[Federal Register Volume 62, Number 185 (Wednesday, September 24, 1997)]
[Proposed Rules]
[Pages 50152-50219]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 97-24237]


      

[[Page 50151]]

_______________________________________________________________________

Part IV





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 9 et al.



Control of Emissions of Air Pollution from Nonroad Diesel Engines; 
Proposed Rule

Federal Register / Vol. 62, No. 185 / Wednesday, September 24, 1997 / 
Proposed Rules

[[Page 50152]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 9, 86, and 89

[AMS-FRL-5888-4]
RIN 2060-AF76


Control of Emissions of Air Pollution From Nonroad Diesel Engines

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this action, EPA is proposing new emission standards for 
nonroad diesel engines. The affected engines are used in most land-
based nonroad equipment and some marine applications. If these 
standards are implemented as proposed, the resulting emission 
reductions would translate into significant, long-term improvements in 
air quality in many areas of the U.S. For engines in this large 
category of pollution sources, the standards for oxides of nitrogen and 
particulate matter emissions would be reduced by up to two-thirds from 
current standards. Overall, the proposed program would provide much-
needed assistance to states facing ozone and particulate air quality 
problems that are causing a range of adverse health effects for their 
citizens, especially in terms of respiratory impairment and related 
illnesses.

DATES: EPA will hold a hearing on the proposed rulemaking on October 8, 
1997. EPA requests comments on the proposed rulemaking by November 24, 
1997. More information about commenting on this action and on the 
public hearing and meeting may be found under Public Participation in 
SUPPLEMENTARY INFORMATION, below.

ADDRESSES: Materials relevant to this proposal, including the Draft 
Regulatory Impact Analysis are contained in Public Docket A-96-40, 
located at room M-1500, Waterside Mall (ground floor), U.S. 
Environmental Protection Agency, 401 M Street, S.W., Washington, DC 
20460. The docket may be inspected from 8:00 a.m. until 5:30 p.m., 
Monday through Friday. A reasonable fee may be charged by EPA for 
copying docket materials.
    Comments on this proposal should be sent to Public Docket A-96-40 
at the above address. EPA requests that a copy of comments also be sent 
to Alan Stout, U.S. EPA, Engine Programs and Compliance Division, 2565 
Plymouth Road, Ann Arbor, MI 48105.
    The public hearing will be held at Ramada Hotel O'Hare, 6600 North 
Mannheim Road, Rosemont, IL 60018, phone number (847) 827-5131. The 
public hearing will begin at 9 a.m. and will continue until all 
testimony has been presented. A transcript of the hearing will be 
placed in the docket. Copies may also be obtained by arrangement with 
the court reporter on the day of the hearing.
    For further information on electronic availability of this 
proposal, see SUPPLEMENTARY INFORMATION below.

FOR FURTHER INFORMATION CONTACT: Alan Stout, U.S. EPA, Engine Programs 
and Compliance Division, (313) 741-7805; stout.alan@epamail.epa.gov.

SUPPLEMENTARY INFORMATION:

Regulated Entities

    Entities potentially regulated by this action are those that 
manufacture or introduce into commerce new compression-ignition nonroad 
engines, vehicles, or equipment, and entities that rebuild or 
remanufacture nonroad compression-ignition engines. Regulated 
categories and entities include:

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             Category                  Examples of regulated entities   
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Industry..........................  Manufacturers of new nonroad diesel 
                                     engines and equipment.             
Industry..........................  Rebuilders and remanufacturers of   
                                     nonroad diesel engines.            
------------------------------------------------------------------------

    This list is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. To determine whether particular activities may be regulated by 
this action, the reader should carefully examine the proposed 
regulations, especially the applicability criteria in Sec. 89.1, and 
the existing regulatory language in 40 CFR part 89. Questions regarding 
the applicability of this action to a particular entity may be directed 
to the person listed in FOR FURTHER INFORMATION CONTACT.

Obtaining Electronic Copies of the Regulatory Documents

    The preamble, regulatory language and Draft Regulatory Impact 
Analysis (Draft RIA) are also available electronically from the EPA 
Internet Web site. This service is free of charge, except for any cost 
already incurred for internet connectivity. The electronic version of 
this proposed rule is made available on the day of publication on the 
primary Web site listed below. The EPA Office of Mobile Sources also 
publishes Federal Register notices and related documents on the 
secondary Web site listed below.

1. http://www.epa.gov/docs/fedrgstr/EPA-AIR/ (either select desired 
date or use Search feature)
2. http://www.epa.gov/OMSWWW/ (look in What's New or under the specific 
rulemaking topic)

    Please note that due to differences between the software used to 
develop the document and the software into which the document may be 
downloaded, changes in format, page length, etc., may occur.

Table of Contents

I. Introduction
II. Background
    A. Air Quality Problems Addressed in the Proposed Rule
    1. Ozone
    2. Particulate Matter
    3. Contribution of Nonroad Engines to Emissions
    B. Legislative and Regulatory History
    1. U.S. Federal Action
    2. State of California Action
    3. Development of This Proposal
    4. Harmonization
    5. 2001 Feasibility Review
III. Description of Proposed Standards and Related Provisions
    A. Emission Standards
    B. Test Procedures
    1. Test Cycles
    2. Test Fuel
    C. Durability
    D. Averaging, Banking, and Trading
    E. Flexibility for Equipment Manufacturers
    F. Flexibility for Post-Manufacture Marinizers
    G. Control of Crankcase Emissions
    H. Control of Smoke
    I. Voluntary Low-Emitting Engine Program
IV. Technical Amendments
    A. Rated Speed Definition
    B. Other Technical Amendments
V. Technological Feasibility
    A. Development of the Implementation Schedule
    B. Development of Numerical Standards
    C. Technological Approaches
    D. Conclusions Regarding Technological Feasibility
VI. Projected Impacts
    A. Environmental Impacts
    B. Economic Impacts
    C. Cost-Effectiveness
VII. Public Participation
    A. Comments and the Public Docket
    B. Public Hearing
VIII. Administrative Requirements
    A. Administrative Designation and Regulatory Analysis
    B. Regulatory Flexibility Act
    C. Paperwork Reduction Act
    D. Unfunded Mandates Reform Act
IX. Statutory Authority

I. Introduction

    Air pollution continues to represent a serious threat to the health 
and well-being of millions of Americans and a large burden to the U.S. 
economy. This threat exists despite the fact that over the past two 
decades great progress has been made at the local, state, and national 
levels in controlling emissions from many sources of air pollution. As

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a result of this progress, many individual emission sources, both 
stationary and mobile, pollute at only a fraction of their precontrol 
rates. However, continued industrial growth and expansion of motor 
vehicle usage threaten to reverse these past achievements. Today, many 
states are finding it difficult to meet the current ozone and 
particulate matter National Ambient Air Quality Standards (NAAQS) by 
the deadlines established in the Act.1 Furthermore, other 
states that are approaching or have reached attainment of the current 
ozone and PM NAAQSs will likely see those gains lost if current trends 
persist.
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     \1\See U.S.C. 7401 et seq.
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    In recent years, significant efforts have been made on both a 
national and state level to reduce air quality problems associated with 
ground-level ozone, with a focus on its main precursors, oxides of 
nitrogen (NOX) and volatile organic compounds 
(VOCs).2 In addition, airborne particulate matter (PM) has 
been a major air quality concern in many regions. As discussed below, 
ozone and PM have been linked to a range of serious respiratory health 
problems and a variety of adverse environmental effects.
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     \2\VOCs consist mostly of hydrocarbons (HC), including 
nonmethane hydrocarbons (NMHC).
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    The states have jurisdiction to implement a variety of stationary 
source emission controls. In most regions of the country, states are 
implementing significant stationary source NOX controls (as 
well as stationary source VOC controls) for controlling acid rain, 
ozone, or both. In many areas, however, these controls will not be 
sufficient to reach and maintain the current ozone standard without 
significant additional NOX reductions from mobile sources. 
Generally, the Clean Air Act specifies that emission standards for 
controlling NOX, HC, and PM emissions from new mobile 
sources must be established at the federal level.3 Thus, the 
states look to the national mobile source emission control program as a 
complement to their efforts to meet air quality goals. The concept of 
common emission standards for mobile sources across the nation is 
strongly supported by manufacturers, which often face serious 
production inefficiencies when different requirements apply to engines 
or vehicles sold in different states or areas.
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    \3\ The CAA limits the role states may play in regulating 
emissions from new motor vehicles and nonroad engines. California is 
permitted to establish emission standards for new motor vehicles and 
most new nonroad engines; other states may adopt California's 
programs (sections 209 and 177 of the Act).
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    Mobile source emission control programs have a history of 
technological success that, in the past, has largely offset the 
pressure from constantly growing numbers of vehicles and miles traveled 
in the U.S. The per-vehicle rate of emissions from new passenger cars 
and light trucks has been reduced to very low levels. Similarly, 
manufacturers of heavy-duty engines for highway use have developed new 
technological approaches over the past two decades that have 
significantly reduced emissions from these engines; new standards 
scheduled to take effect in 1998 will result in significant further 
emission reductions from trucks and buses (58 FR 15781, March 24, 
1993). As a result, increasing attention is now focused on the engines 
used in a wide range of nonroad equipment.
    Manufacturers of engines for nonroad applications have only 
recently become subject to emission regulations. The lessons learned 
from many years of reducing passenger car and heavy-duty truck 
emissions are being applied to nonroad engines; however, extensive new 
efforts are necessary to develop emission control techniques that 
address unique characteristics of nonroad applications (such as special 
engine cooling needs, dusty operating environments, marine use, etc.). 
The broad range of engine sizes (from a few kilowatts of power to many 
hundreds of kilowatts), the vast array of agricultural, construction, 
industrial, and electrical generation applications into which nonroad 
engines are installed, the large number of equipment manufacturers, and 
the newness of many in this industry to emission control requirements 
all combine to increase the challenge of reducing emissions from 
nonroad engines. A more detailed discussion of the history of nonroad 
engine emission control is included under Background (Section II.B.).
    In addition, there are technological challenges inherent to nonroad 
diesel-cycle engine design that must be addressed.4 While 
diesel engines provide advantages in terms of fuel efficiency, 
reliability, and durability, controlling NOX emissions is 
generally considered a greater challenge for diesel engines than for 
otto-cycle engines. Similarly, control of PM emissions, which are very 
low for gasoline-fueled engines, represents a substantial challenge for 
diesel engines. Part of this challenge for diesel engines is that most 
traditional NOX control approaches tend to increase PM 
emissions, and vice versa. A more complete discussion of technology 
issues is presented under Technological Feasibility (Section V).
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    \4\ Diesel-cycle engines, referred to simply as ``diesel 
engines'' in this notice, may also be referred to as compression-
ignition (or CI) engines. These engines typically operate on diesel 
fuel, but other fuels may be also be used. This contrasts with otto-
cycle engines (also called spark-ignition or SI engines), which 
typically operate on gasoline.
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    This notice proposes a new set of emission standards for all 
nonroad diesel engines, except for locomotive engines, engines used in 
underground mining equipment, and marine engines rated over 37 
kW.5 EPA's Supplemental Advance Notice of Proposed 
Rulemaking (Supplemental ANPRM), published on January 2, 1997, and the 
comments received on that notice provide the framework for these new 
emission standards (62 FR 200, January 2, 1997).
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    \5\ This proposal is based on metric units. With the exception 
of engine power ratings, English units are included parenthetically 
throughout the preamble. The conversion of engine power ratings is 
included in Table 1, but is not repeated in the rest of the 
document.
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II. Background

A. Air Quality Problems Addressed in the Proposed Rule

    The emission standards proposed in this notice are intended to be a 
major step in reducing the human health and environmental impacts of 
ground-level ozone and particulate matter (PM). This section summarizes 
the air quality rationale for these new emission standards and their 
anticipated impact on nonroad diesel emissions.
1. Ozone
    There is a large body of evidence showing that ground-level ozone, 
which is formed from photochemical reactions of NOX and 
VOCs, causes harmful respiratory effects, including chest pain, 
coughing, and shortness of breath. Ozone most severely affects people 
with compromised respiratory systems and children. In addition, 
NOX itself can directly harm human health. Beyond their 
effects on human health, other negative environmental effects are also 
associated with ozone and NOX. Ozone has been shown to 
injure plants and materials; NOX contributes to the 
secondary formation of PM (nitrates), acid deposition, and the 
overgrowth of algae in coastal estuaries. These environmental effects, 
as well as the health effects described above, are described in the 
Draft RIA. Additional information may be found in EPA's ``staff 
papers'' and ``air quality criteria''

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documents for ozone and nitrogen 
oxides.6,7,8,9
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    \6\ U.S. EPA, 1996, Review of National Ambient Air Quality 
Standards for ozone, Assessment of Scientific and Technical 
Information, OAQPS Staff Paper, EPA-452/R-96-007 (found in Air 
Docket A-95-58).
    \7\ U.S. EPA, 1996, Air Quality Criteria for Ozone and Related 
Photochemical Oxidants, EPA/600/P-93/004aF (found in Air Docket A-
95-58).
    \8\ U.S. EPA, 1995, Review of National Ambient Air Quality 
Standards for Nitrogen Dioxide, Assessment of Scientific and 
Technical Information, OAQPS Staff Paper, EPA-452/R-95-005 (found in 
Air Docket A-93-06).
    \9\ U.S. EPA, 1993, Air Quality Criteria for Oxides of Nitrogen, 
EPA/600/8-91/049aF (found in Air Docket A-93-06).
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    Today, many states are finding it difficult to show how they can 
meet or maintain compliance with the current National Ambient Air 
Quality Standard for ozone by the deadlines established in the 
Act.10 There are 66 areas currently designated 
``nonattainment'' for ozone.
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    \10\ See 42 U.S.C. 7401 et seq.
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    Local, state and federal organizations charged with initiating 
programs to achieve cleaner air have mounted significant efforts in 
recent years to reduce air quality problems associated with ground-
level ozone, and there are signs of partial success. The main 
precursors of ozone, NOX, and VOCs appear to have been 
reduced, and average levels of ozone seem to have begun gradually 
decreasing. However, this progress is in jeopardy. EPA projects that 
reductions in ozone precursors that will result from the full 
implementation of current emission control programs will fall far short 
of what would be needed to offset the normal emission increases that 
accompany economic expansion. By the middle of the next decade, the 
Agency expects that the downward trends will have reversed, primarily 
due to increasing numbers of emission sources. As discussed below, EPA 
expects that NOX levels will have returned to current levels 
by around 2020 in the absence of significant new reductions. To the 
extent that some areas are seeing a gradual decrease in ozone levels in 
recent years, EPA believes that the expected increase in NOX 
will likely result in an increase in ozone problems in the future.
    NOX controls are an effective strategy for reducing 
ozone where its levels are relatively high over a large region (as in 
the Northeast and much of the Midwest, Southeast, and California). EPA 
and states see regional control of NOX emissions, in 
addition to local-scale VOC and NOX controls, as a key to 
improving regional-scale air quality in many parts of the country. 
Specifically, EPA believes that regional-scale reductions in 
NOX emissions will be necessary for many areas to attain and 
maintain compliance with the current ozone NAAQS. For the regions 
listed above, the NOX reductions needed are very large 
(greater than 50 percent from base 1990 emissions in many cases). New 
programs to control emissions from both stationary and mobile sources 
will be necessary in most of these areas, since it is unlikely that 
cost effective controls of this magnitude can be achieved with either 
source category alone. Although in some locations and circumstances 
moderate reductions in local NOX emissions may be associated 
with localized increases in ozone, the Agency is convinced that the 
ultimate attainment goal of all nonattainment areas necessitates 
continued reduction of regional-scale NOX emissions.
2. Particulate Matter
    Particulate matter, like ozone, has been linked to a range of 
serious respiratory health problems. Particles are deposited deep in 
the lungs and result in effects including premature death, increased 
hospital admissions and emergency room visits, increased respiratory 
symptoms and disease, decreased lung function (particularly in children 
and individuals with asthma), and alterations in lung tissue and 
structure and in respiratory tract defense mechanisms. These effects 
are discussed further in the Draft RIA for this rule. (Additional 
information may be found in EPA's ``staff paper'' and ``air quality 
criteria document'' for particulate matter. 11 
12)
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    \11\ U.S. EPA, 1996, Review of National Ambient Air Quality 
Standards for Partculate Matter, Assessment of Scientific and 
Technical Information, OAQPS Staff Paper, EPA-452/R-96-013 (found in 
Air Docket A-95-54).
    \12\ U.S. EPA, 1996, Air Quality Criteria for Particulate 
Matter, EPA/600/P-95/001aF (found in Air Docket A-95-54).
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    Currently, there are 80 PM-10 nonattainment areas across 
the U.S. (PM-10 refers to particles smaller than 10 microns in 
diameter.) As is the case with NOX, levels of PM caused by 
mobile sources are also expected to rise in the future. EPA believes 
that this projected increase will occur for two reasons: because of the 
expected continued increase in numbers of PM sources, including nonroad 
diesel engines; and because NOX from diesel engines and 
other sources is transformed in the atmosphere into fine secondary 
nitrate particles.
    Secondary nitrate particles account for a substantial fraction of 
the airborne particulate in some areas of the country, especially in 
the West. Measurements of ambient PM in some western U.S. urban areas 
that are having difficulty meeting the current NAAQS for PM-10 have 
indicated that secondary PM is a very important component of the 
problem. Secondary nitrate PM (consisting mostly of ammonium nitrate) 
is the major constituent of this secondary PM. For example, in Denver, 
on days when PM levels are high, about 25 percent of the measured PM-
2.5 is ammonium nitrate. In the Provo/Salt Lake City area, secondary PM 
comprises about 40 percent of the measured PM-10. Similarly, in the Los 
Angeles Basin, secondary nitrate PM levels represent about 25 percent 
of measured PM-10.13 Nitrate PM constitutes a smaller, but 
often important, fraction of PM in other areas of the country.
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    \13\ Summary of Local-Scale Source Characterization Studies, 
EPA-230-S-95-002, July, 1994 (Air Docket A-96-40).
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    Because the atmospheric chemistry of secondary PM formation has 
common attributes to that of ozone, secondary PM also tends to be a 
regional, rather than a strictly local phenomenon. For this reason, EPA 
believes that regional-scale NOX controls, including control 
of mobile NOX sources, are very effective in reducing 
secondary PM over a significant area. For example, California's PM 
State Implementation Plans for serious areas conclude that secondary 
formation of nitrate particulate due to regional-scale NOX 
emissions contributes to the particulate problem in the South Coast Air 
Basin, Coachella Area, and the San Joaquin Valley. EPA and the State of 
California believe that reduction of this fraction of the total PM will 
require additional regional-scale reductions in NOX 
emissions. 14
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    \14\ Memorandum to the docket from Carol Bohnenkamp, EPA Region 
9, regarding regional nature of secondary nitratee PM in California, 
July 30, 1997 (Docket A-96-40).
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    EPA believes that mobile sources, including nonroad diesel engines, 
contribute substantially to the fraction of ambient PM that is 
generally considered controllable. (The largest fraction of ambient PM 
is attributed to ``miscellaneous'' and ``natural'' sources, including 
wind erosion, wildfires, and fugitive dust, which are difficult or 
impossible to control.) As discussed in more detail in the next 
section, mobile sources make up more than a quarter of ``controllable'' 
sources (i.e., excluding

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miscellaneous and natural sources), with nonroad diesel engines 
accounting for about 16 percent. In addition, secondary PM contributes 
significant additional PM in some western PM nonattainment areas.
3. Contribution of Nonroad Engines to Emissions
    Figure 1 shows EPA's current estimates of the NOX 
emissions from the categories of nonroad diesel engines affected by the 
proposed standards. For 1996, nonroad diesel engines are estimated to 
represent about 27 percent of mobile source NOX and 13 
percent of total NOX emissions. In the future, EPA projects 
NOX emissions from these engines to drop slightly due to the 
Tier 1 emission standards, but then begin to rise again as growth 
overtakes the Tier 1 improvements. The contributions of the engines 
covered by this proposal to mobile source NOX and total 
NOX are projected to remain about constant.

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    Similarly, Figure 2 presents the Agency's best current projections 
for diesel PM emissions. EPA estimates that nonroad diesel engines 
currently contribute about 440,000 tons, or 48 percent of 
the directly emitted PM from mobile sources and 16 percent of total 
controllable PM emissions. In the future, Figure 2 projects that 
nonroad diesel PM emissions will steadily rise in the absence of new 
emission standards. In addition to directly emitted PM, EPA estimates 
that, as a national average, nonroad diesel engines currently 
contribute approximately 130,000 tons of PM in the form of secondary 
nitrate particles, based on the estimated 3,100,000 tons of 
NOX emitted by these engines. Since NOX emissions 
from these engines is expected to decrease slightly and then begin to 
rise (see Figure 1), nitrate PM attributable to these engines can be 
expected to follow the same pattern.15
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    \15\ ``Emission Inventories Used in the Nonroad Diesel Proposed 
Rule,'' EPA memorandum to Air Docket A-96-40 from Joe Somers, August 
1997.
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    In this rule, EPA is for the first time proposing emission 
standards for NMHC + NOX, PM, carbon monoxide (CO), and 
smoke from engines rated under 37 kW. Engines in this category 
contribute to emissions of each of these pollutants, including 
emissions in nonattainment areas. Chapter 5 of the Draft RIA presents 
the Agency's most recent estimates of emissions from all land-based 
nonroad diesel engines and marine diesel engines rated under 37 
kW.16
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    \16\ See also, ``Nonroad Engine and Vehicle Emission Study--
Report and Appendices,'' EPA-21A-201, November 1991 (available in 
Air Docket A-96-40).
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B. Legislative and Regulatory History

1. U.S. Federal Action
    Section 213(a)(1) of the Clean Air Act required that the Agency 
study the emissions from all categories of nonroad engines and 
equipment to determine, among other things, whether these emissions 
``cause or significantly contribute to, air pollution which may 
reasonably be anticipated to endanger public health and welfare.'' 
Section 213(a)(2) further required EPA to determine whether the 
emissions of CO, VOC, and NOX found in the above study 
significantly contributed to ozone or CO emissions in more than one 
nonattainment area. With a determination of significance, section 
213(a)(3) requires the Agency to establish emission standards 
regulating CO, VOC, and NOX emissions from new nonroad 
engines and vehicles. EPA may also promulgate emission standards under 
section 213(a)(4) regulating any other emissions from nonroad engines 
that EPA finds contribute significantly to air pollution.
    On June 17, 1994, EPA made an affirmative determination under 
section 213(a)(2) that nonroad emissions are significant contributors 
to ozone or CO in more than one nonattainment area (59 FR 31306, June 
17, 1994). In the same notice, EPA set a first phase of emission 
standards (``Tier 1 standards'') for nonroad diesel engines rated 37 kW 
and above. The Tier 1 standards did not include engines used in 
aircraft, underground mining equipment, locomotives, or marine vessels. 
EPA has initiated separate rulemakings to adopt regulations appropriate 
to different subgroups of nonroad engines, as described below.
    EPA has taken several other actions under section 213, some of 
which provide important background for this proposal and are discussed 
here. The Agency recently published proposed emission standards for 
locomotive engines, which are addressed separately by the Act under 
section 213(a)(5) (62 FR 6366, February 11, 1997). Aircraft, which are 
regulated under sections 231 through 234 of the Act, must comply with 
emission standards finalized May 8, 1997 (62 FR 25356).
    With regard to marine engines, EPA has finalized regulations for 
recreational marine engines, including personal watercraft and outboard 
engines (61 FR 52087, October 4, 1996).17 That final rule 
sets no standards for diesel marine engines, though emission standards 
were proposed for those engines (59 FR 55929, November 9, 1994; 61 FR 
4600, February 7, 1996). The large diesel marine rule is currently 
under development. However, as discussed in the Supplemental ANPRM, 
emission standards for marine diesel engines rated under 37 kW are 
included in the scope of this proposal.
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    \17\ The final rule set no standards for sterndrive/inboards; 
refer to the preamble of that rule for a discussion of that 
decision.
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    EPA has also established a first phase of regulations for small SI 
engines, those rated under 19 kW (60 FR 34582, July 3, 1995). These 
engines are used in handheld and nonhandheld applications like 
chainsaws and lawnmowers. The Agency has also published an ANPRM for a 
second phase of control for these engines (62 FR 14740, March 27, 
1997). SI engines rated over 19 kW remain unregulated, though EPA has 
begun work toward new emission standards for those engines.
2. State of California Action
    The California Air Resources Board (California ARB) has the 
authority to regulate emissions from all nonroad engines, except for 
new engines used in locomotives and new engines used in farm and 
construction equipment rated under 130 kW. So far, the California ARB 
has adopted regulations for four groups of nonroad engines. First, 
emission standards have been promulgated for new small off-road engines 
rated under 19 kW, including both diesel and otto-cycle models. The 
California ARB, as a signatory to the Nonroad Statement of Principles, 
has indicated its intent to amend the regulations for small off-road 
engines to be consistent with the Statement of Principles for diesel 
engines rated under 19 kW in this notice. The California ARB has also 
set emission standards for new land-based nonroad diesel engines rated 
over 130 kW, which will be harmonized with the standards proposed in 
this notice. The California ARB has also adopted emission standards for 
nonroad recreational engines, including both compression-ignition and 
the more prevalent spark-ignition models. EPA intends to work 
cooperatively with the California ARB to develop new emission standards 
for nonroad SI engines rated over 19 kW (including new EPA emission 
standards applicable to engines for recreational vehicles). Finally, 
the California ARB has approved a voluntary registration and control 
program for existing portable equipment.
3. Development of This Proposal
    In 1994 and 1995, states and environmental groups encouraged EPA to 
adopt more stringent emission standards for highway and nonroad diesel 
engines, in order to address the need for national pollution reduction 
measures to improve air quality in many urban areas. In response, EPA 
initiated discussions with engine manufacturers regarding future 
emission controls for these engines, gathering input from other 
interested parties as well. EPA, the California ARB, and engine 
manufacturers subsequently developed and agreed on a Statement of 
Principles supporting proposal of new emission standards for heavy-duty 
highway engines starting with the 2004 model year, which were published 
with an ANPRM on August 31, 1995 (60 FR 45580). These emission 
standards were formally proposed on June 27, 1996 (61 FR 33421), with 
signature on a final rule expected in 1997.
    The Statement of Principles for highway engines included a

[[Page 50158]]

commitment by the signatories to also pursue appropriate standards for 
nonroad engines, which was further discussed in the associated ANPRM. 
Subsequently, EPA, the California ARB, and engine manufacturers 
completed a similar Statement of Principles for nonroad diesel engines, 
which was then published with a Supplemental ANPRM, announcing the 
initiation of the rulemaking described in this document (62 FR 200, 
January 2, 1997). The Nonroad Statement of Principles and the comments 
received on the Supplemental ANPRM serve as a blueprint for the 
emission standards and other regulatory provisions proposed in this 
document.
    In addition, in accordance with the Small Business Regulatory 
Enforcement Fairness Act of 1996, EPA conducted outreach to small 
businesses from various industry sectors to inform them of regulatory 
provisions of this proposed rule that may affect them and to seek early 
comment. As described below in Section VIII.B. (Regulatory Flexibility 
Act), EPA convened a federal government panel which collected comments 
and made recommendations about how the proposed program could reduce 
the impact on small entities. Several provisions to provide flexibility 
or relief for small businesses were recommended by small-entity 
commenters and the panel and have been incorporated into this proposal.
4. Harmonization
    As EPA has pursued the emission reductions from nonroad engines 
needed to meet air quality goals, an important consideration has been 
harmonization with standards adopted and under consideration in 
California and Europe. The international nature of this industry, in 
which many manufacturers sell engines and equipment globally, makes 
harmonized standards and test procedures very important. Harmonized 
programs can avoid costly multiple design configurations to meet 
varying requirements, with associated cost savings to ultimate 
purchasers. In addition, with regard to international trade, 
harmonization reduces the cost of introducing a product into another 
country. For these reasons, EPA has pursued a policy of harmonizing 
with both California and the European Union (EU), to the extent this 
can be accomplished under the air quality improvement goals and process 
constraints of all of the parties, and to the extent it does not have a 
significant adverse impact on EPA's overarching mission of improving 
air quality in the United States.
    To date, the goal of harmonization has been an important factor in 
the context of this rule and, in fact, harmonization was a major 
impetus behind the development of the Nonroad Statement of Principles. 
EPA and the California Air Resources Board agreed in that document to 
pursue harmonized standards and test procedures such that a nonroad 
diesel engine family tested and certified by EPA could be sold in 
California and, similarly, an engine family tested and certified in 
California could be sold in the rest of the country. Regarding 
international harmonization, the Statement of Principles signatories 
expressed an intent to work with the European Union, Japan, and other 
regulatory bodies in developing harmonized future standards, including 
provisions for implementation flexibility.
    Subsequent to the completion of the Nonroad Statement of 
Principles, the responsible regulatory group in the EU issued a draft 
directive proposing a new round of standards that are aligned with the 
Tier 2 standards spelled out in this proposal.18 This 
harmonization was a direct result of extensive discussions on potential 
standards that would be mutually acceptable.
---------------------------------------------------------------------------

    \18\ Common Position (EC) No. /96, Adopted by the Council On 
________ With a View to Adopting Directive 96/ /EC of the European 
Parliament and of the Council On the Approximation of the Laws of 
the Member States Relating To Measures Against the Emission of 
Gaseous and Particulate Pollutants From Internal Combustion Engines 
to Be Installed In Non-Road Mobile Machinery,'' draft dated November 
12, 1996 (available in Docket A-96-40).
---------------------------------------------------------------------------

    Though harmonized to a great degree, the proposed EPA and EU 
standards are not identical. In particular, the proposed EU standards 
do not cover engines rated under 19 kW or above 560 kW and the EU 
proposal does not include Tier 3 standards. In addition, the EU 
proposed separate NOX and HC standards (in contrast to EPA's 
proposed combined standards), and specified a somewhat different 
implementation schedule. Nevertheless, the goal of harmonization 
efforts, avoiding widespread duplicative design configurations, is 
being addressed at this stage of proposing new standards. Beyond 
standard levels and implementation dates, there are other differences 
between EPA and EU programs, including approaches to averaging, 
banking, and trading programs, flexibility provisions, and test 
procedure specifications. EPA plans to continue its harmonization work 
with governments in Europe and in other countries, in conjunction with 
the usual public rulemaking process, to build on the substantial 
successes to date. One major area in which a coordinated program will 
be pursued is the evaluation and possible modification of the 
certification test cycle discussed in Section III.B.
    It should be noted that the small marine engines included in this 
proposal are not currently addressed in the EU program. Therefore, the 
ultimate success of international harmonization efforts with respect to 
these engines depends on further efforts by regulating agencies. It 
should also be noted that these engines are not covered by 
International Maritime Organization NOX reduction efforts in 
the context of the International Convention for the Prevention of 
Pollution from Ships (MARPOL).
5. 2001 Feasibility Review
    EPA proposes to conduct a special review, to be concluded in 2001, 
to reassess the appropriateness of the Tier 2 standards for engines 
rated under 37 kW and the Tier 3 standards for engines rated between 37 
and 560 kW (including whether to propose the introduction of Tier 3 
standards for PM). In addition to reviewing whether or not the proposed 
standards are technologically feasible and otherwise appropriate under 
the Clean Air Act, the Agency will examine the need for equipment 
redesign due to the proposed standards and will take appropriate 
action, such as proposing to relax or delay the standards, if 
significant adverse impacts on the nonroad equipment industry are 
identified.
    Before making a final decision in this review, EPA intends to issue 
a proposal and offer an opportunity for public comment on whether the 
Tier 2 standards for engines rated under 37 kW and the Tier 3 standards 
for engines rated between 37 and 560 kW continue to be consistent with 
the Act and continue to be technologically feasible for implementation 
according to the proposed schedule. Any Tier 3 PM standards would also 
be proposed in such a notice. Following the close of the comment 
period, EPA intends to issue a final Agency decision under section 307 
of the Act.
    If by 2001 EPA finds the emission standards are not feasible 
according to the proposed schedule, or are otherwise not appropriate 
under the Act, EPA will propose changes to the program, possibly 
including adjustments to the levels of the standards. The adjusted 
standards may be more or less stringent than those already established, 
including the possibility of a new emission standard for particulate 
matter. Any change to the specified certification test procedure, 
including the possible adoption of a transient test cycle, will be

[[Page 50159]]

factored into the evaluation of the appropriateness of the numerical 
standards. The standards finalized in the rulemaking initiated by this 
proposal would stay in effect unless revised by subsequent rulemaking 
procedure. The Supplemental ANPRM provides additional discussion of the 
Agency's plans for the feasibility review.
    Based on the information presented in the Draft RIA and in Section 
V of this notice, EPA believes the proposed standards are 
technologically feasible and otherwise appropriate under the Act. 
Nonetheless, it is clear that a significant amount of research and 
development will be needed to comply with the proposed standards. Over 
the next several years, EPA will be actively engaged in programs to 
evaluate technology developments and progress toward meeting the 
proposed standards. This process will involve in-house programs, 
coordination with the involved industries, and active interaction with 
other stakeholders.

III. Description of Proposed Standards and Related Provisions

    This proposed rulemaking includes a comprehensive program to reduce 
emissions from nonroad diesel engines and equipment. The significant 
potential benefits of controlling emissions from these engines provides 
a major opportunity to address the nation's air quality problems. The 
proposed program consists of stringent new emission standards, 
requirements to ensure that engines maintain their level of emission 
performance as they age, provisions providing compliance flexibility to 
engine and equipment manufacturers, and a voluntary program to 
encourage the introduction of low-emitting engines.

A. Emission Standards

    EPA is proposing emission standards covering all nonroad diesel 
engines except for locomotives, engines used in underground mining 
equipment, and large (rated over 37 kW) engines used in marine 
applications. Engines not included in this proposal are or will be 
addressed by other federal programs. EPA is proposing a set of emission 
standards that vary in level and implementation date, depending on the 
rated power of the engine and other factors. The Agency believes that 
the standards proposed in this notice are consistent with the Clean Air 
Act requirement that standards represent the ``greatest degree of 
emission reduction achievable'' given the criteria specified by the Act 
(see Section V below).
    In general, emission standards for engines rated between 37 and 560 
kW are proposed in two tiers, building on the phase-in schedule adopted 
in the Tier 1 rule (see Table 1). These standards approximate the 
degree of control anticipated from existing and proposed standards 
covering engines used in heavy-duty diesel highway vehicles, with 
appropriate consideration of differences in the operational 
characteristics of the engines and in the organization of the 
industries. Specifically, the first set of proposed standards (Tier 2) 
generally parallel the emission standards that apply beginning with 
1998 model year highway engines (58 FR 15781, March 24, 1993). The 
second set of proposed standards (Tier 3) parallel standards EPA has 
proposed for 2004 model year diesel highway engines (61 FR 33421, June 
27, 1996). The standards for engines rated over 37 kW would become 
effective in the 2001 to 2006 time frame for Tier 2 levels and 2006 to 
2008 for Tier 3 levels.

                                Table 1.--Emission Standards in g/kW-hr (g/hp-hr)                               
----------------------------------------------------------------------------------------------------------------
             Engine Power                       Tier          Model  year  NMHC +  NOX       CO           PM    
----------------------------------------------------------------------------------------------------------------
kW<8 (hp<11).........................  Tier 1...............         2000   10.5 (7.8)    8.0 (6.0)   1.0 (0.75)
                                       Tier 2...............         2005    7.5 (5.6)    8.0 (6.0)  0.80 (0.60)
8kW<19 (11hp<25).                                                                                                     
                                       Tier 2...............         2005    7.5 (5.6)    6.6 (4.9)  0.80 (0.60)
19kW<37 (25hp<50).                                                                                                     
                                       Tier 2...............         2004    7.5 (5.6)    5.5 (4.1)  0.60 (0.45)
37kW<75 (50hp<100).                                                                                                    
                                       Tier 3...............         2008    4.7 (3.5)    5.0 (3.7)  ...........
75kW<130 (100hp<175).                                                                                                    
                                       Tier 3...............         2007    4.0 (3.0)    5.0 (3.7)  ...........
130kW<225 (175hp<300).                                                                                                    
                                       Tier 3...............         2006    4.0 (3.0)    3.5 (2.6)  ...........
225kW<450 (300hp<600).                                                                                                    
                                       Tier 3...............         2006    4.0 (3.0)    3.5 (2.6)  ...........
450kW<560 (600hp<750).                                                                                                    
                                       Tier 3...............         2006    4.0 (3.0)    3.5 (2.6)  ...........
kW560 (hp750)..  Tier 2...............         2006    6.4 (4.8)    3.5 (2.6)  0.20 (0.15)
----------------------------------------------------------------------------------------------------------------

    The standards proposed in this notice for engines rated under 37 kW 
would be the first EPA emission standards for these nonroad diesel 
engines. The proposed Tier 1 standards would be phased in by power 
category beginning in 1999, with Tier 2 standards phased in by power 
category beginning in 2004. Tier 3 standards are not proposed for these 
engines in this rule.
    Table 1 lists the range of standards for the different power 
categories, including all the tiers of proposed standards with the 
affected model years. References throughout this notice to the engine 
power ratings listed in Table 1 will identify only the kilowatt rating. 
The reader may refer to the table for conversion between metric and 
English units.
    EPA is at this time proposing Tier 3 standards only for nonroad 
diesel engines rated between 37 kW and 560 kW. For engines rated under 
37 kW, the Agency believes it would be inappropriate to commit to Tier 
3 standards at this time, since the industry is only now beginning to 
address emission control requirements for the first time. The 
uncertainties involved in proposing more than two tiers of standards 
seem too great at this early stage in the regulation of these engines.
    In the case of engines rated over 560 kW, the longer lead time EPA 
believes is appropriate for these engines shifts the proposed 
implementation schedule for these engines later than any other

[[Page 50160]]

engines for Tier 2 standards, starting with the 2006 model year. This 
lead time reflects the longer product redesign cycles typical of these 
large engines with very low sales volumes. The Agency's intent is to 
avoid imposing unnecessary costs associated with frequently changing 
standards. As is the case for engines rated under 37kW, the large 
uncertainties that would be involved in proposing a third tier of 
standards, in this case presumably for sometime after 2010, led to 
EPA's decision not to propose such Tier 3 standards for these engines 
at this time.
    Where Tier 3 standards are proposed, the Agency is choosing not to 
include more stringent PM standards. The Agency recognizes that there 
is an inverse technological relationship between NOX and PM 
emission control and believes that more stringent PM standards may 
threaten the feasibility of the proposed Tier 3 NOX 
standards. In addition, as discussed in Section III.B. below, the 
Agency believes that investigation during the next few years may 
conclude that a different emission test cycle is more appropriate for 
nonroad engines, especially for PM emissions. For these reasons, EPA 
believes that Tier 3 PM standards will be more appropriately discussed 
in the context of the improved technical understanding that will exist 
by the time of the 2001 Feasibility Review (see Section II.B.5. above).
    The standards proposed in this docket assume the use of EPA's 
existing steady-state (modal) test procedures. New steady-state test 
cycles are proposed for constant-speed engines, marine propulsion 
engines, and engines rated under 19 kW. The Agency and the industry are 
working to better understand the sensitivity of nonroad diesel engine 
emissions to the test cycle, as discussed in the next section.
    EPA proposes to change from a measurement of total hydrocarbons to 
nonmethane hydrocarbons. There is, however, no standardized method for 
measuring methane in diesel engine exhaust. In the absence of such a 
procedure, EPA is proposing to allow any of three options: (1) Measure 
total hydrocarbons in place of nonmethane hydrocarbons, without 
adjusting numerical values, (2) manufacturers may develop and use their 
own procedure to analyze nonmethane hydrocarbons, with prior approval 
from EPA, or (3) measure total hydrocarbons but subtract 2% from the 
measured hydrocarbon mass to correct for methane. This assumed methane 
fraction is based on data from two heavy-duty diesel 
engines.19
---------------------------------------------------------------------------

    \19\ Springer, Karl J. (1979), ``Characterization of Sulfates, 
Odor, Smoke, POM and Particulates from Light and Heavy-Duty 
Engines--Part IX,'' Ann Arbor, Michigan: U.S. Environmental 
Protection Agency, Office of Mobile Sources. Publication No. EPA-
460/3-79-007.
---------------------------------------------------------------------------

    EPA is aware of the flame ionization detector plus gas 
chromatography method of determining nonmethane hydrocarbons (SAE 
J1151) and requests comment on whether this procedure or any other 
would be appropriate to measure methane. If such a procedure is 
acceptable, EPA further requests comment on whether a uniform procedure 
is preferable to the proposed options.
    Finally, EPA is proposing to maintain the current smoke standards 
for nonroad diesel engines rated over 37 kW. The Agency proposes to 
extend the applicability of these standards to nonroad diesel engines 
rated under 37 kW. This proposal is discussed in detail in Section 
III.G.

B. Test Procedures

1. Test Cycles
    The test cycle used to measure emissions is intended to simulate 
some measure of actual operation in the field. Testing an engine for 
emissions consists of exercising it over a prescribed duty cycle of 
speeds and loads using an engine dynamometer. The nature of the test 
cycle used for determining compliance with emission standards during 
the certification process is critical in evaluating the likely 
emissions performance of engines designed to those standards. To the 
extent that in-use operation differs from the certification test, there 
is the possibility that a certified engine will have higher than 
expected emission rates in the field. EPA has addressed such concerns 
in the past; for example, the highway heavy-duty engine test cycles 
were changed to address transient operation (45 FR 4136, January 21, 
1980) and, more recently, EPA has revised the test cycle for light-duty 
vehicles (61 FR 54852, October 22, 1996).
    Because of the potential inadequacies in the ability of test cycles 
to ensure control in real-life conditions, EPA is very concerned that 
engines may be designed to control emissions well during a 
certification test only to emit at higher levels during field 
operation. EPA has observed at times that manufacturers may tailor the 
design of their engines to narrowly meet emission test requirements. 
Also, engine manufacturers have a degree of discretion in how they 
control engine operation across the whole range of engine operating 
modes to balance competing demands for power, fuel economy and emission 
control. The advent of electronic controls has greatly increased the 
level of sophistication in controlling the full range of engine 
operation. This advance also carries with it some uncertainty about 
whether proper control of emission-related engine parameters is 
maintained during engine operation that is not represented in the 
certification test cycle. The current nonroad test cycle, with a 
limited combination of steady-state speeds and loads, does not include 
some operating modes that are commonly experienced in the field.
    Originally, certification testing of heavy-duty highway engines was 
conducted with steady-state test cycles (one cycle for diesel engines 
and one for otto-cycle engines), in which an engine is operated at 
several discrete modes of constant speed and load for measuring 
emissions. EPA subsequently revised the highway engine test instead to 
use transient cycles, which continuously vary speeds and loads. Current 
test requirements for nonroad diesel engines are based on an eight-mode 
steady-state test cycle similar to the original cycle for highway 
engines. This test cycle was developed by the International 
Organization for Standards (ISO) as part of Standard 8178 and is 
designated as the C1 cycle.
    EPA still believes that the C1 cycle is the most appropriate cycle 
available at this time for ensuring that emissions are controlled in 
the field. The Agency therefore proposes to continue to rely on the C1 
cycle as the principal method of testing nonroad diesel engines. 
NOX emission rates depend significantly on the degree of 
engine loading (as a fraction of its rated capacity); i.e., higher 
relative engine load, or load factor, corresponds with a greater mass 
of NOX emissions for each combustion event. Testing on a 
limited number of engines--with current technology--shows that total 
NOX emissions from the C1 cycle are comparable to those 
generated on the transient highway test procedure.20 Engine-
to-engine variability is significant, but available data is 
insufficient to determine any directional difference in the average 
results. This testing does not provide for conclusions on the 
possibility of high in-use NOX emissions from engines that 
are designed to control emissions only

[[Page 50161]]

in modes represented by the certification test procedure. The same 
testing shows that HC emissions, while more sensitive to test cycle in 
percentage terms, are formed at much lower levels. The set of engines 
tested emitted on average about 0.7 g/kW-hr (0.5 g/hp-hr) of HC less on 
the C1 cycle than on the highway test procedure, which is much less 
than the variability observed for NOX emissions. Tested CO 
emissions were significantly lower on the C1 cycle than on the highway 
test procedure, which is reflected in the lower numerical emission 
standards for nonroad engines.
---------------------------------------------------------------------------

    \20\ ``Summary of Nonroad Compression Ignition Transient and 
Steady-State NOX and PM Emissions Data,'' EPA memorandum 
from Cleophas Jackson to Docket A-96-40, May 21, 1997.
---------------------------------------------------------------------------

    Evaluating the ability of a test cycle to appropriately measure PM 
emissions, however, requires a review of different parameters than 
evaluation of comparability for NOX emissions. Particulate 
emissions, like NOX emissions, depend on engine load, but 
are most sensitive to the degree of transient engine operation. Most 
nonroad engines are used in applications that include substantial 
transient operation in use, especially those used to propel motive 
equipment. Equipment such as pumps and generators operate mostly or 
exclusively at constant engine speeds, but they may may also depart 
from steady-state operation due to variation in engine loads over time. 
EPA believes that the proposed PM emission standards, with a steady-
state certification test, will result in a predictable improvement in 
PM emissions from those engines used in constant-speed applications. 
Engines experiencing a greater degree of transient operation will also 
likely have lower rates of PM emissions, though the degree of that 
reduction is harder to predict. The concern for ensuring an adequate 
level of control of PM emissions from all nonroad engines has been the 
principal motivation for EPA to look at the possibility of 
incorporating an element of transient operation in the certification 
test. While the proposal includes no testing with a transient cycle, 
EPA will continue to pursue development of a transient cycle that can 
be incorporated into certification testing, as described below.
    The proposal includes additional cycles for specific engines. The 
same numerical standards apply to all test cycles. Any engines that are 
limited to operate only at a constant speed may, at the manufacturer's 
option, use the ISO D2 cycle for emission testing. This cycle, which 
omits idle and intermediate-speed modes from the C1 cycle, is 
representative of engines such as generators, which are designed never 
to run at these omitted speeds.21 Because of the more 
limited range of engine operation in the D2 cycle, manufacturers must 
ensure that engines certified with data generated with the D2 cycle are 
used exclusively in constant-speed applications. Accordingly, these 
engines must include labeling information indicating this limited 
emission certification.
---------------------------------------------------------------------------

    \21\ For a description of the development of the D2 cycle, see 
``Exhaust Emission Testing of Diesel Engines for Industrial 
Applications,'' (Docket A-96-40, item II-D-26).
---------------------------------------------------------------------------

    For engines rated under 19 kW, EPA proposes an additional test 
cycle, the ISO G2 cycle, though manufacturers may also use the C1 or, 
for constant-speed engines, the D2 cycle for these smaller engines. The 
ISO G2 cycle includes the same modes as the D2 cycle and adds a mode 
for operation at idle. This cycle was developed to represent the 
operation of small diesel engines used primarily at rated speed, such 
as in lawn and garden applications, generators, pumps, welders, and air 
compressors. EPA has investigated the representativeness of this cycle 
for engines rated under 19 kW and supports the use of this cycle at 
this time. By capturing operation at rated speed for a variety of 
engine loads and including operation at idle the G2 cycle seems 
appropriate for the principal applications of these engines. The 
Nonroad Statement of Principles specifies only the G2 cycle for engines 
rated under 19 kW. Since that time, further deliberation has led EPA to 
allow also the C1 cycle and, in the case of constant-speed engines, the 
D2 cycle for these engines. As described above, the D2 cycle is 
appropriate for those engines that are limited to operate only at rated 
speed. By including more operating modes, the C1 cycle can be 
considered more broadly representative of a wide range of engine 
applications, including those rated under 19 kW. While the D2 cycle 
clearly has a unique role in emission certification, the C1 and G2 
cycles here present manufacturers with two optional procedures for all 
the engines rated under 19 kW that are not certified under the D2 
cycle. EPA therefore requests comment on whether it is appropriate or 
desirable to allow use of both the C1 and G2 cycles for these engines.
    EPA proposes that propulsion marine engines rated under 37 kW rely 
on the E3 cycle for emission testing. The E3 cycle, which consists of 
engine operation at four different engine speeds and four different 
loads, was developed by ISO to represent the operation of propulsion 
marine engines, and has been supported by an Agency 
investigation.22 EPA nevertheless requests comment on 
whether a similar candidate cycle for propulsion marine engines, the 
ISO E5 cycle, would be equally or more appropriate. The E5 cycle 
differs from the E3 cycle by including engine operation at idle. In 
addition, EPA proposes an additional flexibility to marine engine 
manufacturers to allow marine engines to be included in land-based 
engine families. This flexibility would enable manufacturers to certify 
propulsion marine engines on the C1 test cycle, which would be 
appropriate for marine engines developed from land-based models. 
Finally, EPA proposes that auxiliary marine engines subject to this 
rule (i.e., engines installed on a marine vessel, but not used for 
propulsion) should be tested using the G2, C1, or D2 test cycles, with 
the constraints described above for the counterpart land-based nonroad 
engines.
---------------------------------------------------------------------------

    \22\ Selection of Duty Cycle for High-Speed CI Marine Engines,'' 
EPA memorandum to Docket A-96-40 from Mike Samulski, February 19, 
1997.
---------------------------------------------------------------------------

    Except for the C1 cycle and the D2 cycle for constant-speed 
engines, EPA has little data supporting the adequacy of the test cycles 
described above; however, there also seems to be no information 
indicating that these cycles are flawed. ISO committees developed the 
various test cycles intending to capture a representative portion of 
the in-use operation for particular groups of engines. EPA, supporting 
efforts to harmonize emission certification requirements with those of 
other countries, supports the use of ISO test cycles if EPA can find 
that they are adequate for measuring and controlling in-use emissions. 
As noted above, EPA has reviewed the E3 and G2 cycles and supports the 
use of these cycles at this time. Technologies and emission control 
strategies in the future may, however, become more sensitive to 
variations in engine operation; EPA will therefore continue to explore 
the potential benefits of a new or revised test cycle for certifying 
engines.
    The Supplemental ANPRM describes the need to review the adequacy of 
the certification test procedure, especially as it relates to transient 
operation in the field. The signatories to the Nonroad Statement of 
Principles agreed to better characterize in-use engine operation and 
evaluate the effectiveness of the current test procedure. In the event 
that the current test procedure would be found inadequate to address 
air quality concerns, EPA has committed to pursuing a revised test 
procedure to address the problem. In so doing, the

[[Page 50162]]

Agency recognizes several constraints, including the need for a very 
extensive effort to develop revised test cycles, the importance of the 
objective of maintaining harmonization of international standards, and 
the need to re-evaluate the numerical standards with any change in the 
test procedure. Also, because of the time required to develop revised 
test cycles and the additional time for engine manufacturers to 
redesign engines with a new procedure, any change in the test cycle 
would likely not apply before the implementation of Tier 3 standards.
    EPA requests comment on appropriate test cycles for nonroad diesel 
engines.
2. Test Fuel
    In the 1994 final rule, EPA allowed manufacturers to test for 
certification of PM emission levels using the low-sulfur test fuel 
specified by the California ARB for nonroad diesel engines. EPA's 
objective was to minimize any difference from the protocol previously 
established for California, because EPA finalized PM standards for 
engines rated over 130 kW only in response to industry's request to 
adopt California's PM standard, which was not considered technology-
forcing. Under current regulations, testing with federal test fuel 
involves an optional adjustment of measured PM levels to account for 
the higher PM emissions associated with the higher fuel sulfur content.
    EPA is now proposing PM standards that are expected to provide 
meaningful reductions from all sizes of engines used nationwide. The 
Clean Air Act accordingly requires EPA to ensure that the test 
procedure, including fuel specifications, adequately represent in-use 
operation. Typical nonroad diesel fuel sulfur levels outside of 
California are about 0.33 weight percent, though nonroad equipment to 
some degree utilizes highway fuels, which have a maximum allowable 
sulfur level of 0.05 weight percent.23 California extends 
the 0.05 weight percent limit to include both highway and nonroad 
diesel fuel. Using the calculated adjustment to PM emission levels for 
fuel sulfur finalized in 1994, the difference between 0.33 and 0.05 
weight percent would correlate with a difference of 0.06 g/kW-hr (0.05 
g/hp-hr) in PM emission levels. To the extent that in-use emissions are 
higher with high-sulfur fuel, regulated engines could be operating at 
levels that significantly exceed certification standards. This raises 
concerns regarding whether the test fuel is representative of in-use 
fuels. EPA therefore proposes to require that, beginning with Tier 2 
emission standards (Tier 1 standards for engines rated under 37 kW), 
testing with fuel based on federal specifications be conducted without 
use of any adjustment to measured PM levels. Testing for 
NOX, HC, CO, and smoke is not affected, since the 1994 final 
rule already specified that federal test fuel was appropriate without 
adjustment for measuring emissions of those pollutants.
---------------------------------------------------------------------------

    \23\ ``Estimates for In-use Nonroad Diesel Sulfur Levels,'' EPA 
memorandum from David Korotney to Docket A-96-40, July 1, 1997.
---------------------------------------------------------------------------

    Manufacturers' likely continued interest in using California's test 
fuel is consistent with EPA's goal of harmonizing certification 
requirements where possible. EPA will therefore continue this practice 
as an option for manufacturers. The Agency requests comment on whether 
there should be an upward adjustment to measured PM levels when engines 
are tested with low-sulfur fuel. EPA also requests comment on the 
appropriate form of such a PM adjustment. The current equation for 
adjusting PM measurements depends on the relationship of PM emission 
levels to fuel sulfur content and could therefore be modified to adjust 
PM measurements from testing with low-sulfur fuel. Such a calculation 
would require selection of a representative in-use fuel sulfur level.
    One possible resolution would be to adopt the sulfur specification 
used for European testing. European test fuel specifications include a 
fuel sulfur level between 0.1 and 0.2 weight percent sulfur. Testing 
with fuel sulfur levels between 0.05 and 0.1 weight percent are 
allowed, but are adjusted upward using the same adjustment equation 
specified by EPA, referenced to a test fuel with 0.15 weight percent 
sulfur.
    EPA currently specifies test fuel with a range in fuel sulfur 
levels from 0.05 to 0.5 weight percent. EPA solicits information 
related to sulfur levels found in in-use fuels, including the degree to 
which nonroad equipment utilizes highway-grade diesel fuel. EPA will 
accordingly consider changes to the test fuel specifications to ensure 
that the test fuel is representative of that used in the field.
    Whether or not the manufacturers utilize low-sulfur test fuels and 
any associated adjustment, EPA would intend to conduct confirmatory 
testing with federal test fuels, which would not involve any adjustment 
to measured PM levels.

C. Durability

    To achieve the full benefit of the emissions standards, programs 
are necessary to encourage manufacturers to design and build engines 
with durable emission controls and encourage the proper maintenance and 
repair of engines throughout their lifetime. The goal is for engines to 
maintain good emission performance throughout their in-use operation.
    When the Tier 1 standards for engines rated over 37 kW were 
developed, deterioration was not expected to be a problem for two 
reasons. First, the Tier 1 standards were not considered by EPA to be 
technology forcing. Second, the focus was on NOX control and 
NOX emissions were thought not to deteriorate from these 
engines. As a result, there are few requirements in the current 
regulations that address deterioration concerns for nonroad diesel 
engines. As tighter standards are put into place, EPA believes that it 
becomes necessary to adopt measures to address concerns about possible 
in-use emission performance degradation.
    EPA is proposing to make some changes to the existing durability 
program, as the new standards are phased in, to help ensure that 
engines are still meeting applicable standards in use. The specific 
areas of the durability program that are being focused on here are 
useful life, warranty period, deterioration factors, allowable 
maintenance intervals, and rebuilding requirements.
a. Useful Life
    Currently, nonroad diesel engines rated over 37 kW are defined, for 
emission control purposes, to have a useful life of 8,000 hours or 10 
years, whichever occurs first. The in-use testing liability period is 
currently 6,000 hours or 7 years, whichever occurs first. Based on a 
study performed for EPA, this is representative of the average time 
until first rebuild for the majority of nonroad diesel 
engines.24 EPA is proposing no changes to these 
requirements.
---------------------------------------------------------------------------

    \24\ ICF Incorporated, ``Industry Characterization: Nonroad 
Heavy Duty Diesel Engine Rebuilders,'' prepared for U.S. 
Environmental Protection Agency, Contract 68-C5-0010, WAN 102, 
January 3, 1997, (Docket A-96-40, item II-A-02).
---------------------------------------------------------------------------

    EPA proposes a shorter useful life and liability period for engines 
rated under 37 kW. Based on EPA's current understanding, the smaller 
engines have a shorter life expectancy than larger engines. This is 
supported by data supplied to EPA on two small engines.25 
According to comments received from some manufacturers, engines rated 
under 37 kW that operate at higher rated

[[Page 50163]]

speeds (<3000 rpm) have a shorter life expectancy than engines rated 
under 37 kW that operate at lower speeds.26 EPA believes 
that these comments are reasonable. Table 2 presents the proposed 
useful lives and in-use testing liability periods. EPA requests comment 
on the appropriateness of the proposed useful lives for engines rated 
under 37 kW (land-based and marine). EPA is also interested in any 
durability data on nonroad diesel engines, especially those rated under 
37 kW.
---------------------------------------------------------------------------

    \25\ Letter from Norman Weir, Yanmar Diesel America Corp., to 
Don Kopinski, Environmental Protection Agency, March 10, 1997 
(Docket A-96-40, II-D-27).
    \26\ Letter from Dr. Hartmut Mayer, Euromot, to Donald Kopinski, 
Environmental Protection Agency, January 16, 1997 (Docket A-96-40, 
II-D-32).

        Table 2.--Proposed Useful Life and Recall Testing Periods       
------------------------------------------------------------------------
                                         Useful life     Recall   Hours 
  Power  rating   Rated engine speed ------------------ testing --------
                                       Hours    Years    period   Years 
------------------------------------------------------------------------
< 19 kW.........  All...............     3000        5     2250        4
19-37kW.........  Constant speed         3000        5     2250        4
                   engines 3000 rpm.                                    
                  All others........     5000        7     3750        5
------------------------------------------------------------------------

    Liability periods were proposed based on the ratio of useful life 
and liability periods established for engines rated over 37 kW. The 
purpose of the shorter liability periods is to ensure that engines used 
in recall testing are not statistical outliers with poor emissions 
durability. If a recall were ordered, all engines in that family would 
be subject to the recall regardless of their age.
    EPA also requests comment on the appropriateness of basing the 
useful life on the typical time until first rebuild. The ICF report 
cited above reports that the average time until retirement for nonroad 
diesel engines is between 12,000 and 14,000 hours. According to this 
information, no one would be liable for the emission performance of 
these engines for a large percentage of their overall operation. EPA 
understands, however, that an appropriate useful life is needed to 
protect manufacturers from recall testing being based on engines that 
continue to perform beyond the emission control design life and are not 
representative of typical use.
b. Warranty Period
    Tied to the useful life is the minimum warranty period imposed by 
the Clean Air Act. Currently, the minimum warranty period for nonroad 
diesel engines rated over 37 kW is 3,000 hours or 5 years of use, 
whichever occurs first. EPA proposes to extend this minimum warranty 
period to engines rated between 19 and 37 kW; however, for engines 
rated under 19 kW, EPA proposes a warranty period of 1,500 hours or 3 
years, whichever occurs first. A shorter warranty for engines rated 
under 19 kW is proposed due to the shorter useful lives, and the three 
year warranty period for small engines is consistent with current 
warranty practice. EPA requests comment on the appropriateness of the 
proposed warranty period.
c. Deterioration Factors
    In the Tier 1 nonroad engine rule, EPA did not require 
manufacturers to accumulate operating time on durability data engines 
or to generate deterioration factors for engine certification because 
that rule focused almost entirely on modest reductions in 
NOX emissions. Analysis of highway engine data at that time 
led EPA to conclude that heavy-duty diesel engines do not generally 
produce more NOX emissions as they get older. EPA believes 
that this stability of emission control can be attributed to the fact 
that diesel engine manufacturers have met emission standards through 
internal improvements to the engine and fuel systems, rather than 
relying on aftertreatment and other devices that would be more 
susceptible to in-use degradation. In fact, engine deterioration in 
current technology nonroad diesel engines could result in lower 
NOX emission levels due to a loss in cylinder compression.
    As NOX, HC, and PM standards are reduced and nonroad 
diesel engine manufacturers introduce new technologies solely for 
emission control purposes, such as aftertreatment, sophisticated fuel 
delivery controls, and exhaust gas recirculation (EGR), long-term 
emissions performance becomes a greater concern. In addition, emission 
deterioration characteristics are not well known for aftertreatment, 
EGR, and other more sophisticated emission-control strategies.
    EPA proposes to require the application of a deterioration factor 
(DF) to all engines covered by this rule. The DF is a factor applied to 
the certification emission test data to represent emissions at the end 
of the useful life of the engine. Currently, DFs are required for 
highway heavy-duty engines but are only required for nonroad diesel 
engines rated over 37 kW if engines use aftertreatment technologies. 
Deterioration factors would be determined by the engine manufacturers 
in accordance with good engineering practices. EPA is not proposing a 
specified procedure. The deterioration factors would, however, be 
subject to EPA approval. EPA requests comment on the need for and 
application of DFs.
    It is not EPA's intent to force a great deal of data gathering on 
engines using established technology for which the manufacturers have 
the experience to develop appropriate DFs. New DF testing may not be 
needed where sufficient data already exists. EPA's main interest is 
that technologies with unproven durability in nonroad applications, 
such as EGR, are demonstrated to meet the proposed emission 
requirements throughout their useful lives. However, because this rule 
creates a program that will introduce new standards and new 
technologies over many years, the DF requirement is being proposed for 
all engines so that EPA can be sure that reasonable methods are being 
used to ascertain the capability of engines to meet standards 
throughout their useful lives. This proposed DF program would allow EPA 
to act in the traditional role of establishing emission performance 
standards, rather than putting EPA in a position where it would appear 
to be prejudging the durability of specific technologies and designs.
    Similar to the provisions for highway engines, EPA proposes to 
allow the nonroad engine manufacturers the flexibility of using 
carryover and carryacross of durability emission data from a similar 
engine that has either been certified to the same standard or for which 
all of the data applicable for certification has been submitted. In 
addition, EPA proposes to extend this flexibility to allow 
deterioration data from highway engines to be used for similar nonroad 
engine families.
    EPA is especially concerned that an unnecessarily burdensome 
durability

[[Page 50164]]

demonstration not be required for engines using established technology 
for which the manufacturers have the experience to determine 
appropriate deterioration factors. In these cases, EPA proposes to 
allow nonroad engine manufacturers to perform an analysis, based on 
good engineering practices, in place of actual service accumulation. 
For instance, in the case where no durability data exists for a certain 
engine but both smaller and larger engines using similar technology 
have been shown not to deteriorate for NOX in use, it would 
be possible to build a case showing no NOX deterioration for 
that engine.
    EPA proposes that engines using established technology, for the 
purposes of this program, are engines that do not meet the proposed 
Tier 3 NMHC+NOX and PM emission standards. However, EPA 
specifically proposes to exclude engines using exhaust gas 
recirculation or aftertreatment from being considered as using 
established technology. In the case where a manufacturer believes that 
a given engine is using established technology even though it meets the 
Tier 3 NMHC+NOX and PM levels, EPA proposes that, prior to 
applying for certification, the manufacturer would be able to petition 
the Administrator to consider the given engine as using established 
technology.
    In the past, in on-highway engine certification, durability data 
have been used for many years through carryover and carryacross of 
data. One concern is that, with repeated incremental changes in a 
nonroad engine design, the data would become unrepresentative for the 
engine applying for certification. EPA requests comment on how to 
ensure that carryover and carryacross data is appropriate (for example, 
by including limit on how long data could be used). EPA also requests 
comment on alternatives to the durability program described here which 
would result in better, and more cost-effective, confirmation of in-use 
emissions performance.
d. Allowable Maintenance Intervals
    Manufacturers are currently required to furnish the ultimate 
purchaser of each new nonroad engine with written instructions for the 
maintenance needed to ensure proper functioning of the emission control 
system. Generally, manufacturers require the owners to perform this 
maintenance as a condition of their emission warranties. If such 
required maintenance is more than the engine owner is likely to perform 
due to cost or inconvenience, then in-use emissions deterioration can 
result. For highway diesel engines, EPA imposes limits on the frequency 
of maintenance that can be required of the engine owners for emission-
related items; these limits also apply to the engine manufacturer 
during engine certification and durability testing. Further, the 
performance of maintenance would be considered during any in-use recall 
testing conducted by the Agency.
    Currently, EPA specifies no minimum allowable maintenance intervals 
for nonroad diesel engines. EPA believes, however, that allowable 
maintenance intervals for nonroad engines are necessary to ensure that 
the technology is practical in use. Because the actual maintenance 
intervals for nonroad engines are likely to be similar to highway 
engines, EPA believes that maintenance requirements should parallel 
those for highway engines (40 CFR 86.094-25). EPA therefore proposes 
the following minimum intervals for adjustment, cleaning, repair, or 
replacement of various components.
    At 1,500 hours and 1,500 hour intervals thereafter:
    1. EGR related filters and coolers.
    2. Positive crankcase ventilation valve.
    3. Fuel injector tips (cleaning only).
    At 3,000 hours and 3,000-hour intervals thereafter for engines 
rated under 130 kW, 4,500-hour intervals thereafter for engines rated 
over 130 kW:
    1. Fuel injectors.
    2. Turbocharger.
    3. Electronic engine control unit and its associated sensors and 
actuators.
    4. PM trap or trap-oxidizer system.
    5. EGR system (including all related control valves and tubing).
    6. Catalytic convertor.
    7. Any other add-on emissions-related component.
    Add-on emission-related components are those whose sole or primary 
purpose is to reduce emissions or whose failure will significantly 
degrade emission control, yet not significantly affect the performance 
of the engine.
    Consistent with the definition for highway engine maintenance 
requirements, EPA proposes to define the following components as 
critical emission-related components:
    1. Catalytic convertor.
    2. Electronic engine control unit and its associated sensors and 
actuators.
    3. EGR system (including all related filters, coolers, control 
valves and tubing).
    4. PM trap or trap-oxidizer system.
    5. Any other add-on emissions-related component.
    If maintenance is scheduled on critical emission-related components 
in-use, EPA proposes that the manufacturer be required to show the 
reasonable likelihood that the maintenance will be performed in-use. In 
the proposed regulations, EPA lists the same manufacturer options for 
showing that maintenance is likely to be performed in-use as are 
currently included in the highway program. This list includes showing 
that performance would degrade without maintenance, survey data showing 
that the maintenance is performed, using a visible signal system, free 
maintenance provided by the manufacturer, and other methods approved by 
the Administrator.
    EPA requests comment on the need for allowable maintenance 
intervals and the appropriateness of the intervals proposed here. EPA 
also requests comment on the appropriateness and need for the proposed 
critical emission-related scheduled maintenance requirements.
e. Rebuilding Requirements
    EPA has two concerns regarding the rebuilding of nonroad diesel 
engines, both related to new emission-related components that may be 
added to the engine to meet the new standards. First, EPA is concerned 
that during engine rebuilding, there may not be an incentive to check 
and repair emission controls that do not affect engine performance. 
Second, EPA is concerned that there may be an incentive to rebuild 
engines to an older configuration due to real or perceived performance 
penalties associated with technologies that would be used to meet the 
standards proposed in this notice. Such practices would likely result 
in a loss in emission control.
    Under the current program, there are no specific rebuilding 
requirements for nonroad diesel engines. However, there is a tampering 
provision that states ``the manufacturer or rebuilder of the part may 
certify according to 40 CFR 85.2112 that use of the part will not 
result in a failure of the engine to comply with emission standards.'' 
27 For highway engines, engine rebuilding practices are 
currently addressed in general terms under EPA policies established 
under Clean Air Act section 203(a)(3) regarding tampering. Under a 
separate action for highway heavy-duty engines, EPA has proposed to add 
the highway policies to the regulations as they apply to tampering and 
has also proposed new measures.28 EPA's intent is to propose 
the same rebuilding requirements for nonroad diesel engines as those

[[Page 50165]]

proposed to be put into place for heavy-duty highway engines starting 
with the 2004 model year.
---------------------------------------------------------------------------

    \27\ 40 CFR 89.1007.
    \28\ Environmental Protection Agency, ``Control of Emissions of 
Air Pollution from Highway Heavy-Duty Engines; Notice of Proposed 
Rulemaking,'' 61 FR 33421, June 27, 1996.
---------------------------------------------------------------------------

    EPA proposes that parties involved in the process of rebuilding or 
remanufacturing engines (which may include the removal of the engine, 
rebuilding, assembly, reinstallation and other acts associated with 
engine rebuilding) must follow the provisions listed below to avoid 
tampering with the engine and emission controls. The applicability for 
these provisions is proposed to be based on the build date of the 
engine. The rebuild requirements apply to any engine built on or after 
the date that new standards, proposed in this rule, go into effect for 
a specific engine category, regardless of the emission levels that the 
engine is designed to achieve.
    (1) EPA proposes that, during engine rebuilding, parties involved 
must have a reasonable technical basis for knowing that the rebuilt 
engine is equivalent, from an emissions standpoint, to a certified 
configuration (i.e., tolerances, calibrations, and specifications).
    (2) When an engine is being rebuilt and remains installed or is 
reinstalled in the same piece of equipment, it must be rebuilt to a 
configuration of the same or later model year as the original engine. 
When an engine is being replaced, the replacement engine must be an 
engine of (or rebuilt to) a configuration of the same or later model 
year as the original engine.
    (3) At the time of rebuild, emission-related codes or signals from 
on-board monitoring systems may not be erased or reset without 
diagnosing and responding appropriately to the diagnostic codes. 
Diagnostic systems must be free of all such codes when the rebuilt 
engines are returned to service. Further, such signals may not be 
rendered inoperative during the rebuilding process.
    (4) When conducting an in-frame rebuild or the installation of a 
rebuilt engine, all emission-related components not otherwise addressed 
by the above provisions must be checked and cleaned, repaired, or 
replaced where necessary, following manufacturer recommended practices.
    Under this proposal, any person or entity engaged in the process, 
in whole or part, of rebuilding engines who fails to comply with the 
above provisions may be liable for tampering. Parties would be 
responsible for the activities over which they have control and as such 
there may be more than one responsible party for a single engine in 
cases where different parties perform different tasks during the engine 
rebuilding process (e.g., engine rebuild, full engine assembly, 
installation). EPA is not proposing any certification or in-use 
emissions requirements for the rebuilder or engine owner. EPA requests 
comment on the appropriateness of applying this rebuild program to 
nonroad engines.
    EPA is proposing to adopt modest record keeping requirements that 
EPA believes are in line with customary business practices. The records 
would be kept by persons involved in the process of nonroad engine 
rebuilding or remanufacturing and shall include the hours at time of 
rebuild and a list of the work performed on the engine and related 
emission control systems, including a list of replacement parts used, 
engine parameter adjustments, design element changes, and work 
performed as described in item (4) of the rebuild provisions above. EPA 
proposes that such records be kept for two years after the engine is 
rebuilt.
    Under this proposal, parties would be required to keep the 
information for two years but would be allowed to use whatever format 
or system they choose, provided that the information can be readily 
understood by an EPA enforcement officer. EPA proposes that parties 
would not be required to keep information that they do not have access 
to as part of normal business practice. In cases where it is customary 
practice to keep records for engine families rather than specific 
engines, where the engines within that family are being rebuilt or 
remanufactured to an identical configuration, such record keeping 
practices are proposed to be satisfactory. Rebuilders would be able to 
use records such as build lists, parts lists, and engineering 
parameters that they keep of the engine families being rebuilt rather 
than on individual engines, provided that each engine is rebuilt in the 
same way to those specifications. EPA requests comments on the 
appropriateness of the proposed record keeping requirements including 
whether the records should be kept for a longer period of time such as 
for five years.

D. Averaging, Banking, and Trading

    With this notice, EPA is proposing to replace the existing nonroad 
engine averaging, banking, and trading (ABT) program with a 
comprehensive new program. The proposed program is intended to enhance 
the flexibility offered to engine manufacturers that will be needed in 
meeting the stringent NMHC + NOX standards and the PM 
standards being proposed. The proposed changes to the ABT program have 
been made in tandem with the proposed emission standards. This allows 
EPA to propose the most stringent emission standards that should apply 
with the proposed ABT program, while providing the flexibility and cost 
benefits to manufacturers who have to meet the technical challenges of 
the lower standards. It should be noted that as part of the 2001 
feasibility review described earlier, the Agency plans to reassess the 
appropriateness of the averaging, banking, and trading provisions 
applicable to nonroad diesel engines and modify the provisions if 
deemed necessary.
    The proposed changes come in the context of the existing ABT 
program for nonroad engines, which was adopted in 1994 (see 59 FR 
31306, June 17, 1994). The existing program covers diesel engines rated 
over 37 kW and is available for NOX emissions only. The 
three aspects of the ABT program (averaging, banking, and trading) are 
described in the following paragraphs.
    Averaging means the exchange of emission credits among engine 
families within a given engine manufacturer's product line. Averaging 
allows a manufacturer to certify one or more engine families at levels 
above the applicable emission standard (but below a set upper limit). 
However, the increased emissions must be offset by one or more engine 
families within that manufacturer's product line certified below the 
same emission standard, such that the average emissions from all the 
manufacturer's families (weighted by engine power and production 
volume) are at or below the level of the emission standard. Averaging 
results are calculated for each specific model year. The mechanism by 
which this is accomplished is certification of the engine family to a 
``family emission limit'' (FEL) set by the manufacturer, which may be 
above or below the standard. An FEL that is established above the 
standard may not exceed an upper limit specified in the ABT 
regulations. Once an engine family is certified to an FEL, that FEL 
becomes the enforceable emissions limit used to determine compliance 
during assembly line testing and in-use compliance testing.
    Banking means the retention of emission credits by the engine 
manufacturer generating the credits for use in future model year 
averaging or trading. Under the existing program, banked credits have a 
three year life. EPA believes banking improves the feasibility of 
meeting standards, including the development and early introduction of 
advanced emission control technology, which allows certain engine 
families to act as trail blazers for new technology. This can

[[Page 50166]]

help provide valuable information to manufacturers on the technology 
prior to manufacturers needing to apply the technology throughout their 
product line. It can also provide valuable information for use in other 
regulatory programs. An incentive for early introduction arises because 
the banked credits can subsequently be used by the manufacturer to ease 
the compliance burden of new, more stringent standards.
    Trading means the exchange of emission credits between engine 
manufacturers which can then be used for averaging purposes, banked for 
future use, or traded to another engine manufacturer. Trading can be 
advantageous to smaller manufacturers who might have limited 
opportunity to optimize their costs through the use of averaging. 
Trading can also be advantageous to larger manufacturers because 
extending the effective averaging set through trading can allow for 
overall optimization of costs across manufacturers.
    As described later in this section, EPA is proposing significant 
changes to the existing ABT program for nonroad diesel engines. Behind 
these changes is the recognition that the proposed standards represent 
a major technological challenge to the industry. ABT provisions can 
ease the need to bring all engines into compliance during the exact 
year the proposed new standards would take effect by allowing credits 
to be used, for example, to temporarily offset emissions from some 
particularly difficult to control engine line. While the existing ABT 
provisions were designed with these same general goals in mind, EPA 
believes that the nature of the challenge presented by standards 
proposed in this notice justifies efforts to increase the flexibility 
of the ABT program. The Agency wishes to maximize the flexibility and 
incentives for early introduction of technology which ABT offers 
without limiting the air quality benefits of the proposed standards. 
This will help ensure that the proposed new standards will, in fact, be 
attainable for the manufacturers, will be met at the lowest cost, and 
will still achieve the expected emissions benefit from the proposed 
standards.
    The ABT program contained in this proposal would apply to all 
nonroad diesel engines covered by this notice. The following discussion 
of the proposed ABT provisions is divided into two sections. The first 
section describes the proposed provisions for engines rated over 37 kW. 
The second section describes the proposed provisions for those engines 
rated under 37 kW, including land-based and marine engines, both of 
which are currently unregulated by EPA. Readers are encouraged to 
review the draft regulations for a fuller understanding of how the 
proposed ABT program would operate. In addition to those areas 
specifically highlighted, the Agency solicits comments on all aspects 
of the proposed ABT changes, including comments on the benefit of these 
changes to manufacturers in meeting the proposed emission standards and 
any potential air quality impacts which might be associated with them.
1. Proposed Program for Engines Rated Greater Than or Equal to 37 kW
    EPA is proposing to implement several new provisions upon 
finalization of the proposed standards. The following section is 
divided into two subsections and describes the proposed changes to the 
ABT program for engines greater than or equal to 37 kW. The first 
subsection describes the general provisions applicable to all engines. 
The second subsection describes several provisions specific to engines 
certified to the existing Tier 1 standards for engines greater than or 
equal to 37 kW.
    i. General Provisions: Beginning with the proposed Tier 2 
standards, the form of the standard changes from separate HC and 
NOX standards to a combined NMHC + NOX standard. 
Therefore, once the proposed Tier 2 standards take effect, credits will 
be based on combined NMHC + NOX values. In the Tier 2 time 
frame, NMHC + NOX credits will be generated against the 
proposed Tier 2 standards, which vary from 6.4 to 7.5 g/kW-hr (4.8 to 
5.6 g/hp-hr), depending on the power rating of the engine. In the Tier 
3 time frame, NMHC + NOX credits will be generated against 
the proposed Tier 3 standards, which vary from 4.0 to 4.7 g/kW-hr (3.0 
to 3.5 g/hp-hr), depending on the power rating of the engine.
    The existing Tier 1 ABT program for nonroad engines does not cover 
PM emissions. Based on the certification levels of Tier 1 engines, the 
Tier 2 PM standards contained in the proposal will require 
manufacturers to reduce the PM levels of their engines. In addition, 
the proposed NMHC + NOX standards will affect the 
manufacturer's ability to comply with the proposed PM standards due to 
the tradeoff between NOX emissions and PM emissions which 
exists for diesel engines. Therefore, beginning with the introduction 
of Tier 2 engines, EPA is proposing to include PM emissions in the ABT 
program in order to provide manufacturers with greater flexibility in 
complying with the proposed PM standards. (As described later, EPA is 
proposing to allow the early banking of PM credits from Tier 1 engines 
under certain conditions.) All PM credits will be generated against the 
proposed Tier 2 standards until EPA adopts subsequent PM standards. 
Because EPA is proposing to include both NMHC + NOX and PM 
in the ABT program, EPA is also proposing to prohibit manufacturers 
from generating credits on one pollutant while using credits on another 
pollutant all on the same engine family. EPA believes such a provision 
is important given the tradeoff between NOX and PM emissions 
which exists for diesel engines.
    As discussed earlier, EPA is planning to assess the adequacy of the 
current steady-state test procedure in an effort to determine if the 
expected emission benefits are being realized in use. EPA is concerned 
that PM reductions required on the current steady-state certification 
test will not result in similar reductions in use and could possibly, 
under some situations, even result in an increase in in-use emissions. 
Given the lack of sufficient information to confirm these concerns, EPA 
still believes it is appropriate to include PM emissions in the ABT 
program at this time. However, should EPA determine that the current 
test procedure is inadequate and the expected in-use emission benefits 
are indeed not being fully realized, it would, of course, be 
inappropriate to allow the unconsidered use of credits generated under 
the current test procedure to demonstrate compliance under a future, 
more appropriate test procedure. EPA would therefore need to reassess 
the appropriateness of the PM provisions for any Tier 3 standards, 
taking into consideration the amount of credits generated up to that 
point or taking the expected credit balances into account in setting 
the Tier 3 PM standard levels.
    EPA is also proposing FEL upper limits that go with these new 
proposed standards. EPA believes the proposed FEL upper limits provide 
the manufacturers adequate compliance flexibility while protecting 
against the introduction of unnecessarily high-emitting engines. EPA 
requests comment on the appropriateness of the proposed upper limits. 
EPA is proposing a NMHC + NOX FEL upper limit of 10.5 g/kW-
hr (7.9 g/HP-hr) for engines greater than or equal to 130 kW certified 
in the Tier 2 time frame. The proposed NMHC + NOX FEL upper 
limit is based on the existing Tier 1 NOX and HC standards 
of 9.2 and 1.3 g/kW-hr (6.9 and 1.0 g/HP-hr), respectively.

[[Page 50167]]

Engines between 37 and 130 kW do not currently have to show compliance 
with an HC standard. However, data from those engines currently 
certified with EPA show that these engines are below the 1.3 g/kW-hr 
(1.0 g/HP-hr) HC level. Therefore, EPA is proposing the same NMHC + 
NOX FEL upper limit of 10.5 g/kW-hr for Tier 2 engines 
greater than or equal to 37 kW and less than 130 kW. For Tier 3 engine 
families, EPA proposes that the NMHC + NOX FEL upper limit 
be the Tier 2 NMHC + NOX standards for the same power 
category of engines.
    For PM, EPA is proposing a PM FEL upper limit of 0.54 g/kW-hr (0.40 
g/HP-hr) for engines greater than or equal to 130 kW certified in the 
Tier 2 time frame. The proposed PM FEL upper limit is based on the 
existing Tier 1 PM standard. Engines between 37 and 130 kW do not 
currently have to show compliance with a PM standard. Therefore, EPA is 
proposing a PM FEL upper limit of 1.2 g/kW-hr for Tier 2 engines 
greater than or equal to 37 kW and less than 130 kW. This level 
represents a typical PM level for uncontrolled engines based on an EPA 
report.29 (EPA is not proposing a PM FEL upper limit beyond 
Tier 2 because EPA is not proposing Tier 3 PM standards at this time.)
---------------------------------------------------------------------------

    \29\ ``Nonroad Engine and Vehicle Emission Study'' (NEVES), U.S. 
EPA, EPA Report Number 21A-2001, November 1991 (available in Air 
Docket A-96-40).
---------------------------------------------------------------------------

    Upon finalization of the new standards, EPA is proposing to replace 
the three year credit life provision of the existing ABT program with 
no limit on credit life. EPA believes that unlimited life is warranted 
given the stringency of the proposed standards. An unlimited credit 
life will promote the feasibility of the proposed standards because it 
increases the value of the credit to the manufacturer by providing 
greater flexibility. It is consistent with the emission reduction goal 
of ABT, not only because of the increased manufacturer incentive but 
also because it eliminates the ``use or lose'' aspect of the existing 
program's limit on credit life which creates the perverse incentive for 
manufacturers to use credits as quickly as possible. As a result, 
unused credits, which are extra emission reductions beyond what the EPA 
regulations require, may remain off the market longer. EPA also 
believes that removing credit life limits for the cleaner engines will 
provide maximum incentive for the development and introduction of clean 
engines with emission levels approaching the research objectives of the 
Nonroad Statement of Principles which are 2.0 g/kW-hr (1.5 g/hp-hr) 
NOX and 0.07 g/kW-hr (0.05 g/hp-hr) PM.
    EPA is proposing to eliminate the ``buy high/sell low'' power 
conversion factor provision of the existing ABT regulations and to 
replace it with the sales-weighted average power value beginning in 
Tier 2. Currently, when a manufacturer generates credits, the credits 
are based on the minimum power configuration in a family. When a 
manufacturer goes to use credits, the credits are based on the maximum 
power configuration in the family. In other words, credit generation is 
calculated based on the configuration which generates the least benefit 
within the family while credit use is based on the configuration which 
requires the most credits to comply. In some cases this can result in a 
sizeable offset. Based on experience with the ABT program for highway 
heavy-duty engines, EPA does not believe such an offset is necessary. 
This provision tends to introduce a penalty for credit generating 
engines, thus reducing the benefits of the ABT program for 
manufacturers. Therefore, EPA proposes to base both credit generation 
calculations and credit usage calculations on the sales-weighted 
average power values within each engine family. EPA has already 
proposed to incorporate this same change into the highway heavy-duty 
diesel engine ABT program (61 FR 33421, June 27, 1996) and requests 
comment on the appropriateness of such a change for the nonroad ABT 
program.
    EPA is proposing to include an adjustment in the calculation of 
credits for the useful life of the engine. The existing ABT program 
does not include any adjustment for useful life to the credit 
calculations. All engines covered under the Tier 1 standards were 
assumed to have the same useful life of 8,000 hours. Therefore, in 
light of the fact that manufacturers are allowed to use credits across 
all power categories under the existing Tier 1 program, it was not 
necessary to adjust the value of the credits for different engine 
lifetimes. However, as discussed earlier, EPA is proposing to adopt 
useful life periods for engines below 37 kW that vary from 3,000 hours 
to 5,000 hours. In addition, as discussed later, EPA is also proposing 
to allow ABT credits to be used across some of the power categories 
where useful life will vary. Therefore, in order to appropriately 
determine the relative value of credits generated and the relative 
amount of credits used by different engines over their regulatory 
lifetime, EPA is proposing to include useful life in the equations used 
to calculate credits generated or credits used under the ABT program.
    Another factor applied in the highway heavy-duty engine program 
that EPA is not proposing to include in the credit calculation for the 
nonroad program is related to engine load factor. Load factor refers to 
the percentage of maximum power at which an engine operates. An engine 
class that operates at a higher load would burn more fuel, and 
therefore, generate more emissions during an hour of operation. 
Including the load factor in the equation would lead to a more accurate 
estimation of in-use emissions and would be necessary if EPA were 
proposing to allow credits from the nonroad ABT program to be 
transferred to other emission trading programs, such as the Open Market 
Trading Program. No adjustment to the credit calculations for load 
factor is proposed under this rule because there do not appear to be 
distinct and varied load factors for different types of engines 
regulated under this rule. 30 As an indicator, the D2 and G2 
test cycles have load factors of about 47% and the C1 test cycle has a 
load factor that is generally around 505%. However, the 
decision not to propose the inclusion of a load factor term to the 
credit calculations should not be interpreted to mean that this factor 
would not be appropriate for any future efforts. For example, marine 
engines have two very distinct engine applications: recreational and 
commercial. Commercial marine engines often have useful lives ten times 
longer and load factors two times greater than recreational marine 
engines. As noted below, EPA's diesel marine rule is currently under 
development and may need to address these differences as part of that 
proposal.
---------------------------------------------------------------------------

    \30\ There are a wide range of load factors for in-use nonroad 
diesel engines which are a result of the wide variation of nonroad 
equipment applications. However, EPA believes that any attempt to 
track these load factors for the purposes of credit calculations 
would be overly burdensome and would have no real emissions benefit 
since the credits are only allowed to be used in within the nonroad 
ABT program.
---------------------------------------------------------------------------

    As discussed later in more detail in the equipment manufacturer 
flexibility section, EPA is proposing that engine manufacturers be 
given the option to trade the NMHC + NOX and PM credits 
generated by their engines to equipment manufacturers. Equipment 
manufacturers could use these credits to increase their options under 
the equipment manufacturer flexibility provisions.
    There are two remaining areas on which EPA is requesting comment. 
First, EPA requests comment on the inclusion of engines certified to 
meet the State of California's standards in the

[[Page 50168]]

proposed ABT program. Currently, manufacturers may not include engines 
certified for California in the ABT program. Although the California 
ARB is expected to adopt the same standards that EPA is proposing 
today, they have not yet proposed such changes to their diesel nonroad 
program. Therefore, EPA does not believe that it can propose to include 
such engines in the revised ABT program at this time without knowing 
the full details of California's program.
    Second, EPA is requesting comment on whether there should be 
restrictions on trading PM credits across the different power 
categories for which EPA is proposing standards. Based on the emission 
levels of Tier 1 engines certified with EPA, the PM levels of engines 
between 75 and 130 kW appear to be similar to those of engines between 
130 and 560 kW. (At this point, EPA has very little PM emissions data 
on engines between 37 and 75 kW that are required to be certified by 
January 1998.) Under the proposal, the Tier 2 PM standards for engines 
less than 130 kW will be higher than the Tier 2 PM standards for 
engines greater than 130 kW. Based on the limited certification 
information, EPA has concerns that engines in one power category could 
generate PM credits against higher standards and then use those credits 
for showing compliance with another power category of engines with a 
lower standard. For this reason, EPA is requesting comment on limiting 
the use of PM credits to the power category in which the credits were 
generated.
    ii. Special Provisions for Tier 1 Engines: As described above, EPA 
is proposing to replace the existing ABT program with a comprehensive 
new program. Based on EPA's experience with Tier 1 certification and 
because of implementation differences between the existing Tier 1 
provisions and the proposed Tier 2 and later provisions, EPA is 
proposing two changes that will specifically affect engines certified 
to the existing Tier 1 standards. First, EPA is proposing a methodology 
for calculating NOX credits earned with Tier 1 engines that 
can be used for showing compliance with the proposed Tier 2 NMHC + 
NOX standards. Second, EPA is proposing to allow engine 
manufacturers to bank early PM credits that can be used once the 
proposed Tier 2 standards take effect. Both of these proposed changes 
are described in more detail below. The proposed changes in the general 
provisions, described above, including the unlimited life, use of 
average power for credit calculations, and useful life adjustment, will 
also apply to engines certified to the existing Tier 1 engines. EPA 
believes these changes are warranted for Tier 1 engines given the 
stringency of the proposed standards. Also these proposed changes are 
consistent with the feasibility of the proposed standards because they 
increase the value of the credits to the manufacturer by providing 
greater flexibility.
    With regard to the generation of NOX credits from 
engines certified to the existing Tier 1 standards, EPA is proposing to 
continue to allow manufacturers to earn NOX credits, but not 
NMHC + NOX credits. The NOX credits earned on 
engines certified to the existing Tier 1 standards could be used to 
show compliance with the proposed Tier 2 NMHC + NOX 
standards. Under the existing Tier 1 regulations, manufacturers are 
required to meet separate HC and NOX standards. However, as 
noted earlier, beginning with the proposed Tier 2 standards, the form 
of the standard changes to a combined NMHC + NOX standard. 
Based on EPA certification information for engines between 130 and 560 
kW, the sales-weighted average HC levels of Tier 1 engines are 0.5 g/
kW-hr, well below the 1.3 g/kW-hr standard. EPA believes the Tier 1 HC 
standard did not require manufacturers to reduce HC emissions, and 
therefore, allowing manufacturers to earn NMHC + NOX credits 
against the combined Tier 1 HC and NOX standards would 
provide manufacturers with false HC credits. For this reason, EPA is 
proposing to allow manufacturers to earn NOX credits, and 
not NMHC + NOX credits, on Tier 1 engines.
    With regard to the calculation of NOX credits from Tier 
1 engines that are to be banked or traded, EPA is proposing that an 
adjustment be made in the calculation unless the engine on which the 
credits were earned is below the applicable standards by a specified 
amount. EPA believes an adjustment to the NOX credits from 
certain Tier 1 engines is necessary to prevent the possibility of a 
significant delay in the introduction of engines meeting the proposed 
Tier 2 NMHC + NOX standards. Based on certification 
information for current Tier 1 nonroad engines, if EPA allowed engine 
manufacturers to generate NOX credits against the Tier 1 
standard from all engines, they could potentially generate a large 
number of NOX credits, and thereby significantly delay 
compliance with the proposed Tier 2 standards. Furthermore, the smaller 
incremental reductions from those engines only slightly below the 
standard are less likely to represent the cleaner, pull-ahead 
technologies which ABT is designed to encourage. However, these smaller 
credits do represent early reductions and do have some value given the 
stringency of the Tier 2 standards.
    EPA is proposing to implement a trigger as a mechanism to 
distinguish between Tier 1 engine families which are eligible for no 
adjustment and those families which must be adjusted. For engine 
families certified with a NOX FEL at or below 8.0 g/kW-hr 
NOX, no adjustment would be applied to any NOX 
credits. EPA has set 8.0 g/kW-hr NOX to be a reasonable 
discriminator for pull-ahead technology based on the certification 
levels and technologies used to comply with the existing Tier 1 
standards. For engine families certified at a NOX FEL above 
the 8.0 g/kW-hr trigger in the Tier 1 time frame, an adjustment that 
reduces the value of the credits by 35 percent would be applied to the 
NOX credits. EPA requests comment on the proposed level to 
be used for adjusting the converted Tier 1 NOX credits. The 
proposed level was selected based on a combination of factors. If the 
rate is set too high, EPA would create a significant disincentive for 
the introduction of progressively improved technology. There may also 
be some incentive for manufacturers to marginally recalibrate engines 
at higher NOX levels for improved operating characteristics 
such as fuel economy. Conversely, if EPA set the rate too low (or 
proposed no adjustment at all), there would be little incentive to 
develop and implement truly cleaner technology than currently exists. 
EPA believes an adjustment of 35 percent for credits generated at 
NOX FELs above 8.0 g/kW-hr, strikes a balance between these 
dynamics.
    With regard to PM, EPA is proposing to allow early banking of PM 
credits from Tier 1 engines, under certain conditions, as soon as the 
proposed standards are finalized. Under the proposal, an engine will be 
eligible to generate PM credits as long as the engine meets the Tier 1 
NOX standard of 9.2 g/kW-hr. For those eligible engines, the 
number of PM credits generated will be calculated against the proposed 
Tier 2 standards and may only be used to show compliance once the Tier 
2 PM standards take effect. EPA is not proposing to apply the trigger 
or credit adjustment concept to PM credits because the proposed 
provisions for PM credits already require credits generated in the Tier 
1 time frame to be calculated against the significantly more stringent 
proposed Tier 2 standards. Based on certification information for 
current Tier 1 nonroad engines, if EPA allowed manufacturers to bank 
credits against the relatively loose Tier 1 PM standard,

[[Page 50169]]

manufacturers could potentially generate a large number of PM credits, 
and thereby significantly delay compliance with the proposed Tier 2 
standards. EPA's main objective in ABT is to increase the feasibility 
of the proposed standards by allowing manufacturers to meet more 
stringent standards for certain engine families, allowing manufacturers 
more flexibility and lead time in bringing emissions for more 
problematic families down to the level of the standards. It is not 
designed to allow manufacturers to delay compliance with new standards 
for a long period of time for large numbers of engines. EPA requests 
comment on the appropriateness of the 9.2 g/kW-hr NOX level 
as a limiting factor for whether PM credits can be generated by an 
engine family.
    EPA requests comment on two additional changes for Tier 1 engines 
that EPA is considering adopting upon finalization of the proposed 
standards. First, EPA is considering adopting a safety net approach 
regarding the use of the NOX credits generated from Tier 1 
engines used in the Tier 2 time frame. As noted earlier, manufacturers 
have the potential to earn a large number of credits from current Tier 
1 engines that could be used to significantly delay the introduction of 
engines meeting the Tier 2 standards. Although EPA doesn't expect this 
situation will occur, EPA is considering adopting a provision that 
would apply an additional 10 percent surcharge to the NOX 
credits used by a manufacturer if they use credits to certify more than 
20 percent of their fleet in the first or second year a Tier 2 standard 
applies in a given power category. EPA believes such a provision would 
provide manufacturers with sufficient compliance flexibility while, at 
the same time, encouraging them to reasonably limit the number of 
engines certified through ABT as the proposed standards take effect. 
EPA requests comment on the level of both the surcharge and the level 
at which the surcharge would apply.
    Second, EPA is requesting comment on limiting the number of years 
for which early PM credits would be available. Assuming EPA finalizes 
the proposed standards prior to the beginning of the 1999 model year, 
manufacturers would have the potential to bank early PM credits for 
between two to seven years. This increases the chances that 
manufacturers could potentially generate a large number of PM credits, 
and thereby delay compliance with the proposed Tier 2 standards for 
many engines. Therefore, EPA is requesting comment on limiting the 
availability of early PM credits to the three years prior to when the 
applicable Tier 2 standards take effect.
2. Proposed Program for Engines Rated Under 37 kW
    As noted earlier, EPA is proposing standards for engines rated 
under 37 kW, which are currently unregulated by EPA. Therefore, the 
existing ABT program does not apply to such engines. EPA is proposing 
provisions to include both land-based and marine engines rated under 37 
kW in the ABT program. A number of provisions are being addressed for 
these engines, including credit generation, credit life, credit 
calculation, trading across power categories, credit exchange between 
land-based and marine applications, and a special multi-year averaging 
and banking program.
    With regard to credit generation, EPA is proposing to make credits 
available for both NMHC + NOX emissions and for PM emissions 
as soon as the standards are finalized. However, because of the kinds 
of technologies typically used by these engines, it is necessary to put 
some restrictions on how they are generated. Specifically, EPA is 
proposing that all credits generated from engines rated under 19 kW be 
calculated against the proposed Tier 2 standards, even prior to the 
Tier 2 time frame. This will apply for both NMHC + NOX 
credits and PM credits. In other words, prior to the date when the 
proposed Tier 2 standards become effective, manufacturers who want to 
generate credits can generate credits only against the proposed Tier 2 
standards, not the proposed Tier 1 standards. EPA believes this 
strategy for generating emission credits from engines rated under 19 kW 
is appropriate because the majority of engines in that power category 
use indirect fuel injection designs, which tend to have significantly 
lower NOX levels compared to direct injection engines and, 
in most cases, NMHC + NOX levels significantly lower than 
the proposed Tier 1 standards. For engines rated between 19 and 37 kW, 
where direct injection engines are more common, EPA is proposing that 
all engines generate credits against the applicable proposed standards, 
but, as discussed below, EPA is requesting comment on whether credits 
for engines between 19 kW and 37 kW should be generated against the 
proposed Tier 2 standards even during the Tier 1 time frame.
    Because engines rated under 37 kW are currently unregulated at the 
Federal level, EPA cannot base the Tier 1 FEL upper limits on the 
previously applicable standards. However, the California ARB currently 
regulates nonroad diesel engines rated under 19 kW. Based on existing 
California ARB standards for nonroad diesel engines rated under 19 kW, 
EPA is proposing Tier 1 FEL upper limits for engines rated under 37 kW 
of 16.0 g/kW-hr (12.0 g/hp-hr) for NMHC + NOX and 1.2 g/kW-
hr (0.9 g/hp-hr) for PM. The proposed FEL upper limits for the Tier 2 
standards are the proposed Tier 1 standards.
    With regard to credit life, EPA is proposing to adopt the unlimited 
life provisions for engines rated under 37 kW, as described earlier for 
engines rated over 37 kW, with one exception. Because of concerns over 
the amount of credits manufacturers could earn on indirect injection 
engines under the proposed Tier 1 standards and the potential for 
significant delay in implementation of the Tier 2 standards, EPA is 
proposing that all credits generated prior to the Tier 2 time frame on 
engines rated under 19 kW expire at the end of 2007. With respect to 
credit generation and usage calculations, EPA is proposing that 
manufacturers use the sales-weighted average power for engines rated 
under 37 kW, as described earlier for engines rated over 37 kW. The 
inclusion of useful life in the calculation of credits, as described 
earlier, will also apply to the proposed ABT program for engines rated 
under 37 kW.
    With respect to trading across power categories, EPA is proposing 
two restrictions on such trading because of the concerns noted above 
regarding the relatively low emissions from indirect injection engines. 
First, EPA is proposing that manufacturers not be allowed to use 
credits generated on engines rated under 19 kW to demonstrate 
compliance for engines rated over 19 kW. Second, EPA is proposing to 
prohibit manufacturers from trading credits earned on indirect 
injection engines rated over 19 kW to other manufacturers. Under this 
second proposed restriction, a manufacturer would still be allowed to 
use such credits for averaging or banking purposes with other engines 
it produces rated over 19 kW. EPA believes these trading restrictions 
are important to alleviate concerns that indirect injection engines 
could generate significant NMHC + NOX credits against the 
proposed standards, which could then be traded to other manufacturers 
to delay compliance in the higher power categories. As an alternative 
to the proposed prohibition on trading credits from indirect injection 
engines to other manufacturers, EPA requests comment on applying the 
same limitation on

[[Page 50170]]

credit generation for engines greater than or equal to 19 kW and less 
than 37 kW as are being proposed for engines below 19 kW. This 
alternative would require that all credits, including credits generated 
on Tier 1 engines, be generated against the proposed Tier 2 standards.
    With respect to the exchange of credits across applications, EPA is 
proposing that manufacturers not be allowed to use credits generated on 
land-based engines to demonstrate compliance for marine engines. EPA 
believes that trading from land-based nonroad engines to marine engines 
is inappropriate for three reasons. First, allowing land-based credits 
to offset marine emissions could neutralize the marine program. There 
are many more land-based nonroad engines than there are marine engines, 
and allowing these trades would allow manufacturers to effectively 
trade out of the marine emission control requirements. Second, such a 
program would penalize small marinizers whose business consists of 
buying engines or engine blocks and modifying them for marine 
applications, or other manufacturers of only marine engines. These 
small marinizers would not have the same access to land-based credits 
as large engine manufacturers who also marinize their own engines. 
Allowing cross-application trading would give large manufacturers an 
unfair competitive advantage, since large manufacturers could 
effectively trade themselves out of the marine program whereas smaller 
marinizers would have to make the investments necessary to reduce 
emissions from their marine engines. Third, allowing land-based nonroad 
engine credits to offset marine emissions raises concerns regarding the 
geographic distribution of emission reductions. Specifically, the 
emissions from diesel marine engines are concentrated only in port 
areas while the emission from land-based nonroad are arguably spread 
out more evenly across the country. This creates a level of uncertainty 
as to whether the engines that generated the credits will be used in 
the same nonattainment area as the marine engines whose emissions are 
offset by the credits. While this problem is present to a certain 
degree in all nonroad programs, it is also the case that marine engines 
can be used in only one kind of area, and thus the ability to offset 
potentially higher marine emissions with lower-emitting land-based 
engines is limited.
    While EPA is proposing not to allow manufacturers to use credits 
generated on land-based engines to demonstrate compliance for marine 
engines, EPA is proposing to allow manufacturers to use credits 
generated on marine engines to demonstrate compliance for land-based 
applications. This will benefit those engine manufacturers that only 
manufacture marine engines, who otherwise would be limited to trading 
emission credits among themselves or not trading at all. In addition, 
EPA expects to propose that small diesel marine engines be included in 
future diesel marine ABT program. This would create additional trading 
opportunities for these engine manufacturers.
    Last of all, EPA is proposing a special four-year averaging and 
banking program for engines rated under 37 kW that would allow 
manufacturers to create a negative balance of credits for the first two 
years after the proposed Tier 1 standards are effective. This negative 
balance would have to be eliminated by the end of the fourth year of 
the Tier 1 standards. Based on discussions with engine manufacturers, 
it appears the proposed Tier 1 dates for engines rated under 37 kW will 
be challenging, especially for air-cooled direct injection engines. 
Even though a number of the small engine manufacturers have signed the 
Nonroad Statement of Principles that included the proposed Tier 1 
standards, there may be some engine models that will not be ready by 
the proposed implementation dates. Therefore, EPA believes the two year 
allowance is important to ensure the feasibility of the proposed 
standards given the short lead time that is expected between the time 
the rule is expected to be finalized and the proposed implementation 
dates of the Tier 1 standards. Under the proposed program, 
manufacturers would be allowed to certify engines with FELs above the 
proposed Tier 1 standards and generate ``negative credits'' for the 
first two years after the proposed Tier 1 standards take effect. By the 
end of the fourth year after the proposed Tier 1 standards take effect, 
the manufacturer would be required to have certified enough engines 
with FELs below the proposed Tier 1 standards such that they have 
generated enough credits in order to pay back the negative credits, 
along with a ten percent penalty for any negative balance of credits 
carried over from one year to the next. Because of the penalty applied 
to negative credit balances, EPA believes the multi-year averaging and 
banking program will provide a small benefit to the environment in the 
long run. Under this special program, manufacturers would not be 
allowed to use emission credits obtained through trading with other 
engine manufacturers to offset their negative credit balances. In 
accordance with the above described provisions, separate programs would 
apply for engines rated under 19 kW and for engines between 19 and 37 
kW.
    As noted earlier, EPA solicits comments on all aspects of the 
proposed ABT changes, including comments on the benefit of these 
changes to manufacturers in meeting the proposed emission standards and 
any potential air quality impacts which might be associated with them.

E. Flexibility for Equipment Manufacturers

1. Overview of Approach to Providing Flexibility
    EPA has often set engine emission standards that take full effect 
at a set point in time, concurrently precluding the installation of 
engines not certified to the new standards in vehicles or equipment. In 
meeting with manufacturers of nonroad engines and equipment to develop 
the Statement of Principles, EPA determined that a different approach 
to implementing new standards might be needed to avoid unnecessary 
hardship for equipment manufacturers (sometimes referred to as original 
equipment manufacturers or OEMs), while achieving the desired 
environmental benefits.
    Some equipment manufacturers that do not make their own engines 
have complained that the Tier 1 rule resulted in disruptions because 
their engine suppliers did not always provide adequate lead time for 
the equipment redesigns needed to accommodate engine design changes 
such as mounting locations and heat rejection loads. The averaging, 
banking, and trading program is of little help to them, because they, 
as equipment manufacturers, have no control over which engines earn or 
use credits. For some, even timely information on the new engine 
designs has not solved the problem because of the sheer volume of 
redesign work needed to change diverse product offerings with limited 
engineering staffs. The manufacturers expressed a belief that the same 
problem would accompany the transition to the proposed Tier 2 
standards. By addressing this problem in the design of the Nonroad 
Statement of Principles, the signatories were able to consider more 
stringent standards earlier than would otherwise be feasible.
    In response to these concerns, the Agency is proposing an OEM 
transition program to provide equipment manufacturers with some control 
of the transition process to new standards. This proposed program is 
based on the provisions contained in the

[[Page 50171]]

Supplemental ANPRM, with modifications suggested in written comments, 
in subsequent discussions with equipment manufacturers, and in the 
report of the panel convened for this rule under the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA).31 The 
program consists of six major elements, each directed at a specific 
need. Although they involve certain planning and recordkeeping 
responsibilities if taken advantage of, all of these elements are 
voluntary. An OEM has the option to continue to do business as under 
the current regulations, subject to the prohibited acts provisions of 
40 CFR Part 89, Subpart K. The elements of the program are: (1) A 
percent-of-production allowance for general applications, (2) a larger 
percent-of-production allowance for agricultural equipment, (3) a 
small-volume allowance, (4) continuance of the Tier 1 allowance to use 
up existing inventories of engines, (5) access to averaging, banking, 
and trading program credits, and (6) availability of hardship relief. 
Each of these is discussed in detail below.
---------------------------------------------------------------------------

    \31\ ``Final Report of the SBREFA Small Business Advocacy Review 
Panel for Control of Emissions of Air Pollution from Nonroad Diesel 
Engines'', May 23, 1997 (available in Air Docket A-96-40).
---------------------------------------------------------------------------

2. Elements of Proposed OEM Transition Program
    a. Percent-of-Production Allowance for General Applications: This 
proposed element allows each equipment manufacturer to install engines 
not certified to new emission standards in a certain percentage of its 
annual production for the U.S. market. For equipment with engines over 
37 kW, in each year that a new Tier 2 standard first applies, an OEM 
will be allowed up to 15 percent of its equipment produced for sale or 
use in the U.S. to contain engines certified to Tier 1 standards. This 
allowance drops to 5 percent in each of the next 6 years. These 
allowances can provide substantial relief by allowing an OEM to 
prioritize redesign work onto high volume models. Many manufacturers 
have a substantial number of lower volume models with combined sales 
within these percentages. The several years in which exemptions are 
allowed accounts for the very limited engineering staffs available in 
many companies for the needed redesign work. EPA believes that allowing 
this latitude in the initial years of the standards is consistent with 
the Clean Air Act and that, were it not available, many OEMs would 
likely be unable to meet the redesign requirements necessitated by the 
standards. This flexibility allows the vast majority of the equipment 
population to be in compliance with these stringent standards more 
quickly than would otherwise be possible.
    As presented in the Supplemental ANPRM, this provision would apply 
to equipment with engines under 37 kW as well, except that the 5 
percent allowance would extend for 3 years instead of 6, and the 
exempted equipment could use uncontrolled engines beginning in the Tier 
1 time frame. Manufacturers of equipment with engines rated under 37 kW 
objected to the shorter flexibility program duration proposed for their 
equipment. They argued that the 1999 and 2000 Tier 1 implementation 
dates that apply to them make it even more imperative that they receive 
flexibility allowances at least as large as those applied to 
manufacturers of large equipment. This concept was also put forward for 
consideration by the Small Business Advocacy Review Panel as 
potentially beneficial in addressing small business concerns. EPA 
believes that this concern has merit and also believes that the effect 
of such an extension on the environmental benefit would be small. 
Therefore the Agency is proposing, as a regulatory alternative, that 
the provisions of the general percent-of-production allowance that 
apply to manufacturers of large equipment be applied to manufacturers 
of equipment using small engines as well. Comment is requested on which 
of these regulatory alternatives is preferred. This alternative would 
also apply to the special agricultural equipment allowance and the 
small volume allowance (both discussed below) as well, so that no 
distinction would be made between equipment above and below 37 kW.
    Commenters on the Supplemental ANPRM also requested a somewhat 
modified proposal from that outlined above. Under this modified 
approach, OEMs could respread the fixed percentage allowances across 
the years covered by the program. For example, instead of 15 percent of 
its production in the first year and 5 percent in each of the next 6 
years, an OEM could exempt 45 percent in the first year and none 
thereafter, or save and spread its exemptions at 15 percent in each of 
years five, six, and seven to accommodate Tier 3 product introductions. 
EPA expects that this approach would not result in a significant 
degradation of the environmental benefit, due to the low percentages 
involved after the first year in the fixed percentage approach and the 
likelihood that some OEMs would group exemptions earlier and some 
later. The Agency believes that this added flexibility would provide 
substantial benefit to the industry by allowing each OEM to make its 
own determinations regarding which equipment is most in need of the 
flexibility provisions. EPA is therefore proposing it as a regulatory 
alternative to the fixed-percentage proposal. This concept was also put 
forward for consideration by the Small Business Advocacy Review Panel 
as potentially beneficial in addressing small business concerns (see 
Section VIII.B.).
    To simplify the program, EPA proposes that the allowance under this 
alternative be framed as a 45 percent cumulative allowance over seven 
years (30 percent over 4 years for engines rated under 37 kW if the 
shorter duration alternative for these engines is adopted). The percent 
of production of exempted equipment in the first year would be 
subtracted from this starting allowance to determine the remaining 
allowance, and so on. EPA requests comment on the percent-of-production 
allowance and on which regulatory alternative is preferred.
    Because actual production figures are not available when product 
planning decisions must be made, OEM's will have to base these 
decisions on projected production volumes. As a result, EPA will expect 
manufacturers to factor actual production data into annual 
redeterminations of remaining allowances and to adjust their product 
plans accordingly, so that all compliance determinations are ultimately 
based on actual production.
    Another modification suggested by commenters is a provision to 
allow transfer of exemptions between power categories, with appropriate 
weightings to account for the differing environmental impacts of 
different engines. The Agency believes that this flexibility could 
provide substantial implementation benefits to some manufacturers, but 
is concerned that substantial losses in environmental benefits could 
result unless conservative correction factors could be devised. Many 
parameters affect an engine's impact on the environment, including 
size, life expectancy, average load factors, annual usage, and location 
of use, making the determination of correction factors extremely 
difficult. Of even more concern is the possible abuse of transferred 
exemptions to disadvantage a smaller competitor. A large manufacturer 
with a diverse product offering could stack exemptions into a market 
niche it competes in, possibly allowing it to sell machines with 
cheaper noncomplying engines for many years. EPA requests comment on

[[Page 50172]]

the transfer of exemptions, including possible ways of addressing these 
concerns. EPA is especially interested in comments on the possible 
allowance of exemption transfers limited to the two power categories 
under 19 kW in Tier 1, because of the special challenges involved in 
designing these small engines to control emissions by the 
implementation date, and the relatively narrow power range for these 
two categories, which may somewhat ease concerns about proper weighting 
and exemption stacking.
    b. Percent-of-Production Allowance for Agricultural Equipment: In 
preparing the proposal, EPA was made aware of some special concerns in 
the implementation of new emission controls on agricultural equipment. 
First, because the prices of farm products are strongly influenced by 
economic factors other than the cost of production, individual farmers 
are often not able to pass cost increases for new machinery on to 
consumers. Second, although many agricultural operations are quite 
large, there remains a sizeable segment of this equipment user 
community for which the rapid introduction of new technologies may be 
problematic. This segment is characterized (to varying degrees) by: (1) 
Small operations, often limited to family members, (2) remoteness from 
dealer or factory repair facilities, (3) traditional reliance on user 
maintenance, and (4) reticence to buy machines with unfamiliar 
technologies such as electronic controls. Third, there are numerous 
agricultural equipment models that service niche applications, for 
which only a handful of machines are sold each year. Fourth, although 
the international harmonization of standards is one of the goals of 
this program, farm tractors have not yet been included in the proposed 
regulations in the EU, and so control of emissions from these machines 
in Europe may therefore lag that of other applications. Finally, there 
are special challenges in redesigning some agricultural equipment for 
modified engine designs, such as the potential for heat exchanger 
plugging by airborne crop debris and the need for tractor hood profiles 
that allow a clear view of crop rows. Although certain of these or 
similar issues may apply individually to other equipment market 
segments as well as the agricultural market, they combine in the 
agricultural segment to warrant particular concern about a rapid 
transition to new standards.
    After considering these issues, the Agency is proposing to grant 
more lead time for this equipment through a somewhat expanded OEM 
transition provision. Specifically, in each year that a new Tier 2 
standard (Tier 1 for engines rated under 37 kW) applies, an OEM will be 
allowed up to 30 percent of its farm equipment produced for sale or use 
in the U.S. to contain engines certified to Tier 1 standards 
(uncertified for engines rated under 37 kW). This allowance drops to 15 
percent in each of the next seven years (3 years for engines rated 
under 37 kW if the shorter duration alternative for these engines is 
adopted). A company that makes some farm equipment and some equipment 
used in other applications, wishing to take advantage of both the 
general and the special allowances, would make separate percent-of-
production determinations in each category. EPA is also proposing that 
the provisions discussed above for exemption spreading apply to this 
special allowance as well. This would in effect provide a 135 percent 
cumulative allowance over eight years (75 percent over 4 years for 
engines rated under 37 kW if the shorter duration alternative for these 
engines is adopted).
    EPA is aware that some ambiguity exists in the term ``farm'' 
equipment. The Agency desires that this expanded allowance be reserved 
for equipment models that are clearly targeted for the agricultural 
markets, but also recognizes that machines are sometimes put to diverse 
uses. EPA believes that the current definition for ``farm equipment or 
vehicle'' in 40 CFR 85.1602 is adequate for the purposes of this 
program. This definition covers equipment primarily used in commercial 
farm and logging activities. No routine record keeping or other 
evidence would be required of OEMs to make such an a priori 
determination. However, should EPA gather clear evidence of a 
misapplication of this designation, a recalculation of exemptions under 
the general application allowance would be required. Comment on this 
approach and alternative suggestions are solicited.
    It should be noted that, although this provision may have some 
negative air quality implications, the impact of this expanded 
allowance on air quality is mitigated somewhat by the typical locations 
of this type of equipment. Much of this equipment is used in rural 
areas of the country that are remote from urban nonattainment areas. 
This is perhaps especially true of the small volume applications most 
likely to be exempted in the transition program. Although the regional 
transport of emitted pollutants over large distances is of concern, as 
explained in Section II, it is reasonable to expect some falloff of 
airborne concentrations of these pollutants over these distances.
    Commenters on the Supplemental ANPRM suggested that companies that 
make both agricultural equipment and other equipment be allowed to 
transfer exemptions between these broad categories to further enhance 
implementation flexibility. Though supporting the goal of increased 
flexibility, EPA is concerned that substantial transfers of the large 
special exemption allowance could slow the introduction of complying 
construction, industrial, and utility machines, which is not justified 
by the analysis above. The Agency is also concerned that this added 
flexibility could provide an unfair competitive advantage to large 
companies with diverse product lines, a concern reflected in the 
comments as well. These concerns could be addressed by discounting 
transferred exemptions to reflect environmental or business impact 
differentials. However, at this time, EPA has no basis by which to 
determine the appropriate discount levels and so is not proposing this 
flexibility. Other commenters requested that the special allowance 
provision be dropped entirely and the resulting exemption pool be 
respread into the general allowance. However, the Agency believes that 
this would not address the above-discussed concerns. EPA requests 
comment on the special allowance proposal and on the suggestions made 
in the Supplemental ANPRM comments.
    c. Small Volume Allowance: The percent-of-production approach 
outlined above may provide little benefit to small businesses focused 
on a small number of equipment models. To respond to these concerns, 
EPA is proposing that equipment manufacturers be allowed to exceed the 
percent-of-production allowances described above during the same years 
affected by the allowance program for general applications, provided 
they limit the installation of Tier 1 engines (uncertified engines for 
ratings under 37 kW) in each power category to a single equipment model 
with an annual production level (for U.S. sales) of 100 pieces or less. 
Though intended to ensure that the flexibility program does not 
disadvantage small businesses, this provision would be available to all 
equipment manufacturers. A manufacturer's use of this provision would 
not affect the availability of the other elements of the OEM transition 
program, although it would not be additive to the percent-of-production 
allowances: an OEM could base its exemption count on the percent-of-
production allowance or the small

[[Page 50173]]

volume allowance in any power category in any year.
    EPA proposes that the exemption spreading provisions for the 
percent-of-production allowances discussed above, if adopted for these 
allowances, apply to the small volume allowance as well. That is, a 
manufacturer of a piece of equipment with an engine rated over 37 kW 
may use Tier 1 engines in a total of 700 of these units produced over 
the first seven years after the Tier 2 standard takes effect. 
Similarly, a manufacturer of a piece of equipment with an engine rated 
under 37 kW may use uncontrolled engines in a total of 400 of these 
units produced over the first four years after the Tier 1 standard 
takes effect, if the shorter duration allowance alternative is adopted 
for these engines.
    EPA is aware of two concerns that must be addressed with this 
program element. First, a manufacturer may need to curtail sales of a 
product that, though initially selling below 100 units annually, 
experiences unanticipated sales growth marginally beyond this level; 
there would be no time to redesign the product for the new tier of 
standards. The Agency believes that the flexibility provided by the 
exemption spreading measure discussed above would sufficiently address 
this concern. A manufacturer with better than expected sales orders for 
the exempted model would use up the total exemption allowance earlier 
than expected, but, except in the last year that exemptions are 
available when conservative planning may be called for, an annual 
adjustment of the following year's exemptions would cover any 
reasonable underestimate of sales.
    The second concern regards the vagueness of the term ``model.'' 
Some OEMs may wish to take greater advantage of the small volume 
allowance by grouping several small volume products under a single 
model designation, possibly using ``submodel'' designations to 
distinguish products. One method of addressing this would be to adopt a 
regulatory definition of the term ``model'' for the purposes of this 
program, such as requiring that products cannot be considered to be of 
the same model designation unless they have exactly the same model 
number, with no distinguishing lower level designations.
    Another approach would be to simplify the program by not requiring 
that the small volume exemption be limited to a single model. This has 
the advantage of providing more flexibility to the OEMs by allowing any 
number of models to be exempted, provided the combined annual 
exemptions from all of these models does not exceed the allowed maximum 
in any one power category. Some manufacturers have advocated this 
approach. However, it has the disadvantages of increasing the number of 
exemptions likely to be taken (thus possibly foregoing some 
environmental benefit), and of moving away from the intent of the small 
volume allowance, which is to help small OEMs with very limited product 
offerings. EPA believes that these disadvantages are not serious, and 
so is proposing this approach as an alternative to the single model 
requirement. This concept was also put forward for consideration by the 
Small Business Advocacy Review Panel as potentially beneficial in 
addressing small business concerns. EPA requests comment on the small 
volume allowance and on which of the proposed regulatory alternatives 
is preferred.
    d. Continuance of the Existing Inventory Allowance: Paragraph 
(b)(4) of 40 CFR 89.1003 states in part: ``Nonroad vehicles and 
equipment manufacturers may continue to use uncertified nonroad engines 
built prior to the effective date until uncertified engine inventories 
are depleted; however, stockpiling of uncertified nonroad engines will 
be considered a violation of this section.'' EPA proposes to extend 
this provision to the Tier 1-to-Tier 2 and Tier 2-to-Tier 3 transitions 
as well. A machine using such an engine would be considered under the 
tier of emission standards to which the engine is subject, and would 
therefore be treated as though it were produced in the previous year 
for such purposes as calculating percent-of-production and small volume 
allowances. It should also be noted that engines for which a 
manufacturer uses averaging, banking, and trading program credits to 
demonstrate compliance with EPA requirements will be treated in the OEM 
transition program as though they fully meet the applicable emission 
standards.
    e. Access to Averaging, Banking, and Trading Program Credits: 
Though not discussed in the Supplemental ANPRM, commenters suggested 
that OEMs be provided additional flexibility by allowing them to 
purchase credits generated by engine manufacturers in the nonroad 
averaging, banking, and trading program. These credits would then be 
retired in exchange for further allowances to build equipment 
containing noncomplying engines. Although no guarantee could be made 
that credits would be available at a reasonable price, this provision 
would provide one more alternative in a range of options for OEMs to 
consider in planning for the new engines. This concept was also put 
forward for consideration by the Small Business Advocacy Review Panel 
as potentially beneficial in addressing small business concerns.
    The Agency is favorable to concepts such as this that provide 
flexibility while tending to preserve the environmental benefit of the 
program, and so is proposing this additional flexibility. EPA believes 
this concept may actually benefit the environment by providing an 
incentive for engine manufacturers to pull ahead clean technologies in 
order to sell their credits at a profit. However, the Agency requests 
comment on whether there may be, on the other hand, the potential for a 
loss in environmental benefit through the creation of a market for 
credits that would otherwise have gone unused, and on the advisability 
of discounting credits used by OEMs to mitigate such losses. Comment is 
also sought on the advisability of restricting this provision to those 
applying for hardship relief, as discussed below.
    The Agency is also soliciting comment on means of structuring the 
program to minimize its complexity and to preclude double-counting of 
credits. EPA is proposing that the credit amounts needed for each 
additional allowance be simply determined by multiplying the difference 
between the applicable standards times the midpoint of the applicable 
power range. For example, an allowance for a machine using a 200 kW 
(268 hp) Tier 1 engine in the Tier 2 time frame would require NMHC + 
NOX credits totaling:

(1.3 + 9.2 - 6.6) g/kW-hr  x  177.5 kW  x  8,000 hr = 5.538 Mg,

because 1.3, 9.2, and 6.6 g/kW-hr (1.0, 6.9, and 4.9 g/hp-hr) are the 
Tier 1 hydrocarbon, Tier 1 NOX, and Tier 2 NMHC + 
NOX standards, respectively; 177.5 kW (237.9 hp) is the 
midpoint of the 130 to 225 kW range, and 8,000 hours is the useful life 
for this range. For the sake of simplification, EPA would assume that 
Tier 1 hydrocarbon standards equate to NMHC levels, and that the 1.3 g/
kW-hr (1.0 g/hp-hr) hydrocarbon level applies to Tier 1 power 
categories below 130 kW, for which there are no Tier 1 hydrocarbon 
standards. For OEMs seeking to use credits for additional allowances to 
install uncontrolled engines rated under 37 kW during Tier 1, EPA is 
proposing that the credit calculation assume uncontrolled NMHC + 
NOX and PM levels of 16.0 and 1.2 g/kW-hr (11.9 and 0.9 g/
hp-hr), respectively, based on a review of test data generated in the 
California small engine program.

[[Page 50174]]

Finally, the Agency is proposing that OEMs wishing to use ABT program 
credits would submit the same type of annual reports currently required 
of engine manufacturers participating in the ABT program, to allow the 
Agency to adequately track credits. Other credit use requirements and 
restrictions of the ABT program that apply to engine manufacturers 
would apply to equipment manufacturers as well.
    f. Hardship Relief Provision: Commenters requested adoption of a 
hardship appeal process by which an OEM, especially a small business, 
could obtain relief by providing evidence that, despite its best 
efforts, it cannot meet the implementation dates, even with the OEM 
transition program provisions outlined above. Such a situation might 
occur if an engine supplier without a major business interest in the 
OEM were to change or drop an engine model very late in the 
implementation process. This concept was also put forward for 
consideration by the Small Business Advocacy Review Panel as 
potentially beneficial in addressing small business concerns. Based on 
outreach the Agency has done in formulating this proposal, especially 
to the small OEM community, EPA agrees that the concern of small 
businesses about the uncertainty of timely supply may be valid, and 
seeks to mitigate the possibility of business failures by providing 
fair, objective criteria for hardship appeal that minimize the 
potential loss in environmental benefit, minimize the Agency's 
involvement in a business' financial affairs, and avoid straining 
Agency resources.
    The Agency is proposing a hardship relief provision under which 
appeals must be made in writing, be submitted before the earliest date 
of noncompliance, be limited to firms that fit the small business 
criteria established by the Small Business Administration 
,32 include evidence that failure to comply was not the 
fault of the OEM (such as a supply contract broken by the engine 
supplier), and include evidence that the inability to sell the subject 
equipment will have a major impact on the company's solvency. The 
Agency would work with the applicant to ensure that all other remedies 
available under the flexibility provisions are exhausted before 
granting additional relief, and would limit the period of relief to no 
more than one year. Furthermore, the Agency proposes that applications 
for hardship relief only be accepted during the first year after the 
effective date of an applicable new emission standard. Comment is 
solicited on all aspects of this proposal and on whether the Agency 
should require those who receive relief to recover some of the lost 
environmental benefit, such as by purchasing Blue Sky Series engines 
described elsewhere in this proposal.
---------------------------------------------------------------------------

    \32\ 750 employees for manufacturers of construction equipment 
and industrial trucks, 500 employees for manufacturers of other 
nonroad equipment.
---------------------------------------------------------------------------

3. Availability of Engines
    EPA is proposing that engine manufacturers be allowed to continue 
to build and sell the engines needed to meet the market demand created 
by the OEM transition program described above. Commenters on the 
Supplemental ANPRM expressed concern that the program will have minimal 
value because engine suppliers may decide not to continue making the 
older generation engines. Based on observation of current practice in 
which older engine configurations are routinely built to support 
replacement engine needs, EPA believes that engines will be made 
available to make the transition program workable. Further comment is 
solicited on this issue. Concerns that integrated manufacturers (who 
build engines for installation in their own OEM products and for sale 
to competitors) may purposely manipulate the production or prices of 
these engines to disadvantage their competitors appear to the Agency to 
be without merit, as this opportunity exists apart from EPA programs. 
However, to provide additional assurances, the engine manufacturers 
that signed the Nonroad Statement of Principles have agreed that, if 
they decide to continue the production of such engines, they will make 
them available for sale at reasonable prices to all interested buyers. 
EPA does not believe that regulation codifying this commitment is 
necessary or appropriate.
    EPA is proposing that equipment manufacturers procuring engines for 
use under the OEM transition program provide written assurance to the 
supplying engine manufacturer that such engines are being procured for 
this purpose. EPA requests comment on the need for a requirement that 
engine manufacturers maintain or annually provide records on the 
engines manufactured in support of the OEM transition program, in order 
to help EPA prevent abuse of the program.
4. Enforcement and Record Keeping Requirements
    The Agency desires to minimize the administrative burden to all 
parties involved with the OEM transition program. OEMs choosing not to 
take advantage of the allowances would have no requirements beyond 
those already in place from the Tier 1 rule. For OEMs choosing to take 
advantage of the allowances, EPA believes that the following 
requirements will be sufficient to allow it to enforce the program. (1) 
OEMs must keep records of the production of all pieces of equipment 
with engines covered by this rule. These records must be kept until 
December 31 of the year after the last year in which any of the 
allowances are used by the company. (2) Such records must include 
serial and model numbers and dates of production of equipment and 
installed engines, rated power of each engine, and the calculations 
used to determine the percent of production allowances taken in each 
power category. (3) OEMs must make these records available to the 
Agency upon request.
    The Agency intends to conduct only limited audits of these records, 
and expects that scrutiny by the OEMs of their competitors' products 
will help identify potential candidates for audits. However, to further 
aid this process and the early identification of affected OEMs who may 
not be aware of the program requirements, EPA is considering also 
requiring that each OEM submit a letter to the Agency after each year 
in which allowances are utilized, providing some summary information, 
such as the number of machines sold with and without engines certified 
to the new standards. Comment is requested on the appropriateness of 
such a requirement.
    EPA is aware of two conflicting concerns about the OEM transition 
program expressed by equipment manufacturers. On the one hand, 
manufacturers seek the maximum control and flexibility possible in 
implementing new standards. On the other hand, some manufacturers have 
felt that the flexibility provisions contained in the Supplemental 
ANPRM are already too complicated and that the suggested enhancements 
make them more so. Unfortunately, the simpler approaches suggested to 
date have involved a substantial loss in environmental benefits, 
amounting to effectively delaying the standards. Therefore the Agency 
has chosen to propose the collection of voluntary provisions discussed 
above, recognizing that effort will be needed by both the Agency and 
the industry to help manufacturers make best use of their options.
5. Alternative Concepts
    Commenters on the Supplemental ANPRM suggested an alternative 
approach for helping OEMs implement

[[Page 50175]]

the new standards, by which a period of one to three years would be 
provided between availability of complying engines and the required 
date for use of these engines in new equipment. EPA is not proposing 
this approach because it would require a regulatory enforcement 
mechanism to ensure that final production-ready prototype engines are 
available long before the start of engine production on the required 
implementation date for new standards. Without such a mechanism, engine 
manufacturers could continue making design changes, delaying the 
implementation of new standards indefinitely. EPA is unaware of any 
such mechanism that would not also cause major disruptions in the 
industry.
    Others recommended that the Agency set standards on a cost-
effectiveness basis, application by application. Regulations would only 
apply to engines in those applications with an overall environmental 
impact high enough, and a cost of compliance low enough, to satisfy 
some specified cost-effectiveness threshold. The Agency is not 
proposing this approach for several reasons. First, this approach, 
which makes cost-effectiveness the primary factor in determining 
applicable standards, appears to be at odds with the standard setting 
criteria of section 213 of the Clean Air Act, which is primarily 
technology-based, with added consideration of cost, noise, energy, and 
safety factors. Second, accurate determinations of application-specific 
cost-effectiveness would be extremely difficult to make. Applications 
would constantly move above and below the threshold as new information 
and new design innovations are brought forth, creating uncertainty in 
the industry. Third, many engine models are used in multiple 
applications, possibly leading to multiple versions and higher costs. 
Fourth, evaluation outcomes would depend arbitrarily on how 
applications are defined. Many niche markets may have environmental 
impacts that are low individually, but quite large in the aggregate. 
Fifth, setting the threshold for cost-effectiveness would have inherent 
problems of arbitrariness, and would likely be met with vastly 
differing views in the public regarding the appropriateness of any 
threshold. Finally, the exempted equipment would still have some air 
quality impact, resulting in either a lower benefit of the program or 
more stringent standards for the regulated engines.

F. Flexibility for Post-Manufacture Marinizers

    EPA believes that post-manufacture marinizers affected by the 
proposed standards may need some additional flexibility, beyond that 
available in the ABT program, to meet the challenges of new standards. 
By EPA's definition, a post-manufacture marinizer is someone who 
produces marine diesel engines by substantially modifying a complete or 
partially complete diesel engine, and who is not controlled by the 
manufacturer of the base engines or by an entity that controls both of 
them. For the purpose of this definition, ``substantially modify'' 
means changing an engine in a way that could change engine emission 
characteristics.
    In some ways the challenge of any new standards for these 
marinizers would mirror that of nonroad equipment manufacturers, in 
that changes made by the original engine manufacturers might require 
changes in the parts and process involved in marinization. Because 
marinizers would experience similar impacts from the proposed standards 
as equipment manufacturers, EPA is requesting comment on extending some 
or all of the equipment manufacturer flexibility provisions described 
in Section III.E. to post-manufacture marinizers affected by this 
proposal. EPA sees the hardship relief provision for small businesses 
as perhaps especially appropriate for the post-manufacture marinizers, 
many of which are small businesses, and so is proposing their inclusion 
under this provision.
    Unlike equipment manufacturers, however, marinizers generally 
complete the final stages of engine production and thus would typically 
be responsible for obtaining an EPA Certificate of Conformity with 
standards, and would bear liability for the emissions of these engines 
in use. One marinizer stated in EPA's outreach effort to small 
businesses (see Section VIII.B.) that the impact on small marinizers 
could be reduced if the proposed regulations allowed a post-manufacture 
marinizer to rely on the original engine maker's certificate of 
conformity, provided that the marinizer also demonstrates that it has 
not altered the engine's performance or combustion parameters. EPA is 
interested in pursuing certification streamlining options for 
marinizers, but has concerns that the original engine manufacturers may 
challenge their presumed liability in EPA enforcement actions directed 
at these engines. Also, a simple demonstration of equivalent emissions 
performance on pre- and post-marinized engines would not be sufficient 
to address the Agency's primary concern, which is the possibility of 
degradation of in-use emissions performance over time. EPA solicits 
suggestions on how the post-manufacture marinizer certification process 
might be streamlined while providing assurance of ongoing 
responsibility and durable emissions control design.

G. Control of Crankcase Emissions

    Crankcase emissions are those exhaust gases that, upon leaving the 
combustion chamber, do not pass through the exhaust valve. Instead, the 
gases discharge (blowby) into the crankcase via the clearance between 
the piston and the cylinder wall. On certain engines (those engines 
with open crankcases), these gases may eventually escape from the 
crankcase to the atmosphere and are therefore named crankcase 
emissions. Some manufacturers produce engines that route crankcase 
vapors to the air intake system of the equipment; such a design is 
called a closed crankcase. This method, also called positive crankcase 
ventilation, recirculates blowby gases through a valve back to the 
intake manifold to be burned in the combustion chamber.33
---------------------------------------------------------------------------

    \33\ U.S. Environmental Protection Agency, Office of Mobile 
Sources, NEVES, Appendix I, Chapter 4, November 1991 (available in 
Air Docket A-96-40).
---------------------------------------------------------------------------

    Since 1985, closed crankcases have been required in naturally 
aspirated (nonturbocharged) highway diesel engines (45 FR 4136, January 
21, 1980). Currently, turbocharged highway diesel engines are not 
required to have crankcase emission controls due to special 
difficulties in designing for closed crankcase. The problem with 
recirculating blowby gases in turbocharged engines is that the 
durability and effectiveness of turbocharger and aftercooler components 
can be affected by recycling gases containing particulate matter and 
corrosive gases.
    There is limited data on crankcase emissions from nonroad diesel 
engines. In fact, EPA is not aware of any studies that explicitly 
investigate crankcase emissions from nonroad diesel engines. There are, 
however, studies relating to highway crankcase emissions.34 
Crankcase emission data from a 1977 study, in which three diesel 
engines (two naturally aspirated engines and one turbocharged engine) 
were tested. HC crankcase emissions ranged from 0.007 to 0.017 g/kW-hr 
(0.005 to 0.013 g/hp-hr), which represents 0.2 to 4.1 percent of 
corresponding exhaust emissions. PM crankcase emissions ranged from 0.9 
to 2.9 percent of corresponding exhaust emissions. NOX 
crankcase emissions represented only 0.01 to 0.1 percent of 
corresponding

[[Page 50176]]

exhaust emissions. A more recent study performed by Southwest Research 
Institute in 1993 provided similar crankcase emissions from one 
turbocharged heavy-duty diesel engine, with HC, PM, and NOX 
all at 0.01 g/kW-hr (0.01 g/hp-hr). None of the reported highway 
engines had more than 500,000 miles of use, an important consideration 
because of the expected increase in blowby gases as engines experience 
wear.35
---------------------------------------------------------------------------

    \34\ ibid.
    \35\ ``Draft Regulatory Impact Analysis: Control of Emissions of 
Air Pollution from Highway Heavy-Duty Engines,'' U.S. EPA, June 6, 
1996 (Docket A-95-27).
---------------------------------------------------------------------------

    EPA proposes to extend the closed crankcase requirement to nonroad 
engines, including the exemption for turbocharged diesel engines. Many 
naturally aspirated nonroad engines are already equipped with this 
technology; for those nonroad engine models still manufactured with 
open crankcases, EPA expects that closed-crankcase technology will be 
readily transferable. EPA has included the cost of closing crankcases 
in the analysis of the costs of complying with the proposed standards.
    The proposed closed crankcase requirement applies to engines rated 
over 37 kW concurrent with the Tier 2 standards. Manufacturers of 
nonroad diesel engines rated under 37 kW are likely to have serious 
difficulties fully complying with closed crankcase provisions on the 
schedule proposed for Tier 1 emission standards, since this requirement 
would first apply to these manufacturers starting in 1999. Thus, for 
nonroad diesel engines rated under 37 kW, EPA proposes to delay the 
requirement for closed crankcases until 2001, providing more lead time 
for manufacturers of these engines. This delay will not have a major 
environmental impact because it is short, directed at a small segment 
of the engine market, and confined to a minor emission source relative 
to exhaust emissions. EPA requests comment on the proposal to control 
crankcase emissions and on the appropriateness of delaying the 
requirement for closed crankcases for these small engines.

H. Control of Smoke

1. Proposed Numerical Standards and Procedures
    In 1994, EPA finalized smoke standards for nonroad diesel engines 
rated over 37 kW. The specified measurement method and calculations are 
from 40 CFR 86, subpart I, which was developed for highway engines. EPA 
concluded that the highway smoke test procedure would adequately test 
non-road engines and thus control smoke. The standards for nonroad 
engines are for engine smoke not to exceed averaged values of 20 
percent on acceleration mode or 15 percent on lug mode and not to 
exceed peak opacity levels of 50 percent on either the acceleration or 
lug mode. EPA is proposing no changes to the smoke emission standards 
and procedures currently in place.
    EPA proposes to extend the smoke standards to multiple-cylinder 
diesel engines rated under 37 kW, bringing these engines under the same 
regulatory framework as the larger engines. While these new standards 
may lead to lower smoke levels from some engines, the principal intent 
of setting standards is to prevent increased levels of smoke as engines 
are redesigned to comply with Tier 2 and Tier 3 standards for gaseous 
and particulate emissions. The same numerical standards would apply to 
the small engines. With minor exceptions, the same procedure, 
equipment, and calculation methods would also be used for these 
engines.
    Extending smoke standards to the smaller engines raises some 
important issues. First, two-cylinder engines operating on the 
specified test procedure may produce puffs of smoke that may make the 
smoke measurement erratic. EPA proposes to permit the option of testing 
these engines with a preconditioned muffler of the type used in the 
field. Such an engine configuration is the same as that found in use, 
and thus represents meaningful control of in-use smoke; however, the 
smoke measurement response may be flattened out somewhat, resulting in 
potentially reduced levels of measured smoke. Engines with more than 
two cylinders will continue to be tested without a muffler, which is a 
``worst case'' condition.
    Second, specifying the correct exhaust pipe diameter requires 
extrapolation of specifications found in 40 CFR 86, subpart I. The 
current procedure calls for a 2 inch (5 cm) inside diameter exhaust 
pipe for testing engines rated under 101 horsepower maximum (75 kW). 
Yet, for constant visibility as a function of measured opacity (which 
is, in turn, a function of pipe diameter), this test pipe diameter 
should be smaller for engines with lower rated power. The same is true 
for the larger engines, where the procedure specifies the use of a 5 
inch (13 cm) inside diameter exhaust pipe for the testing engines with 
a maximum rated power of 301 hp (225 kW) or greater. Consequently, the 
Agency is proposing that engines rated between 50 and 100 horsepower 
(37 and 75 kW) be tested with a 2 inch (5 cm) inside diameter exhaust 
pipe, while engines rated under 50 horsepower (37 kW) should be tested 
with an exhaust pipe of 1.5 inches (3.8 cm). Engines rated between 100 
and 200 horsepower (75 and 150 kW) should be tested with the 
established 3 inch (7.6 cm) pipe diameter. Similarly, engines rated 
between 200 and 300 horsepower (150 and 220 kW) should be tested with 
the established 4 inch (10.2 cm) pipe diameter. For engines rated 
between 300 and 500 hp (225 and 373 kW), testing should be performed 
with the 5 inch (13 cm) inside diameter exhaust pipe, while engines 
rated over 500 horsepower (373 kW) should be tested with an exhaust 
pipe of 6 inches (15.2 cm). Perspectives and data on all issues related 
to testing these engines for smoke are solicited.
    In applying the smoke standards and procedures to engines rated 
under 37 kW, EPA proposes to exempt one-cylinder engines. EPA believes 
that operation and testing of these engines is unique in ways that 
would need to be addressed before applying smoke standards. For 
example, it is not known if the smoke puffs emitted after each 
combustion stroke can be accommodated by the test procedure and if so, 
what the procedure features should be. The same is true of the 
dynamometer control specification elements of the procedure. Also, 
since there is no certainty as to the appropriate test procedure, there 
is no basis for selecting numerical standards. EPA is therefore 
proposing to postpone the regulation of smoke from these one-cylinder 
engines until a later rulemaking. The Agency believes there will be 
minimal air quality impact in the interim, since the large majority of 
one-cylinder diesel engines are used in generator sets and other 
steady-state applications; these engines therefore rarely experience 
acceleration modes, which are the the principal focus of smoke 
standards. EPA requests comment on the appropriate treatment of smoke 
requirements for one-cylinder engines.
    In addition, EPA proposes to omit the smoke requirements for 
propulsion marine diesel engines rated under 37 kW. Manufacturers of 
these engines have stated that this is reasonable for at least the 
following two reasons. First, they state that smoke is not a problem 
with propulsion marine diesel engines. Most marine engine manufacturers 
already supply reduced-smoke engines because consumers demand low smoke 
levels for their own personal comfort. Second, they state that there is 
no reliable smoke test for propulsion marine engines, as the smoke test 
designed for land-based nonroad engines does not exercise the engine

[[Page 50177]]

over the typical marine engine operating cycle, which is governed by 
the propeller. EPA solicits comments on this issue.
2. Consideration of ISO Procedure
    Since promulgation of the Tier 1 rule, an International Standards 
Organization committee (ISO TC70/SC8/WG1) has been developing a smoke 
test procedure specifically for nonroad engines. The EPA and regulated 
industry recognize the value of harmonized test procedures and 
standards limits. The Statement of Principles therefore states:

    The Signatories support the completion and worldwide adoption of 
the new smoke test being developed by the International Standards 
Organization (ISO 8178-9). EPA intends to propose to replace its 
current smoke test with the ISO test procedure for the sake of 
harmonization and improved control of smoke, provided that it 
provides for a level of smoke control at least as adequate as the 
current test.

However, this ISO procedure has not been finalized and thus it is not 
being proposed in this rulemaking. In anticipation of EPA's eventual 
consideration of the ISO 8178-9 test procedure, the Agency welcomes 
comments (including test data) addressing issues related to this 
procedure.
    The draft ISO 8178-9 test procedure has several important features 
that distinguish it from the smoke test procedure developed for highway 
engines. First, the duty cycle over which the engine is to be operated 
is very similar to the procedure for highway engines, except that it 
deletes the 200 rpm initial speed increase and first-shift feature of 
the engine duty cycle. These types of operation are seldom, if ever, 
found in nonroad equipment.
    A second important difference is the use of a Bessel filter 
algorithm to compute the peak, acceleration, and lug data from the 
instantaneous smoke values given by the smoke meter. The Bessel 
algorithm specified in the ISO procedure emulates a low-pass second-
order filter and uses iterative calculations to determine coefficients 
that are a function of the smoke meter's physical and electrical 
response times and the sampling rate. This Bessel filter method of 
calculating results contrasts with the method specified in 40 CFR 86 
subpart I, which calls for simple mathematical averages of one-half 
second data. The ISO Bessel filter calculation procedure selects the 
highest calculated value for each reported mode (acceleration, lug and 
peak), using Bessel averaging times that are less than or equal to 
those of the highway-based test procedure. The ISO procedure will 
likely result in values that are greater than those generated from the 
same data by the averaging procedure specified in 40 CFR 86 subpart I. 
Information, addressing this question, including test data if possible, 
is solicited.
    Another issue is the form used for expressing the level of the 
standards. The current form is units of opacity--20 percent 
acceleration, 15 percent lug, and 50 percent peak. Opacity measurements 
are, however, a function of the effective optical path length, which is 
determined by the exit diameter of the exhaust pipe upon which the 
smoke meter is mounted. The diameter of the exhaust pipe specified in 
the current procedure is a function of engine power, as described 
above. However, this creates a step-wise relationship in the level of 
stringency as a function of engine power, which, at a minimum, creates 
different levels of stringency for engines close to the horsepower cut 
points. One solution is to express the measurements in units of light 
absorption coefficient, k (inverse meters), which is the form that the 
ISO committee has stated is the most technically correct. The numerical 
level of the standards would be expressed in terms such as the standard 
level, k, being a function (to some degree) of a parameter such as 
displacement, engine power, or other basic engine descriptor, and some 
constant. The EPA solicits data and comments on these issues.
3. In-Use Smoke Testing
    Some state governments have expressed a desire for a smoke 
regulatory program that would enable them to test in-use nonroad 
engines in a manner that would permit action against gross emitters of 
smoke. The main elements of such a program would be a certification 
smoke requirement for new engines, EPA guidance for state in-use smoke 
control programs (including an in-use smoke test procedure and 
accompanying limit values), and a means by which the data from the two 
programs can be related. The current smoke test procedure from part 86, 
subpart I, does not provide data comparable to the most practical in-
use smoke test procedure (a snap acceleration with measured opacity). 
Based on the current draft ISO 8178-9 certification smoke test 
procedure, EPA believes this test will provide the desired linkage. The 
Agency requests comment on the advisability of establishing such a 
smoke control program and on any interim steps that should be pursued 
while the ISO test is under development. Any such program would need to 
meet the requirements of section 209 of the Act regarding preemption of 
certain state programs.

I. Voluntary Low-Emitting Engine Program

a. Background
    The Nonroad Statement of Principles includes a commitment to work 
towards a goal of achieving emission levels in the future that are even 
lower than those proposed in this notice. Specifically, the signatories 
agreed to strive to develop engines capable of controlling 
NOX emissions to 2.0 g/kW-hr (1.5 g/hp-hr) and PM emissions 
to 0.07 g/kW-hr (0.05 g/hp-hr), while maintaining performance, 
reliability, durability, safety, efficiency, and compatibility with 
nonroad equipment.
    Some technologies that will be pursued in the context of the 
research agreement have already undergone significant development. 
Officials representing certain cities, states, or regions in the U.S. 
have expressed interest in developing incentive programs to encourage 
the use of engines that go beyond federal emission standards. EPA also 
would like to encourage manufacturers to initiate demonstration 
projects to prove out these technologies in areas where there is a 
particular need for superior emission controls. EPA is therefore 
proposing a set of voluntary standards that may be used to earn a 
designation as a low-emitting engine. The program, if successful, will 
lead to the introduction and more widespread use of these low-emission 
technologies.
    Ongoing research has led to much improved prospects for a variety 
of low-emitting diesel engine technologies. Some particulate traps are 
now designed for regeneration without an active control system, 
sometimes using fuel-based catalyst materials to reduce regeneration 
temperature requirements. Selective catalytic reduction, long used very 
effectively in stationary source applications, is now in several 
demonstration heavy-duty vehicles. Plasma and thermoelectric techniques 
are also under consideration for large particulate and NOX 
reductions. EPA is very interested in seeing a demonstration of the 
emission-control potential for these engines in nonroad applications, 
especially related to the capability of maintaining low emission levels 
over extended field operation.
    Alternative fuels also have the potential to reduce emissions from 
internal combustion engines. Alternative-fuel engines have made 
significant inroads into some segments of the nonroad market. Forklifts 
running on propane and generators fueled by

[[Page 50178]]

natural gas are the most visible examples of nonroad applications with 
established roles for alternative fuels. Table 3 includes data derived 
from the PSR PartsLink database for these and other applications in 
which equipment with alternative-fueled engines was sold in 1995. This 
information is approximate and does not reflect the use of battery-
powered equipment or any engine retrofits for fuel conversion.

Table 3.--Approximate Sales of Alternative Fuel Applications Marketed in
                                  1995                                  
------------------------------------------------------------------------
                                              1995 Sales                
                             -------------------------------------------
         Application           Natural                                  
                                 gas        LPG       Diesel    Gasoline
------------------------------------------------------------------------
Forklift....................          0     43,000     12,000     17,000
Generator...................      4,500      1,500     53,000     13,000
Gas Compressor..............      2,400          0          0          0
Oil Field Equip.............        370          0      1,300         15
Terminal Tractor............          0        230      3,700        750
Scrubber/Sweeper............         10        170      6,200      3,400
Irrigation Set..............        150          0      4,700      1,600
Refrigeration, A/C..........         90          0     48,000          0
Pump........................         40          0     10,000      6,600
------------------------------------------------------------------------

    In addition to these existing uses of alternative fuels, ground 
service equipment at airports provides a case study of the potential to 
increase reliance on alternative fuels in the nonroad arena. A concern 
for reducing emissions to improve local air quality and limit worker 
exposures has led some airlines to see alternative fuels as a cost-
effective alternative for their existing diesel-fueled equipment. 
Greater use of alternative fuels at airports has been limited by the 
availability of engines. A challenge for the engine manufacturers is to 
develop a nonroad alternative fuel engine without needing to charge a 
large premium (to recoup R&D) that makes the engines unaffordable. 
EPA's intent in pursuing a program of voluntary standards for low-
emitting engines is to help justify development of these nonroad 
engines.
    EPA believes that nonroad equipment is in some cases much better 
suited to alternative fuels than are highway vehicles. Nonroad 
equipment, when operated within a well-defined local area, often has 
the advantage of central fueling. Also, several high-power engines 
running consistently over long periods can consume great amounts of 
fuel and generate correspondingly high emissions. Alternative fuels 
have the potential to lower operating costs (for example, from less 
expensive fuel and longer oil-change intervals) in addition to reducing 
emissions.
b. Proposal for Blue Sky Series Engines
    EPA proposes to adopt voluntary emission standards that 
manufacturers could use to earn a designation of ``Blue Sky Series'' 
engines. The range of possible incentives to produce these engines are 
described below.
    Central to the purpose of the voluntary standards is the need to 
demonstrate superior control of particulate emissions. Because of the 
sensitivity of particulate emissions to test cycles, as described in 
Section III.B., testing on a transient cycle is an important element of 
the proposed program for Blue Sky Series engines. EPA has begun work 
toward developing transient test cycles for nonroad equipment, but 
there is not yet any established or proven nonroad transient cycle. The 
highway test cycle, while not developed for nonroad engine operation, 
would result in a significant degree of control for nonroad equipment. 
EPA therefore proposes to specify the highway transient test cycle to 
evaluate emission levels relative to the voluntary standards. A 
commenter on the Supplemental ANPRM recommended that engine 
manufacturers have the option of selecting alternative test cycles 
applicable to specific engines or applications. EPA requests further 
comment on alternative test cycles. If EPA adopts a transient test for 
certifying nonroad engines in the future, the Agency will accordingly 
re-evaluate the test cycle and standards for Blue Sky Series engines.
    Manufacturers could certify to one of three levels to demonstrate 
emission control that goes beyond the Tier 2 certification 
requirements, as described in Table 4. The percentage reductions would 
apply to all power categories. EPA requests comment on whether 
simplifying the program to include only one or two emission levels to 
qualify for the Blue Sky Series program would make it more effective. 
Engines would need to meet all the requirements established to 
demonstrate durability of emission controls, including allowable 
maintenance, warranty, useful life, rebuild, and deterioration factor 
provisions. Manufacturers would demonstrate compliance with the CO 
standard by comparing the emission levels generated on the highway test 
cycle with the numerical value of the CO standard for the applicable 
tier of nonroad engines for that model year. Manufacturers would also 
need to demonstrate compliance with applicable smoke standards.

    Table 4.--Proposed Standards and Designations for Blue Sky Series   
                                 Engines                                
------------------------------------------------------------------------
                                                      Percent reduction 
                                                     relative to Tier 2 
                                                          standards     
                    Designation                    ---------------------
                                                      NMHC +            
                                                       NOX         PM   
------------------------------------------------------------------------
Blue Sky Series--Class A*.........................         35         35
Blue Sky Series--Class AA.........................         50         50
Blue Sky Series--Class AAA........................         65         65
------------------------------------------------------------------------
* The Class A option would no longer be available beginning any year    
  that the Tier 2 standards apply to a particular power range.          

    EPA recognizes that among the candidate engines for the Blue Sky 
Series program are those low-emitting engines that have already been 
designed and certified for highway use. EPA therefore requests comment 
on whether it would be more appropriate to set the optional emission 
standards based on established highway standards, defining, for 
example, an engine meeting the 2004 highway emission standards as a 
Blue Sky Series engine.
    Repeating the certification process to develop and submit test data 
to make a highway engine available for nonroad

[[Page 50179]]

use adds a significant hurdle to engines expected to sell in low 
volumes for nonroad applications. EPA therefore proposes for the Blue 
Sky Series engine program that manufacturers with highway-certified 
engines may waive the testing requirements for obtaining nonroad 
certification. This would include the need to comply with the 
provisions related to the durability of emission controls. EPA, 
however, would need to ensure that engine designs are not tailored to 
the transient cycle with much higher emissions on a steady-state cycle. 
To accommodate this, EPA would need to retain the ability to conduct 
in-use testing to verify that engines are operating in steady-state 
modes with substantially the same level of emission control. EPA 
therefore proposes that NOX and PM emissions be no more than 
20 percent higher on the appropriate nonroad steady-state test cycle 
compared with the highway test cycle. This is intended to provide 
relief for development testing needed to protect against in-use 
liability, while preventing any active strategies designed specifically 
for the transient test cycle at the expense of controlling emissions 
during steady-state operation. For evaluation of the performance of one 
of these engines in steady-state operation at any point in an engine's 
useful life, the Agency would conduct paired data generated on both the 
appropriate steady-state test cycle and the highway transient test 
cycle.
    Engine manufacturers could generate credits under the averaging, 
banking, and trading program with Blue Sky Engines, provided that 
emission testing is also conducted on the appropriate steady-state test 
to facilitate calculation and exchange of credits. For this reason and 
for avoiding the uncertainty associated with surrogate test cycles, EPA 
would encourage manufacturers to conduct and submit steady-state test 
data with their application for certification even without a 
requirement to do so.
    The Blue Sky Series program would begin immediately upon 
promulgation and would continue through the 2004 model year. EPA would 
evaluate the program to determine if it should be continued for 2005 
and later engines, and if so, whether any changes are needed. This 
evaluation will be considered as part of the 2001 Feasibility Review. 
The experience gained with these engines and the Tier 3 resolution of 
certification test cycles and PM standards will factor into this 
evaluation.
c. Incentives for Producing Blue Sky Series Engines
    Creating a program of voluntary standards for low-emitting engines, 
including testing and durability provisions to help ensure their in-use 
performance, will be a major step forward in advancing innovative 
emission control technologies, because EPA certification will provide 
protection against false claims of environmentally beneficial products. 
For the program to be most effective, however, incentives for the 
production of these engines must be created as well.
    The Agency sees substantial potential for users and state and local 
governments to establish these incentive programs. For example, the 
increasing public concern about the effects of diesel engine emissions 
on health raises the possibility that some construction companies will 
purchase Blue Sky Series engines to protect its workers or the public 
from localized emissions, especially if benefits can also be gained in 
employee or public relations, such as with highly visible projects in 
polluted city centers. Similarly, a mining company could select these 
low-emitting engines for underground applications to minimize miners' 
exposure to exhaust pollutants. A state or local government may be able 
to add incentives for companies committing to rely on Blue Sky Series 
engines in contract bidding on publicly-funded construction projects in 
nonattainment areas. Some farmers may be willing to pay more for 
equipment with the cleaner engines to lower their field exposure to 
engine exhaust pollutants. In some of these applications, alternative 
fuels may be readily available, possibly even providing a cost savings 
compared to diesel fuel.
    The Agency solicits ideas that could encourage the creation of 
these incentive programs by users and state and local governments. EPA 
also solicits comment on additional measures that that could be taken 
at a federal level to encourage these engines as well. One measure 
already suggested is adoption of a labeling program, by which EPA would 
regulate the form and display of prominent labels on equipment with 
Blue Sky Series engines. The Agency is not convinced at this point that 
such labels would provide sufficient incentive for users to purchase 
these engines to justify labeling requirements, but welcomes comment on 
this suggestion.
    The Agency is concerned that incentive programs not lead to a net 
detriment to the environment through the double counting of benefits. 
For example, a manufacturer of a Blue Sky Series engine that claims 
credit under the averaging, banking, and trading program should not 
also be allowed to generate State Implementation Plan credit for 
emission reductions, such as under a state highway construction project 
program that encourages Blue Sky Series engines. The Agency intends to 
ensure that steps are taken to avoid such double counting of benefits.

IV. Technical Amendments

    This proposed rule contains technical amendments to the procedures 
previously adopted for nonroad diesel engines (40 CFR part 89). These 
amendments result from the experience gained in conducting compliance 
programs for the recently implemented Tier 1 standards. Also, EPA's 
discussions with the industry on similar amendments related to testing 
highway engines have been translated into changes to nonroad test 
requirements where appropriate. This section describes proposed changes 
to the definition of rated speed and related terms and a variety of 
other modifications. A complete description of the technical amendments 
is detailed in a memorandum to the docket.36
---------------------------------------------------------------------------

    \36\ ``Justification for Amendments to 40 CFR Part 89,'' EPA 
memorandum from Greg Orehowsky to Docket A-96-40, August 21, 1997.
---------------------------------------------------------------------------

A. Rated Speed Definition

    EPA is proposing changes to the definitions of rated speed and 
intermediate speed. The current language allows the manufacturer to 
specify both of these speeds. Since these speeds are used to generate 
the test cycle, their definitions should permit only one rated and one 
intermediate speed for each engine. The proposed language links these 
speeds to speeds on the power and torque curves.
    EPA is concerned that the current language allows a manufacturer to 
specify rated and intermediate speeds to any speeds. A manufacturer may 
specify these speeds to develop a less stringent test cycle. This test 
cycle would allow an otherwise failing engine to meet emission 
standards. Similarly, a manufacturer could take advantage of the 
current definitions by specifying speeds that maximize credits 
generated or minimize credits used in the Averaging, Banking, and 
Trading program.
    Rated speed is proposed to be defined as the full load governed 
speed. The term full load is used to avoid confusion between the terms 
governed speed and high idle speed. High idle speed is the no-load 
governed speed. The maximum

[[Page 50180]]

full load speed is the highest speed with an advertised power greater 
than zero. EPA is linking full load governed speed to advertisements at 
this time since no adequate language has been developed that 
mathematically defines full load governed speed as a point on the 
torque or power curve. Power curves in manufacturer's advertisements 
typically end at the governed speed. EPA believes that manufacturers 
will continue to advertise the full range of power of its engine. 
Therefore, manufacturers will not set rated speed at less than full 
load governed speed. It is unlikely that manufacturers will advertise 
powers beyond the full load governed speed since a manufacturer cannot 
guarantee their customers power beyond this point.
    The change in the definition of rated speed should not have any 
effect on manufacturers. EPA does not believe that any manufacturer 
will need to recertify their engines because of this new definition. By 
linking the definition to advertisements, EPA will not require 
manufacturers to perform an engine map for compliance testing. The 
advertised value will be the test value.
    EPA plans to evaluate the appropriateness of the rated speed 
definition in a future test program. EPA would prefer to have a 
technical definition of full load governed speed, possibly in terms of 
rate of change of power. Given the large power range of engines covered 
by these regulations, an adequate definition using a singular rate 
could not be determined at this time. EPA will continue to evaluate 
this possibility.
    Since the steady state test cycles test engines at a maximum of 
three engine speeds, it is important to test at speeds representative 
of in-use operation to control emissions during in-use operation. As 
the shapes of power and torque curves vary with future engine design, 
the emissions from engines will vary. Testing at the full load governor 
speed regulates emissions at this speed but may not effectively limit 
emissions from the engine. As part of the planned evaluation of the 
steady-state test procedure, EPA intends to evaluate whether another 
speed, such as the speed at maximum power, is more effective at 
controlling emissions.
    EPA is proposing to amend the intermediate speed definition to be 
consistent with the definition of intermediate speed for the smoke test 
procedure. This definition will eliminate the possibility of a 
manufacturer specifying an intermediate speed to lower emissions from 
the engine. The proposed definition provides for testing at a median 
engine speed while still linking the definition to the torque curve of 
the engine and being a speed representative of in-use operation.

B. Other Technical Amendments

    Additional amendments make a variety of clarifications and correct 
typographical errors and omissions from the original rule. The most 
significant of these are described in the following paragraphs.
    The amendments change the criteria for test engine selection. The 
current language bases test engine selection on the maximum fuel per 
stroke at maximum power. However, EPA had intended in the original rule 
to make the test engine selection based primarily on the highest fuel 
per stroke at peak torque and secondarily on the highest fuel per 
stroke at rated speed.
    The calibration requirements for the gaseous emission measurement 
analyzers are modified in various ways. The requirements for 
measurement accuracy below fifteen percent of full scale are revised to 
include a specific number of gas concentrations at the low end of the 
calibration curve. Also, calibration requirements are simplified to 
allow laboratories to calibrate only one analyzer range and still 
ensure accurate measurements. Additional changes to calibration 
requirements for other equipment are described in EPA's memorandum to 
the docket.
    Other modifications relate to the test sequence and calculation of 
emission results. A ``mode'' is defined and the procedure for dealing 
with void modes is included. The equations used to calculate emissions 
during raw sampling are corrected. The amendments also correct errors 
in the currently listed equations and include new equations that were 
mistakenly omitted.

V. Technological Feasibility

    The emission standards proposed above would apply to a broad range 
of diesel engines used in a wide variety of nonroad applications. 
Section 213(a)(3) of the Clean Air Act calls for EPA to establish 
standards that provide for the ``greatest degree of emission reduction 
achievable through the application of technology which the 
Administrator determines will be available for the engines or vehicles 
to which such standards apply, giving appropriate consideration to the 
cost of applying such technology within the period of time available to 
manufacturers and to noise, energy, and safety factors associated with 
the application of such technology.'' This section describes EPA's 
understanding of the range of technologies that will be available for 
manufacturers to comply with the proposed standards. The costs 
associated with these technologies are considered in Section VI.B. EPA 
has concluded, as described in the Draft RIA, that the proposed 
standards will have no significant negative effect on noise, energy, or 
safety.
    EPA has considered the diversity of the nonroad engine and 
equipment industries and believes that the standards being proposed 
will require the most advanced technology that will be available for 
the various engines classes in this time frame. While meeting these 
standards will be challenging, EPA believes compliance with the 
standards will be feasible for manufacturers, as described in the 
following discussion. In the course of the 2001 Feasibility Review, EPA 
will verify the appropriateness of the Tier 2 standards for engines 
rated under 37 kW and the Tier 3 standards for engines rated between 37 
and 560 kW, including consideration of the same factors described 
above. A more detailed description of the technologies and their 
potential for controlling emissions is contained in the Draft RIA.
    In developing the various numerical standards and implementation 
dates proposed in this notice, EPA depended heavily on extending the 
analysis of technological feasibility for the preceding proposal for 
highway heavy-duty engines. While the proposed standards for highway 
engines applied equally to all sizes of engines starting in the same 
year, the standards proposed in this notice are a complex combination 
of numerical values and applicable model years. Varying numerical 
standards were considered necessary to account for the very wide range 
of engines represented in nonroad applications. Also, because of the 
range of engines offered by individual manufacturers, EPA agreed with 
manufacturers that new standards could be implemented most 
expeditiously by phasing the standards in at different times for 
different power ranges. EPA applied a similar phase-in for the first 
tier of nonroad emission standards promulgated in 1994.

A. Development of the Implementation Schedule

    The timing of the new and revised standards was calculated to 
maximize the introduction of emission-reduction technologies. For 
engines rated under 37 kW, introducing new Tier 1 standards for 1999 
and 2000 is very aggressive. EPA considered the five years of lead time 
between Tier 1 and Tier 2 standards for these engines to be

[[Page 50181]]

necessary for manufacturers to recover their initial investment and 
prepare for the next round of changes.
    For engines rated between 37 and 560 kW, the Tier 2 standards 
follow the introduction of comparable emission standards for highway 
engines. Within this range, engines rated between 225 and 450 kW were 
considered most susceptible to technologies transferred from highway 
engines and were therefore scheduled to be the first engines subject to 
the Tier 2 standards, starting in 2001. This provides three years 
following implementation of EPA's 1998 highway NOX emission 
standard of 5.4 g/kW-hr (4.0 g/hp-hr) for manufacturers to incorporate 
highway-based technologies into nonroad engines to meet the Tier 2 
standards, which are comparable to the 1998 highway standards. Other 
power ratings within this range follow over the next three years. 
Engines rated between 37 and 75 kW are the last ones in this group to 
be subject to Tier 2 standards; this additional lead time (until 2004) 
is due to the need for a greater effort to transfer technology from the 
larger highway engines to these engines, many of which are naturally 
aspirated. Proposed implementation of Tier 3 standards for these 
engines is scheduled between two and four years following the 
implementation of comparable emission standards for highway engines. 
Also, implementation of Tier 3 standards between 2006 and 2008 allows 
three to five years following implementation of the Tier 2 nonroad 
standards for different power ratings. EPA believes that implementing 
the proposed Tier 3 standards any sooner could either forego the 
potential of transferring highway technology or pose an unreasonably 
short period between the Tier 2 and Tier 3 standards for manufacturers 
to recoup their costs for complying with Tier 2 standards.
    Engines rated over 560 kW are in a unique category. Because of the 
very low sales volumes of these engines, manufacturers need a longer 
period to recoup their development costs. For that reason, these 
engines and the associated equipment generally have much longer product 
development cycles. EPA has accordingly proposed only one additional 
tier of emission standard for these engines. Tier 2 standards would 
then apply beginning in 2006, six years after the Tier 1 standards take 
effect.

B. Development of Numerical Standards

    The next paragraphs lay out the rationale for the numerical 
standards in this proposal (see Table 1 for emission standards). 
Individual technologies and the unique characteristics of various sizes 
of engines are considered in greater detail in the next section. 
Selecting the numerical standards involved a measure of extrapolation 
of information available for highway engines, with additional judgment 
to take into account the unique operating characteristics typical of 
nonroad applications of the various power ranges. For nonroad engines 
most similar to models available as highway heavy-duty engines, EPA 
made a relatively straightforward adjustment of the technological 
capabilities established for highway engines. Expectations for other 
engines, especially smaller models, were adjusted according to their 
size-related limitations, with the expectation that most of the control 
technologies were adaptable to any size diesel engine.
1. NMHC + NOX
    The targeted level of emission control for engines rated under 37 
kW is based on engine designs utilizing direct injection, rather than 
the lower-emitting indirect injection designs. The direct injection 
engines have significantly better fuel economy; EPA therefore does not 
want to set emission standards that preclude the use of direct 
injection engines. The Tier 1 standards allow very little lead time, 
which limits the degree of control achievable from these engines. EPA 
chose a NMHC + NOX standard of 9.5 g/kW-hr (7.1 g/hp-hr) for 
engines rated between 8 and 37 kW, expecting these engines to use 
similar technologies to those adopted for larger Tier 1 engines in 
response to EPA's 1994 rulemaking. Direct injection engines rated under 
8 kW are expected to have a greater challenge reducing emissions in the 
near term, due to the design constraints related to the smaller 
cylinders and higher engine speeds, and would therefore be subject to a 
NMHC + NOX standard of 10.5 g/kW-hr (7.8 g/hp-hr). The 1994 
rulemaking set a NOX standard of 9.2 g/kW-hr (6.9 g/hp-hr) 
for engines rated over 37 kW and an HC standard of 1.3 g/kW-hr (1.0 g/
hp-hr) for engines rated over 130 kW. The technologies needed to meet 
this standard would generally involve combustion chamber optimization 
and timing retard, both of which are well established for diesel 
engines and should be readily adaptable to the smaller engine models.
    The proposed Tier 2 and Tier 3 numerical standards for NMHC + 
NOX emissions are derived most directly from highway 
engines. Engines rated over 75 kW were believed to have little 
difficulty in transferring technology developed for highway engines. 
Two principal factors were considered in selecting the numerical 
standard. First, though nonroad engines have much in common with their 
highway counterparts, some aspects of operation in nonroad applications 
differs significantly from that of highway engines. The main 
distinction in nonroad applications is the lack of high-speed air for 
cooling the engine and intake air (after being heated by a 
turbocharger). Less effective heat transfer in the aftercooler 
translates into higher combustion temperatures and higher levels of 
NOX formation. Second, the different test cycles specified 
for certification testing prevent a direct translation of numerical 
standards; however, as described in Section III.B. above, test data 
shows that NOX and HC levels are roughly comparable on the 
highway test cycle and the primary nonroad test cycle (C1). Taking 
these factors into consideration led EPA to choose numerical standards 
for NMHC + NOX approximately 0.7 g/kW-hr (0.5 g/hp-hr) 
higher than the comparable highway standards for nonroad engines rated 
over 75 kW. The resulting NMHC + NOX standards are either 
6.4 or 6.6 g/kW-hr (4.8 or 4.9 g/hp-hr) for Tier 2 engines and 4.0 g/
kW-hr (3.0 g/hp-hr) for Tier 3 engines.
    Engines rated under 75 kW have additional distinctions relative to 
highway engines. These engines are typically naturally aspirated, in 
which case they do not have the benefit of a turbocharger and 
aftercooler for controlling intake air characteristics. These engines 
also have progressively smaller cylinder displacements and higher 
rotation speeds, which increase the challenge of controlling the 
combustion event. The proposed numerical standards for these engines 
are therefore set higher than those for larger engines. The proposed 
Tier 2 NMHC + NOX standard for all engines rated under 75 kW 
is 7.5 g/kW-hr (5.6 g/hp-hr). Similarly, the proposed Tier 3 NMHC + 
NOX standard for engines rated between 37 and 75 kW is 4.7 
g/kW-hr (3.5 g/hp-hr)
2. PM
    In 1994, EPA set a PM standard of 0.54 g/kW-hr (0.40 g/hp-hr), 
using the steady-state ISO C1 cycle, for engines rated over 130 kW. EPA 
is interested in the possibility of developing a nonroad transient test 
for greater assurance of reduced PM emissions in the field. Because 
there is still no such cycle established for nonroad engines, EPA is 
proposing to adopt PM standards that represent the greatest degree of 
control appropriate for testing on the current test cycles in the Tier 
2 time frame, including engines of all power ratings.

[[Page 50182]]

More stringent PM standards for Tier 3 are not included in the 
proposal, with the hope that questions related to test cycles can be 
resolved in time for a subsequent action, if appropriate.
    For engines rated over 130 kW, EPA proposes a Tier 2 PM standard of 
0.20 g/kW-hr (0.15 g/hp-hr). For the same reasons described above for 
NMHC and NOX emissions, EPA expects smaller engines to face 
a greater challenge in controlling PM emissions. The proposed Tier 2 PM 
standard for engines rated between 75 and 130 kW is therefore set at 
0.30 g/kW-hr (0.22 g/hp-hr); the comparable standard for engines rated 
between 37 and 75 kW is 0.40 g/kW-hr (0.30 g/hp-hr). For engines rated 
under 37 kW, EPA is proposing new PM standards for both Tier 1 and Tier 
2 engines. The near-term standards for Tier 1 engines are 1.0 and 0.80 
g/kW-hr (0.75 and 0.60 g/hp-hr) for engines rated under 8 kW and 
engines rated between 8 and 37 kW, respectively. Proposed Tier 2 
standards are set at 0.80 and 0.60 g/kW-hr (0.60 and 0.45 g/hp-hr) for 
engines rated under 19 kW and engines rated between 19 and 37 kW, 
respectively.
3. CO
    Formation of CO in diesel combustion is inhibited by the presence 
of excess oxygen, resulting in relatively low CO emissions without any 
active control strategies. Setting numerical standards for CO emissions 
therefore serves largely to prevent unexpected problems. Where two 
tiers of standards are set forth in this proposal, the numerical CO 
standard is the same for both tiers. Again, the largest engines have 
the lowest numerical standard.

C. Technological Approaches

    Because the proposed emission standards for nonroad diesel engines 
depend on the evaluation of technologies for complying with the 
standards for highway engines, the discussion of technological 
feasibility in that rulemaking is central to supporting the feasibility 
of the proposed standards for nonroad engines. This analysis of diesel 
engine technologies is contained in Chapter 4 of the Draft RIA for the 
highway rule.37 This analysis is considered and applied to 
nonroad engines in Chapter 3 of the Draft RIA for this proposal, which 
is summarized in the following paragraphs.
---------------------------------------------------------------------------

    \37\ ``Draft Regulatory Impact Analysis: Control of Emissions of 
Air Pollution from Highway Heavy-Duty Engines,'' U.S. EPA, June 6, 
1996 (Docket A-95-27).
---------------------------------------------------------------------------

    By proposing multiple tiers of standards that extend well into the 
next decade, EPA is 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 highway engines allows time for a comprehensive R&D program 
to integrate the most effective emission control approaches into the 
manufacturers' overall design goals related to durability, reliability, 
and fuel consumption.
    To meet the emission standards proposed above, manufacturers would 
need to move beyond the steps used to comply with the first phase of 
nonroad engine controls. Understanding the control technologies applied 
to engines complying with the Tier 1 standards is important in 
assessing the feasibility of meeting more stringent numerical 
standards. Engines rated between 75 and 560 kW have begun to comply 
with the first nonroad emission standards, providing a clearer picture 
of the starting point from which manufacturers of these engines will be 
working to reduce emissions for subsequent emission standards. In the 
case of manufacturers of engines rated under 37 kW, the standards 
proposed in this notice would represent the first emission requirements 
for these engines under EPA regulations; the starting point for 
improving emissions would therefore be focused on basic engine 
technology with new emission controls.
    Highway heavy-duty engines will be subject to a 5.4 g/kW-hr (4.0 g/
hp-hr) NOX standard beginning in the 1998 model year. For 
those manufacturers that produce engines for both highway and nonroad 
service, variations on a single engine model are sometimes sold for 
both markets. Because these engines have similar emission levels on the 
eight-mode test, they could likely comply with the proposed Tier 2 NMHC 
+ NOX standards with relatively minor modifications to adapt 
the technology to nonroad applications. Similarly, Tier 3 standards are 
intended to follow the highway engine standards proposed for the 2004 
model year, with the expectation that technology transfer will be a 
very important element of achieving compliance with the nonroad 
standards. Even where engines are dedicated to nonroad applications, 
the very similar engine design makes clear that much of the 
technological development that has led to lower-emitting highway 
engines can be transferred or adapted for use on nonroad engines. 
Specifically, much of the improvement in highway engines has come from 
``internal'' engine changes such as variation in fuel injection 
variables (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.
    Other technological developments for highway heavy-duty engines 
require a greater degree of development before they can be applied to 
nonroad engines. Turbocharging is widely used now in nonroad 
applications, especially in larger engines, because it improves power 
and efficiency by compressing the intake air. Turbocharging can also 
decrease PM emissions; however, changing an engine from naturally 
aspirated to turbocharged may raise concerns about ``packaging,'' since 
with the added turbocharger the equipment may have to be adapted to 
accommodate a physically larger engine. The concern for packaging is 
especially sensitive for small, compact equipment designs. Space 
constraints, though, are generally a matter of cost rather than 
feasibility and are further addressed in the discussion of cost to 
equipment manufacturers. Turbochargers increase the power density of 
engines, but switching to a smaller engine with equivalent power may 
require substantial equipment redesign. EPA expects that, over the long 
term, equipment specifications will be updated to take advantage of the 
substantial growth in power density from all engines; however, the 
difficulty of making this transition prevents any straightforward 
analysis of addressing engine packaging concerns with more compact 
engines.
    Aftercooling is a well established highway engine technology that 
has only recently been widely used in nonroad engines. The aftercooler 
chills the hot air coming from the turbocharger before it enters the 
cylinder, which decreases fuel consumption and helps prevent 
NOX formation by reducing combustion temperatures. Air-to-
water aftercoolers, which use the engine's coolant to provide partial 
cooling of the the intake air, can fit readily into most engine 
applications. In the long term, manufacturers are expected to move 
toward air-to-air aftercooling, which provides much better benefits for 
fuel economy and NOX control. Because of the additional 
space required for air-to-air aftercoolers (for a separate heat 
exchanger and a bigger fan), these improved aftercoolers may in some 
cases be integrated when equipment manufacturers are ready to rework 
the overall designs for their equipment models.

[[Page 50183]]

    In evaluating the feasibility of the proposed nonroad standards, it 
is helpful to separately consider three broad categories of engines. 
First, manufacturers of turbocharged nonroad diesel engines, most often 
rated over 75 kW, generally have the flexibility to incorporate more 
sophisticated technological innovations for performance, fuel economy, 
and emission control, including those derived from counterpart highway 
engines. Electronic controls offer great potential for improved control 
of engine operating parameters for better performance and lower 
emissions. Unit pumps or injectors would allow higher-pressure fuel 
injection with rate shaping to carefully time the delivery of the whole 
volume of injected fuel into the cylinder. Routing of the intake air 
and the shape of the combustion chamber can be redesigned for improved 
mixing of the air-fuel charge. Air-to-air aftercooling will likely gain 
widespread use in turbocharged engines, primarily for its fuel 
consumption and durability benefits, though it also lowers 
NOX emissions. Manufacturers will be able to combine many of 
these technologies to comply with Tier 2 standards. Tier 3 standards 
will require deployment of additional technologies. Common rail 
injection systems provide greater overall control of the fuel injection 
strategy by maintaining a constant supply of high-pressure fuel at the 
injectors. Also, exhaust gas recirculation will likely be introduced in 
highway diesel engines over the next several years, providing valuable 
experience in developing those systems for nonroad engines. EPA 
believes these technologies will be important in achieving compliance 
with Tier 3 emission standards. A more detailed treatment of the 
feasibility of these engines meeting the proposed standards is included 
in the regulatory impact analyses, as described above. Because the 
long-term standards depend on significant progress in technology 
development, EPA will be reviewing requirements for Tier 3 engines by 
2001 to confirm that developments are progressing as expected.
    The second category is the set of water-cooled naturally aspirated 
engines, which are most often rated under 50 or 75 kW. The lack of 
turbocharging (and aftercooling) and the greater sensitivity to 
increased costs for these relatively inexpensive engines suggest that 
manufacturers will likely depend on basic technologies to control 
emissions to the necessary levels. Expected changes can be divided into 
two broad categories. First, combustion optimization includes changes 
to basic engine design for improved air-fuel mixing and management of 
the combustion process. These changes might include retarded injection 
timing, re-entrant piston bowl shapes, greater swirl of the intake air, 
and improved ring design for lower oil consumption. Second, fuel 
injection parameters provide many variables for the engine designer. 
Manufacturers might modify fuel pumps, injectors, or controls to 
achieve higher injection pressures, more rapid injection, better 
control of injection timing (including rate shaping), and reduced sac 
volume. In addition to exhaust emission control strategies, emissions 
from the crankcase of naturally aspirated engines can be eliminated by 
routing vapors from the crankcase directly to the air intake. These 
technological developments are well understood and should provide 
manufacturers with the tools needed to comply with Tier 1 and Tier 2 
standards for engines rated under 37 kW. Similarly, engines rated 
between 37 and 75 kW should be able to comply with Tier 2 standards 
using these technologies; compliance with Tier 3 standards may in 
addition require use of exhaust gas recirculation. EPA believes these 
engines can meet the proposed emission standards without needing to 
incorporate turbocharging. EPA believes that increasing the numerical 
NMHC + NOX standard by 0.9 g/kW-hr (0.7 g/hp-hr) relative to 
the larger engines appropriately compensates for the design constraints 
imposed by these engines.
    Third, many of the air-cooled diesel engines rated under 8 kW face 
unique design challenges. The small cylinders and low cost of these 
engines limit the flexibility of designing or adapting technologies to 
control emissions. Tier 1 standards for these engines are therefore set 
at less stringent levels than larger engines. To reach these levels, 
manufacturers will need to rely on several of the strategies used for 
other engines. For example, increasing swirl and redesigning piston 
head geometries can be an effective way of improving fuel-air mixing in 
small engines, with the additional benefit of allowing higher injection 
pressures without increasing fuel wetting on the cylinder walls. The 
position and design of piston rings can be improved to reduce the 
contribution of engine oil to particulate emissions. Incorporating fuel 
injectors that provide mechanically controlled rate shaping would allow 
substantial control of NOX emissions at a low cost. Using 
injectors with valve-closed-orifice nozzles would similarly control HC 
emissions. Engines that operate within a relatively narrow range of 
engine speeds can achieve a degree of charge-air compression with 
intake manifold designs that rely on pulse tuning. The unique 
characteristics of the smallest engines pose a challenge to the 
designer, but these and other technologies are available for complying 
with the Tier 1 and Tier 2 standards. Also, certification data from the 
California ARB shows that most direct injection diesel engines rated 
under 19 kW are currently emitting between 8 and 11 g/kW-hr (6 and 8 g/
hp-hr) NMHC + NOX; all these engines will need to improve, 
but the current best performers support the feasibility of the Tier 1 
and Tier 2 standards for all these engines.
    Finally, any engines relying on natural aspiration technology are 
also subject to the proposed requirement to eliminate crankcase 
emissions. This requirement has long been in place for naturally 
aspirated highway engines. EPA believes that the technology required to 
close the crankcase is well established and easily transferrable to any 
size of nonroad engine.

D. Conclusions Regarding Technological Feasibility

    The standards set by this proposal are the most challenging that 
can be justified in this time frame. Engine manufacturers will need to 
use the available lead time to develop the necessary emission control 
technologies, including transfer of technology from highway 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. The 
proposed standards clearly represent major reductions compared with 
current emission levels.
    Emission control technology for diesel engines is in a period of 
rapid development in response to the range of emission standards 
anticipated for the years ahead. This effort will need to continue to 
meet the requirements in this proposal. However, the emission targets 
are set in the framework of a long lead time, which provides 
manufacturers the time they will need to apply emission control 
technology developments to nonroad engines. Also, the experience gained 
in response to EPA's emission standards for highway engines will be 
invaluable in meeting the comparable requirements for nonroad engines. 
Because the technology development for highway engines will to a large 
extent constitute basic research of diesel engine combustion, this 
effort will also benefit manufacturers that produce no highway engines.

[[Page 50184]]

    On the basis of information currently available, EPA believes that 
it is feasible for nonroad diesel engine manufacturers to meet the 
standards proposed in this notice within the the proposed time frame, 
using combinations of the technological approaches discussed above and 
in the Draft RIA. In addition, EPA believes that the flexibilities 
incorporated into this proposal will permit nonroad vehicle and 
equipment manufacturers to respond to engine changes in an orderly way. 
For both industries, EPA expects meeting these requirements will pose a 
significant challenge. As described above, EPA plans to assess, as part 
of the 2001 Feasibility Review, the appropriateness of the proposed 
Tier 3 standards and the proposed Tier 2 standards for engines rated 
under 37 kW.

VI. Projected Impacts

A. Environmental Impacts

    To assess the environmental impact of the proposed standards, EPA 
has created a computer program for predicting emissions from the 
nonroad equipment covered by this proposal. A memorandum describing the 
computer program has been placed in the public docket for this 
rulemaking.38 Chapter 5 of the Draft RIA also contains a 
thorough discussion of the methodology used to project the emission 
inventories and emission reductions from nonroad equipment covered by 
the proposed standards. The reader is directed to both of these 
documents for more information on the environmental impact of this 
proposal. EPA requests comment on all aspects of the computer program 
and the methodology for projecting the emissions impact of the proposed 
standards.
---------------------------------------------------------------------------

    \38\ ``Nonroad CI Nodeling Methodology and Request for 
Comment,'' EPA memorandum from Peter J. Caffrey to Docket A-96-40.
---------------------------------------------------------------------------

    The amount of growth experienced in the nonroad market will have a 
significant impact on the emission inventories and emission reductions 
expected from the proposed standards. For this environmental impact 
analysis, EPA has examined the impact of the proposed standards under 
two different growth scenarios. (The growth rates used in the nonroad 
modeling are compounded growth rates.) The first scenario uses the 
growth rates developed by the Bureau of Economic Analysis (BEA). The 
BEA growth rates, which are based on a variety of economic indicators, 
vary by nonroad segment (i.e., agriculture, construction, etc.) and 
typically range from one to two percent per year. However, based on 
trends in nonroad equipment sales, trends in nonroad fuel usage, and 
the continuing strong performance of the U.S. economy, EPA believes 
that the BEA growth rates may underestimate the future growth of the 
nonroad market. Therefore, EPA has also modeled the impact of the 
proposed standards using a moderately higher growth rate of three 
percent for all nonroad segments. EPA believes the results from the two 
growth scenarios serve to bracket the expected environmental impact of 
the proposed standards. The following discussion of environmental 
impacts presents the results from both the BEA growth scenario and the 
three percent growth scenario. EPA requests comments on the 
appropriateness of the BEA growth rates and the three percent growth 
rate.
    EPA modeled the impact of the proposed standards for 
NOX, NMHC, and PM emissions. The modeling inputs 
conservatively assume that equipment manufacturers take full advantage 
of the flexibility provisions described earlier. EPA did not model the 
impacts of the proposed standards on CO because CO emissions from 
nonroad diesel equipment are a very small portion of the overall CO 
inventory and the proposed standards are not expected to have a 
significant impact on CO levels.
    Because of the uncertainties about the degree to which the steady-
state test procedure will control PM emissions in use, especially from 
the many nonroad engines that frequently operate in transient modes, 
EPA cannot be certain that any assessment of expected PM emission 
reductions made at this time will be completely accurate. Nevertheless, 
EPA has attempted to make a reasonable estimate of these reductions by 
assuming an in-use per-engine reduction equal to the difference between 
the Tier 1 and proposed standards. The baseline levels used in this 
analysis are consistent with the position taken in the Tier 1 rule that 
no PM benefits are claimed from the Tier 1 PM standard. EPA believes 
that this approach provides a reasonable estimate of PM benefits from 
the proposed standards but actual benefits could vary significantly 
from these levels.
    Based on the results of the modeling, the expected emission 
benefits from the proposed standards are quite substantial. Tables 5, 
6, and 7 contain the nationwide NOX, NMHC, and PM 
inventories, respectively, under the baseline scenario, which assumes 
only the current Tier 1 standards are in effect, and under the control 
scenario, which assumes the proposed standards take effect. (The PM 
reductions contained in Table 7 are direct PM and do not include 
secondary PM benefits, which are described below.) By 2020, the 
emission reductions due to the proposed standards reach 50 percent for 
NOX, 15 percent for NMHC, and 20 percent for PM. All 
percentages are calculated relative to the baseline inventories, which 
assumes only the current Tier 1 standards are in effect.

                          Table 5.--NOX Emissions Inventory From Nonroad Diesel Engines                         
                                                  [Short tons]                                                  
----------------------------------------------------------------------------------------------------------------
                                                         BEA growth rates                 3% growth rates       
                                                 ---------------------------------------------------------------
                  Calendar year                      With the        With the        With the        With the   
                                                      current        proposed         current        proposed   
                                                     standards       standards       standards       standards  
----------------------------------------------------------------------------------------------------------------
2000............................................       2,920,000       2,890,000       3,150,000       3,120,000
2010............................................       2,740,000       1,850,000       3,450,000       2,330,000
2020............................................       3,070,000       1,460,000       4,520,000       2,150,000
----------------------------------------------------------------------------------------------------------------


[[Page 50185]]


                         Table 6.--NMHC Emissions Inventory From Nonroad Diesel Engines                         
                                                  [Short tons]                                                  
----------------------------------------------------------------------------------------------------------------
                                                         BEA growth rates                 3% growth rates       
                                                 ---------------------------------------------------------------
                  Calendar year                      With the        With the        With the        With the   
                                                      current        proposed         current        proposed   
                                                     standards       standards       standards       standards  
----------------------------------------------------------------------------------------------------------------
2000............................................         503,000         497,000         543,000         536,000
2010............................................         582,000         509,000         730,000         638,000
2020............................................         673,000         541,000         980,000         789,000
----------------------------------------------------------------------------------------------------------------


                          Table 7.--PM Emissions Inventory From Nonroad Diesel Engines                          
                                                  [Short tons]                                                  
----------------------------------------------------------------------------------------------------------------
                                                         BEA growth rates                 3% growth rates       
                                                 ---------------------------------------------------------------
                  Calendar year                      With the        With the        With the        With the   
                                                      current        proposed         current        proposed   
                                                     standards       standards       standards       standards  
----------------------------------------------------------------------------------------------------------------
2000............................................         478,000         476,000         515,000         513,000
2010............................................         553,000         483,000         693,000         606,000
2020............................................         639,000         534,000         931,000         778,000
----------------------------------------------------------------------------------------------------------------

    In addition to the effect of the proposed emission standards on 
direct PM emissions noted above, the proposed standards are expected to 
reduce the concentrations of secondary PM. Secondary PM is formed when 
NOX reacts with ammonia in the atmosphere to yield ammonium 
nitrate particulate. SAI, under contract with EPA, recently evaluated 
the effect of the NOX reductions on the formation of nitrate 
particulate.39 The report concluded that, as a national 
average, each 100 tons of NOX reduction will result in about 
4 tons of secondary PM reduction. This conversion rate varies from 
region to region, and is greatest in the West. EPA estimates that the 
approximately 1.6 million tons per year of NOX reduction 
projected in 2020 resulting from this proposal (assuming BEA growth 
rates) will result in a national average of about 64,000 tons per year 
reduction in secondary PM. This level of secondary PM reduction 
represents about 60 percent of the projected direct PM reductions 
presented in Table 7.
---------------------------------------------------------------------------

    \39\ ``Benefits of Mobile Source NOX Related 
Particulate Matter Reductions,'' Systems Applications International, 
EPA Contract No. 68-C5-0010, WAN 1-8, October 1996 (available in Air 
Docket A-96-40).
---------------------------------------------------------------------------

B. Economic Impacts

    In assessing the economic impact of changing the emission 
standards, EPA has made a best estimate of the combination of 
technologies that an engine manufacturer might use to meet the new 
standards at an acceptable cost. While equipment manufacturers bear no 
responsibility for meeting emission standards, they will need to make 
changes in the design of their equipment models to accommodate the new 
engines. EPA's treatment of the impacts of the proposal therefore 
includes an analysis of costs for equipment manufacturers. Full details 
of EPA's cost and cost-effectiveness analyses can be found in Chapters 
4 and 6 of the Draft RIA.
    Estimated cost increases are broken into purchase price and total 
life-cycle operating costs. The incremental purchase price for new 
engines and equipment is comprised of variable costs (for hardware and 
assembly time) and fixed costs (for R&D, retooling, and certification). 
Total operating costs include any expected increases in maintenance or 
fuel consumption. Cost estimates based on these projected technology 
packages represent an expected incremental cost of engines as they 
begin to comply with new emission standards. Costs in subsequent years 
would be reduced by several factors, as described below. Separate 
projected costs were derived for engines and equipment used in six 
different ranges of rated power; costs were developed for engines near 
the middle of the listed ranges. All costs are presented in 1995 
dollars. Life-cycle costs have been discounted to the year of sale. EPA 
requests comment on all aspects of the economic impact analysis.
1. Engine Technologies
    The following discussion provides a brief description of those 
technologies EPA projects will be needed to comply with the new 
emission standards. In some cases it is difficult to make a distinction 
between technologies needed to reduce emissions for compliance with 
emission standards and those technologies that offer other benefits for 
improved fuel economy, power density, and other aspects of engine 
performance. EPA believes that without new emission standards, 
manufacturers would continue research on and eventually deploy many 
technological upgrades to improve engine performance or more cost-
effectively control emissions. Turbocharging, aftercooling, and 
variable-valve timing are examples of technologies whose primary 
benefit is for improved performance. Modifications to fuel injection 
systems and the introduction of electronic controls will also continue, 
regardless of any change in emission standards, to improve engine 
performance. Some further development with a focus on NOX, 
HC, and PM emissions will nevertheless play an important role in 
achieving emission reduction targets.
    A variety of technological improvements are projected for complying 
with the multiple tiers of proposed emission standards. Selecting these 
technology packages requires extensive engineering analysis and 
judgment. The fact that manufacturers have nearly a full decade before 
implementation of the most challenging of the proposed standards 
ensures that technologies will develop significantly before reaching 
production. This ongoing development will lead to reduced costs in 
three ways. First, research will lead to enhanced effectiveness for 
individual technologies, allowing manufacturers to use simpler packages 
of emission

[[Page 50186]]

control technologies than we would predict given the current state of 
development. Similarly, the continuing effort to improve the emission 
control technologies will include innovations that allow lower-cost 
production. Finally, manufacturers will focus research efforts on any 
potential drawbacks, such as increased fuel consumption or maintenance 
costs, attempting to minimize or overcome any negative effects.
    A combination of technology upgrades are anticipated as a result of 
the proposed emission standards. Modifications to basic engine design 
features, such as piston bowl shape and engine block and head geometry, 
can improve intake air characteristics and distribution during 
combustion. For this analysis, EPA anticipates that manufacturers will 
make these basic engine modifications for the first tier of proposed 
standards. These redesigned engines are then expected to serve as a 
platform for the other changes anticipated for the next tier of 
standards. This will be less true for engines rated under 37 kW, which 
have less time to incorporate design changes before Tier 1 standards 
become effective. Manufacturers are expected to introduce electronic 
controls on some engines. Advanced fuel-injection techniques and 
hardware will allow designers to modify various fuel injection 
parameters for higher pressure, further rate shaping, and some split 
injection. For Tier 3 standards, EPA expects that many engines will see 
further fuel injection improvements and will incorporate a moderate 
degree of cooled exhaust gas recirculation. Details of the mix of 
technologies included in the cost analysis can be found in Chapter 4 of 
the Draft RIA.
    While the following analysis projects a relatively uniform emission 
control strategy for designing the different categories of engines, 
this should not suggest that EPA expects a single combination of 
technologies will be used by all manufacturers. In fact, depending on 
basic engine emission characteristics, EPA expects that control 
technology packages will gradually be fine-tuned to different 
applications. Furthermore, EPA expects manufacturers to use averaging, 
banking, and trading programs as a means to deploy varying degrees of 
emission control technologies on different engines. EPA nevertheless 
believes that the projections presented here provide a cost estimate 
representative of the different approaches manufacturers may ultimately 
take.
2. Engine Costs
    The projected costs of these new technologies for meeting the 
proposed standards are itemized in the Draft RIA and summarized in 
Table 8. For the proposed Tier 1 standards for engines rated under 37 
kW, estimated costs vary widely. Those engines that already operate 
with emissions low enough to meet the proposed Tier 1 standards would 
bear costs only for closing the crankcase and certifying the engine, or 
about $20 per engine. For the remaining one-third of engines expected 
to need reduced emissions, adding engine modifications leads to total 
costs of around $70. The anticipated increase in operating costs would 
similarly be focused on the minority of engines that need design 
improvements, totaling about $220 in net present value (npv) over the 
lifetime of those engines. The calculated sales-weighted composite 
increase in both the purchase price and the operating costs for all 
engines rated under 37 kW is $75 or less.

                                                         Table 8.--Projected Unit Costs--Engines                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Power (kW)                                 
                        Cost category                            Year of   -----------------------------------------------------------------------------
                                                                production      0-37        37-75        75-130      130-450      450-560        560+   
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Tier 1                                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Incremental purchase price...................................            1          $53  ...........  ...........  ...........  ...........  ...........
Life-cycle Operating costs (npv).............................          all           73  ...........  ...........  ...........  ...........  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Tier 2                                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Incremental purchase price...................................            1           28          180          321          328          916         1214
Life-cycle Operating costs (npv).............................          all            0            0            0            0            0            0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Tier 3                                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Incremental purchase price...................................            1                                                                              
                                                                         6  ...........          322                                                    
                                                                                                 111          424                                       
                                                                                                              177          436                          
                                                                                                                           194         1645             
                                                                                                                                        291  ...........
Life-cycle Operating costs (npv).............................          all  ...........           89          103          125          180  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Tier 2 standards, which apply to to the full range of power 
ratings, involve higher estimated cost impacts. The set of technologies 
anticipated for Tier 2 engines, including engine modifications, 
improved fuel injection and some use of electronic controls, are not 
expected to cause any increase in operating costs, as described in the 
Draft RIA. The price of engines rated under 450 kW is expected to 
increase by up to $330, while engines rated over 450 kW may see price 
increases approaching or exceeding $1,000. The projected cost of 
compliance with Tier 3 standards entails increases from Tier 2 costs 
that follow a similar pattern to the increases for Tier 2 standards, 
though the proposed Tier 3 standards apply only to engines rated 
between 37 and 560 kW.
    Characterizing these estimated costs in the context of their 
fraction of the total purchase price and life-cycle operating costs is 
helpful in gauging the economic impact of the proposed standards. ICF 
conducted a study to characterize the range of current engine 
costs.\40\ Although the incremental cost projections in Table 8 
increase dramatically with increasing power rating, they in fact 
represent a comparable price change relative to the total price of the 
engine. The estimated cost increases for all engines are between 2 and 
10 percent of estimated engine prices (after typical discounts and 
rebates). Moreover, the cost savings

[[Page 50187]]

described below would further reduce the impact of the proposed 
emission standards; long-term cost increases are expected to be 4 
percent of total engine price or less.
---------------------------------------------------------------------------

    \40\ ``Engine Price (On-Highway and Nonroad) & Life-cycle Cost 
Methodology,'' memorandum from Thomas Uden, ICF, Inc. to Alan Stout, 
U.S. EPA, March 21, 1997 (available in Air Docket A-96-40).
---------------------------------------------------------------------------

    Another way of evaluating the variation of compliance costs with 
increasing power rating is to compare the ratio of projected cost to 
rated power (in kilowatts). For the Tier 2 standards, engines rated 
under 130 kW all have cost-per-kilowatt ratios near 3.5, while the 
ratios for larger engines is around 1.5. This shows again that the 
apparently high projected compliance costs for the largest engines, 
upon closer analysis, are consistent with their greater size and price.
    For the long term, EPA has identified two principal factors that 
would cause the estimated incremental costs to decrease over time. 
First, since fixed costs are assumed to be recovered over a fixed 
period, these costs disappear from the analysis after they have been 
fully recovered. This has a most striking effect on the projected costs 
for engines rated over 450 kW, for which the much higher projected 
costs are dominated by fixed costs. Second, the analysis incorporates 
the expectation that manufacturers will apply ongoing research to 
making emission controls more effective and less costly over time. 
Research in the costs of manufacturing has consistently shown that as 
manufacturers gain experience in production, 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.\41\ The analysis incorporates the effects of this learning curve 
by projecting that the variable costs of producing the low-emitting 
engines decreases by 20 percent starting with the third year of 
production and by reducing variable costs again by 20 percent starting 
with the sixth year of production. Table 8 lists the projected costs 
for each category of vehicle over time, including the set of numbers 
that illustrate the projected reduction in long-term costs for Tier 3 
engines.
---------------------------------------------------------------------------

    \41\ ``Learning Curves in Manufacturing,'' Linda Argote and 
Dennis Epple, Science, February 23, 1990, Vol. 247, pp. 920-924 
(available in Air Docket A-96-40).
---------------------------------------------------------------------------

3. Equipment Costs
    In addition to the costs directly associated with engines that are 
redesigned to meet new standards, costs may also result from the need 
to redesign the nonroad equipment in which these engines are used. Such 
redesigns, though not generally technologically challenging, could 
occur if the engine has a different shape or heat rejection rate, or is 
no longer made available in the configuration previously used. Based on 
their experience with the Tier 1 standards set in 1994, equipment 
manufacturers have told EPA that the main barrier to accommodating 
complying engines is the late delivery of such engines by engine 
manufacturers, which cuts into the lead time that equipment 
manufacturers need to properly redesign their equipment. Thus, attempts 
were made in the developing this proposal to provide stability and 
predictability in the setting of standards so engine and equipment 
manufacturers can more easily plan their product releases and can 
reasonably recoup the investment made to meet the standards.
    In addition, the Tier 3 emission standards and implementation dates 
for engines rated over 37 kW and Tier 2 emission standards and 
implementation dates for engines rated under 37 kW are based on the 
premise that no significant equipment redesign beyond that required to 
accommodate engines meeting the previous tier of standards will be 
required to accommodate the new engines. Equipment manufacturers may, 
of course, choose to spread equipment redesigning over the time frame 
for both first and second tiers of standards. This analysis accounts 
for this flexibility by projecting one major redesign for each 
equipment model, spreading the costs of these redesigns over both tiers 
of standards. For each tier of standards, EPA projects that equipment 
manufacturers will have sufficient opportunity to accommodate complying 
engines and to market their product. EPA will consider the potential 
for multiple design changes to equipment models during the 2001 
Feasibility Review.
    In assessing the economic impact of the proposed emissions 
standards, EPA has made a best estimate of the modifications to 
equipment that relate to packaging (installing engines in equipment 
engine compartments), power train (torque curve), and heat rejection 
effects of the new complying engines. The incremental purchase price 
for new engines is comprised of fixed costs (for R&D and retooling) and 
variable costs (for hardware and assembly time for a small percentage 
of the equipment). In its analysis, EPA attributes all increases in 
operating costs (i.e., expected increases in maintenance or fuel 
consumption) to incremental engine costs, and thus, equipment costs do 
not include operating costs. As described in the engine cost section 
above, after a new standard takes effect, projected costs in subsequent 
years would be reduced by several factors. Separate projected costs 
were determined for equipment in the same ranges of power ratings used 
for engine costs. Full details of EPA's equipment cost analysis can be 
found in Chapter 4 of the Draft RIA.
    a. Projected Equipment Changes: Key measures being taken by engine 
manufacturers to meet the Tier 1 standards set in 1994 are retarding 
the injection timing and adding air-to-water aftercooling. EPA 
projected in the Tier 1 rulemaking that, though the standards may lead 
to some additional heat rejection, it would not add enough heat 
rejection to require equipment changes such as increasing the cooling 
capacity and cooling fan speed (i.e., change the size of radiators or 
cooling fan blades). 42 However, equipment manufacturers 
claim that such changes are occurring due to Tier 1 standards. For the 
most part, this additional heat rejection occurred due to the retarded 
injection timing, and thus some equipment manufacturers needed to 
increase the size of their radiators to accommodate these Tier 1 
engines. Some equipment manufacturers also increased the engine fan 
speed for additional airflow and cooling (increasing engine fan size 
can increase fan speed). In some cases, equipment manufacturers 
experienced a small increase in fuel consumption. In many cases 
equipment manufacturers needed to alter the engine compartment to 
accommodate these changes as well as making room for added 
turbochargers and aftercoolers.
---------------------------------------------------------------------------

    \42\ U.S. EPA, Final Regulatory Impact Analysis and Regulatory 
Support Document, ``Control of Air Pollution; Determination of 
Significance for Nonroad Sources and Emission Standards for New 
Nonroad Compression-Ignition Engines at or Above 37 Kilowatts (50 
Horsepower),'' May 27, 1994 (found in Air Docket A-91-24, item VI-B-
1).
---------------------------------------------------------------------------

    A small percentage of equipment is projected to have modifications 
to the radiator and the engine fan to compensate for some additional 
heat rejection resulting from the proposed emission standards. 
Equipment with direct injection engines rated under 37 kW (about one 
third of the equipment in that size range) are expected to meet the 
proposed standards through retarded injection timing, which is expected 
to lead to some additional heat rejection. Some equipment/engines 
introducing or improving air-to-water aftercooling may still require 
more heat rejection and thus a somewhat larger radiator and fan, 
because the engine coolant would be routed ( and thus heated up) 
through both the radiator and the aftercooler. Many equipment 
manufacturers are expected to install engines using air-to-

[[Page 50188]]

air aftercooling, which greatly reduces the heat load compared with 
current air-to-water aftercooling models. Also, no more retarding of 
the timing is expected for these engines as a result of the proposed 
emission standards. Therefore, no increase in heat rejection and thus 
in the size of the radiator and engine fan is expected for equipment 
with air-to-air aftercooling. However, even with air-to-air 
aftercooling, some equipment may need a larger engine fan (increase 
engine fan size or speed), because there may be some reduction in the 
airflow out of the engine compartment due to the aftercooler. In 
addition, exhaust gas recirculation may lead to some additional heat 
load in the Tier 3 time frame.
    With sufficient lead time provided, engine and equipment 
manufacturers are expected to have an opportunity to integrate several 
changes not directly related to emission control (i.e., air-to-air 
aftercooling). Therefore, the equipment changes are projected to be 
needed only to compensate for some additional heat rejection. Thus, EPA 
estimated that a small percentage of the equipment would have an 
increase in the size of their radiators and cooling fans to accommodate 
the new complying engines. In addition, for engine compartment 
modifications (engine panels, brackets, etc.), EPA estimated that, for 
all power ranges, a large percentage of the equipment would need 
additional miscellaneous steel since it is expected that many nonroad 
equipment models would need some additional steel in accommodating 
complying engines.
    b. Projected Equipment Costs: The costs of the projected equipment 
changes due to the proposed standards are itemized in the Draft RIA and 
summarized in Table 9. The effort for the R&D and tooling was estimated 
for modifying equipment in all the above power categories based on 
those changes needed to accommodate the engine technology modifications 
described earlier in this preamble. In addition, variable costs for 
engine compartment, radiator, and engine fan changes as described in 
the above section were added for all the equipment power categories. 
For all the power categories it was estimated that equipment 
manufacturers would expend significant effort to generally redesign the 
engine compartments of their equipment due to emissions control and its 
related effects.

                                         Table 9.--Projected Unit Costs                                         
----------------------------------------------------------------------------------------------------------------
                                                                     Power (kW)                                 
               Tier                -----------------------------------------------------------------------------
                                        0-37        37-75        75-130      130-450      450-560        560+   
----------------------------------------------------------------------------------------------------------------
Tier 1:                                                                                                         
    Equipment.....................          $12  ...........  ...........  ...........  ...........  ...........
    Total Engine and Equipment....           65  ...........  ...........  ...........  ...........  ...........
Tier 2:                                                                                                         
    Equipment.....................            5           55          137          118          159          136
    Total Engine and Equipment....           33          235          458          446        1,075        1,350
Tier 3 short-term:                                                                                              
    Equipment.....................  ...........           18           46           39           53  ...........
    Total Engine and Equipment....  ...........          340          470          475        1,698  ...........
Tier 3 long-term:                                                                                               
    Equipment.....................  ...........            1            2            4            4  ...........
    Total Engine and Equipment....  ...........          112          179          198          295  ...........
----------------------------------------------------------------------------------------------------------------

    For the proposed Tier 1 standards that apply to equipment with 
engines rated under 37 kW, the estimated composite cost increase is $12 
per piece of equipment. As described in the Engine Cost section, this 
cost estimate is based on the determination that a large percentage of 
the engines for this range of equipment already operate with emissions 
low enough to meet the Tier 1 standards.
    For Tier 2 standards, the low engine costs for equipment rated 
under 75 kW reflect the relatively high sales volume of this range even 
though most of the equipment would need relatively more effort for 
accommodating complying engines versus equipment with engines rated 
over 75 kW. The highest projected cost of $159 for equipment utilizing 
engines rated between 450 and 560 kW demonstrates that high per-
equipment piece costs are due to amortizing large fixed costs over 
small sales volumes even though most of the equipment in this large 
power range would require relatively less effort in accommodating 
complying engines. Also, the higher projected cost of $137 for 
equipment with engines rated between 75 and 130 kW results from 
amortizing slightly lower fixed costs compared to ratings under 75 kW 
over a much smaller sales volume.
    The projected incremental cost of complying with Tier 3 standards 
are lower than that for Tier 2 standards, because EPA expects most of 
the significant changes to equipment designs would occur for Tier 2 
standards (the previous or first set of standards). For Tier 3 
standards, equipment with engines rated between 37 and 560 kW are 
expected to have incremental costs ranging from $18 to $53. In 
addition, EPA estimated that, for equipment with engines rated under 37 
kW, the incremental cost of Tier 2 standards is only $5.
    As discussed in the Engine Cost section, characterizing both these 
estimated incremental equipment and engine costs in the context of 
their fraction of the total equipment purchase price is useful for 
evaluating the economic impact of the proposed standards. EPA collected 
quoted retail (list) prices on several equipment pieces to characterize 
the range of current equipment prices. The combined incremental costs 
estimated for equipment and engines together for all power ranges are 
mostly under 2 percent of list prices with the exception of a few low 
power rated equipment (e.g., a 3 kW centrifugal pump), which may have 
relatively low sales prices and thus estimated incremental costs that 
are up to 4 percent of list prices.
    Furthermore, as described above in the Engine Cost section, the 
cost savings below would further reduce the projected cost of the 
proposed standards. For the long term, EPA has identified two principal 
factors that would cause the estimated incremental costs to decrease 
over time. First, since fixed costs are assumed to be recovered over a 
ten-year period, these costs disappear from the analysis after the 
first ten model years. Second, as

[[Page 50189]]

described further in the Engine Cost section, the analysis incorporates 
the effects of a learning curve by projecting that the variable costs 
of making equipment changes to accommodate low-emitting engines 
decreases by 20 percent starting with the third year of production and 
by reducing variable costs again by 20 percent starting with the sixth 
year of production. Table 9 shows the schedule of projected equipment 
costs for each category of equipment over time, and it also presents 
the combined costs estimated for equipment and engines together. (The 
combined engine and equipment costs presented in Table 9 do not include 
increased operating costs.)
4. Aggregate Costs to Society
    The above analysis develops unit cost estimates for each power 
category. With current data for equipment sales for each category and 
projections for the future, these costs can be translated into a total 
projected cost to the nation for the proposed emission standards in any 
year. Increased purchase prices and operating costs lead to aggregate 
costs of about $3 million in the first year, increasing to a peak of 
$320 million in 2008 as increasing numbers of engines become subject to 
the proposed standards. The following years show declining aggregate 
costs as the per-unit cost of compliance decreases, as described above, 
to a low point of about $190 million in 2014. After 2014, stable engine 
costs applied to a slowly growing market lead to slowly increasing 
aggregate costs.
    Commenters on the Supplemental ANPRM suggested that new nonroad 
diesel engine standards would negatively impact other entities such as 
equipment distributors/dealers, ultimate purchasers (e.g., farmers, 
construction contractors, loggers), and suppliers of parts and services 
for engines and equipment. In the segment of the economy involving 
nonroad diesel engines and equipment, distributors/dealers and 
purchasers are downstream of engine and equipment manufacturers, and 
suppliers of parts and services are upstream. EPA recognizes that there 
may be some potential impact on these entities from the proposed rule. 
For example, as some commenters suggested, were a sudden large increase 
in equipment prices to occur, it might result in a slowing of purchases 
of new equipment, possibly causing upstream suppliers or downstream 
dealers to lose business. As described in Section IV.B.3., EPA 
estimates that the combined incremental costs for equipment and engines 
together for all power ranges would generally be under 2 percent of the 
list prices of equipment. Considering that price changes are already a 
common occurrence in this market, EPA believes the impacts will be 
minimal. Also, such small cost increments, together with the complexity 
of this market, make it extremely difficult to quantitatively analyze 
the impacts on entities upstream and downstream of engine and equipment 
makers. Therefore, EPA included in the cost analysis only those 
entities that are expected to be directly impacted by the proposed 
rule.

C. Cost-Effectiveness

    EPA has estimated the cost-effectiveness (i.e., the cost per ton of 
emission reduction) of the proposed Tier 1, Tier 2 and Tier 3 standards 
for the same power categories of nonroad equipment highlighted earlier 
in this section. Chapter 6 of the Draft RIA contains a more detailed 
discussion of the cost-effectiveness analysis. EPA requests comments on 
all aspects of the cost-effectiveness analysis.
    As described above in the Economic Impacts section, the projected 
cost of complying with the proposed standards will vary by power 
category and model year. Therefore, the cost-effectiveness will also 
vary from model year to model year. For comparison purposes, the 
discounted lifetime costs (including increased engine costs, equipment 
costs and operating costs), emission reductions (in short tons), and 
cost-effectiveness of the proposed NMHC + NOX standards are 
shown in Table 10 for the same model years discussed above in the 
Economic Impacts section. EPA believes this is a conservative estimate 
because EPA assumed that all of the increased costs presented earlier 
were attributable to NMHC+NOX control and none of the costs 
were attributed to PM control. NOX reductions represent 
approximately 90 percent of the total NMHC+NOX emission 
reductions expected from the proposed standards.

                        Table 10.--Cost-effectiveness of the Proposed NMHC+NOX Standards                        
----------------------------------------------------------------------------------------------------------------
                                                                                      Discounted                
                                                                         Discounted    lifetime      Discounted 
                  Standard                     Power (kW)    Year of      lifetime     NMHC+NOX    lifetime cost-
                                                            production      cost      reductions   effectiveness
                                                                                        (tons)        (per ton) 
----------------------------------------------------------------------------------------------------------------
Tier 1......................................         0-37            1         $138          0.32          $440 
Tier 2......................................         0-37            1           33          0.04           790 
                                              ...........            6           15  ............           360 
                                                    37-75            1          235          0.59           400 
                                                   75-130            1          458          1.19           390 
                                                  130-450            1          446          2.11           210 
                                                  450-560            1        1,075          8.11           130 
                                                      560            1        1,350         11.44           120 
                                              ...........            6          207  ............            20 
Tier 3......................................        37-75            1          430          0.62           700 
                                                                     6          217  ............           350 
                                                   75-130            1          573          0.94           610 
                                                                     6          325  ............           350 
                                                  130-450            1          601          1.71           350 
                                                                     6          356  ............           210 
                                                  450-560            1        1,878          6.08           310 
                                                                     6          522  ............            90 
----------------------------------------------------------------------------------------------------------------

    Weighting the projected cost and emission benefit numbers presented 
above by the populations of the individual power categories, EPA 
calculated the cost-effectiveness of the proposed NMHC + NOX 
standards for the entire nonroad diesel engine fleet. Table 11 contains 
the resulting fleet-

[[Page 50190]]

wide cost-effectiveness results for the Tier 2 and Tier 3 standards.

 Table 11.--Fleet-wide Cost-effectiveness of the Proposed Nonroad NMHC +
                              NOX Standards                             
------------------------------------------------------------------------
                                              Discounted lifetime cost- 
                 Standard                           effectiveness       
------------------------------------------------------------------------
Tier 2....................................  $300/ton.                   
Tier 3--Short term........................  $400/ton.                   
Tier 3--Long term.........................  $180/ton.                   
------------------------------------------------------------------------

    For comparison to other PM control strategies, EPA has also 
analyzed the cost-effectiveness of the proposed standards assuming half 
of the increased costs were attributable to PM control. Such a fleet-
wide discounted lifetime cost-effectiveness represents the highest 
figure that could be expected for cost-effectiveness of the proposed 
standards and was calculated to provide an indication of the upper 
bound of PM cost-effectiveness. The resulting fleet-wide discounted 
lifetime cost-effectiveness of the proposed Tier 1 and Tier 2 PM 
standards was approximately $1,500 per ton.
    In an effort to evaluate the cost-effectiveness of the proposed 
NMHC + NOX controls for nonroad engines, EPA has summarized 
the cost-effectiveness results for three other recent EPA mobile source 
rulemakings that required reductions in NOX (or NMHC + 
NOX) emissions. The heavy-duty vehicle portion of the Clean 
Fuel Fleet Vehicle Program yielded a cost-effectiveness of 
approximately $1,500/ton of NOX, Phase II of the 
Reformulated Gasoline Program yielded approximately $5,000/ton of 
NOX, and the most recent NMHC + NOX standards for 
highway heavy-duty diesel engines yielded a cost-effectiveness of $100-
$600/ton of NMHC + NOX. The cost-effectiveness of the 
proposed NMHC + NOX standards for nonroad diesel engines 
presented above are more favorable than the cost-effectiveness of both 
the clean fuel fleet vehicle program and reformulated gasoline. The 
cost-effectiveness of the proposed NMHC + NOX standards for 
nonroad diesel engines is comparable to the cost-effectiveness of the 
most recent NMHC + NOX standards for heavy-duty highway 
diesel engines.
    EPA has also summarized the cost-effectiveness results for two 
other recent EPA mobile source rulemakings that required reductions in 
PM emissions. The cost-effectiveness of the most recent urban bus 
engine PM standard was estimated to be $10,000-$16,000/ton and the 
cost-effectiveness of the urban bus retrofit/rebuild program was 
estimated to be approximately $25,000/ton. The PM cost-effectiveness of 
the proposed nonroad engine standards presented above are more 
favorable than either of the urban bus programs.
    In addition to the benefits of reducing ozone within and 
transported into urban ozone nonattainment areas, the NOX 
reductions from the proposed nonroad engine standards are expected to 
have beneficial impacts with respect to crop damage, secondary 
particulate, acid deposition, eutrophication, visibility, and forests, 
as described earlier. Because of the difficulty of quantifying the 
monetary value of these societal benefits, the cost-effectiveness 
values presented do not assign any numerical value to these additional 
benefits. However, based on an analysis of existing studies that have 
estimated the value of such benefits in the past, the Agency believes 
that the actual monetary value of the multiple environmental and public 
health benefits that would be produced by large NOX 
reductions similar to those projected under this proposal will likely 
be greater than the estimated compliance costs. EPA requests comment on 
including these benefits in an estimate of the cost-effectiveness of 
the proposed standards.

VII. Public Participation

    As mentioned above, EPA issued a Supplemental ANPRM releasing the 
Nonroad Statement of Principles and announcing EPA's intent to formally 
propose regulatory action relating to nonroad diesel emissions 
consistent with the Statement of Principles. By the time the comment 
period closed, the Agency had received more than 20 communications 
relating to this program and the Supplemental ANPRM. Additional 
comments have been received as a part of the Agency's special outreach 
to small entities (see Section VIII.B.). These comments have been very 
valuable in developing this proposal, and the Agency looks forward to 
additional comment as the formal rulemaking process now begins. All of 
these comments are available in the rulemaking docket and many of them 
are discussed in the context of various issues in this preamble. EPA 
has considered each of the comments and has attempted to address them 
in this proposal.

A. Comments and the Public Docket

    Publication of this notice opens a formal comment period for this 
proposal. EPA will accept comments for the period indicated under 
``DATES'' above. The Agency encourages all parties that have an 
interest in the program described in this notice to offer comment on 
all aspects of the action. Throughout this proposal are requests for 
specific comment on various topics.
    The most useful comments are those supported by appropriate and 
detailed rationales, data, and analyses. The Agency also encourages 
commenters that disagree with the proposed program to suggest and 
analyze alternate approaches to meeting the air quality goals of this 
proposed program. All comments, with the exception of proprietary 
information, should be directed to the EPA Air Docket Section, Docket 
No. A-96-40 before the date specified above.
    Commenters who wish to submit proprietary information for 
consideration should clearly separate such information from other 
comments by: (1) Labeling proprietary information ``Confidential 
Business Information'' and (2) sending proprietary information directly 
to the contact person listed (see FOR FURTHER INFORMATION CONTACT) and 
not to the public docket. This will help ensure that proprietary 
information is not inadvertently placed in the docket. If a commenter 
wants EPA to use a submission of confidential information as part of 
the basis for the final rule, then a nonconfidential version of the 
document that summarizes the key data or information should be sent to 
the docket.
    Information covered by a claim of confidentiality will be disclosed 
by EPA only to the extent allowed and in accordance with the procedures 
set forth in 40 CFR part 2. If no claim of confidentiality accompanies 
the submission when it is received by EPA, it will be made available to 
the public without further notice to the commenter.

B. Public Hearing

    The Agency will hold a public hearing as noted in the DATES section 
above. Any person desiring to present testimony at the public hearing 
is asked to notify the contact person listed above at least five 
business days prior to the date of the hearing. This notification 
should include an estimate of the time required for the presentation of 
the testimony and any need for audio/visual equipment. EPA suggests 
that sufficient copies of the statement or material to be presented be 
available to the audience. In addition, it is helpful if the contact 
person receives a copy of the testimony or material prior to the 
hearing.
    The hearing will be conducted informally, and technical rules of 
evidence will not apply. A sign-up sheet will be available at the 
hearing for scheduling the order of testimony. A written transcript of 
the hearing will be

[[Page 50191]]

prepared. The official record of the hearing will be kept open for 30 
days after the hearing to allow submittal of supplementary information.

VIII. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

    Under Executive Order 12866, the Agency must determine whether this 
regulatory action is ``significant'' and therefore subject to Office of 
Management and Budget (OMB) review and the requirements of the 
Executive Order (58 FR 51735, Oct. 4, 1993). The order defines 
``significant regulatory action'' as any regulatory action that is 
likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or,
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, EPA has determined 
that this proposal is a ``significant regulatory action'' because the 
proposed standards and other regulatory provisions, if implemented, 
would have an annual effect on the economy in excess of $100 million. A 
Draft RIA has been prepared and is available in the docket associated 
with this rulemaking. This action was submitted to the Office of 
Management and Budget (OMB) for review as required by Executive Order 
12866. Any written comments from OMB and any EPA response to OMB 
comments are in the public docket for this proposal.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act was amended by the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), Public Law 104-
121, to ensure that concerns regarding small entities are adequately 
considered during the development of new regulations that affect them. 
In response to the provisions of this statute, EPA has identified 
industries subject to this proposed rule and has provided information 
to and received comment from small entities and representatives of 
small entities in these industries. The Agency has also convened a 
panel under section 609(b) of the Regulatory Flexibility Act as added 
by SBREFA. The purpose of the Panel is to collect the advice and 
recommendations of representatives of small entities that will be 
affected by the rule and to report on those comments and the Panel's 
findings as to issues related to the key elements of an initial 
regulatory flexibility analysis under section 603 of the Regulatory 
Flexibility Act. Those elements of an initial regulatory flexibility 
analysis are:
     The number of small entities to which the proposed rule 
will apply.
     Projected reporting, recordkeeping, and other compliance 
requirements of the proposed rule, including the classes of small 
entities which will be subject to the requirements and the type of 
professional skills necessary for preparation of the report or record.
     Other relevant Federal rules which may duplicate, overlap, 
or conflict with the proposed rule.
     Any significant alternatives to the proposed rule which 
accomplish the stated objectives of applicable statutes and which 
minimize any significant economic impact of the proposed rule on small 
entities.
    Once completed, the Panel report is provided to the Agency issuing 
the proposed rule and included in the rulemaking record. In light of 
the Panel report, the Agency is to make changes to the proposed rule or 
the initial regulatory flexibility analysis for the proposed rule, 
where appropriate.
    EPA has prepared an initial regulatory flexibility analysis to 
analyze the economic impacts of this proposed rule on small companies; 
the initial regulatory flexibility analysis is found in Chapter 4 of 
the Draft RIA. EPA's outreach to small entities and EPA's responses to 
the recommendations of the Panel are described in the initial 
regulatory flexibility analysis and summarized below. The Agency 
continues to be interested in the potential impacts of the proposed 
rule on small entities and welcomes additional comments during the 
rulemaking process on issues related to such impacts.
1. Applicable Small Businesses
    The initial regulatory flexibility analysis analyzes four separate 
but related industries that will be subject to this proposed rule and 
that contain small businesses as defined by regulations of the Small 
Business Administration (SBA): nonroad diesel engine manufacturing, 
manufacturing of nonroad diesel equipment, post-manufacture marinizing 
of diesel engines, and the rebuilding or remanufacturing of diesel 
nonroad engines. According to SBA's regulations (13 CFR 121), 
businesses with no more than the following numbers of employees or 
dollars of annual receipts are considered ``small entities'' for 
purposes of a regulatory flexibility analysis:
     Manufacturers of engines (includes marinizers)--1000 
employees.
     Equipment manufacturers
     Manufacturers of construction equipment--750 employees.
     Manufacturers of industrial trucks (forklifts)--750 
employees.
     Manufacturers of other nonroad equipment--500 employees.
     Rebuilders/Remanufacturers of engines--$5 million.
2. Small Business Economic Impact Analysis
    The initial regulatory flexibility analysis evaluates in detail the 
financial impacts of the proposed standards on small manufacturers of 
nonroad diesel equipment. Along with small manufacturers of equipment, 
the potential impacts on small manufacturers of diesel engines, small 
marinizers, and small engine rebuilders/remanufacturers were assessed 
as part of the SBREFA Panel process as discussed below; however, a 
detailed economic analysis was conducted only for equipment 
manufacturers, for the following reasons. There is only one small 
manufacturer of diesel engines affected by the proposed rule that meets 
the Small Business Administration's (SBA) small business criteria, and 
this small engine manufacturer would have impacts from the proposal 
that are similar to those impacts experienced by large nonroad engine 
manufacturers, which are described in Section VI.B. of this proposal. 
Marinizers are expected to experience impacts similar to those of 
nonroad equipment manufacturers since changes made by the original 
engine manufacturers might require changes in the parts and process 
involved in marinization. Engine rebuilders/remanufacturers would not 
be economically impacted by this proposed rule since as described in 
Section III.C. of this proposal, the proposed provisions for these 
entities would not require a change to their current practices.
    As described in Section IV.B.4., commenters on the Supplemental 
ANPRM suggested that new nonroad diesel engine standards would 
negatively impact other small entities such as equipment distributors/
dealers, ultimate purchasers, and suppliers of

[[Page 50192]]

parts and services for engines and equipment. EPA recognizes that these 
downstream and upstream small entities may be adversely impacted by the 
proposed rule. However, for the reasons described in Section IV.B.4., 
EPA included in the cost analysis and the initial regulatory 
flexibility analysis only those entities that are expected to be 
directly impacted by the proposed rule. EPA asks for comments on the 
potential impacts of the proposed rule on any downstream and upstream 
small entities, with supporting data or methodologies to assist in 
analyzing these impacts whenever possible.
    The initial regulatory flexibility analysis applies an economic 
measure known as the ``sales test'' to evaluate the economic impact of 
the proposed standards on small manufacturers of nonroad diesel 
equipment. The sales test involves calculation of annualized compliance 
costs as a function of sales revenue. According to the sales test 
results in the initial regulatory flexibility analysis, an estimated 9 
percent of small equipment manufacturers would be economically impacted 
by greater than 1 percent by the proposed rule. Also, an estimated 5 
percent of small equipment manufacturers would experience an impact 
greater than 3 percent.
    As described in Section III.E. of this proposal, this proposed rule 
includes flexibility provisions for equipment manufacturers (both large 
and small manufacturers). As shown in the initial regulatory 
flexibility analysis, the flexibility provisions should reduce any 
economic impacts of the proposed regulations on small equipment 
manufacturers. However, the effects of the provisions are likely 
conservatively estimated because the hardship relief provisions 
described in Section III.E. were not included in the analysis. EPA 
considers the flexibility provisions to be a significant regulatory 
alternative since they meet the Agency's air quality objectives while 
minimizing significant economic impacts on small equipment 
manufacturers.
3. SBREFA Panel and Other Regulatory Alternatives
    Consistent with SBREFA, EPA convened a Small Business Advocacy 
Review Panel on March 25, 1997 to collect the advice and 
recommendations of representatives of small entities that may be 
affected by the proposed rule and to report on those comments. The 
Panel, consisting of representatives of the Small Business 
Administration, the Office of Management and Budget, and EPA, issued a 
report on May 23, 1997.43
---------------------------------------------------------------------------

    \43\ ``Final Report of the SBREFA Small Business Advocacy Review 
Panel for Control of Emissions of Air Pollution from Nonroad Diesel 
Engines'', May 23, 1997 (available in Air Docket A-96-40).
---------------------------------------------------------------------------

    Accordingly, during the development of this proposal, EPA and the 
SBREFA Panel were in contact with representatives of small nonroad 
diesel equipment manufacturers, small nonroad diesel engine 
manufacturers, small nonroad engine rebuilders/remanufacturers, and 
small post-manufacture engine marinizers. In its final report, the 
SBREFA Panel encouraged EPA to continue to seek information and conduct 
analysis relating the number of small entities potentially affected by 
this proposed rule. The Panel also encouraged EPA to consider the 
potential overlap with Occupational Safety and Health Administration 
(OSHA) regulations related to ambient CO levels and to design the rule 
to minimize the need for record keeping and reporting. The Agency 
requests additional information, comments, and suggestions on the 
number of small entities and the potential overlap with OSHA CO limits 
in response to this proposal. Proposed measures to minimize record 
keeping and reporting are discussed in Section III.E. of this proposal.
    In addition, the Panel believed that a set of five alternatives to 
the provisions outlined in the Supplemental ANPRM, considered as an 
integrated package, would provide significant flexibility and burden 
reduction for small entities subject to the proposed rule. The Panel 
believed that EPA should consider conducting further analysis on these 
five alternatives and proposing or soliciting comment on them in this 
proposal. It is important to note that the Panel's findings are based 
on the information available at the time the Panel report was drafted. 
The Panel makes its report at an early stage of the process of 
promulgating a rule and its report should be considered in that light.
    EPA is proposing or soliciting comment in this proposal on the five 
regulatory alternatives, based on EPA's analysis and agreement with the 
Panel's findings (see Section III.E.). These alternatives meet the 
Agency's air quality objectives while maximizing the compliance 
flexibility for small manufacturers of nonroad equipment and small 
marinizers. A more detailed discussion on EPA's outreach and these 
significant regulatory alternatives is provided in the initial 
regulatory flexibility analysis (found in Chapter 4 of the Draft RIA) 
and in Section III.E. of this proposal.

C. Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been submitted for approval to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. A copy 
of any of the submitted Information Collection Requests (ICR) documents 
may be obtained from Sandy Farmer, Regulatory Information Division, 
U.S. Environmental Protection Agency (2136); 401 M St., S.W.; 
Washington, DC 20460 or by calling (202) 260-2740. The following ICR 
documents have been prepared by EPA:

------------------------------------------------------------------------
             EPA ICR #                              Title               
------------------------------------------------------------------------
0011.09...........................  Selective Enforcement Auditing and  
                                     recordkeeping requirements for on- 
                                     highway HDE, nonroad compression   
                                     ignition engines, and on-highway   
                                     light-duty vehicles and light duty 
                                     trucks.                            
0095.10...........................  Pre-certification and testing       
                                     exemption reporting and            
                                     recordkeeping requirements.        
0282.10...........................  Emission Defect Information and     
                                     Voluntary Emission recall reports. 
1684.04...........................  Compression ignition non-road engine
                                     certification application.         
1695.03...........................  Amendment to the Information        
                                     Collection Request Emission        
                                     Standards for New Nonroad Spark-   
                                     Ignition Engines.                  
1826.01...........................  Information Collection for Equipment
                                     Manufacturer Flexibility.          
------------------------------------------------------------------------

    The Agency proposes to collect information related to certification 
results, durability, maintenance, and averaging, banking and trading. 
This information will be used to ensure compliance with and enforce the 
provisions in this rule. Section 208(a) of the Clean Air Act requires 
that manufacturers provide information the Administrator may reasonably 
require to determine compliance with the regulations; submission of the 
information is therefore mandatory. EPA will consider confidential all 
information meeting the requirements of Sec. 208(c) of the Clean Air 
Act.
    These collections of information have an estimated annual burden 
averaging 3100 hours annually for a typical engine manufacturer. The 
estimated likely respondents is 58 with annual operational and 
maintenance costs of $195,000. However, the hours and annual cost of 
information collection activities by a given manufacturer depends on 
manufacturer-specific variables, such as the number of engine

[[Page 50193]]

families, production changes, emissions defects, and so forth. Burden 
means the total time, effort, or financial resources expended by 
persons to generate, maintain, retain, or disclose or provide 
information to or for a federal agency. This includes the time needed 
to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
and transmit or otherwise disclose the information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
    Comments are requested on the Agency's need for this information, 
the accuracy of the provided burden estimates, and any suggested 
methods for minimizing respondent burden, including through the use of 
automated collection techniques. Send comments on the ICR to the 
Director, OPPE Regulatory Information Division; U.S. Environmental 
Protection Agency (2136); 401 M St., S.W.; Washington, DC 20460; and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, 725 17th St., N.W., Washington, DC 20503, marked 
``Attention: Desk Officer for EPA.'' Include the ICR number in any 
correspondence. Since OMB is required to make a decision concerning the 
ICR between 30 and 60 days after publication in the Federal Register, a 
comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days after publication in the Federal Register. 
The final rule will respond to any OMB or public comments on the 
information collection requirements contained in this proposal.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``federal mandates'' that 
may result in expenditures to state, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more for 
any one year. Before promulgating an EPA rule for which a written 
statement is needed, section 205 of the UMRA generally requires EPA to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule. The provisions of 
section 205 do not apply when they are inconsistent with applicable 
law. Moreover, section 205 allows EPA to adopt an alternative other 
than the least costly, most cost-effective, or least burdensome 
alternative if the Administrator publishes with the final rule an 
explanation of why that alternative was not adopted. Before EPA 
establishes any regulatory requirements that may significantly or 
uniquely affect small governments, including tribal governments, it 
must have developed under section 203 of the UMRA a small government 
agency plan. The plan must provide for notifying potentially affected 
small governments, enabling officials of affected small governments to 
have meaningful and timely input in the development of EPA regulatory 
proposals with significant federal intergovernmental mandates, and 
informing, educating, and advising small governments on compliance with 
the regulatory requirements.
    This proposed rule contains no federal mandates (under the 
regulatory provisions of Title II of the UMRA) for state, local, or 
tribal governments. The rule imposes no enforceable duties on any of 
these governmental entities. Nothing in the proposed program would 
significantly or uniquely affect small governments. EPA has determined 
that this rule contains federal mandates that may result in 
expenditures of $100 million or more in any one year for the private 
sector. EPA believes that the proposed program represents the least 
costly, most cost-effective approach to achieving the air quality goals 
of the proposed rule. The cost-benefit analysis required by UMRA is 
contained in the RIA. The reader is directed to Section VIII.A. above, 
Administrative Designation and Regulatory Analysis, for further 
information regarding these analyses.

IX. Statutory Authority

    In accordance with section 213(a) of the Clean Air Act, 42 U.S.C. 
7547(a), EPA conducted a study of emissions from nonroad engines, 
vehicles, and equipment in 1991. Based on the results of that study, 
EPA determined that emissions of NOX, VOCs (including HC), 
and CO from nonroad engines and equipment contribute significantly to 
ozone and CO concentrations in more than one nonattainment area (see 59 
FR 31306, June 17, 1994). Given this determination, section 213(a)(3) 
of the Act requires EPA to promulgate (and from time to time revise) 
emissions standards for those classes or categories of new nonroad 
engines, vehicles, and equipment that in EPA's judgment cause or 
contribute to such air pollution. EPA has determined that the engines 
that would be regulated under this proposal ``cause or contribute'' to 
such air pollution. (See the June 1994 final rule and Section II.A.3. 
above).
    Where EPA determines that other emissions from new nonroad engines, 
vehicles, or equipment significantly contribute to air pollution that 
may reasonably be anticipated to endanger public health or welfare, 
section 213(a)(4) authorizes EPA to establish (and from time to time 
revise) emission standards from those classes or categories of new 
nonroad engines, vehicles, and equipment that EPA determines cause or 
contribute to such air pollution. In the June 1994 final rule, EPA made 
this determination for missions of PM and smoke from nonroad engines in 
general and for CI nonroad engines rated over 37 kW. With this 
document, EPA is making the same findings for nonroad diesel engines 
rated under 37 kW. (See Section II.A.3. above).

List of Subjects

40 CFR Part 9

    Reporting and recordkeeping requirements.

40 CFR Part 86

    Administrative practice and procedure, Confidential business 
information, Labeling, Motor vehicle engine pollution, Reporting and 
recordkeeping requirements.

40 CFR Part 89

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Diesel fuel, Motor vehicles, Motor vehicle 
pollution, Reporting and recordkeeping requirements, Research.

    Dated: August 29, 1997.
Carol M. Browner,
Administrator.

    For the reasons set out in the preamble, title 40, chapter I, parts 
9, 86, and 89 of the Code of Federal Regulations are proposed to be 
amended as set forth below.

[[Page 50194]]

PART 9--[AMENDED]

    1. The authority citation for part 9 continues to read as follows:

    Authority: 7 U.S.C. 135 et seq., 136-136y; 15 U.S.C. 2001, 2003, 
2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 348; 31 U.S.C. 9701; 33 
U.S.C. 1251 et seq., 1311, 1313d, 1314, 1321, 1326, 1330, 1344, 1345 
(d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 CFR, 1971-1975 Comp. 
p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g, 300g-1, 300g-2, 
300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-2, 300j-3, 300j-4, 
300j-9, 1857 et seq., 6901-6992k, 7401-7671q, 7542, 9601-9657, 
11023, 11048.

    2. Section 9.1 is amended in the table by removing the center 
heading ``Control of Emissions From New and In-Use Nonroad Engines'' 
and the entries under that center heading and adding a new center 
heading and entries in numerical order to read as follows:


Sec. 9.1  OMB approvals under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
                                                             OMB control
                      40 CFR citation                            No.    
------------------------------------------------------------------------
                                                                        
                 *        *        *        *        *                  
  Control of Emissions From New and In-Use Compression-Ignition Nonroad 
                                 Engines                                
89.1.......................................................    2060-0124
89.2.......................................................    2060-0124
89.114-89.120..............................................    2060-0104
89.122-89.127..............................................    2060-0104
89.129.....................................................    2060-0104
89.203-89.207..............................................    2060-0104
89.209--89.211.............................................    2060-0104
89.304-89.331..............................................    2060-0104
89.404-89.424..............................................    2060-0104
89.505-89.510..............................................    2060-0064
89.511-89.512..............................................    2060-0064
89.603-89.605..............................................    2060-0095
89.607-89.610..............................................    2060-0095
89.611.....................................................    2060-0007
                                                               2060-0095
89.612.....................................................    2060-0095
89.801-89.803..............................................    2060-0048
89.903.....................................................    2060-0124
89.905-89.911..............................................    2060-0007
                                                                        
                  *        *        *        *        *                 
------------------------------------------------------------------------

PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY VEHICLES 
AND ENGINES

    3. The heading of part 86 is revised as set forth above.
    4. The authority citation for part 86 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

    5. Section 86.884-8 as amended at 62 FR 47122 effective January 5, 
1998, is amended by revising the table in paragraph (c)(4) to read as 
follows:


Sec. 86.884-8  Dynamometer and engine equipment.

* * * * *
    (c) * * *
    (4) * * *

------------------------------------------------------------------------
                                                               Exhaust  
                                                                 pipe   
                  Maximum rated horsepower                     diameter 
                                                               (inches) 
------------------------------------------------------------------------
HP50............................................          1.5
50HP<100........................................          2.0
100HP<200.......................................          3.0
200HP<300.......................................          4.0
300HP<500.......................................          5.0
HP500...........................................          6.0
------------------------------------------------------------------------

* * * * *

PART 89--CONTROL OF EMISSIONS FROM NEW AND IN-USE COMPRESSION-
IGNITION NONROAD ENGINES

    6. The heading of part 89 is revised as set forth above.
    7. The authority citation for part 89 continues to read as follows:

    Authority: Sections 202, 203, 204, 205, 206, 207, 208, 209, 213, 
215, 216, and 301(a) of the Clean Air Act, as amended (42 U.S.C. 
7521, 7522, 7523, 7524, 7525, 7541, 7542, 7543, 7547, 7549, 7550, 
and 7601(a)).

    8. The following sections are redesignated as set forth in the 
following table:

------------------------------------------------------------------------
          Old designation                      New designation          
------------------------------------------------------------------------
89.101-96..........................                   89.101            
89.102-96..........................                   89.102            
89.103-96..........................                   89.103            
89.104-96..........................                   89.104            
89.105-96..........................                   89.105            
89.106-96..........................                   89.106            
89.107-96..........................                   89.107            
89.108-96..........................                   89.108            
89.109-96..........................                   89.109            
89.110-96..........................                   89.110            
89.111-96..........................                   89.111            
89.112-96..........................                   89.112            
89.113-96..........................                   89.113            
89.114-96..........................                   89.114            
89.115-96..........................                   89.115            
89.116-96..........................                   89.116            
89.117-96..........................                   89.117            
89.118-96..........................                   89.118            
89.119-96..........................                   89.119            
89.120-96..........................                   89.120            
89.121-96..........................                   89.121            
89.122-96..........................                   89.122            
89.123-96..........................                   89.123            
89.124-96..........................                   89.124            
89.125-96..........................                   89.125            
89.126-96..........................                   89.126            
89.127-96..........................                   89.127            
89.128-96..........................                   89.128            
89.129-96..........................                   89.129            
89.201-96..........................                   89.201            
89.202-96..........................                   89.202            
89.203-96..........................                   89.203            
89.204-96..........................                   89.204            
89.205-96..........................                   89.205            
89.206-96..........................                   89.206            
89.207-96..........................                   89.207            
89.208-96..........................                   89.208            
89.209-96..........................                   89.209            
89.210-96..........................                   89.210            
89.211-96..........................                   89.211            
89.212-96..........................                   89.212            
89.301-96..........................                   89.301            
89.302-96..........................                   89.302            
89.303-96..........................                   89.303            
89.304-96..........................                   89.304            
89.305-96..........................                   89.305            
89.306-96..........................                   89.306            
89.307-96..........................                   89.307            
89.308-96..........................                   89.308            
89.309-96..........................                   89.309            
89.310-96..........................                   89.310            
89.311-96..........................                   89.311            
89.312-96..........................                   89.312            
89.313-96..........................                   89.313            
89.314-96..........................                   89.314            
89.315-96..........................                   89.315            
89.316-96..........................                   89.316            
89.317-96..........................                   89.317            
89.318-96..........................                   89.318            
89.319-96..........................                   89.319            
89.320-96..........................                   89.320            
89.321-96..........................                   89.321            
89.322-96..........................                   89.322            
89.323-96..........................                   89.323            
89.324-96..........................                   89.324            
89.325-96..........................                   89.325            
89.326-96..........................                   89.326            
89.327-96..........................                   89.327            
89.328-96..........................                   89.328            
89.329-96..........................                   89.329            
89.330-96..........................                   89.330            
89.331-96..........................                   89.331            
89.401-96..........................                   89.401            
89.402-96..........................                   89.402            
89.403-96..........................                   89.403            
89.404-96..........................                   89.404            
89.405-96..........................                   89.405            
89.406-96..........................                   89.406            
89.407-96..........................                   89.407            
89.408-96..........................                   89.408            
89.409-96..........................                   89.409            
89.410-96..........................                   89.410            
89.411-96..........................                   89.411            
89.412-96..........................                   89.412            
89.413-96..........................                   89.413            
89.414-96..........................                   89.414            
89.415-96..........................                   89.415            
89.416-96..........................                   89.416            
89.417-96..........................                   89.417            
89.418-96..........................                   89.418            
89.419-96..........................                   89.419            
89.420-96..........................                   89.420            
89.421-96..........................                   89.421            
89.422-96..........................                   89.422            
89.423-96..........................                   89.423            
89.424-96..........................                   89.424            
89.425-96..........................                   89.425            
89.501-96..........................                   89.501            
89.502-96..........................                   89.502            
89.503-96..........................                   89.503            
89.504-96..........................                   89.504            
89.505-96..........................                   89.505            
89.506-96..........................                   89.506            
89.507-96..........................                   89.507            
89.508-96..........................                   89.508            
89.509-96..........................                   89.509            
89.510-96..........................                   89.510            
89.511-96..........................                   89.511            
89.512-96..........................                   89.512            

[[Page 50195]]

                                                                        
89.513-96..........................                   89.513            
89.514-96..........................                   89.514            
89.515-96..........................                   89.515            
89.516-96..........................                   89.516            
89.601-96..........................                   89.601            
89.602-96..........................                   89.602            
89.603-96..........................                   89.603            
89.604-96..........................                   89.604            
89.605-96..........................                   89.605            
89.606-96..........................                   89.606            
89.607-96..........................                   89.607            
89.608-96..........................                   89.608            
89.609-96..........................                   89.609            
89.610-96..........................                   89.610            
89.611-96..........................                   89.611            
89.612-96..........................                   89.612            
89.613-96..........................                   89.613            
------------------------------------------------------------------------

    9. In part 89, all internal section references are revised as 
indicated in the above redesignation table.

Subpart A--[Amended]

    10. Section 89.1 is amended by revising paragraphs (a) and (b)(4) 
to read as follows:


Sec. 89.1  Applicability.

    (a) This part applies to nonroad compression-ignition engines.
    (b) * * *
    (4) Engines used in marine vessels as defined in the General 
Provisions of the United States Code, 1 U.S.C. 3 , if those engines 
have a rated power at or above 37 kW.
    11. Section 89.2 is amended by adding new definitions in 
alphabetical order to read as follows:


Sec. 89.2  Definitions.

* * * * *
    Auxiliary marine diesel engine means a marine diesel engine that is 
not a propulsion marine diesel engine.
    Blue Sky Series engine means a low-emitting nonroad engine meeting 
the requirements of Sec. 89.112(f).
* * * * *
    Compression-ignition engine means an engine with operating 
characteristics significantly similar to the theoretical Diesel 
combustion cycle. The non-use of a throttle during normal operation is 
indicative of a compression-ignition engine.
    Constant-speed engine means an engine that is governed to operate 
only at rated speed.
    Crankcase emissions means airborne substances emitted to the 
atmosphere from any portion of the engine crankcase ventilation or 
lubrication systems.
* * * * *
    Farm equipment or vehicle has the meaning contained in 40 CFR part 
85, subpart Q.
    Full load governed speed is the maximum full load speed as 
specified by the manufacturer in the sales and service literature and 
certification application. This speed is the highest engine speed with 
an advertised power greater than zero.
* * * * *
    Intermediate speed means peak torque speed if peak torque speed 
occurs from 60 to 75 percent of rated speed. If peak torque speed is 
less than 60 percent of rated speed, intermediate speed means 60 
percent of rated speed. If peak torque speed is greater than 75 percent 
of rated speed, intermediate speed means 75 percent of rated speed.
* * * * *
    Marine diesel engine means a compression-ignition engine that is 
intended to be installed on a vessel.
* * * * *
    Post-manufacture marinizer means a person who produces a marine 
diesel engine by substantially modifying a certified or uncertified 
complete or partially complete engine; and is not controlled by the 
manufacturer of the base engine or by an entity that also controls the 
manufacturer of the base engine. For the purpose of this definition, 
``substantially modify'' means changing an engine in a way that could 
change engine emission characteristics.
* * * * *
    Propulsion marine diesel engine means a marine diesel engine that 
is intended to move a vessel through the water or direct the movement 
of a vessel.
    Rated speed is the maximum full load governed speed for governed 
engines and the speed of maximum horsepower for ungoverned engines.
    Specific emissions means emissions expressed on the basis of 
observed brake power, using units of g/kW-hr. Observed brake power 
measurement includes accessories on the engine if these accessories are 
required for running an emission test (except for the cooling fan). 
When it is not possible to test the engine in the gross conditions, for 
example, if the engine and transmission form a single integral unit, 
the engine may be tested in the net condition. Power corrections from 
net to gross conditions will be allowed with prior approval of the 
Administrator.
* * * * *
    Tier 1 engine means an engine subject to the Tier 1 emission 
standards listed in Sec. 89.112(a).
    Tier 2 engine means an engine subject to the Tier 2 emission 
standards listed in Sec. 89.112(a).
    Tier 3 engine means an engine subject to the Tier 3 emission 
standards listed in Sec. 89.112(a).
* * * * *
    U.S.-directed production volume means the number of nonroad 
equipment or vehicles units produced by a manufacturer for which the 
manufacturer has reasonable assurance that sale was or will be made to 
ultimate purchasers in the United States.
* * * * *
    Vessel has the meaning given to it in 1 U.S.C. 3.
    12. Section 89.3 is amended by adding new acronyms in alphabetical 
order to read as follows:


Sec. 89.3  Acronyms and abbreviations.

* * * * *
EGR  Exhaust gas recirculation
* * * * *
NMHC  Nonmethane hydrocarbon
* * * * *
PM  Particulate matter
* * * * *


Sec. 89.4  [Removed and reserved]

    13. Remove and reserve Sec. 89.4.
    14. Section 89.6 is amended in paragraph (b)(1) by removing the 
last entry in the table and adding a new entry in its place and in 
paragraph (b)(2) by adding in alpha-numeric order a new entry to the 
table to read as follows:


Sec. 89.6  Reference materials.

* * * * *
    (b) * * *
    (1) * * *

------------------------------------------------------------------------
                                                         40 CFR part 89 
                Document No. and name                      reference    
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
ASTM E29-93a: ``Standard Practice for Using                             
 Significant Digits in Test Data to Determine                           
 Conformance with Specifications''...................    89.120; 89.207;
                                                                  89.509
------------------------------------------------------------------------

    (2) * * *

------------------------------------------------------------------------
                                                         40 CFR part 89 
               Document number and name                    reference    
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
SAE J1151 December 1991: ``Methane Measurement Using                    
 Gas Chromatography''................................             89.309
------------------------------------------------------------------------

* * * * *

Subpart B--[Amended]

    15. The newly designated Sec. 89.102 is amended by revising 
paragraph (a) and

[[Page 50196]]

adding new paragraphs (c), (d), (e), (f), and (g) to read as follows:


Sec. 89.102  Effective dates, optional inclusion.

    (a) This subpart applies to all engines described in Sec. 89.101 
with the following power rating and manufactured after the following 
dates:
    (1) Less than 19 kW and manufactured on or after January 1, 2000;
    (2) Greater than or equal to 19 kW but less than 37 kW and 
manufactured on or after January 1, 1999;
    (3) Greater than or equal to 37 kW but less than 75 kW and 
manufactured on or after January 1, 1998;
    (4) Greater than or equal to 75 kW but less than 130 kW and 
manufactured on or after January 1, 1997;
    (5) Greater than or equal to 130 kW but less than 560 kW and 
manufactured on or after January 1, 1996;
    (6) Greater than or equal to 560 kW and manufactured on or after 
January 1, 2000.
* * * * *
    (c) Engines meeting the voluntary standards described in 
Sec. 89.112(f) may be designated as Blue Sky Series engines through the 
2004 model year.
    (d) Implementation flexibility for equipment and vehicle 
manufacturers. Nonroad equipment and vehicle manufacturers and may take 
any of the otherwise prohibited actions identified in 
Sec. 89.1003(a)(1) with respect to the following nonroad equipment and 
vehicles, subject to the requirements of paragraph (e) of this section. 
The following allowances apply separately to each engine power category 
subject to standards under Sec. 89.112:
    (1) Percent-of-production allowances--(i) Farm equipment or 
vehicles at or above 37 kW. For farm equipment or vehicles with engines 
rated at or above 37 kW, a manufacturer may take any of the actions 
identified in Sec. 89.1003(a)(1) [Alternative 1: for up to 30 percent 
of its U.S.-directed production volume of such equipment and vehicles 
in the first year that Tier 2 engine standards apply to such engines, 
and for up to 15 percent of its U.S.-directed production volume in each 
of the seven years following the first year,] [Alternative 2: for a 
portion of its U.S.-directed production volume of such equipment and 
vehicles during the eight years immediately following the date on which 
Tier 2 engine standards first apply to engines used in such equipment 
and vehicles, provided that the eight-year sum of these portions in 
each year, as expressed as a percentage for each year, does not exceed 
135, and] provided that all such equipment and vehicles or equipment 
must contain Tier 1 engines;
    (ii) Farm equipment or vehicles rated under 37 kW. For farm 
equipment or vehicles with engines rated under 37 kW, a manufacturer 
may take any of the actions identified in Sec. 89.1003(a)(1) 
[Alternative 1: for up to 30 percent of its U.S.-directed production 
volume of such equipment and vehicles in the first year that Tier 1 
engine standards apply to such engines, and for up to 15 percent of its 
U.S.-directed production volume in each of the three [seven] years 
following the first year] [Alternative 2: for a portion of its U.S.-
directed production volume of such equipment and vehicles during the 
four [eight] years immediately following the date on which Tier 1 
engine standards first apply to engines used in such equipment and 
vehicles, provided that the four[eight]-year sum of these portions in 
each year, as expressed as a percentage for each year, does not exceed 
75 [135]];
    (iii) Other equipment rated at or above 37 kW. For all other 
nonroad equipment and vehicles with engines rated at or above 37 kW, a 
manufacturer may take any of the actions identified in 
Sec. 89.1003(a)(1) [Alternative 1: for up to 15 percent of its U.S.-
directed production volume of such equipment and vehicles in the first 
year that Tier 2 engine standards apply to such engines, and for up to 
5 percent of its U.S.-directed production volume in each of the six 
years following the first year,] [Alternative 2: for a portion of its 
U.S.-directed production volume of such equipment and vehicles during 
the seven years immediately following the date on which Tier 2 engine 
standards first apply to engines used in such equipment and vehicles, 
provided that the seven-year sum of these portions in each year, as 
expressed as a percentage for each year, does not exceed 45, and] 
provided that all such equipment and vehicles or equipment must contain 
Tier 1 engines;
    (iv) Other equipment rated under 37 kW. For all other nonroad 
equipment and vehicles with engines rated under 37 kW, a manufacturer 
may take any of the actions identified in Sec. 89.1003(a)(1) 
[Alternative 1: for up to 15 percent of its U.S.-directed production 
volume of such equipment and vehicles in the first year that Tier 1 
engine standards apply to such engines, and for up to 5 percent of its 
U.S.-directed production volume in each of the three [six] years 
following the first year][Alternative 2: for a portion of its U.S.-
directed production volume of such equipment and vehicles during the 
four [seven] years immediately following the date on which Tier 1 
engine standards first apply to engines used in such equipment and 
vehicles, provided that the four[seven]-year sum of these portions in 
each year, as expressed as a percentage for each year, does not exceed 
30 [45]].
    (2) Small volume allowances. A nonroad equipment or vehicle 
manufacturer may exceed the production percentages in paragraph (d)(1) 
of this section in any of the years for which these percentages apply, 
provided that in each regulated power category, the manufacturer's 
excepted equipment and vehicles in that year does not exceed 100 
units[, and is limited to a single equipment or vehicle model].
Potential Alternative for Paragraph (d)(2)
    (d)(2) Small volume allowances. A nonroad equipment or vehicle 
manufacturer may exceed the production percentages in paragraph (d)(1) 
of this section, provided that in each regulated power category, the 
manufacturer's total of excepted equipment and vehicles over the years 
in which the percent-of-production allowance applies does not exceed 
100 units times the number of years in which the percent-of-production 
allowance applies[, and is limited to a single equipment or vehicle 
model].
    (3) Emission credit-derived allowances. A nonroad equipment or 
vehicle manufacturer may exceed the allowances in paragraphs (d)(1) and 
(d)(2) of this section in any of the years for which these allowances 
apply, by retiring sufficient NMHC + NOX and PM emission 
credits obtained under the provisions of subpart C of this part. 
Equipment or vehicles for which these emission credit-derived 
allowances are used shall be excluded from the determinations required 
in paragraph (e) of this section.
    (i) The amount of emission credits, in megagrams, to be retired for 
each additional allowance shall be determined separately for NMHC + 
NOX and for PM as follows:

    Emission credits = [(Previous level)--(New level)]  x  (Category 
PR)  x  (UL)  x  (10 -6)


[[Page 50197]]


Where:

Previous level = 10.5 g/kW-hr NMHC + NOX and 0.54 g/kW-hr 
PM if the equipment for which the allowance is being used has an 
engine rated at or above 37 kW, or 16.0 g/kW-hr NMHC + 
NOX and 1.2 g/kW-hr for PM if the equipment for which the 
allowance is being used has an engine rated under 37 kW.
New level = The emission standard that would apply to the engine 
used in the equipment if no allowance were to be used.
Category PR = The midpoint of the power range in Sec. 89.112 
applying to the engine used in the equipment for which the allowance 
is being used.
UL = The useful life for the engine family, in hours.

    (ii) A nonroad equipment or vehicle manufacturer choosing to retire 
emission credits must submit an end-of-the-year report in accordance 
with the requirements of Sec. 89.211 in each year that credits are 
retired.
    (4) Inclusion of previous-tier engines. Equipment and vehicles 
built with previous tier or noncertified engines under the existing 
inventory provisions of Sec. 89.1003(b)(4) need not be included in 
determining compliance with paragraphs (d)(1), (d)(2), and (d)(3) of 
this section, at the manufacturer's option.
    (e) Determination of compliance and recordkeeping. The following 
shall apply to nonroad equipment or vehicle manufacturers who produce 
excepted equipment or vehicles under the provisions of paragraph (d) of 
this section:
    (1) After each year in which excepted equipment or vehicles are 
produced, a determination of compliance with the requirements of 
paragraph (d) of this section shall be made. This determination shall 
be based on actual production information from the subject year and 
shall be made within 3 months after the availability of such 
information. Should any such determination reveal that a production 
percentage allowance (or small volume allowance where applied) for a 
power category has been exceeded for the subject year, the nonroad 
equipment or vehicle manufacturer shall adjust that category's 
percentage allowance and small volume allowance for the year after the 
subject year. The percentage allowance shall be recalculated by 
subtracting the excess percentage of excepted machines from the 
percentage allowance that would otherwise apply in the year after the 
subject year (from zero in the year after the final year of the 
allowance). The small volume allowance shall be recalculated by 
subtracting the excess number of excepted machines in the subject year 
from 100 (from zero in the year after the final year of the allowance). 
If both the recalculated percentage allowance and the recalculated 
small volume allowance for the year after the subject year is less than 
zero in any power category, then the manufacturer is in violation of 
section 203 of the Act and Sec. 89.1003.
Potential Alternative for Paragraph (e)(1)
    (e)(1) For each power category in which excepted equipment or 
vehicles are produced, a determination of compliance with the 
requirements of paragraph (d) of this section shall be made. This 
determination shall be made no later than December 31 of the year 
following the last year in which allowances apply, and shall be based 
on actual production information from the subject years. Should any 
such determination reveal that both the percentage allowance and the 
small volume allowance have been exceeded, then the manufacturer is in 
violation of section 203 of the Act and Sec. 89.1003.
    (2) A nonroad equipment or vehicle manufacturer shall keep records 
of all equipment and vehicles excepted under the provisions of 
paragraph (d) of this section, for each power category in which 
exceptions are taken. These records shall include equipment and engine 
model numbers, serial numbers, and dates of manufacture, and engine 
rated power. In addition, the manufacturer shall keep records 
sufficient to demonstrate the determinations of compliance required in 
paragraph (e)(1) of this section. All such records shall be kept until 
at least two full years after the final year in which exceptions are 
available for each power category.
    (f) Hardship relief. Nonroad equipment and vehicle manufacturers, 
and post-manufacture marinizers, that qualify as small entities under 
13 CFR part 121 may take any of the otherwise prohibited actions 
identified in Sec. 89.1003(a)(1) beyond those allowed under paragraph 
(d) of this section, subject to approval by the Administrator and the 
following requirements:
    (1) Application for relief must be submitted to the Engine Programs 
and Compliance Division of the EPA in writing prior to the earliest 
date in which the applying manufacturer would be in violation of 
Sec. 89.1003.
    (2) Evidence must be provided that the conditions causing the 
impending violation are not substantially the fault of the applying 
manufacturer.
    (3) Evidence must be provided that the applying manufacturer may be 
forced to permanently close or sell its equipment-producing operation 
if relief is not granted.
    (4) Any relief granted must begin within one year after the 
implementation date of the standard applying to engines being used in 
the equipment for which relief is requested, and may not exceed one 
year in duration.
    (g) Allowance for the production of engines. Engine manufacturers 
may take any of the otherwise prohibited actions identified in 
Sec. 89.1003(a)(1) with regard to uncertified engines or Tier 1 
engines, as appropriate, if the engine manufacturer has received 
written assurance that the engine is required to meet the demand for 
engines created under paragraphs (d) and (f) of this section.
    16. The newly designated Sec. 89.104 is amended by revising 
paragraphs (a), (b), and (c) to read as follows:


Sec. 89.104  Useful life, recall, and warranty periods.

    (a) The useful life is based on the rated power and rated speed of 
the engine.
    (1) For all engines rated under 19 kW, and for constant speed 
engines rated under 37 kW rated speeds greater than or equal to 3,000 
rpm, the useful life is a period of 3,000 hours or five years of use, 
whichever first occurs.
    (2) For all other engines rated at or above 19 kW and under 37 kW, 
the useful life is a period of 5,000 hours or seven years of use, 
whichever first occurs.
    (3) For all engines rated at or above 37 kW, the useful life is a 
period of 8,000 hours of operation or ten years of use, whichever first 
occurs.
    (b) Engines are subject to recall testing for a period based on the 
rated power and rated speed of the engines. However, in a recall, 
engines in the subject class or category would be subject to recall 
regardless of actual years or hours of operation.
    (1) For all engines rated under 19 kW and for constant speed 
engines rated under 37 kW with rated speeds greater than or equal to 
3,000 rpm, the engines are subject to recall testing for a period of 
2,250 hours or four years of use, whichever first occurs.
    (2) For all other engines rated at or above 19 kW and under 37 kW, 
the engines are subject to recall for a period of 3,750 hours or five 
years of use, whichever first occurs.
    (3) For all engines rated at or above 37 kW, the engines are 
subject to recall for a period of 6,000 hours of operation or seven 
years of use, whichever first occurs.
    (c) Warranties imposed by the Clean Air Act for engines rated under 
19 kW

[[Page 50198]]

are for 1,500 hours of operation or three years of use, whichever first 
occurs. For engines rated at or above 19 kW, warranties imposed by the 
Clean Air Act are for 3,000 hours of operation or five years of use, 
whichever first occurs.
* * * * *
    17. The newly designated Sec. 89.109 is revised to read as follows:


Sec. 89.109  Maintenance instructions and minimum allowable maintenance 
intervals.

    (a) The manufacturer must furnish or cause to be furnished to the 
ultimate purchaser of each new nonroad engine written instructions for 
the maintenance needed to ensure proper functioning of the emission 
control system. Paragraphs (b) through (g) of this section do not apply 
to Tier 1 engines with rated power at or above 37 kW.
    (b) Maintenance performed on equipment, engines, subsystems or 
components used to determine exhaust emission deterioration factors is 
classified as either emission-related or nonemission-related and each 
of these can be classified as either scheduled or unscheduled. Further, 
some emission-related maintenance is also classified as critical 
emission-related maintenance.
    (c) This paragraph (c) specifies emission-related scheduled 
maintenance for purposes of obtaining durability data and for inclusion 
in maintenance instructions furnished to purchasers of new nonroad 
engines. The maintenance intervals specified below are minimum 
intervals:
    (1) All emission-related scheduled maintenance for purposes of 
obtaining durability data must occur at the same hours of use intervals 
that will be specified in the manufacturer's maintenance instructions 
furnished to the ultimate purchaser of the engine under paragraph (a) 
of this section. This maintenance schedule may be updated as necessary 
throughout the testing of the engine, provided that no maintenance 
operation is deleted from the maintenance schedule after the operation 
has been performed on the test vehicle or engine.
    (2) Any emission-related maintenance which is performed on 
vehicles, engines, subsystems, or components must be technologically 
necessary to assure in-use compliance with the emission standards. The 
manufacturer must submit data which demonstrate to the Administrator 
that all of the emission-related scheduled maintenance which is to be 
performed is technologically necessary. Scheduled maintenance must be 
approved by the Administrator prior to being performed or being 
included in the maintenance instructions provided to the purchasers 
under paragraph (a) of this section. The Administrator has determined 
that emission-related maintenance in addition to or at shorter 
intervals than those outlined in paragraphs (c)(3) and (c)(4) of this 
section is not technologically necessary to ensure in-use compliance 
and therefore will not be accepted. However, the Administrator may 
determine that maintenance even more restrictive (e.g., longer 
intervals) than that listed in paragraphs (c)(3) and (c)(4) of this 
section is also not technologically necessary.
    (3) For nonroad compression-ignition engines, the adjustment, 
cleaning, repair, or replacement listed in paragraphs (c)(3)(i) through 
(c)(3)(iii) of this section shall occur at 1,500 hours of use and at 
1,500-hour intervals thereafter.
    (i) Exhaust gas recirculation system-related filters and coolers.
    (ii) Positive crankcase ventilation valve.
    (iii) Fuel injector tips (cleaning only).
    (4) The adjustment, cleaning and repair in paragraphs (c)(4)(i) 
through (c)(4)(vii) of this section shall occur at 3,000 hours of use 
and at 3,000-hour intervals thereafter for nonroad compression-ignition 
engines rated under 130 kW, or at 4,500-hour intervals thereafter for 
nonroad compression-ignition engines rated at or above 130 kW.
    (i) Fuel injectors.
    (ii) Turbocharger.
    (iii) Electronic engine control unit and its associated sensors and 
actuators.
    (iv) Particulate trap or trap-oxidizer system (including related 
components).
    (v) Exhaust gas recirculation system (including all related control 
valves and tubing) except as otherwise provided in paragraph (c)(3)(i) 
of this section.
    (vi) Catalytic convertor.
    (vii) Any other add-on emission-related component (i.e., a 
component whose sole or primary purpose is to reduce emissions or whose 
failure will significantly degrade emission control and whose function 
is not integral to the design and performance of the engine).
    (5)(i) The components listed in paragraphs (c)(5)(i)(A) through 
(c)(5)(i)(F) of this section are currently defined as critical 
emission-related components.
    (A) Catalytic convertor.
    (B) Electronic engine control unit and its associated sensors and 
actuators.
    (C) Exhaust gas recirculation system (including all related 
filters, coolers, control valves, and tubing).
    (D) Positive crankcase ventilation valve.
    (E) Particulate trap or trap-oxidizer system.
    (F) Any other add-on emission-related component (i.e., a component 
whose sole or primary purpose is to reduce emissions or whose failure 
will significantly degrade emission control and whose function is not 
integral to the design and performance of the engine).
    (ii) All critical emission-related scheduled maintenance must have 
a reasonable likelihood of being performed in-use. The manufacturer 
shall be required to show the reasonable likelihood of such maintenance 
being performed in-use. Critical emission-related scheduled maintenance 
items which satisfy one of the conditions defined in paragraphs 
(c)(5)(ii)(A) through (c)(5)(ii)(F) of this section will be accepted as 
having a reasonable likelihood of the maintenance item being performed 
in-use.
    (A) Data are presented which establish for the Administrator a 
connection between emissions and vehicle performance such that as 
emissions increase due to lack of maintenance, vehicle performance will 
simultaneously deteriorate to a point unacceptable for typical driving.
    (B) Survey data are submitted which adequately demonstrate to the 
Administrator that, at an 80 percent confidence level, 80 percent of 
such engines already have this critical maintenance item performed in-
use at the recommended interval(s).
    (C) A clearly displayed visible signal system approved by the 
Administrator is installed to alert the equipment operator that 
maintenance is due. A signal bearing the message ``maintenance needed'' 
or ``check engine,'' or a similar message approved by the 
Administrator, shall be actuated at the appropriate usage point or by 
component failure. This signal must be continuous while the engine is 
in operation and not be easily eliminated without performance of the 
required maintenance. Resetting the signal shall be a required step in 
the maintenance operation. The method for resetting the signal system 
shall be approved by the Administrator. The system must not be designed 
to deactivate upon the end of the useful life of the engine or 
thereafter.
    (D) A manufacturer may desire to demonstrate through a survey that 
a critical maintenance item is likely to be performed without a visible 
signal on a maintenance item for which there is no prior in-use 
experience without the signal. To that end, the manufacturer may in a 
given model year market up to 200 randomly selected vehicles per 
critical emission-related maintenance item without such visible 
signals, and monitor the performance of the critical

[[Page 50199]]

maintenance item by the owners to show compliance with paragraph 
(c)(5)(ii)(B) of this section. This option is restricted to two 
consecutive model years and may not be repeated until any previous 
survey has been completed. If the critical maintenance involves more 
than one engine family, the sample will be sales weighted to ensure 
that it is representative of all the families in question.
    (E) The manufacturer provides the maintenance free of charge, and 
clearly informs the customer that the maintenance is free in the 
instructions provided under paragraph (a) of this section.
    (F) Any other method which the Administrator approves as 
establishing a reasonable likelihood that the critical maintenance will 
be performed in-use.
    (iii) Visible signal systems used under paragraph (c)(5)(ii)(C) of 
this section are considered an element of design of the emission 
control system. Therefore, disabling, resetting, or otherwise rendering 
such signals inoperative without also performing the indicated 
maintenance procedure is a prohibited act.
    (d) Nonemission-related scheduled maintenance which is reasonable 
and technologically necessary (e.g., oil change, oil filter change, 
fuel filter change, air filter change, cooling system maintenance, 
adjustment of idle speed, governor, engine bolt torque, valve lash, 
injector lash, timing, lubrication of the exhaust manifold heat control 
valve, etc.) may be performed on durability vehicles at the least 
frequent intervals recommended by the manufacturer to the ultimate 
purchaser, (e.g., not the intervals recommended for severe service).
    (e) Adjustment of engine idle speed on emission data engines may be 
performed once before the low-hour emission test point. Any other 
engine, emission control system, or fuel system adjustment, repair, 
removal, disassembly, cleaning, or replacement on emission data 
vehicles shall be performed only with advance approval of the 
Administrator.
    (f) Equipment, instruments, or tools may not be used to identify 
malfunctioning, maladjusted, or defective engine components unless the 
same or equivalent equipment, instruments, or tools will be available 
to dealerships and other service outlets and:
    (1) Are used in conjunction with scheduled maintenance on such 
components; or
    (2) Are used subsequent to the identification of a vehicle or 
engine malfunction, as provided in paragraph (e) of this section for 
emission data engines; or
    (3) Unless specifically authorized by the Administrator.
    (g) All test data, maintenance reports, and required engineering 
reports shall be compiled and provided to the Administrator in 
accordance with Sec. 89.124.
    18. The newly designated Sec. 89.110 is amended by removing ``and'' 
at the end of paragraph (b)(9), by adding a semicolon at the end of 
paragraph (b)(10), and by adding new paragraphs (b)(11) and (b)(12) to 
read as follows:


Sec. 89.110  Emission control information label.

* * * * *
    (b) * * *
    (11) Engines belonging to an engine family that has been certified 
as a constant-speed engine using the test cycle specified in Table 2 of 
appendix B to subpart E of this part must contain the statement on the 
label: ``constant-speed only'';
    (12)(i) Engines meeting the voluntary standards described in 
Sec. 89.112(f)(1) to be designated as Blue Sky Series engines must 
contain the statement on the label: ``Blue Sky--Class A''.
    (ii) Engines meeting the voluntary standards described in 
Sec. 89.112(f)(2) to be designated as Blue Sky Series engines must 
contain the statement on the label: ``Blue Sky--Class AA''.
    (iii) Engines meeting the voluntary standards described in 
Sec. 89.112(f)(3) to be designated as Blue Sky Series engines must 
contain the statement on the label: ``Blue Sky--Class AAA''.
* * * * *
    19. The newly designated Sec. 89.112 is amended by revising 
paragraphs (a), (b), and (d), and adding new paragraphs (e) and (f) to 
read as follows:


Sec. 89.112  Oxides of nitrogen, carbon monoxide, hydrocarbon, and 
particulate matter exhaust emission standards.

    (a) Nonroad engines to which this subpart is applicable must meet 
the exhaust emission standards contained in Table 1 as follows:

                                     Table 1.--Emission Standards (g/kW-hr)                                     
----------------------------------------------------------------------------------------------------------------
                                                              Model                                             
       Rated brake power (kW)                 Tier            year      NOX     HC    NMHC+NOX     CO       PM  
----------------------------------------------------------------------------------------------------------------
kW<8................................  Tier 1..............      2000  ......  ......      10.5      8.0      1.0
                                      Tier 2..............      2005  ......  ......       7.5      8.0     0.80
8kW<19...................  Tier 1..............      2000  ......  ......       9.5      6.6     0.80
                                      Tier 2..............      2005  ......  ......       7.5      6.6     0.80
19kW<37..................  Tier 1..............      1999  ......  ......       9.5      5.5     0.80
                                      Tier 2..............      2004  ......  ......       7.5      5.5     0.60
37kW<75..................  Tier 1..............      1998     9.2  ......  ........  .......  .......
                                      Tier 2..............      2004  ......  ......       7.5      5.0     0.40
                                      Tier 3..............      2008  ......  ......       4.7      5.0  .......
75kW<130.................  Tier 1..............      1997     9.2  ......  ........  .......  .......
                                      Tier 2..............      2003  ......  ......       6.6      5.0     0.30
                                      Tier 3..............      2007  ......  ......       4.0      5.0  .......
130kW<225................  Tier 1..............      1996     9.2     1.3  ........     11.4     0.54
                                      Tier 2..............      2003  ......  ......       6.6      3.5     0.20
                                      Tier 3..............      2006  ......  ......       4.0      3.5  .......
225kW<450................  Tier 1..............      1996     9.2     1.3  ........     11.4     0.54
                                      Tier 2..............      2001  ......  ......       6.4      3.5     0.20
                                      Tier 3..............      2006  ......  ......       4.0      3.5  .......
450kW<560................  Tier 1..............      1996     9.2     1.3  ........     11.4     0.54
                                      Tier 2..............      2002  ......  ......       6.4      3.5     0.20
                                      Tier 3..............      2006  ......  ......       4.0      3.5  .......
kW560....................  Tier 1..............      2000     9.2     1.3  ........     11.4     0.54
                                      Tier 2..............      2006  ......  ......       6.4      3.5     0.20
----------------------------------------------------------------------------------------------------------------


[[Page 50200]]

    (b) Exhaust emissions of oxides of nitrogen, carbon monoxide, 
hydrocarbon, and nonmethane hydrocarbon are measured using the 
procedures set forth in subpart E of this part.
* * * * *
    (d) In lieu of the NOX standards, NMHC + NOX 
standards, and PM standards specified in paragraph (a) of this section, 
manufacturers may elect to include engine families in the averaging, 
banking, and trading program, the provisions of which are specified in 
subpart C of this part. The manufacturer must set a family emission 
limit (FEL) not to exceed the levels contained in Table 2. The FEL 
established by the manufacturer serves as the standard for that engine 
family. Table 2 follows:

                           Table 2.--Upper Limit for Family Emission Limits (g/kW-hr)                           
----------------------------------------------------------------------------------------------------------------
                                                                        Model               NMHC+ NOX           
          Rated brake power (kW)                      Tier               year     NOX FEL      FEL       PM FEL 
----------------------------------------------------------------------------------------------------------------
kW<8.....................................  Tier 1...................       2000  .........       16.0        1.2
                                           Tier 2...................       2005  .........       10.5        1.0
8kW<19........................  Tier 1...................       2000  .........       16.0        1.2
                                           Tier 2...................       2005  .........        9.5       0.80
19kW<37.......................  Tier 1...................       1999  .........       16.0        1.2
                                           Tier 2...................       2004  .........        9.5       0.80
37kW<75.......................  Tier 1...................       1998       14.6  .........  .........
                                           Tier 2...................       2004  .........       10.5        1.2
                                           Tier 3...................       2008  .........        7.5           
75kW<130......................  Tier 1...................       1997       14.6  .........  .........
                                           Tier 2...................       2003  .........       10.5        1.2
                                           Tier 3...................       2007  .........        6.6           
130kW<225.....................  Tier 1...................       1996       14.6  .........  .........
                                           Tier 2...................       2003  .........       10.5       0.54
                                           Tier 3...................       2006  .........        6.6           
225kW<450.....................  Tier 1...................       1996       14.6  .........  .........
                                           Tier 2...................       2001  .........       10.5       0.54
                                           Tier 3...................       2006  .........        6.4           
450kW<560.....................  Tier 1...................       1996       14.6  .........  .........
                                           Tier 2...................       2002  .........       10.5       0.54
                                           Tier 3...................       2006  .........        6.4           
kW560.........................  Tier 1...................       2000       14.6  .........  .........
                                           Tier 2...................       2006  .........       10.5       0.54
----------------------------------------------------------------------------------------------------------------

    (e) Naturally aspirated nonroad engines to which this subpart is 
applicable shall not discharge crankcase emissions into the ambient 
atmosphere. For engines rated under 37 kW, this provision applies to 
all 2001 model year engines and later models. For engines rated at or 
above 37 kW, this provision applies to all Tier 2 engines and later 
models. This provision does not apply to engines using turbochargers, 
pumps, blowers, or superchargers for air induction.
    (f) Engines may be designated ``Blue Sky Series'' engines through 
the 2004 model year by meeting the following voluntary standards, which 
apply to all certification and in-use testing. Emissions are measured 
using the procedures set forth in 40 CFR part 86, subpart N. 
Manufacturers may use an alternate procedure to demonstrate the desired 
level of emission control if approved in advance by the Administrator. 
Engines meeting the requirements to qualify as Blue Sky Series engines 
must be capable of maintaining a comparable level of emission control 
when tested using the procedures set forth in paragraph (c) of this 
section and subpart E of this part. The numerical emission levels 
measured using the procedures from this part may be up to 20 percent 
higher than those measured using the procedures from 40 CFR part 86, 
subpart N, and still be considered comparable. Engines designated as 
Blue Sky Series engines must meet the requirements related to in-use 
durability detailed in Secs. 89.104, 89.109, 89.118, and 89.130; 
alternatively, manufacturers may fulfull these requirements with the 
comparable provisions from 40 CFR part 86.
    (1) Engines certified to voluntary standards at least 35 percent 
below the numerical level established for Tier 2 engines, for both 
particulate matter and NMHC + NOX, may be designated as a 
``Blue Sky Series engine--Class A''. Manufacturers must also 
demonstrate compliance with the numerical level established for CO 
emissions from the applicable tier of engines, as described in 
paragraph (a) of this section, and with the smoke emission standards 
described in Sec. 86.113 of this chapter. This designation will no 
longer be available beginning in the year for which Tier 2 standards 
apply to an engine's power category.
    (2) Engines certified to voluntary standards at least 50 percent 
below the numerical level established for Tier 2 engines, for both 
particulate matter and NMHC + NOX, may be designated as a 
``Blue Sky Series engine--Class AA''. Manufacturers must also 
demonstrate compliance with the numerical level established for CO 
emissions from the applicable tier of engines, as described in 
paragraph (a) of this section, and with the smoke emission standards 
described in Sec. 86.113 of this chapter.
    (3) Engines certified to voluntary standards at least 65 percent 
below the numerical level established for Tier 2 engines, for both 
particulate matter and NMHC + NOX, may be designated as a 
``Blue Sky Series engine--Class AAA''. Manufacturers must also 
demonstrate compliance with the numerical level established for CO 
emissions from the applicable tier of engines, as described in 
paragraph (a) of this section, and with the smoke emission standards 
described in Sec. 86.113 of this chapter.
    20. The newly designated Sec. 89.117 is amended by revising 
paragraph (a) and adding a new paragraph (d) to read as follows:


Sec. 89.117  Test fleet selection.

    (a) The manufacturer must select for testing, from each engine 
family, the engine with the most fuel injected per stroke of an 
injector, primarily at the

[[Page 50201]]

speed of maximum torque and secondarily at rated speed.
* * * * *
    (d) For establishing deterioration factors, the manufacturer shall 
select the engines, subsystems, or components to be used to determine 
exhaust emission deterioration factors for each engine-family control 
system combination. Whether engines, subsystems, or components are 
used, they shall be selected so that their emission deterioration 
characteristics may be expected to represent those of in-use engines, 
based on good engineering judgment.
    21. The newly designated Sec. 89.118 is amended by adding a new 
paragraph (e) to read as follows:


Sec. 89.118  Service accumulation.

* * * * *
    (e) This paragraph (e) describes service accumulation requirements 
for the purpose of deterioration factor development. Paragraphs (b) 
through (d) of this section also apply here.
    (1) Service accumulation on engines, subsystems, or components 
selected by the manufacturer under Sec. 89.117(d). The manufacturer 
determines the form and extent of this service accumulation, consistent 
with good engineering practice, and describes it in the application for 
certification.
    (2) Determination of exhaust emission deterioration factors. The 
manufacturer determines the deterioration factors based on the service 
accumulation in paragraph (e)(1) of this section and related testing, 
according to the manufacturer's procedures.
    (3) Alternatives to service accumulation and testing for the 
determination of a deterioration factor. A written explanation of the 
appropriateness of using an alternative must be included in the 
application for certification.
    (i) Carryover and carryacross of durability emission data. In lieu 
of testing an emission data or durability data engine selected under 
Sec. 89.117(d), and submitting data therefore, a manufacturer may, with 
Administrator approval, use exhaust emission deterioration data on a 
similar engine for which certification to the same standard has 
previously been obtained or for which all applicable data required 
under Sec. 89.124 has previously been submitted. This data must be 
submitted in the application for certification.
    (ii) Use of on-highway deterioration data. In the case where a 
manufacturer produces a certified on-highway engine that is similar to 
the nonroad engine to be certified, deterioration data from the on-
highway engine may be applied to the nonroad engine. This application 
of deterioration data from an on-highway engine to a nonroad engine is 
subject to Administrator approval, and the determination of whether the 
engines are similar must be based on good engineering judgment.
    (iii) Engineering analysis for established technologies. (A) In the 
case where an engine family uses technology which is well established, 
an analysis based on good engineering practices may be used in lieu of 
testing to determine a deterioration factor for that engine family.
    (B) Engines using exhaust gas recirculation or aftertreatment are 
excluded from the provision set forth in paragraph (e)(3)(iii)(A) of 
this section.
    (C) Engines for which the certification levels are not at or below 
the Tier 3 NMHC+NOX or PM standards described in Sec. 89.112 
are considered established technology.
    (D) Manufacturers may petition the Administrator to consider an 
engine with a certification level below the Tier 3 NMHC+NOX 
and PM standards as established technology. This petition must be based 
on proof that the technology used is not significantly different than 
that used on engines that have certification levels that are not below 
the Tier 3 NMHC+NOX and PM levels.
    (E) The manufacturer shall provide a written statement to the 
Administrator that all data, analyses, test procedures, evaluations, 
and other documents, on which the deterioration factor is based, are 
available to the Administrator upon request.
    22. The newly designated Sec. 89.119 is amended by revising 
paragraph (d) to read as follows:


Sec. 89.119  Emission tests.

* * * * *
    (d) Test fuels. EPA may use the fuel specified in either Table 4 or 
Table 5 of Appendix A to subpart D of this part in confirmatory testing 
or other testing on any test engine.
    23. The newly designated Sec. 89.120 is amended by revising 
paragraph (c) and adding paragraph (e) to read as follows:


Sec. 89.120  Compliance with emission standards.

* * * * *
    (c) For each nonroad engine family, except Tier 1 engines with 
rated power at or above 37 kW that do not employ aftertreatment, a 
deterioration factor must be determined and applied.
    (1) The applicable exhaust emission standards (or family emission 
limits, as appropriate) for nonroad compression-ignition engines apply 
to the emissions of engines for their useful life.
    (2) Since emission control efficiency generally decreases with the 
accumulation of service on the engine, deterioration factors will be 
used in combination with emission data engine test results as the basis 
for determining compliance with the standards.
    (3)(i) This paragraph (c)(3) describes the procedure for 
determining compliance of an engine with emission standards (or family 
emission limits, as appropriate), based on deterioration factors 
supplied by the manufacturer. Deterioration factors shall be 
established using applicable emission test procedures. NMHC + 
NOX deterioration factors shall be established based on the 
sum of the pollutants. When establishing deterioration factors for NMHC 
+ NOX, a negative deterioration (emissions decrease from the 
official emissions test result) for one pollutant may not offset 
deterioration of the other pollutant. Where negative deterioration 
occurs for NOX or NMHC, the official exhaust emission test 
result shall be used for purposes of determining the NMHC + 
NOX deterioration factor.
    (ii) Separate exhaust emission deterioration factors, determined 
from tests of engines, subsystems, or components conducted by the 
manufacturer, shall be supplied for each engine-system combination. 
Separate factors shall be established for NMHC, CO, NOX, 
NMHC + NOX, and exhaust particulate. For smoke testing, 
separate factors shall also be established for the acceleration mode 
(designated as ``A''), the lugging mode (designated as ``B''), and peak 
opacity (designated as ``C'').
    (iii) Compression-ignition nonroad engines not utilizing 
aftertreatment technology (e.g., particulate traps). For NMHC, CO, 
NOX, NMHC + NOX, and exhaust particulate, the 
official exhaust emission results for each emission data engine at the 
selected test point shall be adjusted by addition of the appropriate 
deterioration factor. However, if the deterioration factor supplied by 
the manufacturer is less than zero, it shall be zero for the purposes 
of this paragraph (c).
    (iv) Compression-ignition nonroad engines utilizing aftertreatment 
technology (e.g., particulate traps). For NMHC, CO, NOX, 
NMHC + NOX, and exhaust particulate, the official exhaust 
emission results for each emission data engine at the selected test 
point shall be adjusted by multiplication by the appropriate 
deterioration factor. However, if the deterioration factor supplied by 
the manufacturer is less than one, it shall be one for the purposes of 
this paragraph (c).
    (v) For acceleration smoke (``A''), lugging smoke (``B''), and peak 
opacity

[[Page 50202]]

(``C''), the official exhaust emission results for each emission data 
engine at the selected test point shall be adjusted by the addition of 
the appropriate deterioration factor. However if the deterioration 
supplied by the manufacturer is less than zero, it shall be zero for 
the purposes of this paragraph (c).
    (vi) The emission values to compare with the standards (or family 
emission limits, as appropriate) shall be the adjusted emission values 
of paragraphs (c)(3) (iii) through (v) of this section, rounded to the 
same number of significant figures as contained in the applicable 
standard in accordance with ASTM E29-93a, for each emission data 
engine. This procedure has been incorporated by reference (see 
Sec. 89.6).
    (4) Every test engine of an engine family must comply with all 
applicable standards (or family emission limits, as appropriate), as 
determined in paragraph (c)(3)(vi) of this section, before any engine 
in that family will be certified.
* * * * *
    (e) For the purposes of setting an NMHC + NOX 
certification level or FEL, one of the following options shall be used 
for the determination of NMHC for an engine family. The manufacturer 
must declare which option is used in its application for certification 
of that engine family.
    (1) THC may be used in lieu of NMHC for the standards set forth in 
Sec. 89.112.
    (2) The manufacturer may choose its own method to analyze methane 
with prior approval of the Administrator.
    (3) The manufacturer may assume that two percent of the measured 
THC is methane (NMHC=0.98 x THC).
    24. The newly designated Sec. 89.126 is amended by revising 
paragraph (c) to read as follows:


Sec. 89.126  Denial, revocation of certificate of conformity.

* * * * *
    (c) If a manufacturer knowingly commits an infraction specified in 
paragraph (b)(1) or (b)(4) of this section, knowingly commits any other 
fraudulent act which results in the issuance of a certificate of 
conformity, or fails to comply with the conditions specified in 
Secs. 89.203(d), 89.206(c), 89.209(c) or 89.210(g), the Administrator 
may deem such certificate void ab initio.
* * * * *
    25. A new Sec. 89.130 is added to subpart B to read as follows:


Sec. 89.130  Rebuild practices.

    (a) The provisions of this section are applicable to engines 
subject to the standards prescribed in section Sec. 89.112 and are 
applicable to the process of engine rebuilding (or rebuilding a portion 
of an engine or engine system). This section does not apply to Tier 1 
engines rated at or above 37 kW. The process of engine rebuilding 
generally includes disassembly, replacement of multiple parts due to 
wear, and reassembly, and also may include the removal of the engine 
from the vehicle and other acts associated with rebuilding an engine. 
Any deviation from the provisions contained in this section is a 
prohibited act.
    (b) When rebuilding an engine, portions of an engine, or an engine 
system, there must be a reasonable technical basis for knowing that the 
resultant engine is equivalent, from an emissions standpoint, to a 
certified configuration (i.e., tolerances, calibrations, 
specifications) of the same or newer model year as the original engine. 
A reasonable basis would exist if:
    (1) Parts installed, whether the parts are new, used, or rebuilt, 
are such that a person familiar with the design and function of motor 
vehicle engines would reasonably believe that the parts perform the 
same function with respect to emission control as the original parts; 
and
    (2) Any parameter adjustment or design element change is made only:
    (i) In accordance with the original engine manufacturer's 
instructions; or
    (ii) Where data or other reasonable technical basis exists that 
such parameter adjustment or design element change, when performed on 
the engine or similar engines, is not expected to adversely affect in-
use emissions.
    (c) When an engine is being rebuilt and remains installed or is 
reinstalled in the same equipment, it must be rebuilt to a 
configuration of the same or later model year as the original engine. 
When an engine is being replaced, the replacement engine must be an 
engine of (or rebuilt to) a configuration of the same or later model 
year as the original engine.
    (d) At time of rebuild, emission-related codes or signals from on-
board monitoring systems may not be erased or reset without diagnosing 
and responding appropriately to the diagnostic codes, regardless of 
whether the systems are installed to satisfy requirements in 
Sec. 89.109 or for other reasons and regardless of form or interface. 
Diagnostic systems must be free of all such codes when the rebuilt 
engine is returned to service. Such signals may not be rendered 
inoperative during the rebuilding process.
    (e) When conducting a rebuild without removing the engine from the 
equipment, or during the installation of a rebuilt engine, all critical 
emission-related components listed in Sec. 86.109-99(d) of this chapter 
not otherwise addressed by paragraphs (b) through (d) of this section 
must be checked and cleaned, adjusted, repaired, or replaced as 
necessary, following manufacturer recommended practices.
    (f) Records shall be kept by parties conducting activities included 
in paragraphs (b) through (e) of this section. The records shall 
include at minimum the hours of operation at time of rebuild, a listing 
of work performed on the engine, and emission-related control 
components including a listing of parts and components used, engine 
parameter adjustments, emission-related codes or signals responded to 
and reset, and work performed under paragraph (e) of this section.
    (1) Parties may keep records in whatever format or system they 
choose as long as the records are understandable to an EPA enforcement 
officer or can be otherwise provided to an EPA enforcement officer in 
an understandable format when requested.
    (2) Parties are not required to keep records of information that is 
not reasonably available through normal business practices including 
information on activities not conducted by themselves or information 
that they cannot reasonably access.
    (3) Parties may keep records of their rebuilding practices for an 
engine family rather than on each individual engine rebuilt in cases 
where those rebuild practices are followed routinely.
    (4) Records must be kept for a minimum of two years after the 
engine is rebuilt.

Subpart C--[Amended]

    26. The newly designated Sec. 89.203 is revised to read as follows:


Sec. 89.203  General provisions.

    (a) The averaging, banking, and trading programs for 
NOX, NMHC + NOX, and PM emissions from eligible 
nonroad engines are described in this subpart. Participation in these 
programs is voluntary.
    (b) Tier 1 engines rated at or above 37 kW. (1) A nonroad engine 
family is eligible to participate in the averaging, banking, and 
trading program for NOX emissions and the banking and 
trading program for PM emissions if it is subject to regulation under 
subpart B of this part with certain exceptions specified in paragraph 
(b)(2) of this section. No averaging, banking, and trading program

[[Page 50203]]

is available for meeting the Tier 1 HC, CO, or smoke emission standards 
specified in subpart B of this part. No averaging program is available 
for meeting the Tier 1 PM emission standards specified in subpart B of 
this part.
    (2) Nonroad engines may not participate in the averaging, banking, 
and trading programs if they are subject to state engine emission 
standards, are exported, or use an alternate or special test procedure 
under Sec. 89.114. Meeting the voluntary standards described in 
Sec. 89.112(f) for Blue Sky Series engines does not preclude 
participation in the averaging, banking, and trading programs; however, 
participation in the averaging, banking, and trading programs depends 
on manufacturers developing test data on a steady-state test cycle, as 
specified in Sec. 89.410(a), for credit computation purposes.
    (3) A manufacturer may certify one or more nonroad engine families 
at NOX family emission limits (FELs) above or below the Tier 
1 NOX emission standard, provided the summation of the 
manufacturer's projected balance of all NOX credit 
transactions in a given model year is greater than or equal to zero, as 
determined under Sec. 89.207(a). A manufacturer may certify one or more 
nonroad engine families at PM FELs below the Tier 2 PM emission 
standard that will be applicable to those engine families.
    (i) FELs for NOX may not exceed the Tier 1 upper limit 
specified in Sec. 89.112(d).
    (ii) An engine family certified to an FEL is subject to all 
provisions specified in subparts B, D, E, F, G, H, I, J, and K of this 
part, except that the applicable FEL replaces the emission standard for 
the family participating in the averaging, banking, and trading 
program.
    (iii) A manufacturer of an engine family with an NOX FEL 
exceeding the Tier 1 NOX emission standard must obtain 
NOX emission credits sufficient to address the associated 
credit shortfall via averaging, banking, or trading.
    (iv) An engine family with a NOX FEL below the 
applicable Tier 1 standard may generate emission credits for averaging, 
banking, trading, or a combination thereof. An engine family with a PM 
FEL below the Tier 2 standard that will be applicable to that engine 
family may generate emission credits for banking, trading, or a 
combination thereof. Emission credits may not be used to offset an 
engine family's emissions that exceed its applicable FEL. Credits may 
not be used to remedy nonconformity determined by a Selective 
Enforcement Audit (SEA) or by recall (in-use) testing. However, in the 
case of an SEA failure, credits may be used to allow subsequent 
production of engines for the family in question if the manufacturer 
elects to recertify to a higher FEL.
    (4) NOX credits generated in a given model year may be 
used to address credit shortfalls with other engines during that model 
year or in any subsequent model year except as noted under paragraph 
(b)(5)(ii) of this section. PM credits may be used to address credit 
shortfalls with Tier 2 and later engines greater than or equal to 37 kW 
and Tier 1 and later engines less than 37 kW and greater than or equal 
to 19 kW. Credits generated in one model year may not be used for prior 
model years.
    (5) Using Tier 1 NOX credits for showing compliance with 
Tier 2 NMHC + NOX credits.
    (i) A manufacturer may use NOX credits from engines 
subject to the Tier 1 standards to address NMHC + NOX credit 
shortfall with engines in the same averaging set subject to Tier 2 NMHC 
+ NOX emission standards.
    (ii) NOX credits generated from Tier 1 engines may not 
be used to address credit shortfalls with engines subject to the Tier 3 
NMHC + NOX standards.
    (c) Tier 2 and later engines rated at or above 37 kW and Tier 1 and 
later engines rated under 37 kW. (1) A nonroad engine family is 
eligible to participate in the averaging, banking, and trading programs 
for NMHC + NOX emissions and PM emissions if it is subject 
to regulation under subpart B of this part with certain exceptions 
specified in subsection (c)(2) of this section. No averaging, banking, 
and trading program is available for meeting the CO or smoke emission 
standards specified in subpart B of this part.
    (2) Nonroad engines may not participate in the averaging, banking, 
and trading programs if they are subject to state engine emission 
standards, are exported, or use an alternate or special test procedure 
under Sec. 89.114. Meeting the voluntary standards described in 
Sec. 89.112(f) for Blue Sky Series engines does not preclude 
participation in the averaging, banking, and trading programs; however, 
participation in the averaging, banking, and trading programs depends 
on manufacturers developing test data on a steady-state test cycle, as 
specified in Sec. 89.410(a), for credit computation purposes.
    (3)(i) A manufacturer may certify one or more nonroad engine 
families at FELs above or below the applicable NMHC + NOX 
emission standard and PM emission standard, provided the summation of 
the manufacturer's projected balance of all NMHC + NOX 
credit transactions and the summation of the manufacturer's projected 
balance of all PM credit transactions in a given model year in a given 
averaging set is greater than or equal to zero, as determined under 
Sec. 89.207(b).
    (A) FELs for NMHC + NOX and FELs for PM may not exceed 
the upper limits specified in Sec. 89.112(d).
    (B) An engine family certified to an FEL is subject to all 
provisions specified in subparts B, D, E, F, G, H, I, J, and K of this 
part, except that the applicable FEL replaces the emission standard for 
the family participating in the averaging, banking, and trading 
program.
    (C) A manufacturer of an engine family with an FEL exceeding the 
applicable emission standard must obtain emission credits sufficient to 
address the associated credit shortfall via averaging, banking, or 
trading, within the restrictions described in Secs. 89.204(c) and 
89.206(b)(4).
    (D) An engine family with an FEL below the applicable standard may 
generate emission credits for averaging, banking, trading, or a 
combination thereof. Emission credits may not be used to offset an 
engine family's emissions that exceed its applicable FEL. Credits may 
not be used to remedy nonconformity determined by a Selective 
Enforcement Audit (SEA) or by recall (in-use) testing. However, in the 
case of an SEA failure, credits may be used to allow subsequent 
production of engines for the family in question if the manufacturer 
elects to recertify to a higher FEL.
    (ii)(A) In lieu of generating credits under paragraph (c)(3)(i) of 
this section, a manufacturer may certify one or more nonroad engine 
families rated under 37 kW at family emission limits (FELs) above or 
below the applicable NMHC + NOX emission standard and PM 
emission standard. The summation of the manufacturer's projected 
balance of all NMHC + NOX credit transactions and the 
summation of the manufacturer's projected balance of all PM credit 
transactions in a given model year, as determined under Sec. 89.207(b), 
is allowed to be less than zero. Separate calculations shall be 
required for the following two categories of engines: engines rated 
under 19 kW and engines rated at or above 19kW and under 37 kW.
    (B) A penalty equal to ten percent of the year end negative credit 
balance shall be added to the negative credit balance. The resulting 
negative credit balance shall be carried into the next model year.
    (C) For engines rated under 19 kW, a manufacturer will be allowed 
to carry

[[Page 50204]]

over a negative credit balance until December 31, 2003. For engines 
rated at or above 19 kW and under 37 kW, a manufacturer will be allowed 
to carry over a negative credit balance until December 31, 2002. As of 
these dates, the summation of the manufacturer's projected balance of 
all NMHC + NOX credit transactions and the summation of the 
manufacturer's projected balance of all PM credit transactions must be 
greater than or equal to zero.
    (D) FELs for NMHC + NOX and FELs for PM may not exceed 
the upper limits specified in Sec. 89.112(d).
    (E) An engine family certified to an FEL is subject to all 
provisions specified in subparts B, D, E, F, G, H, I, J, and K of this 
part, except that the applicable NMHC + NOX FEL or PM FEL 
replaces the NMHC + NOX emission standard or PM emission 
standard for the family participating in the averaging and banking 
program.
    (F) A manufacturer of an engine family with an FEL exceeding the 
applicable emission standard must obtain emission credits sufficient to 
address the associated credit shortfall via averaging or banking. The 
exchange of emission credits generated under this program with other 
nonroad engine manufacturers in trading is not allowed.
    (G) An engine family with an FEL below the applicable standard may 
generate emission credits for averaging, banking, or a combination 
thereof. Emission credits may not be used to offset an engine family's 
emissions that exceed its applicable FEL. Credits may not be used to 
remedy nonconformity determined by a Selective Enforcement Audit (SEA) 
or by recall (in-use) testing. However, in the case of an SEA failure, 
credits may be used to allow subsequent production of engines for the 
family in question if the manufacturer elects to recertify to a higher 
FEL.
    (4)(i) Except as noted in paragraphs (c)(4)(ii), (c)(4)(iii), and 
(c)(4)(iv) of this section, credits generated in a given model year may 
be used during that model year or used in any subsequent model year. 
Except as allowed under paragraph (c)(3)(ii) of this section, credits 
generated in one model year may not be used for prior model years.
    (ii) Credits generated from engines rated under 19 kW prior to the 
implementation date of the applicable Tier 2 standards, shall expire on 
December 31, 2007.
    (iii) Credits generated from engines rated under 19 kW under the 
provisions of paragraph (c)(3)(ii) shall expire on December 31, 2003.
    (iv) Credits generated from engines rated at or above 19 kW and 
under 37 kW under the provisions of paragraph (c)(3)(ii) shall expire 
on December 31, 2002.
    (d) Manufacturers must demonstrate compliance under the averaging, 
banking, and trading programs for a particular model year by 270 days 
after the model year. Engine families without an adequate amount of 
emission credits, except as allowed under paragraph (c)(3)(ii) of this 
section, will violate the conditions of the certificates of conformity. 
The certificates of conformity may be voided ab initio under 
Sec. 89.126(c) for those engine families.
    (e) Engine families may not generate credits for one pollutant 
while also using credits for another pollutant in the same model year.
    (f) An engine manufacturer may exchange NOX emission 
credits, NMHC + NOX emission credits, and PM emission 
credits to equipment or vehicle manufacturers in trading. Such credits 
may be used within the provisions specified in Sec. 89.102(d)(3).
    27. The newly designated Sec. 89.204 is revised to read as follows:


Sec. 89.204  Averaging.

    (a) Tier 1 engines rated at or above 37 kW. (1) A manufacturer may 
use averaging to offset an emission exceedance of a nonroad engine 
family caused by a NOX FEL above the applicable emission 
standard. NOX credits used in averaging may be obtained from 
credits generated by another engine family in the same model year, 
credits banked in a previous model year, or credits obtained through 
trading.
    (2) Credits scheduled to expire in the earliest model year must be 
used first, before using other available credits.
    (b) Tier 2 and later engines rated at or above 37 kW and Tier 1 and 
later engines rated under 37 kW. (1) A manufacturer may use averaging 
to offset an emission exceedance of a nonroad engine family caused by 
an NMHC + NOX FEL or a PM FEL above the applicable emission 
standard. Credits used in averaging may be obtained from credits 
generated by another engine family in the same model year, credits 
banked in previous model years that have not expired, or credits 
obtained through trading. The use of credits shall be within the 
restrictions described in paragraph (c) of this section and 
Sec. 89.206(b)(4).
    (2) Credits scheduled to expire in the earliest model year must be 
used first, before using other available credits.
    (c) Averaging sets for emission credits. The averaging and trading 
of NOX emission credits, NMHC + NOX emission 
credits, and PM emissions credits will only be allowed between engine 
families in the same averaging set. The averaging sets for the 
averaging and trading of NOX emission credits, NMHC + 
NOX emission credits, and PM emission credits for nonroad 
engines are defined as follows:
    (1) Eligible engines, other than marine diesel engines rated at or 
above 19 kW, constitute an averaging set.
    (2) Marine diesel engines rated at or above 19 kW constitute an 
averaging set. Emission credits generated from marine diesel engines 
rated at or above 19 kW may be used to address credit shortfalls for 
eligible engines other than marine diesel engines rated at or above 19 
kW.
    (3) Eligible engines, other than marine diesel engines rated under 
19 kW, constitute an averaging set.
    (4) Marine diesel engines rated under 19 kW constitute an averaging 
set. Emission credits generated from marine diesel engines rated under 
19 kW may be used to address credit shortfalls for eligible engines 
other than marine diesel engines rated under 19 kW.
    28. The newly designated Sec. 89.205 is revised to read as follows:


Sec. 89.205  Banking.

    (a) Tier 1 engines rated at or above 37 kW. (1) A manufacturer of a 
nonroad engine family with a NOX FEL below the applicable 
standard for a given model year may bank credits in that model year for 
use in averaging and trading in any subsequent model year.
    (2) A manufacturer of a nonroad engine family may bank 
NOX credits up to one calendar year prior to the effective 
date of mandatory certification. Such engines must meet the 
requirements of subparts A, B, D, E, F, G, H, I, J, and K of this part.
    (3)(i) A manufacturer of a nonroad engine family may bank PM 
credits from Tier 1 engines under the provisions specified in 
Sec. 89.207(b) for use in averaging and trading in the Tier 2 or later 
timeframe provided the engine family is certified without an FEL above 
the Tier 1 NOX standard.
    (ii) Such engine families are subject to all provisions specified 
in subparts B, D, E, F, G, H, I, J, and K of this part, except that the 
applicable PM FEL replaces the PM emission standard for the family 
participating in the banking and trading program.
    (b) Tier 2 and later engines rated at or above 37 kW and Tier 1 and 
later engines rated under 37 kW. (1) A manufacturer of a nonroad engine 
family with an NMHC + NOX FEL or a PM FEL below the 
applicable standard for a given model year may bank credits in that 
model year for use in averaging

[[Page 50205]]

and trading in any following model year.
    (2) For engine rated under 37 kW, a manufacturer of a nonroad 
engine family may bank credits prior to the effective date of mandatory 
certification. Such engines must meet the requirements of subparts A, 
B, D, E, F, G, H, I, J, and K of this part.
    (c) A manufacturer may bank actual credits only after the end of 
the model year and after EPA has reviewed the manufacturer's end-of-
year reports. During the model year and before submittal of the end-of-
year report, credits originally designated in the certification process 
for banking will be considered reserved and may be redesignated for 
trading or averaging in the end-of-year report and final report.
    (d) Credits declared for banking from the previous model year that 
have not been reviewed by EPA may be used in averaging or trading 
transactions. However, such credits may be revoked at a later time 
following EPA review of the end-of-year report or any subsequent audit 
actions.
    29. The newly designated Sec. 89.206 is revised to read as follows:


Sec. 89.206  Trading.

    (a) Tier 1 engines rated at or above 37 kW. (1) A nonroad engine 
manufacturer may exchange emission credits with other nonroad engine 
manufacturers within the same averaging set in trading.
    (2) Credits for trading can be obtained from credits banked in a 
previous model year or credits generated during the model year of the 
trading transaction.
    (3) Traded credits can be used for averaging, banking, or further 
trading transactions within the restrictions described in 
Sec. 89.204(c).
    (b) Tier 2 and later engines rated at or above 37 kW and Tier 1 and 
later engines rated under 37 kW. (1) A nonroad engine manufacturer may 
exchange emission credits with other nonroad engine manufacturers 
within the same averaging set in trading.
    (2) Credits for trading can be obtained from credits banked in 
previous model years that have not expired or credits generated during 
the model year of the trading transaction.
    (3) Traded credits can be used for averaging, banking, or further 
trading transactions within the restrictions described in 
Sec. 89.204(c) and paragraph (b)(4) of this section.
    (4) Emission credits generated from engines rated at or above 19 kW 
utilizing indirect fuel injection may not be traded to other 
manufacturers.
    (c) In the event of a negative credit balance resulting from a 
transaction, both the buyer and the seller are liable, except in cases 
involving fraud. Certificates of all engine families participating in a 
negative trade may be voided ab initio under Sec. 89.126(c).
    30. The newly designated Sec. 89.207 is revised to read as follows:


Sec. 89.207  Credit calculation.

    (a) NOX credits from Tier 1 engines rated at or above 37 
kW. (1) For each participating engine family, emission credits 
(positive or negative) are to be calculated according to one of the 
following equations and rounded, in accordance with ASTM E29-93a, to 
the nearest one-tenth of a megagram (Mg). This procedure has been 
incorporated by reference (see Sec. 89.6). Consistent units are to be 
used throughout the equation.
    (i) For determining credit availability from all engine families 
generating credits:

Emission credits = (Std--FEL)  x  (Volume)  x  (AvgPR)  x  (UL)  x  
(Adjustment)  x  (10-6)

    (ii) For determining credit usage for all engine families requiring 
credits to offset emissions in excess of the standard:

Emission credits = (Std--FEL)  x  (Volume)  x  (AvgPR)  x  (UL)  x  
(10-6)

Where:
Std = the applicable Tier 1 NOX nonroad engine emission 
standard, in grams per brake horsepower hour.
FEL = the NOX family emission limit for the engine family 
in grams per brake horsepower hour.
Volume = the number of nonroad engines eligible to participate in 
the averaging, banking, and trading program within the given engine 
family during the model year. Engines sold to equipment or vehicle 
manufacturers under the provisions of Sec. 89.102(g) shall not be 
included in this number. Quarterly production projections are used 
for initial certification. Actual applicable production/sales 
volumes is used for end-of-year compliance determination.
AvgPR = the average power rating of all of the configurations within 
an engine family, calculated on a sales-weighted basis.
UL = the useful life for the engine family, in hours.
Adjustment = a one-time adjustment, as specified in paragraph (a)(2) 
of this section, to be applied to Tier 1 NOX credits to 
be banked or traded for determining compliance with the Tier 1 
NOX standards or Tier 2 NOX+NMHC standards 
specified in subpart B of this part. Banked credits traded in a 
subsequent model year will not be subject to an additional 
adjustment. Banked credits used in a subsequent model year's 
averaging program will not have the adjustment restored.

    (2) If an engine family is certified to a NOX FEL of 8.0 
g/kW-hr or less, an Adjustment value of 1.0 shall be used in the credit 
generation calculation described in paragraph (a)(1)(i) of this 
section. If an engine family is certified to a NOX FEL above 
8.0 g/kW-hr, an Adjustment value of 0.65 shall be used in the credit 
generation calculation described in paragraph (a)(1)(i) of this 
section. If the credits are to be used by the credit-generating 
manufacturer for averaging purposes in the same model year in which 
they are generated, an Adjustment value of 1.0 shall be used for all 
engines regardless of the level of the NOX FEL.
    (b) NMHC + NOX Credits from Tier 2 and later engines 
rated at or above 37 kW and Tier 1 and later engines rated under 37 kW 
and PM credits from all engines. (1) For each participating engine 
family, NOX + NMHC emission credits and PM emission credits 
(positive or negative) are to be calculated according to one of the 
following equations and rounded, in accordance with ASTM E29-93a, to 
the nearest one-tenth of a megagram (Mg). This procedure has been 
incorporated by reference (see Sec. 89.6). Consistent units are to be 
used throughout the equation.
    (i) For determining credit availability from all engine families 
generating credits:

Emission credits = (Std--FEL)  x  (Volume)  x  (AvgPR)  x  (UL)  x  
(10-6)

    (ii) For determining credit usage for all engine families requiring 
credits to offset emissions in excess of the standard:

Emission credits = (Std--FEL)  x  (Volume)  x  (AvgPR)  x  (UL)  x  
(10-6)

Where:
Std = the current and applicable nonroad engine emission standard, 
in grams per brake horsepower hour, except for PM calculations where 
it is the applicable nonroad engine Tier 2 PM emission standard, and 
except for engines rated under 19 kW where it is the applicable 
nonroad engine Tier 2 emission standard, in grams per brake 
horsepower hour. (Engines rated under 19 kW participating in the 
averaging and banking program provisions of Sec. 89.203(c)(3)(ii) 
shall use the Tier 1 standard for credit calculations.)
FEL = the family emission limit for the engine family in grams per 
brake horsepower hour.

[[Page 50206]]

Volume = the number of nonroad engines eligible to participate in 
the averaging, banking, and trading program within the given engine 
family during the model year. Engines sold to equipment or vehicle 
manufacturers under the provisions of Sec. 89.102(g) shall not be 
included in this number. Quarterly production projections are used 
for initial certification. Actual applicable production/sales 
volumes is used for end-of-year compliance determination.
AvgPR = the average power rating of all of the configurations within 
an engine family, calculated on a sales-weighted basis.
UL = the useful life for the given engine family, in hours.

    31. The newly designated Sec. 89.208 is revised to read as follows:


Sec. 89.208  Labeling.

    For all nonroad engines included in the averaging, banking, and 
trading programs, the family emission limits to which the engine is 
certified must be included on the label required in Sec. 89.110.
    32. The newly designated Sec. 89.209 is amended by revising 
paragraph (a) to read as follows:


Sec. 89.209  Certification.

    (a) In the application for certification a manufacturer must:
    (1) Declare its intent to include specific engine families in the 
averaging, banking, and trading programs.
    (2) Submit a statement that the engines for which certification is 
requested will not, to the best of the manufacturer's belief, cause the 
manufacturer to have a negative credit balance when all credits are 
calculated for all the manufacturer's engine families participating in 
the averaging, banking, and trading programs, except as allowed under 
Sec. 89.203(c)(3)(ii).
    (3) Declare the applicable FELs for each engine family 
participating in averaging, banking, and trading.
    (i) The FELs must be to the same number of significant digits as 
the emission standard for the applicable pollutant.
    (ii) In no case may the FEL exceed the upper limits prescribed in 
Sec. 89.112(d).
    (4) Indicate the projected number of credits generated/needed for 
this family; the projected applicable production/sales volume, by 
quarter; and the values required to calculate credits as given in 
Sec. 89.207.
    (5) Submit calculations in accordance with Sec. 89.207 of projected 
emission credits (positive or negative) based on quarterly production 
projections for each participating family.
    (6)(i) If the engine family is projected to have negative emission 
credits, state specifically the source (manufacturer/engine family or 
reserved) of the credits necessary to offset the credit deficit 
according to quarterly projected production, or, if the engine family 
is to be included in the provisions of Sec. 89.203(c)(3)(ii), state 
that the engine family will be included in those provisions.
    (ii) If the engine family is projected to generate credits, state 
specifically (manufacturer/engine family or reserved) where the 
quarterly projected credits will be applied.
* * * * *
    33. The newly designated Sec. 89.210 is amended by revising 
paragraphs (b) and (c) to read as follows:


Sec. 89.210  Maintenance of records.

* * * * *
    (b) The manufacturer of any nonroad engine family that is certified 
under the averaging, banking, and trading programs must establish, 
maintain, and retain the following adequately organized and indexed 
records for each such family:
    (1) EPA engine family;
    (2) Family emission limits (FEL);
    (3) Power rating for each configuration tested;
    (4) Projected applicable production/sales volume for the model 
year; and
    (5) Actual applicable production/sales volume for the model year.
    (c) Any manufacturer producing an engine family participating in 
trading reserved credits must maintain the following records on a 
quarterly basis for each engine family in the trading program:
    (1) The engine family;
    (2) The actual quarterly and cumulative applicable production/sales 
volume;
    (3) The values required to calculate credits as given in 
Sec. 89.207;
    (4) The resulting type and number of credits generated/required;
    (5) How and where credit surpluses are dispersed; and
    (6) How and through what means credit deficits are met.
* * * * *
    34. The newly designated Sec. 89.211 is amended by revising 
paragraphs (a) and (c) to read as follows:


Sec. 89.211  End-of-year and final reports.

    (a) End-of-year and final reports must indicate the engine family, 
the actual applicable production/sales volume, the values required to 
calculate credits as given in Sec. 89.207, and the number of credits 
generated/required. Manufacturers must also submit how and where credit 
surpluses were dispersed (or are to be banked) and/or how and through 
what means credit deficits were met. Copies of contracts related to 
credit trading must be included or supplied by the broker, if 
applicable. The report shall include a calculation of credit balances 
to show that the summation of the manufacturer's use of credits results 
in a credit balance equal to or greater than zero, except as allowed 
under Sec. 89.203(c)(3)(ii).
* * * * *
    (c)(1) End-of-year reports must be submitted within 90 days of the 
end of the model year to: Director, Engine Programs and Compliance 
Division (6405-J), U.S. Environmental Protection Agency, 401 M Street 
SW., Washington, DC 20460.
    (2) Final reports must be submitted within 270 days of the end of 
the model year to: Director, Engine Programs and Compliance Division 
(6405-J), U.S. Environmental Protection Agency, 401 M Street SW., 
Washington, DC 20460.
* * * * *
    35. The newly designated Sec. 89.212 is revised to read as follows:


Sec. 89.212  Notice of opportunity for hearing.

    Any voiding of the certificate under Secs. 89.203(d), 89.206(c), 
89.209(c) and 89.210(g) will be made only after the manufacturer 
concerned has been offered an opportunity for a hearing conducted in 
accordance with Secs. 89.512 and 89.513 and, if a manufacturer requests 
such a hearing, will be made only after an initial decision by the 
Presiding Officer.

Subpart D--[Amended]

    36. The newly designated Sec. 89.302 is revised to read as follows:


Sec. 89.302  Definitions.

    The definitions in subpart A of this part apply to this subpart. 
For terms not defined in this part, the definitions in part 86, 
subparts A, D, I, and N, of this chapter apply to this subpart.
    37. The newly designated Sec. 89.304 is amended by revising 
paragraph (c) to read as follows:


Sec. 89.304  Equipment required for gaseous emissions; overview.

* * * * *
    (c) Analyzers used are a non-dispersive infrared (NDIR) absorption 
type for carbon monoxide and carbon dioxide analysis; a heated flame 
ionization (HFID) type for hydrocarbon analysis; and a chemiluminescent 
detector (CLD) or heated chemiluminescent detector (HCLD) for oxides of 
nitrogen analysis. A gas chromatograph (GC) may also be required for 
methane analysis. Sections

[[Page 50207]]

89.309 through 89.324 set forth a full description of analyzer 
requirements and specifications.
    38. The newly designated Sec. 89.307 is amended by revising 
paragraphs (b)(7) and (b)(8) to read as follows:


Sec. 89.307  Dynamometer calibration.

* * * * *
    (b) * * *
    (7) The measured torque must be within either 2 percent of point or 
1 percent of the engine maximum torque of the calculated torque.
    (8) If the measured torque is not within the above requirements 
adjust or repair the system. Repeat steps in paragraphs (b)(1) through 
(b)(6) of this section with the adjusted or repaired system.
* * * * *
    39. The newly designated Sec. 89.308 is amended by revising 
paragraph (b) to read as follows:


Sec. 89.308  Sampling system requirements for gaseous emissions.

* * * * *
    (b) If water is removed by condensation, the sample gas temperature 
shall be monitored within the water trap or the sample dewpoint shall 
be monitored downstream. In either case, the indicated temperature 
shall not exceed 7  deg.C.
    40. The newly designated Sec. 89.309 is amended by removing and 
reserving paragraph (a)(3) and revising paragraphs (a)(4)(iii), 
(a)(5)(i)(C), and (a)(5)(i)(D) and adding paragraph (a)(6) to read as 
follows:


Sec. 89.309  Analyzers required for gaseous emissions.

    (a) * * *
    (3) [Reserved]
    (4) * * *
    (iii) The FID oven must be capable of maintaining temperature 
within 5.5  deg.C of the set point.
* * * * *
    (5) * * *
    (i) * * *
    (C) For raw analysis, an ice bath or other cooling device located 
after the NOX converter (optional for dilute analysis).
    (D) A chemiluminescent detector (CLD or HCLD).
* * * * *
    (6) Methane analysis. (i) Using a methane analyzer consisting of a 
gas chromatograph combined with an FID, the measurement of methane 
shall be in accordance with SAE Recommended Practice J1151, ``Methane 
Measurement Using Gas Chromatography.'' (Incorporated by reference 
pursuant to Sec. 86.1(b)(2).)
    (ii) As an option, the manufacturer may choose the analyzer to be 
used for methane measurement with the prior approval of the 
Administrator.
* * * * *
    41. The newly designated Sec. 89.310 is amended by revising 
paragraphs (a)(1) and (c) to read as follows:


Sec. 89.310  Analyzer accuracy and specifications.

    (a) * * *
    (1) Response time. As necessary, measure and account for the 
response time of the analyzer.
* * * * *
    (c) Emission measurement accuracy--Bagged sampling. (1) Good 
engineering practice dictates that exhaust emission sample analyzer 
readings below 15 percent of full-scale chart deflection should 
generally not be used.
    (2) Some high resolution read-out systems, such as computers, data 
loggers, and so forth, can provide sufficient accuracy and resolution 
below 15 percent of full scale. Such systems may be used provided that 
additional calibrations of at least 4 non-zero nominally equally spaced 
points, using good engineering judgement, below 15 percent of full 
scale are made to ensure the accuracy of the calibration curves. If a 
gas divider is used, the gas divider must conform to the accuracy 
requirements specified in Sec. 89.312(c). The procedure in paragraph 
(c)(3) of this section may be used for calibration below 15 percent of 
full scale.
    (3) The following procedure shall be followed:
    (i) Span the l analyzer using a calibration gas meeting the 
accuracy requirements of Sec. 89.312(c), within the operating range of 
the analyzer, and at least 90% of full scale.
    (ii) Generate a calibration over the full concentration range at a 
minimum of 6, approximately equally spaced, points (e.g. 15, 30, 45, 
60, 75, and 90 percent of the range of concetrations provided by the 
gas divider). If a gas divider or blender is being used to calibrate 
the analyzer and the requirements of paragraph (c)(2) of this section 
are met, verify that a second calibration gas between 10 and 20 percent 
of full scale can be named within 2 percent of its certified 
concentration.
    (iii) If a gas divider or blender is being used to calibrate the 
analyzer, input the value of a second calibration gas (a span gas may 
be used for the CO2 analyzer) having a named concentration between 10 
and 20 percent of full scale. This gas shall be included on the 
calibration curve. Continue adding calibration points by dividing this 
gas until the requirements of paragraph (c)(2) of this section are met.
    (iv) Fit a calibration curve per Secs. 89.319 through 89.322 for 
the full scale range of the analyzer using the calibration data 
obtained with both calibration gases.
* * * * *
    42. The newly designated Sec. 89.312 is amended by revising 
paragraphs (c)(2), (d), and (f) and adding a new paragraph (g) to read 
as follows:


Sec. 89.312  Analytical gases.

* * * * *
    (c) * * *
    (2) Mixtures of gases having the following chemical compositions 
shall be available:

C3H8 and purified synthetic air;
C3H8 and purified nitrogen (optional for raw 
measurements);
CO and purified nitrogen;
NOX and purified nitrogen (the amount of NO2 
contained in this calibration gas must not exceed 5 percent of the NO 
content);
CO2 and purified nitrogen.
* * * * *
    (d) Oxygen interference check gases shall contain propane with 350 
ppmC75 ppmC hydrocarbon. The three oxygen interference 
gases shall contain 21%1% O2,10%1% 
O2, and 5%1% O2. The concentration 
value shall be determined to calibration gas tolerances by 
chromatographic analysis of total hydrocarbons plus impurities or by 
dynamic blending. Nitrogen shall be the predominant diluent with the 
balance oxygen.
* * * * *
    (f) Hydrocarbon analyzer burner air. The concentration of oxygen 
for raw sampling must be within 1 mole percent of the oxygen 
concentration of the burner air used in the latest oxygen interference 
check (%O2I). If the difference in oxygen concentration is 
greater than 1 mole percent, then the oxygen interference must be 
checked and, if necessary, the analyzer adjusted to meet the 
%O2I requirements. The burner air must contain less than 2 
ppmC hydrocarbon.
    (g) Gases for the methane analyzer shall be single blends of 
methane using air as the diluent.
    43. The newly designated Sec. 89.314 is amended by revising 
paragraphs (a) and (b) to read as follows:


Sec. 89.314  Pre- and post-test calibration of analyzers.

* * * * *
    (a) The calibration is checked by using a zero gas and a span gas 
whose nominal value is between 75 percent

[[Page 50208]]

and 100 percent of full-scale, inclusive, of the measuring range.
    (b) After the end of the final mode, a zero gas and the same span 
gas will be used for rechecking. As an option,the zero and span may be 
rechecked at the end of each mode or each test segment. The analysis 
will be considered acceptable if the difference between the two 
measuring results is less than 2 percent of full scale.


Sec. 89.316  [Amended]

    44. The newly designated Sec. 89.316 is amended by removing and 
reserving paragraph (b).
    45. The newly designated Sec. 89.317 is amended by revising 
paragraphs (g), (h), and (k) to read as follows:


Sec. 89.317  NOX converter check.

* * * * *
    (g) Turn on the NOX generator O2 (or air) 
supply and adjust the O2 (or air) flow rate so that the NO 
indicated by the analyzer is about 10 percent less than indicated in 
paragraph (f) of this section. Record the concentration of NO in this 
NO+O2 mixture.
    (h) Switch the NOX generator to the generation mode and 
adjust the generation rate so that the NO measured on the analyzer is 
20 percent of that measured in paragraph (f) of this section. There 
must be at least 10 percent unreacted NO at this point. Record the 
concentration of residual NO.
* * * * *
    (k) Turn off the NOX generator O2 (or air) 
supply. The analyzer will now indicate the NOX in the 
original NO-in-N2 mixture. This value should be no more than 
5 percent above the value indicated in paragraph (f) of this section.
* * * * *
    46. The newly designated Sec. 89.318 is amended by revising 
paragraphs (c)(2)(i) and (c)(2)(iv) to read as follows:


Sec. 89.318  Analyzer interference checks.

* * * * *
    (c) * * *
    (2) NOX analyzer water quench check. (i) This check 
applies to wet measurements only. An NO span gas having a concentration 
of 80 to 100 percent of full scale of a normal operating range shall be 
passed through the CLD (or HCLD) and the response recorded as D. The NO 
span gas shall then be bubbled through water at room temperature and 
passed through the CLD (or HCLD) and the analyzer response recorded as 
AR. Determine and record the bubbler absolute operating pressure and 
the bubbler water temperature. (It is important that the NO span gas 
contains minimal NO2 concentration for this check. No 
allowance for absorption of NO2 in water has been made in 
the following quench calculations. This test may be optionally run in 
the NO mode to minimize the effect of any NO2 in the NO span 
gas.)
* * * * *
    (iv)(A) The maximum raw or dilute exhaust water vapor concentration 
expected during testing (designated as Wm) can be estimated from the 
CO2 span gas (or as defined in the equation in this 
paragraph and designated as A) criteria in paragraph (c)(1) of this 
section and the assumption of a fuel atom H/C ratio of 1.8:1 as: 
Wm(%)=0.9 x A(%)

Where:
  A= maximum CO2 concentration expected in the sample system 
during testing.
  (B) Percent water quench shall not exceed 3 percent and shall be 
calculated by:
[GRAPHIC] [TIFF OMITTED] TP24SE97.004

    47. The newly designated Sec. 89.319 is amended by revising 
paragraphs (b)(1), (b)(2), (c), (d) introductory text, (d)(2), and 
(d)(6) to read as follows:


Sec. 89.319  Hydrocarbon analyzer calibration.

* * * * *
    (b) Initial and periodic optimization of detector response. * * *
    (1) Follow good engineering practices for initial instrument start-
up and basic operating adjustment using the appropriate fuel (see 
Sec. 89.312(e)) and zero-grade air.
    (2) Optimize the FID's response on the most common operating range. 
The response is to be optimized with respect to fuel pressure or flow. 
Efforts shall be made to minimize response variations to different 
hydrocarbon species that are expected to be in the exhaust. Good 
engineering judgement is to be used to trade off optimal FID response 
to propane-in-air against reductions in relative responses to other 
hydrocarbons. A good example of trading off response on propane for 
relative responses to other hydrocarbon species is given in Society of 
Automotive Engineers (SAE) Paper No. 770141, ``Optimization of Flame 
Ionization Detector for Determination of Hydrocarbon in Diluted 
Automotive Exhausts''; author Glenn D. Reschke. It is also required 
that the response be set to optimum condition with respect to air flow 
and sample flow. Heated Flame Ionization Detectors (HFIDs) must be at 
their specified operating temperature. One of the following procedures 
is required for FID or HFID optimization:
    (i) The procedure outlined in Society of Automotive Engineers (SAE) 
paper No. 770141, ``Optimization of a Flame Ionization Detector for 
Determination of Hydrocarbon in Diluted Automotive Exhausts''; author, 
Glenn D. Reschke. This procedure has been incorporated by reference. 
See Sec. 89.6.
    (ii) The HFID optimization procedures outlined in 40 CFR 86.331-79.
    (iii) Alternative procedures may be used if approved in advance by 
the Administrator.
    (iv) The procedures specified by the manufacturer of the FID or 
HFID.
* * * * *
    (c) Initial and periodic calibration. Prior to introduction into 
service, after any maintenance which could alter calibration, and 
monthly thereafter, the FID or HFID hydrocarbon analyzer shall be 
calibrated on all normally used instrument ranges using the steps in 
this paragraph (c). Use the same flow rate and pressures as when 
analyzing samples. Calibration gases shall be introduced directly at 
the analyzer, unless the ``overflow'' calibration option of 
Sec. 86.1310-90(b)(3)(i) of this chapter for the HFID is taken. New 
calibration curves need not be generated each month if the existing 
curve can be verified as continuing to meet the requirements of 
paragraph (c)(3) of this section.
    (1) Adjust analyzer to optimize performance.
    (2) Zero the hydrocarbon analyzer with zero-grade air.
    (3) Calibrate on each used operating range with propane-in-air 
(dilute or raw) or propane-in-nitrogen (raw) calibration gases having 
nominal concentrations starting between 10-15 percent and increasing in 
at least six incremental steps to 90 percent (e.g., 15, 30, 45, 60, 75, 
and 90 percent of that range) of that range. The incremental steps are 
to be spaced to represent good engineering practice. For each range 
calibrated, if the deviation from a least-squares best-fit straight 
line is 2 percent or less of the value at each data point, 
concentration values may be calculated by use of a single calibration 
factor for that range. If the deviation exceeds 2 percent at each non-
zero data point and within 0.3 percent of full scale on the 
zero, the best-fit non-linear equation which represents the data to 
within these limits shall be used to determine concentration.
    (d) Oxygen interference optimization (Required for raw). Choose a 
range where the oxygen interference check gases will fall in the upper 
50 percent.

[[Page 50209]]

Conduct the test, as outlined in this paragraph, with the oven 
temperature set as required by the instrument manufacturer. Oxygen 
interference check gas specifications are found in Sec. 89.312(d).
* * * * *
    (2) Span the analyzer with the 21% oxygen interference gas 
specified in Sec. 89.312(d).
* * * * *
    (6) Calculate the percent of oxygen interference (designated as 
percent O2I) for each mixture in paragraph (d)(4) of this 
section as follows:

percent O2I=((B-C) x 100)/B

Where:

A= hydrocarbon concentration (ppmC) of the span gas used in paragraph 
(d)(2) of this section.
B= hydrocarbon concentration (ppmC) of the oxygen interference check 
gases used in paragraph (d)(4) of this section.
C= analyzer response (ppmC) = A/D.
    D= (percent of full-scale analyzer response due to A)  x  (percent 
of full-scale analyzer response due to B).
* * * * *
    48. The newly designated Sec. 89.320 is amended by revising 
paragraph (c) to read as follows:


Sec. 89.320  Carbon monoxide analyzer calibration.

* * * * *
    (c) Initial and periodic calibration. Prior to its introduction 
into service, after any maintenance which could alter calibration, and 
every two months thereafter, the NDIR carbon monoxide analyzer shall be 
calibrated. New calibration curves need not be generated every two 
months if the existing curve can be verified as continuing to meet the 
requirements of paragraph (c)(3) of this section.
    (1) Adjust the analyzer to optimize performance.
    (2) Zero the carbon monoxide analyzer with either zero-grade air or 
zero-grade nitrogen.
    (3) Calibrate on each used operating range with carbon monoxide-in-
N2 calibration gases having nominal concentrations starting 
between 10 and 15 percent and increasing in at least six incremental 
steps to 90 percent (e.g., 15, 30, 45, 60, 75, and 90 percent) of that 
range. The incremental steps are to be spaced to represent good 
engineering practice. For each range calibrated, if the deviation from 
a least-squares best-fit straight line is 2 percent or less of the 
value at each non-zero data point and within 0.3 percent of 
full scale on the zero, concentration values may be calculated by use 
of a single calibration factor for that range. If the deviation exceeds 
these limits, the best-fit non-linear equation which represents the 
data to within these limits shall be used to determine concentration.
* * * * *
    49. The newly designated Sec. 89.321 is amended by revising 
paragraph (c) to read as follows:


Sec. 89.321  Oxides of nitrogen analyzer calibration.

* * * * *
    (c) Initial and periodic calibration. Prior to its introduction 
into service, after any maintenance which could alter calibration, and 
monthly thereafter, the chemiluminescent oxides of nitrogen analyzer 
shall be calibrated on all normally used instrument ranges. New 
calibration curves need not be generated each month if the existing 
curve can be verified as continuing to meet the requirements of 
paragraph (c)(3) of this section. Use the same flow rate as when 
analyzing samples. Proceed as follows:
    (1) Adjust analyzer to optimize performance.
    (2) Zero the oxides of nitrogen analyzer with zero-grade air or 
zero-grade nitrogen.
    (3) Calibrate on each normally used operating range with NO-in-
N2 calibration gases with nominal concentrations starting at 
between 10 and 15 percent and increasing in at least six incremental 
steps to 90 percent (e.g., 15, 30, 45, 60, 75, and 90 percent) of that 
range. The incremental steps are to be spaced to represent good 
engineering practice. For each range calibrated, if the deviation from 
a least-squares best-fit straight line is 2 percent or less of the 
value at each non-zero data point and within 0.3 percent of 
full scale on the zero, concentration values may be calculated by use 
of a single calibration factor for that range. If the deviation exceeds 
these limits, the best-fit non-linear equation which represents the 
data to within these limits shall be used to determine concentration.
* * * * *
    50. The newly designated Sec. 89.322 is amended by revising 
paragraph (a) to read as follows:


Sec. 89.322  Carbon dioxide analyzer calibration.

    (a) Prior to its introduction into service, after any maintenance 
which could alter calibration, and bi-monthly thereafter, the NDIR 
carbon dioxide analyzer shall be calibrated on all normally used 
instrument ranges. New calibration curves need not be generated each 
month if the existing curve can be verified as continuing to meet the 
requirements of paragraph (a)(3) of this section. Proceed as follows:
    (1) Follow good engineering practices for instrument start-up and 
operation. Adjust the analyzer to optimize performance.
    (2) Zero the carbon dioxide analyzer with either zero-grade air or 
zero-grade nitrogen.
    (3) Calibrate on each normally used operating range with carbon 
dioxide-in-N2 calibration or span gases having nominal 
concentrations starting between 10 and 15 percent and increasing in at 
least six incremental steps to 90 percent (e.g., 15, 30, 45, 60, 75, 
and 90 percent) of that range. The incremental steps are to be spaced 
to represent good engineering practice. For each range calibrated, if 
the deviation from a least-squares best-fit straight line is 2 percent 
or less of the value at each non-zero data point and within 
0.3 percent of full scale on the zero, concentration values 
may be calculated by use of a single calibration factor for that range. 
If the deviation exceeds these limits, the best-fit non-linear equation 
which represents the data to within these limits shall be used to 
determine concentration.
* * * * *
    51. The newly designated Sec. 89.324 is revised to read as follows:


Sec. 89.324  Calibration of other equipment.

    (a) Other test equipment used for testing shall be calibrated as 
often as required by the instrument manufacturer or necessary according 
to good practice.
    (b) If a methane analyzer is used, the methane analyzer shall be 
calibrated prior to introduction into service and monthly thereafter:
    (1) Follow the manufacturer's instructions for instrument startup 
and operation. Adjust the analyzer to optimize performance.
    (2) Zero the methane analyzer with zero-grade air.
    (3) Calibrate on each normally used operating range with 
CH4 in air with nominal concentrations starting between 10 
and 15 percent and increasing in at least six incremental steps to 90 
percent (e.g., 15, 30, 45, 60, 75, and 90 percent) of that range. The 
incremental steps are to be spaced to represent good engineering 
practice. For each range calibrated, if the deviation from a least-
squares best-fit straight line is 2 percent or less of the value at 
each non-zero data point and within 0.3 percent of full 
scale on the zero, concentration values may be calculated by use of a 
single calibration factor for that range. If the deviation exceeds 
these limits, the best-fit non-linear equation

[[Page 50210]]

which represents the data to within these limits shall be used to 
determine concentration.
    52. The newly designated Sec. 89.328 is amended by revising 
paragraphs (b)(1) and (b)(2) to read as follows:

Sec. 89.328  Inlet and exhaust restrictions.

* * * * *
    (b) * * *
    (1) Equip the test engine with an air inlet system presenting an 
air inlet restriction within 5 percent of the upper limit at maximum 
air flow, as specified by the engine manufacturer for a clean air 
cleaner. A system representative of the installed engine may be used. 
In other cases a test shop system may be used.
    (2) The exhaust backpressure must be within 5 percent of the upper 
limit at maximum declared power, as specified by the engine 
manufacturer. A system representative of the installed engine may be 
used. In other cases a test shop system may be used.
    53. The newly designated Sec. 89.330 is amended by revising 
paragraph (b)(2) to read as follows:

Sec. 89.330  Lubricating oil and test fuels.

* * * * *
    (b) * * *
    (2) Use petroleum fuel meeting the specifications in Table 4 in 
Appendix A of this subpart, or substantially equivalent specifications 
approved by the Administrator, for exhaust emission testing. 
Alternatively, petroleum fuel meeting the specifications in Table 5 in 
Appendix A of this subpart may be used in exhaust emission testing. The 
grade of diesel fuel used must be commercially designated as ``Type 2-
D'' grade diesel fuel and recommended by the engine manufacturer.
* * * * *
    54.-57. Tables 1 through 4 of Appendix A to subpart D are revised 
to read as follows:

Appendix A to Subpart D--Tables

                                                                        
         Table 1.--Abbreviations Used in Subpart D of This Part         
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
CLD..............................  Chemiluminescent detector.           
CO...............................  Carbon monoxide.                     
CO2..............................  Carbon dioxide.                      
HC...............................  Hydrocarbons.                        
HCLD.............................  Heated chemiluminescent detector.    
HFID.............................  Heated flame ionization detector.    
GC...............................  Gas chromatograph.                   
NDIR.............................  Non-dispersive infra-red analyzer.   
NIST.............................  National Institute for Standards and 
                                    Testing.                            
NO...............................  Nitric Oxide.                        
NO2..............................  Nitrogen Dioxide.                    
NOX..............................  Oxides of nitrogen.                  
O2...............................  Oxygen.                              
------------------------------------------------------------------------


        Table 2.--Symbols Used in Subparts D and E of This Part.        
------------------------------------------------------------------------
         Symbol                     Term                     Unit       
------------------------------------------------------------------------
conc...................  Concentration (ppm by       ppm                
                          volume).                                      
f......................  Engine specific parameter   ...................
                          considering atmospheric                       
                          conditions.                                   
FFCB...................  Fuel specific factor for    ...................
                          the carbon balance                            
                          calculation.                                  
FFD....................  Fuel specific factor for    ...................
                          exhaust flow calculation                      
                          on dry basis.                                 
FFH....................  Fuel specific factor        ...................
                          representing the hydrogen                     
                          to carbon ratio.                              
FFW....................  Fuel specific factor for    ...................
                          exhaust flow calculation                      
                          on wet basis.                                 
FR.....................  Rate of fuel consumed.....  g/h                
GAIRW..................  Intake air mass flow rate   kg/h               
                          on wet basis.                                 
GAIRD..................  Intake air mass flow rate   kg/h               
                          on dry basis.                                 
GEXHW..................  Exhaust gas mass flow rate  kg/h               
                          on wet basis.                                 
GFuel..................  Fuel mass flow rate.......  kg/h               
H......................  Absolute humidity (water    g/kg               
                          content related to dry                        
                          air).                                         
i......................  Subscript denoting an       ...................
                          individual mode.                              
KH.....................  Humidity correction factor  ...................
L......................  Percent torque related to   %                  
                          maximum torque for the                        
                          test mode.                                    
mass...................  Pollutant mass flow.......  g/h                
nd,i...................  Engine speed (average at    1/min              
                          the i'th mode during the                      
                          cycle).                                       
Ps.....................  Dry atmospheric pressure..  kPa                
Pd.....................  Test ambient saturation     kPa                
                          vapor pressure at ambient                     
                          temperature.                                  
P......................  Observed brake power        kW                 
                          output uncorrected.                           
PAUX...................  Declared total power        kW                 
                          absorbed by auxiliaries                       
                          fitted for the test.                          
PM.....................  Maximum power measured at   kW                 
                          the test speed under test                     
                          conditions.                                   
Pi.....................  Pi = PM,i + PAUX,i........  ...................
PB.....................  Total barometric pressure   kPa                
                          (average of the pre-test                      
                          and post-test values).                        
Pv.....................  Saturation pressure at dew  kPa                
                          point temperature.                            
Ra.....................  Relative humidity of the    %                  
                          ambient air.                                  
S......................  Dynamometer setting.......  kW                 
T......................  Absolute temperature at     K                  
                          air inlet.                                    
Tbe....................  Air temperature after the   K                  
                          charge air cooler (if                         
                          applicable) (average).                        
Tclout.................  Coolant temperature outlet  K                  
                          (average).                                    
TDd....................  Absolute dewpoint           K                  
                          temperature.                                  
Td,i...................  Torque (average at the      N-m                
                          i'th mode during the                          
                          cycle).                                       
TSC....................  Temperature of the          K                  
                          intercooled air.                              
Tref...................  Reference temperature.....  K                  
VEXHD..................  Exhaust gas volume flow     m3/h               
                          rate on dry basis.                            
VAIRW..................  Intake air volume flow      m3/h               
                          rate on wet basis.                            
PB.....................  Total barometric pressure.  kPa                
VEXHW..................  Exhaust gas volume flow     m3/h               
                          rate on wet basis.                            
WF.....................  Weighing factor...........  ...................
WFE....................  Effective weighing factor.  ...................
------------------------------------------------------------------------


                                                Table 3.--Measurement Accuracy and Calibration Frequency                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
       No.                   Item                            Calibration accuracy \1\                                 Calibration frequency             
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................  Engine speed...........  2%............................................  30 days.                                        
2................  Torque.................  2%............................................  30 days.                                        
3................  Fuel consumption (raw    2% of engine maximum..........................  30 days.                                        
                    measurement).                                                                                                                       
4................  Air consumption (raw     2% of engine maximum..........................  As required.                                    
                    measurement).                                                                                                                       
5................  Coolant temperature....  2 deg.K.......................................  As required.                                    
6................  Lubricant temperature..  2 deg.K.......................................  As required.                                    
7................  Exhaust backpressure...  0.5%..........................................  As required.                                    
8................  Inlet depression.......  0.5%..........................................  As required.                                    
9................  Exhaust gas temperature  15 deg.K......................................  As required.                                    

[[Page 50211]]

                                                                                                                                                        
10...............  Air inlet temperature    2 deg.K.......................................  As required.                                    
                    (combustion air).                                                                                                                   
11...............  Atmospheric pressure...  0.5%..........................................  As required.                                    
12...............  Humidity (combustion     3.0%..........................................  As required.                                    
                    air) (relative).                                                                                                                    
13...............  Fuel temperature.......  2 deg.K.......................................  As required.                                    
14...............  Temperature with regard  2 deg.K.......................................  As required.                                    
                    to dilution tunnel.                                                                                                                 
15...............  Dilution air humidity    3%............................................  As required.                                    
                    (specific).                                                                                                                         
16...............  HC analyzer............  2%............................................  Monthly or as required.                         
17...............  CO analyzer............  2%............................................  Bi-monthly or as required.                      
18...............  NOX analyzer...........  2%............................................  Monthly or as required.                         
19...............  Methane analyzer.......  2%............................................  Monthly or as required.                         
20...............  NOX converter            90%.......................................................  Monthly.                                        
                    efficiency check.                                                                                                                   
21...............  CO2 analyzer...........  2%............................................  Monthly or as required.                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ All accuracy requirements pertain to the final recorded value which is inclusive of the data acquisition system.                                    


                                   Table 4.--Federal Test Fuel Specifications                                   
----------------------------------------------------------------------------------------------------------------
                  Item                                    Procedure (ASTM) \1\                  Value (type 2-D)
----------------------------------------------------------------------------------------------------------------
Cetane..................................  D613-86............................................              42-48
Distillation Range:                                                                                             
    IPB,  deg.C.........................  D86-90.............................................            171-204
    10% point,  deg.C...................  D86-90.............................................            204-235
    50% point,  deg.C...................  D86-90.............................................            243-283
    90% point,  deg.C...................  D86-90.............................................            293-332
    EP,  deg.C..........................  D86-90.............................................            321-366
    Gravity, API........................  D287-92............................................              33-37
    Total sulfur, % mass................  D129-91 or D2622-92................................          >0.05-0.5
Hydrocarbon composition:                                                                                        
    Aromatics, % vol....................  D1319-89...........................................             \2\ 10
    Parafins............................  D1319-89...........................................              (\3\)
    Napthenes...........................  ...................................................  .................
    Olefins.............................  ...................................................  .................
    Flashpoint,  deg.C (minimum)........  D93-90.............................................                 54
    Viscosity @ 38  deg.C, centistokes..  D445-88............................................            2.0-3.2
----------------------------------------------------------------------------------------------------------------
\1\ All ASTM procedures in this table have been incorporated by reference. See Sec.  89.6.                      
\2\ Minimum.                                                                                                    
\3\ Remainder.                                                                                                  

* * * * *

Appendix A, Table 5 [Amended]

    58. Table 5 of Appendix A to subpart D is amended by revising the 
heading to read as follows:
* * * * *

              Table 5.--California Test Fuel Specifications             
                                                                        
                                                                        

* * * * *

Subpart E--[Amended]

    59. The newly designated Sec. 89.401 is amended by revising 
paragraph (b) to read as follows:


Sec. 89.401  Scope; applicability.

* * * * *
    (b) Exhaust gases, either raw or dilute, are sampled while the test 
engine is operated using the appropriate test cycle on an engine 
dynamometer. The exhaust gases receive specific component analysis 
determining concentration of pollutant, exhaust volume, the fuel flow, 
and the power output during each mode. Emissions are reported as grams 
per kilowatt hour (g/kW-hr).
* * * * *
    60. The newly designated Sec. 89.402 is revised to read as follows:


Sec. 89.402  Definitions.

    The definitions in subpart A of this part apply to this subpart. 
For terms not defined in this part, the definitions in part 86, 
subparts A, D, I, and N, of this chapter apply to this subpart.
    61. The newly designated Sec. 89.404 is amended by revising 
paragraph (b) and removing paragraph (e) to read as follows:


Sec. 89.404  Test procedure overview.

* * * * *
    (b) The test is designed to determine the brake-specific emissions 
of hydrocarbons, carbon monoxide, oxides of nitrogen, and particulate 
matter. For more information on particulate matter sampling, see 
Sec. 89.112(c). The test cycles consist of various steady-state 
operating modes that include different combinations of engine speeds 
and loads. These procedures require the determination of the 
concentration of each pollutant, exhaust volume, the fuel flow, and the 
power output during each mode. The measured values are weighted and 
used to calculate the grams of each pollutant emitted per kilowatt hour 
(g/kW-hr).
* * * * *
    62. The newly designated Sec. 89.405 is amended by revising 
paragraphs (d), (e), and (f) to read as follows:


Sec. 89.405  Recorded information.

* * * * *
    (d) Test data; pre-test.
    (1) Date and time of day.
    (2) Test number.
    (3) Intermediate speed and rated speed as defined in Sec. 89.2 and 
maximum observed torque for these speeds.
    (4) Recorder chart or equivalent. Identify for each test segment 
zero traces for each range used, and span traces for each range used.

[[Page 50212]]

    (5) Air temperature after and pressure drop across the charge air 
cooler (if applicable) at maximum observed torque and rated speed.
    (e) Test data; modal.
    (1) Recorder chart or equivalent. Identify for each test mode the 
emission concentration traces and the associated analyzer range(s). 
Identify the start and finish of each test.
    (2) Observed engine torque.
    (3) Observed engine rpm.
    (4) Record engine torque and engine rpm continuously during each 
mode with a chart recorder or equivalent recording device.
    (5) Intake air flow (for raw mass flow sampling method only) and 
depression for each mode.
    (6) Engine intake air temperature at the engine intake or 
turbocharger inlet for each mode.
    (7) Mass fuel flow (for raw sampling) for each mode.
    (8) Engine intake humidity.
    (9) Coolant temperature outlet.
    (10) Engine fuel inlet temperature at the pump inlet.
    (f) Test data; post-test.
    (1) Recorder chart or equivalent. Identify the zero traces for each 
range used and the span traces for each range used. Identify hangup 
check, if performed.
    (2) Total number of hours of operation accumulated on the engine.
    63. The newly designated Sec. 89.406 is amended by revising 
paragraphs (b) and (c)(1) to read as follows:


Sec. 89.406  Pre-test procedures.

* * * * *
    (b) Replace or clean the filter elements and then vacuum leak check 
the system per Sec. 89.316(a). Allow the heated sample line, filters, 
and pumps to reach operating temperature.
    (c) * * *
    (1) Check the sample-line temperatures (see Sec. 89.309 (a)(4)(ii) 
and (a)(5)(i)(A)).
* * * * *
    64. The newly designated Sec. 89.407 is amended by revising 
paragraphs (a), (c), and (d)(2) to read as follows:


Sec. 89.407  Engine dynamometer test run.

    (a) Measure and record the temperature of the air supplied to the 
engine, the fuel temperature, the intake air humidity, and the observed 
barometric pressure during the sampling for each mode. The fuel 
temperature shall be less than or equal to 43  deg.C during the 
sampling for each mode.
* * * * *
    (c) The following steps are taken for each test:
    (1) Install instrumentation and sample probes as required.
    (2) Perform the pre-test procedure as specified in Sec. 89.406.
    (3) Read and record the general test data as specified in 
Sec. 89.405(c).
    (4) Start cooling system.
    (5) Precondition (warm up) the engine in the following manner:
    (i) For variable-speed engines:
    (A) Operate the engine at idle for 2 to 3 minutes;
    (B) Operate the engine at approximately 50 percent power at the 
peak torque speed for 5 to 7 minutes;
    (C) Operate the engine at rated speed and maximum horsepower for 25 
to 30 minutes;
    (ii) For constant-speed engines:
    (A) Operate the engine at minimum load for 2 to 3 minutes;
    (B) Operate the engine at 50 percent load for 5 to 7 minutes;
    (C) Operate the engine at maximum load for 25 to 30 minutes;
    (iii) Optional. It is permitted to precondition the engine at rated 
speed and maximum horsepower until the oil and water temperatures are 
stabilized. The temperatures are defined as stabilized if they are 
maintained within 2 percent of point on an absolute basis 
for 2 minutes. The engine must be operated a minimum of 10 minutes for 
this option. This optional procedure may be substituted for the 
procedure in paragraph (c)(5)(i)or (c)(5)(ii) of this section;
    (iv) Optional. If the engine has been operating on service 
accumulation for a minimum of 40 minutes, the service accumulation may 
be substituted for the procedure in paragraphs (c)(5)(i) through (iii) 
of this section.
    (6) Read and record all pre-test data specified in Sec. 89.405(d).
    (7) Start the test cycle (see Sec. 89.410) within 20 minutes of the 
end of the warmup. (See paragraph (c)(13) of this section.) A mode 
begins when the speed and load requirements are stabilized to within 
the requirements of Sec. 89.410(b). A mode ends when valid emission 
sampling for that mode ends. For a mode to be valid, the speed and load 
requirements must be maintained continuously during the mode. Sampling 
in the mode may be repeated until a valid sample is obtained as long as 
the speed and torque requirements are met.
    (8) Calculate the torque for any mode with operation at rated 
speed.
    (9) During the first mode with intermediate speed operation, if 
applicable, calculate the torque corresponding to 75 and 50 percent of 
the maximum observed torque for the intermediate speed.
    (10) Record all modal data specified in Sec. 89.405(e) during a 
minimum of the last 60 seconds of each mode.
    (11) Record the analyzer(s) response to the exhaust gas during the 
minimum of the last 60 seconds of each mode.
    (12) Test modes may be repeated, as long as the engine is 
preconditioned by running the previous mode. In the case of the first 
mode of any cycle, precondition according to paragraph (c)(5) of this 
section.
    (13) If a delay of more than 20 minutes, but less than 4 hours, 
occurs between the end of one mode and the beginning of another mode, 
precondition the engine by running the previous mode. If the delay 
exceeds 4 hours, the test shall include preconditioning (begin at 
paragraph (c)(2) of this section).
    (14) The speed and load points for each mode are listed in Tables 1 
through 4 of Appendix B of this subpart. The engine speed and load 
shall be maintained as specified in Sec. 89.410(b).
    (15) If at any time during a test mode, the test equipment 
malfunctions or the specifications in paragraph (c)(14) of this section 
are not met, the test mode is void and may be aborted. The test mode 
may be restarted by preconditioning with the previous mode.
    (16) Fuel flow and air flow during the idle load condition may be 
determined just prior to or immediately following the dynamometer 
sequence, if longer times are required for accurate measurements.
    (d) * * *
    (2) Each analyzer range that may be used during a test mode must 
have the zero and span responses recorded prior to the execution of the 
test . Only the zero and span for the range(s) used to measure the 
emissions during the test are required to be recorded after the 
completion of the test .
* * * * *
    65. The newly designated Sec. 89.408 is amended by revising 
paragraph (e) to read as follows:


Sec. 89.408  Post-test procedures.

* * * * *
    (e) For a valid test, the zero and span checks performed before and 
after each test for each analyzer must meet the following requirements:
    (1) The span drift (defined as the change in the difference between 
the zero response and the span response) must not exceed 3 percent of 
full-scale chart deflection for each range used.
    (2) The zero response drift must not exceed 3 percent of full-scale 
chart deflection.
    66. The newly designated Sec. 89.410 is amended by revising 
paragraphs (a), (b), and (c) to read as follows:

[[Page 50213]]

Sec. 89.410  Engine test cycle.

    (a) Test cycles. The manufacturer shall determine from of the 
following test cycles the most appropriate cycle for each engine family 
using the following guidelines. These cycles shall be used to test 
engines on a dynamometer.
    (1) The 8-mode test cycle described in Table 1 of Appendix B of 
this subpart may be used for any land-based or auxiliary marine diesel 
engine.
    (2) The 5-mode test cycle described in Table 2 of Appendix B of 
this subpart may be used for any constant-speed engine (see Sec. 89.2). 
Any engine certified under this test cycle must meet the labeling 
requirements of Sec. 89.110(b)(11).
    (3) The 6-mode test cycle described in Table 3 of Appendix B of 
this subpart may be used for any land-based or auxiliary marine diesel 
engine rated under 19 kW.
    (4) The 4-mode test cycle described in Table 4 of Appendix B of 
this subpart is intended for all propulsion marine diesel engines. 
Manufacturers may measure emissions from propulsion marine diesel 
engines using the 8-mode test cycle described in Table 1 of Appendix B 
of this subpart if the engine has been derived from a model already 
certified with that cycle, if approved in advance by the Administrator.
    (b) During each non-idle mode, hold the specified load to within 2 
percent of the engine maximum value and speed to within 2 
percent of point. During each idle mode, speed must be held within the 
manufacturer's specifications for the engine, and the throttle must be 
in the fully closed position and torque must not exceed 5 percent of 
the peak torque value of mode 5.
    (c) For any mode except those involving either idle or full-load 
operation, if the operating conditions specified in paragraph (b) of 
this section cannot be maintained, the Administrator may authorize 
deviations from the specified load conditions. Such deviations shall 
not exceed 10 percent of the maximum torque at the test speed. The 
minimum deviations above and below the specified load necessary for 
stable operation shall be determined by the manufacturer and approved 
by the Administrator prior to the test run.
* * * * *
    67. The newly designated Sec. 89.411 is amended by revising 
paragraph (e)(5) to read as follows:


Sec. 89.411  Exhaust sample procedure--gaseous components.

* * * * *
    (e) * * *
    (5) If the difference between the readings obtained is 2 percent of 
full scale deflection or more, clean the sample probe and the sample 
line.
* * * * *
    68. The newly designated Sec. 89.412 is amended by revising 
paragraph (c)(3) and removing and reserving paragraph (g)(1) to read as 
follows:


Sec. 89.412  Raw gaseous exhaust sampling and analytical system 
description.

* * * * *
    (c) * * *
    (3) The location of optional valve V16 may not be greater than 61 
cm from the sample pump.
* * * * *
    (g) * * *
    (1) [Reserved]
* * * * *
    69. The newly designated Sec. 89.413 is amended by revising 
paragraph (d) and removing paragraph (e) to read as follows:


Sec. 89.413  Raw sampling procedures.

* * * * *
    (d) All heated sampling lines shall be fitted with a heated filter 
to extract solid particles from the flow of gas required for analysis. 
The sample line for CO and CO2 analysis may be heated or 
unheated.
    70. The newly designated Sec. 89.414 is amended by revising 
paragraph (a) to read as follows:


Sec. 89.414  Air flow measurement specifications.

    (a) The air flow measurement method used must have a range large 
enough to accurately measure the air flow over the engine operating 
range during the test. Overall measurement accuracy must be 
2 percent of the maximum engine value for all modes. The 
Administrator must be advised of the method used prior to testing.
* * * * *
    71. The newly designated Sec. 89.415 is revised to read as follows:


Sec. 89.415  Fuel flow measurement specifications.

    The fuel flow rate measurement instrument must have a minimum 
accuracy of 2 percent of the engine maximum fuel flow rate. The 
controlling parameters are the elapsed time measurement of the event 
and the weight or volume measurement.
    72. The newly designated Sec. 89.418 is amended by revising 
paragraphs (c) and (d), the table in paragraph (e), paragraphs (f) 
introductory text and (f)(1), and the text of paragraph (g) preceding 
the equation to read as follows:


Sec. 89.418  Raw emission sampling calculations.

* * * * *
    (c) When applying GEXHW the measured ``dry'' 
concentration shall be corrected to a wet basis, if not already 
measured on a wet basis. This section is applicable only for 
measurements made on raw exhaust gas. Correction to a wet basis shall 
be according to the following formula:
ConcWET = KW x Conc``dry''
Where:
KW is determined according to the equations in paragraphs 
(c)(1), (c)(2), and (c)(3) of this section.
    (1) For measurements using the mass flow method (see 
Sec. 89.416(a)):
[GRAPHIC] [TIFF OMITTED] TP24SE97.005

[GRAPHIC] [TIFF OMITTED] TP24SE97.006

ALF=Hydrogen mass percentage of fuel = 13.12 for CH1.8 fuel.

[[Page 50214]]

[GRAPHIC] [TIFF OMITTED] TP24SE97.007

=H/C mole ratio of the fuel.
(2) For measurements using the fuel consumption and exhaust gas 
concentrations method (see Sec. 89.416(b)):
[GRAPHIC] [TIFF OMITTED] TP24SE97.008

[GRAPHIC] [TIFF OMITTED] TP24SE97.009

or
[GRAPHIC] [TIFF OMITTED] TP24SE97.010

K=3.5
[GRAPHIC] [TIFF OMITTED] TP24SE97.011

[GRAPHIC] [TIFF OMITTED] TP24SE97.012

    (3) For both methods, H is calculated as specified in paragraph 
(d)(1) of this section:
[GRAPHIC] [TIFF OMITTED] TP24SE97.013

    (d) As the NOX emission depends on intake air 
conditions, the NOX concentration shall be corrected for 
intake air temperature and humidity with the factor KH given 
in the following formula. For engines operating on alternative 
combustion cycles, other correction formulas may be used if they can be 
justified or validated. The formula follows:
[GRAPHIC] [TIFF OMITTED] TP24SE97.014

Where:
A=0.309 (f/a)-0.0266
B=-0.209 (f/a)+0.00954
T=temperature of the air in K
H=humidity of the inlet air in grams of water per kilogram of dry air, 
in which:

[[Page 50215]]

[GRAPHIC] [TIFF OMITTED] TP24SE97.015

or
[GRAPHIC] [TIFF OMITTED] TP24SE97.016

    (e) * * *

----------------------------------------------------------------------------------------------------------------
                    Gas                            u             v             w                 Conc.          
----------------------------------------------------------------------------------------------------------------
NOX........................................      0.001587       0.00205      0.00205   ppm.                     
CO.........................................      0.000966       0.00125      0.00125   ppm.                     
HC.........................................      0.000478      --            0.000618  ppm.                     
CO2........................................     15.19          19.64        19.64      Percent.                 
  Note: The given coefficients u, v, and w                                                                      
are calculated for 273.15  deg.K (0  deg.C)                                                                     
and 101.3 kPa. In cases where the reference                                                                     
conditions vary from those stated, an error                                                                     
       may occur in the calculations.                                                                           
----------------------------------------------------------------------------------------------------------------

    (f) The following equations may be used to calculate the 
coefficients u, v, and w in paragraph (e) of this section for other 
conditions of temperature and pressure:
    (1) For the calculation of u, v, and w for NOX (as 
NO2), CO, HC (in paragraph (e) of this section as 
CH1.80), CO2, and O2:

Where:
w=4.4615.10-5 x M if conc. in ppm
w=4.4615.10-1 x M if conc. in percent
v=w
u=w/Air
M=Molecular weight
Air=Density of dry air at 273.15  deg.K (0  deg.C), 
101.3 kPa=1.293 kg/m3
* * * * *
    (g) The emission shall be calculated for all individual components 
in the following way where power at idle is equal to zero:
* * * * *


Sec. 89.423   [Removed and reserved]

    73. Remove and reserve the newly designated Sec. 89.423.
    74. The newly designated Sec. 89.424 is amended by revising 
paragraphs (a), (d)(6), and (e) to read as follows:


Sec. 89.424  Dilute emission sampling calculations.

    (a) The final reported emission test results are computed by use of 
the following formula:
[GRAPHIC] [TIFF OMITTED] TP24SE97.017

Where:
Awm=Weighted mass emission level (HC, CO, CO2, 
PM, or NOX) in g/kW-hr.
gi=Mass flow in grams per hour, = grams measured during the 
mode divided by the sample time for the mode.
WFi=Effective weighing factor.
Pi=Power measured during each mode (Power set = zero for the 
idle mode)
* * * * *
    (d) * * *
    (6) Equations for H and KH are found in Sec. 89.418.
Wet concentration = Kw X dry concentration

Where:
Kw=
1-(/200) x CO2e(')-((1.608 x H)/(7000+1.608 x H)), 
or
1-(/200) x CO2e(')-((1.608 x H)/(1000+1.608 x H))
for SI units.
CO2e(') = either CO2e or CO2e' as 
applicable.
CO2e (') = average intergrated carbon dioxide concentration 
(wet basis) in percent (for continuous measurement).

    (e) The final modal reported brake-specific fuel consumption (bsfc) 
shall be computed by use of the following formula:
[GRAPHIC] [TIFF OMITTED] TP24SE97.018

Where:
bsfc = brake-specific fuel consumption for a mode in grams of fuel per 
kilowatt-hour (kW-hr).
M = mass of fuel in grams, used by the engine during a mode.
kW-hr = total kilowatts integrated with respect to time for a mode.
* * * * *


Sec. 89.425   [Removed and reserved]

    75. Remove and reserve the newly designated Sec. 89.425.
    76.-80. Appendix B to subpart E of part 89 is revised to read as 
follows:

Appendix B to Subpart E of Part 89--Tables

                             Table 1.--8-Mode Test Cycle for Variable-Speed Engines                             
----------------------------------------------------------------------------------------------------------------
                                                                             Observed                           
                                                                            torque \2\    Minimum               
            Test segment                Mode No.      Engine speed \1\     (percent of    time in     Weighting 
                                                                               max.         mode       factors  
                                                                            observed)    (minutes)              
----------------------------------------------------------------------------------------------------------------
1...................................            1  Rated.................          100          5.0         0.15
1...................................            2  Rated.................           75          5.0          .15
1...................................            3  Rated.................           50          5.0          .15
1...................................            4  Rated.................           10          5.0          .10
2...................................            5  Int...................          100          5.0          .10
2...................................            6  Int...................           75          5.0          .10
2...................................            7  Int...................           50          5.0          .10

[[Page 50216]]

                                                                                                                
2...................................            8  Idle..................            0          5.0         .15 
----------------------------------------------------------------------------------------------------------------
\1\ Engine speed (non-idle): 2 percent of point. Engine speed (idle): Within manufacturer's         
  specifications. Idle speed is specified by the manufacturer.                                                  
\2\ Torque (non-idle): Throttle fully open for 100 percent points. Other non-idle points: 2 percent 
  of engine maximum value. Torque (idle): Throttle fully closed. Load less than 5 percent of peak torque.       


                             Table 2.--5-Mode Test Cycle for Constant-Speed Engines                             
----------------------------------------------------------------------------------------------------------------
                                                                             Observed                           
                                                                             torque 2     Minimum               
                  Mode No.                          Engine speed  1        (percent of    time  in    Weighting 
                                                                               max.         mode       factors  
                                                                            observed)    (minutes)              
----------------------------------------------------------------------------------------------------------------
1..........................................  Rated.......................          100          5.0         0.05
2..........................................  Rated.......................           75          5.0         0.25
3..........................................  Rated.......................           50          5.0         0.30
4..........................................  Rated.......................           25          5.0         0.30
5..........................................  Rated.......................           10          5.0        0.10 
----------------------------------------------------------------------------------------------------------------
1 Engine speed: 2 percent of point.                                                                 
2 Torque: Throttle fully open for 100 percent point. Other points: 2 percent of engine maximum      
  value.                                                                                                        


                            Table 3.--6-Mode Test Cycle for Engines Rated Under 19 kW                           
----------------------------------------------------------------------------------------------------------------
                                                                             Observed                           
                                                                             torque 2     Minimum               
                  Mode No.                          Engine speed 1         (percent of    time  in    Weighting 
                                                                               max.         mode       factors  
                                                                            observed)    (minutes)              
----------------------------------------------------------------------------------------------------------------
1..........................................  Rated.......................          100          5.0         0.09
2..........................................  Rated.......................           75          5.0          .20
3..........................................  Rated.......................           50          5.0          .29
4..........................................  Rated.......................           25          5.0          .30
5..........................................  Rated.......................           10          5.0          .07
6..........................................  Idle........................            0          5.0         .05 
----------------------------------------------------------------------------------------------------------------
1 Engine speed (non-idle): 2 percent of point. Engine speed (idle): Within manufacturer's           
  specifications. Idle speed is specified by the manufacturer.                                                  
2 Torque (non-idle): Throttle fully open for operation at 100 percent point. Other nonidle points: 2
  percent of engine maximum value. Torque (idle): Throttle fully closed. Load less than 5 percent of peak       
  torque.                                                                                                       


                        Table 4.--4-Mode Test Cycle for Propulsion Marine Diesel Engines                        
----------------------------------------------------------------------------------------------------------------
                                                                Engine      Observed                            
                                                              speed \1\    power \2\     Minimum                
                          Mode No.                           (percent of  (percent of    time in      Weighting 
                                                                 max.         max.         mode        factors  
                                                              observed)    observed)    (minutes)               
----------------------------------------------------------------------------------------------------------------
1..........................................................          100          100          5.0        020   
2..........................................................           91           75          5.0           .50
3..........................................................           80           50          5.0           .15
4..........................................................           63           10          5.0           .15 
----------------------------------------------------------------------------------------------------------------
\1\ Engine speed: 2 percent of point.                                                               
\2\ Power: Throttle fully open for operation at 100 percent point. Other points: 2 percent of engine
  maximum value.                                                                                                

Subpart F--[Amended]

    81. The newly designated Sec. 89.505 is amended by revising 
paragraph (e) to read as follows:


Sec. 89.505  Maintenance of records; submittal of information.

* * * * *
    (e) All reports, submissions, notifications, and requests for 
approvals made under this subpart are addressed to: Director, Engine 
Programs and Compliance Division (6405-J), U.S. Environmental 
Protection Agency, 401 M Street SW, Washington, DC 20460.
    82. The newly designated Sec. 89.506 is amended by revising 
paragraph (g) to read as follows:


Sec. 89.506  Right of entry and access.

* * * * *

[[Page 50217]]

    (g) A manufacturer is responsible for locating its foreign testing 
and manufacturing facilities in jurisdictions where local law does not 
prohibit an EPA enforcement officer(s) or EPA authorized 
representative(s) from conducting the entry and access activities 
specified in this section. EPA will not attempt to make any inspections 
which it has been informed that local foreign law prohibits.
    83. The newly designated Sec. 89.509 is amended by revising 
paragraphs (a) and (b) to read as follows:


Sec. 89.509  Calculation and reporting of test results.

    (a) Initial test results are calculated following the applicable 
test procedure specified in Sec. 89.508(a). The manufacturer rounds 
these results, in accordance with ASTM E29-93a, to the number of 
decimal places contained in the applicable emission standard expressed 
to one additional significant figure. This procedure has been 
incorporated by reference. See Sec. 89.6.
    (b) Final test results are calculated by summing the initial test 
results derived in paragraph (a) of this section for each test engine, 
dividing by the number of tests conducted on the engine, and rounding 
in accordance with the procedure specified in paragraph (a) of this 
section to the same number of decimal places contained in the 
applicable standard expressed to one additional significant figure.
* * * * *
    84. The newly designated Sec. 89.512 is amended by revising 
paragraph (b) to read as follows:


Sec. 89.512  Request for public hearing.

* * * * *
    (b) The manufacturer's request must be filed with the Administrator 
not later than 15 days after the Administrator's notification of the 
decision to suspend or revoke, unless otherwise specified by the 
Administrator. The manufacturer must simultaneously serve two copies of 
this request upon the Director of the Engine Programs and Compliance 
Division and file two copies with the Hearing Clerk of the Agency. 
Failure of the manufacturer to request a hearing within the time 
provided constitutes a waiver of the right to a hearing. Subsequent to 
the expiration of the period for requesting a hearing as of right, the 
Administrator may, at her or his discretion and for good cause shown, 
grant the manufacturer a hearing to contest the suspension or 
revocation.
* * * * *
    85. The newly designated Sec. 89.513 is amended by revising 
paragraph (e)(2) to read as follows.


Sec. 89.513  Administrative procedures for public hearing.

* * * * *
    (e) * * *
    (2) To the maximum extent possible, testimony will be presented in 
written form. Copies of written testimony will be served upon all 
parties as soon as practicable prior to the start of the hearing. A 
certificate of service will be provided on or accompany each document 
or paper filed with the Hearing Clerk. Documents to be served upon the 
Director of the Engine Programs and Compliance Division must be sent by 
registered mail to: Director, Engine Programs and Compliance Division 
(6405-J), U.S. Environmental Protection Agency, 401 M Street SW, 
Washington, DC 20460. Service by registered mail is complete upon 
mailing.
* * * * *

Subpart G--[Amended]

    86. The newly designated Sec. 89.602 is amended by revising the 
definition for ``Fifteen working day hold period'' to read as follows:


Sec. 89.602  Definitions.

* * * * *
    Fifteen working day hold period. The period of time between a 
request for final admission and the automatic granting of final 
admission (unless EPA intervenes) for a nonconforming nonroad engine 
conditionally imported pursuant to Sec. 89.605 or Sec. 89.609. Day one 
of the hold period is the first working day (see definition for 
``working day'' in this section) after the Engine Programs and 
Compliance Division of EPA receives a complete and valid application 
for final admission.
* * * * *
    87. The newly designated Sec. 89.603 is amended by revising 
paragraph (d) to read as follows:


Sec. 89.603  General requirements for importation of nonconforming 
nonroad engines.

* * * * *
    (d) The ICI must submit to the Engine Programs and Compliance 
Division of EPA a copy of all approved applications for certification 
used to obtain certificates of conformity for the purpose of importing 
nonconforming nonroad engines pursuant to Sec. 89.605 or Sec. 89.609. 
In addition, the ICI must submit to the Engine Programs and Compliance 
Division a copy of all approved production changes implemented pursuant 
to Sec. 89.605 or subpart B of this part. Documentation submitted 
pursuant to this paragraph must be provided to the Engine Programs and 
Compliance Division within 10 working days of approval of the 
certification application (or production change) by EPA.
    88. The newly designated Sec. 89.604 is amended by revising 
paragraphs (c)(4) and (d) to read as follows:


Sec. 89.604  Conditional admission.

* * * * *
    (c) * * *
    (4) A copy of the written record is to be submitted to the Engine 
Programs and Compliance Division of EPA within five working days of the 
transfer date.
    (d) Notwithstanding any other requirement of this subpart or U.S. 
Customs Service regulations, an ICI may also assume responsibility for 
the modification and testing of a nonconforming nonroad engine which 
was previously imported by another party. The ICI must be a holder of a 
currently valid certificate of conformity for that specific nonroad 
engine or authorized to import it pursuant to Sec. 89.609 at the time 
of assuming such responsibility. The ICI must comply with all the 
requirements of Sec. 89.603, Sec. 89.604, and either Sec. 89.605 or 
Sec. 89.609, as applicable. For the purposes of this subpart, the ICI 
has ``imported'' the nonroad engine as of the date the ICI assumes 
responsibility for the modification and testing of the nonroad engine. 
The ICI must submit written notification to the Engine Programs and 
Compliance Division of EPA within 10 working days of the assumption of 
that responsibility.
    89. The newly designated Sec. 89.605 is amended by revising 
paragraphs (a)(2)(i), (a)(3)(vi), and (c) to read as follows:


Sec. 89.605  Final admission of certified nonroad engines.

    (a) * * *
    (2) * * *
    (i) The ICI attests that the nonroad engine has been modified in 
accordance with the provisions of the ICI's certificate of conformity; 
presents to EPA a statement written by the applicable Original Engine 
Manufacturer (OEM) that the OEM must provide to the ICI, and to EPA, 
information concerning production changes to the class of nonroad 
engines described in the ICI's application for certification; delivers 
to the Engine Programs and Compliance Division of EPA notification by 
the ICI of any production changes already implemented by the OEM at the 
time of application and their effect on emissions; and obtains from EPA

[[Page 50218]]

written approval to use this demonstration option; or
* * * * *
    (3) * * *
    (vi) A report concerning these production changes is to be made to 
the Engine Programs and Compliance Division of EPA within ten working 
days of initiation of the production change. The cause of any failure 
of an emission test is to be identified, if known;
* * * * *
    (c) Except as provided in paragraph (b) of this section, EPA 
approval for final admission of a nonroad engine under this section is 
presumed to have been granted if the ICI does not receive oral or 
written notice from EPA to the contrary within 15 working days of the 
date that the Engine Programs and Compliance Division of EPA receives 
the ICI's application under paragraph (a) of this section. EPA notice 
of nonapproval may be made to any employee of the ICI. It is the 
responsibility of the ICI to ensure that the Engine Programs and 
Compliance Division of EPA receives the application and to confirm the 
date of receipt. During this 15 working day hold period, the nonroad 
engine is to be stored at a location where the Administrator has 
reasonable access to the nonroad engine for the Administrator's 
inspection. The storage is to be within 50 miles of the ICI's testing 
facility to allow the Administrator reasonable access for inspection 
and testing. A storage facility not meeting this criterion must be 
approved in writing by the Administrator prior to the submittal of the 
ICI's application under paragraph (a) of this section.
    90. The newly designated Sec. 89.609 is amended by revising 
paragraph (d) to read as follows:


Sec. 89.609  Final admission of modification nonroad engines and test 
nonroad engines.

* * * * *
    (d) Except as provided in paragraph (c) of this section, EPA 
approval for final admission of a nonroad engine under this section is 
presumed to have been granted if the ICI does not receive oral or 
written notice from EPA to the contrary within 15 working days of the 
date that the Engine Programs and Compliance Division of EPA receives 
the ICI's application under paragraph (b) of this section. Such EPA 
notice of nonapproval may be made to any employee of the ICI. It is the 
responsibility of the ICI to ensure that the Engine Programs and 
Compliance Division of EPA receives the application and to confirm the 
date of receipt. During this 15 working day hold period, the nonroad 
engine is stored at a location where the Administrator has reasonable 
access to the nonroad engine for the Administrator's inspection. The 
storage is to be within 50 miles of the ICI's testing facility to allow 
the Administrator reasonable access for inspection and testing. A 
storage facility not meeting this criterion must be approved in writing 
by the Administrator prior to the submittal of the ICI's application 
under paragraph (b) of this section.
* * * * *
    91. The newly designated Sec. 89.610 is amended by revising 
paragraph (b)(1) to read as follows:


Sec. 89.610  Maintenance instructions, warranties, emission labeling.

* * * * *
    (b) Warranties. (1) ICIs must submit to the Engine Programs and 
Compliance Division of EPA sample copies (including revisions) of any 
warranty documents required by this section prior to importing nonroad 
engines under this subpart.
* * * * *
    92. The newly designated Sec. 89.611 is amended by revising 
paragraph (g) to read as follows:


Sec. 89.611  Exemptions and exclusions.

* * * * *
    (g) An application for exemption and exclusion provided for in 
paragraphs (b), (c), and (e) of this section is to be mailed to: U.S. 
Environmental Protection Agency, Office of Mobile Sources, Engine 
Programs and Compliance Division (6405-J), 401 M Street, SW., 
Washington, DC 20460, Attention: Imports.

Subpart J--[Amended]

    93. Section 89.903 is amended by revising paragraph (b) to read as 
follows:


Sec. 89.903  Application of section 216(10) of the Act.

* * * * *
    (b) EPA will maintain a list of nonroad engines that have been 
determined to be excluded because they are used solely for competition. 
This list will be available to the public and may be obtained by 
writing to the following address: Chief, Selective Enforcement Auditing 
Section, Engine Programs and Compliance Division (6405--J), 
Environmental Protection Agency, 401 M Street SW, Washington, DC 20460.
* * * * *
    94. Section 89.905 is amended by revising paragraph (f) to read as 
follows:


Sec. 89.905  Testing exemption.

* * * * *
    (f) A manufacturer of new nonroad engines may request a testing 
exemption to cover nonroad engines intended for use in test programs 
planned or anticipated over the course of a subsequent one-year period. 
Unless otherwise required by the Director, Engine Programs and 
Compliance Division, a manufacturer requesting such an exemption need 
only furnish the information required by paragraphs (a)(1) and (d)(2) 
of this section along with a description of the record-keeping and 
control procedures that will be employed to assure that the engines are 
used for purposes consistent with paragraph (a) of this section.
    95. Section 89.906 is amended by revising paragraphs (a)(3) 
introductory text, (a)(3)(iii)(D), and (b) to read as follows:


Sec. 89.906  Manufacturer-owned exemption and precertification 
exemption.

    (a) * * *
    (3) Unless the requirement is waived or an alternate procedure is 
approved by the Director, Engine Programs and Compliance Division, the 
manufacturer must permanently affix a label to each nonroad engine on 
exempt status. This label should--
* * * * *
    (iii) * * *
    (D) The statement ``This nonroad engine is exempt from the 
prohibitions of 40 CFR 89.1003.''
* * * * *
    (b) Any independent commercial importer that desires a 
precertification exemption pursuant to Sec. 89.611(b)(3) and is in the 
business of importing, modifying, or testing uncertified nonroad 
engines for resale under the provisions of subpart G of this part, must 
apply to the Director, Engine Programs and Compliance Division. The 
Director may require such independent commercial importer to submit 
information regarding the general nature of the fleet activities, the 
number of nonroad engines involved, and a demonstration that adequate 
record-keeping procedures for control purposes will be employed.
    96. Section 89.911 is revised to read as follows:


Sec. 89.911  Submission of exemption requests.

    Requests for exemption or further information concerning exemptions 
and/or the exemption request review procedure should be addressed to: 
Chief, Selective Enforcement Auditing Section, Engine Programs and 
Compliance Division (6405-J), Environmental Protection Agency, 401 M 
Street SW, Washington, DC 20460.

[[Page 50219]]

    97. Section 89.1003 is amended by revising paragraphs (a)(3), 
(a)(5), (a)(6), and (b)(4) to read as follows:


Sec. 89.1003  Prohibited acts.

    (a) * * *
    (3)(i) For a person to remove or render inoperative a device or 
element of design installed on or in a nonroad engine, vehicle or 
equipment in compliance with regulations under this part prior to its 
sale and delivery to the ultimate purchaser, or for a person knowingly 
to remove or render inoperative such a device or element of design 
after the sale and delivery to the ultimate purchaser; or
    (ii) For a person to manufacture, sell or offer to sell, or 
install, a part or component intended for use with, or as part of, a 
nonroad engine, vehicle or equipment, where a principal effect of the 
part or component is to bypass, defeat, or render inoperative a device 
or element of design installed on or in a nonroad engine in compliance 
with regulations issued under this part, and where the person knows or 
should know that the part or component is being offered for sale or 
installed for this use or put to such use; or
    (iii) for a person to deviate from the provisions of Sec. 89.130 
when rebuilding an engine (or rebuilding a portion of an engine or 
engine system).
* * * * *
    (5) For a person to circumvent or attempt to circumvent the 
residence time requirements of paragraph (2)(iii) of the nonroad engine 
definition in Sec. 89.2.
    (6) For a manufacturer of nonroad vehicles or equipment to 
distribute in commerce, sell, offer for sale, or introduce into 
commerce a nonroad vehicle or piece of equipment, manufactured on or 
after the model year applicable to engines in such vehicle or equipment 
under Sec. 89.112, which contains an engine not covered by a 
certificate of conformity.
    (b) * * *
    (4) Certified nonroad engines shall be used in all vehicles and 
equipment manufactured on or after the applicable model years in 
Sec. 89.112 that are self-propelled, portable, transportable, or are 
intended to be propelled while performing their function, unless the 
manufacturer of the vehicle or equipment can prove that the vehicle or 
equipment will be used in a manner consistent with paragraph (2) of the 
definition of nonroad engine in Sec. 89.2. For any model year for which 
a new standard takes effect, nonroad vehicle and equipment 
manufacturers may continue to use previous model year nonroad engines 
until inventories of those engines are depleted; however, stockpiling 
of noncertified nonroad engines will be considered a violation of this 
section.
    98. Section 89.1007 is amended by revising paragraph (c) to read as 
follows:


Sec. 89.1007  Warranty provisions.

* * * * *
    (c) For the purposes of this section, the owner of any nonroad 
engine warranted under this part is responsible for the proper 
maintenance of the engine. Proper maintenance includes replacement and 
service, at the owner's expense at a service establishment or facility 
of the owner's choosing, of all parts, items, or devices related to 
emission control (but not designed for emission control) under the 
terms of the last sentence of section 207(a)(3) of the Act, unless such 
part, item, or device is covered by any warranty not mandated by this 
Act.

[FR Doc. 97-24237 Filed 9-23-97; 8:45 am]
BILLING CODE 6560-50-P