DOE FINALIZES CHANGES TO STATE AND ALTERNATIVE FUEL PROVIDER PROGRAM

On Friday, the U.S. Department of Energy (DOE) finalized changes to regulations affecting state government and alternative fuel provider fleets. The State & Alternative Fuel Provider Program (SFP) was created as part of the Energy Policy Act of 1992 and requires that covered fleets purchase light duty alternative fuel vehicles. The requirements also can be satisfied by purchasing biodiesel; each 450 gallons of B100 consumed satisfies 1 AFV purchase. The rules issued on Friday incorporate changes called for in EISA 2007, which directed DOE to provide credits to fleets that acquire certain electric-drive vehicles or non-road AFVs, and make investments in emerging electric vehicle technologies or alternative fuel infrastructure. DOE originally proposed these changes back in 2011.

With these changes, fleets that purchase fuel-cell vehicles, hybrid electric vehicles, or plug-in electric vehicles that do not otherwise qualify as AFVs (are not fueled by alternative fuel or do not satisfy the performance requirements for AFVs) will now receive 0.50 AFV credit for each vehicle that is acquired. The rules also provide 0.25 credits for neighborhood electric vehicles that are acquired by covered fleets. The rules also now provide credits for investments made in alternative refueling infrastructure, non- road AFVs, and emerging technology vehicles. Each investment of $25,000 in qualifying activities will earn a fleet 1 credit. Fleets, however, can only earn a maximum of 5 credits for such investments, or 10 credits in the case of fueling infrastructure open to the public.

DOE proposed but did not finalize a requirement that fleets use banked credits or attempt to purchase credits from other entities before requesting exemptions. DOE, however, did include changes that make it much less likely that fleets will be able to obtain exemptions. Previously, exemptions were granted if AFVs or alternative fuels were not available to meet a fleet’s particular needs. Fleets also have to demonstrate that they could not use biodiesel to satisfy up to 50 percent of their purchase requirements. Under the new rules, fleets also must demonstrate that they could not acquire hybrid electric vehicles in sufficient numbers to satisfy 50 percent of their obligations. DOE based the 50 percent figure on the fact that each HEV is only capable of generating 0.50 credits.
None of the changes discussed here affect the obligations of federal fleets.

These changes greatly expand the opportunity of fleets to earn credits without actually buying new AFVs. Therefore, the changes further erode the opportunity for this program to actually drive demand for AFVs. Nevertheless, the changes do afford additional flexibility for natural gas utilities to promote the expanded use of natural gas by providing credits for fueling infrastructure and non-road NGVs (e.g., forklifts, riding lawnmowers, bulldozers, backhoe, front-end loaders, among other things).

To view the final rules, click here.