8. What Are the Not To Exceed Standards and Related Requirements? a. Concept. Our goal is to achieve control of emissions over the broad range of in use speed and load combinations that can occur on a recreational marine diesel engine so that real world emission control is achieved, rather than just controlling emissions under certain laboratory conditions. An important tool for achieving this goal is an in use program with an objective emission standard and an easily implemented test procedure. Prior to this concept, our approach has been to set a numerical standard on a specified test procedure and rely on the additional prohibition of defeat devices to ensure in use control over a broad range of operation not included in the test procedure. We are applying the defeat device provisions established for commercial marine engines to recreational marine diesel engines in addition to the NTE requirements ( see 40 CFR 94.2). A design in which an engine met the standard at the steady state test points but was intentionally designed to approach the NTE limit everywhere else would be considered to be defeating the standard. Electronic controls that recognize and modulate the emissioncontrol system when the engine is not being tested for emissions and increases the emissions from the engine would be an example of a defeat device, regardless of the emissions performance of the engine with regard to the standards. No single test procedure can cover all real world applications, operations, or conditions. Yet to ensure that emission standards are providing the intended benefits in use, we must have a reasonable expectation that emissions under real world conditions reflect those measured on the test procedure. The defeat device prohibition is designed to ensure that emission controls are employed during real world operation, not just under laboratory or test procedure conditions. However, the defeat device prohibition is not a quantified standard and does not have an associated test rocedure, so it does not have the clear objectivity and ready enforceability of a numerical standard and test procedure. As a result, relying on just a using a standardized test procedure and the defeat device prohibition makes it harder to ensure that engines will operate with the same level of control in the real world as in the test cell. Because the ISO E5 duty cycle uses only five modes on an average propeller curve intended to characterize typical marine engine operation for this industry, we are concerned that an engine designed to the duty cycle may not necessarily perform the same way over the range of speed and load combinations normally seen on a boat nor will it always follow the average curve. These duty cycles are based on an average propeller curve, but a propulsion marine engine may never be fitted with an `` average propeller.'' In addition, even if fitted with an `` average propeller,'' an engine fit to a specific boat may operate differently based on how heavily the boat is loaded. To ensure that emissions are controlled from recreational marine engines over the full range of speed and load combinations normally seen on boats, we are establishing a zone under the engine's power curve where the engine may not exceed a specified emission limit. This limit applies to all of the regulated pollutants under steadystate operation. Testing in this `` not toexceed ( NTE) zone may include the whole range of real ambient conditions. The NTE zone, limit, and ambient conditions are described below. We believe there are significant advantages to taking this approach. The test procedure is flexible enough to represent the majority of in use engine operation and ambient conditions. Therefore, the NTE approach takes all of the benefits of a numerical standard and test procedure and expands it to cover a broad range of conditions. Also, a standard that requires laboratory testing makes it harder to perform in use testing because either the engines must be removed from the vessel or laboratorytype conditions must be achieved on the vessel. With the NTE approach, in use testing becomes much easier to implement since emissions may be sampled during normal vessel use. Because this approach is objective, it makes enforcement easier and provides more certainty to the industry in terms of what control is expected in use versus over a fixed laboratory test procedure. Even with the NTE requirements, we believe it is important to retain standards based on the steady state duty cycles. This is the standard that we expect the certified marine engines to meet on average in use. The NTE testing is more focused on maximum emissions for segments of operation. We believe VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68309 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations basing the emission standards on a distinct cycle and using the NTE zone to better ensure in use control creates a comprehensive program. In addition, the steady state duty cycles give a basis for calculating credits for averaging, banking, and trading. As described in the Summary and Analysis of Comments, the same technology that can be used to meet the standards over the E5 duty cycle can be used to meet the NTE caps in the NTE zone. We therefore do not expect these standards to cause recreational marine diesel engines to need more advanced technology that is used by the nonroad and commercial marine engines from which they are derived. We do not believe the NTE concept results in a large amount of additional testing, because these engines should be designed to perform as well in use as they do over the steady state five mode certification test. However, our cost analysis in Chapter 5 of the Final Regulatory Support Document accounts for some additional testing, especially in the early years, to provide manufacturers with assurance that their engines will meet the NTE requirements. b. Shape of the NTE zone. Figure VI. C   1 illustrates the NTE zone for recreational marine diesel engines. We based this zone on the range of conditions that these engines might typically see in use. Also, we divide the zone into subzones of operation which have different limits as described below. Chapter 4 of the Final Regulatory Support Document describes the development of the boundaries and conditions associated with the NTE zone. The NTE zone for recreational marine diesel engines is the same for commercial marine diesel engines operating on a propeller curve, except that an additional subzone is added at speeds over 95 percent of rated to address the typical recreational design for higher rated power.

BILLING CODE 6560   50   P VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68310 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations BILLING CODE 6560   50   C EPA may approve adjustments to the size and shape of the NTE zone for certain engines if the manufacturer demonstrates that the engine will not see operation outside of the revised NTE zone in use. This way, manufacturers can avoid having to test their engines under operation that they will not see in use. However, manufacturers are responsible for ensuring that their specified operation represents realworld operation. In addition, if a manufacturer designs an engine for operation at speeds and loads outside of the NTE zone ( i. e., variable speed engines used with variable pitch propellers), the manufacturer is responsible for notifying us, so the NTE zone for that engine family can be modified to include this operation. c. Transient operation. NTE testing includes only steady state operation with a minimum sampling time of 30 seconds. We specify the ISO E5 steadystate duty cycle for showing compliance with average emission standards. The goal of adopting NTE standards and VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 ER08NO02.002</ GPH> 68311 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 84 The range of intake air temperature is 13 to 30 ° C for engines that draw air from outside the engine room. procedures is to cover the operation away from the five modes that are on the assumed propeller curve. Our understanding is that the majority of marine engine operation is steady state; however, we recognize that recreational marine use is likely more transient than commercial marine use. At this time we do not have enough data on marine engine operation to accurately determine the amount of transient operation that occurs or to set an NTE standard for transient operation. We are aware that the high load transient operation seen when a boat comes to plane is not included in the NTE zone as defined, even if we were to require compliance with NTE standards during transient operation. We are also aware that these speed and load points cannot be achieved under steady state operation for a properly loaded boat in use. If we find that excluding transient operation from the compliance requirements results in a significant increase in emissions, we will revisit this provision in the future. Also, an engine designed, with multiple injection timing maps based on operation, to operate at higher emissions during transient operation than during steadystate testing would be in noncompliance with our defeat device prohibition. d. Emission standards. We are requiring emissions caps for the NTE zones that represent a multiplier times the weighted test result used for certification for all of the regulated pollutants ( HC+ NOX, CO, and PM). This is consistent with the concept of a weighted modal emission test such as the steady state tests included in this rule. The standard itself is intended to represent the average emissions under steady state conditions. Because it is an average, some points can be higher, some lower, and the manufacturer will design to maximize performance and still meet the engine standard. The NTE limit is on top of this. It is designed to make sure that no part of the engine operation and that no application goes too far from the average level of control. Consistent with the requirements for commercial marine engines, recreational marine diesel engines must meet a cap of 1.50 times the certified level for HC+ NOX, PM, and CO for the speed and power subzone below 45 percent of rated power and a cap of 1.20 times the certified levels at or above 45 percent of rated power. However, we are applying an additional subzone at speeds greater than 95 percent of rated, with a corresponding standard of 1.50 times the certified levels for this subzone. This additional subzone addresses the typical recreational design for higher rated power. We understand that this power is needed to ensure that the engine can bring the boat to plane. Chapter 4 of the Final Regulatory Support Document provides more detail on how we determined the standards. We are aware that marine diesel engines may not be able to meet the emissions limit under all conditions. Specifically, there are times when emission control must be compromised for startability or safety. Engine starting is not included in NTE testing. In addition, manufacturers have the option of petitioning the Administrator to allow emissions to increase under engine protection strategies, such as when an engine overheats. This is also consistent with the requirements for commercial marine engines. e. Ambient conditions. Variations in ambient conditions can affect emissions. Such conditions include air temperature, humidity, and ( especially for aftercooled engines) water temperature. We are applying the commercial marine engine ranges for these variables. Chapter 4 of the Final Regulatory Support Document provides more detail on how we determined these ranges. Within the ranges, there is no calculation to correct measured emissions to standard conditions. Outside of the ranges, emissions can be corrected back to the nearest end of the range. The ambient variable ranges are 13 to 35 ° C ( 55 to 95 ° F) for intake air temperature, 7.1 to 10.7 g water/ kg dry air ( 50 to 75 grains/ pound dry air) for intake air humidity, and 5 to 27 ° C ( 41 to 80 ° F) for ambient water temperature. 84 f. Certification. At the time of certification, manufacturers must submit a statement that its engines will comply with these requirements under all conditions that may reasonably be expected to occur in normal vessel operation and use. The manufacturer also provides a detailed description of all testing, engineering analysis, and other information that forms the basis for the statement. This statement may be based on testing other research that validly supports such a statement, consistent with good engineering judgment. EPA may review the basis of this statement during the certification process.

D. Testing Equipment and Procedures The regulations detail specifications for test equipment and procedures that apply generally to commercial marine engines ( including NTE testing) in 40 CFR part 94. We have based the recreational marine diesel engine test procedures on this part. Section VIII gives a general discussion of testing requirements; this section describes procedures that are specific to recreational marine such as the duty cycle for operating engines for emission measurements. Chapter 4 of the Draft Regulatory Support Document describes these duty cycles in greater detail. In addition to the information provided above, the following section discusses issues concerning test equipment and procedures.

1. Which Duty Cycles Are Used To Measure Emissions? For recreational marine diesel engines, we specify the ISO E5 duty cycle. This is a 5 mode steady state cycle, including an idle mode and four modes lying on a cubic propeller curve. ISO intends for this cycle to be used for all engines in boats less than 24 meters in length. We apply it to all recreational marine diesel engines to avoid the complexity of tying emission standards to boat characteristics. A given engine may be used in boats longer and shorter than 24 meters; engine manufacturers generally will not know the size of the boat into which an engine will be installed. Also, we expect that most recreational boats will be under 24 meters in length. Chapter 4 of the Final Regulatory Support Document provides further detail on the ISO E5 duty cycle.

2. What Fuels Will Be Used During Emission Testing? We are applying the same specifications for recreational marine diesel engines that we established for commercial marine diesel engines. That means that the recreational engines will use the same test fuel that is required for testing Category 1 commercial marine diesel engines, which is a regular nonroad test fuel with moderate sulfur content. We are not aware of any difference in fuel specifications for recreational and commercial marine engines of comparable size.

3. How Does In Use Testing Work? In use testing on marine engines may be used to ensure compliance in use. This testing may include taking in use marine engines out of the vessel and testing them in a laboratory, as well as field testing of in use engines on the boat, in a marine environment. We plan to use field testing data in two ways. First, we may use it as a screening tool, with follow up laboratory testing over the ISO E5 duty cycle or NTE zone where appropriate. Second, we may use the data directly as a basis for compliance determinations,

VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68312 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations as long as field testing equipment and procedures are capable of providing reliable information from which conclusions can be drawn regarding what emission levels would be with laboratory based measurements. Because it would likely be difficult to match the E5 test points exactly on an engine in use on a vessel, NTE zone testing will reduce the difficulty of inuse compliance determinations. For marine engines that expel exhaust gases underwater or mix their exhaust with water, manufacturers must equip engines with an exhaust sample port where a probe can be inserted for in use exhaust emission testing. It is important that the location of this port allow a well mixed and representative sample of the exhaust. This provision is intended to simplify in use testing. In cases where the engine manufacturer does not supply enough of the exhaust system to add a sample port, the engine manufacturer would be required to provide installation instructions for a sample port. Vessel manufacturers would be required to follow this and any other emission related installation instructions. One of the advantages of the not toexceed requirements will be to facilitate in use testing. This will allow us to perform compliance testing in the field. As long as the engine is operating under steady state conditions in the NTE zone, we will be able to measure emissions and compare them to the NTE limits. To assist in this testing, engines with electronic controls will be required to broadcast engine torque ( as percent of maximum) and engine speed on their controller area networks.

4. How Is the Maximum Test Speed Determined? To ensure that a manufacturer's declared maximum speed is representative of actual engine operating characteristics and is not improperly used to influence the parameters under which their engines are certified, we are applying the definition of maximum test speed used for commercial marine engines. This definition of maximum test speed is the single point on an engine's normalized maximum power versus speed curve that lies farthest away from the zero power, zero speed point. In establishing this definition of maximum test speed, it was our intent to specify the highest speed at which the engine is likely to be operated in use. Under normal circumstances this maximum test speed should be close to the speed at which peak power is achieved. However, as some manufacturers indicated in their comments, it is possible under this definition for the maximum test speed to be very different than the speed at which peak power is achieved. This could result in the certification test cycle and the NTE zone ( which are both defined in part by the maximum test speed) being unrepresentative of in use operation. Since we were aware of this potential during the development of the commercial marine regulations, we included two provisions to address issues such as these. First, § 94.102 allows EPA to modify test procedures in situations where the specified test procedures would otherwise be unrepresentative of in use operation. Thus, in cases in which the definition of maximum test speed resulted in an engine speed that was not expected to occur with in use engines, we would work with the manufacturers to determine the maximum speed that would be expected to occur in use. Second, § 94.106( c)( 2) allows EPA to specify during certification a broader NTE zone to include actual in use operation. In those cases where we could not specify a single maximum test speed under § 94.102 that would sufficiently cover the range of in use engine speeds, we would specify a broader NTE zone. For example, we would generally expect that the NTE zone would include the peak power point. If the maximum test speed derived under § § 94.102 and 94.107 resulted in an NTE zone that did not include the peak power point, we would likely specify that the NTE zone be broadened to include that point. Similarly, we would expect that a manufacturer's advertised rated power/ speed point should be within the NTE zone, and could broaden the NTE zone to include that point as well.

E. Special Compliance Provisions The provisions discussed here are designed to minimize regulatory burdens on manufacturers needing added flexibility to comply with emission standards. These manufacturers include engine dressers, small volume engine marinizers, and small volume boat builders. Commenters generally supported these provisions as proposed.

1. What Are the Burden Reduction Approaches for Engine Dressers? Many recreational marine diesel engine manufacturers take a new, landbased engine and modify it for installation on a marine vessel. Some of the companies that modify an engine for installation on a boat make no changes that might affect emissions. Instead, the modifications may consist of adding mounting hardware and a generator or reduction gears for propulsion. It can also involve installing a new marine cooling system that meets original manufacturer specifications and duplicates the cooling characteristics of the land based engine, but with a different cooling medium ( such as sea water). In many ways, these manufacturers are similar to nonroad equipment manufacturers that purchase certified land based nonroad engines to make auxiliary engines. This simplified approach of producing an engine can more accurately be described as dressing an engine for a particular application. Because the modified landbased engines are subsequently used on a marine vessel, however, these modified engines will be considered marine diesel engines, which then fall under these requirements. To clarify the responsibilities of engine dressers under this rule, we will not treat them as a manufacturer of a recreational marine diesel engine and therefore they would not be required to obtain a certificate of conformity, as long as they meet the following seven conditions. ( 1) The engine being dressed ( the `` base'' engine) must be a highway, landbased nonroad, or locomotive engine, certified pursuant to 40 CFR part 86, 40 CFR part 89, or 40 CFR part 92, respectively, or a marine diesel engine certified pursuant to this part. ( 2) The base engine's emissions, for all pollutants, must meet the otherwise applicable recreational marine emission limits. In other words, starting in 2005, a dressed nonroad Tier 1 engine will not qualify for this exemption, because the more stringent standards for recreational marine diesel engines go into effect at that time. ( 3) The dressing process must not involve any modifications that can change engine emissions. We do not consider changes to the fuel system to be engine dressing because this equipment is integral to the combustion characteristics of an engine. ( 4) All components added to the engine, including cooling systems, must comply with the specifications provided by the engine manufacturer. ( 5) The original emissions related label must remain clearly visible on the engine. ( 6) The engine dresser must notify purchasers that the marine engine is a dressed highway, nonroad, or locomotive engine and is exempt from the requirements of 40 CFR part 94. ( 7) The engine dresser must report annually to us the models that are exempt pursuant to this provision and such other information as we deem VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68313 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations necessary to ensure appropriate use of the exemption. Any engine dresser not meeting all these conditions will be considered an engine manufacturer and will accordingly need to obtain a certificate of conformity for these new engines, consistent with this rule's provisions, and label the engine showing that it is available for use as a marine engine. An engine dresser violating the above criteria might be liable under antitampering provisions for any change made to the land based engine that affects emissions. The dresser might also be subject to a compliance action for selling new marine engines that are not certified to the required emission standards. For an engine dresser complying with the above provisions, the original certificate would remain in effect and the certifier of the engine would remain liable for the emissions performance of the engine.

2. What Special Provisions Is EPA Adopting for Small Entities? In addition to provisions for engine dressers, we are also finalizing special provisions designed to provide flexibility to small entities. Prior to the proposal, we conducted an inter agency Small Business Advocacy Review Panel as described in Section XI. C. With input from small entity representatives, the panel drafted a report with findings and recommendations on how to reduce the potential small business burden resulting from this rule. The interagency panel's recommendations were proposed by EPA and are now being finalized as proposed. The following sections describe these provisions.

3. What Are the Burden Reduction Approaches for Small Volume Engine Marinizers? We are providing additional options for small volume engine marinizers. The purpose of these options is to reduce the burden on companies for which fixed costs cannot be distributed over a large number of engines. For this reason, we are defining a small volume engine manufacturer based on annual U. S. sales of engines and are providing the additional options on this basis rather than on business size in terms of number of employees, revenue, or other such measures. The production count we are using includes all engines ( automotive, other nonroad, etc.) and not just recreational marine engines. We consider recreational marine diesel engine manufacturers to be small volume for purposes of this provision if they produce fewer than 1,000 internal combustion engines per year. Based on our characterization of the industry, there is a natural break in production volumes above 500 engine sales where the next smallest manufacturers make tens of thousands of engines. We chose 1,000 engines as a limit because it groups together all the marinizers most needing relief, while still allowing for reasonable sales growth. The options for small volume marinizers are discussed below. a. Broaden engine families. We have established engine criteria for distinguishing between engine families, which is intended to divide a manufacturer's product line into multiple engine families. We are allowing small volume marinizers to put all of their models into one engine family ( or more as necessary) for certification purposes. Marinizers would then certify using the `` worstcase configuration. This approach is consistent with the option offered to post manufacture marinizers under the commercial marine regulations. The advantage of this approach is that it minimizes certification testing because the marinizer can use a single engine in the first year to certify their whole product line. As for large companies, the small volume manufacturers could then carry over data from year to year until changing engine designs in a way that might significantly affect emissions. We understand that this option alone still requires a certification test and the associated burden for small volume manufactures. We consider this to be the foremost cost concern for some small volume manufacturers, because the test costs are spread over low sales volumes. Also, we recognize that it may be difficult to determine the worst case emitter without additional testing. We are requiring testing because we need a reliable, test based technical basis to issue a certificate for these engines. Manufacturers will be able to use carryover to spread costs over multiple years of production. b. Minimize compliance requirements. Production line and deterioration testing requirements do not apply to small volume marinizers. We will assign a deterioration factor for use in calculating end of life emission factors for certification. The advantages of this approach would be to minimize compliance testing. Production line and deterioration testing would be more extensive than a single certification test. c. Expand engine dresser flexibility. We are expanding the engine dresser definition for small volume marinizers to include water cooled turbochargers where the goal is to match the performance of the non water cooled turbocharger on the original certified configuration. We believe this would provide more opportunities for diesel marinizers to be excluded from certification testing if they operate as dressers. d. Streamlined certification. We will allow small volume marinizers to certify to the not to exceed ( NTE) requirements with a streamlined approach. We believe small volume marinizers can make a satisfactory showing that they meet NTE standards with limited test data. Similar to the standard NTE program, once these manufacturers test engines over the five mode certification duty cycle ( E5), they can use those or other test points to extrapolate the results to the rest of the NTE zone. For example, an engineering analysis may consider engine timing and fueling rate to determine how much the engine's emissions may change at points not included in the E5 cycle. For this streamlined NTE approach, keeping all four test modes of the E5 cycle within the NTE standards will be enough for small volume marinizers to certify compliance with NTE requirements, as long as there are no significant changes in timing or fueling rate between modes. e. Delay standards for five years. Applying a five year delay, the standards take effect from 2011 to 2014 for small volume marinizers, depending on engine size. Marinizers may apply this five year delay to all or just a portion of their production. They may therefore still sell engines that meet the standards when possible on some product lines while delaying introduction of emission control technology on other product lines. This option provides more time for small marinizers to redesign their products, allowing time to learn from the technology development of the rest of the industry. Boat builders may use these uncertified engines in their vessels. While we are concerned about the loss of emission control from part of the fleet during this time, we recognize the special needs of small volume marinizers and believe the added time may be necessary for these companies to comply with emission standards. This additional time will allow small volume marinizers to obtain and implement proven, cost effective emission control technology. f. Hardship provisions. We are adopting two hardship provisions for small volume marinizers. Marinizers may apply for this relief on an annual basis. First, small marinizers may petition us for additional time to comply with the standards. The marinizer must show that it has taken all possible steps to comply but the burden of compliance costs will have a VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68314 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations major impact on the company's solvency. Also, if a certified base engine is available, the marinizer must generally use this engine. We believe this provision will protect small volume marinizers from undue hardship due to certification burden. Also, some emission reduction can be gained if a certified base engine becomes available. Second, small volume marinizers may also apply for hardship relief if circumstances outside their control caused the failure to comply ( such as a supply contract broken by parts supplier) and if failure to sell the subject engines will have a major impact on the company's solvency. We consider this relief mechanism to be an option of last resort. We believe this provision will protect small volume marinizers from circumstances outside their control. We, however, intend to not grant hardship relief if contract problems with a specific company prevent compliance for a second time. Although the inter agency panel did not specify a time limit for these hardship provisions, and we are not finalizing any such time limits, we envision these hardship provisions as transitional in nature. We would expect their use to be limited to the early years of the program, in a similar time frame as we are establishing for the recreational vehicle hardship provisions, as discussed in Section VII. C.

4. What Are the Burden Reduction Approaches for Small Volume Boat Builders Using Recreational Marine Diesel Engines? The inter agency panel also recommended burden reduction approaches for small volume boat builders. The recommendations were based on the concerns that, although boat builders are not subject to the engine based emission standards, they are required to use certified engines and may need to redesign engine compartments on some boats if engine designs were to change significantly. EPA proposed the flexibilities recommended by the panel and are finalizing them as proposed. We are adopting four options for small volume vessel manufacturers using recreational marine diesel engines. These options are intended to reduce the burden on companies for which fixed costs cannot be distributed over a large number of vessels. As proposed, we are therefore defining a small volume boat builder as one that produces fewer than 100 boats for sale in the U. S. in one year and has fewer than 500 employees. The production count includes all engine powered recreational boats. These options may be used at the manufacturer's discretion. The options for small volume boat builders are discussed below. a. Percent of production delay. Manufacturers with a written request from a small volume boat builder and prior approval from us may produce a limited number of uncertified recreational marine diesel engines. From 2006 through 2010, small volume boat builders may purchase uncertified engines to sell in boats for an amount equal to 80 percent of engine sales for one year. For example, if the small boat builder sells 100 engines per year, a total of 80 uncertified engines may be sold over the five year period. This will give small boat builders an option to delay using new engine designs for a portion of business. Engines produced under this flexibility must be labeled accordingly so that customs inspectors know which uncertified engines can be imported. We continue to believe this approach is appropriate and are finalizing it as proposed. b. Small volume allowance. This allowance is similar to the percent ofproduction allowance, but is designed for boat builders with very small production volumes. The only difference with the above allowance is that the 80 percent allowance described above may be exceeded, as long as sales do not exceed either 10 engines per year or 20 engines over five years ( 2006 to 2010). This applies only to engines less than or equal to 2.5 liters per cylinder. c. Existing inventory and replacement engine allowance. Small volume boat builders may sell their existing inventory after the implementation date of the new standards. However, no purposeful stockpiling of uncertified engines is permitted. This provision is intended to allow small boat builders the ability to turn over engine designs. d. Hardship relief provision. Small boat builders may apply for hardship relief if circumstances outside their control caused the problem ( for example, if a supply contract were broken by the engine supplier) and if failure to sell the subject vessels will have a major impact on the company's solvency. This relief allows the boat builder to use an uncertified engine and is considered a mechanism of last resort. These hardship provisions are consistent with those currently in place for post manufacture marinizers of commercial marine diesel engines.

F. Technical Amendments The regulations include a variety of amendments to the programs already adopted for marine spark ignition and diesel engines, as described in the following paragraphs.

1. 40 CFR Part 91: Outboards and Personal Watercraft We have identified four principal amendments to the requirements for outboard and personal watercraft engines. First, we are adding a definition of United States which is `` the States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, the U. S. Virgin Islands, and the Trust Territory of the Pacific Islands.'' This definition is consistent with that included in 40 CFR part 94 for marine diesel engines. This is especially helpful in clearing up questions related to U. S. territories in the Carribean Sea and the Pacific Ocean. Second, we have found two typographical errors in the equations needed for calculating emission levels in 40 CFR 91.419. Third, we are adjusting the regulation language to clarify testing rates for the in use testing program. The regulations currently specify a maximum rate of 25 percent of a manufacturer's engine families subject to in use testing. The revised language states that for manufacturers with fewer than four engine families subject to in use testing, the maximum testing rate is one family per year in place of the percentage calculation. Finally, we are revising the regulatory provision prohibiting emission controls that lead to increases of noxious or toxic compounds that would pose an unreasonable risk to the public, as described in Section II. B. 2.

2. 40 CFR Part 94: Commercial Marine Diesel Engines We are adopting several regulatory amendments to the program for commercial marine diesel engines. Many of these are straightforward edits for correct grammar and cross references. We are also changing the definition of United States, as described in the previous section. We are adding a definition for sparkignition consistent with the existing definition for compression ignition, which will allow us to define compression ignition as any engine that is not spark ignition. This will help ensure that marine emission standards for the different types of engines fit together appropriately. The discussion of production line testing in Section II. C. 4 specifies reduced testing rates after two years of consistent good performance. We are extending this provision to commercial marine diesel engines as well.

VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68315 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations The test procedures for Category 2 marine engines give a cross reference to 40 CFR part 92, which defines the procedures for testing locomotives and locomotive engines. Part 92 specifies a wide range of ambient temperatures for testing, to allow for outdoor measurements. We expect all testing of Category 2 marine engines to occur indoors and are therefore adopting a range of 13 ° to 30 ° C ( 55 ° to 86 ° F) for emission testing. Finally, we are revising the regulatory provision prohibiting emission controls that lead to increases of noxious or toxic compounds that would pose an unreasonable risk to the public, as described in Section II. B. 2.

G. Technological Feasibility We have concluded that the emissionreduction strategies expected for landbased nonroad diesel engines and commercial marine diesel engines can also be applied to recreational marine diesel engines, such that these emission reductions strategies will provide compliance with recreational marine diesel emission standards. Marine diesel engines are generally derivatives of land based nonroad and highway diesel engines. Marine engine manufacturers and marinizers make modifications to the engine to make it ready for use in a vessel. These modifications can range from basic engine mounting and cooling changes to a restructuring of the power assembly and fuel management system. Chapters 3 and 4 of the Final Regulatory Support Document discuss this process in more detail. Also, we have collected emission data demonstrating the feasibility of the steady state average standard and not to exceed requirements. These data are presented in Chapter 4 of the Final Regulatory Support Document.

1. Implementation Schedule For recreational marine diesel engines, the implementation schedule allows an additional two years of delay beyond the commercial marine diesel standards. This represents up to a fiveyear lead time relative to the implementation dates of the land based nonroad standards. This allows time for the carryover of technology from landbased nonroad and commercial marine diesel engines. In addition, these implementation dates represent three to six years of lead time beyond publication of this final rule.

2. Standard Levels Marine diesel engines are typically derived from or use the same technology as land based nonroad and commercial marine diesel engines and should therefore be able to effectively use the same emission control strategies. In fact, recreational marine engines can better use the water they operate in as a cooling medium compared with commercial marine, because they are able to use raw water aftercooling. This can help them reduce charge air intake temperatures more easily than the commercial models and much more easily than land based nonroad diesel engines. Cooling the intake charge reduces the formation of NOX emissions and thus indirectly enables other HC and PM control strategies. As a result, baseline recreational engines generally have lower NOX emissions than uncontrolled commercial marine engines. Therefore, we believe that recreational marine engines can meet the same standard levels as are in place for commercial marine engines without sacrificing power or increasing weight of the engine.

3. Technological Approaches We anticipate that manufacturers will meet the new emission standards for recreational marine diesel engines primarily with technology that will be applied to land based nonroad and commercial marine diesel engines. Much of this technology has already been established in highway applications and is being used in limited land based nonroad and marine applications. Our analysis of this technology is described in detail in Chapters 3 and 4 of the Final Regulatory Support Document and is summarized here. By adopting standards that don't go into place until 2006, we are providing engine manufacturers with substantial lead time for developing, testing, and implementing emission control technologies. This lead time and the coordination of standards with those for land based nonroad engines allows time for a comprehensive program to integrate the most effective emissioncontrol approaches into the manufacturers' overall design goals related to durability, reliability, and fuel consumption. Engine manufacturers have already produced limited numbers of low NOX marine diesel engines. More than 80 of these engines have been placed into service in California through demonstration programs. Through the demonstration programs, we were able to gain some insight into what technologies can be used to meet the new emission standards. Chapter 4 presents data on 25 of these engines tested over the E5 duty cycle. Although only one of these engines has been shown to meet the HC+ NOX and PM standards, many of these engines are well below either the HC+ NOX or PM standards or are close to meeting both. With further optimization, we believe these engine designs can be used to meet the exhaust emission standards for recreational marine diesel engines. Highway engines have been the leaders in developing new emissioncontrol technology for diesel engines. Because of the similar engine designs in land based nonroad and marine diesel engines, it is clear that much of the technological development that has led to lower emitting highway engines can be transferred or adapted for use on land based nonroad and marine engines. Much of the improvement in emissions from these engines comes from `` internal'' engine changes such as variation in fuel injection variables ( injection timing, injection pressure, spray pattern, rate shaping), modified piston bowl geometry for better air fuel mixing, and improvements intended to reduce oil consumption. Introduction and ongoing improvement of electronic controls have played a vital role in facilitating many of these improvements. Turbocharging is widely used now in marine applications, especially in larger engines, because it improves power and efficiency by compressing the intake air. Turbocharging may also be used to decrease particulate emissions in the exhaust. Today, marine engine manufacturers generally have to rematch the turbocharger to the engine characteristics of the marine version of a nonroad engine and often will add water jacketing around the turbocharger housing to keep surface temperatures low. Once the nonroad Tier 2 engines are available to the marine industry, matching the turbochargers for the engines will be an important step in achieving low emissions. Aftercooling is a well established technology for reducing NOX by decreasing the temperature of the charge air after it has been heated during compression. Decreasing the charge air temperature directly reduces the peak cylinder temperature during combustion, which is the primary cause of NOX formation. Air to water and water to water aftercoolers are well established for land based applications. For engines in marine vessels, there are two different types of aftercooling: jacket water and raw water aftercooling. With jacket water aftercooling, the fluid that extracts heat from the aftercooler is itself cooled by ambient water. This cooling circuit may either be the same circuit used to cool the engine or it may be a separate circuit. By incorporating a separate circuit, marine engine VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68316 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations manufacturers can further reduce charge air temperatures. This separate circuit can result in even lower temperatures with raw water as the coolant. This means that ambient water is pumped directly to the aftercooler. Raw water aftercooling is currently widely used in recreational applications. Because of the access that marine engines have to a large ambient water cooling medium, we anticipate that marine diesel engine manufacturers will largely reduce NOX emissions with aftercooling. Electronic controls also offer great potential for improved control of engine parameters for better performance and lower emissions. Unit pumps or injectors allow higher pressure fuel injection with rate shaping to carefully time the delivery of the whole volume of injected fuel into the cylinder. Marine engine manufacturers can take advantage of modifications to the routing of the intake air and the shape of the combustion chamber of nonroad engines for improved mixing of the fuelair charge. Separate circuit aftercooling ( both jacket water and raw water) will likely gain widespread use in turbocharged engines to increase performance and lower NOX. Fuel injection changes and other NOX control strategies typically reduce engine noise, sometimes dramatically. One important source of noise in diesel combustion is the sound associated with the combustion event itself. When a premixed charge of fuel and air ignites, the very rapid combustion leads to a sharp increase in pressure, which is easily heard and recognized as the characteristic sound of a diesel engine. The conditions that lead to high noise levels also cause high levels of NOX formation. The impact of the new emission standards on energy is measured by the effect on fuel consumption from complying engines. Many of the marine engine manufacturers are expected to retard engine timing which increases fuel consumption somewhat. Most of the technology changes anticipated in response to the new standards, however, have the potential to reduce fuel consumption as well as emissions. Redesigning combustion chambers, incorporating improved fuel injection systems, and introducing electronic controls provide the engine designer with powerful tools for improving fuel efficiency while simultaneously controlling emission formation. To the extent that manufacturers add aftercooling to non aftercooled engines and shift from jacket water aftercooling to raw water aftercooling, there will be a marked improvement in fuelefficiency Manufacturers of highway diesel engines have been able to steadily improve fuel efficiency even as new emission standards required significantly reduced emissions. There are no apparent safety issues associated with the new emission standards. Marine engine manufacturers will likely use only proven technology that is currently used in other engines such as nonroad land based diesel applications, locomotives, and diesel trucks. The main technological approach will likely be optimization and calibration of their fuel injection and air management systems.

4. Our Conclusions The new emission standards for recreational marine diesel engines reasonably reflect what manufacturers can achieve through the application of available technology to current recreational marine diesel engines. Recreational marine engine manufacturers will need to use the available lead time to develop the necessary emission control strategies, including transfer of technology from land based nonroad and commercial marine diesel engines. This development effort will require not only achieving the targeted emission levels, but also ensuring that each engine will meet all performance and emission requirements over its useful life. As discussed in Section IX, the new standards represent significant reductions compared with baseline emission levels. Based on information currently available, we conclude it is feasible for recreational marine diesel engine manufacturers to meet the new emission standards using combinations of technological approaches discussed above and in Chapters 3 and 4 of the Final Regulatory Support Document. While the technologies described above are expected to yield the full degree of emission reduction anticipated, it is possible that manufacturers may also rely on a modest degree of fuel injection timing retard as a strategy for complying with emission standards. This is due to variations in engine designs and baseline injection timing. For instance, an engine with very advanced injection timing in its baseline configuration would likely need to employ some timing retard to meet the standards. The transfer of technology from landbased nonroad and commercial marine engines is an important factor in our determination that the recreational marine diesel engine standards are feasible. Most marine diesel engine models also serve in land based applications. Sales of land based versions of these engines are usually much greater than those of the marine counterpart versions, so manufacturers typically focus their primary technology development efforts on their land based products. Manufacturers then modify these engines for use in marine applications. These changes can be extensive, but they rarely involve basic R& D for new technologies. We do not anticipate the use of advanced technology such as particulate filters and NOX adsorbers on trucks until the 2007 time frame. Therefore, we do not believe that it would be appropriate to implement standards, at this time, that would require the use of advanced technology that has yet to be developed for the higher volume land based diesel engine market. We would, however, consider this technology in the future for setting further tiers of marine engine emission standards. In addition, we have incorporated various options that will permit marinizers and boat builders to respond to engine changes in an orderly way. We expect that meeting these requirements will pose a challenge, but one that is feasible taking into consideration the availability and cost of technology, time, noise, energy, and safety.

VII. General Nonroad Compliance Provisions This section describes a wide range of compliance provisions that apply generally to all the spark ignition engines and vehicles subject to the new emission standards. Several of these provisions apply not only to manufacturers and importers, but also to equipment manufacturers installing certified engines, remanufacturing facilities, operators, and others. The regulatory text for the compliance requirements for Large SI engines and recreational vehicles are in a new Part 1068 of Title 40, entitled `` General Compliance Programs for Nonroad Engines.'' The compliance provisions for recreational marine diesel engines are generally the same as those already adopted for commercial marine diesel engines ( 40 CFR part 94). The following discussion of the general nonroad provisions follows the regulatory text. For ease of reference, the subpart designations for 40 CFR part 1068 are provided. Where different provisions apply to the marine engines, we note those differences in this section.

A. Miscellaneous Provisions ( Part 1068, Subpart A) This subpart contains general provisions to define terms and the scope of application for all of 40 CFR part VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68317 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 85 EPA acted to adjust the maximum penalty amount in 1996 ( 61 FR 69364, December 31, 1996) and 2002 ( 67 FR 41343, June 18, 2002). See also 40 CFR part 19. 1068. Other provisions concern how we handle confidential information, how the EPA Administrator delegates decision making authority, and when we may inspect a manufacturer's facilities, engines, or records. The process of testing engines and preparing an application for certification requires the manufacturer to make a variety of judgments. This includes, for example, selecting test engines, operating engines between tests, and developing deterioration factors. The regulations describe the methodology we use to evaluate concerns related to how manufacturers use good engineering judgment in cases where the manufacturer has such discretion ( see 40 CFR 1068.5 and 40 CFR 94.221). If we find a problem in these areas, we will take into account the degree to which any error in judgment was deliberate or in bad faith. This subpart is consistent with provisions already adopted for lightduty highway vehicles and commercial marine diesel engines.

B. Prohibited Acts and Related Requirements ( Part 1068, Subpart B) The provisions in this subpart establish a set of prohibitions for engine manufacturers ( including importers), equipment manufacturers, operators, engine rebuilders, and owners/ operators to ensure that engines meet the emission standards. These provisions are intended to help ensure that each new engine sold or otherwise entered into commerce in the United States is certified to the relevant standards, that it remains in its certified configuration throughout its lifetime, and that only certified engines are used in the appropriate nonroad equipment.

1. General Prohibitions ( § 1068.101) This regulation contains several prohibitions consistent with the Clean Air Act. No one may sell a new engine subject to the emission standards ( or equipment containing such an engine) in the United States without a valid certificate of conformity issued by EPA, deny us access to relevant records, or keep us from entering a facility to test or inspect engines. In addition, no one may remove or disable a device or design element that may affect an engine's emission levels, or manufacture any device that will make emission controls ineffective, which we consider tampering. Other prohibitions reinforce manufacturers' obligations to meet various certification requirements. We also prohibit selling engine parts that prevent emission control systems from working properly. Finally, for engines that are excluded because they are used in applications not covered by these regulations ( for example, stationary or solely for competition), we generally prohibit using these engines in regulated applications. These prohibitions are the same as those that apply to other engines we have regulated in previous rulemakings. Each prohibited act has a corresponding maximum penalty as specified in Clean Air Act section 205. As provided for in the Federal Civil Penalties Inflation Adjustment Act of 1990, Pub. L. 10   410, these maximum penalties are periodically adjusted by regulation to account for inflation. The current penalty amount for each violation is $ 31,500.85 2. Equipment Manufacturer Provisions ( § 1068.105)

Equipment manufacturers may not sell new equipment with uncertified engines once the emission standards begin to apply. We allow a grace period for equipment manufacturers to use up their supply of uncertified engines, as long as they follow their normal inventory practices for buying engines. We require equipment manufacturers to observe the engine manufacturers' emission related installation specifications to ensure that the engine remains in its certified configuration. This may include such things as radiator specifications, placement of catalytic converters, diagnostic signals and interfaces, and steps to minimize evaporative emissions. If equipment manufacturers install a certified engine in a way that obscures the engine label, they must add a duplicate label on the equipment. If equipment manufacturers don't fulfill the responsibilities we describe in this section, we consider them to be violating one or more of the prohibited acts described above.

3. In Service Engines ( § 1068.110)

The regulations prevent manufacturers from requiring owners to use any certain brand of aftermarket parts and give the manufacturer responsibility for engine servicing related to emissions warranty, leaving the responsibility for all other maintenance with the owner. This regulation also reserves our right to do testing ( or require testing) to determine compliance with emission standards and investigate potential defeat devices, as authorized by the Act. 4. Engine Rebuilding ( § 1068.120)

We are establishing rebuild provisions for all the nonroad engines subject to the emission standards in this final rule. This approach is similar to what applies to heavy duty highway engines, nonroad diesel engines, and commercial marine diesel engines. This is necessary to prevent an engine rebuilder from rebuilding engines in a way that disables the engine's emission controls or compromises the effectiveness of the emission control system. For businesses involved in commercial engine rebuilding, we are adopting minimal recordkeeping requirements so rebuilders can show that they comply with regulations. In general, we require anyone rebuilding a certified engine to restore it to its original ( or a lower emitting) configuration. We are adding unique requirements for rebuilders to replace some critical emission control components such as fuel injectors and oxygen sensors in all rebuilds for engines that use those technologies, unless there is reason to believe that those components are still working properly. We also require that rebuilders replace an existing catalyst if there is evidence that it is not functional; for example, if a catalyst has lost its physical integrity with loose pieces rattling inside, it would need to be replaced. The rebuilding provisions define good rebuilding practices to avoid violating the prohibition on `` removing or disabling'' emission control systems. We are therefore extending these provisions to individuals who rebuild their own engines, but without any recordkeeping requirements.

C. Exemptions ( Part 1068, Subpart C)

We are including several exemptions for certain specific situations. Most of these are consistent with previous rulemakings. We highlight the new or different provisions in the following paragraphs. In general, exempted engines must comply with the requirements only in the sections related to the exemption. Note that additional restrictions may apply to importing exempted engines ( see Section VII. D). Also, we may require manufacturers ( or importers) to add a permanent label describing that the engine is exempt from emission standards for a specific purpose. In addition to helping us enforce emission standards, this helps ensure that imported engines clear Customs without difficulty.

VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68318 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 1. Testing Anyone may request an exemption for engines used only for research or other investigative purposes.

2. Manufacturer Owned Engines Engines that are used by engine manufacturers for development or marketing purposes may be exempted from regulation if they are maintained in the manufacturers' possession and are not used for any revenue generating service.

3. Display Engines Anyone may request an exemption for engines intended for only for display.

4. National Security In general, engines installed in combat related equipment are exempt from emission standards. In addition, engine manufacturers may request and receive an exemption for other engines if they are needed by an agency of the federal government responsible for national defense. The request for exemptions in these cases must include the endorsement of the procuring government agency.

5. Exported Engines Engines that will be exported to countries that don't have the same emission standards as those that apply in the United States are exempted without a request. This exemption is not available if the destination country has the same emission standards as those in the United States.

6. Competition Engines New engines used solely for competition are generally excluded or exempted from regulations that apply to nonroad engines. For purposes of our certification requirements, manufacturers receive an exemption if they can show that they produce an engine model specifically for use solely in competition. In addition, engines that have been modified for use in competition are exempt from the prohibition against tampering described above ( without need for request). The literal meaning of the term `` used solely for competition'' would apply for these modifications. We therefore do not allow anyone to use the engine for anything other than competition once it has been modified. This also applies to someone who later buys the engine, so we require the person modifying the engine to remove or deface the original engine label and inform a subsequent buyer in writing of the conditions of the exemption. 7. Replacement Engines An exemption is available to engine manufacturers without request if that is the only way to replace an engine from the field that was produced before the current emission standards took effect. If less stringent standards applied to the old engine when it was new, the replacement engine must at a minimum meet those standards.

8. Hardship Related to Economic Burden There are two types of hardship provisions. The first type of hardship program allows small businesses to petition EPA for up to three years of additional lead time to comply with the standards. A small manufacturer must demonstrate that it has taken all possible business, technical, and economic steps to comply but the burden of compliance costs will have a significant impact on the company's solvency. A manufacturer must provide a compliance plan detailing when and how it will achieve compliance with the standards. Hardship relief may include requirements for reducing emission on an interim basis and/ or purchasing and using emission credits. The length of the hardship relief decided during review of the hardship application may be up to one year, with the potential to extend the relief as needed. The second hardship program allows companies to apply for hardship relief if circumstances outside their control cause the failure to comply ( such as a supply contract broken by parts supplier) and if the failure to sell the subject engines will have a major impact on the company's solvency. We would, however, not grant hardship relief if contract problems with a specific company prevent compliance for a second time.

9. Hardship for Equipment Manufacturers Equipment manufacturers in many cases depend on engine manufacturers to supply certified engines in time to produce complying equipment by the date emission standards begin to apply. This is especially true for industrial and marine applications. In other programs, equipment manufacturers have raised concerns of certified engines being available too late for equipment manufacturers to adequately accommodate changing engine size or performance characteristics. To address this concern, in unusual circumstances, equipment manufacturers may request up to one extra year before using certified engines if they are not at fault and will face serious economic hardship without an extension. In addition, we are aware that some manufacturers of nonroad engines are dependent on another engine manufacturer to supply base engines that are then modified for the final application. Much like equipment manufacturers, these `` secondary engine manufacturers'' may face difficulty in producing certified engines if the manufacturer selling the base engine makes an engine model unavailable with short notice. These secondary manufacturers generally each buy a relatively small number of engines and would therefore not necessarily be able to influence the marketing or sales practices of the engine selling the base engines. In this rulemaking, this is of particular concern for Large SI engine manufacturers subject to new standards in 2004. As a result, we are allowing secondary engine manufacturers to sell uncertified engines or engines certified at emission levels above the standard for a short period after emission standards begin to apply. However, these companies control the final design of the engines, so we would not approve any exemption unless the manufacturer committed to a plan to make up for any calculated loss in environmental benefit. For example, based on an alternate compliance level for 2004 model year engines, we could calculate the number of 2006 model year engines that would need to be certified early to the 2007 emission standards. Provisions similar to these were adopted for commercial marine diesel engines and will apply equally to recreational marine diesel engines. See the regulatory text in 40 CFR 1068.255 and 40 CFR 94.209 for additional information.

D. Imports ( Part 1068, Subpart D) In general, the same certification requirements apply to engines and equipment whether they are produced in the U. S. or are imported. This regulation also includes some additional provisions that apply if someone wants to import an exempted or excluded engine. For example, the importer needs appropriate documentation before importing nonconforming engines; this is true even if an exemption for the same reason doesn't require approval for engines produced in the U. S. These declaration forms are available on the Internet at http:// www. epa. gov/ OMS/ imports/ or by phone at 202   564   9660. All the exemptions described above for new engines also apply to importation, though some of these apply only on a temporary basis. If we approve a temporary exemption, it is available VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68319 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations only for a defined period and could require the importer to post bond while the engine is in the U. S. There are several additional exemptions that apply only to imported engines.   Identical configuration: This is a permanent exemption to allow individuals to import engines that were designed and produced to meet applicable emission standards. These engines may not have the emission label only because they were not intended for sale in the United States. This exemption applies to all the engines covered by 40 CFR part 1068.   ` ` Antique'' engines: We generally treat used engines as new if they are imported without a certificate of conformity. However, this permanent exemption allows for importation of uncertified engines if they are more than 20 years old and still in their original configuration.   Repairs or alterations: This is a temporary exemption to allow companies to repair or modify engines. This exemption does not allow for operating the engine, except as needed to do the intended work.   Diplomatic or military: This is a temporary exemption to allow diplomatic or military personnel to use uncertified engines during their term of service in the U. S.   Engines subject to other programs: This is a temporary exemption that allows someone to import an uncertified engine that will be converted for use in a different application. For example, someone may want to import a landbased nonroad engine to modify it and eventually sell it as a marine engine. This exemption expires when the engine modifications are complete, since one of the following scenarios will apply ( 1) the company modifying the engine will modify the engine to meet emission standards that apply to the modified engine, ( 2) the company will have a valid exemption under the program that applies to the modified engine, or ( 3) the modified engine will not be subject to emission standards, in which case an exemption is no longer necessary.

E. Selective Enforcement Audit ( Part 1068, Subpart E)

Clean Air Act section 206( b) gives us the discretion in any program with vehicle or engine emission standards to do selective enforcement auditing of production engines. In selective enforcement auditing, we choose an engine family and give the manufacturer a test order detailing a testing program to show that production line engines meet emission standards. The regulation text describes the audit procedures in greater detail. We intend generally to rely on manufacturers' testing of productionline engines to show that their production process is producing engines in compliance they comply with emission standards. However, we reserve our right to do selective enforcement auditing if, for example, we have reason to question the emission testing conducted and reported by the manufacturer.

F. Defect Reporting and Recall ( Part 1068, Subpart F)

In Part 1068, Subpart F, we are adopting defect reporting requirements that obligate manufacturers to tell us when they learn that emission control systems are defective and to conduct investigations under certain circumstances to determine if an emission related defect is present. We are also requiring that manufacturers use warranty information, parts shipments, and any other information which may be available to trigger these investigations. For the purpose of this subpart, we are considering defective any part or system that does not function as originally designed for the regulatory useful life of the engine or the scheduled replacement interval specified in the manufacturer's maintenance instructions. For recreational vehicles and nonroad spark ignition engines over 19 kW, this approach to defect reporting takes into account the varying sales volumes of the different products. We believe the investigation requirement in this rule will allow both EPA and the engine manufacturers to fully understand the significance of any unusually high rates of warranty claims and parts replacement for systems or parts that may have an impact on emissions. We believe that any prudent and responsible engine manufacturer would, and should, conduct a thorough investigation as part of its normal product quality practices when in possession of data indicating an usually high number of recurring parts failures. In the past, defect reports were submitted based on a very low threshold with the same threshold applicable to all size engine families and with little information about the full extent of the problem. The new approach should result in fewer overall defect reports being submitted by manufacturers than would otherwise be required under the old defect reporting requirements because the number of defects triggering the submission requirement rises with the engine family size. The defect reporting requirements under other vehicle and engine regulations do not explicitly require investigations or reporting based on information available to the manufacturer about warranty claims or parts shipments. Such information is valuable and readily available to most manufacturers and should be considered when determining whether or not there is a defect of an emissionrelated part. We are aware that counting warranty claims and part shipments will likely include many claims that are not emission related or that do not represent defects, so we are establishing a relatively high threshold for triggering the manufacturer's responsibility to investigate whether there is in fact a real occurrence of an emission related defect. Manufacturers are not required to count towards the investigation threshold any replacement parts they require to be replaced during the useful life, as specified in the application for certification and maintenance instructions to the owner, because such part shipments clearly do not represent defects. Subpart F is intended to require manufacturers to use information we would expect them to keep in the normal course of business. We believe in most cases manufacturers will not be required to institute new programs or activities to monitor product quality or performance. A manufacturer that does not keep warranty or replacement part information may ask for our approval to use an alternate defect reporting methodology that is at least as effective in identifying and tracking potential emissions related defects as the requirements of subpart F. However, until we approve such a request, the thresholds and procedures of subpart F continue to apply. For engines with rated power below 560 kW, the investigation thresholds in 40 CFR 1068.501 are 4 percent of total production, or 4,000 engines, whichever is less, for any single engine family in one model year. The thresholds are reduced by 50 percent for defects related to aftertreatment devices, because these components typically play such a significant role in controlling engine emissions. For example, for an engine family with a sales volume of 20,000 units in a given model year, the manufacturer must investigate for emission related defects if there were warranty claims for replacing electronic control units in 800 or more engines or catalytic converters on 400 or more engines. For a family with sales volume of 200,000 units in a given model year, the manufacturer VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68320 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations must investigate for emission related defects if there were warranty claims for replacing electronic control units in 4,000 or more engines or catalytic converters on 2,000 or more engines. For engines rated above 560 kW, each engine emits much greater levels of emissions, both because of the higher power rating and the fact that these engines generally operate at high load and for long periods. In addition, the engine family for such engines are typically of smaller volume compared to the lower power engines. We are therefore adopting a requirement that manufacturers investigate defects for these engines if they learn of 5 or more defects that may be emission related, or 1 percent of total production, whichever is greater. The second threshold in 40 CFR 1068.501 specifies when a manufacturer must report that there is an emissionrelated defect. This threshold involves a smaller number of engines because each possible occurrence has been screened to confirm that it is an emission related defect. In counting engines to compare with the defect reporting threshold, the manufacturer must consider a single engine family and model year. However, when a defect report is required, the manufacturer must report all occurrences of the same defect in all engine families and all model years. For engines with rated power below 560 kW, the threshold for reporting a defect is 0.25 percent of total production for any single engine family, or 250 defects, whichever is less. The thresholds are reduced 50 percent for reporting defects related to aftertreatment devices. For engines with rated power greater than 560kW, the threshold for reporting defects is 0.5 percent of total production, or 2 engines, whichever is greater. If the number of engines with a specific defect is found to be less than the threshold for submitting a defect report, but information, such as warranty or parts shipment data, later indicates that there may be additional defective engines, all the information must be considered in determining whether the threshold for submitting a defect report has been met. If a manufacturer has actual knowledge from any source that the threshold for submitting a defect report has been met, a defect report must be submitted even if the trigger for investigating has not yet been met. For example, if manufacturers receive from their dealers, technical staff or other field personnel information showing conclusively that there is a recurring emission related defect, they must submit a defect report. At specified times the manufacturer must also report the open investigations as well as recently closed investigations that did not require a defect report. One manufacturer indicated that investigations of potential defects can sometimes take a long time. We agree and, therefore, are not specifying a time limit for manufacturers to complete their investigations. The periodic reports required by the regulations, however, will allow us to monitor these investigations and determine if it is necessary or appropriate for us to take further action. In general, we believe this updated approach to defect reporting will decrease the number of defect reports submitted by manufacturers overall while significantly improving their quality and their value to both EPA and the manufacturer. We are adopting the defect reporting requirements for recreational marine diesel engines that already apply to Category 1 commercial marine diesel engines ( 40 CFR 94.403). In general, this requires the manufacturer to report to us if they learn that 25 or more models have a specific defect, without considering what percentage of the total engines that represents. This applies to the occurrence of the same defect and is not constrained by engine family or model year. We believe it would not be appropriate to have different defectreporting requirements for different types of marine diesel engines, so we are not adopting the defect reporting provisions described above for recreational marine diesel engines at this time. In the future we may consider whether the defect reporting methodology described above should apply to recreational and commercial marine diesel engines. Under Clean Air Act section 207, if we determine that a substantial number of engines within an engine family, though properly used and maintained, do not conform to the appropriate emission standards, the manufacturer will be required to conduct a recall of the noncomplying engine family to remedy the problem. However, we also recognize the practical difficulty in implementing an effective recall program for nonroad engines. It may be difficult to properly identify all the affected owners absent a nationwide registration requirement similar to that for cars and trucks. The response rate for affected owners or operators to an emission related recall notice is also a critical issue to consider. We recognize that in some cases, recalling noncomplying nonroad engines may not achieve sufficient environmental protection, so our intent in such situations is generally to allow manufacturers to nominate alternative remedial measures to address most potential noncompliance situations. We expect that successful implementation of appropriate alternative remediation would obviate the need for us to make a determination of substantial nonconformity under section 207 of the Act. Alternatives nominated by a manufacturer will be evaluated based on the following criteria. The alternatives should   ( 1) Represent a new initiative that the manufacturer was not otherwise planning to perform at that time, with a clear connection to the emission problem demonstrated by the engine family in question; ( 2) Cost more than foregone compliance costs and consider the time value of the foregone compliance costs and the foregone environmental benefit of the engine family; ( 3) Offset at least 100 percent of the emission exceedance relative to that required to meet emission standards ( or Family Emission Limits); and ( 4) Be possible to implement effectively and expeditiously and to complete in a reasonable time. These criteria, and any other appropriate factors, will guide us in evaluating projects to determine whether their nature and burden is appropriate to remedy the environmental impact of the nonconformity.

G. Hearings ( Part 1068, subpart G) Manufacturers have the opportunity to challenge our decisions related to implementing this final rule. We are adopting hearing procedures consistent with those currently in place for highway engines and vehicles.

VIII. General Test Procedures This rule establishes new engine testing regulations in 40 CFR part 1065. These regulations will apply to anyone who tests engines to show that they meet the emission standards for snowmobiles, ATV, motorcycles, or Large SI engines. This includes certification testing, as well as all production line and in use testing. See the program descriptions above for testing provisions that are unique to different engine categories. The regulatory text in 40 CFR part 1065 is written recognizing that we may someday apply these procedures more broadly to other EPA engine testing programs. If we decide to apply these provisions to other engines in future rulemaking, we would incorporate necessary additions or changes at that time. Recreational marine diesel engines VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68321 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 86 See the final rule for commercial marine diesel engines for a broader discussion of maximum test speed ( 64 FR 73300, December 29, 1999). must be tested using the procedures already adopted in 40 CFR part 94.

A. General Provisions As we have done in previous programs, we are adopting specific test procedures to define how to measure emissions, but allow alternate procedures if they are shown to be equivalent to our specified procedures. The test procedures in 40 CFR part 1065 are derived from our test procedures in 40 CFR part 86 for highway heavy duty gasoline engines and light duty vehicles. The procedures have been simplified ( and to some extent generalized) to better fit nonroad engines.

B. Laboratory Testing Equipment The regulations do not specify the type of engine or chassis dynamometer to use during testing. Rather, they include performance criteria that must be met during each test. These criteria are intended to ensure that deviations from the specified speed and load duty cycle are small. Measuring emissions during transient operation calls for a greater degree of sophistication than steady state testing. For chassis testing of recreational vehicles, we are adopting the specifications established in 40 CFR part 86 for highway engines. For Large SI engines, we based the dynamometer specifications around the capabilities of current dynamometers with enhanced control capabilities. While EPA confirmatory testing with transient duty cycles must meet the prescribed specifications, manufacturers may ask for approval to run tests with relaxed requirements for following the trace of the transient duty cycle. Manufacturers would have an incentive to accurately reproduce the test cycle to ensure compliance with emission standards, but would be able to use otherwise invalidated tests if the degree of variance from the test cycle does not call into question the engine's reported emission levels. In addition, for transient testing with recreational vehicles and any testing with Large SI engines, the regulations specify that emissions must be measured using a full dilution constantvolume sampler ( CVS) like those used to measure emissions from highway engines. This means that during a test, an engine's exhaust is routed into a dilution tunnel where it is mixed with air and then sampled using a bag sampler system. After the test, the concentrations of HC, CO, and NOX in the bag is measured using conventional laboratory analyzers. For Large SI engines and snowmobiles, the steady state test procedures specify measuring emissions with dilute sampling equipment. Some manufacturers have expressed a preference to continue with their established practice of using rawsampling equipment and procedures. While we believe dilute sampling is most appropriate for these engines, the provisions for alternate testing procedures may allow for raw sampling measurements for steady state testing. As specified in 40 CFR 1065.10( c)( 3) of the regulations, we allow manufacturers to use alternate procedures shown to be equivalent to the specified procedures. We are also including an interim provision for snowmobiles to allow manufacturers to use the raw sampling procedures in 40 CFR part 91 for a few years before they are required to show equivalence with the dilute sampling procedures. This option will allow manufacturers to focus their engineering efforts on reducing emissions during the start of the program.

C. Laboratory Testing Procedures The specific procedures for running emission tests are outlined briefly here, with a more detailed description of the most significant aspects. Before testing the engine, it is necessary to operate it enough to stabilize emission levels or to make it more representative of in use engines. This is called service accumulation and may take one of two forms. In the first method, a new engine is operated for up to 50 hours as a breakin period. This is done for most or all emission data engines. The second method is much longer, up to the full useful life, and is done to determine deterioration factors. Once an engine is ready for testing, it is connected to the dynamometer with its exhaust flowing into the dilution tunnel. The dynamometer is controlled to make the engine follow the specified duty cycle. A continuous sample is collected from the dilution tunnel for each test segment or test mode using sample bags. These bags are then analyzed to determine the concentrations of HC, CO, and NOX.

1. Test Speeds The definition of maximum test speed, where speed is the angular velocity of an engine's crankshaft ( usually expressed in revolutions per minute, or rpm), is an important aspect of most duty cycles. Until recently, we relied on engine manufacturers to declare reasonable rated speeds for their engines and then used the rated speed as the maximum test speed. However, to have a more objective measure of an engine's maximum test speed, we have established a specific procedure for measuring this engine parameter. 86 We define the maximum test speed for any engine to be the single point on an engine's maximum power versus speed curve that lies farthest away from the zero power, zero speed point on a normalized maximum power versus speed plot. In other words, consider straight lines drawn between the origin ( speed = 0, load = 0) and each point on an engine's normalized maximumpower versus speed curve. Maximum test speed is defined at that point where the length of this line reaches its maximum value. For constant speed engines, maximum test speed is the engine's rated speed. Intermediate speed for steady state duty cycles is defined as the speed at which the engine generates its maximum torque value. However, in cases where the maximum torque occurs at a speed that is less than 60 percent or greater than 75 percent of the rated speed, the intermediate speed is often specified as either 60 or 75 percent of rated speed, whichever is closer to the speed of maximum torque. The maximum test speed described above is used to calculate these percentage values relative to rated speed.

2. Maintenance As described in Section II. C. 1, we are limiting the amount of scheduled maintenance manufacturers may prescribe for their customers to ensure that engines continue to meet emission standards. If manufacturers specify unreasonably frequent maintenance, there would be little assurance that inuse engines would continue to operate at certified emission levels. We also apply these minimum maintenance intervals to engines the manufacturer operates for service accumulation before testing for emissions. For example, manufacturers may not install a new catalyst on a Large SI engine after 2,000 hours of operation, then select that engine for the in use testing program. Similarly, manufacturers may not replace fuel system components on a recreational vehicle during the course of service accumulation for establishing deterioration factors. We do not restrict scheduling of routine maintenance items, such as changing engine oil and replacing oil, fuel, or air filters. We may also allow changing spark plugs, even though we are aware that spark plugs may affect emissions.

VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68322 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations D. Other Testing Procedures As noted in earlier sections, we are establishing some special test procedures for field testing situations. These special procedures are designed to apply to specific types of engines, and thus do not apply generally to all engines covered by this rulemaking. You should read the specific applicable section to determine if such special test procedures apply to any specific category of engines or vehicles.

IX. Projected Impacts This section summarizes the projected impacts of the emission standards. The anticipated reduction in emissions is compared with the projected cost of the program for an assessment of the cost per ton of reducing emissions for this rule. The section includes the results of the analysis for the Final Program. We have also analyzed the impacts of different alternatives for each of the program areas. This analysis of alternatives, for the most part, focused on more or less stringent alternative standards. For recreational marine diesels, the alternatives analyzed were applying draft European standards or implementing our primary program two years earlier. For the Large SI category, the alternative focused on adopting a steady state only 2007 requirement. For off highway motorcycles, we analyzed a more stringent 1.0 g/ km standard and a less stringent 4.0 g/ km standard for HC + NOX control. With ATVs, the alternatives presented were a 2.0 g/ km and a 1.0 g/ km HC + NOX standard. For snowmobiles, we analyzed four alternatives, ranging from only adopting one phase of standards in 2006 to a standard that would require, on average, reductions of 85% HC and 50% CO from baseline emissions. Additional detailed discussion on these alternatives and the results of the alternatives analysis are presented in Chapter 11 of the RSD.

A. Environmental Impact To estimate nonroad engine and vehicle emission contributions, we used the latest version of our NONROAD emissions model. This model computes emission levels for a wide variety of nonroad engines, and uses information on emission rates, operating data, and population to determine annual emission levels of various pollutants. A more detailed description of the methodology used for projecting inventories and projections for additional years can be found in the Chapter 6 of the Final Regulatory Support Document. Tables IX. A   1 and IX. A   2 contain the projected emission inventories for calendar year 2010 from the engines and vehicles subject to this rulemaking under the base case ( i. e., without the standards taking effect) and assuming the standards take effect. Tables IX. A   3 and IX. A   4 contain the projected emission inventories for calendar year 2020. The percent reductions based on a comparison of estimated emission inventories with and without the emission standards are also presented in each of the tables.

TABLE IX. A   1.   2010 PROJECTED HC AND NOX EMISSIONS INVENTORIES [ Thousand short tons]

Category HC* NOX Base case With standards Percent reduction Base case With standards Percent reduction Large SI ............................................................................................. 268 88 67 389 118 70 Snowmobiles ...................................................................................... 297 250 16 3 4 ( 16) ATVs .................................................................................................. 308 211 31 7 6 11 Off highway motorcycles .................................................................... 193 155 20 1.1 1.2 ( 8) Recreational marine diesel ................................................................ 1.6 1.5 10 49 46 7 Total ........................................................................................ 1,066 705 34 450 174 61 * The estimate for Large SI includes both exhaust HC and evaporative HC emissions. The estimates for snowmobiles, ATVs and Off highway motorcycles includes both exhaust HC and permeation HC emissions. The estimate for recreation marine diesel includes exhaust HC emissions.

TABLE IX. A   2.   2010 PROJECTED CO AND PM EMISSIONS INVENTORIES [ Thousand short tons]

Category CO PM Base case With standards Percent reduction Base case With standards Percent reduction Large SI ................................................................................................... 2,022 945 53 1.9 1.9 0 Snowmobiles ............................................................................................ 775 670 14 7.0 6.7 4 ATVs ........................................................................................................ 1,042 989 5 10.8 7.4 32 Recreational marine diesel ...................................................................... 8 8 0 1.3 1.2 6 Off highway motorcycles .......................................................................... 266 239 10 7.3 5.8 20 Total .............................................................................................. 4,113 2,851 31 28.3 23.0 19 TABLE IX. A   3.   2020 HC AND NOX PROJECTED EMISSIONS INVENTORIES [ Thousand short tons]

Category HC* NOX Base case With standards Percent reduction Base case With standards Percent reduction Large SI ............................................................................................... 318 34 89 472 43 91 VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68323 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 87 For further information on learning curves, see Chapter 5 of the Economic Impact, from Regulatory Impact Analysis Control if Air Pollution from New Motor Vehicles: Tier 2 Motor Vehicle Emission Standards and Gasoline Sulfur Control Requirements, EPA420 R   99   023, December 1999. A copy of this document is included in Air Docket A   2000   01, at Document No. II A   83. The interested reader should also refer to previous final rules for Tier 2 highway vehicles ( 65 FR 6698, February 10, 2000), marine diesel engines ( 64 FR 73300, December 29, 1999), nonroad diesel engines ( 63 FR 56968, October 23, 1998), and highway diesel engines ( 62 FR 54694, October 21, 1997). TABLE IX. A   3.   2020 HC AND NOX PROJECTED EMISSIONS INVENTORIES   Continued [ Thousand short tons]

Category HC* NOX Base case With standards Percent reduction Base case With standards Percent reduction Snowmobiles ........................................................................................ 358 149 58 5 10 ( 101) ATVs .................................................................................................... 374 53 86 8 6 25 Off highway motorcycles ...................................................................... 232 117 50 1.3 1.5 ( 19) Recreational marine diesel .................................................................. 2.0 1.5 28 61 48 21 Total .......................................................................................... 1,284 355 72 547 109 80 * The estimate for Large SI includes both exhaust HC and evaporative HC emissions. The estimates for snowmobiles, ATVs and Off highway motorcycles includes both exhaust HC and permeation HC emissions. The estimate for recreation marine diesel includes exhaust HC emissions.

TABLE IX. A   4.   2020 PROJECTED CO AND PM EMISSIONS INVENTORIES [ Thousand short tons]

Category CO PM Percent reduction Base case With standards Percent reduction Base case With standards Large SI ................................................................................................... 2,336 277 88 2.3 2.3 0 Snowmobiles ............................................................................................ 950 508 46 8.4 4.9 42 ATVs ........................................................................................................ 1,250 1,085 13 13.1 1.9 86 Off highway motorcycles .......................................................................... 321 236 26 8.7 4.4 50 Recreational Marine diesel ...................................................................... 9 9 0 1.6 1.3 18 Total .............................................................................................. 4,866 2,115 56 34.2 14.8 57 As described in Section I, we project there will also be environmental benefits associated with reduced haze in many sensitive areas. Finally, anticipated reductions in hydrocarbon emissions correspond with reduced emissions of the toxic air emissions referenced in Section I.

B. Cost Estimates In assessing the economic impact of setting emission standards, we have made a best estimate of the necessary technologies and their associated costs. In making our estimates we have relied on our own technology assessment, which includes information supplied by individual manufacturers and our own in house testing. Estimated costs include variable costs ( for hardware and assembly time) and fixed costs ( for research and development, retooling, and certification). The analysis also considers total operating costs, including maintenance and fuel consumption. Cost estimates based on the projected technologies represent an expected change in the cost of engines as they begin to comply with new emission standards. All costs are presented in 2001 dollars. Full details of our cost analysis can be found in Chapter 5 of the Final Regulatory Support Document. Cost estimates based on the current projected costs for our estimated technology packages represent an expected incremental cost of vehicles in the near term. For the longer term, we have identified factors that will cause cost impacts to decrease over time. First, we project that manufacturers will generally recover their fixed costs over a five year period, so these costs disappear from the analysis after the fifth year of production. Second, the analysis incorporates the expectation that manufacturers and suppliers will apply ongoing research and manufacturing innovation to making emission controls more effective and less costly over time. Research in the costs of manufacturing unrelated to emissions control technologies has consistently shown that as manufacturers gain experience in production and use, they are able to apply innovations to simplify machining and assembly operations, use lower cost materials, and reduce the number or complexity of component parts ( see the Final Regulatory Support Document for additional information). 87 The cost analysis assumes this learning effect applies equally well to the adoption of the technologies associated with this rule by decreasing estimated variable costs by 20 percent starting in the third year of production and an additional 20 percent starting in the sixth year of production. Table IX. B   1 summarizes the projected near term per unit average costs to meet the new emission standards. These estimates are based on the manufacturing cost rather than predicting price increase; the costs nevertheless take into account anticipated mark ups to present retailprice equivalent figures. Long term impacts on engine costs are expected to decrease as manufacturers fully amortize their fixed costs and learn to optimize their designs and production processes to meet the standards more efficiently. The tables also show our projections of reduced operating costs for some engines ( calculated on a net present value basis), which generally results from substantial reductions in fuel consumption.

VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68324 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 88 Chapter 5 of the Final Regulatory Support Document describes why we believe market forces haven't already led manufacturers to add fuelsaving technologies to their products. 89 The program contains an optional set of standards for off highway motorcycles which could result in the use of direct injection two stroke technology in some high performance applications. Chapter 11.3 provides a cost analysis for this option. The costs are projected to be somewhat higher for this option due to the application of technology to high performance competition models. TABLE IX. B   1.   ESTIMATED AVERAGE COST IMPACTS OF EMISSION STANDARDS Standards Dates Increased production cost per vehicle* Lifetime operating costs per vehicle ( NPV)

Large SI exhaust ............................................................................................................................. 2004 $ 611 $ ¥ 3,981 Large SI exhaust ............................................................................................................................. 2007 55 0 Large SI evaporative ....................................................................................................................... 2007 13 ¥ 56 Snowmobile exhaust ( Phase 1) ....................................................................................................... 2006 73 ¥ 57 Snowmobile exhaust ( Phase 2) ....................................................................................................... 2010 131 ¥ 286 Snowmobile exhaust ( Phase 3) ....................................................................................................... 2012 89 ¥ 191 Snowmobile permeation .................................................................................................................. 2008 7 ¥ 11 ATV exhaust .................................................................................................................................... 2006 84 ¥ 24 ATV permeation ............................................................................................................................... 2008 3 ¥ 6 Off highway motorcycle exhaust ..................................................................................................... 2006 155 ¥ 48 Off highway motorcycle peermeation .............................................................................................. 2008 3 ¥ 5 Recreational ..................................................................................................................................... 2006 346 0 * These estimates are for near term costs. The estimated long term costs decrease by about 35 percent. Costs presented for the Large SI and snowmobile second phase standards are incremental to the first phase standards. Costs for Phase 3 are incremental to Phase 2. These costs numbers may not necessarily reflect actual price increases as manufacturer production costs, perceived product enhancements, and other market impacts will affect actual prices to consumers.

We estimate that the anticipated increase in the near term cost of producing new Large SI engines for the 2004 standards is estimated to range from $ 550 to $ 800, depending on fuel type, with a composite estimated cost of $ 605. This cost is attributed to upgrading engines to operate with closed loop fuel systems and three way catalysts. These technologies also improve the overall performance of these engines, including improvements to fuel economy that result in reduced operating costs that fully offset the additional hardware cost. We further estimate additional costs of $ 50 for the 2007 standards, which primarily involve additional development time to optimize engines using the same closedloop systems with three way catalysts. While these costs are a small percentage of the cost of industrial equipment, we are aware that this may not be insignificant in this very competitive market. Given the compelling advantages of improved performance and reduced operating expenses, however, we believe manufacturers will generally be able to recover their costs over time. 88 Projected average near term costs for ATVs and off highway motorcycles are $ 84 and $ 155 per unit, respectively. Standards are based on the emissioncontrol capability of engines four stroke engines. 89 Those models that convert from two stroke to four stroke technology will see substantial fuel savings in addition to greatly reduced emissions. With an averaging program that allows manufacturers to apply varying degrees of technology to different models, we believe they will be able to tailor emission controls in a way that reflects the performance needs for their products. Fuel savings associated with replacing two stroke engines with four stroke engines partially offsets the additional cost of producing these vehicles. We expect that the near term cost of the 2006 snowmobile standards will average $ 73 per snowmobile. These costs are based on a mix of technologies including a small increase in the use of four stroke and direct injection technology. For other engines we expect manufacturers to lean out the air fuel mixture, improve carburetion for better fuel control and less production variation, and modify the engine to withstand higher temperatures and potential misfire episodes attributed to enleanment. We expect that the 2010 and 2012 standards will be met through inceasing the application of direct injection two stroke technology and four stroke engines on a significant portion of the fleet. We project that the near term incremental cost of the Phase 2 standards will average $ 131 per snowmobile and Phase 3 will be $ 89, although we believe these costs will be fully offset by fuel savings. Recreational marine diesel engines are expected to see increased costs averaging under $ 400 per engine in the near term. We expect manufacturers to meet emission standards by improving fuel injection systems and making general design changes to the geometries, configurations, and calibrations of their engines. These figures are somewhat lower than we have projected for the comparable commercial marine engines, since the recreational models generally already have some of the emission control technologies needed to meet the emission standards. The above analysis presents unit cost estimates for each type of engine or vehicle. These costs represent the total set of costs the engine or vehicle manufacturers will bear to comply with emission standards. For those categories with engine based standards, we do not anticipate significant new costs for equipment manufacturers installing certified engines. Operating costs are also taken into account, but where there is an effect, we project these impacts to involve only cost savings for operators. With current and projected estimates of engine and equipment sales, we translate these costs into projected direct costs to the nation for the new emission standards in any year. A summary of the annualized costs to manufacturers by equipment type is presented in Table IX. B   2. ( The annualized costs are determined over the first twenty years that the standards will be in effect. Because the standards take effect in different years for the various categories of equipment covered by this rule, the aggregate annualized cost is calculated over a slightly longer period of time encompassing the first twenty years of each of the standards. For this reason, the aggregate annualized cost is not the sum of the individual annualized costs.) The annual cost savings due to reduced operating expenses start slowly, then increase as greater numbers of VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68325 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations compliant engines enter the fleet. Table IX. B   2 also presents a summary of the annualized reduction in operating costs. Overall, based on currently available information, we project an annualized net savings to the economy of approximately $ 200 million per year.

TABLE IX. B   2   ESTIMATED ANNUAL COST TO MANUFACTURERS AND ANNUAL SAVINGS FROM REDUCED OPERATING COSTS OF EMISSION STANDARDS Engine type Annualized cost to manufacturers ( millions/ year) Annualized savings from reduced operating costs ( millions/ year)

Large SI ............................................................................................................................................................... $ 84 $ 324 Snowmobiles ........................................................................................................................................................ 36 47 ATVs .................................................................................................................................................................... 61 31 Off highway motorcycles ..................................................................................................................................... 25 14 Marine Diesel ....................................................................................................................................................... 7 0 Aggregate * .......................................................................................................................................................... 192 410 * Because the standards take effect in different years for the various categories of equipment, the aggregate annualized cost is calculated over a slightly longer period of time. For this reason, the aggregate annualized cost is not the sum of the individual annualized costs.

C. Cost Per Ton of Emissions Reduced We calculated the cost per ton of emission reductions for the emission standards. For snowmobiles, this calculation is on the basis of HC and CO emissions. For all other engines, we attributed the entire cost of the program to the control of ozone precursor emissions ( HC or NOX or both). Table IX. C   1 presents the near term discounted cost per ton estimates for the various engines covered by the rule. ( The aggregate cost per ton estimates are over the first 20 years of emission standards.) Reduced operating costs more than offset the increased cost of producing the cleaner engines for Phase 1 Large SI, and Phase 2 and Phase 3 snowmobile engines. The cost to society and the associated cost per ton figures for these engines, and the aggregate values for all engines covered by this rule, therefore show a net savings resulting from the emission standards. The table presents these as $ 0 per ton, rather than calculating a negative value that has no clear meaning.

TABLE IX. C   1.   ESTIMATED COST PER TON OF EMISSION STANDARDS Standards Dates Discounted reductions per vehicle ( short tons) * Discounted cost per ton of HC+ NOX Discounted cost per ton of CO Without fuel savings With fuel savings Without fuel savings With fuel savings Large SI exhaust ( Composite of all fuels) .................................................. 2004 3.07 $ 240 $ 0     Large SI exhaust ( Composite of all fuels) .................................................. 2007 0.80 80 80   Large SI evaporative .................................................................................. 2007 0.13 80 0   Snowmobile exhaust ................................................................................... 2006 HC: 0.40 90 20 $ 40 $ 10 CO: 1.02 Snowmobile exhaust ................................................................................... 2010 HC: 0.10 1,370 0     Snowmobile exhaust ................................................................................... 2012 CO: 0.25     360 0 Snowmobile permeation ............................................................................. 2008 0.03 210 0     ATV exhaust ............................................................................................... 2006 0.21 400 290     ATV permeation .......................................................................................... 2008 0.02 180 0     Off highway motorcycle exhaust ................................................................ 2006 0.38 410 280     Off highway motorcycle permeation ........................................................... 2008 0.01 230 0     Recreational marine diesel ......................................................................... 2006 0.44 670 670     Aggregate ...................................................................................................     240 0 80 0 * HC reductions for evaporative and permeation, and HC+ NOX reductions for exhaust ( except snowmobiles where CO reductions are also presented).

D. Economic Impact Analysis We performed an analysis to estimate the economic impacts of this final rule on producers and consumers of recreational marine diesel vessels ( specifically, diesel inboard cruisers), forklifts, snowmobiles, ATVs, offhighway motorcycles, and society as a whole. This economic impact analysis focuses on market level changes in price, quantity, and economic welfare ( social gains or costs) associated with the regulation. A description of the methodology used can be found in Chapter 9 of the Final Regulatory Support Document prepared for this rulemaking. We did not perform an economic impact analysis for categories of Large SI nonroad engines other than forklifts, even though those other Large SI engines are also subject to the standards contained in this final rule. As explained in more detail in Chapter 9 of the Final Regulatory Support Document, this was due to the large number of different types of equipment that use Large SI engines and data availability constraints for those market segments. For the sake of completeness, the following analysis reports separate estimates for Large SI engines other than forklifts. Engineering costs are assumed VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68326 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations 90 Consumer and producer surplus losses are measures of the economic welfare loss consumers and producers, respectively are likely to experience as a result of the regulations. Combined these losses represent an estimate of the economic or social costs of the rule. Note that for the Large SI and recreational vehicle rules, fuel efficiency gains must be netted from surplus losses to estimate the social costs or social gains ( in cases where fuel efficiency gains exceed surplus losses) attributable to the rules. 91 Regulatory Impact Analysis: Heavy Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements, document EPA420   R   00   026, December 2000. Docket No. A   2000   01, Document No. II   A   13. This document is also available at http:// www. epa. gov/ otaq/ diesel. htm# documents. The transfer technique is described in a memorandum, Dr. Bryan Hubbell, Senior Economist, Estimated Nox, Sox, and PM Emissions Health Damages for Heavy Duty Vehicle Emissions, April 22, 2002. A copy of this letter can be found in Docket A   2000   01, Document IV   A   146.

92 The section 812 studies include: ( 1) U. S. EPA, Report to Congress: The Benefits and Costs of the Clean Air Act, 1970 to 1990, October 1997 ( also known as the `` Section 812 Retrospective Report''); to be equal to economic costs for those engines. This approach slightly overestimates the social costs associated with the relevant standards. Based on the estimated regulatory costs associated with this rule and the predicted changes in prices and quantity produced in the affected industries, the total estimated annual social gains of the rule in the year 2030 is projected to be $ 553.5 million ( in 2000 and 2001 dollars). The net present value of the social gains for the 2002 to 2030 time frame is equal to $ 4.9 billion, using a 3% discount rate. This value would be $ 2.4 billion with a 7% discount rate. The social gains are equal to the fuel savings minus the combined loss in consumer and producer surplus ( see Table IX. D   1), taking into account producers' and consumers' changes in behavior resulting from the costs associated with the rule. 90 Social gains do not account for the social benefits ( the monetized health and environmental effects of the rule).

TABLE IX. D   1.   SURPLUS LOSSES, FUEL EFFICIENCY GAINS, AND SOCIAL GAINS/ COSTS IN 2030 a Vehicle category Surplus losses in 2030 ($ millions) Fuel efficiency gains in 2030 ($ millions) Social gains/ costs in 2030 b ($ millions)

Recreational marine diesel vessels ......................................................................................... $ 6.6 $ 0 ($ 6.6) Forklifts .................................................................................................................................... 47.8 420.1 372.3 Other Large SI ......................................................................................................................... c 48.1 138.4 90.3 Snowmobiles ............................................................................................................................ 41.9 135.0 93.1 ATVs ........................................................................................................................................ 47.2 51.4 4.2 Off highway motorcycles ......................................................................................................... 25.0 25.2 0.2 All vehicles total ....................................................................................................................... 216.6 770.1 553.5 NPV of all vehicles total d ........................................................................................................ 3,231.4 8,130.3 4,898.9 NPV of all vehicles total e ......................................................................................................... 1,889.5 4,282.3 2,392.8 a Figures are in 2000 and 2001 dollars. b Figures in this column exclude estimated social benefits. Numbers in parentheses denote social costs. c Figure is engineering costs; see text for explanation. d Net Present Value is calculated over the 2002 to 2030 time frame using a 3 percent discount rate. e Net Present Value is calculated over the 2002 to 2030 time frame using a 7 percent discount rate.

For most of the engine categories contained in this rule, we expect there will be a fuel savings as manufacturers redesign their engines to comply with emission standards. For ATVs and offhighway motorcycles, the fuel savings will be realized as manufacturers switch from two stroke to four stroke technologies. For snowmobiles, the fuel savings will be realized as manufacturers switch some of their engines to more fuel efficient two stroke technologies and some of their engines to four stroke technologies. For Large SI engines, the fuel savings will be realized as manufacturers adopt more sophisticated and more efficient fuel systems; this is true for all fuels used by Large SI engines. Overall, we project the fuel savings associated with the anticipated changes in technology to be about 800 million gallons per year once the program is fully phased in. These savings are factored into the calculated costs and costs per ton of reduced emissions, as described above. E. Do the Benefits Outweigh the Costs of the Standards?

While EPA uses relative costeffectiveness as the primary manner to take costs into consideration, further insight regarding the standards can be provided by benefit cost analysis. The purpose of this section is to summarize the methods we used and results we obtained in conducting an analysis of the economic benefits of the changes in emissions from engines covered by this rule, and to compare these economic benefits with the estimated economic costs of the rule. In summary, the results of our analysis indicate that the economic benefits of the final standards will exceed the costs of meeting the standards. The annual estimated benefits we were able to quantify were approximately $ 10 billion in 2030.

1. What Was Our Overall Approach to the Benefit Cost Analysis?

The basic question we sought to answer in the benefit cost analysis was, `` What are the net yearly economic benefits to society of the reduction in mobile source emissions likely to be achieved by this final rulemaking?'' In designing an analysis to address this question, we selected a future year for analysis ( 2030) that is representative of full implementation of the program ( i. e., when the Large SI and recreational vehicle fleet is composed of virtually only compliant vehicles). To quantify benefits, we evaluated PM related health effects ( including directly emitted PM and NOX contribution to particulate nitrate) using a benefits transfer technique. Although we expect economic benefits to exist, we were unable to quantify or to value specific changes in visibility, ozone, CO or air toxics because we did not perform additional air quality modeling. To evaluate the PM related health effects, we adopted a benefits transfer technique that relies on the extensive particulate matter air quality and benefits modeling conducted for the highway Heavy Duty Engine/ Diesel Fuel final rule. 91 That RIA used an analytical structure and sequence similar to that used in the `` section 812 studies'' to estimate the total benefits and costs of the full Clean Air Act. 92 In the HD VerDate 0ct< 31> 2002 17: 09 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 E:\ FR\ FM\ 08NOR2. SGM 08NOR2 68327 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Rules and Regulations and ( 2) the first in the ongoing series of prospective studies estimating the total costs and benefits of the Clean Air Act ( see EPA report number: EPA   410   R   99   001, November 1999). See Docket A   99   06, Document II   A   21. 93 In the original HD Engine/ Diesel Fuel analysis, we modeled air quality and benefits in 2030. There are sufficient non linearities and interactions among pollutants in the atmospheric chemistry that introduce additional uncertainties in the quantitative estimate of the benefits in years that were not fully modeled in the original analysis. 94 SAB advised that the EPA `` continue to use a wage risk based VSL as its primary estimate, including appropriate sensitivity analyses to reflect the uncertainty of these estimates,'' and that `` the only risk characteristic for which adjustments to the VSL can be made is the timing of the risk'' ( EPASAB EEAC   00   013; a copy of this document can be found in Docket A   99   06, Document No. IV   A   19). In developing our primary estimate of the benefits of premature mortality reductions, we have appropriately discounted over the lag period between exposure and premature mortality. However, an empirical basis that meets the SAB's standards of reliability for adjusting the current $ 6 million VSL for many of these factors does not yet exist. A discussion of these factors is contained in the RIA and supporting documents. EPA recognizes the need for additional research by the scientific community to develop additional empirical support for adjustments to VSL for the factors mentioned above. Engine/ Diesel Fuel analysis, we used many of the same models and assumptions used in the section 812 studies as well as other Regulatory Impact Analyses ( RIAs) prepared by the Office of Air and Radiation. By adopting the major design elements, models, and assumptions developed for the section 812 studies and other RIAs, we have largely relied on methods which have already received extensive review by the independent Science Advisory Board ( SAB), by the public, and by other federal agencies. Although the underlying method has experienced significant review, the transfer of values from an existing primary benefits analysis to estimate the benefits of a new program has not had this type of review and the transfer technique introduces additional uncertainties.