This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

52867 

Vol. 74, No. 198 

Thursday, October 15, 2009 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and 

Renewable Energy 

10 CFR Part 452 

RIN 1904–AB73 

Production Incentives for Cellulosic 

Biofuels; Reverse Auction Procedures 

and Standards 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, U.S. Department of 

Energy. 

ACTION: Final rule. 

SUMMARY: The Department of Energy 

(DOE) today publishes a final rule 

establishing the procedures and 

standards for reverse auctions of 

production incentives for cellulosic 

biofuels pursuant to section 942 of the 

Energy Policy Act of 2005 (EPAct 2005). 

DATES: This final rule is effective 

November 16, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Lawrence J. Russo, Jr., Office of Biomass 

Program, U.S. Department of Energy, 

Mailstop EE–2E, Room 5H021, 1000 

Independence Avenue, SW., 

Washington, DC 20585; (202) 586–5618 

or larry.russo@ee.doe.gov; or Mr. 

Edward Myers, Office of the General 

Counsel, U.S. Department of Energy, 

Mailstop GC–72, Room 6B–256, 1000 

Independence Avenue, SW., 

Washington, DC 20585; (202) 586–3397 

or edward.myers@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background and Overview 

II. Discussion of Comments and 

Modifications of Proposed Rule 

A. Comments of Dupont Danisco Cellulosic 

Ethanol, LLC 

B. Energy Independence and Security Act 

of 2007 

C. Heating Value 

D. Commercial Suitability 

III. Regulatory Review 

A. Executive Order 12866 

B. National Environmental Policy Act 

C. Regulatory Flexibility Act 

D. Paperwork Reduction Act 

E. Unfunded Mandates Reform Act of 1995 

F. Treasury and General Government 

Appropriations Act, 1999 

G. Executive Order 13132 

H. Executive Order 12988 

I. Treasury and General Government 

Appropriations Act, 2001 

J. Executive Order 13211 

K. Consultation 

L. Congressional Notification 

IV. Approval of the Office of the Secretary 

I. Background and Overview 

Section 942 of the Energy Policy Act 

of 2005, Pub. L. 109–58 (August 8, 

2005), requires the Secretary of Energy 

(Secretary), in consultation with the 

Secretary of Agriculture, the Secretary 

of Defense, and the Administrator of the 

Environmental Protection Agency, to 

establish an incentive program for the 

production of cellulosic biofuels and to 

implement that program by means of a 

‘‘reverse auction.’’ Section 942(a) states 

that the purposes of the program are to: 

‘‘(1) Accelerate deployment and 

commercialization of biofuels; (2) 

deliver the first one billion gallons of 

annual cellulosic biofuel production by 

2015; (3) ensure biofuels produced after 

2015 are cost competitive with gasoline 

and diesel; and (4) ensure that small 

feedstock producers and rural small 

businesses are full participants in the 

development of the cellulosic biofuels 

industry.’’ In order to achieve these 

purposes, the Secretary is to award 

production incentives on a per gallon 

basis to eligible entities by means of a 

reverse auction. Under section 942, the 

auction is conducted annually until the 

earlier of the first year that annual 

production of cellulosic biofuels in the 

United States reaches one billion 

gallons or 10 years after enactment of 

EPAct 2005. 

In order to implement section 942, 

DOE is promulgating this final rule 

establishing procedures for the reverse 

auction and standards for making 

production incentive awards. The 

eligibility standards include both preauction requirements which must be 

met prior to an entity’s participation in 

a reverse auction under section 942 and 

several post-auction standards which 

must be met as a condition of receiving 

an award. The post-auction standards 

are especially necessary if the nation is 

to achieve the long-term goals of section 

942, including delivery of the first one 

billion gallons of annual cellulosic 

biofuel production by the statutory 

deadline, and establishment of a 

biofuels industry that is cost 

competitive with gasoline and diesel. 

The post-auction standards are thus 

intended to ensure that successful 

bidders make real and meaningful 

progress toward the production of 

cellulosic biofuels in commercially 

significant quantities. DOE believes that 

as successive auctions yield more and 

more production of cellulosic biofuels, 

the nation will move closer to achieving 

section 942’s long-term national goal of 

a commercially viable production 

capability after 2015. In addition, by 

setting forth clear pre-auction and postauction standards, DOE believes that 

only the most serious entities will seek 

to participate in each reverse auction. 

II. Discussion of Comments and 

Modifications of Proposed Rule 

A. Comments of Dupont Danisco 

Cellulosic Ethanol, LLC 

On December 23, 2008, DOE 

published a Notice of Proposed 

Rulemaking (NOPR) in the Federal 

Register, 73 FR 78663, proposing the 

issuance of this rule and inviting public 

comment on the proposal. In response, 

DOE received only one set of 

comments—from Dupont Danisco 

Cellulosic Ethanol, LLC (Dupont 

Danisco). 

Dupont Danisco offered the following 

recommendations: 

Æ Eligibility Criteria. Tighten the 

eligibility criteria for bidders, including 

the addition of requirement that a 

bidder must have previously 

demonstrated its refining technology in 

a pilot plant; that DOE employ a review 

panel to qualify bidders; and that 

putative bidders must submit pro forma 

financial statements. 

Æ Bidding Process. Adopt an 

anonymous iterative, open bidding 

process and clarify whether bids are to 

cover one year or multiple years and/or 

total volume production for a specific 

site or multiple sites for a single entity. 

The comments recommend that the rule 

should permit incentive awards that are 

site specific and for multiple years and 

that a bidder also should be able to bid 

in subsequent years for uncovered 

production volumes at the same site. 

Æ Bidder Defaults. Where the bidder 

defaults due to a failure to fulfill annual 

production obligations, (a) only the 


jlentini on DSKJ8SOYB1PROD with RULES
52868 Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 / Rules and Regulations 

1The commenter uses the term ‘‘next highest bid’’ 

but, given the context of a reverse auction, we 

understand him to mean ‘‘next lowest bid.’’ 

shortfall should be considered to be in 

default and only the dollar value of the 

shortfall should be added to the amount 

of incentives eligible in the next auction 

round; or, in the alternative, (b) 

defaulted monies should be allocated to 

the next lowest 1 non-winning bidder in 

the auction in which the defaulting 

bidder won its award. 

Æ Force Majeure. DOE should provide 

a reasonable time extension for 

performance by the successful bidder 

where there has been a delay due to a 

force majeure event. 

Æ Transfer of Awards. Awards should 

be site specific but transferable to 

entities producing at that site. 

DOE agrees with the commenter that, 

as a condition of eligibility for 

participation in reverse auctions under 

the rule, bidders should have to 

demonstrate that the technologies which 

they employ have been first 

demonstrated as effective processes for 

biofuels refining, and the final rule 

incorporates this recommendation in 

the definition of ‘‘eligible cellulosic 

biofuels production facility’’ in section 

452.2. Likewise, DOE agrees that 

bidders must submit audited or pro 

forma financial statements as a 

condition of eligibility, as reflected in 

section 452.4(a)(2). These two 

modifications of the NOPR should help 

to ensure that only capable and 

financially fit entities participate in the 

reverse auctions. On the other hand, the 

rule does not adopt the commenter’s 

recommendation for the establishment 

of a review panel. The review of 

bidders’ qualifications is a governmental 

function. While DOE may employ a 

panel to assist it in this review, in the 

manner suggested by the commenter, 

DOE is not convinced of the need for it 

in this situation. 

DOE appreciates the commenter’s 

recommendation for the adoption of an 

anonymous, iterative bidding process. 

However, it is not clear at this time that 

an iterative bidding process would 

improve the bidding process or the 

quality of the bids received. It warrants 

noting that DOE had specifically 

solicited public comment on the 

question of potential benefits from use 

of such an open iterative bidding 

process but, other than the single 

recommendation described above, 

received none. Accordingly, DOE will 

carefully monitor the procedures 

adopted in this final rule. Over time, 

DOE may reconsider whether an open 

iterative bidding scheme would be 

helpful. 

With respect to whether a bid is site 

specific and/or entity specific, or 

whether a bid is to cover only a single 

year or multiple years, DOE intends that 

each bid should identify a projected 

level of production on a per gallon, site, 

entity, and year specific basis for a six 

year production period. Bids thus must 

contain projections of anticipated 

production volumes for each of the six 

years covered by the bid. The final rule 

provides clarification of these matters in 

section 452.5(b). Additionally, DOE 

intends that a bidder should be able to 

bid for additional incentives for 

uncovered production volumes in 

subsequent years at the same site where 

an award has already been made. Also 

see, section 452.5(b). 

DOE has revised section 452.6 to 

address the question of force majeure 

events. Section 452.6(b) contains 

language that would allow a reasonable 

extension of time to be granted at DOE’s 

discretion to winning bidders to fulfill 

their obligations under their production 

agreements with DOE. 

Absent a force majeure event, 

however, the final rule provides, in 

section 452.6(c) that a winning bidder 

must produce at least 50 percent of its 

annual obligation under the production 

agreement in order to avoid a default 

and the revocation of its award. 

Assuming that at least 50 percent of its 

annual obligation is produced in any 

calendar year covered by the production 

agreement, any shortfall will be added 

to the production obligation for the 

following year. 

The final rule, however, adopts the 

commenter’s alternate recommendation 

as regards defaults, i.e., if there is still 

a shortfall at the end of the last calendar 

year covered by the production 

agreement, the shortfall will be 

allocated to the next best (lowest) bidder 

in the auction round won by the bidder 

that is party to the production 

agreement. If, however, the next best 

bidder fails to enter into a production 

agreement with DOE within 30 days 

after being notified of its award, the 

shortfall will be allocated instead to the 

next reverse auction. See, section 

452.5(d). 

As proposed in the NOPR, DOE also 

agrees with the commenter that awards 

should be site specific but transferable 

to eligible entities that succeed to 

ownership of the site. Section 452.5(g) 

has been revised to clarify this intent. 

B. Energy Independence and Security 

Act of 2007 

Title II of the Energy Independence 

and Security Act of 2007, Pub. L. 110– 

140 (December 19, 2007) (EISA), directs 

the Administrator of the Environmental 

Protection Agency (EPA) to revise that 

agency’s regulations implementing 

section 211(o)(1) of the Clean Air Act, 

42 U.S.C. 7545(o), to ensure, inter alia, 

that transportation fuel sold or 

introduced into commerce in the United 

States on an annual average basis, 

contains at least a specified minimum 

volume of renewable fuel, advanced 

biofuel, cellulosic biofuel, or biomassbased diesel. Pursuant to EISA section 

202, the minimum volume requirement 

for cellulosic biofuel, as defined in 

EISA, is 1 billion gallons by the year 

2013. The term ‘‘cellulosic biofuel’’ is 

defined in section 201 of EISA as 

‘‘renewable fuel derived from any 

cellulose, hemicellulose, or lignin that 

is derived from renewable biomass and 

that has lifecycle greenhouse gas 

emissions, as determined by the 

Administrator, that are at least 60 

percent less than the baseline lifecycle 

greenhouse gas emissions.’’ 

To date, the Administrator of the EPA 

has not issued the regulations required 

under section 202 of EISA. Nonetheless, 

DOE is mindful that the EPA 

regulations, once promulgated, could 

affect reverse auctions established by 

this final rule. In particular, if the 

renewable fuel standard for ‘‘cellulosic 

biofuel’’ under EISA is achieved, the 

last reverse auction required under 

section 942 of EPAct 2005 may occur in 

2013, rather than 2015, the target 

provided under EPAct for refining 1 

billion gallons of cellulosic biofuels on 

an annual basis. However, this 

presupposes that the ‘‘cellulosic 

biofuel’’ used to meet the renewable fuel 

standard under EISA also qualifies as 

‘‘cellulosic biofuels’’ for purposes of this 

final rule. 

That may not be the case, however. 

The definition of ‘‘cellulosic biofuel’’ in 

section 201 of EISA is different from the 

definition used in EPAct and this final 

rule. The final rule defines ‘‘cellulosic 

biofuel’’ as ‘‘any liquid fuel produced 

from cellulosic feedstocks’’ and 

‘‘cellulosic feedstock means any 

lignocellulosic feedstock as defined by 

EPAct, section 932(a)(2).’’ Thus the final 

rule attempts to be consistent with the 

definition used elsewhere in EPAct. In 

the absence of final regulations 

implementing the renewable fuel 

standard of EISA, the definitions 

established in the later-enacted 

legislation cannot be imported to this 

final rule without the possibility that 

the EPA regulations may further refine 

the statutory definitions. 

Nevertheless, DOE retains discretion 

to later modify the definition used in 

this final rule in order to make it 

consistent with the regulations 

implementing EISA, if sound public 


jlentini on DSKJ8SOYB1PROD with RULES
Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 / Rules and Regulations 52869 

policy considerations support such a 

modification within the parameters 

established by EPAct. After EPA 

promulgates its regulations 

implementing section 202 of EISA, DOE 

will review this final rule to determine 

whether it is feasible and appropriate to 

reconcile the terms and definitions of 

both rules. 

C. Heating Value 

In an effort to treat all potential 

biofuels equally, section 452.5 of this 

final rule modifies the proposed rule by 

requiring bidders to set forth their 

calculation of the fuel selected for their 

bids on a gasoline equivalent volumetric 

basis using the lower heating Btu value 

(LHV) of the fuel compared to the LHV 

of gasoline. Awards similarly shall be 

issued on a gasoline equivalent 

volumetric basis. The gasoline 

equivalent volumes are to be calculated 

by multiplying the gallons of biofuels 

times the LHV of the fuel divided by 

116,090 Btu per gallon (the LHV of 

gasoline). An example, in the case of 

ethanol, would be 1 gallon of ethanol 

times 76,330 Btu per gallon (the LHV of 

ethanol) divided by 116,090 (the LHV of 

gasoline). Consequently, 1 gallon of 

ethanol would be 0.6575 gasoline 

equivalent gallons. A table with most 

common fuels heating values can be 

found at: http://cta.ornl.gov/bedb/

appendix_a/Lower Higher_

Heating_Values_for_Various_Fuels.xls. 

D. Commercial Suitability 

This final rule modifies section 

452.4(a)(2) of the proposed rule by 

clarifying that bidders must demonstrate 

in their pre-auction eligibility 

submissions that, in addition to other 

requirements set forth in section 452.4, 

they will produce a cellulosic biofuel 

which either currently is suitable for 

widespread general use as a 

transportation fuel or, alternatively, that 

the cellulosic biofuel will be suitable for 

such use in a timeframe and in 

sufficient volumes to significantly 

contribute to the goal of 1 billion gallons 

of refined cellulosic biofuel by the 

statutory deadline. Those pre-auction 

eligibility submissions proposing fuels 

that are not currently widely accepted 

and available as a transportation fuel 

also must describe a clear path to 

achieving the status of an acceptable 

liquid transportation cellulosic biofuel. 

This description may include, but is not 

limited to the following: 

• Obtaining vehicle manufacturer(s) 

approval; 

• Obtaining EPA fuel registration(s); 

• Establishing standards for use, 

production, storage, transportation, and 

retail dispensing; and, 

• Establishing a distribution/ 

dispensing infrastructure. 

Additionally, the pre-auction eligibility 

submissions must estimate the costs and 

discuss the activities required for 

eventually commercializing the 

proposed cellulosic biofuel. 

III. Regulatory Review 

A. Executive Order 12866 

Today’s rule has been determined to 

be a significant regulatory action under 

Executive Order 12866, ‘‘Regulatory 

Planning and Review,’’ 58 FR 51735 

(October 4, 1993). Accordingly, this 

action was subject to review under that 

Executive Order by the Office of 

Information and Regulatory Affairs of 

the Office of Management and Budget 

(OMB). 

Section 942 of EPAct 2005 provides 

that awards under the program shall be 

limited to not more than $100 million 

in any one year. 42 U.S.C. 16251(d)(4). 

The possibility of awards at the $100 

million level makes this rulemaking 

economically significant under the 

Executive Order. However, the level of 

funding provided by Congress for this 

program, thus far, suggests it is unlikely 

DOE will award $100 million in any one 

year. In fiscal year 2008, Congress 

appropriated $5.0 million to initiate the 

program. The President has requested 

no funding for this program in his Fiscal 

Year 2010 budget. 

The incentives awarded for the 

production of cellulosic biofuels under 

this program constitute transfer 

payments. In this case, the payments are 

from the Government to private entities, 

and they do not affect total resources 

available to society. These transfers do 

not involve costs and benefits, and thus 

no assessment of costs and benefits is 

required by Executive Order 12866. See 

OMB Circular A–4, at 38 and 46. DOE 

expects the first auction will be held in 

late 2009 or 2010 and the last auction 

no later than 2015. As discussed in 

section II. B. of this notice, the 

Renewable Fuel Standard administered 

by EPA was amended by EISA to call for 

the production of 1 billion gallons of 

cellulosic biofuel by the year 2013. If 

that goal is met, then the last auction 

would occur in 2013. 

The EPAct 2005 program for 

conducting reverse auctions to provide 

incentives for production of cellulosic 

biofuels is one of several actions 

Congress has taken to encourage the 

production of cellulosic biofuels. As 

discussed, Congress has amended the 

Renewable Fuel Standard to set specific 

targets for the production of cellulosic 

biofuel, including 1 billion gallons by 

2013. Congress also in EPAct 2005 and 

EISA authorized funding for research 

and development of advanced biofuels 

and cellulosic biofuel. Current research 

and development efforts, in 

combination with various 

methodologies that could be funded 

using the procedures established in this 

regulation, have the potential to realize 

alternatives that DOE believes can 

achieve the production goals set in 

section 942 of EPAct 2005 and EISA. 

B. National Environmental Policy Act 

DOE has determined that this rule is 

covered under the Categorical Exclusion 

found in the DOE’s National 

Environmental Policy Act (NEPA) 

regulations at paragraph A6 of 

Appendix A to Subpart D, 10 CFR part 

1021, which applies to rulemakings that 

are strictly procedural. DOE notes that 

the procedures proposed in this rule do 

not afford DOE discretion to determine 

whether or how a facility will be 

constructed or operated. DOE’s 

prescribed role under section 942, that 

is, awarding production incentives to 

the lowest bidder in a reverse auction, 

is strictly procedural. Accordingly, 

neither an environmental assessment 

nor an environmental impact statement 

is required for the rule or for an award 

that DOE gives or proposes to give to a 

successful bidder. If DOE subsequently 

proposes to take any additional actions 

with respect to successful bidders, 

separate from the award of funds under 

section 942 of EPAct 2005, DOE will 

separately evaluate the need for NEPA 

review of those new proposed actions. 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of an initial regulatory flexibility 

analysis for any rule that by law must 

be proposed for public comment, unless 

the agency certifies that the rule, if 

promulgated, will not have a significant 

economic impact on a substantial 

number of small entities. As required by 

Executive Order 13272, ‘‘Proper 

Consideration of Small Entities in 

Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process (68 FR 7990). DOE 

has made its procedures and policies 

available on the Office of General 

Counsel’s Web site: http:// 

www.gc.doe.gov. 

DOE has reviewed today’s rule under 

the provisions of the Regulatory 

Flexibility Act and the procedures and 

policies published on February 19, 

2003. The rule will only affect biofuels 


jlentini on DSKJ8SOYB1PROD with RULES
52870 Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 / Rules and Regulations 

producers if they choose to participate 

in the reverse auction. Moreover, the 

rule will provide an economic benefit 

without imposing any regulatory 

requirements on producers of cellulosic 

biofuels. On the basis of the foregoing, 

DOE certifies that this rule will not have 

a significant economic impact on a 

substantial number of small entities. 

Accordingly, DOE has not prepared a 

regulatory flexibility analysis for this 

rulemaking. This certification and 

supporting statement of factual basis 

will be provided to the Chief Counsel 

for Advocacy of the Small Business 

Administration pursuant to 5 U.S.C. 

605(b). 

D. Paperwork Reduction Act 

Section 452.4(a) provides that entities 

that intend to participate in a reverse 

auction must file a pre-auction 

eligibility submission. The pre-auction 

eligibility submission must contain 

certain information, including an 

implementation plan, as described 

above. This information will be used by 

DOE to determine if an entity that files 

a pre-auction eligibility submission will 

be accepted to participate in the reverse 

auction. 

In addition, section 452.4(c) provides 

that a bidder must submit a progress 

report. The progress report must contain 

the additional information described 

above. DOE will use this information to 

evaluate the bidder’s progress in the 

production of cellulosic biofuels. DOE 

has submitted this collection of 

information to the Office of 

Management and Budget for approval 

pursuant to the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.) and 

the procedures implementing that Act, 5 

CFR 1320.1 et seq. 

DOE estimates that the annual 

reporting and recordkeeping burden for 

this collection of information will be 30 

hours per year (10 bidders × 3 hours) at 

a total annual cost of $2250 (10 bidders 

× $225 per auction). Burden means the 

total time, effort, or financial resources 

expended by persons to generate, 

maintain, retain, or disclose or provide 

information to or for a federal agency. 

An agency may not conduct or sponsor, 

and a person is not required to respond 

to a collection of information unless it 

displays a currently valid OMB control 

number. 

E. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4) generally 

requires Federal agencies to examine 

closely the impacts of regulatory actions 

on State, local, and tribal governments. 

Subsection 101(5) of title I of that law 

defines a Federal intergovernmental 

mandate to include any regulation that 

would impose upon State, local, or 

tribal governments an enforceable duty, 

except a condition of Federal assistance 

or a duty arising from participating in a 

voluntary federal program. Title II of 

that law requires each Federal agency to 

assess the effects of Federal regulatory 

actions on State, local, and tribal 

governments, in the aggregate, or to the 

private sector, other than to the extent 

such actions merely incorporate 

requirements specifically set forth in a 

statute. Section 202 of that title requires 

a Federal agency to perform a detailed 

assessment of the anticipated costs and 

benefits of any rule that includes a 

Federal mandate which may result in 

costs to State, local, or tribal 

governments, or to the private sector, of 

$100 million or more in any one year 

(adjusted annually for inflation). 2 

U.S.C. 1532(a) and (b). Section 204 of 

that title requires each agency that 

proposes a rule containing a significant 

Federal intergovernmental mandate to 

develop an effective process for 

obtaining meaningful and timely input 

from elected officers of State, local, and 

tribal governments. 2 U.S.C. 1534. 

This rule will not impose a Federal 

mandate on State, local, or tribal 

governments or on the private sector. 

Accordingly, no assessment or analysis 

is required under the Unfunded 

Mandates Reform Act of 1995. 

F. Treasury and General Government 

Appropriations Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well being. The 

rule will not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

G. Executive Order 13132 

Executive Order 13132, ‘‘Federalism,’’ 

64 FR 43255 (August 4, 1999) imposes 

certain requirements on agencies 

formulating and implementing policies 

or regulations that preempt State law or 

that have federalism implications. 

Agencies are required to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and carefully assess the necessity 

for such actions. DOE has examined this 

rule and has determined that it would 

not preempt State law and would not 

have a substantial direct effect on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. No further action 

is required by Executive Order 13132. 

H. Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ 61 FR 4729 (February 7, 1996), 

imposes on Executive agencies the 

general duty to adhere to the following 

requirements: (1) Eliminate drafting 

errors and ambiguity; (2) write 

regulations to minimize litigation; and 

(3) provide a clear legal standard for 

affected conduct rather than a general 

standard and promote simplification 

and burden reduction. With regard to 

the review required by section 3(a), 

section 3(b) of Executive Order 12988 

specifically requires that Executive 

agencies make every reasonable effort to 

ensure that the regulation: (1) Clearly 

specifies the preemptive effect, if any; 

(2) clearly specifies any effect on 

existing Federal law or regulation; (3) 

provides a clear legal standard for 

affected conduct while promoting 

simplification and burden reduction; (4) 

specifies the retroactive effect, if any; (5) 

adequately defines key terms; and (6) 

addresses other important issues 

affecting clarity and general 

draftsmanship under any guidelines 

issued by the Attorney General. Section 

3(c) of Executive Order 12988 requires 

Executive agencies to review regulations 

in light of applicable standards in 

section 3(a) and section 3(b) to 

determine whether they are met or it is 

unreasonable to meet one or more of 

them. DOE has completed the required 

review and determined that, to the 

extent permitted by law, the rule meets 

the relevant standards of Executive 

Order 12988. 

I. Treasury and General Government 

Appropriations Act, 2001 

The Treasury and General 

Government Appropriations Act, 2001 

(44 U.S.C. 3516 note) provides for 

agencies to review most disseminations 

of information to the public under 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. 

OMB’s guidelines were published at 

67 FR 8452 (February 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (October 7, 2002). DOE has 

reviewed today’s rule under the OMB 

and DOE guidelines and has concluded 

that it is consistent with applicable 

policies in those guidelines. 


jlentini on DSKJ8SOYB1PROD with RULES
Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 / Rules and Regulations 52871 

J. Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use,’’ 66 FR 28355 (May 

22, 2001) requires Federal agencies to 

prepare and submit to OMB, a 

Statement of Energy Effects for any 

proposed significant energy action. A 

‘‘significant energy action’’ is defined as 

any action by an agency that 

promulgated or is expected to lead to 

promulgation of a final rule, and that: 

(1) Is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

Today’s regulatory action would not 

have a significant adverse effect on the 

supply, distribution, or use of energy 

and is therefore not a significant energy 

action. Accordingly, DOE has not 

prepared a Statement of Energy Effects. 

K. Consultation 

Pursuant to section 942(c)(1) of EPAct 

2005, DOE has consulted with the 

Secretary of Agriculture, the Secretary 

of Defense, and the Administrator of the 

Environmental Protection Agency prior 

to issuing today’s rule. 

L. Congressional Notification. 

As required by 5 U.S.C. 801, DOE will 

report to Congress promulgation of this 

rule prior to its effective date. The 

report will state that it has been 

determined that the rule is not a ‘‘major 

rule’’ as defined by 5 U.S.C. 804(2). DOE 

will submit the supporting analysis to 

the Comptroller General in the U.S. 

Government Accountability Office and 

make it available to each House of 

Congress. 

IV. Approval of the Office of the 

Secretary 

The issuance of this rule has been 

approved by the Office of the Secretary. 

List of Subjects in 10 CFR Part 452 

Fuel, Grant programs, Recordkeeping 

and reporting requirements, Renewable 

energy. 

Issued in Washington, DC, on September 

11, 2009. 

Cathy Zoi, 

Assistant Secretary, Energy Efficiency and 

Renewable Energy. 

■ For the reasons stated in the preamble, 

DOE is amending chapter II of title 10 

of the Code of Federal Regulations by 

adding a new part 452 as set forth 

below: 

PART 452—PRODUCTION INCENTIVES 

FOR CELLULOSIC BIOFUELS 

Sec. 

452.1 Purpose and scope. 

452.2 Definitions. 

452.3 Solicitations. 

452.4 Eligibility requirements. 

452.5 Bidding procedures. 

452.6 Incentive award terms and 

limitations. 

Authority: 42 U.S.C. 7101 et seq.; 42 

U.S.C. 16251. 

§ 452.1 Purpose and scope. 

(a) This part sets forth the standards, 

policies, and procedures that the 

Department of Energy uses for receiving, 

evaluating, and awarding bids in reverse 

auctions of production incentive 

payments for cellulosic biofuels under 

section 942 of the Energy Policy Act of 

2005 (42 U.S.C. 16251). 

(b) Part 1024 of chapter X of title 10 

of the Code of Federal Regulations shall 

not apply to actions taken under this 

part. 

§ 452.2 Definitions. 

As used in this part: 

Cellulosic biofuel means any liquid 

fuel produced from cellulosic 

feedstocks. 

Cellulosic feedstock means any 

lignocellulosic feedstock as defined by 

EPAct, section 932(a)(2). 

Commercially significant quantity 

means 10 million gallons or more of 

cellulosic biofuels produced in one 

year. 

DOE means the U.S. Department of 

Energy. 

Eligible biofuels producer means a 

business association, including but not 

limited to a sole proprietorship, 

partnership, joint venture, corporation, 

or other business entity that owns and 

operates, or plans to own and operate, 

an eligible cellulosic biofuels 

production facility and that meets all 

other eligibility requirements that are 

conditions on the receipt of production 

incentives under this part. 

Eligible cellulosic biofuels production 

facility means a facility— 

(1) Located in the United States 

(including U.S. territories and 

possessions); 

(2) Which meets all applicable 

Federal and State permitting 

requirements; 

(3) Employs a demonstrated refining 

technology; and 

(4) Meets any relevant financial 

criteria established by the Secretary. 

EPAct 2005 means the Energy Policy 

Act of 2005, Public Law 109–58 (August 

8, 2005). 

Open window means the period 

during each reverse auction, as specified 

in an associated solicitation, during 

which DOE accepts bids for production 

incentives under this part. 

Secretary means the Secretary of 

Energy. 

§ 452.3 Solicitations. 

The reverse auction process 

commences with the issuance of a 

solicitation by DOE. DOE will publish a 

solicitation in the Federal Register and 

shall post the solicitation on its website 

at www.eere.energy.gov no later than 60 

days before the bidding in a reverse 

auction under this part commences. The 

solicitation shall: 

(a) Invite interested persons and 

businesses to submit pre-qualification 

statements; 

(b) Set forth the terms on which bids 

will be accepted; 

(c) Specify the open window for 

bidding; and 

(d) Specify the date by which 

successful bidders will be required to 

file pre-auction eligibility submissions. 

§ 452.4 Eligibility requirements. 

(a) Pre-auction eligibility submissions. 

(1) Entities that intend to participate in 

a reverse auction, within the time 

period stated in the relevant solicitation, 

must file a pre-auction eligibility 

submission that provides all 

information requested in the applicable 

solicitation to which it is responding, 

including an implementation plan. 

(2) Each pre-auction eligibility 

submission’s implementation plan 

must, at a minimum: 

(i) Demonstrate that the filing party 

owns and operates or plans to own and 

operate an eligible cellulosic biofuels 

production facility; 

(ii) Identify the site or proposed site 

for the filing party’s eligible cellulosic 

biofuels production facility; 

(iii) Demonstrate that the cellulosic 

biofuel to be produced for purposes of 

receiving an award either currently is 

suitable for widespread general use as a 

transportation fuel or will be suitable for 

such use in a timeframe and in 

sufficient volumes to significantly 

contribute to the goal of 1 billion gallons 

of refined cellulosic biofuel by August 

2015. 


jlentini on DSKJ8SOYB1PROD with RULES
52872 Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 / Rules and Regulations 

(iv) Provide audited or pro forma 

financial statements for the latest 12 

month period; and 

(v) Identify one or more proposed 

sources of financing for the construction 

or expansion of the filing party’s eligible 

cellulosic biofuels production facility. 

(b) Notification of pre-auction 

eligibility status. DOE shall notify each 

entity that files a pre-auction eligibility 

submission of its acceptance or rejection 

no later than 15 days before the reverse 

auction for which the submission was 

made. A DOE decision constitutes final 

agency action and is conclusive. 

(c) Progress reports. Within one year 

after the reverse auction in which a 

bidder successfully competed, the 

bidder must submit a progress report 

that includes all additional information 

required by the solicitation in which the 

bidder submitted a successful bid and 

which demonstrates that the bidder has: 

(1) Acquired the site where its 

proposed eligible cellulosic biofuels 

production facility is or will be located; 

(2) Obtained secure financing 

commitments for the plant or expansion 

thereof, as necessary to produce 

cellulosic biofuels; and 

(3) Entered into a written engineering, 

procurement, and construction (EPC) 

contract for design and construction of 

the eligible cellulosic biofuels 

production facility; such EPC contract 

must provide for completion of 

construction of the eligible cellulosic 

biofuels production facility such that 

operations at the plant or plant 

expansion will commence within three 

years of the reverse auction in which the 

bidder successfully competed. 

(d) Production agreement. Within 90 

days after submission of its progress 

report under paragraph (c) of this 

section, the successful bidder must 

enter into an agreement with DOE 

which requires the bidder to begin 

production of commercially significant 

quantities of cellulosic biofuels, at the 

eligible cellulosic biofuels production 

facility that was the subject of the 

relevant bid, not later than three years 

from the date of the acceptance of the 

successful bid. 

(e) Confirmation of continuing 

eligibility. After receiving the progress 

report described in the paragraph (e) of 

the section and upon confirmation by 

DOE that the successful bidder has 

entered into a production agreement 

with DOE, as described in paragraph (d) 

of this section, DOE will confirm to the 

bidder that it continues to meet the 

eligibility requirements of this part. 

(f) Contractual condition on eligibility. 

(1) As a condition of the receipt of an 

award under this part, a successful 

bidder in a reverse auction under this 

part must demonstrate that it has 

fulfilled the terms of its production 

agreement entered into with DOE 

pursuant to paragraph (d) of this 

section. 

(2) As a condition of continuing to 

receive production incentive payments 

under this part, a bidder that has 

entered into a production agreement 

with DOE must annually submit to DOE, 

by a commercially reasonable date 

specified by DOE, verification of the 

bidder’s production volumes for the 

prior calendar year. Within 90 days of 

the submission of such verification, 

DOE shall notify the successful bidder 

whether the bidder has fulfilled the 

terms of the production agreement and 

shall make payment of any production 

incentive awards then outstanding for 

the one year period covered by the 

verified data submission. 

§ 452.5 Bidding procedures. 

DOE shall conduct an electronic 

reverse auction through a limited 

duration single bid per producer auction 

process open only to pre-auction 

eligible cellulosic biofuels producers. 

The following procedures shall be used: 

(a) DOE shall accept only electronic 

bids received from pre-auction eligible 

cellulosic biofuels producers during the 

open window established in the 

solicitation. The open window shall 

consist of a single continuous period of 

at least four hours for each auction. 

(b) Bids shall identify an estimated 

annual production amount from an 

eligible cellulosic biofuels production 

facility on a per gallon, site, entity, and 

year specific basis for a consecutive six 

year production period. A bid also may 

be submitted for additional incentives 

for uncovered production volumes at a 

site where an award was made in an 

earlier auction round. 

(c) All bids must set forth the 

methodology used to derive the 

estimates of annual production volumes 

covered by the bid and the bid shall be 

calculated on a gasoline equivalent 

volumetric basis using the lower heating 

Btu value of the fuel compared to the 

lower heating Btu value of gasoline. 

(d) All bids will be confidential until 

45 days after the close of the window for 

submission of bids for the reverse 

auction. 

(e) Bid evaluation and incentive 

awards selection procedures include the 

following: 

(1) After DOE evaluates the bids 

received during the open window, it 

shall, within 45 days following the close 

of the open window for submission of 

bids for the reverse auction, announce 

on DOE’s website and by direct mail the 

names of the successful bidders and the 

terms of their bids. 

(2) DOE shall issue awards for the bid 

production amounts beginning with the 

bidder that submitted the bid for the 

lowest level of production incentive on 

a per gallon basis. 

(3) In the event of a tie among the 

lowest bids, preference will be given to 

the lowest tied bidder based on DOE’s 

evaluation of the extent to which the 

tied bids meet the following criteria: 

(i) Demonstrates outstanding potential 

for local and regional economic 

development; 

(ii) Includes agricultural producers or 

cooperatives of agricultural producers as 

equity partners in the ventures; and 

(iii) Has a strategic agreement in place 

to fairly reward feedstock suppliers. 

(4) In the event more than one lowest 

tied bid equally meets the standards in 

paragraph (c)(3) of this section, the 

award will be distributed equally on a 

per capita basis among those lowest tied 

bidders meeting the standards. 

§ 452.6 Incentive award terms and 

limitations. 

(a) Amount of incentive. Subject to the 

availability of appropriated funds and 

the limitations in paragraph (c) of this 

section, an eligible cellulosic biofuels 

producer selected to receive an award 

shall receive the amount of the 

production incentive on the per gallon 

basis requested in the auction 

solicitation for each gallon produced 

and sold by the entity during the first 

six years of operation of its eligible 

cellulosic biofuels production facility. 

(b) Failure to commence production. 

Except in the circumstance of a force 

majeure event, as solely determined by 

DOE, failure by an eligible cellulosic 

biofuels producer that made a 

successful bid to commence production 

of cellulosic biofuels, at the eligible 

cellulosic biofuels production facility 

that was the subject of the successful 

bid, by the end of the third year after the 

close of submission of the open window 

of bids for the reverse auction in which 

it submitted a successful bid, shall 

result in immediate revocation of DOE’s 

award to that producer. 

(c) Failure of the successful bidder to 

meet annual production obligations. 

Except in the circumstance of a force 

majeure event, as solely determined by 

DOE, a successful bidder’s failure to 

produce at least 50 percent of the 

volumes specified in its production 

agreement by December 31 of any year 

covered by the bid shall result in 

immediate revocation of DOE’s award; if 

the successful bidder produces 50 

percent or more of the volumes set forth 

in the production agreement on an 


jlentini on DSKJ8SOYB1PROD with RULES
Federal Register / Vol. 74, No. 198 / Thursday, October 15, 2009 / Rules and Regulations 52873 

annual basis by December 31 of any year 

covered by the agreement, any 

production shortfall will be carried 

forward and added to the successful 

bidder’s production obligations for next 

year covered by the agreement. 

(d) Shortfalls remaining at the end of 

the production period. If, for any reason, 

by December 31 of the last year of the 

production agreement, the bidder has 

failed to produce the total production 

volumes for all years covered by the 

agreement, any such remaining shortfall 

shall be awarded to the bidder with the 

next lowest bid in the auction round for 

which the award was made. If, however, 

the next best bidder is unable to enter 

into a production agreement with DOE 

within 30 days after being notified of its 

award, the shortfall shall be allocated 

instead to the next reverse auction. 

(e) Incentive award limitations. The 

following limits shall apply to awards of 

cellulosic biofuels production 

incentives under this part: 

(1) During the first four years after the 

commencement of the program, the 

incentive shall be limited to $1.00 per 

gallon. For purposes of this limitation, 

the program shall be deemed to have 

commenced on the date that the first 

solicitation for a reverse auction is 

issued; 

(2) A per gallon cap over the 

remaining lifetime of the program of 

$.95 per gallon provided that— 

(i) This cap shall be lowered by $.05 

each year commencing the first year 

after annual cellulosic biofuels 

production in the United States exceeds 

1 billion gallons; 

(ii) Not more than 25 percent of the 

funds committed within each reverse 

auction shall be awarded to any single 

project; 

(iii) Not more than $100 million in 

production incentives shall be awarded 

in any one calendar year; and 

(iv) Not more than $1 billion in 

production incentives shall be awarded 

over the lifetime of the program. 

(f) Participation in subsequent 

auctions. A successful bidder in a 

reverse auction under this part may 

participate in subsequent reverse 

auctions if the incentives sought will 

assist the addition of plant production 

capacity for the eligible cellulosic 

biofuels production facility associated 

with its previously successful bid. 

(g) Transferability of awards. A 

production incentive award under this 

part may be transferred to a successor 

entity at the same production facility for 

which the award was made, provided 

that the successor entity meets all 

eligibility requirements of this part, 

including execution of an agreement 

with DOE to commence production of 

cellulosic biofuels in commercially 

significant quantities not later than 

three years of the date that bidding 

closes on the reverse auction in which 

the predecessor entity submitted a 

successful bid. 

[FR Doc. E9–24778 Filed 10–14–09; 8:45 am] 

BILLING CODE 6450–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 204 

[Regulation D; Docket No. R–1373] 

Reserve Requirements of Depository 

Institutions 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board is amending 

Regulation D, Reserve Requirements of 

Depository Institutions, to reflect the 

annual indexing of the reserve 

requirement exemption amount and the 

low reserve tranche for 2010. The 

Regulation D amendments set the 

amount of total reservable liabilities of 

each depository institution that is 

subject to a zero percent reserve 

requirement in 2010 at $10.7 million, up 

from $10.3 million in 2009. This 

amount is known as the reserve 

requirement exemption amount. The 

Regulation D amendments also set the 

amount of net transaction accounts at 

each depository institution that is 

subject to a three percent reserve 

requirement in 2010 at $55.2 million, up 

from $44.4 million in 2009. This 

amount is known as the low reserve 

tranche. The adjustments to both of 

these amounts are derived using 

statutory formulas specified in the 

Federal Reserve Act. The Board is also 

announcing changes in two other 

amounts, the nonexempt deposit cutoff 

level and the reduced reporting limit, 

that are used to determine the frequency 

at which depository institutions must 

submit deposit reports. 

DATES: Effective Date: November 16, 

2009. 

Compliance Dates: For depository 

institutions that report deposit data 

weekly, the new low reserve tranche 

and reserve requirement exemption 

amount will apply to the fourteen-day 

reserve computation period that begins 

Tuesday, December 1, 2009, and the 

corresponding fourteen-day reserve 

maintenance period that begins 

Thursday, December 31, 2009. For 

depository institutions that report 

deposit data quarterly, the new low 

reserve tranche and reserve requirement 

exemption amount will apply to the 

seven-day reserve computation period 

that begins Tuesday, December 15, 

2009, and the corresponding seven-day 

reserve maintenance period that begins 

Thursday, January 14, 2010. For all 

depository institutions, these new 

values of the nonexempt deposit cutoff 

level, the reserve requirement 

exemption amount, and the reduced 

reporting limit will be used to 

determine the frequency at which a 

depository institution submits deposit 

reports effective in either June or 

September 2010. 

FOR FURTHER INFORMATION CONTACT: 

Sophia Allison, Senior Counsel (202/ 

452–3565), Legal Division, or MaryFrances Styczynski, Financial Analyst 

(202/452–3303), Division of Monetary 

Affairs; for users of 

Telecommunications Device for the Deaf 

(TDD) only, contact (202/263–4869); 

Board of Governors of the Federal 

Reserve System, 20th and C Streets, 

NW., Washington, DC 20551. 

SUPPLEMENTARY INFORMATION: Section 

19(b)(2) of the Federal Reserve Act (12 

U.S.C. 461(b)(2)) requires each 

depository institution to maintain 

reserves against its transaction accounts 

and nonpersonal time deposits, as 

prescribed by Board regulations, for the 

purpose of implementing monetary 

policy. Section 11(a)(2) of the Federal 

Reserve Act (12 U.S.C. 248(a)(2)) 

authorizes the Board to require reports 

of liabilities and assets from depository 

institutions to enable the Board to 

conduct monetary policy. The Board’s 

actions with respect to each of these 

provisions are discussed in turn below. 

1. Reserve Requirements 

Pursuant to section 19(b) of the 

Federal Reserve Act (Act), transaction 

account balances maintained at each 

depository institution are subject to 

reserve requirement ratios of zero, three, 

or ten percent. Section 19(b)(11)(A) of 

the Act (12 U.S.C. 461(b)(11)(A)) 

provides that a zero percent reserve 

requirement shall apply at each 

depository institution to total reservable 

liabilities that do not exceed a certain 

amount, known as the reserve 

requirement exemption amount. Section 

19(b)(11)(B) provides that, before 

December 31 of each year, the Board 

shall issue a regulation adjusting the 

reserve requirement exemption amount 

for the next calendar year if total 

reservable liabilities held at all 

depository institutions increase from 

one year to the next. No adjustment is 

made to the reserve requirement 

exemption amount if total reservable 


jlentini on DSKJ8SOYB1PROD with RULES