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    \273\ As a result, oxygenate blenders would not be subject to
the RFG, Anti-dumping or MSAT1 regulations except for gasoline to
which they add other blendstocks in addition to the oxygenate.
---------------------------------------------------------------------------

2. Averaging, Banking and Trading Program
a. Early Credit Generation
    As discussed, early credit generation could occur as early as the
averaging period beginning June 1, 2007, through the averaging period
ending December 31, 2010, or ending December 31, 2014, for small
refiners. In order to generate early benzene credits, a refinery would
first establish a benzene baseline which is its average benzene
concentration over the period January 1, 2004, through December 31,
2005. A refinery would be eligible to generate early credits when it
reduced its annual average benzene concentration by at least 10%
compared to its benzene baseline. Credits would then be calculated
based on the entire reduction in benzene below the baseline. Generation
of early credits for the first averaging period, June 1, 2007 through
December 31, 2007, which is less than a calendar year, would be based
on the average benzene level of the gasoline produced only during this
period. Gasoline produced before June 1, 2007, would not be included in
the credit generation determination.
    We are proposing to allow only refiners (and not importers) to
generate early benzene credits because it is at the refinery, or
production level, where real changes in the production of gasoline can
be made. Importers would simply seek out blending streams or gasoline
with lower benzene, but would not have to invest or take other action
involving the production of the lower benzene gasoline. Furthermore,
many importer operations grow in volume, shrink in volume, come into
existence and go out of existence on a continual basis, making it
difficult to assess the appropriateness of both the baseline and any
early credits. Thus, even though an importer may have had regular,
consistent import activity during the 2004-2005 baseline period, we are
proposing that only refiners would be allowed to apply for a benzene
baseline, and if approved, to generate early benzene credits based on
reductions in future averaging period gasoline benzene levels.
    As discussed above, one of the purposes of allowing the early
generation of benzene credits would be to promote reductions in benzene
through refinery processing changes. We are concerned that benzene
reductions due to increased oxygenate use would result in reduced
benzene concentrations. Oxygenate use (in the form of ethanol) in CG is
expected to increase as a result of the Energy Policy Act
requirements.\274\ This additional oxygenate will dilute gasoline
benzene levels as well as extend the gasoline pool. As a result,
refinery average benzene levels would be likely to be lower during the
early credit generation period than during the benzene baseline period
(2004-2005) if there is an increase in the amount of CG refiners send
for downstream blending with ethanol (CBOB). We are concerned that
reductions in fuel benzene levels due to oxygenate addition
significantly beyond the average levels of recent years could result in
windfall early credit generation for some refineries. We request
comment on the likelihood of windfall early credit generation, and if
such a situation were to occur, whether it would warrant limiting early
benzene credits by consideration of the average oxygenate use during
the baseline period compared to the early credit generation period or
by adjusting the early credit trigger point. We believe this would be
less of an issue during the standard credit generation period beginning
in 2011 (2015 for small refiners) because of the more stringent
requirements for generating standard credits (getting below the 0.62
vol% standard) compared to the early credit generation requirements
(achieving a minimum 10% reduction in baseline benzene levels).
---------------------------------------------------------------------------

    \274\ Even though the Energy Policy Act of 2005 eliminated the
oxygen mandate for RFG, oxygenate use (in the form of ethanol) in
RFG is expected to continue.
---------------------------------------------------------------------------

b. How Would Refinery Benzene Baselines Be Determined?
    As mentioned above, a refiner would submit a benzene baseline
application to EPA for any of its refineries which planned to generate
early credits. The benzene baseline would be the volume-weighted
average of the benzene levels of the gasoline produced by the refinery
during 2004-2005. Note that the gasoline would be the combination of
the refinery's RFG and CG, if applicable, and would exclude California
gasoline and other fuels exempted from the proposed standard. The
benzene values used in the benzene baseline calculation should be the
same as used in the RFG, Anti-dumping and MSAT1 compliance
determinations. We are not proposing provisions for adjusting these
benzene baselines based on circumstances during the baseline years or
otherwise.
    Though we expect that most refineries that apply for a benzene
baseline would have data for both 2004 and 2005, if a refinery was shut
down for part of the 2004-2005 period, it could still be able to
establish a benzene baseline. Under these circumstances, the refiner
would have to provide and justify, using refinery and engineering
analyses, an appropriate adjusted value that reflects the likely
average benzene concentration for the refinery, had it been fully
operational. A refinery that was non-operational for the entire period
January 1, 2004 through December 31, 2005 would not be able to
establish a benzene baseline and therefore not allowed to generate
early credits.
c. Credit Generation Beginning in 2011
    Credits could be generated in any annual averaging period beginning
January 1, 2011, or for small refiners, beginning January 1, 2015.
These credits, also called standard benzene credits, could be generated
by a refinery or importer when the refinery's or importer's annual
average benzene concentration was less than the proposed standard of
0.62 vol%.
    While the proposed benzene standard is a 49-state standard due to
the fact that California would maintain its existing benzene standard,
we request comment on the appropriateness of allowing California
refineries to generate credits that could be used to demonstrate
compliance outside of California.
d. How Would Credits Be Used?
    We are proposing that all gasoline benzene credits that are
properly created may be used equally and interchangeably. That is, once
generated, there would be no difference

between early credits and standard credits, except for their credit
life, as discussed below. Under this proposal, credits could be
transferred to another refiner or importer, or they could be banked by
the refinery or importer that created them for use or transfer in a
later compliance period.
    As in past credit programs, we are proposing some limits on credit
use. First, we are proposing to limit the number of times a credit
could be transferred. At the end of the allowable number of transfers,
the credit would have to be used by the last transferee before its
expiration date. Second, we are proposing that credits would have a
finite life whether or not transferred. We are proposing that early
credits, those generated prior to 2011, would have a three-year credit
life from the start of the program in 2011. These credits would have to
be used to achieve compliance with the proposed benzene standard in
2011, 2012, and/or 2013, or they would expire. In addition, we are
proposing that credits generated in 2011 and beyond (or early credits
generated by small refiners during this period) would have to be used
within five years of the year in which they were generated. We had
considered requiring credits be used in order of their generation date,
that is, credits generated earlier would have to be used before credits
generated later. However, the finite credit life is likely to ensure
this usage, and thus we are not proposing to regulate credit use in
this manner. We are also proposing that credit life could be extended
by two years for any credits that are generated by or traded to
approved small refiners.
    Under the proposed regulations, a refiner or importer would have to
use all benzene credits in its possession before being allowed to have
deficit carryover, and would have to meet its own compliance
requirement before transferring any gasoline benzene credits. In the
case of invalid credits, or credits improperly created, all parties
would have to adjust their credit records, reports, and compliance
calculations to reflect proper credit use. The transferor would first
correct its own records and ensure its own compliance, and then apply
any remaining properly created credits to the transferee before trading
or banking those credits. See section X.A below for more discussion of
these issues.
3. Hardship and Small Refiner Provisions
a. Hardship
    The hardship provisions and requirements are extensively discussed
in section VII.E.2, and thus are only briefly addressed here. We are
proposing that a refiner for any of its refineries could seek temporary
relief from meeting the proposed benzene standard due to unusual
circumstances, including those situations, such as a natural disaster,
which would clearly be outside the control of the refiner. A refiner
would have to apply to EPA for this temporary relief, and EPA could
deny the application or approve it for an appropriate period of time.
However, given the existence of a flexible ABT program, EPA expects
that, prior to requesting hardship relief, the refiner would have made
best efforts to obtain credits in order to comply with the proposed
benzene standard. In past rulemakings, for example the gasoline sulfur
rule, the hurdle for receiving a hardship was very high, with very few
granted. While we are proposing these provisions again here, the
expectation is that the hurdle would be even higher. Given the
existence and flexibility afforded by the ABT program and the more
limited cost of the benzene standard, it is our expectation that as
long as a viable credit market existed, it would be difficult to
justify granting a hardship. Furthermore, the form of any relief we are
proposing is in the form of additional time to demonstrate compliance
via credits as opposed to any waiver of the standards.
b. Small Refiners
    As discussed earlier, we are proposing to allow small refiners to
meet the proposed benzene standard beginning with the 2015 averaging
period, which is four years later than non-small refiners and
importers. Small refiners could also generate both early and standard
credits if they can meet the requirements of those programs. A refiner
would have to apply to EPA by December 31, 2007 in order to be
considered a small refiner under this proposed rule even if the entity
was or had been considered a small refiner under other EPA rules. The
requirements for small refiners under this rule are detailed in section
VII.E.
4. Administrative and Enforcement Related Provisions
a. Sampling/Testing
    As under the Tier 2 program where a sulfur concentration must be
determined for every batch of gasoline, we are proposing that a benzene
concentration value also be determined for every batch of gasoline
produced or imported. Thus, as gasoline samples are taken for sulfur
measurement, they would also be taken for benzene measurement. The RFG
program, which has both a toxics emissions requirement and a per-gallon
benzene cap, already requires a benzene value to be determined for
every batch of gasoline. The Anti-dumping program, which has only a
toxics emissions requirement, allows benzene values to be determined
from composite samples. See 40 CFR 80.101(i). Thus, the proposed
sampling requirement would be a change from the current sampling
methodology allowed under the Anti-dumping provisions but makes it
consistent with the ongoing Tier 2 sulfur program. However, unlike the
gasoline sulfur requirements, this every batch testing requirement for
conventional gasoline benzene would not have to occur prior to the
batch leaving the refinery. Additionally, the batch numbering system
would be the same as that used for conventional gasoline sulfur.
    We are not proposing any changes to the benzene test methodology.
See 40 CFR 80.46(e). We are proposing sample retention requirements
similar to those in the gasoline sulfur provisions. See 40 CFR 80.335.
b. Recordkeeping/Reporting
    We are proposing to require that records be kept for each averaging
period in order to accommodate the proposed benzene standard and the
accompanying credit trading program. These records would include: the
benzene baseline calculation, if applicable; the number of early
credits generated, if applicable; the actual average benzene
concentration of gasoline produced or imported; the compliance benzene
value; any deficit; the number of credits generated; and records of any
credit transfers to or from the refinery or importer, including price
of the credits and dates of transactions. All of this information, and
any other information that EPA may require, such as information similar
to that proposed below for inclusion in the pre-compliance reports,
would be submitted in a refiner's or importer's annual report to the
Agency. Since we are proposing that the regulatory provisions for the
benzene control program would become the single regulatory mechanism
covering RFG and Anti-dumping annual average toxics requirements once
the benzene standard is in effect, and would replace the MSAT1
requirements, we expect to be able to streamline several of the current
reporting forms once the proposed program is fully implemented in 2015.
    As mentioned, we are also proposing to require that refiners and
importers submit pre-compliance reports in order to provide information
as to the likely number of benzene credits needed and

available, and how the refiner or importer plans to achieve compliance
with the proposed benzene requirements. These reports would be required
annually each June 1 from 2001 through 2011 (or through 2015 for small
refiners). In addition to information regarding gasoline production and
the number of credits expected to be used or produced, the pre-
compliance reports would include information regarding the benzene
reduction technology expected to be used, any capital commitments, and
information on the progress of the installation of the technology. We
are also proposing that these reports include price and quantity
information for any credits bought or sold. The reports would include
updates from the previous year's estimates, and comparison of previous
year actual production to the projected values.
c. Attest Engagements, Violations, Penalties
    We are proposing to require attest engagements for generation of
both early and other credits, credit use, and compliance with the
proposed program, using the usual procedures for attest engagements.
The violation and penalty provisions applicable to this proposed
benzene program would be very similar to the provisions currently in
effect in other gasoline programs. We request comment on the need for
additional attest engagement, violation or penalty provisions specific
to the proposed benzene program.
5. How Would Compliance With the Provisions of the Proposed Benzene
Program Affect Compliance With Other Gasoline Toxics Programs?
    As discussed above, we expect that virtually all refineries will
reduce benzene from their current levels, and no refineries will
increase it. This impact on benzene levels, combined with the pre-
existing gasoline controls in sulfur, RVP, and VOC performance, means
that compliance with the benzene content provisions is also expected to
lead to compliance with the annual average requirements on benzene and
toxics performance for reformulated gasoline and the annual average
Anti-dumping toxics performance for conventional gasoline. EPA is
therefore proposing that upon full implementation in 2011 the
regulatory provisions for the benzene control program would become the
single regulatory mechanism used to implement these RFG and Anti-
dumping annual average toxics requirements, replacing the current RFG
and Anti-dumping annual average toxics standards as unnecessary. The
proposed benzene control program would also replace the MSAT1
requirements. However, we propose the RFG per gallon benzene cap of 1.3
vol% remain in effect; we are requesting comment on the need to retain
this requirement for RFG. Note that compliance with the proposed
benzene standard would ensure compliance with the aforementioned RFG,
Anti-dumping and MSAT1 requirements beginning with the 2011 averaging
period, or the 2015 averaging period for small refiners. Thus, during
the early credit generation period, 2007 through 2010, all entities
would still be required to comply with their applicable RFG, Anti-
dumping and MSAT1 requirements. In addition, from 2011 through 2014,
small refiners would have to continue to meet their applicable RFG,
Anti-dumping and MSAT1 requirements. As discussed earlier in section
VII.E.2, we are also requesting comment on the option of allowing some
refineries to meet the proposed benzene standard early, thus replacing
the current RFG and Anti-dumping annual average toxics provisions and
replacing MSAT1 requirements for these refineries.

VIII. Gas Cans

    Gas cans are consumer products people use to refuel a wide variety
of gasoline-powered equipment. Their most frequent use is for refueling
lawn and garden equipment such as lawn mowers, trimmers, and chainsaws.
They are also routinely used for recreational equipment such as all-
terrain vehicles and snowmobiles, and for passenger vehicles which have
run out of gas. The gas cans are red, per ASTM specifications, and
about 95 percent of them are made of plastic (high density polyethelene
(HDPE)). There are approximately 20 million gas cans sold annually and
about 80 million cans are in use nationwide. The average lifetime of a
gas can is about 5 years.
    California has established an emissions control program for gas
cans which began in 2001. Since then, some other states have adopted
the California requirements. Last year, California adopted a revised
program which is very similar to the one we are proposing in this
rulemaking. Manufacturers are required to meet the new requirements in
California by July 1, 2007 at the latest. State programs are discussed
further in section VIII.A.3., below.

A. Why Are We Proposing an Emissions Control Program for Gas Cans?

1. VOC Emissions
    We are proposing standards to control VOCs as an ozone precursor
and also to minimize exposure to VOC-based toxics such as benzene and
toluene. Gasoline is highly volatile and evaporates easily from
containers that are not sealed or closed properly. Although an
individual gas can is a relatively modest emission source, the
cumulative VOC emissions from gas cans are quite significant. We
estimate that containers currently emit about 315,000 tons of VOC
annually nationwide, which is equal to about 5 percent of the
nationwide mobile source inventory (see section V.A.). Left
uncontrolled, a gas can's evaporative emissions are up to 60 times the
VOC of a new Tier 2 vehicle evaporative control system. Gas can
emissions are primarily of three types: evaporative emissions from
unsealed or open containers; permeation emissions from gasoline passing
through the walls of the plastic containers; and evaporative emissions
from gasoline spillage during use.
    As discussed in section IV. above, ozone continues to be a
significant air quality concern, and gas cans are currently an
uncontrolled source of VOC emissions in many areas of the country.
Section 183(e) of the Clean Air Act directs EPA to study, list, and
regulate consumer and commercial products that are significant sources
of VOC emissions. In 1995, after conducting a study and submitting a
Report to Congress on VOC emissions from consumer and commercial
products, EPA published an initial list of product categories to be
regulated under section 183(e). Based on criteria that we established
pursuant to section 183(e)(2)(B), we listed for regulation those
consumer and commercial products that we considered at the time to be
significant contributors to the ozone nonattainment problem, but we did
not include gas can emissions.\275\ After analyzing the emissions
inventory impacts of gas cans, EPA plans to publish a Federal Register
notice that would add portable gasoline containers to the list of
consumer products to be regulated and explain the rationale for this
action in detail. EPA will afford interested persons the opportunity to
comment on the data underlying the listing before taking final action
on today's proposal. In today's notice, EPA is proposing that the
standards for

portable gasoline containers represent ``best available controls'' as
required by section 183(e)(3)(A). Determination of the ``best available
controls'' requires EPA to determine the degree of reduction achievable
through use of the most effective control measures (which includes
chemical reformulation, and other measures) after considering
technological and economic feasibility, as well as health, energy, and
environmental impacts.\276\
---------------------------------------------------------------------------

    \275\ 60 FR 15264 ``Consumer and Commercial Products: Schedule
for Regulation,'' March 23, 1995.
    \276\ See section 183(e)(1); see also section 183(e)(4)
providing broad authority to include ``systems of regulation'' in
controlling VOC emissions from consumer products.
---------------------------------------------------------------------------

2. Technological Opportunities to Reduce Emissions From Gas Cans
    Gas can manufacturers have already developed and applied emissions
controls in response to California requirements. Traditional gas cans
typically have a spout for pouring fuel and a vent at the rear of the
can to allow air to flow into the cans when in use. About 70 percent of
emissions from gas cans are due to evaporative losses from caps being
left off one or both of these openings. The primary way to reduce these
emissions is to design cans that are not easily left open. To
accomplish this, gas can manufacturers have developed spouts that
incorporate a spring mechanism to close cans automatically when not in
use. Many spout designs are opened by consumers pushing the spout
against the equipment fuel tank. Some designs incorporate a button or
trigger mechanism that the consumer pushes to start fuel flow and then
releases when done refueling. Also, some cans are made without rear
vents, incorporating venting into the spouts and thus eliminating one
potential emission point. The consumer still must remove the spout to
refill the cans but would replace the spout once the can is full in
order to prevent spillage during transport.
    The auto-closing spouts reduce spillage by giving consumers greater
control over the fuel flow. The spouts allow consumers to place the can
in position before activating or opening the cans. Once the receiving
fuel tank is full, consumers can easily release the mechanism to stop
the fuel flow. This reduces spillage during the positioning and removal
of the can and reduces overall spillage by about half. Consumers
generally appreciate the greater control over the refueling event.
    Blow-molding is used to manufacture gas cans. Typically, blow-
molding is performed by creating a hollow tube, known as a parison, by
pushing high-density polyethylene (HDPE) through an extruder with a
screw. The parison is then pinched in a mold and inflated with an inert
gas. The HDPE plastics used for gas cans allow gasoline molecules to
permeate (i.e., pass through) the walls of the container. This
contributes to overall emission losses from the containers. There are
several effective permeation barriers that can be incorporated into the
can walls. Gas can manufacturers have used several of these methods to
meet California program requirements. The technologies were initially
developed to meet automotive evaporative emissions standards and are
now also being used for other types of fuel tanks. The barriers are
either incorporated as part of the manufacturing process of the can
(either as a layer or by mixing the barrier materials with the
plastics) or are applied to the cans after they are manufactured. These
barriers typically achieve reductions of 85 percent or better compared
to untreated cans.
    Some gas can manufacturers have produced non-permeable plastic gas
cans by blow molding a layer of ethylene vinyl alcohol (EVOH) or nylon
between two layers of polyethylene. This process is called coextrusion
and requires at least five layers: The barrier layer, adhesive layers
on either side of the barrier layer, and HDPE as the outside layers
which make up most of the thickness of the gas can walls. However, this
blow-molding process requires two additional extruder screws, which
significantly increases its cost.
    An alternative to coextrusion is to blend a low-permeability resin
with the HDPE and extrude it with a single screw to create barrier
platelets. The trade name typically used for this permeation control
strategy is Selar. The low-permeability resin, typically EVOH or nylon,
creates non-continuous platelets in the HDPE gas can which reduce
permeation by creating long, tortuous pathways that the hydrocarbon
molecules must navigate to pass through the gas can walls. Although the
barrier is not continuous, this strategy can still achieve greater than
a 90-percent reduction in permeation of gasoline. EVOH has much higher
permeation resistance to alcohol than nylon; therefore, it would be the
preferred material to use for meeting our proposed standard (described
at Section B., below), which is based on testing with a 10-percent
ethanol fuel.
    Another type of low permeation technology for HDPE gas cans is
treating the surfaces of plastic gas cans with a barrier layer. Two
ways of achieving this are known as fluorination and sulfonation. The
fluorination process causes a chemical reaction where exposed hydrogen
atoms are replaced by larger fluorine atoms, creating a barrier on the
surface of the gas can. In this process, a batch of gas cans is
generally processed post production by stacking them in a steel
container. The container is then voided of air and flooded with
fluorine gas. By pulling a vacuum in the container, the fluorine gas is
forced into every crevice in the gas can. As a result of this process,
both the inside and outside surfaces of the gas can would be treated.
As an alternative, gas cans can be fluorinated on the manufacturing
line by exposing the inside surface of the gas can to fluorine during
the blow molding process. However, this method may not prove as
effective as off-line fluorination, which treats the inside and outside
surfaces.
    Sulfonation is another surface treatment technology. In this
process, sulfur trioxide reacts with the exposed polyethylene to form
sulfonic acid groups on the surface. Current practices for sulfonation
are to place a gas can on a small assembly line and expose the inner
surfaces to sulfur trioxide, then rinse with a neutralizing agent.
However, sulfonation can also be performed using a batch method. Either
of these processes can be used to reduce gasoline permeation by more
than 95 percent.
3. State Experiences Regulating Gas Cans
    California established an emissions control program for gas cans
that began in 2001.\277\ Twelve other states and the District of
Columbia have adopted the California program in recent years. These
states include Delaware, Maine, Maryland, Pennsylvania, New York,
Connecticut, Massachusetts, New Jersey, Rhode Island, Vermont,
Virginia, Washington, DC, and Texas.
---------------------------------------------------------------------------

    \277\ Portable Fuel Container Spillage Control Regulations,
Final Statement of Reasons, State of California Environmental
Protection Agency Air Resources Board, June 2000.
---------------------------------------------------------------------------

    Last year, California adopted a revised program that is very
similar to the one we are proposing in this rulemaking.\278\
California's new program goes into effect on July 1, 2007. California
addressed several deficiencies they observed in their first program by
adding new enhanced diurnal standards, new testing requirements, and
new certification requirements, and by removing automatic shut-off
requirements that lead to designs that do not work well in the field.

California's original program contained several design specifications
which limited manufacturer flexibility and resulted, in many cases, in
products that were difficult for consumers to use. California has
removed most of these design specifications from their revised program.
---------------------------------------------------------------------------

    \278\ Public Hearing to Consider Amendments to the Regulations
for Portable Fuel Containers, Final Statement of Reasons, California
Air Resources Board, October 2005.
---------------------------------------------------------------------------

    California's original program included an automatic shut-off
requirement intended to reduce spillage caused by overfilling the
receiving fuel tank. The spouts were required to be designed to stop
fuel flow when the fuel reached the tip of the spout, similar to how
gas pumps shut off when refueling a vehicle. California specified a
test fixture, the height of the fuel in the receiving tank at which
point the fuel flow must stop, and the minimum fuel flow rate. The gas
cans were designed by manufacturers to work well with the test fixture,
but the automatic shut-off failed in use a significant amount of the
time. California found that the design of the equipment fuel tank had a
big impact on the performance of the automatic shut-off. Due to the
wide variety of fuel tank designs, the automatic shut-off worked on a
relatively small percentage of equipment. In addition, many of the
spout designs were not compatible with passenger vehicles. This is
especially critical because the cans are customarily used by consumers
when their vehicles run out of gas.
    These problems led to many consumer complaints to both the
manufacturers and to the California Air Resources Board. It also led to
increased spillage in many cases. It was also found that many consumers
did not understand how the spouts were supposed to operate. Even in
cases where the spouts would have stopped the flow of fuel in time,
consumers did not use the cans properly. Consumers are used to actively
controlling the flow of fuel. For these reasons, California removed the
automatic shut-off requirements from their program for all cans.

B. What Emissions Standard Is EPA Proposing, and Why?

1. Description of Emissions Standard
    We are proposing a performance-based standard of 0.3 grams per
gallon per day (g/gal/day) of HC to control evaporative and permeation
losses. The standard would be measured based on the emissions from the
can over a diurnal test cycle. The cans would be tested as a system
with their spouts attached. Manufacturers would test the cans by
placing them in an environmental chamber which simulates summertime
ambient temperature conditions and cycling the cans through the 24-hour
temperature profile (72-96[deg] F), as discussed below. The test
procedures, which are described in more detail below, would ensure that
gas cans meet the emission standard over a range of in-use conditions
such as different temperatures, different fuels, and taking into
consideration factors affecting durability.
2. Determination of Best Available Control
    The 0.3 g/gal/day emissions standard and associated test procedures
reflect the performance of the best available control technologies
discussed above, including durable permeation barriers, auto-closing
spouts, and a can that is well-sealed to reduce evaporative losses. The
standard is both economically and technologically feasible. As
discussed above, to comply with California's program, gas can
manufacturers have developed gas cans with low VOC emissions at a
reasonable cost (see section IX. for costs). Testing of cans designed
to meet CARB standards has shown the proposed standards to be
technologically feasible. When tested over cycles very similar to those
we are proposing, emissions from these cans have been in the range of
0.2-0.3 g/gal/day.\279\ These cans have been produced with permeation
barriers representing a high level of control (over 90 percent
reductions) and with auto-closing spouts, which are technologies that
represent best available controls for gas cans. Establishing the
standard at 0.3 g/gal/day would require the use of best available
technologies. We are proposing a level at the upper end of the tested
performance range to account for product performance variability. In
addition, we believe that any of the current best designs can achieve
these levels, so we do not believe that the proposed standard
forecloses use of any of the existing performing product designs. Our
detailed feasibility analysis is provided in the Regulatory Impact
Analysis. We request comment on the level of the standard and on its
feasibility. We request that commenters provide detail and data where
possible.
---------------------------------------------------------------------------

    \279\ ``Quantification of Permeation and Evaporative Emissions
From Portable Fuel Container'', California Air Resources Board, June
2004.
---------------------------------------------------------------------------

    In addition to considering technological and economic feasibility,
section 183(e)(1)(A) requires us to consider ``health, environmental,
and energy impacts'' in assessing best available controls.
Environmental and health impacts are discussed in section IV. Moreover,
control of spillage from gas cans may reduce fire hazards as well
because cans would stay tightly closed if tipped over. We expect the
energy impacts of gas can control to be positive, because the standards
will reduce evaporative fuel losses.
3. Emissions Performance vs. Design Standard
    We are proposing an emissions performance standard rather than
mandating that gas cans be of any specified design. Rather than
proposing to require that gas cans only have one opening, or other
design-based requirements, we believe that it is sufficient to require
gas cans to meet an emissions performance standard. A performance
standard allows flexibility in can design while ensuring the overall
emissions performance of the cans. We are reluctant to specify design
standards for consumer products in order not to limit manufacturer (and
ultimately consumer) choice. The market will encourage manufacturers to
offer products that work well for consumers, and design-based
requirements could unnecessarily limit manufacturer design flexibility.
4. Automatic Shut-Off
    We are not requiring automatic shut-off as a design-based standard,
or considering it to be a ``best available control.'' As described in
section VIII.A.3. above, the automatic shut-off has been shown to be
problematic for consumers for several reasons, and we believe that
including requirements for automatic shut-off would be
counterproductive. Automatic shut-off is supposed to stop the flow of
fuel when the fuel reaches the top of the receiving tank in order to
prevent over-filling. However, due to a wide variety of receiving fuel
tank designs, the auto shut off spouts do not work well with a variety
of equipment types. In California, this problem led to spillage and
consumer dissatisfaction. We want to avoid cases where spills occur
even when consumers are using the products properly due to a mismatch
between the spout design and the design of the receiving fuel tank
being filled. Excessive consumer difficulties in using new cans would
likely lead to some consumers defeating the low emissions features of
the cans by removing the spouts and using other means such as funnels
to refuel equipment. Any additional emissions reductions provided by
automatic shut-off in cases where it worked properly would likely be
largely or completely offset by increased spillage due to cases where

consumers defeated the designs or the designs failed to work properly.
We believe that the automatic closing cans, even without automatic
shut-off requirements, will lead to reduced spillage. As discussed
above, automatic closure keeps the cans closed when they are not in use
and provides more control to the consumer during use.
    Some additional reduction in spillage is likely possible in some
cases with automatic shut-off, but may not be feasible across the wide
array of gas can usage. It is possible to design a spout that works
well on some equipment but not for all equipment. It might also be
possible to cover more uses by having multiple spouts, but we believe
that having multiple spouts would lead to confusion and would also
require consumers to have multiple cans depending on the types of
equipment that they refuel. We request comment on automatic shut-off
requirements and on ways to establish an automatic shut-off requirement
that would reduce spillage, be feasible for manufacturers, and be
practical for consumers.
5. Consideration of Retrofits of Existing Gas Cans
    Clean Air Act section 183(e) provides authority to consider
retrofitting gasoline containers as an approach for controlling
emissions. We do not believe, however, that requiring the retrofit of
existing gas cans would be a feasible approach for controlling gas can
emissions, either technically or economically. This would likely entail
manufacturers first developing retrofit systems (including spouts for
various previous gas can designs), testing them for emissions
performance, and certifying them with EPA. Manufacturers would need
time to develop and certify systems and also to develop an
implementation strategy, considering that there are millions of cans in
use. Manufacturers would then likely need to collect gas cans from
consumers, recondition the cans, permanently close vents, incorporate
permeation barriers, and incorporate new spouts. We believe that this
process would lead to costs that far exceed the cost of newly
manufactured gas cans. In addition, emissions reductions would depend
on consumer participation, which would be highly uncertain given that
gas cans are relatively low-cost consumer products. In fact, we believe
that consumers who are concerned about emissions would be more likely
to discard old gas cans and purchase new cans meeting emissions
standards. For all these reasons, we do not believe that a retrofitting
approach makes sense for gas cans.
6. Consideration of Diesel, Kerosene and Utility Containers
    We are requesting comment on but not proposing applying emissions
control requirements to diesel, kerosene, and utility containers. Due
to the low volatility of diesel and kerosene, the evaporative losses
from diesel and kerosene cans would be minimal when used with the
designated fuels. California has included diesel and kerosene cans in
their regulations largely due to the concern that they would be
purchased as substitutes for gasoline containers. California also
included utility containers in their portable fuel container program
due to concerns that these containers would be used for gasoline. We
believe that manufacturers can minimize this incentive by designing
gasoline cans and spouts that are easy to use and beneficial to the
consumer. However, storing gasoline in diesel, kerosene, and utility
containers would result in a loss of emissions reductions and therefore
we are requesting comment on including them in the program. The costs
for these containers would be similar to the costs estimated for
gasoline containers. We request comment on the potential for diesel,
kerosene, and utility containers to be used as a substitute for
regulated gas cans, and the cost and other implications of including
them in the program.

C. Timing of Standard

    As an aspect of considering the proposed standard's technological
feasibility, we are proposing to require manufacturers to meet the
standard beginning January 1, 2009. Manufacturers have developed the
primary technologies to reduce emissions from gas cans but will need a
few years of lead time to certify products and ramp up production to a
national scale. The certification process would take at least six
months due to the required durability demonstrations described below,
and manufacturers would need time to procure and install the tooling
needed to produce gas cans with permeation barriers for nationwide
sales.
    The standards would apply to gas cans manufactured on or after the
start date of the program and would not affect cans produced before the
start date. We propose that as of July 1, 2009, manufacturers and
importers must not enter into U.S. commerce any products not meeting
the emissions standards. This provides manufacturers with a 6-month
period to clear any stocks of gas cans manufactured prior to the
January 1, 2009 start of the program, allowing the normal sell through
of these cans to the retail level. Retailers would be able to sell
their stocks of gas cans through the course of normal business without
restriction. Gas cans are currently stamped with their production date,
which would allow EPA to determine which cans are required to meet the
new standards.
    We believe that the 2009 time frame is feasible, but recognize that
it could be a challenge for manufacturers with high volume sales to
ramp up production. We request comment on the economic feasibility of
the proposed timing and also on whether or not a phase-in of the
standards would ease the transition to a national program. We encourage
commenters to provide detailed rationale and data where possible to
support their comments.

D. What Test Procedures Would Be Used?

    As part of the proposed system of regulations for gas cans, we are
proposing test conditions designed to assure that the intended emission
reductions occur over a range of in-use conditions such as operating at
different temperatures, with different fuels, and considering factors
affecting durability. These proposed test procedures implement section
183(e)(4), which authorizes EPA to develop appropriate standards
relating to product use. Emission testing on all gas cans that
manufacturers produce is not feasible due to the high volumes of gas
cans produced every year and the cost and time involved with emissions
testing. Instead, we are proposing that before the gas cans are
introduced into commerce, EPA would need to certify gas cans to the
emissions standards based on manufacturers' applications for
certification. Manufacturers would submit test data on a sample of gas
cans that are prototypes of the products manufacturers intend to
produce. Manufacturers would also need to certify that their production
cans would not deviate in materials or design from the prototype gas
cans that are tested. Manufacturers would need to obtain approval of
their certification from EPA prior to introducing their products into
commerce. The proposed test procedures and certification requirements
are described in detail below.
    We are proposing that manufacturers would test cans in their most
likely storage configuration. The key to reducing evaporative losses
from gas cans is to ensure that there are no openings on the cans that
could be left open by the consumer. Traditional cans

have vent caps and spout caps that are easily lost or left off cans,
which leads to very high evaporative emissions. We expect manufacturers
to meet the evaporative standards by using automatic closing spouts and
by removing other openings that consumers could leave open. However, if
manufacturers choose to design cans with an opening that does not close
automatically, we are proposing to require that containers be tested in
their open condition. If the gas cans have any openings that consumers
could leave open (for example, vents with caps), these openings thus
would need to be left open during testing. This would apply to any
opening other than where the spout attaches to the can. We believe it
is important to take this approach because these openings could be a
significant source of in-use emissions and there is a realistic
possibility that these openings would be inadvertently left open in
use.
    We propose that spouts would be in place during testing because
this would be the most likely storage configuration for the emissions
compliant cans. Spouts would still be removable so that consumers would
be able to refill the cans, but we would expect the containers to be
resealed by consumers after being refilled in order to prevent spillage
during transport. We do not believe that consumers would routinely
leave spouts off cans because spouts are integral to the cans' use and
it is obvious that they need to be sealed.
1. Diurnal Test
    We are proposing a test procedure for diurnal emissions testing
where manufacturers (or others conducting the testing) place gas cans
in an environmental chamber or a Sealed Housing for Evaporative
Determination (SHED), vary the temperature over a prescribed
temperature and time profile, and measure the hydrocarbons escaping
from the gas can. We are proposing that gas cans would be tested over
the same 72-96 [deg]F (22.2-35.6 [deg]C) temperature profile used for
automotive applications. This temperature profile represents a hot
summer day when ground level ozone emissions (formed from hydrocarbons
and oxides of nitrogen) would be highest. We propose that three
containers would be tested, each over a three-day test. We are
proposing that three cans would be tested for certification in order to
address variability in products or test measurements. All three cans
would have to individually meet the proposed standard. As noted above,
gas cans would be tested in their most likely storage configuration.
    The final result would be reported in grams per gallon, where the
grams are the mass of hydrocarbons escaping from the gas can over 24
hours and the gallons are the nominal gas can capacity. The daily
emissions would then be averaged for each can to demonstrate compliance
with the standard. This test would capture hydrocarbons lost through
permeation and any other evaporative losses from the gas can as a
whole. We are proposing that the grams of hydrocarbons lost would be
determined by either weighing the gas can before and after the diurnal
test cycle or measuring emissions directly using the SHED
instrumentation.
    Consistent with the automotive test procedures, we are proposing
that the testing take place using 9 pounds per square inch (psi) Reid
Vapor Pressure (RVP) certification gasoline, which is the same fuel
required by EPA to be used in its other evaporative test programs. We
are proposing for this testing to use E10 fuel (10% ethanol blended
with the gasoline described above) in this testing to help ensure in-
use emission reductions on ethanol-gasoline blends, which tend to have
increased evaporative emissions with certain permeation barrier
materials. We believe including ethanol in the test fuel will lead to
the selection of materials by manufacturers that are consistent with
``best available control'' requirements for all likely contained
gasolines, and is clearly appropriate given the expected increase over
time of the use of ethanol blends of gasoline under the renewable fuel
provisions of the Energy Policy Act of 2005. Diurnal emissions are not
only a function of temperature and fuel volatility, but of the size of
the vapor space in the container as well. We are proposing that the
fill level at the start of the test be 50% of the nominal capacity of
the gas can. This would likely be the average fuel level of the gas can
in-use. Nominal capacity of the gas cans would be defined as the volume
of fuel, specified by the manufacturer, to which the gas can could be
filled when sitting on level ground. The vapor space that normally
occurs in a gas can, even when ``full,'' would not be considered in the
nominal capacity of the gas can. All of these test requirements are
proposed to represent typical in-use storage conditions for gas cans,
on which EPA can base its emissions standards. These provisions are
proposed as a way to implement the standards effectively, which will
lead to the use of best available technology at a reasonable cost.
    Before testing for certification, the gas cans would be run through
the durability tests described below. Within 8 hours of the end of the
soak period contained in the durability cycle, the gas cans would be
drained and refilled to 50 percent nominal capacity with fresh fuel,
and then the spouts re-attached. When the gas can is drained, it would
have to be immediately refilled to prevent it from drying out. The
timing of these steps is needed to ensure that the stabilized
permeation emissions levels are retained. The can will then be weighed
and placed in the environmental chamber for the diurnal test. After
each diurnal, the can would be re-weighed. In lieu of weighing the gas
cans, we propose that manufacturers could opt to measure emissions from
the SHED directly. For any in-use testing of gas cans, the durability
procedures would not be run prior to testing.
    California's test procedures are very similar to those described
above. However, the California procedure contains a more severe
temperature profile of 65-105 [deg]F. We propose to allow manufacturers
to use this temperature profile to test gas cans as long as other parts
of the EPA test procedures are followed, including the durability
provisions below. We request comment on these test procedures,
including ways the procedures may be further streamlined without
impacting the overall emissions measurements and performance of the gas
cans.
2. Preconditioning To Ensure Durable In-Use Control
a. Durability Cycles
    To determine permeation emission deterioration rates, we are
specifying three durability aging cycles: Slosh, pressure-vacuum
cycling, and ultraviolet exposure. They represent conditions that are
likely to occur in-use for gas cans, especially for those cans used for
commercial purposes and carried on truck beds or trailers. The purpose
of these deterioration cycles is to help ensure that the technology
chosen by manufacturers is durable in-use, representing best available
control, and the measured emissions are representative of in-use
permeation rates. Fuel slosh, pressure cycling, and ultraviolet (UV)
exposure each impact the durability of certain permeation barriers, and
we believe these cycles are needed to ensure long-term emissions
control. Without these durability cycles, manufacturers could choose to
use materials that meet the certification standard but have degraded
performance in-use, leading to higher emissions. We do not expect these
procedures to adversely impact the feasibility of the standards,
because

there are permeation barriers available at a reasonable cost that do
not deteriorate significantly under these conditions (which permeation
barriers are examples of best available controls). As described above,
we believe including these cycles as part of the certification test is
preferable to a design-based requirement.
    For slosh and pressure cycling, we are proposing to use durability
tests that are based on draft recommended SAE practice for evaluating
permeation barriers.\280\ For slosh testing, the gas can would be
filled to 40 percent capacity with E10 fuel and rocked for 1 million
cycles. The pressure-vacuum testing contains 10,000 cycles from -0.5 to
2.0 psi. The third durability test is intended to assess potential
impacts of ultraviolet (UV) sunlight (0.2 [mu]m-0.4 [mu]m) on the
durability of a surface treatment. In this test, the gas cans must be
exposed to a UV light of at least 0.40 Watt-hour/meter\2\ /minute on
the gas can surface for 15 hours per day for 30 days. Alternatively,
gas cans could be exposed to direct natural sunlight for an equivalent
period of time. We have also established these same durability
requirements as part of our program to control permeation emissions
from recreational vehicle fuel tanks.\281\ While there are obvious
differences in the use of gas cans compared to the use of recreational
vehicle fuel tanks, we believe the test procedures offer assurance that
permeation controls used by manufacturers will be robust and will
continue to perform as intended when in use. We request comments on the
use of these procedures for gas cans to help ensure permeation control
in-use.
---------------------------------------------------------------------------

    \280\ Draft SAE Information Report J1769, ``Test Protocol for
Evaluation of Long Term Permeation Barrier Durability on Non-
Metallic Fuel Tanks,'' (Docket A-2000-01, document IV-A-24).
    \281\ Final Rule, ``Control of Emissions from Nonroad Large
Spark-ignition engines, and Recreational Engines (Marine and Land-
based)'', 67 FR 68287, November 8, 2002.
---------------------------------------------------------------------------

    We also propose to allow manufacturers to do an engineering
evaluation, based on data from testing on their permeation barrier, to
demonstrate that one or more of these factors (slosh, UV exposure, and
pressure cycle) do not impact the permeation rates of their gas cans
and therefore that the durability cycles are not needed. Manufacturers
would use data collected previously on gas cans or other similar
containers made with the same materials and processes to demonstrate
that the emissions performance of the materials does not degrade when
exposed to slosh, UV, and/or pressure cycling. The test data would have
to be collected under equivalent or more severe conditions as those
noted above.
b. Preconditioning Fuel Soak
    It takes time for fuel to permeate through the walls of containers.
Permeation emissions will increase over time as fuel slowly permeates
through the container wall, until the permeation finally stabilizes
when the saturation point is reached. We want to evaluate emissions
performance once permeation emissions have stabilized, to ensure that
the emissions standard is met in-use. Therefore, we are proposing that
prior to testing the gas cans, the cans would need to be preconditioned
by allowing the cans to sit with fuel in them until the hydrocarbon
permeation rate has stabilized. Under this step, the gas can would be
filled with a 10-percent ethanol blend in gasoline (E10), sealed, and
soaked for 20 weeks at a temperature of 28  5[deg] C. As an
alternative, we are proposing that the fuel soak could be performed for
10 weeks at 43  5[deg]C to shorten the test time. During
this fuel soak, the gas cans would be sealed with the spout attached.
This is representative of how the gas cans would be stored in-use. We
have established these soak temperatures and durations based on
protocols EPA has established to measure permeation from fuel tanks
made of HDPE.\282\ These soak times should be sufficient to achieve
stabilized permeation emission rates. However, if a longer time period
is necessary to achieve a stabilized rate for a given gas can, we would
expect the manufacturer to use a longer soak period (and/or higher
temperature) consistent with good engineering judgment.
---------------------------------------------------------------------------

    \282\ Final Rule, ``Control of Emissions from Nonroad Large
Spark-ignition engines, and Recreational Engines (Marine and Land-
based)'', 67 FR 68287, November 8, 2002.
---------------------------------------------------------------------------

    Durability testing that is performed with fuel in the gas can may
be considered part of the fuel soak provided that the gas can
continuously has fuel in it. This approach would shorten the total test
time. For example, the length of the UV and slosh tests could be
considered as part of the fuel soak provided that the gas can is not
drained between these tests and the beginning of the fuel soak.
c. Spout Actuation
    In its recently revised program for gas cans, California included a
durability demonstration for spouts. We are proposing a durability
demonstration consistent with California's procedures. Automatically
closing spouts are a key part of the emissions controls expected to be
used to meet the proposed standards. If these spouts stick or
deteriorate, in-use emissions could remain very high (essentially
uncontrolled). We are interested in ways to ensure during the
certification procedures that the spouts also remain effective in use.
California requires manufacturers to actuate the spouts 200 times prior
to the soak period and 200 times near the conclusion of the soak period
to simulate spout use. The spouts' internal components would be
required to be exposed to fuel by tipping the can between each cycle.
Spouts that stick open or leak during these cycles would be considered
failed. The total of 400 spout actuations represents about 1.5
actuations per week on average over the average container life of 5
years. In the absence of data, we believe this number of actuations
appears to reasonably replicate the number that can occur in-use for
high end usage and will help ensure quality spout designs that do not
fail in-use. We also believe that proposing requirements consistent
with California will help manufacturers to avoid duplicate testing. We
request comment on the above approach for demonstrating spout
durability.

E. What Certification and In-Use Compliance Provisions Is EPA
Proposing?

1. Certification
    Section 183(e)(4) authorizes EPA to adopt appropriate systems of
regulations to implement the program, including requirements ranging
from registration and self-monitoring of products, to prohibitions,
limitations, economic incentives and restrictions on product use. We
are proposing a certification mechanism pursuant to these authorities.
Manufacturers would be required to go through the certification process
specified in the proposed regulations before entering their containers
into commerce. To certify products, manufacturers would first define
their emission families. This is generally based on selecting groups of
products that have similar emissions. For example, co-extruded gas cans
of various geometries could be grouped together. The manufacturer would
select a worst-case configuration for testing, such as the thinnest-
walled gas can. These determinations may be made using good engineering
judgment and would be subject to EPA review. Testing with those
products, as specified above, would need to show compliance with
emission standards. The manufacturers would then send us an application
for certification. We propose to define the

manufacturer as the entity that is in day-to-day control of the
manufacturing process (either directly or through contracts with
component suppliers) and responsible for ensuring that components meet
emissions-related specifications. Importers would not be considered a
manufacturer and thus would not be certifying entities; the
manufacturers of the cans they import would have to certify the cans.
Importers would only be able to import gas cans that are certified.
    After reviewing the information in the application, we would issue
a certificate of conformity allowing manufacturers to introduce into
commerce the gas cans from the certified emission family. EPA review
would typically take about 90 days or less, but could be longer if we
have questions regarding the application. The certificate of conformity
would be for a production period of up to five years. Manufacturers
could carry over certification test data if no changes are made to
their products that would affect emissions performance. Changes to the
certified products that would affect emissions would require
reapplication for certification. Manufacturers wanting to make changes
without doing testing would be required to present an engineering
evaluation demonstrating that emissions are not affected by the change.
    The certifying manufacturer accepts the responsibility for meeting
applicable emission standards. While we are proposing no requirement
for manufacturers to conduct production-line testing, we may pursue EPA
in-use testing of certified products to evaluate compliance with
emission standards. If we find that gas cans do not meet emissions
standards in use, we would consider the new information during future
product certification. Also, we may require certification prior to the
end of the five-year production period otherwise allowed between
certifications. The details of the proposed certification process are
provided in the proposed regulatory text. We request comments on the
certification process we are proposing.
2. Emissions Warranty and In-Use Compliance
    We are proposing a warranty period of one year to be provided by
the manufacturer of the gas can to the consumer. The warranty would
cover emissions-related materials defects and breakage under normal
use. For example, the warranty would cover failures related to the
proper operation of the auto-closing spout or defects with the
permeation barriers. We are also proposing to require that
manufacturers submit a warranty and defect report documenting
successful warranty claims and the reason for the claim to EPA annually
so that EPA may monitor the program. Unsuccessful claims would not need
to be submitted. We believe that this warranty will encourage designs
that work well for consumer and are durable. Although it does not fully
cover the average life of the product, it is not typical for very long
warranties to be offered with products and therefore we believe a one
year warranty is reasonable. Also, the warranty period is more similar
to the expected life of gas cans when used in commercial operations,
which would need to be considered by the manufacturers in their
designs. We request comment on the warranty period.
    EPA views this aspect of the proposal as another part of the
``system of regulation'' it is proposing to control VOC emissions from
gas cans, which system may include ``requirements for registration and
labeling * * * use, or consumption * * * of the product'' pursuant to
section 183(e)(4) the Act. A warranty will promote the objective of the
proposed rule by assuring that manufacturers will ``stand behind''
their product, thus improving product design and performance.
Similarly, the proposed defect reporting requirement will promote
product integrity by allowing EPA to readily monitor in-use performance
by tracking successful warranty claims.
    Gas cans have a typical life of about five years on average before
they are scrapped. We are proposing durability provisions as part of
certification testing to help ensure containers perform well in use (a
system of regulation for ``use'' of the product, pursuant to section
183(e)(4)). Under the proposal, we could test gas cans within their
five-year useful life period to monitor in-use performance and take
steps to correct in-use failures, including denying certification, for
container designs that are consistently failing to meet emissions
standards. (This proposed provision thus would work in tandem with the
warranty claim reporting provision proposed in the preceding
paragraph.)
    We are not proposing any recall provisions for gas cans.
Manufacturers do not have registration programs for gas cans and
implementing such a program for a low-cost consumer product may be
overly burdensome, and have a very low participation rate. Also, we
would not expect a high participation rate from consumers in a recall,
in any event, due to the nature of gas cans as a consumer product. We
believe, however, that by having the authority to test products in use,
along with the possible repercussions of in-use noncompliance, will
encourage manufacturers to develop robust designs.
3. Labeling
    Since the requirements will be effective based on the date of
manufacture of the gas can, we propose that the date of manufacture
must be indelibly marked on the can. This is consistent with current
industry practices. This is needed so that we and others can recognize
whether a unit is regulated or not. In addition, we propose to require
a label providing the manufacturer name and contact information, a
statement that the can is EPA certified, citation of EPA regulations,
and a statement that it is warranted for one year from the date of
purchase. The manufacturer name and contact information is necessary to
verify certification. Indicating that a 1 year warranty applies will
ensure that consumers have knowledge of the warranty and a way to
contact the manufacturer. Enforcement of the warranty is critical to
the defect reporting system. In proposing this labeling requirement, we
further believe, pursuant to section 183(e)(8), that these labeling
requirements would be useful in meeting the NAAQS for ozone. They
provide necessary means of implementing the various measures described
above which help ensure that VOC emission reductions from the proposed
standard will in fact occur in use.

F. How Would State Programs Be Affected by EPA Standards?

    As described in section VIII.A.3. above, several states have
adopted emissions control programs for gas cans. California implemented
an emissions control program for gas cans in 2001. Thirteen other
states, mostly in the northeast, have adopted the California program in
recent years.\283\ Last year, California adopted a revised program,
which will go into effect on July 1, 2007. The revised California
program is very similar to the program we are proposing. We believe
that although a few aspects of the program we are proposing are
different, manufacturers will be able to meet both EPA and CARB
requirements with the same gas can designs and therefore sell a single
product in all 50

states. In most cases, we believe manufacturers will take this
approach. By closely aligning with California where possible, we will
allow manufacturers to minimize research and development (R&D) and
emissions testing, while potentially achieving better economies of
scale. It may also reduce administrative burdens and market logistics
from having to track the sale of multiple can designs. We consider
these to be important factor under CAA section 183(e) which requires us
to consider economic feasibility of controls.
---------------------------------------------------------------------------

    \283\ Delaware, Maine, Maryland, Pennsylvania, New York,
Connecticut, Massachusetts, New Jersey, Rhode Island, Vermont,
Virginia, Washington DC, and Texas.
---------------------------------------------------------------------------

    States that have adopted the original California program will
likely choose to either adopt the new California program or eliminate
their state program in favor of the federal program. Because the
programs are similar, we expect that most states will eventually choose
the EPA program rather than continue their own program. We expect very
little difference in the emissions reductions provided by the EPA and
California programs in the long term. In addition, if EPA's program
starts in 2009, as discussed above, this would be the same timing
states would likely target in their program revisions.

G. Provisions for Small Gas Can Manufacturers

    As discussed in previous sections, prior to issuing a proposal for
this proposed rulemaking, we analyzed the potential impacts of these
regulations on small entities. As a part of this analysis, we convened
a Small Business Advocacy Review Panel (SBAR Panel, or ``the Panel'').
During the Panel process, we gathered information and recommendations
from Small Entity Representatives (SERs) on how to reduce the impact of
the rule on small entities, and those comments are detailed in the
Final Panel Report which is located in the public record for this
rulemaking (Docket EPA-HQ-OAR-2005-0036). Based upon these comments, we
propose to include flexibility and hardship provisions for gas can
manufacturers. Since nearly all gas can manufacturers (3 of 5
manufacturers as defined by SBA) are small entities and they account
for about 60 percent of sales, the Panel recommended to extend the
flexibility options and hardship provisions to all gas can
manufacturers. (Our proposal today is consistent with that
recommendation.) Moreover, implementation of the program would be much
simpler by doing so. The flexibility provisions are incorporated into
the program requirements described earlier in sections VIII.C through
VIII.E. The hardship provisions are described below. For further
discussion of the Panel process, see section XII.C of this proposed
rule and/or the Final Panel Report.
    The Panel recommended that two types of hardship provisions be
extended to gas can manufacturers. These entities could, on a case-by-
case basis, face hardship, and we are proposing these provisions to
provide what could prove to be needed safety valves for these entities.
Thus, the propose hardship provisions are as follows:
1. First Type of Hardship Provision
    Gas can manufacturers would be able to petition EPA for limited
additional lead-time to comply with the standards. A manufacturer would
have to demonstrate that it has taken all possible business, technical,
and economic steps to comply but the burden of compliance costs or
would have a significant adverse effect on the company's solvency.
Hardship relief could include requirements for interim emission
reductions.
2. Second Type of Hardship Provision
    Gas can manufacturers would be permitted to apply for hardship
relief if circumstances outside their control cause the failure to
comply (i.e. supply contract broken by parts supplier), and if failure
to sell the subject containers would have a major impact on the
company's solvency. The terms and timeframe of the relief would depend
on the specific circumstances of the company and the situation
involved.
    For both types of hardship provisions, the length of the hardship
relief would be established during the initial review for not more than
one year and would be reviewed annually thereafter as needed. As part
of its application, a company would be required to provide a compliance
plan detailing when and how it would achieve compliance with the
standards.

IX. What Are the Estimated Impacts of the Proposal?

A. Refinery Costs of Gasoline Benzene Reduction

    The proposed 0.62 volume percent benzene standard would generally
result in many refiners investing in benzene control hardware and
changing the operations in their refineries to reduce their gasoline
benzene levels. The proposed ABT program would allow refiners to
optimize their investments, which we believe would maximize the benzene
reductions at the lowest possible cost. We have estimated that the
capital and operating costs that we believe would result from the
proposed program would average 0.13 cents per gallon of gasoline.
    In this section we summarize the methodology used to estimate the
costs of benzene control, the scenarios we evaluated, and our estimated
costs for the program. We also summarize the results of our analyses of
other potential MSAT control programs. A detailed discussion of all of
these analyses is found in Chapter 9 of the RIA.
1. Tools and Methodology
a. Linear Programming Cost Model
    We considered performing our cost assessments for this proposed
program using a linear programming (LP) cost model. LP cost models are
based on a set of complex mathematical representations of refineries
which, for national analyses, are usually conducted on a regional
basis. This type of refining cost model has been used by the government
and the refining industry for many years for estimating the cost and
other implications of changes to fuel quality.
    The design of LP models lends itself to modeling situations where
every refinery in a region is expected to use the same control strategy
and/or has the same process capabilities. As we began to develop a
gasoline benzene control program with an ABT program, it became clear
that LP modeling was not well suited for evaluating such a program.
Because refiners would be choosing a variety of technologies for
controlling benzene, and because the program would be national and
would include an ABT program, we initiated development of a more
appropriate cost model, as described below. However, the LP model
remained important for providing many of the inputs into the new model,
and for performing analyses of other potential programs.
b. Refiner-by-Refinery Cost Model
    In contrast to LP models, refinery-by-refinery cost models are
useful when individual refineries would respond to program requirements
in different ways and/or have significantly different process
capabilities. Thus, in the case of today's proposed gasoline benzene
control program, we needed a model that would accurately simulate the
variety of decisions refiners would make at different refineries,
especially in the context of a nationwide ABT program. For this and
other related reasons, we developed a refinery-by-refinery cost model
specifically to evaluate the proposed benzene control program.
    Our benzene cost model incorporates the capacities of all the major
units in

each refinery in the country, as reported by the Energy Information
Administration and in the Oil and Gas Journal. Regarding operational
information, we know less about how the various units are used to
produce gasoline and such factors as octane and hydrogen costs for
individual refineries. We used the LP model to estimate these factors
on a regional basis, and we applied the average regional result to each
refinery in that region (PADD). We calibrated the model for each
individual refinery based on 2003 gasoline volumes and benzene levels,
which was the most recent year for which data was available, and found
that the model simulated the actual situation well. We also compared
cost estimates of similar benzene control cases from both the refinery-
by-refinery model and the LP model, and the results were in close
agreement.
    Refinery-by-refinery cost models have been used in the past by both
EPA and the oil industry for such programs as the highway and nonroad
diesel fuel sulfur standards, and they are a proven means for
estimating the cost of compliance for fuel control programs. For the
specific benzene cost model, we have initiated a peer review process,
and have received some comments on the design of our model. Although we
did not receive these comments in time to respond to them in this
proposal, we plan to address all peer review comments in the
development of the final rule. (Based on our initial assessment of
these comments, we do not believe that the changes suggested would
significantly affect the projected costs of the program. See Chapter 9
of the RIA for our initial responses to these peer-review comments.)
    Based on our understanding of the primary benzene control
technologies (see section VII.F above), the cost model assumes that
four technologies would be used, as appropriate, for reducing benzene
levels. All of these technologies focus on addressing benzene in the
reformate stream. They are (1) routing the benzene precursors around
the reformer; (2) routing benzene precursors to an existing
isomerization unit, if available; (3) benzene extraction (extractive
distillation); and (4) benzene saturation. There are several
restrictions on the use of these various technologies (such as the
assumption that benzene extraction would only be expanded in areas with
strong benzene chemical markets) and these are incorporated into the
model.
    For the proposed benzene control program, the associated nationwide
ABT program is intended to optimize benzene reduction by allowing each
refinery to individually choose the most cost-effective means of
complying with the program. To model this phenomenon, we first
establish an estimated cost for the set of technologies required for
each refinery to meet the standard. We then rank the refineries in
order from lowest to highest control cost per gallon of gasoline. The
model then follows this ranking, starting with the lowest-cost
refineries, and adds refineries and their associated control
technologies one by one until the projected national average benzene
level reaches 0.62 volume percent. This establishes which refineries we
expect to apply control technologies to comply, as well as those that
would generate credits and those that would use credits in lieu of
investing in control. The sum of the costs of the refineries expected
to invest in control provides the projected overall cost of the
program.
c. Price of Chemical Grade Benzene
    The price of chemical grade benzene is critical to the proposed
program because it defines the opportunity cost for benzene removed
using benzene extraction and sold into the chemicals market. According
to 2004 World Benzene Analysis produced by Chemical Market Associates
Incorporated (CMAI), during the consecutive five year period ending
with 2004, the price of benzene averaged 24 dollars per barrel higher
than regular grade gasoline. During the three consecutive year period
ending with 2004, the price of benzene averaged 28 dollars per barrel
higher than regular grade gasoline. However, during the first part of
2004, the price of benzene relative to gasoline rose steeply, primarily
because of high energy prices adding to the cost of extracting benzene.
The projected benzene price for 2004 indicated that the benzene price
averaged 38 dollars per barrel higher than regular grade gasoline.
    For the future, CMAI projects that the price of benzene relative to
gasoline will return to more historic levels or lower, in the range of
$20 per barrel higher than regular grade gasoline. We have based our
modeling on this value. However, we have also examined the sensitivity
of the projected overall program costs for a case where the cost of
benzene control remains at $38 higher than gasoline into the future.
d. Applying the Cost Model to Special Cases
    For the comparative cases we modeled that involve a maximum-average
(max-avg) standard in addition to an average benzene standard, modeling
the costs requires a different modeling methodology. Refineries that
the model estimates would have benzene levels above the max-avg
standard are assumed to apply the most cost-effective benzene reduction
technologies that the model shows would reduce benzene levels to below
the max-avg standard. The benzene reductions associated with meeting
the max-avg standard may or may not be sufficient for also meeting the
average standard, depending on how stringent the max-avg standard is
relative to the average standard. If the model indicates that
additional benzene reduction would be necessary, these additional
benzene reductions are modeled in the same way as the case of an
average standard only, as described above.
    We also evaluated a limited number of cases that did not include an
ABT program. In such cases, the model assumes that all the refineries
with benzene levels below the standard would maintain the same benzene
level, while each refinery with benzene levels above the standard would
take all the necessary steps to reduce their benzene levels down to the
standard. If the model shows that capital investments are needed to
achieve the necessary benzene reduction, we assume that the refiner
installs a full sized unit to treat the entire stream and then operates
the unit only to the extent necessary to meet the standard.
2. Summary of Costs
a. Nationwide Costs of the Proposed Program
    We have used the refinery-by-refinery cost model to estimate the
costs of the proposed program, with an average gasoline benzene content
standard of 0.62 volume percent and the proposed ABT program. In
general, the cost model indicates that among the four primary
reformate-based technologies, benzene extraction would be the most cost
effective. The next most cost effective technologies are benzene
precursor rerouting, and rerouting coupled with isomerization. The
model indicates that benzene saturation would be the least cost-
effective, but only marginally so in the larger refineries.
    Our refinery-by-refinery model estimates that 92 refineries of the
total 115 gasoline-producing refineries in the U.S. would have to put
in new capital equipment or change their refining operations to reduce
the benzene levels in their gasoline. Of these refineries 25 would use
benzene precursor removal, 32 refineries would use benzene precursor
removal coupled with isomerization, 24 would use extraction,

[[Continued on page 15903]]

]

[[pp. 15903-15952]] Control of Hazardous Air Pollutants From Mobile Sources

[[Continued from page 15902]]

and 11 would use benzene saturation. The analysis projects that 43
refineries would reduce their benzene levels to the proposed benzene
standard or lower, while 49 refineries would reduce their benzene
levels but still would need to purchase credits to comply with the
average benzene standard. Including the refineries with benzene levels
currently below 0.62, we project that there would be a total of 62
refineries producing gasoline with benzene levels at 0.62 or lower. The
model assumes that those with benzene levels lower than 0.62 volume
percent would generate credits for sale to other refineries. Finally,
the model projects that there would be 6 refineries that would take no
benzene reduction action and comply with the proposed program solely
through the use of benzene credits.
    The refinery model estimates that the proposed benzene standard
would cost 0.13 cents per gallon, averaged over the entire U.S.
gasoline pool. (When averaged only over those refineries which are
assumed to take steps to reduce their benzene levels, the average cost
would be 0.19 cents per gallon.) This per-gallon cost would result from
an industry-wide investment in capital equipment of $500 million to
reduce gasoline benzene levels. This would amount to an average of $5
million in capital investment in each refinery that adds such
equipment.\284\
---------------------------------------------------------------------------

    \284\ The modeling does not separate out capital costs for the
recovery of lost octane and supplying additional hydrogen, but
rather includes these in the operating cost estimates. Therefore,
actual capital costs maybe somewhat greater.
---------------------------------------------------------------------------

    We also estimated annual aggregate costs associated with the
proposed new fuel standard. As shown in Table IX.A-1, these costs are
projected to begin at $186 million in 2011 and increase over time as
fuel demand increases.

                                   Table IX.A-1.--Annual Aggregate Fuel Costs
----------------------------------------------------------------------------------------------------------------
              2011                     2013            2015            2017            2019            2020
----------------------------------------------------------------------------------------------------------------
$185,533,000....................    $191,873,000    $198,283,000    $204,212,000    $209,875,000    $212,606,000
----------------------------------------------------------------------------------------------------------------

    Several observations can be made from these results from our
nationwide analysis. First, significantly reducing gasoline benzene
levels to low levels, coupled with the flexibility of an ABT program,
will incur fairly modest costs. This is primarily because we expect
that refiners would optimize their benzene control strategies,
resulting in large benzene reductions at a low overall program cost.
With high benzene prices relative to those of gasoline projected to
continue (even if they drop from the recent very high levels),
extraction would be a very low cost technology--the primary reason why
the cost of the overall program is very low. Also, precursor rerouting,
either with or without isomerization in an existing unit, is a low-cost
technology requiring little or no capital to realize. The model
concludes that even the higher-cost benzene saturation technology would
be fairly cost-effective overall because larger refineries that install
this technology would take advantage of their economies of scale.
b. Regional Distribution of Costs
    The benzene reductions estimated by the cost model and associated
costs vary significantly by region. Table IX.A-2 summarizes the initial
benzene levels and the projected benzene levels after refiners take
anticipated steps to reduce the benzene in their gasoline and the
estimated per-gallon costs for complying with the proposed benzene
standard.
    Table IX.A-2 shows that under the proposed program the largest
benzene reductions occur in the areas with the highest benzene levels.
This is expected as many of these refineries are not doing anything to
reduce their gasoline benzene levels today and simple, low-cost
technologies can be employed to realize large reductions in their
benzene levels. In PADDs 1 and 3, which have significant benzene
control today to meet the RFG requirements, a more modest benzene
reduction would occur. Many of the refineries producing fuel for sale
in PADDs 1 and 3 cannot reduce their benzene levels further because
they are already extracting all the benzene that they can. Extraction
is the technology most used in PADDs 1 and 3, resulting in a much lower
average cost for reducing benzene in these regions.
    For comparison, we also modeled a program where the 0.62 vol%
average standard was supplemented by a maximum average benzene cap
standard, as described in section VII above. We did not propose such a
maximum average standard because the main effect would simply be to
shift emission reductions from one region of the country to another
with no change in overall emission reductions. Table IX.A-2 shows that
a maximum average standard would increase costs slightly nationwide,
but that PADD 2 benzene levels, already above the standard, would rise
while other areas improved.

                      Table IX.A-2.--Current and Projected Benzene Levels and Costs by PADD
                                          [$2002, 7% ROI before taxes]
----------------------------------------------------------------------------------------------------------------
                                                                         PADD
                                               -------------------------------------------------------
                                                                                5  (w/o      U.S.
                                                    1          2          3          4         CA)
----------------------------------------------------------------------------------------------------------------
Current Benzene Level (vol%)..................       0.66       1.32       0.86       1.54       1.87       0.97
Projected Benzene Level (vol%)................       0.51       0.73       0.55       0.95       1.04       0.62
Cost (c/gal)..................................       0.05       0.25       0.05       0.40       0.72      0.125
Projected Benzene Level (vol%) (With 1.3 vol%        0.50       0.75       0.56       0.90       0.88       0.62
 Max-Avg Std).................................
Cost (c/gal)..................................       0.06       0.22       0.03       0.43       1.18      0.130
----------------------------------------------------------------------------------------------------------------

c. Cost Effects of Different Standards
    We also estimated the benzene reduction costs for other benzene
reduction levels, as summarized in Table IX.A-3. The cost model
estimates that a 0.52 volume percent benzene

standard with an ABT program \285\ is the maximum benzene reduction
possible when each refinery employs the maximum appropriate reformate
benzene control (that is, benzene extraction whenever possible, and
benzene saturation otherwise).
---------------------------------------------------------------------------

    \285\ The cost model projects that this standard would require
an ABT program because many of the refineries modeled would not be
able to achieve this standard. These refineries would have to rely
on the purchase of credits from other refineries which are already
below this benzene level, or other refineries which could install
benzene control technology to get their benzene levels below this
standard. This scenario assumes a fully utilized credit program.

   Table IX.A-3.--Costs of Various Potential Benzene Control Standards
                      [$2002, 7% ROI before taxes]
------------------------------------------------------------------------
                                                           Cost  (cents/
                Average standard  (vol%)                      gallon)
------------------------------------------------------------------------
0.62 (Proposed Standard)................................            0.13
0.65....................................................            0.09
0.60....................................................            0.15
0.52....................................................            0.36
------------------------------------------------------------------------

    The results in Table IX.A-3 indicate that the cost for reducing
benzene levels is not very sensitive to the benzene standard in the
range from 0.60 to 0.65 volume percent benzene. This is because we
project that standards in this range would not require many of the
smaller or otherwise higher-cost refineries to employ benzene
saturation, which is the highest cost technology. Also, in this range
of potential standards, the ABT program would allow the refining
industry to optimize the benzene control technologies they apply. The
need for all refineries to use either benzene saturation or benzene
extraction to comply with a 0.52 vol% standard explains the much higher
cost for a program with a standard that range.
    We also examined the effect of the ABT program on cost. Without
ABT, we assume that the standard would be met by all refineries. To
achieve a national average level of 0.62 vol% benzene without an ABT
program would require an absolute standard of 0.73 vol%. We estimate
that such a program would result in a nationwide average cost of 0.25
cents per gallon, about double the cost of the program with ABT.
d. Effect on Cost Estimates of Higher Benzene Prices
    As described above, we also performed a sensitivity analysis to
estimate the costs of the proposed program if the recent very high
prices for chemical grade benzene continue into the future. We estimate
that at an average benzene price of $38 dollars above that for
gasoline, the program would cost 0.08 cents per gallon less on average
nationwide.
3. Economic Impacts of MSAT Control Through Gasoline Sulfur and RVP
Control and a Total Toxics Standard
    As discussed above in section VII, we have considered two
approaches to fuel-related MSAT control that would involve increasing
the stringency of two existing emission control programs, the gasoline
sulfur program and the gasoline volatility program. We estimated the
cost of programs that would further reduce the sulfur content and Reid
vapor pressure (RVP) of gasoline. For these costs estimates, the LP
refinery model was used to estimate the costs for the year 2010,
including the fuel economy impacts. We summarize these costs here and
provide detailed analyses in Chapter 9 of the RIA.
    For sulfur control, we estimated the costs of reducing U.S.
gasoline sulfur levels down to 10 ppm from the 30 ppm sulfur level
required for Tier 2 sulfur control. The costs are based on revamping
current hydrotreaters installed to meet the 30 ppm sulfur standard. We
estimate that reducing gasoline sulfur down to 10 ppm would cost 0.51
cents per gallon, taking into account the fuel economy effects. The
analysis also estimates that U.S. refiners would invest $1.3 billion in
new capital to achieve this sulfur reduction.
    We also estimated costs for lowering summertime gasoline RVP down
to a maximum of 7.8 or 7.0 RVP from the current average for non-RVP
controlled gasoline of 9.0 RVP. The estimated volume of gasoline
required to meet an additional low RVP requirement was assumed to be
equivalent to half of the volume of the reformulated gasoline sold
within the PADD, applied to the conventional gasoline sold within the
PADD. This simple means of estimating the volume of gasoline affected
by future additional RVP control programs was used because the analysis
of possible new low RVP programs established for complying with the 8
hour ozone National Ambient Air Quality Standards (NAAQS) was not
completed when the cost analysis was initiated. The per-gallon cost is
not expected to vary much by the size of the program. The cost analysis
estimates that reducing RVP down to 7.8 RVP would cost 0.23 cents per
gallon. The analysis also estimates that U.S. refiners would invest
$121 million in new capital to achieve this level of RVP control. The
cost analysis estimates that reducing RVP down to 7.0 RVP would cost
0.40 cents per gallon. Meeting a 7.0 RVP standard is projected to cause
U.S. refiners to invest $184 million in new capital to achieve this
level of RVP control.
    We have also evaluated the costs of programs that would control
total air toxics. These programs, the analyses of which are also found
in Chapter 9 of the RIA, would all be more costly than the proposed
program.

B. What Are the Vehicle Cost Impacts?

    In assessing the economic impact of setting cold temperature
emission standards, we have made a best estimate of the necessary
vehicle modifications and their associated costs. In making our
estimates we have relied on our own technology assessment, which
includes information supplied by individual manufacturers and our own
in-house testing. Estimated costs typically include variable costs (for
hardware and assembly time) and fixed costs (for research and
development, retooling, and certification). All costs are presented in
2003 dollars. Full details of our cost analysis can be found in Chapter
8 of the draft RIA.
    As described in section VI, we are not expecting hardware changes
to Tier 2 vehicles in response to new cold temperature standards. Tier
2 vehicles are already being equipped with very sophisticated emissions
control systems. We expect manufacturers to use these systems to
minimize emissions at cold temperatures. We were able to demonstrate
significant emissions reductions from a Tier 2 vehicle through
recalibration alone. In addition, a standard based on averaging allows
some vehicles to be above the numeric standard as long as those excess
emissions are offset by vehicles below the standard. Averaging would
help manufacturers in cases where they are not able to achieve the
numeric standard for a particular vehicle group, thus helping
manufacturers avoid costly hardware changes. The phase-in of standards
and emissions credits provisions also help manufacturers avoid
situations where expensive vehicle modifications would be needed to
meet a new cold temperature NMHC standard. Therefore, we are not
projecting hardware costs or additional assembly costs associated with
meeting new cold temperature NMHC emissions standards.
    Manufacturers would incur research and development (R&D) costs
associated with a new cold temperature standard, and some likely would
need to upgrade testing facilities to handle an increased number of
cold tests during vehicle development. We have estimated the

fixed costs associated with R&D and test facilities. We project that
manufacturers would recover R&D costs over a five-year period and their
facilities costs over a ten-year period. Long-term impacts on engine
costs are expected to decrease as manufacturers fully amortize their
fixed costs. Because manufacturers recoup fixed costs over a large
volume of vehicles, average per vehicle costs due to the new cold
temperature NMHC standards are expected to be low. We project that the
average incremental costs associated with the new cold temperature
standards would be less than $1 per vehicle.
    We are not anticipating additional costs for the proposed new
evaporative emissions standard. As discussed in section VI, we expect
that manufacturers will continue to produce 50-state evaporative
systems that meet LEV II standards. Therefore, harmonizing with
California's LEV-II evaporative emission standards would streamline
certification and be an ``anti-backsliding'' measure. It also would
codify the approach manufacturers have already indicated they are
taking for 50-state evaporative systems.
    We also estimated annual aggregate costs associated with the new
cold temperature emissions standards. These costs are projected to
increase with the phase-in of standards and peak in 2014 at about $13.4
million per year, then decrease as the fixed costs are fully amortized.
The projected aggregate costs are summarized below, with annual
estimates provided in Chapter 8 of the RIA.

                                      Table IX.B-1.--Annual Aggregate Costs
----------------------------------------------------------------------------------------------------------------
              2010                     2012            2014            2016            2018            2020
----------------------------------------------------------------------------------------------------------------
$11,119,000.....................     $12,535,000     $13,406,000     $12,207,000     $10,682,000              $0
----------------------------------------------------------------------------------------------------------------

C. What Are the Gas Can Cost Impacts?

    For gas cans, we have made a best estimate of the necessary
technologies and their associated costs. Estimated costs include
variable costs (for hardware and assembly time) and fixed costs (for
research and development, retooling, and certification). The analysis
also considers fuels savings associated with low emissions gas cans.
Cost estimates based on the projected technologies represent an
expected change in the cost of gas cans as they begin to comply with
new emission standards. All costs are presented in 2003 dollars. Full
details of our cost analysis, including fuel savings, can be found in
Chapter 10 of the Draft RIA.
    Table IX.C-1 summarizes the projected near-term and long-term per
unit average costs to meet the new emission standards. Long-term
impacts on gas cans are expected to decrease as manufacturers fully
amortize their fixed costs. We project that manufacturers will
generally recover their fixed costs over a five-year period, so these
costs disappear from the analysis after the fifth year of production.
These estimates are based on the manufacturing cost rather than
predicted price increases.\286\ The table also shows our projections of
average fuel savings over the life of the gas can. Fuel savings can be
estimated based on the VOC emissions reductions due to gas can
controls.
---------------------------------------------------------------------------

    \286\ These cost numbers may not necessarily reflect actual
price increases as manufacturer production costs, perceived product
enhancements, and other market impacts will affect actual prices to
consumers.

Table IX.C-1.--Estimated Average Gas Can Costs and Lifetime Fuel Savings
------------------------------------------------------------------------
                                                                   Cost
------------------------------------------------------------------------
Near-Term Costs................................................    $2.69
Long-Term Costs................................................     1.52
Fuel Savings (NPV).............................................     4.24
------------------------------------------------------------------------

    With current and projected estimates of gas can sales, we translate
these costs into projected direct costs to the nation for the new
emission standards in any year. A summary of the annual aggregate costs
to manufacturers is presented in Table IX.C-2. The annual cost savings
due to fuel savings start slowly, then increase as greater numbers of
compliant gas cans enter the market. Table IX.C-2 also presents a
summary of the estimated annual fuel savings. Aggregate costs are
projected to peak in 2013 at about $51 million and then drop to about
$29 million once fixed costs are recovered. The change in numbers
beyond 2015 occurs due to projected growth in gas can sales and
population.

                             Table IX.C-2.--Total Annualized Costs and Fuel Savings
----------------------------------------------------------------------------------------------------------------
                                                       2009            2013            2015            2020
----------------------------------------------------------------------------------------------------------------
Costs...........................................     $49,112,000     $51,228,000     $28,772,000     $31,767,000
Fuel Saving.....................................      14,381,000      76,037,000      92,686,000      98,861,000
----------------------------------------------------------------------------------------------------------------

D. Cost Per Ton of Emissions Reduced

    We have calculated the cost per ton of HC, benzene, total MSATs,
and PM emissions reductions associated with the proposed fuel, vehicle,
and gas can programs using the costs described above and the emissions
reductions described in section V. More detail on the costs, emissions
reductions, and cost per ton estimates can be found in the draft RIA.
We have calculated the costs per ton using the net present value of the
annualized costs of the program, including gas can fuel savings, from
2009 through 2030 and the net present value of the annual emission
reductions through 2030. We have also calculated the cost per ton of
emissions reduced in the year 2030 using the annual costs and emissions
reductions in that year alone. This number represents the long-term
cost per ton of emissions reduced. For fuels, the cost per ton
estimates include costs and emission reductions that will occur from
all motor vehicles and nonroad engines fueled with gasoline.\287\
---------------------------------------------------------------------------

    \287\ The proposed standards do not apply to nonroad engines,
since section 202 (l) authorizes controls only for ``motor
vehicles,'' which does not include nonroad vehicles. CAA section 216
(2). However, we are reducing benzene in all gasoline, including
that used in nonroad equipment. Therefore, we are including both the
costs and the benzene emissions reductions associated with the fuel
used in nonroad equipment.

---------------------------------------------------------------------------

    For vehicles and gas cans, we are proposing to establish NMHC and
HC standards, respectively, which would also reduce benzene and other
VOC-based toxics. For vehicles, we are also expecting direct PM
reductions due to the proposed NMHC standard.\288\ Section V provides
an overview of how we are estimating benzene and PM reductions
resulting from the NMHC standards for vehicles and benzene reductions
resulting from the HC standard for gas cans. We have not attempted to
apportion costs across these various pollutants for purposes of the
cost per ton calculations since there is no distinction in the
technologies, or associated costs, used to control the pollutants.
Instead, we have calculated costs per ton by assigning all costs to
each individual pollutant. If we apportioned costs among the
pollutants, the costs per ton presented here would be proportionally
lowered depending on what portion of costs were assigned to the various
pollutants.
---------------------------------------------------------------------------

    \288\ Again, although gasoline PM is not a mobile source air
toxic, the rule will result in emission reductions of gasoline PM
which reductions are accounted for in our analysis.
---------------------------------------------------------------------------

    The results for HC for vehicles and gas cans are provided in Table
IX.D-1 using both a three percent and a seven percent social discount
rate. Again, this analysis assumes that all costs are assigned to HC
control. The discounted cost per ton of HC reduced for the proposal as
a whole would be $0 because the fuel savings from gas cans offsets the
costs of gas can and vehicle controls. The table presents these as $0
per ton, rather than calculating a negative value that has no clear
meaning. For vehicles in 2030, the cost per ton is $0 because by 2030
all fixed costs have been recovered and there are no variable costs
estimated for the proposed vehicle program.\289\
---------------------------------------------------------------------------

    \289\ We note that in determining whether the proposed vehicle
controls represent the greatest emissions reductions achievable
considering costs, we have considered the proposed cold-start
standards separately from any other proposed control program.
Similarly, in considering whether the proposed controls for gas cans
represent the best available control considering economic
feasibility, we considered the proposed gas can standards separately
from any other proposed control program.
---------------------------------------------------------------------------

    The cost per ton estimates for each individual program are
presented separately in the tables below, and are part of the
justification for each of the programs. For informational purposes, we
also present the cost per ton for the three programs combined.

                   Table IX.D-1.--HC Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................             $14             $18              $0
Gas Cans (without fuel savings).................................             230             250             180
Gas Cans (with fuel savings)....................................               0               0               0
Combined (with fuel savings)....................................               0               0               0
----------------------------------------------------------------------------------------------------------------

    The cost per ton of benzene reductions for fuels, vehicles, and gas
cans are shown in Table IX.D-2 using the same methodology as noted
above for HC. The results are calculated by assigning all costs to
benzene control.

                 Table IX.D-2.--Benzene Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Fuels...........................................................         $10,900          11,100          11,400
Vehicles........................................................             260             340               0
Gas Cans (without fuels savings)................................          27,800          30,900          21,600
Gas Cans (with fuel savings)....................................               0               0               0
Combined (with fuel savings)....................................           3,400           3,600           2,400
----------------------------------------------------------------------------------------------------------------

    The cost per ton of overall MSAT reductions for fuels, vehicles,
and gas cans are shown in Table IX.D-3 using the same methodology as
noted above for HC and benzene. The results are calculated by assigning
all costs to MSAT control.

                  Table IX.D-3.--MSAT Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Fuels...........................................................         $10,900         $11,100         $11,400
Vehicles........................................................              40              53               0
Gas Cans (without fuel savings).................................           1,800           2,000           1,400
Gas Cans (with fuel savings)....................................               0               0               0
Combined (with fuel savings)....................................             710             780             450
----------------------------------------------------------------------------------------------------------------

    We have also calculated a cost per ton for direct PM reductions for
vehicles. Again, this analysis assigns all related costs to direct PM
reductions.

                Table IX.D-4.--Direct PM Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     ($2003)
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................            $620            $820              $0
----------------------------------------------------------------------------------------------------------------

E. Benefits

    This section presents our analysis of the health and environmental
benefits that can be expected to occur as a result of the proposed
standards throughout the period from initial implementation through
2030. In terms of emission benefits, we expect to see significant
reductions in mobile source air toxics (MSATs) from the proposed
vehicle, fuel and gas can standards, reductions in VOCs (an ozone
precursor) from the proposed cold temperature vehicle and gas can
standards, and reductions in direct PM2.5 from the proposed
cold temperature vehicle standards. When translating emission benefits
to health effects and monetized values, however, we only quantify the
PM-related benefits associated with the proposed cold temperature
vehicle standards.
    The reductions in PM from the proposed cold temperature vehicle
standards would result in significant reductions in premature deaths
and other serious human health effects, as well as other important
public health and welfare effects. We estimate that in 2030, the
benefits we are able to monetize are expected to be approximately $6.5
billion using a 3 percent discount rate and $5.9 billion using a 7
percent discount rate. Total social costs of the entire proposal for
the same year (2030) are $205 million. Details on the costs of each of
the proposed controls are in section IX.F. These estimates, and all
monetized benefits presented in this section, are in year 2003 dollars.
    We demonstrate that the proposed standards would reduce cancer and
noncancer risk from reduced exposure to MSATs (as described in Section
IV of this preamble). However, we do not translate this risk reduction
into benefits. We also do not quantify the benefits related to ambient
reductions in ozone due to the VOC emission reductions expected to
occur as a result of the proposed standards. The following section
describes in more detail why these benefits are not quantified.
1. Unquantified Health and Environmental Benefits
    This benefit analysis estimates improvements in health and human
welfare that can be expected as a result of the proposed standards, and
monetizes those benefits. The benefits would come from reductions in
emissions of air toxics (including benzene, 1,3-butadiene,
formaldehyde, acetaldehyde, acrolein, naphthalene, and other air toxic
pollutants discussed in Section III), ambient ozone (as a result of VOC
controls), and direct PM2.5 emissions.
    While there will be benefits associated with air toxic pollutant
reductions, notably with regard to reductions in exposure and risk (see
Section IV, above), we do not attempt to monetize those benefits. This
is primarily because available tools and methods to assess air toxics
risk from mobile sources at the national scale are not adequate for
extrapolation to incidence estimations or benefits assessment. The best
suite of tools and methods currently available for assessment at the
national scale are those used in the National Scale Air Toxics
Assessment (NATA; these tools are discussed in Section IV.A). The EPA
Science Advisory Board specifically commented in their review of the
1996 National Air Toxics Assessment (NATA) that these tools were not
yet ready for use in a national-scale benefits analysis, because they
did not consider the full distribution of exposure and risk, or address
sub-chronic health effects.\290\ While EPA has since improved the
tools, there remain critical limitations for estimating incidence and
assessing benefits of reducing mobile source air toxics. We continue to
work to address these limitations, and we are exploring the feasibility
of a quantitative benefits assessment for air toxics as part of a case
study being done for benzene as part of the ongoing update to the
Section 812 retrospective and prospective studies.\291\
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    \290\ Science Advisory Board. 2001. NATA-Evaluating the
National-Scale Air Toxics Assessment for 1996--an SAB Advisory.
http://www.epa.gov/ttn/atw/sab/sabrev.html.

    \291\ The analytic blueprint for the Section 812 benzene case
study can be found at http://www.epa.gov/air/sect812/appendixi51203.pdf
.

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    We also do not estimate the monetized benefits of VOC controls in
this benefits analysis. Though VOCs would be demonstrably reduced as a
result of the cold temperature vehicle standards, we assume that these
emissions would not have a measurable impact on ozone formation since
the standards seek to reduce VOC emissions at cold ambient temperatures
and ozone formation is primarily a warm ambient temperature issue. The
gas can controls would likely result in ozone benefits, though we do
not attempt to monetize those benefits. This is primarily due to the
magnitude of, and uncertainty associated with, the estimated changes in
ambient ozone associated with the proposed standards. In Section IV.C.,
we discuss that the ozone modeling conducted for the proposed gas can
standards results in a net reduction in the population weighted ozone
design value metric measured within the modeled domain (37 Eastern
states and the District of Columbia). The net improvement is very
small, however, and would likely lead to negligible monetized benefits.
Instead, we acknowledge that this analysis may underestimate the
benefits associated with reductions in ozone precursor emissions
achieved by the various proposed standards. We discuss these benefits
qualitatively within the Regulatory Impact Analysis.
    Table IX.E-1 lists each of the MSAT and ozone health and welfare
effects that remain unquantified because of current limitations in the
methods or available data. This table also includes the PM-related
health and welfare effects that also remain unquantified due to current
method and data limitations. Chapter 12 of the Regulatory Impact
Analysis for the proposed standards provides a qualitative description
of the health and welfare effects not quantified in this analysis.

                                                  Table IX.E-1.--Unquantified and Non-Monetized Effects
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            Pollutant/effects                                          Effects not included in primary estimates--changes in:
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Ozone Health \a\.........................  Premature mortality: short term exposures \b\.
                                           Hospital admissions: respiratory.
                                           Emergency room visits for asthma.
                                           Minor restricted-activity days.
                                           School loss days.
                                           Asthma attacks.
                                           Cardiovascular emergency room visits.
                                           Acute respiratory symptoms.
                                           Chronic respiratory damage.
                                           Premature aging of the lungs.
                                           Non-asthma respiratory emergency room visits.
                                           Exposure to UVb (+/-) \e\.
Ozone Welfare............................  Decreased outdoor worker productivity.
                                           Agricultural yields for
                                           --commercial forests.
                                           --some fruits and vegetables.
                                           --non-commercial crops.
                                           Damage to urban ornamental plants.
                                           Impacts on recreational demand from damaged forest aesthetics.
                                           Ecosystem functions.
                                           Exposure to UVb (+/-) \e\.
PM Health \c\............................  Premature mortality--short term exposures \d\.
                                           Low birth weight.
                                           Pulmonary function.
                                           Chronic respiratory diseases other than chronic bronchitis.
                                           Non-asthma respiratory emergency room visits.
                                           Exposure to UVb (+/-) \e\.
PM Welfare...............................  Visibility in many Class I areas.
                                           Residential and recreational visibility in non-Class I areas.
                                           Soiling and materials damage.
                                           Damage to ecosystem functions.
                                           Exposure to UVb (+/-) \e\.
MSAT Health..............................  Cancer (benzene, 1,3-butadiene, formaldehyde, acetaldehyde, naphthalene).
                                           Anemia (benzene).
                                           Disruption of production of blood components (benzene).
                                           Reduction in the number of blood platelets (benzene).
                                           Excessive bone marrow formation (benzene).
                                           Depression of lymphocyte counts (benzene).
                                           Reproductive and developmental effects (1,3-butadiene).
                                           Irritation of eyes and mucus membranes (formaldehyde).
                                           Respiratory irritation (formaldehyde).
                                           Asthma attacks in asthmatics (formaldehyde).
                                           Asthma-like symptoms in non-asthmatics (formaldehyde).
                                           Irritation of the eyes, skin, and respiratory tract (acetaldehyde).
                                           Upper respiratory tract irritation and congestion (acrolein).
MSAT Welfare.............................  Direct toxic effects to animals.
                                           Bioaccumulation in the food chain.
                                           Damage to ecosystem function.
                                           Odor.
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\a\ In addition to primary economic endpoints, there are a number of biological responses that have been associated with ozone health effects including
  increased airway responsiveness to stimuli, inflammation in the lung, acute inflammation and respiratory cell damage, and increased susceptibility to
  respiratory infection.
\b\ EPA sponsored a series of meta-analyses of the ozone mortality epidemiology literature, published in the July 2005 volume of the journal
  Epidemiology, which found that short-term exposures to ozone may have a significant effect on daily mortality rates, independent of exposure to PM.
  EPA is currently considering how to include an estimate of ozone mortality in its primary benefits analyses.
\c\ In addition to primary economic endpoints, there are a number of biological responses that have been associated with PM health effects including
  morphological changes and altered host defense mechanisms. The public health impact of these biological responses may be partly represented by our
  quantified endpoints.
\d\ While some of the effects of short term exposures are likely to be captured in the estimates, there may be premature mortality due to short term
  exposure to PM not captured in the cohort study upon which the primary analysis is based.
\e\ May result in benefits or disbenefits.

2. Quantified Human Health and Environmental Effects of the Proposed
Cold Temperature Vehicle Standard
    In this section we discuss the PM2.5 benefits of the
proposed cold temperature vehicle standard. To estimate
PM2.5 benefits, we rely on a benefits transfer technique.
The benefits transfer approach uses as its foundation the relationship
between emission reductions and ambient PM2.5 concentrations
modeled across the contiguous 48 states (and DC) for the Clean Air
Nonroad Diesel (CAND) proposal.\292\ For a given future year, we first
calculate the ratio between CAND direct PM2.5 emission
reductions and direct PM2.5 emission reductions associated
with the proposed cold temperature vehicle control standard

(proposed emission reductions/CAND emission reductions). We multiply
this ratio by the percent that direct PM2.5 contributes
towards population-weighted reductions in total PM2.5 due to
the CAND standards. This calculation results in a ``benefits
apportionment factor'' for the relationship between direct PM emissions
and primary PM2.5, which is then applied to the BenMAP-based
incidence and monetized benefits from the CAND proposal. In this way,
we apportion the results of the proposed CAND analysis to its
underlying direct PM emission reductions and scale the apportioned
benefits to reflect differences in emission reductions between the
modeled CAND control option and the proposed standards.\293\ This
benefits transfer method is consistent with the approach used in other
recent mobile and stationary source rules.\294\
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    \292\ See 68 FR 28327, May 23, 2003.
    \293\ Note that while the proposed regulations also control
VOCs, which contribute to PM formation, the benefits transfer
scaling approach only scales benefits based on NOX,
SO2, and direct PM emission reductions. PM benefits will
likely be underestimated as a result, though we are unable to
estimate the magnitude of the underestimation.
    \294\ See: Clean Air Nonroad Diesel final rule (69 FR 38958,