standards, and cannot be used in Tier 2 or other programs.
e. Deficits Can Be Carried Forward
    When a manufacturer has an NMHC deficit at the end of a model
year--that is, its corporate average NMHC level is above the required
corporate average NMHC standard--the manufacturer will be allowed to
carry that deficit forward into the next model year. To prevent
deficits from being carried forward indefinitely, we are finalizing, as
proposed, that manufacturers will not be permitted to run a deficit for
two years in a row. A deficit carry-forward may only occur after the
manufacturer used any banked credits. If the deficit still exists and
the manufacturer chooses not to, or is unable to, purchase credits, the
deficit will be carried over. At the end of that next model year, the
deficit must be covered with an appropriate number of credits that the
manufacturer generated or purchased. Any remaining deficit means that
the manufacturer is not in compliance and can be subject to an
enforcement action.
    We believe that it is reasonable to provide this flexibility to
carry a deficit for one year given the uncertainties that manufacturers
face with changing market forces and consumer preferences, especially
during the introduction of new technologies. These uncertainties can
make it hard for manufacturers to accurately predict sales trends of
different vehicle models.
f. Voluntary Heavy-Duty Vehicle Credit Program
    In addition to MDPV requirements in Tier 2, we also currently have
chassis-based emissions standards for other complete heavy-duty
vehicles (e.g., large pick-ups and cargo vans) above 8,500 pound GVWR.
However, these standards do not include cold temperature CO standards.
As noted below in section V.B.6.a, we did not propose to apply cold
temperature NMHC standards to heavy-duty gasoline vehicles due to a
current lack of emissions data on which to base such standards.
Accordingly, the final rule does not contain any provisions for heavy-
duty vehicle standards or credit program.
    Our proposal discussed a few ideas for voluntary approaches where
manufacturers could earn credits by including heavy-duty gasoline
vehicles in the program. We only received one comment regarding a
voluntary credit program for heavy-duty gasoline vehicles. The
organization that submitted the comment opposed the creation of NMHC
credits applicable to other vehicle categories generated by reductions
from heavy-duty vehicles. In light of this lack of support, as well as
insufficient data, we are not including a heavy-duty standard or credit
program at this time. We plan to revisit the need for and feasibility
of standards as data become available.
7. Additional Vehicle Cold Temperature Standard Provisions
a. Applicability
    As proposed, the new cold temperature NMHC standards apply to all
gasoline-fueled light-duty vehicles and MDPVs sold nationwide. The cold
NMHC standards do not apply to diesel vehicles, alternative-fueled
vehicles, or to the non-gasoline portion of flex fuel vehicles
(FFVs).\150\ We are finalizing as proposed that FFVs will still require
certification to the applicable cold NMHC standard, though only when
operated on gasoline. FFVs operating on ethanol are not subject to the
cold standard. When manufacturers submit their application for
certification for FFVs (such as FFVs that can run on gasoline or E85
\151\), the FFVs must have been tested using gasoline. The application
must also include a statement that either confirms the same control
strategies used with gasoline will be used when operating on ethanol,
or that identifies any differences as an Auxiliary Emission Control
Device (AECD). Again, dedicated alternative-fueled vehicles are not
covered.
---------------------------------------------------------------------------

    \150\ In this preamble, we use the term flex fuel vehicle (FFV)
to mean a vehicle capable of operating on two or more different fuel
types, either separately or simultaneously. Most FFVs available
today run on gasoline and ethanol mixtures. EPA regulations use the
term ``multi-fuel vehicle'' when referring to these vehicles.
    \151\ E85 is a fuel mixture consisting of 85% ethanol and 15%
gasoline.
---------------------------------------------------------------------------

    We requested comment on standards for vehicles operating on fuels
other than gasoline. Vehicle manufacturers agreed that the cold NMHC
standards should not apply to diesels and alternative fuel vehicles,
stating that the standard would capture all but a very small percentage
of air toxics emissions from the light-duty onroad fleet. We also
received comments in support of a standard for diesel vehicles. One
organization argued that the EPA must exercise its authority to gather
the necessary data and establish a cold temperature NMHC standard for
diesel, alternative fuel, and FFVs, or explain why such standards are
not needed.
    A comprehensive assessment of appropriate standards for diesel
vehicles will require a significant amount of investigation and
analysis of issues such as feasibility and costs. While we have
significant amounts of data on which to base our final standards for
light-duty gasoline vehicles, we have very little data for light-duty
diesels. Currently, diesel vehicles are not subject to the cold CO
standard, so, unlike the situation for gasoline motor vehicles where
some certification data under cold temperature conditions are
available, there is very limited data available on diesel cold
temperature emissions. Also, many manufacturers are currently in the
process of developing their diesel product offerings and the cold
temperature performance of these vehicles cannot yet be evaluated.
    Therefore, at this time, the cold NMHC standards will not apply to
light-duty diesel vehicles. We will continue to evaluate data for these
vehicles as they enter the fleet and will reconsider the need for
standards. We have adopted cold temperature FTP testing for diesels as
part of the Fuel Economy Labeling rulemaking, including NMHC
measurement.\152\ These testing data would allow us to assess diesel
NMHC certification levels over time. There are sound engineering
reasons, however, to expect cold NMHC emissions for diesel vehicles to
be as low as or even lower than those required for gasoline vehicles in
the finalized standards. This is because diesel engines operate with
leaner air-fuel mixtures compared to gasoline engines. Therefore
diesels have fewer engine-out NMHC emissions due to the abundance of
oxygen and more complete combustion. A very limited amount of
confidential manufacturer-furnished information is consistent with this
engineering hypothesis.
---------------------------------------------------------------------------

    \152\ ``Fuel Economy Labeling of Motor Vehicles; Revisions to
Improve Calculations of Fuel Economy Estimates,'' Final Rule, 71 FR
77872, December 27, 2006.
---------------------------------------------------------------------------

    With respect to FFVs, although FFVs are currently required to
certify to the cold CO standards at 20 [deg]F while operating on
gasoline, there is no cold testing requirement for these vehicles while
operating on the alternative fuel at 20 [deg]F. There are little data
upon which to evaluate NMHC emissions when operating on alternative
fuels at cold temperatures. For FFVs operating on E85,\153\ it is
difficult to develop a reasonable standard due to a lack of fuel
specifications, testing protocols, and test data for the 20 [deg]F cold
CO cycle. Standards reflecting use of other fuels such as methanol and
natural gas pose similar uncertainty. As in the case of diesels, it
will take time to gain an

understanding of these other technologies in sufficient detail to
support a rulemaking. Therefore, as proposed, we are not adopting a
cold NMHC testing requirement for FFVs while operating on the non-
gasoline fuel or for alternative fuel vehicles under this final
rulemaking. However, for FFVs, we are requiring confirmation that
emission controls used when operating on gasoline are also used when
operating on the non-gasoline fuel unless a reasonable exception why
they cannot be used is declared. We will continue to investigate these
other technologies.
---------------------------------------------------------------------------

    \153\ E85 is a fuel mixture consisting of 85% ethanol and 15%
gasoline typical of a summer blend of an ethanol based alternative
fuel.
---------------------------------------------------------------------------

    Between the proposed rule and today's final rule, we conducted an
initial emissions testing program on a limited number of FFVs operated
on several blends of gasoline and ethanol at normal test temperatures
and 20 [deg]F. \154\ These vehicles were tested on summer gasoline and
E85 under normal test temperatures and on winter gasoline and E70 \155\
at 20 [deg]F. At 20 [deg]F, HC emissions were significantly higher with
E70 fuel than with gasoline, with the HC emissions largely consisting
of unburned ethanol generated during the cold start. The reason for the
elevated HC emission levels is that during cold starts, ethanol, which
is an MSAT, does not readily burn in the combustion chamber due to its
higher boiling point (approximately 180 [deg]F). FFVs must start on the
gasoline portion of the alternative fuel, which can compose as little
as 15% of the alternative fuel. Ethanol emissions are further increased
at colder temperatures because the lower engine start temperature will
require an increasing amount of the fuel mixture to start the vehicle
and subsequently more unburned ethanol can escape the combustion
process. However, the testing also indicates significantly lower
benzene emission levels for FFVs when operating on the high ethanol
blends. Benzene was 30% to 90% lower on E85 and approximately 30% lower
on E70 compared to the levels when run on gasoline. Acetaldehyde
emissions are significantly higher with E85 relative to emissions from
gasoline-fueled vehicles, since it is a byproduct of partial (i.e.,
incomplete) ethanol combustion. In addition, some other VOC-based
toxics emissions were generally lower with the vehicles running on E85
and E70 compared with gasoline.
---------------------------------------------------------------------------

    \154\ ``Flex Fuel Vehicles (FFVs) VOC/PM Cold Temperature
Characterization When Operating on Ethanol (E10, E70, E85)''
February, 2007.
    \155\ E70 is a fuel mixture consisting of 70% ethanol and 30%
gasoline typical of a winter blend of an ethanol based alternative
fuel.
---------------------------------------------------------------------------

    There are many issues that must be resolved before we are able to
establish a cold temperature standard for FFVs when run on E85 (and E70
at cold temperatures). These include feasibility (i.e., levels that are
technically achievable), cost, test procedures, test fuel
specifications and the appropriate form of the standard. For example,
because much of the VOC emissions from FFVs operating on the high
ethanol blends at cold temperatures is unburned ethanol, we may need to
consider whether higher NMHC level would be justified or whether an
NMHC minus ethanol standard would have merit. We plan to address these
issues as part of a broader assessment of E85 emissions regulatory
issues in the future.
    One organization commented that EPA must establish cold temperature
standards for heavy-duty vehicles. Since there is no 20 [deg]F cold
standard for heavy-duty vehicles, we have no data for heavy-duty
gasoline-fueled vehicles, but we would expect a range of emissions
performance similar to that of lighter gasoline-fueled trucks. Due to
the lack of test data on which to base feasibility and cost analyses,
we did not propose cold temperature NMHC standards for these vehicles.
As mentioned previously, we plan to revisit this issue when sufficient
data become available.
b. Useful Life
    We are adopting the proposed requirement that the new cold
temperature standards must be met over the full useful life of the
vehicle, consistent with other emissions standards for Tier 2 vehicles.
The ``useful life'' of a vehicle means the period of use or time during
which an emission standard applies to light-duty vehicles and light-
duty trucks.\156\ Given that we expect that manufacturers will make
calibration or software changes to existing Tier 2 technologies, it is
reasonable for the new cold temperature standards to have the same
useful life as the Tier 2 standards. For LDV/LLDT, the full useful life
values will be 120,000 miles or 10 years, whichever comes first, and
for HLDT/MDPV, full useful life is 120,000 miles or 11 years, whichever
comes first.\157\ We did not receive any comments regarding these
useful life provisions.
c. High Altitude
---------------------------------------------------------------------------

    \156\ 40 CFR 86.1803-01.
    \157\ 40 CFR 86.1805-04.
---------------------------------------------------------------------------

    We do not expect emissions to be significantly different at high
altitude due to the use of common emissions control calibrations.
Limited data submitted by a manufacturer suggest that FTP emissions
performance at high altitude generally follows sea level performance.
Furthermore, there are very limited cold temperature testing facilities
at high altitudes. Therefore, under normal circumstances, manufacturers
will not be required to submit vehicle test data for high altitude.
Instead, manufacturers will be required to submit an engineering
evaluation indicating that common calibration approaches will be
utilized at high altitude. Any deviation from sea level in emissions
control practices must be included in the auxiliary emission control
device (AECD) descriptions submitted by manufacturers at certification.
In addition, any AECD specific to high altitude must include
engineering emission data for EPA evaluation to quantify any emission
impact and validity of the AECD. We did not receive any comments
regarding these provisions relating to altitude.
d. In-Use Standards for Vehicles Produced During Phase-In
    As proposed, we are finalizing provisions for an in-use standard
that is 0.1 g/mile higher than the certification FEL for any given test
group for a limited number of model years. For example, a test group
with a 0.2 g/mile FEL would have an in-use standard of 0.3 g/mile. This
would not change the FEL or averaging approaches and would only apply
in cases where EPA tests vehicles in-use to ensure emissions
compliance. Tables V.B-3 and V.B-4 provide the finalized schedule for
the availability of the in-use standards.

                           Table V.B-3.--Schedule for In-Use Standards for LDVs/LLDTs
----------------------------------------------------------------------------------------------------------------
                Model year of introduction                    2008     2009     2010     2011     2012     2013
----------------------------------------------------------------------------------------------------------------
Models years that the in-use standard is available for         2008     2009     2010     2011     2012     2013
 carry-over test groups...................................     2009     2010     2011     2012     2013     2014
                                                               2010     2011     2012     2013     2014
                                                               2011     2012     2013
----------------------------------------------------------------------------------------------------------------

                           Table V.B-4.--Schedule for In-Use Standards for HLDVs/MDPVs
----------------------------------------------------------------------------------------------------------------
                Model year of introduction                    2010     2011     2012     2013     2014     2015
----------------------------------------------------------------------------------------------------------------
Models years that the in-use standard is available for         2010     2011     2012     2013     2014     2015
 carry-over test groups...................................     2011     2012     2013     2014     2015     2016
                                                               2012     2013     2014     2015     2016
                                                               2013     2014     2015
----------------------------------------------------------------------------------------------------------------

    This approach is similar to the one adopted in the Tier 2
rulemaking.\158\ As we have indicated, the standards we are finalizing
will be more challenging for some vehicles than for others. With any
new technology, or even with new calibrations of existing technology,
there are risks of in-use compliance problems that may not appear in
the certification process. In-use compliance concerns may discourage
manufacturers from applying new calibrations or technologies. Thus, we
believe it is appropriate, for the first few years, for those vehicles
most likely to require the greatest applications of effort to provide
assurance to the manufacturers that they will not face recall if they
exceed standards in use by a specified amount.
---------------------------------------------------------------------------

    \158\ ``Control of Air Pollution from New Motor Vehicles: Tier 2
Motor Vehicle Emissions Standards and Gasoline Sulfur Control
Requirements,'' Final Rule, 65 FR 6796, February 10, 2000.
---------------------------------------------------------------------------

    The in-use standards will be available for the first few model
years of sales after a test group meeting the new standards is
introduced, according to a schedule that provides more years for test
groups introduced earlier in the phase-in. This schedule provides
manufacturers with time to determine the in-use performance of vehicles
and learn from the earliest years of the program to help ensure that
vehicles introduced after the phase-in period meet the final standards
in-use. The in-use compliance margin only applies to carry-over models.
That is, once a test group is certified to the new standards, it will
be carried over to future model years.
    We received one comment on the provisions for an interim in-use
standard. A manufacturer commented that the EPA should consider
allowing an interim in-use increment greater than 0.1 g/mi to account
for known variability in in-use conditions and vehicle technologies.
However, we did not receive any data that supported the manufacturer's
assertion, nor any indication of an acceptable increase beyond the 0.1
g/mi increment. Furthermore, no other manufacturers commented on this
provision. We believe the 0.1 g/mi increment is sufficient and that
anything greater may result in a reduction of emission control.
Therefore, the interim in-use standard is finalized as proposed.
8. Monitoring and Enforcement
    As proposed, manufacturers must either report that they met the
relevant corporate average standard in their annual reports to the
Agency, or show via the use of credits that they have offset any
exceedance of the corporate average standard. Manufacturers must also
report their credit balances or deficits. EPA will monitor the program.
    As in Tier 2, the averaging, banking and trading program will be
enforced through the certificate of conformity that manufacturers must
obtain in order to introduce any regulated vehicles into commerce.\159\
The certificate for each test group will require all vehicles to meet
the emissions level to which the vehicles were certified, and will be
conditioned upon the manufacturer meeting the corporate average
standard within the required time frame. If a manufacturer fails to
meet this condition, the vehicles causing the corporate average
exceedance will be considered to be not covered by the certificate of
conformity for that engine family. A manufacturer will be subject to
penalties on an individual vehicle basis for sale of vehicles not
covered by a certificate.
---------------------------------------------------------------------------

    \159\ ``Control of Air Pollution from New Motor Vehicles: Tier 2
Motor Vehicle Emissions Standards and Gasoline Sulfur Control
Requirements,'' Final Rule, 65 FR 6797, February 10, 2000.
---------------------------------------------------------------------------

    EPA will review the manufacturer's sales to designate the vehicles
that caused the exceedance of the corporate average standard. We will
designate as nonconforming those vehicles in those test groups with the
highest certification emission values first, continuing until we reach
a number of vehicles equal to the calculated number of noncomplying
vehicles, as determined above. In a test group where only a portion of
vehicles are deemed nonconforming, we will determine the actual
nonconforming vehicles by counting backwards from the last vehicle
produced in that test group number. Manufacturers will be liable for
penalties for each vehicle sold that is not covered by a certificate.
    As proposed, we will condition certificates to enforce the
requirements that manufacturers not sell credits that they have not
generated. A manufacturer that transfers credits it does not have will
create an equivalent negative credit balance or deficit that the
manufacturer must make up by the reporting deadline for the same model
year. A credit deficit in such cases at the reporting deadline will be
a violation of the conditions under which EPA issued the certificate of
conformity. EPA will identify the nonconforming vehicles in the same
manner described above and nonconforming vehicles will not be covered
by the certificate.
    In the case of a trade that resulted in a negative credit balance
that a manufacturer could not cover by the reporting deadline for the
model year in which the trade occurred, both the buyer and the seller
will be liable, except in cases involving fraud. We believe that
holding both parties liable will induce the buyer to exercise diligence
in assuring that the seller has or will be able to generate appropriate
credits and will help to ensure that inappropriate trades do not occur.
    We did not propose any new compliance monitoring activities or
programs for vehicles. These vehicles will be subject to the
certification testing provisions of the CAP2000

rule.\160\ We are not requiring manufacturer in-use testing to verify
compliance. There is no cold CO manufacturer in-use testing requirement
today (similarly, we do not require manufacturer in-use testing for
SCO3 standards under the Supplemental Federal Test Procedures (SFTP)
program largely due to the limited availability of the test
facilities). As noted earlier, manufacturers have limited cold
temperature testing capabilities and we believe these facilities will
be needed for product development and certification testing. However,
we have the authority to conduct our own in-use testing program for
exhaust emissions to ensure that vehicles meet standards over their
full useful life. We will pursue remedial actions when substantial
numbers of properly maintained and used vehicles fail any standard in-
use. We also retain the right to conduct Selective Enforcement Auditing
of new vehicles at manufacturers' facilities.
---------------------------------------------------------------------------

    \160\ 71 FR 2810, January 17, 2006.
---------------------------------------------------------------------------

    The use of credits will not be permitted to address Selective
Enforcement Auditing or in-use testing failures. The enforcement of the
averaging standard will occur through the vehicle's certificate of
conformity. A manufacturer's certificate of conformity will be
conditioned upon compliance with the averaging provisions. If a
manufacturer failed to meet the corporate average standard and did not
obtain appropriate credits to cover its shortfalls in that model year
or in the subsequent model year (see deficit carry forward provision in
section V.B.5.e.), then the certificate for the affected test groups
will be void for all past, present, and future sales related to that
certificate. Manufacturers will need to track their certification
levels and sales unless they produced only vehicles certified to NMHC
levels below the standard and did not plan to bank credits. We did not
receive any comments on the provisions regarding Selective Enforcement
Auditing or conditions of certification.

C. What Evaporative Emissions Standards Are We Finalizing?

    We are finalizing as proposed a set of numerically more stringent
evaporative emission standards for all light-duty vehicles, light-duty
trucks, and medium-duty passenger vehicles. The standards we are
finalizing are equivalent to California's LEV II standards, and these
standards are shown in Table V.C-1. The new standards represent about a
20 to 50 percent reduction (depending on vehicle weight class and type
of test) in the diurnal plus hot soak standards currently in place for
Tier 2 vehicles.\161\ As with the current Tier 2 evaporative emission
standards, the standards we are finalizing vary by vehicle weight
class. The increasingly higher standards for heavier weight class
vehicles account for larger vehicle sizes and fuel tanks (non-fuel and
fuel emissions).\162\
---------------------------------------------------------------------------

    \161\ Diurnal emissions (or diurnal breathing losses) means
evaporative emissions as a result of daily temperature cycles or
fluctuations for successive days of parking in hot weather. Hot soak
emissions (or hot soak losses) are the evaporative emissions from a
parked vehicle immediately after turning off the hot engine. For the
evaporative emissions test procedure, diurnal and hot soak emissions
are measured in an enclosure commonly called the SHED (Sealed
Housing for Evaporative Determination).
    \162\ Larger vehicles may have greater non-fuel evaporative
emissions, probably due to an increased amount of interior trim,
vehicle body surface area, and larger tires.

           Table V.C-1.--Final Evaporative Emission Standards
                    [Grams of hydrocarbons per test]
------------------------------------------------------------------------
                                                        Supplemental  2-
            Vehicle class               3-Day diurnal      day diurnal
                                        plus hot soak     plus hot soak
------------------------------------------------------------------------
LDVs................................              0.50              0.65
LLDTs...............................              0.65              0.85
HLDTs...............................              0.90              1.15
MDPVs...............................              1.00              1.25
------------------------------------------------------------------------

1. Current Controls and Feasibility of the New Standards
    As described earlier, we are reducing the numerical level of the
evaporative emission standards applicable to diurnal and hot soak
emissions from light-duty vehicles and trucks by about 20 to 50
percent. These new standards are meant to be effectively the same as
the evaporative emission standards in the California LEV II program.
Although the new standards are numerically more stringent, as we
explained at proposal, we believe they are essentially equivalent to
the current Tier 2 standards because of differences in testing
requirements (see 71 FR 15854; also see section V.C.5 below for further
discussion of such test differences, e.g., test temperatures and fuel
volatilies). As discussed in the proposal, this view is supported by
manufacturers and by current industry practices. Based on this
understanding, we do not project additional VOC or air toxics
reductions from the evaporative standards we are finalizing today.\163\
Also, we do not expect additional costs since we expect that
manufacturers will continue to produce 50-state evaporative systems.
Therefore, harmonizing the federal and California LEV-II evaporative
emission standards will codify (i.e., lock in) the approach
manufacturers have already indicated they are taking for 50-state
evaporative systems.
---------------------------------------------------------------------------

    \163\ U.S. EPA, Office of Air and Radiation, Update to the
Accounting for the Tier 2 and Heavy-Duty 2005/2007 Requirements in
MOBILE6, EPA420-R-03-012, September 2003.
---------------------------------------------------------------------------

    We believe this action is an important step to ensure that the
federal standards reflect the lowest possible evaporative emissions,
and it also will provide states with certainty that the emissions
reductions we project to occur due to 50-state compliance strategies
will in fact occur. In addition, the new standards will assure that
manufacturers continue to use available fuel system materials to
minimize evaporative emissions.
    In the proposal, we considered but did not propose more stringent
evaporative requirements contained in the partial zero-emission vehicle
(PZEV) portion of California's LEV II program. The LEV II program
includes PZEV credits for vehicles that achieve near zero emissions
(e.g., LDV evaporative emission standards for both the 2-day and 3-day
diurnal plus hot soak tests are 0.35 grams/test, which are more
stringent than the standards finalized today). State and local air
quality organizations commented that EPA should adopt the PZEV
evaporative standards. In addition, they indicated that California Air
Resources Board estimates the additional per vehicle cost

for a PZEV evaporative emission system to be about $10.20. They
commented that EPA should consider the introduction of a similar
standard for some vehicles. Moreover, they urged us to commit in the
final rule to pursue actions to achieve further evaporative emission
reductions in the future.
    However, auto manufacturers supported the proposed evaporative
emission standards. They indicated that, as EPA tentatively concluded
in the proposed rule, it would be inappropriate for EPA to propose more
stringent standards. Manufacturers noted that PZEVs have been limited
to a small fraction of the light-duty fleet, mainly small 4-cylinder
passenger cars, and that the PZEV standard has not proven feasible
across the light-duty fleet. Furthermore, it is significantly more
costly to comply with the PZEV evaporative emission standard because of
significant modifications needed to the evaporative emission control
system and fuel system. Also, the auto manufacturers suggested that
emission benefits, if any, of the PZEV standard would be minimal.
    We have decided not to set more stringent PZEV-equivalent
evaporative standards at this time. The limited PZEV vehicles available
today require additional evaporative emissions technology or hardware
(e.g., modifications to fuel tank and secondary canister) beyond what
will be needed for vehicles meeting the new standards that we are
adopting today. As we described in the proposed rule, at this time, we
need to better understand the evaporative system modifications (i.e.,
technology, costs, lead time, etc.) potentially needed across the
vehicle fleet to meet PZEV-level standards before we can fully evaluate
whether it is feasible to consider more stringent standards. For
example, at this point we cannot determine whether the PZEV
technologies could be used fleetwide or on only a limited set of
vehicles. Thus, in the near term, we lack any of the information
necessary to determine if further reductions are feasible, and if they
could be achievable considering cost, energy and safety issues.
Moreover, sufficient new information or data was not provided from
commenters on the proposed rule to close these gaps in our
understanding. However, we intend to consider more stringent
evaporative emission standards in the future.
2. Evaporative Standards Timing
    As proposed, we will implement today's evaporative emission
standards in model year 2009 for LDVs/LLDTs and model year 2010 for
HLDTs/MDPVs. Many manufacturers already have begun or completed model
year 2008 certification. Thus, model year 2009 is the earliest
practical start date of new standards for LDVs/LLDTs. For HLDTs/MDPVs,
the phase-in of the existing Tier 2 evaporative emission standards ends
in model year 2009. Thus, the model year 2010 is the earliest start
date possible for HLDTs/MDPVs. As discussed earlier, since we believe
that manufacturers already meet these standards, there is no need for
additional lead time beyond the implementation dates we are finalizing.
3. Timing for Flex Fuel Vehicles
    For FFVs, the phase-in schedule we are finalizing for the new
evaporative standards is somewhat different than the phase-in schedule
we proposed for these vehicles. In the proposal, we recognized that
manufacturers will need a few additional years of lead time to adjust
their evaporative systems to comply with the new evaporative emission
standards for FFVs operating on the non-gasoline fuel, typically E85
(see 71 FR 15855). The existing regulations require that FFVs or E85
vehicles (vehicles designed to operate on fuel that is 85 percent
ethanol and 15 percent gasoline) certify on both gasoline and E10 (E10
is a fuel containing 10 percent ethanol and 90 percent gasoline) for
the evaporative emissions test procedure. E10 is considered the ``worst
case'' test fuel for evaporative emissions, because it is the ethanol
blend that results in greater evaporative emissions. Thus, E10 is the
evaporative certification test fuel for E85 vehicles. Thus far, only a
few FFV systems have been certified to California LEV-II standards on
E10 fuel. Vehicles not certified with E10 in California are sold as
gasoline-fueled only vehicles rather than FFVs. Some manufacturers are
still developing FFVs for future introduction and the evaporative
control systems in some cases have not been fully field tested and
certified on the E10 fuel. Therefore, certifying FFVs to the new
standards on the E10 fuel (which is required by Tier 2) represents a
new requirement for manufacturers.
    We proposed that FFVs would need to meet the new evaporative
emission certification standards on the non-gasoline fuel beginning in
the fourth year of the program--2012 for LDVs/LLDTs and 2013 for HLDTs/
MDPVs. We proposed that the evaporative emission standards would be
implemented in 2009 for LDVs/LLDTs and 2010 for HLDTs/MDPVs for the
FFVs when run on gasoline (along with gasoline vehicles that are not
flex fuel). At the time of proposal, we believed this additional three
years of lead time would provide sufficient time for manufacturers to
make adjustments to their new evaporative systems for FFVs, which are
limited product lines.
    Auto manufacturers commented that additional lead time and
flexibility beyond that proposed is needed for the non-gasoline portion
of FFVs. Manufacturers requested the following revisions to the
proposed timing of the new evaporative emission standards for the non-
gasoline portion of FFVs:

--combine the LDV/LLDT and HLDT/MDPV fleets,
--implement the phase-in of this combined fleet starting in 2013, and
--permit a three-year phase-in of 30 percent/60 percent/100 percent for
this combined fleet.

    The auto industry indicated that for many manufacturers of FFVs,
the new standards are considered new emission requirements for their
FFVs. This is unlike the situation for gasoline vehicles, where EPA
intends to codify what is already being done in practice rather than
imposing any new requirements on gasoline vehicles. For most
manufacturers of FFVs, there is no demonstrated capability at this time
to meet the new evaporative emission standards from which to begin
planning compliance to the new standards. Also, manufacturers expressed
that there are important enough differences between fuels in the
gasoline and FFVs (or the non-gasoline portion of FFVs) that
independent evaluations of FFVs on gasoline and the non-gasoline fuel
are warranted.
    In addition, auto manufacturers stated that as interest in
alternative fuels has increased due to energy supply concerns, they are
suddenly considering widespread introduction of FFV models, across
entire product lines. What was at first a limited offering of a few
models may become more offerings across a manufacturer's full line of
products in the timeframe of this rulemaking. The auto industry argues
that these new developments justify lead time provisions commensurate
with those when a new emission requirement applies across a
manufacturer's light-duty product line.
    They also indicated that model renewals provide the most cost-
effective timing for the introduction of new emissions capability to
meet the new standards. At this time, some manufacturers plan model
renewals for multiple vehicle lines from model years 2013 to 2015.
Allowing a three-year phase-in for the non-gasoline portion of FFVs
provides more opportunities for scheduled model renewals to coincide

with implementation dates for the new standards. Planning, engineering,
and development activities needed to meet these new standards can be
incorporated into the model redesign activities.
    We believe that many of the concerns presented by manufacturers
supporting additional lead time are valid. Most manufacturers have less
experience meeting the new standards on the non-gasoline portion of
FFVs compared to gasoline vehicles. The new standards will apply
beginning in model year 2012 with a three-year phase-in, 30/60/100
percent, for LDVs/LLDTs and HLDTs/MDPVs grouped together (see Table
V.C-2). Although auto manufacturers requested a start date of 2013 for
a combined fleet, we believe the additional flexibilities we are
providing (three-year phase-in and grouping LDVs/LLDTs and HLDTs/MDPVs
together) is sufficient flexibility for the production of FFVs. There
is enough time between now and the implementation dates or phase-in
schedule (2012 through 2014) for manufacturers to coordinate model
renewals with the introduction of broader product offerings of FFVs.
See the Summary and Analysis of Comments of this rulemaking for further
discussion of comments and our responses to comments.

        Table V.C-2.--Phase-in Schedule for Non-Gasoline Portion of FFVs: Evaporative Emission Standards*
----------------------------------------------------------------------------------------------------------------
                     Vehicle GVWR (Category)                           2012            2013            2014
----------------------------------------------------------------------------------------------------------------
<=6000 lbs (LDVs/LLDTs) and > 6000 lbs (HLDTs and MDPVs)........             30%             60%           100%
----------------------------------------------------------------------------------------------------------------
*Phase-in schedules are grouped together for LDVs/LLDTs and HLDTs/MDPVs.

    Provisions for in-use evaporative emission standards similar to
those described below in section V.C.4 do not apply to the non-gasoline
portion of FFVs. We believe that three to five additional years to
prepare vehicles (or evaporative families) to meet the certification
standards, and to simultaneously make vehicle adjustments from the
federal in-use experience of other vehicles (including those that are
not FFVs) is sufficient to resolve any issues for FFVs. Also, we did
not receive comments requesting additional flexibility beyond the
phase-in schedule for certification vehicles discussed earlier.
Therefore, we are finalizing our proposal not to provide additional in-
use compliance margin to FFVs. According to the phase-in schedule for a
combined fleet in Table V.C-2, the evaporative emission standards will
apply both for certification and in-use beginning in 2012 for LDVs/
LLDTs and HLDTs/MDPVs.
4. In-Use Evaporative Emission Standards
    As described earlier in this section, we are adopting evaporative
emission standards that are equivalent to California's LEV II
standards. Currently, the Tier 2 evaporative emission standards are the
same for certification and in-use vehicles. However, the California LEV
II program permits manufacturers to meet less stringent standards in-
use for a short time in order to account for potential variability in-
use during the initial years of the program when technical issues are
most likely to arise.\164\ The LEV II program specifies that in-use
evaporative emission standards of 1.75 times the certification
standards will apply for the first three model years after an
evaporative family is first certified to the LEV II standards (only for
vehicles introduced prior to model year 2007, the year after 100
percent phase-in).165 166 An interim three-year period was
considered sufficient to accommodate any technical issues that may
arise.
---------------------------------------------------------------------------

    \164\ California Air Resources Board, ``LEV II'' and ``CAP
2000'' Amendments to the California Exhaust and Evaporative Emission
Standards and Test Procedures for Passenger Cars, Light-Duty Trucks
and Medium-Duty Vehicles, and to the Evaporative Emission
Requirements for Heavy-Duty Vehicles, Final Statement of Reasons,
September 1999.
    \165\ 1.75 times the 3-day diurnal plus hot soak and 2-day
diurnal plus hot soak standards.
    \166\ For example, evaporative families first certified to LEV
II standards in the 2005 model year shall meet in-use standards of
1.75 times the evaporative certification standards for 2005, 2006,
and 2007 model year vehicles.
---------------------------------------------------------------------------

    Federal in-use conditions may raise unique issues (e.g., salt/ice
exposure) for evaporative systems certified to the new standards (which
are equivalent to the LEV II standards), and thus, we will adopt a
similar, interim in-use compliance provision for vehicles subject to
these new federal standards. As with the LEV II program, this provision
will enable manufacturers to make adjustments for unforeseen problems
that may occur in-use during the first three years of a new evaporative
family. We believe that a three-year period is enough time to resolve
these problems, because it allows manufacturers to gain real world
experience and to make adjustments to a vehicle within a typical
product cycle.
    Depending on the vehicle weight class and type of test, the Tier 2
certification standards are 1.3 to 1.9 times the LEV II certification
standards. On average the Tier 2 standards are 1.51 times the LEV II
certification standards. Thus, to maintain the same level of stringency
for the in-use evaporative emission standards provided by the Tier 2
program, we will apply the Tier 2 standards in-use for only the first
three model years after an evaporative family is first certified under
today's new standards, instead of using the LEV II 1.75 multiplier
approach described above. Since the new evaporative emission
certification standards (equivalent to LEV II standards) will be
implemented in model year 2009 for LDVs/LLDTs and model year 2010 for
HLDTs/MDPVs, these same certification standards will apply in-use
beginning in model year 2012 for LDVs/LLDTs and model year 2013 for
HLDTs/MDPVs.\167\ The schedule for in-use evaporative emissions
standards are shown in Tables V.C.-3 and V.C.-4 below.
---------------------------------------------------------------------------

    \167\ For example, evaporative families first certified to the
new LDV/LLDT evaporative emission standards in the 2011 model year
will be required to meet the Tier 2 LDV/LLDT evaporative emission
standards in-use for 2011, 2012, and 2013 model year vehicles
(applying Tier 2 standards in-use will be limited to the first three
years after introduction of a vehicle), and 2014 and later model
year vehicles of such evaporative families will be required to meet
the new LDV/LLDT evaporative emission standards in-use.

                 Table V.C-3.--Schedule for In-Use Evaporative Emission Standards for LDVs/LLDTs
----------------------------------------------------------------------------------------------------------------
                   Model year of introduction                          2009            2010            2011
----------------------------------------------------------------------------------------------------------------
Models Years That Tier 2                                                    2009            2010            2011

Standards Apply to In-use Vehicles..............................            2010            2011            2012
                                                                            2011            2012            2013
----------------------------------------------------------------------------------------------------------------

                Table V.C-4.--Schedule for In-Use Evaporative Emission Standards for HLDTs/MDPVs
----------------------------------------------------------------------------------------------------------------
                   Model year of introduction                          2010            2011            2012
----------------------------------------------------------------------------------------------------------------
Models Years That Tier 2 Standards Apply to In-use Vehicles.....            2010            2011            2012
                                                                            2011            2012            2013
                                                                            2012            2013            2014
----------------------------------------------------------------------------------------------------------------

5. Existing Differences Between California and Federal Evaporative
Emission Test Procedures
    As described above, the levels of the California LEV II evaporative
emission standards are seemingly more stringent than EPA's Tier 2
standards, but due to differences in California and EPA evaporative
test requirements, EPA and most manufacturers view the programs as
similar in stringency. The Tier 2 evaporative program requires
manufacturers to certify the durability of their evaporative emission
systems using a fuel containing the maximum allowable concentration of
alcohols (highest alcohol level allowed by EPA in the fuel on which the
vehicle is intended to operate, i.e., a ``worst case'' test fuel).
Under current requirements, this fuel would be about 10 percent ethanol
by volume.\168\ We are retaining these Tier 2 durability requirements
for the new evaporative emissions program. California does not require
this provision. To compensate for the increased vulnerability of system
components to alcohol fuel, manufacturers have indicated that they will
produce a more durable evaporative emission system than the Tier 2
numerical standards would imply, using the same low permeability hoses
and low loss connections and seals planned for California LEV II
vehicles.
---------------------------------------------------------------------------

    \168\ Manufacturers are required to develop deterioration
factors using a fuel that contains the highest legal quantity of
ethanol available in the U.S.
---------------------------------------------------------------------------

    As shown in Table V.C-3, in addition to the maximum alcohol fuel
content for durability testing, the other key differences between the
federal and California test requirements are fuel volatilities, diurnal
temperature cycles, and running loss test temperatures.\169\ The EPA
fuel volatility requirement is 2 psi greater than that of California.
The high end of EPA's diurnal temperature range is 9[deg] F lower than
that of California. Also, EPA's running loss temperature is 10[deg] F
lower than California's.
---------------------------------------------------------------------------

    \169\ Running loss emissions means evaporative emissions as a
result of sustained vehicle operation (average trip in an urban
area) on a hot day. The running loss test requirement is part of the
3-day diurnal plus hot soak test sequence.

Table V.C-3.--Differences in Tier 2 and LEV II Evaporative Emission Test
                              Requirements
------------------------------------------------------------------------
                                                      EPA     California
                 Test Requirement                    Tier 2     LEV II
------------------------------------------------------------------------
Fuel volatility (Reid Vapor Pressure in psi):.....        9            7
Diurnal temperature cycle (degrees F):............    72-96       65-105
Running loss test temperature (degrees F):........       95          105
------------------------------------------------------------------------

    Currently, California accepts evaporative emission results
generated on the federal test procedure (using federal test fuel),
because available data indicates the federal procedure to be a ``worst
case'' procedure. In addition, manufacturers can currently obtain
federal evaporative certification based upon California results
(meeting LEV II standards under California fuels and test conditions),
if they obtain advance approval from EPA.\170\
---------------------------------------------------------------------------

    \170\ Currently, EPA may require comparative data from both
federal and California tests.
---------------------------------------------------------------------------

    Auto manufacturers commented that meeting the new standards can be
achieved more effectively if they are provided greater flexibility in
the certification process. They recommended that EPA allow federal
evaporative certification to the new standards, which are equivalent to
California's LEV II standards, through California evaporative testing
results without obtaining advance approval. Since we are harmonizing
federal evaporative standards with the LEV II evaporative emission
standards in today's rule, we believe that for the new standards it is
unnecessary to continue to require this advance approval for California
results. Thus, we are finalizing provisions that would allow
certification to the new evaporative emission standards in accordance
with California test conditions and test procedures without pre-
approval from EPA.

D. Additional Exhaust Control Under Normal Conditions

    We received comments recommending that EPA harmonize exhaust
emissions standards with the California LEV II program. We also
received comments from manufacturers stating that more stringent
tailpipe standards beyond Tier 2 were not warranted and that the
difference between Tier 2 and LEV II would not be meaningful. As
discussed in the proposal (71 FR 15856), we did not propose to further
align the federal light-duty exhaust emissions control program with
that of California. We continue to believe, for reasons discussed
below, that it would not be appropriate to adopt more stringent
tailpipe standards under normal test conditions beyond those contained
in Tier 2. It is possible that a future evaluation could result in EPA
reconsidering the option of harmonizing the Tier 2 program with
California's LEV-II program or otherwise seeking emission reductions
beyond those of the Tier 2 program and those being finalized
today.\171\ A full analysis of the comments is available in the Summary
and Analysis of Comments document for this final rule.
---------------------------------------------------------------------------

    \171\ See Sierra Club v. EPA, 325 F. 3d at 480 (EPA can
reasonably determine that no further reductions in MSATs are
presently achievable due to uncertainties created by other recently
promulgated regulatory provisions applicable to the same vehicles).
---------------------------------------------------------------------------

    As explained earlier, section 202(l)(2) requires EPA to adopt
regulations that contain standards which reflect the greatest degree of
emissions reductions achievable through the application of technology
that will be available, taking into consideration existing motor

vehicle standards, the availability and costs of the technology, and
noise, energy and safety factors. The cold temperature NMHC program
finalized today is appropriate under section 202(l)(2) as a near-term
control: that is, a control that can be implemented relatively soon and
without disruption to the existing vehicle emissions control program.
We did not propose additional long-term controls (i.e., controls that
require longer lead time to implement) because we lack the information
necessary to assess their appropriateness. We believe it will be
important to address the appropriateness of further MSAT controls in
the context of compliance with other significant vehicle emissions
regulations (discussed below).
    In the late 1990's both the EPA and the California Air Resources
Board finalized new and technologically challenging light-duty vehicle/
truck emission control programs. The EPA Tier 2 program focuses on
reducing NOX emissions from the light-duty fleet. In
contrast, the California LEV-II program focuses primarily on reducing
hydrocarbons by tightening the light-duty nonmethane organic gas (NMOG)
standards.\172\ Both programs will require the use of hardware and
emission control strategies not used in the fleet under previously
existing programs. Both programs will achieve significant reductions in
emissions. Taken as a whole, the Tier 2 program presents the
manufacturers with significant engineering challenges in the coming
years. Manufacturers must bring essentially all passenger vehicles
under the same emission control program regardless of their size,
weight, and application. The Tier 2 program represents a comprehensive,
integrated package of exhaust, evaporative, and fuel quality standards
which will achieve significant reductions in NMHC, NOX, and
PM emissions from all light-duty vehicles in the program. These
reductions will include significant reductions in MSATs. Emission
control in the Tier 2 program will be based on the widespread
implementation of advanced catalyst and related control system
technology. The standards are very stringent and will require
manufacturers to make full use of nearly all available emission control
technologies.
---------------------------------------------------------------------------

    \172\ NMOG includes emissions of nonmethane hydrocarbons plus
all other nonmethane organic air pollutants (for example,
aldehydes), which are ozone precursors. For gasoline and diesel
vehicles, NMHC and NMOG emissions levels are very similar.
---------------------------------------------------------------------------

    Today, the Tier 2 program remains in its phase-in. Cars and lighter
trucks will be fully phased into the program with the 2007 model year,
and the heavier trucks won't be fully entered into the program until
the 2009 model year. Even though the lighter vehicles will be fully
phased in by 2007, we expect the characteristics of this segment of the
fleet to remain in a state of transition at least through 2009, because
manufacturers will be making adjustments to their fleets as the larger
trucks phase in. The Tier 2 program is designed to enable vehicles
certified to the LEV-II program to cross over to the federal Tier 2
program. At this point in time, however, it is difficult to predict the
degree to which this will occur. The fleetwide NMOG levels of the Tier
2 program will ultimately be affected by the manner in which LEV-II
vehicles are certified within the Tier 2 bin structure, and vice versa.
We intend to carefully assess these two programs as they evolve and
periodically evaluate the relative emission reductions and the
integration of the two programs.
    Today's final rule addresses toxics emissions from vehicles
operating at cold temperatures. The technology to achieve this is
already available and we project that compliance will not be costly.
However, we do not believe that we could reasonably propose further
controls at this time. There is enough uncertainty regarding the
interaction of the Tier 2 and LEV-II programs to make it difficult to
evaluate today what might be achievable in the future. Depending on the
assumptions one makes, the LEV-II and Tier 2 programs may or may not
achieve very similar NMOG emission levels. Therefore, the eventual Tier
2 baseline technologies and emissions upon which new standards would
necessarily be based are not known today. Additionally, we believe it
is important for manufacturers to focus in the near term on developing
and implementing robust technological responses to the Tier 2 program
without the distraction or disruption that could result from changing
the program in the midst of its phase-in. We believe that it may be
feasible in the longer term to seek additional emission reductions from
the base Tier 2 program, and the next several years will allow an
evaluation based on facts rather than assumptions. For these reasons,
we are deferring a decision on seeking additional NMOG reductions from
the base Tier 2 program.

E. Vehicle Provisions for Small Volume Manufacturers

    Before issuing a proposal for this rulemaking, we analyzed the
potential impacts of these regulations on small entities. As a part of
this analysis, we convened a Small Business Advocacy Review Panel (SBAR
Panel, or ``the Panel''). During the Panel process, we gathered
information and recommendations from Small Entity Representatives
(SERs) on how to reduce the impact of the rule on small entities, and
those comments are detailed in the Final Panel Report which is located
in the public record for this rulemaking (Docket EPA-HQ-OAR-2005-0036).
Based on these comments, we proposed lead time transition and hardship
provisions that will be applicable to small volume manufacturers as
described below in section V.E.1 and V.E.2. For further discussion of
the Panel process, see section XII.C of this rule and/or the Final
Panel Report. We received no comments on this section in response to
the proposed rulemaking.
    As discussed in more detail in section XII.C, in addition to the
major vehicle manufacturers, three distinct categories of businesses
relating to highway light-duty vehicles would be covered by the new
vehicle standards: small volume manufacturers (SVMs), independent
commercial importers (ICIs),\173\ and alternative fuel vehicle
converters.\174\ We define small volume manufacturers as those with
total U.S. sales less than 15,000 vehicles per year, and this status
allows vehicle models to be certified under a slightly simpler
certification process. For certification purposes, SVMs include ICIs
and alternative fuel vehicle converters since they sell less than
15,000 vehicles per year.
---------------------------------------------------------------------------

    \173\ ICIs are companies that hold a Certificate (or
certificates) of Conformity permitting them to import nonconforming
vehicles and to modify these vehicles to meet U.S. emission
standards.
    \174\ Alternative fuel vehicle converters are businesses that
convert gasoline or diesel vehicles to operate on alternative fuel
(e.g., compressed natural gas), and converters must seek a
certificate for all of their vehicle models.
---------------------------------------------------------------------------

    About 34 out of 50 entities that certify vehicles are SVMs, and the
Panel identified 21 of these 34 SVMs that are small businesses as
defined by the Small Business Administration criteria (5 manufacturers,
10 ICIs, and 6 converters). Since a majority of the SVMs are small
businesses and all SVMs have similar characteristics as described below
in section V.E.1, the Panel recommended that we apply the lead time
transition and hardship provisions to all SVMs. These manufacturers
represent just a fraction of one percent of the light-duty vehicle and
light-duty truck sales. Our final rule today is consistent with the
Panel's recommendation.

1. Lead Time Transition Provisions
    In these types of vehicle businesses, predicting sales is difficult
and it is often necessary to rely on other entities for technology (see
earlier discussions in section V on technology needed to meet the new
standards).175 176 Moreover, percentage phase-in
requirements pose a dilemma for an entity such as an SVM that has a
limited product line. For example, it is challenging for an SVM to
address percentage phase-in requirements if the manufacturer makes
vehicles in only one or two test groups. Because of its very limited
product lines, a SVM could be required to certify all their vehicles to
the new standards in the first year of the phase-in period, whereas a
full-line manufacturer (or major manufacturer) could utilize all four
years of the phase-in. Thus, similar to the flexibility provisions
implemented in the Tier 2 rule, the Panel recommended that we allow
SVMs (includes all vehicle small entities that would be affected by
this rule, which are the majority of SVMs) the following options for
meeting cold temperature NMHC standards and evaporative emission
standards as an element of determining appropriate lead time for these
entities to comply with the standards.
---------------------------------------------------------------------------

    \175\ For example, as described later in section V.E.3, ICIs may
not be able to predict their sales because they are dependent upon
vehicles brought to them by individuals attempting to import
uncertified vehicles.
    \176\ SMVs (those with sales less than 15,000 vehicles per year)
include ICIs, alternative fuel vehicle converters, companies that
produce specialty vehicles by modifying vehicles produced by others,
and companies that produce small quantities of their own vehicles,
but rely on major manufacturers for engines and other vital emission
related components.
---------------------------------------------------------------------------

    For cold NMHC standards, the Panel recommended that SVMs simply
comply with the standards with 100 percent of their vehicles during the
last year of the four-year phase-in period. Since these entities could
need additional lead time and the new standards for LDVs and LLDTs
would begin in model year 2010 and would end in model year 2013 (25%,
50%, 75%, 100% phase-in over four years), we are finalizing, as
proposed, a provision requiring only that SVMs certify 100 percent of
their LDVs and LLDTs in model year 2013. Also, since the new standard
for HLDTs and MDPVs would start in 2012 (25%, 50%, 75%, 100% phase-in
over four years), we are finalizing, again as proposed, a provision
requiring that the SVMs certify 100 percent of their HLDTs and MDPVs in
model year 2015.
    In regard to evaporative emission standards, the Panel recommended
that since the new evaporative emissions standards would not have
phase-in years, we allow SVMs to simply comply with standards during
the third year of the program. We have implemented similar provisions
in past rulemakings. Given the additional challenges that SVMs face, as
noted above, we believe that this recommendation is reasonable.
Therefore, for a 2009 model year start date for LDVs and LLDTs, we are
finalizing, as proposed, a provision requiring that SVMs meet the
evaporative emission standards in model year 2011. For a model year
2010 implementation date for HLDTs and MDPVs, we are finalizing the
proposed provision requiring that SVMs comply in model year 2012.
2. Hardship Provisions
    In addition, the Panel recommended that case-by-case hardship
provisions be extended to SVMs for the cold temperature NMHC and
evaporative emission standards as an aspect of determining the greatest
emission reductions feasible. These entities could, on a case-by-case
basis, face hardship more than major manufacturers (manufacturers with
sales of 15,000 vehicles or more per year), and we are finalizing as
proposed this provision to provide what could prove to be a needed
safety valve for these entities. SVMs will be allowed to apply for up
to an additional 2 years to meet the 100 percent phase-in requirements
for cold NMHC and the delayed requirement for evaporative emissions. As
with hardship provisions for the Tier 2 rule, we are finalizing, as
proposed, a provision providing that applications for such hardship
relief must be made in writing, must be submitted before the earliest
date of noncompliance, must include evidence that the noncompliance
will occur despite the manufacturer's best efforts to comply, and must
include evidence that severe economic hardship will be faced by the
company if the relief is not granted.
    We will work with the applicant to ensure that all other remedies
available under this rule are exhausted before granting additional
relief. To avoid any perception that the existence of the hardship
provision could prompt SVMs to delay development, acquisition and
application of new technology, we want to make clear that we expect
this provision to be rarely invoked, and that relief would rarely be
granted. Today's rule contains numerous flexibilities for all
manufacturers and it delays implementation dates for SVMs. We would
expect SVMs to prepare for the applicable implementation dates in
today's rule.
3. Special Provisions for Independent Commercial Importers (ICIs)
    Although the SBAR panel did not specifically recommend it, we are
finalizing as proposed provisions allowing ICIs to participate in the
averaging, banking, and trading program for cold temperature NMHC fleet
average standards (as described in Table IV.B.-1), but with appropriate
constraints to ensure that fleet averages will be met. The existing
regulations for ICIs specifically prohibit ICIs from participating in
emission-related averaging, banking, and trading programs unless
specific exceptions are provided (see 40 CFR 85.1515(d)). The concern
is that they may not be able to predict their sales and control their
fleet average emissions because they are dependent upon vehicles
brought to them by individuals attempting to import uncertified
vehicles. However, an exception for ICIs to participate in an
averaging, banking, and trading program was made for the Tier 2
NOX fleet average standards (65 FR 6794, February 10, 2000),
and today we are finalizing, as proposed, a similar exception for the
cold temperature NMHC fleet average standards.
    If an ICI is able to purchase credits or to certify a test group to
a family emission level (FEL) below the applicable cold temperature
NMHC fleet average standard, the rule allows the ICI to bank credits
for future use. Where an ICI desires to certify a test group to a FEL
above the applicable fleet average standard, the rule allows them to do
so if they have adequate and appropriate credits. Where an ICI desires
to certify to an FEL above the fleet average standard and does not have
adequate or appropriate credits to offset the vehicles, we will permit
the manufacturer to obtain a certificate for vehicles using such a FEL,
but will condition the certificate such that the manufacturer can only
produce vehicles if it first obtains credits from other manufacturers
or from other vehicles certified to a FEL lower than the fleet average
standard during that model year.
    Our experience over the years through certification indicates that
the nature of the ICI business is such that these companies cannot
predict or estimate their sales of various vehicles well. Therefore, we
do not have confidence in their ability to certify compliance under a
program that will allow them leeway to produce some vehicles to a
higher FEL now but sell vehicles with lower FELs later, such that they
were able to

[[Continued on page 8477]]

]

[[pp. 8477-8526]] Control of Hazardous Air Pollutants From Mobile Sources

[[Continued from page 8476]]

comply with the fleet average standard. We also cannot reasonably
assume that an ICI that certifies and produces vehicles one year, will
certify or even be in business the next. Consequently, we are
finalizing the proposed provision barring ICIs from utilizing the
deficit carry forward provisions of the ABT program.

VI. Gasoline Benzene Control Program

A. Description of and Rationale for the Gasoline Benzene Control
Program

    We received comments on a wide range of issues regarding our
proposal of a gasoline benzene control program. We have considered
these comments carefully. This notice finalizes a gasoline benzene
control program that is very similar to the proposed program, with the
inclusion of an upper limit benzene standard on which we sought
comment.
    The gasoline benzene control program has three main components,
each of which is discussed in this section:
--A gasoline benzene content standard. In general, refiners and
importers will be subject to an annual average gasoline benzene
standard of 0.62 volume percent (vol%), beginning January 1, 2011. This
single standard will apply to all gasoline, both reformulated gasoline
(RFG) and conventional gasoline (CG) nationwide (except for gasoline
sold in California, which is already covered by a similar state
program).
--An upper limit benzene standard. In general, this ``maximum average
standard'' will require that the annual average of actual benzene
levels that each refinery produces be less than or equal to 1.3 vol%
without the use of credits, beginning July 1, 2012.\177\
---------------------------------------------------------------------------

    \177\ The per-gallon benzene cap (1.3 vol%) in the RFG program
will continue to apply separately.
---------------------------------------------------------------------------

--An averaging, banking, and trading (ABT) program. The ABT program
allows refiners and importers to choose the most economical compliance
strategy (investment in technology, credits, or both) for meeting the
0.62 vol% annual average benzene standard. The program allows refiners
to generate ``early credits'' for making qualifying benzene reductions
earlier than required and allows refiners and importers to generate
``standard credits'' for overcomplying with the 0.62 vol% benzene
standard in 2011 and beyond. Credits may be used interchangeably
towards compliance with the 0.62 vol% standard, ``banked'' for future
use, and/or transferred nationwide to other refiners/importers subject
to the standard. While credits may not be used to demonstrate
compliance with the 1.3 vol% maximum average standard, the ABT program
in its entirety provides the refining industry with significant
compliance flexibility. To achieve compliance with the 0.62 vol%
average standard in 2011 and beyond, refiners and importers may use
credits generated and/or obtained under the ABT program, reduce their
gasoline benzene levels, or any combination of these.
--Provisions for refiners facing economic hardship. Refiners approved
as ``small refiners'' will have access to special temporary relief
provisions. In addition, any refiner facing extreme unforeseen
circumstances or extreme hardship circumstances can apply for temporary
relief.
1. Gasoline Benzene Content Standard
a. Description of the Average Benzene Content Standard
    The program finalized in this rule requires significant reductions
in the average levels of benzene in gasoline sold in the U.S. Beginning
in 2011, the average benzene level of all batches of gasoline produced
during a calendar year at each refinery will need to be at or below a
standard of 0.62 vol% benzene. Approved small refiners must comply with
this requirement by 2015. Each gasoline importer will need to meet the
0.62 vol% standard on average for its imported gasoline during each
year. The 0.62 vol% average standard may be met through actual
production/importation of fuel with a benzene content of 0.62 vol% or
less, on average, and/or by using benzene credits. A deficit is created
when compliance is not achieved in a given year. This deficit may be
carried forward without regulatory approval but must be made up the
next year. (See VI.B (Implementation), below.) While this subsection
focuses on the 0.62 vol% average standard, refiners and importers will
also be subject to a ``maximum average benzene standard'' of 1.3 vol%,
which is discussed below in section VI.A.1.d.
    The 0.62 vol% average benzene standard applies to all gasoline,
both RFG and CG. Gasoline sold nationwide is covered by the standard,
with the exception of gasoline sold in California. California gasoline
is covered by existing State of California benzene requirements that
result in benzene reductions similar to the federal program finalized
here.
    The 0.62 vol% average benzene standard and the 1.3 vol% maximum
average standard result in air toxics emissions reductions that are
greater than required under all existing gasoline-related MSAT
programs. As a result, upon implementation in 2011, the regulatory
provisions for this gasoline benzene control program will become the
regulatory mechanism used to implement the RFG and CG (Anti-Dumping)
annual average toxics performance requirements and the annual average
benzene content requirement for RFG. The current RFG and Anti-Dumping
annual average toxics provisions thus will be replaced by this benzene
control program. This final benzene control program will also replace
the requirements of the 2001 MSAT rule (``MSAT1''). In addition, the
program will satisfy certain conditions of the Energy Policy Act of
2005 (EPAct) and thus remove the need to revise individual MSAT1 toxics
baselines for RFG otherwise required by the EPAct. In all of these
ways, this program will significantly consolidate and simplify the
existing national fuel-related MSAT regulatory program while achieving
greater overall emission reductions.\178\ See Section VI.C below for
additional discussion of this issue.
---------------------------------------------------------------------------

    \178\ Although this program will supersede several compliance
requirements from other programs, we are retaining certain
recordkeeping and reporting requirements from these programs. For
example, refiners will need to continue to provide gasoline fuel
property data for more than just benzene. This is discussed in more
detail in VI.B below.
---------------------------------------------------------------------------

b. Why Are We Finalizing a Benzene Content Standard?
    As discussed in the proposal, we believe a benzene content standard
is the most cost-effective and most certain way to reduce gasoline
benzene emissions from vehicles. Fuel benzene reductions directly and
demonstrably result in benzene emissions reductions which also results
in overall MSAT emission reductions. Focusing MSAT control on benzene
alone means that the effectiveness of the control will not be affected
by changes in fuel composition or vehicle technology. Because benzene
is a small component of gasoline (around 1 vol%), gasoline octane is
not significantly affected by a reduction in benzene content. Other
fuel changes that could be undertaken to reduce MSATs would
significantly impact octane, and replacing that octane would be costly
and could increase emissions of MSATs other than benzene. Nonetheless,
in addition to proposing to control fuel-related MSAT emissions by
means of a gasoline benzene content standard, we sought comment on a

number of alternative approaches, including control of toxics in
addition to benzene and more stringent limits on gasoline sulfur and
volatility. A number of commenters expressed support for some of these
alternatives and others opposed them. In reaching our decision to
finalize a benzene content standard, we evaluated the comments on each
of the alternative approaches, and we discuss these next.
i. Standards That Would Include Toxics Other Than Benzene
    We considered separate standards for each of the key fuel-related
toxics (we discuss control of aromatic compounds separately) as well as
a total toxics performance standard.

A Standard for Total Toxics Performance

    Several commenters advocated a standard in the form of a toxics
emissions performance standard, analogous to the current MSAT1 and RFG
standards. Some commenters requested an air toxics standard in addition
to the fuel benzene content standard we are finalizing. In general,
these commenters expressed concern that if toxics other than benzene
are not also controlled simultaneously, refiners may allow the
emissions of these other compounds to increase, even while benzene is
being reduced. Other commenters requested a toxics standard instead of
fuel benzene control (or as an alternative compliance option). These
commenters felt that a toxics performance standard offered more
compliance flexibility. Other commenters supported our proposed
benzene-only standard, stating that a total toxics standard would add
complexity without additional benefit.
    For several reasons, we continue to believe that a benzene-only
standard is superior to a toxics emissions performance standard. First,
because controlling benzene is much more cost-effective than
controlling emissions of other MSATs, refiners historically have
preferentially reduced benzene under the MSAT1 and other air toxics
control programs. This is despite the theoretical flexibility that
refiners have under a toxics performance standard to change other fuel
parameters instead of benzene. Thus, even if we were to express the
proposed standard as an air toxics performance standard, we would
expect the outcome to be the same--refiners would reduce benzene
content and leave unchanged the levels of other MSATs.
    Even with, or as a result of, this fuel benzene control, we do not
expect refiners to actively modify their refinery operations such that
increases will occur in emissions of the other MSATs currently
controlled under the toxics performance standards. These other MSATs
are acetaldehyde, formaldehyde, POM, and 1,3-butadiene, and they are
all affected to varying degrees by VOC emissions control. VOC emissions
are generally decreasing due to the gasoline sulfur controls recently
phased in along with tighter vehicle controls under the Tier 2 program,
as well as the vehicle controls being finalized under this program (see
section V above). In combination, these changes are expected to
decrease VOC-based MSAT emissions substantially.
    In addition to reductions because of declining VOC emissions,
formaldehyde emissions are currently, and for the foreseeable future,
declining as MTBE use ends. See 71 FR 15860.
    According to the Complex Model, the Agency's current gasoline
emissions compliance model, POM emissions correlate directly with VOC
emissions (see 40 CFR 80.45(e)(8). Therefore, we expect significant POM
emission reductions as VOC emissions decline.
    For 1,3-butadiene, the fuel parameter of interest is olefins.
Increasing olefins increases 1,3-butadiene emissions. However, olefins
are expected to decrease as a result of the implementation of the
gasoline sulfur program because they are reduced along with sulfur
during the desulfurization process. Olefins are also often used for
their octane value, but because of increased ethanol use, this need
should be reduced. As a result, we do not expect refiners to take
actions to increase olefins, and thus 1,3-butadiene emissions should
not increase. Also, 1,3-butadiene, like other MSATs, is reduced when
VOC is reduced due to fuel and vehicles standards being implemented
(see 71 FR 15860).
    The one MSAT likely to increase in the future is acetaldehyde.
Current market forces, along with state and federal policies and
requirements such as the proposed Renewable Fuels Standard (RFS)
Program,\179\ ensure that ethanol use will increase, and thus
acetaldehyde as well, since that MSAT is directly and substantially
affected by ethanol use. Acetaldehyde emissions are currently about
one-seventh the magnitude of benzene emissions from motor vehicles, but
are increasing (while formaldehyde emissions are decreasing) due to the
substitution of ethanol for MTBE in RFG as a result of state MTBE bans.
Any action that refiners could take to offset the total toxics increase
as a result of acetaldehyde increasing would be through benzene
control, which we are already requiring to be controlled to the maximum
extent possible. The EPAct, which charged EPA with developing the RFS
program, also requires an evaluation of that Act's impacts on air
quality. Any future control of acetaldehyde emissions will be based
primarily on the results of that study. EPA thus believes it premature
to act until we determine a course of future action reflecting the
EPAct study, a draft of which is due to Congress in 2009.
---------------------------------------------------------------------------

    \179\ 71 FR 55552, September 22, 2006.
---------------------------------------------------------------------------

    As described above, with the exception of acetaldehyde, the benzene
control program will ensure the certainty of additional MSAT
reductions. Other MSAT emissions are thus unlikely to increase under
this program. Because an air toxics standard would not provide any
additional emission reductions, we believe that the regulatory
controls, and the associated paperwork and the other administrative
costs that would result if standards explicitly including these other
MSATs were adopted, are not necessary. The benzene control program will
thus ensure the certainty of additional MSAT reductions. A toxics
emissions performance standard that would effectively achieve the same
level of MSAT reduction would be more costly and complex. For all of
these reasons, we believe a standard in the form of a benzene content
standard will produce more certain environmental results with less
complexity than a toxics emissions performance standard, and we are
therefore finalizing only a benzene content standard.

A Standard for Aromatic Compounds in Addition to Benzene

    In the proposal, we considered MSAT control through the reduction
of the content of aromatics in addition to benzene in gasoline. For a
number of reasons, we did not propose such control (see 71 FR 15860 and
15864). During the comment period, we received comments urging EPA to
impose controls on non-benzene gasoline aromatic compounds, in addition
to controlling benzene. These commenters believe aromatics control
would provide more toxics emissions reductions than a benzene-only
control program, and they also believe it would improve air quality by
significantly reducing fine particulate matter. Expanded use of E85 and
flexible-fuel vehicles and ETBE were suggested as ways to replace the
octane value which would be lost if aromatics were reduced. They also
cited other benefits such as energy independence and reduction of trade
deficits, and stated that costs to

the refining industry would not be significant. A significant rebuttal
to this request for aromatics control was presented by the refining
industry.
    We note first that regardless of specific regulatory action to
control aromatics, the increased use of ethanol in response to current
market forces and state and federal policies (including the RFS
program) will contribute to lower aromatics levels. This will occur for
two reasons. First, ethanol has historically been blended downstream of
refineries, either as a ``splash blend'' or as a ``match blend.'' In a
splash blend, the ethanol is mixed with finished gasoline. In a match
blend, refiners prepare a special subgrade of gasoline that, when
blended with ethanol, becomes finished gasoline. In recent years, match
blending has increased as refiners have been producing RFG with
ethanol, and it is expected to increase even more as ethanol use
expands. A splash blend will reduce aromatics by about 3 vol% by simple
dilution.\180\ A match blend will reduce aromatics by about 5
vol%.\181\ With ethanol use expected to more than double, we expect a
significant reduction in aromatics levels. Second, with all of this
ethanol there will be excess octane in the gasoline pool. Thus, not
only will increased ethanol use decrease aromatics concentrations
through dilution, but refiners will make the economic decision to use
ethanol to reduce or avoid producing aromatics for the purpose of
increasing octane.
---------------------------------------------------------------------------

    \180\ If the aromatics content of a gallon of gasoline is 30
vol%, adding 10% ethanol dilutes the aromatic content to about 27
vol%.
    \181\ Section 2.2 ``Effects of Ethanol and MTBE on Gasoline Fuel
Properties'' in the Renewable Fuel Standard Program: Draft
Regulatory Impact Analysis, September, 2006.
---------------------------------------------------------------------------

    Because of differences in how refiners will respond to the rapid
increase in ethanol use, it would be difficult to determine an
appropriate level for an aromatics standard at this time. The gasoline
market is going through an historic transition now due to the removal
of MTBE, conversion of some portion of the MTBE production volume to
other high octane blendstock production, growth of ethanol use, and the
rise in crude oil prices. Consequently, it is difficult to reliably
project a baseline level of aromatics for the gasoline pool with any
confidence. This is compounded by a great deal of uncertainty in
knowing how much of the market ethanol will capture. Projections by EIA
are significantly higher now than just a few months ago, and
Presidential and Congressional proposals could easily result in 100% of
gasoline being blended with ethanol. Second, aromatics levels vary
dramatically across refineries based on a number of factors, including
refinery configuration and complexity, access to other high octane
feedstocks, access to the chemicals market, crude sources, and premium
grade versus regular grade production volumes. Third, without knowing
with some certainty the range of aromatics contents of refineries'
gasoline, we cannot determine the greatest degree of emission reduction
achievable, and also cannot make reasonable estimates regarding cost,
lead time, safety, energy impacts, etc. As a result, at this time we
would not be able to determine an appropriate or meaningful aromatics
standard.
    For the purpose of reducing total toxics emissions, fuel benzene
control is far more cost-effective than control of total aromatics, for
a number of reasons. As we explained in the proposal, reducing the
content of other aromatics in gasoline is much less effective at
reducing benzene emissions than reducing fuel benzene content. Based on
the Complex Model,\182\ roughly 20 times greater reduction in total
aromatics content is needed to achieve the same benzene emission
reduction as is achieved by fuel benzene reductions. At the same time,
to broaden the program to control other aromatics would result in a
significant octane loss. While we have not yet conducted a thorough
refinery modeling evaluation, based on existing refinery and market
information the alternative sources of octane (other than ethanol)
appear to be of limited supply and would be of limited effectiveness in
replacing the octane lost from any fuel aromatics reductions.
Furthermore, as noted above, the uncertainty in the extent to which
ethanol will penetrate the market makes it difficult to project the
potential replacement of aromatics with ethanol. Any significant
reduction in aromatics would also affect the gasoline and diesel sulfur
reduction programs because hydrogen, which is used in the
desulfurization process, is produced when aromatics are produced. If
refiners were required to reduce their aromatics levels, costs would
increase further because some would have to expand or build new
hydrogen production facilities.
---------------------------------------------------------------------------

    \182\ Total toxics emissions are as calculated by the Complex
Model. This model is the tool used to determine compliance with the
toxics emissions controls in the RFG, Anti-dumping, and MSAT1
programs. Cost estimates for aromatics control and analysis of
relative benzene emissions with control of aromatics and benzene are
found in Regulation of Fuels and Fuel Additives; Standards for
Reformulated and Conventional Gasoline; Final rule, Table VI-A6 of
the Regulatory Impact Analysis, February 16, 1994.
---------------------------------------------------------------------------

    Reducing aromatics would also raise other environmental concerns
that would need to be addressed in any regulation. Actions available to
refineries for replacing octane, including adding ethanol, can increase
other MSATs, as mentioned above. In addition, some commenters
encouraged the use of the ether derived from ethanol, ETBE, to make up
octane. Any regulatory action that required or was based on the use of
ETBE would likely raise issues of potential groundwater contamination
given the groundwater contamination caused by the use of the chemically
similar MTBE.
    There may be compelling reasons to consider aromatics control in
the future, especially regarding reduction in secondary
PM2.5 emissions, to the extent that evidence supports a role
for aromatics in secondary PM2.5 formation.\183\
Unfortunately, there are limitations in both primary and secondary PM
science and modeling tools that limit our present ability to
quantitatively predict what would happen for a given fuel control.
Thus, at this point, we do not feel that the existing body of
information and analytical tools provide a sufficient basis to
determine if further fuel aromatics control is warranted. However, we
do feel that additional research is very important. Test programs and
analyses are planned to address primary PM issues, including those
examining the role of aromatics. Also, more work is underway on how
fuel aromatics, including toluene, affect secondary PM formation, and
how aromatics control should be incorporated into air quality
predictive models.\184\
---------------------------------------------------------------------------

    \183\ See Chapter 1 in the RIA for more on current studies on
this subject.
    \184\ See Chapter 1 in the RIA for more on current studies on
this subject.
---------------------------------------------------------------------------

    In summary, we believe that aromatics levels will be falling even
without an aromatics standard, and aromatics control will need to be
evaluated in the context of what might be possible beyond what will
occur through the expanded use of ethanol. Furthermore, any additional
control would be costly and raise a number of other issues which need
further investigation before EPA could responsibly initiate such a
control effort. Thus, we have concluded that additional aromatics
control for MSAT purposes is not warranted at this time.

ii. Control of Gasoline Sulfur and/or Volatility for MSAT Reduction
    In the proposal, we outlined a number of issues related to further
control of gasoline sulfur content and volatility (usually described as
Reid vapor pressure, or RVP) as a means of MSAT emissions
reduction.\185\ (See 71 FR 15861-62.) In both cases, there was
insufficient data on newest technology vehicles at that time to
evaluate their effectiveness as MSAT controls. Therefore, we did not
propose changes to existing standards.
---------------------------------------------------------------------------

    \185\ For further discussion of the impact of these fuel
properties on emissions, see RIA Chapter 7.
---------------------------------------------------------------------------

    We received several comments related to sulfur and RVP control, but
there was general agreement in the comments from auto manufacturers and
refiners that sufficient data does not yet exist for EPA to take action
as a part of this rule. Consequently, we are not taking action to adopt
additional control of gasoline sulfur or RVP. However, since the
proposal, we have completed a small fuel effects test program in
cooperation with several automakers to help evaluate the impact of fuel
property changes on emissions from Tier 2 vehicles. These data suggest
that reducing gasoline sulfur below 30 ppm could bring significant
reductions in VOC and NOX, but the data relating to air
toxics reductions were not statistically significant. Unlike past
programs on older technology vehicles, these data suggest that reducing
gasoline volatility from 9 to 7 psi RVP under normal testing conditions
(75[deg] F) may actually increase exhaust toxics emissions. The program
did not examine the impacts of fuel volatility on evaporative
emissions. These data indicate that there may be benefits to future
fuel control but that more testing is warranted. More details on the
test program and its results are available in Chapter 6 of the RIA.
iii. Diesel Fuel Changes
    In the proposal, EPA did not propose additional controls on diesel
fuel for MSAT control. We continue to believe that the recent highway
and nonroad diesel programs (see section IV. D. 1. c above) will
achieve the greatest currently achievable reductions in diesel-related
MSAT control (i.e., reductions in emissions of diesel particulate
matter and exhaust organic gases). These emission reductions will
result from the deep cuts in diesel fuel sulfur that will be
implemented in the same time frame as this gasoline benzene rule, along
with the associated diesel engine emission control requirements of the
diesel programs. We said that we were unaware of other changes to
diesel fuel that could have a significant effect on MSAT emissions, and
requested comment about limiting this action to gasoline benzene.
    One group of commenters stated in joint comments that they believe
that EPA needs to do more to protect human health and the environment
from the effects of diesel exhaust emissions. While they specifically
mention actions to accelerate the introduction of cleaner diesel
engines, they do not suggest any additional changes to diesel fuel.
Another commenter, a refiner, believes that further diesel fuel
controls are not warranted.
    Some commenters support control of the polyaromatic hydrocarbon
(PAH) content of diesel fuel. The actions refiners are taking to
produce ultra-low sulfur diesel fuel (15 ppm sulfur) are expected to
reduce the PAH content in diesel fuel.\186\ In addition, available data
indicate that the advent of exhaust emission controls on diesel engines
under the recent diesel programs will reduce exhaust PAH, regardless of
any changes to diesel fuel.
---------------------------------------------------------------------------

    \186\ Control of Emissions of Air Pollution from Nonroad Diesel
Engines and Fuel--Final Rule, Section 5.9.4 of the Regulatory Impact
Analysis, June 29, 2004.
---------------------------------------------------------------------------

    We continue to believe that existing regulations will achieve the
greatest currently achievable reductions in MSAT emissions from diesel
engines. EPA will continue to monitor MSAT issues related to diesel
fuel. For example, there are active programs underway to measure PAH
exhaust emissions from diesel engines meeting the 2007 PM engine
standards.\187\ However, at this time, we are not aware of diesel fuel
controls that could significantly affect MSAT emissions and commenters
did not offer specific information to the contrary. Consequently, we
have focused our fuel-related MSAT action on gasoline benzene, as
proposed.
---------------------------------------------------------------------------

    \187\ Health Effects Institute's Advanced Collaborative
Emissions Study.
---------------------------------------------------------------------------

c. Why Are We Finalizing a Level of 0.62 vol% for the Average Benzene
Standard?
    We considered a range of average benzene standards, taking into
account technological feasibility as well as cost and the other
enumerated statutory factors. We received comments from a variety of
parties supporting standards more stringent than the proposed level of
0.62 vol%. In general, the refining industry did not express strong
opposition to a standard of 0.62 vol%. However, several small refiners
opposed a benzene standard and argued for relief for small refiners if
EPA went forward with such a program. One commenter, an importer,
proposed a standard of 1.0 vol%. None of the commenters opposing the
0.62 vol% standard provided analytical support for a less stringent
standard, or addressed how a less stringent standard might reflect the
greatest emission reductions achievable based on the statutory factors.
We have considered all of these comments and reassessed the level of
the standard in light of the key factors we are required to consider,
and have concluded that, as proposed, 0.62 vol% is the appropriate
level for the average standard, because it achieves the greatest
achievable emission reductions through the application of technology
that will be available, considering cost, energy, safety, and lead
time.\188\ As discussed in section VI.A.1.d below, we have drawn this
conclusion in the context of the 1.3 vol% maximum average benzene
standard. We summarize our assessment of technological and economic
factors next.
---------------------------------------------------------------------------

    \188\ EPA does not believe that there are any noise issues
associated with these standards, and no comments suggested any such
issues exist.
---------------------------------------------------------------------------

i. General Technological Feasibility of Benzene Control

Benzene Control Technologies

    We have identified several technologies that can cost-effectively
reduce gasoline benzene levels and we assessed their feasibility. These
benzene control technologies function primarily by controlling the
benzene in the feedstock to and the product stream from the reformer.
They primarily focus on the reformer because refiners rely on the
reformer to produce aromatic compounds for their octane content, and
benzene is one of the aromatic compounds produced. For refiners who are
not actively reducing the benzene in their gasoline today, we estimate
that the reformer is responsible for about one half to three quarters
of the benzene in gasoline.
    Since the proposal, we learned of a change in how a particular
gasoline blending stream is being routed in the refinery which affects
its treatability for reducing benzene. After speaking to several
refiners, we learned that natural gasoline is being blended differently
into gasoline today because of the need to address the sulfur in this
stream for compliance with Tier 2. Specifically, natural gasoline is
being blended with the crude oil before the crude oil is refined in the
refinery. Therefore the benzene in natural gasoline would be treated
along with the naturally occurring benzene in crude oil using the

benzene control technologies described below. We reflected this change
in our refinery modeling.
    One approach to reducing gasoline benzene levels is to reroute
around the reformer the intermediate refiner streams that have the
greatest tendency to form benzene in the reformer. This technology is
usually termed light naphtha splitting. Assuming that a refinery
applying this technology is not applying any sort of benzene control
today, we estimate that this method reduces the benzene levels of
reformate (the stream leaving the reformer) by 60 percent. This
approach requires little or no capital investments in refineries to
realize the results, but its effectiveness is limited because it does
not address any of the naturally-occurring benzene found in crude oil
and from natural gasoline and the other benzene which is formed in the
reformer. Although this benzene control technology normally will not
achieve the most substantial benzene control, refiners choosing it will
achieve some measure of benzene control and then would likely need to
purchase credits to comply with the 0.62 benzene standard.
    To achieve deeper benzene control, refiners with an isomerization
unit can send the rerouted intermediate refinery stream to their
isomerization unit. The isomerization unit would saturate the
naturally-occurring benzene from crude oil and natural gasoline in the
rerouted refinery intermediate stream mentioned above, thus achieving
additional benzene reduction. Using these two technologies together,
refiners will be able to reduce reformer benzene levels by an estimated
80 percent. However, the benzene formed in the reformer would still not
be treated using these two technologies together.
    For even deeper benzene reductions than benzene precursor rerouting
by itself or in combination with isomerization, refiners could choose
between benzene saturation and benzene extraction. Each of these
technologies work by reducing the benzene levels in the reformate,
achieving an estimated 96 percent reduction in benzene, assuming that
the refinery is not already taking steps to control its benzene levels.
Benzene saturation involves using hydrogen to saturate the benzene into
cyclohexane, which is a compound usually found in gasoline. Benzene
extraction units chemically extract the benzene from the rest of the
hydrocarbon compounds in reformate and concentrate it to a high purity
using distillation such that it is suitable for sale into the chemicals
market. Either of these technologies is capable of achieving the
deepest levels of gasoline benzene reductions, allowing virtually all
refiners to meet or exceed the 0.62 vol% gasoline benzene standard.
    The actual impact of these benzene control technologies on an
individual refinery's finished gasoline benzene content, however, will
be a function of many different refinery-specific factors. These
factors include the types of refining units in each refinery and the
benzene levels produced by them, and the extent to which they are
already utilizing one or more of these benzene control technologies.
    Each of the benzene control technologies associated with the
reformer has been commercially demonstrated by at least half a dozen
units in U.S. refineries today operating for at least two years. Also,
we did not receive any comments questioning the viability of these
technologies for achieving the benzene reduction attributed to these
technologies in the proposed rule. We therefore conclude that these
technologies can feasibly achieve the benzene reductions that we
attribute to them. We discuss the economics for each of these
approaches to benzene reduction in more detail in section VIII.A. of
this preamble, and we discuss their feasibility and cost in detail in
Chapters 6 and 9 of the RIA.
    We evaluated the benzene control level achievable without the use
of credits by each refinery using either benzene saturation or
extraction, since this would represent the maximum technologically
feasible level of benzene control by each refinery. Our refinery cost
model shows that based on the application of one or the other of these
two benzene technologies, eight refineries would still not be able to
achieve the final 0.62 vol% benzene average standard. We believe that
these refineries would, however, be able to achieve the 1.3 vol%
maximum average standard (which, as explained in section VI.A.1.d
below, must be achieved without the use of credits) through the use of
one of these technologies.
    These eight refineries would be able to further reduce their
gasoline benzene levels by treating the benzene contained in other
gasoline blendstocks, particularly light straight run, light coker
naphtha and light hydrocrackate. We believe that refiners could merge
these streams with their reformate gasoline stream, so that these other
sources of benzene would be treated along with the benzene in the
reformate using either benzene saturation or benzene extraction. The
results of this additional analysis summarized in the RIA show that
these eight refineries would be able to meet the 0.62 vol% average
standard if they were to apply one or more of these additional benzene
control steps, though in some cases it may be at a considerably higher
cost than through the purchase of credits. The cost and ultimate
feasibility for controlling the benzene in light straight run, light
coker naphtha and light hydrocrackate is very difficult to determine
without detailed and comprehensive knowledge about how refineries are
configured and operated today. It might be possible for a refinery to
adjust existing distillation units, either operationally or with minor
capital investments, to change the cutpoints for these streams. They
might then route the benzene in these streams to the reformer, where a
benzene control technology would be applied. On the other hand,
changing the cutpoints to reroute the benzene might require the
addition of a whole new distillation column, similar in function to a
reformate splitter. Adding such grassroots distillation columns to make
these splits would be much more costly. Finally we have not found any
commercially demonstrated benzene control technologies that can reduce
the benzene of FCC naphtha, the second largest contributor of benzene
to the gasoline pool.

Impacts on Octane and Strategies for Recovering Octane Loss

    All these benzene reduction technologies tend to cause a small
reduction in the octane value of the final gasoline, since benzene is
high in octane (about 101 octane number ((R+M)/2). Understanding how
lost octane will be recovered is critical to determining the
feasibility and cost of benzene control. Regular grade gasoline must
comply with a minimum 87 octane number (or a sub-octane rating of 86
for driving in altitude), while premium grade gasoline must comply with
an octane rating which ranges from 91 to 93 octane numbers. Gasoline
must meet these octane ratings to be sold at retail. Routing the
benzene precursors around the reformer reduces the octane of the six-
carbon compound stream (by foregoing the formation of benzene) which
normally exits the reformer with the rest of the reformate. Without
these compounds in the reformate, our refinery model shows that a loss
of octane in the gasoline pool of about 0.14 octane numbers will
typically occur. If this rerouted stream can be sent to an
isomerization unit additional octane loss will occur due to the
saturation of

benzene \189\; however, as described below, the isomerization unit
offsets a part of the octane loss caused by this combination of
saturation and rerouting. Benzene saturation and benzene extraction
both affect the octane of reformate and therefore of the gasoline pool.
Our refinery model estimates that benzene saturation typically reduces
the octane of gasoline by 0.24 octane numbers, and benzene extraction
typically reduces the octane of gasoline by 0.14 octane numbers.
---------------------------------------------------------------------------

    \189\ The chemical process of benzene saturation in the
isomerization unit is the same as the process that occurs in a
benzene saturation unit, as described above.
---------------------------------------------------------------------------

    Refiners have several choices available to them for recovering the
lost octane. One is to blend in ethanol. Ethanol has a very high octane
number rating of 115. Thus, only a small amount of ethanol (one percent
of the gasoline pool or less) would be necessary to offset the octane
loss associated with benzene reductions. Moreover, ethanol blending
will occur for reasons independent of the benzene control requirements
(and attendant octane loss) of the present rule. As explained in the
discussion of potential aromatics controls above, current market forces
and state and federal policies (including the RFS program) will
increase the volume of renewable fuels, including ethanol, which is to
be blended into gasoline. The volume of renewable fuels must increase
from around 4 billion gallons in 2004 to 7.5 billion gallons in 2012
when the renewable fuels provisions of the RFS are fully implemented.
However, as part of the Annual Energy Outlook for 2006, the Energy
Information Administration projects that the economics driven by higher
crude oil prices will result in more like 9.6 billion gallons of
ethanol use by 2012.
    Octane may also be increased by increasing the severity of the
reformer (which determines the final octane of the reformate). However,
if the refiner is reducing benzene through precursor rerouting or
saturation, this strategy can be somewhat counterproductive. This is
because increased severity increases the amount of benzene in the
reformate and thus increases the cost of saturation and offsets some of
the benzene reduction of precursor rerouting. Increasing reformer
severity also decreases the operating cycle life of the reformer,
requiring more frequent regeneration. However, where benzene extraction
is used, increased reformer severity can improve the economics of
extraction because not only is lost octane replaced by other aromatic
compounds, but more benzene is extracted and sold.
    Refiners can also recover lost octane by increased use of
isomerization and alkylate units. As discussed above, saturating
benzene in the isomerization unit results in an octane loss, but the
octane loss is partially offset by the simultaneous formation of
branch-chain compounds in the isomerization unit. The isomerization
unit would only offset a portion of the octane loss caused by
saturating the benzene if the unit has sufficient capacity to treat
both the five-carbon hydrocarbons normally sent to the unit as well as
the newly rerouted six-carbon hydrocarbons. Also, many refineries
produce a high-octane blendstock called alkylate. Refiners can alter
their refineries to produce more alkylate or they may be able to
purchase alkylate on the open market. Not only is alkylate moderately
high in octane (93 or 94 octane numbers), but it converts four-carbon
(i.e., butane) compounds that are too volatile to be blended in large
amounts into the gasoline pool into heavier compounds that can be
readily blended into gasoline, thus increasing gasoline volume.
    All these means available to refiners for recovering the octane
loss associated with gasoline benzene reductions are commercially
demonstrated, and we did not receive any comments questioning our
reliance on them at proposal for maintaining the octane of the gasoline
pool in the proposal. Therefore, we conclude that it is feasible for
refiners to recover the octane loss associated with benzene control.
ii. Appropriateness of the 0.62 vol% Average Benzene Content Standard
    As discussed above, we received many comments about the proposed
level of the benzene standard. Many commenters advocated a more
stringent standard, generally pointing to refineries currently
producing gasoline with benzene levels below the proposed 0.62 vol%
standard and stating that the average standard should be sufficiently
stringent that all refineries, especially those with higher benzene
levels, would be required to use similar technologies and achieve
similarly low levels. We also received broad support for the 0.62 vol%
standard in the comments from the refining industry, although several
small refiners opposed imposing a benzene standard and argued for
relief for small refiners if EPA implemented the proposed standard. One
importer was concerned that the standard of 0.62 vol% could make it
more difficult for importers to find compliant gasoline shipments and
proposed a standard of 1.0 vol%. None of the commenters opposing the
0.62 vol% standard provided analytical support for a less stringent
standard or addressed how a less stringent standard might reflect the
greatest emission reductions achievable based on the statutory factors.
    In the proposal, EPA described in detail what we believe would be
the consequences of average standards of different stringencies to the
overall goals of the program (see 71 FR 15866-67). These anticipated
consequences relate in large part to how we believe refiners would
respond to the benzene averaging and benzene credit trading provisions
that were integral to the proposed program. For the final rule, we have
reassessed how we believe refiners would respond to different average
standards. We continue to believe that increasing the stringency of the
average benzene standard would have the effect of reducing the number
of benzene credits generated, since fewer refineries are likely or able
to take actions to significantly reduce benzene further than required
by the standard. This would reduce the liquidity of the credit trading
market. As discussed in section VI.A.2, a well functioning averaging,
banking, and trading program is integral to the achievability of the
benzene standard. With fewer credits available that are affordable as
an alternative to immediate capital investment, investment in
relatively expensive benzene saturation equipment would be necessary
for a greater number of refiners. We specifically considered a level of
0.50 vol% for the average standard, which we expected would require all
refineries to install the most expensive benzene control technologies.
We concluded that this level would clearly not be achievable,
considering cost. In a related analysis, we also showed that if,
contrary to our expectations, credits were not easily available as a
compliance option, there are several refineries for which it may be
technologically feasible to reach benzene levels below 0.62 vol%, but
only at costs far greater than for most other refiners.
    Decreasing the stringency of the standard would fail to meet our
obligation under 202(l)(2) to set the most stringent standard
achievable considering costs and other statutory factors. First, over
the last several years RFG benzene levels have already been averaging
around 0.62 vol%, and we have no information to suggest that this level
is not technologically feasible for the rest of the gasoline pool as
well. In fact, our analysis shows that this level is feasible for the
pool of gasoline as a whole. Commenters did not provide any analysis
that a standard of 0.62 vol%

was not the greatest achievable after considering cost and the other
statutory factors. Second, a standard less stringent than 0.62 vol%
would not achieve a number of important programmatic objectives. As
shown in Table VI.C-1 below, a 0.62 vol% standard is necessary to
satisfy the conditions on overall RFG toxics performance established by
EPAct and thus to avoid the requirement for updated individual refinery
baselines. We believe that any level for the standard above 0.62 vol%
would require EPA to promulgate regulations requiring RFG refiners to
continue to maintain individual refinery-specific baselines, adjusted
to 2001-2 as required by EPAct. The refining industry believes that
this would continue to penalize the cleanest refineries, constrain
their flexibility, and cause market inefficiencies that increase costs.
They have been strongly supportive of a program that eliminates the
need for individual refinery baselines. EPA agrees with these concerns,
and believes that the nationwide ABT program allowed under this program
will remove these impacts. Another of EPA's policy objectives that has
been strongly supported by the refining industry was establishing the
same standard nationwide for the combined pool of RFG and CG. The level
of 0.62 vol% allows us to establish a single combined program for RFG
and CG. In addition, the level of 0.62 vol% for the standard allows us
to streamline with confidence our toxics regulations for RFG and CG, so
that this benzene program (along with the gasoline sulfur program) will
become the regulatory mechanism used to implement the RFG and CG annual
average toxics performance requirements and the annual average benzene
content requirement for RFG. Further, we believe that with such a
stringent benzene standard, refiners should have the certainty they
need for their investment and planning decisions.
    Many comments that supported a more stringent standard pointed to
average costs projected in the proposal that are higher than for the
proposed standard, but are not large on a per-gallon basis compared to
other EPA fuel programs. However, these commenters did not address the
wide range of compliance costs for individual refineries that we
discuss in the proposal (see Chapter 9 of the proposed and final RIA
documents). It is critical to recognize that as more stringent average
standards are considered, the costs for many refineries begin to rise
significantly, especially for some individual technologically-
challenged refineries. This potential for high costs at more stringent
average standards exists if, as we expect, the ABT program functions as
it is designed to. If the ABT program operates less efficiently than
projected, the costs for some individual refineries could be higher
still. (We discuss issues related to the 1.3 vol% maximum average
standard, which cannot be met through the use of credits, in section
VI.A.1.d, ``Upper Limit Benzene Standard,'' below.)
    Based on our analysis of the projected response of the refining
industry to an average benzene standard, we are finalizing the 0.62
vol% standard as proposed. We believe that this average benzene
standard of 0.62, in the context of the associated ABT program and the
1.3 vol% maximum average standard, results in the greatest reductions
achievable, taking into account cost and the other statutory factors in
CAA 202(l)(2).
iii. Timing of the Average Standard
    Section 202(l)(2) requires that we consider lead time in adopting
any fuel control for MSATs. We proposed that refiners and importers
meet the 0.62 vol% average benzene standard beginning January 1, 2011
(January 1, 2015 for small refiners). This date was based on the
industry experience that most of the technological approaches that we
believe refiners will apply--rerouting of benzene precursors around the
reformer and use of an existing isomerization unit--will take less than
two years. The more capital intensive approaches--saturation and
extraction--generally take two to three years to complete. The January
1, 2011 date provides nearly four years of lead time. We believe this
is an appropriate amount of lead time, even taking into account that
other fuel control programs (notably the Nonroad Diesel program) will
be implemented in the same time frame.
    Some commenters supported earlier start dates, referring in some
cases to the experience of Canada in regulating gasoline benzene.
However, these comments failed to acknowledge the less stringent
Canadian standard (0.95 vol%) which naturally takes less lead time to
implement. No commenter provided information that challenged our
assessments of the technical lead time for the range of benzene control
approaches that will be implemented. Other commenters, mostly from the
refining industry, supported a start date that would be at least four
years after the date of the final rule. For the reasons described
above, we do not believe this additional time is necessary for this
program. We are finalizing a start date of January 1, 2011, as
proposed.
    We discuss the lead time for the 1.3 vol% maximum average standard,
which takes effect July 1, 2012 for non-small refiners and importers,
and July 1, 2016 for small refiners, in the next section.
d. Upper Limit Benzene Standard
    In the proposal, we discussed the potential concern that without an
upper limit, some refiners may choose to allow their benzene levels to
increase, or to remain unchanged indefinitely. However, we also said
that once an average standard is in place, any increase in benzene
levels will necessarily come at the cost of purchasing additional
credits. We tentatively concluded that this downward pressure on
benzene levels meant there would likely be no increases in benzene from
any refinery, whether or not there was an upper limit. In fact, we
concluded that this pressure would result in actual reductions at
almost all refineries, especially into the future as refiners try to
limit their reliance on credits as much as and whenever it is
economical to do so (see 71 FR 15867-68).
    We nonetheless considered the implications of an upper limit on the
actual level of benzene in the gasoline that refiners produce (as
opposed to the level achieved using credits). (See 71 FR 15678-79.) We
considered an upper limit both in the form of a per-gallon benzene cap
and a limit on the average of actual benzene in gasoline produced by a
refinery (``maximum average standard''). Of these two approaches, we
recognized that a per-gallon cap would be the more rigid. If every
batch needed to meet the cap, there would be no opportunity to offset
benzene spikes with lower-benzene production at other times. Even
during times of normal operation, our review of refinery batch data
indicated that unavoidable wide swings commonly occur in the benzene
content of gasoline batches, even for refineries that have relatively
low benzene levels on average. A per-gallon cap could result in
refiners halting gasoline production during short-term shut-downs of
benzene control equipment or in other temporary excursions in benzene
levels. Unless a per-gallon limit were generous enough or included
case-by-case exceptions (eroding the possible benefit of the cap), many
refiners would likely need to implement much deeper and more costly
reductions in benzene than would otherwise be necessary, simply to
protect against such fluctuations. For some refiners, we concluded, a
cap

could make complying with the program prohibitively expensive.
    The other option on which we solicited comment, a maximum average
standard, would be more flexible. A maximum average standard would
limit the average benzene content of the actual production at each
refinery over the course of the year, regardless of the extent to which
credits may have been used to comply with the 0.62 vol% average
standard. Thus, a maximum average standard would allow for short-term
benzene fluctuations as long as the annual average benzene level of
actual production was less than that upper limit.
    Several commenters stated that an upper limit would add costs
without resulting in additional benefits, and supported a program
without upper limits. Other commenters, however, expressed serious
concerns about the potential consequences of a program without upper
limits. Several commenters were concerned that under the program as
proposed, it would be possible for refiners to maintain benzene levels
well above the standard indefinitely while complying through the use of
credits, thus potentially reducing the benefits of the program where
this gasoline is used. Some commenters noted that under the proposed
program, gasoline in some areas could still have significantly higher
benzene levels than in other parts of the country. These commenters
believe that these projected disparities raise issues of fairness.
While our modeling of the proposed average standard suggested that all
refineries were likely to reduce their benzene levels to some extent
and that there would be significant reductions in gasoline benzene
levels in each PADD, the commenters noted that an upper limit would
provide a guarantee of reduction to at least the level of the upper
limit.
    After evaluating the results of our updated refinery analysis and
considering all of the comments, we have reconsidered the
appropriateness of an upper limit standard. For the reasons discussed
above, we continue to believe that a per-gallon cap for CG would be
inappropriate for a benzene control program due to actions refineries
would need to take to protect against common fluctuations in benzene
content, and the related adverse cost and energy implications if
refineries invest in deeper benzene reductions or need to temporarily
shut down. In contrast, the per-gallon cap for RFG of 1.3 vol%, which
is currently in place, functions differently than would a per-gallon
cap that applied to both the RFG and CG pools. The per-gallon cap for
RFG alone is appropriate because the CG pool provides an outlet for
batches of higher benzene RFG. However, if such a cap were applied to
CG as well, refiners would be left without an outlet. As we said in the
proposal, any meaningful level for a per-gallon cap applying to CG
would thus overly restrict the normal fluctuations in gasoline benzene
(see 71 FR 15869).
    On the other hand, we now believe that the program should include a
maximum average benzene standard, set at an appropriate level. The
maximum average standard has the strong advantage of ensuring that the
benzene content of gasoline produced by each refinery (or imported by
each importer) will average no higher than this standard, regardless of
the use of credits, providing greater assurance that actual in-use
benzene reductions more clearly reflect our modeled projections which
form the basis for this rule. At the same time, the maximum average
standard avoids the serious drawbacks of a per-gallon cap.
    Our refinery modeling is state of the art, but it cannot predict
with high confidence each refinery's actions and how benzene trading
will occur in each instance. We have done a refinery-by-refinery
assessment of the most economical decisions we believe the industry
will make to comply with the standard. However, in developing the
model, we did not have access to specific information on many
refineries, much of which is confidential business information. To fill
these gaps, we used broader industry average information for a number
of key model input parameters (including benzene levels in crude oil