Subpart B-Advanced Biofuel Payment Program, 20085-20109 [2010-8278]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service

[Federal Register Volume 75, Number 73 (Friday, April 16, 2010)]
[Proposed Rules]
[Pages 20085-20109]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-8278]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

7 CFR Part 4288

RIN 0570-AA75


Subpart B--Advanced Biofuel Payment Program

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Business-Cooperative Service (Agency) is proposing 
to establish a payment program for producers of advanced biofuels to 
support existing advanced biofuel production and to encourage new 
production of advanced biofuels. The Agency would enter into contracts 
with advanced biofuel producers to pay such producers for the 
production of eligible advanced biofuels. To be eligible for payments, 
advanced biofuels must be produced from renewable biomass, excluding 
corn kernel starch, in a biorefinery located in the United States.

DATES: Written comments on the proposed rule must be received on or 
before May 17, 2010. The comment period for the information collection 
under the Paperwork Reduction Act of 1995 continues through June 15, 
2010.

ADDRESSES: You may submit comments to this proposed rule by any of the 
following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Diane Berger, USDA Rural Development, 
1400 Independence Ave., SW., Room 6865, STOP 3225, Washington, DC 
20250. Telephone: (202) 260-1508. Fax: (202) 720-2213. E-mail: 
diane.berger@wdc.usda.gov.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    This proposed rule has been reviewed under Executive Order (EO) 
12866 and has been determined to be economically significant by the 
Office of Management and Budget. The EO defines a ``significant 
regulatory action'' as one that is likely to result in a rule that may: 
(1) Have an annual effect on the economy of $100 million or more or 
adversely affect, in a material way, the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in this EO.
    The Agency conducted a benefit-cost analysis to fulfill the 
requirements of Executive Order 12866. The Agency has identified 
potential benefits to the advanced biofuel producer and to the Agency. 
While unable to quantify any costs or benefits associated with this 
rulemaking, the Agency believes that the overall effect of the rule may 
be beneficial.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public 
Law 104-4 establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and Tribal 
governments and the private sector. Under section 202 of the UMRA, 
Rural Development generally must prepare a written statement, including 
a cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or Tribal 
governments, in the aggregate, or to the private sector of $100 million 
or more in any one year. When such a statement is needed for a rule, 
section 205 of UMRA generally requires Rural Development to identify 
and consider a reasonable number of

[[Page 20086]]

regulatory alternatives and adopt the least costly, more cost-
effective, or least burdensome alternative that achieves the objectives 
of the rule.
    This proposed rule contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, and 
Tribal governments or the private sector. Thus, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

National Environmental Policy Act/Environmental Impact Statement

    This renewable energy program under Title IX of the 2008 Farm Bill 
has been operated on an interim basis through the issuance of a Notice 
of Contract Proposal (NOCP). During this initial round of applications, 
the Agency conducted National Environmental Policy Act (NEPA) reviews 
on each individual application for funding. No significant 
environmental impacts were reported. As expected, these applications 
were not from any concentrated grouping of applicant facilities, but 
represented a wide variety of applicants for a diverse range of 
renewable energy proposals. Taken collectively, the applications show 
no potential for significant adverse cumulative effects.
    The Agency is preparing a programmatic environmental assessment 
(PEA), pursuant to 7 CFR subpart 1940-G, to analyze the environmental 
effects to air, water, and biotic resources; land use; historic and 
cultural resources, and greenhouse gas emissions affected by the 
Section 9005 proposed rule. The purpose of the PEA is to assess the 
overall environmental impacts of the programs related to the 
Congressional goals of advancing biofuels production for the purposes 
of energy independence and green house gas emission reductions. The 
impact analyses will be national in scope but will draw upon site-
specific data from advanced biofuel facilities funded under Sections 
9003, 9004, and 9005 NOFA's (or NOCP's) for FY 2008 and/or FY 2009 as 
reasonable assumptions for the types of facilities, feedstocks, and 
impacts likely to be funded under the proposed rulemaking for FY 2010-
FY 2012. Site-specific NEPA documents prepared for those facilities 
funded under Sections 9003 and 9004 in FY 2008 and/or 2009 will be 
utilized, as well, to forecast likely impacts under the proposed rules. 
Qualitative analyses of likely programmatic impacts beyond the FY 2012 
program expiration date will be provided, as appropriate. The draft PEA 
will be made available to the public for comment on the USDA Rural 
Business Service's Web site by May 3, 2010, and all comments will be 
addressed as part of any revision of the PEA, or prior to the 
publication of any Finding of No Significant Impact (FONSI).

Executive Order 12988, Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) All State and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given this rule; and (3) 
administrative proceedings in accordance with the regulations of the 
Department of Agriculture's National Appeals Division (7 CFR part 11) 
must be exhausted before bringing suit in court challenging action 
taken under this rule unless those regulations specifically allow 
bringing suit at an earlier time.

Executive Order 13132, Federalism

    It has been determined, under Executive Order 13132, Federalism, 
that this proposed rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in the proposed rule will not have a substantial 
direct effect on States or their political subdivisions or on the 
distribution of power and responsibilities among the various government 
levels.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute unless the agency 
certifies that the rule will not have an economically significant 
impact on a substantial number of small entities. Small entities 
include small businesses, small organizations, and small governmental 
jurisdictions.
    In compliance with the RFA, Rural Development has determined that 
this action will not have an economically significant impact on a 
substantial number of small entities. Rural Development made this 
determination based on the fact that this regulation only impacts those 
who choose to participate in the Program. Small entity applicants will 
not be affected to a greater extent than large entity applicants.
    The entities affected by the Program are biorefineries. The Agency 
received approximately 180 applications in fiscal year 2009, and 
approved 160 entities for participation. In assessing whether these 
entities are small businesses, the Agency notes that there is no unique 
Small Business Administration (SBA) definition for biorefineries, 
because biorefineries are found in a number of North American Industry 
Classification System (NAICS) codes. The majority of existing 
biorefineries produce biodiesel, and for these biorefineries, the small 
business definition is 1,000 employees. Based on Agency experience and 
in-house knowledge of the fiscal year 2009 applicants and using 1,000 
employees as the definition of small business, the majority of 
biorefineries applying in fiscal year 2009 would be classified as small 
businesses. The Agency expects this to continue to be true as the 
Program continues.
    The average cost to a biorefinery to participate in the Program is 
estimated to be approximately $500. This cost is not expected to impose 
an economically significant impact on these small entities. Because of 
this minimal cost, the Agency does not believe that the cost of 
applying and participating will dissuade a small business from seeking 
to participate in this program. Further, biorefineries are expected to 
realize more in payments than in costs for participating in the 
program. Thus, participating biorefineries will be able to recoup this 
expense, although small biorefineries are likely to take longer to 
recoup the expense because they will be producing less advanced 
biofuel. Also, this regulation only affects biorefineries that choose 
to participate in the program. Lastly, the program is open to all 
eligible producers.

Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    The regulatory impact analysis conducted for this proposed rule 
meets the requirements for Actions Concerning Regulations That 
Significantly Affect Energy Supply Distribution and Use, Executive 
Order No. 13211, which states that an agency undertaking regulatory 
actions related to energy supply, distribution, or use is to prepare a 
Statement of Energy Effects. This analysis does not find that this 
proposed rule will have any adverse impacts on energy supply, 
distribution or use.
    Section 9005 payments will be made to existing biorefineries. These 
payments will likely increase quantities of renewable energy produced 
from domestic feedstock. While an increase in advanced biofuels will 
likely displace the use of petroleum-based liquid and gaseous fuels, 
the volumes supported by

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this program will not disrupt U.S. energy supply. On the contrary, 
increased biofuels from domestic feedstock will diversify 
transportation fuels in the U.S. and replace petroleum imports. 
Replacing imported petroleum with biofuels from domestic feedstock will 
reduce the risk of potential disruption in supply or spike in prices 
from relying on foreign oil imports. The reduction in risks will 
improve our energy security and stabilize our energy supply.
    In sum, because the regulatory impacts analysis does not find that 
this proposed rule will have any adverse impacts on energy supply, 
distribution or use, a Statement of Energy Effects was not prepared.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This Program is not subject to Executive Order 12372, 
Intergovernmental Review of Federal Programs, because the Program 
involves no construction and therefore no mitigation or planning 
activities are involved.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have Tribal implications or 
preempt Tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
Tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and the Indian 
Tribes. Thus, the proposed rule is not subject to the requirements of 
Executive Order 13175.

Programs Affected

    This Program is listed in the Catalog of Federal Domestic 
Assistance under Number 10.867.

Paperwork Reduction Act

    The information collection requirements contained in the Notice of 
Funding Availability for the Section 9005 Advanced Biofuels Payments 
Program published on June 12, 2009, were approved by the Office of 
Management and Budget under emergency clearance procedures and assigned 
OMB Control Number 0570-0057. As noted in the June 12, 2009 notice, the 
Agency sought emergency clearance to comply with the time frames 
mandated by a Presidential Memorandum in order to implement the Program 
as quickly as possible, and that providing for public comment under the 
normal procedure would unduly delay the provision of benefits 
associated with this Program and be contrary to the public interest. 
Now, however, in accordance with the Paperwork Reduction Act of 1995, 
the Agency is seeking OMB approval for three years of the reporting and 
recordkeeping requirements contained in this proposed rule and hereby 
opens a 60-day public comment period.
    Title: Advanced Biofuels Producer Payment Program.
    Type of Request: New collection.
    Abstract: Rural Development is providing payments to eligible 
producers of advanced biofuels to support and ensure an expanding 
production of advanced biofuels.
    The collection of information is vital to Rural Development to make 
wise decisions regarding the eligibility of advanced biofuels producers 
and their products in order to ensure compliance with the provisions of 
this Program and to ensure that the payments are made to eligible 
producers and advanced biofuels and is necessary in order to implement 
this Program.
    Advanced biofuel producers seeking to participate in the Program 
must enroll in the Program by submitting an Agency-approved 
application. This application requires the advanced biofuel producer to 
provide information on the applicant; the applicant's biorefineries at 
which the advanced biofuels are produced, including location and 
quantities produced and a description of the business; the types and 
quantities of renewable biomass feedstock being used to produce the 
advanced biofuels; and the amount of eligible advanced biofuels 
produced at each biorefinery in the 12 months prior to the first day of 
the sign-up period for the fiscal year for which the annual application 
is being submitted. Applicants are also required to submit 
documentation to support the amount of eligible advanced biofuels 
reported in the form and to certify the information provided, including 
that the advanced biofuels are eligible advanced biofuels and that the 
renewable biomass feedstock used to produce the advanced biofuels are 
eligible biomass feedstock. Applicants must submit authoritative 
evidence documenting production of advanced biofuels, and the 
eligibility of the advanced biofuels.
    The information contained in the application will be used by the 
Agency to determine whether the advanced biofuel producer is eligible 
to participate in the Program and whether the advanced biofuel being 
produced is eligible for payments under the Program. The same Agency-
approved application form will also be used by the Agency to sign-up 
advance biofuel producers in subsequent fiscal years (FY) and to obtain 
information to help determine payment rates.
    Before being accepted into the Program, the advanced biofuel 
producer must also furnish the Agency all required certifications, as 
applicable, and furnish access to the advanced biofuel producer's 
records required by the Agency to verify compliance with program 
provisions. The required certifications, which must be completed and 
provided by an accredited independent third party, depend on the type 
of biofuel produced.
    Once an advanced biofuel producer has been approved to participate 
in the Program, the producer and the Agency enter into an Agency-
approved contract. All contracts will be reviewed at least annually to 
ensure compliance with the contract and ensure the integrity of the 
program.
    Once the contract is signed, the advanced biofuel producer will 
submit, preferably on a quarterly basis, an Agency-approved form to 
request payment. This form requires the advanced biofuel producer to 
provide information on the types and quantities of advanced biofuels 
produced in each quarter and on the types and quantities of renewable 
feedstock used to produce those advanced biofuels. In addition, the 
advanced biofuel producer will report cumulative production of advanced 
biofuels and the use of renewable biomass feedstock for all advanced 
biofuel biorefineries. The information for each advanced biofuel 
biorefinery is to be provided cumulatively and on an individual 
advanced biofuel biorefinery basis. This information is required in 
order for the Agency to determine the payments to be made to the 
eligible producers each quarter and to track the quantities of advanced 
feedstock for which payments have been made.
    The following estimates are based on the average over the first 
three years the Program is in place.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.8 hour per response.
    Respondents: Advanced biofuels producers.
    Estimated Number of Respondents: 302.
    Estimated Number of Responses per Respondent: 9.4.
    Estimated Number of Responses: 2,842.

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    Estimated Total Annual Burden (hours) on Respondents: 2,273.
    Copies of this information collection may be obtained from Cheryl 
Thompson, Regulations and Paperwork Management Branch, Support Services 
Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 
1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling 
(202) 692-0043.

Comments

    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
Rural Development, including whether the information will have 
practical utility; (b) the accuracy of the new Rural Development 
estimate of the burden of the proposed collection of information, 
including the validity of the methodology and assumptions used; (c) 
ways to enhance the quality, utility, and clarity of the information to 
be collected; and (d) ways to minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology. 
Comments may be sent to Cheryl Thompson, Regulations and Paperwork 
Management Branch, U.S. Department of Agriculture, Rural Development, 
STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All 
responses to this proposed rule will be summarized and included in the 
request for OMB approval. All comments will also become a matter of 
public record.

E-Government Act Compliance

    Rural Development is committed to complying with the E-Government 
Act, to promote the use of the Internet and other information 
technologies to provide increased opportunities for citizen access to 
Government information and services, and for other purposes.

I. Background

    Rural Development administers a multitude of Federal programs 
benefitting rural America, ranging from housing and community 
facilities to infrastructure and business development. Its mission is 
to increase economic opportunity and improve the quality of life in 
rural communities by providing leadership, infrastructure, venture 
capital, and technical support that can support rural communities, 
helping them prosper.
    To achieve its mission, Rural Development provides financial 
support (including direct loans, grants, and loan guarantees) and 
technical assistance to help enhance the quality of life and provide a 
support for economic development in rural areas. The Food, 
Conservation, and Energy Act of 2008 (2008 Farm Bill) contains several 
sections under which Rural Development will provide financial 
assistance for the production and use of biofuels. This proposed rule 
addresses Section 9005 of the 2008 Farm Bill, which authorizes the 
Secretary of Agriculture to ``make payments to eligible producers to 
support and ensure an expanding production of advanced biofuels'' by 
entering into contracts for the production of advanced biofuels to both 
support existing advanced biofuel production and encourage new 
production.
    Section 9005 of the Farm Security and Rural Investment Act of 2002 
as added by the Food Conservation and Energy Act of 2008, authorizes 
the Secretary of Agriculture to ``make payments to eligible producers 
to support and ensure an expanding production of advanced biofuels'' by 
entering into contracts for the production of advanced biofuels to both 
support existing advanced biofuel production and encourage new 
production. To be eligible for payments, advanced biofuels produced 
must be derived from renewable biomass, excluding corn kernel starch, 
in a biorefinery located in the United States.
    Under the proposed rule, the sign-up period for new and current 
producers of advanced biofuels is October 1 to October 31 of the fiscal 
year for which payment is sought, unless otherwise announced by the 
Agency in a Federal Register notice. An executed contract remains valid 
until the end of the program (September 30, 2012), or terminated by 
either the Agency or participating party. All contracts will be 
reviewed at least annually to ensure compliance with the contract and 
ensure the integrity of the program. Applicants will update production 
amounts annually during the solicitation process.
    Payment rates under the proposed rule are determined based on the 
size of the facility and whether production is ``base'' or 
``incremental.'' Base production is defined as a facility's existing 
level of production; any subsequent production that is in excess of the 
base amount is considered to be incremental. Under the proposed rule, 
to encourage more production of advanced biofuels, the payment rate for 
the incremental production will be five times greater than the payment 
rate for base production. The proposed rule provides that the base and 
incremental rates will be calculated on a British Thermal Unit basis.
    The Agency is also considering an approach to offer different 
payment rates based on their lifecycle greenhouse gas (GHG) emissions. 
This approach would offer a significantly higher payment rate for 
biofuels that are demonstrated to significantly reduce GHGs emissions 
relative to the conventional fuels that they replace; biofuels that do 
not demonstrate significant GHG reductions would receive the lower 
payment rate. For example, in the case of liquid biofuels, fuels that 
have been certified as advanced biofuels, cellulosic biofuels, or bio-
based diesel under EPA's Renewable Fuels Standard achieve lifecycle GHG 
reductions of at least 50 percent relative to conventional liquid fuels 
and so would qualify for the higher payment rate. We request comments 
on this approach as an alternative to the proposed rule text, including 
comments on how such an alternative should be drafted to best address 
the goal of lifecycle GHG reductions. Please provide analytical support 
for comments provided in response to this request.
    Because there is no limit on the number of advanced biofuels 
producers that enter this program, the actual payment rates will be 
determined based on the number of eligible applications received each 
year.
    Consistent with the authorizing legislation, the goal of this 
program is to encourage the expansion of the country's production 
capacity of advanced biofuels. To help meet this goal, the program 
would be open to all producers of advanced biofuels given the 
difficulty of determining the types or technologies that will 
ultimately create the foundation of this industry at this early stage 
of development of the industry. In addition, given that the biofuels 
industry is very capital intensive, the Agency is proposing multi-year 
contracts to enable advanced biofuels producers the assurance of a 
multi-year revenue stream. This approach is consistent with the goal of 
creating a stable industry. Finally, the Agency is proposing a two-
tiered payment approach under which incremental production is paid at a 
significantly higher rate than base production in order to balance the 
interests of encouraging new production while providing stability to 
existing production. With respect to all of these points, the Agency 
welcomes feedback from the public during the comment period.
    The Agency views this program in conjunction with its other 
renewable

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energy programs in the context of an overall Federal renewable energy 
strategy. The goal of this strategy is to foster the development of a 
strong, expanding, and economically sustainable group of renewable 
energy industries in the United States to supply an increasing share of 
the country's energy needs. The success of these industries will depend 
on their ability to produce energy sources that meet the demands of the 
country's energy markets. These markets are driven by a number of 
factors including the price of oil and other fossil fuels, developments 
in technologies, the acceptance of the public, the capacity of 
distribution systems, and the impact of government regulation such as 
the renewable fuels standard.
    The Advanced Biofuels Payment Program is one part of Rural 
Development's contribution to the Department of Agriculture's renewable 
energy efforts that support the overall Federal renewable energy 
strategy. This program provides stability and incentives to maintain 
and grow the advanced biofuels industry.
    The development of the advanced biofuels industry will take a 
strong partnership between the Federal government and the private 
sector to generate the capital needed to construct and operate these 
facilities to meet the future energy needs of the country. This program 
provides funding stability that will assist these advanced biofuels 
producers to attract the private capital they need to continue 
expansion of this industry.

II. Discussion of Proposed Rule for Advanced Biofuel Payment Program

    On June 12, 2009, the Agency published a Notice, Contract Proposal 
for Payments to Eligible Advanced Biofuel Producers [74 FR 27998]. 
(This Notice is referred to in this preamble as the Section 9005 NOCP.) 
While the Section 9005 NOCP provided requirements for participation in 
Fiscal Year 2009, most of its provisions are applicable to Fiscal Year 
2010 and beyond and, thus, have been carried forward into this proposed 
rule.
    This section describes the Advanced Biofuel Payment Program, first 
by presenting a brief overview of how the Program will work, then by 
the overall organization of the Program, and lastly by presenting a 
section-by-section description. In developing this Program, the Agency 
relied heavily on the predecessor Bioenergy Program (7 CFR Part 1424), 
although there are some differences between the two programs. For 
example, under the Bioenergy Program, payments were made for the 
production of ethanol and biodiesel from eligible commodities 
including, but not limited to, barley; corn; grain sorghum; oats; rice; 
wheat; soybeans; switchgrass; fats, oils, and greases (including 
recycled fats, oils and greases) derived from an agricultural product; 
and any animal byproduct. In contrast, under the Section 9005 Program, 
payments will be made to producers of advanced biofuel and biogas, 
which is fuel derived from renewable biomass, other than corn kernel 
starch (cellulose, hemicellulose, or lignin, sugar and starch; waste 
material, including crop residue, other vegetative waste material, 
animal waste, food waste, and yard waste; vegetable oil and animal fat, 
etc.). Another example is that the Section 9005 Program requires the 
biorefinery to have at least 51 percent U.S. ownership; the Bioenergy 
Program did not have this requirement.
    By relying on this predecessor program, the Agency believes that 
the proposed Advanced Biofuel Payment Program is within the guidance of 
its authorizing statute and will facilitate participation from those 
producers already familiar with the Bioenergy Program.

A. Program Overview

    As noted earlier in this preamble, the Section 9005 Program will 
make payments to eligible producers for the production of eligible 
advanced biofuels. Participation in the Program requires advanced 
biofuel producers to follow the following three steps:
    1. Producers submit form RD 4288-1, ``Advanced Biofuel Payment 
Program Annual Application'' along with applicable permits, 
registrations etc. Currently, the application form requires the 
producer to complete the base amount and project the incremental amount 
for the fiscal year.
    2. If the producer meets the eligibility requirements, a contract 
(form RD 4288-2) will be issued. An executed contract remains valid 
until the end of the program (September 30, 2012), or until terminated 
by either the Agency or participating party. The Agency will review all 
contracts at least annually to ensure compliance with the contract and 
ensure the integrity of the program.
    3. The producer must submit form RD 4288-3, ``Advanced Biofuel 
Payment Program--Payment Request'' with documentation verifying the 
actual amount produced.
    Therefore, each fiscal year, current, participating producers 
complete steps 1 and 3 above. If a producer is new to the Program, the 
producer must complete steps 1 through 3. The sign-up period for both 
new and current participating producers is October 1 to October 31 of 
the fiscal year for which payment is sought, unless otherwise announced 
by the Agency in a Federal Register notice.
    Each fiscal year, the Agency will notify each eligible applicant of 
the program payment the applicant may expect to receive for that fiscal 
year. A producer will only be paid for the advanced biofuels identified 
in the application submitted during the sign-up period and which are 
actually produced during the fiscal year. If the producer starts 
producing a new advanced biofuel or changes the type of advanced 
biofuel during the fiscal year, the producer will not receive any 
payments for those new advanced biofuels. However, during each sign-up 
period, a producer can identify new advanced biofuels and production 
levels compared to the previous year.
    To ensure compliance with the Section 9005, the Agency will conduct 
a number of oversight and monitoring activities, including site visits 
and records review. By conducting such activities, the Agency will be 
verifying production and feedstock eligibility, the portion of the 
advanced biofuel eligible for payment, and certificate of analyses 
records. If the Agency discovers any misrepresentation or fraud by a 
producer, it may suspend payment, terminate the contract, or debar the 
producer from participation in any Federal program.

B. Overall Organization of the Advanced Biofuel Payments Program Rule

    The proposed Advanced Biofuel Payment Program is divided into four 
sets of sections, which are described in the following paragraphs.
    General Provisions. This set of sections in Subpart B of Part 4288 
of title 7 of the CFR (hereafter referred to as Subpart B) contains 
provisions general to the administration of the Advanced Biofuel 
Payment Program. It covers the purpose and scope of the Program (Sec.  
4288.101), definitions (Sec.  4288.102), reviews and appeals (Sec.  
4288.103), compliance with other Federal, State, and local laws (Sec.  
4288.104), oversight and monitoring (Sec.  4288.105), forms, 
regulations, and instructions (Sec.  4288.106), and exception authority 
(Sec.  4288.107).
    Eligibility Provisions. This set of sections of Subpart B contains 
provisions addressing the eligibility of applicants (Sec.  4288.110) 
and biofuels (Sec.  4288.111), and the notification process that the 
Agency will use to inform the public of its eligibility

[[Page 20090]]

decisions (Sec.  4288.112). This section concludes with requirements 
for records required to document payment requests (Sec.  4288.113).
    Enrollment Provisions. This set of sections contains the provisions 
associated with enrolling in the Program (Sec.  4288.120) and on 
contracts and their termination (Sec.  4288.121). Figure 1 illustrates 
the basic steps for initially enrolling in the Program.
    Payment Provisions. This set of sections contains the provisions 
associated with applying for and receiving payments under the Program. 
Figure 2 illustrates the basic steps for payment applications. Section 
4288.130 covers payment application provisions, while Sec. Sec.  
4288.131 through 4288.136 cover procedures associated with determining 
payment amounts and adjustments, payment liability, refunds and 
interest payments, unauthorized assistance and offsets, and remedies. 
This section concludes with provisions addressing the succession and 
transfer of ownership of biorefineries participating in the Program 
(Sec.  4288.137).
    There is no competition for available funding. Assistance is based 
on total requests received and funding available. Each eligible 
applicant will receive a pro rata share of available funding based on 
the applicant's production compared to the total production for all 
eligible applicants.
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BILLING CODE 3410-XY-C

C. Discussion of Sections

Section A--General Provisions
Purpose and Scope (Sec.  4288.101)
    Paragraph (a) defines the purpose, which is to support and ensure 
an expanding production of advanced biofuels by providing payments to 
eligible advanced biofuel producers. Paragraph (b) identifies the 
scope, which lays out the terms and conditions an advanced biofuel 
producer must meet in order to obtain payments from the Agency for 
eligible advanced biofuel production under the Advanced Biofuel Payment 
Program. This section also states that additional terms and conditions 
may be provided in the Program contract and the payment agreement 
prescribed by the Agency.
Definitions (Sec.  4288.102)
    This section presents the definitions used in this subpart B, 
including terms that are specified in the 2008 Farm Bill. The 
definitions contained in this section are found in the Section 9005 
NOCP, with revisions to the definitions of base production and 
incremental production necessary to implement the proposed rule and to 
the definitions for larger producers and smaller producers. As 
discussed below, there are four key definitions associated with this 
rule.
    Two of the key definitions are advanced biofuel and renewable 
biomass. Both terms are defined in the Food, Conservation, and Energy 
Act of 2008.
    With regard to the definition of advanced biofuel, the Agency notes 
that the statute requires payments to be made for ``advanced 
biofuels,'' which are fuels derived from renewable biomass

[[Page 20093]]

(other than corn kernel starch). The Agency understands the definition 
to apply to solid, liquid, or gaseous fuels that are final products and 
not to intermediary components or products that are used in the 
production of the final advanced biofuel product. Therefore, the Agency 
is proposing that this rulemaking only applies to producers of solid, 
liquid, or gaseous advanced biofuels that are final products and not to 
producers of intermediary components and products used in the 
production of a final advanced biofuel product (see Sec.  
4288.111(a)(2) and (3)).
    In addition, in order to be eligible for payment under this 
Program, the Agency is proposing that if the advanced biofuel is used 
on-site, the producer must be able to verify the quantity of advanced 
biofuel being consumed on-site using an Agency-approved system (see 
Sec.  4288.111(a)(4)).
    While many advanced biofuels are used in the transportation market, 
there are other end use markets for advanced biofuels. For example, 
biogas can be used for the production of electricity and replacing 
petroleum-based gases, such as natural gas, for both mobile and 
stationary uses. It is the Agency's intent to make the Section 9005 
program available to all eligible advanced biofuels, regardless of the 
end use market. The Agency, however, does expect that the majority of 
advanced biofuels participating in this program would be used as 
transportation fuels, thus furthering the goals of the Renewable Fuels 
Standard mandate. Lastly, the Agency notes that the Section 9005 
program is different from the REAP because the REAP program is used to 
construct facilities, which may include biorefineries, and to make 
energy efficiency improvements, while the Section 9005 program will 
make payments to producers for the advanced biofuels produced.
    With regard to the definition of renewable biomass, the Agency 
notes that the definition of renewable biomass provides for a wide 
range of feedstock to be used in the production of advanced biofuel. 
For example, sunflower seeds can be used to produce long-chain 
hydrocarbons; algae and jatropha can be used to produce biodiesel; 
forest mass can be used to produce alcohols and methanol; and 
switchgrass can be used to produce ethanol. The only feedstock 
specifically excluded from the statutory definition of advanced 
biofuels is corn kernel starch. Further, the Agency points out that 
both second generation (biochemical) advanced biofuels and third 
generation (thermochemical) advanced biofuels are eligible for 
participation in the Program.
    The third and fourth key definitions are base production and 
incremental production. As discussed later in this preamble, the Agency 
is proposing that payments be made based on both a biorefinery's 
existing level of production and for increases above the biorefinery's 
existing level of production. This requires the Agency to define a 
biorefinery's ``existing level of production.'' This is referred to in 
the rule as the biorefinery's base production.
    Base production. For the Section 9005 rule, the Agency is proposing 
to determine an advanced biofuel biorefinery's base production using 
one of two methods, as applicable, which are the same as two of the 
methods found in the Section 9005 (NOCP). These two methods are:
     If the biorefinery has been in existence for 12 months or 
more prior to the first day of the sign-up period for the fiscal year 
(i.e., October 1) for which payment under this Program is sought, the 
biorefinery's base production for the sign-up fiscal year will be equal 
to the quantity of eligible advanced biofuel produced at the advanced 
biofuel biorefinery in the 12 months immediately preceding the first 
day of the sign-up period. For example, for Fiscal Year 2011, the base 
production for a biorefinery would be the quantity of eligible advanced 
biofuel produced from October 1, 2009, through September 30, 2010.
     If the biorefinery has been in existence less than 12 
months prior to the first day of the sign-up period for the fiscal year 
for which payment under this Program is sought or if the biorefinery 
will begin producing on or after October 1 of the sign-up fiscal year, 
the biorefinery's base production for the sign-up fiscal year will be 
equal to the quantity projected to be produced by the biorefinery's 
producer as reported in Form RD 4288-1, ``Advanced Biofuel Payment 
Program Annual Application.''
    Incremental production. The fourth key definition is incremental 
production. As proposed, a biorefinery's incremental production is the 
quantity of eligible advanced biofuel produced at the biorefinery that 
is in excess of that biorefinery's base production. However, for a 
biorefinery that has been in existence less than 12 months before 
October 1 of the sign-up fiscal year or that begins producing eligible 
advanced biofuels on or after October 1 of the sign-up fiscal year, 
there is no incremental production; all production for that sign-up 
fiscal year will be considered base production and the biorefinery's 
producer would receive payment at the base production payment rate for 
that fiscal year. In subsequent fiscal years, the advance biofuel 
producer for such a biorefinery would be eligible for both base and 
incremental production payments.
    Lastly, the Agency is revising the definitions for ``larger 
producers'' and ``smaller producers'' to clarify the calculation of the 
amount of advanced biofuel a producer is producing. In the NOCP, the 
determination of whether a producer was a larger producer or smaller 
producer did not address the situation where a producer owned more than 
one advanced biofuel biorefinery. In making this calculation, the 
Agency will determine the refining capacity of an advanced biofuel 
producer based on the production of advanced biofuel at all of the 
advanced biofuel biorefineries in which the producer has 50 percent or 
more ownership.
Review or Appeal Rights (Sec.  4288.103)
    This section provides the legal basis for a person to seek a review 
of an adverse Agency decision under this subpart. When the Agency makes 
an adverse decision, a person may seek a review of an Agency decision 
or appeal to the National Appeals Division in accordance with 7 CFR 
part 11. This provision is the same as found in the Section 9005 NOCP.
Compliance With Other Laws and Regulations (Sec.  4288.104)
    This section states that advanced biofuel producers must comply 
with other applicable Federal, State, and local laws including, but not 
limited to, Equal Employment Opportunity Act, Title VI of the Civil 
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, The 
Age Discrimination Act of 1975, the American with Disabilities Act of 
1990, and 7 CFR part 1901, subpart E. This includes collection and 
maintenance of race, sex, and national origin data of the recipient's 
employee.
    Furthermore, producers must comply with equal opportunity and 
nondiscriminatory requirements in accordance with 7 CFR 15d. The Agency 
will not discriminate against an applicant on the basis of race, color, 
religion, national origin, sex, sexual orientation, marital status, 
familial status, disability, or age (provided that the applicant has 
the capacity to contract); on the basis of whether all or part of the 
applicant's income derives from public assistance program; or whether 
the applicant has in good faith exercised any right under the Consumer 
Credit Protection Act.

[[Page 20094]]

Oversight and Monitoring (Sec.  4288.105)
    The provisions in this section, which are substantively the same as 
found in the Section 9005 NOCP, cover how the Agency will enforce the 
terms of this Program, including site visits (which the Agency will 
conduct as frequently as necessary to ensure compliance with the 
provisions of this Program) and examination of records. In order to 
ensure the integrity of the Program, the Agency reserves the right to 
verify, as frequently as necessary, all payment applications and 
subsequent payments made under paragraph (a) of this section. 
Enforcement of this Program includes, but will not necessarily be 
limited to, three key Program aspects as described below. The Agency is 
focusing on these three areas because they are key to ensuring the 
integrity of the Program.
     Production and feedstock verification. The Agency will 
review producer records to verify the type and amount of biofuel 
produced and the type and amount of feedstocks used.
     Blending verification. The Agency will review the 
producer's certificates of analysis and feedstock records to verify the 
portion of the advanced biofuel eligible for payment.
     Certificate of Analysis. The Agency will review the 
producer records to ensure that each certificate of analysis has been 
issued by a qualified, independent third party.
    This section also states that all eligible advanced biofuel 
producers participating in the Program must make available to the 
Agency for inspection, at one place and at a reasonable time, all 
books, papers, records, contracts, scale tickets, settlement sheets, 
invoices, written price quotations, and other documents related to the 
Program that is within the control of the producer (Sec.  4288.105(b)). 
In addition, these records must be maintained by the producer for not 
less than three years from each Program payment date. These records are 
required in order for the Agency to ensure compliance with the Program 
and that all payments are made appropriately.
Forms, Regulations, and Instructions (Sec.  4288.106)
    This section states that all forms, regulations, instructions, and 
other materials related to the Program may be obtained from any USDA 
Rural Development State Office, Rural Energy Coordinator, and the USDA 
Rural Development Web site at: https://www.rurdev.usda.gov/rbs/busp/9005Biofuels.htm. The Agency notes that this link may change in the 
future.
Exception Authority (Sec.  4288.107)
    This section identifies that condition under which the 
Administrator may make, on a case-by-case basis, exceptions to any 
requirement or provision of this subpart. The proposed provisions are 
the same as found in 7 CFR 4280, subpart B, for the renewable energy 
systems and energy efficiency improvements program.
Section B--Eligibility
    This section addresses the eligibility requirements for advanced 
biofuel producers and their biofuels, notifications of the Agency's 
eligibility determinations, and payment record requirements.
Applicant Eligibility (Sec.  4288.110)
    This section identifies the requirements for applicant eligibility 
and conditions under which an otherwise eligible advanced biofuel 
producer may be found to be ineligible for participation in the 
Program. The requirements for applicant eligibility in this section are 
the same as those in the Section 9005 NOCP, except that the Agency has 
added provisions to clarify the eligibility of applicants that are 
subsidiaries and has clarified that public bodies and educational 
institutions are not eligible for this Program.
    To be eligible for this Program, an applicant must be an eligible 
producer, which is defined as a producer of advanced biofuels (Sec.  
4288.102). This is a statutory requirement. Any applicant that 
generates biogas from an anaerobic digester, including those located on 
a farm, would be eligible if all other program requirements are met.
    Lastly, applicants will be required to meet the following 
citizenship requirements, as applicable:
     If the applicant is an individual, the applicant must be a 
citizen or national of the United States (U.S.), the Republic of Palau, 
the Federated States of Micronesia, the Republic of the Marshall 
Islands, or American Samoa, or must reside in the U.S. after legal 
admittance for permanent residence.
     If the applicant is an entity other than an individual, 
the applicant must be at least 51 percent owned by persons who are 
either citizens or nationals of the United States (U.S.), the Republic 
of Palau, the Federated States of Micronesia, the Republic of the 
Marshall Islands, or American Samoa, or legally admitted permanent 
residents residing in the U.S. However, this requirement is not 
applicable if the entity is composed solely of members of an immediate 
family. In such instances, if at least one of the immediate family 
members is a citizen or national as described above, then the entity is 
eligible to participate in this program. Immediate family is being 
defined as: Individuals who are closely related by blood, marriage, or 
adoption, or live within the same household, such as a spouse, domestic 
partner, parent, child, brother, sister, aunt, uncle, grandparent, 
grandchild, niece, or nephew.
     If the applicant is a subsidiary, the parent entity or the 
entities that have an ownership in that applicant must also be at least 
51 percent owned by persons who are either citizens or nationals of the 
United States (U.S), the Republic of Palau, the Federated States of 
Micronesia, the Republic of the Marshall Islands, or American Samoa, or 
legally admitted permanent residents residing in the U.S.
    If an applicant does not meet the citizenship requirement, the 
applicant is not eligible for this program. While this citizenship 
requirement is not required by statute, it is consistent with the 
Agency's other programs. As found in Section III of this preamble, the 
Agency is seeking comment on this requirement.
    To make its determination as to whether or not the applicant is 
eligible for participation, the Agency will review the application to 
determine if the information submitted is sufficient to determine if 
the applicant is eligible. If the Agency determines that the submitted 
information is insufficient to make this determination, the Agency will 
notify the applicant, in writing, as soon as practicable after receipt 
of the application, as to what additional information is needed and a 
timeframe in which to provide the information (Sec.  4288.110(b)). The 
Agency is requesting that applicants supply information in a timely 
fashion in order to setup the payment amounts each fiscal year and to 
estimate expected payments to each participating producer.
    If the additional information is received within the specified 
timeframe, the Agency will determine the applicant's eligibility for 
the upcoming fiscal year. However, if the additional information is not 
received by the Agency within the specified timeframe, the Agency will 
not consider the applicant any further for the year in which the 
applicant has submitted its application form. Such an applicant may 
reapply to participate in the Program during the next sign-up period.
    As noted above, this section also contains three conditions under 
which the Agency may determine that an advanced biofuel producer is no 
longer eligible to participate in the Advanced

[[Page 20095]]

Biofuel Payment Program (Sec.  4288.110(c)). These conditions, which 
are the same as in the Section 9005 NOCP, are necessary for ensuring 
the integrity of the Program. The three conditions are where the 
producer:
     Refuses to allow the Agency to verify any information 
provided by the producer under this subpart, including information for 
determining applicant eligibility, advanced biofuel eligibility, and 
application payments;
     Fails to meet any of the conditions set out in this 
subpart, in the contract, or in other Program documents; or
     Fails to comply with all applicable Federal, State, or 
local laws.
Biofuel Eligibility (Sec.  4288.111)
    This section identifies four criteria that a biofuel must meet in 
order to be eligible for payment under this Program (Sec.  
4288.111(a)). These four criteria notwithstanding, flared gases would 
not be eligible for payments under this Program.
    First. The biofuel must meet the definition of advanced biofuel. As 
noted earlier in this preamble, this requirement is based on the 
authorizing statute that payments are to be made for advanced biofuel.
    Second. As discussed earlier in this preamble under the discussion 
on the definition of advanced biofuel, the biofuel must be a solid, 
liquid, or gaseous advanced biofuel.
    Third. The biofuel must be a final product and not an intermediary 
component or product to the biofuel. As stated earlier in this 
preamble, the Agency understands the definition of advanced biofuel 
applies to solid, liquid, and gaseous fuels that are final products and 
not to intermediary components or products used in the production of 
the final advanced biofuel product. We do not believe it is consistent 
with the Program to pay for both the intermediary components or 
products and the end product; this would be essentially paying twice 
for the same advanced biofuel. Therefore, the Agency is proposing that 
only advanced biofuels that are final products are eligible for payment 
under this Program, and that production of intermediary components and 
products are not eligible for payment under this Program. This 
provision was not specifically articulated in the Section 9005 NOCP.
    Fourth. As discussed earlier in this preamble under the discussion 
on the definition of advanced biofuel, if the advanced biofuel is used 
on-site, the producer must be able to verify the quantity of advanced 
biofuel being used on-site using an Agency-approved system.
    The Agency notes that, as proposed, the biofuel may be produced in 
a biorefinery located in either a rural or non-rural area. This is 
different from the Section 9005 NOCP, which required that the biofuel 
be produced in a biorefinery located in a rural area in order to be 
eligible for payment. Lastly, as found in Section III of this preamble, 
the Agency is seeking public comment on whether this program should 
limit payments to only those eligible advanced biofuels produced at a 
biorefinery located in a rural area.
    As for when determining applicant eligibility, if the Agency 
determines that there is insufficient information provided to determine 
if a biofuel is an eligible advanced biofuel, the Agency will notify 
the applicant, in writing, as soon as practicable after receipt of the 
application, as to what additional information is needed and a 
timeframe in which to provide the information (Sec.  4288.111(b)). If 
the applicant provides the requested information to the Agency within 
the specified timeframe, the Agency will determine the biofuel's 
eligibility for the upcoming fiscal year.
    If the applicant does not provide the requested information to the 
Agency within the specified timeframe, the biofuel will not be eligible 
for payment in the upcoming fiscal year. The applicant may elect to 
include such biofuels during the next sign-up period. The Agency notes 
that determination by the Agency that a biofuel is ineligible or that 
information is insufficient to make an eligibility determination does 
not affect the status of other biofuels included in the application 
form.
Eligibility Notifications (Sec.  4288.112)
    This section presents the process that the Agency will use to 
notify applicants of its decisions concerning applicant and biofuel 
eligibility. It also addresses notifications concerning subsequent 
Agency determinations regarding producer and biofuel eligibility.
    With regard to applicant eligibility (Sec.  4288.112(a)), if the 
Agency determines that an applicant is eligible for participation in 
the Program, the Agency will notify the applicant, in writing, as soon 
as practicable after receipt of the application and will assign the 
applicant a contract number.
    If the Agency determines that an applicant or a biofuel is 
ineligible (Sec.  4288.112(b)), the Agency will notify the applicant, 
in writing, as soon as practicable after receipt of the application, 
and will include the reason(s) for the Agency's determination that the 
applicant or biofuel was determined to be ineligible.
    Lastly, Sec.  4288.112(c) states that the Agency will notify a 
producer, in writing, whenever the Agency determines that the producer 
or the producer's biofuel(s) are subsequently determined by the Agency 
to be ineligible.
    Because any finding of ineligibility is an adverse decision, the 
applicant/producer, as applicable, would have the right to appeal such 
a decision, as provided in Sec.  4288.103.
    The Agency notes that the Section 9005 NOCP addressed notifying the 
applicant concerning applicant eligibility. The Agency is specifically 
including in the proposed rule the notification process concerning 
biofuel eligibility and subsequent ineligibility determinations to more 
clearly identify its intent to communicate such findings to the 
producer.
Payment Record Requirements (Sec.  4288.113)
    This section identifies records that an advanced biofuel producer 
approved for participation in the Advanced Biofuel Payment Program must 
maintain in order to be eligible to receive payments under this 
subpart. The records required in the proposed rule are identified in 
more detail than those identified in the Section 9005 NOCP, but the 
intent in either case is to ensure that sufficient records are 
maintained by participating advanced biofuel producers to ensure the 
integrity of the Program and to allow the Agency to conduct its 
oversight and monitoring responsibilities. These records are:
     The type and amount of eligible renewable biomass used in 
the production of advanced biofuel;
     The quantity of advanced biofuel produced from eligible 
renewable biomass at each advanced biofuel biorefinery;
     The quantity of eligible renewable biomass used at each 
advanced biofuel biorefinery to produce the advanced biofuel; and
     All other records required to establish Program 
eligibility and compliance.
    The advanced biofuel producer is required to maintain these records 
for each fiscal year and each fiscal year quarter for each advanced 
biofuel biorefinery for which the producer has requested payment under 
this Program. As noted earlier, these records must be maintained by the 
producer for not less than three years from each Program payment date. 
The Agency is proposing these records to be kept because they are 
needed by the Agency in order to verify

[[Page 20096]]

that payments made to each producer are in compliance with the 
provisions of this subpart.
Section C--Enrollment Provisions
    In order to participate in the Advanced Biofuel Payment Program, a 
producer of advanced biofuels must be approved by the Agency and enter 
into a contract with the Agency. The process for enrolling and 
continued participation in the Advanced Biofuel Payment Program is 
presented in this subpart. The provisions for enrolling in the Program 
(Sec.  4288.120) are consistent with those found in the Section 9005 
NOCP. The contract provisions (Sec.  4288.121), while consistent with 
the contract identified in the Section 9005 NOCP, are described more 
specifically in the proposed rule than in the Section 9005 NOCP.
Enrollment (Sec.  4288.120)
    To enroll in the Advanced Biofuel Payment Program, a producer must 
submit a completed enrollment application (Form RD 4288-1) to the 
Agency. This form requests information on the advanced biofuel 
producer; the advanced biofuel biorefineries in which the producer has 
50 percent or more ownership and at which the advanced biofuels are 
produced, including location and quantities produced; the types and 
quantities of renewable biomass feedstock being used to produce the 
advanced biofuels; and the amount of eligible advanced biofuels 
produced at each biorefinery in the 12 months prior to the first day of 
the sign-up period for the fiscal year for which the enrollment 
application is being submitted. Applicants are required to submit with 
this form documentation to support the amount of eligible advanced 
biofuels reported in the form. The form also requires the advanced 
biofuel producer to certify the information provided, including that 
the advanced biofuels are eligible advanced biofuels and that the 
renewable biomass feedstock used to produce the advanced biofuels are 
eligible biomass feedstock. The Agency will identify in an annual 
Federal Register notice where this form is to be submitted.
    All applicants, except those that are individuals, are required to 
have a Dun and Bradstreet Universal Numbering System (DUNS) number. The 
DUNS number is a nine-digit identification number, which uniquely 
identifies business entities. A DUNS number can be obtained at no cost 
via a toll-free request line at 1-866-705-5711 or online at https://fedgov.dnb.com/webform.
    The first time a producer submits Form RD 4288-1, the Agency will 
make its determination as to whether or not the producer is eligible to 
participate. If an advanced biofuel producer is determined to be 
ineligible, the Agency will notify the producer, in writing, as soon as 
practicable after receipt of the application, of its determination.
    After the first year a producer is enrolled in the Program, the 
producer must submit to the Agency Form RD 4288-1 in each subsequent 
sign-up period in order to receive payments for the corresponding 
fiscal year (Sec.  4288.120(a)(1)). For example, Producer A's first 
year of participation is FY 2010. In order to receive payments in FY 
2011, Producer A must submit Form RD 4288-1 during the sign-up period 
for FY 2011 in order to be eligible to receive payments during FY 2011.
    Eligible advanced biofuel producers may submit Form RD 4288-1 
during a fiscal year's sign-up period even if the advanced biofuel 
biorefinery is scheduled to start producing advanced biofuel in the 
upcoming fiscal year.
    If a participating producer fails to submit Form RD 4288-1 during a 
fiscal year's applicable sign-up period, the producer's contract will 
be terminated and the producer will be ineligible to receive payments 
for that fiscal year (Sec.  4288.120(a)(1)). Such a producer must 
reapply, and sign a new contract, to participate in the Program for the 
next fiscal year.
    In addition to the application form, applicants must also submit 
the appropriate certifications for the type(s) of advanced biofuels for 
which they are seeking payment. These certifications, which must be 
completed and provided by an accredited independent third-party, are 
those the Agency believes are necessary to ensure that the biofuels 
being produced are of sufficient quality for sale and use in the 
marketplace. The certifications producers are required to submit, which 
are the same as identified in the Section 9005 NOCP (unless otherwise 
noted), depend on the type of biofuel produced, as summarized below.
     For alcohol, a copy of either the Alcohol Fuel Producers 
Permit (TTB F 5110.74) or the registration of Distilled Spirits Plant 
(TTB F 5110.41) and Operating Permit (TTB F 5110.25).
     For hydrous ethanol, if the advanced biofuel producer is 
the hydrous ethanol producer, an affidavit, acceptable to the Agency, 
from the distiller stating that the applicable hydrous ethanol produced 
is distilled and denatured for fuel use according to ATF requirements, 
and that the distiller will not include the applicable ethanol in any 
payment requests that the distiller may make under this Program.
     For hydrous ethanol, if the advanced biofuel producer is 
the distiller that upgrades hydrous ethanol to anhydrous ethyl alcohol, 
an affidavit, acceptable to the Agency, from the hydrous ethanol 
producer stating that the hydrous ethanol producer will not include the 
applicable ethanol in any payment requests that may be made under this 
Program.
     For biodiesel, biomass-based diesel, and liquid 
hydrocarbons derived from biomass, a self-certification by the producer 
that the producer, the advanced biofuel biorefinery, and the biofuel 
meet the de