Tracking Gasoline Downstream of the Refinery We believe that an effective downstream compliance and enforcement scheme is necessary in order to achieve the full emissions reduction benefits of the rule. Today's rule modifies the proposed tracking scheme so that compliance with the program can be monitored. Under today's rule, all gasoline downstream of the refiner or importer is subject to the national downstream standard unless a different downstream standard, based on the highest sulfur content of any small refiner/ temporary refiner relief gasoline in the gasoline mixture ( as determined by the small refiners' batch testing), is supported by PTDs and a test result confirming the presence of small refiner/ temporary refiner relief gasoline. The test result must be for gasoline sampled from the downstream facility classifying the gasoline as small refiner gasoline, unless the facility is a trucker, retailer or wholesale purchaser consumer. We have concluded that this requirement is necessary to monitor compliance with the downstream standards during the period that small refiner/ temporary refiner relief standards are in effect, because the vast majority of the gasoline transported by pipelines will be gasoline produced to comply with the national cap, 135 even though most of those pipeline shipments will be classified as small refiner gasoline. 136 We believe that the ability to track small refiner gasoline is made even more important due to the geographic phase in area ( GPA) gasoline provisions finalized today. 137 GPA gasoline is subject to less stringent refiner/ importer standards than gasoline produced for use in other parts of the country. Therefore, its use is limited to the GPA states. However, it may be produced or imported at any location in the country before it is transported for use in the GPA. EPA would have little ability to assure GPA designated gasoline is only being used in the GPA if it cannot determine if gasoline at a downstream location outside the GPA that exceeds the applicable downstream cap for nonsmall refiner gasoline, is in fact small refiner gasoline or if it may include gasoline that was designated for use in the GPA but has been diverted for use elsewhere. The tracking requirements for small refiner gasoline will help us to make that determination. The only parties required to perform testing in order to demonstrate that a shipment, or tank, of gasoline contains small refiner gasoline are gasoline pipelines and terminals. Where a terminal properly classifies gasoline in its storage tank as small refiner gasoline, and subsequently receives a load of gasoline into that tank, it may not continue to classify the gasoline as small refiner gasoline unless the tank is sampled, and a test demonstrates that the tank still contains small refiner gasoline and the gasoline sulfur content exceeds the national refinery level cap. In 2004 the test result would have to exceed 350 ppm; in 2005, 300 ppm; and starting with 2006, 80 ppm. In the GPA, the test result would have to exceed 350 ppm in 2004, and 300 ppm in 2005 and 2006. We have concluded that the pipeline and terminal testing provisions are necessary for effective enforcement. We believe that terminals and pipelines will be able to perform sampling and testing that will enable them to identify the presence of small refiner gasoline in a cost effective manner. These parties have knowledge regarding the mixing of gasoline as it moves from the pipeline and into the terminal tank, and knowledge of the distribution system, that will enable them to make judgments regarding the extent of testing that may be needed to demonstrate whether gasoline meets the national downstream cap. Further, a terminal operator may take additional tests if it believes a tank may contain a stratified portion of small refiner gasoline, despite a test result showing the tank complies with the national downstream cap. Many terminals may have sufficient reason to believe they are receiving only gasoline meeting the national cap such that they will not normally test each receipt of gasoline. Additionally, even for terminals who receive small refiner gasoline, we do not believe the sampling and testing will be burdensome. This is partly because many terminals already conduct periodic sampling, or even sampling after every delivery of gasoline into storage tanks, at least in the summer VOC or RVP season, to test gasoline for various parameters, which may already include sulfur testing in RFG areas. Field test instruments already exist that are adequate for this testing in 2004 and 2005 when the national downstream cap is 378 ppm and 326 ppm, respectively. Moreover, we believe that because of today's rule, better field test instruments for sulfur analysis at lower levels are likely to be developed in the next few years. Therefore, it will not be necessary for quality assurance samples to be sent to a laboratory for testing. Thus, we do not believe shipments will be held up while terminals await a test result. We also believe that it is likely that these instruments will be available for a cost that will be far less than most laboratory instruments available today. Under today's rule, retailers are not required to conduct testing. The retailer can demonstrate that the gasoline is properly designated small refiner gasoline subject to a less stringent downstream standard by maintaining PTDs from its suppliers that demonstrate a terminal classified gasoline supplied to the retailer's storage tank as small refiner gasoline.

Downstream Standards and Requirements for GPA Gasoline Consistent with the way today's rule sets downstream sulfur standards for other gasoline, the GPA program downstream standard is determined by adding the ASTM reproducibility applicable to the refinery level sulfur VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6805 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 138 As stated in section IV. C. of this preamble, the GPA states are Alaska, Idaho, Montana, North Dakota, Wyoming, Utah, Colorado and New Mexico. 139 See 40 CFR 80.46( a). Today's rule updates the former designated test method, ASTM D 2622   94. 140 See preamble discussion in section VI. E., below. cap to that refinery level cap, which for GPA gasoline is as high as 350 ppm in 2004, and 300 ppm in 2005 and 2006. This results in downstream standards for GPA gasoline of 378 ppm in 2004, and 326 ppm in 2005 and 2006. Because GPA gasoline must be used only within the GPA states, 138 today's rule requires that refiners and importers producing or importing gasoline subject to the GPA standards must designate each such batch of gasoline as GPA gasoline and segregate such batches from all other gasoline. Product transfer documents must identify the gasoline as GPA gasoline so that all downstream parties will be aware that it must be sold or distributed for use only in the GPA. Gasoline produced for use in all areas of the country outside the GPA may be sold for use in the GPA, including gasoline subject to small refiner standards under section 80.240 of today's rule. Where GPA gasoline is commingled with other gasoline, the commingled gasoline must be classified as GPA gasoline and used only in the GPA states. Where GPA gasoline is commingled with S   RGAS, the applicable downstream sulfur standard for that gasoline is the greater of the GPA downstream standard or the applicable small refiner/ temporary refiner relief standard as determined under section 80.210 of the rule.

Lead Time for Downstream Compliance With New Standards Some commenters stated that there should be a lead time of several months between the implementation date of a new refinery level sulfur standard and the implementation date of the corresponding downstream standard. Based on our experience with other fuels programs, we believe that a onemonth lead time will be adequate for gasoline at the terminal level to meet new standards. An additional one month for retailers will give them ample time to comply. Therefore, under today's rule, the 378 ppm downstream sulfur standard ( or any applicable small refiner downstream cap standard) is effective February 1, 2004 at the terminal level and March 1, 2004 at the retail level. The 326 ppm downstream sulfur standard is effective February 1, 2005 at the terminal level and March 1, 2005 at the retail level. The 95 ppm downstream standard is effective February 1, 2006 at the terminal level and March 1, 2006 at the retail level ( or February 1, 2007, and March 1, 2007, respectively, in the case of gasoline at facilities in the GPA).

Retail Gasoline Pump Labeling EPA believes gasoline advertised as being `` low sulfur gasoline'' when sold at retail outlets should have a sulfur content of no more than 95 ppm because this is the maximum sulfur level of gasoline at retail outlets that would protect the emission controls of Tier 2 vehicles. We are stating this to inform refiners and other regulated parties, when making advertisement decisions regarding gasoline, that it is EPA's position that effective January 1, 2004, if any retailer represents that gasoline is low sulfur gasoline, or representations to the same effect, the gasoline sulfur content should be no greater than 95 ppm.

D. Testing and Sampling Methods and Requirements 1. Test Method for Sulfur in Gasoline We proposed ASTM standard method D 2622   98, `` Standard Test Method for Sulfur in Petroleum Products by Wavelength Dispersive X ray Fluorescence Spectrometry,'' as the primary method for testing sulfur in gasoline by refiners and importers. This is the designated method under the RFG/ CG rule. 139 We also requested comment on adopting other methods as the primary method, in particular, ASTM method D 5453   93, `` Standard Test Method for Determination of Total Sulfur in Light Hydrocarbons, Motor Fuels and Oils by Ultraviolet Fluorescence,'' and ASTM D 4045, `` Standard Test Method for Sulfur in Petroleum Products by Hydrogenolysis and Rateometric Colorimetry,'' which is used under the California fuels program for sulfur levels below 10 ppm. We also proposed ASTM D 5453 as an alternative method for determining the sulfur content of gasoline and we requested comment on this proposal. Most comments supported the continued use of ASTM D 2622 as the designated method for testing sulfur in gasoline under the various fuels rules, including today's rule. Commenters indicated that most refineries outside of California are currently using ASTM D 2622. Under the California fuels regulations, California refineries currently use ASTM D 5453, as well as ASTM D 2622 and ASTM D 4045. Comments were generally favorable to the proposed use of ASTM D 5453 as an alternate method. However, one California refinery, an automobile manufacturers association and a manufacturer of analytical equipment stated that ASTM D 5453 should be the primary method, primarily due to its greater precision at low sulfur levels. Favorable comments were received to the use of ASTM D 4045, especially for gasoline sulfur content of 10 ppm or less. One commenter suggested that ASTM D 5623   94 should be allowed; one commenter suggested that ASTM D 3120 should be allowed, and one commenter suggested that ASTM D 6428 should be allowed. Several commenters stated that we should utilize a performance based criteria system to determine what test methods can be used. We have considered the comments carefully. We believe there are a number of test methods for determining the sulfur content of gasoline that may eventually be shown to be as good as, or better than, ASTM D 2622. We also considered that the Agency is likely to issue a proposed rulemaking for a performance based test method approach that would apply to motor vehicle fuel parameters. This rule, once promulgated, would set forth criteria for determining whether an alternative analytical test method could be used instead of the designated analytical test method for a given fuel parameter and would set forth criteria for correlating alternative analytical test methods to the designated analytical test method. We believe it is appropriate that alternate analytical methods should be qualified and correlated to the regulatory method according to standardized criteria. Today's rule therefore provides that ASTM D 2622, the recognized standard analytical method for determining sulfur in gasoline, is the sole regulatory method, anticipating that a performance based testing rule may be issued before 2004, and that under its terms anyone will be able to qualify and correlate additional testing methods. We do not believe this will result in undue hardship for several reasons. First, our current fuels rules already provide that ASTM D 2622 is the sole regulatory method for determining the sulfur content of gasoline. Second, California refiners currently using ASTM D 5453 or ASTM D 4045 will not face any hardship because today's rule allows the use of approved California test methods by California refiners. 140 Third, today's rule allows continued use of composite samples for sulfur testing for CG during the period of early credit generation, and therefore refiners currently using outside labs to test composite samples,

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6806 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 141 ASTM D 5623, entitled `` Standard Test Method for Sulfur Compounds in Light Petroleum Liquids by Gas Chromatography and Sulfur Selective Detection.'' 142 ASTM D 2784, entitled `` Standard Test Method for Sulfur in liquefied Petroleum Gases''; ASTM D 4468   85( 1995), entitled `` Standard Test Method for Total Sulfur in Gaseous Fuels by Hydrogenolysis and Rateometric Colorimetry''; and ASTM D 3246   96, entitled `` Standard Test Method for Sulfur in Petroleum Gas by Oxidative Microcoulometry.'' 143 ASTM D 3227, entitled `` Mercaptan sulfur in Gasoline, Kerosine, Aviation Turbine, and Distillate Fuels''. The commenter suggested it should be allowed with the use of the x ray finish. 144 Discussed in section VI. D. 3. but who may elect to conduct testing inhouse when the every batch sulfur testing requirement is implemented, will not need to determine whether a less expensive alternative to ASTM D 2622 is available for several years. Last, if a performance based test method rule is not issued by the Agency in the near future, then we may reconsider this issue in a subsequent rulemaking. We also believe that a standardized approach for determining the appropriateness of alternate test methods, correlation methodology and quality control criteria for alternate test methods would be the most fair approach to the test equipment manufacturers and to the purchasers of testing equipment. It should result in a level playing field for competition among manufacturers of test equipment. We already know that ASTM D 5453 can be purchased for about half the price of ASTM D 2622 equipment, and competition may result in even less expensive equipment. Some commenters suggested that where a refiner or importer uses ASTM D 2622 to test gasoline, and where the test result is less than 10 ppm, the refiner or importer should be able to report a test result of zero or perhaps use a default value of 5 ppm. This sort of approach has been allowed under the RFG and Anti dumping Question and Answer Document. However, we disagree with the commenters that this practice is appropriate under the sulfur rule. Under the sulfur rule, with a refiner average standard of 30 ppm, it is important whether a bias is consistently drawn in favor of zero ppm as opposed to 10 ppm. This could artificially increase the number of credits earned or could allow more batches to be produced by the refiner that are near the 80 ppm cap. We believe that any imprecision of sulfur values derived from analysis using ASTM D 2622, will, over the course of numerous batches, average out to near zero. Further, we believe that the precision of ASTM D 2622 is likely to be improved by 2004. Also, by 2004 there may be other methods that will be shown to be precise at low sulfur levels that may be made available for use under a performance based test method rule. Under today's rule the refiner or importer must report the test result that the test method provides, so long as the result is not less than zero ( in which case a result of zero would be reported). If alternative methods are ultimately made available for use under a performance based rule, refiners and importers who are producing or importing gasoline with low levels of sulfur may desire to use an alternative test method for low sulfur levels, especially if ASTM D 2622 is less precise at such levels. Under today's rule, if any approved alternative method is used for this purpose, a party could not choose to use the test result from ASTM D 2622 when its result is lower, and the test result from the alternative method when its result is lower. For any alternative test method that is eventually approved, if the party uses it for a certain range of sulfur concentrations, and ASTM D 2622 for another range, it must be consistent in such use. For example, if the alternate method were used for test results below 10 ppm, its result would always have to be used for sulfur levels below 10 ppm and ASTM D 2622 would always have to be used for sulfur levels greater than 10 ppm.

2. Test Method for Sulfur in Butane We proposed the use of ASTM standard test method D 5623   94 141 as the designated method for testing the sulfur content of butane and requested comment on whether this method should be the designated method. Although some butane suppliers or refiners currently use this method, several commenters stated that many refiners do not have ready access to ASTM D 5623 and that it is not necessarily the most precise method for determination of low levels of sulfur in butane. Commenters suggested at least three other methods are equal to ASTM D 5623. These are ASTM D 2784, ASTM D 4468, and ASTM D 3246.142 One commenter also suggested that ASTM D 3227   92,143 should be allowed. Several commenters requested that EPA at least allow alternative test methods for quality assurance testing. We have reviewed the suitability of ASTM D 5623 and agree that it is not the best method for testing for sulfur content in butane. ASTM D 5623 measures sulfur compounds rather than total elemental sulfur, and the current ASTM 5623 method is specified for liquid fuels, not gaseous fuels. ASTM D 2784 does not seem to be a better method than ASTM D 5623. Commenters stated that ASTM D 2784 is not the most precise method and that it is not widely used. We believe there may be some difficulty in even obtaining the apparatus for ASTM D 2784. ASTM D 3227 is not appropriate since it is designed for measuring a single sulfur compound, and it is currently designated for testing liquid samples. We believe that ASTM D 4468 appears to be a good method for testing butane for sulfur levels below 20 ppm. However, dilution would be necessary to test for sulfur levels above 20 ppm. This may be problematical, since it may be difficult to dilute a gaseous fuel. We expect that under today's rule, butane being tested will frequently have sulfur content in excess of 20 ppm. Several other methods exist that might work well for testing for sulfur content of gaseous fuels, but their current scope does not include determination of sulfur in gaseous fuels. ASTM D 3246   96, which was suggested by API and NPRA as a suitable method, is an appropriate method for measuring gaseous compounds and provides test results for total elemental sulfur. Its range is 1.5 to 100 ppm, which is ideal for testing for the alternative 30 ppm butane sulfur standard applicable to butane blenders promulgated in today's rule. 144 After considering the strengths and weaknesses of all the available options we believe ASTM D 3246 is the best currently available method. Therefore, today's rule makes ASTM D 3246 the designated method for testing the sulfur content of butane or other gaseous blendstocks. As discussed above, we anticipate that a performance based test method rule for motor vehicle fuel parameters may be promulgated before 2004, and that the efficacy of other methods would be demonstrable under that rule. However, if that is not the case, the Agency may reconsider the issue of appropriate alternate test methods in a future rulemaking.

3. Quality Assurance Testing Several commenters urged that alternate test methods be allowed for quality assurance test purposes. Under today's rule, the use of alternate test methods for quality assurance testing for purposes of establishing a defense to liability, for butane quality assurance testing under section 80.340( b)( 4), and for determination of whether gasoline is small refiner gasoline, is allowed, so long as the alternate test method is correlated to the regulatory test method, the method is ASTM approved, and the VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00110 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6807 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 145 Except for certain truck importers, as noted above. 146 As noted above, we are not requiring every batch testing for CG parameters other than sulfur. protocols under the method are followed. However, the regulatory method is required for the truck importer quality assurance testing under section 80.350( c).

4. Requirement To Test Every Batch of Gasoline Produced or Imported We proposed in the NPRM that refiners and importers 145 would be required to sample each batch of gasoline produced or imported and perform a test on each sample to determine the sulfur content prior to the gasoline leaving the refinery gate or importer facility. We received comments on several aspects of this proposed requirement. Several commenters urged that we continue to allow composite sampling and testing for sulfur. Some refiners commented that the requirement to test each batch would raise testing costs. However, one refiner commented that every batch testing for sulfur would not be a substantial burden so long as everybatch testing for other CG parameters is not required. 146 This commenter stated that testing for sulfur content is much less complex than testing for certain other CG parameters. We believe that with a refinery gate sulfur cap combined with refinery averaged standards, there is no realistic alternative to every batch testing. The Agency has no way to know whether a composite sample that is tested and found to meet the applicable refinery cap included a sample from an individual batch of gasoline that was introduced into commerce that exceeded the cap by a factor of 2 or 3. Further, we believe that with averaged standards for refiners and importers, and with multiple cap standards in effect during the phase in period, monitoring compliance without everybatch testing would be impossible even if we could somehow be assured that no individual batch significantly exceeded the applicable refinery level cap. We realize that there will be an additional cost associated with testing every batch of CG   for sulfur content ( this is already required for RFG). However, we believe less expensive test methods for sulfur content already exist, and may continue to be developed, that will likely be acceptable as alternative methods in the future, as discussed above. Therefore, today's rule retains the requirement for every batch testing. Under today's final rule, the test results for each batch of gasoline will be used to determine compliance with the applicable refiner/ importer cap standard and to calculate the refiner's or importer's annual average sulfur level. Any batch of gasoline that exceeds the applicable sulfur cap cannot be distributed or sold in the U. S. ( unless it is exempted from the standards under today's rule, as described in section VI. G., below). Refiners who use computerized inline blending methods objected to the proposed requirement for a batch test before the gasoline is released from the refinery. These commenters stated that refiners using the sophisticated in line blending practice cannot produce a complete batch test until a portion of the batch is already past the refinery gate. These commenters did not urge that we eliminate the requirement for every batch testing, but urged that the sulfur rule adopt the RFG rule provisions for in line blending found at 40 CFR 80.65( f)( 4), for both RFG and CG. We believe that the importance of assuring compliance with the refinery level cap is such that the rule must generally require that gasoline must be tested for sulfur content before it leaves the refinery. Based on experience under the RFG rule, we do not believe that the requirement to test each batch before it is released will substantially increase the cost of testing or cause delays in shipments. However, today's rule recognizes the unique circumstances involved in computerized in line blending. We believe that with appropriate safeguards, compliance with sulfur standards for gasoline produced by refineries using in line blending can be assured. Therefore, today's rule incorporates the RFG rule provisions for in line blending at 40 CFR 80.65( f)( 4). Such provisions will be applicable to RFG and CG. However, refineries presently having an in line blending waiver will be asked to submit additional information under the auditing procedures included in approvals of in line blending petitions already in place. We will contact individual holders of in line blending approvals to request information on how sulfur is monitored and how streams of gasoline are distributed in the in line blending process. If we cannot conclude that the monitoring procedures will assure compliance with sulfur standards, we will revoke the inline blending approval for that purpose. We believe it is important to ensure that the in line analyzer technology and the refiner's methodology and procedures are sufficient for the gasoline sulfur levels the refinery will have after this rule is implemented, for both RFG and CG. Several commenters stated that the proposed rule's requirement to test every batch of CG for sulfur is unnecessary during the period of early credit generation because there is no cap standard in effect during this period, even for those refiners generating credits. We agree that every batch testing is not essential for CG until the refinery gate per gallon cap standards go into effect. Thus, today's final rule allows composite sample testing for CG to continue during the period of early credits generation, until January 1, 2004, when a cap standard for sulfur is first imposed on gasoline.

5. Exceptions to the Every Batch Testing Requirement Under the RFG rule, refiners who blend butane or other blendstocks to previously certified gasoline ( PCG) must determine the volume and parameter values of the blendstock, including sulfur content, by testing the gasoline before and after blending, and calculating the properties of the blendstock by subtracting the volume and parameter values of the PCG. For CG only, under certain conditions, we have allowed butane blenders to use the parameter specifications of butane as tested by the butane producer. We have allowed this alternative to every batch testing because of the costs of testing each load of butane. We proposed a similar alternative to every batch testing for butane blenders in the NPRM, which allows butane blenders to use the sulfur test result of their suppliers, if the butane contains no more than 30 ppm sulfur and if the butane blender undertakes a quality assurance program of periodic sampling and testing to ensure that the supplier's sampling and testing is accurate. We also proposed to allow refiners that blend other blendstocks into PCG to meet an alternative testing requirement in lieu of testing every batch of gasoline. Provided that the refiner's test result for the sulfur content of each of the blendstocks is less than the national refinery level per gallon cap standard, a refiner can sample and test each blendstock when received at the refinery, and treat each blendstock receipt as a separate batch for purposes of compliance calculations for the annual average sulfur standard. Today's rule adopts these provisions. Several commenters urged us to delay the 30 ppm per gallon cap standard until other refiners must meet a 30 ppm average standard. The proposed 30 ppm per gallon standard was intended to be environmentally neutral in relation to VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6808 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 147 See Table IV. C.   1. 148 See the discussion on this subject in the preamble to the reformulated gasoline program's final rule, 59 FR 7765 ( Feb. 16, 1994). 149 See 40 CFR 80.65( f)( 3)( F)( ii), and the Proposed Rule for Modifications to Standards and Requirements for Reformulated and Conventional Gasoline, 62 FR 37337 et seq, proposed 40 CFR 80.101( i)( 1)( i)( C)( iii). the standard applicable to other refiners. Therefore, today's final rule makes clear that for the alternative compliance approach for butane blenders, the 30 ppm per gallon cap is not applicable until January 1, 2005. The per gallon cap starting January 1, 2004 is 120 ppm. 147 For GPA gasoline the per gallon cap under this alternative compliance option is 150 ppm in 2004 through 2006.

6. Sampling Methods Sampling methods apply to all parties who conduct sampling and testing under the rule. We proposed to require the use of sampling methods that were proposed in the July 11, 1997 Federal Register notice for the RFG/ CG rule ( 62 FR 37338, at 37341   37342, 37375   37376). These sampling methods include ASTM D 4057   95 ( manual sampling), ASTM D 4177   95 ( automatic sampling from pipelines/ in line blending), and ASTM D 5842 ( this sampling method is primarily concerned with sampling where gasoline volatility is going to be tested, but it would also be an appropriate sampling method to use when testing for sulfur). There were no adverse comments to the proposed sampling provisions. Today's rule adopts the methods as proposed.

7. Gasoline Sample Retention Requirements In the NPRM, we proposed a refiner and importer ( collectively referred to in this section as `` refiner'') sampling and testing program to establish the sulfur compliance of each batch of gasoline produced or imported. We were aware that there were possible drawbacks to a self testing scheme. For example, a party might sample or test gasoline in a manner that is inconsistent with the required procedures, or employees might inaccurately record the test results by mistake or otherwise. Parties might also attempt to conceal a discovered violation or to save money by not correcting a violation. To address our concerns about selftesting we considered an alternative option of requiring independent sampling and testing for all gasoline, including conventional gasoline. We did not propose this requirement for independent sampling and testing for all gasoline because of the costs of such a requirement, 148 and we are not adopting such a program in today's final rule. Instead, we proposed in the NPRM a different strategy to complement the self testing program that would help ensure refinery sulfur compliance. This strategy would have required refiners to retain for thirty days a representative sample from each batch of gasoline produced, and to provide such samples to the Agency upon request. We believed that, by means of this option, EPA could verify the refiner test results. We believe that this would create an incentive for refiners to sample, test, and record their sulfur results in an accurate and truthful manner. We also proposed that refiners be required to certify annually that the samples have been collected in the manner required under the sulfur rule. In addition, we proposed that specific procedures be followed by refiners to properly collect, retain, and ship the samples in a manner consistent with requirements already imposed or proposed under the RFG program. Under the proposal, a minimum representative sample of 330 ml of each gasoline batch would need to be retained ( and submitted to EPA upon request). 149 Although there were few comments on this proposal, one commenter, the National Petrochemical & Refiners Association (`` NPRA''), did comment extensively on it, and strongly urged the Agency not to finalize it. One of the points raised by the NPRA was that the RFG regulations have their own sample retention and submission requirements, ( 40 CFR 80.65), so that a sulfur rule provision for RFG batches was not necessary. The Agency continues to believe that sample and retention requirements are useful to ensure compliance with the sulfur standards, but we agree with NPRA that the sample retention and submission requirements found in the RFG rule will serve equally as well for the sulfur rule. Therefore, the final sulfur rule requires all refiners, including those producing RFG, to comply with the sulfur rule's retention requirements. However, any refiner of RFG using an independent laboratory pursuant to 40 CFR 80.65( f), either under the 100% Option or the 10% Option, will be considered to be in compliance with the sulfur rule's retain requirements provided the refiner ensures that the independent laboratory conducting the retain program for the refiner, is in compliance with these requirements. In particular, the refiner must ensure that its independent laboratory sends the appropriate certificate of analysis along with any sample forwarded to EPA. Under the RFG program's 100% Option, the refiner must ensure that its independent laboratory sends the independent lab's certificate of analysis; and under the 10% Option, the refiner must ensure that its independent laboratory sends the refiner's certificate of analysis. In addition to urging EPA not to finalize the sample retention and submission requirements for RFG gasoline, NPRA urged us not to finalize these requirements for CG as well. NPRA argued that these requirements would not prove useful in deterring non compliance with the sulfur requirements for this product, primarily because false samples could be forwarded to EPA. The Agency disagrees with NPRA's argument. First, the goal of these requirements is not only to deter cheating but also to reveal inadequacies that exist in refiners' sulfur testing procedures. We do not expect that most non compliance with the sulfur standards will occur through cheating, but rather through operational problems. Agency enforcement experience under the RFG rule reveals that some refiners' testing procedures are not always accurate in measuring parameters and thus detecting noncompliance. EPA verification testing will expose such testing inaccuracy, enabling the refiner to improve its testing procedures and thus improve its ability to detect, and correct, its own compliance problems. To ensure the effectiveness of these sulfur sample retention and submission requirements, the final rule requires all refiners to provide EPA with the sulfur test result the refiner has obtained for the sample, along with each sample the refiner provides to the Agency under this rule. EPA will use these retained samples in compliance determinations. Gasoline samples that are forwarded to EPA under the sample retention requirements that are found to be in violation of a refinery cap, will be considered by EPA to be evidence of violations of the cap standard, regardless of the refiner's own test result. In addition, EPA testing of these samples may establish that the refiners' test results are generally incorrect, i. e., are biased. EPA will evaluate whether such a bias constitutes evidence of a violation of the sulfur average standards applicable to the refiner, including whether the bias extends to other sulfur tests conducted by the refiner during the current or previous averaging periods. Further, evidence of testing bias could constitute evidence a refiner has not met the requirement to conduct sulfur testing in accordance with specified VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6809 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 150 See 40 CFR 80.81( g). procedures, and any reports submitted to EPA that reflect the bias could be evidence a refiner has not met the requirement to properly report the sulfur content of gasoline produced. While it is true that a party can submit false samples to EPA in order to prevent the Agency from discovering what in actuality is a non compliant batch of gasoline, we do not believe that there will be many examples of such flagrant cheating. Our enforcement experience indicates that the great majority of parties regulated under the fuels programs work to comply with the regulatory requirements. We believe that the potential penalties for the submission of false samples to the government, and the potential criminal liability which such conduct would subject parties to under to section 113 of the Clean Air Act, will act as significant deterrents to this cheating. Last, to further decrease perceived incentives for such cheating, the regulation specifically requires that the refinery official signing and submitting the refinery's annual sulfur report must make inquiries to verify the correctness of the sampling collection and retention procedures and include with the annual sulfur report a personal certification of the correctness of the procedures used to collect the retained samples. If such certification cannot be made, then the report cannot be timely filed. NPRA further commented that CG being counted to create early credits under the sulfur rule's ABT program should not be subject to the proposed sample retention and submission requirements. NPRA argues that the lack of a sulfur cap during the early credit timeframe makes such retention and submission unnecessary. The Agency disagrees. During the early credit generation timeframe, refiners participating in the credit program must comply with sulfur averaging requirements, even though sulfur caps are not required to be met. Accurate determination of compliance with the averaging requirements necessitates accurate sulfur testing in the early credit period, just as it does during implementation of the full sulfur program, even though sulfur testing of CG composite samples will be permitted. Hence, the sample retention and submission requirements, whose purpose is to ensure accurate testing and compliance determination, continue to be necessary for the early credit period. The final rule retains the sample retention requirements for CG during the early credit time frame. NPRA also suggested that in place of the proposed 30 day sample retention requirement, EPA instead should require refiners to maintain samples only from the last three batches of gasoline produced. NPRA argued that this alternative requirement would prove more economical for the refiners, yet would still provide EPA with the ability to test some samples itself. Although the Agency believes that the proposed 30 day retention period would provide a valuable amount of samples to be retained and thus available for testing by EPA, the Agency agrees that a more limited sample retention requirement could provide an acceptable means of confirming refiner testing accuracy and sulfur compliance, while being less burdensome to refiners. We do not believe, however, that retention of samples from only three batches of gasoline would be effective in accomplishing the goal of producing greater testing accuracy. Three samples would not be a great enough number to realistically demonstrate if a pattern of testing irregularities exists or to demonstrate that a significant volume of the refiner's production is covered by the testing verification process. Consequently, instead of the three batch sample retention requirement proposed by this commenter, the Agency has instead required in the final rule that at least the last 20 samples be retained, and that each sample be retained for a minimum of 21 days. The Agency believes this amended requirement addresses NPRA's concern that the amount of days of sample retention be reduced from thirty days, while also providing the Agency with an effective means of assuring a reasonable number of samples, representing a significant period of refining activity, will be available for accuracy testing. We believe the retention requirement is not burdensome given the limited number of samples that must be retained. Further, many refineries already retain samples. A final comment by NPRA about the sample retention and submission requirements is addressed in the final rule. NPRA raised a concern about the required retention and submission of samples of pressurized blendstock, particularly butane, which would require the use of specialized highpressure containers. The Agency agrees that there is legitimate concern about the handling, storing and shipping of such samples. We also believe that the final rule's quality assurance testing requirements and the testing requirements for blendstock suppliers provides adequate assurance of the compliance of these blendstocks. Hence, the final sulfur rule does not contain a requirement that samples of pressurized blendstock must be retained.

E. Federal Enforcement Provisions for California Gasoline and for Use of California Test Methods To Determine Compliance Requirements to Segregate Gasoline and to Use Product Transfer Documents for Certain California gasoline; Definition of California Gasoline In the NPRM, the Agency proposed to generally exempt from the requirements of the federal sulfur rule certain gasoline sold or intended for sale in California. For the purpose of program consistency, the gasoline to be exempt in the sulfur rule would meet the same definition of California gasoline as found in the RFG rule ( 40 CFR 80.81( a)( 2)). The exempt gasoline would include all gasoline sold, intended for sale, or made available for sale in California that was also either: produced within California; imported into California from outside the U. S.; or imported into California from another state, provided that the out of state refinery did not also produce federal RFG. Although the NPRM proposed to exempt California gasoline from compliance with the proposed sulfur standards ( for reasons discussed elsewhere in this preamble), we did propose two requirements that would apply to some exempt California gasoline. The first would require exempt gasoline produced outside of California but intended for use in California, to be segregated from non exempt gasoline at all points in the distribution system. The second would require out of state producers of exempt gasoline intended for sale in California to create PTDs identifying the product as California gasoline, and would require such PTDs to be provided to all transferees of this gasoline in the distribution system. Requiring such documentation is intended to facilitate enforcement and compliance by identifying gasoline that is not federally regulated. The same PTD requirements currently apply under the RFG program. 150 One commenter expressed a reservation about the sulfur rule's proposed segregation requirement. The commenter was concerned that the segregation requirement for exempt California gasoline might interfere with the ability of California importers to import into California, non exempt, federal RFG gasoline that happened to comply with California Air Resources Board ( ARB) sulfur requirements, but had not been kept segregated by its out

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6810 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations of state refiner from the refiner's federal RFG product. Out of a concern about potential gasoline supply problems in California, the commenter asked for assurances from the Agency that such gasoline would not be prohibited from sale in California because of the sulfur rule's segregation requirement. The Agency agrees that it would not be beneficial to restrict the flow of complying gasoline into California. However, since the federal and the ARB sulfur control programs provide for differing calculations of standard compliance, and since the standards themselves are not always consistent between the two programs, EPA does not believe that the compliance of gasoline produced for federal purposes will necessarily assure its compliance with ARB program requirements, and vice versa. Therefore, we believe it is necessary to require the physical segregation of the gasolines produced for the different programs in order to best ensure compliance with our uniquely determined federal sulfur standards. To ensure segregation, it is necessary that refiners and importers designate gasoline batches destined for California as California gasoline and that PTDs identify the gasoline as being for use only in California. Further, one of the purposes of creating the California exemption in the federal sulfur rule is to ensure the exclusion of California gasoline from the refiner's compliance calculations under the federal rule. This exclusion is necessary to prevent gasoline that is produced to comply with the strict California standards from unfairly effecting the refiner's compliance with the federal requirements, thereby facilitating the production of higher sulfur gasoline for use in a federal market supplied by the refiner. EPA believes that segregation of the two gasolines is necessary because it facilitates accurate identification of the product to be included solely in the federal compliance calculations. EPA does not believe that requiring the segregation of California gasoline from gasoline produced for the federal market should create a significant restriction in the flow of gasoline to California. The Agency believes that if a California marketer needs to acquire ARB complying gasoline from out ofstate the marketer should generally be able to satisfy that need by ordering a batch of California gasoline to be created for it by out of state producers. Under this circumstance of the creation of a unique batch of California gasoline, segregation of the gasoline will typically be assured. In analyzing the above comment on segregation of California gasoline, the Agency realized that the sulfur rule's proposed definition of exempted California gasoline, which paralleled the definition existing in the RFG rule, was not as complete as it should be to properly address the unique needs of the sulfur program. Specifically, the exclusion from the sulfur rule's exemption of out of state gasoline sold or intended for sale in California solely because it happens to be produced at a refinery that produces federal RFG gasoline, is not appropriate. Basing an exemption on whether or not an out ofstate refinery produces federal RFG is relevant to the RFG program, but it has no relevance to the sulfur control program. To ensure effective determination of compliance with federal sulfur standards, the final sulfur rule deletes any reference to RFG production in the rule's definition of exempt California gasoline. Hence, the example presented in the comment, in which out of state gasoline for sale in California could be considered nonexempt gasoline, would not arise under the expanded definition of California gasoline.

Use of California Test Methods and Off Site Sampling Procedures for 49 State Gasoline Under the NPRM and the final rule, refineries and importers located in California would be required to meet the federal sulfur standards and other requirements with regard to their `` federal'' gasoline to be used outside of California. However, we proposed that gasoline produced in California for sale outside of California could be tested for compliance under the federal sulfur rule using the methodologies approved by the ARB, provided that the producer complies with the procedures for such testing as already required under 40 CFR 80.81( h), which permits California test methods not identical to federal test methods to be used for conventional gasoline. Today's rule adopts this provision, as well as the corollary proposed provision that gasoline produced by California refiners for use out of state may be tested at off site testing as already permitted pursuant to 40 CFR 80.81( h) for CG purposes. Both provisions in today's rule should alleviate duplicate testing burdens on California refiners subject to both the federal and California programs, since the test methods acceptable under these alternative provisions in today's rule are also currently used to comply with California requirements. No comments were received on these provisions. F. Recordkeeping and Reporting Requirements 1. Product Transfer Documents Small Refiner Gasoline Transfers The NPRM proposed that the business practice PTDs that accompany each transfer of custody or title of gasoline that includes gasoline produced by any small refiner subject to sulfur rule individual refinery standards would be required to identify the gasoline as such, including the applicable downstream cap, as an aid to enforcing the national downstream cap. Today's rule adopts the proposed PTD requirement, with modifications regarding how the PTD requirement relates to testing, as described in section VI. C. The requirement for printing information on PTDs has been simplified in the final rule. All parties may use brief codes to identify the small refiner status of the gasoline and to identify the small refiner downstream standard it is subject to. This small refiner gasoline PTD provision is also applied to gasoline subject to individual refinery standards under the temporary refiner relief provision of today's rule.

GPA Gasoline Transfers Under the geographic phase in program finalized today, gasoline produced or imported for use in the GPA may be used only in the GPA states. Therefore, it is necessary for PTDs for gasoline that is comprised in whole, or in part, of GPA gasoline, to identify the gasoline as such and state that the gasoline may not be distributed or sold for use outside the GPA. Product codes may be used to provide this information, except in the case of transfers to truck carriers, retailers and wholesale purchaser consumers.

2. Recordkeeping Requirements Under today's rule, refiners and importers will be required to keep and make available to EPA certain records that demonstrate compliance with the sulfur program standards and requirements. This includes records pertaining to the generation, use and transfer of credits and allotments. The RFG/ CG regulations currently require refiners and importers to retain records that include much of the information required in the sulfur rule. Where this is the case, there is no requirement for duplication of records or information. Under the final rule, all parties in the gasoline distribution system, including refiners, importers, oxygenate blenders, retailers, and all types of distributors will be required to retain PTDs and records of quality assurance programs ( including, where applicable, sulfur test VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6811 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 151 Five years is the applicable statute of limitations for the RFG and other fuels programs. See 28 U. S. C. 2462. results) that parties conduct to establish a defense to downstream violations. All parties in the gasoline distribution system currently are required to keep PTDs for RFG. However, since there are no downstream CG standards under the anti dumping regulations, only refiners and importers are required to retain PTDs for conventional gasoline under the current regulations. Because the sulfur rule, like the RFG rule, includes downstream standards, we believe that a requirement to retain PTDs for all parties in the gasoline distribution system is appropriate under the sulfur rule. The PTD information will help us identify the source of any gasoline found to be in violation of the sulfur standards, and will provide downstream parties with information regarding the applicable downstream standard. Parties are required to keep records for a period of five years, 151 with additional requirements for records pertaining to credits and allotments. Records pertaining to credits or allotments that were banked and never transferred to another party are required to be retained for five years after the credits or allotments are used for compliance purposes. Records pertaining to credits or allotments that were transferred are required to be retained by the transferor for five years after the year the credits or allotments were transferred, and by the transferee for five years after use. We received comment that the regulations should allow records to be maintained in non hard copy formats, such as photographic or electronic means. We do not believe that the recordkeeping requirements, as proposed, disallow the retention of records in electronic or photographic form. However, parties that electronically generate and/ or maintain records must make available to EPA the hardware and software necessary to review the records, or if requested by EPA, electronic records shall be converted to paper documents. The sulfur rule, like the RFG/ CG rule, requires regulated parties to keep the results of tests conducted on the gasoline. A number of parties previously have asked EPA to clarify whether, under the RFG/ CG rule, this recordkeeping requirement requires parties to keep copies of all documents that contain test results. To clarify what the recordkeeping requirements require with regard to test data, we proposed for the RFG/ CG rule to add language which specifies that the test result as originally printed by the testing apparatus is required to be kept, or, where no printed result is generated by the testing apparatus, the results as originally recorded by the person who performed the tests. Today's action incorporates this clarification in the sulfur rule. Under this provision, where the test data is initially recorded into a database system and there are no prior written recordings of the data, the information in the database system may serve as the original record of the test data. The final rule also specifies that any record that contains results for a test that are not identical to the results as originally printed by the testing apparatus or recorded by the person who performed the test must also be kept. Although this language was not included in the NPRM, we have concluded it is a logical outgrowth of the proposal regarding recordkeeping for test data, and that it will make the regulation clearer with regard to this requirement. As a result, it is appropriate to include this language in the final rule.

3. Reporting Requirements Refiners and importers will be required to submit an annual report that demonstrates compliance with the applicable sulfur standards and data on individual batches of gasoline, including batch volume and sulfur content. The rule requires that refiners and importers report on the generation, use and transfer of credits and allotments. The RFG/ CG programs contain similar reporting requirements. Based on our experience with these programs, we believe that requiring an annual sulfur report and batch information will provide an appropriate and effective means of monitoring compliance with the average standards under the sulfur program. The batch data also will serve to verify that each batch of gasoline met the applicable sulfur cap standard when it left the refinery or import facility. The batch data must also show which batches were designated as GPA gasoline, as appropriate. For the 2004 and 2005 annual averaging periods, refiners will be required to submit a report for the refiner's gasoline production ( RFG and conventional gasoline) for all refineries during the averaging period, which demonstrates compliance with the applicable corporate average and pergallon cap standards. For the 2005 annual averaging period, refiners will also be required to submit a separate report for each refinery, which demonstrates compliance with the refinery average standard. For the 2004 and 2005 annual averaging periods, importers will be required to submit a report for all of the gasoline they import during the averaging period, which demonstrates compliance with the applicable corporate average and pergallon cap standards. The importer's report for 2005 must also demonstrate compliance with the refinery average ( 30 ppm) standard. Any refiner who is also an importer must aggregate the refining and importing activities for the purpose of demonstrating compliance with the applicable corporate average standards. Importers of gasoline produced by foreign refiners with individual baselines have additional reporting requirements. For the 2006 averaging period and beyond, corporate average reports are no longer required for either refiners or importers. Refiners will be required to submit an annual report for each refinery ( importers for the gasoline they import), which demonstrates compliance with the refinery average and per gallon cap standards. Refiners or importers producing both GPA gasoline and gasoline for the remainder of the country, must separately report compliance with the different standards. Annual reports, on forms provided by the Agency, must be received by EPA by the last day of February for the prior calendar year. The annual reports will also provide a vehicle for accounting for any sulfur allotments or credits created, sold or used to achieve compliance during the averaging period. ( See Section IV. C. for a discussion of the sulfur allotment and ABT credit programs.) Each refiner or importer choosing to participate in the ABT program will be required to report to the Agency on an annual basis ( refiners for each refinery, and importers for the gasoline they import) the applicable sulfur baseline and the annual average gasoline sulfur level produced at that refinery or by that importer ( in ppm sulfur) during the averaging period. Credit calculations will be reported, along with an accounting of credits banked, used, traded, acquired or terminated. The credits will be in units of ppm gallons. The identity of the refiners/ refineries and importers involved in these transactions will be reported, along with the registration numbers assigned to them by the Agency under the RFG/ CG program ( 40 CFR 80, subparts D, E, and F). For years 2000 through 2003, parties who generate early ABT credits will be required to report information relating to the generation of these credits. These early credit reports will only cover credits banked and traded. Beginning in 2004 and beyond, refiners and importers VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00115 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6812 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 152 See section 80.5 ( penalties for fuels violations); section 80.23 ( liability for lead violations); section 80.28 ( liability for volatility violations); section 80.30 ( liability for diesel violations); section 80.79 ( liability for violation of RFG prohibited acts); section 80.80 ( penalties for RFG/ CG violations). 153 An additional type of liability, vicarious liability, is also imposed on branded refiners under these fuels programs. who generate and/ or use ABT credits will be required to submit information relating to the generation and use of the credits as part of their annual compliance reports, including any credit debit that is carried over to the subsequent year. For each purchase of ABT credits, as reported on the buyer's annual report, there must be a corresponding entry on the seller's annual report. The annual report must also indicate any credits that are used to achieve compliance with the refinery average standard. As discussed above, during the 2004 and 2005 annual averaging periods, refiners for the combined production from all their refineries, and importers for the gasoline they import, will also be required to demonstrate compliance with the applicable corporate average standard. In addition, refiners and importers must demonstrate compliance with the requirements for the generation, use, transfer and termination of allotments. Refiners and importers who trade sulfur allotments to meet the corporate average standard will be required to submit information relating to these transactions. All sulfur allotment transactions must be concluded by the last day of February of the calendar year following the year the allotments were used to meet the corporate average. Information relating to such transactions, including the identity of the refiners and importers involved in the transactions and their EPA registration numbers, must be reported by both parties to the transaction as part of their annual compliance reports. As discussed in Section IV. C., above, parties that only blend oxygenates into gasoline are not treated as refiners under the sulfur rule, and, as a result, are not subject to the reporting requirements under § 80.370. Refiners and importers are also required to arrange for a certified public accountant or certified internal auditor to conduct an annual review of the company's records that form the basis of the annual sulfur compliance report ( called an `` attest engagement''). The purpose of the attest engagement is to determine whether representations by the company are supported by the company's internal records. Attest engagements are already required under the RFG/ CG regulations. The refiner's attest engagement under the RFG/ CG rule partially encompasses sulfur rule compliance since the attest auditors are already required to verify sulfur results for both CG and RFG. However, the RFG/ CG attest engagements do not require the attest auditor to review sulfur credit generation, credit purchases, credit trading or small refiner issues. Because of the complexity of the sulfur credit program and small refiner program, sulfur attest engagement provisions have been adopted by today's rule that require the attest auditor to review sulfur credit generation, credit trading, credit purchasing, credit selling, corporate pool averaging, and small refiner issues. Consistent with the RFG regulations, the attest reports for sulfur are to be included in the presently required attest engagement submitted by May 31 of each year.

G. Exemptions for Research, Development, and Testing The final rule provides for an exemption from the sulfur requirements for gasoline used for research, development and testing purposes. We recognize that there may be legitimate research programs that require the use of gasoline with higher sulfur levels than those allowed under the sulfur rule. As a result, the final rule includes provisions for obtaining an exemption from the prohibitions for persons distributing, transporting, storing, selling or dispensing gasoline that exceeds the standards, where such gasoline is necessary to conduct a research, development or testing program. Parties are required to submit to EPA an application for exemption that describes the purpose and scope of the program and the reasons why use of the higher sulfur gasoline is necessary. In approving any application, EPA will impose reasonable conditions such as recordkeeping, reporting, volume limitations and possible requirements to repair vehicles. We received comment that the regulations should clarify that suppliers of gasoline used for R& D purposes are exempt from the prohibitions and penalties under the sulfur rule. To clarify this point, we have added a provision which explicitly states that gasoline subject to an R& D exemption is exempt from the provisions of subpart H, so long as the gasoline is used in a way that complies with the terms of the memorandum of exemption. If the R& D exemption is shown to be based on false information or is not properly maintained, parties will be liable for violations of the provisions under subpart H regarding any gasoline covered under the exemption. We also received comment that the regulations should ensure that vehicles which have been used for testing with high sulfur test fuels are not later returned to the general fleet, or if they are, the vehicles should be required to be restored to their original condition. EPA agrees that it would be improper to permit such vehicles to be used in general use if their emission controls have been rendered inoperative through fueling with high sulfur gasoline. This issue may be effectively addressed through the anti tampering requirements of section 203( a)( 3) of the Clean Air Act, 42 U. S. C. § 7522( a)( 3), and is also addressed in today's rule, which provides the Administrator with the power to include appropriate conditions when granting R& D exemptions.

H. Liability and Penalty Provisions for Noncompliance The liability and penalty provisions under the sulfur rule are similar to the liability and penalty provisions of the RFG and other fuels regulations. 152 Regulated parties will be liable for committing certain prohibited acts, such as selling or distributing gasoline that does not meet the sulfur standards, or causing others to commit prohibited acts. In addition, parties will be liable for a failure to meet certain affirmative requirements, such as the recordkeeping or PTD requirements, or causing others to fail to meet such requirements. The sulfur rule, like other EPA fuels regulations, includes a presumptive liability scheme for violations of prohibited acts. Under this approach, the party in the gasoline distribution system that controls the facility where the violation occurred, and other parties in that gasoline's distribution system ( such as the refiner, reseller, and distributor), are presumed liable for the violation. 153 The sulfur rule explicitly includes causing another person to commit a prohibited act and causing the presence of non conforming gasoline to be in the distribution system as prohibitions. The final rule clarifies that causing the presence of non conforming gasoline to be in the distribution system includes gasoline that does not conform to the applicable average standard, as well as gasoline that does not conform to the cap standard. Affirmative defenses are provided for each party that is deemed presumptively liable for a violation, and all presumptions of liability are refutable. The defenses under the sulfur rule are similar to those VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00116 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6813 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations available to parties for violations of the RFG regulations. The final sulfur rule, like the proposal, applies the provisions of section 211( d)( 1) of the Clean Air Act ( Act) for the collection of penalties. The penalty provisions subject any person who violates any requirement or prohibition of the sulfur rule to a civil penalty of up to $ 27,500 for every day of each such violation and the amount of economic benefit or savings resulting from the violation. A violation of the applicable average sulfur standard constitutes a separate day of violation for each day in the averaging period. A violation of a sulfur cap standard constitutes a separate day of violation for each day the gasoline giving rise to the violation remained in the gasoline distribution system. The length of time the gasoline in question remained in the distribution system is deemed to be twenty five days unless there is evidence that the gasoline remained in the gasoline distribution system for fewer than or more than twenty five days. The penalty provisions are similar to the penalty provisions for violations of the RFG regulations. After consideration of the comments received, the Agency is adopting regulations that specify the regulated parties who may be subject to liability for causing a violation of the sulfur rule. As proposed, the regulation would have applied to any person, not limited to the parties in the gasoline distribution system whose actions could logically have caused the nonconformity. This provision would have potentially broadened the range of liable parties under the sulfur rule beyond the range established under other fuel programs. EPA believes that the presumptive liability schemes of current fuels regulations have generally been effective and finds no compelling reason to apply the regulatory provision at issue to `` any person'' rather than to specific parties. Therefore, in the final sulfur rule, the liability sections for the causation violations will specify the regulated parties subject to the liability, and will not encompass unspecified parties. The final rule clarifies that oxygenate blenders are among the specified parties potentially subject to liability. Today's final rule also clarifies that parent corporations are liable for violations of subsidiaries. This is consistent with our interpretation of the RFG rule, as stated in the RFG and Anti dumping Question and Answer document. Finally, the final rule clarifies that each partner to a joint venture will be jointly and severally liable for the violations at a joint venture facility or by a joint venture operation. We received several comments on the proposal. Some commenters believe that the Act does not authorize EPA to establish prohibitions against causing another person to commit a prohibited act or causing the presence of nonconforming gasoline to be in the distribution system. These commenters believe that these prohibitions are a departure from the liability scheme under the existing fuels regulations and that they constitute double jeopardy by imposing liability for multiple violations for a single act. The commenters also believe that imposing liability for causing another person to commit a prohibited act extends the limits that Congress placed on liability under section 211 of the Act, since sections 211( d) and 211( k)( 5) do not expressly mention imposing liability for causing another person to violate regulations. The commenter also noted that, had Congress intended for such actions to be prohibited, it could have expressly included such a prohibition in section 211. This commenter cites section 211( g) as an example of a statutory provision with such a prohibition. One commenter said that, rather than clarify the presumptive liability scheme, the rule provides no guidance regarding what it means to cause someone to violate a prohibition or cause non conforming gasoline to be in the distribution system. A commenter also stated that these proposed prohibitions are unnecessary, since EPA has issued violations to multiple parties under current fuels regulations. EPA disagrees with the comment that the sulfur rule's proposed liability scheme is a marked departure from the liability schemes typically found in the other fuels programs promulgated pursuant to section 211 of the Act and with the comment that the regulations constitute double jeopardy ( the double jeopardy issue is addressed in the Response to Comment document). The majority of these programs, including the proposed sulfur rule, contain presumptive liability enforcement structures which impose liability on parties who, through their actions, could logically have caused the fuel nonconformity. The sulfur rule's presumptive liability scheme is thus consistent with the liability schemes of typical prior fuels programs. While EPA has issued notices of violations to multiple parties for violations under current fuels regulations, the Agency believes it is appropriate to clarify that the act of causing another party to violate the regulations is a prohibited act. Therefore, the regulatory language in the sulfur regulations explicitly addresses this issue. EPA also disagrees with the comment that this provision is inconsistent with Section 211( d) of the Act because Section 211( d) does not mention imposing liability for causing another person to violate the regulations promulgated under Section 211( c). For the reasons described above, EPA is adopting a provision in today's regulations that prohibits causing another entity to violate the standards. This prohibition is a reasonable exercise of EPA's discretion under Section 211( c), and the penalty provision of Section 211( d) apply to violations of the prohibition. The fact that Section 211( d) does not specifically mention causing another person to violate the regulations is therefore irrelevant, such action is itself a violation of the regulations. Moreover, Section 211( d) does not mention any specific violations for which penalties may be assessed, but rather states generally that violations shall result in penalties. Thus, the absence of specific mention of causing another entity to violate the regulations is irrelevant, since all other specific prohibitions in regulations subject to Section 211( d) penalties are similarly not mentioned. The Agency also disagrees with the comment that the Clean Air Act does not give EPA the authority to establish causation violations under the sulfur rule. We believe that the Act gives us ample authority to categorize the sulfur rule's causative acts, i. e., the causing of another party to commit a violation, and the causing of nonconforming gasoline to be present in the distribution system, as prohibited acts. Section 211( c) of the Act authorizes the Agency to promulgate regulations for the purpose of prohibiting or controlling the manufacture, introduction into commerce, sale, or offering for sale of fuels or fuel additives where the fuel or additive causes or contributes to air pollution which may reasonably be anticipated to endanger public health or welfare, or where the fuel or additive will impair to a significant degree the performance of emission control devices that are or will be in general use. Today's gasoline sulfur rule is promulgated pursuant to this authority. Section 211( c) gives EPA broad discretion to fashion regulations to control or prohibit the manufacture, introduction into commerce, sale, or offering for sale of fuels once the Agency has made the requisite findings regarding contribution to harmful air pollution or impairment of vehicle emissions control system performance. This includes the discretion to adopt VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6814 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations reasonable regulatory provisions that are necessary and appropriate to ensure that the controls or prohibitions are effective. To effectively regulate sulfur in gasoline under section 211, it is necessary for the Agency to regulate the actions of those parties who do the manufacturing, introducing into commerce, and selling of gasoline subject to the sulfur requirements. When one or several of these regulated parties causes another regulated party to violate the rule ( or causes nonconforming gasoline to be present in the system), such an act could logically result in the high sulfur gasoline contributing to harmful air pollution or to the impairment of vehicle emission control device performance, which are the adverse impacts that legislative authority under section 211( c) was created to control. Examples of such upstream causative acts include the scenario where a refiner produces high sulfur gasoline which it sells to a distributor. That distributor then resells the nonconforming product to a variety of retail outlets which, in their turn, also violate the rule by selling the high sulfur gasoline to owners of motor vehicles. Another example occurs where a distributor has created high sulfur gasoline by blending high sulfur blendstock into his gasoline. This distributor then makes several different sales of this noncomplying product to a variety of retail outlets, which, in their turn, also violate the rule by selling the product to numerous motor vehicle owners. A third upstream causation scenario could occur if several refiners happen to make nonconforming gasoline. Each then sells its nonconforming product to a different distributor, and a retail outlet which is a customer of both distributors, purchases some of the noncomplying gasoline from both distributors. The retailer then commits a violation by offering this product for sale to its customers. In some cases, an upstream action has more severe environmental impacts through causing a downstream violation than would occur if the violation was corrected upstream. For example, a refiner may violate the sulfur regulations by shipping gasoline that exceeds the applicable standards when it leaves the refinery. If that violation is corrected before the gasoline reaches the retail outlets, the adverse environmental impacts could be mitigated or avoided. However, if the refiner's violation is not corrected and ultimately causes a number of violations of the standards at retail outlets, the environmental impact would be more severe, since high sulfur gasoline would be introduced into vehicles and impair catalyst performance. Therefore, it is reasonable to consider causing a downstream violation by another party to be a separate violation, since an upstream party's actions can have more severe environmental consequences if they cause downstream parties to violate applicable requirements. For these reasons, it is reasonable to conclude that section 211( c) authorizes the Agency to prohibit and control such causative acts in order to ensure that gasoline ultimately introduced into vehicles meets the low sulfur standards. Our approach is also reasonable under section 211( c) even though section 211( c) does not expressly prohibit causing another party to violate standards adopted under this subsection. In fact, section 211( c) itself does not contain any express prohibitions, but rather provides EPA authority to regulate fuels and fuel additives, based on certain findings. In contrast, other provisions of section 211, such as section 211( g), do include express prohibitions against certain actions. Thus, under section 211( g), the specified actions are prohibited even in the absence of EPA adopting regulations to codify the prohibitions. In section 211( g), Congress indicated a clear intent to prohibit a specific action ( misfueling), without requiring EPA to adopt regulations to implement that prohibition. However, section 211( c) authorizes EPA to establish regulations with certain controls and prohibitions, and, as described above, EPA has the discretion to adopt reasonable measures to ensure that the requirements of such regulations are met. Moreover, the commenters' assertion that this provision is inconsistent with other subsections of section 211 of the Act is misplaced. First, while the sulfur standards do apply to all gasoline, including gasoline subject to the reformulated gasoline requirements, the sulfur standards are being adopted pursuant to EPA's authority under section 211( c)( 1), not under section 211( k). Therefore, section 211( k)( 5)' s prohibitions, which describe actions that are violations of section 211( k), are not relevant to the sulfur standards. In addition, the enumeration of specific prohibitions in section 211( k) does not mean that EPA may establish no other prohibited acts with respect to reformulated gasoline; rather, it simply identifies certain actions that `` shall be'' violations of section 211( k), but does not preclude establishment of other appropriate prohibited acts pursuant to EPA's authority under the Act. The Agency also disagrees with the argument that the proposed causation violations under the sulfur rule would impose unjustifiable, multiple liability for the commission of a single prohibited act. The Agency is generally not in the best position to know the exact cause of a gasoline nonconformity since so many parties and actions are involved with the sale and transfer of the gasoline. Therefore, for effective enforcement, we must have the ability to assert the liability of all the parties in the system who were connected with the nonconforming gasoline because they each could have caused the violation. Similarly, we must also have the ability to assert upstream liability for the full number of downstream violations a party may be responsible for causing, even if the multiple downstream violations may all ultimately be found to stem from one gasoline sale or transfer on the part of the upstream party. The enforcement possibility exists that the separate downstream violations may each have stemmed from separate actions by that party. Any party may rebut the presumption of liability for each asserted violation by establishing through affirmative defenses that it did not cause the violation. Moreover, any party against whom EPA institutes an enforcement action may raise equitable factors about its own conduct as part of settlement of the violation enforcement action. In settling fuels matters, the Agency typically takes into account such matters as the volume of nonconforming product that a party was connected with, and the severity and the amount of proscribed activity that the party was actually involved with in causing the violation. We do not believe that either the sulfur rule's liability scheme or its future implementation will be arbitrary or unjustified. To further alleviate commenters' concern about potential liability for multiple violations under the sulfur rule, we want to clarify that the Agency does not ordinarily attempt to collect separate penalties from an entity for the array of possible standard violations ( e. g., both for the manufacturing and the selling of noncomplying product), that a party might be liable for in respect to the same gasoline. In addition, we do not intend to seek penalties from a single party for violating regulatory standard requirements while also seeking penalties for that party's causing of other entities to violate regulatory standard requirements, where both violations involve the same gasoline, unless very unusual circumstances exist which would warrant such action, such as egregious conduct on the part of the party.

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6815 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations In a similar fashion, we do not expect to collect penalties from one party for both types of causation violations for the same amount of gasoline under normal circumstances. A primary Agency purpose in defining the causation violations as two separate prohibited acts ( i. e., causing another to commit a violation, and causing the presence of nonconforming product in the distribution system), was not to collect a double penalty, but to address different scenarios of evidence collection. For example, if the Agency finds a sulfur rule standard violation in a sample from a retail outlet supplied by a certain distributor, but we do not have a nonconforming sample from the distributor, the evidence would most easily permit us to assert that the distributor was responsible for causing the retailer violation that we do have evidence for. It is reasonable for us to assert the causation violation against the distributor in spite of our lack of a sample from the distributor, because any distributor who transfers gasoline to a retailer, which gasoline is found to be noncompliant, could logically have caused the noncompliance of the gasoline when it was under the distributor's control, such as by blending high sulfur blendstock into the gasoline. On the other hand, if we have a violation sample from a distributor, but no samples from its downstream customers, we may assert that the distributor caused the presence of nonconforming gasoline in the distribution system, rather than assert that the distributor caused another party to sell nonconforming product, since we don't have a nonconforming sample from another party's facility. It would be reasonable for us to assert that the distributor caused the presence of nonconforming gasoline in the distribution system since we do have a sample of nonconforming gasoline from the distributor, and provided also that there is evidence that the distributor had sold, transferred, etc. this product to downstream customers. In summary, the Agency intends to enforce the liability scheme of the sulfur rule in the same reasonable manner that we have enforced the similar liability schemes in our prior fuels regulations. This does not include attempting to penalize a party for multiple variations of noncompliance in regard to the same gasoline unless unusual circumstances make such action appropriate.

I. How Will Compliance With the Sulfur Standards Be Determined? We have often used a variety of evidence to establish non compliance with the requirements imposed under our current fuels regulations. Test results of the content of gasoline have been used to establish violations, both in situations where the sample has been taken from the facility at which the violation occurred, and where the sample has been obtained from other parties' facilities when such test results have had probative value of the gasoline's characteristics at points upstream or downstream. The Agency has also commonly used documentary evidence to establish non compliance or a party's liability for non compliance. Typical documentary evidence has included PTDs identifying the gasoline as inappropriate for the facility it is being delivered to, or identifying parties having connection with the noncomplying gasoline. EPA proposed that compliance with the sulfur standards would be determined based on the sulfur level of the gasoline, as measured using the regulatory testing methodologies. We further proposed that any evidence from any source or location could be used to establish the gasoline sulfur level, provided that such evidence is relevant to whether the level would have been in compliance if the regulatory sampling and testing methodology had been correctly performed. In today's action, EPA is adopting the proposed regulatory provision. Several commenters interpreted this proposed language as evidencing the Agency's intent to make all evidence, including evidence not derived from regulatory test methods, equal in probative value to that from the regulatory test methods. One commenter also stated that the proposed provision is inconsistent with other parts of the proposal because it undercuts the benefits of having clearly defined regulatory test methodologies. EPA disagrees that the regulatory language indicates such an intent, or has such an effect. The regulations provide that compliance with the standards is to be determined using specified test methodologies. While other information may be used, including test results using different test methods, such other information may only be used if it is relevant to determining whether the sulfur level would meet applicable standards had compliance been properly measured using the specified test methodologies. Thus, the regulation adopted today does not result in a situation where any and all evidence carries equal weight in an enforcement action. In fact, the regulation establishes the regulatory test method as the standard against which other evidence is measured. Moreover, since any evidence other than regulatory test results must be relevant to compliance using the test method, EPA disagrees with the commenter who stated that the validity of the sulfur standards can be challenged in any enforcement action because neither EPA nor regulated entities will be able to rely on measurements taken using the regulatory test methods. Rather than causing more confusion regarding compliance with the standard, this provision clarifies that the regulatory test method defines compliance, since other evidence can only be used if it relates to compliance using that test method. The following is an example of how the Agency believes evidence of standard non compliance not based on regulatory test results might be used for compliance purposes under today's rule provisions. Under a first scenario, the Agency might not have sulfur results derived from regulatory test methods for a certain amount of gasoline sold by a terminal, yet the terminal's own test results, based on testing using methods other than those specified in the regulations, show an exceedance of the sulfur standard. Under the requirements of today's rule, the evidence from the non regulatory test method could only be used to establish noncompliance if the terminal's test results are relevant to the determination of the gasoline's sulfur level that would have resulted if the regulatory test method had been used. Thus, the Agency would have to present evidence to link the results of the alternative test method to sulfur levels as measured using the regulatory test method. Another commenter has suggested that, if the Agency decides to finalize a `` credible evidence'' provision, it use the language in the current RFG regulations which establishes a presumption that the regulatory testing methods prevail, except in exceptional circumstances. Other commenters also opposed the proposed provision in part because it differs from that in EPA's current fuels regulations. As described above, EPA believes that the provision adopted today does not undercut the importance of the regulatory testing methodologies, since other evidence may be used only as relevant to compliance as measured using the regulatory methods. In addition, as is consistent with the RFG scheme, EPA believes it is appropriate to use such other evidence even in some circumstances where test results using the regulatory test methods do exist, and the provision adopted today clarifies this. EPA also notes that it intends to undertake rulemaking in the near future to revise the current fuels regulations to VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6816 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 154 The commenter references section 211( k)( 5) as support for its assertion, but quotes language from section 211( k)( 4). EPA assumes that the commenter intended to cite section 211( k)( 4) rather than section 211( k)( 5). include the same language for use of other evidence as adopted today in the final sulfur rule. The provision adopted today also clarifies that any probative evidence obtained from any source or location may be used to establish noncompliance with requirements other than the sulfur standards, such as recordkeeping requirements and requirements to properly calculate sulfur credits and averages, as well as to establish which parties have facility control or some other basis for liability for sulfur rule non compliance. Since proof of these elements is not predicated on establishing sulfur levels, whether or not regulatory test methods are used is not significant. Therefore commenters' concern about the use of other evidence undercutting the primacy of the regulatory test methods is not germane to this part of the regulation which is not directed toward standards. This provision is being included in the final sulfur rule to clarify that this rule, as is consistent with our interpretation of our other fuels rules, contemplates the full use of all relevant evidence to establish non standard violations and rule liability. EPA disagrees with the commenters who stated that EPA lacks authority under the Clean Air Act to permit the use of any evidence of non compliance of the sulfur standards other than test results using the regulatory test methods. One commenter notes that the only explicit reference in the Act to the use of `` credible evidence'' is in section 113( e), which applies only to stationary sources, and that neither section 211 nor section 205 mention `` credible evidence.'' Finally, the commenter states that the proposed provision is inconsistent with the directive of section 211( k) that EPA determine appropriate measures of and methods for ascertaining the emissions of air pollutants. EPA disagrees with the comments asserting that the Agency lacks authority to promulgate this provision. While section 113( e) does refer to `` credible evidence,'' that provision is not relevant to EPA's action today. Moreover, the absence of the explicit use of the term `` credible evidence'' in sections 205 and 211 does not compel a conclusion that EPA lacks authority to allow the consideration of relevant evidence in determining compliance with the sulfur standards. EPA believes that section 211( c) provides sufficient authority to adopt such a provision. Section 211( c) authorizes the Agency to promulgate regulations for the purpose of prohibiting or controlling the manufacture, introduction into commerce, sale, or offering for sale of fuels or fuel additives where the fuel or additive causes or contributes to air pollution which may reasonably be anticipated to endanger public health or welfare, or where the fuel or additive will impair to a significant degree the performance of emission control devices that are or will be in general use. As described in other sections of this preamble and in the RIA, today's regulation is promulgated pursuant to this authority. Section 211( c) gives EPA broad discretion to fashion regulations to control or prohibit the manufacture, introduction into commerce, sale, or offering for sale of fuels once the Agency has made the requisite findings regarding contribution to harmful air pollution or impairment of vehicle emissions control system performance. This includes the discretion to adopt reasonable regulatory provisions that are necessary and appropriate to ensure that the controls or prohibitions are effective and can be enforced. To ensure the effectiveness and the ability to adequately enforce the sulfur standards, it is reasonable for EPA to consider evidence other than actual test results using the regulatory test method, where such evidence can be related to the test results. As described above, test results using the regulatory test method are often not available. In such circumstances, it is reasonable to consider other evidence of compliance, such as test results using other methods or commercial documents, if such evidence can be shown to be relevant to determining whether the gasoline would meet the standard if tested using the regulatory methods. This provision would not permit the use of other evidence that is not relevant to such a determination, and is therefore reasonably limited to allow for effective enforcement, without creating uncertainty about compliance. Finally, EPA disagrees with the commenter's assertion that this provision is inconsistent with section 211( k). First, while the sulfur standards do apply to all gasoline, including gasoline subject to the reformulated gasoline requirements, the sulfur standards are being adopted pursuant to EPA's authority under section 211( c)( 1), not under section 211( k). In any case, the directive of section 211( k)( 4) that EPA determine through regulation appropriate measures of and methods for ascertaining the emissions of air pollutants explicitly applies only for purposes of section 211( k), and applies for determining the emissions levels of VOCs and toxic air pollutants from baseline vehicles when operating on baseline gasoline, as defined by section 211( k). Thus, the commenter's reference to section 211( k)( 4) as inconsistent with the provision adopted today is misplaced, particularly in light of the limited applicability of the language in section 211( k)( 4). 154 As described in the NPRM, the Agency frequently uses a variety of evidence to establish compliance with fuel programs' regulatory requirements and liability for non compliance. Such evidence has included test results obtained from a variety of sources, including bills of lading, delivery records, manifests, and other commercial documents. The compliance determination provisions included in today's final rule are created to provide the most effective Agency capability to enforce the rule's requirements.

VII. Public Participation A wide variety of interested parties participated in the rulemaking process that culminates with this final rule. The formal comment period and four public hearings associated with the NPRM provided additional opportunities for public input. EPA also met with a variety of stakeholders, including environmental and public health organizations, oil company representatives, auto company representatives, emission control equipment manufacturers, and states at various points in the process. We have prepared a detailed Response to Comments document that describes the comments received on the NPRM and presents our response to each of these comments. The Response to Comments document is available in the docket for this rule and on the Office of Mobile Sources internet home page. Comments and our responses are also included throughout this preamble for several key issues.

VIII. Administrative Requirements A. Administrative Designation and Regulatory Analysis Under Executive Order 12866 ( 58 FR 51735, Oct. 4, 1993), the Agency is required to determine whether this regulatory action would be `` significant'' and therefore subject to review by the Office of Management and Budget ( OMB) and the requirements of the Executive Order. The order defines a `` significant regulatory action'' as any regulatory action that is likely to result in a rule that may:

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6817 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 155 The Final RFA is contained in Chapter 8 of the Regulatory Impact Analysis. 156 Report of the Small Business Advocacy Panel on Tier 2 Light Duty Vehicle and Light Duty Truck Emission Standards, Heavy Duty Gasoline Engine Standards, and Gasoline Sulfur Standards, October 1998. · Have an annual effect on the economy of $ 100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; · Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; · Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or, · Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Pursuant to the terms of Executive Order 12866, EPA has determined that this final rule is a `` significant regulatory action'' because the vehicle standards, gasoline sulfur standards, and other regulatory provisions, if implemented, would have an annual effect on the economy in excess of $ 100 million. Accordingly, we have prepared a Final Regulatory Impact Analysis ( RIA) which is available in the docket for this rulemaking and at the internet address listed under ADDRESSES above. This action was submitted to the Office of Management and Budget ( OMB) for review as required by Executive Order 12866. Any written comments from OMB on today's action and any responses from EPA to OMB comments are in the public docket for this rulemaking.

B. Regulatory Flexibility The Regulatory Flexibility Act, 5 U. S. C. 601   612, was amended by the Small Business Regulatory Enforcement Fairness Act of 1996 ( SBREFA), Public Law 104   121, to ensure that concerns regarding small entities are adequately considered during the development of new regulations that affect them. EPA has identified industries subject to this rule and has provided information to, and received comment from, small entities and representatives of small entities in these industries. We have prepared a Final Regulatory Flexibility Analysis ( RFA) to evaluate the economic impacts of today's proposal on small entities. 155 The key elements of the RFA include: · The number of affected small entities; · The projected reporting, record keeping, and other compliance requirements of the proposed rule, including the classes of small entities that would be affected and the type of professional skills necessary for preparation of the report or record; · Other federal rules that may duplicate, overlap, or conflict with the proposed rule; and · Any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize significant economic impacts of the proposed rule on small entities. The Agency convened a Small Business Advocacy Review Panel ( the Panel) under section 609( b) of the Regulatory Flexibility Act as added by SBREFA. The purpose of the Panel was to collect the advice and recommendations of representatives of small entities that could be affected by today's proposed rule and to report on those comments and the Panel's findings as to issues related to the key elements of the Regulatory Flexibility Analysis under section 603 of the Regulatory Flexibility Act. The report of the Panel has been placed in the docket for this rulemaking. 156 The contents of today's final rule and the Final Regulatory Flexibility Analysis reflect the recommendations in the Panel's report. We summarize our outreach to small entities and our responses to the recommendations of the Panel below.

1. Potentially Affected Small Businesses The Regulatory Flexibility Analysis identifies small businesses from the industries in the following table as subject to the provisions of today's rule:

TABLE VIII. 1.   INDUSTRIES CONTAINING SMALL BUSINESSES POTENTIALLY AFFECTED BY TODAY'S RULE Industry NAICS a codes SIC b codes Defined by SBA as a small business if: c Motor Vehicle Manufacturers ....................................... 336111 3711 < 1000 employees. 336112 336120 Alternative Fuel Vehicle Converters ............................. 336311 3592 < 500 employees. 541690 8931 336312 3714 < 750 employees. 422720 5172 < 100 employees. 454312 5984 7549 < $ 5 million annual sales. 811198 8742 541514 Independent Commercial Importers of Vehicles and Vehicle Components. 811112 7533 7549 < $ 5 million annual sales.

811198 8742 541514 Petroleum Refiners ....................................................... 324110 2911 < 1500 employees. Petroleum Marketers and Distributors .......................... 422710 5171 5172 < 100 employees. 422720 a North American Industry Classification System.

b Standard Industrial Classification system.

c According to SBA's regulations ( 13 CFR 121), businesses with no more than the listed number of employees or dollars in annual receipts are considered `` small entities'' for purposes of a regulatory flexibility analysis.

The Final RFA identifies about 15 small petroleum refiners, several hundred small petroleum marketers, and about 15 small certifiers of covered vehicles ( belonging to the other categories in the above table) that would be subject to the rule.

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6818 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 157 The information collection requirements associated with the amendments to the requirements for vehicle certification are contained in the Information Collection Request entitled `` Amendments to the Reporting and Recordkeeping Requirements for Motor Vehicle Certification Under the Tier 2 Rule'', OMB No. 2060   0114, EPA ICR # 783.40. 2. Small Business Advocacy Review Panel and the Evaluation of Regulatory Alternatives The Small Business Advocacy Review Panel was convened by EPA on August 27, 1998. The Panel consisted of representatives of the Small Business Administration ( SBA), the Office of Management and Budget ( OMB), and EPA. During the development of the proposal, EPA and the Panel were in contact with representatives from the small businesses that would be subject to the provisions of the rule. In addition to verbal comments from industry noted by the Panel at meetings and teleconferences, we received written comments from each of the affected industry segments or their representatives. These comments, alternatives suggested by the Panel to mitigate adverse impacts on small businesses, and issues the Panel requested EPA take additional comment on are contained in the report of the Panel and are summarized below. Today's final rule incorporates the major recommendations of the Panel.

Fuel Related Small Business Issues Most of the small refiners stated that if they were required to achieve 30 ppm sulfur levels on average with an 80 ppm per gallon cap without some regulatory relief, they would be forced out of business. Thus, the Panel devoted much attention to regulatory alternatives to address this concern. Most small refiners strongly supported delaying mandatory compliance for their facilities. On the other hand, most small refiners stated that a phase in of gasoline sulfur standards would not be helpful because it would be more costeffective for them to install the maximum technology required for the most stringent sulfur levels that would ultimately be imposed. The Society of Independent Gasoline Marketers of America ( SIGMA) commented that EPA should consider giving relief not only to refiners that meet the SBA definition of small refiner but also to refineries with relatively small production capacity that are owned by large refining companies. This was because a refinery with a small production capacity would operate essentially as an SBA defined small refiner would. SIGMA also noted that small gasoline marketers would be affected by the closure of any refinery with small production capacity, whether it was owned by a large company or an SBA defined small refining company. The Panel recommended that small refiners be given a four to six year period of relief during which less stringent gasoline sulfur requirements would apply. The Panel also advised that EPA specifically request comment on an alternative duration of ten years for the relief period. Small refiners would be assigned interim sulfur standards during this relief period based on their current individual refinery sulfur levels. Following this relief period, small refiners would be required to meet the industry wide standard, although temporary hardship relief would be available on a case by case basis. The Panel concluded that additional time provided to small refiners before compliance with the industry wide standard was required would allow ( 1) new sulfur reduction technologies to be proven out by larger refiners, ( 2) the costs of advanced technology units to drop as the volume of their sales increases, ( 3) industry engineering and construction resources to be freed up, and ( 4) the acquisition of the necessary capital by small refiners. The Panel also concluded that adding gasoline sulfur to the fuel parameters already being sampled and tested by gasoline marketers would likely result in little, if any, additional burden. Therefore, the Panel did not recommend any special provision for gasoline marketers. EPA's final action on this issue closely follows the Panel's recommendations. You can find a description of the small refiner provisions of today's final rule in Section IV. C. 2. above. Comments and our responses on related issues are collected in the Response to Comments document.

Vehicle Related Small Business Issues Independent commercial importers of vehicles ( ICIs) suggested that the new emissions standards be phased in with the phase in schedule based on the small vehicle manufacturer's annual production volume. Secondly, the ICIs requested that small testing laboratories be permitted to use older technology dynamometers than proposed for use by the Agency. Finally, the ICIs commented that the certification process should be waived for certain foreign vehicles. Small volume vehicle manufacturers ( SVMs) stated that a phase in of Tier 2 emissions standards is essential. They further stated that SVMs should not be required to comply until the end of the phase in period, which should not be before model year 2007. The SVMs also stated that a caseby case hardship relief provision should be provided for their members. SVMs requested that a credit program be established with incentives for larger manufacturers to make credits available to SVMs in meeting their compliance goals. Based on the above comments, the Panel advised that EPA consider several alternatives, individually or in combination, for the potential relief that they might provide to small certifiers of vehicles. The Final Regulatory Flexibility Analysis evaluates the financial impacts of the proposed vehicle standards and fuel controls on small entities. EPA believes that the regulatory alternatives incorporated in today's final rule will provide substantial relief to small business from the potential adverse economic impacts of complying with today's proposed rule.

C. Paperwork Reduction Act The information collection requirements ( ICRs) associated with today's rule belong to two distinct categories: ( 1) those that pertain to amendments to the vehicle certification requirements, and ( 2) those that pertain to requirements for the control of gasoline sulfur content. These information collection requirements are contained in two separate ICR documents according to the category to which they belong. The ICR in this final rule that pertains to the amendments to the vehicle certification requirements has been submitted for approval to the Office of Management and Budget ( OMB) under the Paperwork Reduction Act, 44 U. S. C. 3501 et seq. Copies of this ICR 157 can be obtained from Sandy Farmer, Office of Environmental Information, Collections Strategy Division, U. S. Environmental Protection Agency ( Mail Code 2822), 401 M Street, SW, Washington, D. C. 20460, or by calling ( 202) 260   2740. Please refer to ICR # 783.40 in any correspondence. Copies may also be downloaded from the internet at http:// www. epa. gov/ icr. The ICR in this final rule that pertains to the requirements for the control of gasoline sulfur will be submitted for approval to the Office of Management and Budget ( OMB) under the Paperwork Reduction Act, 44 U. S. C. 3501 et seq. The submission to OMB of the ICR document that contains this ICR and its availability to the public will be announced in a subsequent Federal Register notice.

VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6819 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 158 These ICRs will become effective on the date that model year 2001 vehicles are introduced into commerce. EPA assumes that September 1, 2000 is the earliest date that model year 2001 vehicles will be marketed. 159 Assuming model year 2004 vehicles are introduced into commerce on this date. 160 A refiner can petition EPA for an extension of the small refiner provisions beyond January 1, 2008, based on hardship. 161 The information collection requirements associated with the proposed gasoline sulfur control program are contained in the Information Collection Request that accompanied the Tier 2 NPRM which is entitled `` Recordkeeping and Reporting Requirements Regarding the Sulfur Content of Motor Vehicle Gasoline Under the Tier 2 Proposed Rule'', ICR # 1907.01. Copies of this ICR can be obtained as discussed earlier in this section. The Agency may not conduct or sponsor an information collection, and a person is not required to respond to a request for information unless the information collection request displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15. The OMB control numbers for the information collection requirements in this rule will be listed in an amendment to 40 CFR part 9 in a subsequent Federal Register notice after OMB approves the ICRs. The Paperwork Reduction Act stipulates that ICR documents estimate the burden of activities required of regulated parties within a three year time period. Consequently, the ICR documents associated with today's final rule contain burden estimates for the activities that will be required under the first three years of the program. ICRs Pertaining to the Amendments to Vehicle Certification Requirements: The information collection burden to vehicle certifiers associated with the amendments to the vehicle certification requirements in today's notice pertain to the fleet average NOX standard and emission credits provisions. These requirements are very similar to those under the voluntary National Low Emission Vehicle ( NLEV) program, which includes a fleet average standard for nonmethane hydrocarbon organic gases ( NMOG) and associated emission credits provisions. The hours spent annually by a given vehicle certifier on the information collection activities associated with the these recordkeeping and reporting requirements depends upon certifier specific variables, including: the scope/ variety of their product line as reflected in the number of test groups and strategy used to comply with the fleet average NOX standard, the extent they utilize emissions credits provisions, and whether they opted into the NLEV program. Vehicle certifiers that use the provisions for early banking of emission credits will be subject to the associated information collection requirements as early as September 1, 2000.158 All vehicle certifiers will be required to comply with the information collection requirements associated with the amendments to the vehicle certification program beginning September 1, 2003.159 The ICR document for the amendments to the vehicle certification program in this final rule provides burden estimates for all of the associated information collection requirements. The total information collection burden associated with the amendments to the vehicle certification requirements is estimated at 8,406 hours and $ 567,217 annually for the certifiers of light duty vehicles, medium duty passenger vehicles, and light duty trucks. ICRs Pertaining to the Requirements for Gasoline Sulfur Control: The information collection burden to gasoline refiners, importers, marketers, distributors, retailers and wholesale purchaser consumers ( WPCs), and users of research and development ( R& D) gasoline pertain to the gasoline sulfur control program in today's rule. The scope of the recordkeeping and reporting requirements for each regulated party, and therefore the cost to that party, reflects the party's opportunity to create, control, or alter the sulfur content of gasoline. As a result, refiners and importers have significant requirements, which are necessary both for their own tracking, and that of downstream parties, and for EPA enforcement. Parties downstream from the gasoline production or import point, such as retailers, have minimal burdens that are primarily associated with the transfer and retention of product transfer documents. Many of the reporting and recordkeeping requirements for refiners and importers regarding the sulfur content of gasoline currently exist under EPA's Reformulated Gasoline ( RFG) and Anti Dumping programs. The ICR for the RFG program covered start up costs associated with reporting gasoline sulfur content under the RFG program. Consequently, much of the cost of the information collection requirements under the gasoline sulfur control program has already been accounted for under the RFG program ICR. In addition, many of the information collection burdens associated with the sulfur program are the result of provisions designed to provide refiners with flexibility in demonstrating compliance with the sulfur standards in the early years of the program, such as the credit trading and small refiner programs. The information collection requirements under the sulfur control program evolve over time as the program is phased in. Beginning July 1, 2000, certain requirements apply to parties that voluntarily opt to generate credits for early sulfur reduction under the average banking and trading ( ABT) provisions. Many of the requirements do not become applicable until the beginning of the sulfur control program on October 1, 2003, when all refiners are required to meet the sulfur standards. The information collection requirements under the sulfur control program become stable after January 1, 2008, when the optional small refiner provisions expire. 160 The ICR document for the sulfur control program in this final rule will provide burden estimates for the activities required under the first three years of the program, from July 1, 2000, through June 30, 2003. The burden associated with activities required after June 30, 2003, will be estimated in later ICRs. The initial ICR for the gasoline sulfur control program, however, will provide a qualitative characterization of all of the required activities and associated burdens for the various regulated parties as they develop, and until they become stable after January 1, 2008. In the ICR associated with the NPRM for this final rule, we estimated that the total burden of the information collection requirements that would be applicable during the first three years of the proposed gasoline sulfur control program would be 42,479 hours and $ 2,149,865 annually. 161 Annual burden estimates for the various regulated entities under the initial three year period of the gasoline sulfur control program were also provided in the NPRM ICR as follows: · Refiners: 31,231 hours; $ 1,879,822. · Importers: 40 hours; $ 2,067. · Pipelines: 85 hours; $ 2,785. · Terminals: 1,700 hours; $ 55,700. · Truckers: 3,333 hours; $ 118,000. · Retailers/ WPCs: 6,087 hours; $ 91,298. · R& D Gasoline Users: 3 hours; $ 193. We received few comments on the ICR burden estimates in the proposed sulfur rule. Most regulated parties have been fulfilling reporting, recordkeeping and testing requirements under the reformulated and conventional gasoline regulations. The only negative comments we received related to the batch testing for sulfur content and sample retention for conventional gasoline. We believe the estimated cost of complying with these requirements is somewhat higher than the actual VerDate 27< JAN> 2000 21: 29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00123 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 10FER2. SGM pfrm08 PsN: 10FER2 6820 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations burdens industry will realize. The ICR for this final rule will be adjusted accordingly. We estimate that there will be some additional costs and hourly burdens over those estimated in the NPRM associated with certain changes made to the sulfur program from the NPRM to this final rule. In particular, this final rule includes a program which provides for relaxed standards in the early years of the program for refiners and importers who produce or import gasoline for use in certain states in the western U. S. This program requires some additional reporting and recordkeeping burdens for those refiners and importers who participate in the program, since they will be required to submit an application for the program, including a baseline for purposes of establishing their sulfur standard. This program requires gasoline intended for use in the geographic area to be identified on product transfer documents and segregated from other gasoline in the distribution system. This final rule also includes provisions for trading sulfur allotments to provide refiners and importers additional flexibility in meeting the corporate pool average standards. This program requires additional reporting and recordkeeping to track allotment trading activity. In addition, the final rule requires small refiners to submit information regarding their crude oil capacity in order to qualify for the small refiner standards under the rule. Small refiners are also required to submit reports of their progress toward compliance with the sulfur standards. The additional total annual cost and hourly burden over the first three years of the program, as a result of changes made to the program in the final rule, are estimated to add less than one percent to the overall burden estimates contained in the NPRM ICR for the sulfur control program. Total Burden of the ICRs: In the NPRM, we estimated that the total burden of the recordkeeping and reporting requirements associated with the proposed vehicle certification and gasoline sulfur control requirements would be 50,840 hours and $ 2,714,037 annually over the first three years that these requirements would be in effect. In the ICR document for this final rule which covers the ICRs for the vehicle certification program, the burden estimates were increased by 45 hours and $ 3,045 over the burden estimates in the NPRM ICR. This increase reflects changes from the NPRM in the final rule associated the inclusion of the mediumduty passenger vehicles ( MDPVs) under the program. As discussed above, we anticipate that changes to the ICR document for this final rule which covers the ICRs for the sulfur control program will have burden estimates less than one percent higher than the estimates contained in the NPRM. Adding these increased costs to the burden estimates presented in the NPRM, we arrive at an estimate of the total burden of the recordkeeping and reporting requirements associated with the vehicle certification and gasoline sulfur control requirements in this final rule of less than 51,350 hours and $ 2,742,000 annually over the first three years that these requirements will be in effect. These burden estimates will be more precisely stated in the forthcoming Federal Register notice which announces the submission to OMB of the ICR document for this final rule that covers the ICRs for the sulfur control program and the availability of this ICR document to the public.

D. Intergovernmental Relations 1. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 ( UMRA), P. L. 104   4, establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with `` federal mandates'' that may result in expenditures to state, local, and tribal governments, in the aggregate, or to the private sector, of $ 100 million or more for any single year. Before promulgating a rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost effective, or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative that is not the least costly, most costeffective or least burdensome alternative if EPA provides an explanation in the final rule of why such an alternative was adopted. Before we establish any regulatory requirement that may significantly or uniquely affect small governments, including tribal governments, we must develop a small government plan pursuant to section 203 of the UMRA. Such a plan must provide for notifying potentially affected small governments, and enabling officials of affected small governments to have meaningful and timely input in the development of our regulatory proposals with significant federal intergovernmental mandates. The plan must also provide for informing, educating, and advising small governments on compliance with the regulatory requirements. This rule contains no federal mandates for state, local, or tribal governments as defined by the provisions of Title II of the UMRA. The rule imposes no enforceable duties on any of these governmental entities. Nothing in the rule would significantly or uniquely affect small governments. EPA has determined that this rule contains federal mandates that may result in expenditures of more than $ 100 million to the private sector in any single year. EPA believes that today's final rule represents the least costly, most cost effective approach to achieve the air quality goals of the rule. The cost benefit analysis required by the UMRA is discussed in Section IV. D. above and in the Draft RIA. See the `` Administrative Designation'' and Regulatory Analysis' section in today's preamble ( VIII. A.) for further information regarding these analyses.