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

    \577\ U.S. Environmental Protection Agency. (2012). Regulatory
Impact Analysis for the Final Revisions to the National Ambient Air
Quality Standards for Particulate Matter. Prepared by: Office of Air
and Radiation, EPA-452/R-12-005. Retrieved August 14, 2013 at http://www.epa.gov/ttn/ecas/ria.html.
    \578\ U.S. Environmental Protection Agency. (2008). Final Ozone
NAAQS Regulatory Impact Analysis. Prepared by: Office of Air and
Radiation, Office of Air Quality Planning and Standards. Retrieved
March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html. EPA-HQ-OAR-
2009-0472-0238.
---------------------------------------------------------------------------

    The Agency also received many comments supportive of the benefits
that the Tier 3 standards will achieve. This includes broad support
from many non-governmental institutions, state and local governments,
and private citizens.

B. Quantified Human Health Impacts

    Table VIII-3 and Table VIII-4 present the core estimates of annual
PM2.5 and ozone health impacts, respectively, in the 48
contiguous U.S. states associated with the final standards for 2030.
For each endpoint presented in Table VIII-3 and Table VIII-4, we
provide both the mean estimate and the 90 percent confidence interval.
    Using EPA's preferred estimates, based on the American Cancer
Society (ACS) and Six-Cities studies and no threshold assumption in the
model of mortality, we estimate that the final standards would result
in between 660 and 1,500 cases of avoided PM2.5-related
premature mortalities annually in 2030. A sensitivity analysis was also
conducted to understand the impact of alternative concentration
response functions suggested by experts in the field. When the range of
expert opinion is used, we estimate between 130 and 2,200 fewer
premature mortalities in 2030 (see Table 8.8 in the RIA that
accompanies this action). For ozone-related premature mortality in
2030, we estimate a range of between 110 to 500 fewer premature
mortalities.

        Table VIII-3--Estimated PM2.5-Related Health Impacts \a\
------------------------------------------------------------------------
                                      2030 Annual reduction in incidence
            Health effect                       (5th%-95th%ile)
------------------------------------------------------------------------
Premature Mortality--Derived from
 epidemiology literature \b\
    Adult, age 30+, ACS Cohort Study                       660 (480-840)
     (Krewski et al., 2009).........
    Adult, age 25+, Six-Cities Study                   1,500 (860-2,100)
     (Lepeule et al., 2012).........

Infant, age <1 year (Woodruff et
 al., 1997)
Non-fatal myocardial infarction
 (adult, age 18 and over)
    Peters et al. (2001)............                     790 (290-1,300)
    Pooled estimate of 4 studies....                         85 (42-190)
Hospital admissions--respiratory                           210 (-38-380)
 (all ages) \c\ \e\.................
Hospital admissions--cardiovascular                        250 (130-440)
 (adults, age >18) \d\..............
Emergency room visits for asthma                           340 (-58-660)
 (age 18 years and younger) \e\.....
Acute bronchitis, (children, age 8-                      980 (-35-2,000)
 12) \e\............................
Lower respiratory symptoms                         13,000 (6,000-19,000)
 (children, age 7-14)...............
Upper respiratory symptoms                         18,000 (5,600-30,000)
 (asthmatic children, age 9-18).....
Asthma exacerbation (asthmatic                     19,000 (2,300-37,000)
 children, age 6-18)................
Work loss days......................              81,000 (70,000-91,000)
Minor restricted activity days                 480,000 (400,000-550,000)
 (adults age 18-65).................
------------------------------------------------------------------------
\a\ Incidence is rounded to two significant digits. Estimates represent
  incidence within the 48 contiguous United States.
\b\ PM-related adult mortality based upon the most recent American
  Cancer Society (ACS) Cohort Study (Krewski et al., 2009) and the most
  recent Six-Cities Study (Lepeule et al., 2012). Note that these are
  two alternative estimates of adult mortality and should not be summed.
  PM-related infant mortality based upon a study by Woodruff, Grillo,
  and Schoendorf, (1997).\579\
\c\ Respiratory hospital admissions for PM include admissions for
  chronic obstructive pulmonary disease (COPD), pneumonia and asthma.
\d\ Cardiovascular hospital admissions for PM include total
  cardiovascular and subcategories for ischemic heart disease,
  dysrhythmias, and heart failure.
\e\ The negative estimates at the 5th percentile confidence estimates
  for these morbidity endpoints reflect the statistical power of the
  study used to calculate these health impacts. These results do not
  suggest that reducing air pollution results in additional health
  impacts.

        Table VIII-4--Estimated Ozone-Related Health Impacts \a\
------------------------------------------------------------------------
                                      2030 Annual reduction in incidence
            Health effect                       (5th%-95th%ile)
------------------------------------------------------------------------
Premature Mortality, All ages \b\
Multi-City Analyses
    Bell et al. (2004)--Non-                                110 (46-170)
     accidental.....................
    Huang et al. (2005)--                                   160 (74-250)
     Cardiopulmonary................
    Schwartz (2005)--Non-accidental.                        170 (68-270)
Meta-analyses:
    Bell et al. (2005)--All cause...                       350 (190-510)
    Ito et al. (2005)--Non-                                490 (320-660)
     accidental.....................
    Levy et al. (2005)--All cause...                       500 (360-630)
Hospital admissions--respiratory                          740 (87-1,400)
 causes (adult, 65 and older) \c\...
Hospital admissions--respiratory                           310 (160-450)
 causes (children, under 2).........
Emergency room visit for asthma (all                        330 (-8-990)
 ages) \d\..........................
Minor restricted activity days                 600,000 (290,000-910,000)
 (adults, age 18-65)................
School absence days.................            210,000 (92,000-300,000)
------------------------------------------------------------------------
\a\ Incidence is rounded to two significant digits. Estimates represent
  incidence within the 48 contiguous U.S.
\b\ Estimates of ozone-related premature mortality are based upon
  incidence estimates derived from several alternative studies: Bell et
  al. (2004); Huang et al. (2005); Schwartz (2005); Bell et al. (2005);
  Ito et al. (2005); Levy et al. (2005). The estimates of ozone-related
  premature mortality should therefore not be summed.
\c\ Respiratory hospital admissions for ozone include admissions for all
  respiratory causes and subcategories for COPD and pneumonia.
\d\ The negative estimate at the 5th percentile confidence estimate for
  this morbidity endpoint reflects the statistical power of the study
  used to calculate this health impact. This result does not suggest
  that reducing air pollution results in additional health impacts.

C. Monetized Benefits

    Table VIII-5 presents the estimated monetary value of changes in
the incidence of ozone and PM2.5-related health effects. All
monetized estimates are stated in 2011 dollars. These estimates account
for growth in real gross domestic product (GDP) per capita between the
present and 2030. Our estimate of total monetized benefits in 2030 for
the program, using the ACS and Six-Cities PM mortality studies and the
range of ozone mortality assumptions, is between $7.4 and $19 billion,
assuming a 3 percent discount rate, or between $6.7 and $18 billion,
assuming a 7 percent discount rate. This represents the health benefits
of the Tier 3 program anticipated to occur annually when the program is
fully implemented and most of the fleet turned over.
---------------------------------------------------------------------------

    \579\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. (1997).
The Relationship Between Selected Causes of Postneonatal Infant
Mortality and Particulate Air Pollution in the United States.
Environmental Health Perspectives 105(6):608-612.

Table VIII-5--Estimated Monetary Value of Changes in Incidence of Health
                       and Welfare Effects in 2030
                         [Millions of 2011$] \a\
------------------------------------------------------------------------
                                                 2030 (5th and 95th
             Health Endpoints                        percentile)
------------------------------------------------------------------------
                PM[ihel2].[ihel5]-Related Health Effects
------------------------------------------------------------------------
Premature Mortality--Derived from
 Epidemiology Studies: \b\ \c\
    Adult, age 30+--ACS study (Krewski et
     al., 2009)
        3% discount rate..................         $6,100 ($910-$14,000)
        7% discount rate..................         $5,500 ($820-$13,000)
    Adult, age 25+--Six-Cities study
     (Lepeule et al., 2012)
        3% discount rate..................      $14,000 ($2,000-$33,000)
        7% discount rate..................      $12,000 ($1,800-$30,000)
        Infant Mortality, <1 year--                       $13 ($1.8-$32)
         (Woodruff et al. 1997)...........
Non-fatal acute myocardial infarctions
 (Peters et al., 2001):
    3% discount rate......................                $96 ($21-$230)
    7% discount rate......................                $93 ($19-$220)
Pooled estimate of 4 studies:
    3% discount rate......................                $10 ($2.6-$27)
    7% discount rate......................                $10 ($2.4-$27)
Hospital admissions for respiratory causes              $5.9 (-$1.6-$11)
 \d\......................................
Hospital admissions for cardiovascular                   $9.9 ($5.0-$17)
 causes...................................
Emergency room visits for asthma \d\......          $0.15 (-$0.02-$0.29)
Acute bronchitis (children, age 8-12) \d\.           $0.49 (-$0.02-$1.2)
Lower respiratory symptoms (children, 7-             $0.27 ($0.11-$0.51)
 14)......................................
Upper respiratory symptoms (asthma, 9-11).            $0.62 ($0.18-$1.4)
Asthma exacerbations......................             $1.1 ($0.14-$2.7)
Work loss days............................                 $12 ($11-$14)
Minor restricted-activity days (MRADs)....                 $34 ($20-$49)
------------------------------------------------------------------------
                      Ozone-Related Health Effects
------------------------------------------------------------------------
Premature Mortality, All ages--Derived
 from Multi-city analyses:
    Bell et al., 2004.....................          $1,100 ($150-$2,800)
    Huang et al., 2005....................          $1,600 ($220-$4,100)
    Schwartz, 2005........................          $1,700 ($220-$4,400)
Premature Mortality, All ages--Derived
 from Meta-analyses:
    Bell et al., 2005.....................          $3,600 ($510-$8,800)
    Ito et al., 2005......................          $5,000 ($740-$12,000
    Levy et al., 2005.....................         $5,100 ($760-$12,000)
Hospital admissions--respiratory causes                   $21 ($2.5-$39)
 (adult, 65 and older)....................
Hospital admissions--respiratory causes                 $3.7 ($1.9-$5.4)
 (children, under 2)......................
Emergency room visit for asthma (all ages)         $0.14 (-$0.003-$0.41)
Minor restricted activity days (adults,                    $43 ($19-$73)
 age 18-65)...............................
School absence days.......................                $21 ($9.3-$31)
------------------------------------------------------------------------
\a\ Monetary benefits are rounded to two significant digits for ease of
  presentation and computation. PM and ozone benefits are nationwide.
\b\ Monetary benefits adjusted to account for growth in real GDP per
  capita between 1990 and the analysis year (2030).
\c\ Valuation assumes discounting over the SAB recommended 20 year
  segmented lag structure. Results reflect the use of 3 percent and 7
  percent discount rates consistent with EPA and OMB guidelines for
  preparing economic analyses.
\d\ The negative estimate at the 5th percentile confidence estimate for
  this morbidity endpoint reflects the statistical power of the study
  used to calculate this health impact. This result does not suggest
  that reducing air pollution results in additional health impacts.

D. What are the limitations of the benefits analysis?

    Every benefit-cost analysis examining the potential effects of a
change in environmental protection requirements is limited to some
extent by data gaps, limitations in model capabilities (such as
geographic coverage), and uncertainties in the underlying scientific
and economic studies used to configure the benefit and cost models.
Limitations of the scientific literature often result in the inability
to estimate quantitative changes in health and environmental effects,
such as potential decreases in premature mortality associated with
decreased exposure to carbon monoxide. Deficiencies in the economics
literature often result in the inability to assign economic values even
to those health and environmental outcomes which can be quantified.
These general uncertainties in the underlying scientific and economics
literature, which can lead to valuations that are higher or lower, are
discussed in detail in the RIA and its supporting references. Key
uncertainties that have a bearing on the results of the benefit-cost
analysis of the final standards include the following:
     The exclusion of potentially significant and unquantified
benefit categories (such as health, odor, and ecological benefits of
reduction in air toxics, ozone, and PM);
     Errors in measurement and projection for variables such as
population growth;
     Uncertainties in the estimation of future year emissions
inventories and air quality (including future year climate
uncertainty);
     Uncertainty in the estimated relationships of health and
welfare effects to changes in pollutant concentrations including the
shape of the concentration-response function, the size of the effect
estimates, and the relative toxicity of the many components of the PM
mixture;
     Uncertainties in exposure estimation; and

     Uncertainties associated with the effect of potential
future actions to limit emissions.
    As Table VIII-5 indicates, total benefit estimates are driven
primarily by the reduction in premature mortalities each year. Some key
assumptions underlying the premature mortality estimates include the
following, which may also contribute to uncertainty:
     We assume that all fine particles, regardless of their
chemical composition, are equally potent in causing premature
mortality. This is an important assumption, because PM2.5
varies considerably in composition across sources, but the scientific
evidence is not yet sufficient to allow differential effects estimates
by particle type. The 2009 PM ISA, which was twice reviewed by EPA's
Science Advisory Board Clean Air Science Advisory Committee (SAB-
CASAC), concluded that ``many constituents of PM2.5 can be
linked with multiple health effects, and the evidence is not yet
sufficient to allow differentiation of those constituents or sources
that are more closely related to specific outcomes.'' \580\
---------------------------------------------------------------------------

    \580\ U.S. Environmental Protection Agency (U.S. EPA). 2009.
Integrated Science Assessment for Particulate Matter (Final Report).
EPA-600-R-08-139F. National Center for Environmental Assessment--RTP
Division. December. Available on the Internet at <http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546>.
---------------------------------------------------------------------------

     We assume that the health impact function for fine
particles is log-linear without a threshold in this analysis. Thus, the
estimates include health benefits from reducing fine particles in areas
with varied concentrations of PM2.5, including both areas
that do not meet the fine particle standard and those areas that are in
attainment, down to the lowest modeled concentrations.
     We assume that there is a ``cessation'' lag between the
change in PM exposures and the total realization of changes in
mortality effects. Specifically, we assume that some of the incidences
of premature mortality related to PM2.5 exposures occur in a
distributed fashion over the 20 years following exposure based on the
advice of EPA's Science Advisory Board Health Effects Subcommittee
(SAB-HES),\581\ which affects the valuation of mortality benefits at
different discount rates.
---------------------------------------------------------------------------

    \581\ U.S. Environmental Protection Agency--Science Advisory
Board (U.S. EPA-SAB). 2004. Advisory Council on Clean Air Compliance
Analysis Response to Agency Request on Cessation Lag. EPA-COUNCIL-
LTR-05-001. December. Available on the Internet at .
---------------------------------------------------------------------------

     There is uncertainty in the magnitude of the association
between ozone and premature mortality. The range of ozone benefits
associated with the final standards is estimated based on the risk of
several sources of ozone-related mortality effect estimates. In a
report on the estimation of ozone-related premature mortality published
by the National Research Council, a panel of experts and reviewers
concluded that short-term exposure to ambient ozone is likely to
contribute to premature deaths and that ozone-related mortality should
be included in estimates of the health benefits of reducing ozone
exposure.\582\
---------------------------------------------------------------------------

    \582\ National Research Council (NRC), (2008). Estimating
Mortality Risk Reduction and Economic Benefits from Controlling
Ozone Air Pollution. The National Academies Press: Washington, DC.
---------------------------------------------------------------------------

    Despite the uncertainties described above, we believe this analysis
provides a conservative estimate of the estimated criteria pollutant-
related health and environmental benefits of the standards in future
years because of the exclusion of potentially significant benefit
categories that are not quantifiable at this time. Acknowledging
benefits omissions and uncertainties, we present a best estimate of the
total benefits based on our interpretation of the best available
scientific literature and methods supported by EPA's technical peer
review panel, the Science Advisory Board's Health Effects Subcommittee
(SAB-HES). The National Academies of Science (NRC, 2002) has also
reviewed EPA's methodology for analyzing the health benefits of
measures taken to reduce air pollution. EPA addressed many of these
comments in the analysis of the final PM NAAQS.583 584 This
analysis incorporates this work to the extent possible.
---------------------------------------------------------------------------

    \583\ National Research Council (NRC). (2002). Estimating the
Public Health Benefits of Proposed Air Pollution Regulations. The
National Academies Press: Washington, DC.
    \584\ U.S. Environmental Protection Agency. (2012). Regulatory
Impact Analysis for the Final Revisions to the National Ambient Air
Quality Standards for Particulate Matter. Prepared by: Office of Air
and Radiation, EPA-452/R-12-005. Retrieved August 14, 2013 at http://www.epa.gov/ttn/ecas/ria.html.
---------------------------------------------------------------------------

E. Illustrative Analysis of Estimated Monetized Impacts Associated With
the Rule in 2018

    For illustrative purposes, this section presents the total
estimated monetized benefits associated with the final standards in
2018. As presented in Section III.B, the emissions impacts of the final
standards in 2018 are primarily due to the effects of sulfur on the
existing (pre-Tier 3) fleet.
    Table VIII-6 presents total aggregate monetized benefits of the
program in 2018. Monetized estimates are presented in 2011$. Our
estimate of total monetized benefits associated with the final
standards in 2018, using the ACS and Six-Cities PM mortality studies
and the range of ozone mortality assumptions, is between $2.1 and $5.6
billion, assuming a 3 percent discount rate, or between $1.9 and $5.3
billion, assuming a 7 percent discount rate. For a more detailed
presentation of the quantified and monetized impacts of the final
standards in 2018, please refer to Chapter 8 of the RIA that
accompanies this preamble.

  Table VIII-6--Total Estimated Monetized Ozone and PM-Related Benefits Associated With the Final Standards in
                                                    2018 \a\
----------------------------------------------------------------------------------------------------------------
     Total Ozone and PM Benefits (billions, 2011$)--PM Mortality Derived From the ACS and Six-Cities Studies
-----------------------------------------------------------------------------------------------------------------
                       3% Discount rate                                         7% Discount rate
----------------------------------------------------------------------------------------------------------------
                                                  Mean total    Ozone mortality                     Mean total
  Ozone mortality function       Reference         benefits         function        Reference        benefits
----------------------------------------------------------------------------------------------------------------
Multi-city..................  Bell et al.,          $2.1-$4.1   Multi-city.....  Bell et al.,          $1.9-$3.7
                               2004.                                              2004.
                              Huang et al.,         $2.3-$4.2                    Huang et al.,         $2.1-$3.9
                               2005.                                              2005.
                              Schwartz, 2005.       $2.3-$4.3                    Schwartz, 2005.       $2.1-$3.9
Meta-analysis...............  Bell et al.,          $3.1-$5.0   Meta-analysis..  Bell et al.,          $2.9-$4.7
                               2005.                                              2005.
                              Ito et al.,           $3.6-$5.6                    Ito et al.,           $3.4-$5.2
                               2005.                                              2005.
                              Levy et al.,          $3.6-$5.6                    Levy et al.,          $3.5-$5.3
                               2005.                                              2005.
----------------------------------------------------------------------------------------------------------------

 Total Ozone and PM Benefits (billions, 2010$)--PM Mortality Derived From Expert Elicitation (Lowest and Highest
                                                    Estimate)
-----------------------------------------------------------------------------------------------------------------
                       3% Discount rate                                         7% Discount rate
----------------------------------------------------------------------------------------------------------------
                                                  Mean total    Ozone mortality                     Mean total
  Ozone mortality function       Reference         benefits         function        Reference        benefits
----------------------------------------------------------------------------------------------------------------
Multi-city..................  Bell et al.,         $0.81-$5.8   Multi-city.....  Bell et al.,         $0.78-$5.3
                               2004.                                              2004.
                              Huang et al.,         $1.0-$6.0                    Huang et al.,        $0.98-$5.5
                               2005.                                              2005.
                              Schwartz, 2005.       $1.0-$6.0                    Schwartz, 2005.       $1.0-$5.5
Meta-analysis...............  Bell et al.,          $1.8-$6.8   Meta-analysis..  Bell et al.,          $1.8-$6.3
                               2005.                                              2005.
                              Ito et al.,           $2.3-$7.3                    Ito et al.,           $2.3-$6.8
                               2005.                                              2005.
                              Levy et al.,          $2.4-$7.4                    Levy et al.,          $2.4-$6.8
                               2005.                                              2005.
----------------------------------------------------------------------------------------------------------------
\a\ Total includes estimated premature mortality-related and morbidity-related ozone and PM2.5 benefits. Range
  was developed by adding the estimate from the ozone premature mortality function to the estimate of PM2.5-
  related premature mortality derived from either the ACS study (Krewski et al., 2009) or the Six-Cities study
  (Lepeule et al., 2012) or the lowest and highest mortality estimate across the range derived from the expert
  elicitation. Range also reflects alternative estimates of non-fatal heart attacks avoided based on either
  Peters et al. (2001) or a pooled estimate of four studies.

IX. Alternatives Analysis

    As described throughout this preamble, we have considered a number
of regulatory alternatives in the development of this final rule,
including alternatives related to timing and stringency of the
standards, as well as alternative program design elements (e.g.,
averaging, banking, and trading). This section summarizes alternatives
we have considered for both vehicle emission and fuel standards.

A. Vehicle Emission Standards

    The federal vehicle emission standards we are adopting are the most
stringent feasible considering anticipated developments in motor
vehicle emissions control technology. Consideration of alternatives
focused less on the level of the fleet-average and per-vehicle
standards themselves and more on the phase-in schedule for the
standards, which can have an important influence on the cost of the
standards. Phase-in schedules directly impact costs depending on how
they are aligned with other light-duty rules and product design cycles,
especially those of the California LEV III criteria emissions program
and the EPA greenhouse gas (GHG) rules. In addition, phase-in schedules
can impact the cost of available resources, specifically design,
development and testing resources within vehicle manufacturers and
emission control suppliers.\585\
---------------------------------------------------------------------------

    \585\ We note that the Tier 3 program includes additional phase-
in flexibility through the alternative phase-in schedules for light-
duty exhaust emissions standards, heavy-duty exhaust emissions
standards, and light- and heavy-duty evaporative emissions
standards.
---------------------------------------------------------------------------

    As we considered options for the Tier 3 vehicle standards, one of
the important factors we considered was the degree of harmonization
that would result between Tier 3 and the CARB LEV III program. As
discussed earlier in this preamble, the auto manufacturing industry
stressed throughout the development of the Tier 3 rule and in their
comments on the proposed rule--both as individual companies and through
their trade associations--the need for harmonization of the two
programs as completely and as soon as possible.
    Another factor in our consideration of program options has been how
the timing of the Tier 3 program aligns with the federal light-duty
vehicle GHG rules. We believe that both programs will be more efficient
and less costly if manufacturers have greater ability to coordinate
their product planning to respond to the various regulatory
requirements they face.
    For these reasons, we have focused on program alternatives that
generally achieve close harmony with the California programs in the
earliest appropriate time frame, and on a schedule matching those of
the GHG rules as much as possible. The following paragraphs describe
the major alternatives we have considered.
1. Shorter NMOG+NOX Standard Phase-In
    We originally considered requiring full implementation of the
NMOG+NOX final fleet average standard by MY 2022. However,
we determined that this would have disrupted the manufacturer's normal
product design cycles,\586\ and it would not have allowed manufacturers
to use consistent product design cycles for both the Tier 3 standards
and the 2017 LD GHG standards, which reach full implementation in MY
2025. We are adopting a phase-in schedule that gradually increases the
stringency of the standards until MY 2025, as with the GHG program, in
order to allow vehicle manufacturers to better integrate the compliance
with Tier 3 into their product design cycles as well as to take
advantage of additional learning to reduce costs. We believe this
implementation schedule for the Tier 3 NMOG+NOX standards
allows us to achieve the environmental objectives of the program
without imposing unnecessary costs and burden on the industry.
---------------------------------------------------------------------------

    \586\ A light-duty vehicle product design cycle is the number of
years between major redesigns of a vehicle. Typically, major
redesigns are completed every 5 to 6 years.
---------------------------------------------------------------------------

2. NMOG+NOX Standards Phase-In and Early Tier 3 Credits
    The key agency goals in designing the structure of the Tier 3
program are to facilitate the step-down in fleet average stringency in
the initial model years and to create a program that is of equivalent
stringency and aligned with LEV III as early as possible. We considered
allowing manufacturers to generate early credits against the current
Tier 2 Bin 5 fleet average and to use generated early credits without
limitation for the first five years of the Tier 3 program. CARB, along
with some vehicle manufacturers, noted that if a manufacturer were to
substantially over-comply with the Tier 2 Bin 5 fleet average, these
early credits might delay achievement of the Tier 3 emission levels and
also delay harmonization between the Tier 3 and LEV III programs for
several years. Based on the fact that manufacturers are selling many
vehicles today that are already cleaner than the existing Tier 2 Bin 5
fleet average, we believe that there is a strong potential for them to
generate an excessive amount of credits. Also, most manufacturers will
already have begun to sell vehicles that meet the LEV III standards
(and thus the Tier 3 standards). The use of such a ``windfall'' of
credits would likely result in a substantial delay in achieving
alignment between the LEV III and Tier 3 programs.
    To avoid this potential misalignment, we are finalizing as proposed
a provision that any early credits

generated be capped starting in MY 2018 at the number of a
manufacturer's LEV III credits, but adjusted by the ratio of California
and other LEV III sales nationwide. (See Section IV.A.7.a for more
detail on these early credit provisions.) This approach balances the
need for meaningful transition flexibility to avoid unnecessary costs,
while still ensuring expeditious harmonization with LEV III and
achievement of the environmental benefits of the Tier 3 standards.
3. NMOG+NOX Standards
    We believe that the fleet-average NMOG+NOX standards
that we are finalizing reflect the greatest degree of emission
reduction achievable considering cost, developments in technology, and
gasoline sulfur levels as required by this rule. We also believe the
implementation schedule for the NMOG+NOX standards is as
short as practicable, as explained above. We believe that more
stringent or less stringent standards are not justified based on the
information currently available, including comments received.
Therefore, and consistent with our goal of harmonizing the Tier 3
program with LEV III as much as possible, we are finalizing the
declining FTP and SFTP NMOG+NOX standards and phase-in
schedules as proposed, as discussed in Section IV.A.3 and IV.A.4 above.
4. PM Standards
    The FTP and SFTP (US06) PM standards that we are adopting are the
most stringent technically feasible standards within their
implementation timeframe and meet the EPA goal of bringing all vehicles
to the FTP and US06 PM emission levels demonstrated by most vehicles
today.
    We considered adopting for Tier 3 the 1 mg/mi FTP PM standard that
the LEV III program will begin phasing-in in MY 2025. However, as
explained in the proposal and in Section IV.A.3.b above, and upon
further review of current test procedures and the public comments, we
concluded that 3 mg/mi is the most stringent technologically feasible
FTP PM standard. We will continue to work closely with CARB in this
area. Specifically, our agencies will continue our parallel evaluations
of how improved gravimetric PM measurement methods can reduce PM mass
measurement variability at very low PM levels, and how this relates to
the evolving technological capabilities of automakers to reach very low
PM levels with sufficient compliance margins.
    As discussed in Section IV.A.4, we are finalizing numerically lower
US06 standards than those we proposed. More recent test data shows that
the levels of the final US06 standards better meet EPA's goal of
capping US06 PM emissions at levels already being demonstrated by most
vehicles in the current light-duty fleet. We proposed a 10 mg/mi US06
PM standard for cars, and 20 mg/mi for trucks. Like the FTP PM
standards, the US06 PM standards are per-vehicle caps and not fleet
averages. The comments we received ranged from suggesting a numerically
lower standard to maintaining the standards as proposed. CARB and other
stakeholders recommended a standard of 4 mg/mi, and the International
Council on Clean Transportation recommended that the standards be no
higher than 6 mg/mi. The Alliance and Global Automakers supported the
proposed standards. We considered all of the comments suggesting
various levels for these standards, and we are finalizing standards of
10 mg/mi through MY 2021 and of 6 mg/mi for 2022 and later model years,
for both lighter and heavier vehicles, because they reflect the current
US06 PM performance of most vehicles. We believe these standards will
address current poor performing vehicles and ensure that future
vehicles with future technologies will perform, at a minimum, at or
near the level of PM emissions that is being demonstrated by current
vehicles.
    Because the final standards maintain the same stringency relative
to emission levels achieved currently, as we describe our goal for
these standards in the proposal, there is no difference in the
projected costs and benefits associated with the proposed and final
US06 PM standard levels. The costs associated with meeting the final PM
standards are driven by the vehicle performance over the FTP. That is,
the 3 mg/mi FTP standard is the primary controlling factor in a
vehicle's overall PM performance and manufacturer compliance
strategies. The US06 PM standard is intended to supplement the FTP PM
standard in that any additional level of PM control required to meet
the US06 PM standard is expected to be accomplished through calibration
and not through the use of additional hardware.
5. Higher Ethanol Content of Emissions Test Fuel
    We proposed and considered a change in the required ethanol content
of emissions test fuel, from the current zero percent (E0)
specification to a 15 percent ethanol (E15) specification. However, as
discussed in Section IV.F above, the market fuel shift toward higher
ethanol content has not materialized, and we are finalizing E10 as the
Tier 3 gasoline test fuel to better match in-use fuels expected in the
implementation timeframe of the Tier 3 standards. The adoption of E10
in lieu of E15 not only creates a federal test fuel that more closely
reflects the ethanol content of in-use fuel currently and in the
foreseeable future, but also more closely aligns with California's LEV
III test fuel.

B. Fuel Sulfur Standards

1. Annual Average Sulfur Standard
    As explained in Section V.B., we believe that a 10 ppm annual
average standard is required to enable the vehicle fleet to meet the
final Tier 3 standards and appropriately balances feasibility with
costs. Other countries and California have also reduced the sulfur
content of their gasoline; California's gasoline is already meeting our
proposed 10 ppm average sulfur level, and Europe and Japan have a cap
on the sulfur content of gasoline at 10 ppm. During the development of
the proposed rule, we considered imposing a 10 ppm cap (i.e., no
averaging, banking and trading), similar to the standard in Europe and
Japan, as well as an average standard lower than 10 ppm average,
because vehicle emission performance improves as sulfur is reduced.
    However, by allowing averaging to meet 10 ppm, we believe that the
most challenged refiners would be able to avoid what could be cost-
prohibitive investments, while still meeting 10 ppm across the fuel
pool. As discussed in Section VII.B., we estimate that allowing
averaging would reduce nationwide control costs by nearly 26 percent,
and would still be sufficient to enable vehicles to meet the proposed
Tier 3 standards.
    We also considered an even lower sulfur standard of 5 ppm. Based
upon the results of our test programs and associated modeling, a sulfur
standard of 5 ppm could reduce VOC+NOX emissions from the
existing fleet by an additional 65,000 tons in 2018.
    However, we believe a 5 ppm standard would significantly increase
both capital and operating costs. Such a standard would require: (1)
More severe treatment of FCC gasoline; (2) treatment of additional
(non-FCC) gasoline blendstocks; (3) essentially all refineries to
reduce sulfur to 5 ppm, thereby eliminating much of the benefit of the
ABT provisions; and potentially (4) more overcapacity and storage for
reprocessing off-specification product. A 5 ppm standard would also
warrant consideration of controlling the

contribution to gasoline sulfur from gasoline additives, transmix,
ethanol denaturants, and contamination in the distribution system.
    In our analysis of the 10 ppm average standard and refineries that
might reduce sulfur to 5 ppm in order to generate credits, we estimated
that the sulfur control costs to achieve 5 ppm would be about twice
that for our final 10 ppm standard. This is 60 percent higher on a cost
per ppm-gallon basis. The much higher cost is because a 5 ppm standard
eliminates the practical ability for refineries to trade credits. That
is, there would not be enough refineries overcomplying to generate
credits and support a viable trading program. As a result, it could
become prohibitively expensive for the more challenged refineries to
comply, creating potential financial hardship situations. Because the
costs and other economic impacts rise dramatically as sulfur is reduced
below 10 ppm, we believe that a 10 ppm sulfur standard is the most
stringent feasible standard considering technology and cost.
    Table IX-1 below summarizes the various alternative gasoline sulfur
programs that we assessed and our estimated costs for those alternative
programs.

                           Table IX-1--Summary of Costs for Alternative Fuel Programs
----------------------------------------------------------------------------------------------------------------
                                                                                Per-gallon     Capital cost
                                         Sulfur level        Credit trading        cost (c/gal)        ($MM)
----------------------------------------------------------------------------------------------------------------
Final Rule Case.......................              10  Nationwide..............            0.65            2025
NPRM Case.............................              10  Intra-company Only......            0.75            2195
No ABT Case...........................              10  None....................            0.87            2990
Stringent Case........................               5  None....................            1.27            3805
----------------------------------------------------------------------------------------------------------------

    Table IX-1 demonstrates that the ABT program has a profound impact
on the cost of sulfur control. The estimated per-gallon cost and the
capital costs for the case without an ABT program are 35 percent and 47
percent higher, respectively, than the final rule case which assumes
nationwide credit trading. The stringent sulfur control case, which
modeled a 5 ppm average standard and assumes no ABT program, is
estimated to cost about twice that of the final rule case. The final
rule case, which provides a very flexible ABT program, achieves a 10
ppm average sulfur standard at the lowest cost and therefore is the
most cost-effective of the various options that we studied.
    Additionally, as discussed in Sections IV.A and V.B a standard
above 10 ppm would not be sufficiently low to meet the Tier 3 emissions
standards. The feasibility of the 30 mg/mi NMOG+NOX fleet
average depends on exhaust catalyst systems that require gasoline with
average sulfur levels of 10 ppm or less. Further, annual average sulfur
levels greater than 10 ppm would significantly impair the emission
control technology that we expect will be used to meet the Tier 3
standards and to ensure in-use compliance over a vehicle's useful life.
This is particularly a concern for some larger vehicles that will need
to reduce NOX to near-zero levels, due to greater difficulty
in reducing cold-start NMOG, in order to meet a combined
NMOG+NOX standard. As discussed in Section IV.A.6,
increasing gasoline sulfur to 20 or 30 ppm would make it impossible for
vehicle manufacturers to meet the Tier 3 standards. Achieving Tier 3
standards would require offsetting the resultant higher emissions, but
EPA is not aware of existing or developing technology that could
address these higher emissions when taking into consideration the
entire vehicle fleet.
    Thus, we believe that a standard of 10 ppm is appropriate. When
combined with the advances in emissions control technologies, a 10 ppm
average sulfur standard is sufficient to allow vehicles meet the Tier 3
emissions standards at the lowest cost.
2. Refinery Gate Sulfur Cap
    In addition to lower average sulfur standards, we also considered
lowering the per-gallon cap standards. As discussed in Section V.C, we
are maintaining the current per-gallon caps of 80 ppm at the refinery
gate and 95 ppm downstream. We co-proposed refinery gate per-gallon cap
standards of 50 ppm and 80 ppm (with downstream caps of 65 and 95,
respectively), and we requested comment on a refinery gate cap of 20
ppm.
    In assessing the potential of a lower refinery gate cap of 50 ppm,
we found that it would directionally increase the costs of the Tier 3
program. Our analysis shows that a 50 ppm cap would increase the cost
of the Tier 3 gasoline sulfur standards by approximately 10 percent
(see RIA Chapter 5). A cap at this level would result in higher capital
costs for a number of refiners due to the decreased ability to handle
off-spec product with a lower refinery gate cap. The need for
installation of additional tankage and/or increased refinery processing
capability would also be greater, as refiners must ensure that they can
continue to produce saleable product and meet demand in the event of an
upset or an off-spec batch of fuel.
    Additionally, the more stringent cap would unlikely provide
significant additional emission benefits nationwide. As discussed
previously in Sections III through V, the emissions benefits associated
with the Tier 3 program are mainly associated with the reduction in the
average sulfur content of gasoline from 30 to 10 ppm, since vehicle
emissions are proportional to the sulfur content of the fuel; changes
in the cap would not affect this. We anticipate that in most (if not
all) cases refineries will make operational changes and/or investments
in order to reduce their credit burden and reduce their compliance
costs; thus, we anticipate that most refineries, including those using
credits, will still average less than 20 or 30 ppm in their physical
gasoline production. While there will certainly be some variations
above and below 10 ppm (just as there are today relative to the 30 ppm
standard under the current Tier 2 program), it is not possible for us
to predict them in a way that we could quantify the associated
emissions and air quality impacts. As a result, we cannot currently
estimate the potential benefits of a 50 ppm cap. However, during the
implementation of the program we will be monitoring in-use sulfur
levels and further evaluating in-use sulfur levels and their impact on
vehicle emissions. This will provide us additional information with
which to evaluate the potential benefits of a lower sulfur cap, if
warranted.

C. Program Start Date

    We are finalizing the Tier 3 vehicle emissions and fuel standards
with a 2017 start date, considering the vehicle and its fuel together
as an integrated system. As described in Section IX.A.1 and 2, we
considered different phase-ins for the vehicle program. We have also
considered the comments requesting additional lead time for the fuel

program. As discussed in Section V.L.3, we believe that the lead time
provided is sufficient to meet a January 1, 2017, start date for the
fuel sulfur standard, especially coupled with the flexibilities being
offered as part of the program and the fact that only a few refineries
will need to install grassroots equipment to meet the Tier 3 standards.
As discussed in Section V.D, we did consider and are finalizing, in
response to comments, a provision allowing refiners to carry over
credits from Tier 2.
    Given that the lead time and associated programmatic flexibility we
are finalizing is sufficient to allow industry to readily comply; we do
not expect that a delay in the start date of the fuel standards would
change the cost of compliance; any further delay in the program start
date would simply delay the actions to comply. Furthermore, delaying
the start of the program would forego significant emissions, air
quality, and health benefits. Sections III and VIII describe the
impacts of the Tier 3 standards in the year 2018. The majority of these
impacts result from the effects of the fuel sulfur standard on the
existing fleet, because there will be limited penetration of Tier 3
vehicles in 2018, and even those vehicles will not yet be meeting fully
phased-in standards. Thus, the 2018 estimates of emission reductions,
air quality improvements, and health benefits are an approximation of
the benefits that would be foregone for each year that the program is
delayed. Because we believe the start of the Tier 3 program is feasible
and appropriate, and its delay would forego significant benefits, we
are finalizing, as proposed, fuel sulfur standards that take effect
January 1, 2017.

X. Economic Impact Analysis

A. Introduction

    The rule will affect two sectors directly: Vehicle manufacturing
and petroleum refining. For these two regulated sectors, the economic
impact analysis discusses the market impacts from the rule: Changes in
price and quantity sold. In addition, although analysis of employment
impacts is not part of a benefit-cost analysis (except to the extent
that labor costs contribute to costs), employment impacts of federal
rules are of particular concern in the current economic climate of
sizeable unemployment. Executive Order 13563, ``Improving Regulation
and Regulatory Review'' (January 18, 2011), states, ``Our regulatory
system must protect public health, welfare, safety, and our environment
while promoting economic growth, innovation, competitiveness, and job
creation'' (emphasis added). For this reason, we are examining the
effects of this rule on employment in the regulated sectors.
    Some commenters suggest that the overall effects of Tier 3 on the
economy are likely to be positive, because the standards encourage
innovation and reduce emissions. In addition, they suggest that Tier 3
will lead to greater employment to develop the emissions control
technologies and to upgrade refineries. As discussed further below,
other commenters suggest negative impacts, especially due to the fuel
standards. The Motor and Equipment Manufacturers Association asks that
the regulations ``be based on sound science and data and balance the
public interest objectives with economic realities of manufacturers.''
EPA has used the best available information in developing these
standards (including the use of peer reviewed literature, peer reviewed
models, public comments received, etc.), and has documented its final
estimates of the economic impacts from these standards in the RIA.

B. Vehicle Sales Impacts

    This rule takes effect from MY 2017-2025. In the intervening years,
it is possible that the assumptions underlying a quantitative analysis,
as well as market conditions, might change. For this reason, we present
a qualitative discussion of the effects on vehicle sales of the
standards at the aggregate market level. Vehicle manufacturers are
expected to comply with the standards primarily through technological
changes to vehicles. These changes to vehicle design and manufacturing
are expected to increase manufacturers' costs of vehicle production.
    Section VII.A estimates the increase in vehicle costs due to the
standards. These costs differ across years and range from $46 to $65
for cars, $73 to $88 for trucks and $33 to $75 for Class 2b/3 vehicles
(see Section VII.A). These costs are small relative to the cost of a
vehicle. In a fully competitive industry, these costs would be entirely
passed through to consumers. However in an oligopolistic industry such
as the automotive sector, these increases in cost may not fully pass
through to the purchase price, and the consumers may face an increase
in price that is less than the increased manufacturers' costs of
vehicle production.\587\ We do not quantify the expected level of cost
pass-through or the ultimate vehicle price increase consumers are
expected to face, apart from noting that prices are expected to
increase by an amount up to the increase in manufacturers' costs.
---------------------------------------------------------------------------

    \587\ See, for instance, Gron, A., and Swenson, D. (2000), Cost
Pass-Through in the U.S. Automobile Market. Review of Economics and
Statistics 82, 316-324 (Docket EPA-HQ-OAR-2011-0135-0056), who found
significantly less than full-cost pass-through using data from 1984-
1994. Using full-cost pass-through overstates costs and thus
contributes to lower vehicle sales than using a lower estimate. To
the extent that the auto industry has become more competitive over
time, full-cost pass-through may be more appropriate than a result
based on this older study.
---------------------------------------------------------------------------

    This increase in price is expected to lower the quantity of
vehicles sold. Given that we expect that vehicle prices will not change
by more than the cost increase, we expect that the decrease in vehicle
sales will be negligible.
    The effect of this rule on the use and scrappage of older vehicles
is related to its effects on new vehicle prices and the total sales of
new vehicles. The increase in price is likely to cause the ``turnover''
of the vehicle fleet (i.e., the retirement of used vehicles and their
replacement by new models) to slow slightly, thus reducing the
anticipated effect of the rule on fleet-wide emissions. Because we do
not estimate the effect of the rule on new vehicle price changes nor do
we have a good estimate of the effect of new vehicle price changes on
vehicle turnover, we have not attempted to estimate explicitly the
effects of the rule on scrappage of older vehicles and the turnover of
the vehicle fleet.
    Commenters note that the incentives to go beyond the 8-year/80,000-
mile warranty could improve vehicle reliability and lower costs, in
addition to improving air quality. Other commenters suggest that
harmonizing standards across the whole U.S. will benefit the economy.
EPA agrees that harmonized standards will simplify manufacturing and
marketing decisions for automakers. The Manufacturers of Emission
Controls Association points out that many SULEV- and PZEV-compliant
vehicles have already been sold in the U.S. Commenters did not raise
other concerns with the qualitative vehicle sales analysis.

C. Impacts on Petroleum Refinery Sector Production

    The key change for refiners from the standards is more stringent
sulfur requirements. This change to fuels is expected to increase
manufacturers' costs of gasoline production by about 0.65 cents per
gallon (see Section VII.B).
    Some commenters raise concerns about the economic burdens to
refineries and to consumers who must buy more expensive gasoline, in
part based on estimates of the costs of the

standards as high as 6-9 cents per gallon. As discussed in Section
VII.B of this preamble, EPA has considered the costs to refineries and
has estimated that the additional cost of gasoline will be about 0.65
cents per gallon. Though some refineries may face costs of up to 2.1
cents per gallon, and one refinery up to 2.8 cents per gallon, most
will face much lower costs, as the averaging, banking, and trading
provisions of the standards significantly ease the challenge of
refineries to meet the standards.
    In a perfectly competitive industry, this cost would be passed
along completely to consumers. In an imperfectly competitive industry,
as noted above, full cost pass-through is not necessary: Firms may
choose to reduce impacts on sales by not passing along full costs. In
2004, the Federal Trade Commission reported that ``concentration for
most levels of the petroleum industry has remained low to moderate.''
\588\ Thus the assumption of competitive markets has some foundation in
this industry. We estimate that the price increase that consumers are
likely to face should be positive and up to the increase in
manufacturers' costs of gasoline production.
---------------------------------------------------------------------------

    \588\ Federal Trade Commission, Bureau of Economics. (2004). The
Petroleum Industry: Mergers, Structural Change, and Antitrust
Enforcement. Retrieved August 16, 2011 from Federal Trade Commission
Web site: http://www.ftc.gov/os/2004/08/040813mergersinpetrolberpt.pdf (Docket EPA-HQ-OAR-2011-0135-0055).
---------------------------------------------------------------------------

    The Emissions Control Technology Association (ECTA) and Northeast
States for Coordinated Air Use Management (NESCAUM) note that previous
Tier 2 standards, which required greater reductions in absolute
magnitude, do not appear to have had measurable adverse impacts on
refineries. ECTA cites a study by Navigant Economics that found no
measurable impact on gasoline price from Tier 2. NESCAUM notes that
refineries used a number of technologies and facility improvements to
achieve the standards in a cost-effective manner, and notes that the
North American refining industry is making significant new investments
in response to favorable long-term conditions. Small increases in
gasoline price due to standards may be very difficult to identify,
because of the natural volatility of gasoline prices.
    The effect of higher gasoline prices on gasoline sales is expected
to be different over the short and long term. In the long run, in
response to the increase in fuel costs, consumers can more easily
change their driving habits, including where they live or what vehicles
they use. Because of this, we expect that gasoline sales will decrease
more in the long run compared to the short run as a result of the price
increase due to the rule. However, because manufacturers' costs are
expected to increase less than one cent per gallon, we expect that the
decrease in gasoline sales will be negligible over all time horizons.

D. Employment Impacts

    This section discusses changes in employment due to the rule. We
focus on the auto manufacturing sector and the refinery sector because
they are directly regulated, and because they are likely to bear a
substantial share of changes in employment due to this rule. We
partially quantify impacts in the auto sector, providing a mix of
qualitative and quantitative discussion, following the methods used in
the Final Rulemaking for 2017-2025 Model Year Light-Duty Vehicle
Greenhouse Gas Emissions and Corporate Average Fuel Economy
Standards.\589\ For the refinery sector we provide a qualitative
analysis. We also include discussion of effects on the motor vehicle
parts manufacturing sector because the auto manufacturing sector can
either produce parts internally or buy them from an external supplier,
and we do not have estimates of the likely breakdown of effort between
the two sectors. For the same reasons, we discuss effects on producers
of equipment that refiners will use to comply with the standards.
---------------------------------------------------------------------------

    \589\ 77 FR 62623 (October 15, 2012).
---------------------------------------------------------------------------

    Chevron Products Company states that we did not consider the
economic context of the time when discussing our impacts. As we stated
in the NPRM, we recognize the importance of context. When the economy
is at full employment, an environmental regulation is unlikely to have
much impact on net overall U.S. employment; instead, labor would
primarily be shifted from one sector to another. These shifts in
employment impose an opportunity cost on society, approximated by the
wages of the employees, as regulation diverts workers from other
activities in the economy. In this situation, any effects on net
employment are likely to be transitory as workers change jobs (e.g.,
some workers may need to be retrained or require time to search for new
jobs, while shortages in some sectors or regions could bid up wages to
attract workers).
    On the other hand, if a regulation comes into effect during a
period of high unemployment, a change in labor demand due to regulation
may affect net overall U.S. employment because the labor market is not
in equilibrium. Schmalansee and Stavins point out that net positive
employment effects are possible in the near term when the economy is at
less than full employment due to the potential hiring of idle labor
resources by the regulated sector to meet new requirements (e.g., to
install new equipment) and new economic activity in sectors related to
the regulated sector.\590\ In the longer run, the net effect on
employment is more difficult to predict and will depend on the way in
which the related industries respond to the regulatory requirements. As
Schmalansee and Stavins note, it is possible that the magnitude of the
effect on employment could vary over time, region, and sector, and
positive effects on employment in some regions or sectors could be
offset by negative effects in other regions or sectors. For this
reason, they urge caution in reporting partial employment effects since
it can ``paint an inaccurate picture of net employment impacts if not
placed in the broader economic context.''
---------------------------------------------------------------------------

    \590\ Schmalensee, R., & Stavins, R. (2011). A Guide to Economic
and Policy Analysis of EPA's Transport Rule'' White paper
commissioned by Excelon Corporation (Docket EPA-HQ-OAR-2011-0135-
0054).
---------------------------------------------------------------------------

    A number of commenters (including unions, environmentalists,
investor organizations, Medical Advocates for Health Air, NESCAUM, and
the National Association of Clean Air Agencies) argue that the
standards will increase employment, by stimulating auto companies and
refiners to invest in pollution abatement equipment. As will be
discussed further below, EPA agrees that the standards are likely to
lead to more employment to provide abatement equipment, but employment
due to production may also be reduced (although by very small amounts)
due to incrementally higher prices for vehicles and fuel; we expect the
net impact on employment in the regulated sectors to be small.
    Chevron Products Company states that we do not account for the
hardship on local and regional economies due to the increase in
refinery costs. Because we do not consider employment impacts to be
large, even at local and regional scale, we do not expect large impacts
on the economies at that scale.
    ECTA argues that job impacts will be not only positive in the auto
and auto parts sectors, but substantially more positive than EPA
states, based on Regional Input-Output Modeling System (RIMS)
multipliers that find increases of 5.9 jobs for every $1 million
investment in new auto parts. Multiplier impacts trace the entire chain
of job impacts

associated with an expenditure, including factors such as changes in
employment in retail establishments due to changes in workers in the
auto sector. Because the expenditures will occur when unemployment is
still high, ECTA argues, it is important to consider the multiplier
effects of the expenditures that are embedded in the RIMS multipliers.
As discussed above, the multiplier impacts of expenditures depend
heavily on the state of the macroeconomy. Because of uncertainty over
the state of the economy when the increased expenditures will occur,
EPA has not quantified the multiplier impacts due to changes in
employment associated with these standards. As discussed again below,
some expenditures, perhaps especially in the refinery sector, will
occur before the standards take effect, to get the manufacturing
processes in place to meet the standards. These near-term expenditures
may have some multiplier effects, because they are more likely to have
their impacts during the current period of above-average unemployment.
In contrast, the ongoing costs of complying with the standards, which
contribute most directly to price increases, are likely to come in
future years, when it is expected that unemployment rates will be
lower.
    The Mercatus Center at George Mason University recommended that we
``acknowledge that both jobs gained and jobs destroyed are costs of the
proposed regulation. Ideally, compliance jobs should be minimized, not
viewed as a benefit of a regulation.'' This assertion is confusing, in
that it implies that any effect on employment, positive or negative, is
costly. Marathon Petroleum Company and the American Petroleum Institute
with the Association of Fuel and Petroleum Manufacturers argue that
employment impacts should not be counted as benefits. Our analysis of
the employment impacts of the standards is intended to identify
additional ways that these standards will affect the public. Employment
clearly provides benefits to the people who are employed, and reducing
unemployment is considered a desirable outcome in times of high
unemployment. EPA disagrees that minimizing compliance jobs should be
an independent objective of this rulemaking. The objective of the
program is to improve air quality through reductions in vehicle
emissions; we provide information concerning employment impacts as part
of our overall analysis of economic impacts from the rule.\591\
---------------------------------------------------------------------------

    \591\ We note that employment shows up in the benefit-cost
analysis through labor costs, which are included in the costs of
achieving the standards; any increases in employment are part of the
increased expenditures due to the standards, and decreases in
employment reduce expenditures.
---------------------------------------------------------------------------

    The Mercatus Center also requests that we consider the long-term
effects of unemployment on workers who may lose jobs, and that we
acknowledge that those who lose jobs may not be the same people who
gain jobs. We recognize there are costs to workers who shift from one
job to another,\592\ but we also note, as discussed further below, that
we expect very small employment impacts from the standards.
---------------------------------------------------------------------------

    \592\ E.g., Jacobson, Louis S., Robert J. LaLonde, and Daniel G.
Sullivan, ``Earnings Losses of Displaced Workers.'' American
Economic Review 83(4) (1993): 685-709 (Docket EPA-HQ-OAR-2011-0135).
---------------------------------------------------------------------------

    After reviewing these comments, we conclude they have not
identified any specific reason to depart from the approach to
employment analysis that was used in the NPRM, though we here use a
slightly modified theoretical framework. In the NPRM, we followed the
theoretical structure in a study by Morgenstern, Pizer, and Shih (2002)
\593\ of the impacts of regulation in employment in the regulated
sectors. We here shift to a very similar framework by Berman and
Bui.\594\ RIA Chapter 9.1 provides additional background on this
framework. In Berman and Bui's (2001, p. 274-75) theoretical model, the
change in a firm's labor demand arising from a change in regulation is
decomposed into two main components: Output and substitution
effects.\595\
---------------------------------------------------------------------------

    \593\ Morgenstern, R., Pizer, W., & Shih, J. (2002). Jobs Versus
the Environment: An Industry-Level Perspective. Journal of
Environmental Economics and Management 43, 412-436 (Docket EPA-HQ-
OAR-2011-0135-0057).
    \594\ Berman, E. and L. T. M. Bui (2001). ``Environmental
Regulation and Labor Demand: Evidence from the South Coast Air
Basin.'' Journal of Public Economics 79(2): 265-295 (Docket EPA-HQ-
OAR-2011-0135).
    \595\ The authors also discuss a third component, the impact of
regulation on factor prices, but conclude that this effect is
unlikely to be important for large competitive factor markets, such
as labor and capital. Morgenstern, Pizer and Shih (2002) use a very
similar model, but they break the employment effect into three
parts: (1) The demand effect; (2) the cost effect; and (3) the
factor-shift effect. See Morgenstern, Richard D., William A. Pizer,
and Jhih-Shyang Shih. ``Jobs Versus the Environment: An Industry-
Level Perspective.'' Journal of Environmental Economics and
Management 43 (2002): 412-436 (Docket EPA-HQ-OAR-2011-0135-0057).
---------------------------------------------------------------------------

     The output effect describes how, if labor-intensity of
production is held constant, a decrease in output generally leads to a
decrease in labor demand. However, as noted by Berman and Bui, although
it is often assumed that regulation increases marginal cost, and
thereby reduces output, it need not be the case. A regulation could
induce a firm to upgrade to less polluting, and more efficient
equipment that lowers marginal production costs, for example. In such a
case, output could theoretically increase.
     The substitution effect describes how, holding output
constant, regulation affects the labor-intensity of production.
Although increased environmental regulation generally results in higher
utilization of production factors such as pollution control equipment
and energy to operate that equipment, the resulting impact on labor
demand is ambiguous. For example, equipment inspection requirements,
specialized waste handling, or pollution technologies that are added to
the production process may affect the number of workers necessary to
produce a unit of output. Berman and Bui (2001) model the substitution
effect as the effect of regulation on pollution control equipment and
expenditures that are required by the regulation and the corresponding
change in labor-intensity of production.
    In summary, as the output and substitution effects may be both
positive, both negative or some combination, standard neoclassical
theory alone does not point to a definitive net effect of regulation on
labor demand at regulated firms.
1. Employment Impacts in the Auto Sector
    Following the Berman and Bui (2001) framework, we consider two
effects for the auto sector: The output effect and the substitution
effect.
a. The Output Effect
    The output effect depends on the effects of this rule on vehicle
sales. If vehicle sales decrease, employment associated with these
activities will decrease. As discussed in Section X.B, we do not make a
quantitative estimate on the effect of the rule on vehicle sales but we
note that the decrease in vehicle sales is expected to be negligible.
Thus we expect any decrease in employment in the auto sector through
the output effect to be small as well.
b. The Substitution Effect
    The output effect, above, measures the effect due to new vehicle
sales only. The substitution effect measures the impacts due to the
changes in technologies needed for vehicles to meet the standards,
separate from the effect on output (that is, as though holding output
constant). This effect includes both changes in employment due to
incorporation of abatement technologies and overall changes in the
labor intensity of manufacturing. We estimate

the substitution effect by multiplying the ratio of workers to each $1
million of expenditures in the auto sector by the cost estimates for
complying with the rule. This approach estimates the effects of
increased expenditures while holding constant the labor intensity of
manufacturing; it does not take into account changes in labor intensity
due to changes in the nature of production. This latter effect could
either increase or decrease the employment impacts estimated here.\596\
---------------------------------------------------------------------------

    \596\ As noted above, Morgenstern et al. (2002) separate the
effect of holding output constant into two effects: The cost effect,
which holds labor intensity constant, and the factor shift effect,
which estimates those changes in labor intensity.
---------------------------------------------------------------------------

    Some of the costs of this rule will be spent directly in the auto
manufacturing sector, but it is also likely that some of the costs will
be spent in the auto parts manufacturing sector. We separately present
the ratios for both the auto manufacturing sector and the auto parts
manufacturing sector.
    There are several public sources for estimates of employment per $1
million expenditures. As discussed in the RIA, EPA examines several
sources for these estimates: The U.S. Bureau of Labor Statistics
(BLS)'s Employment Requirements Matrix (ERM),\597\ the Census Bureau's
Annual Survey of Manufactures \598\ (ASM), and its Economic Census. The
use of these ratios has both advantages and limitations. It is often
possible to estimate these ratios for quite specific sectors of the
economy: For instance, it is possible to estimate the average number of
workers in the light-duty vehicle manufacturing sector per $1 million
spent in the sector, rather than use the ratio from another, more
aggregated sector, such as motor vehicle manufacturing. As a result, it
is not necessary to extrapolate employment ratios from possibly
unrelated sectors. On the other hand, these estimates are averages for
the sectors, covering all the activities in those sectors; they may not
be representative of the labor required when expenditures are required
on specific activities, or when manufacturing processes change
sufficiently that labor intensity changes. For instance, the ratio for
the motor vehicle manufacturing sector represents the ratio for all
vehicle manufacturing, not just for emissions reductions associated
with compliance activities. In addition, these estimates do not include
changes in sectors that supply these sectors, such as steel or
electronics producers. They thus may best be viewed as the effects on
employment in the specific sectors due to the changes in expenditures
in those sectors, rather than as an assessment of all employment
changes due to these changes in expenditures.
---------------------------------------------------------------------------

    \597\ Bureau of Labor Statistics. Employment Requirements
Matrix. http://www.bls.gov/emp/ep_data_emp_requirements.htm
(Docket EPA-HQ-OAR-2011-0135).
    \598\ U.S. Census Bureau. Annual Survey of Manufactures. http://www.census.gov/manufacturing/asm/index.html (Docket EPA-HQ-OAR-2011-
0135).
---------------------------------------------------------------------------

    The values used here are adjusted to remove the employment effects
of imports through use of a ratio of domestic production to domestic
sales of 0.667.\599\ As discussed in the RIA, trends in the BLS ERM are
used to estimate productivity improvements over time that are used to
adjust these ratios over time.
---------------------------------------------------------------------------

    \599\ To estimate the proportion of domestic production affected
by the change in sales, we use data from Ward's Automotive Group for
total car and truck production in the U.S. compared to total car and
truck sales in the U.S. For the period 2001-2010, the proportion is
66.7 percent (Docket EPA-HQ-OAR-2011-0135-0333).
---------------------------------------------------------------------------

    Table X-1 provides estimates of the substitution effect of this
rule on employment. Chapter 2.1 of the RIA discusses the vehicle cost
estimates developed for this rule, discussed in Section VII.A,
presented in the second column. The maximum value for employment
impacts per $1 million (2011$) (before adjustments for changes in
productivity, after accounting for the share of domestic production) is
1.771 if all the additional costs are in the parts sector; the minimum
value is 0.389, if all the additional costs are in the light-duty
vehicle manufacturing sector. Increased costs of vehicles and parts
will, by itself, and holding labor intensity constant, be expected to
increase employment between 2017 and 2025 by some hundreds of jobs each
year.
    While we estimate employment impacts, measured in job-years,
beginning with program implementation, some of these employment gains
may occur earlier as auto manufacturers and parts suppliers hire staff
in anticipation of compliance with the standard. A job-year is a way to
calculate the amount of work needed to complete a specific task. For
example, a job-year is one year of work for one person.

            Table X-1--Employment Effects Due to Increased Costs of Vehicles and Parts, in Job-Years
----------------------------------------------------------------------------------------------------------------
                                                                                Minimum employment
                                                                       Maximum employment      effect  (if all
                     Year                        Costs  (Millions of     effect  (if all     expenditures are in
                                                       2010$)          expenditures are in     the light duty
                                                                        the parts sector)    vehicle mfg sector)
----------------------------------------------------------------------------------------------------------------
2016..........................................                   $21                     0                     0
2017..........................................                   297                   400                   100
2018..........................................                   615                   800                   200
2019..........................................                   653                   800                   200
2020..........................................                   697                   800                   200
2021..........................................                   725                   800                   200
2022..........................................                   758                   800                   200
2023..........................................                   751                   800                   200
2024..........................................                   761                   800                   200
2025..........................................                   773                   700                   200
----------------------------------------------------------------------------------------------------------------

c. Summary of Employment Effects in the Auto Sector
    The overall effect of the standards on auto sector employment
depends on the relative magnitude of the output effect and the
substitution effect. Because we do not have quantitative estimates of
the output effect, and only a partial estimate of the substitution
effect, we cannot reach a quantitative estimate of the overall
employment effects of the standards on auto sector employment or even
whether the total effect will be positive or negative. However, given
that the expected increase in production costs to the auto
manufacturers is relatively small, we expect that the magnitudes of all
these effects will be small as well.
    Additionally, the standards are not expected to provide incentives
for

manufacturers to shift employment between domestic and foreign
production. This is because the increased standards of the rule will
apply to vehicles sold in the U.S. regardless of where they are
produced. If foreign manufacturers already have increased expertise in
satisfying the requirements of the rule, there may be some initial
incentive for foreign production, but the opportunity for domestic
manufacturers to sell in other markets might increase. To the extent
that the requirements of this rule might lead to installation and use
of technologies that other countries may seek now or in the future,
developing this capacity for domestic production now may provide some
additional ability to serve those markets. This potential benefit for
domestic production will not apply if other countries are not likely to
have similar standards.
2. Refinery Employment Impacts
    The Berman and Bui (2001) framework of output and substitution
effects can also be applied to the impact of the rule on employment in
the refinery sector. Here we use a fully qualitative approach. A
qualitative discussion allows for a wider incorporation of additional
considerations, such as timing of impacts and the effects of the rule
on imports and exports. Because the discussion is qualitative, we do
not sum the net effects on employment.
    The output effect on refining sector employment is expected to be
negative. The discussion in Section X.C above suggested that the
standards will cause a small decrease in the quantity of gasoline
demanded due to higher production costs being passed through to
consumers. This slightly reduced level of sales will likely have a
negative impact on employment in the refining sector. While we do not
quantify the level of job losses that could be expected here, recall
that the quantity of gasoline sold as a result of these standards is
expected to decrease by only a very small amount over any time horizon.
    The substitution effect of the standards on employment in the
refining sector can be either positive or negative in the Berman and
Bui framework; here, we expect a small, possibly positive impact. In
order to satisfy the requirements of the rule, firms in the refining
industry are expected to perform additional work that will require
hiring more employees, especially perhaps in the short run. Section
V.L.2.e discusses the expected employment needed to reduce the sulfur
content of fuels; as noted there, to meet the Tier 3 sulfur standards,
refiners are expected to invest $2 billion between 2012 and 2019 and
utilize approximately 250 front-end design and engineering jobs and
1,500 construction jobs. As the petroleum sector employed approximately
71,000 workers in 2011, this temporary increase in employment will be
small when compared to 2011 levels.
    Chevron Products Company states that we have not considered global
competitive forces in our assessment. As we discussed in the NPRM, this
rule is not expected to provide incentives to shift employment between
domestic and foreign production. First, the standards will apply to
gasoline sold in the U.S. regardless of where it has been produced.
U.S. gasoline demand is projected to continue to decline for the
foreseeable future in response to higher gasoline prices, more
stringent vehicle and engine greenhouse gas and fuel economy standards
as well as increased use of renewable fuels. As a result, this analysis
of incentives to shift employment between domestic and foreign
production focuses on investments for existing capacity instead of
expanding capacity.\600\ In this case, what is relevant is whether the
necessary modifications to comply with Tier 3 will be significantly
cheaper overseas than in the U.S.
---------------------------------------------------------------------------

    \600\ While refinery capacity has been increasing around the
world in recent years, it has been designed primarily to supply
foreign markets other than the U.S. (e.g., increasing demand in
China and India).
---------------------------------------------------------------------------

    The main impacts on capital and operating costs to comply with Tier
3 associated with adding hydrotreating capacity are likely to be
similar overseas as in the U.S. This is particularly true when
analyzing likely sources of U.S. imports. The majority of gasoline
imported to the U.S. today comes into the East Coast and is sourced out
of either Europe or refineries in Canada or the Caribbean that exist
almost solely to supply the U.S. market. These Canadian and Caribbean
refineries, by virtue of their focus on the U.S. market, are very
similar to U.S. based refineries and would be expected to have to incur
similar capital and operating costs as their U.S. based competitors
meeting the 10 ppm standard. Furthermore, the European refineries are
already producing gasoline to a 10 ppm sulfur cap for Europe. To the
extent they have refinery streams that are more difficult to
hydrotreat, the U.S. market currently serves as an outlet for their
higher sulfur gasoline streams. As a result, they may incur capital and
operating costs on a per gallon basis at least as high as for their
U.S. based competitors for these remaining higher sulfur gasoline
streams. Alternatively, they may instead choose to find markets outside
the U.S., opening the way for increased U.S. based refinery demand.
    Finally, despite refining industry projections that previously
imposed diesel rules would lead to greater U.S. reliance on imports
through major negative impacts on domestic refining, the reverse has
actually occurred. Over the last 8 years, imports of gasoline and
diesel fuel have continued to be the marginal supply, and have even
dropped precipitously so that the U.S. is now a net exporter of diesel
fuel and is importing half the gasoline that it did at its peak in
2006. With the projected decline in future gasoline demand in the U.S.
as vehicle fuel efficiency improves, gasoline imports are expected to
continue to decline.
    Thus it is expected that for the refining sector, the output effect
will lower employment, and the substitution effect will raise
employment. As a whole then, it is not evident whether the standards
will increase or decrease employment in the refining sector. However,
given the small anticipated reduction in quantity sold, it appears that
the standards will not have major employment consequences for this
sector.
    The petroleum refining industry is one of the manufacturing
industries studied by Berman and Bui (2001) when they looked at the
effect of environmental expenditures on employment. They found that
``Employment effects are very small, generally positive, but not
statistically different from zero.'' (p. 281) [Berman and Bui, Table
3]. Berman and Bui also state that the estimates rule out large
negative effects (p. 282). Because most of the abatement cost of the
regulations they analyze is incurred by refineries, in their sample,
they report separate employment effects for refineries and non-
refineries ``which are also all small.'' (p. 282). Berman and Bui
suggest some explanations for the zero or small estimates, particularly
for oil refineries: they are capital-intensive industries with
relatively little employment when compared to other manufacturing; they
face relatively inelastic demand because they sell output in local
markets and/or because there are no unregulated refineries to compete
with; and, finally, regulations may have been associated with
productivity gains in petroleum refineries. We note that the
regulations that these estimates are derived from are not directly
comparable to the current rule; they are based on the costs of

reductions in refinery air pollution emissions instead of changing fuel
properties, and therefore may not be applicable for these standards.
The American Petroleum Institute requested that we delete reference to
use of analysis by Morgenstern et al. (2002) because it is based on
temporary construction jobs and a single study. We had presented that
figure not as a conclusive estimate, but rather as one estimate that we
too consider of unclear applicability to the standards; we have
substituted Berman and Bui's results. Several commenters cite a study
by Navigant Economics that estimates 24,500 installation jobs during
the first three years of the program, and 5,300 permanent jobs,
associated with the refinery standards. These estimates include
employment not just in the refinery sector, but also multiplier effects
(discussed above) for suppliers, which EPA does not estimate. As noted
above, EPA estimates approximately 250 front-end design and engineering
jobs and 1,500 construction jobs.
    Section 5.3 of the RIA contains some historical discussion
regarding the impact on refineries and refining capacity of earlier
rules which resulted in higher costs for refiners. Over the period
2003-2011, when a number of rules were being implemented, EIA data show
a net of two refinery closures on its Web site. Meanwhile, over this
same period the average size of U.S. refineries increased from 113,000
barrels per day to 123,000 barrels per day, and total U.S. refining
capacity increased by six percent. Thus, historically during a time
when rules with much larger expected impacts were being implemented
(the 2003 ultra-low sulfur nonroad diesel proposal alone was expected
to have a cost impact on refineries more than five times greater than
the current rule), U.S. refining capacity increased even as the number
of U.S. refineries slightly fell. While closing refineries has a
negative effect on industry employment, it is likely that the increased
refining capacity at many of the remaining plants had a positive effect
on industry employment.
    The standards are also likely to have a positive impact on
employment among producers of equipment that refiners will use to
comply with the standards. Section V.A.2.c notes that some refiners are
expected to need to revamp their current treatment units, and others
will need to add additional treatment units. Producers of this
equipment will be expected to hire additional labor to meet this
increased demand. We also note that the employment effects may be
different in the immediate implementation phase than in the ongoing
compliance phase. It is expected that the employment increases through
the substitution effect from revamping old equipment and installing
additional equipment should occur in the near term, when current
unemployment levels are high, and the opportunity cost of workers is
relatively low. Meanwhile, the employment decreases in the refining
sector from the output effect will not start until 2017, when
compliance will be required, and when unemployment is expected to be
reduced; in a time of full employment, any changes in employment levels
in the regulated sector are mostly expected to be offset by changes in
employment in other sectors.

XI. Public Participation

    Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on May 21, 2013 (78 FR 29816), and we considered these
comments in developing the final rule. In addition, we held public
hearings on the proposed rulemaking on April 24 and 29, 2013, and we
have considered comments presented at the hearing.
    Throughout the rulemaking process, EPA met with stakeholders
including representatives from various industries (vehicle
manufacturers, fuel refiners, fuel distributors, suppliers, engine
manufacturers, etc.), states, non-governmental organizations, and
others.
    We have prepared a detailed Summary and Analysis of Comments
document, which describes the comments we received on the proposal and
our responses. The Summary and Analysis of Comments is available in the
docket for this rule at the Internet address listed under ADDRESSES, as
well as on the Office of Transportation and Air Quality Web site
(http://www.epa.gov/tier3.htm). In addition, comments and responses for
key issues are included throughout this preamble.

XII. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    Under section 3(f)(1) of Executive Order 12866 (58 FR 51735,
October 4, 1993), this action is an ``economically significant
regulatory action'' because it is likely to have an annual effect on
the economy of $100 million or more. Accordingly, EPA submitted this
action to the Office of Management and Budget (OMB) for review under
Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any
changes made in response to OMB recommendations have been documented in
the docket for this action.
    In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action. This analysis is contained in
Sections VII and VIII of this preamble and in Chapter 8 of the RIA. A
copy of the analysis is available in the docket for this action.

B. Paperwork Reduction Act

    This action is continuing existing information collection from the
Tier 2 program, with additional changes as noted below. The Office of
Management and Budget (OMB) has previously approved the information
collection requirements contained in the existing the existing Tier 2
gasoline rule (65 FR 6698, February 10, 2000), under the provisions of
the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The ICRs were
assigned OMB Control Numbers 2060-0437 (fuels), 2060-0104 (light-duty
vehicles), 2060-0287 (heavy-duty vehicles), and 2060-0086 (in-use
verification program). The ICRs are being revised to reflect the
changes being finalized today. The additional information collection
requirements in this rule will be submitted for approval to OMB under
the Paperwork Reduction Act. The information collection requirements
are not enforceable until OMB approves them.
    This rule contains reporting and recordkeeping requirements to
implement EPA's motor vehicle certification program and the
manufacturers' in-use verification program (IUVP). Existing regulations
require manufacturers to submit emissions information to EPA in
conjunction with these two programs. Manufacturers must submit an
application for emission certification prior to production. The
application describes the major aspects of the product line, technical
details of the emission control systems, and the results of tests to
indicate compliance with the emissions limitations. The application and
supporting test results are reviewed and, if appropriate, a certificate
of conformity is issued. Subsequently, low- and high-mileage vehicles
in use are tested for emissions by manufacturers and the results of
those tests reported to EPA. EPA estimates the total number of
respondents to be 55, the total burden hours to be 73,567, and the
total cost to respondents to be $7,690,934.
    As a result of the change in certification test fuel from 9 RVP E0
to

9 RVP E10, EPA must assess the need to make test procedure adjustments
related to fuel economy testing such that the change in test fuel
quality does not impact the stringency of the CAFE standards. EPA
recognized that this action was needed in the proposed rule, but
deferred proposing a specific adjustment or set of adjustments because
the data needed to determine the value(s) for the adjustments was not
available. Historically, manufacturers have used criteria pollutant
emission information from the exhaust emission testing for
certification as part of the data needed to determine fuel economy
values. The final rule sets a process in motion for EPA to gather the
information need to develop any test procedure adjustments. While the
basic data will likely be available in late 2015 or early 2016, any
rule to enact potential test procedure adjustments will take additional
time. During this interim period, any LEV III or early Tier 3 vehicles
using E10 test fuel for exhaust emission certifications will have to be
tested for fuel economy values on E0. EPA has studied the expected
phase-in rates for these vehicles in LEV III and estimates that for the
2015-2017 model years there will an average about 35 additional tests
per year for the industry with an hour burden of about 30 hours per
test. Thus, over this three-year period, the added hour burden is 1050
hours and the sum of the cost of testing and the hour burden is
$402,150.
    This rule also contains reporting, recordkeeping, and Product
Transfer Document (PTD) requirements for refiners and importers of
motor vehicle gasoline. This rule contains registration, reporting,
recordkeeping, and PTD requirements for producers and importers of
denatured fuel ethanol (DFE) and other oxygenates. This rule also
contains registration, recordkeeping, and PTD requirements for
producers of certified ethanol denaturants. This rule also contains
recordkeeping and PTD requirements for producers of gasoline additives.
The reporting, recordkeeping, and PTD requirements for refiners and
importers of motor vehicle gasoline are the same requirements that
exist under the Tier 2 sulfur program.\601\ The registration and
reporting requirements for DFE producers and importers are new as are
the registration requirements for producers and importers of certified
ethanol denaturants. The recordkeeping and PTD requirements for
gasoline additive producers, DFE manufacturers, ethanol denaturant
manufacturers, and downstream parties under the Tier 3 program are new
but should be minimal since we expect that they are already followed as
part of normal business practices. EPA estimates the total number of
respondents to be 2,675, the total burden hours to be 84,000 and the
total cost to respondents to be $6,300,000.
---------------------------------------------------------------------------

    \601\ 65 FR 6698, February 10, 2000; OMB Control Number: 2060-
0437; EPA ICR 1907.05.
---------------------------------------------------------------------------

    Finally, this rule also contains provisions for qualifications of
laboratories on test methods. We have adopted recordkeeping and
reporting requirements that would apply to fuel testing laboratories.
The collected data will permit EPA to: (1) Qualify laboratories to use
test methods based upon accuracy and precision criteria supported by
industry; and (2) Ensure that various fuels meet the standards required
under the regulations at 40 CFR part 80 and that the associated
benefits to human health and the environment are realized. We estimate
that 750 laboratories may be subject to the information collection.
This estimate is based upon our experience with qualification of
laboratories under the existing diesel sulfur program. We estimate an
annual reporting burden of 95 hours per respondent and an annual
recordkeeping burden of 104 hours, yielding a total of 199 hours. For
those laboratories that elect to be reference installations, the annual
reporting burden would be 95 hours and the annual recordkeeping burden
would be 128 hours. Burden is defined at 5 CFR 1320.3(b).
    The ICR supporting statements can be found in Docket ID number EPA-
HQ-OAR-2011-0135.
    An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When the ICRs are
approved by OMB, the Agency will publish a technical amendment to 40
CFR part 9 in the Federal Register to display the OMB control numbers
for the approved information collection requirements contained in this
final rule.
    We did not receive any specific comments on the ICR; comments
received regarding compliance-related provisions are discussed above in
Sections IV and V.

C. Regulatory Flexibility Act

1. Overview
    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201 (see table below); (2) a small governmental jurisdiction that
is a government of a city, county, town, school district or special
district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.
    The following table provides an overview of the primary SBA small
business categories potentially affected by this regulation:

------------------------------------------------------------------------
                                                       Defined as small
                                    NAICS \a\ Code     entity by SBA if
            Industry                    (2007)        less than or equal
                                                              to
------------------------------------------------------------------------
Gasoline fuel refiners and        324110............  1,500 employees.
 importers.
Ethanol producers...............  325193............  1,000 employees.
Gasoline additive manufacturers.  325199............  1,000 employees.
                                  325998............  500 employees.
                                  424690............  100 employees.
Transmix processors.............  Varied............  1,500 employees.
Petroleum bulk stations and       424710............  100 employees.
 terminals.
Other warehousing and storage-    493190............  $25.5 million
 bulk petroleum storage.                               (annual
                                                       receipts).
Light-duty vehicle and light-     336111, 336112....  1,000 employees.
 duty truck manufacturers.

Independent commercial importers  811111, 811112 ,    $7 million (annual
                                   811198.             receipts).
Alternative fuel converters.....  335312............  1,000 employees.
                                  336312............  750 employees.
                                  336322............  ''
                                  336399............  ''
                                  811198............  $7 million (annual
                                                       receipts).
On-highway heavy-duty engine &    333618............  1,000 employees.
 vehicle (>8,500 lbs GVWR)
 manufacturers.
                                  336120............  ''
                                  336211............  ''
                                  336312............  750 employees.
------------------------------------------------------------------------
Note: \a\ North American Industrial Classification System.

2. Background
    EPA's Tier 2 Vehicle and Gasoline Sulfur Program, which was
finalized in February 2000, took a systems-based approach to motor
vehicle pollution by setting standards for both passenger vehicles and
their fuel (gasoline). The program set stricter tailpipe and
evaporative emissions standards for criteria pollutants from vehicles
beginning with model year (MY) 2004 and phasing in through 2009. The
program also lowered the sulfur content of gasoline, to a 30 ppm
refinery average, 80 ppm per-gallon cap, and 95 ppm downstream cap;
beginning in 2004 and phasing in through 2008. The potential to extend
the phase-in for small refiners and approved Gasoline Phase-In Area
(GPA) refiners through the end of 2010 was provided in the Highway
Diesel Rule \602\ in exchange for early compliance with the diesel
program. Similar to the Tier 2 rule, the Tier 3 program is a
comprehensive, systems-based approach to address the impact of light-
duty vehicles and certain heavy-duty vehicles on air quality and
health.
---------------------------------------------------------------------------

    \602\ 66 FR 5136 (January 18, 2001).
---------------------------------------------------------------------------

    Pursuant to section 603 of the RFA, EPA prepared an initial
regulatory flexibility analysis (IRFA) for the proposed rule and
convened a Small Business Advocacy Review Panel to obtain advice and
recommendations of representatives of the regulated small entities (see
78 FR 29816, May 21, 2013). A detailed discussion of the Panel's advice
and recommendations is found in the Panel Report, located in the
rulemaking docket (document number: EPA-HQ-OAR-2011-0135-0423). A
summary of the Panel's recommendations is presented at 78 FR 29994 (May
21, 2013).
    As required by section 604 of the RFA, we also prepared a final
regulatory flexibility analysis (FRFA) for today's final rule. The FRFA
addresses the issues raised by public comments on the IRFA, which was
part of the proposal of this rule. The FRFA is available for review in
the docket (see Chapter 10 of the RIA) and is summarized below.
3. Reason for Today's Rule
    This rule establishes more stringent vehicle emissions standards
and reduces the sulfur content of gasoline beginning in 2017, as part
of a systems approach in addressing the impacts of motor vehicles and
fuels on air quality and public health. The gasoline sulfur standards
will make emission control systems more effective and enable more
stringent vehicle emissions standards, and the vehicle standards will
reduce vehicle tailpipe and evaporative emissions. This will result in
significant reductions in pollutants such as ozone, particulate matter,
and air toxics. For a more detailed discussion of the reasoning for
today's rule, please see Sections II and III of this preamble. The
vehicle and fuel programs are further discussed in Sections IV and V,
respectively.
4. Legal Basis for Agency Action
    The Clean Air Act (CAA) authorizes EPA to establish emissions
standards for motor vehicles to address air pollution that may
reasonably be anticipated to endanger public health or welfare. EPA
also has authority to establish fuel controls to address such air
pollution. The authority for the vehicle emission standards comes from
CAA section 202(a), Section 202(k) provides EPA with authority to issue
and revise regulations applicable to evaporative emissions of
hydrocarbons from gasoline-fueled motor vehicles, and section 206(d)
authorizes EPA to establish methods and procedures for testing whether
a motor vehicle or motor vehicle engine conforms with section 202
requirements. The authority for the fuel standards comes from section
211(c).
    For more detailed information on our legal authority for today's
proposal, please see Sections II.A and V.M of this preamble.
5. Summary of Potentially Affected Small Entities
    The table above lists industries/sectors potentially affected by
the Tier 3 rule. For businesses potentially impacted by the Tier 3
vehicle standards, this includes vehicle manufacturers, alternative
fuel converters, and independent commercial importers. For businesses
potentially impacted by the Tier 3 gasoline sulfur standards, this
includes gasoline refiners and importers, distributors, fuel additive
manufacturers, transmix processors, and ethanol producers.
    EPA used a variety of sources to identify which entities are
appropriately considered ``small.'' EPA used the criteria for small
entities developed by the Small Business Administration under the North
American Industry Classification System (NAICS) as a guide. Information
about these entities comes from sources including the Energy
Information Administration (EIA) within the U.S. Department of Energy,
oil industry literature, EPA's certification data, and previous
rulemakings that have affected these industries. EPA then found
employment information for these companies using the business
information database Hoover's Online (a subsidiary of Dun and
Bradstreet). These entities fall under the categories listed in the
table.
6. Reporting, Recordkeeping, and Compliance
    For any emission control program, EPA must have assurances that the
regulated products will meet the standards. The program that EPA is
finalizing for manufacturers subject to this rule will include testing,
reporting, and recordkeeping requirements for manufacturers of vehicles
covered by the Tier 3 regulations. Testing requirements for these
manufacturers will include certification emission

(including deterioration factor) testing, in-use testing, and
production line testing. Reporting requirements will include emission
test data and technical data on the vehicles. Manufacturers must keep
records of this information.
    Similarly for any fuel control program, EPA must have the assurance
that fuel produced, distributed, sold and used meets the applicable
standard. The recordkeeping, reporting, and compliance provisions of
this rule are consistent with those in place today for other fuel
programs. Further, we will use existing registration and reporting
systems that parties in the fuel production and distribution industry
are already familiar with.
7. Related Federal Rules
    The primary federal rules that are related to this final rule are:
The Tier 2 Vehicle/Gasoline Sulfur rulemaking (65 FR 6698, February 10,
2000), the 2017 Light-duty Greenhouse Gas (LD GHG) rule (77 FR 62623),
and the Greenhouse Gas Emissions Standards and Fuel Efficiency
Standards for Medium- and Heavy-Duty Engines and Vehicles (HD GHG) rule
(76 FR 57106).
    The LD GHG and HD GHG rules are coordinated efforts by EPA and the
National Highway Traffic Safety Administration (NHTSA) taking steps to
reduce GHG emissions and improve fuel efficiency from on-road vehicles
and engines.
8. Steps Taken To Minimize the Economic Impact on Small Entities
a. Significant Panel Findings
    The Small Business Advocacy Review Panel (SBAR Panel, or the Panel)
considered regulatory options and flexibilities to help mitigate
potential adverse effects on small businesses as a result of this rule.
During the SBREFA Panel process, the Panel sought out and received
comments on the regulatory options and flexibilities that were
presented to SERs and Panel members. As described below, much of the
Panel's recommendations were proposed, and many of those flexibilities
are being finalized today. (The recommendations of the Panel are also
located in Section 9 of the SBREFA Final Panel Report, which is
available in the public docket.)
    In today's action we are also finalizing some additional
flexibilities that were not discussed during the Panel process.
b. Outreach With Small Entities and the Panel Process
    As required by section 609(b) of the RFA, as amended by SBREFA, we
conducted outreach to small entities and convened an SBAR Panel on
August 4, 2011 to obtain advice and recommendations of representatives
of the small entities that would be subject to the Tier 3 requirements.
    As part of the SBAR Panel process, we conducted outreach with
representatives of small businesses that would be affected by the rule.
We met with these SERs to discuss the potential rulemaking approaches
and flexibility options to decrease the impact of the rulemaking on
their industries. The SERs provided written comments to the Panel,
specifically on regulatory alternatives that could help to minimize the
rule's impact on small businesses.
    The Panel's findings and discussions were based on the information
that was available during the term of the Panel and issues that were
raised by the SERs during the outreach meetings and in their comments.
It was agreed that EPA should consider the issues raised by the SERs
and discussions had by the Panel itself, and that EPA should consider
comments on flexibility alternatives that would help to mitigate
negative impacts on small businesses to the extent legally allowable by
the Clean Air Act. Alternatives discussed throughout the Panel process
included those offered in previous or current EPA rulemakings, as well
as alternatives suggested by SERs and Panel members. A full discussion
of the regulatory alternatives and hardship provisions discussed and
recommended by the Panel can be found in the SBREFA Final Panel Report,
located in the rulemaking docket. A summary of the Panel's
recommendations, what the Agency proposed, and what is being finalized
today is discussed below. (A more detailed discussion of the final
provisions for small entities can be found in Sections IV.G and V.E.)
    It should be noted that during the Panel process, two additional
issues were discussed with SERs. EPA was considering extending the new
certification fuel specifications to all regulatory categories of
engines, vehicles, equipment, and fuel system components that use
gasoline. This would have included a wide range of additional
applications, including small nonroad engines used in lawn and garden
applications, recreational vehicles such as ATVs and snowmobiles,
recreational marine applications, on-highway motorcycles, and heavy-
duty gasoline engines. In addition, EPA considered new volatility (Reid
Vapor Pressure, or RVP) standards for in-use gasoline. Neither of these
issues was proposed, thus the discussion of Panel recommendations below
does not address these issues, however they are addressed in the Final
Panel Report.
c. Panel Recommendations, Proposed Provisions, and Provisions Being
Finalized Today
i. Tier 3 Fuels
(1) Lead Time--Sulfur
    The Panel recommended that EPA allow small refiners to postpone
their compliance with the Tier 3 program for up to three years. EPA
proposed, and is finalizing, this provision. Approved small refiners
will have from January 1, 2017 through December 31, 2019 to continue
production of gasoline with an average sulfur level of 30 ppm (per the
Tier 2 gasoline sulfur program). Compliance with the 10 ppm annual
average sulfur standard will begin on January 1, 2020. As discussed
further in Section V.D.6, small refiners may continue to generate
sulfur credits relative to the 30 ppm sulfur standard through December
31, 2019. Comments received on the small refiner provisions were
generally supportive of the proposed three-year delay. However,
commenters did not agree with EPA's proposal that small refiners could
only generate early credits relative to the 10 ppm sulfur standard
beginning January 1, 2017, and requested an early credit generation
period for small refiners relative to the 30 ppm sulfur standard.
    As small refiners will still be subject to the 30 ppm sulfur
standard when the Tier 3 program begins on January 1, 2017, we are
finalizing that small refiners may continue to generate credits
relative to 30 ppm through December 31, 2019. Additionally, from
January 1, 2017 through December 1, 2019, small refiners may split
their credit generation between both the 10 ppm and 30 ppm standards
(without double-counting). For example, during this time period, a
small refiner with an average gasoline sulfur level of 8 ppm could
generate 20 ppm-volume credits (30-10 ppm, relative to the 30 ppm Tier
2 sulfur standard) plus 2 ppm-volume credits (10-8 ppm, relative to the
10 ppm Tier 3 sulfur standard).
(2) Provisions for Additive Manufacturers
    During the SBREFA Panel process, different requirements than those
proposed (and being finalized today) were discussed for additive
manufacturers. Thus, the provisions recommended by the Panel were not
applicable to the provisions proposed and now finalized for these
parties. More information on the Panel's recommendations for gasoline
additive manufacturers can be found in the Final Panel Report, located
in the rulemaking docket.

    We proposed that parties introducing additives to gasoline greater
than 1.0 volume percent would be required to satisfy all of the
obligations of a fuel manufacturer, including demonstration that the
finished blend meets the applicable sulfur specification. We also
proposed a maximum sulfur contribution of 3 ppm from the use of a
gasoline additive added downstream of the refinery at less than 1.0
volume percent (when added at the maximum recommended treatment rate).
Lastly, we proposed that additive manufacturers would need to maintain
records of their additive production quality control activities for
five years.
    As discussed further in Section V.C., we are finalizing the
requirement that manufacturers of gasoline additives used downstream of
the refinery at less than 1.0 volume percent must limit the sulfur
contribution to the finished gasoline from the use of the additive to
less than 3 ppm when the additive is used at the maximum recommended
treatment rate. For each batch of additive produced, the manufacturer
must retain sulfur test records for five years, and must make these
records available to EPA upon request. Parties that introduce additives
to gasoline at over 1.0 volume percent will be required to satisfy all
of the obligations of a fuel manufacturer, including demonstration that
the finished blend meets the applicable sulfur specification.
(3) Refinery Gate and Downstream Caps
    The Panel recommended that EPA assess and request comment on
retaining the current Tier 2 refinery gate and downstream caps of 80
and 95 ppm, respectively, to help provide maximum flexibility and avoid
system upsets for the entire refining and distribution system. The
Panel also recommended that EPA request comment on additional refinery
gate and downstream caps above 20/25 ppm but below 80/95 ppm. The Panel
expressed concern with a refinery gate cap as low as 20 ppm, because
such a standard could cause operational problems for small refiners
during a refinery turnaround or an upset--a cap of this level could
result in a refiner not being able to produce gasoline. The Panel
likewise expressed concerns that a downstream cap of 25 ppm could cause
problems for small downstream entities, such as transmix processors,
because they may not be able to reprocess finished gasoline down to
this level.
    In the proposal, EPA co-proposed caps of 80/95 ppm and 50/65 ppm
and took comment on caps at 20/25 ppm. However, as discussed above in
Section V.C, we are finalizing retaining the Tier 2 80 and 95 ppm caps.
Since we are retaining the same caps from the Tier 2 program that
entities in the fuel industry are currently complying with, we do not
believe that additional flexibilities with respect to the refinery gate
and downstream sulfur caps are needed.
(4) Hardship Provisions
    The Panel recommended that EPA propose hardship provisions for all
gasoline refiners and importers, similar to those in prior EPA fuels
programs: (a) The extreme unforeseen circumstances hardship provision,
and (b) the extreme hardship provision. The Panel also recommended that
if EPA were to propose lower refinery gate and downstream caps, EPA
should also consider hardship relief in the form of long-term relief on
the sulfur cap if the circumstances both warrant it and can be
structured in a way to allow for it. EPA proposed, and is finalizing,
both the extreme unforeseen circumstances and extreme hardship
provisions for all gasoline refiners and importers. As described in
Section V.E.2, hardship relief will be granted on a case-by-case basis
following a showing that compliance (especially through the use of
credits) is not feasible. If a hardship waiver is granted, EPA will
determine appropriate hardship relief based on the refiner's hardship
application and an assessment of the credit market at that time.
ii. Tier 3 Vehicles
    As discussed in Section 5 of the Panel Report, in addition to
vehicle manufacturers, two categories that include small businesses are
covered by the new vehicle standards: Independent commercial importers
(ICIs), and alternative fuel vehicle converters. As discussed below,
EPA's expectation at the time of the Panel process was to propose a set
of flexibilities that would be available to all small entities in these
three business categories as well as to small volume manufacturers
(SVMs) that sell less than 5,000 vehicles per year. The Panel
identified a number of entities covered by the vehicle standards that
qualify as small businesses under the SBA definition. Six of these
companies participated as SERs.
    The Panel and SERs discussed several regulatory flexibility
alternatives for small businesses that certify vehicles subject to the
proposed Tier 3 emission standards. As described in Appendix A of the
Panel Report, EPA sought comment from the SERs on allowing small
entities to skip the Tier 3 phase-in and instead implement Tier 3
requirements for all of their vehicles following the phase-in period.
In addition, EPA sought comment on the following flexibilities: (1) A
hardship relief provision that would allow these businesses to apply
for additional time to meet the requirements, (2) use of assigned
deterioration factors for certification purposes, and (3) reduction in
the number of tests required in the manufacturer in-use verification
testing program. SERs were generally supportive of these flexibility
provisions. However, one SER requested that EPA consider providing
relaxed standards for exhaust emissions in addition to the delay, and
another SER requested that we consider eliminating some of the
evaporative emissions testing requirements.
    The recommendations made by the Panel on these approaches are
discussed in detail in Section XII.C of the NPRM. We consequently
proposed small business and small volume manufacturer provisions based
on these recommendations, as summarized in Section IV.G above. These
proposed provisions consisted of additional lead time, reduced testing
requirements, and opportunities for hardship relief, that would help
small entities to leverage technological developments by others and to
spread the availability of needed engineering, supplier, and capital
resources. Based on the comments we subsequently received during the
public comment period, we have improved on the proposed provisions and
are finalizing Tier 3 vehicle provisions for small businesses and SVMs
as described in detail in Section IV.G above, consisting of:
     An alternative NMOG+NOX light-duty fleet
average standard phase-in schedule for small businesses and SVMs: 125
mg/mi for MYs 2017-2021, 51 mg/mi for MYs 2022-2027, and 30 mg/mi
thereafter;
     An optional delay of Tier 3 requirements until MY 2022 for
small businesses and SVMs;
     EPA-assigned deterioration factors for small businesses
and SVMs (as well as for small volume test groups);
     Reduced in-use testing requirements for SVMs with annual
sales under 15,000, including no required testing for those with annual
sales under 5,000;
     A PM testing waiver for small businesses and SVMs;
     An allowance for small alternative fuel vehicle converters
to meet existing OBD requirements (40 CFR 86.1806-05) instead of new
Tier 3 requirements;
     A provision for small businesses and SVMs in hardship
situations to

apply for additional time to meet the Tier 3 standards;
     An extension of eligibility for the Tier 3 SVM provisions
to small manufacturers that are owned by large manufacturers but are
able to demonstrate that they are operationally independent.
    As required by section 212 of SBREFA, EPA also is preparing a Small
Entity Compliance Guide to help small entities comply with this rule.
The Small Entity Compliance Guide will be available on EPA's Office of
Policy's Small Entity Web site at: http://www.epa.gov/rfa/compliance-guides.html, and on the Tier 3 Web site (http://www.epa.gov/otaq/tier3.htm) 60 days after publication of the final rule in the Federal
Register.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2
U.S.C. 1531-1538, requires Federal agencies, unless otherwise
prohibited by law, to assess the effects of their regulatory actions on
State, local, and tribal governments and the private sector. This rule
contains a Federal mandate that may result in expenditures of $100
million or more for State, local, and tribal governments, in the
aggregate, or the private sector in any one year. Accordingly, EPA has
prepared under section 202 of the UMRA a written statement of the cost-
benefit analysis, which can be found in Section VIII of this preamble,
and in Chapter 8 of the RIA.
    Consistent with section 205, EPA has identified and considered a
reasonable number of regulatory alternatives. These alternatives are
described above in Sections IV, V, and IX of this preamble.
    This rule is not subject to the requirements of section 203 of UMRA
because it contains no regulatory requirements that might significantly
or uniquely affect small governments. The rule imposes no enforceable
duty on any State, local or tribal governments. EPA has determined that
this rule contains no regulatory requirements that might significantly
or uniquely affect small governments. EPA has determined that this rule
contains a Federal mandate that may result in expenditures of $100
million or more for the private sector in any one year, however EPA
believes that the program being finalized today represents the least
costly, and least burdensome approach to achieve the statutory
requirements of the rule. The costs and benefits associated with this
rule are discussed above in Section VIII of this preamble, and in
Chapter 8 of the RIA, as required by section 202 of the UMRA.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. Thus, Executive Order 13132 does
not apply to this action. Although Executive Order 13132 does not apply
to this rule, EPA did consult with representatives of various State and
local governments in developing the rule. EPA also consulted with
representatives from the National Association of Clean Air Agencies
(NACAA, representing state and local air pollution officials),
Northeast States for Coordinated Air Use Management (NESCAUM, the Clean
Air Association of the Northeast States), and the Ozone Transport
Commission (OTC, a multi-state organization created under the CAA
responsible for advising EPA on transport issues and for developing and
implementing regional solutions to the ground-level ozone problem in
the Northeast and Mid-Atlantic regions).
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicited comment on the proposed action
from State and local officials. These comments are in the rulemaking
docket and are summarized in the Summary and Analysis of Comments
document.

F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    This action does not have tribal implications, as specified in
Executive Order 13175 (65 FR 67249, November 9, 2000). This rule will
be implemented at the Federal level and will impose compliance costs
only on those in the gasoline production, distribution, and additive
industry and in the engine and vehicle manufacturing industries. Tribal