believe that a flat (or stepped) limit in the NTE zone could be
effectively used to establish meaningful standards for these engines.
At the same time, we continue to believe that NTE standards are
valuable for facilitating in-use testing. We therefore developed a
weighted NTE approach specifically for these engines. In the long term,
we may consider further emission reductions based on catalytic control
applied to OB/PWC engines. In this case, we would revisit the
appropriateness of the weighted NTE approach in the context of those
standards.
    Under the weighted NTE approach, emission data is collected at five
test points. These test points are idle, full power, and the speeds
specified in Modes 2 through 4 of the 5-mode duty cycle. Similar to the
5-mode duty cycle, the five test points are weighted to achieve a
composite value. This composite value must be no higher than 1.2 times
the FEL for that engine family.
    The difference in this approach from the 5-mode duty cycle is that
the test torque is not specified. During an in-use test, the engine
would be set to the target speed and the torque value would be allowed
to float. The actual torque would depend on the propeller design, the
weight and condition of the boat, and other factors. In addition, the
engine speed at wide open throttle would be based on actual performance
on the boat. Because in-use engines installed in boats do not generally
operate on the theoretical propeller curve used to define the 5-mode
duty cycle, this approach helps facilitate NTE testing.
    At each test mode, limits are placed on allowable engine operation.
These limits are generally based on the NTE zone presented above for
four-stroke engines, but there are two exceptions. First, the lower
torque limit at 40 percent speed is lowered slightly to better ensure
that an engine on an in-use boat is capable of operating within the NTE
zone. Second, the speed range is extended at wide-open throttle for the
same reason. Figure IV-3 presents the NTE zone and subzones. These
limits would apply to all non-catalyzed two-stroke engines. See Section
III.D.2 for a detailed discussion of NTE requirements that apply to
catalyst-equipped engines (including OB/PWC engines).

[GRAPHIC] [TIFF OMITTED] TR08OC08.063

    During laboratory testing, any point within each of the four non-
idle subzones may be chosen as test points. These test points do not
necessarily need to lie on a propeller curve. Note that measured power
should be used in the calculation of the weighted brake-specific
emissions.
(6) Test Fuel
    As described below in Section V.D.3, we are adopting provisions
that will allow manufacturers to use a 10 percent ethanol blend for
certification testing of exhaust emissions from Small SI engines as an
alternative to the standard gasoline test fuel. We are adopting similar
provisions for Marine SI engines in this rule. This option to use a 10
percent ethanol blend will begin with the implementation date of the
new exhaust standards for both OB/PWC engines and SD/I engines. The
option to use a 10 percent ethanol blend would apply to PLT testing as
well if the manufacturer based their certification on the 10 percent
ethanol blend. The test fuel specifications are based on using the
current gasoline test fuel and adding ethanol until the blended fuel
has 10 percent ethanol by volume. While we will allow use of a 10
percent ethanol blend for certification, we expect to use our test fuel
without oxygenates for all confirmatory testing for exhaust emissions.
Therefore, an engine manufacturer will want to consider the impacts of
ethanol on emissions in evaluating the compliance margin for the
standard, or in setting the FEL for the engine family if it is
participating in the ABT program. We could decide at our own discretion
to do exhaust emissions testing using a 10 percent ethanol blend if the
manufacturer certified on that fuel.
    Ethanol has been blended into in-use gasoline for many years and
its use has been increasing in recent years. Under provisions of the
Energy Independence and Security Act of 2007, ethanol is required to be
used in significantly greater quantities. We project that potentially
80 percent of the national gasoline pool will contain ethanol by 2010,
making ethanol blends (up to 10 percent) the de facto in-use fuel. As
ethanol blends become the main in-use fuel, we believe it makes sense
for manufacturers to optimize their engine designs with regard to
emissions, performance, and durability on such a fuel. While limited
data on Marine SI engines operated on a 10 percent ethanol blend
suggests the HC emissions will decrease and NOX emission
will increase or stay the same, these effects result in small decreases
in total HC+NOX emission levels, with the difference
generally being around 10 percent. CARB is currently running a test
program to look at the emission impacts of ethanol blends on a range of
Marine SI engines. Based on the results of that test program, we may
consider changes to the provisions allowing the use of a 10 percent
ethanol blend for certification and production-line testing.

E. Additional Certification and Compliance Provisions

(1) Production-Line Testing
    We are continuing to require that manufacturers routinely test
engines at the point of production to ensure that production
variability does not affect the engine family's compliance with
emission standards. The final rule includes a variety of amendments and
adjustments as described in the proposal. We may also require
manufacturers to perform production line testing under the selective
enforcement auditing provisions of 40 CFR part 1068, subpart E.
(2) In-Use Testing
    We are also continuing the requirements related to the

manufacturer-run in-use testing program. Under this program,
manufacturers test field-aged engines to determine whether they
continue to meet emission standards (see part 1045, subpart E). We are,
however, making a variety of changes and clarifications to the current
requirements, as described in the following sections.
(a) Adjustments Related to Engine Selection
    Both EPA and manufacturers have gained insights from implementing
the current program. Manufacturers have expressed a concern that engine
families are selected rather late in the model year, which makes it
harder to prepare a test fleet for fulfilling testing obligations. On
the other hand, we have seen that manufacturers certify some of their
engine families well into the model year. By making selections early in
the model year, we will generally be foregoing the opportunity to
select engine families for which manufacturers don't apply for
certification until after the selections occur.
    To address these competing interests, we are adopting an approach
that allows for early selection of engine families, while preserving
the potential to require testing for engines that are certified later
in the model year. For complete applications we receive by December 31
of a given calendar year for the following model year, we expect to
select engine families for testing by the end of February of the
following year. If we have not made a complete selection of engine
families by the end of February, manufacturers have the option of
making their own selections for in-use testing. The regulations include
criteria to serve as guidance for manufacturers to make appropriate
selections. For example, we expect manufacturers to most strongly
consider those engine families with the highest projected sales volume
and the smallest compliance margins. Manufacturers may also take into
account past experience with engine families if they have already
passed an in-use testing regimen and have not undergone significant
design changes since that time.
    We will treat engine families differently for in-use testing if we
receive the application after December 31. This applies, for example,
if we receive a complete application for a 2010 engine family in
February 2010. In these cases, the engine family will automatically be
subject to in-use testing, without regard to the 25 percent limitation
that will otherwise dictate our selections. This may appear to increase
the potential test burden, but the clear majority of applications for
certification are completed before the end of the calendar year for the
following model year. This provision will eliminate the manufacturers'
ability to game the testing system by delaying a family of potential
concern until the next calendar year. We expect to receive few new
applications after the end of the calendar year. This will be
consistent with the manufacturers' interest in early family selections,
without jeopardizing EPA's interest in being able to select from a
manufacturer's full product lineup.
(b) Crankcase Emissions
    Because the crankcase requirements are based on a design
specification rather than emission measurements, the anticipated
crankcase technologies are best evaluated simply by checking whether or
not they continue to function as designed. As a result, we intend for
an inspection of in-use engines to show whether these systems continue
to function properly throughout the useful life, but we are not
requiring manufacturers to include crankcase emission measurements as
part of the in-use testing program described in this section. This is
consistent with the approach we have taken in other programs.
(c) In-Use Emission Credits
    Clean Air Act section 213 requires engines to comply with emission
standards throughout the regulatory useful life, and section 207
requires a manufacturer to remedy in-use nonconformity when we
determine that a substantial number of properly maintained and used
engines fail to conform with the applicable emission standards (42
U.S.C. 7541). As described in the original rulemaking, a potential
option to address a nonconformity is that manufacturers could use a
calculation of emission credits generated under the in-use testing
program to avoid a recall determination if an engine family's in-use
testing results exceeded emission standards (61 FR 52095, October 4,
1996).
    We are adopting a more general approach to addressing potential
noncompliance under the in-use testing program than is specified in 40
CFR part 91. The final regulations do not specify how manufacturers
could generate emission credits to offset a nonconforming engine
family. This new approach is preferred for two primary reasons. First,
manufacturers will be able to use emission data generated from field
testing to characterize an engine family's average emission level. This
becomes necessarily more subjective, but allows us to consider a wider
range of information in evaluating the degree to which manufacturers
are complying with emission standards across their product line.
Second, this approach makes clearer the role of the emission credits in
our consideration to recall failing engines. We plan to consider, among
other information, average emission levels from multiple engine
families in deciding whether to recall engines from a failing engine
family. We therefore believe it is not appropriate to have a detailed
emission credit program defining precisely how and when to calculate,
generate, and use credits that do not necessarily have value elsewhere.
    Not specifying how manufacturers generate emission credits under
the in-use testing program gives us the ability to consider any
appropriate test data in deciding what action to take. In generating
this kind of information, some general guidelines will apply. For
example, we expect manufacturers to share test data from all engines
and all engine families tested under the in-use testing program,
including nonstandard tests that might be used to screen engines for
later measurement. This allows us to understand the manufacturers'
overall level of performance in controlling emissions to meet emission
standards. Average emission levels should be calculated over a running
three-year period to include a broad range of testing without skewing
the results based on old designs. Emission values from engines
certified to different tiers of emission standards or tested using
different measurement procedures should not be combined to calculate a
single average emission level. Average emission levels should be
calculated according to the following equation, rounding the results to
0.1 g/kW-hr:

Average EL = [Sigma]i[(STD-CL)i x (UL)i x (Sales)i x Poweri x LFi] /
[Sigma]i [(UL)i x (Sales)i x Poweri x LFi]

Where:

Average EL = Average emission level in g/kW-hr.
Salesi = The number of eligible sales, tracked to the point of first
retail sale in the U.S., for the given engine family during the
model year.
(STD-CL)i = The difference between the emission standard (or Family
Emission Limit) and the average emission level for an in-use testing
family in g/kW-hr.
ULi = Useful life in hours.
Poweri = The sales-weighted average maximum engine power for an
engine family in kW.
LFi = Load factor or fraction of maximum engine power utilized in
use; use 0.50 for engine families used only in constant-

speed applications and 0.32 for all other engine families.

    We have adopted this same approach for the in-use testing program
that applies for Large SI engines in 40 CFR part 1048.
(3) Optional Procedures for Field Testing
    Outboard engines are inherently portable, so it may be easier to
test them in the laboratory than in the field. However, there is a
strong advantage to using portable measurement equipment to test
personal watercraft and SD/I engines while the engine remains installed
to avoid the effort of taking the engine out and setting it up in a
laboratory. Field testing will also provide a much better means of
measuring emissions to establish compliance with the NTE standards,
because it is intended to ensure control of emissions during normal in-
use operation that may not occur during laboratory testing over the
specified duty cycle. We are adopting the field testing provisions
described below as an option for all OB/PWC and SD/I engines.
    The regulations at 40 CFR part 1065, subpart J, specify how to
measure emissions using portable measurement equipment. To test engines
while they remain installed, analyzers are connected to the engine's
exhaust to detect emission concentrations during normal operation.
Exhaust volumetric flow rate and continuous power output are also
needed to convert the analyzer responses to units of g/kW-hr for
comparing to emission standards. These values can be calculated from
measurements of the engine intake flow rate, the exhaust air-fuel ratio
and the engine speed, and from torque information.
    Available small analyzers and other equipment may be adapted for
measuring emissions in the field. A portable flame ionization detector
can measure total hydrocarbon concentrations. A portable analyzer based
on zirconia technology can measure NOX emissions. A
nondispersive infrared (NDIR) unit can measure CO. We are requiring
manufacturers to specify how they will intend to draw emission samples
from in-use engines for testing installed engines. For example,
emission samples can be drawn from the exhaust flow directly upstream
of the point at which water is mixed into the exhaust flow. This should
minimize collection of water in the extracted sample, though a water
separator may be needed to maintain a sufficiently dry sample. Mass
flow rates also factor into the torque calculation; this may be
measured either in the intake or exhaust manifold.
    Calculating brake-specific emissions depends on determining
instantaneous engine speed and torque levels. We are therefore
requiring manufacturers to design their engine control systems to be
able to continuously monitor engine speed and torque. We have already
adopted this requirement for other mobile source programs where
electronic engine control is used. Monitoring speed values is
straightforward. For torque, the onboard computer needs to convert
measured engine parameters into useful units. Manufacturers generally
will need to monitor a surrogate value such as intake manifold pressure
or throttle position (or both), then rely on a look-up table programmed
into the onboard computer to convert these torque indicators into
Newton-meters. Manufacturers may also want to program look-up tables
for torque conversion into a remote scan tool. Part 1065 specifies the
performance requirements for accuracy, repeatability, and noise related
to speed and torque measurements. These tolerances are taken into
account in the selection of the new NTE standards. We are adopting the
requirement to meet the torque-broadcasting requirements in the 2013
model year, which aligns with the final implementation of the NTE
standards.
(4) Other Changes for In-Use Testing
    A question has been raised regarding the extent of liability if an
engine family is found to be noncompliant during in-use testing.
Because it can take up to two years to complete the in-use testing
regimen for an engine family, we want to clarify the status of engines
produced under that engine family's certificate, and under the
certificates of earlier and later engine families that were effectively
of the same design. For example, manufacturers in many cases use
carryover data to continue certifying new engine families for a
subsequent model year; this avoids the need to produce new test data
for engines whose design does not change from year to year. For these
cases, absent any contrary information from the manufacturer, we will
maintain the discretion to include other applicable engine families in
the scope of any eventual recall, as allowed by the Act.
    In response to comments received from manufacturers, we have agreed
to adopt a provision allowing manufacturers to request hardship relief
under the in-use testing program if conditions outside their control
prevent them from completing the required testing. We would expect this
to be a rare occurrence, but this provision will allow us to
accommodate manufacturers if extreme unforeseen circumstances prevent a
manufacturer from completing a test program.
    There are a variety of smaller changes to the in-use testing
provisions as a result of updating the regulatory language to reflect
the language changes that we adopted for similar testing with Large SI
engines. First, we are removing the requirement to select engines that
have had service accumulation representing less than 75 percent of the
useful life. This gives manufacturers the flexibility to test somewhat
older engines if they want to. Second, we are slightly adjusting the
description of the timing of the test program, specifying that the
manufacturer must submit a test plan within 12 months of EPA selecting
the family for testing, with a requirement to complete all testing
within 24 months. This contrasts with the current requirement to
complete testing within 12 months after the start of testing, which in
turn must occur within 12 months of family selection. We believe the
modified approach allows additional flexibility without delaying the
conclusion of testing. Third, we are requiring that manufacturers
explain why they excluded any particular engines from testing. Finally,
we are requiring manufacturers to report any noncompliance within 15
days after completion of testing for a family, rather than 15 days
after an individual engine fails. This has the advantage for
manufacturers and the Agency of a more unified reporting after testing
is complete, rather than piecemeal reporting before conclusions can be
drawn.
(5) Use of Engines Already Certified to Other Programs
    In some cases, manufacturers may want to use engines already
certified under our other programs. Engines certified to the emission
standards for highway applications in part 86 or Large SI applications
in part 1048 are meeting more stringent standards. We are therefore
accepting the pre-existing certification for these engines used in
marine applications, on the condition that the engine is not changed
from its certified configuration in any way (see Sec.  1045.605). We
allow this in a similar way for a limited number of engines certified
to the Small SI emission standards (see Sec.  1045.610). The number of
installed marine engines must generally be less then five percent of
the total U.S. sales of that engine model in all applications.

(6) Import-Specific Information at Certification
    We are requiring additional information to improve our ability to
oversee compliance related to imported engines (see Sec.  1045.205). In
the application for certification, the following additional information
is necessary: (1) The port or ports at which the manufacturer has
imported engines over the previous 12 months, (2) the names and
addresses of the agents the manufacturer has authorized to import the
engines, and (3) the location of the test facilities in the United
States where the manufacturer will test the engines if we select them
for testing under a selective enforcement audit. See Section 1.3 of the
Summary and Analysis of Comments for further discussion related to
naming test facilities in the United States.
(7) Alternate Fuels
    The emission standards apply to all spark-ignition engines
regardless of the fuel they use. Almost all Marine SI engines operate
on gasoline, but these engines may also operate on other fuels, such as
natural gas, liquefied petroleum gas, ethanol, or methanol. The test
procedures in 40 CFR part 1065 describe adjustments needed for
operating test engines with oxygenated fuels.
    In some special cases, a single engine is designed to alternately
run on different fuels. For example, some engines can switch back and
forth between natural gas and LPG. We are adding a clarification to the
regulations to describe how manufacturers would submit certification
data and divide such engines into engine families. We would expect a
manufacturer to submit test data on each fuel type. If manufacturers
produce engines that run only on one fuel where that dedicated-fuel
engine is identical to a dual-fuel engine with respect to that fuel,
those engines could be included in the same family. This is also true
for the second fuel. For example, if a manufacturer produces an engine
that can run on both gasoline and LPG and also produces that engine
model in gasoline-only and LPG-only versions without adjusting the
calibration or other aspects of that configuration, those engines may
all be included in the same engine family.
    Once an engine is placed into service, someone might want to
convert it to operate on a different fuel. This would take the engine
out of its certified configuration, so we are requiring that someone
performing such a fuel conversion to go through a certification
process. We will allow certification of the complete engine using
normal certification procedures, or the aftermarket conversion kit
could be certified using the provisions of 40 CFR part 85, subpart V.
This contrasts with the provisions in part 91 that allow for fuel
conversions that can be demonstrated not to increase emission levels
above the applicable standard. We propose to apply this requirement
starting January 1, 2010. (See Sec.  91.1103 and Sec.  1045.645.)
(8) Special Provisions Related to Altitude
    As described in Section IV.C.1, we are allowing manufacturers to
comply with emission standards at high altitudes using an altitude kit.
Manufacturers using altitude kits to comply at altitude must take steps
to describe their altitude kits in the application for certification
and explain their basis for believing that engines with these altitude
kits will comply with emission standards at high altitude.
Manufacturers must also describe a plan for making information and
parts available such that the widespread use of altitude kits will
reasonably be expected in high-altitude areas. For a more thorough
description of these compliance provisions, see the discussion in
Section V.E.5 for nonhandheld Small SI engines.

F. Other Adjustments to Regulatory Provisions

    We are moving the regulatory requirements for marine spark-ignition
engines from 40 CFR part 91 to 40 CFR part 1045. This gives us the
opportunity to update the details of our certification and compliance
program to be consistent with the comparable provisions that apply to
other engine categories. The following paragraphs highlight some of the
provisions in the new language that may involve noteworthy changes from
the current regulations in part 91. All these provisions apply equally
to SD/I engines, except that they are not subject to the current
requirements in 40 CFR part 91.
    We are making some adjustments to the criteria for defining engine
families (see Sec.  1045.230). The fundamental principle behind engine
families is to group together engines that will have similar emission
characteristics over the useful life. As a result, all engines within
an engine family must have the same approximate bore diameter and use
the same method of air aspiration (for example, naturally aspirated vs.
turbocharged). Under the previous regulation, manufacturers were
allowed the discretion to consider bore and stroke dimensions and
aspiration method for subdividing engine families beyond what was
required under the primary criteria in Sec.  91.115. We believe engines
with substantially different bore diameters will have combustion and
operating characteristics that must be taken into account with unique
engineering. Similarly, adding a turbocharger or supercharger changes
the engine's combustion and emission control in important ways. We are
also requiring that all the engines in an engine family use the same
type of fuel. This may have been a simple oversight in the current
regulations, since all OB/PWC engines operate on gasoline. However, if
a manufacturer were to produce an engine model that runs on natural gas
or another alternative fuel, that engine model should be in its own
engine family. See Section IV.E.7 for a discussion of dual-fuel
engines. Finally we are removing the provision currently in part 91
related to the engine-cooling mechanism. Manufacturers pointed out that
raw-water cooling and separate-circuit cooling do not have a
significant effect on an engine's emission characteristics.
    The new regulatory language related to engine labels remains
largely unchanged from the previous requirements (see Sec.  1045.135).
We are including a provision to allow manufacturers to print labels
that have a different company's trademark. Some manufacturers in other
programs have requested this flexibility for marketing purposes.
    The warranty provisions are described above. We are adding an
administrative requirement to describe the provisions of the emission-
related warranty in the owners manual (see Sec.  1045.120). We expect
that many manufacturers already do this, but believe it is appropriate
to require this as a routine practice.
    Certification procedures depend on establishing deterioration
factors to predict the degradation in emission controls that occurs
over the course of an engine's useful life. This typically involves
service accumulation in the laboratory to simulate in-use operation.
Since manufacturers do in-use testing to further characterize this
deterioration rate, we are specifying that deterioration factors for
certification must take into account any available data from in-use
testing with similar engines. This provision applies in most of our
emission control programs that involve routine in-use testing. To the
extent this information is available, it should be factored into the
certification process. For example, if in-use testing shows that
emission deterioration is substantially higher than that characterized
by the deterioration factor, we expect the manufacturer to factor the
in-use data

into a new deterioration factor, or to revise durability testing
procedures to better represent the observed in-use degradation.
    Maximum engine power for an engine family is an important
parameter. For example, maximum engine power determines the applicable
CO standard for engines at or below 40 kW. For bigger engines, emission
credits are calculated based on total power output. As a result, we are
specifying that manufacturers determine their engines' maximum engine
power as the point of maximum engine power on the engine's nominal
power curve (see Sec.  1045.140). This value may be established as a
design value, but must be determined consistent with the engine mapping
procedures in Sec.  1065.510. The manufacturer must adjust the declared
value for maximum engine power if it does not fall within the range of
values from production engines.
    The new requirements related to the application for certification
will involve some new information, most of which is described above,
such as installation instructions and a description of how engines
comply with not-to-exceed standards (see Sec.  1045.205). In addition,
we are requiring that manufacturers submit projected sales volumes for
each family, rather than allowing manufacturers to keep these records
and make them available upon request. Manufacturers already do this
routinely and it is helpful to have ready access to this information to
maintain compliance oversight for such things as emission credit
calculations. We are also requiring that each manufacturer identify an
agent for service in the United States. For companies based outside the
United States, this ensures that we will be able to maintain contact
regarding any official communication that may be required. We have
adopted these same requirements for other nonroad programs.
    We are requiring that manufacturers use good engineering judgment
in all aspects of their effort to comply with regulatory requirements.
The regulations at Sec.  1068.5 describe how we will apply this
provision and what we will require of manufacturers where we disagree
with a manufacturer's judgment.
    We are also establishing new defect-reporting requirements. These
requirements are described in Section VIII of the preamble to the
proposed rule.
    It is common practice for one company to produce engine blocks that
a second company modifies for use as a marine engine. Since our
regulations prohibit the sale of uncertified engines, we are
establishing provisions to clarify the status of these engines and
defining a path by which these engines can be handled without violating
the regulations. See Section VIII.C.1 for more information.

G. Small-Business Provisions

    The OB/PWC market has traditionally been made up of large
businesses. We anticipate that the OB/PWC standards will be met through
the expanded use of existing cleaner engine technologies. Small
businesses certifying to standards today are already using technologies
that could be used to meet the new standards. As a result, we are
adopting only three small business regulatory relief provisions for
small business manufacturers of OB/PWC engines. We are allowing small
business OB/PWC engine manufacturers to be exempt from PLT testing and
to use assigned deterioration factors for certification. (EPA will
provide guidance to engine manufacturers on the assigned deterioration
factors prior to implementation of the new OB/PWC standards.) We are
also extending the economic hardship relief to OB/PWC engine
manufacturers that qualify as small businesses (see Sec.  1068.250). We
are defining small business eligibility criteria for OB/PWC engine
manufacturers based on an employee cut-off of 250 employees.
    In addition to the flexibilities noted above, all OB/PWC engine
manufacturers, regardless of size, will be able to apply for the
unusual circumstances hardship in Sec.  1068.245. Finally, all OB/PWC
vessel manufacturers that rely on other companies to provide certified
engines or fuel system components for their product will be able to
apply for the hardship provisions in Sec.  1068.255.

H. Technological Feasibility

(1) Level of Standards
    Over the past several years, manufacturers have demonstrated their
ability to achieve significant HC+NOX emission reductions
from outboard and personal watercraft engines. This has largely been
accomplished through the introduction of two-stroke direct injection
engines and conversion to four-stroke engines. Recent certification
data for these types of engines show that these technologies may be
used to achieve emission levels significantly below the current exhaust
emission standards. In fact, California standards require a 65 percent
reduction beyond the current federal standards.
    Our own analysis of recent certification data shows that most four-
stroke outboard engines and many two-stroke direct injection outboard
engines can meet the final HC+NOX standard. Similarly,
although PWC engines tend to have higher HC+NOX emissions,
presumably due to their higher power densities, many of these engines
can also meet the new HC+NOX standard. Although there is
currently no CO standard for OB/PWC engines, OB/PWC manufacturers are
required to report CO emissions from their engines (see Sec.
91.107(d)(9)). These emissions are based on test data from new engines
and do not consider deterioration or compliance margins. Based on this
data, all the two-stroke direct injection engines show emissions well
below the new standards. In addition, the majority of four-stroke
engines meet the new CO standards as well.
    We therefore believe the HC+NOX and CO emission
standards will be achieved by phasing out conventional carbureted two-
stroke engines and replacing them with four-stroke engines or two-
stroke direct injection engines. This has been the market-driven trend
over the last five years. Chapter 4 of the Final RIA presents charts
that compare certification data to the new standards.
(2) Implementation Dates
    We are implementing the new emission standards beginning with the
2010 model year. This gives two additional years beyond the
implementation date of the same standards in California. This
additional time may be necessary for manufacturers that do not sell
engine models in California or that sell less than their full product
lineup into the California market. We believe the same technology used
to meet the 2008 standards in California could be used nationwide with
the additional year allowed for any engine models not sold in
California. Low-emission engines sold in California are generally sold
nationwide as part of manufacturer compliance strategies for EPA's 2006
standards. Manufacturers have indicated that they are calibrating their
four-stroke and direct-injection two-stroke engines to meet the
California requirements. To meet the new standards, manufacturers'
efforts will primarily center on phasing out their higher-emission
carbureted two-stroke engines and producing more of their lower
emission engines.
(3) Technological Approaches
    Conventional two-stroke engines add a fuel-oil mixture to the
intake air with a carburetor, and use the crankcase to force this mixed
charge air into the combustion chamber. In the two-stroke

design, the exhaust gases must be purged from the cylinder while the
fresh charge enters the cylinder. With traditional two-stroke designs,
the fresh charge, with unburned fuel and oil, will push the exhaust
gases out of the combustion chamber as the combustion event concludes.
As a result, 25 percent or more of the fresh fuel-oil could pass
through the engine unburned. This is known as scavenging losses.
Manufacturers have phased out sales of the majority of their
traditional two-stroke engines to meet the federal 2006 OB/PWC exhaust
emission standards. However, many of these engines still remain in the
product mix as a result of emission credits.
    One approach to minimizing scavenging losses in a two-stroke engine
is through the use of direct fuel injection into the combustion
chamber. The primary advantage of direct injection for a two-stroke
engine is that the exhaust gases can be scavenged with fresh air and
fuel can be injected into the combustion chamber after the exhaust port
closes. As a result, hydrocarbon emissions, fuel economy, and oil
consumption are greatly improved. Some users prefer two-stroke direct
injection engines over four-stroke engines due to the higher power-to-
weight ratio. Most of the two-stroke direct injection engines certified
to the current OB/PWC emission standards have HC+NOX
emissions levels somewhat higher than certified four-stroke engines.
However, these engines also typically have lower CO emissions due to
the nature of a heterogeneous charge. By injecting the fuel directly
into a charge of air in the combustion chamber, localized areas of lean
air/fuel mixtures are created where CO is efficiently oxidized.
    OB/PWC manufacturers are also achieving lower emissions through the
use of four-stroke engine designs. Because a single combustion event
takes place over two revolutions of the crankshaft, the fresh fuel-air
charge can enter the combustion chamber after the exhaust valve is
closed. This minimizes scavenging losses. Manufacturers currently offer
four-stroke marine engines with maximum engine power ranging from 1.5
to more than 250 kW. These engines are available with carburetion,
throttle-body fuel injection, or multi-point fuel injection. Based on
the certification data, whether the engine is carbureted or fuel-
injected does not have a significant effect on combined
HC+NOX emissions. For PWC engines, the HC+NOX
levels are somewhat higher, primarily due to their higher power-to-
weight ratio. CO emissions from PWC engines are similar to those for
four-stroke outboard engines.
    One manufacturer has certified two PWC engine models with oxidation
catalysts. One engine model uses the oxidation catalyst in conjunction
with a carburetor while the other uses throttle-body fuel injection. In
this application, the exhaust system is shaped in such a way to protect
the catalyst from water. The exhaust system is relatively large
compared to the size of the engine. We are not aware of any efforts to
develop a three-way catalyst system for PWC engines. We are also not
aware of any development efforts to package a catalyst into the exhaust
system of an outboard marine engine. In current designs, water and
exhaust are mixed in the exhaust system to help cool the exhaust and
tune the engine. Water can work its way up through the exhaust system
because the lower end is under water and varying pressures in the
exhaust stream can draw water against the prevailing gas flow. As
discussed in Chapter 4 of the Final RIA, saltwater can be detrimental
to catalyst performance and durability. In addition, outboard engines
are designed with lower units that are designed to be as thin as
possible to improve the ability to turn the engine on the back of the
boat and to reduce drag on the lowest part of the unit. This raises
concerns about the placement and packaging of catalysts in the exhaust
stream. Certainly, the success of packaging catalysts in sterndrive and
inboard boats in recent development efforts (see Section III) suggests
that catalysts may be feasible for outboards with additional effort.
However, this has not yet been demonstrated and significant development
efforts will be necessary.
(4) Regulatory Alternatives
    We considered a level of 10 g/kW-hr HC+NOX for OB/PWC
engines above 40 kW with an equivalent percent reduction below the new
standards for engines at or below 40 kW. This second tier of standards
could apply in the 2012 or later time frame. Such a standard would be
consistent with currently certified emission levels from a significant
number of four-stroke outboard engines. We had three concerns with
adopting this second tier of OB/PWC standards. First, while some four-
stroke engines may be able to meet a 10 g/kW-hr standard with improved
calibrations, it is not clear that all engines could meet this standard
without applying catalyst technology. As described in Section IV.H.3,
we believe it is not appropriate to base standards in this rule on the
use of catalysts for OB/PWC engines. Second, certification data for
personal watercraft engines show somewhat higher exhaust emission
levels, so setting the standard at 10 g/kW-hr would likely require
catalysts for many models. Third, it is not clear that two-stroke
engines would be able to meet the more stringent standard, even with
direct injection and catalysts. These engines operate with lean air-
fuel ratios, so reducing NOX emissions with any kind of
aftertreatment is especially challenging.
    Therefore, unlike the new standards for sterndrive and inboard
engines, we are not adopting OB/PWC standards that require the use of
catalysts. Catalyst technology would be necessary for significant
additional control of HC+NOX and CO emissions for these
engines. While there is good potential for eventual application of
catalyst technology to outboard and personal watercraft engines, we
believe the technology is not adequately demonstrated at this point.
Much laboratory and in-water work is needed.
(5) Our Conclusions
    We believe the final emission standards can be achieved by phasing
out conventional carbureted two-stroke engines in favor of four-stroke
engines or two-stroke direct injection engines. The four-stroke engines
or two-stroke direct injection engines are already widely available
from marine engine manufacturers. One or both of these technologies are
currently in place for the whole range of outboard and personal
watercraft engines.
    The new exhaust emission standards represent the greatest degree of
emission control achievable in the contemplated time frame. While
manufacturers can meet the standards with their full product line in
2010, requiring full compliance with a nationwide program earlier, such
as in the same year that California introduces new emission standards,
will pose an unreasonable requirement. Allowing two years beyond
California's requirements is necessary to allow manufacturers to
certify their full product line to the new standards, not only those
products they will make available in California. Also, as described
above, we believe the catalyst technology that will be required to meet
emission standards substantially more stringent than we are adopting
has not been adequately demonstrated for outboard or personal
watercraft engines. As such, we believe the new standards for
HC+NOX and CO emissions are the most stringent possible in
this rulemaking. More time to gain experience with catalysts on
sterndrive and inboard engines and a substantial engineering effort to
apply that learning

to outboard and personal watercraft engines may allow us to pursue more
stringent standards in a future rulemaking.
    As discussed in Section VII, we do not believe the final standards
will have negative effects on energy, noise, or safety and may lead to
some positive effects.

V. Small SI Engines

A. Overview

    This section applies to new nonroad spark-ignition engines with
rated power at or below 19 kW (``Small SI engines''). These engines are
most often used in lawn and garden applications, typically by
individual consumers; they are many times also used by commercial
operators and they provide power for a wide range of other home,
industrial, farm, and construction applications. The engines are
typically air-cooled single-cylinder models, though Class II engines
(with displacement over 225 cc) may have two or three cylinders, and
premium models with higher power may be water-cooled.
    We have already adopted two phases of exhaust standards for Small
SI engines. The first phase of standards for nonhandheld engines
generally led manufacturers to convert any two-stroke engines to four-
stroke engines. These standards applied only at the time of sale. The
second phase of standards for nonhandheld engines generally led
manufacturers to apply emission control technologies, such as in-
cylinder controls and improved carburetion, with the additional
requirement that manufacturers needed to meet emission standards over a
useful life period.
    As described in Section I, this final rule is the result of a
Congressional mandate that springs from the new California ARB
standards. In 2003, California ARB adopted more stringent standards for
nonhandheld engines. These standards target emission reductions of
approximately 35 percent below EPA's Phase 2 standards and are based on
the expectation that manufacturers will use relatively low-efficiency
three-way catalysts to control HC+NOX emissions. California
ARB did not change the applicable CO emission standard.\96\
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    \96\ California ARB also adopted new fuel evaporative emission
standards for equipment using handheld and nonhandheld engines.
These included tank permeation standards for both types of equipment
and hose permeation, running loss, and diurnal emission standards
for nonhandheld equipment. See Section VI for additional information
related to evaporative emissions.
---------------------------------------------------------------------------

    We are adding these new regulations for Small SI engines in 40 CFR
part 1054 rather than changing the current regulations in 40 CFR part
90. This gives us the opportunity to update the details of our
certification and compliance program that are consistent with the
comparable provisions that apply to other engine categories and
describe regulatory requirements in plain language. Most of the change
in regulatory text provides improved clarity without changing
procedures or compliance obligations. Where there is a change that
warrants further attention, we describe the need for the change below.
For nonhandheld engines, manufacturers must comply with all the
provisions in part 1054 once the Phase 3 standards begin to apply in
2011 or 2012. For handheld engines, manufacturers must comply with the
provisions in part 1054 starting in 2010. Note, however, that part 1054
specifies that certain provisions do not apply for handheld engines
until sometime after 2010.
    Engines and equipment subject to part 1054 are also subject to the
general compliance provisions in 40 CFR part 1068. These include
prohibited acts and penalties, exemptions and importation provisions,
selective enforcement audits, defect reporting and recall, and hearing
procedures. See Section VIII of the preamble to the proposed rule for
further discussion of these general compliance provisions.

B. Engines Covered by This Rule

    This action includes more stringent exhaust emission standards for
new nonroad engines with rated power at or below 19 kW that are sold in
the United States. The exhaust standards are for nonhandheld engines
(Classes I and II). As described in Section I, handheld Small SI
engines (Classes III, IV, and V) are also subject to standards, but we
are not changing the level of exhaust emission standards for these
engines. As described in Section VI, we are also adopting new standards
for controlling evaporative emissions from Small SI engines, including
both handheld and nonhandheld engines. Certain of the provisions
discussed in this Section V apply to both handheld and nonhandheld
engines, as noted. Reference to both handheld and nonhandheld engines
also includes marine auxiliary engines subject to the Small SI engine
standards for that size engine.
(1) Engines Covered by Other Programs
    The Small SI engine standards do not apply to recreational vehicles
covered by EPA emission standards in 40 CFR part 1051. The regulations
in part 1051 apply to off-highway motorcycles, snowmobiles, all-terrain
vehicles, and certain offroad utility vehicles. However, if an
amphibious vehicle or other recreational vehicle with an engine at or
below 19 kW is not subject to standards under part 1051, its engine
will need to meet the Small SI engine standards. We also do not
consider vehicles such as go karts or golf carts to be subject to part
1051 because they are not intended for high-speed operation over rough
terrain; these engines are also subject to Small SI engine standards.
The Small SI engine standards do not apply to engines used in scooters
or other vehicles that qualify as motor vehicles.
    Consistent with the current regulation under 40 CFR part 90, Small
SI engine standards apply to spark-ignition engines used as generators
or for other auxiliary power on marine vessels, but not to marine
propulsion engines. As described below, we are finalizing more
stringent exhaust emission standards that will apply uniquely to marine
generator engines.
    Engines with rated power above 19 kW are subject to emission
standards under 40 CFR part 1048. However, we adopted a special
provision under part 1048 allowing engines with total displacement at
or below 1000 cc and with rated power at or below 30 kW to meet the
applicable Small SI engine standards instead of the standards in part
1048. For any engines that are certified using this provision, any
emission standards that we adopt for Class II engines and equipment in
this rulemaking (or in later rulemakings) will also apply at the same
time. Since these engines are not required to meet the Small SI engine
standards we have not included them in the analyses associated with
this final rule.
(2) Maximum Engine Power and Engine Displacement
    Under the current regulations, ``rated power'' and ``power rating''
are determined by the manufacturer with little or no direction for
selecting appropriate values. We are establishing an objective approach
to establishing the alternative term ``maximum engine power'' under the
regulations (see Sec.  1054.140). This value has regulatory
significance for Small SI engines only to establish whether or not
engines are instead subject to Large SI engine standards. Determining
maximum engine power is therefore relevant only for those engines that
are approaching the line separating these two engine categories. We are
requiring that manufacturers determine and report maximum engine power
if their emission-data engine has a maximum modal power at or above 15
kW (at or

above 25 kW if engine displacement is at or below 1000 cc).
    Similarly, the regulations depend on engine displacement to
differentiate engines for the applicability of different standards. The
regulations currently provide no objective direction or restriction
regarding the determination of engine displacement. We are defining
displacement as the intended swept volume of the engine to the nearest
cubic centimeter, where the engine's swept volume is the product of the
internal cross-sectional area of the cylinders, the stroke length, and
the number of cylinders.
    For both maximum engine power and displacement, the declared values
must be within the range of the values from production engines
considering normal production variability. This does not imply that
production engines need to be routinely tested or measured to verify
the declared values, but it serves to define a range of appropriate
values and provides a mechanism by which we can ensure that the
declared values conform to the production engines in question. If
production engines are found to have different values for maximum
engine power or displacement, this should be noted in a change to the
application for certification.
(3) Exempted or Excluded Engines
    Under the Clean Air Act, engines that are used in stationary
applications are not nonroad engines. States are generally preempted
from setting emission standards for nonroad engines but this preemption
does not apply to stationary engines. EPA has adopted emission
standards for stationary compression-ignition engines sold or used in
the United States (71 FR 39154, July 11, 2006). EPA also recently
adopted emission standards for stationary spark-ignition engines in a
separate action (73 FR 3568, January 18, 2008). In pursuing emission
standards for stationary engines, we have attempted to maintain
consistency between stationary and nonroad requirements as much as
possible. As explained in the stationary rule, stationary spark-
ignition engines below 19 kW are almost all sold into residential
applications so we believe it is not appropriate to include
requirements for owners or operators that will normally be part of a
program for implementing standards for stationary engines. As a result,
we indicated in the stationary rule that it is most appropriate to set
exhaust and evaporative emission standards for stationary spark-
ignition engines and equipment below 19 kW as if they were used in
nonroad applications. This will allow manufacturers to make a single
product that meets all applicable EPA standards for both stationary and
nonroad applications.
    The Clean Air Act provides for a different regulatory approach for
engines used solely in competition. Rather than relying on engine
design features that serve as inherent indicators of dedicated
competitive use, we have taken the approach in other programs of more
carefully differentiating competition and noncompetition models in ways
that reflect the nature of the particular products. In the case of
Small SI engines, we believe there are no particular engine design
features that allow us to differentiate between engines that are used
solely for competition from those with racing-type features that are
not used solely for competition. We are requiring that handheld and
nonhandheld equipment with engines meeting all the following criteria
will be considered as being used solely for competition:
     The engine (or equipment in which the engine is installed)
may not be displayed for sale in any public dealership;
     Sale of the equipment in which the engine is installed
must be limited to professional competitors or other qualified
competitors;
     The engine must have performance characteristics that are
substantially superior to noncompetitive models;
     The engines must be intended for use only in competition
events sanctioned (with applicable permits) by a state or federal
government agency or other widely recognized public organization, with
operation limited to competition events, performance-record attempts,
and official time trials.
    We are also including a provision allowing us to approve an
exemption for cases in which an engine manufacturer can provide clear
and convincing evidence that an engine will be used solely for
competition even though not all the above criteria apply for a given
situation. This may occur, for example, if a racing association
specifies a particular engine model in the competition rules, where
that engine has design features that prevent it from being certified,
or from being used for purposes other than competition.
    Engine manufacturers will make their request for each new model
year and we will deny a request for future production if there are
indications that some engines covered by previous requests are not
being used solely for competition. Competition engines are produced and
sold in very small quantities so manufacturers should be able to
identify which engines qualify for this exemption.
    In the rulemaking for recreational vehicles, we chose not to apply
standards to hobby products by exempting all reduced-scale models of
vehicles that were not capable of transporting a person (67 FR 68242,
November 8, 2002). We are extending that same provision to handheld and
nonhandheld Small SI engines. (See Sec.  1054.5.)
    In the rulemaking to establish Phase 2 emission standards, we
adopted an exemption for handheld and nonhandheld engines used in
rescue equipment. The regulation does not require any request,
approval, or recordkeeping related to the exemption. We discovered
while conducting the SBAR Panel described in Section VI.G that some
companies are producing noncompliant engines under this exemption. As a
result, we are keeping this exemption but are adding several provisions
to allow us to better monitor how it is used (see Sec.  1054.660). We
are also keeping the requirement that equipment manufacturers use
certified engines if they are available. We are updating this provision
by adding a requirement that equipment manufacturers use an engine that
has been certified to less stringent Phase 1 or Phase 2 standards if
such an engine is available. We are explicitly allowing engine
manufacturers to produce engines for this exemption (with permanent
labels identifying the particular exemption), but only if they have a
written request for each equipment model from the equipment
manufacturer. We are further requiring that the equipment manufacturer
notify EPA of the intent to produce emergency equipment with exempted
engines. Also, to clarify the scope of this provision, we are defining
``emergency rescue situations'' as firefighting or other situations in
which a person is retrieved from imminent danger. Finally, we are
clarifying that EPA may discontinue the exemption on a case-by-case
basis if we find that such engines are not used solely for emergency
and rescue equipment or if we find that a certified engine is available
to power the equipment safely and practically. We are applying the
provisions of this section for new equipment built on or after January
1, 2010.
    The current regulations also specify an exemption allowing
individuals to import up to three nonconforming handheld or nonhandheld
engines one time. We are keeping this exemption with three adjustments
(see Sec.  1054.630). First, we are allowing this exemption only for
used equipment. Allowing

importation of new equipment under this exemption is not consistent
with the intent of the provision, which is to allow people to move to
the United States from another country and continue to use lawn and
garden equipment that may already be in their possession. Second, we
are allowing such an importation once every five years but are
requiring a statement that the person importing the exempted equipment
has not used this provision in the preceding five years. The current
regulations allow only one importation in a person's lifetime without
including any way of making that enforceable. We believe the new
combination of provisions represents an appropriate balance between
preserving the enforceability of the exemption within the normal flow
of personal property for people coming into the country. Third, we are
no longer requiring submission of the taxpayer identification number
since this is not essential for ensuring compliance. We are applying
these changes starting January 1, 2010.

C. Final Requirements

    A key element of the new requirements for Small SI engines is the
more stringent exhaust emission standards for nonhandheld engines. We
are also finalizing several changes to the certification program that
will apply to both handheld and nonhandheld engines. For example, we
are clarifying the process for selecting an engine family's useful
life, which defines the length of time over which manufacturers are
responsible for meeting emission standards. We are also adding several
provisions to update the program for allowing manufacturers to use
emission credits to show that they meet emission standards. The
following sections describe the elements of this rule.
    The timing for implementation of the new exhaust emission standards
is described below. Unless we specify otherwise, all the additional
regulatory changes will apply when engines are subject to the emission
standards and the other provisions under 40 CFR part 1054. This will be
model year 2012 for Class I engines and model year 2011 for Class II
engines. For handheld engines, we are generally requiring that
manufacturers comply with the provisions of part 1054, including the
certification provisions, starting in the 2010 model year. These new
requirements apply to handheld engines unless stated otherwise. For
convenience we refer to the handheld emission standards in part 1054 as
Phase 3 standards even though the numerical values remain unchanged
from the Phase 2 standards.
(1) Emission Standards
    Extensive testing and dialogue with manufacturers and other
interested parties has led us to a much better understanding of the
capabilities and limitations of applying emission control technologies
to nonhandheld Small SI engines. As described in the Final RIA, we have
collected a wealth of information related to the feasibility,
performance characteristics, and safety implications of applying
catalyst technology to these engines. We have concluded within the
context of Clean Air Act section 213 that it is appropriate to
establish emission standards that are consistent with those adopted by
California ARB. We are finalizing HC+NOX emission standards
of 10.0 g/kW-hr for Class I engines starting in the 2012 model year,
and 8.0 g/kW-hr for Class II engines starting in the 2011 model year
(see Sec.  1054.105). For both classes of nonhandheld engines we are
maintaining the existing CO standard of 610 g/kW-hr.
    We are eliminating the defined subclasses for the smallest sizes of
nonhandheld engines starting with implementation of the Phase 3
standards. Under the current regulations in part 90, Class I-A is
designated for engines with displacement below 66 cc that may be used
in nonhandheld applications. To address the technological constraints
of these engines, all the current requirements for these engines are
the same as for handheld engines. Class I-B is similarly designated for
engines with displacement between 66 and 100 cc that may be used in
nonhandheld applications. These engines are currently subject to a mix
of provisions that result in an overall stringency that lies between
handheld and nonhandheld engines. We are revising the regulations such
that engines at or below 80 cc are subject to the Phase 3 standards for
handheld engines and equipment in part 1054 starting in the 2010 model
year. We are allowing engines at or below 80 cc to be used without
restriction in nonhandheld equipment. The 80 cc threshold aligns with
the California ARB program. For nonhandheld engines above 80 cc, we are
treating them in every way as Class I engines. Based on the fact that
it is more difficult for smaller displacement engines to achieve the
same g/kW-hr emission level as larger displacement engines, it will be
more of a challenge for manufacturers to achieve a 10.0 g/kW-hr
HC+NOX level on these smallest Class I engines. However, for
those engines unable to achieve the level of the new standards (either
with or without a catalyst), manufacturers may elect to rely on
emission credits to comply with emission standards. We believe all
manufacturers producing engines formerly included in Class I-B also
have a wide enough range of engine models that they will be able to
generate sufficient credits to meet standards across the full product
line. (See Sec.  1054.101 and Sec.  1054.801.)
    We are making another slight change to the definition of handheld
engines that may affect whether an engine is subject to handheld or
nonhandheld standards. The handheld definition relies on a weight
threshold for certain engines. As recently as 1999, we affirmed that
the regulation should allow for the fact that switching to a heavier
four-stroke engine to meet emission standards might inappropriately
cause an engine to no longer qualify as a handheld engine (64 FR 5252,
February 3, 1999). The regulation accordingly specifies that the weight
limit is 20 kilograms for one-person augers and 14 kilograms for other
types of equipment, based on the weight of the engine that was in place
before applying emission control technologies. We believe it is
impractical to base a weight limit on product specifications that have
become difficult to establish. We are therefore increasing each of the
specified weight limits by two kilograms, representing the approximate
additional weight related to switching to a four-stroke engine, and
applying the new weight limit to all engines and equipment (see Sec.
1054.801).
    Finally, we are revising the list of applications identified in the
handheld definition as being subject to the handheld standards. We are
specifically adding hand-supported jackhammers or rammer/compactor to
the handheld definition as we have approved these types of applications
in the past as meeting the attributes laid out in the definition. We
are removing the ``one-person'' term from the auger description in the
handheld definition because some augers can be operated by two people,
but still have other attributes that would lead to the equipment being
considered handheld. We are also removing the specific mention of pumps
and generators from the handheld definition if they are below the
specified weight limit. With the change noted earlier that allows
manufacturers to use engines below 80cc in either handheld or
nonhandheld applications, we believe these applications no longer need
to be cited for special treatment in the handheld definition.

    The regulations in part 90 allow manufacturers to rely on altitude
kits to comply with emission requirements at high altitude. We are
continuing this approach but are clarifying that all nonhandheld
engines must comply with Phase 3 standards without altitude kits at
barometric pressures above 94.0 kPa, which corresponds to altitudes up
to about 2,000 feet above sea level (see Sec.  1054.115). This will
ensure that all areas east of the Rocky Mountains and most of the
populated areas in Pacific Coast states will have compliant engines
without depending on engine modifications. This becomes increasingly
important as we anticipate manufacturers relying on technologies that
are sensitive to controlling air-fuel ratio for reducing emissions.
Engine manufacturers must identify in the owner's manual the altitude
ranges for proper engine performance and emission control that are
expected with and without the altitude kit. The owner's manual must
also state that operating the engine with the wrong engine
configuration at a given altitude may increase its emissions and
decrease fuel efficiency and performance. See Section V.E.5 for further
discussion related to the deployment of altitude kits where the
manufacturers rely on them for operation at higher altitudes.
    We are adopting a slightly different approach for handheld engines
with respect to altitude. Since we are not adopting more stringent
exhaust emission standards, we believe it is appropriate to adopt
provisions that are consistent with current practice at this time. We
are therefore requiring handheld engines to comply with the current
standards without altitude kits at barometric pressures above 96.0 kPa,
which will allow for testing in most weather conditions at all
altitudes up to about 1,100 feet above sea level.
    Spark-ignition engines used for marine auxiliary power (i.e.,
marine generator engines) are covered by the same regulations as land-
based engines of the same size. However, the marine generator versions
of Small SI engines are able to make use of ambient water for enhanced
cooling of the engine and exhaust system. Exhaust systems for these
engines are water-jacketed to maintain low surface temperatures to
minimize the risk of fires on boats, where the generator is often
installed in small compartments within the boat. Manufacturers of
marine generator engines have recently developed advanced technology in
an effort to improve fuel consumption and CO emission controls for
marine generators. This advanced technology includes the use of
electronic fuel injection and three-way catalysts. As a result,
manufacturers are offering new products with more than a 99 percent
reduction in CO and have expressed their intent to offer only these
advanced-technology engines in the near future. They have stated that
these low-CO engines are responsive to market demand. We are
establishing a CO standard of 5.0 g/kW-hr CO for marine generator
engines to reflect the recent trend in marine generator engine designs
(see Sec.  1054.105). We believe this standard is necessary to prevent
backsliding in CO emissions that could occur if new manufacturers were
to attempt to enter the market with less expensive, high-CO designs.
See Section II for a discussion of air quality concerns related to CO
emissions.
    At this time, we are continuing the current regulatory approach for
wintertime engines (e.g., engines used exclusively to power equipment
such as snowthrowers and ice augers). Under this final rule, the
HC+NOX exhaust emission standards will be optional for
wintertime engines. However, if a manufacturer chooses to certify its
wintertime engines to such standards, those engines will be subject to
all the requirements as if the optional standards were mandatory. We
are adopting a definition of wintertime engines to clarify which
engines qualify for these special provisions.
    All engines subject to standards must continue to control crankcase
emissions. In the case of snowthrower engines, crankcase emissions may
be vented to the ambient air as long as manufacturers take crankcase
emissions into account in demonstrating compliance with exhaust
emission standards.
(2) Useful Life
    The Phase 2 standards for Small SI engines included the concept
that manufacturers are responsible for meeting emission standards over
a useful life period. The useful life defines the design target for
ensuring the durability of emission controls under normal in-use
operation for properly maintained engines. Given the very wide range of
engine applications, from very low-cost consumer products to commercial
models designed for long-term continuous operation, we determined that
a single useful life value for all products, which is typical for other
engine programs, was not appropriate for Small SI engines. We proposed
at that time to determine the useful life for an engine family based on
specific criteria, but commenters suggested that such a requirement was
overly rigid and unnecessary. The final rule instead specified three
alternative useful life values, giving manufacturers the responsibility
to select the useful life that was most appropriate for their engines
and the corresponding types of equipment. The preamble to the Phase 2
final rule expressed a remaining concern that manufacturers might not
select the most appropriate useful life value. This concern related to
both ensuring effective in-use emission control and maintaining the
integrity of emission-credit calculations. The preamble also stated our
intent to periodically review the manufacturers' decisions to determine
whether modifications to these rules would be appropriate.
    The regulations in Sec.  90.105 provide a benchmark for determining
the appropriate useful life value for an engine family. The regulations
direct manufacturers to select the useful life value that ``most
closely approximates the expected useful lives of the equipment into
which the engines are anticipated to be installed.'' To maintain a
measure of accountability, we included a requirement that manufacturers
document the basis for their selected useful life values. The suggested
data included, among other things: (1) Surveys of the life spans of the
equipment in which the subject engines are installed; (2) engineering
evaluations of field-aged engines to ascertain when engine performance
deteriorates to the point where utility and/or reliability is impacted
to a degree sufficient to necessitate overhaul or replacement; and (3)
failure reports from engine customers. These regulatory provisions
identify the median time to retirement for in-use equipment as the
marker for defining the useful life period. This allows manufacturers
to consider that equipment models may fail before the engine has
reached the point of failure and that engines may be installed in
different types of equipment with varying usage patterns. Engines used
in different types of equipment, or even engines used in the same
equipment models used by different operators, may experience widely
varying usage rates. The manufacturer is expected to make judgments
that take this variability into account when estimating the median life
of in-use engines and equipment.
    Several manufacturers have made a good faith effort to select
appropriate useful life values for their engine families, either by
selecting only the highest value, or by selecting higher values for
families that appear more likely to be used in commercial applications.
At the same time, we have observed several instances in which engine
models are installed in

commercial equipment and marketed as long-life products but are
certified to the minimum allowable useful life period.
    After assessing several ideas, we chose to adopt an approach that
preserves the fundamental elements of the current provisions related to
useful life but clarifies and enhances its implementation (see Sec.
1054.107). Manufacturers will continue to select the most appropriate
useful life from the same nominal values to best match the expected in-
use lifetime of the equipment into which the engines in the engine
family will be installed. Manufacturers must continue to document the
information supporting their selected useful life. We are adopting
three provisions to address remaining concerns with the process of
selecting useful life values.
    First, for manufacturers not selecting the highest available
nominal value for useful life, we expect to routinely review the
information to confirm that it complies with the regulation. Where our
review indicates that the selected useful life may not be appropriate
for an engine family, we may request further justification. If we
determine from available information that a longer useful life is
appropriate, the manufacturer must either provide additional
justification or select a longer useful life for that engine family. We
will encourage manufacturers to use the new provisions related to
preliminary approval in Sec.  1054.210 if there is any uncertainty
related to the useful life selection. We would rather work together
early to establish this in the certification process rather than
reviewing a completed application for certification to evaluate whether
the completed durability demonstration is sufficient.
    Second, we are modifying the regulations to allow nonhandheld
engine manufacturers to select a useful life value that is longer than
the three specified nominal values. Manufacturers may choose to do this
for the marketing advantage of selling a long-life product or they may
want to generate emission credits that correspond to an expected
lifetime that is substantially longer than we would otherwise allow. We
are allowing manufacturers to select longer useful life values in 100-
hour increments, up to 3,000 hours for Class I engines and up to 5,000
hours for Class II engines. Durability testing for certification will
need to correspond to the selected useful life period. We have
considered the possibility that a manufacturer might overstate an
engine family's useful life to generate emission credits while knowing
that engines may not operate that long. We believe the inherent testing
burden and compliance liability is enough to avoid such a problem, but
we are including the specified maximum values corresponding with the
applicable useful life for comparable diesel engines or Large SI
engines. We are not allowing for longer useful life values for handheld
engines.
    Third, we are requiring that engines and equipment be labeled to
identify the applicable useful life period. The current requirement
allows manufacturers to identify the useful life with code letters on
the engine's emission control information label, with the numerical
value of the useful life spelled out in the owner's manual. We believe
it is important for equipment manufacturers and consumers to be able to
find an unambiguous designation showing the engine manufacturer's
expectations about the useful life of the engine. Comments on the
proposed rule also indicated an interest in using descriptive terms to
identify the useful life on the label. We believe any terminology will
communicate less effectively than the numerical value of the useful
life, but we will allow manufacturers to use specified descriptive
terms in addition to the number of hours.
    We are also including a provision in the final rule stating that
the useful life is defined as a five-year period if the engine has not
yet exceeded the specified number of operating hours during that time.
This is consistent with our other engine programs. This does not affect
the certification process. If we test an in-use engine within the five-
year useful life period and there is no clear indication that it has
not yet exceeded the specified number of operating hours, it would need
to meet applicable emission standards. Conversely, if an engine has not
yet exceeded the number of operating hours but the engine is six years
old, it is no longer required to meet emission standards.
(3) Averaging, Banking, and Trading
    EPA has included averaging, banking, and trading (ABT) programs in
most of the emission control programs for highway and nonroad engines.
EPA's existing Phase 2 regulations for Small SI engines include an
exhaust ABT program (see 40 CFR 90.201 through 90.211). We are adopting
an ABT program for the Phase 3 HC+NOX exhaust emission
standards that is similar to the existing program (see part 1054,
subpart H). The new exhaust ABT program is intended to enhance the
ability of engine manufacturers to meet more stringent emission
standards. The exhaust ABT program is also structured to avoid delay of
the transition to the new exhaust emission controls. As described in
Section VI.D, we are establishing a separate evaporative ABT program
for fuel tanks used in Small SI equipment. Credits may not be exchanged
between the exhaust ABT program and the evaporative ABT program.
    The exhaust ABT program has three main components. Averaging means
the exchange of emission credits between engine families within a given
engine manufacturer's product line for a specific model year. Engine
manufacturers divide their product line into ``engine families'' that
are comprised of engines expected to have similar emission
characteristics throughout their useful life. Averaging allows a
manufacturer to certify one or more engine families at levels above the
applicable emission standard, but below a set upper limit. This level
then becomes the applicable standard for all the engines in that engine
family, for purposes of certification, in-use testing, and the like.
However, the increased emissions must be offset by one or more engine
families within that manufacturer's product line that are certified
below the same emission standard, such that the average standard from
all the manufacturer's engine families, weighted by engine power,
regulatory useful life, and production volume, is at or below the level
of the emission standard. Banking means the retention of emission
credits by the engine manufacturer for use in averaging or trading for
future model years. Trading means the exchange of emission credits
between engine manufacturers which can then be used for averaging
purposes, banked for future use, or traded to another engine
manufacturer.
    Because we are not adopting any change in the general equation
under which emission credits are calculated, EPA is allowing
manufacturers to use Phase 2 credits generated under the part 90 ABT
program for engines that are certified in the Phase 3 program under
part 1054, within the limits described below. Furthermore, even though
we are not establishing new exhaust emission standards for handheld
engines, the handheld engine regulations are migrating to part 1054.
Therefore, handheld engines will be included in the new ABT program
under part 1054 with one change in the overall program as described
below.
    Under an ABT program, averaging is allowed only between engine
families in the same averaging set, as defined in the

regulations. For the exhaust ABT program, we are separating handheld
engines and nonhandheld engines into two distinct averaging sets
starting with the 2011 model year. Under the new program, credits may
generally be used interchangeably between Class I and Class II engine
families, with a limited restriction on Phase 3 credits during model
years 2011 and 2012 as noted below. Likewise, credits can be used
interchangeably between all three handheld engine classes (Classes III,
IV, and V). Because the Phase 2 exhaust ABT program allowed exchange
across all engine classes (i.e., allowing exchanges between handheld
engines and nonhandheld engines), manufacturers using credits beginning
with the 2011 model year will need to show that the credits were
generated within the allowed category of engines. For many companies,
especially those in the handheld market, this will potentially be
straightforward since they are primarily in the handheld market. For
companies that have a commingled pool of emission credits generated by
both handheld engines and nonhandheld engines, this will take more
careful accounting. Because manufacturers have been aware of this new
requirement since the proposal, keeping records to distinguish handheld
credits and nonhandheld credits will be relatively straightforward for
2006 and later model years.
    We are making two exceptions to the provision restricting credit
exchanges between handheld engines and nonhandheld engines. Currently,
some companies that are primarily nonhandheld engine manufacturers also
sell a limited number of handheld engines. Under the Phase 2 program,
these engine manufacturers can use credits from nonhandheld engines to
offset the higher emissions of their handheld engines. Because we are
not adopting new exhaust requirements for handheld engines, we are
addressing this existing practice by specifying that an engine
manufacturer may use emission credits from their nonhandheld engines
for their handheld engines under certain conditions. Specifically, a
manufacturer may use credits from their nonhandheld engines for their
handheld engines only where the handheld engine family is certified in
2008 and later model years without any design changes from the 2007
model year and the FEL of the handheld engine family does not increase
above the level that applied in the 2007 model year, unless such an
increase is based on emission data from production engines.
Furthermore, we are limiting the number of handheld engines for which a
manufacturer can use emission credits from their nonhandheld engines to
30,000 per year. We believe these provisions allow for engine
manufacturers to continue producing these handheld engines for use in
existing handheld models of low-volume equipment applications while
preventing new high-emitting handheld engine families from entering the
market through the use of nonhandheld engine credits. (See Sec.
1054.740.)
    A second exception to the provision restricting credit exchanges
between handheld engines and nonhandheld engines arises because of our
handling of engines below 80cc. Under the new Phase 3 program, all
engines below 80cc are considered handheld engines for the purposes of
the emission standards. However, a few of these engines are used in
nonhandheld applications. Therefore, EPA will allow a manufacturer to
generate nonhandheld ABT credits from engines below 80cc for those
engines a manufacturer has determined are used in nonhandheld
applications. (The credits will be generated against the applicable
handheld engine standard.) These nonhandheld credits could be used
within the Class I and Class II engine classes to demonstrate
compliance with the Phase 3 exhaust standards (subject to applicable
restrictions). The credits generated by engines below 80cc used in
handheld applications could only be used for other handheld engines.
(See Sec.  1054.701.)
    Under an ABT program, a manufacturer establishes a ``family
emission limit'' (FEL) for each participating engine family. This FEL
may be above or below the standard. The FEL becomes the enforceable
emission limit for all the engines in that family for purposes of
compliance testing. FELs that are established above the standard may
not exceed an upper limit specified in the ABT regulations. For
nonhandheld engines we are establishing FEL caps to prevent the sale of
very high-emitting engines. Under the new FEL caps, manufacturers will
need to establish FELs at or below the levels of the Phase 2
HC+NOX emission standards of 16.1 g/kW-hr for Class I
engines and 12.1 g/kW-hr for Class II engines. (The Phase 3 FEL cap for
Class I engines with a displacement between 80 cc and 100 cc will be
40.0 g/kW-hr since these engines were Class I-B engines under the Phase
2 regulations and subject to this higher level.) For handheld engines,
where we are not adopting new exhaust emission standards, we are
maintaining the FEL caps as currently specified in the part 90 ABT
regulations.
    For nonhandheld engines we are adding two special provisions
related to the transition from Phase 2 to Phase 3 standards in Sec.
1054.740. First, we are providing incentives for manufacturers to
produce and sell engines certified at or below the Phase 3 standards
before the standards are scheduled to be implemented. Second, we are
establishing provisions to allow the use of Phase 2 credits for a
limited time under specific conditions. The following discussions
describe each of these provisions in more detail for Class I engines
and Class II engines separately.
    For Class I engines, engine manufacturers can generate early Phase
3 credits by producing engines with an FEL at or below 10.0 g/kW-hr
prior to 2012. These early Phase 3 credits will be calculated and
categorized into two distinct types of credits, Transitional Phase 3
credits and Enduring Phase 3 credits. For engines certified with an FEL
at or below 10.0 g/kW-hr, the manufacturer will earn Transitional Phase
3 credits. The Transitional Phase 3 credits will be calculated based on
the difference between 10.0 g/kW-hr and 15.0 g/kW-hr. (The 15.0 g/kW-hr
level is the production-weighted average of Class I FEL values under
the Phase 2 program.) Manufacturers could use the Transitional Phase 3
credits from Class I engines in 2012 through 2014 model years. For
engines certified with an FEL below 10.0 g/kW-hr, manufacturers will
earn Enduring Phase 3 credits in addition to the Transitional Phase 3
credits described above. The Enduring Phase 3 credits will be
calculated based on the difference between the FEL for the engine
family and 10.0 g/kW-hr (i.e., the applicable Phase 3 standard). The
Enduring Phase 3 credits could be used once the Phase 3 standards are
implemented without the model year restriction noted above for
Transitional Phase 3 credits.
    Engine manufacturers may certify their Class I engines using Phase
2 credits generated by Class I or Class II engines for the first two
years of the Phase 3 standards (i.e., model years 2012 and 2013) under
certain conditions. The manufacturer must first use all of its
available transitional Phase 3 credits to demonstrate compliance with
the Phase 3 standards, subject to the cross-class credit restriction
noted below which applies prior to model year 2013. If these
Transitional Phase 3 credits are sufficient to demonstrate compliance,
the manufacturer may not use Phase 2 credits. If these Transitional
Phase 3 credits are insufficient to

demonstrate compliance, the manufacturer could use Phase 2 credits to a
limited degree (under the conditions described below) to cover the
remaining amount of credits needed to demonstrate compliance. If
manufacturers still need credits to demonstrate compliance, they may
then use their remaining Phase 3 credits (i.e., their Enduring Phase 3
credits or any other Phase 3 credits generated in 2012 or 2013, subject
to the cross-class credit restriction noted below which applies prior
to model year 2013).
    The maximum number of Phase 2 HC+NOX exhaust emission
credits that manufacturers could use for their Class I engines will be
calculated based on the characteristics of Class I engines produced
during the 2007, 2008, and 2009 model years. For each of those years,
the manufacturer will calculate a Phase 2 credit allowance using the
ABT credit equation and inserting 1.6 g/kW-hr for the ``Standard--FEL''
term, and basing the rest of the values on the total production of
Class I engines, the production-weighted power for all Class I engines,
and production-weighted useful life value for all Class I engines
produced in each of those years. Manufacturers will not include their
wintertime engines in the calculations unless the engines are certified
to meet the otherwise applicable HC+NOX emission standard.
The maximum number of Phase 2 HC+NOX exhaust emission
credits a manufacturer could use for their Class I engines (calculated
in kilograms) will be the average of the three values calculated for
model years 2007, 2008, and 2009. The calculation described above
allows a manufacturer to use Phase 2 credits to cover a cumulative
shortfall over the first two years for their Class I engines of 1.6 g/
kW-hr above the Phase 3 standard.
    The Phase 2 credit allowance for Class I engines could be used all
in 2012, all in 2013, or partially in either or both model year's ABT
compliance calculations. Because ABT compliance calculations must be
done annually, the manufacturer will know its 2013 remaining allowance
based on its 2012 calculation. For example, if a manufacturer uses all
of its Phase 2 credit allowance in 2012, it will have no use of Phase 2
credits for 2013. Conversely, if a manufacturer doesn't use any Phase 2
credits in 2012, it will have all of its Phase 2 credit allowance
available for use in 2013. If a manufacturer uses less than its
calculated total credits based on the 1.6 g/kW-hr limit in 2012, the
remainder will be available for use in 2013. This provision allows for
limited use of Phase 2 emission credits to address the possibility of
unanticipated challenges in reaching the Phase 3 emission levels in
some cases or selling Phase 3 compliant engines early nationwide,
without creating a situation that will allow manufacturers to
substantially delay the introduction of Phase 3 emission controls.
    For Class II engines, engine manufacturers could generate early
Phase 3 credits by producing engines with an FEL at or below 8.0 g/kW-
hr prior to 2011. These early Phase 3 credits will be calculated and
categorized as Transitional Phase 3 credits and Enduring Phase 3
credits. For engines certified with an FEL at or below 8.0 g/kW-hr, the
manufacturer will earn Transitional Phase 3 credits. The Transitional
Phase 3 credits will be calculated based on the difference between 8.0
g/kW-hr and 11.0 g/kW-hr. (The 11.0 g/kW-hr level is the production-
weighted average of Class II FEL values under the Phase 2 program.)
Manufacturers could use the Transitional Phase 3 credits from Class II
engines in 2011 through 2013 model years. For engines certified with an
FEL below 8.0 g/kW-hr, manufacturers will earn Enduring Phase 3 credits
in addition to the Transitional Phase 3 credits described above. The
Enduring Phase 3 credits will be calculated based on the difference
between the FEL for the engine family and 8.0 g/kW-hr (i.e., the
applicable Phase 3 standard). The Enduring Phase 3 credits could be
used once the Phase 3 standards are implemented without the model year
restriction noted above for Transitional Phase 3 credits.
    Engine manufacturers may certify their Class II engines using Phase
2 credits generated by Class I or Class II engines for the first three
years of the Phase 3 standards (i.e., model years 2011, 2012 and 2013)
under certain conditions. The manufacturer must first use all of its
transitional Phase 3 credits to demonstrate compliance with the Phase 3
standards, subject to the cross-class credit restriction noted below
which applies prior to model year 2013. If these Transitional credits
are sufficient to demonstrate compliance, the manufacturer may not use
Phase 2 credits. If these Transitional Phase 3 credits are insufficient
to demonstrate compliance, the manufacturer could use Phase 2 credits
to a limited degree (under the conditions described below) to cover the
remaining amount of credits needed to demonstrate compliance. If the
manufacturer still needs credits to demonstrate compliance, they may
then use their remaining Phase 3 credits (i.e., their Enduring Phase 3
credits or any other Phase 3 credits generated in 2011, 2012, or 2013,
subject to the cross-class credit restriction noted below which applies
prior to model year 2013).
    The maximum number of Phase 2 HC+NOX exhaust emission
credits a manufacturer could use for their Class II engines will be
calculated based on the characteristics of Class II engines produced
during the 2007, 2008, and 2009 model years. For each of those years,
the manufacturer will calculate a Phase 2 credit allowance using the
ABT credit equation and inserting 2.1 g/kW-hr for the ``Standard--FEL''
term, and basing the rest of the values on the total production of
Class II engines, the production-weighted power for all Class II
engines, and production-weighted useful life value for all Class II
engines produced in each of those years. Manufacturers will not include
their wintertime engines in the calculations unless the engines are
certified to meet the otherwise applicable HC+NOX emission
standard. The maximum number of Phase 2 HC+NOX exhaust
emission credits a manufacturer could use for their Class II engines
(calculated in kilograms) will be the average of the three values
calculated for model years 2007, 2008, and 2009. The calculation
described above allows a manufacturer to use Phase 2 credits to cover a
cumulative shortfall over the first three years for their Class II
engines of 2.1 g/kW-hr above the Phase 3 standard.
    The Phase 2 credit allowance for Class II engines could be used all
in 2011, all in 2012, all in 2013, or partially in any or all three
model year's ABT compliance calculations. Because ABT compliance
calculations must be done annually, the manufacturer will know its
remaining allowance based on its previous calculations. For example, if
a manufacturer uses all of its Phase 2 credit allowance in 2011, it
will have no Phase 2 credits for 2012 or 2013. However, if a
manufacturer uses less than its calculated total credits based on the
2.1 g/kW-hr limit in 2011, it will have the remainder of its allowance
available for use in 2012 and 2013. This provision allows for some use
of Phase 2 emission credits to address the possibility of unanticipated
challenges in reaching the Phase 3 emission levels in some cases or
selling Phase 3 engines nationwide, without creating a situation that
will allow manufacturers to substantially delay the introduction of
Phase 3 emission controls.
    To avoid the use of credits to delay the introduction of Phase 3
technologies, we are also not allowing manufacturers to use Phase 3
credits from Class I engines to demonstrate compliance with Class II
engines in the 2011 and 2012 model years. Similarly,

we are not allowing manufacturers to use Phase 3 credits from Class II
engines to demonstrate compliance with Class I engines in the 2012
model year. The 1.6 kW-hr and 2.1 g/kW-hr allowances discussed above
may not be exchanged across engine classes or traded among
manufacturers.
    We are making one additional adjustment related to the exhaust ABT
program for engines subject to the new emission standards. We are
adopting a requirement that lowering an FEL after the start of
production may occur only if the manufacturer has emission data from
production engines justifying the lower FEL (see Sec.  1054.225). This
prevents manufacturers from making FEL changes late in the model year
to generate more emission credits (or use fewer emission credits) when
there is little or no opportunity to verify whether the revised FEL is
appropriate for the engine family. This provision is common in EPA's
emission control programs for other engine categories. We are also
requiring that any revised FEL can apply only for engines produced
after the FEL change. This is necessary to prevent manufacturers from
recalculating emission credits in a way that leaves no way of verifying
that the engines produced prior to the FEL change met the applicable
requirements.
    As described below in Section V.E.3, we are allowing equipment
manufacturers to install a limited number of Class II engines,
certified by engine manufacturers with a catalyst as Phase 3 engines,
into equipment without the catalyst. (This is only allowed when the
engine is shipped separately from the exhaust system under the
provisions described in Section V.E.2.) Because engine manufacturers
may be generating emission credits from these engines based on the use
of a catalyst, EPA is concerned that engine manufacturers could be
earning exhaust ABT credits for engines that are sold but never have
the catalyst installed. Therefore, EPA believes it is appropriate to
adjust such credits to account for the fact that equipment
manufacturers may in many cases legally install a non-catalyzed muffler
on an engine that is part of a family whose certification depends on
the use of a catalyst. Therefore, EPA is adopting a 0.9 adjustment
factor for calculating credits for engine families that are available
under the delegated assembly provisions and are also participating in
the TPEM program. In addition, EPA is including an option that will
allow engine manufacturers to track the final configuration of the
engines to determine the actual number of engines that were downgraded
under the TPEM program. A manufacturer would need to track sales for
all the equipment manufacturers purchasing the given engine family. The
engine manufacturer could use the resulting number of engines that were
not downgraded in its calculation of ABT credits for that specific
engine family. Engine manufacturers may specifically direct equipment
manufacturers not to participate in the TPEM program for certain engine
models, which would allow for a more straightforward accounting of the
number of engines that are downgraded under the TPEM program.
    For all emission credits generated by engines under the Phase 3
exhaust ABT program, we are allowing an indefinite credit life. We
consider these emission credits to be part of the overall program for
complying with Phase 3 standards. Given that we may consider further
reductions beyond these standards in the future, we believe it will be
important to assess the ABT credit situation that exists at the time
any further standards are considered. Emission credit balances will be
part of the analysis for determining the appropriate level and timing
of new standards, consistent with the statutory requirement to
establish standards that represent the greatest degree of emission
reduction achievable, considering cost, safety, lead time, and other
factors. If we were to allow the use of Phase 3 credits to meet future
standards, we may need to adopt emission standards at more stringent
levels or with an earlier start date than we would absent the continued
(or limited) use of Phase 3 credits, depending on the level of Phase 3
credit banks. Alternatively, we could adopt future standards without
allowing the use of Phase 3 credits. The final requirements in this
rulemaking describe a middle path in which we allow the use of Phase 2
credits to meet the Phase 3 standards, with provisions that limit the
extent and timing of using these credits.
    Finally, manufacturers may include as part of their federal credit
calculation the sales of engines in California as long as they don't
separately account for those emission credits under the California
regulations. We originally proposed to exclude engines sold in
California which are subject to the California ABR standards. However,
we consider California's current HC+NOX standards to be
equivalent to those we are adopting in this rulemaking, so we would
expect a widespread practice of producing and marketing 50-state
products. Therefore, as long as a manufacturer is not generating
credits under California's averaging program for small engines, we
would allow manufacturers to count those engines when calculating
credits under EPA's program. This is consistent with how EPA allows
credits to be calculated in other nonroad sectors, such as recreational
vehicles.

D. Testing Provisions

    The test procedures provide an objective measurement for
establishing whether engines comply with emission standards. The
following sections describe a variety of changes to the current test
procedures. Except as identified in the following sections, we are
preserving the testing-related regulatory provisions that currently
apply under 40 CFR part 90 for Phase 2 engines. Note that there is no
presumption that any previous approvals, guidance, or judgments related
to alternatives, deviations, or interpretations of the testing
requirements under the Phase 1 or Phase 2 program will continue to
apply; any decisions on such issues will be handled going forward on a
case-by-case basis.
(1) Migrating Procedures to 40 CFR Part 1065
    Manufacturers have been using the procedures in 40 CFR part 90 to
test their engines for certification of Phase 1 and Phase 2 engines. As
part of a much broader effort, we have adopted comprehensive testing
specifications in 40 CFR part 1065 that are intended to serve as the
basis for testing all types of engines. The procedures in part 1065
include updated information reflecting the current state of available
technology. We are applying the procedures in part 1065 to nonhandheld
engines starting with new certification testing in 2013 and later model
years as specified in 40 CFR part 1054, subpart F. The procedures in
part 1065 identify new types of analyzers and update a wide range of
testing specifications, but leave intact the fundamental approach for
measuring exhaust emissions. There is no need to shift to the part 1065
procedures for nonhandheld engines before 2013. This allows
manufacturers time to make any necessary adjustments or upgrades in
their lab equipment and procedures. While any new certification testing
for nonhandheld engines will be subject to the part 1065 procedures
starting in model year 2013, manufacturers will be allowed to continue
certifying nonhandheld engines using carryover data generated under the
part 90 procedures.
    We are not setting new exhaust emission standards for handheld
engines so there is no natural point in

[[Continued on page 59083]]

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[[pp. 59083-59132]] Control of Emissions From Nonroad Spark-Ignition Engines and
Equipment

[[Continued from page 59082]]

time for shifting to the part 1065 procedures. We nevertheless believe
handheld engines should also use the part 1065 procedures for measuring
exhaust emissions. We are requiring manufacturers to start using the
part 1065 procedures in the 2013 model year as described above for
nonhandheld engines. Manufacturers will be allowed to continue
certifying handheld engines using carryover data generated under the
part 90 procedures, but any new certification testing will be subject
to the part 1065 procedures starting with the 2013 model year.
    We have taken several steps to address the concerns raised by
engine manufacturers related to the specified test procedures in part
1065. First, we have confirmed that the calculations in part 1065 yield
the same emission results for a given set of raw data from testing. The
two calculation methods resulted in differences that were less than 1
percent for both handheld and nonhandheld engines. We have identified a
variety of clarifications and adjustments that we need to make to the
equations in Sec.  1065.655 to ensure accurate calculations for engines
operating with rich air-fuel mixtures. Second, we have modified the
cycle-validation criteria in Sec.  1054.505 to more carefully reflect
achievable torque control for small engines. The new criteria are based
on a combination of specifications for continuous measurements and mean
values, including specification of absolute thresholds where a
percentage approach would not work for very small torque values. Third,
we are adjusting the fueling instructions in part 1065 to allow for
fuel-oil mixtures with two-stroke engines.
    We also acknowledge that handheld engines that depend on special
fixtures for proper testing should be tested under the provisions of
Sec.  1065.10(c) for special test procedures. This would require that
manufacturers describe their test fixtures and make them available upon
request. Further effort may be required to incorporate more specific
requirements or specifications related to these test fixtures. We
expect to cooperate with government agencies from California and from
other countries in an effort to harmonize Small SI test procedures, for
part 1065 procedures generally and for these special test procedures in
particular.
(2) Duty Cycle
    The regulations under part 90 currently specify duty cycles for
testing engines for exhaust emissions. The current requirements specify
how to control speeds and loads and describe the situations in which
the installed engine governor controls engine speed. We are extending
these provisions to testing under the new standards with a few
adjustments described below. For engines equipped with an engine speed
governor, the current regulations at 40 CFR 90.409(a)(3) state:
    For Class I, Class I-B, and Class II engines subject to Phase 2
standards that are equipped with an engine speed governor, the governor
must be used to control engine speed during all test cycle modes except
for Mode 1 or Mode 6, and no external throttle control may be used that
interferes with the function of the engine's governor; a controller may
be used to adjust the governor setting for the desired engine speed in
Modes 2-5 or Modes 7-10; and during Mode 1 or Mode 6 fixed throttle
operation may be used to determine the 100 percent torque value.
    In addition, the current regulations at 40 CFR 90.410(b) state:

    For Phase 2 Class I, I-B, and II engines equipped with an engine
speed governor, during Mode 1 or Mode 6 hold both the specified
speed and load within  five percent of point, during
Modes 2-3, or Modes 7-8 hold the specified load with
five percent of point, during Modes 4-5 or Modes 9-10, hold the
specified load within the larger range provided by 0.27
Nm (0.2 lb-ft), or  ten (10) percent of
point, and during the idle mode hold the specified speed within
 ten percent of the manufacturer's specified idle engine
speed (see Table 1 in Appendix A of this subpart for a description
of test Modes).

    Manufacturers have raised questions about the interpretation of
these provisions. Our intent is that the current requirements specify
that testing be conducted as follows:
     Full-load testing occurs at wide-open throttle to maintain
engines at rated speed, which is defined as the speed at which the
engine's maximum power occurs (as declared by the manufacturer).
     Idle testing occurs at the manufacturer's specified idle
speed with a maximum load of five percent of maximum torque. The
regulation allows adjustment to control speeds that are different than
will be maintained by the installed governor.
     The installed governor must be used to control engine
speed for testing at all modes with torque values between idle and
full-load modes. The regulation allows adjustments for nominal speed
settings that are different than will be maintained by the installed
governor without modification.
    We are adopting the Phase 3 standards with adjustments to the
regulatory requirements currently described in 40 CFR part 90 (see
Sec.  1054.505). Since each of these adjustments may have some effect
on measured emission levels, we believe it is appropriate to implement
these changes concurrent with the Phase 3 standards. To the extent the
adjustments apply to handheld engines, we believe it is appropriate to
apply the changes for new testing with 2013 and later model year
engines for the reasons described above for adopting the test
procedures in part 1065.
    First, for engines with installed governors we are requiring the
engine speed during the idle mode to be controlled by the governor. We
believe there is no testing limitation that will call for engine
operation at idle to depart from the engine's governed speed. Allowing
manufacturers to arbitrarily declare an idle speed only allows
manufacturers to select an idle speed that gives them an advantage in
achieving lower measured emission results but not in a way that
corresponds to in-use emission control. We are also aware that some
production engines have a user-selectable control for selecting high-
speed or low-speed idle (commonly identified as ``rabbit/turtle''
settings). We believe this parameter adjustment may have a significant
effect on emissions that should be captured in the certification test
procedure. As a result, we are requiring that manufacturers conduct
testing with user-selectable controls set to keep the engine operating
at low-speed idle if any production engines in the engine family have
such an option. For engines with no installed governor, part 1065
specifies that the engine should operate at the idle speed declared by
the manufacturer.
    Second, we are allowing an option in which manufacturers will test
their nonhandheld engines using a ramped-modal version of the specified
duty cycle. We expect this testing to be equivalent to the modal
testing described above but it will have advantages for streamlining
test efforts by allowing for a single result for the full cycle instead
of relying on a calculation from separate modal results. Under the new
requirement we will allow manufacturers the option to select this type
of testing. Manufacturers must use the same test method for production-
line testing that they use for certifying the engine family.
Manufacturers may include results from both types of testing in their
application for certification, in which case they could use either
method for production-line testing. EPA's confirmatory testing will
involve the same type of testing

performed by the manufacturers for certification.
    Third, the part 90 regulations currently specify two duty cycles
for nonhandheld engines: (1) Testing at rated speed; and (2) testing at
85 percent of rated speed. The regulations direct manufacturers simply
to select the most appropriate cycle and declare the rated speed for
their engines. We are making this more objective by stating that rated
speed is 3,600 rpm and intermediate speed is 3,060 rpm, unless the
manufacturer demonstrates that a different speed better represents the
in-use operation for their engines. This is consistent with the most
common in-use settings and most manufacturers' current practice.
    In addition, we are adding regulatory provisions to clarify how
nonhandheld engines are operated to follow the prescribed duty cycle.
As described in part 90, we are requiring that the engines operate
ungoverned at wide-open throttle for the full-power mode. This test
mode is used to denormalize the rest of the duty cycle. This operation
is intentionally not representative of in-use operation, but disabling
the governor allows for more uniform testing that is not dependent on
the various governing strategies that manufacturers might use. To avoid
a situation where engines are designed to control emissions over the
test cycle, with less effective controls under similar modes of
operation that engines experience in use, we are adding a requirement
for manufacturers to provide an explanation in the application for
certification if air-fuel ratios are significantly different for
governed and ungoverned operation at wide-open throttle, especially for
fuel-injected engines. Manufacturers would need to explain why this
emission control strategy is not a defeat device. If we test engines
governed and ungoverned at wide open throttle, we would expect to see
little or no difference in emission rates. If we would observe higher
emission rates with governed engine operation, manufacturers would
again need to justify why this discrepancy is not a defeat device.
Engines with conventional carburetors offer a limited ability to
manipulate air-fuel ratios at different operating points, so in these
cases manufacturers would simply state that air-fuel ratios do not vary
significantly at governed and ungoverned points of full-load operation.
    Testing at other modes occurs with the governor controlling engine
speed. Before each test mode, manufacturers may adjust the governor to
target the same nominal speed used for the full-power mode, with a
tolerance limiting the variation in engine speed at each mode.
Alternatively, testing may be done by letting the installed governor
control engine speed, in which case only the torque value will need to
be controlled within an established range. Any EPA testing will be done
only with installed governors controlling engine speed in the standard
configuration, regardless of the method used by manufacturers for their
own testing. Any such engine with test results that exceed applicable
emission standards would be considered to fail, without regard to
emission results that might be different with testing in which the
governor is adjusted to target a given nominal speed.
    A different duty cycle applies to handheld engines, which are
generally not equipped with governors to control engine speed. The
current regulations allow manufacturers to name their operating speed
for testing at each of the test modes. However, we are concerned that
this approach allows manufacturers too much discretion for selecting a
rated speed for high-load testing. We are revising this approach to
specify that manufacturers must select a speed that best represents in-
use operation for the engine family if the in-use applications involve
operation centered on a given nominal speed (350 rpm).
Engine manufacturers generally also make their own equipment, so this
can often be established for engines in an engine family. For engine
families without such a predominant operating speed, we require that
engine manufacturers test their engines within 350 rpm of the speed at
which the engine produces maximum power. Some engine families may have
a dominant engine speed, but also include a variety of applications
that operate at different in-use speeds. We specify for these cases
that engine manufacturers must test at both of the test speeds
identified above, in which case EPA testing might also involve emission
measurements using either (or both) test speeds. We are further
requiring manufacturers to describe in their application for
certification how they select the value for rated speed.
(3) Test Fuel
    We are requiring Phase 3 exhaust emission testing with a standard
test fuel consistent with the existing requirements under 40 CFR part
90 (see 40 CFR part 1065, subpart H). The existing regulatory
specifications allow for no oxygenates in the test fuel. Because
California ARB specifies a test fuel which contains the oxygenate MTBE
(but also allows for the use of EPA's test fuel), we understand that
some engine manufacturers will have emission data from engines that
meet EPA's Phase 3 standards based on testing to meet California's Tier
3 Small Off-Road Engine requirements for 2007 and later model years. In
some cases the test data will be based on California's oxygenated test
fuel, although manufacturers have the option to certify using a test
fuel such as that specified by EPA in 40 CFR part 90. To allow for a
quicker transition to the new EPA standards, we will allow for use of
this pre-existing exhaust emission test data (based on California's
oxygenated test fuel) for EPA certification purposes through the 2012
model year. Manufacturers could also use the California ARB test fuel
for their PLT testing, if they based their certification on that fuel.
The use of the California ARB data would be subject to the provisions
for carryover data for demonstrating compliance with the standards in
effect. (The carryover provisions for Phase 3 are specified in Sec.
1054.235.) While we will allow use of California ARB data for
certification through the 2012 model year, we will use our test fuel
without oxygenates for all confirmatory testing we perform for exhaust
emissions. We are limiting the timeframe for such a provision because
we ultimately want the exhaust emission test results to be performed
using the EPA specified test fuel.
    In the proposal we noted our concerns about testing with oxygenated
fuels since this could affect an engine's air-fuel ratio, which in turn
could affect the engine's combustion and emission characteristics.
Because of the relatively recent dramatic increase in the use of
ethanol (another oxygenate) in the broad motor gasoline pool, we have
reexamined our position (as discussed below) and are adopting
provisions that will allow manufacturers to use a 10 percent ethanol
blend for certification testing for exhaust emissions from nonhandheld
engines, as an alternative to the standard test fuel. This option to
use a 10 percent ethanol blend will begin with the implementation date
of the Phase 3 exhaust standards. The use of the ethanol blend would
apply to production-line testing as well if the manufacturer based
their certification on the 10 percent ethanol blend. We are also
committing to using a 10 percent ethanol blend for all confirmatory
testing we perform for exhaust emissions under the provisions described
below.
    Ethanol has been blended into in-use gasoline for many years, and
until as recently as 2005, was used in less than one-third of the
national gasoline pool.

However, ethanol use has been increasing in recent years and, under
provisions of the Energy Independence and Security Act of 2007, ethanol
will be required in significantly greater quantities. We project that
potentially 80 percent of the national gasoline pool will contain
ethanol by 2010, making ethanol blends up to 10 percent the de facto
in-use fuel. As ethanol blends become the primary in-use fuel, we
believe it makes sense for manufacturers to optimize their engine
designs with regard to emissions, performance, and durability on such a
fuel. We also believe manufacturers need to know that any confirmatory
testing we do on their engines will be performed on the same fuel the
manufacturer used for certification since the fuel can impact the
ability to demonstrate compliance with the emission standards.
    Limited data of nonhandheld engine emissions tested on 10 percent
ethanol blends suggests the HC emissions will decrease and
NOX emissions will increase compared to emissions from the
same engine operated on current certification fuel without oxygenates.
Depending on the relative HC and NOX levels of the engines,
these offsetting effects can result in small increases or decreases in
total HC+NOX emission levels. Because the impact on
HC+NOX emissions can vary slightly from engine family to
engine family, we do not want manufacturers varying their certification
fuel from one family to another to gain advantage with regard to
emissions certification.
    Therefore, if a manufacturer wishes to use a 10 percent ethanol
blend for certification, they should use the 10 percent ethanol blend
for all their Phase 3 nonhandheld engines for a given engine class by
the third year of the Phase 3 standard (i.e., by the 2014 model year
for Class I engines and by the 2013 model year for Class II engines).
During the transition period, we will perform any confirmatory testing
on the 10 percent ethanol blend if that is the fuel used by the
manufacturer for certification. At the end of the transition period, we
will perform any confirmatory testing on the 10 percent ethanol blend
if that is the fuel used by the manufacturer for certification, but
only if the manufacturer has certified all their nonhandheld engines in
that engine class on the 10 percent ethanol blend. If the manufacturer
has not certified all its engines in a given engine class on the 10
percent ethanol blend, we may decide to test the engine on our current
test fuel without oxygenates. (See Sec.  1054.145 and Sec.  1054.501.)
    For handheld engines, where we do not have sufficient data on the
impact of ethanol blends on emissions, we are adopting a slightly
different approach. Manufacturers will have the option to use a 10
percent ethanol blend for certification beginning with the 2010 model
year. The option to use a 10 percent ethanol blend would apply to PLT
testing as well if the manufacturer based their certification on the 10
percent ethanol blend. While we will allow use of a 10 percent ethanol
blend for certification, we expect to use our test fuel without
oxygenates for all confirmatory testing for exhaust emissions.
Therefore, an engine manufacturer will want to consider the impacts of
ethanol on emissions in evaluating the compliance margin for the
standard, or in setting the FEL for the engine family if it is
participating in the ABT program. We could decide at our own discretion
to do exhaust emissions testing using a 10 percent ethanol blend if the
manufacturer certified on that fuel. It should be noted that both EPA
and the California ARB are currently running test programs to assess
the emission impacts of a 10 percent ethanol blend on a range of Small
SI engines, including handheld engines. Based on the results of that
test program, we may want to consider changes to the provisions
allowing the use of a 10 percent ethanol blend for certification and
PLT testing for handheld engines. If the results of the handheld engine
testing show that emissions are comparable on both fuels, we would
expect to revise the provisions for handheld engines and take a similar
approach to that described above for nonhandheld engines. (See Sec.
1054.501.)
    The test fuel specifications for the 10 percent ethanol blend are
based on using the current gasoline test fuel and adding fuel-grade
ethanol until the blended fuel contains 10 percent ethanol by volume.
In addition, we recognize that in some cases using fuel-grade ethanol
may be less practical than using other grades and so we will allow the
use of other grades, provided they do not affect a manufacturer's
ability to demonstrate compliance with the emission standards. To
understand this allowance, it is helpful to remember that one of the
main purposes of certification is for the manufacturer to use test data
to show that the engines produced will conform to the regulations.
Implicit in this is the concept that if EPA were to test an engine in
the family according to the specified procedures, its measured
emissions would be below the standards. Allowing a manufacturer to
deviate from the specified test procedures could potentially hinder our
ability to determine whether the engines would meet the standards when
tested according to the specified procedures. Nevertheless, it is
possible to overcome this concern based on the expected impact of the
deviation on measured emissions and on the manufacturer's compliance
margin (that is, the degree to which the measured certification
emissions are below the standard). For example, we would conclude that
a deviation that was expected to change measured emission rates by less
than 0.1 g/kW-hr would clearly not affect a manufacturer's ``ability to
demonstrate compliance with the emission standards'' if the certified
emission level was 1.0 g/kW-hr below the standard (or below the Family
Emission Limit). On the other hand, a deviation that was expected to
change measured emission rates by 0.1 to 0.5 g/kW-hr would affect a
manufacturer's ``ability to demonstrate compliance with the emission
standards'' if the compliance margin was only 0.5 g/kW-hr. Another way
to show that a deviation will not affect a manufacturer's ``ability to
demonstrate compliance with the emission standards'' is to show through
engineering analysis that a deviation will actually cause measured
emissions to increase relative to the specified procedures.
    It should be noted that this is the first time EPA regulations
specify the use of an ethanol test fuel for exhaust emissions testing
for certification purposes. It is likely that EPA will consider similar
test fuel changes in the future for other vehicle and engine categories
including those addressed in this final rule. As part of those
deliberations, it is possible that EPA could decide that the test fuel
specifications for the ethanol blend should be different than those
adopted in this rule. Should that occur, EPA would need to consider
whether changes to the test fuel specifications adopted in this rule
for the 10 percent ethanol blend are appropriate for Small SI engine
testing.

E. Certification and Compliance Provisions for Small SI Engines and
Equipment

(1) Deterioration Factors
    As part of the certification process, manufacturers generate
deterioration factors to demonstrate that their engines meet emission
standards over the full useful life. We are adopting some changes from
the procedures currently included in part 90 (see Sec.  1054.240 and
Sec.  1054.245). Much of the basis for these

changes comes from the experience gained in testing many different
engines in preparation for this final rule. First, we are discontinuing
bench aging of emission components. Testing has shown that operating
and testing the complete engine is necessary to get accurate
deterioration factors. Second, we are allowing assigned deterioration
factors for a limited number of small-volume nonhandheld engine
families. Manufacturers could use assigned deterioration factors for
multiple small-volume nonhandheld engine families as long as the total