B-318885

November 10, 2009

The Honorable JeffBingaman
Chairman
The Honorable Lisa Murkowski
Ranking Minority Member
Committee on Energy and Natural Resources
United States Senate

The Honorable Henry A.Waxman
Chairman
The Honorable Joe L. Barton
Ranking Minority Member
Committee on Energy and Commerce
House of Representatives

Subject: Department of Energy, Office of Energy Efficiency and Renewable Energy:Production Incentives for Cellulosic Biofuels; Reverse Auction Procedures andStandards

Pursuant to section801(a)(2)(A) of title 5, United States Code, this is our report on a major rulepromulgated by the Department of Energy (DOE), Office of Energy Efficiency andRenewable Energy, entitled "Production Incentives for Cellulosic Biofuels;Reverse Auction Procedures and Standards" (RIN: 1904-AB73). It was published in the Federal Register as a final rule on October 15, 2009. 74 Fed. Reg. 52,867. It was effectively received as a major rule onOctober 26, 2009.

The final rule establishes the procedures and standardsfor reverse auctions of production incentives for cellulosic biofuels.

The final rule has an announced effective date of November16, 2009. The Congressional Review Actrequires 60 days between the effective date of a major rule and the later ofthe publication of the rule in the FederalRegister or receipt by Congress of a report containing a copy of the finalrule, a concise general statement, including whether or not the rule is a majorrule, and the proposed effective date of the rule. 5 U.S.C. sect. 802(a)(3)(A). GAO received a copy of the rule identified asnon-major on October 15, 2009. However,on October 26, 2009, DOE notified GAO that the Office of Information andRegulatory Affairs (OIRA) of the Office of Management and Budget (OMB) haddetermined that the final rule was likely to result in an annual effect on theeconomy of $100 million or more, and therefore, the final rule is a "majorrule" under the Congressional Review Act. 5 U.S.C. sect. 804(2). Consequently, DOE's major rule was effectivelyreceived on October 26, 2009, for purposes of our reporting requirements under5 U.S.C. sect. 801(a)(2)(A). Therefore, thisfinal rule does not have the required 60-day period prior to its effectivedate.

Enclosed is our assessment of the DOE's compliance withthe procedural steps required by section 801(a)(1)(B)(i) through (iv) of title5 with respect to the rule. Our reviewof the procedural steps taken indicates that, with the exception of the 60-day period prior to the effective date, DOE complied with the applicablerequirements.

If you have any questions about this report or wish tocontact GAO officials responsible for the evaluation work relating to thesubject matter of the rule, please contact Shirley A. Jones, Assistant GeneralCounsel, at (202) 512-8156.

signed

Robert J. Cramer
Managing Associate General Counsel

Enclosure

cc: Daniel Cohen
Assistant General Counsel for
Legislation and Regulatory Law
Department of Energy

ENCLOSURE

REPORT UNDER 5 U.S.C. sect.801(a)(2)(A) ON A MAJORRULE
ISSUED BY THE
DEPARTMENT OF ENERGY,
OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY
ENTITLED
"PRODUCTION INCENTIVES FOR CELLULOSIC BIOFUELS;
REVERSE AUCTION PROCEDURES AND STANDARDS"
(RIN: 1904-AB73)

(i) Cost-benefit analysis

The incentives awarded for the production of cellulosicbiofuels under the program will constitute a transfer payment from thegovernment to private entities, which means they will not affect totalresources available to society. These transfersdo not involve costs and benefits, and therefore DOE did not prepare anassessment of the costs and benefits of the final rule.

(ii) Agency actions relevant to the RegulatoryFlexibility Act, 5 U.S.C. sections603-605, 607, and 609

DOE certified that the final rule will not have asignificant economic impact on a substantial number of small entities. Therefore, DOE did not prepare a regulatoryflexibility analysis for the final rule.

(iii) Agency actions relevant to sections 202-205 ofthe Unfunded Mandates Reform Act of 1995, 2 U.S.C. sections1532-1535

DOE determined that the final rule will not impose afederal mandate on state, local, or tribal governments or on the privatesector. Therefore, DOE did not preparean analysis under the Unfunded Mandates Reform Act.

(iv) Other relevant information or requirements underacts and executive orders

Administrative Procedure Act, 5 U.S.C. sections551 etseq.

DOE published a notice of proposed rulemaking on December23, 2008. 73 Fed. Reg. 78,663. DOE received one comment on the proposed rule,and DOE responded to that comment in the final rule. 74 Fed. Reg. 52,867.

Paperwork Reduction Act, 44 U.S.C. sections3501-3520

The final rule requires that entities that intend toparticipate in a reverse auction must file a pre-auction eligibility submissionand that a bidder submits a progress report.DOE estimates that the annual recordkeeping burden for this collectionof information will be 30 hours per year at a total annual cost of $2250. DOE has submitted this collection ofinformation to OMB for approval.

Statutory authorization for the rule

The final rule is authorized by section 942 of the EnergyPolicy Act of 2005, Pub. L. 109-58, codified at 42 U.S.C. sect. 16251.

Executive Order No. 12,866 (Regulatory Planning andReview)

The final rule was determined to be a significantregulatory action under the Order, and reviewed by OMB. The authorizing statute provides that awardsunder the program shall be limited to not more than $100 million in any oneyear. 42 U.S.C. 16251(d). OMB determined the rule was economicallysignificant because of the possibility of awards at the $100 millionlevel. DOE notes, however, that thelevel of funding provided for the program thus far suggests that it is unlikelythat DOE will award $100 million in any one year.

Executive Order No. 13,132 (Federalism)

DOE determined that the final rule will not preempt statelaws and will not have a substantial direct effect on the states, on therelationship between the national government and the states, or on thedistribution of power and responsibilities among the various levels ofgovernment.