The proposed definition for sterndrive/inboard also is drafted to
include all engines not otherwise classified as outboard or personal
watercraft engines. Note that we are proposing to revise the
definitions of outboard and personal watercraft engines as described in
Section IV.B.
    The proposed definition has several noteworthy impacts. First, it
removes a requirement that only four-stroke engines can qualify as
sterndrive/inboard engines. We believe limiting the definition to
include only four-stroke engines is unnecessarily restrictive and could
create an incentive to use two-stroke (or rotary) engines to avoid the
proposed catalyst-based standards. Second, it removes limitations
caused by reference to propellers. The definition should not refer
specifically to propellers, because there are other propulsion drives
on marine vessels, such as jet drives, that could be used with SD/I
engines. Third, as explained in the section on the OB/PWC definitions,
the proposed definitions treat engines installed in open-bay vessels
(e.g. jet boats) and in vessels over 4 meters long as SD/I engines.
Finally, the existing definition does not clearly specify how to treat
specialty vessels such as airboats or hovercraft that use engines that
are similar to those in conventional SD/I applications. Under the
discretion in the regulation allowing EPA to make judgments about the
scope of the SD/I engine definition, we have classified airboats as SD/
I engines. See 40 CFR 91.3 for the existing definitions of the marine
engine classes. We continue to believe these engines share fundamental
characteristics with traditional SD/I engines and should therefore be
treated the same way. However, we believe the definitions should
address these applications expressly to make clear which standards
apply.
    We request comment on the following proposed definition:
     Sterndrive/inboard engine means a spark-ignition engine
that is used to propel a marine vessel, but is not an outboard engine
or a personal watercraft engine. This includes engines on propeller-
driven vessels, jet boats, airboats, and hovercraft.
    High-performance SD/I engines are generally characterized by high-
speed operation, supercharged air intake, customized parts, very high
power densities, and a short time until rebuild (50 to 200 hours).
Based on current SD/I product offerings, we are proposing to define a
high-performance engine as an SD/I engine with maximum power at or
above 373 kW (500 hp) that has design features to enhance power output
such that the expected operating time until rebuild is substantially
shorter than 480 hours.
(2) Exclusions and Exemptions
    We are proposing to extend our basic nonroad exemptions to the SD/I
engines and vessels covered by this proposal. These include the testing
exemption, the manufacturer-owned exemption, the display exemption, and
the national-security exemption. If the conditions for an exemption are
met, then the engine is not subject to the exhaust emission standards.
These exemptions are described in more detail under Section VIII.
    In the rulemaking for recreational vehicles, we chose not to apply
standards to hobby products by exempting all reduced-scale models of
vehicles that are not capable of transporting a person (67 FR 68242,
November 8, 2002). We are proposing to extend that same provision to
SD/I marine engines (see Sec.  1045.5).
    The Clean Air Act provides for different treatment of engines used
solely for competition. Rather than relying on engine design features
that serve as inherent indicators of dedicated competitive use, as
specified in the current regulations, we have taken the approach in
more recent programs of more carefully differentiating competition and
noncompetition models in ways that reflect the nature of the particular
products. In the case of Marine SI engines, we do not believe there are
engine design features that allow us to differentiate between engines
that are used in high-performance recreational applications and those
that are used solely for competition. We are therefore proposing that,
starting January 1, 2009, Marine SI engines meeting all the following
criteria would be considered to be used solely for competition, except
in other cases where information is available indicating that engines
are not used solely for competition (see Sec.  1045.620):
     The engine (or a vessel in which the engine is installed)
may not be displayed for sale in any public dealership or otherwise
offered for sale to the general public.
     Sale of the vessel in which the engine is installed must
be limited to professional racers or other qualified racers.
     The engine must have performance characteristics that are
substantially superior to noncompetitive models (e.g. higher power-to-
weight ratio).
     The engines must be intended for use only in racing events
sanctioned (with applicable permits) by the Coast Guard or other public
organization, with operation limited to racing events, speed record
attempts, and official time trials.
    Engine manufacturers would make their request for each new model
year, and we would deny a request for future production if there are
indications that some engines covered by previous requests are not
being used solely for competition. Competition engines are produced and
sold in very small quantities, so manufacturers should be able to
identify which engines qualify for this exemption. We are also
proposing to apply the same criteria to outboard and personal
watercraft engines and vessels. We request comment on this approach to
qualifying for a competition exemption.
    We are proposing a new exemption to address individuals who
manufacture recreational marine vessels for personal use (see Sec.
1045.630). Under the proposed exemption, these vessels and their
engines could be exempt from standards, subject to certain limitations.
For example, an individual may produce one such vessel over a ten-year
period, the vessel may not be used for commercial purposes, and any
exempt engines may not be sold for at least five years. The vessel must
generally be built from unassembled components, rather than simply
completing assembly of a vessel that is otherwise similar to one that
will be certified to meet emission standards. This proposal addresses
the concern that hobbyists who make their own vessels could otherwise
be a manufacturer subject to the full set of emission standards by
introducing these vessels into commerce. We expect this exemption to
involve a very small number of vessels.

C. Proposed Exhaust Emission Standards

    We are proposing technology-based exhaust emission standards for
new SD/I engines. These standards are similar to the exhaust emission
standards that California ARB recently adopted (see Section I). This
section describes the proposed requirements for SD/I engines for
controlling exhaust emissions. See

Section V for a description of the proposed requirements related to
evaporative emissions.
(1) Standards and Dates
    We are proposing exhaust emission standards of 5 g/kW-hr
HC+NOX and 75 g/kW-hr CO for SD/I engines, starting with the
2009 model year (see Sec.  1045.105). On average, this represents about
a 70 percent reduction in HC+NOX and a 50 percent reduction
in CO from baseline engine configurations. Due to the challenges of
controlling CO emissions at high load, the expected reduction in CO
emissions from low to mid-power operation is expected to be more than
80 percent. We are proposing additional lead time for small businesses
as discussed in Section III.F.2. The proposed standards would be based
on the same duty cycle that currently is in place for outboard and
personal watercraft engines, as described in Section III.D. Section
III.F discusses the technological feasibility of these standards in
more detail. We request comment on the feasibility and appropriateness
of the proposed standards.
    The proposed standards are largely based on the use of small
catalytic converters that can be packaged in the water-cooled exhaust
systems typical for these applications. California ARB also adopted an
HC+NOX standard of 5 g/kW-hr, but they did not adopt a
standard for CO emissions. We believe the type of catalyst used to
achieve the HC+NOX standard will also be effective in
reducing CO emissions enough to meet the proposed standard, so no
additional technology will be needed to control CO emissions.
    Manufacturers have expressed concern that the proposed
implementation dates may be difficult to meet, for certain engines, due
to anticipated changes in engine block designs produced by General
Motors. As described in the Draft RIA and in the docket, the vast
majority of SD/I engines are based on automotive engine blocks sold by
General Motors.\75\ There are five basic engine blocks used, and
recently GM has announced that it will discontinue production of the
4.3L and 8.1L engine blocks in 2009. GM anticipates that it will offer
a 4.1L engine block and a 6.0L supercharged engine block to the marine
industry as replacements. Full run production of these new blocks is
anticipated in mid to late 2009. SD/I engine manufacturers have
expressed concern that they will not be able to begin the engineering
processes related to marinizing these engines, including the
development of catalyst-equipped exhaust manifolds, until mid-2007,
when they are expecting to see the first prototypes of the two
replacement engine models. In addition, they are concerned that they do
not have enough remaining years of sales of the 4.3L and 8.1L engines
to justify the cost of developing catalyst-equipped exhaust manifolds
for these engines and amortizing the costs of the required tooling
while also developing the two new engine models.
---------------------------------------------------------------------------

    \75\ ``GM Product Changes Affecting SD/I Engine Marinizers,''
memo from Mike Samulski, EPA, to Docket EPA-HQ-QAR-2004-0008-0528.
---------------------------------------------------------------------------

    The SD/I requirements begin in earnest in California in the 2008
model year. Manufacturers have indicated that they plan to use
catalysts to meet the California standards in 2008 for three or four of
the five engine models used in SD/I applications but to potentially
have limited availability of the 4.3L or 8.1L engines until the
catalyst-equipped versions of the two new engine models (4.1L and 6.0L)
have been marinized and meet the new California emission standards. At
this point, the manufacturers project that the two new engine models
would be available for sale in California in 2010. Some 4.3L and 8.1L
engines may be available in California during the phase-out based on
the possibility of some use of catalyst for one or both of these
displacements and the use of transitional flexibilities.
    These are unique circumstances because the SD/I engine
manufacturers' plans and products depend on the manufacture of the base
engine by a company not directly involved in marine engine
manufacturing. The SD/I sales represent only a small fraction of total
engine sales and thus did not weigh heavily in GM's decision to replace
the existing engine blocks with two comparable versions during the
timeframe when the SD/I manufacturers are facing new emission
standards. SD/I manufacturers have stated that alternative engine
blocks that meet their are not available in the interim, and that it
would be cost-prohibitive for them to produce their own engine blocks.
    EPA is proposing that the Federal SD/I standards take effect for
the 2009 model year, one year after the same standards apply in
California. We believe a requirement to extend the California standards
nationwide after a one-year delay allows manufacturers adequate time to
incorporate catalysts across their product lines as they are doing in
California. Once the technology is developed for use in California, it
would be available for use nationwide soon thereafter. In fact, one
company currently certified to the California standards is already
offering catalyst-equipped SD/I engines nationwide. However, we request
comment on whether an additional year of lead time would be appropriate
for engines not using catalysts in California in 2008. This is
potentially the 4.3L or 8.1L SD/I engines. Under this alternative,
engines based on the three engine blocks not being changed would be
required to meet the standards in 2009. Also, engines built from the
4.3L and/or the 8.1L GM blocks would be required to meet the EPA
standards if sold in California in 2008 or 2009. Otherwise the new
standards for these engines could be delayed for an additional model
year (until 2010). Assuming product plans follow through as projected,
the two new engine blocks would be required to meet the standards in
the 2010 model year.
    Another possibility would be to address this issue through the
combination of the flexibilities provided through an ABT program and a
phase-in of the standards over two model years (2009/2010) instead of
implementation in one model year (2009). Under this approach,
manufacturers could certify and sell the 4.3L and 8.1L engines in the
2009 model year without catalysts or with limited use of catalysts
through emissions averaging. This approach would have the advantage of
giving manufacturers flexibility in how they choose to phase in their
catalyst-equipped engines. However, engine manufacturers have expressed
concern that, even though they will be offering limited configurations
of catalyzed engines in California in 2008, that the lead time is short
and they will not have the ability to fully catalyze their entire line
of engines for 2009. Thus, if the rule is structured in a manner to
permit it, marine engine manufacturers would sell a mix of catalyzed
and non-catalyzed engines in 2009. Since boat builders can determine
which engines are purchased and can choose either catalyzed or non-
catalyzed versions of the engines if available, manufacturers are
concerned that it would be difficult for SD/I engine manufacturers to
ensure compliance with standards based on sales and horsepower
weightings. Engine manufacturers, not boat builders, are subject to
exhaust emission standards. Thus, a phase-in approach, which would be
based on a projection that a certain number of catalyzed engines would
be sold, may not be a feasible approach for this industry. The industry
would thus prefer a mandatory implementation date as discussed below
without a phase-in that uses averaging. The industry's concerns
notwithstanding, there are benefits to

this approach. Therefore, we are requesting comment on phasing in the
proposed standards over the 2009-2010 timeframe. Under this approach,
the standards would be 10 g/kW-hr HC+NOX and 100 g/kW-hr CO
in 2009. The proposed standards would then go into effect in 2010.
During the phase-in period, the proposed family emission limit (FEL)
caps (see Section III.C.3) would still apply.
    A third alternative, preferred by the two large SD/I manufacturers,
would be full compliance with the 5 g/kW-hr standard in 2010 except for
the 4.1L engine and the 6.0L supercharged engine and requiring those
engines to comply with the standards in 2011. Manufacturers have
expressed the view that there is value in limiting production volumes
of catalyst-equipped engines only to California for two years to gain
in-use experience before selling these engines nationwide. Under this
approach, any technical issues that may arise with catalyst designs or
in-use performance would affect only a small portion of the fleet,
which would help minimize in-use concerns and costs associated with
warranty claims. This approach would also provide additional lead time
for those configurations not modified for California and the two new
engine displacements. In addition, as discussed above, manufacturers
stated that an averaging-based phase-in program that required the
introduction of catalyst-equipped engines outside of California before
2010 is problematic because of marketplace and competitive issues as
discussed above. For these reasons, we request comment on whether the
proposed standards for SD/I engines should be delayed to 2010 for the
three engine models that are not being modified and with an additional
model year (2011) for the 4.1L and 6.0L supercharged engines.
    Under stoichiometric or lean conditions, catalysts are effective at
oxidizing CO in the exhaust. However, under very rich conditions,
catalysts are not effective for reducing CO emissions. In contrast,
NOX emissions are effectively reduced under rich conditions.
SD/I engines often run at high power modes for extended periods of
time. Under high-power operation, engine marinizers must calibrate the
engine to run rich as an engine-protection strategy. If the engine were
calibrated for a stoichometric air-fuel ratio at high power, high
temperatures could lead to failures in exhaust valves and engine heads.
In developing the proposed CO standard for SD/I engines, we considered
an approach where test Mode 1 (full power) would be excluded from the
weighted CO test level and the other four test modes would be re-
weighted accordingly. Under this approach, the measured CO emissions
from catalyst-equipped engines were observed to be 65-85 percent lower
without Mode 1, even though the weighting factor for Mode 1 is only 6
percent of the total cycle weighting. These test results are presented
in Chapter 4 of the Draft RIA. We request comment on finalizing a CO
standard of 25 g/kW-hr based on a four-mode duty cycle that excludes
Mode 1 instead of the proposed CO standard. Under this approach, we
also request comment on CO cap, such as 350 g/kW-hr, specific to Mode
1. Manufacturers would still measure CO emissions at Mode 1 to
demonstrate compliance with this cap.
    Controlling CO emissions at high power may be a more significant
issue with supercharged 6.0L engines due to uncertainty with regard to
the air fuel ratio of the engine at high power. Engine manufacturers
have not yet received prototype engines; however, they have expressed
concern that these engines may need to be operated with a rich air-fuel
ratio even at Mode 2 as an engine-protection strategy.\76\ This concern
is based on previous experience with other supercharged engines. If
this is the case, it may affect the potential CO emission reductions
from these engines. To address the uncertainties related to the two new
SD/I engines (4.1L and 6.0L supercharged) we are asking for comment on
a CO averaging standard with a maximum family emission limit to cap
high CO emissions. Specifically, we request comment on averaging
standard of 25 g/kW-hr CO based on a four-mode test, as discussed
above, with a maximum family emission limit for the four-mode test of
75 g/kW-hr.
---------------------------------------------------------------------------

    \76\ 80 percent of maximum engine test speed and 71.6 percent of
maximum torque at maximum test speed.
---------------------------------------------------------------------------

    Engines used on jet boats may have been classified under the
existing definitions as personal watercraft engines. As described
above, engines used in jet boats or personal watercraft-like vessels 4
meters or longer would be classified as SD/I engines under the proposed
definitions. Such engines subject to part 91 today would therefore need
to continue meeting EPA emission standards as personal watercraft
engines through the 2008 model year under part 91, after which they
would need to meet the new SD/I standards under the proposed part 1045.
This is another situation where the transition period discussed above
may be helpful. In contrast, as discussed above, air boats have been
classified as SD/I engines under EPA's discretionary authority and are
not required to comply with part 91.
    As described above, engines used solely for competition would not
be subject to the proposed regulations, but many SD/I high-performance
engines are sold for recreational use. High-performance SD/I engines
have very high power outputs, large exhaust gas flow rates, and
relatively high concentrations of hydrocarbons and carbon monoxide in
the exhaust gases. From a conceptual perspective, the application of
catalytic converter technology to these engines is feasible. As is the
case in similar heavy-duty highway gasoline engines, these catalytic
converters would have to be quite large in volume, perhaps on the order
of the same volume as the engine displacement, and would involve
significant heat rejection issues. Highway heavy-duty gasoline engine
certification information from the late 1970s and early 1980s suggests
that it is possible to achieve HC and CO emission reductions around 20
to 40 percent by adding an air pump to increase the level of oxygen in
the exhaust stream. This would be a relatively low-cost and durable
method of oxidizing HC and CO when the exhaust gases are hot enough to
support further oxidation reactions. California ARB has implemented the
same HC+NOX standards we are proposing but is expecting
manufacturers to rely on emissions averaging within the SD/I class.
This is not viable for small business manufacturers who do not have
other products with which to average.
    Even if manufacturers use catalysts to control HC+NOX
emissions from high-performance engines, controlling CO emissions
continues to present a technological challenge. Since these engines
generally operate with fuel-rich combustion, there is little or no
oxygen in the exhaust stream. As a result, any oxidation of hydrocarbon
compounds in the catalyst would likely increase CO levels, rather than
oxidizing all the way to CO2. We are therefore proposing a
CO standard for high-performance engines of 350 g/kW-hr. We believe
this is achievable with more careful control of fueling under idle
conditions. Control of air-fuel ratios at idle should result in
improved emission control even after multiple rebuilds. Basing
standards on non-catalyst hardware such as an air pump could enable
lower CO levels.
    We are proposing a variety of provisions to simplify the
requirements for exhaust emission certification and compliance for
these engines, as described in Section IV.F. We are also proposing not
to apply the not-to-exceed

emission standards to high-performance SD/I marine engines.
    We also request comment on two alternative approaches to define
emission standards for high-performance engines. First, we could set
the HC+NOX standard at 5 g/kW-hr and allow for emission
credits as described above, but allow small-volume manufacturers of
high-performance engines to meet a HC+NOX emission standard
in the range of 15 to 22 g/kW-hr. See Section III.F.2 for our proposed
definition of small-volume SD/I engine manufacturers. We would also
need to adopt an FEL cap of 22 g/kW-hr for HC+NOX for all
manufacturers under this approach to avoid the situation where only
small-volume manufacturers of high-performance engines need to make
design changes to reduce these emissions. Our concern is that a large
manufacturer would otherwise be able to use emission credits to avoid
making design changes to their high-performance engines. This emission
level is consistent with measured HC+NOX emission values
from these engines showing a range of emission levels with different
types of fuel systems and different calibrations, as shown in the Draft
RIA. Treating small-volume manufacturers of high-performance engines
differently may be appropriate because they have little or no access to
emission credits.
    Second, we could alternatively set the high-performance engine
HC+NOX standard in the range of 15 to 22 g/kW-hr for all
companies and disallow the use of emission credits for meeting this
standard. This would require all companies to redesign their engines,
rather than use emission credits, to reduce emissions to a standard
that is tailored to high-performance engines.
    We request comment on the primary approach as well as the two
alternatives for high-performance engine standards. Comment is
requested on the costs and general positives and negatives of each
approach. Comment is also requested on the technology required if a
level above the proposed standards is supported, as well as information
on safety and energy implications of the alternative emission
standards. If a commenter supports either of the two alternative
approaches, information and data are requested to assist EPA in setting
the appropriate HC+NOX and CO emission standards within the
15 to 22 g/kW-hr range.
    We are also aware that there may be some very small sterndrive or
inboard engines. In particular, sailboats may have small propulsion
engines for backup power. These engines would fall under the proposed
definition of sterndrive/inboard engines, even though they are much
smaller and may experience very different in-use operation. These
engines may have more in common with marine auxiliary engines that are
subject to land-based standards. Nevertheless, these engines share some
important characteristics with bigger SD/I engines, such as reliance on
four-stroke technology and access to water-based cooling. It is also
true that emission standards are based on specific emission levels
expected from engines of comparable sizes, so the standards adjust
automatically with the size of the engine to require a relatively
constant level of stringency. These engines are not like the very small
outboard engines that are subject to less stringent standards because
of their technical limitations in controlling emissions. Accordingly,
we believe these engines can incorporate the same technologies as the
bigger marine propulsion engines and meet the same emission standards.
However, we request comment on the need for adjusting the emission
standards for these engines to accommodate any technology constraints
related to their unique designs. Specifically, we request comment on
allowing manufacturers the option of certifying small SD/I engines to
the proposed standards for auxiliary marine engines discussed in
Section V.C.1. We also request comment on the possibility that some
other small engines may inappropriately fall into the category of
sterndrive/inboard engines. We request comment on the engine size for
which any special accommodations must be made. Such comments should
also address any issues that may exist for these engines with regard to
meeting the proposed standards, or identify any other appropriate way
of differentiating these engines from conventional sterndrive/inboard
engines.
(2) Not-To-Exceed Standards
    We are proposing emission standards for an NTE zone representing a
multiplier times the duty cycle standard for HC+NOX and for
CO (see Sec.  1045.105). Section III.D.2 describes the proposed NTE
test procedures and gives an overview of the proposed NTE provisions.
In addition, Section III.D.2 presents the specific multipliers for the
proposed NTE standards.
    The NTE approach is consistent with the concept of a weighted modal
emission test such as the steady-state tests included in this rule. The
proposed duty cycle standard itself is intended to represent the
average emissions under steady-state conditions. Because it is an
average, manufacturers design their engines with emission levels at
individual points varying as needed to maintain maximum engine
performance and still meet the engine standard. The NTE limit would be
an additional requirement. It is intended to ensure that emission
controls function with relative consistency across the full range of
expected operating conditions.
(3) Emission Credit Programs
(a) Averaging, Banking, and Trading
    We are proposing averaging, banking, and trading of emission
credits for sterndrive and inboard marine engines for meeting
HC+NOX and CO standards (see Sec.  1045.105 and part 1045,
subpart H). See Section VII.C.5 for a description of general provisions
related to averaging, banking, and trading programs. Emission credit
calculations would be based on the maximum engine power for an engine
family, as described in Section IV.F.
    As with previous emission control programs, we are also proposing
not to allow an emission family to earn credits for one pollutant if it
is using credits to meet the standard for another pollutant. In other
words, an engine family that does not meet the CO standard would not be
able to earn HC+NOX emission credits, or vice versa. This
should rarely be an issue for SD/I engines, because the same catalyst
technology is effective for controlling HC+NOX and CO
emissions. In addition, as with previous emission control programs, we
are proposing that engines sold in California would not be included in
this ABT program because they are already subject to California
HC+NOX requirements.
    Credit generation and use is calculated based on the family
emission limit (FEL) of the engine family and the standard. We are
proposing FEL caps to prevent the sale of very-high emitting engines.
For HC+NOX, the proposed FEL cap is 16 g/kW-hr for
HC+NOX emissions from engines below 373 kW; this emission
level is equal to the first phase of the California SD/I standards. We
are proposing an FEL cap of 150 g/kW-hr for CO emissions from engines
below 373 kW. These FEL caps represent the average baseline emission
levels of SD/I engines, based on data described in the Draft RIA. The
analogous figures for high-performance engines are 30 g/kW-hr for
HC+NOX and 350 g/kW-hr for CO, as described in Section
III.C.(d).
    Except as specified below for jet boat engines, we are proposing to
keep OB/PWC engines and SD/I engines in separate averaging sets. This
means that credits earned by SD/I and OB/PWC engines are counted
separately and may not be exchanged to demonstrate

compliance with emission standards. Most of the engine manufacturers
building SD/I engines do not also build OB/PWC engines. The exception
to this is the largest manufacturer in both categories. We are
concerned that allowing averaging, banking, or trading between OB/PWC
engines and SD/I engines would not provide the greatest achievable
reductions, because the level of the standard we are proposing is
premised on the use of aftertreatment technology in SD/I engines, and
is based on what is feasible for SD/I engines. We did not set the SD/I
level based on the reductions achievable between OB/PWC and SD/I, but
instead based on what is achievable by SD/I engines alone. The proposed
limitation on ABT credits is consistent with this approach to setting
the level of the SD/I standard. In addition, allowing such credit usage
could provide an incentive to avoid the use of aftertreatment
technologies in SD/I engines. This could create a competitive
disadvantage for the many small manufacturers of SD/I engines that do
not also produce OB/PWC engines.
    We propose that emission credits for SD/I engines have an unlimited
credit life with no discounting. We consider these emission credits to
be part of the overall program for complying with the proposed
standards. Given that we may consider further reductions beyond these
standards in the future, we believe it will be important to assess the
ABT credit situation that exists at the time any further standards are
considered. We would need to set such future emission standards based
on the statutory direction that emission standards must represent the
greatest degree of emission control achievable, considering cost,
safety, lead time, and other factors. Emission credit balances will be
part of the analysis for determining the appropriate level and timing
of new standards. If we were to allow the use of credits generated
under this proposed program for future, more stringent, standards, we
may, depending on the level of emission credit banks, need to adopt
emission standards at more stringent levels or with an earlier start
date than we would absent the continued or limited use of existing
emission credits. Alternatively, we could adopt future standards
without allowing the use of existing emission credits.
    We are requesting comment on one particular issue regarding credit
life. As proposed, credits earned under the exhaust ABT program would
have an unlimited lifetime. This could result in a situation where
credits generated by an engine sold in a model year are not used until
many years later when the engines generating the credits have been
scrapped and are no longer part of the fleet. EPA believes there may be
value to limiting the use of credits to the period that the credit-
generating engines exist in the fleet. For this reason, EPA requests
comment on limiting the lifetime of the credits to five years or,
alternatively, to the regulatory useful life of the engine.
(b) Early-Credit Approaches
    We are proposing an early-credit program in which a manufacturer
could earn emission credits before 2009 with early introduction of
emission controls designed to meet the proposed standards (see Sec.
1045.145). For engines produced by small-volume SD/I manufacturers that
are eligible for the proposed two-year delay described in Section
III.F.2, early credits could be earned before 2011. While we believe
adequate lead time is provided to meet the proposed standards, we
recognize that flexibility in timing could help some manufacturers--
particularly small manufacturers--to meet the new standards. Other
manufacturers that are able to comply early on certain models would be
better able to transition their full product line to the new standards
by spreading out the transition over two years or more. Under this
approach, we anticipate that manufacturers would generate credits
through the use of catalysts.
    Manufacturers would generate these credits based on the difference
between the measured emission level of the clean engines and an
assigned baseline level (16 g/kW-hr HC+NOX and 150 g/kW-hr
CO). These assigned baseline levels are based on data presented in
Chapter 4 of the Draft RIA representing the average level observed for
uncontrolled engines. We are also proposing to provide bonus credits to
any manufacturer that certifies early to the proposed standard to
provide a further incentive for introducing catalysts in SD/I engines.
The bonus credits would take the form of a multiplier times the earned
credits. The proposed multipliers are 1.25 for one year early, 1.5 for
two years early, and 2.0 for three years early. For example, a small-
volume manufacturer certifying an engine to 5.0 g/kW-hr
HC+NOX in 2009 (2 years early) would get a bonus multiplier
of 1.5. Therefore, early HC+NOX credits would be calculated
using the following equation: credits [grams] = (16-5) x Power [kW] x
Useful Life [hours] x Load Factor x 1.5. We are proposing to use a load
factor of 0.207, that is currently used in the OB/PWC calculations.
    To earn these credits, the engine would have to meet both the
proposed HC+NOX and CO standards. These early credits would
be treated the same as emission credits generated after the emission
standards start to apply. This approach would provide an incentive for
manufacturers to pull ahead significantly cleaner technologies. We
believe such an incentive would lead to early introduction of catalysts
on SD/I and help promote earlier market acceptance of this technology.
Because of the proposed credit life, these credits would only be able
to be used during the transition period to the new standards. We
believe this proposed early credit program will allow manufactures to
comply to the proposed standards in an earlier time frame than they
would otherwise because it allows them to spread out their development
resources over multiple years. To ensure that manufacturers do not
generate credits for already required activities, no credits would be
generated for the proposed federal program for engines that are
produced for sale in California. We request comment on this approach.
    Alternatively, we request comment on the alternative of an early
``family banking'' approach. Under this approach, we would allow
manufacturers to certify an engine family early to the proposed
standards. For each year of certifying engines early, the manufacturer
would be able to delay certification of a comparable number of engines
by one year, taking into account the relative power ratings of the
different engine families. This would be based on the actual sales and
would require no calculation or accounting of emission credits. This
approach would not provide the same degree of precision as the early-
credit program described above, but it may be an effective way of
helping manufacturers make the transition to new emission standards.
See 40 CFR 1048.145(a) for an example of regulations that implement
such a family banking program.
    We request comment on the above early-credit approaches or any
other approach that would help manufacturers bring the product lines
into compliance with the proposed standards without compromising
overall emission reductions. Any allowance for high-emitting or late-
compliant engines should be offset by emission controls that achieve
emission reductions beyond that required by the new standards. We
request comment on the merits of the various approaches noted above and
others that commenters may wish to suggest. We request that commenters
provide detailed comments on how the approaches described above

should be set up, enhanced, or constrained to ensure that they serve
their purpose without diminishing the overall effectiveness of the
standards.
(c) Jet Boats
    Sterndrive and inboard vessels are typically propelled by
traditional SD/I engines based on automotive engine blocks. As
explained in Section IV, we are proposing to amend the definition of
personal watercraft engine to ensure that engines used on jet boats
would no longer be classified as personal watercraft engines but
instead as SD/I engines because jet boats are more comparable to SD/I
vessels. However, manufacturers in some cases make these jet boats by
installing an engine also used in outboard or personal watercraft
applications (less than 4 meters in length) and coupling the engine to
a jet drive for propelling the jet boat. Thus, manufacturers of
outboard or personal watercraft engines may also manufacture the same
or similar engine for use on what we would propose here to be
considered a jet boat (whose engine we would therefore proposed to be
subject to SD/I standards).
    We are proposing to allow some flexibility in meeting new emission
standards for jet boat engines because they are currently designed to
use engines derived from OB/PWC applications and because of their
relatively low sales volumes. We are also proposing to allow
manufacturers to use emission credits generated from outboard and
personal watercraft engines to demonstrate that their jet boat engines
meet the proposed HC+NOX and CO standards for SD/I engines
(see Sec.  1045.660 and Sec.  1045.701). We further propose that such
engine manufacturers may only use this provision if the engines are
certified as outboard or personal watercraft engines, and if the
majority of units sold in the United States from those related engine
families are sold for use as outboard or personal watercraft engines.
We would decide whether a majority of engine units are sold for use as
outboard or personal watercraft engines based on projected sales
volumes from the application for certification. Manufacturers would
need to group SD/I engines used for jet boats in a separate engine
family from the outboard or personal watercraft engine to ensure proper
labeling and calculation of emission credits, but manufacturers could
rely on emission data from the same prototype engine for certifying
both engine families. Finally, we propose that manufacturers of jet
boat engines subject to SD/I standards and using credits from outboard
or personal watercraft engines must certify these jet boat engines to
an FEL that meets or exceed the standards for outboard and personal
watercraft engines. This limits the degree to which manufacturers may
take advantage of emission credits to produce engines that are emitting
at higher levels than competitive engines. As such, the FELs for these
engines must therefore be at or below the proposed emission standards
for outboard and personal watercraft engines.
(d) SD/I High-Performance Engines
    We are proposing that the ABT program described above (III.C.3(a)
through (c)) would also include SD/I high-performance engines.
Manufacturers would be able to use emission credits from conventional
SD/I engines to offset credit deficits from higher-emitting SD/I high-
performance engines. Although SD/I high-performance engines represent
fewer than 1 percent of total SD/I engine sales, there are many more
companies producing SD/I high-performance engines than conventional SD/
I engines. Because of the relatively small sales of these engines, a
large manufacturer with a broad product line could readily offset a
potential credit deficit by using credits from high-volume SD/I
engines. In contrast, most manufacturers of SD/I high-performance
engines are small businesses that do not also produce conventional SD/I
engines. Section III.F discusses special provisions intended to reduce
the burden for small businesses to meet the proposed standards. We
request comment on whether this ABT program would create a competitive
disadvantage for small businesses.
    We are proposing an approach in which manufacturers can use default
emission factor of 30 g/kW-hr for HC+NOX emissions and 350
g/kW-hr for CO emissions in lieu of testing for certification. For
purposes of this ABT program these default emission factors, if used in
lieu of testing, would be used for certification to an FEL at these
levels. Thus, the emission credits needed would be the difference
between the default levels and the applicable standard (see Sec.
1045.240). These default emission levels represent the highest emission
rates observed on uncontrolled engines. Manufacturers would always have
the option of conducting tests to establish a measured emission rate to
reduce or eliminate the need to use emission credits. While this
testing may require additional setup and preparation, we believe it
would be possible even for the most high-powered engines. To avoid the
possibility of manufacturers selectively taking advantage of the
default values, we would require them to rely on measured values for
both HC+NOX and CO emissions if they do testing.
    For the purposes of the credit calculations, we are proposing to
use an hours term longer than the proposed useful life for these
engines. The proposed useful life for traditional SD/I engines is
intended to reflect the full useable life of the engine. For high-
performance engines the proposed useful life is intended to reflect the
expected time until the engine is rebuilt. High-performance engines are
typically rebuilt several times. In fact, manufacturers have indicated
that it is common for the boat owner to own two pairs of engines so
that they can use one pair while the other is being rebuilt. Therefore,
the proposed useful life does not reflect the full life of the engine,
including rebuilds, over which emission credits would be used (or
generated). We are proposing, for purposes of the credit calculations,
that a life of 480 hours would be used for high-performance SD/I
engines at or below 485 kW and 250 hours for engines above 485 kW. We
request comment on the number of times that high-performance engines
are typically rebuilt and how the number of rebuilds should be
addressed in the credit calculations.
(4) Crankcase Emissions
    Due to blowby of combustion gases and the reciprocating action of
the piston, exhaust emissions can accumulate in the crankcase.
Uncontrolled engine designs route these vapors directly to the
atmosphere. Closed crankcases have become standard technology for
automotive engines and for outboard and personal watercraft engines.
Manufacturers generally do this by routing crankcase vapors through a
valve into the engine's air intake system. We propose to require
manufacturers to prevent crankcase emissions from SD/I marine engines
(see Sec.  1045.115). Because automotive engine blocks are already
tooled for closed crankcases, the cost of adding a valve for positive
crankcase ventilation is small for SD/I engines. Even with non-
automotive blocks, the tooling changes necessary for closing the
crankcase are straight-forward.
(5) Durability Provisions
    We rely on pre-production certification, and other programs, to
ensure that engines control emissions throughout their intended
lifetime of operation. Section VII describes how we are proposing to
require manufacturers to incorporate laboratory aging in the
certification process, how we limit the

extent of maintenance that manufacturers may specify to keep engines
operating as designed, and other general provisions related to
certification. The following sections describe additional provisions
that are specific to SD/I engines.
(a) Useful Life
    We are proposing to specify a useful life period of 480 hours or
ten years, whichever comes first. The engines would be subject to the
emission standards during this useful life period. This is consistent
with the requirements adopted by California ARB (see Sec.  1045.105).
We are further proposing that the 480-hour useful life period is a
baseline value, which may be extended if data show that the average
service life for engines in the family is longer. For example, we may
require that the manufacturer certify the engine over a longer useful
life period that more accurately represents the engines' expected
operating life if we find that in-use engines are typically operating
substantially more than 480 hours. This approach is similar to what we
adopted for recreational vehicles.
    For high-performance SD/I engines (at or above 373 kW), we are
proposing a useful life of 150 hours or 3 years for engines at or below
485 kW and a useful life of 50 hours or 1 year for engines above 485
kW. Due to the high power and high speed of these engines, mechanical
parts are often expected to wear out quickly. For instance, one
manufacturer indicated that some engines above 485 kW have scheduled
head rebuilds between 50 and 75 hours of operation. These proposed
useful life values are consistent with the California ARB regulations
for high-performance SD/I engines. We request comment on the proposed
useful life requirements for high performance marine engines.
    Some SD/I engines below 373 kW may be designed for high power
output even though they do not reach the power threshold to qualify as
SD/I high-performance engines. Because they do not qualify for the
shorter useful life that applies to SD/I high-performance engines, they
would be subject to the default value of 480 hours for other SD/I
engines. However, to address the limited operating life for engines
that are designed for especially high power output, we are proposing to
allow manufacturers to request a shorter useful life for such an engine
family based on information showing that engines in the family rarely
operate beyond the requested shorter period. For example, if engines
designed for extremely high performance are typically rebuilt after 250
hours of operation, this would form the basis for establishing a
shorter useful life period for those engines. See the proposed
regulations for additional detail in establishing a shorter useful
life.
(b) Warranty Periods
    We are proposing that manufacturers must provide an emission-
related warranty during the first 3 years or 480 hours of engine
operation, whichever comes first (see Sec.  1045.120). This warranty
period would apply equally to emission-related electronic components on
SD/I high-performance engines. However, we are proposing shorter
warranty periods for emission-related mechanical components on SD/I
high-performance engines because these parts are expected to wear out
more rapidly than comparable parts on traditional SD/I engines.
Specifically, we are proposing a warranty period for emission-related
mechanical components of 3 years or 150 hours for engines between 373
and 485 kW, and 1 year or 50 hours for engines above 485 kW. These
proposed warranty periods are the same as those adopted by the
California ARB.
    If the manufacturer offers a longer warranty for the engine or any
of its components at no additional charge, we propose that the
emission-related warranty for the respective engine or component must
be extended by the same amount. The emission-related warranty includes
components related to controlling exhaust, evaporative, and crankcase
emissions from the engine. This approach to setting warranty
requirements is consistent with provisions that apply in most other
programs for nonroad engines.
(6) Engine Diagnostics
    We are proposing to require that manufacturers design their SD/I
engines to diagnose malfunctioning emission control systems starting
with the introduction of the proposed standards (see Sec.  1045.110).
As discussed in the Draft RIA, three-way catalyst systems with closed-
loop fueling control work well only when the air-fuel ratios are
controlled to stay within a narrow range around stoichiometry. Worn or
broken components or drifting calibrations over time can prevent an
engine from operating within the specified range. This increases
emissions and can lead to significantly increased fuel consumption and
engine wear. The operator may or may not notice the change in the way
the engine operates. We are not proposing to require similar diagnostic
controls for OB/PWC or Small SI engines because the anticipated
emission control technologies for these other applications are
generally less susceptible to drift and gradual deterioration. We have
adopted similar diagnostic requirements for Large SI engines operating
in forklifts and other industrial equipment that also use three-way
catalysts to meet emission standards.
    This diagnostic requirement focuses solely on maintaining
stoichiometric control of air-fuel ratios. This kind of design detects
problems such as broken oxygen sensors, leaking exhaust pipes, fuel
deposits, and other things that require maintenance to keep the engine
at the proper air-fuel ratio.
    Diagnostic monitoring provides a mechanism to help keep engines
tuned to operate properly, with benefits for both controlling emissions
and maintaining optimal performance. There are currently no inspection
and maintenance programs for marine engines, so the most important
variable in making the emission control and diagnostic systems
effective is in getting operators to repair the engine when the
diagnostic light comes on. This calls for a relatively simple design to
avoid signaling false failures as much as possible. The diagnostic
requirements in this rule therefore focus on detecting inappropriate
air-fuel ratios, which is the most likely failure mode for three-way
catalyst systems. The malfunction indicator light must go on when an
engine runs for a full minute under closed-loop operation without
reaching a stoichiometric air-fuel ratio.
    California ARB has adopted diagnostic requirements for SD/I engines
that involve a more extensive system for monitoring catalyst
performance and other parameters. We would accept a California-approved
system as meeting EPA requirements. However, we believe the simpler
system described above is better matched to the level of emission
control involved, and is more appropriate in the context of
recreational boating by consumers who are not subject to any systematic
requirements for inspecting or maintaining their engines.
    The proposed regulations direct manufacturers to follow standard
practices defined in documents adopted by the International
Organization for Standardization (ISO) that establish protocols for
automotive systems. The proposed regulations also state that we may
approve variations from these industry standards, because individual
manufacturers may have systems with unique operating parameters that
warrant a deviation from the automotive approach. Also, if a new
voluntary consensus standard is adopted to define appropriate practices
for marine

engines, we would expect to incorporate that new standard into our
regulations. See Sec.  1045.110 of the draft regulations for more
information.

D. Test Procedures for Certification

(1) General Provisions
    The proposed test procedures are generally the same for both SD/I
and OB/PWC engines. This involves laboratory measurement of emissions
while the engine operates on the ISO E4 duty cycle. This is a five-mode
steady-state duty cycle including an idle mode and four modes lying on
a propeller curve with an exponent of 2.5, as shown in Appendix II to
part 1045 of the draft regulations. The International Organization for
Standardization (ISO) intended for this cycle to be used for
recreational spark-ignition marine engines installed in vessels up to
24 m in length. Because most or all vessels over 24 m have diesel
engines, we believe the E4 duty cycle is most appropriate for SD/I
engines covered by this rule. There may be some spark-ignition engines
installed in vessels somewhat longer than 24 m, but we believe the E4
duty cycle is no less appropriate in these cases. See Section IV.D for
a discussion of adjustments to the test procedures related to the
migration to 40 CFR part 1065, testing with a ramped-modal cycle,
determining maximum test speed for denormalizing the duty cycle, and
testing at higher altitudes.
    The E4 duty cycle is gives a weighting of 40 percent for idle.
High-performance engine manufacturers have expressed their belief that
the E4 duty cycle overstates the idle fraction of operation of high-
performance engines. They stated that these engines are rarely operated
at idle and are therefore primarily designed for mid-range and high-
power operation at the expense of rough idle operation. We request
comment on whether the modes for the proposed duty cycle should be
reweighted toward higher power for high-performance engines. Commenters
should support their assertions with data on high-performance engine
use. If constructive data are forthcoming, we may finalize an
alternative cycle weighting for high-performance engines based on this
data.
(2) Not-to-Exceed Test Procedures and Standards
    We are proposing not-to-exceed (NTE) requirements similar to those
established for marine diesel engines. Engines would be required to
meet the NTE standards during normal in-use operation. We request
comment on applying the proposed NTE requirements to spark-ignition
marine engines and on the application of the requirements to these
engines.
(a) Concept
    Our goal is to achieve control of emissions over a wide range of
ambient conditions and over the broad range of in-use speed and load
combinations that can occur on a marine engine. This would ensure real-
world emission control, rather than just controlling emissions under
certain laboratory conditions. An important tool for achieving this
goal is an in-use testing program with an objective standard and an
easily implemented test procedure. Our traditional approach has been to
set a numerical standard on a specified test procedure and rely on the
additional prohibition of defeat devices to ensure in-use control over
a broad range of operation not included in the test procedure.
    We are proposing to apply the same prohibition on defeat devices
for OB/PWC and SD/I engines (see Sec.  1045.115).
    No single test procedure or test cycle can cover all real-world
applications, operations, or conditions. Yet to ensure that emission
standards are providing the intended benefits in use, we must have a
reasonable expectation that emissions under real-world conditions
reflect those measured on the test procedure. The defeat device
prohibition is designed to ensure that emission controls are employed
during real-world operation, not just under laboratory testing
conditions. However, the defeat device prohibition is not a quantified
standard and does not have an associated test procedure, so it does not
have the clear objectivity and ready enforceability of a numerical
standard and test procedure. We believe using the traditional approach,
i.e., using only a standardized laboratory test procedure and test
cycle, makes it difficult to ensure that engines will operate with the
same level of control in use as in the laboratory.
    Because the proposed duty cycle uses only five modes on an average
propeller curve to characterize marine engine operation, we are
concerned that an engine designed to the proposed duty cycle would not
necessarily perform the same way over the range of speed and load
combinations seen on a boat. This proposed duty cycle is based on an
average propeller curve, but a marine propulsion engine may never be
fitted with an ``average propeller.'' For instance, an engine fit to a
specific boat may operate differently based on how heavily the boat is
loaded.
    To ensure that engines control emissions over the full range of
speed and load combinations seen on boats, we propose to establish a
zone under the engine's power curve where the engine may not exceed a
specified emission limit (see Sec.  1045.105 and Sec.  1045.515). This
limit would apply to all regulated pollutants during steady-state
operation. In addition, we propose that a wide range of real ambient
conditions be included in testing with this NTE zone. The NTE zone,
limit, and ambient conditions are described below.
    We believe there are significant advantages to establishing NTE
standards. The proposed NTE test procedure is flexible, so it can
represent the majority of in-use engine operation and ambient
conditions. The NTE approach thus takes all the benefits of a numerical
standard and test procedure and expands it to cover a broad range of
conditions. Also, laboratory testing makes it harder to perform in-use
testing because either the engines would have to be removed from the
vessel or care would have to be taken to achieve laboratory-type
conditions on the vessel. With the NTE approach, in-use testing and
compliance become much easier since emissions may be sampled during
normal boating. By establishing an objective measurement, this approach
makes enforcement of defeat device provisions easier and provides more
certainty to the industry.
    Even with the NTE requirements, we believe it is still appropriate
to retain standards based on the steady-state duty cycle. This is the
standard that we expect the certified marine engines to meet on average
in use. The NTE testing is focused more on maximum emissions for
segments of operation and, in most cases, would not require additional
technology beyond what is used to meet the proposed standards. In some
cases, the calibration of the engine may need to be adjusted. We
believe that basing the emission standards on a distinct cycle and
using the NTE zone to ensure in-use control creates a comprehensive
program.
    We believe the technology used to meet the standards over the five-
mode duty cycle will meet the caps that apply across the NTE zone. We
therefore do not expect the proposed NTE standards to cause
manufacturers to need additional technology. We believe the NTE
standard will not result in a large amount of additional testing,
because these engines should be designed to perform as well in use as
they do over the five-mode test. However, our cost analysis in the
Draft RIA accounts for some additional testing, especially in the early
years, to provide

manufacturers with assurance that their engines would meet the proposed
NTE requirements.
(b) Shape of NTE Zone
    Figure III-1 illustrates our proposed NTE zone for SD/I engines. We
developed this zone based on the range of conditions that these engines
typically see in use. Manufacturers collected data on several engines
installed on vessels and operated under light and heavy load. Chapter 4
of the Draft RIA presents this data and describes the development of
the boundaries and conditions associated with the proposed NTE zone.
Although significant in-use engine operation occurs at low speeds, we
are excluding operation below 40 percent of maximum test speed because
brake-specific emissions increase dramatically as power approaches
zero. An NTE limit for low-speed or low-power operation would be very
hard for manufacturers and EPA to implement in a meaningful way. We are
proposing NTE limits for the subzones shown in Figure III-1, as
described below. We request comment on the proposed NTE zone and
subzones.
[GRAPHIC] [TIFF OMITTED] TP18MY07.000

    We propose to allow manufacturers to request approval for
adjustments to the size and shape of the NTE zone for certain engines,
if they can show that the engine will not see operation outside of the
revised NTE zone in use (see Sec.  1045.515). We would not want
manufacturers to go to extra lengths to design and test their engines
to control emissions for operation that will not occur in use. However,
manufacturers would still be responsible for all operation of an engine
on a vessel that would reasonably be expected to be seen in use, and
they would be responsible for ensuring that their specified operation
is indicative of real-world operation. In addition, if a manufacturer
designs an engine for operation at speeds and loads outside of the
proposed NTE zone, the manufacturer would be responsible for notifying
us so the NTE zone can be modified appropriately to include this
operation for that engine family.
(c) Excluded Operation
    As with marine diesel engines, we are proposing that only steady-
state operation be included for NTE testing (see Sec.  1045.515).
Steady-state operation would generally mean setting the throttle (or
speed control) in a fixed position. We believe most operation with
Marine SI engines involves nominally steady-state operator demand. It
is true that boats often experience rapid accelerations, such as with
water skiing. However, boats are typically designed for planing
operation at relatively high speeds. This limits the degree to which we
would expect engines to experience frequent accelerations during
extended operation. Also, because most of the transient events involve
acceleration from idle to reach a planing condition, most transient
engine operation is outside the NTE zone and would therefore not be
covered by NTE testing anyway. Moreover, we believe OB/PWC and SD/I
engines designed to comply with steady-state NTE requirements will be
using technologies that also work effectively under the changing speed
and load conditions that may occur. If we find there is substantial
transient operation within the NTE zone that causes significantly
increased emissions from installed engines, we will revisit

this provision in the future. We request comment on the appropriateness
of excluding transient operation from NTE requirements.
    We are aware that SD/I engines may not be able to meet emission
standards under all conditions, such as times when emission control
must be compromised for startability or safety. We are proposing to
specify that NTE testing excludes engine starting and warm-up. We would
allow manufacturers to design their engines to utilize engine
protection strategies that would not be covered by defeat device
provisions or NTE standards. This is analogous to the tampering
exemptions incorporated into 40 CFR 1068.101(b)(1) to address
emergencies. We believe it is appropriate to allow manufacturers to
design their engines with ``limp-home'' capabilities to prevent a
scenario where an engine fails to function, leaving an operator on the
water without any means of propulsion.
(d) NTE Emission Limits
    We are proposing NTE limits for the subzones shown in Figure III-1
above based on data collected from several SD/I engines equipped with
catalysts. These data and our analysis are presented in Chapter 4 of
the Draft RIA. See Section IV.C for a discussion of NTE limits for OB/
PWC engines.
    Because the proposed NTE zone does not include the idle point,
which is weighted at 40 percent of the certification duty cycle, brake-
specific emissions throughout most of the proposed NTE zone are less
than the weighted average from the steady-state testing. For most of
the NTE zone, we are therefore proposing a limit equal to the duty
cycle standard (i.e., NTE multiplier = 1.0). However, data on low-
emission engines show that brake-specific emissions increase for engine
speeds below 50 percent of maximum test speed (Subzone 4). We are
therefore proposing an HC+NOX cap of 1.5 times the
certification level in Subzone 4. Emission data on catalyst-equipped
engines also show higher emissions near full-power operation. We
understand that richer air-fuel ratios are needed under high-power
operation to protect the engines from overheating. We are therefore
proposing higher NTE limits for engine speeds at or above 90 percent of
rated test speed and at or above 100 percent of peak torque measured at
the rated test speed (Subzone 1). Specifically, we are proposing an
HC+NOX cap of 1.5 times the duty cycle standard and a CO cap
of 3.5 times the duty cycle standard for Subzone 1. We request comment
on the proposed NTE limits for SD/I engines. These limits are
summarized in Table III-1.

                          Table III-1.--Proposed NTE Limits by Subzone for SD/I Engines
----------------------------------------------------------------------------------------------------------------
                    Pollutant                        Subzone 1       Subzone 2       Subzone 3       Subzone 4
----------------------------------------------------------------------------------------------------------------
HC+NOX..........................................             1.5             1.0             1.0             1.5
CO..............................................             3.5             1.0             1.0             1.0
----------------------------------------------------------------------------------------------------------------

    SD/I engine manufacturers have begun developing prototype engines
with catalysts, and one manufacturer is currently selling SD/I engines
equipped with catalysts. These manufacturers have indicated that they
begin moving to richer air-fuel ratio calibrations at torque values
greater than 80 percent of maximum. These richer air-fuel ratios give
more power but because more fuel is burned also lead to higher
hydrocarbon and carbon monoxide emission rates. Part of the
manufacturers' rationale in selecting the appropriate air-fuel ratio in
this type of operation is to protect the engine by minimizing excess
air, which would lead to greater engine temperatures as increased
combustion of fuel and exhaust gases. To avoid the adverse effects of
this potential for overheating, we request comment on whether subzone 1
should be expanded to accommodate the engine-protection strategies
needed for SD/I engines at high power. In addition, we request comment
on the proposed NTE limits in subzone 1 with respect to open-loop
engine operation, especially for carbon monoxide.
    Marine engine manufacturers have suggested alternative approaches
to setting NTE limits for marine engines, which are discussed in
Section IV.C.2. Largely, these suggestions have been made to address
the emission variability between test modes seen in direct-injection
two-stroke outboard and PWC engines. However, we request comment on
alternative approaches for SD/I engines as well.
(e) Ambient Conditions
    Variations in ambient conditions can affect emissions. Such
conditions include air temperature, water temperature, and barometric
pressure, and humidity. We are proposing to apply the comparable ranges
for these variables as for marine diesel engines (see Sec.  1045.515).
Within the ranges, there is no calculation to correct measured
emissions to standard conditions. Outside of the ranges, emissions
could be corrected back to the nearest end of the range using good
engineering practice. The proposed ranges are 13 to 35 [deg]C (55 to 95
[deg]F) for ambient air temperature, 5 to 27 [deg]C (41 to 80 [deg]F)
for ambient water temperature, and 94.0 to 103.325 kPa for atmospheric
pressure. We do not specify a range of humidity values, but propose
only to require that laboratory testing be conducted at humidity levels
representing in-use conditions.
(f) Measurement Methods
    While it may be easier to test outboard engines in the laboratory,
there is a strong advantage to using portable measurement equipment to
test SD/I engines and personal watercraft without removing the engine
from the vessel. Field testing would also provide a much better means
of measuring emissions to establish compliance with the NTE standards,
because it is intended to ensure control of emissions during normal in-
use operation that may not occur during laboratory testing over the
specified duty cycle. We propose to apply the field testing provisions
for all SD/I engines. These field-testing procedures are described
further in Section IV.E.2.d. We request comment on any ways the field
testing procedures should be modified to address the unique operating
characteristics of marine engines.
    A parameter to consider is the minimum sampling time for field
testing. A longer period allows for greater accuracy, due mainly to the
smoothing effect of measuring over several transient events. On the
other hand, an overly long sampling period can mask areas of engine
operation with poor emission control characteristics. To balance these
concerns, we are applying a minimum sampling period of 30 seconds. This
is consistent with the requirement for marine diesel engines. Spark-
ignition engines generally don't have turbochargers and they control
emissions largely by maintaining air-fuel ratio. Spark-ignition engines
are therefore much less prone to consistent

emission spikes from off-cycle or unusual engine operation. We believe
the minimum 30 second sampling time will ensure sufficient measurement
accuracy and will allow for meaningful measurements.
    We do not specify a maximum sampling time. We expect manufacturers
testing in-use engines to select an approximate sampling time before
measuring emissions; however, the standards apply for any sampling time
that meets the minimum.
(g) Certification
    We propose to require that manufacturers state in their application
for certification that their engines will comply with the NTE standards
under any nominally steady-state combination of speeds and loads within
the proposed NTE zone (see Sec.  1045.205). The manufacturer would also
provide a detailed description of all testing, engineering analysis,
and other information that forms the basis for the statement. This
statement would be based on testing and, if applicable, other research
that supports such a statement, consistent with good engineering
judgment. We would be able to review the basis for this statement
during the certification process. For marine diesel engines, we have
provided guidance that manufacturers may demonstrate compliance with
NTE standards by testing their engines at a number of standard points
throughout the NTE zone. In addition, manufacturers must test at a few
random points chosen by EPA prior to the testing. We request comment on
this approach for Marine SI engines.

E. Additional Certification and Compliance Provisions

(1) Production Line Testing
    We are proposing to require that manufacturers routinely test
engines at the point of production to ensure that production
variability does not affect the engine family's compliance with
emission standards (see part 1045, subpart D). These proposed testing
requirements are the same as we are proposing for outboard and personal
watercraft engines and are very similar to those already in place in
part 91. See Section VII.C.7 and the draft regulations for a detailed
description of these requirements. We may also require manufacturers to
perform production line testing under the selective enforcement
auditing provisions described in Section VIII.E.
(2) In-Use Testing
    Manufacturers of OB/PWC engines have been required to test in-use
engines to show that they continue to meet emission standards. We
contemplated a similar requirement for SD/I engines, but have decided
not to propose a requirement for a manufacturer-run in-use testing
program at this time. Manufacturers have pointed out that it would be
very difficult to identify a commercial fleet of boats that could be
set up to operate for hundreds of hours, because it is very uncommon
for commercial operators to have significant numbers of SD/I vessels.
Where there are commercial fleets of vessels that may be conducive to
accelerated in-use service accumulation, these vessels generally use
outboard engines. Manufacturers could instead hire drivers to operate
the boats, but this may be cost-prohibitive. We request comment on any
other alternative approaches that might be available for accumulating
operating hours with SD/I engines. For example, to the extent that boat
builders maintain a fleet of boats for product development or
employees' recreational use, those engines may be available for
emission testing after in-use operation.
    There is also a question about access to the engines for testing.
If engines need to be removed from vessels for testing in the
laboratory, it is unlikely that owners would cooperate. However, we are
proposing test procedures with specified portable equipment that would
potentially allow for testing engines that remain installed in boats.
This is described in Section IV.E.2.d.
    While we are not proposing a program to require manufacturers to
routinely test in-use engines, the Clean Air Act allows us to perform
our own testing at any time with in-use engines to evaluate whether
they continue to meet emission standards throughout the useful life.
This may involve either laboratory testing or in-field testing with
portable measurement equipment. For laboratory tests, we could evaluate
compliance with either the duty cycle standards or the not-to-exceed
standards. For testing with engines that remain installed on marine
vessels, we would evaluate compliance with the not-to-exceed standards.
In addition, we may require the manufacturer to conduct a reasonable
degree of testing under Clean Air Act section 208 if we have reason to
believe that an engine family does not conform to the regulations. This
testing may take the form of a Selective Enforcement Audit, or we may
require the manufacturer to test in-use engines.
(3) Certification Fees
    Under our current certification program, manufacturers pay a fee to
cover the costs for various certification and other compliance
activities associated with implementing the emission standards. As
explained below, we are proposing to assess EPA's compliance costs
associated with SD/I engines based on EPA's existing fees regulation.
Section VI describes our proposal to establish a new fees category,
based on the cost study methodology used in establishing EPA's existing
fees regulation, for costs related to the proposed evaporative emission
standards for both vessels and equipment that would be subject to
standards under this proposal.
    EPA established a fee structure by grouping together various
manufacturers and industries into fee categories, with an explanation
that separation of industries into groups was appropriate to tailor the
applicable fee to the level of effort expected for EPA to oversee the
range of certification and compliance responsibilities (69 FR 26222,
May 11, 2004). As part of this process, EPA conducted a cost analysis
to determine the various compliance activities associated with each fee
category and EPA's associated annual cost burden. Once the total EPA
costs were determined for each fee category, the total number of
certificates involved within a fee category was added together and
divided into the total costs to determine the appropriate assessment
for each anticipated certificate.\77\ One of the fee categories created
was for ``Other Engines and Vehicles,'' which includes marine engines
(both compression-ignition and spark-ignition), nonroad spark-ignition
engines (above and below 19 kW), locomotive engines, recreational
vehicles, heavy-duty evaporative systems, and heavy-duty engines
certified only for sale in California. These engine and vehicle types
were grouped together because EPA planned a more basic certification
review than, for example, light-duty vehicles.
---------------------------------------------------------------------------

    \77\ See Cost Analysis Document at p. 21 associated with the
proposed fees rule (http://www.epa.gov/otaq/fees.htm).

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    EPA determined in the final fees rulemaking that it would be
premature to assess fees for the SD/I engines since they were not yet
subject to emission standards. The fee calculation nevertheless
includes a projection that there will eventually be 25 certificates of
conformity annually for SD/I engines. We are proposing to now formally
include SD/I engines in the ``Other Engines and Vehicles'' category and

assess a fee of $839 for each certificate of conformity in 2006. Note
that we will continue to update assessed fees each year, so the actual
fee in 2009 and later model years will depend on these annual
calculations (see Sec.  1027.105).
(4) Special Provisions Related to Partially Complete Engines
    It is common practice for Marine SI engines for one company to
produce the base engine for a second company to modify for the final
application. Since our regulations prohibit the sale of uncertified
engines, we are proposing provisions to clarify the status of these
engines and defining a path by which these engines can be handled
without violating the regulations. See Section XI for more information.
(5) Use of Engines Already Certified to Other Programs
    In some cases, manufacturers may want to use engines already
certified under our other programs. Engines certified to the emission
standards for highway applications in part 86 or Large SI applications
in part 1048 are meeting more stringent standards. We are therefore
proposing to allow the pre-existing certification to be valid for
engines used in marine applications, on the condition that the engine
is not changed from its certified configuration in any way (see Sec.
1045.605). Manufacturers would need to demonstrate that fewer than five
percent of the total sales of the engine model are for marine
applications. There are also a few minor notification and labeling
requirements to allow for EPA oversight of this provision.
(6) Import-Specific Information at Certification
    We are proposing to require additional information to improve our
ability to oversee compliance related to imported engines (see Sec.
1045.205). In the application for certification, we are proposing to
require the following additional information: (1) The port or ports at
which the manufacturer will import the engines, (2) the names and
addresses of the agents the manufacturer has authorized to import the
engines, and (3) the location of the test facilities in the United
States where the manufacturer will test the engines if we select them
for testing under a selective enforcement audit.

F. Small-Business Provisions

(1) Small Business Advocacy Review Panel
    On June 7, 1999, we convened a Small Business Advocacy Review Panel
under section 609(b) of the Regulatory Flexibility Act as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996. The
purpose of the Panel was to collect the advice and recommendations of
representatives of small entities that could be affected by this
proposed rule and to report on those comments and the Panel's findings
and recommendations as to issues related to the key elements of the
Initial Regulatory Flexibility Analysis under section 603 of the
Regulatory Flexibility Act. We convened a Panel again on August 17,
2006 to update our review for this new proposal. The Panel reports have
been placed in the rulemaking record for this proposal. Section 609(b)
of the Regulatory Flexibility Act directs the review Panel to report on
the comments of small entity representatives and make findings as to
issues related to identified elements of an initial regulatory
flexibility analysis (IRFA) under RFA section 603. Those elements of an
IRFA are:
     A description of, and where feasible, an estimate of the
number of small entities to which the proposed rule will apply;
     A description of projected reporting, recordkeeping, and
other compliance requirements of the proposed rule, including an
estimate of the classes of small entities that will be subject to the
requirements and the type of professional skills necessary for
preparation of the report or record;
     An identification, to the extent practicable, of all
relevant Federal rules that may duplicate, overlap, or conflict with
the proposed rule; and
     A description of any significant alternative to the
proposed rule that accomplishes the stated objectives of applicable
statutes and that minimizes any significant economic impact of the
proposed rule on small entities.
    In addition to the EPA's Small Business Advocacy Chairperson, the
Panel consisted of the Director of the Assessment and Standards
Division of the Office of Transportation and Air Quality, the
Administrator of the Office of Information and Regulatory Affairs
within the Office of Management and Budget, and the Chief Counsel for
Advocacy of the Small Business Administration.
    Using definitions provided by the Small Business Administration
(SBA), companies that manufacture internal-combustion engines and that
employ fewer than 1000 employees are considered small businesses for a
Small Business Advocacy Review (SBAR) Panel. Equipment manufacturers,
boat builders, and fuel system component manufacturers that employ
fewer than 500 people are considered small businesses for the SBAR
Panel. Based on this information, we asked 25 companies that met the
SBA small business thresholds to serve as small entity representatives
for the duration of the Panel process. Of these 25 companies, 13 were
involved in the marine industry. These companies represented a cross-
section of SD/I engine manufacturers, boat builders, and fuel system
component manufacturers.
    With input from small entity representatives, the Panel reports
provide findings and recommendations on how to reduce potential burden
on small businesses that may occur as a result of this proposed rule.
The Panel reports are included in the rulemaking record for this
proposal. In light of the Panel reports, and where appropriate, the
agency has made changes to the provisions anticipated for the proposed
rule. The proposed options recommended to us by the Panel are described
below.
(2) Proposed Burden Reduction Approaches for Small-Volume SD/I Engine
Manufacturers
    We are proposing several options for small-volume SD/I engine
manufacturers. For purposes of determining which engine manufacturers
are eligible for the small business provisions described below for SD/I
engine manufacturers, we are proposing criteria based on a production
cut-off of 5,000 SD/I engines per year. Under this approach, we would
allow engine manufacturers that exceed the production cut-off level
noted above to request treatment as a small business if they have fewer
than the number of employees specified above. In such a case, the
manufacturer would provide information to EPA demonstrating the number
of employees in their employ. The proposed options would be used at the
manufacturers' discretion. We request comment on the appropriateness of
these options, which are described in detail below.
(a) Additional Lead Time
    One small business marine engine manufacturer is already using
catalytic converters on some of its production SD/I marine engines
below 373 kW. These engines have been certified to meet standards
adopted by California ARB that are equivalent to the proposed
standards. However, other small businesses producing SD/I engines have
stated that they are not as far along in their catalyst development
efforts. These manufacturers support the concept of receiving
additional time for

compliance, beyond the implementation date for large manufacturers.
    High-performance SD/I engine manufacturers are typically smaller
businesses than other SD/I engine manufacturers. The majority of high-
performance engine manufacturers produce fewer than 100 engines per
year for sale in the United States, and some produce only a few engines
per year. Due to these very low sales volumes, additional lead time may
be useful to the manufacturers to help spread out the compliance
efforts and costs.
    As recommended in the SBAR Panel report, EPA is proposing an
implementation date of 2011 for SD/I engines below 373 kW produced by
small business marine engine manufacturers and a date of 2013 for small
business manufacturers of high-performance (at or above 373 kW) marine
engines (see Sec.  1045.145). As discussed earlier, we have requested
comment on alternative non-catalyst based standard of 22 g/kW-hr for
high-performance SD/I marine engines. In the case of an alternative
non-catalyst based standard, less lead time may be necessary. EPA
requests comments on the proposed additional lead time in the
implementation of the proposed SD/I exhaust emission standards for
small businesses.
(b) Exhaust Emission ABT
    As discussed above, we are proposing an averaging, banking, and
trading (ABT) credit program for exhaust emissions from SD/I marine
engines (see part 1045, subpart H). Small businesses expressed some
concern that ABT could give a competitive advantage to large
businesses. Specifically, there was an equity concern that if credits
generated by SD/I engines below 373 kW could be used for high-
performance SD/I engines, that one large manufacturer could use these
credits to meet the high-performance SD/I engine standards without
making any changes to their engines. EPA requests comment on the
desirability of credit trading between high-performance and other SD/I
marine engines and the impact it could have on small businesses.
(c) Early Credit Generation for ABT
    The SBAR Panel recommended an early banking program and expressed
belief that bonus credits will provide greater incentive for more small
business engine manufacturers to introduce advanced technology earlier
across the nation than would otherwise occur. As discussed above, we
are proposing an early banking program in which bonus credits could be
earned for certifying early (see Sec.  1045.145). This program,
combined with the additional lead time for small businesses, would give
small-volume SD/I engine manufacturers ample opportunity to bank
emission credits prior to the proposed implementation date of the
standards.
(d) Assigned Emission Rates for High-Performance SD/I Engines
    Small businesses commented that certification may be too costly to
amortize effectively over the small sales volumes for high-performance
SD/I engines. One significant part of certification costs is engine
testing. This includes testing for emissions over the specified duty
cycle, deterioration testing, and not to exceed (NTE) zone testing.
Even in the case where an engine manufacturer is using emission credits
to comply with the standard, the manufacturer would still need to test
engines to calculate how many emission credits are needed. One way of
minimizing this testing burden would be to allow manufacturers to use
assigned baseline emission rates for certification based on previously
generated emission data. As discussed earlier in this preamble, we are
proposing assigned baseline HC+NOX and CO emission rates for
all high-performance SD/I engines. These assigned emission rates are
based on test data presented in Chapter 4 of the Draft RIA.
(e) Alternative Standards for High-Performance SD/I Engines
    Small businesses expressed concern that catalysts have not been
demonstrated on high-performance engines and that they may not be
practicable for this application. In addition, the concern was
expressed that emission credits may not be available at a reasonable
price. As discussed earlier, we are requesting comment on the need for
and level of alternative standards for high-performance marine engines.
    The proposed NTE standards discussed above would likely require
additional certification and development testing. The SBAR Panel
recommended that NTE standards not apply to any high-performance SD/I
engines, as it would minimize the costs of compliance testing for small
businesses. For these reasons, we are not proposing to apply NTE
standards to high-performance SD/I engines (See Sec.  1045.105).
(f) Broad Engine Families for High-Performance SD/I Engines
    Testing burden could be reduced by using broader definitions of
engine families. Typically in EPA engine and equipment programs,
manufacturers are able to group their engine lines into engine families
for certification to the standards. Engines in a given family must have
many similar characteristics including the combustion cycle, cooling
system, fuel system, air aspiration, fuel type, aftertreatment design,
number of cylinders and cylinder bore sizes. A manufacturer would then
perform emission tests only on the engine in that family that would be
most likely to exceed an emission standard. We are proposing to allow
small businesses to group all of their high performance SD/I engines
into a single engine family for certification, subject to good
engineering judgment (see Sec.  1045.230).
(g) Simplified Test Procedures for High-Performance SD/I Engines
    Existing testing requirements include detailed specifications for
the calibration and maintenance of testing equipment and tolerances for
performing the actual tests. For laboratory equipment and testing,
these specifications and tolerances are intended to achieve the most
repeatable results feasible given testing hardware capabilities. For
in-use testing, EPA allows for different equipment than is specified
for the laboratory and with arguably less restrictive specifications
and tolerances. The purpose of separate requirements for in-use testing
is to account for the variability inherent in testing outside of the
laboratory. These less restrictive specifications allow for lower cost
emission measurement devices, such as portable emission measurement
units. For high performance SD/I engines, it may be difficult to hold
the engine at idle or high power within the tolerances currently
specified by EPA in the laboratory test procedure. Therefore, we are
proposing less restrictive specifications and tolerances, for testing
high performance SD/I engines, which would allow the use of portable
emission measurement equipment (see Sec.  1065.901(b)). This would
facilitate less expensive testing for these small businesses without
having a negative effect on the environment.
(h) Reduced Testing Requirements
    We are proposing that small-volume engine manufacturers may rely on
an assigned deterioration factor to demonstrate compliance with the
standards for the purposes of certification rather than doing service
accumulation and additional testing to measure deteriorated emission
levels at the end of the regulatory useful life (see Sec.  1045.240).
EPA is not proposing actual

levels for the assigned deterioration factors with this proposal. EPA
intends to analyze available emission deterioration information to
determine appropriate deterioration factors for SD/I engines. The data
will likely include durability information from engines certified to
California ARB's standards and may also include engines certified early
to EPA's standards. Prior to the implementation date for the SD/I
standards, EPA will provide guidance to engine manufacturers specifying
the levels of the assigned deterioration factors for small-volume
engine manufacturers.
    We are also proposing that small-volume engine manufacturers would
be exempt from the production-line testing requirements (see Sec.
1045.301). While we are proposing to exempt small-volume engine
manufacturers from production line testing, we believe requiring
limited production-line testing could be beneficial to implement the
ongoing obligation to ensure that production engines are complying with
the standards. Therefore, we request comment on the alternative of
applying limited production-line testing to small-volume engine
manufacturers with a requirement to test one production engine per
year.
(i) Hardship Provisions
    We are proposing two types of hardship provisions for SD/I engine
manufacturers consistent with the Panel recommendations. The first type
of hardship is an unusual circumstances hardship, which would be
available to all businesses regardless of size. The second type of
hardship is an economic hardship provision, which would be available to
small businesses only. Sections VIII.C.8 and VIII.C.9 provide a
description of the proposed hardship provisions that would apply to SD/
I engine manufacturers.
    Because boat builders in many cases will depend on engine
manufacturers to supply certified engines in time to produce complying
boats, we are also proposing a hardship provision for all boat
builders, regardless of size, that would allow the builder to request
more time if they are unable to obtain a certified engine and they are
not at fault and would face serious economic hardship without an
extension (see Sec.  1068.255). Section VIII.C.10 provides a
description of the proposed hardship provisions that would apply to
boat builders.

G. Technological Feasibility

(1) Level of Standards
    Over the past few years, developmental programs have demonstrated
the capabilities of achieving significant reductions in exhaust
emissions from SD/I engines. California ARB has acted on this
information to set an HC+NOX emission standard of 5 g/kW-hr
for SD/I engines, starting in 2008. Chapter 4 of the Draft RIA presents
data from several SD/I engines with catalysts packaged within water-
cooled exhaust manifolds. Four of these engines were operated with
catalysts in vessels for 480 hours. The remaining engines were tested
with catalysts that had been subjected to a rapid-aging cycle in the
laboratory. Data from these catalyst-equipped engines generally show
emission levels below the proposed standards.
(2) Implementation Dates
    We anticipate that manufacturers will use the same catalyst designs
to meet the proposed standards that they will use to meet the
California ARB standards for SD/I engines in 2008. We believe a
requirement to extend the California standards nationwide after a one-
year delay allows manufacturers adequate time to incorporate catalysts
across their product lines. Once the technology is developed for use in
California, it would be available for use nationwide. In fact, one
company currently certified to the California standards is already
offering catalyst-equipped SD/I engines nationwide. As discussed above,
we request comment on the effect that anticipated product changes for
specific General Motors engine blocks may have on the proposed
implementation dates.
(3) Technological Approaches
    Engine manufacturers can adapt readily available technologies to
control emissions from SD/I engines. Electronically controlled fuel
injection gives manufacturers more precise control of the air/fuel
ratio in each cylinder, thereby giving them greater flexibility in how
they calibrate their engines. With the addition of an oxygen sensor,
electronic controls give manufacturers the ability to use closed-loop
control, which is especially valuable when using a catalyst. In
addition, manufacturers can achieve HC+NOX reductions
through the use of exhaust gas recirculation. However, the most
effective technology for controlling emissions is a three-way catalyst
in the exhaust stream.
    In SD/I engines, the exhaust manifolds are water-jacketed and the
water mixes with the exhaust stream before exiting the vessel.
Manufacturers add a water jacket to the exhaust manifold to meet
temperature-safety protocol. They route this cooling water into the
exhaust to protect the exhaust couplings and to reduce engine noise.
Catalysts must therefore be placed upstream of the point where the
exhaust and water mix--this ensures the effectiveness and durability of
the catalyst. Because the catalyst must be small enough to fit in the
exhaust manifold, potential emission reductions are not likely to
exceed 90 percent, as is common in land-based applications. However, as
discussed in Chapter 4 of the Draft RIA, demonstration programs have
shown that emissions may be reduced by 70 to 80 percent for
HC+NOX and 30 to 50 percent for CO over the proposed test
cycle. Larger reductions, especially for CO, have been achieved at
lower-speed operation.
    There have been concerns that aspects of the marine environment
could result in unique durability problems for catalysts. The primary
aspects that could affect catalyst durability are sustained operation
at high load, saltwater effects on catalyst efficiency, and thermal
shock from cold water coming into contact with a hot catalyst. Modern
catalysts perform well at temperatures up to 1100[deg] C, which is much
higher than would be seen in a marine exhaust manifold. These catalysts
have also been shown to withstand the thermal shock of being immersed
in water. More detail on catalyst durability is presented in the Draft
RIA. In addition, use of catalysts in automotive, motorcycle, and
handheld equipment has shown that catalysts can be packaged to
withstand vibration in the exhaust manifold.
    Manufacturers already strive to design their exhaust systems to
prevent water from reaching the exhaust ports. If too much water
reaches the exhaust ports, significant durability problems would result
from corrosion or hydraulic lock. As discussed in the Draft RIA,
industry and government worked on a number of cooperative test programs
in which several SD/I engines were equipped with catalysts and
installed in vessels to prove out the technology. Early in the
development work, a study was performed on an SD/I engine operating in
a boat to see if water was entering the part of the manifold where
catalysts would be installed. Although some water was collected in the
exhaust manifold, it was found that this water came from water vapor
that condensed out of the combustion products. This was easily
corrected using a thermostat

to prevent overcooling from the water jacket.
    Four SD/I engines equipped with catalysts were operated in vessels
for 480 hours on fresh water. This time period was intended to
represent the full expected operating life of a typical SD/I engine. No
significant deterioration was observed on any of these catalysts, nor
was there any evidence of water reaching the catalysts. In addition,
the catalysts were packaged such that the exhaust system met industry
standards for maximum surface temperatures.
    Testing has been performed on one engine in a vessel on both fresh
water and saltwater over a test protocol designed by industry to
simulate the worst-case operation for water reversion. No evidence was
found of water reaching the catalysts. After the testing, the engine
had emission rates below the proposed HC+NOX standard. We
later engaged in a test program to evaluate three additional engines
with catalysts in vessels operating on saltwater for extended periods.
Early in the program, two of the three manifolds experienced corrosion
in the salt-water environment resulting in water leaks and damage to
the catalyst. These manifolds were rebuilt with guidance from experts
in the marine industry and additional hours have been accumulated on
the boats. Although the accumulated hours are well below the 480 hours
performed on fresh water, the operation completed has shown no visible
evidence of water reversion or damage to the catalysts.
    One SD/I engine manufacturer began selling engines equipped with
catalysts in Summer 2006. They have certified their engines to the
California ARB standards, and are selling their catalyst-equipped
engines nationwide. This manufacturer indicated that they have
successfully completed durability testing, including extended in-use
testing on saltwater. Other manufacturers have indicated that they will
have catalyst-equipped SD/I engines for sale in California by the end
of this year.
(4) Regulatory Alternatives
    In developing the proposed emission standards, we considered both
what was achievable without catalysts and what could be achieved with
larger, more efficient catalysts than those used in our test programs.
Chapter 4 of the Draft RIA presents data on SD/I engines equipped with
exhaust gas recirculation (EGR). HC+NOX emission levels
below 10 g/kW-hr were achieved for each of the engines. CO emissions
ranged from 25 to 185 g/kW-hr. We believe EGR would be a
technologically feasible and cost-effective approach to reducing
emissions from SD/I marine engines. However, we believe greater
reductions could be achieved through the use of catalysts. We
considered basing an interim standard on EGR, but were concerned that
this would divert manufacturers' resources away from catalyst
development and could have the effect of delaying emission reductions
from this sector.
    Several of the marine engines with catalysts that were tested as
part of the development of the proposed standards had HC+NOX
emission rates in the 3-4 g/kW-hr range, even with consideration of
expected in-use emissions deterioration associated with catalyst aging.
However, we believe a standard of 5 g/kW-hr is still appropriate given
the potential variability in in-use performance and in test data. The
test programs described in Chapter 4 of the Draft RIA did not
investigate larger catalysts for SD/I applications. The goal of the
testing was to demonstrate catalysts that would work within the
packaging constraints associated with water jacketing the exhaust and
fitting the engines into engine compartments on boats. However, we did
perform testing on engines equipped with both catalysts and EGR. These
engines showed emission results in the 2-3 g/kW-hr range. We expect
that these same reductions could be achieved more simply through the
use of larger catalysts or catalysts with higher precious metal
loading. Past experience indicates that most manufacturers will strive
to achieve emission reductions well below the proposed standards to
give them certainty that they will pass the standards in-use,
especially as catalysts on SD/I engines are a new technology.
Therefore, we do not believe it is necessary at this time to set a
lower standard for these engines.
(5) Our Conclusions
    We believe the proposed 2009 exhaust emission standards for SD/I
engines represent the greatest degree of emission reduction feasible in
this time frame. Manufacturers could meet the proposed standards
through the use of three-way catalysts packaged in the exhaust systems
upstream of where the water and exhaust mix. One manufacture is already
selling engines with this technology and by 2009 many other
manufacturers will have experience in producing engines with catalysts
for sale in California.
    As discussed in Section X, we do not believe the proposed standards
would have negative effects on energy, noise, or safety and may lead to
some positive effects.

IV. Outboard and Personal Watercraft Engines

A. Overview

    This section applies to spark-ignition outboard and personal
watercraft (OB/PWC) marine engines and vessels. OB/PWC engines are
currently required to meet the HC+NOX exhaust emissions and
other related requirements under 40 CFR part 91. As a result of these
standards, manufacturers have spent the last several years developing
new technologies to replace traditional, carbureted, two-stroke engine
designs. Many of these technologies are capable of emission levels well
below the current standards. We are proposing new HC+NOX and
CO exhaust emission standards for OB/PWC marine engines.
    For outboard and personal watercraft engines, the current emission
standards regulate only HC+NOX emissions. As described in
Section II, we are proposing in this notice to make the finding under
Clean Air Act section 213(a)(3) that Marine SI engines cause or
contribute to CO nonattainment in two or more areas of the United
States.
    We believe manufacturers can use readily available technological
approaches to design their engines to meet the proposed standards. In
fact, as discussed in Chapter 4 of the Draft RIA, manufacturers are
already producing several models of four-stroke engines and direction-
injection two-stroke engines that meet the proposed standards. The most
important compliance step for the proposed standards will be to retire
high-emitting designs that are still available and replace them with
these cleaner engines. We are not proposing standards based on the use
of catalytic converters in OB/PWC engines. While this may be an
attractive technology in the future, we do not believe there has been
sufficient development work on the application of catalysts to OB/PWC
engines to use as a basis for standards at this time.
    Note that we are proposing to migrate the regulatory requirements
for marine spark-ignition engines from 40 CFR part 91 to 40 CFR part
1045. This gives us the opportunity to update the details of our
certification and compliance program to be consistent with the
comparable provisions that apply to other engine categories and
describe regulatory requirements in plain language. Most of the change
in regulatory text provides improved clarity without substantially
changing procedures or compliance obligations. Where there is a change
that warrants further attention, we describe the need for the change
below.

B. Engines Covered by This Rule

(1) Definition of Outboard and Personal Watercraft Engines and Vessels
    The proposed standards are intended to apply to outboard marine
engines and engines used to propel personal watercraft. We are
proposing to change the existing definitions of outboard and personal
watercraft to reflect this intent. The existing definitions of outboard
engine and personal watercraft marine engine are presented below:
     Outboard engine is a Marine SI engine that, when properly
mounted on a marine vessel in the position to operate, houses the
engine and drive unit external to the hull of the marine vessel.
     Personal watercraft engine (PWC) is a Marine SI engine
that does not meet the definition of outboard engine, inboard engine,
or sterndrive engine, except that the Administrator in his or her
discretion may classify a PWC as an inboard or sterndrive engine if it
is comparable in technology and emissions to an inboard or sterndrive
engine.
    With the proposed implementation of catalyst-based standards for
sterndrive and inboard marine engines, we believe the above definitions
could be problematic. Certain applications using SD/I engines and able
to apply catalyst control would not be categorized as SD/I under the
existing definitions in at least two cases. First, an airboat engine,
which is often mounted well above the hull of the engine and used to
drive an aircraft-like propeller could be misconstrued as an outboard
engine. However, like traditional sterndrive and inboard engines,
airboat engines are typically derived from automotive-based engines
without substantial modifications for marine application. Airboat
engines can use the same technologies that are available to sterndrive
and inboard engines, so we believe they should be subject to the same
standards. To address the concerns about classifying airboats, we are
proposing to change the outboard definition to specify that the engine
and drive unit be a single, self-contained unit that is designed to be
lifted out of the water. This clarifies that air boats are not outboard
engines; air boats do not have engines and drive units that are
designed to be lifted out of the water. We are proposing the following
definition:
     Outboard engine means an assembly of a spark-ignition
engine and drive unit used to propel a marine vessel from a properly
mounted position external to the hull of the marine vessel. An outboard
drive unit is partially submerged during operation and can be tilted
out of the water when not in use.
    Second, engines used on jet boats (with an open bay for passengers)
have size, power, and usage characteristics that are very similar to
sterndrive and inboard applications, but these engines may be the same
as OB/PWC engines, rather than the marinized automotive engines
traditionally used on sterndrive vessels. We believe classifying such
engines as personal watercraft engines is inappropriate because it
would subject the jet boats to less stringent emission standards than
other boats with similar size and power characteristics. This different
approach could lead to increased use of high-emitting engines in these
vessels. Under the current regulations, engines powering jet boats
could be treated as SD/I engines at the discretion of the Agency,
because they are comparable in technology to conventional SD/I engines.
We are proposing definitions that would explicitly exclude jet boats
and their engines from being treated as personal watercraft engines or
vessels. Instead, we are proposing to classify jet boat engines as SD/
I.
    The proposed definitions conform to the existing definition of
personal watercraft established by the International Organization for
Standardization (ISO 13590). This ISO standard excludes open-bay
vessels and specifies a maximum vessel length of 4 meters. The ISO
standard therefore excludes personal watercraft-like vessels 4 meters
or greater and jet boats. Thus, engines powering such vessels would be
classified as sterndrive/inboard engines. We believe this definition
effectively serves to differentiate vessels in a way that groups
propulsion engines into categories that are appropriate for meeting
different emission standards. This approach is shown below with the
corresponding proposed definition of personal watercraft engine. We are
proposing one change to the ISO definition for domestic regulatory
purposes; we propose to remove the word ``inboard'' to prevent
confusion between PWC and inboard engines and state specifically that a
vessel powered by an outboard marine engine is not a PWC. We are
proposing the following definition:
     Personal watercraft means a vessel less than 4.0 meters
(13 feet) in length that uses an installed internal combustion engine
powering a water jet pump as its primary source of propulsion and is
designed with no open load carrying area that would retain water. The
vessel is designed to be operated by a person or persons positioned on,
rather than within, the confines of the hull. A vessel using an
outboard engine as its primary source of propulsion is not a personal
watercraft.
     Personal watercraft engine means a spark-ignition engine
used to propel a personal watercraft.
    Section III.C.2 describes special provisions that would allow
manufacturers extra flexibility with emission credits if they want to
continue using outboard or personal watercraft engines in jet boats.
These engines would need to meet the standards for sterndrive/inboard
engines, but we believe it is appropriate for them to make this
demonstration using emission credits generated by other outboard and
personal watercraft engines because these vessels are currently using
these engine types. We request comment on this approach to defining
personal watercraft, especially as it relates to vessels 4 meters or
longer and jet boats.
(2) Exclusions and Exemptions
    We are proposing to maintain the existing exemptions for OB/PWC
engines. These include the testing exemption, the manufacturer-owned
exemption, the display exemption, and the national-security exemption.
If the conditions for an exemption are met, the engine is not subject
to the exhaust emission standards. These exemptions are described in
more detail under Section VIII.
    The Clean Air Act provides for different treatment of engines used
solely for competition. In the initial rulemaking to set standards for
OB/PWC engines, we adopted the conventional definitions that excluded
engines from the regulations if they had features that would be
difficult to remove and that would make it unsafe, impractical, or
unlikely to be used for noncompetitive purposes. We have taken the
approach in other programs of more carefully differentiating
competition and noncompetition models, and are proposing these kinds of
changes in this rule. The proposed changes to the existing provisions
relating to competition engines would apply equally to all types of
Marine SI engines. See Section III and Sec.  1045.620 of the
regulations for a full discussion of the proposed approach.
    We are proposing a new exemption to address individuals who
manufacture recreational marine vessels for personal use (see Sec.
1045.630). Under the proposed exemption, these vessels and their
engines could be exempt from standards, subject to certain limitations.
For example, an individual may produce one such vessel over a ten-year

period, the vessel may not be used for commercial purposes, and any
exempt engines may not be sold for at least five years. The vessel must
generally be built from unassembled components, rather than simply
completing assembly of a vessel that is otherwise similar to one that
will be certified to meet emission standards. This proposal addresses
the concern that hobbyists who make their own vessels would otherwise
be manufacturers subject to the full set of emission standards by
introducing these vessels into commerce. We expect this exemption to
involve a very small number of vessels.
    In the rulemaking for recreational vehicles, we chose not to apply
standards to hobby products by exempting all reduced-scale models of
vehicles that are not capable of transporting a person (67 FR 68242,
November 8, 2002). We are proposing to extend that same provision to
OB/PWC marine engines (see Sec.  1045.5).

C. Proposed Exhaust Emission Standards

    We are proposing more stringent exhaust emission standards for new
OB/PWC marine engines. These proposed standards can be met through the
expanded reliance on four-stroke engines and two-stroke direct-
injection engines. This section describes the proposed requirements for
OB/PWC engines for controlling exhaust emissions. See Section V for a
description of the proposed requirements related to evaporative
emissions.
(1) Standards and Dates
    We are proposing new HC+NOX standards for OB/PWC engines
starting in model year 2009 that would achieve more than a 60 percent
reduction from the existing 2006 standards. We are also proposing new
CO emission standards. These proposed standards would result in
meaningful CO reductions from many engines and prevent CO from
increasing from engines that already use technologies with lower CO
emissions. The proposed emission standards are largely based on
certification data from cleaner-burning Marine SI engines, such as
four-stroke engines and two-stroke direct-injection engines. Section
IV.F discusses the technological feasibility of these standards in more
detail. Table IV-1 presents the proposed exhaust emission standards for
OB/PWC. We are also proposing to apply not-to-exceed emission standards
over a range of engine operating conditions, as described in Section
IV.C.2. (See Sec.  1045.103.)

  Table IV-1--Proposed OB/PWC Exhaust Emission Standards [g/kW-hr] for
                             2009 Model Year
------------------------------------------------------------------------
             Pollutant                P\a\ <= 40 kW       P\a\ > 40 kW
------------------------------------------------------------------------
HC+NOX............................         28-0.3 x P                 16
CO................................        500-5.0 x P               300
------------------------------------------------------------------------
\a\ P = maximum engine power in kilowatts (kW).

    The proposed emission standards for HC+NOX are similar
in stringency to the 2008 model year standards adopted in California,
and we expect that the same technology anticipated to be used in
California can be used to meet these proposed standards. However, we
are proposing to simplify the form of the standards. The existing EPA
2006 and California ARB 2008 requirements use a functional relationship
to set the emission standard for each engine family depending on the
power rating--the numerical value of the standard increases with
decreasing power ratings, especially for the smallest engines. However,
as described in Chapter 4 of the Draft RIA, certification data show
that brake-specific emission rates (in g/kW-hr) are relatively constant
for engines with maximum engine power above 40 kW. We are therefore
proposing a single standard for engines with maximum engine power above
40 kW. For smaller engines, the relationship between brake-specific
emissions and maximum engine power is pronounced. We are proposing a
simple linear function for the standards for these engines, as shown in
Table IV-1. While this approach differs slightly from the California
ARB standards, we believe it provides a good match for establishing a
comparable level of stringency while simplifying the form of the
regulatory standard.
    The proposed implementation date gives an additional year beyond
the implementation date of the California standards of similar
stringency. Manufacturers generally sell their lower-emission engines,
which are already meeting the 2008 California standards, nationwide.
However, the additional year would give manufacturers time to address
any models that may not meet the upcoming California standards or are
not generally sold in California. We request comment on additional
regulatory flexibility that manufacturers may need to transition to the
proposed standards. For instance, a modest phase-in of the standards
may be useful to manufacturers to complete an orderly turnover of high-
emitting engines. This phase-in could take the form of giving an extra
year for compliance with the proposed standards for a small percentage
of engines (e.g., 10 percent of projected sales) or phasing-in the
level of the standard (e.g., 20-25 g/kW-hr HC+NOX). Any
comments on proposed transitional flexibility should give details that
fully describe the recommended program.
    The proposed standards include the same general provisions that
apply today. For example, engines must control crankcase emissions. The
regulations also require compliance over the full range of adjustable
parameters and prohibit the use of defeat devices. (See Sec.
1045.115.)
(2) Not-to-Exceed Standards
    Section III.D.2 describes NTE standards for sterndrive and inboard
engines. We are proposing to apply the same NTE testing provisions to
OB/PWC engines, including the same NTE zone and subzones and ambient
conditions (see Sec.  1045.515). However, data presented in Chapter 4
of the Draft RIA suggest that different emission limits would be
appropriate for OB/PWC engines. For instance, we are proposing higher
limits at full power for SD/I engines equipped with catalysts because
the engines must operate rich at this mode to protect catalysts and
exhaust valves. Because we are not anticipating the use of catalysts on
OB/PWC to meet the exhaust emission standards, we believe it is not
necessary to adopt such high limits for OB/PWC engines.
    The Draft RIA describes the available emission data that allow us
to specify appropriate modal caps for OB/PWC engines based on four-
stroke engine technology. The available data for direct-injection two-
stroke engines showed two different distinct patterns in modal emission
rates. We are therefore proposing two alternative sets of NTE limits--
manufacturers could use either set of NTE limits for their OB/PWC
engines. To offset the relaxed

limits for certain subzones, we are proposing more stringent limits for
other subzones for these alternative approaches. Table IV-2 presents
the proposed sets of NTE limits for the subzones described in Section
III.D.2. We request comment on the proposed NTE limits for OB/PWC
engines.

                          Table IV-2--Proposed NTE Limits by Subzone for OB/PWC Engines
----------------------------------------------------------------------------------------------------------------
           Approach                 Pollutant        Subzone 4       Subzone 3       Subzone 2       Subzone 1
----------------------------------------------------------------------------------------------------------------
Primary.......................  HC+NOX..........             1.6             1.2             1.2             1.2
                                CO..............             1.5             1.5             1.5             1.5
Alternative 1.................  HC+NOX..........             2.0             0.8             0.8             2.0
                                CO..............             1.0             1.0             1.5             3.0
Alternative 2.................  HC+NOX..........             3.0             1.0             1.0             1.0
                                CO..............             2.0             1.0             1.0             1.5
----------------------------------------------------------------------------------------------------------------

    Marine engine manufacturers indicated that they are concerned that
the differences in engine designs, especially for direct-injection two-
stroke engines, may result in emission variation that would make it
difficult to meet a fixed set of NTE limits for all engines. To address
this variability, they have suggested two alternative approaches to
setting NTE limits for marine engines. The first approach would be to
base the NTE limits on the modal test results from the certification
test rather than fixed values that would apply to all engines. NTE
limits would then be linearly interpolated between the modes as a
function of speed and load. For example, if the modal results were 2.0
g/kW-hr at Mode 3 and 4.0 g/kW-hr at Mode 4, the interpolated value
half way between these modal test points would be 3 g/kW-hr. A
multiplier would then be applied to this interpolated value to create
the NTE limit. This multiplier would be intended to account for testing
and production variability. The multiplier would not likely need to be
as large as the proposed general multipliers for the subzones presented
above because it would be applied to a surface generated from each
manufacturer's actual modal data. Because the NTE cap would be
calculated from the individual test modes in the steady-state test, it
may be necessary for the manufacturers to assign family emission limits
for each of the test modes in the proposed NTE zone.
    The second conceptual approach would be to use a weighted average
approach to the NTE limit rather than to have individual NTE limits for
each subzone. Under this approach, an emission measurement would be
made in each of the subzones plus idle. These measurements could be
made at any operation point within each subzone. The measured emissions
would then be combined using the weighting factors for the modal test.
This weighted average emission level would be required to be below the
standard (or family emission limit) times a multiplier (under this
approach, only a single multiplier would be needed). The purpose of the
multiplier would be to allow for some variability within each subzone.
Because the weighted average emissions from the subzones would have the
tendency of approaching the steady-state test value, this multiplier
would not be expected to be much higher than 1.0. However, one drawback
to this approach is that there is no specific cap for each mode and a
weighted average approach may not be as effective in capping modal
emissions as would be specific limits for each subzone. More detail on
this concept is available in the docket.\78\
---------------------------------------------------------------------------

    \78\ ``Marine NTE Zones,'' Presentation to EPA by BRP on October
26, 2006, Docket EPA-HQ-OAR-2004-0008-0508.
---------------------------------------------------------------------------

    We request comment on the two alternative NTE limit approaches
described above. Specifically, commenters should provide detail on what
advantages (and disadvantages) these alternatives may provide and what
effect they may have on in-use emissions and the potential for
improving the manufacturer in-use testing program. In addition,
commenters should describe what emission limits or multipliers would be
appropriate for the alternative approaches and provide test data
supporting these conclusions.
(3) Emission Credit Programs
    Engine manufacturers may use emission credits to meet OB/PWC
standards under part 91. See Section VII.C.5 for a description of
general provisions related to averaging, banking, and trading programs.
    We propose to adopt an ABT program for the new HC+NOX
emission standards that is similar to the existing program (see part
1045, subpart H). Credits may be used interchangeably between outboard
and personal watercraft engine families. Credits earned under the
current program may also be used to comply with the new OB/PWC
standards as described below.
    We are proposing an unlimited life for emission credits earned
under the proposed new standards for OB/PWC engines. We consider these
emission credits to be part of the overall program for complying with
proposed standards. Given that we may consider further reductions
beyond the proposed standards in the future, we believe it will be