speed operation, supercharged air intake, customized parts, very high
power densities, and a short time until rebuild (50 to 200 hours).
Based on current SD/I product offerings, we are defining a high-
performance engine as an SD/I engine with maximum power above 373 kW
(500 hp) that has design features to enhance power output such that the
expected operating time until rebuild is substantially shorter than 480
hours.
(2) Exclusions and Exemptions
    We are extending our basic nonroad exemptions to the SD/I engines
and vessels covered by this rule. These include the testing exemption,
the manufacturer-owned exemption, the display exemption, and the
national-security exemption. If the conditions for an exemption are
met, then the engine is not subject to the exhaust emission standards.
    In the rulemaking for recreational vehicles, we chose not to apply
standards to hobby products by exempting all reduced-scale models of
vehicles that are not capable of transporting a person (67 FR 68242,
November 8, 2002). We are extending that same provision to SD/I marine
engines (see Sec.  1045.5).
    The Clean Air Act provides for different treatment of engines used
solely for competition. Rather than relying on engine design features
that serve as inherent indicators of dedicated competitive use, as
specified in the current regulations, we have taken the approach in
more recent programs of more carefully differentiating competition and
noncompetition models in ways that reflect the nature of the particular
products. In the case of Marine SI engines, we do not believe there are
engine design features that allow us to differentiate between engines
that are used in high-performance recreational applications and those
that are used solely for competition. Starting January 1, 2009, Marine
SI engines meeting all the following criteria will therefore be
considered to be used solely for competition:
     The engine (or a vessel in which the engine is installed)
may not be displayed for sale in any public dealership or otherwise
offered for sale to the general public.
     Sale of the vessel in which the engine is installed must
be limited to professional racers or other qualified racers.
     The engine must have performance characteristics that are
substantially superior to noncompetitive models (e.g. higher power-to-
weight ratio).
     The engines must be intended for use only in racing events
sanctioned (with applicable permits) by the Coast Guard or other public
organization, with operation limited to racing events, speed record
attempts, and official time trials.
    We are also including a provision allowing us to approve an
exemption for cases in which an engine manufacturer can provide clear
and convincing evidence that an engine will be used solely for
competition even though not all the above criteria apply for a given
situation. This may occur, for example, if a racing association
specifies a particular engine model in their competition rules, where
that engine has design features that prevent it from being certified or
from being used for purposes other than competition.
    Engine manufacturers will make their request for each new model
year. We will deny a request for future production if there are
indications that some engines covered by previous requests are not
being used solely for competition. Competition engines are generally
produced and sold in very small quantities, so manufacturers should be
able to identify which engines qualify for this exemption. We are
applying the same criteria to outboard and personal watercraft engines
and vessels. See Sec.  1045.620.
    We are adopting a new exemption to address individuals who
manufacture recreational marine vessels for personal use (see Sec.
1045.630). Under this exemption, someone may install a used engine in a
new vessel where that engine is exempt from standards, subject to
certain limitations. For example, an individual may produce one such
vessel over a five-year period, the vessel may not be used for
commercial purposes, and any exempt engines may not be sold for at
least five years. The vessel must generally be built from unassembled
components, rather than simply completing assembly of a vessel that is
otherwise similar to one that will be certified to meet emission
standards. This exemption does not apply for freshly manufactured
engines. This exemption addresses the concern that hobbyists who make
their own vessels could otherwise be a manufacturer subject to the full
set of emission standards by introducing these vessels into commerce.
We expect this exemption to involve a very small number of vessels. We
revised the provisions of the personal-use exemption since the proposal
to allow people to build a vessel with an exempted engine once every
five years instead of ten years. We believe this is more reflective of
a hobbyists interest in building a boat and using it before moving on
to the next building project.

C. Exhaust Emission Standards

    We are adopting technology-based exhaust emission standards for new
SD/I engines. These standards are similar to the exhaust emission
standards that California ARB recently adopted (see Section I). This
section describes the provisions related to controlling exhaust
emissions from SD/I engines. See Section VI for a description of the
new requirements related to evaporative emissions.
(1) Standards and Dates
    We are adopting exhaust emission standards of 5.0 g/kW-hr
HC+NOX and 75 g/kW-hr CO for SD/I engines, starting with the
2010 model year (see Sec.  1045.105). On average, this represents about
a 70 percent reduction in HC+NOX and a 50 percent reduction
in CO from baseline engine configurations. Due to the challenges of
controlling CO emissions at high load, the expected reduction in CO
emissions from low-to mid-power operation is expected to be more than
80 percent. We are providing additional lead time for small businesses
as discussed in Section III.F.2. The new standards are based on the
same duty cycle that currently is in place for outboard and personal
watercraft engines, as described in Section III.D. Section III.G
discusses the technological feasibility of these standards in more
detail.
    The new standards are largely based on the use of small catalytic
converters

that can be packaged in the water-cooled exhaust systems typical for
these applications. California ARB also adopted an HC+NOX
standard of 5 g/kW-hr, starting with 2008 model year engines, but they
did not adopt a standard for CO emissions. We believe the type of
catalyst used to achieve the HC+NOX standard will also be
effective in reducing CO emissions enough to meet the new standard with
the proper calibrations, so no additional hardware will be needed to
control CO emissions.
    Manufacturers have expressed concern that the implementation dates
may be difficult to meet, for certain engines, due to anticipated
changes in engine block designs produced by General Motors. As
described in the Final RIA and in the docket, the vast majority of SD/I
engines are based on automotive engine blocks sold by General
Motors.\93\ There are five basic engine blocks used, and recently GM
announced that it plans to discontinue production of the 4.3L and 8.1L
engine blocks. GM anticipates that it will offer a 4.1L engine block
and a 6.0L supercharged engine block to the marine industry as
replacements. Full-run production of these new blocks is anticipated
around the time that manufacturers will be making the transition to
meeting new EPA emission standards. SD/I engine manufacturers have
expressed concern that they will not be able to begin the engineering
processes related to marinizing these engines, including the
development of catalyst-equipped exhaust manifolds, until they see the
first prototypes of the two replacement engine models. In addition,
they are concerned that they do not have enough remaining years of
sales of the 4.3L and 8.1L engines to justify the cost of developing
catalyst-equipped exhaust manifolds for these engines and amortizing
the costs of the required tooling while also developing the two new
engine models.
---------------------------------------------------------------------------

    \93\ ``GM Product Changes Affecting SD/I Engine Marinizers,''
memo from Mike Samulski, EPA, to Docket EPA-HQ-OAR-2004-0008-0528.
---------------------------------------------------------------------------

    These are unique circumstances because the SD/I engine
manufacturers' plans and products depend on the manufacture of the base
engine by a company not directly involved in marine engine
manufacturing. The SD/I sales represent only a small fraction of GM's
total engine sales and thus did not weigh heavily in their decision to
replace the existing engine blocks with two comparable versions during
the timeframe when the SD/I manufacturers are facing new emission
standards. SD/I manufacturers have stated that alternative engine
blocks that meet their needs are not available in the interim, and that
it will be cost-prohibitive for them to produce their own engine
blocks.
    EPA's SD/I standards start to take effect with the 2010 model year,
two years after the same standards apply in California. We believe a
requirement to extend the California standards nationwide after a two-
year delay allows manufacturers adequate time to incorporate catalysts
across their product lines as they are doing in California. Once the
technology is developed for use in California, it will be available for
use nationwide soon thereafter. In fact, one company currently
certified to the California standards is already offering catalyst-
equipped SD/I engines nationwide. To address the challenge related to
the transition away from the current 4.3 and 8.1 liter GM engines, we
are including in the final rule a direct approval for a hardship
exemption allowing manufacturers to produce these engines for one
additional year without certifying them (see Sec.  1045.145). Starting
in the 2011 model year, we would expect manufacturers to have worked
things out such that they could certify their full product lineup to
the applicable standards.
    Engines used on jet boats may have been classified under the
original definitions as personal watercraft engines. As described in
Section IV, engines used in jet boats or personal watercraft-like
vessels that are four meters or longer will be classified as SD/I
engines under the new definitions. Such engines subject to part 91
today will therefore need to continue meeting EPA emission standards as
personal watercraft engines through the 2009 model year under part 91,
after which they will need to meet the new SD/I standards under part
1045. This is another situation where the transition period discussed
above may be helpful. In contrast, as discussed above, air boats have
been classified as SD/I engines under EPA's discretionary authority and
are not required to comply with part 91, but must meet the new emission
standards for SD/I engines under part 1045.
    As described above, engines used solely for competition are not
subject to emission standards, but many SD/I high-performance engines
are sold for recreational use. SD/I high-performance engines have very
high power outputs, large exhaust gas flow rates, and relatively high
concentrations of hydrocarbons and carbon monoxide in the exhaust
gases. As described in the Final Regulatory Impact Analysis, applying
catalyst technology to these engines is not practical. California ARB
initially adopted the same HC+NOX standards that apply for
other SD/I engines with the expectation that manufacturers would simply
rely on emission credits from other SD/I engines. We believe a credit-
based solution is not viable for small business manufacturers that do
not have other products with which to exchange emission credits and
California ARB has modified their rule to also address this concern.
    We are adopting standards for SD/I high-performance engines based
on the level of control that can be expected from recalibration with
electronically controlled fuel injection. These standards are phased in
over a two-year transition period. In the 2010 model year, the
HC+NOX emission standards are 20.0 g/kW-hr for engines at or
below 485 kW and 25.0 g/kW-hr for bigger engines. In 2011 and later
model years, the HC+NOX emission standards drop to 16.0 g/
kW-hr for engines at or below 485 kW and 22.0 g/kW-hr for bigger
engines. The CO standard is 350 g/kW-hr for all SD/I high-performance
engines. We believe this is achievable with more careful control of
fueling rates, especially under idle conditions. Control of air-fuel
ratios should result in improved emission control even after multiple
rebuilds. Note that small-volume manufacturers may delay complying with
the high-performance standards until 2013. In that year, the standard
will be the same as the 2011 standards for larger manufacturers.
    We are adopting a variety of provisions to simplify the
requirements for exhaust emission certification and compliance for SD/I
high-performance engines, as described in Section IV.F. We have also
chosen not to apply the Not-to-Exceed emission standards to these
engines because we have very limited information on their detailed
emission characteristics and we are concerned about extent of testing
that would be required by the large number of affected engine
manufacturers that are small businesses.
    We are also aware that there are some very small sterndrive or
inboard engines. In particular, sailboats may have small propulsion
engines for backup power. These engines will fall under the new
definition of sterndrive/inboard engines, even though they are much
smaller and may experience very different in-use operation. These
engines generally have more in common with marine auxiliary engines or
lawn and garden engines that are subject to land-based standards. We
are therefore allowing manufacturers to use engines that have been
certified to current land-

based emission standards for sterndrive and inboard installation, much
like we are adopting for outboard and personal watercraft engines (see
Sec.  1045.610).
    The emission standards apply at the range of atmospheric pressures
represented by the test conditions specified in part 1065. This
includes operation at elevated altitudes. Since we expect most or all
SD/I engines to have three-way catalysts with closed-loop fuel control,
these engines should be able to include the ability to automatically
compensate for varying altitude. Manufacturers may choose to use an
altitude kit for demonstrating compliance with emission standards at
high altitudes as described for OB/PWC engines in Section IV.C.1.
Manufacturers using altitude kits would need to take a variety of steps
to describe their approach and ensure that such altitude kits are in
fact being used with in-use engines operating at high altitudes, as
described in Section IV.E.8.
(2) Not-to-Exceed Standards
    We are adopting emission standards that apply over an NTE zone. The
NTE standards are in the form of a multiplier times the duty-cycle
standard for HC+NOX and for CO (see Sec.  1045.105. Section
III.D.2 gives an overview of the NTE standards and compliance
provisions and describes the NTE test procedures.
    Manufacturers commented that certification to the NTE standards
requires additional testing for engine models that are already
certified to the new emission standards for California. In addition,
they expressed concern that they may need to recalibrate existing
engine models to meet the NTE standards. Manufacturers commented that
this would not be possible by the date of the duty cycle standard. For
engines already certified in California, manufacturers carry over
preexisting certification test data from year to year. Manufacturers
commented that additional time would be necessary to retest, and
potentially recalibrate, these engines for certification to the NTE
standards. To address these issues regarding lead time needed to retest
these engines, we are not applying the NTE standards for 2010-2012
model year engines that are certified using preexisting data (i.e.,
carryover engine families). For new engine models, manufacturers
indicated that they will be able to perform the NTE testing and duty-
cycle testing as part of their efforts to certify to the new standards.
Therefore the primary implementation date of 2010 applies to these
engines. Beginning in the 2013 model year, all conventional SD/I
engines must be certified to meet the NTE standards.
    This NTE approach complements the weighted modal emission tests
included in this rule. These steady-state duty cycles and standards are
intended to establish average emission levels over several discrete
modes of engine operation. Because it is an average, manufacturers
design their engines with emission levels at individual points varying
as needed to maintain maximum engine performance and still meet the
engine standard. The NTE limit will be an additional requirement. It is
intended to ensure that emission controls function with relative
consistency across the full range of expected operating conditions.
(3) Emission Credit Programs
(a) Averaging, Banking, and Trading
    We are adopting provisions for averaging, banking, and trading of
emission credits for conventional SD/I engines to meet the new
HC+NOX and CO standards (see Sec.  1045.105 and part 1045,
subpart H). See Section VII.C.5 of the preamble to the proposed rule
for a description of general provisions related to averaging, banking,
and trading programs. A description of the ABT provisions for the new
SD/I standards is provided in this section.
    EPA proposed that manufacturers would not be able to earn credits
for one pollutant while using credits to comply with the emissions
standard for another pollutant. The proposed restriction was modeled on
similar requirements in other ABT programs where there was concern that
a manufacturer could use technologies to reduce one pollutant while
increasing another pollutant. Manufacturers are expected to comply with
the new SD/I standards by using a combination of improved engine
designs and catalysts. This should result in reductions in both
HC+NOX emissions and CO emissions compared to current
designs. While the technology is expected to reduce both
HC+NOX emissions and CO emissions, there could be situations
where the engines are capable of meeting one of the emission standards
but not the other. EPA does not want to preclude such engines from
being able to certify using the provisions of the ABT program and is
therefore dropping the proposed restriction from the final rule.
    Credit generation and use is calculated based on the FEL of the
engine family and the standard. We are adopting FEL caps to prevent the
sale of very high-emitting engines. The HC+NOX FEL cap for
conventional SD/I engines is 16 g/kW-hr while the CO FEL cap is 150 g/
kW-hr and applies starting in 2010, except as noted below. These FEL
caps represent the average baseline emission levels of SD/I engines,
based on data described in the Final RIA. However, through the 2013
model year we are separately allowing small-volume engine manufacturers
to certify their four-stroke conventional SD/I engines without testing
by assuming an HC+NOX FEL of 22.0 g/kW-hr and a CO FEL of
150 g/kW-hr. Manufacturers using this provision would not be subject to
the FEL cap for those engine families.
    We are specifying that SD/I engines are in a separate averaging set
from OB/PWC engines, with a limited exception for certain jet boat
engines as described below. This means that credits earned by SD/I
engines may be used only to offset higher emissions from other SD/I
engines. Likewise, credits earned by OB/PWC engines may be used only to
offset higher emissions from other OB/PWC engines (except where we
allow those credits to be used for certain jet boat engines).
    Emission credits earned for SD/I engines will have an indefinite
credit life with no discounting. We consider these emission credits to
be part of the overall program for complying with the new standards.
Given that we may consider further reductions beyond these standards in
the future, we believe it will be important to assess the ABT credit
situation that exists at the time any further standards are considered.
Emission credit balances will be part of the analysis for determining
the appropriate level and timing of new standards, consistent with the
statutory requirement to establish standards that represent the
greatest degree of emission reduction achievable, considering cost,
safety, lead time, and other factors. If we were to allow the use of
credits generated under the standards adopted in this rule to meet more
stringent standards adopted in a future rulemaking, we may need to
adopt emission standards at more stringent levels or with an earlier
start date than we would absent the continued use of existing emission
credits, depending on the level of emission credit banks.
Alternatively, we may adopt future standards without allowing the use
of existing emission credits.
    Finally, manufacturers may include as part of their federal credit
calculation the sales of engines in California as long as they don't
separately account for those emission credits under the California
regulations. We originally proposed to exclude engines sold in
California that are subject to the California ABR standards. However,
we

consider California's current HC+NOX standards to be
equivalent to those we are adopting in this rulemaking, so we would
expect a widespread practice of producing and marketing 50-state
products. Therefore, as long as a manufacturer is not generating
credits under California's regulations for SD/I engines, we would allow
manufacturers to count those engines when calculating credits under
EPA's program. This is consistent with how EPA allows credits to be
calculated in other nonroad sectors, such as recreational vehicles.
(b) Early-Credit Approaches
    We are adopting an early-credit program in which a manufacturer
could earn emission credits before 2010 with early introduction of
emission controls designed to meet the new standards (see Sec.
1045.145). For engines produced by small-volume SD/I manufacturers that
are eligible for the one-year delay described in Section III.F.2, early
credits could be earned before 2011. As proposed, use of these early
credits would be limited to the first three years that the new
standards apply. While we believe adequate lead time is provided to
meet the new standards, we recognize that flexibility in timing could
help some manufacturers--particularly small manufacturers--to meet the
new standards. Other manufacturers that are able to comply early on
certain models will be better able to transition their full product
line to the new standards by spreading out the transition over two
years or more. Under this approach, we anticipate that manufacturers
will generate credits through the use of catalysts.
    Manufacturers will generate these early credits based on the
difference between the measured emission level of the clean engines and
an assigned baseline level (16 g/kW-hr HC+NOX and 150 g/kW-
hr CO). These assigned baseline levels are based on data presented in
Chapter 4 of the Final RIA representing the average level observed for
uncontrolled engines. We also provide bonus credits for any small-
volume SD/I engine manufacturer that certifies early to the new
standards to provide a further incentive for introducing catalysts in
SD/I engines. The bonus credits will take the form of a multiplier
times the earned credits. The multipliers are 1.25 for being one year
early, 1.5 for being two years early, and 2.0 for being three years
early. For example, a small-volume manufacturer certifying an engine to
5.0 g/kW-hr HC+NOX in 2009 (two years early) will get a
bonus multiplier of 1.5. Early HC+NOX credits will therefore
be calculated using the following equation: credits [grams] = (16-5) mu
Power [kW] x Useful Life [hours] x Load Factor x 1.5. The specified
load factor is 0.207, which is currently used in the OB/PWC
calculations.
    To earn these early credits, the engine must meet both the new
HC+NOX standard and the new CO standard. These early credits
will be treated the same as emission credits generated after the
emission standards start to apply. This approach provides an incentive
for manufacturers to pull ahead significantly cleaner technologies. We
believe such an incentive will lead to early introduction of catalysts
on SD/I engines and help promote earlier market acceptance of this
technology. We believe this early credit program will allow
manufactures to comply with the new standards in an earlier time frame
because it allows them to spread out their development resources over
multiple years. To ensure that manufacturers do not generate credits
for meeting standards that already apply, no EPA credits will be
generated for engines that are produced for sale in California.
(c) Jet Boats
    Sterndrive and inboard vessels are typically propelled by
traditional SD/I engines based on automotive engine blocks. As
explained in Section IV, we are changing the definition of personal
watercraft to ensure that engines used on jet boats will no longer be
classified as personal watercraft engines but instead as SD/I engines
because jet boats are more like SD/I vessels. However, manufacturers in
many cases make these jet boats by installing an engine also used in
outboard or personal watercraft applications (less than 4 meters in
length) and coupling the engine to a jet drive for propelling the jet
boat. Thus, manufacturers of outboard or personal watercraft engines
may also manufacture the same or a similar engine for use on what we
consider to be a jet boat.
    Engines used in jet boats will be subject to SD/I emission
standards. However, we are providing some flexibility in meeting the
new emission standards for jet boat engines because they are currently
designed to use engines derived from OB/PWC applications and because of
their relatively low sales volumes. We will allow manufacturers to use
emission credits generated from OB/PWC engines to demonstrate that
their jet boat engines meet the new HC+NOX and CO standards
for SD/I engines if the same or similar engine is certified as an
outboard or personal watercraft engine, and if the majority of units
sold in the United States from those related engine families are sold
for use as outboard or personal watercraft engines (see Sec.  1045.660
and Sec.  1045.701). Manufacturers will need to group SD/I engines used
for jet boats in a separate engine family from the outboard or personal
watercraft engines to ensure proper labeling and calculation of
emission credits, but manufacturers could rely on emission data from
the same prototype engine for certifying both engine families.
    Finally, manufacturers of jet boat engines subject to SD/I
standards and using credits from outboard or personal watercraft
engines must certify these jet boat engines to an FEL that meets or
exceeds the newly adopted standards for outboard and personal
watercraft engines. This limits the degree to which manufacturers may
take advantage of emission credits to produce engines that are emitting
at higher levels than competitive engines.
(d) SD/I High-Performance Engines
    For the reasons described in Section III.C.1, the standards being
adopted for SD/I high-performance engines are less stringent than
originally proposed. As a result, we are not including the SD/I high-
performance engines in the ABT program. Manufacturers are required to
meet the emission standards for SD/I high-performance engines without
using emission credits.
(4) Crankcase Emissions
    Due to blowby of combustion gases and the reciprocating action of
the piston, exhaust emissions can accumulate in the crankcase.
Uncontrolled engine designs route these vapors directly to the
atmosphere. Closed crankcases have become standard technology for
automotive engines and for outboard and personal watercraft engines.
Manufacturers generally do this by routing crankcase vapors through a
valve into the engine's air intake system. We are requiring
manufacturers to prevent crankcase emissions from SD/I marine engines
(see Sec.  1045.115). Because automotive engine blocks are already
tooled for closed crankcases, the cost of adding a valve for positive
crankcase ventilation is small for SD/I engines. Even with non-
automotive blocks, the tooling changes necessary for closing the
crankcase are straightforward.
(5) Durability Provisions
    We rely on pre-production certification, and other programs, to
ensure that engines control emissions throughout their intended
lifetime of operation. Section VII of the preamble to

the proposed rule describes how we require manufacturers to incorporate
laboratory aging in the certification process, how we limit the extent
of maintenance that manufacturers may specify to keep engines operating
as designed, and other general provisions related to certification. The
following sections describe additional provisions that are specific to
SD/I engines.
(a) Useful Life
    We are specifying a useful life period of ten years or 480 hours of
engine operation, whichever comes first (see Sec.  1045.105).
Manufacturers are responsible for meeting emission standards during
this useful life period. This is consistent with the requirements
adopted by California ARB. We are further requiring that the 480-hour
useful life period is a baseline value, which may be extended if data
show that the average service life for engines in the family is longer.
For example, we may require that the manufacturer certify the engine
over a longer useful life period that more accurately represents the
engines' expected operating life if we find that in-use engines are
typically operating substantially more than 480 hours. This approach is
similar to what we adopted for recreational vehicles.
    For SD/I high-performance engines, we are specifying a useful life
of 150 hours or 3 years for engines at or below 485 kW and a useful
life of 50 hours or 1 year for engines above 485 kW. Due to the high
power and high speed of these engines, mechanical parts are often
expected to wear out quickly. For instance, one manufacturer indicated
that some engines above 485 kW have scheduled head rebuilds between 50
and 75 hours of operation. These useful life values are consistent with
the California ARB regulations for SD/I high-performance engines.
    Some SD/I engines below 373 kW may be designed for high power
output even though they do not reach the power threshold to qualify as
SD/I high-performance engines. Because they do not qualify for the
shorter useful life that applies to SD/I high-performance engines, they
will be subject to the default value of 480 hours for other SD/I
engines. However, to address the limited operating life for engines
that are designed for especially high power output, we are allowing
manufacturers to request a shorter useful life for such an engine
family based on information showing that engines in the family rarely
operate beyond the requested shorter period. For example, if engines
designed for extremely high-performance are typically rebuilt after 250
hours of operation, this will form the basis for establishing a shorter
useful life period for those engines. See Sec.  1045.105 for additional
detail in establishing a shorter useful life.
    Jet boat engines that are certified in conjunction with outboard or
personal watercraft engine families are subject to the shorter useful
life period that applies for outboard or personal watercraft engines.
This is necessary to prevent a situation where the original
certification data is insufficient for certifying the jet boat engines
without some further testing or analysis to show that the engines meet
emission standards over a longer period.
(b) Warranty Periods
    We are requiring that manufacturers provide an emission-related
warranty during the first three years or 480 hours of engine operation,
whichever comes first (see Sec.  1045.120). This warranty period
applies equally to emission-related electronic components on SD/I high-
performance engines. However, we are allowing shorter warranty periods
(in hours) for emission-related mechanical components on SD/I high-
performance engines because these parts are expected to wear out more
rapidly than comparable parts on traditional SD/I engines.
Specifically, we are specifying a warranty period for emission-related
mechanical components of 3 years or 150 hours for high-performance
engines between 373 and 485 kW, and 1 year or 50 hours for high-
performance engines above 485 kW. These warranty periods are the same
as those adopted by the California ARB.
    If the manufacturer offers a longer warranty for the engine or any
of its components at no additional charge, we require that the
emission-related warranty for the respective engine or component must
be extended by the same amount. The emission-related warranty includes
components related to controlling exhaust, evaporative, and crankcase
emissions from the engine. These warranty requirements are consistent
with provisions that apply in most other programs for nonroad engines.
(6) Engine Diagnostics
    We are requiring that manufacturers design their catalyst-equipped
SD/I engines to diagnose malfunctioning emission control systems
starting with the introduction of the final standards (see Sec.
1045.110). As discussed in the Final RIA, three-way catalyst systems
with closed-loop fueling control work well only when the air-fuel
ratios are controlled to stay within a narrow range around
stoichiometry. Worn or broken components or drifting calibrations over
time can prevent an engine from operating within the specified range.
This increases emissions and can lead to significantly increased fuel
consumption and engine wear. The operator may or may not notice the
change in the way the engine operates. We are not requiring similar
diagnostic controls for OB/PWC engines because the anticipated emission
control technologies for these other applications are generally less
susceptible to drift and gradual deterioration. We have adopted similar
diagnostic requirements for Large SI engines operating in forklifts and
other industrial equipment that also use three-way catalysts to meet
emission standards.
    This diagnostic requirement focuses solely on maintaining
stoichiometric control of air-fuel ratios. This kind of design detects
problems such as broken oxygen sensors, leaking exhaust pipes (upstream
of sensors and catalysts), fuel deposits, and other things that require
maintenance to keep the engine at the proper air-fuel ratio.
    Diagnostic monitoring provides a mechanism to help keep engines
tuned to operate properly, with benefits for both controlling emissions
and maintaining optimal performance. There are currently no inspection
and maintenance programs for marine engines, so the most important
variable in making the emission control and diagnostic systems
effective is getting operators to repair the engine when the diagnostic
light comes on. This calls for a relatively simple design to avoid
signaling false failures as much as possible. The diagnostic
requirements in this final rule, therefore, focus on detecting
inappropriate air-fuel ratios, which is the most likely failure mode
for three-way catalyst systems. The malfunction indicator must go on
when an engine runs for a full minute under closed-loop operation
without reaching a stoichiometric air-fuel ratio.
    California ARB has adopted diagnostic requirements for SD/I engines
that involve a more extensive system for monitoring catalyst
performance and other parameters. We will accept a California-approved
system as meeting EPA requirements. The final regulations direct
manufacturers to follow standard practices defined in documents adopted
recently by the Society of Automotive Engineers in SAE J1939-5. See
Sec.  1045.110 for detailed information.

D. Test Procedures for Certification

(1) General Provisions
    The marine engine test procedures are generally the same for both
SD/I and OB/PWC engines. This involves laboratory measurement of
emissions while the engine operates over the ISO E4 duty cycle. This is
a five-mode steady-state duty cycle including an idle mode and four
modes lying on a propeller curve with an exponent of 2.5, as shown in
Appendix II to part 1045. The International Organization for
Standardization (ISO) intended for this cycle to be used for
recreational spark-ignition marine engines installed in vessels up to
24 m in length. Because most or all vessels over 24 m have diesel
engines, we believe the E4 duty cycle is most appropriate for SD/I
engines covered by this rule. There may be some spark-ignition engines
installed in vessels somewhat longer than 24 m, but we believe the E4
duty cycle is no less appropriate in these cases. See Section IV.D for
a discussion of adjustments to the test procedures related to the
migration to 40 CFR part 1065, testing with a ramped-modal cycle,
determining maximum test speed for denormalizing the duty cycle, and
testing at high altitude.
    The E4 duty cycle includes a weighting of 40 percent for idle. For
SD/I high-performance engines, commenters suggested that these engines
typically have substantial auxiliary loads and parasitic losses even
when the vessel does not need propulsion power. While the specified
duty cycle for SD/I high-performance engines is identical to that for
other Marine SI engines, we would expect manufacturers to use the
provisions of Sec.  1065.510(b)(3) to target a reference torque of 15
percent instead of zero at idle.
(2) Not-to-Exceed Test Procedures and Standards
    We are adopting not-to-exceed (NTE) requirements similar to those
established for marine diesel engines. Engines will be required to meet
the NTE standards during normal in-use operation.
(a) Concept
    Our goal is to achieve control of emissions over a wide range of
ambient conditions and over the broad range of in-use speed and load
combinations that can occur on a marine engine. This will ensure real-
world emission control, rather than just controlling emissions under
certain laboratory conditions. This allows us to evaluate an engine's
compliance during in-use testing without removing the engine from the
vessel because the NTE requirements establish an objective standard and
an easily implemented test procedure. Our traditional approach has been
to set a numerical standard on a specified test procedure and rely on
the additional prohibition of defeat devices to ensure in-use control
over a broad range of operation not included in the test procedure. We
are establishing the same prohibition on defeat devices for OB/PWC and
SD/I engines (see Sec.  1045.115).
    No single test procedure or test cycle can cover all real-world
applications, operations, or conditions. Yet to ensure that emission
standards are providing the intended benefits in use, we must have a
reasonable expectation that emissions under real-world conditions
reflect those measured on the test procedure. The defeat device
prohibition is designed to ensure that emission controls are employed
during real-world operation, not just under laboratory testing
conditions. However, the defeat device prohibition is not a quantified
standard and does not have an associated test procedure, so it does not
have the clear objectivity and ready enforceability of a numerical
standard and test procedure. We believe using the traditional approach,
i.e., using only a standardized laboratory test procedure and test
cycle, makes it difficult to ensure that engines will operate with the
same level of emission control in use as in the laboratory.
    Because the duty cycle we have adopted uses only five modes on an
average propeller curve to characterize marine engine operation, we are
concerned that an engine designed to that duty cycle will not
necessarily perform the same way over the range of speed and load
combinations seen on a boat. This duty cycle is based on an average
propeller curve, but a marine propulsion engine may never be fitted
with an ``average propeller.'' For instance, an engine installed in a
specific boat with a particular propeller may operate differently based
on the design of the boat and how heavily the boat is loaded, among
other factors.
    To ensure that engines control emissions over a wide range of speed
and load combinations normally seen on boats, we are including a zone
under the engine's power curve where the engine may not exceed a
specified emission limit (see Sec.  1045.105 and Sec.  1045.515). This
limit will apply to all regulated pollutants during steady-state
operation. In addition, we are requiring that a wide range of real
ambient conditions be included in testing with this NTE zone. The NTE
zone, limit, and ambient conditions are described below.
    We believe there are significant advantages to establishing NTE
standards. The final NTE test procedure is flexible, so it can
represent the majority of in-use engine operation and ambient
conditions. The NTE approach thus takes all the benefits of a numerical
standard and test procedure and expands it to cover a broad range of
conditions. Also, laboratory testing makes it harder to perform in-use
testing because either the engines will have to be removed from the
vessel or care will have to be taken to achieve laboratory-type
conditions on the vessel. With the NTE approach, in-use testing and
compliance become much easier since emissions may be sampled during
normal boating. By establishing an objective measurement, this approach
makes enforcement of defeat device provisions easier and provides more
certainty to the industry.
    Even with the NTE requirements, we believe it is still appropriate
to retain standards based on the steady-state duty cycle. This is the
standard that we expect the certified marine engines to meet on average
in use. The NTE testing is focused more on maximum emissions for
segments of operation and, in most cases, will not require additional
technology beyond what is used to meet the final standards. In some
cases, the calibration of the engine may need to be adjusted. We
believe that basing the emission standards on a distinct cycle and
using the NTE zone to ensure in-use control creates a comprehensive
program.
    We believe the technology used to meet the standards over the five-
mode duty cycle, when properly calibrated, will meet the caps that
apply across the NTE zone. We therefore do not expect the final NTE
standards to cause manufacturers to need additional hardware. We
believe the NTE standard will not result in a large amount of
additional testing, because these engines should be designed to perform
as well in use as they do over the five-mode test. However, our cost
analysis in the Final RIA accounts for some additional testing,
especially in the early years, to provide manufacturers with assurance
that their engines will meet the NTE requirements.
(b) Shape of NTE Zone
    We developed the NTE zone based on the range of conditions that
these engines typically see in use. Manufacturers collected data on
several engines installed on vessels and operated under light and heavy
load. Chapter 4 of the Final RIA presents this data and describes the
development of the boundaries and conditions

associated with the NTE zone. Although significant in-use engine
operation occurs at low speeds, we are excluding operation below 40
percent of maximum test speed because brake-specific emissions increase
dramatically as power approaches zero. An NTE limit for low-speed or
low-power operation will be very hard for manufacturers and EPA to
implement in a meaningful way.
    We anticipate that most, if not all SD/I engines subject to the NTE
standards will use three-way catalytic controls to meet the exhaust
emission standards. For that reason, this discussion focuses on the NTE
zone and subzones for catalyst-equipped engines. Catalysts are most
effective when the fuel-air ratio in the exhaust is near stoichiometry,
and engine manufacturers use closed-loop electronic control to monitor
and maintain the proper fuel-air ratio in the exhaust for optimum
catalyst efficiency. However, at high power, engine manufacturers must
increase the fueling rate to reduce the exhaust temperatures.
Otherwise, if the exhaust temperature becomes too high, exhaust valves
and catalysts may be damaged. During rich, open-loop operation at high
power, the catalyst is oxygen-limited and less effective at oxidizing
HC and CO. To address the issue of open-loop catalyst efficiency, we
created a high power subzone for catalyst-equipped engines. The shape
of this subzone is based on data presented in the RIA on engine
protection strategies.
    Figure III-1 illustrates the final NTE zone for engines equipped
with catalysts. Section IV.D.5 discusses the NTE test procedures and
limits for non-catalyzed engines. The NTE zones and standards apply
depending on whether the engine has a catalyst or not, so outboard or
personal watercraft engines may be subject to the NTE approach
described in this section and sterndrive/inboard engines may be subject
to the NTE provisions described in Section IV.D.5. However, we expect
these situations to be rather uncommon.
[GRAPHIC] [TIFF OMITTED] TR08OC08.061

    The final regulations allow manufacturers to request approval for
adjustments to the size and shape of the NTE zone for certain engines
if they can show that the engine will not normally operate outside the
revised NTE zone in use (see Sec.  1045.515). We do not want
manufacturers to go to extra lengths to design and test their engines
to control emissions for operation that will not occur in use. However,
manufacturers will still be responsible for all operation of an engine
on a vessel that will reasonably be expected to be seen in use, and
they will be responsible for ensuring that their specified operation is
indicative of real-world operation. EPA testing may include any normal
operation observed on in-use vessels, consistent with the applicable
regulatory provisions. In addition, if a manufacturer designs an engine
for operation at speeds and loads outside of the NTE zone, the
manufacturer is required to notify us so the NTE zone used to comply
with the applicable standards can be modified appropriately to include
this operation for that engine family.
(c) NTE Emission Limits
    We are establishing NTE limits for the individual subzones shown in
Figure III-1 above based on data collected from several SD/I engines
equipped with catalysts. These data and our analysis are presented in
Chapter 4 of the Final RIA. See Section IV.D.5 for a discussion

of NTE limits for engines not equipped with catalysts.
    For catalyst-equipped engines, the largest contribution of
emissions over the 5-mode duty cycle comes from open-loop operation at
Mode 1. In addition, the idle point (Mode 5) is weighted 40 percent in
the 5-mode duty cycle, but not included in the NTE zone. For this
reason, brake-specific emissions throughout most of the NTE zone are
less than the weighted average from the steady-state testing. For most
of the NTE zone, we are therefore establishing a limit equal to the
duty-cycle standard (i.e., NTE multiplier = 1.0). This means that these
engines may not have steady-state emissions at any point inside the NTE
zone, except in the subzone around full-load operation, that exceed the
HC+NOX or CO emission standards.
    Emission data on catalyst-equipped engines also show higher
emissions near full-power operation. As discussed above, this is due to
the need for richer fuel-air ratios under high-power operation to
protect the engines from overheating. Under rich conditions, a three-
way catalyst does not effectively oxidize CO emissions. Therefore, we
are not setting an NTE limit in Subzone 1 for CO. Some
HC+NOX control is expected in Subzone 1 because a three-way
catalyst will efficiently reduce NOX emissions under rich
conditions. Similar to CO, HC emissions are not effectively oxidized in
a catalyst during rich operation. We are therefore establishing a
higher NTE limit of 1.5 for HC+NOX in Subzone 1. This limit
is based on emission control performance during open-loop operation.
(d) Excluded Operation
    As with marine diesel engines, only steady-state operation is
included for NTE testing (see Sec.  1045.515). Steady-state operation
will generally mean setting the throttle (or speed control) in a fixed
position. We believe most operation with Marine SI engines involves
nominally steady-state operator demand. It is true that boats often
experience rapid accelerations, such as with water skiing. However,
boats are typically designed for planing operation at relatively high
speeds. This limits the degree to which we would expect engines to
experience frequent accelerations during extended operation. Also,
because most of the transient events involve acceleration from idle to
reach a planing condition, most transient engine operation is outside
the NTE zone and will therefore not be covered by NTE testing anyway.
Moreover, we believe OB/PWC and SD/I engines designed to comply with
steady-state NTE requirements will be using technologies that also work
effectively under the changing speed and load conditions that may
occur. If we find there is substantial transient operation within the
NTE zone that causes significantly increased emissions from installed
engines, we will revisit this provision in the future.
    We are aware that engines may not be able to meet emission
standards under all conditions, such as times when emission control
must be compromised for startability or safety. As with outboard and
personal watercraft engines, NTE testing excludes engine starting and
warm-up. We are allowing manufacturers to design their engines to
utilize engine protection strategies that will not be covered by defeat
device provisions or NTE standards. This is analogous to the tampering
exemptions incorporated into 40 CFR 1068.101(b)(1) to address
emergencies. We believe it is appropriate to allow manufacturers to
design their engines with ``limp-home'' capabilities to prevent a
scenario where an engine fails to function, leaving an operator on the
water without any means of propulsion.
(e) Ambient Conditions
    Variations in ambient conditions can affect emissions. Such
conditions include air temperature, water temperature, barometric
pressure, and humidity. We are applying the comparable ranges for these
variables as for marine diesel engines (see Sec.  1045.515). Within the
specified ranges, there is no provision to correct emission levels to
standard conditions. Outside of the specified ranges, emissions may be
corrected back to the nearest end of the range using good engineering
practice. The specified ranges are 13 to 35 [deg]C (55 to 95 [deg]F)
for ambient air temperature, 5 to 27 [deg]C (41 to 80 [deg]F) for
ambient water temperature, and 94.0 to 103.325 kPa for atmospheric
pressure. NTE testing may take place at any humidity level, but
manufacturers may correct for humidity effects as described in Sec.
1065.670.
(f) Measurement Methods
    While it may be easier to test outboard engines in the laboratory,
there is a strong advantage to using portable measurement equipment to
test SD/I engines and personal watercraft without removing the engine
from the vessel. Field testing will also provide a much better means of
measuring emissions to establish compliance with the NTE standards,
because it is intended to ensure control of emissions during normal in-
use operation that may not occur during laboratory testing over the
specified duty cycle. We are adopting field-testing provisions for all
SD/I engines. These field-testing procedures are described further in
Section IV.E.2.
    A parameter to consider is the minimum sampling time for field
testing. A longer period allows for greater accuracy, due mainly to the
smoothing effect of measuring over several transient events. On the
other hand, an overly long sampling period can mask areas of engine
operation with poor emission control characteristics. To balance these
concerns, we are applying a minimum sampling period of 30 seconds. This
is consistent with the requirement for marine diesel engines. Spark-
ignition engines generally don't have turbochargers and they control
emissions largely by maintaining air-fuel ratio. Spark-ignition engines
are therefore much less prone to consistent emission spikes from off-
cycle or unusual engine operation. We believe the minimum 30 second
sampling time will ensure sufficient measurement accuracy and will
allow for meaningful measurements.
    We do not specify a maximum sampling time. We expect manufacturers
testing in-use engines to select an approximate sampling time before
measuring emissions. However, for any sampling period, each 30-second
period of operation would be subject to the NTE standards. For example,
manufacturers may measure emissions for ten minutes. The engine's
emissions over the ten-minute period would need to meet the applicable
NTE standards, but each 30-second period of operation during the ten-
minute period should also be evaluated to determine that the engine
complies.
(g) Certification
    We are requiring that manufacturers state in their application for
certification that their engines will comply with the NTE standards
under any nominally steady-state combination of speeds and loads within
the new NTE zone (see Sec.  1045.205). The manufacturer must also
provide a detailed description of all testing, engineering analysis,
and other information that forms the basis for the statement. This
statement will be based on testing and, if applicable, other research
that supports such a statement, consistent with good engineering
judgment. We will review the basis for this statement during the
certification process. For marine diesel engines, we have provided
guidance that manufacturers may demonstrate compliance with NTE
standards by testing their engines at a number of standard points
throughout the NTE zone. In addition, manufacturers must test at a few
random points chosen by EPA prior to the testing.

E. Additional Certification and Compliance Provisions

(1) Production-Line Testing
    There are several factors that have led us to conclude that we
should not finalize production-line testing requirements for SD/I
engines in this rulemaking. First, California ARB has not yet adopted
production-line testing requirements for these engines. Second, the
companies producing these engines are predominantly small businesses.
Third, the relatively short useful life and small sales volumes limit
the overall emissions effect from these engines. Fourth, we are aware
that marine engines may need additional setup time for testing to
simulate the marine configuration. We do not consider any of these
issues to be fundamental, but we believe it is best to defer further
consideration of a requirement for production-line testing until a
later rulemaking. This would allow us to better understand the degree
of compliance with emission standards, the effectiveness of diagnostic
controls, and California ARB's interest in requiring production-line
testing. However, we may require the manufacturer to conduct a
reasonable degree of testing under Clean Air Act section 208 if we have
reason to believe that an engine family does not conform to the
regulations. This testing may take the form of a Selective Enforcement
Audit.
(2) In-Use Testing
    Manufacturers of OB/PWC engines have been required to test in-use
engines to show that they continue to meet emission standards. We
contemplated a similar requirement for SD/I engines, but have decided
not to adopt a requirement for a manufacturer-run in-use testing
program at this time. Manufacturers have pointed out that it would be
very difficult to identify a commercial fleet of boats that could be
set up to operate for hundreds of hours because it is very uncommon for
commercial operators to have significant numbers of SD/I vessels. Where
there are commercial fleets of vessels that may be conducive to
accelerated in-use service accumulation, these vessels generally use
outboard engines. Manufacturers could instead hire drivers to operate
the boats, but this may be cost-prohibitive. There is also a question
about access to the engines for testing. If engines need to be removed
from vessels for testing in the laboratory for some reason, it is
unlikely that owners will cooperate.
    While we are not establishing a program to require manufacturers to
routinely test in-use engines, the Clean Air Act allows us to perform
our own testing at any time with in-use engines to evaluate whether
they continue to meet emission standards throughout the useful life.
This may involve either laboratory testing or in-field testing with
portable measurement equipment. For laboratory tests, we could evaluate
compliance with either the duty-cycle standards or the not-to-exceed
standards. For testing with engines that remain installed on marine
vessels, we will evaluate compliance with the not-to-exceed standards.
In addition, as described above for production-line testing, we may
require manufacturers to perform a reasonable degree of testing. This
may include testing in-use engines.
(3) Certification Fees
    Under our current certification program, manufacturers pay a fee to
cover the costs for various certification and other compliance
activities associated with implementing the emission standards. As
explained below, we are assessing EPA's compliance costs associated
with SD/I engines based on EPA's existing fees regulation. Section VI
describes a new fees category we are adopting, based on the cost study
methodology used in establishing EPA's original fees regulation, for
costs related to the final evaporative emission standards for both
vessels and equipment that are subject to this final rule.
    EPA established a fee structure by grouping together various
manufacturers and industries into fee categories, with an explanation
that separation of industries into groups was appropriate to tailor the
applicable fee to the level of effort expected for EPA to oversee the
range of certification and compliance responsibilities (69 FR 26222,
May 11, 2004). As part of this process, EPA conducted a cost analysis
to determine the various compliance activities associated with each fee
category and EPA's associated annual cost burden. Once the total EPA
costs were determined for each fee category, the total number of
certificates involved within a fee category was added together and
divided into the total costs to determine the appropriate assessment
for each anticipated certificate.\94\ One of the fee categories created
was for ``Other Engines and Vehicles,'' which includes marine engines
(both compression-ignition and spark-ignition), nonroad spark-ignition
engines (above and below 19 kW), locomotive engines, recreational
vehicles, heavy-duty evaporative systems, and heavy-duty engines
certified only for sale in California. These engine and vehicle types
were grouped together because EPA planned a more basic certification
review than, for example, for light-duty motor vehicles.
---------------------------------------------------------------------------

    \94\ See Cost Analysis Document at p. 21 associated with the
proposed fees rule (http://www.epa.gov/otaq/fees.htm).
---------------------------------------------------------------------------

    EPA determined in the final fees rulemaking that it was premature
to assess fees for SD/I engines since they were not yet subject to
emission standards. The fee calculation nevertheless includes a
projection that there will eventually be 25 certificates of conformity
annually for SD/I engines. We are now formally including SD/I engines
in the ``Other Engines and Vehicles'' category such that the baseline
fee is $839 for each certificate of conformity. Note that we will
continue to update assessed fees each year, so the actual fee in 2010
and later model years will depend on these annual calculations (see
Sec.  1027.105).
(4) Special Provisions Related to Partially Complete Engines
    It is common practice for one company to produce engine blocks that
a second company modifies for use as a marine engine. Since our
regulations prohibit the sale of uncertified engines, we are
establishing provisions to clarify the status of these engines and
defining a path by which these engines can be handled without violating
the regulations. See Section VIII.C.1 for more information.
(5) Use of Engines Already Certified to Other Programs
    In some cases, manufacturers may want to use engines already
certified under our other programs. Engines certified to the emission
standards for highway applications in part 86 or Large SI applications
in part 1048 are meeting more stringent standards. We are therefore
allowing the pre-existing certification to be valid for engines used in
marine applications, on the condition that the engine is not changed
from its certified configuration in any way (see Sec.  1045.605).
Manufacturers will need to demonstrate that fewer than five percent of
the total sales of the engine model are for marine applications. There
are also a few minor notification and labeling requirements to allow
for EPA oversight of this provision. We are adopting similar provisions
for engines below 19 kW that are certified to Small SI standards as
described in Section III.C.1.

(6) Import-specific Information at Certification
    We are requiring additional information to improve our ability to
oversee compliance related to imported engines (see Sec.  1045.205). In
the application for certification, we require the following additional
information: (1) The port or ports at which the manufacturer has
imported engines over the previous 12 months, (2) the names and
addresses of the agents the manufacturer has authorized to import the
engines, and (3) the location of the test facilities in the United
States where the manufacturer will test the engines if we select them
for testing under a selective enforcement audit. See Section 1.3 of the
Summary and Analysis of Comments for further discussion related to
naming test facilities in the United States.
(7) Alternate Fuels
    See Section IV.E.7 for a discussion of requirements that apply to
spark-ignition SD/I engines that operate on fuels other than gasoline.

F. Small-Business Provisions

(1) Small Business Advocacy Review Panel
    On June 7, 1999, we convened a Small Business Advocacy Review Panel
under section 609(b) of the Regulatory Flexibility Act as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996 (RFA).
The purpose of the Panel was to collect the advice and recommendations
of representatives of small entities that could be affected by the
proposal and to report on those comments and the Panel's findings and
recommendations as to issues related to the key elements of the Initial
Regulatory Flexibility Analysis under section 603 of the Regulatory
Flexibility Act. We re-convened the Panel on August 17, 2006 to update
our review for the proposal. The Panel reports have been placed in the
rulemaking record for this final rule. Section 609(b) of the Regulatory
Flexibility Act directs the review Panel to report on the comments of
small entity representatives and make findings as to issues related to
certain elements of an initial regulatory flexibility analysis (IRFA)
under RFA section 603. Those elements of an IRFA are:
     A description of, and where feasible, an estimate of the
number of small entities to which the rule will apply;
     A description of projected reporting, recordkeeping, and
other compliance requirements of the rule, including an estimate of the
classes of small entities that will be subject to the requirements and
the type of professional skills necessary for preparation of the report
or record;
     An identification, to the extent practicable, of all
relevant Federal rules that may duplicate, overlap, or conflict with
the rule; and
     A description of any significant alternative to the rule
that accomplishes the stated objectives of applicable statutes and that
minimizes any significant economic impact of the rule on small
entities.
    In addition to the EPA's Small Business Advocacy Chairperson, the
Panel consisted of the Director of the Assessment and Standards
Division of the Office of Transportation and Air Quality, the
Administrator of the Office of Information and Regulatory Affairs
within the Office of Management and Budget, and the Chief Counsel for
Advocacy of the Small Business Administration.
    EPA used the size standards provided by the Small Business
Administration (SBA) at 13 CFR part 121 to identify small entities for
the purposes of its regulatory flexibility analysis. Companies that
manufacture internal-combustion engines and that employ fewer than 1000
employees are considered small businesses for the purpose of the RFA
analysis for this rule. Equipment manufacturers, boat builders, and
fuel system component manufacturers that employ fewer than 500 people
are considered small businesses for the purpose of the RFA analysis for
this rule. Based on this information, we asked 25 companies that met
the SBA small business thresholds to serve as small entity
representatives for the duration of the Panel process. Of these 25
companies, 13 were involved in the marine industry. These companies
represented a cross-section of SD/I engine manufacturers, boat
builders, and fuel system component manufacturers.
    With input from small entity representatives, the Panel reports
provide findings and recommendations on how to reduce potential burden
on small businesses that may occur as a result of the proposed rule.
The Panel reports are included in the rulemaking record for this
action. In light of the Panel report, and where appropriate, we
proposed a number of provisions for small business SD/I engine
manufacturers. With this final rule we are adopting many of the
flexibility options proposed with some changes due to the different
standards we are adopting for SD/I high-performance engines. In
addition, we are making a change to the criteria for determining which
companies are eligible for the flexibility options. The following
section describes the flexibility options being adopted as part of this
final rule and the criteria for determining which manufacturers are
eligible.
(2) Final Burden Reduction Approaches for Small-Volume SD/I Engine
Manufacturers
    We are establishing several options for small-volume SD/I engine
manufacturers. For purposes of determining which engine manufacturers
are eligible for the small business provisions described below for SD/I
engine manufacturers, we are adopting a 250 employee limit. EPA
believes this limit will cover all the existing small business SD/I
engine manufacturers (as defined by SBA), but places a reasonable limit
on how large a company could grow before they are no longer eligible
for EPA's flexibilities for small volume engine manufacturers.
(a) Additional Lead Time
    As recommended in the SBAR Panel report and as proposed, EPA is
establishing an implementation date of 2011 for conventional SD/I
engines produced by small volume engine manufacturers. In addition, EPA
is establishing an implementation date of 2013 for SD/I high-
performance engines produced by small volume engine manufacturers (see
Sec.  1045.145).
(b) Exhaust Emission ABT
    In the proposal, EPA cited concerns raised by small businesses that
ABT could give a competitive advantage to large businesses and
requested comment on the desirability of credit trading between high-
performance and conventional SD/I marine engines. As described earlier
in Section III.C.1, EPA is adopting different standards for SD/I high-
performance engines than originally proposed. While we are adopting an
averaging, banking, and trading (ABT) credit program for conventional
SD/I marine engines (see part 1045, subpart H), SD/I high-performance
engines are required to meet the new standards without an ABT program.
(c) Early Credit Generation for ABT
    As recommended in the SBAR Panel report and as proposed, we are
adopting an early banking program in which small volume engine
manufacturers can earn bonus credits for certifying earlier than
required (see Sec.  1045.145). This program, combined with the
additional lead time for small businesses, will give small-volume SD/I
engine manufacturers ample opportunity to

bank emission credits prior to the implementation date of the standards
and will provide greater incentive for more small business engine
manufacturers to introduce advanced technology earlier across the
nation than will otherwise occur. The ABT program applies only to
conventional SD/I engines so the early credit provisions will not apply
to SD/I high-performance engines.
(d) Assigned Emission Rates for SD/I High-Performance Engines
    In the proposal, EPA noted that engine manufacturers using emission
credits to comply with the standard will still need to test engines to
calculate how many emission credits are needed. To minimize this
testing burden, we proposed to allow manufacturers to use assigned
baseline emission rates for certification based on previously generated
emission data. As discussed above, we are adopting less stringent
standards for SD/I high-performance engines that do not allow for the
use of the ABT program for demonstrating compliance with the standards.
We are not adopting baseline HC+NOX and CO emission rates
for SD/I high-performance engines since the proposed levels were higher
than the standards being adopted and therefore are of no use without an
ABT program.
(e) Alternative Standards for SD/I High-Performance Engines
    In the proposal, EPA cited concerns raised by small businesses that
catalysts had not been demonstrated on high-performance engines and
that they may not be practicable for this application and therefore
requested comment on the need for and level of alternative standards
for SD/I high-performance engines. As described in Section III.C.1, we
are adopting a less stringent set of exhaust emission standards for SD/
I high-performance engines than originally proposed.
    In addition, as described in Section III.C.2, we are not adopting
NTE standards for SD/I high-performance engines (See Sec.  1045.105).
This is consistent with the SBAR Panel recommendation that NTE
standards not apply to SD/I high-performance engines.
(f) Broad Engine Families for SD/I High-Performance Engines
    In the proposal, EPA noted that the testing burden could be reduced
by using broader definitions of engine families. As proposed, we are
adopting provisions to allow small businesses to group all their SD/I
high-performance engines into a single engine family for certification
(see Sec.  1045.230). A manufacturer will need to perform emission
tests only on the engine in that family that is most likely to exceed
an emission standard.
(g) Simplified Test Procedures for SD/I High-Performance Engines
    Existing testing requirements include detailed specifications for
the calibration and maintenance of testing equipment and tolerances for
performing the actual tests. For laboratory equipment and testing,
these specifications and tolerances are intended to achieve the most
repeatable results feasible given testing hardware capabilities. For
SD/I high-performance engines, EPA is adopting a provision that allows
for different equipment than is specified for the laboratory and with
less restrictive specifications and tolerances more typical of in-use
testing (see Sec.  1045.501(h)). These less restrictive specifications
will facilitate less expensive testing for businesses, with little or
no negative effect on the environment. The relaxation on these
specifications is especially helpful for testing high-performance
engines due to their high exhaust flow rates, temperatures, and
emission concentrations. This provision is available to all SD/I high-
performance engine manufacturers, regardless of business size.
(h) Reduced Testing Requirements for SD/I Engines
    We are adopting provisions to allow small-volume engine
manufacturers to use an assigned deterioration factor to demonstrate
compliance with the standards for certification rather than doing
service accumulation and additional testing to measure deteriorated
emission levels at the end of the regulatory useful life (see Sec.
1045.240). EPA is not specifying actual levels for the assigned
deterioration factors in this final rule. EPA intends to analyze
available emission deterioration information to determine appropriate
deterioration factors for SD/I engines. The data will likely include
durability information from engines certified to California ARB's
standards and may also include engines certified early to EPA's
standards. Prior to the implementation date for the SD/I standards, EPA
will provide guidance to engine manufacturers specifying the levels of
the assigned deterioration factors for small-volume engine
manufacturers.
    We proposed to exempt small-volume manufacturers of SD/I engines
from the production-line testing requirements. However, we are dropping
the production-line testing requirements for all SD/I engine
manufacturers. Therefore, no production-line testing will be required
of any SD/I engine manufacturer, whether large or small (see Sec.
1045.301).
(i) Hardship Provisions
    We are adopting two types of hardship provisions for SD/I engine
manufacturers, consistent with the Panel recommendations. EPA used the
SBA size standards for purposes of defining ``small businesses'' for
its regulatory flexibility analysis. The eligibility criteria for the
hardship provisions described below reflect EPA's consideration of the
Panel's recommendations and a reasonable application of existing
hardship provisions. As has been our experience with similar provisions
already adopted, we anticipate that hardship mechanisms will be used
sparingly. First, under the unusual circumstances hardship provision,
any manufacturer subject to the new standards may apply for hardship
relief if circumstances outside their control cause the failure to
comply and if failure to sell the subject engines or equipment or fuel
system component would have a major impact on the company's solvency
(see Sec.  1068.245). An example of an unusual circumstance outside a
manufacturer's control may be an ``Act of God,'' a fire at the
manufacturing plant, or the unforeseen shutdown of a supplier with no
alternative available. The terms and time frame of the relief will
depend on the specific circumstances of the company and the situation
involved. As part of its application for hardship, a company will be
required to provide a compliance plan detailing when and how it will
achieve compliance with the standards. This hardship provision will be
available to all manufacturers of engines, equipment, boats, and fuel
system components subject to the new standards, regardless of business
size.
    Second, an economic hardship provision allows small businesses
subject to the new standards to petition EPA for limited additional
lead time to comply with the standards (see Sec.  1068.250). A small
business must make the case that it has taken all possible business,
technical, and economic steps to comply, but the burden of compliance
costs would jeopardize the company's solvency. Hardship relief could
include requirements for interim emission reductions and/or the
purchase and use of emission credits. The length of the hardship relief
decided during review of the hardship application will be up to one
year, with the potential to extend the relief as needed. We anticipate
that

one to two years will normally be sufficient. As part of its
application for hardship, a company will be required to provide a
compliance plan detailing when and how it will achieve compliance with
the standards. This hardship provision will be available only to
qualifying small businesses.
    Because boat builders in many cases will depend on engine
manufacturers to supply certified engines in time to produce complying
boats, we are also providing a hardship provision for all boat
builders, regardless of size, that will allow the builder to request
more time if they are unable to obtain a certified engine and they are
not at fault and will face serious economic hardship without an
extension (see Sec.  1068.255).

G. Technological Feasibility

(1) Level of Standards
    Over the past few years, developmental programs have demonstrated
the capabilities of achieving significant reductions in exhaust
emissions from SD/I engines. California ARB has acted on this
information to set an HC+NOX emission standard of 5 g/kW-hr
for SD/I engines, starting in 2008. At this time, three engine
manufacturers have certified SD/I engines to these standards. Chapter 4
of the Final RIA presents data from these engines as well as detailed
data on several developmental SD/I engines with catalysts packaged
within water-cooled exhaust manifolds. Four of these developmental
engines were operated with catalysts in vessels for 480 hours. The
remaining developmental engines were tested with catalysts that had
been subjected to a rapid-aging cycle in the laboratory. Data from
these catalyst-equipped engines support the level of the standards.
    SD/I high-performance engines have very high power outputs, large
exhaust gas flow rates, and relatively high concentrations of
hydrocarbons and carbon monoxide in the exhaust gases. As a result, we
believe it is not practical to apply catalyst technology to these
engines. We are therefore adopting standards for SD/I high-performance
engines based on the level of control that can be expected from
recalibration with electronically controlled fuel injection.
(2) Implementation Dates
    We anticipate that manufacturers will use the same catalyst designs
to meet the final standards that they will use to meet the California
ARB standards for SD/I engines in 2008. We believe a requirement to
extend the California standards nationwide after a two-year delay
allows manufacturers adequate time to incorporate catalysts across
their product lines. Once the technology is developed for use in
California, it will be available for use nationwide. In fact, several
engine models currently certified to the California standards are
already available with catalysts nationwide. As discussed above, we are
accommodating the transition to new base engines by agreeing to one
year of hardship relief for companies that would otherwise need to
design and certify an engine for that one year before it becomes
obsolete.
(3) Technological Approaches
    Engine manufacturers can adapt readily available technologies to
control emissions from SD/I engines. Electronically controlled fuel
injection gives manufacturers more precise control of the air/fuel
ratio in each cylinder, thereby giving them greater flexibility in how
they calibrate their engines. With the addition of an oxygen sensor,
electronic controls give manufacturers the ability to use closed-loop
control, which is especially valuable when using a catalyst. In
addition, manufacturers can achieve HC+NOX reductions
through the use of exhaust gas recirculation. However, the most
effective technology for controlling emissions is a three-way catalyst
in the exhaust stream.
    In SD/I engines, the exhaust manifolds are water-jacketed and the
water mixes with the exhaust stream before exiting the vessel.
Manufacturers add a water jacket to the exhaust manifold to meet
temperature-safety protocol. They route this cooling water into the
exhaust to protect the exhaust couplings and to reduce engine noise.
Catalysts must therefore be placed upstream of the point where the
exhaust and water mix-this ensures the effectiveness and durability of
the catalyst. Because the catalyst must be small enough to fit in the
exhaust manifold, potential emission reductions are not likely to
exceed 90 percent, as is common in land-based applications. However, as
discussed in Chapter 4 of the Final RIA, data on catalyst-equipped SD/I
engines show that emissions may be reduced by 70 to 80 percent for
HC+NOX and 30 to 50 percent for CO over the test cycle.
Larger reductions, especially for CO, have been achieved at lower-speed
operation.
    There have been concerns that aspects of the marine environment
could result in unique durability problems for catalysts. The primary
aspects that could affect catalyst durability are sustained operation
at high load, saltwater effects on catalyst efficiency, and thermal
shock from cold water coming into contact with a hot catalyst. Modern
catalysts perform well at temperatures up to 1100 [deg]C, which is much
higher than expected in a marine exhaust manifold. These catalysts have
also been shown to withstand the thermal shock of being immersed in
water. More detail on catalyst durability is presented in the Final
RIA. In addition, use of catalysts in automotive, motorcycle, and
handheld equipment has shown that catalysts can be packaged to
withstand vibration in the exhaust manifold.
    Manufacturers already strive to design their exhaust systems to
prevent water from reaching the exhaust ports. If too much water
reaches the exhaust ports, significant durability problems will result
from corrosion or hydraulic lock. As discussed in the Final RIA,
industry and government worked on a number of cooperative test programs
in which several SD/I engines were equipped with catalysts and
installed in vessels to prove out the technology. Early in the
development work, a study was performed on an SD/I engine operating in
a boat to see if water was entering the part of the manifold where
catalysts will be installed. Although some water was collected in the
exhaust manifold, it was found that this water came from water vapor
that condensed out of the combustion products. This was easily
corrected using a thermostat to prevent overcooling from the water
jacket.
    Four SD/I engines equipped with catalysts were operated in vessels
for 480 hours in fresh water. This time period was intended to
represent the full expected operating life of a typical SD/I engine. No
significant deterioration was observed on any of these catalysts, nor
was there any evidence of water reaching the catalysts. In addition,
the catalysts were packaged such that the exhaust system met industry
standards for maximum surface temperatures.
    Testing has been performed on one engine in a vessel on both fresh
water and saltwater over a test protocol designed by industry to
simulate the worst-case operation for water reversion. No evidence was
found of water reaching the catalysts. After the testing, the engine
had emission rates below the HC+NOX standard. We later
engaged in a test program to evaluate three additional engines with
catalysts in vessels operating on saltwater for extended periods. Early
in the program, two of the three manifolds experienced corrosion in the
salt-water environment resulting in water leaks and damage to the
catalyst. These manifolds were rebuilt with guidance from experts in
the marine industry and additional

hours were accumulated on the boats. Although the accumulated hours are
well below the 480 hours performed on fresh water, the operation
completed showed no visible evidence of water reversion or damage to
the catalysts.
    Three SD/I engine manufacturers have certified SD/I engines to the
California ARB standards, and some catalyst-equipped engines are
available for purchase nationwide. Manufacturers have indicated that
they have successfully completed durability testing, including extended
in-use testing on saltwater.
(4) Regulatory Alternatives
    In developing the final emission standards, we considered both what
was achievable without catalysts and what could be achieved with
larger, more efficient catalysts than those used in our test programs.
Chapter 4 of the Final RIA presents data on SD/I engines equipped with
exhaust gas recirculation (EGR). HC+NOX emission levels
below 10 g/kW-hr were achieved for each of the engines. CO emissions
ranged from 25 to 185 g/kW-hr. We believe EGR will be a technologically
feasible and cost-effective approach to reducing emissions from SD/I
marine engines. However, we believe greater reductions could be
achieved through the use of catalysts. We considered basing an interim
standard on EGR, but were concerned that this will divert
manufacturers' resources away from catalyst development and could have
the effect of delaying emission reductions from this sector.
    Several of the marine engines with catalysts that were tested as
part of the development of the standards had HC+NOX emission
rates appreciably lower that 5 g/kW-hr, even with consideration of
expected in-use emissions deterioration associated with catalyst aging.
However, we believe a standard of 5 g/kW-hr is still appropriate given
the potential variability in in-use performance and in test data. The
test programs described in Chapter 4 of the Final RIA did not
investigate larger catalysts for SD/I applications. The goal of the
testing was to demonstrate catalysts that will work within the
packaging constraints associated with water jacketing the exhaust and
fitting the engines into engine compartments on boats. However, we did
perform testing on engines equipped with both catalysts and EGR. These
engines showed emission results in the 2-3 g/kW-hr range. We expect
that these same reductions could be achieved more simply through the
use of larger catalysts or catalysts with higher precious metal
loading. Past experience indicates that most manufacturers will strive
to achieve emission reductions well below the final standards to give
them certainty that they will pass the standards in-use, especially as
catalysts on SD/I engines are a new technology. Therefore, we do not
believe it is necessary at this time to set a lower standard for these
engines.
    For SD/I high-performance engines, we originally proposed a
standard based on the use of catalysts and then considered a less
stringent alternative based on engine fuel system upgrades,
calibration, or other minor changes such as an air injection pump
rather than catalytic control. However, manufacturers commented that
catalysts are not practical for these engines due to the high exhaust
flow rates, high emission rates, and short time between rebuilds. In
the final rule, we are establishing standards that can be met through
the use of engine controls, similar to the alternative standard that
was analyzed in the proposal. Because we do not consider catalyst-based
standards to be feasible for high-performance engines at this time, we
did not model a more stringent alternative for these engines.
(5) Our Conclusions
    We believe the final 2010 exhaust emission standards for SD/I
engines represent the greatest degree of emission reduction achievable
in this time frame. Manufacturers of conventional SD/I engines can meet
the standards through the use of three-way catalysts packaged in the
exhaust systems upstream of where the water and exhaust mix.
Manufacturers are already selling engines with this technology. By 2010
there will be widespread experience in applying emission controls to a
large number of engine models.
    As discussed in Section VII, we do not believe the final standards
will have negative effects on energy, noise, or safety and may lead to
some positive effects.

IV. Outboard and Personal Watercraft Engines

A. Overview

    This section applies to spark-ignition outboard and personal
watercraft (OB/PWC) marine engines and vessels. OB/PWC engines are
currently required to meet the HC+NOX exhaust emissions and
other related requirements under 40 CFR part 91. As a result of these
standards, manufacturers have spent the last several years developing
new technologies to replace traditional carbureted two-stroke engine
designs. Many of these technologies are capable of emission levels well
below the current standards. We are adopting new HC+NOX and
CO exhaust emission standards for OB/PWC marine engines reflecting the
capabilities of these new technologies.
    For outboard and personal watercraft engines, the current emission
standards regulate only HC+NOX emissions. As described in
Section II, we are making the finding under Clean Air Act section
213(a)(3) that Marine SI engines cause or contribute to CO
nonattainment in two or more areas of the United States.
    We believe manufacturers can use readily available technological
approaches to design their engines to meet the new standards. In fact,
as discussed in Chapter 4 of the Final RIA, manufacturers are already
producing several models of four-stroke engines and direction-injection
two-stroke engines that meet the new standards. The most important
compliance step for the standards will be to retire high-emitting
designs that are still available and replace them with these cleaner
engines. We are not establishing standards based on the use of
catalytic converters in OB/PWC engines. While this may be an attractive
technology in the future, we do not believe there has been sufficient
development work on the application of catalysts to OB/PWC engines to
use as a basis for standards at this time.
    Note that we are migrating the regulatory requirements for marine
spark-ignition engines from 40 CFR part 91 to 40 CFR part 1045.
Manufacturers must comply with the provisions in part 1045 for an
engine once the exhaust emission standards begin to apply in 2010. This
gives us the opportunity to update the details of our certification and
compliance program to be consistent with the comparable provisions that
apply to other engine categories and describe regulatory requirements
in plain language. Most of the change in regulatory text provides
improved clarity without substantially changing procedures or
compliance obligations. Where there is a change that warrants further
attention, we describe the need for the change below.
    Engines and vessels subject to part 1045 are also subject to the
general compliance provisions in 40 CFR part 1068. These include
prohibited acts and penalties, exemptions and importation provisions,
selective enforcement audits, defect reporting and recall, and hearing
procedures. See Section VIII of the preamble to the proposed rule for
further discussion of these general compliance provisions.

B. Engines Covered by This Rule

(1) Definition of Outboard and Personal Watercraft Engines and Vessels
    The final standards are intended to apply to outboard marine
engines and engines used to propel personal watercraft. We are changing
the definitions of outboard and personal watercraft to reflect this
intent. The original definitions of outboard engine and personal
watercraft marine engine adopted in 40 CFR part 91 are presented below:
     Outboard engine is a Marine SI engine that, when properly
mounted on a marine vessel in the position to operate, houses the
engine and drive unit external to the hull of the marine vessel.
     Personal watercraft engine (PWC) is a Marine SI engine
that does not meet the definition of outboard engine, inboard engine,
or sterndrive engine, except that the Administrator in his or her
discretion may classify a PWC as an inboard or sterndrive engine if it
is comparable in technology and emissions to an inboard or sterndrive
engine.
    With the implementation of catalyst-based standards for sterndrive
and inboard marine engines, we believe the above definitions could be
problematic. Certain applications using SD/I engines and able to apply
catalyst control will not be categorized as SD/I under the original
definitions in at least two cases. First, an airboat engine, which is
often mounted well above the hull of the engine and used to drive an
aircraft-like propeller could be misconstrued as an outboard engine.
However, like traditional sterndrive and inboard engines, airboat
engines are typically derived from automotive-based engines without
substantial modifications for marine application. Airboat engines can
use the same technologies that are available to sterndrive and inboard
engines, so we believe they should be subject to the same standards. To
address the concerns about classifying airboats, we are changing the
outboard definition to specify that the engine and drive unit be a
single, self-contained unit that is designed to be lifted out of the
water. This clarifies that air boats are not outboard engines; air
boats do not have engines and drive units that are designed to be
lifted out of the water. We are adopting the following definition:
     Outboard engine means an assembly of a spark-ignition
engine and drive unit used to propel a marine vessel from a properly
mounted position external to the hull of the marine vessel. An outboard
drive unit is partially submerged during operation and can be tilted
out of the water when not in use.
    Second, engines used on jet boats (with an open bay for passengers)
have size, power, and usage characteristics that are very similar to
sterndrive and inboard applications, but these engines may be the same
as OB/PWC engines, rather than the marinized automotive engines
traditionally used on sterndrive vessels. Because jet boat engines may
be the same as OB/PWC engines, the regulations classified them as OB/
PWC engines unless the Agency classified them as SD/I due to comparable
technology and emissions as SD/I engines. However, as explained in the
proposed rule, we believe classifying such engines as personal
watercraft engines is inappropriate because it will subject the jet
boats to less stringent emission standards than other boats with
similar size, power, and usage characteristics, and thus potentially
lead to increased use of high-emitting engines in these vessels.
Because the current regulations authorize engines powering jet boats to
be treated as SD/I engines at the discretion of the Agency, but do not
compel such classification, we are finalizing amendments to the
definition to explicitly exclude jet boats and their engines from being
treated as personal watercraft engines or vessels. Instead, we are
classifying jet boat engines as SD/I engines.
    The new definition conforms to the definition of personal
watercraft established by the International Organization for
Standardization (ISO 13590). This ISO standard excludes open-bay
vessels and specifies a maximum vessel length of 4 meters. The ISO
standard for personal watercraft therefore excludes personal
watercraft-like vessels 4 meters or greater and jet boats. Thus,
engines powering such vessels will be classified as sterndrive/inboard
engines. We believe this definition effectively serves to differentiate
vessels in a way that groups propulsion engines into categories that
are appropriate for meeting different emission standards. This approach
is shown below with the corresponding definition of personal watercraft
engine. We are making one change to the ISO definition for domestic
regulatory purposes; we are removing the word ``inboard'' to prevent
confusion between PWC and inboard engines and state specifically that a
vessel powered by an outboard marine engine is not a PWC. We are
revising the definitions as follows:
     Personal watercraft means a vessel less than 4.0 meters
(13 feet) in length that uses an installed spark-ignition engine
powering a water jet pump as its primary source of propulsion and is
designed with no open load carrying area that would retain water. The
vessel is designed to be operated by a person or persons positioned on,
rather than within the confines of the hull. A vessel using an outboard
engine as its primary source of propulsion is not a personal
watercraft.
     Personal watercraft engine means a spark-ignition engine
used to propel a personal watercraft.
    Section III.C.3 describes special provisions that will allow
manufacturers extra flexibility with emission credits if they want to
continue using outboard or personal watercraft engines in jet boats.
These engines will need to meet the standards for sterndrive/inboard
engines, but we believe it is appropriate for them to make this
demonstration using emission credits generated by other outboard and
personal watercraft engines because these vessels are currently using
these engine types.
(2) Exclusions and Exemptions
    We are maintaining the current exemptions for OB/PWC engines. These
include the testing exemption, the manufacturer-owned exemption, the
display exemption, and the national-security exemption. If the
conditions for an exemption are met, the engine is not subject to the
exhaust emission standards. These exemptions are described in more
detail in Section VIII of the preamble to the proposed rule.
    The Clean Air Act provides for different treatment of engines used
solely for competition. In the initial rulemaking to set standards for
OB/PWC engines, we adopted the conventional definitions that excluded
engines from the regulations if they had features that were difficult
to remove and that made it unsafe, impractical, or unlikely to be used
for noncompetitive purposes. We have more recently taken the approach
in other programs of more carefully differentiating competition and
noncompetition models, and are adopting these kinds of changes in this
rule. The changes to the provisions relating to competition engines
apply equally to all types of Marine SI engines. See Section III.B and
Sec.  1045.620 of the regulations for a full discussion of the new
approach.
    We are incorporating a new exemption to address individuals who
manufacture recreational marine vessels for personal use as described
in Section III.B.2.
    In the rulemaking for recreational vehicles, we chose not to apply
standards to hobby products by

exempting all reduced-scale models of vehicles that are not capable of
transporting a person (67 FR 68242, November 8, 2002). We are extending
that same provision to OB/PWC marine engines (see Sec.  1045.5).

C. Final Exhaust Emission Standards

    We are requiring more stringent exhaust emission standards for new
OB/PWC marine engines. These standards can be met through expanded
reliance on four-stroke engines and two-stroke direct-injection
engines. This section describes the new requirements for OB/PWC engines
for controlling exhaust emissions. See Section VI for a description of
the final requirements related to evaporative emissions.
(1) Standards and Dates
    We are requiring new HC+NOX standards for OB/PWC engines
starting in model year 2010 that will achieve more than a 60 percent
reduction from the 2006 standards (see Sec.  1045.103). We are also
establishing new CO emission standards. These standards will result in
meaningful CO reductions from many engines and prevent CO from
increasing for engines that already use technologies with lower CO
emissions. The new emission standards are largely based on
certification data from cleaner-burning four-stroke engines and two-
stroke direct-injection engines that are certified under part 91.
Section IV.H discusses the technological feasibility of these standards
in more detail. Table IV-1 presents the exhaust emission standards for
OB/PWC. The HC+NOX emission standards are the same as those
adopted by California ARB for 2008 and later model years. We are also
applying not-to-exceed emission standards over a range of engine
operating conditions, as described in Section IV.C.2.

                             Table IV-1: OB/PWC Exhaust Emission Standards [g/kW-hr]
----------------------------------------------------------------------------------------------------------------
             Pollutant                    Power                           Emission standard
----------------------------------------------------------------------------------------------------------------
HC+NOX.............................     P <= 4.3 kW  30.0
                                         P > 4.3 kW  2.1 + 0.09 x (151 + 557/P\0.9\))
CO.................................      P <= 40 kW  500--5.0 x P
                                           P> 40 kW  300
----------------------------------------------------------------------------------------------------------------
Note: P = maximum engine power in kilowatts (kW).

    Our implementation date allows two additional years beyond the
implementation date of the same standards in California. Manufacturers
generally sell their lower-emission engines, which are already meeting
the 2008 California standards, nationwide. However, the additional time
will give manufacturers time to address any models that may not meet
the upcoming California standards or are not sold in California. This
also accommodates the lead time concerns with the timing of this final
rule as expressed by the commenters.
    The emission standards apply at the range of atmospheric pressures
represented by the test conditions specified in part 1065. This
includes operation at elevated altitudes. Since not all engines have
electronic engines with feedback controls to incorporate altitude
compensation, we are taking the same approach here as for Small SI
engines where a similar dynamic is in place. Specifically, we are
requiring that all engines must comply with emission standards in the
standard configuration (i.e., without an altitude kit) at barometric
pressures above 94.0 kPa, which corresponds to altitudes up to about
2,000 feet above sea level (see Sec.  1045.115). This will ensure that
all areas east of the Rocky Mountains and most of the populated areas
in Pacific Coast states will have compliant engines without depending
on engine adjustments. This becomes more important as we anticipate
manufacturers increasingly relying on technologies that are sensitive
to controlling air-fuel ratio for reducing emissions. For operation at
higher altitudes, manufacturers may rely on an altitude kit that allows
their engines to meet emission standards at higher elevations. In this
case, engine manufacturers must describe the kit specifications in
their application for certification and identify in the owner's manual
the altitude ranges for proper engine performance and emission control
that are expected with and without the altitude kit. The owner's manual
must also state that operating the engine with the wrong engine
configuration at a given altitude may increase its emissions and
decrease fuel efficiency and performance. The regulations specify that
owners may follow the manufacturer's instructions to modify their
engines with altitude kits without violating the tampering prohibition.
See Section IV.E.8 for further discussion related to the deployment of
altitude kits where the manufacturers rely on them for operation at
higher altitudes.
    The new standards include the same general provisions that apply
today. For example, engines must control crankcase emissions. The
regulations also require compliance over the full range of adjustable
parameters and prohibit the use of defeat devices. (See Sec.
1045.115.)
(2) Not-to-Exceed Standards
    We are adopting emission standards that apply over an NTE zone. The
NTE standards are in the form of a multiplier times the duty-cycle
standard for HC+NOX and for CO (see Sec.  1045.105). Section
IV.D.5 gives an overview of the NTE standards and compliance provisions
and describes the NTE test procedures.
    Manufacturers commented that certification to the NTE standards
requires additional testing even for engine models that are currently
certified to emission levels below the new duty-cycle based standards.
In addition, they expressed concern that they may need to recalibrate
existing engine models to meet the NTE standards. Manufacturers
commented that this would not be possible by 2010 because of the large
number of engine models. For most engines, manufacturers carry over
preexisting certification test data from year to year. Manufacturers
commented that additional time would be necessary to retest, and
potentially recalibrate, all these engines for certification to the NTE
standards. To address these issues regarding lead time needed to retest
these engines, we are not applying the NTE standards for 2010-2012
model year engines that are certified using preexisting data (i.e.,
carryover engine families). For new engine models, manufacturers
indicated that they will be able to perform the NTE testing and duty-
cycle testing as part of their efforts to certify to the new standards.
Therefore the primary implementation date of 2010 applies to these
engines. Beginning in the 2013 model year, all conventional OB/PWC
engines must be certified to meet the NTE standards.

    This NTE approach complements the weighted modal emission tests
included in this rule. These steady-state duty cycles and standards are
intended to establish average emission levels over several discrete
modes of engine operation. Because it is an average, manufacturers
design their engines with emission levels at individual points varying
as needed to maintain maximum engine performance and still meet the
engine standard. The NTE limit will be an additional requirement. It is
intended to ensure that emission controls function with relative
consistency across the full range of expected operating conditions.
(3) Emission Credit Programs
    Engine manufacturers may use emission credits to meet OB/PWC
standards under part 91. We are adopting an ABT program for the new
HC+NOX emission standards that is similar to the previous
program (see part 1045, subpart H). A description of the ABT provisions
for the new OB/PWC standards is described below.
    OB/PWC engine manufacturers that have generated HC+NOX
credits under the 2006 standards will be able to use those credits to
demonstrate compliance with the new HC+NOX standards being
adopted in this final rule. The credits generated under the 2006
standards are subject to a three-year credit life. Therefore, a
manufacturer will be able to use those credits for demonstrating
compliance with the new standards as long as the credits have not
expired.
    We are allowing an indefinite life for emission credits earned
under the new standards for OB/PWC engines. We consider these emission
credits to be part of the overall program for complying with standards.
Given that we may consider further reductions beyond these standards in
the future, we believe it will be important to assess the ABT credit
situation that exists at the time any further standards are considered.
Emission credit balances will be part of the analysis for determining
the appropriate level and timing of new standards, consistent with the
statutory requirement to establish standards that represent the
greatest degree of emission reduction achievable, considering cost,
safety, lead time, and other factors. If we were to allow the use of
credits generated under the standards adopted in this rule to meet more
stringent standards adopt in a future rulemaking, we may need to adopt
emission standards at more stringent levels or with an earlier start
date than we would absent the continued use of existing emission
credits, depending on the level of emission credit banks.
Alternatively, we may adopt future standards without allowing the use
of existing emission credits.
    We are adopting the equation for calculating emission credits for
OB/PWC engines as proposed. This equation represents a simpler
calculation than is currently used for OB/PWC engines and is based on
the equation that is common in many of our other ABT programs. The
primary difference is that the regulatory useful life will be used in
the credit calculation rather than a discounted useful life function
based on engine type and power rating. In addition, the emission
credits will be reported in units of kilograms rather than grams.
    We are also adopting an averaging program for CO emissions. Under
this program, manufacturers can generate credits with engine families
that have FELs below the CO emission standard to be used for engine
families in their product line in the same model year that are above
the CO standard. However, we are not establishing a banking program for
CO emissions. As noted in the proposal, we are concerned that a banking
program could result in a large accumulation of credits based on a
given company's mix of engine technologies. Furthermore, because we
generally allow trading only with banked credits, we are not allowing
trading of CO emission credits.
    EPA proposed that manufacturers would not be able to earn credits
for one pollutant while using credits to comply with the emissions
standard for another pollutant. We are dropping that provision for the
final rule. The proposed restriction was modeled on similar
requirements in other ABT programs where there was concern that a
manufacturer could use technologies to reduce one pollutant while
increasing another pollutant. The types of technologies manufacturers
are expected to use to comply with the new standards include direct-
injection two-stroke engines or four-stroke engines. Both of these
technologies should result in reductions in both HC+NOX
emissions and CO emissions compared to current designs. While the
technologies are expected to reduce both HC+NOX emissions
and CO emissions, there could be situations where these technologies
are capable of meeting one of the emission standards but not the other.
EPA does not want to preclude such engines from being able to certify
using the provisions of the ABT program and is therefore dropping the
proposed restriction from the final rule.
    For OB/PWC engines subject to the new emission standards, we are
adopting FEL caps to prevent the sale of very high-emitting engines.
For HC+NOX, the FEL cap will be the applicable 2006 and
later model year HC+NOX standard, which is dependent on the
average power of an engine family. For CO, the FEL cap will be 150 g/
kW-hr above the newly adopted CO standard, which is also dependent on
the average power of an engine family. We believe these FEL caps will
allow a great deal of flexibility for manufacturers using credits, but
will require manufacturers to stop producing engines that emit
pollutants at essentially uncontrolled levels.
    We are specifying that OB/PWC engines are in a separate averaging
set from SD/I engines, with an exception for certain jet boat engines.
This means that credits earned by OB/PWC engines may be used only to
offset higher emissions from other OB/PWC engines. Likewise, credits
earned by SD/I engines may be used only to offset higher emissions from
other SD/I engines. As described in Section III.C.2, manufacturers will
be able to use credits generated from OB/PWC engines to demonstrate
that their jet boat engines meet the HC+NOX and CO standards
for SD/I engines if the majority of units sold in the United States
from those related OB/PWC engine families are sold for use as OB/PWC
engines.
    Finally, manufacturers may include as part of their federal credit
calculation the sales of engines in California as long as they don't
separately account for those emission credits under the California
regulations. We originally proposed to exclude engines sold in
California that are subject to the California ARB standards. However,
we consider California's current HC+NOX standards to be
equivalent to those we are adopting in this rulemaking, so we would
expect a widespread practice of producing and marketing 50-state
products. Therefore, as long as a manufacturer is not generating
credits under California's averaging program for OB/PWC engines, we
would allow manufacturers to count those engines when calculating
credits under EPA's program. This is consistent with how EPA allows
credits to be calculated in other nonroad sectors, such as recreational
vehicles.
(4) Durability Provisions
    We are keeping the useful life periods from 40 CFR part 91. The
specified useful life for outboard engines is 10 years or 350 hours of
operation, whichever comes first. The useful life for personal
watercraft engines is 5

years or 350 hours of operation, whichever comes first. (See Sec.
1045.103.)
    We are updating the specified emissions warranty periods for
outboard and personal watercraft engines to align with our other
emission control programs (see Sec.  1045.120). Most nonroad engines
have emissions warranty periods that are half of the total useful life
period. Accordingly, the new warranty period for outboard engines is
five years or 175 hours of operation, whichever comes first. The new
warranty period for personal watercraft engines is 30 months or 175
hours, whichever comes first. This contrasts somewhat with the
currently specified warranty period of 200 hours or two years (or three
years for specified major emission control components). The new
approach will slightly decrease the warranty period in terms of hours,
but will somewhat increase the period in terms of calendar years (or
months).
    If the manufacturer offers a longer mechanical warranty for the
engine or any of its components at no additional charge, we are
requiring that the emission-related warranty for the respective engine
or component must be extended by the same amount. The emission-related
warranty includes components related to controlling exhaust,
evaporative, and crankcase emissions from the engine. This approach to
setting warranty requirements is consistent with provisions that apply
in most other programs for nonroad engines.
    We are keeping the requirements related to demonstrating the
durability of emission controls for purposes of certification (see
Sec.  1045.235, Sec.  1045.240, and Sec.  1045.245). Manufacturers must
run engines long enough to develop and justify full-life deterioration
factors. This allows manufacturers to generate a deterioration factor
that helps ensure that the engines will continue to control emissions
over a lifetime of operation. The new requirement to generate
deterioration factors for CO emissions is the same as that for
HC+NOX emissions. For the HC+NOX standard, we are
requiring that manufacturers use a single deterioration factor for the
sum of HC and NOX emissions. However, if manufacturers get
our approval to establish a deterioration factor on an engine that is
tested with service accumulation representing less than the full useful
life for any reason, we will require separate deterioration factors for
HC and NOX emissions. The advantage of a combined
deterioration factor is that it can account for an improvement in
emission levels with aging. However, for engines that have service
accumulation representing less than the full useful life, we believe it
is not appropriate to extrapolate measured values indicating that
emission levels for a particular pollutant will decrease.
    Under the current regulations, emission-related maintenance is not
allowed during service accumulation to establish deterioration factors.
The only maintenance that may be done must be (1) regularly scheduled,
(2) unrelated to emissions, and (3) technologically necessary. This
typically includes changing engine oil, oil filter, fuel filter, and
air filter. In addition, we are specifying that manufacturers may not
schedule critical emission-related maintenance during the useful life
period (see Sec.  1045.125). This will prevent manufacturers from
designing engines with emission controls that depend on scheduled
maintenance that is not likely to occur with in-use engines.

D. Changes to OB/PWC Test Procedures

    We are making a number of minor changes to the test procedures for
OB/PWC to make them more consistent with the test procedures for other
nonroad spark-ignition engines. These test provisions will apply to SD/
I marine engines as well.
(1) Duty Cycle
    A duty cycle is the set of modes (engine speed and load) over which
an engine is operated during a test. For purposes of exhaust emission
testing, we are keeping the duty cycle specified for OB/PWC engines,
with two adjustments (see Sec.  1045.505). First, we are requiring that
manufacturers may choose to run the specified duty cycle as a ramped-
modal cycle. Second, we are changing the low-power test mode from a
specified 25 percent load condition to 25.3 percent load, which will
complete the intended alignment with the E4 duty cycle adopted by the
International Organization for Standardization.
(2) Maximum Test Speed
    The definition of maximum test speed, where speed is the angular
velocity of an engine's crankshaft (usually expressed in revolutions
per minute, or rpm), is an important aspect of the duty cycles for
testing. Engine manufacturers currently declare the rated speeds for
their engines and then used the rated speed as the maximum speed for
testing. However, we have established an objective procedure for
measuring this engine parameter to have a clearer reference point for
an engine's maximum test speed. This is important to ensure that
engines are tested at operating points that correspond with in-use
operation. This also helps ensure that the NTE zone is appropriately
matched to in-use operating conditions.
    We are defining the maximum test speed for any engine to be the
single point on an engine's maximum-power versus speed curve that lies
farthest away from the zero-power, zero-speed point on a normalized
maximum-power versus speed plot. In other words, consider straight
lines drawn between the origin (speed = 0, load = 0) and each point on
an engine's normalized maximum-power versus speed curve. The nominal
value of maximum test speed is defined at that point where the length
of this line reaches its maximum value.
    The engine mapping procedures in part 1065 that we referenced in
the proposal allow manufacturers to declare a value for maximum test
speed that is within 2.5 percent of the calculated (or measured)
nominal value. Based on the manufacturers' descriptions of the way they
instruct boat builders to match propellers to their engines, we have
included in the final rule a special allowance for manufacturers to
declare a value for maximum test speed that is up to 500 rpm below the
calculated value. This equates to about 8 percent of the calculated
value for most engines; however, we would never expect manufacturers to
select a value for maximum test speed that is above the nominal value,
so the total allowable range is not much greater than for other
engines. We also note that the maximum test speed for a four-stroke
engine that remains installed in a vessel is the highest engine speed
that can occur. As long as the propeller matching and other vessel
characteristics do not take the engine outside of the manufacturer's
specified range, the engine would need to meet the Not-to-Exceed
standards based on the in-use value for maximum test speed. These
provisions related to maximum test speed apply equally to OB/PWC
engines and SD/I engines.
(3) 40 CFR Part 1065
    We are requiring that OB/PWC engines certified to the new exhaust
emission standards use the test procedures in 40 CFR part 1065 instead
of those in 40 CFR part 91.\95\ Part 1065 includes detailed laboratory
and equipment specifications and procedures for equipment calibration
and emission measurements. These new procedures will apply starting
with the introduction of new exhaust standards,

though we will allow manufacturers to start using these new procedures
earlier as an alternative procedure. The procedures in part 1065
include updated provisions to account for newer measurement
technologies and improved calculation and corrections procedures. Part
1065 also specifies more detailed provisions related to alternate
procedures, including a requirement to conduct testing representative
of in-use operation. In many cases, we allow carryover of emission test
data from one year to another. After the implementation of the new
standards, we will allow the carryover of any test data generated prior
to 2009 under the test procedures in 40 CFR part 91.
---------------------------------------------------------------------------

    \95\ See our previous rulemakings related to 40 CFR part 1065
for more information about the changes in test provisions (70 FR
40420, July 13, 2005 and 67 FR 68242, November 8, 2002).
---------------------------------------------------------------------------

(4) Engine Break-in
    Testing new engines requires a period of engine operation to
stabilize emission levels. The regulations specify two separate figures
for break-in periods. First, for certification, we establish a limit on
how much an engine may operate and still be considered a ``low-hour''
engine. The results of testing with the low-hour engine are compared
with a deteriorated value after some degree of service accumulation to
establish a deterioration factor. For Large SI engines, we require that
low-hour test engines have no more than 300 hours of engine operation.
However, given the shorter useful life for marine engines, this will
not make for a meaningful process for establishing deterioration
factors, even if there is a degree of commonality between the two types
of engines. We are requiring that low-hour marine spark-ignition
engines generally have no more than 30 hours of engine operation (see
Sec.  1045.801). This allows some substantial time for break-in,
stabilization, and running multiple tests, without approaching a
significant fraction of the useful life. The current regulation in part
91 specifies that manufacturers perform the low-hour measurement after
no more than 12 hours of engine operation (see Sec.  91.408(a)(1)). The
new allowance for up to 30 hours of engine operation is consistent with
what we have done for recreational vehicles and will give manufacturers
more time to complete a valid low-hour test.
    For production-line testing there is also a concern about how long
an engine should operate to reach a stabilized emission level. We are
keeping the provision in part 91 that allows for a presumed
stabilization period of 12 hours (see Sec.  90.117(a)). We believe 12
hours is sufficient to stabilize the emissions from the engine.
(5) Not-to-Exceed Test Procedures and Standards
    Section III.D.2 discusses the general concept and approach behind
NTE standards for Marine SI engines. In addition, Section III.D.2
presents specific zones and limits for catalyst-equipped marine
engines. We are applying the same general NTE testing provisions to OB/
PWC engines, including the same broad NTE zone and ambient conditions
(see Sec.  1045.515).
    We anticipate that most OB/PWC engines subject to the NTE standards
will use engine-based controls to meet the exhaust emission standards.
For that reason, this discussion focuses on the NTE zone and subzones
for engines not equipped with catalysts. Data presented in Chapter 4 of
the RIA suggests that the emissions characteristics of marine engines
are largely dependent on technology type. Four-stroke engines tend to
have relatively constant emission levels throughout the NTE zone. In
contrast, two-stroke engines tend to have high variability in
emissions, not only within the NTE zone but between different engine
designs as well. Therefore, we developed separate NTE approaches and
standards for four-stroke and two-stroke engines. These approaches and
standards are discussed below.
(a) Four-Stroke Marine Engines
    The NTE approach for four-stroke marine engines without catalysts
is similar to that for catalyst-equipped engines as described in
Section III. We are applying the same NTE zone; however, we are
establishing different subzones and emission limits based on data
presented in the Final RIA. Emission data for four-stroke marine
engines suggest that brake-specific emission rates are relatively
constant throughout the NTE zone. One exception is slightly higher
HC+NOX emissions at low power. To account for this, we are
subdividing the NTE zone to have a low-power subzone below 50 percent
of maximum test speed. In this low-power subzone, the HC+NOX
NTE limit is 1.6, while it is 1.4 for the remainder of the NTE zone.
The CO NTE limit is 1.5 throughout the NTE zone. Figure IV-1 presents
the NTE zone and subzones. These limits would apply to all non-
catalyzed four-stroke engines. See Section III.D.2 for a detailed
discussion of NTE requirements that apply for catalyst-equipped engines
(including OB/PWC engines).
    As discussed above in Section IV.C.2, we are providing extra lead
time for 2010-2012 model year engines certified using preexisting data.
The purpose of this provision is to allow testing and calibration work
to better fit into product development cycles. We have received an
indication that a small subset of existing outboard engines may need
additional time to meet the 1.4 NTE limit at mid-range speeds due to
technological challenges associated with high-power supercharging.
Manufacturers have indicated that a slightly higher limit of 1.6 would
be feasible in the 2013 time frame, but additional time would be needed
for hardware changes to meet the 1.4 limit. To address this issue, we
are temporarily expanding Subzone 2 to include mid-range speeds up to
70 percent of maximum test speed for supercharged outboard engines
greater than 150 kW. Beginning with the 2015 model year, these engines
would be subject to the same NTE zone and standards as other four-
stroke engines.

[GRAPHIC] [TIFF OMITTED] TR08OC08.062

(b) Two-Stroke Marine Engines
    The emission data presented in Chapter 4 of the Final RIA for two-
stroke direct-injection marine engines suggest that these engines have
high variability in emissions, not only within the NTE zone but between
different engine designs as well. Due to this variability, we do not