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FEDERAL TRADE COMMISSION

U.S. Immigration and Customs Enforcement

CFR Citation: 16 CFR Part 306

RIN ID: RIN 3084-AA45

NOTICE: Part VI

DOCUMENT ACTION: Final rule.

SUBJECT CATEGORY: Automotive Fuel Ratings, Certification and Posting

DATES: The amendments published in this final rule will become effective December 16, 2008. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of December 16, 2008.

DOCUMENT SUMMARY: Section 205 of the Energy Independence and Security Act of 2007 requires the Commission to promulgate biodiesel and biomassbased diesel labeling requirements. In accordance with this directive, the Commission has completed the required rulemaking and is publishing final amendments to its rule for ``Automotive Fuel Ratings, Certification and Posting'' (``Fuel Rating Rule'' or ``Rule'') (16 CFR Part 306).

SUMMARY: Federal Trade Commission,

SUPPLEMENTAL INFORMATION

Section 205 of the Energy Independence and Security Act of 2007 (``EISA'' or the ``Act'') (Pub. L. 110140) requires the Commission to promulgate biodiesel and biomassbased diesel labeling requirements within 180 days of the law's passage. The Act addresses three categories of biodiesel and biomassbased diesel blends and specifies labeling requirements for two of them. The Act also contains definitions for the terms ``biomassbased diesel,'' ``biodiesel,'' and ``biomassbased diesel and biodiesel blends'' (hereinafter referred to collectively as ``biodiesel fuels''). Following enactment on December 19, 2007, the Commission published a Notice of Proposed Rulemaking (``NPRM'') on March 11, 2008.

Based on comments received in response to the NPRM, the Commission now publishes final amendments to the Fuel Rating Rule (16 CFR Part 306) that incorporate EISA's labeling requirements. Under the final amendments, the rating and certification requirements of the existing Rule apply to fuels containing more than five percent biodiesel or more than five percent biomassbased diesel. This notice provides background on the Fuel Rating Rule, a short description of biodiesel and biomass based diesel fuels, information about the new statutory labeling requirements for biodiesel fuels, a discussion of the comments submitted along with an explanation of the changes made in response to those comments, and a detailed description of the Commission's final amendments.

I. The Fuel Rating Rule

The Commission first promulgated the Fuel Rating Rule (then titled the ``Octane Certification and Posting Rule'') in 1979 in accordance with the Petroleum Marketing Practices Act (``PMPA'') (15 U.S.C. 2821 et seq.). In response to amendments to the PMPA, the Commission expanded the scope of the Rule in 1993 to cover liquid alternative fuels (58 FR 41356 (Aug. 3, 1993)). The Fuel Rating Rule, therefore, covers any alternative liquid fuel distributed for use in any motor vehicle including, but ``not limited to,'' methanol, denatured ethanol, liquefied natural gas, and coalderived liquid fuels.\1\ PMPA gives the Commission authority to designate methods for fuel rating, fuel certification, and posting for these fuels at the point of sale. See 15 U.S.C. 2822.
\1\ In 1993, the Commission explained that ``[t]he Fuel Rating Rule . . . applies to all present and future alternative liquid automotive fuels.'' 58 FR 41355, 41358 (Aug. 3, 1993).

II. Biodiesel Fuels

EISA contains labeling requirements for ``biomassbased diesel'' and ``biodiesel.'' It defines biomassbased diesel as any fuel substitute that is produced from certain renewable resources and that meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (``EPA'') under 42 U.S.C. 7545,\2\ but not necessarily the requirements of the ASTM International\3\ (``ASTM'') standard D6751.\4\
\2\ The EPA has issued registration requirements for fuels and fuel additives (40 CFR Part 79 ``Registration of Fuels and Fuel Additives'') pursuant to 42 U.S.C. 7545. Those requirements constitute EPA's regulatory program for the registration of motor vehicle diesel fuel (including biomassbased diesel and biodiesel), motor vehicle gasoline, and their additives.
\3\ ASTM International was formerly known as, and is referred to in the Fuel Rating Rule as, the American Society for Testing and Materials.
\4\ ASTM D6751 is titled: ``Standard Specification for Biodiesel Fuel Blend Stock (B100) for Middle Distillate Fuels.'' EISA defines ``biomassbased diesel'' by referencing the definition of the term ``biodiesel'' provided in Section 312(f) of the Energy Policy Act of 1992 (42 U.S.C. 13220(f)). The definition reads: ``a diesel fuel substitute produced from nonpetroleum renewable resources that meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under [42 U.S.C. 7545],'' and includes fuel derived from ``(i) animal wastes, including poultry fats and poultry wastes, and other waste materials; or (ii) municipal solid waste and sludges and oils derived from wastewater and the treatment of wastewater.'' 42 U.S.C. 13220(f)(1)(A) and (B).
``Biodiesel,'' as defined by EISA, is a diesel fuel produced using alcohol to transform animal fat or vegetable oil. Specifically, EISA (Sec. 205(c)) defines ``biodiesel'' to mean ``the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet: (A) the registration requirements for fuels and fuel additives under this section [42 U.S.C. 7545];\5\ and (B) the requirements of ASTM standard D6751.''\6\ Biodiesel serves as a substitute for diesel fuel for some diesel vehicles and is usually blended with diesel for sale at retail pumps. According to the Department of Energy, biodiesel in the United States is usually made from soybean oil or recycled restaurant grease. Some estimates suggest that biodiesel sales increased from 15 million gallons in 2002 to 250 million gallons in 2006.\7\
\5\ EISA's definition of ``biodiesel'' specifically refers to the registration requirements for fuels and fuel additives under ``this section.'' However, there are no such registration
requirements in Section 205 of EISA nor are there any in the FTC's Fuel Rating Rule (16 CFR Part 306). Accordingly, we assume the phrase ``this section'' refers to the EPA's registration
requirements for fuels and fuel additives (40 CFR Part 79
``Registration of Fuels and Fuel Additives'') issued pursuant to 42 U.S.C. 7545. Therefore, the definition of ``biodiesel'' in the final amendments references the requirements of 40 CFR Part 79.
\6\ Because biodiesel, as defined by EISA, meets EPA's fuel registration requirements and is derived from renewable resources, biodiesel also meets the definition of biomassbased diesel, effectively making biodiesel a subset of biomassbased diesel. \7\ See (http://www1.eere.energy.gov/biomass/renewable_ diesel.html) (2002 estimate) and (http://www.biodiesel.org/pdf_ files/fuelfactsheets/Biodiesel_Sales_Graph.pdf) (2006 estimate).

Finally, EISA (Sec. 205(c)(4)) defines ``biomassbased diesel and biodiesel blends'' as fuels consisting of ```biomassbased diesel' or `biodiesel' . . . blended with petroleumbased diesel fuel.''

Although the FTC has never specifically addressed fuel labeling requirements for biodiesel fuels, the broad authority under PMPA allows the Commission to include these fuels
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under the rating, certification, and posting requirements of the Fuel Rating Rule. In light of Congress's specific directive in EISA to promulgate biodiesel fuel labeling requirements, the Commission now amends the Fuel Rating Rule to include biodiesel fuels in accordance with that directive.\8\
\8\ The Fuel Rating Rule currently does not specify labeling requirements for petroleumbased diesel. See 58 FR 41356, 41368 (Aug. 3, 1993). The Commission, therefore, is not amending the Rule to include such requirements for diesel fuel as part of this proceeding.

III. EISA's Directive

Section 205(a) of EISA provides that ``[e]ach retail diesel fuel pump shall be labeled in a manner that informs consumers of the percent of biomassbased diesel or biodiesel that is contained in the biomass based diesel blend or biodiesel blend that is offered for sale, as determined by the Federal Trade Commission.'' EISA also specifically addresses three categories of biodiesel fuel blends, requiring labels with precise wording for two. First, fuel blends containing no more than five percent biodiesel and no more than five percent biomassbased diesel, and that meet ASTM D975 (``Standard Specification for Diesel Fuel Oils''), need not be labeled.\9\ Second, fuel blends containing more than five but no more than twenty percent biomassbased diesel or biodiesel ``shall be labeled `contains biomassbased diesel or biodiesel in quantities between 5 percent and 20 percent.''' EISA, Sec. 205(b)(2) (emphasis added). Finally, blends containing more than twenty percent biodiesel or biomassbased diesel ``shall be labeled `contains more than 20 percent biomassbased diesel or biodiesel.''' EISA, Sec. 205(b)(3) (emphasis added). Significantly, although Section 205 of EISA furnishes precise, mandatory label language, the Act leaves the FTC with discretion to determine the specific size, layout, and color of the required label, as well as to require any additional wording necessary to ``inform[] consumers of the percent of biomassbased diesel or biodiesel that is contained in the biomassbased diesel blend or biodiesel blend that is offered for sale.'' EISA, Sec. 205(a). \9\ Specifically, EISA states that these fuels ``shall not require any additional labels.'' EISA, Sec. 205(b)(1). We understand this language to mean that although EISA does not require labeling of biodiesel and biomassbased diesel blends at concentrations of five percent or less, any label requirements otherwise applicable to such diesel fuel will continue to apply.

IV. Procedural History

On March 11, 2008, the Commission published an NPRM requesting comment on proposed amendments to the Rule. (73 FR 12916). The Commission designed the proposed amendments to: (1) explicitly include fuels containing more than five percent biodiesel or more than five percent biomassbased diesel as alternative fuels subject to the rating, certification, and posting requirements of the Fuel Rating Rule; and (2) promulgate labeling requirements for those fuels consistent with EISA's requirements. The NPRM also raised specific questions for comment.

V. Comments Received and the Commission's Response

The Commission received twelve comments.\10\ Generally, the comments supported the FTC's proposed amendments. However, several commenters raised issues. This section addresses these issues in the following order: separate labeling for fuels containing biodiesel and for fuels containing biomassbased diesel; the appropriateness of the labeling scheme generally; the appropriate background color for the labels; modifications to the labels proposed by the commenters to benefit consumers; and whether to require specific percentage designations only for biodiesel fuel blends over twenty percent. \10\ Comments are available at: (http://www.ftc.gov/os/comments/ biodiesel/index.shtm.)
A. Separate Labeling for Fuels Containing Biodiesel and BiomassBased Diesel

FOR FURTHER INFORMATION CONTACT Matthew Wilshire, (202) 326-2976, or Hampton Newsome, (202) 3262889, Attorneys, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.