1) Notification to the producer. Upon determination that
unauthorized assistance has been made to an advanced biofuel producer
under this Program, the Agency will send a demand letter to the
producer. Unless the Agency modifies the original demand, it will
remain in full force and effect. The demand letter will:
(i) Specify the amount of unauthorized assistance, including any
accrued interest to be repaid, and the standards for imposing accrued
interest;
(ii) State the amount of penalties and administrative costs to be
paid, the standards for imposing them and the date on which they will
begin to accrue;
(iii) Provide detailed reason(s) why the assistance was determined
to be unauthorized;
(iv) State the amount is immediately due and payable to the Agency;
(v) Describe the rights the producer has for seeking review or
appeal of the Agency's determination pursuant to 7 CFR part 11;
(vi) Describe the Agency's available remedies regarding enforced
collection, including referral of debt delinquent after due process for
Federal salary, benefit and tax offset under the Department of Treasury
Offset Program; and
(vii) Provide an opportunity for the producer to meet with the
Agency and to provide to the Agency facts, figures, written records, or
other information that might refute the Agency's determination.
(A) If the producer meets with the Agency, the producer will be
given an opportunity to provide information to refute the Agency's
findings.
(B) When requested by the producer, the Agency may grant additional
time for the producer to assemble documentation. Such extension of time
for payment will be valid only if the Agency documents the extension in
writing and specifies the period in days during which period the
payment obligation created by the demand letter (but not the ongoing
accrual of interest) will be suspended. Interest and other charges will
continue to accrue pursuant to the initial demand letter during any
extension period unless the terms of the demand letter are modified in
writing by the Agency.
(2) Payment in full. If the producer agrees with the Agency's
determination or will pay the amount in question, the Agency may allow
a reasonable period of time (usually not to exceed 90 days) for the
producer to arrange for repayment. The amount due will be the
unauthorized payments made plus interest accrued beginning on the date
of the demand letter at the interest rate stipulated until the date
paid unless otherwise agreed, in writing, by the Agency.
(3) Promissory note. If the producer agrees with the Agency's
determination or is willing to pay the amount in question, but cannot
repay the unauthorized assistance within a reasonable period of time,
the Agency will convert the unauthorized assistance amount to a loan
provided all of the conditions specified in paragraphs (a)(3)(i)
through (iii) of this section are met. Loans established under this
paragraph will be at the Treasury interest rate in effect on the date
the financial assistance was provided and that is consistent with the
term length of the promissory note. In all cases, the receivable will
be amortized per a repayment schedule satisfactory to the Agency that
has the producer pay the unauthorized assistance as quickly as
possible, but in no event will the amortization period exceed fifteen
(15) years. The producer will be required to execute a debt instrument
to evidence this receivable, and the best security position practicable
in a manner that will adequately protect the Agency's interest during
the repayment period will be taken as security.
(i) The producer did not provide false information;
(ii) It would be highly inequitable to require prompt repayment of
the unauthorized assistance; and
(iii) Failure to collect the unauthorized assistance immediately
will not adversely affect the Agency's interests.
(4) Appeals. Appeals resulting from the demand letter prescribed in
paragraph (a)(1) of this section will be handled according to the
provisions Sec. 4288.103. All appeal provisions will be concluded
before proceeding with further actions.
(b) Offsets. Failure to make payment as determined under paragraph
(a) of this section will be treated by the Agency as a debt that can be
collected by an Administrative offset, unless written agreements to
repay such debt as an alternative to administrative offset is agreed to
between the Agency and the producer.
(1) Any debtor who wishes to reach a written agreement to repay the
debt as
[[Page 20109]]
an alternative to administrative offset must submit a written proposal
for repayment of the debt, which must be received by the Agency within
20 calendar days of the date the notice was delivered to the debtor. In
response, the Agency will notify the debtor in writing whether the
proposed agreement is acceptable. In exercising its discretion, the
Agency will balance the Government's interest in collecting the debt
against fairness to the debtor.
(2) When the Agency receives a debtor's proposal for a repayment
agreement, the offset is stayed until the debtor is notified as to
whether the proposed agreement is acceptable. If a Government payment
will be made before the end of the fiscal year and the review is not
yet completed, the offset will be taken after 30 days, even when a
review is requested. The amount of the debt and interest will be
withheld from payment to the debtor, but not applied against the debt
until the stay expires. If withheld funds are later determined not to
be subject to offset, they will promptly be paid to the debtor without
interest. Administrative offsets will be taken against delinquent
debtors requesting reviews that are pending final determination by the
Review Officer. However, a review and appeal will also include the
adequacy of any proposed written repayment agreement.
Sec. 4288.136 Remedies.
If the Agency has determined that a producer has misrepresented the
information or defrauded the Government, the Agency will take one of
the following steps in accordance to 7 CFR part 3017, Government-wide
Debarment and Suspension:
(a) Suspend payments on the Contract until the violation has been
reconciled;
(b) Terminate the Contract; or
(c) Debarment to participate in any Federal Government program.
Sec. 4288.137 Succession and loss of control of biorefineries and
production.
(a) Contract succession. An entity who becomes the eligible
advanced biofuel producer for a biorefinery that is under contract
under this subpart must request permission from the Agency to succeed
to the Program contract and the Agency may grant such request if it is
determined that the entity is an eligible producer and permitting such
succession would serve the purposes of the Program. If appropriate, the
Agency may require the consent of the previous eligible advanced
biofuel producer to such succession.
(b) Loss of control. Payments will be made only for eligible
advanced biofuels produced at a biorefinery owned or controlled by an
eligible advanced biofuel producer with a valid contract. If payments
are made to an advanced biofuel producer for production at a
biorefinery no longer owned or controlled by said producer or to an
otherwise ineligible advanced biofuel producer, the Agency will demand
full refund of all such payments.
Sec. Sec. 4288.138-4288.200 [Reserved]
Dated: April 5, 2010.
Judith A. Canales,
Administrator, Rural Business-Cooperative Service.
[FR Doc. 2010-8278 Filed 4-15-10; 8:45 am]
BILLING CODE 3410-XY-P