Alternative Fuel Transportation Program; Replacement Fuel Goal Modification

[Federal Register: March 15, 2007 (Volume 72, Number 50)]
[Rules and Regulations]
[Page 12041-12060]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr07-5]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 490
RIN 1904-AB67

AGENCY: Office of Energy Efficiency and Renewable Energy (EERE),
Department of Energy (DOE).
ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: DOE is publishing this final rule pursuant to the Energy
Policy Act of 1992 (EPAct 1992). DOE is extending the EPAct 1992 goal
of achieving a production capacity for replacement fuels sufficient to
replace 30 percent of the projected U.S. motor fuel consumption
(Replacement Fuel Goal) to 2030. DOE determined through its analysis
that the 30 percent Replacement Fuel Goal cannot be met by 2010, as
established in section 502(b)(2)(B). DOE has determined that the 30
percent goal can be achieved by 2030.

DATES: Effective Date: This rule is effective June 1, 2007.

FOR FURTHER INFORMATION CONTACT: To request a copy of this Final Rule
notice or arrange on-site access to paper copies of other information
in the docket, or for further information, contact Mr. Dana V. O'Hara,
Office of Energy Efficiency and Renewable Energy (EE-2G), U.S.
Department of Energy, 1000 Independence Avenue, SW., Washington, DC
20585-0121; (202) 586-9171; regulatory_info@afdc.nrel.gov; or Mr.
Chris Calamita, Office of the General Counsel, U.S. Department of
Energy, 1000 Independence Avenue, SW., Washington, DC 20585-0121; (202)
586-9507. Copies of this final rule and supporting documentation for
this rulemaking will be placed at the following Web site address:
http://www1.eere.energy.gov/vehiclesandfuels/epact/private/index.html.
Interested persons may also access these documents using a computer in
DOE's Freedom of Information (FOI) Reading Room, U.S. Department of
Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW.,
Washington, DC 20585-0121, (202) 586-3142, between the hours of 9 a.m.
and 4 p.m., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

I. Introduction
II. Background
A. Replacement Fuel Program
B. Replacement Fuel Goals
C. Definitions
D. Previous Review of Goals
E. Previous Rulemakings and Court Order
F. Notice of Proposed Rule (NOPR) for the Replacement Fuel Goal
III. Comments
A. Comments Received
B. Discussion of Comments
C. Assessment of Comments
IV. Determination that the Congressional Goals are Unachievable
V. Goal Modification Analysis
A. Approach
B. Building Blocks
C. Replacement Fuel Scenarios
D. DOE's VISION Model Analysis
E. Annual Energy Outlook (AEO) 2007 Results
F. Additional Reports
G. Other Issues
VI. Modified Goal
A. 30 Percent by 2030
B. Interim Goal
VII. Regulatory Review
A. Review under Executive Order 12866
B. Review under Regulatory Flexibility Act
C. Review under the Paperwork Reduction Act
D. Review Under the National Policy Act of 1969 (NEPA)
E. Review Under Executive Order 12988
F. Review Under Executive Order 13132
G. Review of Impact on State Governments--Economic Impact on States
H. Review of Unfunded Mandates Reform Act of 1995
I. Review of Treasury and General Appropriations Act, 1999
J. Review of Treasury and General Appropriations Act, 2001
K. Review Under Executive Order 13175
L. Review Under Executive Order 13211
M. Congressional Notification
VIII. Approval by the Office of the Secretary

I. Introduction

On September 19, 2006, DOE published a notice of proposed
rulemaking (NOPR) announcing its proposed determination that the EPAct
1992 (Pub. L. 102-486) Replacement Fuel Goal of 30 percent by 2010 is
not achievable and announcing its proposal to extend the time for
achieving the 30 percent replacement fuel production capacity goal to
2030. 71 FR 54771, Sept. 19, 2006.
EPAct 1992, section 502(a) directed DOE to establish a replacement
fuel program. (42 U.S.C. 13252(a)) The purpose of this program is to
``promote the replacement of petroleum motor fuels with replacement
fuels to the maximum extent practicable.'' (Id., emphasis added.) The
focus of this program, as indicated in section 502(b)(2), is on
expanding replacement fuels production capacity. (42 U.S.C.
13252(b)(2)) Further, section 502(b)(2) specifies an interim
Replacement Fuel Goal of producing sufficient replacement fuels to
replace 10 percent by 2000 of the projected consumption of motor fuels
in the United States and a final goal of 30 percent by 2010. (42 U.S.C.
13252(b)(2)(A) and (B)) Under section 504, DOE was tasked with
evaluating these goals and if DOE finds the goals to be unachievable,
then DOE is directed to modify the goals so that they are achievable.
(42 U.S.C. 13254(a) and (b)) In modifying the goals DOE can either
modify the goal percentage or timeframe or both. (42 U.S.C. 13254(b))
In evaluating and modifying the goals, DOE must balance
considerations in order to establish goals that are ``achievable.'' (42
U.S.C. 13254(b)) The Replacement Fuel Goals must promote replacement
fuels to the ``maximum extent possible'' while remaining
technologically and economically feasible. (42 U.S.C. 13254(a) and
(b)(2)) The revised goal adopted today meets these requirements, for
several reasons. First, DOE based its analysis on the best information
available, from published and peer-reviewed sources. In particular,
much of DOE's analysis was based on the Energy Information
Administration's (EIA) Annual Energy Outlook (AEO) 2005 through 2007.
Second, DOE's analysis generally was based on the current budget and
policy framework, under which many technologies show reasonable
potential for success and market penetration. Thus, the analysis
assumed virtually no major new policies or funding initiatives beyond
those already in place. Third and last, the modified goal balances the
minimum and maximum projected replacement fuel production capacities
from several reasonable scenarios.
In the NOPR, DOE evaluated four scenarios, which identified
projected replacement fuel capacities of 8.65 percent, 17.84 percent,
35.25 percent, and 47.06 percent, by 2030. (Updated analyses conducted
in this final rule resulted in the first and third of these becoming
7.38 percent and 33.13 percent, respectively.) These projections
reflect considerations of numerous variables including oil prices,
technological breakthroughs, and market acceptance. The goal proposed
by DOE fell in the mid-range among these scenarios. Also, the proposed
goal did not rest upon a single technology, but instead relied on a
portfolio of options. Explicit in this approach is the assumption that
not all of the technologies will achieve the same measure of success;
some will be more successful than others. Similarly, the proposed goal
did not rely on the most advantageous market conditions.

[[Page 12042]]

Therefore, DOE determined that the proposed goal would meet the
requirement to balance the objective of section 502(a) to promote
replacement fuels to the ``maximum extent practicable'' and the section
504(b) requirement that the Replacement Fuel Goal be ``achievable.''
(42 U.S.C. 13252(a) and 13254(b))
In today's Final Rule, DOE determines that the EPAct 1992 goal of
establishing sufficient replacement fuel production capacity to replace
30 percent on an energy equivalent basis of all U.S. motor fuel by 2010
is not achievable. This determination is based on a similar evaluation
of the projected U.S. production capacity of replacement fuels as was
presented in the NOPR. 71 FR 54711. Further, today's Final Rule extends
the 30 percent Replacement Fuel Goal out to 2030 based on an analysis
similar to that presented in the NOPR and discussed further below.
Today's Final Rule complies with DOE's obligation under section 504(b)
of EPAct 1992 to ``establish goals that are achievable, for the
purposes of this title.'' (42 U.S.C. 13254(b))
Today's final rule also implements the March 6, 2006 order of the
U.S. District Court for Northern District of California to prepare and
publish a final rule to modify EPAct 1992's replacement fuel production
goal for 2010. See Center for Biological Diversity v. U.S. Department
of Energy et. al., 419 F.Supp. 2d 1166 (N.D. Cal. 2006).
DOE reminds interested parties that the Replacement Fuel Goal is an
administrative goal guiding the replacement fuel program, including
administering the EPAct 1992 title V fleet mandates. It is not a
program plan, implementation plan, national policy, or any other type
of major program for achievement of the Replacement Fuel Goal. In
addition, the statutory requirement for the Replacement Fuel Goal is
potential production capacity. This does not require the fuel
quantities implied by this goal actually be produced or used.

II. Background

A. Replacement Fuel Program

Section 502(a) of EPAct 1992 requires the Secretary of Energy
(Secretary) to establish a program to promote the development and use
of ``domestic replacement fuels'' and to ``promote the replacement of
petroleum fuels with replacement fuels to the maximum extent
practicable'' (42 U.S.C. 13252(a)). Section 502(a) states:

The Secretary shall establish a program to promote the
development and use in light duty motor vehicles of domestic
replacement fuels. Such a program shall promote the replacement of
petroleum fuels to the maximum extent practicable. Such program
shall, to the extent practicable, ensure the availability of those
replacement fuels that will have the greatest impact in reducing oil
imports, improving the health of our Nation's economy and reducing
greenhouse gas emissions.

(42 U.S.C. 13252(a))

Since 1992, DOE has taken a number of steps to implement EPAct
1992's replacement fuel programs, under the authority provided in
titles III, IV and V of the Act. DOE coordinates various aspects of the
Federal fleet's efforts to comply with the vehicle acquisition
requirements established under section 303 of EPAct 1992. (42 U.S.C.
13212). DOE has also promulgated and implemented regulations and
guidance for alternative fuel providers and State government fleets,
which are subject to the fleet provisions contained in sections 501 and
507(o) (42 U.S.C. 13251 and 13257(o), respectively). 10 CFR Part 490.
DOE also established the Clean Cities initiative, which supports public
and private partnerships that deploy alternative fueled vehicles (AFVs)
and build supporting infrastructure. Clean Cities works closely with
both voluntary and regulated fleets in specific geographic areas, to
bring together the necessary ``critical mass'' of demand for
alternative fuels to support expansion of the refueling infrastructure.
In addition, DOE conducts research and development on replacement fuels
production and utilization technologies in conjunction with other
Federal agencies (such as the U.S. Department of Agriculture (USDA)),
States, private industry, and universities. All of these programs work
together to increase the production and utilization of replacement
fuels and improve the efficiency of vehicles.
In particular, the regulatory fleet programs have been successful
in moving fleets covered under EPAct 1992 toward the use of AFVs and
alternative fuels and reducing the use of petroleum fuels. The
regulatory fleet programs established under EPAct 1992 have seen
extremely high levels of compliance. Nearly all individual Federal
agencies have met their AFV acquisition requirements, and the Federal
fleet as a whole has exceeded the required 75 percent acquisition level
for the last four years. Among State and alternative fuel provider
fleets, compliance has also been high and DOE has been able to work out
nearly all the relatively few instances of deficient acquisitions with
the involved fleets, either through the fleets purchasing credits or
agreeing to acquire additional AFVs in future years.
Original equipment manufacturers (OEMs) have expanded the number
and type of AFV models offered, mostly due to the demand from EPAct
regulated fleet programs, regulatory incentives (Corporate Average Fuel
Economy (CAFE) credits), and coordinated voluntary activities (Clean
Cities). In model year 1993, OEMs were only offering a handful of
different AFVs models. The availability of models and fuel types has
increased substantially over the past decade. During model year 2006,
there were over 20 light-duty fuel/vehicle model combinations available
(with more models promised over the next several years). Virtually all
of these were E85 flexible fuel vehicles (FFVs). Overall, there are now
on the order of one million FFVs manufactured annually in the U.S.,
largely to take advantage of the CAFE benefits. At the same time, the
regulated fleets do acquire many of these vehicles each year.
The Replacement Fuel Program efforts have also assisted in
expanding the infrastructure for alternative fuels. In 1992 when EPAct
was passed, there were not that many alternative fuel refueling
stations in operation (approximately 3,600) and nearly all were for
propane. Today, there are approximately 5,400 alternative fuel
refueling stations in the U.S., including over 1,000 E85 stations in
operation, with several hundred coming on-line each year over past few
years. There are also many more compressed natural gas (CNG) stations
than in 1992, although this number has begun to decrease slightly in
the last few years as OEM offerings have dwindled. (For the current
number and location of alternative fuel refueling stations, visit the
Alternative Fuel Data Center (AFDC) station locator,
http://www.eere.energy.gov/afdc/infrastructure/refueling.html.) This
overall growth in stations has been primarily through the demand generated
through the regulated fleets and related voluntary efforts under Clean
Cities. The number of alternative fuel refueling stations remains small
when compared to the 180,000 total refueling stations Nationwide, but
is projected to continue increasing.
In the State of the Union address in January 2006, the President
announced the Advanced Energy Initiative (AEI), which focuses on
increasing the use of non-conventional fuels like replacement fuels in
all sectors of the U.S. economy, with a central focus on the
transportation sector. AEI sets out an aggressive course for reducing the

[[Page 12043]]

Nation's dependence on foreign petroleum, setting a national goal of
replacing more than 75 percent of the U.S. imports from foreign sources
by 2025. AEI emphasizes technology developments as the key to reducing
energy dependence, including several of the same technologies such as
efficiency improvements, biofuels, and hydrogen. These appear under the
portion of the Initiative focused on ``Changing the way we fuel our
vehicles.'' AEI is available on the White House Web site at the
following location: http://www.whitehouse.gov/stateoftheunion/2006/energy/.
On January 23, 2007, the President, in the State of the Union
Address, proposed replacing 20 percent of the projected gasoline usage
in 10 years (``Twenty in Ten'' initiative). Twenty in Ten builds on the
foundation established by the AEI from the previous year's State of the
Union Address with two major elements relevant to today's final rule.
The first element is to increase the use of alternative fuels to 35
billion gallons in 2017, reducing projected gasoline consumption by 15
percent, through advancements in many fields including cellulosic
ethanol, butanol, and biodiesel. In the second element of Twenty in
Ten, the President has asked Congress to give the Administration
authority to reform the fuel efficiency system for passenger cars, as
was recently done for light trucks and sport utility vehicles (SUVs).
It is estimated that the projected gains in mileage for passenger cars
could save another 5 percent of our projected gasoline usage in 2017.
The Twenty in Ten initiative, which sets a goal for 2017, is
consistent with the Replacement Fuel Goal adopted today. However, there
are several notable differences. First, DOE notes that the Twenty in
Ten initiative relates to projected gasoline consumption, whereas
today's final goal relates to projected gasoline and diesel fuel
consumption. Second, the Replacement Fuel Goal is established in terms
of energy equivalency, where as the Twenty in Ten initiative is in
terms of absolute volume. Third, while the Twenty in Ten initiative
emphasizes the same elements as the Replacement Fuel Goal, the Twenty
in Ten initiative is more aggressive than the revised goal in terms of
assumptions of increased fuel efficiency of light trucks and passenger
cars and increased use of renewable and alternative fuels to replace a
significant portion petroleum usage.\1\
---------------------------------------------------------------------------

\1\ The President's initiative notes that given the changing
nature of the marketplace for both cars and light trucks, the
Secretary of Transportation would determine in a flexible rulemaking
process the actual fuel economy standard and accompanying fuel
savings. Additionally, under the Twenty in Ten initiative the EPA
Administrator and the Secretaries of Agriculture and Energy will
have authority to waive or modify the required levels of alternative
and renewable fuel use if they deem it necessary, and the new fuel
standard will include an automatic ``safety valve'' to protect
against unforeseen increases in the prices of alternative fuels or
their feedstocks.
---------------------------------------------------------------------------

The more aggressive components of the Twenty in Ten initiative are
based on policy and legislative actions proposed by the President that
were not considered in today's final rule. The final rule generally
considered only policies and programs currently in place, and therefore
the policies proposed in the Twenty in Ten initiative were not
considered in today's final rule. DOE intends to continue monitoring
the Twenty in Ten initiative as policies and programs begin to develop,
and will determine if the Replacement Fuel Goal requires additional
modification. The Twenty in Ten initiative is available on the White
House Web site at:
http://www.whitehouse.gov/stateoftheunion/2007/initiatives/energy.html.

B. Replacement Fuel Goals

As previously discussed, section 502(a) requires DOE to implement a
replacement fuel program. Under such program the Secretary is required
to review appropriate information and estimate the production capacity
for replacement fuels and AFVs. The Secretary also has to determine the
technical and economical feasibility of achieving the capacity to
produce on an energy equivalent basis, 10 percent of the projected
motor fuel in the U.S. in 2000 and 30 percent in 2010. Section 502(b)
established production goals for replacement fuels, and states:

(b) Development Plan and Production Goals--[T]he Secretary * * *
shall review appropriate information and--
* * * * *
(2) Determine the technical and economic feasibility of
achieving the goals of producing sufficient replacement fuels to
replace, on an energy equivalent basis--
(A) At least 10 percent by the year 2000; and
(B) At least 30 percent by the year 2010, of the projected
consumption of motor fuel in the United States for each such year,
with at least one half of such replacement fuels being domestic fuels[.]

(42 U.S.C. 13252(b)(2)) (Emphasis added.) Thus section 502(b) sets two
goals, an interim goal of developing sufficient U.S. domestic
replacement fuel production capacity to replace 10 percent of projected
total motor fuel use by the year 2000, and a final goal of 30 percent
by the year 2010, with at least one half of such replacement fuels
being domestic fuels. (42 U.S.C. 13252(b)(2)(A) and (B))

While the goals in section 502(b) and the programs established
under section 502(a) are related, the goals are not mandates for the
programs. Today's review of the Congressional goals is in the context
of the section 502(a) programs. Section 502(b) states that, ``under the
programs established under subsection (a), the [DOE] * * * shall review
appropriate information and'' evaluate the achievability of the goals.
(42 U.S.C. 13252(b)) Further, in the context of the section 502(a)
programs, DOE must ``determine the most suitable means and methods of
developing and encouraging the production, distribution, and use of
replacement fuels and alternative fueled vehicles[.]'' (42 U.S.C.
13252(b)(3)) As discussed above, DOE has established various programs
to implement the goals of sections 502(a) and (b). However, no where in
the text of section 502 are the goals established as mandates for the
section 502(a) programs.
Pursuant to section 504 of EPAct 1992, DOE is required to review
these goals periodically and publish the results and provide
opportunities for public comments. (42 U.S.C. 13254(a)) If DOE
determines that the goals are not achievable, section 504(b) directs
DOE to modify, by rule, the percentage requirements and/or dates, so
that the goals are achievable. (42 U.S.C. 13254(b)) DOE has determined
that in order for a goal to be achievable, there must be a reasonable
expectation that the desired level of replacement fuels production
capacity will develop within the relevant timeframe.
While DOE has authority to modify the section 502(b) goals, DOE's
authority to establish requirements under the replacement fuel and
alternative fuel programs is limited. Section 504(c) provides DOE the
authority to issue regulations if the achievement of the Replacement
Fuel Goals contained in section 502(b) are likely to lead to ``a
significant and correctable failure'' to meet the overall program goals
established by section 502(a). (42 U.S.C 13254(c)) However, EPAct 1992
does not provide DOE the authority ``to mandate marketing or pricing
practices, policies or strategies for alternative fuel, or to mandate
the production or delivery of such fuels.'' (42 U.S.C. 13254(c))
Further, DOE's authority to

[[Page 12044]]

require the use of alternative fuels is limited.\2\
---------------------------------------------------------------------------

\2\ Fleets are not required to use alternative or replacement
fuel in their AFVs (except for alternative fuel providers and
Federal Fleet, which are required by section 501(a)(4) and 303 of
EPAct, respectively).
---------------------------------------------------------------------------

C. Definitions

The term ``replacement fuel'' is defined by EPAct 1992 to mean
``the portion of any motor fuel that is methanol, ethanol, or other
alcohols, natural gas, liquefied petroleum gas, hydrogen, coal derived
liquids, fuels (other than alcohols) derived from biological materials,
electricity (including electricity from solar energy), ethers,'' or any
other fuel that the Secretary determines meets certain statutory
requirements. (42 U.S.C. 13211(14)) (Emphasis added.)
The term ``alternative fuel'' is defined to include many of the
same types of fuels (such as ethanol, natural gas, hydrogen, and
electricity), but also includes certain ``mixtures'' of petroleum-based
fuels and other fuels as long as the ``mixture'' is ``substantially not
petroleum.'' (42 U.S.C. 13211(2) and 10 CFR 490.2) Thus, a certain
mixture might constitute an ``alternative fuel,'' but only the portion
of the fuel that falls within the definition of ``replacement fuel''
would actually constitute a ``replacement fuel.'' For example, M85, a
mixture of 85 percent methanol and 15 percent gasoline, would, in its
entirety, constitute an ``alternative fuel,'' but only the 85 percent
that was methanol would constitute ``replacement fuel.'' Also by way of
example, gasohol (a fuel blend typically consisting of approximately 10
percent ethanol and 90 percent gasoline) would not qualify as an
``alternative fuel'' because it is not ``substantially not petroleum,''
but the 10 percent that is ethanol would qualify as ``replacement fuel.''
Section 301(12) of EPAct 1992 defines ``motor fuel'' as ``any
substance suitable as fuel for a motor vehicle.'' (42 U.S.C. 13211(12))
Moreover, the term motor vehicle is defined in EPAct 1992 section
301(13), through reference to 42 U.S.C. 7550(2), as a self-propelled
vehicle that is designed for transporting persons or property on a
street or highway. (42 U.S.C. 13261(13)) The goals established in
section 502(b)(2) require that DOE evaluate the capacity of producing
sufficient replacement fuels to offset a certain percentage of U.S.
``motor fuel'' consumption. Therefore, DOE, for the purposes of Title V
of EPAct 1992, has interpreted the term motor fuel to include all fuels
that are used in motor vehicles. This includes fuels used in light-,
medium-, and heavy-duty on-road vehicles. 71 FR 54771 (September 19, 2006).

D. Previous Review of the Goals

Section 504(a) of EPAct 1992 requires DOE to periodically
``examine'' the goals established in section 502(b)(2) and determine
whether they should be modified. (42 U.S.C. 13254(a)) The examination
of the goals is to be made taking into account the program goals stated
under section 502(a), namely to promote the development and use of
``domestic replacement fuels'' and to ``promote the replacement of
petroleum fuels with replacement fuels to the maximum extent
practicable.'' (42 U.S.C. 13254(a))
As an initial matter, DOE notes that it is unaware of any analysis
or technical data that was used by Congress in 1992 as a basis for
setting the 10 percent and 30 percent Replacement Fuel Goals set forth
in EPAct 1992. DOE is also not aware of any affirmative determination
by Congress or by any agency that, at the time they were set, the
statutory goals were explicitly considered achievable. Thus, DOE has
treated these replacement fuel production capacity levels as the
starting point for future goal analyses. Regardless of the original
rationale for the goals, and as described and discussed below, DOE
periodically has evaluated the feasibility of the goals as provided by
Congress in EPAct 1992.
Several previous efforts were made by DOE to analyze the
Replacement Fuel Goal. The first effort was in 1996, as part of the
Assessment of Costs and Benefits of Flexible and Alternative Fuel Use
in the U.S. Transportation Sector, Technical Report Fourteen: Market
Potential and Impacts of Alternative Fuel Use in Light-Duty Vehicles: a
2000/2010 Analysis (U.S. Department of Energy, Office of Policy and
Office of Energy Efficiency and Renewable Energy, January 1996, report
number DOE/PO-0042), to be referred to as Technical Report 14.
The second major attempt by DOE to evaluate the replacement fuel
picture was made at the end of the last decade, in the report
Replacement Fuel and Alternative Fuel Vehicle Analysis Technical and
Policy Analysis, Pursuant to Section 506 of the Energy Policy Act of
1992 (U.S. Department of Energy, Energy Efficiency and Renewable
Energy, Office of Transportation Technologies, December 1999 with
amendments September 2000), hereinafter section 506 report. The report
is available at http://www.eere.energy.gov/vehiclesandfuels/epact/pdfs/
plf_docket/section506.pdf.
The next report to consider the achievability of the Replacement
Fuel Goals was the Transitional Alternative Fuels and Vehicles (TAFV)
Model Report. See The Alternative Fuel Transition: Results from the
TAFV Model of Alternative Fuel Use in Light-Duty Vehicles 1996-2000
(ORNL.TM2000/168) (September 17, 2000). This report was completed
shortly after the section 506 report. It examined multiple pathways
toward increased replacement and alternative fuel use. The major
difference between the TAFV report and earlier reports is that it used
a dynamic transitional model to analyze potential replacement fuel
pathways. Many of the earlier studies and analyses used single-period
equilibrium models and also assumed no transitional barriers to
increased alternative fuel and replacement fuel use. The TAFV report
includes a number of scenarios that assume no transitional barriers but
it also includes multiple pathways that do include analysis of
transitional barriers. The report is available for review at:
http://www.eere.energy.gov/vehiclesandfuels/epact/pdfs/plf_docket/
tafv99report31a_ornltm.pdf.
In summary, Technical Report 14, prepared only three years after
EPAct 1992's passage, did indicate that the 2010 goal could be
achieved, albeit only under several scenarios relying upon extensive
policy additions. The section 506 report and TAFV Report both concluded
that it would be difficult and unlikely, but not impossible, to achieve
the 30 percent EPAct 1992 Replacement Fuel Goal by 2010. In neither of
the latter reports, issued in mid to late 2000, did DOE make a
determination under EPAct 1992 section 504(b) that the statutory
Replacement Fuel Goals were not achievable. If DOE had made such a
determination, it would have triggered a statutory obligation to set a
new, achievable, Replacement Fuel Goal. Instead, DOE chose to take a
``wait and see'' approach regarding the need to revise the 2010 goal. A
much more detailed discussion on each of the three reports and their
conclusions was provided in section III. of the NOPR. 71 FR 54773,
Sept. 19, 2006.

E. Previous Rulemakings and Court Order

Section 507(c) directed DOE to issue an Advanced Notice of Proposed
Rulemaking (ANOPR) that, in part, would evaluate the progress toward
achieving the Replacement Fuel Goal and assess the adequacy and
practicability of the goal. (42 U.S.C. 13257(c)) In response to that
directive, DOE issued an ANOPR on April 17, 1998, 63 FR 19372. DOE
conducted three public hearings (Minneapolis,

[[Page 12045]]

Minnesota; Los Angeles, California; and Washington, DC) and solicited
written comments from the public on the ANOPR. More than 110 interested
parties responded by providing written and oral comments. Comments were
received through July 16, 1998.
In the ANOPR, DOE requested comments on 23 specific questions
covering three broad areas: replacement fuels, fleet requirements, and
urban transit buses. Only the first set of questions is relevant to
today's rulemaking. A detailed discussion of these comments was
previously provided in the NOPR for the Private and Local Government
Fleet Determination (68 FR 10320, 10326-10328; March 3, 2003) and a
summary of those comments was provided in the Replacement Fuel Goal
NOPR. 71 FR 54771, Sept. 19, 2006.
Additionally, DOE previously addressed the issue of whether to
revise the replacement fuel production goal for 2010 in the context of
its determination that an AFV acquisition mandate for private and local
government fleets was not necessary. 69 FR 4219 (January 29, 2004).
Section 507(e) directs DOE to consider whether a fleet requirement
program for private and local fleets is ``necessary'' for the
achievement of the Replacement Fuel Goals. (42 U.S.C. 13257(e)) As part
of DOE's decision under that directive, DOE stated in its notice of
final rulemaking that a private and local government fleet rule would
``not appreciably increase the percentage of alternative fuel and
replacement fuel used by motor vehicles.'' 69 FR 4220, Jan. 29, 2004.
DOE further concluded that ``adoption of a revised goal would not
impact its determination that a private and local government rule * * *
would not provide any appreciable increase in replacement fuel use.''
69 FR 4221, Jan. 29, 2004. DOE, therefore, did not revise the
Replacement Fuel Goal at the time but indicated that it would continue
to evaluate the need to revise the statutory goal in the future.
Subsequent to the publication of the January 29, 2004 final rule,
DOE was sued in Federal court by the Center for Biological Diversity
(CBD) and Friends of the Earth for failing to impose a private and
local government fleet acquisition mandate and for not revising the
replacement fuel production goal for 2010 as part of its determination.
On March 6, 2006, the U.S. District Court for the Northern District of
California vacated DOE's final determination regarding the private and
local government fleet mandate and ordered DOE to revise the
replacement fuel production goal for 2010. (See Center for Biological
Diversity, 419 F.Supp. 2d 1166.) In its order, the Court directed DOE
to prepare notices of proposed rulemaking and final rules on both the
Replacement Fuel Goal for 2010 and the private and local government
fleets determination. (Id. at 1171.)

F. NOPR for the Replacement Fuel Goal

DOE proposed to revise the 30 percent by 2010 goal by extending the
goal date to 2030. 71 FR 54771, Sept. 19, 2006. DOE based the proposed
revised goal on an analysis which focused on projected production
capacity for replacement fuels through 2030. DOE based the proposal on
four reference cases, which were based on three building blocks. The
three building blocks are: (1) The reference case projected by EIA in
AEO 2006; (2) the high price case presented in AEO 2006; and (3)
projections from the DOE programs conducting research and development
on replacement fuel and vehicle technologies. These building blocks
provide the basis for the reference cases which project varying levels
of potential replacement fuel production capacity.
The four scenarios relied upon in the NOPR analysis were: (1) The
reference case projected by EIA in AEO 2006; (2) the high price
scenario presented in AEO 2006; (3) a combination of the AEO 2006
reference case with achievement of program goals (designated as program
developments); and (4) a combination of the AEO 2006 high price case
with program developments. The different scenarios represent the
potential bounds for proposing a revised replacement fuel production
goal under sections 502 and 504 of EPAct 1992. Under a 2030 timeframe,
these scenarios projected a replacement fuel production capacity as a
percent of on-road fuel use of 8.65 percent, 17.84 percent, 35.25
percent, and 47.06 percent, respectively. 71 FR 54782-3, Sept. 19, 2006.
As presented in the NOPR, DOE proposed to maintain the 30 percent
goal and move the goal date out 20 years, to 2030. 71 FR 54785, Sept.
19, 2006. Given the uncertainties inherent in projecting fuel prices
and technology achievements, DOE tentatively determined that a goal
slightly above the midpoint of the projections of the four reference
cases represented an ``achievable'' goal as required by section 504(b).
(42 U.S.C. 13254(b))
A detailed discussion of the building blocks and the reference
cases is provided in section V. of the NOPR. 71 FR 54776, Sept. 19,
2006. Today's final rule relies on essentially the same analysis
framework, with updated projections by the EIA. The analysis framework
and results are summarized below.

III. Comments

A. Comments Received

The NOPR solicited comments on the proposed Replacement Fuel Goal
modification. Written comments were received from a total of sixteen
organizations. This included the following four specific organizations
providing substantive comments:
? The American Automotive Leasing Association (AALA),
? The CBD/Friends of the Earth,
? The National Association of Fleet Administrators (NAFA),
and
? NGVAmerica.
The other twelve sets of comments were from Clean Cities
coordinators or stakeholders, or were organizations that were not
identified specifically as related to Clean Cities, but which provided
similar type or level of comments to those received from the Clean
Cities organizations. Thus, for most of the discussion below, these
Clean Cities and related comments were grouped together. These
organizations included:
? Central Texas Clean Cities.
? City of Victoria.
? DieselGreen/Austin Biodiesel Cooperative.
? Granite State Clean Cities.
? Greater New Haven Clean Cities Coalition, Inc.
? Greater New Orleans Regional Planning Commission.
? Kansas City Clean Cities.
? Maine Clean Communities.
? Norwich Clean Cities.
? Public Solutions Group, Ltd./Central Texas Clean Cities.
? St. Louis Clean Cities.
? Synetek Research Co.
It should be noted that within these comments, most Clean Cities
organizations utilized a common framework for their comments, relying
upon shared key points. Within these organizations, however, two
(Granite State Clean Cities and Maine Clean Communities) provided
somewhat more expansive and detailed comments.
On October 3, 2006, DOE held a hearing at DOE headquarters in
Washington, DC. Approximately one dozen people attended, including
representatives from AALA, NGVAmerica, several media organizations, and
DOE program staff and related personnel. In addition, one member of the
general public also attended. A list of attendees is available at
http://www1.eere.energy.gov/vehiclesandfuels/epact/pdfs/plg_docket/
hearing_attendee_list.pdf.

[[Page 12046]]

Program technical staff presented a short overview of the rulemaking
process (available at http://www1.eere.energy.gov/vehiclesandfuels/epact/
pdfs/plg_docket/ohara_presentation.pdf). No entities prepared
or delivered detailed testimony at this hearing. Discussions during the
hearing were relatively short and of a much more general nature with
all points raised also included within the written comments received.
Therefore, no separate discussion of the comments from the hearing is
necessary. The transcript from this hearing is available at
http://www1.eere.energy.gov/vehiclesandfuels/epact/pdfs/plg_docket/
hearing_transcript.pdf.
Due to technical difficulties in receiving comments on the NOPR
electronically, on January 18, 2007, DOE published a limited re-opening
of the comment period; 72 FR 2212, Jan. 18, 2007. This notice re-opened
the comment period until January 31, 2007. During this additional
period, one additional set of comments was received from the National
Propane Gas Association (NPGA).

B. Discussion of Comments

In order to address the comments in a clear manner, they were split
out into several basic categories. These include:
? Approach--comments concerning DOE's approach to addressing
its requirements concerning evaluating and modifying the Replacement
Fuel Goal;
? Goal--comments concerning the level and time-frame for the
proposed modified goal, schedule for review of the modified goal, and
whether an interim goal was necessary;
? Assumptions--comments concerning the detailed assumptions
made by DOE in its analysis; and
? Programmatic/DOE's Role--comments concerning possible
programs or DOE's overall role concerning achievement of the
Replacement Fuel Goal.
In addition to identifying the comments in each section below, the
discussion of the final analysis further addresses, where appropriate,
specific issues raised by commenters.
Approach
One commenter indicated that DOE's interpretation of ``achievable''
was reasonable, and that the current goal needed to be modified. This
commenter also indicated that DOE was correct to focus on more than
just a single technology, and on the entire fuel supply chain. Another
commenter also indicated that DOE should base the revised goal upon
reductions across the entire transportation sector, and not just
regulated fleets. In response, DOE reiterates that it did base its
approach upon a number of technologies and fuels, and did look at fuel
savings and substitution within the entire on-road transportation
sector. As indicated in the NOPR, DOE looked at the entire highway
transportation sector in determining the Replacement Fuel Goal. DOE
also looked at technologies such as hybrids, fuel cell vehicles,
advanced energy efficient vehicles, and dual-fuel/FFVs. The fuels used
in the analysis included ethanol, biodiesel, natural gas, coal to
liquids, gas to liquids, and hydrogen. 71 FR 54771, Sept. 19, 2006.
Different opinions were expressed concerning DOE's approach with
respect to determining if the Private and Local Government Fleets Rule
is necessary. One commenter specifically indicated its satisfaction
with the approach taken by DOE, while another specifically indicated
its objection. A third commenter simply cautioned DOE to resist the
urge to set a new Replacement Fuel Goal level solely for the purpose of
justifying a Private and Local Government Fleet Rule. This same
commenter spent the majority of its comments stating why such a fleet
rule is wrong.
In response, DOE is focused only on the development of an
achievable goal that meets the requirements of sections 502(a) and
504(b) of EPAct 1992 in this rule. DOE is not predisposed to any
outcome beyond setting the goal. The Private and Local Government Fleet
Rule determination is a separate rulemaking process from the
Replacement Fuel Goal modification, and DOE is continuing to treat
these as separate processes. The fleet rule determination will not be
commenced until the revised Replacement Fuel Goal is set, and the
determination process will specifically include an opportunity for
comment on a proposed determination prior to development of the final
determination.
Goal/Schedule/Interim Goal
Two specific commenters plus a number of the Clean Cities and
related organizations objected to what they stated is a 20-year delay
in the goal, from 2010 to 2030. They indicated that a more progressive
goal is needed, and one that has a stronger focus upon program
development and implementation. Similarly, one of the individual
commenters indicated that it did not understand why the inability to
meet the goal in 2010 permits a 20-year delay. While a number of these
commenters indicated that they wanted to see DOE set a ``higher goal,''
few offered concrete proposals as to what that goal should be and how
it would be achievable. Two Clean Cities coordinators did specifically
suggest that DOE select one of the more accelerated paths included
within its NOPR analysis, such as utilizing one of the ``program
development'' cases. At the same time, one commenter felt that DOE's
proposed goal was reasonable, based upon comparison to similar actions
of States and several foreign governments.
In response to commenters requesting a more aggressive goal than
what was proposed, DOE notes that it has a statutory obligation to
balance certain considerations in order to establish goals that are
``achievable.'' (42 U.S.C. 13254(b)) The replacement fuel production
capacity goals must promote replacement fuels to the ``maximum extent
possible'' while at the same time remaining technologically and
economically feasible. (42 U.S.C. 13254(a) and (b)(2)) DOE interprets
``achievable'' to mean that there is a reasonable expectation of
reaching the goal in the time period specified. DOE considered the
various options within the current budgetary and policy framework and
selected what DOE determined is a goal which is set at the ``maximum
extent practical'' and still ``achievable.'' The current EIA baseline
projection for replacement fuels by 2030 is only 7.38 percent. Today's
analysis indicated that if all DOE's technical programs were as
successful as predicted and the technologies were fully adopted in the
marketplace, the maximum replacement fuel that could be achieved is 33
to 47 percent. To expect DOE to be 100 percent successful in its
development programs is unreasonable. By their very nature, many of the
research programs are high risk.
One individual commenter and several Clean Cities and related
organizations generally claimed that there are significant
environmental, energy security, and economic impacts in delaying the
goal. However, the commenters did not provide specific estimates of
these potential impacts or how moving the goal to 2030 would result in
such impacts.
One individual commenter and two Clean Cities coordinators
specifically called for DOE to set an interim goal. DOE notes that in
the Court's order directing DOE to revise the Replacement Fuel Goal,
the Court focused almost entirely upon the 2010 goal. (Center for
Biological Diversity, 419 F.Supp. 2d 1166.) Further, the Court clearly
directed DOE to revise the ``goal.'' (Center for Biological Diversity
v. U.S.

[[Page 12047]]

Dept. of Energy et. al., No. 05-cv-01526-WHA Document 54 p. 2 (N.D.
Cal. March 30, 2006) (Order re Timing of Relief)) The Court's use of
``goal'' in the singular provides direction to revise the 2010 goal,
and DOE developed the NOPR accordingly.
To the extent that an ``interim goal'' allows the public to
understand the trajectory of the replacement fuel production necessary
to meet the 2030 goal, DOE's analysis developed data points at 2020,
2025 and 2030 for all four scenarios evaluated. The charts provided
below indicate a range of percentages which provide benchmarks for
evaluating progress towards the achieving the goal. Moreover, the
annual publication of EIA analyses of replacement fuel contributions in
the Annual Energy Review (AER) and AEO provides an indication of
progress. For example, the replacement fuel production capacity levels
were estimated in the range between approximately 6 and 17 percent in
the NOPR for 2020. As updated in the analysis for this final rule, the
two 2020 reference case-based scenarios project a replacement fuel
capacity between 5 and 14 percent. DOE and the public will be able to
compare the AEO projections and AER data to the Replacement Fuel Goal
analysis presented in today's final rule and the NOPR.
Two commenters specifically requested that DOE provide a specific
schedule for reviewing the Replacement Fuel Goal in the future. These
commenters stated that the information resulting from such reviews
should be published more frequently. The statutory requirement in
section 504(a) is for periodic review. As discussed above, EIA
publishes the AEO report annually, which estimates the replacement fuel
production capacity of the U.S. DOE will review the annual AEO reports
and based in part on these reports determine whether a more
comprehensive review of the Replacement Fuel Goal is warranted.
Finally, a commenter specifically indicated that ``DOE should note
that future reviews may also result in modifying the goal to reduce the
timeframe or increase the replacement fuel percentage if achievable in
order to effectuate the intent of the Act and the Replacement Fuel
Program.'' DOE acknowledges that if future reviews show results more or
less favorable to achievement of the goal, then DOE could increase/
decrease the level or accelerate/push out the date. DOE has no pre-
conceived concepts as to what any future reviews of progress toward the
goal will show. The statutory requirement of the periodic review is for
DOE to evaluate the goal and determine if the goal is practical and
achievable. If the goal is not achievable, DOE has the responsibility
to develop an achievable goal that is ``technically and economically
feasible'' and promotes replacement fuels to the ``maximum extent
practicable'' in a specific timeframe, whatever that may be.
Analysis Assumptions
One individual commenter and two Clean Cities coordinators stated
that the future oil prices upon which DOE based its analyses should
have been much higher. Therefore, these commenters asserted, the
decision on replacement fuel penetration levels should have been closer
to the EIA high price case, or even based on prices higher than EIA's
high price case. In response, DOE determined that it was inappropriate
to assume significantly higher fuel prices than those presented in the
AEO reports without a sufficient basis upon which to determine such
prices. A case in point: there has been a significant drop in the cost
of crude oil since the publication of the NOPR on September 19, 2006.
Last summer crude prices were over $70 per barrel, but prices had
fallen below $50 per barrel by late January, 2007. (EIA Petroleum
Navigator at http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm)
In addition, EIA analysis from AEO Reports indicates that higher oil
prices do encourage more replacement fuel usage and increased energy
efficiency. However, higher oil prices also cause drivers to use less
petroleum overall. This coupled with the increased use of replacement
fuels and increased energy efficiency can cause oil prices to fall.
DOE is required to develop a goal that is achievable. Commenters
did not provide any data to justify reliance on abnormally high oil
prices for a sustained period or years. Therefore, DOE based its
analysis upon EIA analyses. If projections for future prices increase
significantly, DOE will review the annual AEO and based in part on
these reports determine whether further review of the Replacement Fuel
Goal is warranted.
One commenter indicated that it felt DOE underestimated the
contribution of conservation in the overall analysis. In response, DOE
did address conservation, and believes that conservation was given a
sizable role in both of the program development cases. The program
development cases included energy efficiency gains from hybrids,
advanced diesels, and fuel cell vehicles. The EIA data only takes into
account the annual energy efficiency gains that vehicles have gained
historically, typically around 1.2 percent. As presented in the NOPR,
DOE analyzed two cases that incorporated savings of approximately 3
million barrels per day in 2030, above and beyond any conservation
efforts already taken into account in EIA data.
One commenter stated that DOE's assertion that research and
development programs will accomplish their goals is unrealistic, and
thus contradicts DOE's approach to ``achievable.'' DOE notes that it
used approximately a 50 percent, not 100 percent, success rate for all
of DOE's programs in arriving at the final Replacement Fuel Goal. As
reflected in the NOPR, estimates for the maximum contributions from
successful commercialization of technologies resulting from DOE
research and development to the overall goal by 2030 were no more than
30 percent replacement fuel. The two EIA base cases (reference and high
price (NOPR Tables 1 and 2)) projected levels of approximately 9 to 18
percent replacement fuel. Adding approximately half of the DOE research
and development technologies to the EIA base cases results in projected
levels of approximately 24 to 33 percent replacement fuel. Therefore,
DOE proposed in the NOPR a goal within the range of the identified
scenarios, and did not rely upon DOE research and development programs
achieving all of their goals.
One commenter plus a number of Clean Cities-related organizations
specifically questioned the Department's exclusion of plug-in hybrid
electric vehicles (PHEVs) as inadequate, and disagreed with projections
showing that the contribution from electricity would not grow
significantly during the period of the analysis. No commenter submitted
any data supporting a more concrete role for these vehicles, or what
their overall effect would be. As stated in the NOPR, DOE has
determined that it is premature to specifically evaluate this new
technology, especially to the level of detail of the analysis done for
this action. DOE recognizes that PHEVs offer a significant potential
for reducing petroleum use in the U.S. transportation sector. As such,
PHEVs were evaluated as part of the total hybrid vehicle market
analysis. Modeling used for this analysis indicates that conventional,
flex-fuel, and PHEVs as well as fuel-cell hybrids will be vying for the
same market segments by 2030. The entire market segment was evaluated
and significant gains in fuel efficiency and replacement fuels were
indicated. However, DOE does not have sufficient data to evaluate the
specific contributions to petroleum

[[Page 12048]]

reduction attributable to PHEVs. Furthermore, DOE notes that its
analysis is based upon replacement fuels competing in the marketplace.
Nothing in the 30 percent goal prevents PHEVs from capturing a larger
share of the replacement fuel market than is indicated by DOE's
analysis. If PHEVs develop quickly and impact the relative
contributions of electricity and energy efficiency relied upon in the
current analysis, DOE will take notice and determine if the Replacement
Fuel Goal requires additional modification.
Considerable analysis was done in the NOPR scenario 3 to determine
what the vehicle sales would have to be in order to generate a demand
for replacement fuel commensurate with a 35 percent Replacement Fuel
Goal by 2030. 71 FR 54783. The VISION results are in Figures 5 and 6 in
the NOPR. 71 FR 54784. For a level of replacement fuel demand that
would be equivalent to the replacement fuel production capacity under a
35 percent by 2030 Replacement Fuel Goal, the VISION model projected
that non-conventional light-duty vehicles would comprise 99 percent of
new LDV sales in that model year. The breakdown of the LDVs were FFVs--
24 percent of new vehicle sales; Hybrids--37 percent of new vehicle
sales; Diesels--22 percent of new vehicle sales; Fuel Cell Vehicles--15
percent of new vehicle sales; and other AFVs--1 percent of new vehicle
sales.
Similarly, two commenters and several Clean Cities-related
organizations indicated that they felt the potential from natural gas
and gas-to-liquids (GTL) was underestimated. One of these commenters
also raised environmental concerns about GTL. Thus it was unclear
whether this particular commenter wanted a greater role shown for this
technology or not. In response to the overall concerns about potential
for any particular technology, DOE relied upon the best information it
had available, relying primarily upon the EIA AEO data. Neither
commenter nor the Clean Cities-related organizations submitted specific
data on these or other technologies.
In general, however, even if the contribution of a particular
technology (whether natural gas, GTL, PHEVs, or others) were increased,
DOE would anticipate that much of this change might be at the expense
of another included technology. As presented above, the total level of
replacement fuel usage is relatively fixed. Thus, the gains for one
technology will likely be offset by reductions in another technology,
as opposed to increasing the number of non-conventionally fueled motor
vehicles. Therefore, given that other replacement fuels may have a
larger share of the market than our analysis might otherwise indicate,
the overall results for replacement fuel production capacity will
remain the same. Should better data become available DOE will review it
and revise the goal as necessary.
One commenter also questioned EIA's projections about coal-to-
liquids (CTL), since current oil prices already appear above the level
needed for economic parity, but plants have not been built. As
discussed in the NOPR, having economic parity now or achieving it only
recently does not mean that the plants would already be in place. As
DOE indicated in the NOPR, financial investors often need to see
current and projected conditions that appear favorable for several
years before they are moved to act. Once investment begins, it can be a
number of years before any plants are on-line. Today, some of this
initial investment appears to be happening, since conditions now appear
favorable, but it may be many years before significant contributions
are anticipated from this technology. In addition, as shown in section
V.E. below, under the updated analysis based upon the AEO 2007, the
projected contribution from CTL decreased significantly.
One commenter indicated that it was unclear if DOE used Government
Performance and Results Act (GPRA) analyses, or if not, why not. DOE
did use GPRA analyses for a number of the program developments
technologies, as indicated in the NOPR. 71 FR 54777, 54778, 54781. Two
such examples are the energy efficiency gains from the FreedomCAR and
Vehicle Technologies (FCVT) program and in the Hydrogen Fuel Cell and
Infrastructure Technologies (HFCIT) Program (commonly referred to as
the ``Hydrogen Program'') in the building blocks section (V.B.3) of the
NOPR. 71 FR 54777. Where current analyses existed for technology
programs, they were used. Item D11 in the electronic docket (available
at http://www1.eere.energy.gov/vehiclesandfuels/epact/private/
plg_docket.html) specifically provides a link to EERE's GPRA analyses
for all relevant technology programs.
One commenter questioned whether DOE's analysis assumed new Federal
incentives for certain fuels, but not for others (particularly natural
gas). This commenter also indicated that DOE needed to explain how
different fuels react differently to higher prices. Generally, DOE did
not assume new incentives or policies that would promote a specific
alternative fuel. In the limited instances in which a new policy was
assumed, DOE identified its assumptions, which were based upon
information received from EIA or the relevant technology programs.
One instance in which policies beyond those existing were assumed
was for the hydrogen and fuel cell technologies. These technologies
were identified as an exception because DOE recognizes that they will
need additional support later in getting the technology into the
market. Most of the other replacement fuels and technologies are viable
in the market or they have or are getting tax breaks, subsidies, or
other price supports until they become market viable. In order for fuel
cell technologies to have the same opportunities in the market they may
require similar types of support as previous technologies as well as
potentially new types of assistance.
One commenter indicated that DOE did not adequately address the
benefits of other Federal, State, local, and private efforts, including
other EERE, FCVT, and USDA activities. In particular, this commenter
indicated that DOE should include a discussion of other efforts and
indicate how the President's AEI fits in. The commenter did not
indicate specific programs that should be included in DOE's analysis
that would contribute significantly to the Replacement Fuel Goal. It
should be noted that DOE did much of what this commenter claims it did
not. In particular, the ``program developments'' scenarios were
specifically based upon EERE and FCVT efforts, and DOE did discuss the
AEI in section VI.B. of the NOPR. 71 FR 54786. DOE also is working with
USDA in development of biofuels especially in the area of cellulosic
ethanol. In preparing this final rule, DOE has taken into account the
Renewable Fuel Standard (RFS) from EPAct 2005 and also considered the
Twenty in Ten initiative.
The same commenter indicated that DOE did not address the
utilization side of the equation sufficiently. Again, the Replacement
Fuel Goal is a production capacity goal, not a utilization goal.
However, DOE recognizes that production and use are related. DOE did
look at utilization in the VISION modeling, provided in tables 5 and 6
of the NOPR. 71 FR 54784. Moreover, the commenter failed to provide
data for a revised analysis to reflect the commenter's concern.
One commenter pointed out perceived discrepancies between the EIA
and VISION model analyses concerning the makeup of the LDV market.
While DOE acknowledges that these two analyses differ somewhat in

[[Page 12049]]

their pathways, they are in relative agreement on the overall
destination points. DOE analysis looked at the potential capacity to
produce replacement fuels as required by section 502(a) and (b). In
order to validate that data, a second analysis was performed using a
fuel usage model. The VISION model looked at what replacement fuels
could be used in what type of vehicles based on available knowledge of
the different vehicle technologies. The total replacement fuel figures
were very similar even though there were slight variations of the fuel
mix and vehicle technologies. These simply show two different paths to
the same result, based upon the particular assumptions of their
analysts and the mechanisms within the models. DOE is not stating any
one specific fuel or technology advancement, or specific set of
advancements, has to occur for the Replacement Fuel Goal to be
achieved. DOE believes that a portfolio of technologies, some indicated
here, as well as possibly some that were not included, are required to
achieve any goal.
Finally, one commenter took particular issue with DOE's approach to
its greenhouse gas (GHG) analysis. This commenter stated that DOE used
the wrong baseline for assessing GHG emissions. The commenter indicated
that DOE should have used the levels ``the U.S. would have achieved if
DOE had implemented Congress's original fuel replacement goals.''
In response, DOE believes that the commenter's assertion is
incorrect on several counts. First, DOE does not have authority to
mandate achievement of the goal. DOE has authority to conduct programs
in accordance with the goals, to review the goals, and modify the
goals. The commenter's implication that DOE could have mandated
achievement of the 30 percent goal by 2010 is therefore incorrect.
Second, a GHG analysis as suggested by the commenter would require the
establishment of a fictitious baseline based upon a completely
fabricated fuel mix that possibly could be used to meet the goal in
2010 whether or not a 2010 goal was ever achievable. Since DOE has
found that the goal is unachievable, it does not know what the fuel mix
would have been in 2010 if the 30 percent goal had been achieved, which
is critical to determining the baseline contribution of GHGs. Without
such a breakdown, no such estimate can be made.
This commenter further asserted that DOE was required to perform an
environmental assessment as part of this rulemaking. As discussed below
in section VII, Regulatory Review, DOE has not conducted an
environmental assessment, which is consistent with the Court's holding
in Center for Biological Diversity. (419 F. Supp 2d at 1173.)
Programmatic/DOE's Role
Three commenters and several Clean Cities-related organizations
specifically called for DOE to promote programs or incentives and make
recommendations to further the goals of the Replacement Fuel Programs.
This Final Rule requires DOE to select a specific goal that is
achievable. DOE notes that the Administration is making proposals and
recommendations relevant to alternative fuel production and use. The
President's 2007 State of the Union Address on January 23, 2007, made
two clear and strong recommendations. Twenty in Ten proposed increasing
the RFS to 35 billion gallons of renewable and alternative fuel in 2017
and giving Department of Transportation (DOT) authority to set CAFE
standards for passenger vehicles based on vehicle attributes consistent
with DOT's recent rule for light-duty trucks. Thus, the President's
``Twenty in Ten'' initiative contains replacement fuel and energy
efficiency as its main elements, which is the same approach employed by
the Replacement Fuel Goal established today.
In addition, one of the previous commenters cited CAFE standards as
an opportunity for DOE to take action. As part of his Twenty in Ten
initiative, the President has called for reforms in the CAFE standards.
However, concerning CAFE, Congress has limited authority in this area
to itself and the DOT, not DOE. While DOT does confer with DOE in this
area, Congress has established the authority for CAFE regulations
within DOT. (49 U.S.C. 32902).
Two commenters called for DOE to establish a replacement fuel
program and develop a plan for its implementation. In addition, one of
these specifically called for DOE to solicit input from stakeholders
concerning measures to advance replacement fuels. In response, DOE
notes that the research and development programs provided the data and
development plans relied on for the analysis. As for a replacement fuel
program under the context of EPAct 1992 (particularly section 502(a)),
DOE has, for more than a decade, been conducting a program focused on
the replacement of petroleum in the transportation sector. These on-
going efforts include activities such as the Federal Fleet
requirements, the State and Alternative Fuel Provider Fleets
Regulations, and the Clean Cities initiative. As for soliciting input
from stakeholders, the NOPR specifically provided opportunity for
comment by stakeholders interested in replacement fuels, both through
written comments and testimony at the hearing. In addition, DOE
continues an open dialog in this area with interested stakeholders,
particularly through the Clean Cities initiative.
One commenter specifically called for DOE to work with the
Environmental Protection Agency (EPA) to ensure that regulations for
conversions ``are not overly burdensome for those wishing to convert
vehicles * * * to alternative fuels.'' DOE has a history of working
with EPA in alternative fuel-related areas, and will continue to do so.
One commenter disagreed with DOE's assertion that its authority
under this rulemaking is limited by EPAct 1992. It cited EPAct's
section 504(c), which states that:

If the Secretary determines that the achievement of goals
described in section 502(b)(2) of this title would result in a
significant and correctable failure to meet the program goals
described in section 502(a) of this title, the Secretary shall issue
such additional regulations as are necessary to remedy such failure.

(42 U.S.C. 13254(c)).

DOE has read this clause to mean that, if the numerical Replacement
Fuel Goal (30 percent in 2010 from 502(b)(2)) conflicts with the
overall replacement fuel program goal of replacing motor fuels to the
maximum extent practical (from 502(a)), then DOE has additional
regulatory authority to rectify the conflict. However, DOE's additional
authority to establish regulations under EPAct 1992 is limited. Section
504(c) continues:

The Secretary shall have no authority under this Act to mandate
the production of alternative fueled vehicles or to specify, as
applicable, the models, lines, or types of, or marketing or pricing
practices, policies, or strategies for, vehicles subject to this
Act. Nothing in this Act shall be construed to give the Secretary
authority to mandate marketing or pricing practices, policies, or
strategies for alternative fuels or to mandate the production or
delivery of such fuels.

(42 U.S.C. 13254(c)).

Finally, several Clean Cities related organizations called for DOE
generally to enforce EPAct, support mandated fleets with funding,
increase funding to Clean Cities coalitions, and to ``propose real
solutions.'' An additional commenter also raised the issue of funding
for relevant programs. In response, DOE asserts that it is indeed
enforcing EPAct fleet programs, through programs focused specifically
on regulated fleets under titles III and V of EPAct. These programs, as
mentioned

[[Page 12050]]

above, have been highly successful at accomplishing their missions
within the context of the scope and authority provided by Congress. DOE
remains committed to Clean Cities as a key element of its replacement
fuel efforts. DOE intends to continue to utilize Clean Cities to
identify new opportunities for success in the implementation of
replacement fuel and energy efficiency technologies as they become
available for deployment. As for the non-specific request that DOE
propose ``real solutions,'' DOE has provided its detailed analysis
supporting its decision concerning modification of the Replacement Fuel
Goal, which also incorporates the technology development plans of many
of its research and development programs.

C. Assessment of Comments

There are several important observations that can be made about the
comments received. First, no commenter supplied any data to dispute
DOE's analysis. Commenters did discuss the potential of particular
technologies, but data from which DOE could make projections of the
technology impacts was not provided, nor were any indications that
modifying the analysis as generally proposed by several commenters
would result in any significant net changes to the results of DOE's
analysis. Second, a number of commenters (especially the Clean Cities
and related organizations) merely asserted an objection to delaying the
goal by 20 years, without any comment on the achievability of the
proposed goal or an alternative goal. Third, many commenters did not
appear to fully understand the purpose of the goal and the purpose of
this rulemaking. As indicated in the NOPR and in the discussion above,
DOE is directed by statute to analyze the existing goal of 30 percent
replacement in 2010, and if found not to be achievable, modify the
goal. However, many commenters discussed issues beyond the scope of
this rulemaking, e.g., funding policies, establishment of particular
programs, and other wide-ranging regulatory actions.
In conclusion, the comments received have not persuaded DOE that it
erred in its analysis or in its choice of revised goal, as included in
the NOPR. DOE does note its continuing responsibility to periodically
conduct analyses of the progress toward this goal, and to modify the
goal again if and when appropriate. Such modification could include
proposing either earlier or later achievement, or also a higher or
lower replacement fuel level.

IV. Determination That Congressional Goals Are Unachievable

DOE has determined that the 2000 goal was not achieved and that the
2010 goal is not achievable. DOE notes that it is unaware of any
analysis or technical data that was used by Congress in 1992 as a basis
for setting the 10 percent and 30 percent Replacement Fuel Goals set
forth in EPAct 1992. DOE is also not aware of any affirmative
determination by Congress or by any agency that, at the time they were
set, the statutory goals were reasonably achievable.
As indicated in the NOPR, the actual data reported for 2000
indicated that the 10 percent Replacement Fuel Goal was not achieved.
Replacement fuel use in that year totaled about 4.7 billion gallons, or
only about 2.9 percent of the 162 billion gallons of motor fuel
consumed. Of this amount, oxygenates in the form of ethanol and Methyl
Tertiary Butyl Ether (MTBE) supplied about 92 percent of the
replacement fuel production. (See Transportation Energy Data Book--26th
Edit., Table 2.3 (2006) (replacement fuel use) and FHWA Motor Fuel Use
Report, Table MF-21; http://199.79.179.101/ohim/hs00/mf.htm.)

Based on EIA's AER 2005 (the last such review completed prior to
this final rule), replacement fuels supply approximately 2.5 percent of
the total motor vehicle fuel used in motor vehicles. The amount of
replacement fuel used, as a percent of total motor fuel consumed, has
essentially been flat for the past decade despite some increased use of
alternative and replacement motor fuels. There are two reasons for this
trend. First, as discussed in the NOPR, the recently accelerated phase-
out of MTBE as an additive in gasoline has limited the total amount of
replacement fuels consumed since MTBE previously accounted for a
significant portion of these fuels. Because a gallon of MTBE contains
more energy than a gallon of ethanol, replacing MTBE with ethanol may
result in more gallons of ethanol used, but not in a higher replacement
fuel level, since the level of replacement (percentage) is calculated
on an energy content basis. This replacement of MTBE with ethanol
partly explains why replacement fuels have not garnered a larger share
of the on-road fuels market on an energy basis, even as ethanol use has
increased quite significantly in the past several years, increasing
from a level of slightly more than 1 billion gallons in 2002 to 4
billion gallons in 2005. (AER 2005.) Second, the comparatively small
growth in total replacement fuels production and use has been matched
by the growth in petroleum-based motor fuel use.
The EIA AEO 2007 reference case projected that replacement fuels in
2010 will account for approximately 4.5 percent of total motor fuel
use, or approximately 8.7 billion gallons of gasoline equivalent
replacement fuel (although it is possible higher oil prices and the
President's recent proposals will result in greater use of biofuels
during this period). Given the short-term nature of the 2010 goal, it
appears that ethanol would be the primary replacement fuel option to
consider. Some production capacity for ethanol now exists, with
increases in capacity projected over the next few years. The changes in
distribution and infrastructure needed for other fuels (e.g., gaseous
fuels or electricity) to make major contributions would be much longer
term in nature, and thus largely impractical for serious consideration
before 2010. Therefore, ethanol in blends are expected to account for
about 85 percent of the replacement fuels produced in 2010, with the
remaining balance made up of mostly natural gas and propane.
DOE did not receive any data or information from commenters as to
the projected production capacities of replacement fuel by 2010. In
addition, the commenters did not provide any data or information to
indicate how the replacement fuel production capacity of 30 percent in
2010 could be achievable. DOE therefore determines that the EPAct 1992
Replacement Fuel Goal of 10 percent for 2000 was not met and that the
goal of 30 percent for 2010 is not achievable, considering all
information available and the economic and technical feasibility of
achieving the 2010 goal.

V. Goal Modification Analysis

As part of its preparation for the NOPR, DOE conducted an analysis
focused on projecting potential production capacity for replacement
fuels through 2030. This was necessary to determine how the Replacement
Fuel Goal should be modified. DOE has relied upon this analysis and
other more recent information and data currently available in the
development of this final rule. DOE has identified and reviewed
relevant internal and external reports, studies, and analyses on
alternative and replacement fuel use and projected production. The
pertinent information was compiled to assist in the development of an
``achievable goal.''
Because of the detailed analytical description provided in the NOPR
concerning this analysis, and because

[[Page 12051]]

today's notice relies on substantially similar analytical framework
(e.g., building blocks and scenarios, and assumptions), a discussion of
the analysis conducted by DOE will primarily be provided in summary
form here. For more detail on the analysis, consult section V. of the
NOPR. 71 FR 54776. During the period since the publication of the NOPR,
EIA released portions of the AEO 2007. In order to meet the court
ordered deadline and because the full AEO 2007 is unavailable, DOE
could not update all of its analysis described in the NOPR. DOE does
provide a comparison of the results using AEO 2006 and the available
portions of AEO 2007 at the end of this section.

A. Approach

As discussed previously, DOE has two statutory criteria for
modification of the Replacement Fuel Goal. First, the goal has to be
aggressive enough to meet the intent of the program goal to promote
replacement fuels to the ``maximum extent practicable.'' (42 U.S.C.
13252(a)). Secondly, the Replacement Fuel Goal has to be
``achievable.'' (42 U.S.C. 13254(b)).
In meeting these criteria, DOE had several options in modifying the
Replacement Fuel Goal, in accordance with the authority provided in
section 504 of EPAct 1992. First, DOE could modify the goal level to
what it believed was achievable in the 2010 timeframe, probably around
the 4.5 percent projected in the AEO 2007. Second, DOE could move the
goal out in time, since the potential contributions from replacement
fuels increase over time. A third option would be to combine the two
primary options and modify both the replacement fuel level and date. In
analyzing the data, DOE looked at all of these options. DOE's evaluated
credible data, projections, and other information covering
approximately the next 25 years, to see what could be achievable. DOE's
evaluation and analysis went out to 2030, since that is the last date
for which credible input existed, particularly in the form of data from
AEO 2006 and the recently released portions of AEO 2007.
In general, the analytical framework included only existing
statutory authorities and incentives in the development of the
technologies. The only exception was in hydrogen and fuel cell
technologies which did consider some level of additional or new
incentives and/or mandates in the future. Therefore, the primary
variables in DOE's analysis were projected technological and cost
improvements. Hydrogen and fuel cell technologies were specifically
identified as an exception because DOE recognizes that the hydrogen
economy will require additional support later in the market
introduction phase. Most of the other replacement fuels and
technologies are viable in the market or they are getting or have
gotten tax breaks, subsidies, or other price supports until they become
viable in the market.
One commenter claimed that DOE's analysis assumes continued support
in terms of tax credits and other incentives that are currently
provided but are scheduled to expire before 2030. In response, DOE
believes it was careful to keep such variations to a minimum. Most of
the technologies did not assume continue price support or other
incentives. The projected results from technology programs were
primarily based upon reaching technology cost goals that would result
in cost competitiveness without subsidies. Therefore, DOE did not
assume any new policies for nearly all technologies. The only
exception, as indicated above, was hydrogen and fuel cell technologies,
which embedded a higher level of support into its GPRA projections.

B. Building Blocks

The Replacement Fuel Goal proposed in this action was developed
after careful consideration of existing market factors, energy
forecasts, and programs directed by DOE and its national laboratories.
Three combined building blocks were considered: (1) The reference case
projected by EIA in the AEO 2006 with updates from AEO 2007; (2) the
high price case presented in the AEO 2006; and (3) projections from the
DOE programs conducting research and development on replacement fuel
and vehicle technologies. The outcome of this effort is several
different cases under which varying levels of replacement fuel are
potentially achieved.
These building blocks include replacement fuel and vehicle
technologies, with projected contributions based on either the high or
reference prices from the AEO, or the DOE program development
projections. Some of the building blocks are relevant to all of the
scenarios, while others appear in a limited number of scenarios. As
indicated above, DOE evaluated data out through 2030, at periodical
intervals. In all cases, the highest levels of replacement fuels appear
in 2030. Below is a description of the building blocks and ``cases''
which were used to develop the four scenarios, described in the
subsequent section.
AEO Reference Case Description
The AEO reference case is the base case prepared by EIA. It takes
into account developments that are likely to occur as a result of
policies that existed at the time the forecast was developed. AEO takes
into account expected improvements and cost reductions in many
technologies, but does not attempt to project the impact of DOE
technology development programs. It does not account for potentially
new policies, or legislation. The reference case also includes a number
of other critical assumptions including economic growth rates and oil
prices. The AEO 2006 reference case assumes a U.S. economic growth rate
of 3 percent per year. Oil prices in this case are projected to
fluctuate from the high $40 range to mid $50 range and peak at $57 in
2030 under AEO 2006. AEO 2006, which was first released in late 2005,
indicates that the oil price projection in the reference case
represents EIA's ``current judgment regarding the expected behavior of
the Organization of Petroleum Exporting Countries (OPEC) producers in
the long term, adjusting production to keep world oil prices in a range
of $40 to $50 per barrel''. (AEO 2006, p. 206.)
In the AEO 2007 Reference Case update, EIA estimated that ``the
average world crude oil price declines slowly in real terms (2005
dollars), from a 2006 average of more than $69 per barrel * * * to just
under $50 per barrel * * * in 2014 as new supplies enter the market,
then rises slowly to about $59 per barrel * * * in 2030.'' Thus the
2030 world oil price in the AEO 2007 reference case is slightly above
the 2030 price in the AEO 2006 reference case ($59 versus $57). It
should be noted that EIA specifically used the same rationale in
developing its projections in the AEO 2007 as it had in the AEO 2006,
indicating the following:

The world oil price in AEO2007 is defined as the average price
of low-sulfur, light crude oil imported into the United States--the
same definition used in AEO2006. This price is approximately equal
to the price of the light, sweet crude oil contract traded on the
New York Mercantile Exchange (NYMEX) and the price of West Texas
Intermediate (WTI) crude oil delivered to Cushing, Oklahoma. The
weighted average U.S. refiners' acquisition cost of imported crude
oil is $5 to $8 per barrel less than the price of imported low-
sulfur, light crude oil.

(AEO 2007.) For more information on the AEO 2007 (Early Release), see
http://www.eia.doe.gov./oiaf/aeo/index.html.
AEO High Price Case Description
The high price case makes ``more pessimistic assumptions for worldwide

[[Page 12052]]

crude oil and natural gas resources than in the reference case'' (AEO
2006, p. 204). In particular, OPEC resources and production capacity
are projected to be lower in this case. As a result, oil prices rise to
nearly $90/barrel by 2030. Even in the high price case, however, some
of the projected prices are lower than recent levels, rising to $70/
barrel in 2013 and $80/barrel in 2018. The high oil price forecast for
the next several years ranges from $50 to $60, roughly comparable to
today's prices. In this case, transportation energy demand also is
reduced because of high petroleum prices, which tend to encourage fuel
efficiency. At the same time, higher oil prices in general also
encourage more replacement fuel use. It should be noted that at the
time of preparation of this final rule, EIA had not yet released its
updated High price case for the AEO 2007.
DOE Program Development Case Description
Section 504(b) of EPAct 1992 requires that the goal, as modified,
be achievable. (42 U.S.C. 13254(b)) As part of the determination as to
whether a goal would be achievable, DOE considered technologies that
are technically and economically feasible today. DOE also considered
technologies that currently may not be technologically or economically
feasible, but that may be reasonably expected to be technologically and
economically feasible given the achievement of certain conditions in
the timeframes necessary to contribute to the goal. Many of these
technologies are currently being developed under DOE's own programs.
The DOE program development case represents the estimated potential
replacement fuel levels achieved if industry commercializes in
significant amounts the new technologies and new fuels being developed
by DOE and its industry partners through research and development
programs. These estimated levels are predicated on continuing existing
research and development activities and the achievement of technology
goals/milestones that have been set. They also depend on economic
targets being achieved and market acceptance of the technologies and
fuels reviewed; however, for the most part, they do not rely upon new
policy or regulatory initiatives. Information to support these cases
came primarily from the relevant EERE and Fossil Energy programs, and
included GPRA (Public Law 103-62; August 3, 1993) analyses and recently
released technical reports identifying potential contributions of
various fuel and vehicle technologies. (For more information concerning
GPRA analyses, see
http://www1.eere.doe.gov/ba/pba/gpra_estimates/fy_07.html.)
The technologies and fuels for which information was received from
DOE program offices include fuel efficiency measures, ethanol, gas-to-
liquid fuels, hydrogen, and electricity in PHEVs. The GPRA analysis was
specifically relied on for the figures used for the Hydrogen Program
and the fuel-efficiency savings rates projected for technologies
arising from the EERE's FCVT Program. It should be noted that the GPRA
figures are based on the AEO 2005 forecast and not AEO 2006 or AEO 2007
because AEO 2006 and AEO 2007 were not available when the most recent
GPRA analysis was conducted. The GPRA analyses are updated every 2 or 3
years and have not been updated since the publication of the NOPR. In
the case of hydrogen, therefore, this means that the analysis presented
here is based on AEO 2007. In the case of energy efficient vehicle
technology savings, DOE calculated a savings rate based on the 2007
GPRA report and applied this figure to AEO 2006's (or for the updated
Reference Case analysis for AEO 2007's) projection of on-road motor
fuel use.
The analysis conducted by DOE addressed a number of programs and
fuels that contribute to the Replacement Fuel Goal, including energy
efficiency measures, ethanol, biodiesel, coal-to-liquid fuels, gas-to-
liquid fuels, hydrogen, and other alternative fuels. These programs and
fuels were described in section V. of the NOPR. 71 FR 54776.

C. Replacement Fuel Scenarios

The previous section summarized the building blocks reviewed by
DOE. This section describes how the various building blocks are
combined into separate and distinct scenarios. Four scenarios were
considered: (1) The reference case projected by EIA in AEO 2006; (2)
the high price scenario presented in AEO 2006; (3) a combination of the
AEO 2006 reference case with achievement of program goals (designated
as program developments); and (4) a combination of the AEO 2006 high
price case with program developments. The different scenarios represent
the potential bounds for proposing a revised replacement fuel
production goal under sections 502 and 504 of EPAct 1992. The analysis
performed looked at values for replacement fuel penetrations in the
2020, 2025, and 2030 timeframes. Near the end of this section, a
comparison of the reference case analyses based upon the AEO 2006 and
AEO 2007 is provided.
Reference Case Scenario
As discussed earlier, the reference case represents the base case,
or the most conservative approach to projecting potential replacement
fuel production. The total projected replacement fuel production level
by the year 2030 is approximately 8.65 percent in this scenario based
upon AEO 2006. This level of petroleum replacement further assumes that
all CTL fuel is used for transportation purposes. Aside from this
assumption, the most noticeable difference between this scenario and
the ones that include the program development case is the relatively
low amount of biofuels that is projected to be used. (This is due to
assumptions made about technological progress of ethanol production
technologies in the program development case.) Results for this
scenario are provided in Figure 1.
---------------------------------------------------------------------------

\3\ On all summary results tables, the AEO 2006 cases have some
fuel efficiency savings built into the forecasts, as a result of
gradual improvements in vehicle technologies. The fuel efficiency
savings reflected in the line below in each table represent those
additional savings due to FCVT program developments.

Figure 1.--Summary of Results for Reference Case Scenario
------------------------------------------------------------------------
Reference 2020 2025 2030
------------------------------------------------------------------------
On-road Fuel Use \3\................... 14.42 15.36 16.46
Additional Fuel Efficiency Savings 0.00 0.00 0.00
(FCVT)................................
OnRoad Fuel Use w/Additional Fuel 14.42 15.36 16.46
Efficiency Savings....................
Ethanol................................ 0.49 0.51 0.51
Biodiesel.............................. 0.02 0.02 0.02
Hydrogen/FCVs.......................... 0.001 0.001 0.002
Coal to Liquids........................ 0.23 0.58 0.76

[[Page 12053]]

Gas to Liquids......................... 0.00 0.00 0.00
Other Alternative Fuels................ 0.10 0.11 0.12
Petroleum Use.......................... 13.58 14.14 15.03
--------------------------------
Total Replacement Fuel............. 0.84 1.22 1.42
------------------------------------------------------------------------
Portion Replacement Fuel............... 5.83% 7.95% 8.65%
------------------------------------------------------------------------
[Note: Results in million barrels per day (mbpd) unless otherwise noted]

High Price Case Scenario
The high price case, which predicts higher oil prices throughout
the forecast, indicates a potential for replacement fuel production
level that is double that in the reference case. By 2030, replacement
fuel production potentially accounts for 2.65 million petroleum
equivalent barrels per day, providing a replacement fuel production
level of 17.84 percent. The most notable changes in this forecast are
the reduction in total motor fuel consumption, dropping from 16.46 to
14.86 million barrels a day as a result of reduced demand, and the
significant increase in potential CTL production, which increases from
a level of 0.76 million barrels a day in the reference case to 1.69
million barrels a day in the high price case. Results for this scenario
are provided in Figure 2.

Figure 2.--Summary of Results for High Price Case Scenario
------------------------------------------------------------------------
High price 2020 2025 2030
------------------------------------------------------------------------
On-road Fuel Use....................... 13.20 13.97 14.86
Additional Fuel Efficiency Savings 0.00 0.00 0.00
(FCVT)................................
OnRoad Fuel Use w/Additional Fuel 13.20 13.97 14.86
Efficiency Savings....................
Ethanol................................ 0.54 0.60 0.62
Biodiesel.............................. 0.03 0.03 0.03
Hydrogen/FCVs.......................... 0.001 0.001 0.002
Coal to Liquids........................ 0.29 0.81 1.69
Gas to Liquids......................... 0.04 0.19 0.19
Other Alternative Fuels................ 0.09 0.10 0.11
Petroleum Use.......................... 12.21 12.24 12.21
--------------------------------
Total Replacement Fuel............. 0.99 1.73 2.65
------------------------------------------------------------------------
Portion Replacement Fuel............... 7.49% 12.37% 17.84%
------------------------------------------------------------------------
(Note: Results in mbpd unless otherwise noted).

Reference Case With Program Developments Scenario
This scenario combined the reference case assumptions regarding
transportation energy demand with projections for successful DOE
research and development programs. As in the reference case discussed
above, this case assumes that all the CTL production capacity
forecasted in the reference case is used for transportation purposes.
The reference case with program developments further assumes additional
fuel efficiency savings over and above those included in the reference
case based on the fuel efficiency improvements and change in vehicle
penetration rates attributed to commercialization of technologies
undergoing research and development at DOE. Each of the other program
initiatives discussed in this notice are factored into this scenario so
that estimates for replacement fuel production potential of GTL,
ethanol, biodiesel, and hydrogen are included. The potential impact of
combining these forecasts with the individual program goals results in
a replacement fuel production level potential of 35.25 percent in 2030.
The most significant differences from the two previous forecasts
(reference and high price stand-alone) are the incorporation of
additional efficiency savings and significant biofuels (ethanol and
biodiesel) production. The additional fuel efficiency improvements
represent over 3 mbpd savings by 2030. The two biofuels also combine to
replace more than 3 mbpd equivalent in this scenario. Results for this
scenario are provided in Figure 3.

Figure 3.--Summary of Results for Reference Case With Program
Development Scenario
------------------------------------------------------------------------
Reference/program goals 2020 2025 2030
------------------------------------------------------------------------
On-road Fuel Use....................... 14.42 15.36 16.46
Additional Fuel Efficiency Savings 0.55 1.11 3.04
(FCVT)................................
OnRoad Fuel Use w/ Additional Fuel 13.88 14.25 13.42
Efficiency Savings....................
Ethanol................................ 1.33 1.95 2.58
Biodiesel.............................. 0.37 0.51 0.65
Hydrogen/FCVs.......................... 0.001 0.16 0.47
Coal to Liquids........................ 0.23 0.58 0.76
Gas to Liquids......................... 0.05 0.15 0.15

[[Page 12054]]

Other Alternative Fuels................ 0.10 0.11 0.12
Petroleum Use.......................... 11.81 10.79 8.64
--------------------------------
Total Replacement Fuel............. 2.07 3.46 4.73
Portion Replacement Fuel............... 14.94% 24.27% 35.25%
------------------------------------------------------------------------
(Note: Results in mbpd unless otherwise noted).

High Price Case With Program Developments
This scenario combines the high price case assumptions with the
program developments. It includes the same assumptions regarding CTL
use as discussed above. The program development assumptions regarding
potential replacement fuels and fuel efficiency savings are the same as
used in the previous scenario. The major difference in this scenario is
that CTL production more than doubles due to higher oil prices. Ethanol
and biodiesel again demonstrate the potential to replace a significant
amount of petroleum. The higher oil prices, however, have the effect of
reducing overall motor fuel use, which magnifies the potential
replacement fuel levels. The result in this scenario is a maximum
potential replacement fuel level of 47.06 percent. Results for this
scenario are provided in Figure 4.

Figure 4.--Summary of Results for High Price Case With Program
Development Scenario
------------------------------------------------------------------------
High price/program goals 2020 2025 2030
------------------------------------------------------------------------
On-Road Fuel Use....................... 13.20 13.97 14.86
Additional Fuel Efficiency Savings 0.50 1.01 2.74
(FCVT)................................
On-Road Fuel Use w/Additional Fuel 12.70 12.96 12.12
Efficiency Savings....................
Ethanol................................ 1.33 1.95 2.58
Biodiesel.............................. 0.37 0.51 0.65
Hydrogen/FCVs.......................... 0.001 0.16 0.47
Coal to Liquids........................ 0.29 0.81 1.69
Gas to Liquids......................... 0.05 0.15 0.20
Other Alternative Fuels................ 0.09 0.10 0.11
Petroleum Use.......................... 10.58 9.28 6.41
--------------------------------
Total Replacement Fuel............. 2.12 3.68 5.70
------------------------------------------------------------------------
Portion Replacement Fuel............... 16.710% 28.400% 47.060%
------------------------------------------------------------------------
Note: Results in mbpd unless otherwise noted.

D. DOE's VISION Model Analysis

To validate the results of its analysis, DOE used the VISION model
to look at what the vehicle mix would have to be for the replacement
fuel production levels suggested by the different scenarios considered.
The Replacement Fuel Goal is a production capacity goal not a fuel use
goal. However, production capacity (supply) is tightly linked with fuel
usage (demand). The primary purpose of the VISION modeling exercise was
to verify the replacement fuel production levels were reasonable given
various potential vehicle mixes and fuel availability. The secondary
use was to project the greenhouse emission impacts under each of the
scenarios. (For more information on VISION, see
http://www.transportation.anl.gov/software/VISION/index.html.)
The VISION model results matched very closely with those from the
analysis for this rule. In most cases the VISION model projected
slightly higher replacement fuel levels due to differences in
assumptions about overall petroleum consumption, efficiency gains, and
heating values for fuels. The projected emission results indicated that
the annual emissions will decrease from approximately 846 million
metric tons of carbon equivalent (MMTCe) for the AEO 2006 reference
case scenario, to just under approximately 500 MMTCe for the AEO 2006
reference case with program development scenario. Additional results
and discussion on the VISION results for vehicle mix and greenhouse
emissions impact can be found in section V.D. of the NOPR. 71 FR 54783.
One commenter pointed out apparent discrepancies between the EIA
and VISION model analyses concerning the makeup of the LDV market.
While DOE acknowledges that these two analyses differ somewhat in their
pathways, they are in relative agreement on the overall destination
points. Comparison of the VISION model with the combined scenarios
validates that the combination of replacement fuels analyzed by DOE, is
achievable under the framework of this rule.

E. AEO 2007 Results

DOE utilized AEO 2006 in conducting the analysis for the NOPR. In
December 2006, EIA began to make available portions of its AEO 2007.
(See http://www.eia.doe.gov/oiaf/aeo/index.html.) EIA released its
reference case update, which allowed DOE to conduct comparative
analysis of its Replacement Fuel Goal analysis, namely the two
scenarios based specifically upon the reference case. At the time of
preparation of this final rule, EIA had not yet released its high price
case, thus DOE could not update all four scenarios.
Overall, the AEO 2007 update did result in a few differences in the
Replacement Fuel Goal analysis, although overall (net) impacts were
relatively minor. Figure 5 below shows a comparison of the year 2030
results for the reference case scenario and the reference case with
program developments scenario (portrayed in the table as ``Reference/
Program Goals'').

[[Page 12055]]

Figure 5.--Summary of Results for Reference Case and Reference Case With Program Development Scenarios for 2030
----------------------------------------------------------------------------------------------------------------
Reference Reference Reference/ Reference/
case case program program
AEO ------------------------ goals goals
-----------------------
2006 2007 2006 2007
----------------------------------------------------------------------------------------------------------------
On-Road Fuel Use................................................ 16.46 16.27 16.46 16.27
Additional Fuel Efficiency Savings (FCVT)....................... 0.00 0.00 3.04 3.01
On-Road Fuel Use w/Additional Fuel Efficiency Savings........... 16.46 16.27 13.42 13.26
Ethanol......................................................... 0.51 0.62 2.58 2.58
Biodiesel....................................................... 0.02 0.03 0.65 0.65
Hydrogen/FCVs................................................... 0.002 0.002 0.47 0.47
Coal to Liquids................................................. 0.76 0.44 0.76 0.44
Gas to Liquids.................................................. 0.00 0.00 0.15 0.15
Other Alternative Fuels......................................... 0.12 0.11 0.12 0.11
Petroleum Use................................................... 15.03 15.07 8.64 8.87
-----------------------------------------------
Total Replacement Fuel...................................... 1.42 1.20 4.73 4.39
----------------------------------------------------------------------------------------------------------------
Portion Replacement Fuel........................................ 8.65% 7.38% 35.25% 33.13%
----------------------------------------------------------------------------------------------------------------
(Note: Results in mbpd unless otherwise noted.)

The first change seen from the AEO 2007 reference case update is
that motor fuel use drops from 16.46 to 16.27 mbpd. As for the
replacement fuels, ethanol and biodiesel increase slightly, while CTL
drops significantly. This change in the biofuels reflects EIA's
readjusting for the RFS and the accompanying increased use of blends.
EIA has indicated that the primary cause for the change to the CTL
projection is higher capital costs. Discussions with industry indicated
that the capital costs for CTL facilities were higher than originally
anticipated, resulting in less facilities being built. Other
alternative fuels are relatively flat however, and within this number
electricity actually grows by nearly 40 percent over the AEO 2006 with
a corresponding reduction in liquid petroleum gas. Overall these
figures are very small and the changes are a reflection of minor
adjustments in EIA's earlier assumptions. AEI also indicated that PHEVs
were incorporated in their modeling analysis but that the resulting
electricity use was negligible. The overall impact on the reference
case replacement fuel percentage is to reduce the replacement fuel
contribution from 8.65 percent down to 7.38 percent, a change of
approximately 1.3 percentage points or 15 percent.
The impact of the 2007 AEO reference case update has much less
overall significance to the reference case plus program developments
scenario. This is because the efficiency contribution and many of the
replacement fuel contributions in this scenario were the result of
programmatic inputs, such as from GPRA or other technical analyses
conducted by DOE's research and development programs. These did not
change, as new analyses have not been conducted by the programs since
publication of the NOPR. The programmatic inputs include additional
fuel efficiency savings (implemented solely as an unchanging percentage
of overall on-road fuel use), ethanol, biodiesel, hydrogen, and GTL.
Thus, the biggest impact on this scenario came from the EIA change to
its reference case projection for CTL (which was used in both the
reference case and reference case plus program developments scenarios
of this analysis). The resulting impact was to reduce the replacement
fuel contribution under the reference case plus program developments
scenario slightly from 35.25 percent to 33.13 percent, a reduction of
just over 2 percentage points or 6 percent.
In summary, overall, the changes due to the use of the AEO 2007
reference case did not result in major impacts on the replacement fuel
analysis as included in the NOPR. Thus, DOE did not see sufficient
changes to warrant modifying the Replacement Fuel Goal as proposed in
the NOPR.

F. Additional Reports

DOE also reviewed additional reports and analyses released during
the period since the NOPR that are relevant to the development of the
final rule. DOE notes three such reports.
In October 2006, the Council on Foreign Relations (CFR) released
National Security Consequences of U.S. Oil Dependency, Report of an
Independent Task Force (CFR Report). The CFR task force is chaired by
John Deutsch (former director of Central Intelligence and Deputy
Secretary of Defense) and James R. Schlesinger (former Secretary of
Defense and the first Secretary of Energy). This report was focused on
examining ``the consequences of dependence on imported energy for U.S.
foreign policy.'' In doing so, it focused its attention on ``how oil
consumption (or at least growth in consumption) can be reduced and why
and how energy issues must become better integrated with other aspects
of U.S. foreign oil policy.'' (See CFR Report p. xi.) Consistent with
DOE's analysis supporting today's final rule, the Council's analysis
``concentrates on the next twenty years, a period long enough to put
necessary policy measures into place but not so distant as to encounter
a wider range of future geopolitical or technological uncertainties.''
(See CFR Report p. 4.) The Council then went on to emphasize many of
the same technologies that DOE relies upon in today's action, such as
energy efficiency, batteries, fuel cells, and biofuels. The Council
also pointed out, as DOE did in the NOPR, that energy market forces are
now leading to innovation by encouraging entrepreneurs to invest in new
energy products and services, particularly research and development.
While focusing on a different objective than today's final rule, the
CFR Report relied on many assumptions and analyses that appear
consistent with those employed by DOE in today's action.
In November 2006, the President's Council of Advisors on Science
and Technology (PCAST) released The Energy Imperative: Technology and
the Role of Emerging Companies (PCAST Report). PCAST was formed under
Executive Order 13226 in September 2001 to advise the President ``on
matters

[[Page 12056]]

involving science and technology policy.'' The PCAST Report
recommendations focus on ``immediate steps that could be taken to
reduce our Nation's reliance on foreign oil and to reduce atmospheric
emissions from energy production and use.'' (PCAST Report cover
letter.) For transportation, PCAST suggests ``steps for a major
transition to biofuels and to electric or hydrogen-powered vehicles.''
(PCAST Report cover letter.) The major transportation-related
recommendations focus specifically on increasing production of and
demand for biofuels, as well as reviewing CAFE standards to make needed
reforms and encourage non-fossil-fuel use. Thus, the PCAST report
highlights two of the more important elements of DOE's replacement fuel
analysis, biofuels and energy efficiency, and is also generally
consistent with the President's recent State of the Union Address.
The Energy Security Leadership Council (ESLC) released
Recommendations to the Nation on Reducing U.S. Oil Dependence in
December 2006. ESLC is chaired by General P.X. Kelley, USMC (Ret.), the
former Commandant of the Marine Corps, and Frederick W. Smith,
Chairman, President, and CEO, FedEx Corporation. Other Council members
include various leaders of industry as well as former Defense and
Homeland Security officials and high-ranking military officers. As in
today's action, the Council used the year 2030 as its focal point for
analysis. Consistent with the DOE's Replacement Fuel Goal analysis,
ESLC focused heavily upon improved efficiency of vehicles and
increasing supply and demand of biofuels. Its corollary recommendations
included suggestions relating to improving the efficiency of medium-
and heavy-duty trucks (through both hybrid technologies and fuel
efficiency standards) and carbon sequestration (to enable coal-to-
liquids and other fuels production). Thus, the ESLC's portfolio also
appears to be generally consistent with the portfolio relied upon by DOE.
Each of these reports provides interesting and thoughtful
perspectives on issues that are closely related to those addressed in
this final rule. While the reports do not include quantitative analyses
that would either support or undercut DOE's analysis, they do use
approaches that are similar to those used by DOE and they draw
conclusions that appear to be generally consistent with those reached
by DOE in this final rule. For example, each focused on a portfolio of
options, with the greatest emphasis on energy efficiency, biofuels, and
other non-petroleum fuels. They also considered 20-25 year time-frames,
similar to those used by DOE.

G. Other Issues

Domestic Content
Section 502(b)(2) of EPAct 1992 directs that of the replacement
fuels counted in the goal, at least half must be domestic replacement
fuels. (42 U.S.C. 13252(b)(2)) The replacement fuels analyzed for
today's final goal are assumed to be primarily domestic in nature. The
only replacement fuels analyzed that showed potential for being
imported are GTL, which represent a relatively small contribution to
the overall goals. In addition, the small amount of GTL fuels included
in the analysis was assumed to be based solely upon domestic resources.
Ethanol imports are also assumed to be small. All biodiesel, CTL, and
hydrogen are assumed to be domestic. Thus, DOE has assumed that the
overwhelming majority of the replacement fuels included in its analyses
will be domestic in nature. However, since the actual contribution of
imports to the supply of these replacement fuels will be determined by
markets, DOE intends to closely monitor the development of markets in
this area. If it determines that these assumptions are not valid, it
will consider whether changes in the Replacement Fuel Goal are warranted.
One commenter did indicate a concern about any assumptions that may
have been made about exports of replacement fuels, and that any
decision to reduce exports might constitute a major shift in trade
policy. It should be remembered that the Replacement Fuel Goal is a
production capacity goal. Therefore, for the purposes of the analysis,
DOE was concerned with whether there would be sufficient capacity to
produce a given amount of replacement fuels. A consideration of whether
some portion of those fuels might ultimately be exported, if export was
the opportunity that made the most sense, was outside the scope of
DOE's analysis.
GHG
As part of its analysis of the replacement fuel levels considered
in this Final Rule, DOE evaluated the overall GHG implications of the
various scenarios. All scenarios show reduced carbon emissions over the
reference case. Carbon emissions are reduced because more fuel
efficient vehicles are used in these scenarios and the replacement
fuels in general are less carbon intensive than petroleum motor fuels.
The exception is the GHG emissions associated with CTL fuels if the
carbon dioxide emitted during fuel production is not captured and
sequestered. EIA indicates that there are currently no plans to
sequester the carbon associated with CTL production absent new policies
or requirements, so DOE has not assumed such emissions will be
sequestered. Even with the increased emissions of GHG from CTL, the net
effect of the replacement fuel production goal proposed in today(s
notice is a substantial reduction in GHG emissions.
On a life cycle basis, replacement fuel percentages projected by
the VISION model goal would achieve a reduction in GHG emissions of
over 40 percent compared to the reference case. The annual emissions
are projected to decrease from 846.5 million metric tons of carbon
equivalent (MMTCe) from fuel mix represented by the AEO 2006 reference
case scenario, to just under 500 MMTCe from the fuel mix represented by
the fuel mix that most closely represents the AEO 2006 reference case
with program development scenario. This projected reduction is
primarily due to the high utilization of biofuels, most of which have
significantly lower carbon emissions than petroleum-based fuels,
especially when derived from biomass. As noted earlier, the exact
carbon emissions cannot be pinpointed as the mix of fuels may
ultimately be different than that projected; however, it is expected
that significant reductions would occur.
The full VISION model is typically not updated until the middle of
the calendar year, several months after release of all of the Annual
Energy Outlook. Therefore, it was not possible to conduct a complete
update to the GHG emission analysis conducted for the NOPR. A
preliminary effort was made, focusing primarily upon the contribution
from CTL because it was the only component of the analysis that changed
significantly that could have a detrimental impact on GHG. Initial
estimates indicate that GHG emissions from CTL are significantly
greater than previously estimated. Additional studies since the
original NOPR analysis indicated that the life-cycle GHG emissions from
CTL produced was underestimated. At the same time, however, the updated
analyses based upon the AEO2007 reference case indicate that the CTL
contribution in the 2030 time-frame will be considerably less than
estimated in the NOPR. The increase in per unit GHG emissions was of a
comparable degree to the decrease in the projected contribution of CTL
to the replacement fuel market. Thus, according to the most current
analysis,

[[Page 12057]]

the net result is that there is no change in GHG emissions as compared
to the estimates in the NOPR. There is still a projected 40 percent
drop in GHG emissions versus the baseline reference case.
One commenter took particular issue with DOE's approach to its GHG
analysis. This commenter claimed that DOE used the wrong baseline for
assessing GHG emissions. The commenter indicated that DOE should have
used the levels ``the U.S. would have achieved if DOE had implemented
Congress's original fuel replacement goals.'' DOE disagrees with this
comment.
First, as stated above, the goal established by Congress and
modified today is not a mandate. DOE's authority is limited to
supporting achievement of the goal, reviewing the goal, and modifying
the goal. As such, the commenter's suggestion that DOE was required to
implement the goals is a mischaracterization.
Second, the baseline suggested by the commenter would be based upon
a hypothetical fuel mix used to meet the goal in 2010. Since DOE has
found that the goal is unachievable, it does not know what the fuel mix
would have been in 2010 to achieve a 30 percent level. This fuel mix is
critical for determining the baseline contribution of GHGs. Without
such a breakdown, no such estimate can be made.

VI. Modified Goal

A. 30 Percent by 2030

DOE is establishing a modified Replacement Fuel Goal of 30 percent
by 2030. The modified Replacement Fuel Goal is based primarily on the
evaluation of four scenarios across a range of probable market
conditions and involves a portfolio of technology options as presented
in the NOPR. The four scenarios project a replacement fuel percentage
that ranges from just over 7 percent to a little above 47 percent in
the 2030 timeframe. DOE selected a goal that falls near the middle of
this range, providing a balance between the most optimistic and
pessimistic scenarios analyzed by DOE. Based on the analysis as
presented in the NOPR and summarized in this notice DOE determines that
a fuel production capacity of 30 percent by 2030 is achievable.
Section 504 makes clear that achievability of the goal is key, both
for analysis of the goal as well as modifying the goal. (42 U.S.C.
13245(b).) EPAct 1992, however, does not define ``achievable'' for the
purpose of modifying the goal. Section 502(b)(2) directs DOE to
consider the technological and economic feasibility of the statutory
goal in determining the goal's achievability under the initial review
(42 U.S.C. 13242(b)(2).) As stated in the NOPR, DOE has determined that
in order for a goal to be achievable there must be a reasonable
expectation, based on technological and economic feasibility, that the
desired level of production capacity will be created within the
relevant timeframe. In order to further ensure that the final goal is
achievable, as discussed above, the final rule generally considered
only policies and programs that are currently in place.
In establishing the Replacement Fuel Goal adopted today, DOE
assumed that not all technologies would be fully adopted into the
marketplace. This assumption is consistent with statements provided by
one commenter, who stated that to assume that research and development
programs will accomplish all of their goals is unrealistic. This
assumption provides an appropriate balance between the statutory
requirements of the ``maximum extent practicable'' and ``achievable.''
DOE has determined that a timeframe of 2030 is necessary to achieve
the 30 percent level of the Replacement Fuel Goal adopted today. There
are important reasons why a timeframe extending out to 2030 is required
to make major changes in motor fuel consumption patterns and thus
production levels--the lead-time for investments to begin and bear
fruit, and the retirement cycles for U.S. vehicles.
Major investments of capital are required to establish industrial
capacity to produce replacement fuels. Such investments are typically
focused over the entire operating life of a production facility (often
30 years) and potential investors may require a high degree of
certainty that the cost of competing fuels will be higher than the cost
of fuels produced by the subject plant far into the future, thus
allowing a positive return on investment. Barriers to such major
investments include uncertainty of world oil prices, high cost of
production coupled with high initial capital cost, and the long
decision-to-production lead times.
Once investments are made to develop replacement fuel production,
production facilities must be built. It can take five years or more
from the start of construction on a new facility until full operation
is achieved, depending on the complexity and size of the production
facility involved. Achievement of the 30 percent Replacement Fuel Goal
is projected to require a substantial number of new production
facilities (such as plants to produce cellulosic ethanol and CTL
fuels). Construction of production facilities is not expected to occur
simultaneously, thereby resulting in an additional five or even ten
years until production capacity is at a level necessary to achieve the
Replacement Fuel Goal.
Many of the investments anticipated in 1992 have only recently
begun. Recent high oil prices are beginning to spur more investment in
alternative and replacement fuels, but not fast enough to allow DOE to
set a 2010 replacement fuel production goal at levels any higher than
the AEO 2007 ( ~4.5 percent).
Although the Replacement Fuel Goal is production (supply) based,
production is closely linked to fuel usage (demand). On the vehicle
side, a similar period of lead-time is typically required to make a
significant impact on U.S. fuel consumption patterns. This is because
it takes more than 25 years to turn over the U.S. fleet of in-use motor
vehicles. According to the 25th Edition of the Transportation Energy
Data Book (TEDB 25, U.S. DOE and Oak Ridge National Laboratory, ORNL-
6974, 2006), after 30 years, approximately 93 percent of the 1990 model
year vehicles are projected to be retired, and slightly less than 96
percent of the 1990 model year light trucks will have been scrapped.
The median lifetime for 1990 cars is now 16.9 years, and 15.5 years for
1990 light trucks. While the truck numbers are relatively consistent
(compared to 1970 and 1980 model years), the car numbers have increased
substantially (from 11.5 years in 1970 and 12.5 years in 1980).
The effects of this can be seen by a U.S. vehicle population of 226
million in 2003, with annual new LDV sales of approximately 16.5-17
million/year (or approximately equal to 7 percent of the size of the
in-use fleet). Thus, any replacement fuel or higher efficiency
technology which requires actual replacement of vehicles must be phased
into the U.S. fleet of vehicles over a number of years to eventually
account for a significant portion of in-use vehicles. (See TEDB, Tables
3.8, 3.9, 4.5, 4.6, and 8.1.)
DOE has determined to maintain the level of the goal at 30 percent
for two reasons. First, when Congress passed EPAct 1992, it indicated
that it believed the level of 30 percent replacement fuel was
appropriate. Second, this level of replacement fuel production is both
consistent with the overall goals of the President's AEI and Twenty in
Ten initiatives, to promote replacement fuels and energy efficiency.

[[Page 12058]]

Since DOE's analysis of the Replacement Fuel Goal was originally
published in the NOPR, DOE has continued to review relevant data and
published reports to inform today's decision. Overall, the reports
appear to rely on an analytical framework consistent with that relied
upon for today's final rule, further supporting the reasonableness of
DOE's approach.
DOE also reviewed comments received in response to the NOPR and
found that none included data to support a Replacement Fuel Goal other
than that adopted in this final rule. It should be noted that nearly
all of the public comments agreed with the need to modify the goal, but
a majority disagreed with the Department's choice to move the goal to
2030. As discussed above in section III, a variety of commenters
requested that DOE establish a more aggressive goal with a stronger
focus upon program development and implementation. While a number of
these commenters indicated that they wanted to see DOE set a ``higher
goal,'' few offered concrete proposals as to what that goal should be
and how it could be achieved.
DOE is required to set a goal that is deemed achievable. As
illustrated in the analysis above and that provided in the NOPR, DOE
has set out a rational pathway to the achievement of a goal, based upon
widely accepted forecasts (such as the EIA forecast) and information
provided by DOE research and development programs. In addition, the
documents provided by the research and development programs and
included within the docket, include the individual pathways for
contributing to the achievement of the modified Replacement Fuel Goal.
As for utilizing either of the ``program developments'' cases as the
specific goal level, DOE explicitly rejected a goal based solely on
these levels because of the fact that not all research and development
programs can be expected to achieve all milestones. DOE is unable to
set a more accelerated pathway based upon the information it has at
this time.
In summary, due to both lead-times for fuel supply investments and
the time required to turn over nearly all of the U.S. fleet of
vehicles, a significant change in the utilization of U.S. motor fuel
consumption patterns could take more than two decades. Today's decision
is based primarily on the existing budgetary and policy framework.
Therefore, it is largely a reflection of existing and expected
conditions. In and of itself, it is not an action plan or roadmap for
expanding replacement fuel production capacity. Nothing in this action
precludes appropriate parties (such as Federal, State, or local
governments, or private industry) from taking steps to accelerate
achievement of the goal.

B. Interim Goal

As proposed, today's final rule adopts a revised the Replacement
Fuel Goal for 2030. Today's rule does not adopt an interim Replacement
Fuel Goal. The court order under which today's final rule is being
issued, directed DOE to ``revise the goal for replacement fuels
contained in the Energy Policy Act of 1992.'' Center for Biological
Diversity v. U.S. Dept. of Energy et. al., No. 05-cv-01526-WHA Document
54 p. 2 (N.D. Cal. March 30, 2006) (Order Re Timing of Relief);
emphasis added. As indicated by the court, DOE is only required to
revise a single goal, and not the final goal and the interim goal.
Several commenters urged DOE to establish a revised interim goal in
conjunction with a revised final goal. Commenters stated that Congress
established the ten percent by 2000 interim goal as a method of
evaluating the Nation's progress in achieving the original thirty
percent by 2010 final goal. Commenters further stated that a revised
interim goal is necessary to provide for an evaluation of progress
towards achieving the revised goal, and is necessary so that DOE may
identify difficulties in achieving the revised goal earlier in the process.
A revised interim goal is not necessary for evaluating the progress
in achieving the revised final goal adopted in today's final rule. The
EIA AEO provides the current production capacity of alternative fuel in
comparison to the consumption of motor fuel in the Untied States. The
EIA AEO provides a de facto report on the progress in achieving the
revised Replacement Fuel Goal. As such, DOE determined that an interim
goal is not needed to monitor the progress of the Replacement Fuel Goal.
Further, DOE will periodically evaluate the prospects for achieving
the Replacement Fuel Goal set in today's rule, including tracking the
levels projected for intervening years, and will publish the results of
its evaluations as appropriate. If the AEO projections should indicate
that the goal, as revised in this action, no longer meets the criteria
of achievable, or if it appears that the goal can be achieved earlier
or a greater level can be achieved, DOE will institute a rulemaking
process to modify the goal at that time.

VII. Regulatory Review

A. Review Under Executive Order 12866

Today's final rule action has been determined to be a ``significant
regulatory action'' under Executive Order 12866, Regulatory Planning
and Review, 58 FR 51735 (October 4, 1993). Accordingly, this action was
subject to review under the Executive Order by the Office of Information
and Regulatory Affairs in the Office of Management and Budget.

B. Review Under Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires
preparation of a regulatory flexibility analysis for any rule that is
likely to have a significant economic impact on a substantial number of
small entities. Today's action merely modifies the Replacement Fuel
goal, with no requirements imposed upon any entity. Therefore, this
action will not result in compliance costs on small entities. DOE
certifies that this final rule will not have a significant economic
impact on a substantial number of small entities, and accordingly, no
regulatory flexibility analysis has been prepared.

C. Review Under the Paperwork Reduction Act

No new record keeping requirements, subject to the Paperwork
Reduction Act, 44 U.S.C. 3501, et seq., are imposed by this final rule.

D. Review Under the National Environmental Policy Act of 1969 (NEPA)

DOE has not prepared an environmental impact statement (EIS) or an
environmental assessment (EA) for the final rule, as neither is
required. The final rule implements the March 6, 2006, Order of the
U.S. District Court of California to modify the EPAct 1992 Replacement
Fuel Goal. Center for Biological Diversity, 419 F.Supp 2d 1166. In its
order, the Court determined that EPAct 1992 imposed mandatory action on
the Secretary in requiring that the goal be modified, if the Secretary
determines the goal is unachievable. Since DOE lacked discretion, the
Court determined that NEPA did not apply. In the final rule, DOE has
determined that the ``30 percent by 2010'' goal is unachievable.
Therefore, modification of the goal is mandatory, and consistent with
the Court's Order, neither an EA or EIS is required.

E. Review Under Executive Order 12988

With respect to the review of existing regulations and the
promulgation of

[[Page 12059]]

new regulations, section 3(a) of Executive Order 12988, Civil Justice
Reform, 61 FR 4729 (February 7, 1996), imposes on Executive agencies
the general duty to adhere to the following requirements: (1) Eliminate
drafting errors and ambiguity; (2) write regulations to minimize
litigation; and (3) provide a clear legal standard for affected conduct
rather than a general standard and promote simplification and burden
reduction. With regard to the review required by sections 3(a) and 3(b)
of Executive Order 12988 specifically requires that Executive agencies
make every reasonable effort to ensure that the regulation: (1) Clearly
specifies the preemptive effect, if any; (2) clearly specifies any
effect on existing Federal law or regulation; (3) provides a clear
legal standard for affected conduct while promoting simplification and
burden reduction; (4) specifies the retroactive effect, if any; (5)
adequately defines key terms; and (6) addresses other important issues
affecting clarity and general draftsmanship under any guidelines issued
by the Attorney General. Section 3(c) of Executive Order 12988 requires
Executive agencies to review regulations in light of applicable
standards in sections 3(a) and 3(b) to determine whether they are met
or it is unreasonable to meet one or more of them. Executive Order
12988 does not apply to this rulemaking notice because DOE is merely
modifying the Replacement Fuel Goal provided in section 502(b)(2) of
EPAct 1992, and is not establishing any regulations that would impose
any requirements on any person or entity.

F. Review Under Executive Order 13132

Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999),
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions. DOE has examined today's modification of
the Replacement Fuel Goal and has determined that it will not preempt
State law and will not have a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government.

G. Review of Impact on State Governments--Economic Impact on States

Section 1(b)(9) of Executive Order 12866, Regulatory Planning and
Review, 58 FR 51735 (September 30, 1993), established the following
principle for agencies to follow in rulemakings: ``Wherever feasible,
agencies shall seek views of appropriate State, local, and tribal
officials before imposing regulatory requirements that might
significantly or uniquely affect those governmental entities. Each
agency shall assess the effects of Federal regulations on State, local,
and tribal governments, including specifically the availability of
resources to carry out those mandates, and seek to minimize those
burdens that uniquely or significantly affect such governmental
entities, consistent with achieving regulatory objectives. In addition,
as appropriate, agencies shall seek to harmonize Federal regulatory
actions with regulated State, local and tribal regulatory and other
governmental functions.''
Because DOE is modifying the Replacement Fuel Goal under section
502(b)(2) of EPAct 1992, and is not establishing any requirements, no
significant impacts upon State and local governments are anticipated.
The position of State fleets currently covered under the existing EPAct
1992 fleet program is unchanged by this action.

H. Review of Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995, Public Law
104-4, requires each Federal agency to assess the effects of Federal
regulatory actions on State, local and tribal governments and the
private sector. The Act also requires a Federal agency to develop an
effective process to permit timely input by elected officials on a
proposed ``significant intergovernmental mandate,'' and requires an
agency plan for giving notice and opportunity for timely input to
potentially affected small governments before establishing any
requirements that might significantly or uniquely affect small
governments. On March 18, 1997, DOE published in the Federal Register a
statement of policy on its process for intergovernmental consultation
under the Act. 62 FR 12820. The final rule published today does not
establish or contain any Federal mandate, so the requirements of the
Unfunded Mandates Reform Act do not apply.

I. Review of Treasury and General Government Appropriations Act, 1999

Section 654 of the Treasury and General Government Appropriations
Act, 1999, Public Law 105-277, requires Federal agencies to issue a
Family Policymaking Assessment for any proposed rule that may affect
family well-being. Today's final rule does not have any impact on the
autonomy or integrity of the family as an institution. Accordingly, DOE
has concluded that it is not necessary to prepare a Family Policymaking
Assessment.

J. Review of Treasury and General Government Appropriations Act, 2001

The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by the Office of
Management and Budget (OMB). OMB's guidelines were published at 67 FR
8452 (February 22, 2002), and DOE's guidelines were published at 67 FR
62446 (October 7, 2002). DOE has reviewed today's final rule under the
OMB and DOE guidelines, and has concluded that it is consistent with
applicable policies in those guidelines.

K. Review Under Executive Order 13175

Under Executive Order 13175, Consultation and Coordination with
Indian Tribal Governments, 59 FR 22951 (November 9, 2000), DOE is
required to consult with Indian tribal officials in development of
regulatory policies that have tribal implications. Today's final rule
does not have such implications. Accordingly, Executive Order 13175
does not apply.

L. Review Under Executive Order 13211

Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy, Supply, Distribution, or Use, 66 FR 28355
(May 22, 2001) requires preparation and submission to OMB of a
Statement of Energy Effects for significant regulatory actions under
Executive Order 12866 that are likely to have a significant adverse
effect on the supply, distribution, or use of energy. A modification to
the Replacement Fuel Goal under EPAct 1992 section 502(b)(2) does not
require fleets, suppliers of energy, or distributors of energy to do or
to refrain from doing anything. Consequently, DOE has concluded there
is no need for a Statement of Energy Effects.

[[Page 12060]]

M. Congressional Notification

As required by 5 U.S.C. 801, DOE will submit to Congress a report
regarding the issuance of today's Final Rule prior to the effective
date set forth at the outset of this Final Rule. The report will state
that it has been determined that the rule is not a ``major rule'' as
defined by 5 U.S.C. 801(2).

VIII. Approval by the Office of the Secretary

The issuance of this Final Rule for the Replacement Fuel Goal
modification has been approved by the Office of the Secretary.

List of Subjects in 10 CFR Part 490

Administrative practice and procedure, Energy conservation, Fuel
economy, Gasoline, Motor vehicles, Natural gas, Penalties, Petroleum,
Reporting, and recordkeeping requirements.

Issued in Washington, DC, on March 6, 2007.
Alexander A. Karsner,
Assistant Secretary, Energy Efficiency and Renewable Energy.

? For the reasons set forth in the Preamble, the Department of Energy is
amending Chapter II of title 10 of the Code of Federal Regulations as
set forth below:

PART 490--ALTERNATIVE FUEL TRANSPORTATION PROGRAM

? 1. The authority citation for part 490 is revised to read as follows:

Authority: 42 U.S.C. 7191 et seq.; 42 U.S.C. 13201, 13211,
13220, 13251 et seq.

? 2. In Sec. 490.1 of subpart A, paragraph (b) is revised to read as
follows:

Sec. 490.1 Purpose and Scope.

* * * * *
(b) The provisions of this subpart cover:
(1) The definitions applicable throughout this part;
(2) Procedures to obtain an interpretive ruling and to petition for
a generally applicable rule to amend this part; and
(3) The goal of the replacement fuel supply and demand program
established under section 502(a) of the Act (42 U.S.C. 13252(a)).

? 3. Subpart A is amended by adding Sec. 490.8 to read as follows:

Sec. 490.8 Replacement fuel production goal.

The goal of the replacement fuel supply and demand program
established by section 502(b)(2) of the Act (42 U.S.C. 13252(b)(2)) and
revised by DOE pursuant to section 504(b) of the Act (42 U.S.C.
13254(b)) is to achieve a production capacity of replacement fuels
sufficient to replace, on an energy equivalent basis, at least 30
percent of motor fuel consumption in the United States by the year 2030.

[FR Doc. E7-4324 Filed 3-14-07; 8:45 am]
BILLING CODE 6450-01-P

Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Alternative Fuel Transportation Program; Replacement Fuel Goal Modification

Local Navigation