VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6787 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 108 Generally the provisions of this section V that apply to HLDTs also apply to MDPVs. See section IV. B. 4. g for a thorough discussion of the main program elements and how they impact MDPVs. TABLE IV. D.   9.   ALTERNATIVE BENEFITS CALCULATIONS FOR THE TIER 2 GASOLINE SULFUR RULE IN 2030 Alternative calculation Impact on primary benefit estimate ( million 1997$)

5th percentile of `` measurement'' uncertainty distribution .......................................................................................... ¥ $ 20,300 ( ¥ 81%) 95th percentile of `` measurement'' uncertainty distribution ........................................................................................ + 33,900 (+ 134%) PM related premature mortality based on Dockery et al. .......................................................................................... + 30,200 (+ 120%) Value of avoided premature mortality incidences based on statistical life years. ..................................................... ¥ 11,500 ( ¥ 46%) Reversals in chronic bronchitis treated as lowest severity cases ............................................................................. + 280 (+ 1%) Value of visibility changes in all class I areas ........................................................................................................... + 180 (+ 1%) Value of visibility changes in eastern U. S. residential areas ..................................................................................... + 420 (+ 2%) Value of visibility changes in western U. S. residential areas .................................................................................... + 130 (+ 1%) Household soiling damage ......................................................................................................................................... + 110 (+ 1%) Avoided costs of reducing nitrogen loadings in east coast estuaries ....................................................................... + 160 (+ 1%)

The estimated adjusted cost of implementing the final Tier 2 program is $ 5.3 billion ( 1997$), while the estimate of monetized benefits using EPA's preferred approach for monetizing reductions in PM related premature mortality   the VSL approach   are $ 25.2 billion ( 1997$). Monetized net benefits using EPA's preferred method for valuing avoided incidences of premature mortality are approximately $ 19.9 billion ( 1997$). Using the alternative, age adjusted approach   the VSLY approach   total monetized benefits are projected to be around $ 13.8 billion ( 1997$). Monetized net benefits using this approach are approximately $ 8.5 billion ( 1997$). Therefore, implementation of the Tier 2 program will provide society with a net gain in social welfare. Tables VI. D.   10a and IV. D.   10b summarize the costs, benefits, and net benefits for the two alternative valuation approaches.

TABLE IV. D.   10A.   2030 ANNUAL MONETIZED COSTS, BENEFITS, AND NET BENEFITS FOR THE FINAL TIER 2/ GASOLINE SULFUR RULE: EPA PREFERRED ESTIMATE USING THE VALUE OF STATISTICAL LIVES SAVED APPROACH TO VALUE REDUCTIONS IN PREMATURE MORTALITY a Billion 1997 ( dollars)

Adjusted compliance costs ..... $ 5.3 Monetized PM related benefits b. 24.7+ BPM Monetized Ozone related benefitsb 0.5+ BOzone Monetized net benefits c, d ........ 19.9+ B Notes: a For this section , all costs and benefits are rounded to the nearest 100 million. Thus, figures presented in this chapter may not exactly equal benefit and cost numbers presented in earlier sections of the chapter. b Not all possible benefits or disbenefits are quantified and monetized in this analysis. Potential benefit categories that have not been quantified and monetized are listed in Table IV. D.   8. Unmonetized PM and ozone related benefits are indicated by BPM. And BOzone, respectively c B is equal to the sum of all unmonetized benefits, including those associated with PM, ozone, CO, and HAPS. d These estimates are based on the EPA preferred approach for valuing reductions in premature morality, the VSL approach. This approach and an alternative, age adjusted approach   the VSLY approach   are discussed more fully in section f above.

Table IV. D.   10b.   2030 Annual Monetized Costs, Benefits, and Net Benefits for the Final Tier 2/ Gasoline Sulfur Rule: Alternative Estimates Using the Value of Statistical Life Years Saved Approach to Value Reductions in Premature Mortality a Billion 1997 ( dollars)

Adjusted compliance costs ..... $ 5.3 Monetized PM related benefits b. $ 13.3+ BPM Monetized Ozone related benefits b. $ 0.5+ BOzone Monetized net benefits c, d ....... $ 8.5+ B Notes: a For this section, all costs and benefits are rounded to the nearest 100 million. Thus, figures presented in this chapter may not exactly equal benefit and cost numbers presented in earlier sections of the chapter. b Not all possible benefits or disbenefits are quantified and monetized in this analysis. Potential benefit categories that have not been quantified and monetized are listed in Table IV. D.   8. Unmonetized PM and ozone related benefits are indicated by BPM. And BOzone, respectively c B is equal to the sum of all unmonetized benefits, including those associated with PM, ozone, CO, and HAPS. d The VSLY estimate is calculated by amortizing the $ 5.9 million mean VSL estimate over the 35 years of life expectancy associated with subjects in the labor market studies used to obtain the VSL estimate. The resulting estimate using a 5 percent discount rate, is $ 360,000 per life year saved in 1997 dollars. This approach is discussed more fully in section f above.

V. Other Vehicle Related Provisions The section describes several additional provisions of today's final rule that were not previously discussed in this preamble. 108 A. Final Tier 2 CO, HCHO and PM Standards Tables IV. B.   4 and   5 in Section IV. B. 4. a. above presented the Tier 2 standards for carbon monoxide ( CO), formaldehyde ( HCHO), and particulate matter ( PM). The following paragraphs discuss our selection of these specific standards.

1. Carbon Monoxide ( CO) Standards Beyond aligning carbon monoxide ( CO) standards for all LDVs and LDTs, and harmonizing with California vehicle technology, reduction in CO emissions is not a primary goal of the Tier 2 program. However, we note that more than three fourths of CO emissions in 1997 came from mobile sources and that there are currently 20 officially designated CO nonattainment areas in the U. S. These areas include 47 counties with a combined population of 34 million. In addition, there are 23 officially designated maintenance areas also with a combined population of 34 million. Further, CO is a deadly gas that leads to accidental poisoning fatalities and injuries. Also, CO may play a role in ozone formation by increasing the reactivities of VOCs in the atmosphere. Although there remain many areas of nonattainment and maintenance for the VerDate 27< JAN> 2000 22: 48 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm01 PsN: 10FER2 6788 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 109 We recognize that the standards we are finalizing for interim LDT4s are more stringent than for equivalent vehicles ( MDV3s) under Cal LEV I. Still our interim HLDT standards harmonize with Cal LEV I standards applicable to MDV2s. 110 Ibid. CO NAAQS, and those areas include large populations, the broad trends indicate that ambient levels are being reduced and the amount of further reductions needed to meet the CO NAAQS will not be as substantial as for the ozone NAAQS. The reductions in this program will help ensure that emissions and ambient levels of CO continue to decline, which will contribute to the attainment and maintenance of the CO NAAQS in current nonattainment areas. These standards will also ensure that CO levels do not increase in the future, which could exacerbate any CO attainment and maintenance concerns. Our analysis estimating of the tons of CO reduction due to the Tier 2/ Gasoline Sulfur program is found in Chapter III of the RIA. Thus the CO standards we are finalizing for all Tier 2 LDVs and LDTs are essentially the same as those from the NLEV program for LDV/ LLDTs. These standards will harmonize with CalLEV II CO standards except at California's SULEV level ( EPA Bin 2). This lone divergence will not pose additional burden to manufacturers because the federal Tier 2 CO standards for these vehicles will be less stringent than California's. Bins applicable during the interim programs will include CO values from the NLEV program for LDV/ LLDTs and from the Cal LEV I program for HLDTs. 109 In our NPRM, we proposed tighter CO standards than California for certain higher bins. Based upon comment, we are aligning our CO standards with those of California to help ensure that carry over between the two programs can occur. 110 This alignment is consistent with our goal of bringing all LDVs and all categories of LDTs under common standards that allow for technology to be harmonized to the extent possible with California. Despite these minor changes, we still expect the standards in today's rule to lead to CO reductions.

2. Formaldehyde ( HCHO) Standards Similar to our approach to CO standards, we are aligning all Tier 2 LDVs and LDTs under the formaldehyde standards from the NLEV program or CalLEV II program. HLDTs, which are not subject to the NLEV program, will become subject to federal formaldehyde standards for the first time under the provisions of this rulemaking. Formaldehyde is a hazardous air pollutant and EPA is required to regulate motor vehicle formaldehyde under section 202( l) of the Act. The standards finalized today are primarily of concern for methanol and methane ( compressed natural gas or CNG) fueled vehicles, because formaldehyde is chemically similar to methanol and methane and is likely to be produced when methanol or methane are not completely burned in the engine. HLDTs are not included under the NLEV program and will therefore not face formaldehyde standards as LDVs and LLDTs will in 2001 ( 1999 in the northeast states). We believe it is appropriate to bring HLDTs under HCHO standards in this rulemaking. Applying formaldehyde standards to HLDTs will be consistent with our goals of aligning standards for all LDVs and LDTs regardless of fuel type and harmonizing technologically with California standards wherever possible and reasonable and the burden will be minimal. Consequently, we are including formaldehyde standards for HLDTs under the Tier 2 program as well as under the interim programs.

3. Use of NMHC Data To Show Compliance with NMOG Standards; Alternate Compliance With Formaldehyde Standards In response to comments, we are finalizing a provision to allow manufacturers to demonstrate compliance with the interim and Tier 2 NMOG standards using NMHC data ( non methane hydrocarbons) for gasoline and diesel vehicles. For these vehicles, NMOG and NMHC emissions are very similar and testing for NMHC is considerably simpler and cheaper than measuring NMOG. Data available to us show that NMHC emissions at levels expected from interim and Tier 2 LDVs and LDTs can be adjusted to represent NMOG emissions by a small multiplicative factor. We are finalizing to accept NMHC test results to demonstrate compliance with the NMOG standards, but are requiring that the NMHC results be multiplied by 1.04. We will permit the use of other adjustment factors based upon comparative testing. A drawback to NMHC testing is that NMHC testing does not yield formaldehyde results as NMOG testing does. We noted in the NPRM that HCHO is actually a component of NMOG and that we expect that all vehicles able to meet the proposed Tier 2 or interim standards ( including methanol and CNG fueled vehicles) will readily comply with the HCHO standards. In fact, based upon a review of certification data, we believe that gasoline and diesel vehicles will be far below the HCHO standards, perhaps by as much as 90%. ( See the Response to Comments document for details) To reduce testing costs while harmonizing with the CalLEV II standards we are finalizing a provision that will permit manufacturers of gasoline and diesel vehicles to demonstrate compliance with the formaldehyde standards based on engineering judgement. This provision will apply only to diesel and gasoline fueled vehicles and will require manufacturers to make a demonstration in their certification application that vehicles having similar engine and vehicle size and engine and aftertreatment technologies have been shown to exhibit compliance with the applicable formaldehyde standard for their full useful life. This demonstration will be similar to that currently required for gasoline vehicles to demonstrate compliance with the particulate matter standard ( see 40 CFR 86.1829( b)( 1)), and should be readily available from California vehicles where NMOG testing is required and formaldehyde data is routinely generated.

4. Particulate Matter ( PM) Standards We proposed to adopt tighter PM standards. For Tier 2 vehicles, we proposed PM bin values such that PM would consistently be 0.01 g/ mi or less. To provide manufacturers with flexibility, we proposed a 0.02 g/ mi PM standard for vehicles that certify to the highest Tier 2 bins. As we have indicated elsewhere in this preamble, we anticipate that low sulfur diesel fuel will be available by 2007 to enable diesel vehicles to utilize advanced diesel technologies and meet these PM standards. For the interim standards we proposed a PM standard of 0.06 g/ mi for the highest bins. We received considerable comment from manufacturers and others about the PM standards we proposed. In the final rule, we are raising the PM standard to 0.08 g/ mi for bin 10. For HLDTs, manufacturers would likely have had to use advanced diesel technologies to attain our proposed interim standards and these technologies require low sulfur diesel fuel. Since we do not expect that fuel to be widely available until the 2006   2007 timeframe, we are raising the PM standard so that diesels are not barred from the interim program by a fuel situation beyond their manufacturers' control. PM standards are primarily a concern for diesel cycle vehicles, but they also apply to gasoline and other otto cycle VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6789 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 111 SFTP requirements do not apply to MDPVs. We plan to address the applicability of SFTP standards and test procedures to MDPVs in a future rulemaking. 112 For vehicles included in the NLEV program, this phase in becomes a four year phase in beginning in 2001. vehicles. We will continue to permit otto cycle vehicles to certify to PM standards based on representative test data from similar technology vehicles.

B. Useful Life The `` useful life'' of a vehicle is the period of time, in terms of years and miles, during which a manufacturer is formally responsible for the vehicle's emissions performance. For LDVs and LDTs, there have historically been both `` full useful life'' values, approximating the average life of the vehicle on the road, and `` intermediate useful life'' values, representing about half of the vehicle's life. We proposed and are finalizing several changes to the current useful life provisions for LDVs and LDTs.

1. Mandatory 120,000 Mile Useful Life We are finalizing our proposal to equalize full useful life values for all Tier 2 LDVs and LDTs at 120,000 miles. Congress, in directing EPA to perform the Tier 2 study, also directed EPA to consider changing the useful lives of LDVs and LDTs. Manufacturers have made numerous advances in quality, materials and engineering that have led to longer actual vehicle lives and data show that each year of a vehicle's life, people are driving more miles. Current data indicate that passenger cars are driven approximately 120,000 miles in their first ten years of life. Trucks are driven further. Current regulatory useful lives are 10 years/ 100,000 miles for LDV/ LLDTs and 11 years/ 120,000 miles for HLDTs. We project, based on our Tier 2 model, that approximately 13 percent of light duty NOX and 11 percent of light duty VOCs is produced between 100,000 and 120,000 miles. Given the trend toward longer actual vehicle lives and increases in annual mileage, we believe that it is reasonable to extend the regulatory useful life requirements California, in its LEV II program, has adopted full useful life standards for all LDVs and LDTs of 10 years or 120,000 miles, whichever occurs first. The time period for federal LDV/ LLDTs will be 10 years, but will remain at 11 years for HLDTs consistent with the Clean Air Act. Intermediate useful life values, where applicable, will remain at 5 years or 50,000 miles, whichever occurs first. Where manufacturers elect to certify Tier 2 vehicles for 150,000 miles to gain additional NOX credits, as discussed below, the useful life of those vehicles will be 15 years and 150,000 miles. We are not harmonizing with California on the mandatory useful life for evaporative emissions of 15 years and 150,000 miles, but rather this useful life will be mandatory for evaporative emissions only when a manufacturer elects optional 150,000 mile exhaust emission certification. We proposed to extend the useful life of interim LDV/ LLDTs to 10 years/ 120,000 miles beginning in 2004. Based upon extensive comment, we are not finalizing that provision and the useful lives of interim LDV/ LLDTs will remain unchanged to help facilitate their carryover from the NLEV program into the interim program. Commenters provided persuasive argument that the proposed provision, along with others, would impose a large workload burden on manufacturers because they would be unable to carry over certification data from 2003 and would have to recertify virtually all of their LDV/ LLDTs in 2004. Manufacturers stressed that this would be an especially unproductive use of their resources because these vehicles would all have to be recertified again as they were phased into the Tier 2 standards between 2005 and 2007. This change in the final rule will have only minimal impact on the benefits of our program.

2. 150,000 Mile Useful Life Certification Option We are adopting as proposed a provision to provide additional NOX credit in the fleet average calculation for vehicles certified to a useful life of 150,000 miles. A manufacturer certifying a test group to a 150,000 mile useful life will incorporate those vehicles into its corporate NOX average as if they were certified to a full useful life standard 0.85 times the applicable 120,000 mile NOX standard. To use this option, the manufacturer will have to agree to ( 1) certify the engine family to the applicable 120,000 mile exhaust and evaporative standards at 150,000 miles for all pollutants; and ( 2) increase the mileage on the single extra high mileage in use test vehicle from a minimum of 90,000 miles to a minimum of 105,000 miles. Today's vehicles are lasting longer and being driven farther than those built in past years and we believe it is reasonable to encourage the development of more durable emission control systems. Consequently we believe it is appropriate to provide incentives to manufacturers to certify their vehicles to extended useful lives beyond 120,000 miles. This is why we proposed and are today finalizing additional NOX credits for Tier 2 vehicles certified to a useful life of 150,000 miles. In the final rule we are adding an option that, for a test group certified to a 150,000 mile useful life, the manufacturer may choose between the additional credits or a waiver of intermediate life standards. Commenters suggested that some vehicles would be discriminated against by our intermediate life standards, because they might have flat deterioration curves, and could meet our full life standards, but not the lower intermediate life standards. We are reluctant to give up our intermediate life standards, because we believe they provide an additional measure of certainty that vehicles will meet standards. Nonetheless, we believe that certification to a longer useful life is an important goal and that manufacturers who do so will likely use technologies that have very flat deterioration curves. This option provides manufacturers with the flexibility to certify vehicles without having to comply with intermediate life standards. In exchange they must comply with full life standards for considerably longer mileage.

C. Supplemental Federal Test Procedure ( SFTP) Standards 111 1. Background Supplemental Federal Test Procedure ( SFTP) standards require manufacturers to control emissions from vehicles when operated at high rates of speed and acceleration ( the US06 test cycle) and when operated under high ambient temperatures with air conditioning loads ( the SC03 test cycle). The existing light duty SFTP requirements begin a three year phase in in model year 2000 for Tier 1 LDV/ LLDTs. 112 For HLDTs, SFTP requirements begin a similar phase in in 2002. Intermediate and full useful life SFTP standards exist for all categories of Tier 1 vehicles except that SFTP standards do not apply to diesel fueled LDT2s and HLDTs. Table V. A.   1 shows the full useful life federal SFTP requirements applicable to Tier 1 vehicles.

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6790 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 113 This disparity arose because neither EPA nor CARB had full useful life SFTP standards for LEVs or ULEVs when the NLEV program was adopted. Since a major requirement of the NLEV program was harmony with California standards, EPA adopted the California SFTP standards in place for the NLEV time frame ( 2001 and later). 114 Except that, we proposed to permit TLEV vehicles ( EPA interim Bin 10 in Table IV. B.   4), which are not subject to new SFTP standards under NLEV, to continue to meet Tier 1 SFTP standards, and to permit HLDTs under the interim programs to continue to meet Tier 1 SFTP standards that do not fully phase in until the 2004 model year. TABLE V. A.   1.   FULL USEFUL LIFE FEDERAL SFTP STANDARDS APPLICABLE TO TIER 1 VEHICLES Vehicle category NMHC + NOX ( weighted g/ mi) a CO ( g/ mi) b US06 SC03 Weighted LDV/ LDT1 ( gasoline) ....................................................................................... 0.91 11.1 3.7 4.2 LDV/ LDT1 ( diesel) ........................................................................................... 2.07 11.1   4.2 LDT2 ................................................................................................................ 1.37 14.6 5.6 5.5 LDT3 ................................................................................................................ 1.44 16.9 6.4 6.4 LDT4 ................................................................................................................ 2.09 19.3 7.3 7.3 Notes: a Weighting for NMHC+ NOX and optional weighting for CO is 0.35x( FTP)+ 0.28x( US06)+ 0.37x( SC03). b CO standards are stand alone for US06 and SC03 with option for a weighted standard.

2. SFTP Under the NLEV Program The NLEV program includes SFTP requirements for LDVs, LDT1s and LDT2s. These requirements impose the Tier 1 intermediate and full useful life SFTP standards on Tier 1 and TLEV vehicles, but impose only 4000 mile standards adopted from California LEV I program on LEVs and ULEVs. 113 NLEV SFTP standards for LEVs and ULEVs are shown in Table V. A.   2. Table V. A.   2 also includes the California LEV I SFTP standards for LDT3s and 4s. The standards in that table do not provide for a weighted standard for NMHC+ NOX or for CO, but rather employ separate sets of standards for the US06 and SC03 tests. Also, while the NLEV and CAL LEV I SFTP standards apply to gasoline and diesel vehicles, they do not include a standard for diesel particulates ( PM).

TABLE V. A.   2.   SFTP STANDARDS FOR LEVS AND ULEVS IN THE NLEV/ CAL LEV I PROGRAM [ 4000 Mile Standards]

US06 SC03 NMHC+ NOX ( g/ mi) CO ( g/ mi) NMHC+ NOX ( g/ mi) CO ( g/ mi)

LDV/ LDT1 ...................................................................................................... 0.14 8.0 0.20 2.7 LDT2 .............................................................................................................. 0.25 10.5 0.27 3.5 LDT 3 ( Calif MDV 2) ...................................................................................... 0.4 10.5 0.31 3.5 LDT 4 ( Calif MDV 3) ...................................................................................... 0.6 11.8 0.44 4.0 3. SFTP Standards for Interim and Tier 2 LDVs and LDTs: As Proposed Since no significant numbers of vehicles certified to SFTP standards will enter the fleet until 2001, manufacturers raised concerns during the development of the NPRM regarding significant changes to the SFTP program before its implementation. We stated in the NPRM that it was reasonable not to increase SFTP stringency beyond NLEV/ CalLEV I levels for the Tier 2 program, but we proposed to include SFTP standards adjusted for intermediate and full useful life deterioration where there are currently only 4000 mile standards. Full useful life standards for Tier 2 vehicles are consistent with our mandate under the Clean Air Act. We derived the full and intermediate useful life standards in the NPRM by applying deterioration allowances from our draft MOBILE 6 model to the existing 4000 mile standards for LDVs and LLDTs. For HLDTs we applied similarly derived deterioration allowances to California's LEV I SFTP standards for MDV2s and MDV3s, which are the corresponding categories to LDT3s and LDT4s in the California LEV I program. The full and intermediate useful life SFTP standards we proposed would have applied to all Tier 2 vehicles including Tier 2 LDT3s and LDT4s. Further, since our interim standards are derived from NLEV and Cal LEV I standards, we proposed that our full life SFTP standards would apply to all interim LDV/ LLDTs beginning in 2004.114 4. Final SFTP Standards for Interim and Tier 2 LDVs and LDTs Based upon extensive comment from manufacturers, we are persuaded that our proposed intermediate and full life SFTP standards need more review and should possibly be reexamined in a separate rulemaking. Manufacturers were quite concerned that the technique we used to obtain the intermediate and full life SFTP standards led to standards that were overly stringent. They argued that they have little experience with SFTP compliant vehicles given the current infancy of the program and they do not know whether SFTP emissions can be reasonably be expected to deteriorate like FTP emissions. Consequently, in today's notice, we are finalizing a program that will adopt the existing NLEV/ Cal LEV I 4000 mile standards and utilize adjusted full life standards from the Tier 1 program, instead of values derived by applying the draft MOBILE 6 model. These standards will apply to all Tier 2 vehicles and to all interim LDV/ LLDTs. We proposed and are finalizing that interim HLDTs meet Tier 1 SFTP standards which do not finish their phase in until the 2004 model year. With regard to intermediate and full life SFTP standards, the preamble to the final rule implementing the SFTP program for the Tier 1 SFTP emission standards ( 61 FR 54856) provided a formula for computing SFTP standards to apply under more stringent future VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6791 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 115 The 4,000 mile standards under NLEV are phased in in such a way that diesels would not likely be subject to them until the 2004 model year, given their very small market share. Today's rulemaking effectively supercedes the NLEV program beginning with the 2004 model year. In other words, while NLEV contains 4,000 mile SFTP standards for diesels, they are not likely to ever impact diesel LDV/ LLDTs. FTP standards. In the Tier 1 program, SFTP standards represent a weighted average of FTP, US06 and SC03 standards. The three components are weighted by factors of 0.35, 0.28, and 0.37 respectively. The formula simply adjusts the Tier 1 SFTP weighted average standards downward to reflect the decrease in the component FTP standards. The weighting factors remain the same and the US06 and SC03 standards remain the same, but the SFTP standard becomes tighter because the FTP component becomes smaller. These standards will take effect for all LDV/ LLDTs beginning in 2004 and will phase in with the Tier 2 standards for HLDTs in 2008 and 2009. The formula is as follows: New SFTP Standard = Old SFTP Standard ¥ [ 0.35 ´   ( Tier 1 FTP standard ¥ New FTP Standard)]

In today's final rule, we will employ this formula to compute full useful life SFTP standards for all Tier 2 vehicles and for interim LDV/ LLDTs. Because we are also adopting the California 4000 mile SFTP standards for these vehicles, we are not adopting intermediate life SFTP standards, so as to avoid the burden of three sets of SFTP standards. LDT3 and LDT4 SFTP standards do not currently apply to diesels. Further, the standards applicable to Tier 1 diesel LDVs and LDT1s are less stringent than gasoline standards and do not apply to the SC03 cycle. There are no SFTP standards under Tier 1 for diesel LDT2s. In this final rule, we are applying the same approach we are using with other standards in this document to the Tier 2 and interim SFTP standards. Consequently, we are finalizing that Tier 2 vehicles and interim LDV/ LLDTs with diesel or gasoline engines must comply with the same NMHC+ NOX and CO SFTP limits. Thus, in computing Tier 2 SFTP full life standards for diesel LDVs and LDT1s from Tier 1 values, the values for diesels must be determined from the standards applicable to gasoline vehicles of the same category. Because we lack certainty as to whether diesel vehicles can comply with the 4,000 mile SFTP standards for gasoline vehicles that we are adopting from the NLEV and Cal LEV I programs, we are providing an option that diesel LDV/ LLDTs may comply with intermediate life SFTP standards instead. 115 Manufacturers must calculate intermediate life standards using the same approach described for full life standards, but must substitute appropriate intermediate life values in the equation above. This provision will only apply through model year 2006, and thus will likely only impact interim non Tier 2 vehicles, given the very small market share that diesels occupy and given our expectation that they will be the last LDV/ LLDTs phased into Tier 2 standards. We noted above that interim non Tier 2 HLDTs will have the option of meeting Tier 1 SFTP standards. Thus diesel HLDTs will not have to comply with the 4,000 mile standards in the interim years and the option we are providing for LDV/ LLDTs is not needed for HLDTs.

5. Adding a PM Standard to the SFTP Standards We requested comment on the appropriate SFTP PM standards for diesel vehicles. We suggested it would be appropriate to establish a margin above the applicable FTP PM standard to serve as the SFTP standard. EPA has implemented such margins in recent consent decrees, under which heavyduty engine manufacturers have agreed not to exceed emission levels 1.25 times the applicable exhaust standards ( including PM standards) when engines are operated over a wide range of operating conditions. We received comments in favor of an SFTP PM standard of 1.25 times the FTP standard and we received many comments from manufacturers against setting any SFTP PM standard until more data become available. We believe it is reasonable to include an SFTP standard for PM. However, we are uncertain as to the technical appropriateness of the 1.25 value for passenger vehicles. Further, the 1.25 value would lead to an SFTP standard for PM that would not match the stringency of the other SFTP standards we are finalizing. Consequently, we are finalizing a procedure for computing diesel PM standards that is nearly identical to the procedure for computing weighted SFTP standards for NMHC+ NOX and CO described above. We believe standards computed in this way will be readily feasible for both gasoline and diesel vehicles. To compute the SFTP PM standards, manufacturers will use the same formula described above for NMHC+ NOX and CO. Where that formula calls for the Tier 1 SFTP standard to be inserted, manufacturers must insert the Tier 1 FTP standard. This is because, under Tier 1 standards, there is no SFTP standard for PM. However, the Tier 1 weighted SFTP standards are equal to the Tier 1 FTP standards ( or the sum of the Tier 1 FTP standards in the case of NMHC+ NOX). Using the Tier 1 FTP PM standards in this way will lead to a Tier 2 SFTP PM standard whose stringency is appropriately matched to the other pollutants. For HLDTs , we proposed and are finalizing that Tier 1 SFTP standards would apply through the interim program. because of the late start of SFTP phase in for Tier 1 vehicles. We see no reason to impose SFTP PM standards on these vehicles during the interim period when their manufacturers will be under pressure to develop diesel vehicles to comply with the Tier 2 standards. Also, if we were to impose an FTP PM standard on the interim vehicles, it would likely be matched to the interim phase in for HLDTs and manufacturers would simply defer compliance for diesels until the last phase in year ( 2007). The manufacturers would then have to recertify to the Tier 2 standards by 2009. Given the relatively small number of diesel vehicles, we believe the most reasonable approach is to defer SFTP PM standards for HLDTs until the Tier 2 phase in. Consequently, we are finalizing that Tier 2 HLDTs will have to comply with an SFTP PM standard computed as described above. For LDV/ LLDTs we are also including the SFTP PM standard for the Tier 2 vehicles. There are only a few diesel LDV/ LLDTs currently produced and no large increase in their numbers is expected. We see little environmental benefit in imposing the SFTP PM standard on interim vehicles.

6. Future Efforts Relevant to SFTP Standards We are very concerned about `` off cycle'' emissions, i. e. those emissions that occur under vehicle operational modes that are not captured in the FTP. SFTP standards help to address our concerns and we believe that they should apply to all vehicles, regardless of fuel. Our final rule essentially promulgates Tier 1 SFTP standards that are reduced to represent the reduction in the FTP component standards. As we indicate under our discussion of SFTP for medium duty passenger vehicles ( see section IV. B. 4. g) we expect to conduct a rulemaking to establish appropriate `` Tier 2'' SFTP standards for all Tier 2 vehicles. In that rule, we expect to reexamine the US06 and SC03 test cycles and their applicability to vehicles using different fuels and technologies,

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6792 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 116 The Compliance Assurance Program, ( 64 FR 23906) takes effect in the 2000 model year. including whether these cycles are the most appropriate ones for diesels. We will also examine whether it is necessary to have different sets of standards for different vehicle sizes or whether it is possible to establish one set of standards for all vehicles.

D. LDT Test Weight Historically, HLDTs ( LDT3s and LDT4s) have been emission tested at their adjusted loaded vehicle weight ( ALVW), while LDVs, LDT1s, and LDT2s have been tested at their loaded vehicle weight ( LVW). ALVW is equivalent to the curb weight of the truck plus half its maximum payload, while LVW is equivalent to the curb weight of the truck plus a driver and one adult passenger ( 300 pounds). As we are equalizing standards and useful lives across LDVs and all categories of LDTs, we believe it is appropriate to test all the vehicles under the same conditions. Therefore, we are finalizing as proposed to test HLDTs at their loaded vehicle weight. We believe this is appropriate because the standards we are imposing on HLDTs under Tier 2 are considerably more stringent than the Tier 1 standards. Further, one of our reasons for bringing HLDTs under the same standards as passenger cars is that these trucks include many vans and sport utility vehicles that are often used as passenger cars with just one or two passengers. Lastly, we note that testing HLDTs at LVW is consistent with the way they have been tested for fuel economy purposes for many years. Consequently, we believe it is appropriate to test them at LVW. The NPRM proposed that all HLDTs would certify using LVW beginning in the 2004 model year. Based upon comments, the final rule will allow the certification of HLDTs based on ALVW until those vehicles are phased into the Tier 2 standards in 2008 and 2009 at which time they must be tested at LVW. This will enhance carryover of California vehicles to the Federal interim program in cases where the California vehicles meet our interim standards.

E. Test Fuels As discussed elsewhere in this preamble, the NLEV program was adopted virtually in its entirety from California's program. Because California's standards were developed around the use of California Phase II reformulated gasoline ( RFG) as the exhaust emission test fuel, we adopted California Phase II test fuel as the exhaust emission test fuel for gasolinefueled vehicles in the federal NLEV program, although we recognized at the time that vehicles outside of California would be unlikely to operate on that fuel in use. In the NPRM we proposed interim programs that were derived from NLEV ( for LDV/ LLDTs) and the CAL LEVI program ( for HLDTs), and we proposed to accept certification test results generated on California fuel, but indicated that we might test or require in use testing on federal fuel. Based upon comment we are finalizing provisions to permit, for interim vehicles, that if a test group has been certified to the exhaust emission standards using California fuel and is being carried into the interim program from NLEV or is being carried across from California LEV I certification, then we will not test or require in use exhaust testing on federal fuel. This change is intended to help address recertification workload concerns raised by manufacturers. For new certification not carried across from California LEV I or carried over from NLEV, and for any Tier 2 vehicles, we will accept exhaust certification test results based on California fuel for 50 state vehicles only, but we will reserve the right to perform or require certification confirmatory testing and in use testing on federal test fuel. We recognize that manufacturers may want to perform calibration changes on vehicles carried across from the California LEV I program or carried over from NLEV program. These calibration changes will likely be aimed at certifying the test group to the lowest possible NOX value. We believe that these calibration changes would be appropriate, provided they can still be covered by the existing worst case durability data vehicle. We will perform or require certification confirmatory testing and in use emission testing on these vehicles using California fuel. Because differences exist between the California and federal evaporative emission testing procedures, we proposed to continue to require the use of federal certification fuel as the test fuel in evaporative emission testing. Under current programs, where California and federal evaporative emission standards are essentially the same, California accepts evaporative results generated on the federal procedure ( using federal test fuel), because available data indicates the federal procedure to be a `` worst case'' procedure. The evaporative standards California has adopted for their LEV II program are more stringent than those we are finalizing in this document. In the NPRM, we requested comment and supporting emission test data on whether vehicles certified to CalLEV II evaporative standards using California fuels will necessarily comply with the federal Tier 2 evaporative standards, including ORVR standards, when tested with federal test fuel. While we got comments from manufacturers advocating that we accept the results of California evaporative testing to demonstrate compliance with the federal evaporative standards, we received no supporting data. Still, given the fairly large difference between California and federal evaporative standards, it seems reasonable that a vehicle meeting the California standards under California fuels and test conditions might also meet federal standards under federal fuels and conditions. We believe it may be possible for manufacturers to establish a relationship between the two sets of standards, fuels and conditions that would enable us to grant federal certification based upon data showing conformity with the California standards under California fuels and conditions. Consequently, we are including a provision in the certification regulations to enable manufacturers to obtain federal evaporative certification based upon California results, if they obtain advance approval from EPA. EPA will review test data from manufacturers to establish whether it is appropriate to accept California data to demonstrate compliance with federal standards.

F. Changes to Evaporative Certification Procedures To Address Impacts of Alcohol Fuels Current certification procedures, including regulations under the new CAP2000 program, 116 allow manufacturers to develop their own durability process for calculating deterioration factors for evaporative emissions. The regulations ( § 86.1824   01) permit manufacturers to develop service accumulation ( aging) methods based on `` good engineering judgement''. The manufacturer's durability process must be designed to predict the expected evaporative emission deterioration of in use vehicles over their full useful lives. We proposed and are finalizing requirements that these aging methods include the use of alcohol fuels to address concerns that alcohol fuels increase the permeability and thus the evaporative losses from hoses and other evaporative components. Based upon comment, we are also finalizing an option to the requirement that the manufacturer use the alcohol fuel. Under this option, the manufacturer may demonstrate to EPA using good engineering judgement VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6793 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 117 Numerous SAE papers examine the permeability of fuel and evaporative system materials as well as the influence of alcohols on permeability. See, for example SAE Paper # s 910104, 920163, 930992, 970307, 970309, 930992, and 981360, copies of which are in the docket for this rulemaking. 118 Ibid. 119 California Exhaust Emission Standards and Test Procedures for 2003 and Subsequent Model Zero Emission Vehicles, and 2001 and Subsequent Model Hybrid Electric Vehicles. In the Passenger Car, Light Duty Truck and Medium Duty Vehicle Classes; adopted August 5, 1999. acceptable to EPA that its durability process for calculating evaporative emission deterioration factors accurately predicts deterioration under prolonged exposure to alcohol fuels. We have reviewed data indicating that the permeability, and therefore the evaporative losses, of hoses and other evaporative components can be greatly increased by exposure to fuels containing alcohols. 117 Alcohols have been shown to promote the passage of hydrocarbons through a variety of different materials commonly used in evaporative emission systems. Data from component and fuel line suppliers indicate that alcohols cause many elastomeric materials to swell, which opens up pathways for hydrocarbon permeation and also can lead to distortion and tearing of components like `` O'' ring seals. Ethers such as MTBE and ETBE have a much smaller effect. Alcohol resistant materials such as fluoroelastomers are available and are currently used by manufacturers to varying extents. Alcohols do not impact evaporative components and hoses immediately, but rather it may take as long as one year of exposure to alcohol fuels for permeation rates to stabilize. The end result is higher permeation and increased in use evaporative emissions. 118 Today, roughly 10% of fuel sold in the U. S. contains alcohol, mainly in the form of ethanol, and such fuels are often offered in ozone nonattainment areas. We believe it is appropriate to ensure that evaporative certification processes expose evaporative components to alcohols and do so long enough to stabilize their permeability. Therefore, we are finalizing our proposal to the evaporative certification requirements to require manufacturers to develop their deterioration factors using a fuel that contains the highest legal quantity of ethanol available in the U. S. To implement this change, we are modifying the Durability Demonstration Procedures for Evaporative Emissions found at § 86.1824   01. The amendments will require manufacturers not using an approved option, to age their systems using a fuel containing the maximum concentration of alcohols allowed by EPA in the fuel on which the vehicle is intended to operate, i. e., a `` worst case'' test fuel. ( Under current requirements, this fuel would be about 10% ethanol, by volume.) We are also modifying the Durability Demonstration Procedures to require manufacturers to ensure that their aging procedures are of sufficient duration to stabilize the permeability of the fuel and evaporative system materials. These modifications will take place as vehicles are phased into the evaporative emission standards contained in this final rule. We requested comment on alternative ways by which manufacturers could document or demonstrate that their components are made of materials whose permeability is not significantly affected by alcohols. We received no comments responsive to this request, but we did receive comments that EPA should not change the CAP2000 provision allowing manufacturers to develop their own durability process for calculating evaporative emission deterioration factors `` using good engineering judgement''. We do not wish to foreclose the possibility that an alternative method may exist or may arise in the future. Consequently, in the final rule we will permit manufacturers to use an optional method based on good engineering judgement acceptable to EPA. As an example, one method would be for the manufacturer to show that it is exclusively using materials documented in the technical literature to have low permeability in the presence of alcohols.

G. Other Test Procedure Issues California's LEV II program implements a number of minor changes to exhaust emissions test procedures. We have evaluated these changes and found that, for tailpipe emissions, the California test procedures fall within ranges and specifications permitted under the Federal Test Procedure. With regard to hybrid electric vehicles ( HEVs) and zero emission vehicles ( ZEVs), we believe that these vehicles will be predominantly available in California, or that they will typically be first offered for sale in California, because of California's ZEV requirement, which promotes the sale of HEVs and ZEVs. Where manufacturers market HEVs or ZEVs outside of California, it is likely that they will market the same vehicles in California. Consequently, we are finalizing our proposal to incorporate by reference California's exhaust emission test procedures for HEVs and ZEVs. 119 In the NLEV program, we provided a specific formula used by California that could be used to compute an HEV contribution factor to NMOG emissions. This formula took into consideration the range without engine operation of various types of HEVs and had the effect of reducing the NMOG emission standard for a given emission bin ( for HEV vehicles only). This would have obvious beneficial effects on a manufacturer's calculation of its corporate NMOG average. The technology of HEVs is under rapid change and we do not believe that we can design a formula now that will accurately predict the impact of HEVs on corporate average NOX emissions in the Tier 2 time frame. Consequently, we are finalizing the proposed provision by which manufacturers could propose HEV contribution factors for NOX to EPA. If approved, these factors can be used in the calculation of a manufacturer's fleet average NOx emissions and will provide a mechanism to credit an HEV for operating with no emissions over some portion of its life. These factors will be based on good engineering judgement and will consider such vehicle parameters as vehicle weight, the portion of the time during the test procedure that the vehicle operates with zero emissions, the zero emission range of the vehicle, NOX emissions from fuel fired heaters and any measurable NOX emissions from on board electricity production and storage. The final NLEV rule ( See 62 FR pg 31219, June 6, 1997) incorporated by reference California's NMOG measurement procedure and adopts California's approach of using Reactivity Adjustment Factors ( RAFs) to adjust vehicle emission test results to reflect differences in the impact on ozone formation between an alternative fueled vehicle and a vehicle fueled with conventional gasoline. As has been discussed elsewhere in this preamble, the NLEV program is a special case in which California standards and provisions were adopted virtually in their entirety. In the preamble to the final NLEV rule ( See 62 FR 31203), we expressed our reservations about the use of RAFs. We also addressed our reservations about the use of reactivity factors developed in California in a program that spans a range of climates and geographic locations across the United States in the final rule on reformulated gasoline ( RFG) ( see 59 FR 7220). We continue to be concerned about the validity of RAFs to predict ozone formation nationwide and asked the National Academy of Sciences to VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6794 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 120 Ozone Forming Potential of Reformulated Gasoline, May 1999. National Academy of Sciences; National Academy Press. Available from the NAS web site: http:// www. nap. edu. 121 California Evaporative Emission Standards and Test Procedures for 2001 and Subsequent Model Motor Vehicles. Adopted August 5, 1999. 122 We define small volume manufacturers to be those with total U. S. sales of less than 15,000 highway units per year. Independent commercial importers ( ICIs) with sales under 15,000 per year are included under this term. 123 For a graphical illustration of the phase ins through time, see Table IV. B.   2. 124 2005   2006 for vehicles where the small volume manufacturer commences its 2004 model year for all its 2004 vehicles before the fourth anniversary date of the signature of this rule. look at the scientific evidence in support of the use of these factors nationwide. While we have recently received a report from NAS, 120 we have not yet developed a final position on how RAFs should be treated in federal regulations. We are finalizing as proposed not to permit the use of RAFs in the Tier 2 program. The issue of RAFs is relevant primarily to alcohol and CNG fueled vehicles. RAFs are not relevant at all if a manufacturer elects to use NMHC data to show compliance with the NMOG standards. While, in our final rule, alcohol and CNG vehicles will have to comply with NMOG standards beginning in 2004 and while we desire to harmonize with California when practical and reasonable, we will not permit the use of RAFs for Tier 2 vehicles and interim non Tier 2 vehicles. We note that we are finalizing a provision from the NPRM that permits dual fueled and flexible fueled vehicles to elect an NMOG value from the next higher bin when they are tested on an alternative fuel. This provides flexibility in compliance with applicable NMOG standards for these vehicles. We do not believe that dedicated alcohol or CNG vehicles should have any problems complying with the NMOG standards we are finalizing and consequently the relief these vehicles might get when RAFs are employed is unnecessary. In its LEV II program, California is also implementing a number of changes to evaporative emission test procedures. 121 Many of these changes address the evaporative emission testing of hybrid electric vehicles. We proposed not to adopt California's changes, because California uses different test temperatures and different test fuel in its evaporative emission testing of gasoline vehicles than we use in the federal program. The preamble to the final NLEV rule ( See 62 FR 31227) explains that California and EPA are reviewing an industry proposal to streamline and reconcile the California and federal procedures. That work has not been completed. However, where California adopts procedures specific to HEVs and ZEVs, we are adopting those procedures, except that our testing will occur at lower temperatures, and use a fuel determined by EPA to be representative of federal usage ( for HEVs only). H. Small Volume Manufacturers Our final rule includes the following flexibilities intended to assist all manufacturers in complying with the stringent proposed standards without harm to the program's environmental goals as presented in the NPRM: · A four year phase in of the standards for LDV/ LLDTs; · A delayed phase in for HLDTs; · The freedom to select from specific bins of standards; · A standard that can be met through averaging, banking and trading of NOX credits; · Provisions for NOX credit deficit carryover; and, · Provisions for alternative phase in schedules. These flexibilities apply to all manufacturers, regardless of size, and in general we believe they eliminate the need for more specific provisions for small volume manufacturers. 122 However, we proposed and are finalizing one additional flexibility for small volume manufacturers. Today's rule exempts small volume manufacturers from the 25%, 50% and 75% Tier 2 phase in requirements applicable to the 2004, 2005 and 2006 LDV/ LLDTs and the 50% phase in requirement applicable to 2008 HLDTs. Instead, small volume manufacturers will simply comply with the appropriate Tier 2 100% requirement in the 2007 and 2009 model year. In the phase in years, small volume manufacturers will simply comply with the appropriate interim standards for all of their vehicles, except that we will also exempt small volume manufacturers from the 25%, 50% and 75% phase in requirements for the 0.20 g/ mi corporate average NOX standard applicable to interim HLDTs in 2004   2006. Small volume HLDT manufacturers must simply comply with the interim standards, including the corporate average NOX standard, in 2007 for 100% of their vehicles. During model years 2004   2006, these same small volume manufacturers must comply with any of the applicable bins of standards for 100% of their HLDTs. 123, 124 Provisions to deal with the leadtime issue related to HLDTs and outlined in section IV. B. apply to small volume manufacturers. Therefore unless the small volume manufacturer wants to use the optional NMOG standards for interim LDT2s and LDT4s, it may optionally meet the Tier 1 standards for its 2004 model year HLDTs, provided it commences its model year for those vehicles before the fourth anniversary date of today's rulemaking. As explained in the NPRM, we will continue to apply the federal small volume manufacturer provisions, which provide relief from emission data and durability showing and reduce the amount of information required to be submitted to obtain a certificate of conformity. In addition, the CAP2000 program contains reduced in use testing requirements for small volume manufacturers. Exempting small volume manufacturers from the Tier 2 and interim HLDT phase in requirements eliminates a dilemma that phase in percentages can pose to a manufacturer that has a limited product line, i. e., how to address percentage phase in requirements if the manufacturer makes vehicles in only one or two test groups. We have implemented similar provisions for small entities in other rulemakings. Approximately 15   20 manufacturers that currently certify vehicles, many of which are independent commercial importers ( ICIs), will qualify. These manufacturers represent just a fraction of one percent of LDVs and LDTs produced. We do not believe that this provision will have any measurable impact on air quality.

1. Special Provisions for Independent Commercial Importers ( ICIs) We requested comment in the NPRM as to whether ICIs should be exempted from the interim and Tier 2 fleet average NOX standards. We explained that ICIs may not be able to predict their sales and control their fleet average emissions because they may be dependent upon vehicles brought to them by individuals attempting to import uncertified vehicles. We noted that the NLEV program is optional for ICIs and that ICIs are specifically prohibited, under existing regulations, from complying with the fleet average NMOG standard under the NLEV program. ( See 40 CFR 85.1515( c)). Also, the existing regulations specifically bar ICIs from participating in any emission related averaging, banking or trading program. ( See 40 CFR 85.1515( d)). We expressed our concern that if we do not amend this provision, ICIs would likely just pick the least stringent bin available to certify their vehicles. This would create an inequity for other manufacturers,

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6795 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations especially other small volume manufacturers that must comply with the fleet average NOX standards. Since we do not believe it is wise to finalize a provision that could lead to an inequity like this, and since averaging may not be workable for ICIs, we are finalizing that ICIs must comply with the standards from the bin that contains the relevant fleet average NOX standard, e. g., in model years 2007 and later an ICI would have to use bin 5 or below for all of its LDV/ LLDTs. However, if an ICI is able to purchase credits or to certify to bins below the one containing the fleet average NOX standard, we will permit the ICI to bank credits for future use. Where an ICI desires to certify to bins above the fleet average standard, we will permit them to do so if they have adequate and appropriate credits. Where an ICI desires to certify to bins above the fleet average standard and does not have adequate or appropriate credits to offset the vehicles, we will permit the manufacturer to obtain a certificate for vehicles using those bins, but will condition the certificate such that the manufacturer can only produce vehicles if it first obtains credits from other manufacturers or from other vehicles certified to lower bins during that model year. We do not believe that ICIs can predict or estimate their sales of various vehicles well enough to participate in a program that will allow them leeway to produce some vehicles to higher bins now, knowing that they will sell vehicles from lower bins later. We also do not believe that we can reasonably assume that an ICI that certifies and produces vehicles one year, will certify or even be in business the next, consequently, we are also not permitting ICIs to utilize the deficit carryforward provisions of the rule. Essentially, ICIs will be allowed the major benefits of the averaging, banking and trading program, but will be constrained from getting into a situation where they can ever produce vehicles to higher bins that they can not cover with credits at the time they produce the vehicles.

2. Hardship Provision for Small Volume Manufacturers The panel convened under the Small Business Regulatory Enforcement Fairness Act recommended that we seek comment on the inclusion of a hardship provision. We requested comment on whether we should include such a provision in the NPRM. Based upon comment, we are including a limited hardship provision in the final rule that will be applicable to small volume manufacturers. Small volume manufacturers include companies that independently import motor vehicles ( Independent Commercial Importers or ICIs), companies that modify vehicles to operate on alternative fuels, companies that produce specialty vehicles by modifying vehicles produced by others, and companies that produce small quantities of their own vehicles, but rely on major manufacturers for engines and other vital emission related components. In these businesses, predicting sales is difficult and it is often necessary to rely on others for technology. This provision will provide limited relief in the case where a small volume manufacturer is unable to comply with the phase in dates or average NOX standard. The manufacturer will need to provide evidence that, despite its best efforts, it cannot meet implementation dates or required NOX averages. Appeals for hardship relief must be made in writing, must be submitted before the earliest date of noncompliance, must include evidence that the noncompliance will occur despite the manufacturer's best efforts to comply and must include evidence that severe economic hardship will be faced by the company if the relief is not granted. Hardship relief will only be granted for the first year after a new standard is finally implemented. For small volume manufacturers, which are already exempted from the phase in schedules for the interim and Tier 2 programs, this means that relief would be available for the final phase in year for the LDV/ LLDT Tier 2 phase in ( 2007), for the final phase in year for the interim HLDT phase in ( 2007), and the final phase in year for the Tier 2 HLDT phase in ( 2009). Relief will also be available for manufacturers that did not opt into NLEV and must meet our interim standards for all their LDV/ LLDTs in 2004, and relief will be available for HLDTs and MDPVs which must be brought under our interim program in the 2004 model year. We will work with the applicant to ensure that all other remedies available under this rule, e. g., use of banked or purchased credits, are exhausted before granting additional relief, and will limit the period of relief to one year. Note that in our discussion of the credit deficit carryforward provision in section IV. B. 4. d. vi, we indicate that we are not permitting small volume manufacturers to carry deficits forward until they have demonstrated compliance with the NOX averaging provisions for one year. This is to prevent small volume manufacturers, that have already received additional time due to the waiver of the phase in requirements, from gaining even more time to finally comply through the credit deficit carryforward provisions. To avoid this provision creating a selfimplementing problem, by which the very existence of the hardship provision prompts small volume manufacturers to delay development, acquisition and application of new technology, we want to make clear that we expect this provision to be rarely used. Our final rule contains numerous flexibilities for all manufacturers and it waives the phase in steps for small volume manufacturers, which effectively provides them more time. We expect small manufacturers, to prepare for the applicable implementation dates in today's rule.

I. Compliance Monitoring and Enforcement 1. Application of EPA's Compliance Assurance Program, CAP2000 The CAP2000 program ( 64 FR 23905, May 14, 1999) streamlines and simplifies the procedures for certification of new vehicles and will also require manufacturers to test in use vehicles to monitor compliance with emission standards. The CAP2000 program was developed jointly with the State of California and involved considerable input and support from manufacturers. As the name implies, it can be implemented as early as the 2000 model year. We are finalizing our proposal that the Tier 2 and the interim requirements will be implemented subject to the requirements of the CAP2000 program. Certain CAP2000 requirements are being slightly modified to reflect changes to useful lives, standard structure and other aspects of the Tier 2 program, but we proposed no major changes to fundamental principles of the CAP2000 program, and we are not adding any major changes with today's final rule. Although we proposed changes to useful lives, we did not propose to amend the 50,000 mile minimum mileage used in manufacturer in use verification testing or in use confirmatory testing under the CAP2000 program at this time. The CAP2000 inuse program is not yet implemented and we believe it is appropriate to allow manufacturers to gain experience with procuring and testing vehicles at the 50,000 mile level before making significant changes. However, where one vehicle from each in use test group would have a minimum mileage of 75,000 miles under the CAP2000 program, we proposed and are finalizing, consistent with California, to VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6796 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations change that figure to 90,000 miles for Tier 2 vehicles. We may, in our own in use program, procure and test vehicles at mileages higher than 50,000 and pursue remedial actions ( e. g., recalls) based on that data. We may also use that data as the basis to initiate a rulemaking to make changes in the CAP2000 in use requirements, if the data indicate significant nonconformity at higher mileages. We are finalizing certification test fuel specifications consistent with our final fuel sulfur requirements. Given the phase in for low sulfur fuel we are finalizing in this rulemaking, we recognize that 2004 to 2007 vehicles ( and vehicles certified in earlier model years to bank early NOX credits) may be exposed to higher sulfur levels early in their lives. Because of this sulfur exposure, these vehicles could experience problems with OBD indicator light illuminations. Consistent with our approach under the NLEV program, we will consider requests from manufacturers to permit OBD systems that function properly on low sulfur fuel, but exhibit sulfurinduced passes when operated on higher sulfur fuel. For OBD systems that exhibit sulfur induced indicator light illumination, we will consider requests to modify such vehicles on a case bycase basis.

2. Compliance Monitoring We plan no new compliance monitoring activities or programs for Tier 2 vehicles. These vehicles will be subject to the certification and manufacturer in use testing provisions of the CAP2000 rule. Also, we expect to continue our own in use testing program for exhaust and evaporative emissions. We will pursue remedial actions when substantial numbers of properly maintained and used vehicles fail any standard in either in use testing program. Consistent with our approach under NLEV we will consider requests, prior to manufacturer or EPA in use testing to permit preconditioning procedures designed solely to remove the effects of high sulfur gasoline on vehicles produced through the 2007 model year. We retain the right to conduct Selective Enforcement Auditing of new vehicles at manufacturer's facilities. In recent years, we have discontinued SEA testing of new LDVs and LDTs, because compliance rates were routinely at 100%. We recognize that the need for SEA testing may be reduced by the low mileage in use testing requirements of the CAP2000 program. However, we expect to re examine the need for SEA testing as standards tighten under the NLEV, interim, and Tier 2 programs. We have established a data base to record and track manufacturers' compliance with NLEV requirements including the corporate average NMOG standards. We expect to monitor manufacturers' compliance with the Tier 2 and interim corporate average NOX standards in a similar fashion and also to monitor manufacturers' phase in percentages for Tier 2 vehicles.

3. Relaxed In Use Standards for Vehicles Produced During the Phase in Period The Tier 2 standards will be challenging for manufacturers to achieve, and some vehicles will pose more of a challenge than others. Not only will manufacturers be responsible for assuring that vehicles can meet the standards at the time of certification, they will also have to ensure that the vehicles comply when self tested in use under the provisions of the CAP2000 program, and when tested by EPA under its in use (`` Recall'') test program. With any new technology, or even with new calibrations of existing technology, there are risks of in use compliance problems that may not appear in the certification process. Inuse compliance concerns may discourage manufacturers from applying new technologies or new calibrations. Thus, we proposed and are finalizing, relaxed in use standards for those bins most likely to require the greatest applications of effort, to provide assurance to the manufacturers that they will not face recall if they exceed standards by a specified amount. For the first two years after a test group meeting a new standard is introduced, that test group will be subject to more lenient in use standards. These `` in use standards'' will apply only to bin 5 and below, only for the pollutants indicated, and only for the first two model years that a test group is certified under that bin. The in use standards will not be applicable to any test group first certified to a new standard after 2007 for LDV/ LLDTs or after 2009 for HLDTs. The temporary in use standards are shown in Table V. A.   3 below.

TABLE V. A.   3.   IN USE COMPLIANCE STANDARDS ( G/ MI) [ Certification standards shown for reference purposes]

Bin Durability period ( miles) NOX In use NOX certification NMOG in use NMOG certification 5 .. 50,000 0.05 n/ a 0.075 5 .. 120,000 0.10 0.07 n/ a 0.090 4 .. 120,000 0.06 0.04 n/ a 0.070 3 .. 120,000 0.05 0.03 0.09 0.055 2 .. 120,000 0.03 0.02 0.02 0.010 Because we are concerned that diesel vehicles may require low sulfur fuel to comply with our interim requirements and that such fuel may not be widely available until the 2006   2007 timeframe, we are providing in use standards specifically for diesel vehicles certified to bin 10 standards. These standards will be determined by multiplying the applicable NOX and PM certification standards by factors of 1.2 and 1.35, respectively. These multipliers can be used only for years during which bin 10 is viable, only for diesels and only for the pollutants indicated. We believe manufacturers should and will strive to meet certification standards for the full useful lives of the vehicles, but we recognize that the existence of such in use standards poses some risk that a manufacturer might aim for the in use standard in its design efforts rather than the certification standard, and thus market less durable designs. We do not believe that risk to be significant. We believe that such risks are more than balanced by the gains that can result from earlier application of new technology or new calibration techniques that might occur in a scenario where in use liability is slightly reduced. Further, we believe that the in use standards will be of short enough duration that any risks are minimal.

VerDate 27< JAN> 2000 23: 12 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm01 PsN: 10FER2 6797 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 4. Enforcement of the Tier 2 and Interim Corporate Average NOX Standards We are finalizing, as proposed, that manufacturers can either report that they meet the relevant corporate average NOX standard in their annual reports to the Agency or they can show via the use of NOX credits that they have offset any exceedance of the corporate average NOX standard. Manufacturers will also have to report their NOX credit balances or deficits. The averaging, banking and trading program will be enforced through the certificate of conformity that the manufacturer must obtain in order to introduce any regulated vehicles into commerce. The certificate for each test group will require all vehicles to meet the applicable Tier 2 emission standards from the applicable bin of the Tier 2 program, and will be conditioned upon the manufacturer meeting the corporate average NOX standard within the required time frame. If a manufacturer fails to meet this condition, the vehicles causing the corporate average NOX exceedance will be considered to be not covered by the certificate of conformity for that engine family. A manufacturer will be subject to penalties on an individual vehicle basis for sale of vehicles not covered by a certificate. These provisions will also apply to the interim corporate average standards. As outlined in detail in the preamble to the final NLEV rule, EPA will review the manufacturer's sales to designate the vehicles that caused the exceedance of the corporate average NOX standard. We will designate as nonconforming those vehicles in those test groups with the highest certification emission values first, continuing until a number of vehicles equal to the calculated number of noncomplying vehicles as determined above is reached. In a test group where only a portion of vehicles are deemed nonconforming, we will determine the actual nonconforming vehicles by counting backwards from the last vehicle produced in that test group. Manufacturers will be liable for penalties for each vehicle sold that is not covered by a certificate. During phase in years, the certificates will also require manufacturers to meet the applicable phase in requirements. Compliance with the phase in requirements will be enforced in the same manner as for the corporate average NOX standard. For the optional phase in requirement for HLDTs for model year 2004, manufacturers must declare in their application for certification whether they intend to comply with the interim requirements for all of their HLDTs and initiate phasein to the interim corporate average NOX standard in 2004 and receive the benefits of that phase in ( less stringent NMOG standards for certain LDT2s and LDT4s). Compliance with this phase in requirement and the fleet average NOX standard will be enforced just like compliance with any other average NOX standard and phase in requirement of today's program. We will also condition certificates to enforce the requirements that manufacturers not sell NOX credits that they have not generated. A manufacturer that transfers NOX credits it does not have will create an equivalent number of debits that it must offset by the reporting deadline for the same model year. Failure to cover these debits with NOX credits by the reporting deadline will be a violation of the conditions under which EPA issued the certificate of conformity, and nonconforming vehicles will not be covered by the certificate. EPA will identify the nonconforming vehicles in the same manner described above. In the case of a trade that results in a negative credit balance that a manufacturer could not cover by the reporting deadline for the model year in which the trade occurred, we proposed, and are finalizing, to hold both the buyer and the seller liable. This is consistent with other mobile source rules, except for the NLEV rule as discussed below. We believe that holding both parties liable will induce the buyer to exercise diligence in assuring that the seller has or will be able to generate appropriate credits and will help to ensure that inappropriate trades do not occur. In the NLEV program we implemented a system in which only the seller of credits would be liable. In the preamble to the final NLEV rule ( See 62 FR 31216), we explained that a multiple liability approach would be unnecessary in the context of the NLEV program given that the main benefit to a multiparty liability approach would be to `` protect against a situation where one party sells invalid credits and then goes bankrupt, leaving no one liable for either penalties or compensation for the environmental harm.'' Our preamble stated further that EPA would not necessarily take the same approach for `` other differently situated trading programs.'' The NLEV program was implemented to be a relatively short duration program, during which time we could expect relative stability in the industry. Also, given that NLEV is a voluntary program of lower than mandated standards, we did not expect that the smallest manufacturers would opt in. These are the companies whose stability is most in jeopardy in a dynamic and very competitive worldwide business. We currently believe that the Tier 2 program and its framework will remain for many years. We note that the program is not scheduled for complete phase in for almost nine years after the publication of today's rule. All manufacturers, large and small, will ultimately have to meet the Tier 2 standards. We cannot predict that in the Tier 2 timeframe there will not be companies that leave the market or are divided between other companies in mergers and acquisitions. Thus we believe it is prudent to implement a program to provide inducements to the seller to assure the validity of any credits that it purchases or contracts for.

J. Addressing Environmentally Beneficial Technologies Not Recognized by Test Procedures Compliance with the current and proposed EPA motor vehicle emission standards is based on the emission performance of a vehicle over EPA's prescribed test procedure. While this test procedure addresses many of the aspects of a vehicle's impact on air quality, it does not address all such impacts. EPA is aware of two developing technologies which have potential to improve ozone related air quality, but that would not do so over the current EPA test procedure. The first example is a device that removes ozone from the air as the vehicle is driven. A major producer of automotive catalysts, Englehard, has developed a catalytic coating for vehicle radiators ( called PremAir) that converts ambient ozone to oxygen. ARB has been working with Englehard for some time to develop a procedure which would grant PremAir and other direct ozone reducing technologies a NMOG credit under its LEV I and LEV II programs. ARB issued on December 20, 1999 a Manufacturers Advisory Circular outlining procedures for establishing such a NMOG credit. Englehard submitted substantial comments to the Tier 2 NPRM, including ozone modeling results for five cities ( Los Angeles, Houston, Atlanta, New York City, and Chicago). This ozone modeling compared the ozone reductions from reduced exhaust VOC and NOX emissions to that from using PremAir. As a result of this modeling, Englehard requested that EPA grant a typical PremAir system a NMOG or NOX emission credit of 0.015 g/ mi. This credit would be adjusted based the exact design and performance of the system and vehicle being certified.

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6798 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations The second example is an insulated catalyst. The insulation retains heat for extended periods of time, increasing the catalyst temperature when the engine is started and reducing the time required for the catalyst to reach an operational temperature. This technology can reduce cold start emissions for engine off times ( called soaks) of 24 hours or less. The vast majority of engine soaks in use are less than 24 hours. However, EPA's test procedure only tests emissions at two fairly extreme soak times: 10 minutes and 12   36 hours. The 10 minute soak is so short that even an uninsulated catalyst is warm enough to quickly begin working upon restart. The 36 hour soak is beyond the practical limit of cost effective insulating techniques. As a result of the Tier 2 NPRM, EPA received a number of inquiries from potential manufacturers of insulated catalysts, requesting further information about emission credits, test procedures and certification requirements. EPA believes that both of these technologies, as well as other potential technologies, will reduce regulated emissions and/ or ambient ozone levels, as long as they operate as designed inuse EPA will work with the developers of such technologies to establish regulatory procedures to determine whether it is appropriate to grant emission credit for particular technologies. This process will involve the opportunity for public notice and comment. With regard to Englehard's PremAir technology, EPA specifically requested comments on ARB's proposed approach to determining an NMOG credit and received no adverse comment on granting this type of technology a VOC emission credit. Thus, EPA is promulgating today procedures very similar to ARB's for certifying such technologies and determining the appropriate VOC emission credit. The only difference between EPA's and ARB's procedures involve assessing the effectiveness of VOC emission reductions and ozone reducing devices in areas outside of California. In summary, the ozone reductions associated by both the ozone reducing technology, such as PremAir, and exhaust VOC emission reductions will be estimated using urban airshed modeling, using up to date chemical and meteorological simulation techniques. Four local areas shall be modeled: New York City, Chicago, Atlanta and Houston. The ozone episodes to be modeled shall be those selected by the states for use in their most recent ozone SIPs. Emissions shall be projected for calendar year 2007. Baseline emissions will include the benefits of the Tier 2 and sulfur standards being promulgated today, as well as all other emission controls assumed in EPA's ozone modeling of the benefits of the Tier 2 and sulfur standards described above. The ozone benefit of VOC emission reductions will be modeled by assuming that Tier 2 LDVs and LDTs meet a 0.055 g/ mi exhaust NMOG standard instead of a 0.09 g/ mi NMOG standard. The relationship between changes in exhaust NMOG emission standards and in use VOC emissions shall be determined by modeling LDV+ LDT emission in 2030 assuming that all Tier 2 vehicles meet a 0.055 g/ mi exhaust NMOG standard instead of a 0.09 g/ mi NMOG standard. All emission modeling shall utilize the updated Tier 2 emission model developed by EPA as part of this rule, or MOBILE6, once it is available. The measure of ozone to be used in calculating VOC emission equivalency will be the peak one hour ozone level anywhere in the modeled region on the day when ozone is at its highest. The NMOG credit will be determined by averaging the NMOG credit determined in each of the four local areas. Simulation of the benefits of the direct ozone reducing device will assume that ozone levels immediately around the roadway will be 40% less than that existing in the broader grid. The performance aspects of the direct ozone reducing device can be simulated by any reasonable values, since the appropriate NMOG credit for any specific application of this technology will be scaled to the performance of the specific application. The manufacturer wishing to obtain an NMOG credit for use of this technology must demonstrate its effectiveness to EPA as part of the certification process. This will involve demonstrating the air flow through the device, its ozone destruction capability under conditions analogous to those photochemically modeled, the durability of this capability over the useful life of the vehicle and the method to be used to diagnose its effectiveness in use. Regarding the insulated catalyst technology, less information has been received to date on its performance. We are not promulgating regulations for determining the appropriate credit for such technology today. However, when we were developing our SFTP standards, EPA developed a methodology to assess the emission benefits of insulated catalysts or other techniques which reduced emissions after the vehicle soaks between 10 minutes and 12   36 hours. Thus, EPA expects to use this methodology as a starting point in assessing the benefit of insulated catalysts and will continue to assess development of options in this area. Because an insulated catalyst operates essentially like a typical catalyst, we do not expect that the test procedures for its certification would differ from those applicable to typical Tier 2 vehicles. The primary difference will be an assessment of its effectiveness relative to conventional catalyst technology over a range of vehicle soak times between 10 minutes and 36 hours. Then, it will be necessary to estimate the average effectiveness in use relative to conventional technology using the inuse frequency of vehicle soak times.

K. Adverse Effects of System Leaks The standards set forth in today's final rule are very stringent. They require extremely tight control of air/ fuel ratios and also tight control of the inputs to the catalyst( s). A sealed exhaust system is crucial to the proper operation and emission control of current vehicles and even more so to the expected Tier 2 vehicles. Because a given point in the exhaust system intermittently sees negative pressure, exhaust leaks can permit air to enter the exhaust system. Even tiny amounts of air entering this way can have large impacts on the output of the oxygen sensor. If the output of the oxygen sensor is affected, then the exhaust output of the cylinders will be affected. Consequently, an exhaust leak can lead to both excess NOX and NMOG emissions. Air entering through exhaust leaks can also impact the NOX conversion efficiency of catalysts. In the preamble to the NPRM, we expressed our concerns about the impact of small exhaust leaks and requested comment on design or onboard monitoring measures we could finalize to ensure that exhaust systems were manufactured and installed in such a way that leaks are prevented. We also asked for comment on whether we should implement a provision that would require manufacturers to demonstrate through engineering analysis or design that the possibilities of exhaust leaks have been addressed. Manufacturers indicated in their comments that they believe addressing exhaust leaks is unnecessary. We believe otherwise. Data we have seen suggest that very large emission effects can occur due to very small leaks. Consequently, we are finalizing a provision in today's rule that will require, as part of the certification process, for manufacturers to indicate that they have conducted an engineering analysis of the exhaust system. This VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6799 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 125 40 CFR Part 80, subpart F. analysis must cover the entire exhaust system, including air injection systems, from the engine block exhaust manifold gasket surface to a point beyond the last catalyst or oxygen sensor. This analysis must determine whether the exhaust system has been designed to facilitate leak free assembly, installation, repair and operation for the full useful life of the vehicle. With regard to the concept of `` facilitating leak free repair'', we intend that manufacturers should ascertain that the exhaust system can be removed in a dealership or repair shop for repairs to the exhaust system itself or to other components of the vehicle and be able to be reassembled and reinstalled in a leak free manner using commonly available tools. It is not our intention that the concept of `` facilitating leak free repair'' apply to situations of gross misuse, tampering or serious vehicle damage.

L. The Future Development of Advanced Technology and the Role of Fuels The EPA staff will continue to assess the emission control potential of vehicles powered by technologies such as lean burn and/ or fuel efficient technologies, including diesel engines equipped with advanced aftertreatment systems, gasoline direct injection engines, and other technologies that show promise for significant advances in fuel economy and meeting the Tier 2 standards in the post 2004 time frame. In this assessment, we will maintain a `` systems'' perspective, considering the progress of advanced vehicle technologies in the context of the role that sulfur in fuels plays in enabling the introduction of these advanced technologies or maximizing their effectiveness.

M. Miscellaneous Provisions We are finalizing, as proposed, to continue existing emission standards from Tier 1 and NLEV that apply to cold CO, certification short testing, refueling, running loss, and highway NOX. We are discontinuing, as proposed, the 50 degree ( F) standards and testing included in the NLEV program. The 50 degree standards are a part of the NLEV program because that national program adopted California requirements virtually in their entirety. These standards had not previously been part of any federal program. We are also discontinuing idle CO standards for LDTs, based upon comment. These standards are adequately covered by the certification short test standards. VI. Gasoline Sulfur Program Compliance and Enforcement Provisions A. Overview The gasoline sulfur program promulgated today has many of the same features as the reformulated gasoline/ conventional gasoline ( RFG/ CG) program, including refinery averaging, refinery and downstream level caps, and the generation and use of credits. These features raise similar compliance issues for both programs. As a result, the enforcement mechanisms of the gasoline sulfur rule generally track those of the RFG/ CG rule, where applicable. Because low sulfur gasoline is necessary to avoid significant impairment of Tier 2 motor vehicle emissions technology, we believe measures are needed to assure that gasoline meets the standards promulgated in today's rule at the time the gasoline leaves the refinery gate or is imported, and to assure that the quality of the gasoline is maintained downstream of the refinery. More specifically, today's rule includes the following provisions: · Refiners and importers must test each batch of gasoline produced or imported for sulfur content and maintain testing records and retain test samples; · Refiners and importers must submit reports regarding compliance with the average standards and credit provisions; · Attest procedures 125 similar to those of the RFG/ CG rule will be applied to the sulfur standards and credit provisions; · Refiners and importers are prohibited from using, selling or purchasing invalid sulfur credits, and are required to adjust compliance calculations if invalid credits have been used, sold or purchased; · Small foreign refiners subject to the small refiner standards described in section IV. C. above must comply with the rule's small refiner compliance requirements and other requirements to ensure the separation of such foreign gasoline from all other gasoline to the U. S. port of entry; any foreign refiners participating in the early credit generation program must also meet certain provisions concerning credit generation, including reporting and recordkeeping; · All regulated parties in the gasoline distribution system who are downstream from the refiner or importer must comply with downstream sulfur cap standards; · Regulated parties are subject to presumptive liability for violations at a party's own facility and for violations at other facilities that could have been caused by the regulated party; branded refiners are subject to liability for violations occurring at branded facilities. · Refiners and distributors may implement downstream quality assurance testing to assure compliance and to establish an element of defense against presumptive liability. As in other fuels programs, the sulfur standards apply to all motor vehicle fuel that meets the definition of gasoline, except for aviation fuel and racing gasoline, as was proposed in the NPRM. See 40 CFR 80.2( c). Gasoline sulfur standards apply, however, to gasoline that is ultimately used in nonroad equipment or marine engines. As we noted in the NPRM, we are aware there are certain fuels, such as aviation fuel and racing fuel, that are generally segregated from gasoline throughout the distribution system. Where such fuels are segregated from motor vehicle gasoline and not made available for use in motor vehicles, the fuel is not subject to sulfur rule standards. However, if such fuels are not segregated throughout the distribution system, but are used as motor vehicle gasoline or are commingled with motor vehicle gasoline, then any person who introduces such fuels into the gasoline distribution system is a refiner, subject to all the refiner requirements of today's regulations, including registration, reporting, testing and meeting the national refiner average and cap standards for the volume of gasoline that person added to the distribution system. Today's rule adopts the provisions concerning fuel used for racing vehicles as proposed. One commenter suggested that racing gasoline or aviation gas should be allowed to be used as motor vehicle gasoline by downstream parties so long as the racing gasoline or aviation gas does not exceed the applicable downstream cap standard. We disagree. Racing gas that meets the applicable downstream sulfur cap would nevertheless not be subject to the refinery gate cap or averaging standards, and may not meet such standards. Allowing such fuels to be distributed for motor vehicle use would thus circumvent the intent of the rule. The rule promulgated today clarifies the definition of `` refinery'' at 40 CFR 80.2( h), as was proposed in the NPRM. We received no comments on this clarifying change. Specifically, section 80.2( h) now provides that `` refinery''

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6800 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 126 The term `` oxygenate blenders'' includes `` ethanol elnders.'' 127 Reformulated Gasoline and Anti dumping Questions and Answers, ( 11/ 12/ 96); Proposed Rule for Modifications to Standards and Requirements for Reformulated and Conventional Gasoline; 62 FR 37337 et seq. ( July 11, 1997). 128 62 FR 37337 et seq. ( July 11, 1997) ( proposed 40 CFR 80.84). means any facility, including a plant, tanker truck or vessel where gasoline or diesel fuel is produced, including any facility at which blendstocks are combined to produce gasoline or diesel fuel, or at which blendstock is added to gasoline or diesel fuel. This is consistent with all current EPA fuels rules, interpretations, policies and question and answer documents.

Oxygenate Blenders In the NPRM we proposed that oxygenate blenders 126 would not be subject to the refiner sulfur standard like other blenders, because we felt it unlikely that oxygenates will have sulfur levels that will raise the sulfur content of the gasoline. This approach also was proposed because gasoline is the denaturant normally used to produce denatured ethanol. However, we received comments that denatured ethanol may contain as much as 50 ppm sulfur, which could result in significant increases in sulfur content from ethanol blending alone. While it is true that some of today's gasoline has a sulfur content as high as 1,000 ppm which if used as an ethanol denaturant results in ethanol having a sulfur content of 50 ppm, the average sulfur content of gasoline is about 300 ppm which if used as an ethanol denaturant results in ethanol with a sulfur content of 15 ppm. In addition, when the gasoline sulfur standards being promulgated today are in effect, the average sulfur levels of gasoline will be significantly reduced, which will further reduce the sulfur content of denatured ethanol to very low levels. For this reason, we are finalizing the regulation as proposed that oxygenate blenders are not subject to refiner sulfur standards. However, if gasoline blendstock instead of finished gasoline is used as a denaturant for ethanol the oxygenate blender who adds the ethanol would become a `` refiner,'' who is required to demonstrate compliance with the sulfur standards for the denatured ethanol added to gasoline. This is because the oxygenate blender would be adding a blendstock along with the ethanol, which subjects the blendstock blender to refiner standards and requirements. Moreover, if the blendstock has a high sulfur content the denatured ethanol could have a sulfur content greater than 30 ppm, or even greater than 80 ppm, which could make compliance by such a `` refiner'' difficult or impossible. In addition, as discussed above, in certain cases ethanol is included in the refinery compliance calculations of the refiner who produced the gasoline or RBOB with which the ethanol is blended. Refiners assume this ethanol has no sulfur content, an assumption that could be incorrect if high sulfur blendstock is used as the denaturant. For these reasons we believe it is important that ethanol blenders use denatured ethanol with a sulfur content of 30 ppm or less, which would occur if the current practice of using finished gasoline as ethanol denaturant continues. In order to ensure this result, the regulations include a provision that prohibits ethanol blenders from using denatured ethanol with a sulfur content greater than 30 ppm. We believe ethanol blenders can comply with this requirement through commercial arrangements with their ethanol suppliers, that specify the maximum sulfur content of denatured ethanol. In addition, ethanol blenders can assure compliance with this requirement by testing to determine the sulfur content of denatured ethanol received.

Gasoline Treated as Blendstock ( GTAB) One commenter suggested that the Agency policy under the RFG/ CG rule that allows certain imported gasoline to be treated as a blendstock by importerrefiners should be applied to today's rule. The GTAB policy was originally issued in the RFG Question and Answer document, and was subsequently published as part of a proposed RFG rulemaking in 1997.127 We intend to address GTAB issues in that RFG rulemaking, including issues regarding compliance with today's rule.

Transmix We are aware that when gasoline meeting the requirements finalized in today's rule is transported through pipelines, there will be some situations where adjacent distillate product in the pipeline will mix with a portion of the gasoline to create an interface product, commonly referred to as transmix. This transmix may not be blended into the diesel fuel because the gasoline in the transmix may result in diesel fuel performance problems. Historically, this type of transmix product has either been blended into the gasoline, in limited concentrations, or the transmix has been separated into its gasoline and distillate components at a reprocessing plant. However, the practice of blending the transmix into gasoline may result in violations of the downstream standards for RFG, and such blending could violate the downstream sulfur caps finalized in today's rule, because many distillates have a very high sulfur content. Therefore, we believe regulatory provisions are needed to resolve these issues. We have not addressed transmix issues in today's rule because we have already proposed regulations regarding transmix blending and processing in another rulemaking. 128 We plan to address transmix issues, including issues regarding compliance with today's rule, in that rulemaking, which we plan to finalize in the near future.

Inability To Produce Conforming Gasoline in Extraordinary Circumstances Several commenters suggested the rule should include a provision, similar to the RFG rule provision at 40 CFR 80.73, to address situations where, due to extraordinary circumstances, a refiner or importer cannot produce or distribute conforming gasoline. Section 80.73 applies to refiners, importers and oxygenate blenders. Today's rule has adopted the provisions of section 80.73 for RFG and CG, for importers and refiners, but not for oxygenate blenders. This is because the gasoline sulfur program does not include provisions that would be expected to require oxygenate blender relief. In the remainder of this section we discuss enforcement issues regarding today's rule that are not covered in this Overview or in section IV. C., above.

B. Requirements for Foreign Refiners and Importers In the NPRM we proposed that standards for gasoline produced by foreign refineries that are not subject to small refiner individual refinery standards would be met by the importer. Standards for gasoline produced by a foreign refinery subject to an individual sulfur rule standard would be met by the foreign refinery, with certain limited exceptions as provided in the foreign refinery provisions. The rule promulgated today adopts the provisions as proposed, except for several changes aimed at clarifying the proposed requirements, changes relating to the temporary relief provision, and changes relating to foreign refiners' participation in the early credit program. These provisions are very similar to the foreign refinery provisions of the RFG/ CG rule.

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6801 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 129 40 CFR 80.94. 130 Small refiner and temporary refiner hardship individual refinery standards sunset January 1, 2008, except for any small refineries that receive a hardship extension not to exceed two years. 1. Requirements for Foreign Refiners With Individual Refinery Sulfur Standards or Credit Generation Baselines Under the RFG/ CG rule, EPA promulgated regulations 129 addressing the establishment and implementation of individual baselines for CG produced by certain foreign refiners. The purpose of these regulations is to ensure the compliance of gasoline supplied from foreign refineries with individual compliance baselines. It includes comprehensive controls, requirements and enforcement mechanisms to monitor the movement of gasoline from the foreign refinery to the U. S., to monitor gasoline quality and to provide for enforcement as necessary. In the NPRM, we proposed similar requirements for compliance with the applicable sulfur standards that would apply to any foreign refiner who demonstrates that it meets the sulfur program's small refiner criteria. We proposed that foreign refinery baselines would be based on annual average sulfur levels and the volume of gasoline imported to the U. S. during the same baseline period as would be applicable to domestic small refiners. In today's final rule we have also adopted provisions for foreign refiners to establish baselines to participate in the early credit generation program, and to request temporary relief. Any foreign refiner who obtains a foreign refinery gasoline sulfur baseline would be subject to the same requirements as domestic refiners with individual refinery baselines under today's rule. Additionally, provisions similar to the provisions at 40 CFR 80.94 would apply, which include: · Segregating gasoline produced at the small refinery until it reaches the U. S.; · Refinery registration; · Controls on product designation; · Load port and port of entry testing; · Attest requirements; and · Requirements regarding bonds and sovereign immunity. The rationale for these enforcement provisions is discussed more fully in the Agency's preamble to the final RFG/ CG foreign refineries rule ( 62 FR 45533 ( Aug. 28, 1997)). Several commenters suggested that the rule should have even stronger enforcement provisions concerning foreign refiners, including criminal provisions against foreign individuals who violate the requirements of the rule. While we agree that the rule's enforcement provisions pertaining to foreign refiners must be effective, we believe the proposed enforcement provisions are sufficient, and that attempts to further strengthen them would not significantly increase their overall effectiveness. Today's rule imposes various requirements on foreign refiners not required of domestic refiners, as noted above, which we believe are more effective for ensuring environmental compliance than criminal provisions would be for foreign individuals, in light of the potential difficulties of enforcing sanctions against foreign individuals. EPA's experience to date with the similar RFG/ CG requirements under section 80.94 of the RFG/ CG rule does not indicate the provisions are inadequate. Therefore, today's rule generally retains these provisions as proposed. The final rule makes several technical changes, including changes regarding baselines for foreign refiners, to be consistent with the requirements for domestic small refiners and refiners generating early credits finalized in today's rule. The rule's foreign refiner enforcement provisions now also apply to foreign refiners participating in the early credits program, and to the use of credits by foreign small refiners. One commenter stated that the language of the proposed § 80.410( n) would be too broad in that prohibiting any `` person'' from combining certified small foreign refiner gasoline with noncertified small foreign refiner gasoline or with certified small foreign refinery gasoline produced at a different refinery would prohibit even retail level commingling of such products. This was not intended and today's rule clarifies that such commingling can occur subsequent to importation. Under the proposal, when the small refiner standards sunset ( and additionally under today's rule, when the temporary refiner relief provisions sunset), 130 all gasoline would be subject to a single national averaged standard and one national refinery level cap. Thereafter, standards for all imported gasoline would be met by U. S. importers. We have retained this provision as proposed. With a single national average standard and cap standard, gasoline sulfur content can most readily be monitored at the U. S. importer level, since there will no longer be a special class of gasoline with different standards that would need to be monitored. 2. Requirements for Truck Importers Today's final rule adopts the proposed requirement for importers to sample and test each batch of gasoline imported. However, as noted in the preamble to the NPRM, for parties that import gasoline into the U. S. by truck, the every batch testing requirement would include testing the gasoline in each truck compartment, or if the gasoline is homogeneous, testing the gasoline in the truck. In the NPRM we recognized that this every batch testing requirement may not be feasible for truckers hauling many small loads of gasoline, and we therefore proposed a limited alternative approach for truck importers in lieu of every batch testing. The proposed alternative approach is based on the importer meeting the 30 ppm sulfur standard on a per gallon basis. Under this alternative approach, the importer would be allowed to rely on the sulfur results based on sampling and testing conducted by the operator of the foreign truck loading terminal. Because, in most cases, the terminal operator will not be subject to United States laws, we also proposed safeguards intended to ensure that the gasoline in fact meets the applicable standard. This includes the requirement that the importer conduct a quality assurance sampling and testing program independent from the sampling and testing conducted by the terminal. Under this approach the reporting requirements would be minimized since no averaging would be required. The environmental consequences of this approach would be neutral, because by meeting the 30 ppm sulfur standard on an every gallon basis the standard also would be met on average. One commenter stated that the 30 ppm per gallon standard would be difficult for truck importers to meet due to the fact that Canadian terminals may not always have gasoline with a sulfur content no greater than 30 ppm. The commenter suggested that truck importers be allowed to rely on testing conducted by the foreign gasoline terminal, as discussed above, to meet the average and cap standards like other importers. We agree that truck importers may have difficulty obtaining gasoline that meets the 30 ppm sulfur standard on a per gallon basis. Under Canadian regulations, Canadian refiners will be subject to a 150 ppm average standard and a 300 ppm cap in 2004, and in 2005 Canadian refiners will be subject to a 30 ppm average standard and an 80 ppm VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6802 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 131 Vol. 133 23/ 6/ 99 C. Gaz. II, 23 June 99 ( pp. 1469 et seq.) 132 In 2004, a 120 ppm cap; In 2005 and beyond, a 30 ppm cap. See Table IV. C.   1. 133 In 2004, a 120 ppm average standard and a 300 ppm cap; In 2005, a 30 ppm average standard, a corporate pool average no greater than 90 ppm, and a 300 ppm cap; In 2006 and beyond, a 30 ppm average standard and a 80 ppm cap. See Table IV. C.   1. cap. 131 This means that truck importers should be able to meet the standards applicable to other importers, including the ultimate average standard and cap standard under today's rule ( 30 ppm average and 80 ppm cap), without great difficulty. However, meeting a pergallon cap of 30 ppm might be difficult since the sulfur content of gasoline in the storage tanks of Canadian terminals, like those of U. S. terminals, will likely exceed 30 ppm at times, even after the 30/ 80 standards are implemented. We have concluded that we can address this concern by providing additional flexibility to truck importers, and still assure compliance. While today's rule retains the proposed alternative, with some modifications, it also provides a second alternative approach. Under this second approach, truckers are allowed to meet the national average and cap applicable to other importers, and rely on testing conducted by the foreign gasoline terminal so long as all the other requirements applicable to the proposed alternative approach are complied with. In addition, truckers using this second alternative approach will be subject to more extensive reporting than required for the proposed alternative, since the importer will have to demonstrate compliance with the annual average sulfur standard applicable to other importers. One commenter urged that truckers should be subject only to the national downstream cap. We cannot agree to this approach as it is not environmentally neutral relative to the national standards in effect for other importers and refiners. If truck importers were required to meet only the downstream cap, sulfur levels for their imported gasoline could be substantially higher than for other importers, which could have a detrimental environmental consequence. One commenter stated that the 30 ppm per gallon standard for truck importers should not go into effect until the 30 ppm standard becomes the national average standard for refineries and other importers. We agree. Under today's rule, the per gallon standards applicable to truck importers under the proposed alternative will be the same sulfur level as the sulfur average standard that applies to other importers ( in 2004 there is no average standard; however, truck importers using this alternative compliance approach must meet the corporate pool standard on a per gallon basis). 132 Under the second alternative approach, the truck importer will be subject to the same average standard and cap standard applicable to other importers. 133 Similar provisions as provided above apply to truck importers for gasoline subject to the geographic phase in area ( GPA) standards ( see section IV. C. of this preamble for a discussion of GPA standards). However, because of the small volumes of truck imported gasoline, and the consequent difficulty in meeting corporate pool averages for a trucker who imports gasoline into both the GPA and areas outside the GPA, today's rule requires that for truck importers using the averaging option, the corporate pool average does not have to be met. The 150 ppm average standard and the 300 ppm cap standard apply to gasoline imported by truck into the GPA in 2004 through 2006. For truck importers meeting the per gallon standard option for gasoline imported into the GPA, the per gallon standards are 150 ppm for 2004 through 2006.

Truck Import of Foreign Small Refiner Gasoline The NPRM addressed issues associated with gasoline produced by a foreign small refinery with an individual baseline and certified as subject to the refinery's individual interim standard ( S   FRGAS), and imported by truck. The proposed requirements for S   FRGAS included segregating the gasoline from all other gasoline from the refinery gate to the U. S., so that compliance with standards can be tracked. For ordinary, non truck importers, each batch of certified S   FRGAS must be tested at the load port and port of entry. Today's rule finalizes these proposed requirements for S   FRGAS. However, in the case of gasoline imported by truck, the NPRM acknowledged that the testing and other procedures proposed for certified S   FRGAS may not be feasible. As a result, we proposed an alternative to the requirement for testing every truckload of imported certified S   FRGAS, and to other importer requirements. This alternative approach includes a requirement that small foreign refiners producing any S   FRGAS that will be imported by truck submit a petition to EPA that includes a plan which is designed to ensure that certified S   FRGAS remains segregated from all other gasoline from the refinery to the U. S. Rather than specifying the precise requirements of such a plan in the regulations, we proposed to allow the refiner to develop its own procedures for ensuring that S   FRGAS remains segregated. However, the plan must contain certain elements, such as product transfer documents which identify the origin of the gasoline and prohibit its commingling with any product other than certified S   FRGAS from that refinery. This approach also requires the refiner of such truck imported gasoline to receive and maintain all such product shipment documents, including U. S. import documents, for five years and review these to ensure that segregation is maintained until reaching the U. S. To ensure that refiners conduct this review, we proposed to require the refiner's plan to include attest audit procedures to be conducted annually by an independent third party. We received no comments on this proposal for ensuring the integrity of S   FRGAS imported by truck. Today's final rule adopts the petitioning provision to permit alternative segregation procedures for S   FRGAS imported by truck as proposed since we continue to believe that it will provide flexibility to foreign refiners and to importers and will adequately assure enforceability.

C. What Standards and Requirements Apply Downstream?

We proposed per gallon cap standards that would apply to all parties in the distribution system downstream of the refinery and importer level, including pipelines, terminals, oxygenate blenders, distributors, carriers, retailers and wholesale purchaser consumers. We believe that downstream cap standards and compliance monitoring based on downstream standards are needed to ensure that the sulfur level of gasoline remains below the cap level when dispensed for use in motor vehicles, to avoid adverse emissions consequences that would be caused by the use of gasoline having a sulfur content above the cap level. The following discussion addresses downstream standards generally, downstream standards and requirements for gasoline produced by refineries subject to standards under § 80.240 and 80.270, and downstream standards and requirements for gasoline produced or imported for the geographic phase in area ( GPA).

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6803 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 134 ASTM standard method D 2622   98, entitled ` Standard Test Method for Sulfur in Petroleum Products by Wavelength Dispersive X ray Fluorescence Spectrometry.'' Determination of Downstream Cap Standards We proposed that the downstream standards would be more lenient than the refinery level cap standards so that refiners and importers can produce gasoline that equals the refinery level cap standard. We did so because it has been EPA's experience that if a refiner produces gasoline that equals, or almost equals a standard, that gasoline may be shown to violate the standard when subsequently tested at a location downstream of the refinery due to testing variability. As a result, parties downstream of the refinery ( primarily pipelines) set commercial specifications for the quality of the gasoline they will accept that are more stringent than the standard that applies to the downstream party. This, in effect, forces refiners to produce gasoline that is `` cleaner'' than the refinery level standard. In other fuels programs ( for example, the benzene per gallon standard for RFG) we resolved this concern by announcing enforcement tolerances for fuels standards that apply downstream of the refinery level, thereby reducing the need for pipelines to set specifications more stringent than the refinery level standards. We believe that having more lenient downstream standards will have the same effect as enforcement tolerances. In the NPRM we proposed that the values of the downstream cap standards would reflect the testing variability that could reasonably be expected when different laboratories test gasoline for sulfur content; that is, lab to lab variability, or reproducibility. Industry commenters supported this approach, and today's rule adopts this approach. For gasoline subject to the 80 ppm refinery level sulfur cap, the downstream maximum standard is 95 ppm. This difference reflects the reproducibility established by the American Society for Testing and Materials ( ASTM). 134 For gasoline subject to refinery level sulfur caps higher than 80 ppm, which will be the case for gasoline produced before 2006 and for gasoline produced by certain small refineries through 2007, the downstream cap is similarly established by using ASTM reproducibility data. The national downstream cap is 378 in 2004, when the refinery level cap can be as high as 350 ppm. The national downstream cap in 326 in 2005, when the refinery level cap is 300. Because these downstream caps are based on sulfur test reproducibility, we intend to amend the rule in the future if improvements in test precision are made for the designated method. We may also consider amending the rule to make some other method the designated method if a more precise method is available in the future.

The Proposed Downstream Standards Compliance Scheme Under the proposal, if gasoline produced by a small refiner with a less stringent cap standard is mixed in the distribution system with gasoline subject to the national cap standard, the entire mixture would then be subject to the higher cap standard, even though most of the gasoline, at the refinery level, would be subject to the more stringent national cap standard. We proposed that during the period that small refinery individual standards are in effect, for gasoline that is comprised, in whole or in part, of small refiner gasoline with a higher sulfur cap standard than the national cap standard, product transfer documents ( PTDs) would specify that the gasoline is small refiner gasoline and the level of the downstream cap applicable to the gasoline. The purpose of the proposed provisions was to make it possible to determine the standard that applies to any gasoline downstream of the refinery. If the gasoline contains no small refiner gasoline, the downstream standard would be based on the national cap. If the gasoline is comprised, in whole or in part, of small refiner gasoline subject to a less stringent cap standard, the downstream standard would be based on this less stringent cap standard. As gasoline is mixed and remixed in the fungible distribution system, the percentage of gasoline that is small refinery gasoline will progressively diminish until the fungibly mixed gasoline meets the national downstream cap. Therefore, we proposed in the NPRM that a downstream party may no longer classify gasoline as containing small refiner gasoline if a test result shows the sulfur content of the gasoline is below the applicable national ( i. e., not small refiner) downstream cap. Several commenters suggested that this tracking scheme would be unworkable. Some of these comments were based on the belief that the proposal intended to require segregation of the small refiner gasoline through the distribution system. The proposal was not intended to require that small refiner gasoline must be segregated, and under today's final rule there is no requirement that small refiner gasoline must be segregated from gasoline produced by other refiners. Some commenters also believed that testing by downstream parties would be required under the proposed rule. These commenters were concerned that a downstream testing requirement could be costly and could delay distribution of gasoline. This latter point is addressed later in this discussion. Some commenters stated that the proposed PTD provisions of the downstream enforcement scheme were too complex and that some means other than changing PTD designations should be found to track small refiner gasoline. Other commenters, including automobile manufacturer trade associations, stated they believed that EPA enforcement and testing downstream of the refinery is necessary to assure that gasoline complies with standards at the retail gasoline pump. We have carefully considered the comments and we have concluded that the tracking scheme as proposed would not be effective because most pipeline shipments are expected to include some small refiner gasoline ( although the amount of small refiner gasoline may comprise less than 1% of the shipment) and therefore, most of the gasoline in the nation might be classified as small refiner gasoline, even though only a small fraction of the supply will actually be small refiner gasoline. Therefore, a downstream cap much less stringent than the national downstream cap would attach to most gasoline produced to meet the national refinery standards, and the scheme would not be effective in monitoring whether the quality of most gasoline is maintained after it enters the gasoline distribution system. The proposed scheme could lead to other unintended results. The gasolines contained in a fungible mixture in the distribution system may not be fully mixed and homogenous. As a result, a distinct, unmixed, portion of gasoline within a fungible mixture could be small refiner gasoline with a sulfur content above the national downstream cap, while other parts of the fungible mixture would meet the national downstream cap. This is especially true for fungible mixtures in pipelines and could also be true for gasoline in storage tanks. If a test result for a sample collected from part of such a fungible mixture in a pipeline shows compliance with the national downstream cap, under the proposed rule the entire mixture would become subject to the national downstream cap, and the pipeline PTDs could not classify the gasoline as small refiner gasoline. Thus,

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6804 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 135 For example, most pipeline shipments are expected to contain small refiner gasoline in the two U. S. pipelines that carry the highest volume of gasoline. However, in most shipments the small refiner gasoline is expected to account for substantially less than 5% of the total volume of gasoline in the shipment. 136 For purposes of this discussion, `` small refiner gasolne'' includes any gasoline from a refiner to whom EPA grants relief based on a showing of extreme hardship. 137 See section IV. C. of this preamble for refiner/ importer standards and the discussion below regarding downstream compliance and enforcement provisions. under the proposal, parties downstream of the pipeline could be subject to liability because they might receive small refiner gasoline not meeting the national standard even where a pipeline PTD does not represent that the gasoline is small refiner gasoline. That was not intended by the proposal. Because of these difficulties, we concluded that the proposed scheme must be modified to address these concerns, in order for there to be effective enforcement of the downstream standards. We are concerned that the quality of gasoline will be affected downstream of the refinery. Gasoline may be contaminated with high sulfur blendstocks or other high sulfur products such as distillates after it leaves the refinery gate. There is likely to be an economic incentive for some downstream parties to sell or use gasoline or blendstocks that have a higher sulfur content than the national downstream standard. The inability to monitor downstream compliance would result in environmental degradation that is not intended by the rule, and in an inability to assure a level playing field for all parties in the gasoline distribution industry.