PWC.................................................          178          2.1       -4,076         -4.2
Small SI:
    Engines.................................................           17          9.1     -354,915         -1.7
    Equipment...............................................           10          2.4     -475,825         -1.4
        Class I.............................................           15          5.6     -225,168         -1.8
        Class II............................................           25          2.6     -135,400         -2.8
        HH..................................................          0.2          0.3     -115,257         -0.5
----------------------------------------------------------------------------------------------------------------

(b) Economic Welfare Analysis
    In the economic welfare analysis we look at the costs to society of
the proposed program in terms of losses to consumer and producer
surplus. These surplus losses are combined with the fuel savings to
estimate the net economic welfare impacts of the proposed program.
Estimated annual net social costs for selected years are presented in
Table XII-F-3. This table shows that total social costs for each year
are slightly less than the total engineering costs. This is because the
total engineering costs do not reflect the decreased sales of engines
and equipment that are incorporated in the total social costs.

                   Table XII.F-3.--Estimated Annual Engineering and Social Costs, Through 2038
                                                [2005$, $million]
----------------------------------------------------------------------------------------------------------------
                                                                                Net
                                       Total                                        engineering     Net social
              Year                  engineering    Total social    Fuel savings        costs           costs
                                       costs           costs                        (including      (including
                                                                                fuel savings)   fuel savings)
----------------------------------------------------------------------------------------------------------------
2008............................            $9.5            $9.5            $3.1            $6.4            $6.4
2009............................           171.7           168.8            13.7           157.9           155.1
2010............................           191.1           188.0            25.4           165.7           162.6
2011............................           470.5           463.4            64.9           405.7           398.5
2012............................           647.3           638.2           103.5           543.8           534.7
2013............................           652.5           643.4           136.5           516.0           506.9
2014............................           621.1           613.1           161.2           459.9           451.9
2015............................           627.0           619.0           182.3           444.7           436.7
2016............................           520.9           515.2           200.9           320.0           314.2
2017............................           492.6           487.5           216.2           276.4           271.3
2018............................           497.2           492.0           229.9           267.3           262.1
2019............................           503.6           498.4           242.1           261.5           256.2
2020............................           510.0           504.7           253.1           256.9           251.6
2021............................           516.4           511.0           263.3           253.1           247.8
2022............................           522.7           517.3           272.9           249.8           244.4
2023............................           529.1           523.7           281.4           247.7           242.3
2024............................           535.8           530.3           289.3           246.5           241.0
2025............................           542.3           536.7           296.6           245.6           240.0
2026............................           548.7           543.1           303.6           245.1           239.5

2027............................           555.2           549.4           310.1           245.1           239.3
2028............................           561.6           555.8           316.3           245.3           239.5
2029............................           568.0           562.2           322.0           246.1           240.2
2030............................           574.5           568.6           327.3           247.2           241.3
2031............................           580.9           575.0           332.3           248.6           242.6
2032............................           587.4           581.3           337.1           250.3           244.2
2033............................           593.8           587.7           341.7           252.1           246.0
2034............................           600.3           594.1           346.1           254.2           248.0
2035............................           606.7           600.5           350.4           256.3           250.1
2036............................           613.1           606.9           354.5           258.6           252.3
2037............................           619.6           613.2           358.5           261.1           254.7
2038............................           626.0           619.6           362.5           263.6           257.1
NPV at 3% a.....................         9,996.2         9,882.2         4,356.2         5,640.1         5,526.0
NPV at 7% a.....................         5,863.6         5,794.1         2,291.5         3,572.1        3,502.6
----------------------------------------------------------------------------------------------------------------
\a\ EPA EPA presents the present value of cost and benefits estimates using both a three percent and a seven
  percent social discount rate. According to OMB Circular A-4, ``the 3 percent discount rate represents the
  ``social rate of time preference'* * * [which] means the rate at which `society' discounts future consumption
  flows to their present value''; ``the seven percent rate is an estimate of the average before-tax rate of
  return to private capital in the U.S. economy* * * [that] approximates the opportunity cost of capital.''

    Table XII.F-4 shows how total social costs are expected to be
shared across stakeholders, for selected years. According to these
results, consumers in the Marine SI market are expected to bear
approximately 66 percent of the cost of the Marine SI program. This is
expected to be offset by the fuel savings. Vessel manufacturers are
expected to bear about 22 percent of that program, and engine
manufacturers the remaining 11 percent. In the Small SI market,
consumers are expected to bear 79 percent of the cost of the Small SI
program. This will also be offset by the fuel savings. Equipment
manufacturers are expected to bear about 17 percent of that program,
and engine manufacturers the remaining 4 percent. The estimated
percentage changes in surplus are the same for all years because the
initial equilibrium conditions are shocked by both fixed and variable
costs; producers would pass the fixed costs to consumers at the same
rate as the variable costs.

                      Table XII.F-4: Summary of Estimated Social Costs for 2013, 2018, 2030
                                               [2005 $, $ million]
----------------------------------------------------------------------------------------------------------------
                                                     Absolute
                     Market                          change in    Percent change   Fuel savings    Total change
                                                      surplus       in  surplus                     in surplus
----------------------------------------------------------------------------------------------------------------
                                                      2013
----------------------------------------------------------------------------------------------------------------
Marine SI:
    Engine Manufacturers........................         -$21.54              11  ..............         -$21.54
    Equipment Manufacturers.....................          -42.23              22  ..............          -42.23
    End User (Households).......................         -125.14              66          $42.27          -82.87
                                                 ---------------------------------------------------------------
        Subtotal................................         -188.91  ..............  ..............         -146.64
                                                 ---------------------------------------------------------------
Small SI:
    Engine Manufacturers........................          -18.36               4  ..............          -18.36
    Equipment Manufacturers.....................          -80.16              18  ..............          -80.16
    End User (Households).......................         -355.95              78           94.26         -261.69
                                                 ---------------------------------------------------------------
        Subtotal................................         -454.47  ..............  ..............         -360.21
                                                 ---------------------------------------------------------------
            Total...............................         -643.38  ..............          136.53         -506.85
----------------------------------------------------------------------------------------------------------------
                                                      2018
----------------------------------------------------------------------------------------------------------------
Marine SI:
    Engine Manufacturers........................          -17.29              11  ..............          -17.29
    Equipment Manufacturers.....................          -34.02              22  ..............          -34.02
    End User (Households).......................         -100.19              66           87.12          -13.07
                                                 ---------------------------------------------------------------
        Subtotal................................         -151.50  ..............  ..............          -64.38
                                                 ---------------------------------------------------------------
Small SI:
    Engine Manufacturers........................          -13.89               4  ..............          -13.89
    Equipment Manufacturers.....................          -57.65              17  ..............          -57.65

    End User (Households).......................         -268.95              79          142.78         -126.17
                                                 ---------------------------------------------------------------
        Subtotal................................         -340.49  ..............  ..............         -197.71
                                                 ---------------------------------------------------------------
            Total...............................         -491.99  ..............          229.90         -262.09
----------------------------------------------------------------------------------------------------------------
                                                      2030
----------------------------------------------------------------------------------------------------------------
Marine SI:
    Engine Manufacturers........................          -18.81              11  ..............          -18.81
    Equipment Manufacturers.....................          -36.97              23  ..............          -36.97
    End User (Households).......................         -108.52              66          149.36           40.84
                                                 ---------------------------------------------------------------
        Subtotal................................         -164.30  ..............  ..............          -14.94
                                                 ---------------------------------------------------------------
Small SI:
    Engine Manufacturers........................          -16.49               4  ..............          -16.49
    Equipment Manufacturers.....................          -68.45              17  ..............          -68.45
    End User (Households).......................         -319.31              79          177.89         -141.42
                                                 ---------------------------------------------------------------
        Subtotal................................         -404.25  ..............  ..............         -226.36
                                                 ---------------------------------------------------------------
            Total...............................         -568.55  ..............          327.25         -241.30
----------------------------------------------------------------------------------------------------------------

    Table XII.F-5 contains more detailed information on the sources of
the social costs for 2013. This table shows that vessel and equipment
manufacturers are expected to bear more of the burden of the program
than engine manufacturers. On the marine side, the loss of producer
surplus for the vessel manufacturers has two sources. First, they would
bear part of the burden of the equipment costs. Second, they would also
bear part of the engine costs, which are passed on to vessel
manufacturers in the form of higher engine prices. Vessel manufacturers
would not be able to pass along a greater share of the engine and
vessel compliance costs to end consumers due to the elastic price
elasticity of demand for consumers of these vessels. On the Small SI
side, equipment manufacturers can pass on more of the compliance costs
to end consumers because the price elasticity of demand in these
markets is less elastic.

          Table XII.F-5.--Distribution of Estimated Surplus Changes by Market and Stakeholder for 2013
                                                [2005$, million$]
----------------------------------------------------------------------------------------------------------------
                                    Engineering
             Scenario                compliance    Producer     Consumer      Total         Fuel         Net
                                        costs      surplus      surplus      surplus      savings      surplus
----------------------------------------------------------------------------------------------------------------
                                                    Marine SI
----------------------------------------------------------------------------------------------------------------
Engine Manufacturers..............       $133.2       -$21.5  ...........       -$21.5  ...........       -$21.5
----------------------------------------------------------------------------------------------------------------
Equipment Manufacturers...........         59.1        -42.2  ...........        -42.2  ...........        -42.2
Engine Price Changes..............  ...........        -18.7  ...........  ...........  ...........  ...........
Equipment Cost Changes............  ...........        -23.6  ...........  ...........  ...........  ...........
End User (Households).............  ...........  ...........       -125.1       -125.1         42.3        -82.8
Engine Price Changes..............  ...........  ...........        -91.8  ...........  ...........  ...........
Equipment Price Changes...........  ...........  ...........        -33.3  ...........  ...........  ...........
                                   -----------------------------------------------------------------------------
    Subtotal......................        192.2        -63.8       -125.1       -188.9         42.3       -146.6
----------------------------------------------------------------------------------------------------------------
                                                    Small SI
----------------------------------------------------------------------------------------------------------------
Engine Manufacturers..............        371.9        -18.4  ...........        -18.4  ...........        -18.4
----------------------------------------------------------------------------------------------------------------
Equipment Manufacturers...........         88.4        -80.2  ...........        -80.2  ...........        -80.2
Engine Price Changes..............  ...........        -59.0  ...........  ...........  ...........  ...........
Equipment Cost Changes............  ...........        -21.1  ...........  ...........  ...........  ...........
End User (Households).............  ...........  ...........       -355.9       -355.9         94.3       -261.7
Engine Price Changes..............  ...........  ...........       -289.8  ...........  ...........  ...........
Equipment Cost Changes............  ...........  ...........        -66.1  ...........  ...........  ...........
                                   -----------------------------------------------------------------------------
    Subtotal......................        460.3        -98.5       -355.9       -454.5         94.3       -360.2
                                   -----------------------------------------------------------------------------

        Total.....................        652.5       -162.3       -481.1       -643.4        136.6       -506.8
----------------------------------------------------------------------------------------------------------------

    The present value of net social costs of the proposed standards
through 2038 at a 3 percent discount rate, shown in Table XII.F-6, is
estimated to be $5.5 billion, taking the fuel savings into account. We
also performed an analysis using a 7 percent social discount rate.\137\
Using that discount rate, the present value of the net social costs
through 2038 is estimated to be $3.5 billion, including the fuel
savings.
---------------------------------------------------------------------------

    \137\ EPA has historically presented the present value of cost
and benefits estimates using both a 3 percent and a 7 percent social
discount. The 3 percent rate represents a demand-side approach and
reflects the time preference of consumption (the rate at which
society is willing to trade current consumption for future
consumption). The 7 percent rate is a cost-side approach and
reflects the shadow price of capital.

                     Table XII.F-6.--Estimated Net Social Costs Through 2038 by Stakeholder
                                                [2005$, $million]
----------------------------------------------------------------------------------------------------------------
                                                                            Percentage
                                                                 Total      change in       Fuel      Net change
                           Market                              change in      total       savings     in surplus
                                                                surplus      surplus
----------------------------------------------------------------------------------------------------------------
                                              Net Present Value 3%
----------------------------------------------------------------------------------------------------------------
Marine SI:
    Engine Manufacturers....................................      -$354.4           11  ...........      -$354.4
    Equipment Manufacturers.................................       -688.8           22  ...........       -688.8
    End User (Households)...................................     -2,058.8           66     $1,831.3       -227.5
                                                             ---------------------------------------------------
    Subtotal................................................     -3,102.0  ...........      1,831.3     -1,270.7
Small SI:
    Engine Manufacturers....................................       -275.0            4  ...........       -275.0
    Equipment Manufacturers.................................     -1,171.8           17  ...........     -1,171.8
    End User (Households)...................................     -5,333.4           79      2,524.8     -2,808.6
                                                             ---------------------------------------------------
        Subtotal............................................     -6,780.2  ...........      2,524.8     -4,255.4
                                                             ---------------------------------------------------
            Total...........................................     -9,882.2  ...........      4,356.1     -5,526.1
----------------------------------------------------------------------------------------------------------------
                                              Net Present Value 7%
----------------------------------------------------------------------------------------------------------------
Marine SI:
    Engine Manufacturers....................................       -216.4           11  ...........       -216.4
    Equipment Manufacturers.................................       -417.6           22  ...........       -417.6
    End User (Households)...................................     -1,259.5           66        937.1       -322.8
        Subtotal............................................     -1,893.8  ...........        937.1        956.8
                                                             ---------------------------------------------------
Small SI:
    Engine Manufacturers....................................       -157.8            4  ...........        157.8
    Equipment Manufacturers.................................       -680.4           17      1,354.4        680.4
    End User (Households)...................................     -3,062.1           79      1,354.4      1,707.7
                                                             ---------------------------------------------------
        Subtotal............................................     -3,900.3  ...........  ...........  ...........
                                                             ---------------------------------------------------
            Total...........................................     -5,794.2  ...........      2,291.5     -3,502.6
----------------------------------------------------------------------------------------------------------------

(7) What Are the Significant Limitations of the Economic Impact
Analysis?
    Every economic impact analysis examining the market and social
welfare impacts of a regulatory program is limited to some extent by
limitations in model capabilities, deficiencies in the economic
literatures with respect to estimated values of key variables necessary
to configure the model, and data gaps. In this EIA, there are three
potential sources of uncertainty: (1) Uncertainty resulting from the
way the EIM is designed, particularly from the use of a partial
equilibrium model; (2) uncertainty resulting from the values for key
model parameters, particularly the price elasticity of supply and
demand; and (3) uncertainty resulting from the values for key model
inputs, particularly baseline equilibrium price and quantities.
    Uncertainty associated with the economic impact model structure
arises from the use of a partial equilibrium approach, the use of the
national level of analysis, and the assumption of perfect competition.
These features of the model mean it does not take into account impacts
on secondary markets or the general economy, and it does not

consider regional impacts. The results may also be biased to the extent
that firms have some control over market prices, which would result in
the modeling over-estimating the impacts on producers of affected goods
and services.
    The values used for the price elasticities of supply and demand are
critical parameters in the EIM. The values of these parameters have an
impact on both the estimated change in price and quantity produced
expected as a result of compliance with the proposed standards and on
how the burden of the social costs will be shared among producer and
consumer groups. In selecting the values to use in the EIM it is
important that they reflect the behavioral responses of the industries
under analysis.
    Published estimates of price elasticities of supply and demand from
the economic literature should be used whenever possible. Such
estimates would be peer reviewed and generally constitute reasonable
estimates for the industries in question. In this analysis, because we
were unable to find published supply and demand elasticities for the
Small SI and Marine SI markets, we estimated these parameters
econometrically using the procedures described in Chapter 9 of the
Draft RIA.
    The estimates on the supply elasticity reflect a production
function approach using data at the industry level. This method was
chosen because of limitations with the available data. We were not able
to obtain firm-level or plant-level production data for companies that
operate in the affected sectors. However, the use of aggregate industry
level data may not be appropriate and may not be an accurate way to
estimate the price elasticity of supply compared to firm-level or
plant-level data. This is because, at the aggregate industry level, the
size of the data sample is limited to the time series of the available
years and because aggregate industry data may not reveal each
individual firm or plant production function (heterogeneity). There may
be significant differences among the firms that may be hidden in the
aggregate data but that may affect the estimated elasticity. In
addition, the use of time series aggregate industry data may introduce
time trend effects that are difficult to isolate and control.
    To address these concerns, EPA intends to investigate estimates for
the price elasticity of supply for the affected industries for which
published estimates are not available, using an alternative method and
data inputs. This research program will use the cross-sectional data
model at either the firm level or the plant level from the U.S. Census
Bureau to estimate these elasticities. We plan to use the results of
this research, provided the results are robust and they are available
in time for the analysis for the final rule.
    Finally, uncertainty in measurement of data inputs can have an
impact on the results of the analysis. This includes measurement of the
baseline equilibrium prices and quantities and the estimation of future
year sales. In addition, there may be uncertainty in how similar
engines and equipment were combined into smaller groups to facilitate
the analysis. There may also be uncertainty in the compliance cost
estimations.
    To explore the effects of key sources of uncertainty, we performed
a sensitivity analysis in which we examine the results of using
alternative values for the price elasticity of supply and demand,
alternative baseline prices for certain equipment markets, and
alternative methods in compliance costs to shock the market. The
results of these analyses are contained in Appendix 9H of the Draft
RIA.
    Despite these uncertainties, we believe this economic impact
analysis provides a reasonable estimate of the expected market impacts
and social welfare costs of the proposed standards in future.
Acknowledging benefits omissions and uncertainties, we present a best
estimate of the social costs based on our interpretation of the best
available scientific literature and methods supported by EPA's
Guidelines for Preparing Economic Analyses and the OAQPS Economic
Analysis Resource Document.

XIII. Public Participation

    We request comment on all aspects of this proposal. This section
describes how you can participate in this process.
    In 2001 we published a proposed rule to adopt evaporative emission
standards for marine vessels powered by spark-ignition engines (67 FR
53050, August 14, 2002). We are withdrawing that proposal and reissuing
our proposal in this notice. We received several comments on that
proposed rule and have attempted to take all those comments into
account in this action. Commenters on the previous proposal who feel
their concerns have not been addressed should send us updated comments
expressing any remaining concerns. This proposal includes a variety of
changes from the earlier proposal, mostly centered on testing methods
and implementation dates.
    A hearing will be held on Tuesday, June 5, 2007 in Washington, DC.
The hearing will start at 10 a.m. and continue until testimony is
complete. See ADDRESSES above for location and phone information.
    Please notify the contact person listed above at least ten days
before the hearing if you would like to present testimony at a public
hearing. You should estimate the time you will need for your
presentation and identify any needed audio/visual equipment. We suggest
that you bring copies of your statement or other material for the EPA
panel and the audience. It would also be helpful if you send us a copy
of your statement or other materials before the hearing.
    We will conduct the hearing informally so technical rules of
evidence will not apply. We will arrange for a written transcript of
the hearing and keep the official record of the hearing open for 30
days to allow you to submit supplementary information. You may make
arrangements to purchase copies of the transcript directly with the
court reporter.
    The comment period for this rule will end on August 3, 2007.

XIV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order (EO) 12866 (58 FR 51735,
October 4, 1993), this action is an ``economically significant
regulatory action'' because it is likely to have an annual effect on
the economy of $100 million or more. Accordingly, EPA submitted this
action to the Office of Management and Budget (OMB) for review under EO
12866 and any changes made in response to OMB recommendations have been
documented in the docket for this action.
    In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action. This analysis is contained in the
Draft Regulatory Impact Analysis, which is available in the docket for
this action and is summarized in Section XII.

B. Paperwork Reduction Act

    The information collection requirements in this proposed rule have
been submitted for approval to the Office of Management and Budget
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The
Information Collection Request (ICR) document prepared by EPA has been
assigned EPA ICR number 2251.01.
    The Agency proposes to collect information to ensure compliance
with

the provisions in this rule. This includes a variety of requirements,
both for engine manufacturers, equipment manufacturers and
manufacturers of fuel system components. Section 208(a) of the Clean
Air Act requires that manufacturers provide information the
Administrator may reasonably require to determine compliance with the
regulations; submission of the information is therefore mandatory. We
will consider confidential all information meeting the requirements of
section 208(c) of the Clean Air Act.
    As shown in Table XIV-1, the total annual burden associated with
this proposal is about 131,000 hours and $18 million based on a
projection of 1,100 respondents. The estimated burden for engine
manufacturers is a total estimate for both new and existing reporting
requirements. Most information collection is based on annual reporting.
Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency. This includes the time needed
to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.

                                       Table XIV-1.--Estimated Burden for Reporting and Recordkeeping Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual operation
               Industry sector                    Number of      Average burden     Annual burden      Annualized       Annual labor     and maintenance
                                                 respondents     per respondent         hours         capital costs         costs             costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small SI engine manufacturers...............                58               885            51,301        $5,529,000        $2,065,643        $3,100,306
Small SI equipment & fuel system component                 623             1,568            62,715                 0           497,631           624,066
 mfr. (evaporative).........................
Marine SI engine manufacturers..............                40                19            11,605                 0         2,677,821         8,299,569
Marine SI equipment & fuel system component                380                14             5,241                 0           224,871           383,024
 mfr. (evaporative).........................
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................             1,101             2,486           130,862         5,529,000         5,465,966        12,406,965
                                             ===========================================================================================================
                                                                                Total Annual Cost = 18,012,246
--------------------------------------------------------------------------------------------------------------------------------------------------------

    An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
    To comment on the Agency's need for this information, the accuracy
of the provided burden estimates, and any suggested methods for
minimizing respondent burden, including the use of automated collection
techniques, EPA has established a public docket for this rule, which
includes this ICR, under Docket ID number EPA-HQ-OAR-2004-0008. Submit
any comments related to the ICR for this proposed rule to EPA and OMB.
See ADDRESSES section at the beginning of this notice for where to
submit comments to EPA. Send comments to OMB at the Office of
Information and Regulatory Affairs, Office of Management and Budget,
725 17th Street, NW., Washington, DC 20503, Attention: Desk Office for
EPA. Since OMB is required to make a decision concerning the ICR
between 30 and 60 days after May 18, 2007, a comment to OMB is best
assured of having its full effect if OMB receives it by June 18, 2007.
The final rule will respond to any OMB or public comments on the
information collection requirements contained in this proposal.

C. Regulatory Flexibility Act

(1) Overview
    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this action on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201 (see Table XIV-2, below); (2) a small governmental jurisdiction
that is a government of a city, county, town, school district or
special district with a population of smaller than 50,000; and (3) a
small organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field. The
following table provides an overview of the primary SBA small business
categories potentially affected by this regulation.

 Table XIV-2.--Small Business Definitions for Entities Affected by This
                                  Rule
------------------------------------------------------------------------
                                                             Threshold
                                                            definitions
                Industry                   NAICS a codes     for small
                                                            business b
                                                            (employees)
------------------------------------------------------------------------
Small SI and Marine SI Engine                     333618           1,000
 Manufacturers..........................

Equipment Manufacturers:
    Farm Machinery......................          333111             500
    Lawn and Garden.....................          333112             500
    Construction........................          333120             750
    Sawmill and Woodworking.............          333210             500
    Pumps...............................          333911             500
    Air and Gas Compressors.............          333912             500
    Generators..........................          335312           1,000
Boat Builders...........................          336612             500
Fuel Tank Manufacturers:
    Other Plastic Products..............          326199             500
    Metal Stamping......................          332116             500
    Metal Tank (Heavy Gauge)............          332420             500
Fuel Line Manufacturers:
    Rubber and Plastic Fuel Lines.......          326220            500
------------------------------------------------------------------------
a North American Industry Classification System
b According to SBA's regulations (13 CFR 121), businesses with no more
  than the listed number of employees are considered ``small entities''
  for RFA purposes.

    Pursuant to section 603 of the RFA, EPA prepared an initial
regulatory flexibility analysis (IRFA) that examines the impact of the
proposed rule on small entities along with regulatory alternatives that
could reduce that impact. The IRFA, as summarized below, is available
for review in the docket and Chapter 10 of the Draft RIA.
(2) Background
    Air pollution is a serious threat to the health and well-being of
millions of Americans and imposes a large burden on the U.S. economy.
Ground-level ozone and carbon monoxide are linked to potentially
serious respiratory health problems, especially respiratory effects and
environmental degradation, including visibility impairment in and
around our national parks. (Section II of this preamble and Chapter 2
of the Draft RIA for this rule describe these pollutants and their
health effects.) Over the past quarter century, state and federal
representatives have established emission control programs that
significantly reduce emissions from individual sources. Many of these
sources now pollute at only a small fraction of their pre-control
rates.
    This proposal includes standards that would require manufacturers
to substantially reduce exhaust emissions and evaporative emissions
from Marine SI engines and vessels and from Small SI engines and
equipment. We are proposing the standards under section 213(a)(3) of
the CAA which directs EPA to set emission standards that ``achieve the
greatest degree of emission reduction achievable through the
application of technology'' giving appropriate consideration to cost,
noise, energy, safety, and lead time. In addition to the general
authority to regulate nonroad engines under the CAA, Section 428 of
2004 Consolidated Appropriations Act requires EPA to propose and
finalize new regulations for nonroad spark-ignition engines below 50
horsepower.
(3) Summary of Regulated Small Entities
    The standards being proposed for Small SI engines and equipment
will affect manufacturers of both handheld equipment and nonhandheld
equipment. Based on EPA certification records, the Small SI nonhandheld
engine industry is made up primarily of large manufacturers including
Briggs and Stratton, Tecumseh, Honda, Kohler and Kawasaki. The Small SI
handheld engine industry is also made up primarily of large
manufacturers including Electrolux Home Products, MTD, Homelite, Stihl
and Husqvarna. EPA has identified 10 Small SI engine manufacturers that
qualify as a small business under SBA definitions. Half of these small
manufacturers certify gasoline engines and the other half certify
liquefied petroleum gas (LPG) engines.
    The Small SI equipment market is dominated by a few large
businesses including Toro, John Deere, MTD, Briggs and Stratton, and
Electrolux Home Products. While the Small SI equipment market may be
dominated by just a handful of companies, there are many small
businesses in the market; however these small businesses account for
less than 10 percent of equipment sales. We have identified over three
hundred equipment manufacturers that qualify as a small business under
the SBA definitions. More than 90 percent of these small companies
manufacture fewer than 5,000 pieces of equipment per year. The median
employment level is 65 employees for nonhandheld equipment
manufacturers and 200 employees for handheld equipment manufacturers.
The median sales revenue is approximately $9 million for nonhandheld
equipment manufacturers and $20 million for handheld equipment
manufacturers.
    EPA has identified 25 manufacturers that produce fuel tanks for the
Small SI equipment market that meet the SBA definition of a small
business. Fuel tank manufacturers rely on three different processes for
manufacturing plastic tanks--rotational molding, blow molding and
injection molding. EPA has identified small business fuel tank
manufacturers using the rotational molding and blow molding processes
but has not identified any small business manufacturers using injection
molding. In addition, EPA has identified two manufacturers that produce
fuel lines for the Small SI equipment market that meet the SBA
definition of a small business. The majority of fuel line in the Small
SI market is made by large manufacturers including Avon Automotive and
Dana Corporation.
    The standards being proposed for Marine SI engines and vessels will
affect manufacturers in the OB/PWC market and the SD/I market. Based on
EPA certification records, the OB/PWC market is made up primarily of
large manufacturers including, Brunswick (Mercury), Bombardier
Recreational

Products, Yamaha, Honda, Kawasaki, Polaris, Briggs & Stratton, Nissan,
and Tohatsu. One company that qualifies as a small business under the
SBA definitions has certified their product as a PWC. This company is
Surfango who makes a small number of motorized surfboards.
    The SD/I market is made up mostly of small businesses; however,
these businesses account for less than 20 percent of engine sales. Two
large manufacturers, Brunswick (Mercruiser) and Volvo Penta, dominate
the market. We have identified 28 small entities manufacturing SD/I
marine engines. The third largest company is Indmar, which has much
fewer than the SBA threshold of 1,000 employees. Based on sales
estimates, number of employees reported by Thomas Register, and typical
engine prices, we estimate that the average revenue for the larger
small SD/I manufacturers is about $50-60 million per year. However, the
vast majority of the SD/I engine manufacturers produce low production
volumes of engines and typically have fewer than 50 employees.
    The two largest boat building companies are Brunswick and Genmar.
Brunswick owns approximately 25 boat companies and Genmar owns
approximately 12 boat companies. Based on a manufacturer list
maintained by the U.S. Coast Guard, there are over 1,600 boat builders
in the United States. We estimate that, based on manufacturer
identification codes, more than 1,000 of these companies produce boats
using gasoline marine engines. According to the National Marine
Manufacturers Association (NMMA), most of these boat builders are small
businesses. These small businesses range from individuals building one
boat per year to businesses near the SBA small business threshold of
500 employees.
    We have identified 15 marine fuel tank manufacturers in the United
States that qualify as small businesses under the SBA definition. These
manufacturers include five rotational molders, three blow molders, six
aluminum fuel tank manufacturers, and one specialty fuel tank
manufacturer. The small rotational molders average fewer than 50
employees while the small blow-molders average over 100 employees.
Moeller qualifies as a large business because they are owned by Moore;
however, their rotational molding business is a small part of the
company and operates similar to the smaller businesses. Other blow-
molders are in the same situation such as Attwood which is owned by
Brunswick.
    We have only identified one small fuel line manufacturer that
produces for the Marine SI market. Novaflex primarily distributes fuel
lines made by other manufacturers but does produce its own filler
necks. Because we expect vessel manufacturers will design their fuel
systems such that there will not be standing liquid fuel in the fill
neck (and therefore the proposed low-permeation fuel line requirements
will not apply to the fill neck), we have not included this
manufacturer in our analysis. The majority of fuel line in the Marine
SI market is made by large manufacturers including Goodyear and Parker-
Hannifin.
    To gauge the impact of the proposed standards on small businesses,
EPA employed a cost-to-sales ratio test to estimate the number of small
businesses that would be impacted by less than one percent, between one
and three percent, and above three percent. For this analysis, EPA
assumed that the costs of complying with the proposed standards are
completely absorbed by the regulated entity. Overall, EPA projects that
60 small businesses will be impacted by one to three percent, 18 small
businesses will be impacted by over three percent, and the remaining
companies (over 1,000 small businesses) will be impacted by less than
one percent. Table XIV-3 summarizes the impacts on small businesses
from the proposed exhaust and evaporative emission standards for Small
SI engines and equipment and Marine SI engines and vessels. A more
detailed description of the inputs used for each affected industry
sector and the methodology used to develop the estimated impact on
small businesses in each industry sector is included in the IRFA as
presented in Chapter 10 of the Draft RIA for this rulemaking.

          Table XIV-3.--Summary of Impacts on Small Businesses
------------------------------------------------------------------------
                                                       1-3        > 3
        Industry sector             0-1 percent      percent    percent
------------------------------------------------------------------------
Manufacturers of Marine OB/PWC   1................          0          0
 engines.
Manufacturers of Marine SD/I     4................          5          0
 engines <  373 kW.
Manufacturers of Marine SD/I     2................         17          0
 engines >= 373 kW (high-
 performance).
Boat Builders..................  >1,000...........          0          0
Manufacturers of Fuel Lines and  15...............          0          0
 Fuel Tanks for Marine SI
 Vessels.
Small SI engines and equipment.  314..............         38         18
Manufacturers of Fuel Lines and  27...............          0          0
 Fuel Tanks for Small SI
 Applications.
                                ----------------------------------------
    Total......................  363 + >1,000 boat         60         18
                                  builders.
------------------------------------------------------------------------

(4) Potential Reporting, Recordkeeping, and Compliance
    For any emission control program, EPA must have assurances that the
regulated products will meet the standards. Historically, EPA's
programs for Small SI engines and Marine SI engines have included
provisions requiring that engine manufacturers be responsible for
providing these assurances. The program that EPA is considering for
manufacturers subject to this proposal may include testing, reporting,
and recordkeeping requirements for manufacturers of engines, equipment,
vessels, and fuel system components including fuel tanks, fuel lines,
and fuel caps.
    For Small SI engine manufacturers and OB/PWC engine manufacturers,
EPA is proposing to continue the same reporting, recordkeeping, and
compliance requirements prescribed in the current regulations. For SD/I
engine manufacturers, which are not currently subject to EPA
regulation, EPA is proposing to apply similar reporting, recordkeeping,
and compliance requirements to those for OB/PWC engine manufacturers.
Testing requirements for engine manufacturers would include
certification emission (including deterioration factor) testing and
production-line testing. Reporting requirements would include emission
test data and technical data on the engines. Manufacturers would also
need to keep records of this information.

    Because of the proposed evaporative emission requirements, there
would be new reporting, recordkeeping and compliance requirements for
Small SI equipment manufacturers. Small SI equipment manufacturers
participating in the proposed transition program would also be subject
to reporting, recordkeeping and compliance requirements. There may also
be new reporting, recordkeeping and compliance requirements for fuel
tank manufacturers, fuel line manufacturers, fuel cap manufacturers and
marine vessel manufacturers. Testing requirements for these
manufacturers could include certification emission testing. Reporting
requirements could include emission test data and technical data on the
designs. Manufacturers would also need to keep records of this
information.
(5) Relevant Federal Rules
    For Small SI engines and equipment, the primary federal rules that
are related to the rule under consideration are EPA's Phase 1 rule for
Small SI engines (60 FR 34582, July 3, 1995), EPA's Phase 2 rule for
Small SI nonhandheld engines (64 FR 15208, March 30, 2004), and EPA's
Phase 2 rule for Small SI handheld engines (65 FR 24268, April 25,
2000). For Marine SI engines and vessels, the primary federal rule that
is related to the rule under consideration is EPA's October 1996 final
rule (61 FR 52088, October 4, 1996).
    Three other federal agencies have regulations that relate to the
equipment and vessels under consideration. These agencies are the
Consumer Product Safety Commission (CPSC), United States Department of
Agriculture (USDA), and the United States Coast Guard (USCG). CPSC has
safety requirements that apply to walk-behind lawnmowers to protect
operators of such equipment. USDA has design requirements intended to
reduce the potential fire threat of Small SI equipment. The USCG has
safety regulations for marine engine and fuel system designs. The USCG
safety regulations include standards for exhaust system temperature,
fuel tank durability and fuel line designs, including specific
requirements related to system survivability in a fire. Manufacturers
will need to consider both EPA and other federal standards when
certifying their products.
(6) Significant Alternatives
    For Small SI engines and equipment, EPA looked at the existing
Phase 2 rule for small engines, as well as other recent EPA rules, to
provide potential flexibilities which might be offered with the Phase 3
standards. For engine manufacturers, the potential flexibilities
considered included extra time before the Phase 3 requirements would
apply and reduced testing burden, such as assigned deterioration
factors for certification purposes and exemption from the production-
line testing requirements. For equipment manufacturers, the potential
flexibilities considered included extra time before having to use Phase
3 engines and the ability to request extra time for a variety of
reasons, including technical hardship, economic hardship, and unusual
circumstances. For fuel tank and fuel line manufacturers, EPA has tried
to develop the timing of the proposal to accommodate all manufacturers,
including small businesses. We also considered offering manufacturers
the ability to request extra time for a variety of reasons, including
economic hardship and unusual circumstances.
    For Marine SI engines and vessels, EPA previously convened two
Small Business Advocacy Review Panel (SBAR Panel, or the Panel) to
obtain advice and recommendation of representatives of the small
entities that potentially would be subject to the requirements under
consideration at the time. The Panels took place in 1999 and 2001 and
addressed small business issues related to exhaust and evaporative
emission standards similar to those described in this proposal.
Nineteen small entities that sell in the Marine SI engine and vessel
sectors participated as Small Entity Representatives (SERs) in the two
previous Panels.
    On June 7, 1999, we convened a SBAR Panel to address small entity
issues related to anticipated exhaust emission standards for SD/I
marine engines. As part of that Panel, we considered a range of
regulatory options, including standards that would be expected to
require the use of catalytic control. With input from the SERs, the
1999 Panel drafted a report providing findings and recommendations to
us on how to reduce potential burden on small businesses that may occur
as a result of this proposed rule. Small business flexibility
approaches recommended by the 1999 Panel included the following:
     Broad definition of engine families for certification.
     Minimizing compliance testing requirements.
     Design-based certification (as an option to emission
testing).
     Use of emission credits.
     Delay of the implementation date of the standards.
     Hardship provisions (for economic reasons or under unusual
circumstances).
     Limited temporary exemptions for small boat builders.
    On May 3, 2001, we convened a SBAR Panel to address potential small
entity issues for a number of emission programs under consideration.
One of the programs was evaporative emission standards for boats using
gasoline engines. With input from SERs, the 2001 Panel drafted a report
providing findings and recommendations to us on how to reduce potential
burden on small businesses that may occur as a result of this proposed
rule. The flexibility approaches recommended by the 2001 Panel included
the following:
     Broad definition of emission families for certification.
     Design-based certification (as an option to emission
testing).
     Use of emission credits.
     Delay of the implementation date of the standards.
     Hardship provisions (for economic reasons or under unusual
circumstances).
    In the time since the 1999 and 2001 SBAR Panels were completed, a
great deal of development has been performed on exhaust and evaporative
emission control technology. We considered the flexibilities
recommended by the 1999 and 2001 Panels (as noted above) in the context
of this new information.
(7) Panel Process and Panel Outreach
    As required by section 609(b) of the RFA, as amended by SBREFA, EPA
also has conducted outreach to small entities and convened a SBAR Panel
to obtain advice and recommendation of representatives of the small
entities that potentially would be subject to the requirements of this
rule. On August 17, 2006 EPA's Small Business Advocacy Chairperson
convened a Panel under section 609(b) of the RFA. In addition to the
Chair, the Panel consisted of the Division Director the Assessment and
Standards Division within EPA's Office of Air and Radiation, the Chief
Counsel for Advocacy of the Small Business Administration, and the
Administrator of the Office of Information and Regulatory Affairs
within the Office of Management and Budget.
    As part of the SBAR Panel process we conducted outreach with
representatives from 25 various small entities that would be affected
by this rule. The SERs included engine, equipment, fuel tank and fuel
line manufacturers for the Small SI market and engine, vessel, fuel
tank and fuel line manufacturers for the Marine SI

market. We met with these SERs to discuss the potential rulemaking
approaches and potential options to decrease the impact of the
rulemaking on their industries. We distributed outreach materials to
the SERs; these materials included background on the rulemaking,
possible regulatory approaches, and possible rulemaking alternatives
(as noted earlier). The Panel met with SERs from the industries that
will be impacted directly by this rule on September 12, 2006 to discuss
the outreach materials and receive feedback on the approaches and
alternatives detailed in the outreach packet. (EPA also met with SERs
on July 11, 2006 for an initial outreach meeting.) The Panel received
written comments from the SERs following the meeting in response to
discussions at the meeting and the questions posed to the SERs by the
Agency. The SERs were specifically asked to provide comment on
regulatory alternatives that could help to minimize the rule's impact
on small businesses.
(8) Panel Recommendations for Small Business Flexibilities
    The Panel recommended that EPA consider and seek comment on a wide
range of regulatory alternatives to mitigate the impacts of the
rulemaking on small businesses, including those flexibility options
described below. The following section summarizes the SBAR Panel
recommendations. EPA has proposed provisions consistent with each of
the Panel's recommendations.
    Consistent with the RFA/SBREFA requirements, the Panel evaluated
the assembled materials and small-entity comments on issues related to
elements of the IRFA. A copy of the Final Panel Report (including all
comments received from SERs in response to the Panel's outreach meeting
(Appendix D) as well as summaries of both outreach meetings that were
held with the SERs (Appendices B and C)) is included in the docket for
this proposed rule. A summary of the Panel recommendations is detailed
below. As noted above, this proposal includes proposed provisions for
each of the Panel recommendations.
(a) Manufacturer Flexibilities for Small SI Engine Exhaust Standards
    The Panel's recommendations for the Phase 3 exhaust emission
standards for nonhandheld engines are summarized below. A complete
discussion of the proposed small business provisions in response to
each of the Panel recommendations noted below can be found in Section
V.F of this preamble.
    Additional Lead Time for Nonhandheld Engine Manufacturers--The
Panel recommended that EPA propose two additional years of lead time
before the Phase 3 standards take effect for small business engine
manufacturers. For Class I engines, the effective date for small
business engine manufacturers would be 2014. For Class II engines, the
effective date for small business engine manufacturers would be 2013.
    Assigned Deterioration Factors--The Panel recommended EPA propose
that small business engine manufacturers be allowed the option to use
EPA-developed assigned deterioration factors in demonstrating
compliance with the Phase 3 exhaust emission standards.
    Production-Line Testing Exemption--The Panel recommended EPA
propose that small business engine manufacturers be exempted from the
production line testing requirements for the Phase 3 exhaust emission
standards.
    Broader Definition of Engine Family--The Panel recommended that EPA
propose allowing small business engine manufacturers to group all of
their Small SI engines into a single engine family for certification by
engine class and useful life category, subject to good engineering
judgment.
    Simplified Engine Certification for Equipment Manufacturers--
Generally, it has been engine manufacturers who certify with EPA for
the exhaust emission standards since the standards are engine-based
standards. However, a number of equipment manufacturers, especially
those that make low-volume models, believe it may be necessary for
equipment manufacturers to certify their own unique engine/muffler
designs with EPA (but using the same catalyst substrate already used in
a muffler certified by the engine manufacturer). The Panel recommended
that EPA propose a simplified engine certification process for small
business equipment manufacturers in such situations. Under such a
simplified certification process, the equipment manufacturer would need
to demonstrate that it is using the same catalyst substrate as the
approved engine manufacturer's family, provide information on the
differences between their engine/exhaust system and the engine/exhaust
system certified by the engine manufacturer, and explain why the
deterioration data generated by the engine manufacturer would be
representative for the equipment manufacturer's configuration.
    Additional Lead Time for Small SI Equipment Manufacturers--The
Panel recommended that EPA propose a transition program that would
allow small business equipment manufacturers to continue using Phase 2
engine designs (i.e., engines meeting the Phase 2 exhaust emission
standards) during the first two years that the Phase 3 standards take
effect. (For equipment using Class I engines, the provision would apply
in 2012 and 2013. For equipment using Class II engines, the provision
would apply in 2011 and 2012.) The Panel also recommended that EPA
propose to allow small business equipment manufacturers to use Phase 3
engines without the catalyst during this initial two-year period
provided the engine manufacturer has demonstrated that the engine
without the catalyst would comply with the Phase 2 exhaust emission
standards and labels it appropriately.
    Eligibility for the Small Business Flexibilities--For purposes of
determining which engine and equipment manufacturers are eligible for
the small business flexibilities described above, EPA is proposing
criteria based on a production cut-off of 10,000 nonhandheld engines
per year for engine manufacturers and 5,000 pieces of nonhandheld
equipment per year for equipment manufacturers. The Panel recommended
that EPA propose to allow engine and equipment manufacturers which
exceed the production cut-off levels noted above but meet the SBA
definitions for a small business (i.e., fewer than 1,000 employees for
engine manufacturers or fewer than 500 employees for most types of
equipment manufacturers) to request treatment as a small business.
(b) Manufacturer Flexibilities for SD/I Marine Exhaust Standards
    The Panel's recommendations for the exhaust emission standards for
SD/I marine engines are summarized below. A complete discussion of the
proposed small business provisions in response to each of the Panel
recommendations noted below can be found in Section III.F of this
preamble.
    Additional Lead Time for SD/I Engine Manufacturers--The Panel
recommended that EPA propose an implementation date of 2011 for SD/I
engines below 373 kW produced by small business marine engine
manufacturers and an implementation date of 2013 for small business
manufacturers of high performance SD/I marine engines (at or above 373
kW). Based on the proposed 2009 implementation date for the remaining
SD/I engine manufacturers (i.e., the large businesses), these dates
would provide small business SD/I engine manufacturers with two years
additional lead time for SD/I engines below 373 kW and four years
additional lead time for SD/I engines at or above 373 kW.
    Exhaust Emission ABT--EPA is proposing an averaging, banking and

trading (ABT) program for the SD/I engine standards. Because EPA is
proposing an ABT program for SD/I engines, the Panel recommended that
EPA request comment on the desirability of credit trading between high
performance and other SD/I marine engines and the impact it could have
on small business.
    Early Credit Generation for ABT--EPA is proposing an early banking
program for SD/I marine engines. Under the early banking provisions,
manufacturers can generate ``bonus'' credits for the early introduction
of engines meeting the proposed emission standards. The Panel supports
EPA proposing an early banking program and believes that bonus credits
will provide greater incentive for more small business engine
manufacturers to introduce advanced technology earlier than would
otherwise occur.
    Assigned Emission Rates for High Performance SD/I Engines--The
Panel recommended that EPA propose to allow the use of default emission
rates that could be used by small business high performance SD/I engine
manufacturers as part of their certification. Based on currently
available test data, the proposed default baseline emission levels for
high performance engines are 30 g/kW-hr HC+NOX and 350 g/kW-
hr CO.
    Alternative Standards for High Performance SD/I Engines--SERs
expressed concern that that catalysts have not been demonstrated on
high performance engines and that they may not be practicable for this
application. While EPA is proposing a standard based on the use of
catalysts, EPA is requesting comment on a standard for high performance
SD/I marine engines that could be met without the use of a catalyst.
(Based on available data, levels of 16 g/kW-hr HC+NOX and
350 g/kW-hr CO were discussed with the SERs). The Panel recommended EPA
request comment on a non-catalyst based standard for high performance
marine engines.
    EPA is proposing to not apply the not-to-exceed (NTE) standards to
high performance SD/I engines. The Panel supports excluding high
performance SD/I engines from NTE requirements.
    Broad Engine Families for High Performance SD/I Engines--The Panel
recommended that EPA propose allowing small businesses to group all of
their high performance SD/I engines into a single engine family for
certification, subject to good engineering judgment.
    Simplified Test Procedures for High Performance SD/I Engines--For
high performance SD/I engines, it may be difficult to hold the engine
at idle or high power within the tolerances currently specified in
existing EPA test procedures. The Panel recommended that EPA propose
less restrictive specifications and tolerances for small businesses
testing high performance SD/I engines, which would allow the use of
portable emission measurement equipment.
    Eligibility for the Small Business Flexibilities--For purposes of
determining which engine manufacturers are eligible for the small
business flexibilities described above for SD/I engine manufacturers,
EPA is proposing criteria based on a production cut-off of 5,000 SD/I
engines per year. The Panel recommended EPA propose to allow engine
manufacturers that exceed the production cut-off level noted above but
meet the SBA definitions for a small business (i.e., fewer than 1,000
employees for engine manufacturers), to request treatment as a small
business.
(c) Manufacturer Flexibilities for Small SI and Marine SI Evaporative
Standards
    The Panel's recommendations for the evaporative emission standards
for Small SI engines and equipment and SD/I marine engines and vessels
are summarized below. SERs raised many of the same issues regarding
evaporative emission standards for both Small SI and marine
applications. In fact, many of the SERs supply fuel system components
to both industries. For these reasons, the Panel's recommendations on
regulatory flexibility discussed below would apply to Small SI
equipment and to SD/I marine vessels except where noted.
    Because the majority of fuel tanks produced for the Small SI
equipment and the SD/I marine vessel market are made by small
businesses, the details of the evaporative emissions program under
consideration and the flexibility provisions shared by EPA with the
SERs were noted as being available to all fuel tank manufacturers.
Therefore, the Panel recommendations on regulatory flexibility for fuel
tank manufacturers discussed below are being proposed to apply to all
fuel tank manufacturers. A complete discussion of the proposed
provisions in response to each of the Panel recommendations noted below
can be found in Section VI.G of this preamble.
    Consideration of Appropriate Lead Time--The Panel recommended that
EPA propose to implement the fuel tank permeation standards in 2011
with an additional year (2012) for rotationally molded marine fuel
tanks. The extra year for rotationally molded marine tanks would give
manufacturers time to address issues that are specific to the marine
industry.
    With regard to diurnal emissions control, SERs commented that they
would like additional time to install carbon canisters in their vessels
because of deck and hull changes that might be needed to accommodate
the carbon canisters. SERs commented that they would consider asking
EPA to allow the use of low-permeation fuel lines prior to 2009 as a
method of creating an emission neutral flexibility option for providing
extra time for canisters. The Panel recommended that EPA continue
discussions with the marine industry and request comment on
environmentally neutral approaches to provide more flexibility in
meeting the potential diurnal emission standards.
    Fuel Tank ABT and Early Incentive Program--The Panel recommended
that EPA propose an ABT program for fuel tank permeation. The Panel
also recommended that EPA request comment on including service tanks
(i.e., replacement tanks) in the ABT program. Finally, the Panel
recommended that EPA request comment on an early incentive program for
tank permeation.
    Broad Definition of Evaporative Emission Family for Fuel Tanks--The
Panel recommended that EPA propose a broad emission family definition
for Small SI fuel tanks and for Marine SI fuel tanks similar to that in
the regulations for recreational vehicles. Under the recreation vehicle
evaporative emission regulations, EPA specifies that fuel tank
permeation emission families be based on type of material (including
additives such as pigments, plasticizers, and ultraviolet (UV)
inhibitors), emission control strategy, and production methods. Fuel
tanks of different sizes, shapes, and wall thicknesses may be grouped
into the same emission family.
    Compliance Progress Review for Marine Fuel Tanks--While there is
clearly a difference of opinion among the SERs involved in tank
manufacturing, some SERs expressed concern that there is not an
established low-permeation technology available for rotationally molded
marine fuel tanks. These SERs stated that they are working on
developing such technology but do not have in-use experience to
demonstrate the durability of low-permeation rotationally molded fuel
tanks. The Panel recommended that if a rule is implemented, EPA
undertake a ``compliance progress review'' assessment with the
manufacturers. In this effort, EPA should continue to engage on a
technical level with

[[Continued on page 28247]]

]

[[pp. 28247-28296]] Control of Emissions from Nonroad Spark-Ignition Engines and
Equipment

[[Continued from page 28246]]

rotationally-molded marine fuel tank manufacturers and material
suppliers to assess the progress of low-permeation fuel tank
development and compliance.
    Design-Based Certification--The Panel recommended that EPA propose
a design-based certification for carbon canisters and fuel tanks. For
the carbon canisters, the design requirement would call for a ratio of
carbon volume (liters) to fuel tank capacity (gallons) of 0.04 liter/
gallon for boats less than 26 feet in length, and 0.016 liter/gallon
for larger boats. The different canister sizes are intended to account
for the differences between boats normally trailered to the water for
use versus boats normally stored in the water between uses. For fuel
tanks, the Panel recommended that EPA propose to allow design-based
certification for metal tanks and plastic fuel tanks with a continuous
EVOH barrier.
    SERs commented that the American Boat and Yacht Council (ABYC) and
the Society of Automotive Engineers (SAE) have industry recommended
practices for boat designs that must be met as a condition of
membership in the National Marine Manufacturers Association (NMMA).
NMMA is working to update these recommended practices to include carbon
canister installation specifications and a low-permeation fuel line
designation. The Panel recommended that EPA propose to accept data used
for meeting the voluntary requirements as part of the EPA
certification.
    Additional Lead Time for Small SI Fuel Line Requirement--EPA is
proposing to apply the fuel line permeation requirements beginning with
the 2008 model year for Small SI nonhandheld equipment. Given the short
lead time before 2008, small business equipment manufacturers may not
be ready for such a requirement. The Panel recommended EPA propose a
2009 implementation date for low-permeation fuel line for small
business equipment manufacturers producing Small SI nonhandheld
equipment.
(d) Manufacturer Hardship Provisions
    The Panel recommended that EPA propose hardship programs for
affected manufacturers. EPA has adopted hardship provisions in a number
of previous rules. The following section summarizes the hardship
provisions recommended by the Panel which would be available to engine
manufacturers, equipment manufacturers, vessel manufacturers, and fuel
system component manufacturers (i.e., fuel tank, fuel line, and fuel
cap manufacturers). A discussion of the proposed hardship provisions
can be found in Sections VIII.C.8, VIII.C.9, and VIII.C.10.
    Unusual Circumstances Hardship--The Panel recommended that EPA
propose a provision allowing for hardship relief under unusual
circumstances for manufacturers affected by this rule. Manufacturers
would be able to apply for hardship relief if circumstances outside
their control cause the failure to comply and if failure to sell the
subject engines or equipment would jeopardize the company's solvency.
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 shut down of a supplier with no alternative available.
    Economic Hardship--The Panel recommended that EPA propose economic
hardship provisions for small businesses affected by this rule. Small
manufacturers would be able to petition EPA for limited additional lead
time to comply with the standards. A manufacturer would have to make
the case that it has taken all possible business, technical, and
economic steps to comply but the burden of compliance costs would have
a significant impact on the company's solvency.
    We invite comments on all aspects of the proposal and its impacts
on small entities.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for federal agencies to assess the
effects of their regulatory actions on state, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``federal mandates'' that
may result in expenditures to state, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires that EPA identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective, or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
Administrator publishes with the final rule an explanation of why that
alternative was not adopted.
    Before EPA establishes any regulatory requirements that may
significantly or uniquely affect small governments, including tribal
governments, it must have developed under section 203 of the UMRA a
small government agency plan. The plan must provide for notifying
potentially affected small governments, enabling officials of affected
small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant federal
intergovernmental mandates, and informing, educating, and advising
small governments on compliance with the regulatory requirements.
    This rule contains no federal mandates for state, local, or tribal
governments as defined by the provisions of Title II of the UMRA. The
rule imposes no enforceable duties on any of these governmental
entities. Nothing in the rule would significantly or uniquely affect
small governments.
    EPA has determined that this rule contains federal mandates that
may result in expenditures of more than $100 million to the private
sector in any single year. EPA believes that the proposal represents
the least costly, most cost-effective approach to achieve the air
quality goals of the rule. The costs and benefits associated with the
proposal are discussed above and in the Draft Regulatory Impact
Analysis as required by the UMRA.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
    Under section 6 of Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing the proposed regulation. EPA also may not issue a regulation
that has federalism implications and that preempts State law, unless
the Agency consults with

State and local officials early in the process of developing the
proposed regulation.
    Section 4 of the Executive Order contains additional requirements
for rules that preempt State or local law, even if those rules do not
have federalism implications (i.e., the rules will not have substantial
direct effects on the States, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government). Those
requirements include providing all affected State and local officials
notice and an opportunity for appropriate participation in the
development of the regulation. If the preemption is not based on
express or implied statutory authority, EPA also must consult, to the
extent practicable, with appropriate State and local officials
regarding the conflict between State law and Federally protected
interests within the agency's area of regulatory responsibility.
    This proposed rule does have federalism implications. It does not
propose any significant revisions from current statutory and regulatory
requirements, but it proposes to codify existing statutory
requirements. Prior to the passage of Public Law 108-199, the various
states could adopt and enforce nonroad emission control standards
previously adopted by the state of California under section 209(e) of
the Clean Air Act, once California had received authorization from EPA
to enforce such standards. As part of directing EPA to undertake this
rulemaking, section 428 of Public Law 108-199 has taken away the
authority of states to adopt California standards for any nonroad
spark-ignition engine under 50 horsepower that they had not already
adopted by September 1, 2003. No state had done so by that date. No
current state law is affected by the provisions of Public Law 108-199
mentioned above. Today's action proposes to codify the statutory
provision prohibiting other states from adopting California standards
for nonroad spark-ignition engines under 50 horsepower. It does not
affect the independent authority of California.
    EPA did consult with representatives of various State and local
governments in developing this rule. EPA has also consulted
representatives from the National Association of Clean Air Agencies
(NACAA), which represents state and local air pollution officials.
These officials participated in two EPA workshops regarding the Small
SI safety study in which they expressed concern about the language of
section 428 of Public Law 108-199 limiting the states ability to adopt
the California standards for nonroad spark-ignition engines under 50
horsepower and urged EPA to move expeditiously in adopting new Federal
emission standards for this category.
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this proposed rule
from State and local officials.

F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.''
    This proposed rule does not have tribal implications as specified
in Executive Order 13175. This rule will be implemented at the Federal
level and impose compliance costs only on engine and equipment
manufacturers. Tribal governments will be affected only to the extent
they purchase and use equipment with regulated engines. Thus, Executive
Order 13175 does not apply to this rule. EPA specifically solicits
additional comment on this proposed rule from tribal officials.

G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

    Executive Order 13045, ``Protection of Children from Environmental
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies
to any rule that (1) Is determined to be ``economically significant''
as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, section 5-501 of the Order directs the Agency to
evaluate the environmental health or safety effects of the planned rule
on children, and explain why the planned regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered by the Agency.
    This proposed rule is not subject to the Executive Order because it
does not involve decisions on environmental health or safety risks that
may disproportionately affect children.
    The effects of ozone on children's health were addressed in detail
in EPA's rulemaking to establish the NAAQS for these pollutants, and
EPA is not revisiting those issues here. EPA believes, however, that
the emission reductions from the strategies proposed in this rulemaking
will further reduce air toxic emissions and the related adverse impacts
on children's health.

H. Executive Order 12898: Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations.

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
    EPA has determined that this proposed rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it increases the
level of environmental protection for all affected populations without
having any disproportionately high and adverse human health or
environmental effects on any population, including any minority or low-
income population. This proposed rule will reduce air pollution from
mobile sources in general and thus decrease the amount of such
emissions to which all affected populations are exposed.

I. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

    This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR
28355, May 22, 2001), because it is not likely to have a significant
adverse effect on the supply, distribution, or use of energy. If
promulgated, this proposed rule is expected to result in the use of
emission control technologies that are estimated to reduce nationwide
fuel consumption by around 100 million gallons per year by 2020.

J. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement

Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C.
272 note) directs EPA to use voluntary consensus standards in its
regulatory activities unless doing so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. NTTAA directs EPA to
provide Congress, through OMB, explanations when the Agency decides not
to use available and applicable voluntary consensus standards.
    This proposed rulemaking involves technical standards. EPA proposes
to use the test procedures specified in 40 CFR part 1065, as described
in Section IX. While the Agency identified the test procedures
specified by the International Organization for Standardization (ISO
8178) as being potentially applicable, we do not propose to use it in
this rulemaking. The use of this voluntary consensus standard would be
impractical because we have been working with engine manufacturers and
other interested parties in comprehensive improvements to test
procedures for measuring engine emissions, as reflected by the
provisions in part 1065. We expect these procedures to form the basis
for internationally harmonized test procedures that will be adopted by
ISO, other testing organizations, and other national governments.
    EPA welcomes comments on this aspect of the proposed rulemaking
and, specifically, invites the public to identify potentially
applicable voluntary consensus standards and to explain why such
standards should be used in this regulation.

List of Subjects

40 CFR Part 60

    Administrative practice and procedure, Air pollution control,
Incorporation by reference, Intergovernmental relations, Reporting and
recordkeeping requirements.

40 CFR Part 63

    Administrative practice and procedure, Air pollution control,
Hazardous substances, Incorporation by reference, Intergovernmental
relations, Reporting and recordkeeping requirements.

40 CFR Part 85

    Confidential business information, Imports, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements, Research,
Warranties.

40 CFR Part 89

    Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements, Research, Vessels,
Warranty.

40 CFR Part 90

    Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Labeling, Reporting and
recordkeeping requirements, Research, Warranty.

40 CFR Part 91

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Labeling, Penalties, Reporting and recordkeeping requirements,
Warranties.

40 CFR Part 1027

    Environmental protection, Administrative practice and procedure,
Air pollution control, Imports, Reporting and recordkeeping
requirements.

40 CFR Parts 1045, 1048, 1051, 1054, and 1060

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Incorporation by Reference, Labeling, Penalties, Reporting and
recordkeeping requirements, Warranties.

40 CFR Part 1065

    Environmental protection, Administrative practice and procedure,
Incorporation by reference, Reporting and recordkeeping requirements,
Research.

40 CFR Part 1068

    Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Motor vehicle pollution,
Penalties, Reporting and recordkeeping requirements, Warranties.

40 CFR Part 1074

    Environmental protection, Administrative practice and procedure,
Motor vehicle pollution.

    Dated: April 17, 2007.
Stephen L. Johnson,
Administrator.
    For the reasons set out in the preamble, title 40, chapter I of the
Code of Federal Regulations is proposed to be amended as set forth
below.

PART 60--STANDARDS OF PERFORMANCE FOR NEW STATIONARY SOURCES

    1. The authority citation for part 60 continues to read as follows:

    Authority: 42 U.S.C. 7401, et seq.

Subpart JJJJ--[Amended]

    2. Section 60.4231 as proposed on June 12, 2006 (71 FR 33804) is
proposed to be further amended by revising the section heading and
paragraphs (a), (b), and (c) and adding paragraph (e) to read as
follows:

Sec.  60.4231  What emission standards must I meet if I am a
manufacturer of stationary SI internal combustion engines or equipment
containing such engines?

    (a) Stationary SI internal combustion engine manufacturers must
certify their stationary SI ICE with a maximum engine power less than
or equal to 19 KW (25 HP) manufactured on or after January 1, 2008 to
the certification emission standards and other requirements for new
nonroad SI engines in 40 CFR part 90 or 1054, as follows:

------------------------------------------------------------------------
                                                        the engine must
                                                         meet emission
                                                         standards and
                                   and manufacturing        related
 If engine displacement is . . .    dates are . . .    requirements for
                                                          nonhandheld
                                                       engines under . .
                                                               .
------------------------------------------------------------------------
(1) below 225 cc................  January 1, 2008 to  40 CFR part 90.
                                   December 31, 2011.
(2) below 225 cc................  January 1, 2012 or  40 CFR part 1054.
                                   later.
(3) at or above 225 cc..........  January 1, 2008 to  40 CFR part 90.
                                   December 31, 2010.
(4) at or above 225 cc..........  January 1, 2011 or  40 CFR part 1054.
                                   later.
------------------------------------------------------------------------

    (b) Stationary SI internal combustion engine manufacturers must
certify their stationary SI ICE with a maximum engine power greater
than 19 KW (25 HP) that use gasoline and that are manufactured on or
after the applicable date in Sec.  60.4230(a)(2) to the certification
emission standards and other requirements for new nonroad SI engines in
40 CFR part 1048. Stationary SI internal combustion engine
manufacturers may certify their stationary SI ICE with a maximum engine
power less than or equal to 30 KW (40 HP) with a total displacement
less than or equal to 1,000 cubic centimeters (cc) to the certification
emission standards and other requirements for new nonroad SI engines in
40 CFR part 90 or 1054, as appropriate.
    (c) Stationary SI internal combustion engine manufacturers must
certify their stationary SI ICE with a maximum engine power greater
than 19 KW (25 HP) that are rich burn engines that use LPG and that are
manufactured on or after the applicable date in Sec.  60.4230(a)(2) to
the certification emission standards and other requirements for new
nonroad SI engines in 40 CFR part 1048. Stationary SI internal
combustion engine manufacturers may certify their stationary SI ICE
with a maximum engine power less than or equal to 30 KW (40 HP) with a
total displacement less than or equal to 1,000 cc to the certification
emission standards and other requirements for new nonroad SI engines in
40 CFR part 90 or 1054, as appropriate.
* * * * *
    (e) Manufacturers of equipment containing stationary SI internal
combustion engines meeting the provisions of 40 CFR part 1054 must meet
the provisions of 40 CFR part 1060, to the extent they apply to
equipment manufacturers.
    3. Section 60.4238 as proposed on June 12, 2006 (71 FR 33804) is
revised to read as follows:

Sec.  60.4238  What are my compliance requirements if I am a
manufacturer of stationary SI internal combustion engines < =19 KW (25
HP) or a manufacturer of equipment containing such engines?

    Stationary SI internal combustion engine manufacturers who are
subject to the emission standards specified in Sec.  60.4231(a) must
certify their stationary SI ICE using the certification procedures
required in 40 CFR part 90, subpart B, or 40 CFR part 1054, subpart C,
as applicable, and must test their engines as specified in those parts.
Manufacturers of equipment containing stationary SI internal combustion
engines meeting the provisions of 40 CFR part 1054 must meet the
provisions of 40 CFR part 1060, subpart C, to the extent they apply to
equipment manufacturers.
    4. Section 60.4239 as proposed on June 12, 2006 (71 FR 33804) is
revised to read as follows:

Sec.  60.4239  What are my compliance requirements if I am a
manufacturer of stationary SI internal combustion engines >19 KW (25
HP) that use gasoline or a manufacturer of equipment containing such
engines?

    Stationary SI internal combustion engine manufacturers who are
subject to the emission standards specified in Sec.  60.4231(b) must
certify their stationary SI ICE using the certification procedures
required in 40 CFR part 1048, subpart C, and must test their engines as
specified in that part. Stationary SI internal combustion engine
manufacturers who certify their stationary SI ICE with a maximum engine
power less than or equal to 30 KW (40 HP) with a total displacement
less than or equal to 1,000 cc to the certification emission standards
and other requirements for new nonroad SI engines in 40 CFR part 90 or
40 CFR part 1054 must certify their stationary SI ICE using the
certification procedures required in 40 CFR part 90, subpart B, or 40
CFR part 1054, subpart C, as applicable, and must test their engines as
specified in those parts. Manufacturers of equipment containing
stationary SI internal combustion engines meeting the provisions of 40
CFR part 1054 must meet the provisions of 40 CFR part 1060, subpart C,
to the extent they apply to equipment manufacturers.
    5. Section 60.4240 as proposed on June 12, 2006 (71 FR 33804) is
revised to read as follows:

Sec.  60.4240  What are my compliance requirements if I am a
manufacturer of stationary SI internal combustion engines >19 KW (25
HP) that are rich burn engines that use LPG?

    Stationary SI internal combustion engine manufacturers who are
subject to the emission standards specified in Sec.  60.4231(c) must
certify their stationary SI ICE using the certification procedures
required in 40 CFR part 1048, subpart C, and must test their engines as
specified in that part. Stationary SI internal combustion engine
manufacturers who certify their stationary SI ICE with a maximum engine
power less than or equal to 30 KW (40 HP) with a total displacement
less than or equal to 1,000 cc to the certification emission standards
and other requirements for new nonroad SI engines in 40 CFR part 90 or
40 CFR part 1054 must certify their stationary SI ICE using the
certification procedures required in 40 CFR part 90, subpart B, or 40
CFR part 1054, subpart C, as applicable, and must test their engines as
specified in those parts. Manufacturers of equipment containing
stationary SI internal combustion engines meeting the provisions of 40
CFR part 1054 must meet the provisions of 40 CFR part 1060, subpart C,
to the extent they apply to equipment manufacturers.
    6. Section 60.4242 as proposed on June 12, 2006 (71 FR 33804) is
amended by revising paragraphs (a) and (b) to read as follows:

Sec.  60.4242  What other requirements must I meet if I am a
manufacturer of stationary SI internal combustion engines or equipment
containing stationary SI internal combustion engines or a manufacturer
of equipment containing such engines?

    (a) Stationary SI internal combustion engine manufacturers must
meet the provisions of 40 CFR part 90, 40 CFR part 1048, or 40 CFR part
1054, as applicable, as well as 40 CFR part 1068 for engines that are
certified to the emission standards in 40 CFR part 1048 or 1054, except
that engines certified pursuant to the voluntary certification
procedures in Sec.  60.4241 are permitted to provide instructions to
owners and operators allowing for deviations from certified
configurations, if such deviations are consistent with the provisions
of paragraphs Sec.  60.4241(c) through (f). Manufacturers of equipment
containing stationary SI internal combustion engines meeting the
provisions of 40 CFR part 1054 must meet the provisions of 40 CFR part
1060, as applicable. Labels on engines certified to 40 CFR part 1048
must refer to stationary engines, rather than or in addition to nonroad
engines, as appropriate.
    (b) An engine manufacturer certifying an engine family or families
to standards under this subpart that are identical to standards
applicable under 40 CFR part 90, 40 CFR part 1048, or 40 CFR part 1054
for that model year may certify any such family that contains both
nonroad and stationary engines as a single engine family and/or may
include any such family containing stationary engines in the averaging,
banking and trading provisions applicable for such engines under those
parts. This provision also applies to equipment or component
manufacturers certifying to standards under 40 CFR part 1060.
* * * * *
    7. Section 60.4243 as proposed on June 12, 2006 (71 FR 33804) is
amended

by revising paragraph (a) to read as follows:

Sec.  60.4243  What are my compliance requirements if I am an owner or
operator of a stationary SI internal combustion engine?

    (a) If you are an owner or operator, you must operate and maintain
the stationary SI internal combustion engine and control device
according to the manufacturer's written instructions or procedures
developed by the owner or operator that are approved by the engine
manufacturer. In addition, owners and operators of certified engines
may only change those settings that are allowed by the manufacturer to
ensure compliance with the applicable emission standards. If you own or
operate a stationary SI internal combustion engine that is certified to
40 CFR part 90, 1048, 1054, or 1060, you must also meet the
requirements of 40 CFR parts 90, 1048, 1054, 1060, and/or part 1068, as
they apply to you.
* * * * *
    8. Section 60.4245 as proposed on June 12, 2006 (71 FR 33804) is
amended by revising the introductory text and paragraph (a) to read as
follows:

Sec.  60.4245  What are my notification, reporting, and recordkeeping
requirements if I am an owner or operator of a stationary SI internal
combustion engine?

    Owners or operators of stationary SI ICE must meet the following
notification, reporting and recordkeeping requirements.
    (a) Owners and operators of all stationary SI ICE must keep records
of the information in paragraphs (a)(1) through (4) of this section.
    (1) All notifications submitted to comply with this subpart and all
documentation supporting any notification.
    (2) Maintenance conducted on the engine.
    (3) If the stationary SI internal combustion engine is a certified
engine, documentation from the manufacturer that the engine is
certified to meet the emission standards and information as required in
40 CFR parts 90, 1048, 1054, and 1060, as applicable.
    (4) If the stationary SI internal combustion engine is not a
certified engine, documentation that the engine meets the emission
standards.
* * * * *
    9. Section 60.4246 as proposed on June 12, 2006 (71 FR 33804) is
amended by revising the definitions for ``Certified stationary internal
combustion engine'' and ``Useful life'' to read as follows:

Sec.  60.4246  What definitions apply to this subpart?

* * * * *
    Certified stationary internal combustion engine means an engine
that belongs to an engine family that has a certificate of conformity
that complies with the emission standards and requirements in this
part, or of 40 CFR part 90, 40 CFR part 1048, or 40 CFR part 1054, as
appropriate.
* * * * *
    Useful life means the period during which the engine is designed to
properly function in terms of reliability and fuel consumption, without
being remanufactured, specified as a number of hours of operation or
calendar years, whichever comes first. The values for useful life for
stationary SI ICE with a maximum engine power less than or equal to 19
KW (25 HP) are given in 40 CFR 90.105, 40 CFR 1054.107, and 40 CFR
1060.101, as appropriate. The values for useful life for stationary SI
ICE with a maximum engine power greater than 19 KW (25 HP) certified to
40 CFR part 1048 are given in 40 CFR 1048.101(g). The useful life for
stationary SI ICE with a maximum engine power greater than 19 KW (25
HP) certified under the voluntary manufacturer certification program of
this subpart is 8,000 hours or 10 years, whichever comes first.
* * * * *
    10. Table 1 to subpart JJJJ of part 60 as proposed on June 12, 2006
(71 FR 33804) is amended by revising footnote a to read as follows:

Table 1 to Subpart JJJJ of Part 60--NOX, NMHC, and CO
Emission Standards in g/HP-hr for Stationary SI Engines 25
HP (except Gasoline and Rich Burn LPG Engines)

* * * * *
    a Stationary SI natural gas and lean burn LPG engines
between 25 and 50 HP may comply with the requirements of 40 CFR part
1048, instead of this table. Stationary SI internal combustion
engine manufacturers may certify their stationary SI ICE with a
maximum engine power less than or equal to 30 KW (40 HP) with a
total displacement less than or equal to 1,000 cc to the
certification emission standards and other requirements for new
nonroad SI engines in 40 CFR part 90 or 1054, as appropriate.

PART 63--NATIONAL EMISSION STANDARDS FOR HAZARDOUS AIR POLLUTANTS
FOR SOURCE CATEGORIES

    11. The authority citation for part 63 continues to read as
follows:

    Authority: 42 U.S.C. 7401 et seq.

Subpart A--[Amended]

    12. Section 63.6675 as proposed to be amended on June 12, 2006 (71
FR 33804) is amended by revising the definitions for ``Certified
stationary RICE'' and ``Useful life'' to read as follows:

Sec.  63.6675  What definitions apply to this subpart?

* * * * *
    Certified stationary RICE means an engine that belongs to an engine
family that has a certificate of conformity that complies with the
emission standards and requirements in this part, or in 40 CFR parts
89, 90, 1039, 1048, or 1054, as appropriate.
* * * * *
    Useful life means the period during which the engine is designed to
properly function in terms of reliability and fuel consumption, without
being remanufactured, specified as a number of hours of operation or
calendar years, whichever comes first. The values for useful life for
stationary CI ICE with a displacement of less than 10 liters per
cylinder are given in 40 CFR 1039.101. The values for useful life for
stationary CI ICE with a displacement of greater than or equal to 10
liters per cylinder and less than 30 liters per cylinder are given in
40 CFR 94.9. The values for useful life for stationary SI ICE with a
maximum engine power less than or equal to 25 HP are given in 40 CFR
90.105, 40 CFR 1054.107, or 40 CFR 1060.101, as appropriate. The values
for useful life for stationary SI ICE with a maximum engine power
greater than 25 HP certified to 40 CFR part 1048 are given in 40 CFR
1048.101 and 1048.105. The useful life for stationary SI ICE with a
maximum engine power greater than 25 HP certified under the voluntary
manufacturer certification program 40 CFR part 60, subpart JJJJ, is
8,000 hours or 10 years, whichever comes first.

PART 85--CONTROL OF AIR POLLUTION FROM MOBILE SOURCES

    13. The authority citation for part 85 continues to read as
follows:

    Authority: 42 U.S.C. 7401-7671q.

Subpart Q--[Removed]

    14. Subpart Q is removed.

Subpart R--[Amended]

    15. Section 85.1713 is amended as follows:
    a. By revising the introductory text and paragraphs (a),
(c)(3)(iv), and (d) through (k).
    b. By adding paragraph (l).

    c. By removing and reserving paragraph (c)(3)(v).

Sec.  85.1713  Delegated-assembly exemption.

    The provisions of this section apply with respect to heavy-duty
highway engines. This section is addressed to engine manufacturers
unless specified otherwise.
    (a) Shipping an engine separately from an aftertreatment component
that you have specified as part of its certified configuration will not
be a violation of the prohibitions in Clean Air Act section 203 (42
U.S.C. 7522) if you follow the provisions of paragraph (b), (c), or (d)
of this section.
* * * * *
    (c) * * *
    (3) * * *
    (iv) Audits must involve the assembling companies' facilities,
procedures, and production records to monitor their compliance with
your instructions, must include investigation of some assembled
engines, and must confirm that the number of aftertreatment devices
shipped were sufficient for the number of engines produced.
* * * * *
    (d) If you manufacture engines and install them in equipment you
also produce, you must take steps to ensure that your facilities,
procedures, and production records are set up to ensure that equipment
and engines are assembled in their proper certified configurations. You
may demonstrate compliance with the requirements of this section by
maintaining a database showing how you pair aftertreatment components
with the appropriate engines.
    (e) The engine's model year does not change based on the date the
vehicle manufacturer adds the aftertreatment device.
    (f) Once the vehicle manufacturer takes possession of an engine
exempted under this section and the engine reaches the point of final
vehicle assembly, the exemption expires and the engine is subject to
all the prohibitions in Clean Air Act section 203 (42 U.S.C. 7522).
    (g) You must notify us within 15 days if you find from an audit or
another source that a vehicle manufacturer has failed to meet its
obligations under this section.
    (h) We may suspend, revoke, or void an exemption under this
section, as follows:
    (1) We may suspend or revoke your exemption for the entire engine
family if we determine that any of the engines are not in their
certified configuration after installation in the vehicle, or if you
fail to comply with the requirements of this section. If we suspend or
revoke the exemption for any of your engine families under this
paragraph (g), this exemption will not apply for future certificates
unless you demonstrate that the factors causing the nonconformity do
not apply to the other engine families. We may suspend or revoke the
exemption for shipments to a single facility where final assembly
occurs.
    (2) We may void your exemption for the entire engine family if you
intentionally submit false or incomplete information or fail to keep
and provide to EPA the records required by this section.
    (i) You are liable for the in-use compliance of any engine that is
exempt under this section.
    (j) It is a violation of the Act for any person to introduce into
U.S. commerce a previously exempted engine, including as part of a
vehicle, without complying fully with the installation instructions.
    (k) [Reserved]
    (l) You may ask us to provide a temporary exemption to allow you to
complete production of your engines at different facilities, as long as
you maintain control of the engines until they are in their certified
configuration. We may require you to take specific steps to ensure that
such engines are in their certified configuration before reaching the
ultimate purchaser. You may request an exemption under this paragraph
(l) in your application for certification, or in a separate submission.
    16. Subpart Y is revised to read as follows:

Subpart Y--Fees for the Motor Vehicle and Engine Compliance Program

Sec.  85.2401  Assessment of fees.

    See 40 CFR part 1027 for the applicable fees associated with
certifying engines, vehicles, and equipment under this chapter.

PART 90--CONTROL OF EMISSIONS FROM NONROAD SPARK-IGNITION ENGINES
AT OR BELOW 19 KILOWATTS

    17. The authority citation for part 90 continues to read as
follows:

    Authority: 42 U.S.C. 7401--7671q.

Subpart A--[Amended]

    18. Section 90.1 is amended by revising paragraphs (d)(1) and
(d)(5) and adding paragraphs (d)(8) and (h) to read as follows:

Sec.  90.1  Applicability.

* * * * *
    (d) * * *
    (1) Engines that are certified to meet the requirements of 40 CFR
part 1051, or are otherwise subject to 40 CFR part 1051 (for example,
engines used in snowmobiles and all-terrain vehicles). This part
nevertheless applies to engines used in recreational vehicles if the
manufacturer uses the provisions of 40 CFR 1051.145(a)(3) to exempt
them from the requirements of 40 CFR part 1051. Compliance with the
provisions of this part is a required condition of that exemption.
* * * * *
    (5) Engines certified to meet the requirements of 40 CFR part 1048,
or are otherwise subject to 40 CFR part 1048, subject to the provisions
of Sec.  90.913.
* * * * *
    (8) Engines that are subject to emission standards under 40 CFR
part 1054. See 40 CFR 1054.1 to determine when part 1054 applies. Note
that certain requirements and prohibitions apply to engines built on or
after January 1, 2009 if they are installed in equipment that will be
used solely for competition, as described in 40 CFR 1054.1 and 40 CFR
1068.1; those provisions apply instead of the provisions of this part
90.
* * * * *
    (h) Although the definition of nonroad engine in Sec.  90.3
excludes certain engines used in stationary applications, stationary
engines manufactured after January 1, 2008 are required under 40 CFR
part 60 to comply with this part.
    19. Section 90.2 is amended by adding paragraph (d) to read as
follows:

Sec.  90.2  Effective dates.

* * * * *
    (d) Engines used in emergency and rescue equipment as described in
Sec.  90.1(d)(7) are subject to the provisions of this part through
December 31, 2009. Starting January 1, 2010 the provisions in 40 CFR
1054.660 apply instead of those in Sec.  90.1(d)(7).
    20. Section 90.3 is amended by adding a definition for ``Fuel
line'' in alphabetical order to read as follows:

Sec.  90.3  Definitions.

* * * * *
    Fuel line has the meaning given in 40 CFR 1054.801.
* * * * *
    21. Section 90.7 is amended by adding paragraph (b)(3) to read as
follows:

Sec.  90.7  Reference materials.

* * * * *

    (b) * * *
    (3) California Air Resources Board material. The following table
lists material from the California Air Resources Board that we have
incorporated by reference. The first column lists the number and name
of the material. The second column lists the sections of this part
where we reference it. Anyone may get copies of these materials from
the California Air Resources Board, 9528 Telstar Ave., El Monte,
California 91731.

------------------------------------------------------------------------
                                                              Part 90
                Document number and name                     reference
------------------------------------------------------------------------
``Tier 3 standards for Small Off-Road Engines,'' Mobile    Sec.   90.127
 Source Division, California Air Resources Board........
------------------------------------------------------------------------

Subpart B--[Amended]

    22. Section 90.101 is revised to read as follows:

Sec.  90.101  Applicability.

    (a) The requirements of this subpart B are applicable to all
nonroad engines and vehicles subject to the provisions of subpart A of
this part.
    (b) In a given model year, you may ask us to approve the use of
procedures for certification, labeling, reporting, and recordkeeping
specified in 40 CFR part 1054 or 1068 instead of the comparable
procedures specified in this part 90. We may approve the request as
long as it does not prevent us from ensuring that you fully comply with
the intent of this part.
    23. Section 90.107 is amended by revising paragraph (d)(11)(ii) and
adding paragraphs (d)(12), (d)(13), (d)(14), and (d)(15) to read as
follows:

Sec.  90.107  Application for certification.

* * * * *
    (d) * * *
    (11) * * *
    (ii) Provide the applicable useful life as determined under Sec.
90.105;
    (12) Describe in your application for certification how you comply
with the requirements of Sec. Sec.  90.127 and 90.129, if applicable.
    (13) A statement indicating whether the engine family contains only
nonroad engines, only stationary engines, or both;
    (14) Identification of an agent for service located in the United
States. Service on this agent constitutes service on you or any of your
officers or employees for any action by EPA or otherwise by the United
States related to the requirements of this part; and
    (15) For imported engines, identification of the following:
    (i) The port(s) at which the manufacturer will import the engines.
    (ii) The names and addresses of the agents authorized to import the
engines.
    (iii) The location of test facilities in the United States where
the manufacturer can test engines if EPA selects them for testing under
a selective enforcement audit, as specified in subpart F of this part.
* * * * *
    24. Section 90.114 is amended by adding paragraph (g) to read as
follows:

Sec.  90.114  Requirement of certification--engine information label.

* * * * *
    (g) Manufacturers may add appropriate features to prevent
counterfeit labels. For example, manufacturers may include the engine's
unique identification number on the label.
    25. Section 90.116 is amended as follows:
    a. By revising paragraphs (a) introductory text and (d)(5).
    b. By removing and reserving paragraph (e)(1).
    c. By adding paragraph (g).

Sec.  90.116  Certification procedure--determining engine displacement,
engine class, and engine families.

    (a) Except as specified in paragraph (g) of this section, engine
displacement must be calculated using nominal engine values and rounded
to the nearest whole cubic centimeter in accordance with ASTM E29-93a.
This procedure has been incorporated by reference. See Sec.  90.7.
* * * * *
    (d) * * *
    (5) The engine class. In addition, engines of different
displacements that are within 15 percent of the largest displacement
may be included within the same engine family as long as all the
engines are in the same class;
* * * * *
    (g) Each engine produced under the provisions of Sec.  90.1(b) must
have a total displacement at or below 1000.0 cc after rounding to the
nearest 0.1 cc.
    26. Section 90.120 is amended by adding paragraph (b)(3) to read as
follows:

Sec.  90.120  Certification procedure--use of special test procedures.

* * * * *
    (b) * * *
    (3) A manufacturer may elect to use the test procedures in 40 CFR
part 1065 as an alternate test procedure without getting advance
approval by the Administrator or meeting the other conditions of
paragraph (b)(1) of this section. The manufacturer must identify in its
application for certification that the engines were tested using the
procedures in 40 CFR part 1065. For any EPA testing with Phase 1 or
Phase 2 engines, EPA will use the manufacturer's selected procedures
for mapping engines, generating duty cycles, and applying cycle-
validation criteria. For any other parameters, EPA may conduct testing
using either of the specified procedures.
* * * * *
    27. A new Sec.  90.127 is added to subpart B to read as follows:

Sec.  90.127  Fuel line permeation from nonhandheld engines and
equipment.

    The following permeation standards apply to new nonhandheld engines
and equipment with respect to fuel lines:
    (a) Emission standards and related requirements. New nonhandheld
engines and equipment that run on a volatile liquid fuel (such as
gasoline) must meet the emission standards specified in paragraph
(a)(1) or (a)(2) of this section starting in the 2009 model year for
small-volume engine manufacturers and small-volume equipment
manufacturers (as defined in 40 CFR 1054.801), and in the 2008 model
year for all other engines and equipment, as follows:
    (1) New nonhandheld engines and equipment must use only fuel lines
that meet a permeation emission standard of 15 g/m\2\/day when measured
according to the test procedure described in 40 CFR 1060.515. This
standard applies to any fuel line that is exposed to liquid fuel during
normal operation.
    (2) Alternatively, new nonhandheld engines and equipment must use
only fuel lines that meet standards that apply for these engines in
California for the same model year (the California standards are
incorporated by reference in Sec.  90.7). This may involve SHED-based
measurements for equipment or testing with fuel lines alone. If this
involves SHED-based measurements, all elements of the emission-control
system

must remain in place for fully assembled engines and equipment.
    (3) The emission standards in this section apply with respect to
discrete fuel line segments of any length. Compliance may also be
demonstrated using aggregated systems that include multiple sections of
fuel line with connectors, and fittings. The standard applies with
respect to the total permeation emissions divided by the wetted
internal surface area of the assembly. Where it is not practical to
determine the wetted internal surface area of the assembly, the
internal surface area per unit length of the assembly may be assumed to
be equal to the ratio of internal surface area per unit length of the
hose section of the assembly.
    (4) The emission standards in this section apply over a useful life
of five years.
    (5) Fuel lines must be labeled in a permanent and legible manner
with one of the following approaches:
    (i) By meeting the labeling requirements that apply for these
engines in California.
    (ii) By identifying the certificate holder's corporate name or
trademark, or the fuel line manufacturer's corporate name or trademark,
and the fuel line's permeation level. For example, the fuel line may
identify the emission standard from this section, the applicable SAE
classification, or the family number identifying compliance with
California standards. A continuous stripe or other pattern may be added
to help identify the particular type or grade of fuel line.
    (6) The requirements of this section do not apply to auxiliary
marine engines.
    (b) Certification requirements. To certify that you meet the
standards of this section, you must have emission data from your
testing or from the fuel line manufacturer using the appropriate
procedures that demonstrate compliance with the standard, including any
of the following:
    (1) Emission data demonstrating compliance with fuel line
permeation requirements for model year 2008 equipment sold in
California. You may satisfy this requirement by presenting an approved
Executive Order from the California Air Resources Board showing that
the fuel lines meet the applicable standards in California.
    (2) Emission data demonstrating a level of permeation control that
meets any of the following industry standards:
    (i) R11A specifications in SAE J30 (incorporated by reference in
Sec.  90.7).
    (ii) R12 specifications in SAE J30 (incorporated by reference in
Sec.  90.7).
    (iii) Category 1 specifications in SAE J2260 (incorporated by
reference in Sec.  90.7).
    (iv) Emission data demonstrating compliance with the fuel line
permeation standards in 40 CFR 1051.110.
    (c) Prohibitions. (1) Except as specified in paragraph (c)(2) of
this section, introducing engines or equipment into U.S. commerce
without meeting all the requirements of this section violates Sec.
90.1003(a)(1).
    (2) It is not a violation to introduce your engines into U.S.
commerce if other companies add fuel lines when installing your engines
in their equipment. However, you must give equipment manufacturers any
appropriate instructions so that fully assembled equipment will meet
all the requirements in this section, as described in Sec.  90.128.
    28. A new Sec.  90.128 is added to subpart B to read as follows:

Sec.  90.128  Installation instructions.

    (a) If you sell an engine for someone else to install in a piece of
nonroad equipment, give the engine installer instructions for
installing it consistent with the requirements of this part. Include
all information necessary to ensure that an engine will be installed in
its certified configuration. In particular, describe the steps needed
to control evaporative emissions, as described in Sec.  90.127. This
may include information related to the delayed requirements for small-
volume equipment manufacturers.
    (b) You do not need installation instructions for engines you
install in your own equipment.
    (c) Provide instructions in writing or in an equivalent format. For
example, you may post instructions on a publicly available website for
downloading or printing. If you do not provide the instructions in
writing, explain in your application for certification how you will
ensure that each installer is informed of the installation
requirements.
    (d) Equipment manufacturers failing to follow the engine
manufacturer's emission-related installation instructions will be
considered in violation of Sec.  90.1003(a)(3).
    29. A new Sec.  90.129 is added to subpart B to read as follows:

Sec.  90.129  Fuel tank permeation from handheld engines and equipment.

    The following permeation standards apply to certain new handheld
engines and equipment with respect to fuel tanks:
    (a) Emission standards and related requirements. (1) New handheld
engines and equipment that run on a volatile liquid fuel (such as
gasoline) and have been certified to meet applicable fuel tank
permeation standards in California must meet one of the following
emission standards starting in the 2009 model year, as follows:
    (i) Engines and equipment must use only fuel tanks that meet a
permeation emission standard of 2.0 g/m2/day when measured
according to the applicable test procedure specified by the California
Air Resources Board.
    (ii) Engines and equipment must use only fuel tanks that meet the
fuel tank permeation standards in 40 CFR 1060.103.
    (iii) Engines and equipment must use only fuel tanks that meet
standards that apply for these engines in California for the same model
year. This may involve SHED-based measurements for equipment or testing