The Secretary of Energy 

Washington, DC 20585 

March 19, 2009 

The Honorable Nancy Sutley 

Chair, Council on Environmental Quality 

722 Jackson Place, NW 

Washington, DC 20503 

Dear Ms. Sutley: 

Following staff discussions with Ted Boling and Horst Greczmiel of your staff, I 

am writing to advise you of the approach that the Department of Energy (DOE) 

plans to take in meeting its National Environmental Policy Act (NEPA) 

obligations for certain activities under the Advanced Te::hnology Vehicles 

Manufacturing Incentive Program (Auto Loan Program). Section 136 of the 

Energy Independence and Security Act of 2007, as amended, provides for loans to 

eligible automobile manufacturers and component suppliers for projects that 

reequip, expand, and establish manufacturing hcilities in the United States t~ 

produce light-duty vehicles and components that provide meaningful 

improvement in fuel economy, and for engineering integration costs associated 

with such projects. 

In its review of the applications received for the first round of funding, DOE 

determined that 26 applications are eiigible for consideration, and of the 

approximate 175 projects proposed in the 26 applications, the majority (about 

80%) involve reequipping or retooling of an existing facility or the associated 

engineering integration. Based on its review of the Env;ronmental Reports for 

these proposais, DOE has found no potential for significant impact. As 

appropriate, DOE plans to apply four of the categorical exclusions in its NEPA 

regulations ( 10 CFR 102 I), which are presented in the enclosure. Although these 

categorical exclusions were established before the Auto Loan Program was 

envisioned, the activities addressed by the categorical exclusions are similar to the 

activities anticipated under the Auto Loan Program. In future rounds of funding, 

other categorical exclusions may apply. In applying the categorical exclusions, 

DOE will conslder the incrementai impacts of a proposed project on the 

underlying non-Federal activity. 

DOE intends to apply one of three categorical exclusions, B1.24, B1.3 1, and B2.5 

(enclosure) to proposals for reequipping and retooling manufacturing facilities. A 

DOE loan could enable the acquisitior, of interests in an existing facility where 

environmentai impacts after acquisition wouid generally be slmilar !o those before 

acquisition (R1.24), relocate or instal! eljuipment irl an existing facility consistent 

@ Printed on recycled paper 
with the general use of the receiving structure (B 1.3 I), and/or suspend operations 

while replacing or upgrading components (B2.5). In addition, DOE intends to 

apply its categorical exclusion for actions to conserve energy and promote energy 

efficiency, B5.1, to proposals for engineering integration. These engineering 

integration proposals may involve the purchase of materials and supplies for 

prototype development and tooling to incorporate qualifying components into the 

design of advanced technology vehicles and/or developing manufacturing 

processes for facilities that produce qualifying components or advanced 

technology vehicles. 

The environmental professionals in DOE who are familiar with the proposals and 

the categorical exclusions expect the proposals to fit the categorical exclusions 

unless they determine, during evaluation of the environmental information that 

has been submitted, that extraordinary circumstances exist. To ensure that 

applicants have provided timely and accurate information regarding the 

environmental effects of their projects, there are a variety of means to verify the 

validity of application materials. For example, during the technical and financial 

due diligence review pursuant to loan underwriting, DOE will conduct a site visit 

and review application materials with the applicant. 

I would appreciate your views on this approach. 

Sincerely, 

Steven Chu 

Enclosure 
Enclosure 

Department of Energy Categorical Exclusions (1 0 CFR 102 1, Appendix B) 

Potentially Applicable to the Advanced Technology Vehicles Manufacturing 

Incentive Program (Auto Loan Program) 

Four categorical exclusions potentially applicable to the Auto Loan Program are 

listed below, followed by the four conditions that are integral elements of them. 

Four Categorical Exclusions 

B 1.24 Transfer, lease, disposition or acquisition of interests in uncontaminated 

permanentor temporary structures, equipment therein, and only land that is 

necessary for use of the transferred structures and equipment, for residential, 

commercial, or industrial uses (including, but not limited to, office space, 

warehouses, equipment storage facilities) where, under reasonably foreseeable 

uses, there would not be any lessening in quality, or increases in volumes, 

concentrations, or discharge rates, of wastes, air emissions, or water effluents, and 

environmental impacts would generally be similar to those before the transfer, 

lease, disposition, or acquisition of interests. 

Uncontaminated means that there would be no potential for release of substances 

at a level, or in a form, that would pose a threat to public health or the 

environment. 

B 1.3 1 Relocation of machinery and equipment, such as analytical laboratory 

apparatus, electronic hardware, maintenance equipment, and health and safety 

equipment, including minor construction necessary for removal and installation, 

where uses of the relocated items will be similar to their former uses and 

consistent with the general missions of the receiving structure. 

B2.5 Safety and environmental improvements of a facility, including replacement 

and upgrade of facility components, that do not result in a significant change in 

the expected useful life, design capacity, or function of the facility and during 

which operations may be suspended and then resumed. Improvements may 

include, but are not limited to: Replacementlupgrade of control valves, in-core 

monitoring devices, facility air filtration systems, or substation transformers or 

capacitors; addition of structural bracing to meet earthquake standards andlor 

sustain high wind loading; and replacement of aboveground or belowground tanks 

and related piping if there is no evidence of leakage, based on testing that meets 

performance requirements in 40 CFR part 280, subpart D (40 CFR part 280.40). 

This includes activities taken under RCRA, subtitle I; 40 CFR part 265, subpart J; 

40 CFR part 280, subparts B, C, and D; and other applicable state, Federal and 

local requirements for underground storage tanks. These actions do not include 

rebuilding or modifying substantial portions of a facility, such as replacing a 

reactor vessel. 
B5.1 Actions to conserve energy, demonstrate potential energy conservation, and 

promote energy-efficiency that do not increase the indoor concentrations of 

potentially harmful substances. These actions may involve financial and technical 

assistance to individuals (such as builders, owners, consultants, designers), 

organizations (such as utilities), and state and local governments. Covered actions 

include, but are not limited to: programmed lowering of thermostat settings, 

placement of timers on hot water heaters, installation of solar hot water systems, 

installation of efficient lighting, improvements in generator efficiency and 

appliance efficiency ratings, development of energy-efficient manufacturing or 

industrial practices, and small-scale conservation and renewable energy research 

and development and pilot projects. The actions could involve building 

renovations or new structures in commercial, residential, agricultural, or industrial 

sectors. These actions do not include rulemakings, standard-settings, or proposed 

DOE legislation. 

Conditions that are integral elements of each categorical exclusion in Appendix B. 

To fit within the categorical exclusion a proposal must be one that would not: 

(1) Threaten a violation of applicable statutory, regulatory, or permit requirements 

for environment, safety, and health, including requirements of DOE andlor 

Executive Orders. 

(2) Require siting and construction or major expansion of waste storage, disposal, 

recovery, or treatment facilities (including incinerators), but the proposal may 

include categorically excluded waste storage, disposal, recovery, or treatment 

actions. 

(3) Disturb hazardous substances, pollutants, contaminants, or CERCLA-excluded 

petroleum and natural gas products that preexist in the environment such that 

there would be uncontrolled or unpermitted releases; or 

(4) Adversely affect environmentally sensitive resources. An action may be 

categorically excluded if, although sensitive resources are present on a site, the 

action would not adversely affect those resources (e.g., construction of a building 

with its foundation well above a sole-source aquifer or upland surface soil 

removal on a site that has wetlands). Environmentally sensitive resources include, 

but are not limited to ....[ seven examples are provided in the regulations] 
EXECUTIVE OFFICE OF THE PREBlDENT 

COUNCIL ON ENVIRONMEN.TAL QU~ITY 

WASHINGTON. D C' 20503 

March 20.2009 

The Honorable Steven Chu 

Secretary, Department of Energy 

1000 Independence Avenue, SW, Room 7A-257 

Washington, D.C. 20590 

Dear Secretary Chu: 

I write in response to your letter of March 19,2009, asking for the Council on 

Environmental Quality's (CEQ) views on the Department of Energy's (DOE) 

consideration of the use of categorical exclusions to address National Environmental 

Policy Act (NEPA) compliancerequirements when addressing certain activities under the 

Advanced Technology Vehicles Manufacturing Incentive Program (Auto Loan Program) 

established under section 136 of the Energy Independence and Security Act of 2007, as 

amended. 

The CEQ NEPA regulations provide for categorical exclusions as a means to comply 

with NEPA when an agency has identified a "category of actions which do not 

individually or cumulatively have a significant effect on the human environment and 

which have been found to have no such effect in procedures adopted by a federal agency 

in implementing" the CEQ NEPA regulations, which include the requirement that the 

agency NEPA procedures "provide for extraordinary circumstances in which a normally 

excluded action may have a significant effect." 40 C.F.R. 1508.4. 

\ 

The categorical exclusions DOE is considering for acting on the Auto Loan Program 

applications were adopted in the DOE NEPA regulations at 10 CFR 1021 and provide for 

extraordinary circumstances. The DOE NEPA regulations at 10 CFR 1021 set forth 

categorical exclusions that describe the activities that would take place as a result of DOE 

loan approvals, and DOE experience has shown that such activities, when are undertaken 

directly by DOE, do not result in significant environmental impacts. 

Applying the categorical exzlusions under these circumstances is consistent with 

longstanding CEQ guidance that encourages agencies to focus on the underlying 

activities and criteria which characterize the types of activities and their effects. See 

"Guidance Regarding NEPA Implementation" (CEQ 1983). In this case, the focus of the 

analysis for determining whether a categorical exclusion applies is appropriately on the 

underlying activity that 1s funded in whole or in part by DOE - not on whether that 

activity is directly undertaken by DOE - and the determination of the incremental effect 

of the proposed federal action on the underlying non-federal activity (e.g., production of 
advanced technology vehicles). When consideiing the appropriate application of the 

categorical exclusions set out in the DOE NEPA procedures, DOE must determine 

whether there are extraordinary, circumstances. 1i is therefore appropriate and necessary 

for the environmental professionals at DOE to evaluate the information obtained to 

determine whether there are any extraordinary circumstances that indicate the need to 

conduct further environmental analysis. The process outlined by DOE for reviewing the 

loan applications with regard to the proposed activities, the environmental consequences 

of those activities, and the circumstances surrounding those activities to determine 

whether the proposed actions are categorically excluded from further NEPA analysis, 

comports with NEPA and the CEQ regulations. 

We appreciate the opportunity to have reviewed this process with your staff and are 

available in the event you have further questions. 

~ancy H. &ley 

Chair 

Council on Environmental Quality