[Federal Register Volume 65, Number 107 (Friday, June 2, 2000)]
[Proposed Rules]
[Pages 35430-35559]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 00-12952]



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Part II





Environmental Protection Agency





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40 CFR Parts 69, 80, and 86



Control of Air Pollution From New Motor Vehicles: Heavy-Duty Engine and 
Vehicle Standards; Highway Diesel Fuel Sulfur Control Requirements; 
Proposed Rules

Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Proposed 
Rules

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 69, 80, and 86

[AMS-FRL-6705-2]
RIN 2060-AL69


Control of Air Pollution From New Motor Vehicles: Proposed Heavy-
Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur 
Control Requirements

AGENCY: Environmental Protection Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: Diesel engines contribute considerable pollution to our 
nation's continuing air quality problems. Even with more stringent 
heavy-duty highway engine standards set to take effect in 2004, these 
engines will continue to emit large amounts of nitrogen oxides and 
particulate matter, both of which contribute to serious public health 
problems in the United States. These problems include premature 
mortality, aggravation of respiratory and cardiovascular disease, 
aggravation of existing asthma, acute respiratory symptoms, chronic 
bronchitis, and decreased lung function. Numerous studies also link 
diesel exhaust to increased incidence of lung cancer.
    The diesel engine is a vital workhorse in the United States, moving 
much of the nation's freight, and carrying out much of its farm, 
construction, and other labor. Diesel engine sales have grown over the 
last decade, so that now about a million new diesel engines are put to 
work in the U.S. every year. Diesels overwhelmingly dominate the bus 
and large truck markets and have been capturing a growing share of the 
light heavy-duty vehicle market over the last decade.
    We are proposing a comprehensive national control program that 
would regulate the heavy-duty vehicle and its fuel as a single system. 
We are proposing new emission standards that would begin to take effect 
in 2007, and would apply to heavy-duty highway engines and vehicles. 
These proposed standards are based on the use of high-efficiency 
catalytic exhaust emission control devices or comparably effective 
advanced technologies. Because these devices are damaged by sulfur, we 
are also proposing to reduce the level of sulfur in highway diesel fuel 
significantly by the middle of 2006.
    Diesel engines are more durable and get better fuel economy than 
gasoline engines, but also pollute significantly more. If this program 
is implemented as proposed, diesel trucks and buses will have 
dramatically reduced emission levels. This proposed program will bring 
heavy-duty diesel emissions on par with new cars. The results of this 
historic proposal would be comparable to the advent of the catalytic 
converter on cars, as the proposed standards would, for the first time, 
result in the widespread introduction of exhaust emission control 
devices on diesel engines.
    By 2007, we estimate that heavy-duty trucks and buses will account 
for as much as 30 percent of nitrogen oxides emissions from 
transportation sources and 14 percent of particulate matter emissions. 
In some urban areas, the contribution will be even greater. The 
standards for heavy-duty vehicles proposed in this rule would have a 
substantial impact on the mobile source inventories of oxides of 
nitrogen and particulate matter. Beginning the program in the 2007 
model year ensures that emission reductions start early enough to 
counter the upward trend in heavy-duty vehicle emissions that would 
otherwise occur because of the increasing number of vehicle miles 
traveled each year.
    This proposed program would result in particulate matter and oxides 
of nitrogen emission levels that are 90% and 95% below current 
standards levels, respectively. In order to meet these more stringent 
standards for diesel engines, the proposal calls for a 97% reduction in 
the sulfur content of diesel fuel. As a result, diesel vehicles would 
achieve gasoline-like exhaust emission levels, in addition to their 
inherent advantages over gasoline vehicles with respect to fuel 
economy, lower greenhouse gas emissions, and lower evaporative 
hydrocarbon emissions. We are also proposing more stringent standards 
for heavy-duty gasoline vehicles.
    The clean air impact of this program would be dramatic when fully 
implemented. By 2030, this program would reduce annual emissions of 
nitrogen oxides, nonmethane hydrocarbons, and particulate matter by a 
projected 2.8 million, 305,000 and 110,000 tons, respectively. We 
project that these reductions and the resulting significant 
environmental benefits of this program would come at an average cost 
increase of about $1,700 to $2,800 per new vehicle in the near term and 
about $1000 to $1600 per new vehicle in the long term, depending on the 
vehicle size. In comparison, new vehicle prices today can range up to 
$250,000 for larger heavy-duty vehicles. The cost of reducing the 
sulfur content of diesel fuel would result in an estimated increase of 
approximately four cents per gallon.

DATES: Comments: We must receive your comments by August 14, 2000.
    Hearings: We will hold public hearings on June 19, 20, 22, 27, and 
29, 2000. See ADDRESSES below for the locations of the hearings.

ADDRESSES: Comments: You may send written comments in paper form and/or 
by e-mail. We must receive them by the date indicated under ``DATES'' 
above. Send paper copies of written comments (in duplicate if possible) 
to the contact person listed below. Send e-mail comments to 
diesel@epa.gov.
    EPA's Air Docket makes materials related to this rulemaking 
available for review in Docket No. A-99-06 located at U.S. 
Environmental Protection Agency (EPA), Air Docket (6102), Room M-1500, 
401 M Street, SW, Washington, DC 20460 (on the ground floor in 
Waterside Mall) from 8 a.m. to 5:30 p.m., Monday through Friday, except 
on government holidays. You can reach the Air Docket by telephone at 
(202) 260-7548 and by facsimile at (202) 260-4400. We may charge a 
reasonable fee for copying docket materials, as provided in 40 CFR part 
2.
    Hearings: We will hold five public hearings at the following 
locations:

    June 19, 2000, Crowne Plaza Hotel, 1605 Broadway, New York, NY, 
10019
    June 20, 2000, Rosemont Convention Center, 5555 N. River Rd., 
Rosemont, IL 60018
    June 22, 2000, Renaissance Atlanta Hotel, 590 W. Peachtree St, NW, 
Atlanta, GA, 30308
    June 27, 2000, Hyatt Regency, 711 S. Hope Street, Los Angeles, CA, 
90017
    June 29, 2000, Doubletree Hotel, 3203 Quebec St., Denver, CO, 80207

    We request that parties who want to testify at a hearing notify the 
contact person listed below ten days before the date of the hearing. 
Please see section X, ``Public Participation'' below for more 
information on the comment procedure and public hearings.

FOR FURTHER INFORMATION CONTACT: Margaret Borushko, U.S. EPA, National 
Vehicle and Fuel Emissions Laboratory, 2000 Traverwood, Ann Arbor MI 
48105; Telephone (734) 214-4334, FAX (734) 214-4816, E-mail 
borushko.margaret@epa.gov.

SUPPLEMENTARY INFORMATION:
Regulated Entities
    This proposed action would affect you if you produce or import new

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heavy-duty engines which are intended for use in highway vehicles such 
as trucks and buses or heavy-duty highway vehicles, or convert heavy-
duty vehicles or heavy-duty engines used in highway vehicles to use 
alternative fuels. It would also affect you if you produce, distribute, 
or sell highway diesel fuel.
    The table below gives some examples of entities that may have to 
follow the proposed regulations. But because these are only examples, 
you should carefully examine the proposed and existing regulations in 
40 CFR parts 69, 80, and 86. If you have questions, call the person 
listed in the FOR FURTHER INFORMATION CONTACT section above.

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                                                                              Examples of potentially regulated
                  Category                    NAICS Codes a    SIC Codes b                 entities
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Industry...................................          336112            3711  Engine and truck manufacturers.
                                                     336120
Industry...................................          811112            7533  Commercial importers of vehicles
                                                                              and vehicle components.
                                                     811198            7549
Industry...................................          324110            2911  Petroleum refiners.
Industry...................................          422710            5171  Diesel fuel marketers and
                                                                              distributors.
                                                     422720            5172
Industry...................................          484220            4212  Diesel fuel carriers.
                                                     484230           4213
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a North American Industry Classification System (NAICS).
b Standard Industrial Classification (SIC) system code.

Access to Rulemaking Documents Through the Internet
    Today's proposal is available electronically on the day of 
publication from the Environmental Protection Agency Internet Web site 
listed below. Electronic copies of the preamble, regulatory language, 
Draft Regulatory Impact Analysis, and other documents associated with 
today's proposal are available from the EPA Office of Transportation 
and Air Quality (formerly the Office of Mobile Sources) Web site listed 
below shortly after the rule is signed by the Administrator. This 
service is free of charge, except any cost that you incur for 
connecting to the Internet.
    Environmental Protection Agency Web Site:

http://www.epa.gov/fedrgstr/

(Either select a desired date or use the Search feature.)

    Office of Transportation and Air Quality (OTAQ) Web Site:

http://www.epa.gov/otaq/

(Look in ``What's New'' or under the ``Heavy Trucks/Busses'' topic.)

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

Table of Contents

I. A Brief Overview
    A. What Is Being Proposed?
    1. Heavy-Duty Emission Standards
    2. Fuel Quality Standards
    B. Why Is EPA Making This Proposal?
    1. Heavy-Duty Vehicles Contribute to Serious Air Pollution 
Problems
    2. Technology-Based Solutions
    3. Basis for Action Under the Clean Air Act
    C. Putting This Proposal In Perspective
    1. Diesel Popularity
    2. Past Progress and New Developments
    3. Tier 2 Emissions Standards
    4. Mobile Source Air Toxics Rulemaking
    5. Nonroad Engine Standards and Fuel
    6. Actions in California
    7. Retrofit Programs
    8. Actions in Other Countries
II. The Air Quality Need and Projected Benefits
    A. Overview
    B. Public Health and Welfare Concerns
    1. Ozone and Its Precursors
    a. Health and Welfare Effects From Short-Term Exposures to Ozone
    b. Current and Future Nonattainment Status With the 1-Hour Ozone 
NAAQS
    i. Ozone Predictions Made in the Tier 2 Rulemaking and Other 
Information on Ozone Attainment Prospects
    ii. Areas At Risk of Exceeding the 1-Hour Ozone Standard
    iii. Conclusion
    c. Public Health and Welfare Concerns from Prolonged and 
Repeated Exposures to Ozone
    2. Particulate Matter
    a. Health and Welfare Effects
    i. Particulate Matter Generally
    ii. Special Considerations for Diesel PM
    b. Potential Cancer Effects of Diesel Exhaust
    c. Noncancer Effects of Diesel Exhaust
    d. Attainment and Maintenance of the PM10 NAAQS
    i. Current PM10 Nonattainment
    ii. Risk of Future Exceedances of the PM10 Standard
    e. Public Health and Welfare Concerns from Exposure to Fine PM
    f. Visibility and Regional Haze Effects of Ambient PM
    g. Other Welfare Effects Associated with PM
    h. Conclusions Regarding PM
    3. Other Criteria Pollutants
    4. Other Air Toxics
    a. Benzene
    b. 1,3-Butadiene
    c. Formaldehyde
    d. Acetaldehyde
    e. Acrolein
    f. Dioxins
    5. Other Environmental Effects
    a. Acid Deposition
    b. Eutrophication and Nitrification
    c. POM Deposition
    C. Contribution From Heavy-Duty Vehicles
    1. NOX Emissions
    2. PM Emissions
    3. Environmental Justice
    D. Anticipated Emissions Benefits
    1. NOX Reductions
    2. PM Reductions
    3. NMHC Reductions
    4. Additional Emissions Benefits
    a. CO Reductions
    b. SOX Reductions
    c. Air Toxics Reductions
    E. Clean Heavy-Duty Vehicles and Low-Sulfur Diesel Fuel Are 
Critically Important for Improving Human Health and Welfare
III. Heavy-Duty Engine and Vehicle Standards
    A. Why Are We Setting New Heavy-Duty Standards?
    B. Technology Opportunity for Heavy-Duty Vehicles and Engines
    C. What Engine and Vehicle Standards Are We Proposing?
    1. Heavy-Duty Engine Standards
    a. Federal Test Procedure
    b. Not-to-Exceed and Supplemental Steady-State Test
    c. Crankcase Emissions Control
    2. Heavy-Duty Vehicle Standards
    a. Federal Test Procedure
    b. Supplemental Federal Test Procedure
    3. Heavy-Duty Evaporative Emission Standards
    D. Standards Implementation Issues
    1. Alternative Approach To Phase-In
    2. Implementation Schedule for Gasoline Engine and Vehicle 
Standards
    E. Feasibility of the Proposed New Standards
    1. Feasibility of Stringent Standards for Heavy-Duty Diesel
    a. Meeting the Proposed PM Standard
    b. Meeting the Proposed NOX Standard
    c. Meeting the Proposed NMHC Standard

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    d. Meeting the Crankcase Emissions Requirements
    e. The Complete System
    2. Feasibility of Stringent Standards for Heavy-Duty Gasoline
    3. Feasibility of the Proposed Evaporative Emission Standards
    F. Need for Low-Sulfur Diesel Fuel
    1. Diesel Particulate Filters and the Need for Low-Sulfur Fuel
    a. Inhibition of Trap Regeneration Due to Sulfur
    b. Loss of PM Control Effectiveness
    c. Increased Maintenance Cost for Diesel Particulate Filters Due 
to Sulfur
    2. Diesel NOX Catalysts and the Need for Low-Sulfur 
Fuel
    a. Sulfate Particulate Production for NOX Control 
Technologies
    b. Sulfur Poisoning (Sulfate Storage) on NOX 
Adsorbers
    c. Sulfur Impacts on Catalytic Efficiency
    3. What About Sulfur in Engine Lubricating Oils?
    G. Fuel Economy Impact of Advanced Emission Control Technologies
    1. Diesel Particulate Filters and Fuel Economy
    2. NOX Control Technologies and Fuel Economy
    3. Emission Control Systems for 2007 and Net Fuel Economy 
Impacts
    H. Future Reassessment of Diesel NOX Control 
Technology
    I. Encouraging Innovative Technologies
IV. Diesel Fuel Requirements
    A. Why Do We Believe New Diesel Fuel Sulfur Controls Are 
Necessary?
    B. What New Sulfur Standard Are We Proposing for Diesel Fuel?
    1. Why Is EPA Proposing a 15 ppm Cap and Not a Higher or Lower 
Level?
    2. Why Propose a Cap and Not an Average?
    3. Should the Proposed 15 ppm Cap Standard Also Have an Average 
Standard?
    4. Why We Believe Our Diesel Fuel Sulfur Program Should Be Year-
round and Nationwide
    C. When Would the New Diesel Sulfur Standard Go Into Effect?
    D. Why We Believe the Proposed Diesel Sulfur Standard is 
Technologically Feasible
    1. What Technology Would Refiners Use?
    2. Are These Technologies Commercially Demonstrated?
    3. Are There Unique Concerns for Small Refiners?
    4. Can Refiners Comply with an April 1, 2006 Start Date?
    5. Can a 15 ppm Cap on Sulfur be Maintained by the Distribution 
System?
    6. What are the Potential Impacts of the Proposed Sulfur Change 
on Lubricity, Other Fuel Properties, and Specialty Fuels?
    a. What Is Lubricity and Why Might It be a Concern?
    b. Voluntary Approach for the Maintenance of Fuel Lubricity
    c. What Are the Possible Impacts of Potential Changes in Fuel 
Properties Other Than Sulfur on the Materials Used in Engines and 
Fuel Supply Systems?
    d. What Impact Would the 15 ppm Cap Have on Diesel Performance 
Additives?
    e. What Are the Concerns Regarding the Potential Impact on the 
Availability and Quality of Specialty Fuels?
    E. Who Would Be Required to Meet This Proposed New Diesel Sulfur 
Standard?
    F. What Might Be Done To Encourage the Early Introduction of 
Low-Sulfur Diesel Fuel?
V. Economic Impact
    A. Cost for Diesel Vehicles to Meet Proposed Emissions Standards
    1. Summary of New System and Operating Costs
    2. New System Costs for NOX and PM Emission Control
    3. Operating Costs Associated With NOX and PM Control
    B. Cost for Gasoline Vehicles to Meet Proposed Emissions 
Standards
    1. Summary of New System Costs
    2. Operating Costs Associated with Meeting the Heavy-Duty 
Gasoline Standard
    C. Benefits of Low-Sulfur Diesel Fuel for the Existing Diesel 
Fleet
    D. Cost of Proposed Fuel Change
    1. Refinery Costs
    2. Cost of Possibly Needed Lubricity Additives
    3. Distribution Costs
    E. Aggregate Costs
    F. Cost Effectiveness
    1. What Is the Cost Effectiveness of This Proposed Program?
    2. Comparison With Other Means of Reducing Emissions
    G. Does the Value of the Benefits Outweigh the Cost of the 
Proposed Standards?
    1. What Is the Purpose of This Benefit-Cost Comparison?
    2. What Is Our Overall Approach to the Benefit-Cost Analysis?
    3. What Are the Significant Limitations of the Benefit-Cost 
Analysis?
    4. How Will the Benefit-Cost Analysis Change From the Tier 2 
Benefit-Cost Analysis?
    5. How Will We Perform the Benefit-Cost Analysis?
    6. What Types of Results Will Be Presented in the Benefit-Cost 
Analysis?
VI. Alternative Program Options
    A. What Other Fuel Implementation Options Have We Considered?
    1. What Are the Advantages and Disadvantages of a Phase-in 
Approach to Implementing the Low Sulfur Fuel Program?
    a. Availability of Low Sulfur Diesel Fuel
    b. Misfueling
    c. Distribution System Impacts
    d. Uncertainty in the Transition to Low Sulfur
    e. Cost Considerations Under a Phase-in Approach
    2. What Phase-in Options Is EPA Seeking Comment on in Today's 
Proposal?
    a. Refiner Compliance Flexibility
    i. Overview of Compliance Flexibility
    ii. What Are the Key Considerations in Designing the Compliance 
Flexibility?
    iii. How Does This Compliance Flexibility Relate to the Options 
for Small Refiner Flexibility?
    iv. How Would the Averaging, Banking and Trading Program Work?
    v. Compliance, Recordkeeping, and Reporting Requirements
    b. Refiner-Ensured Availability
    c. Retailer Availability Requirement
    2. Why Is a Regulation Necessary to Implement the Fuel Program?
    3. Why Not Just Require Low-Sulfur Diesel Fuel for Light-Duty 
Vehicles and Light-Duty Trucks?
    4. Why Not Phase-Down the Concentration of Sulfur in Diesel Fuel 
Over Time as Was Done With Gasoline in the Tier 2 Program?
    B. What Other Fuel Standards Have We Considered In Developing 
This Proposal?
    1. What About Setting the 15 ppm Sulfur Level as an Average?
    a. Emission Control Technology Enablement Under a 15 ppm Average 
Standard
    b. Vehicle and Operating Costs for Diesel Vehicles to Meet the 
Proposed Emissions Standards with a 15 ppm Average Standard
    c. Diesel Fuel Costs Under a 15 ppm Average Standard
    d. Emission Reductions Under a 15 ppm Average Standard
    e. Cost Effectiveness of a 15 ppm Average Standard
    2. What About a 5 ppm Sulfur Level?
    3. What About a 50 ppm Sulfur Level?
    4. What Other Fuel Properties Were Considered for Highway Diesel 
Fuel?
    C. Should Any States or Territories Be Excluded from this Rule?
    1. What Are the Anticipated Impacts of Using High-Sulfur Fuel in 
New and Emerging Diesel Engine Technologies if Areas Are Excluded 
From This Rule?
    2. Alaska
    a. Why is Alaska Unique?
    b. What Flexibilities Are We Proposing for Alaska?
    c. How Do We Propose to Address Alaska's Petition Regarding the 
500 ppm Standard?
    3. American Samoa, Guam, and the Commonwealth of Northern 
Mariana Islands
    a. Why are We Considering Excluding American Samoa, Guam, and 
the Commonwealth of Northern Mariana Islands?
    b. What Are the Relevant Factors?
    c. What Are the Options and Proposed Provisions for the 
Territories?
    D. What About the Use of JP-8 Fuel in Diesel Equipped Military 
Vehicles?
VII. Requirements for Engine and Vehicle Manufacturers
    A. Compliance With Standards and Enforcement
    B. Certification Fuel
    C. Averaging, Banking, and Trading
    D. Chassis Certification
    E. FTP Changes to Accommodate Regeneration of Aftertreatment 
Devices
    F. On-Board Diagnostics
    G. Supplemental Test Procedures
    H. Misfueling Concerns
    I. Light-Duty Provisions
    J. Correction of NOX Emissions for Humidity Effects
VIII. Requirements For Refiners, Importers, and Fuel Distributors

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    A. Compliance and Enforcement
    1. Overview
    2. What Are the Requirements for Refiners and Importers?
    a. General Requirements
    b. Dyes and Markers
    3. What Requirements Apply Downstream?
    a. General Requirements
    b. Use of Used Motor Oil in Diesel-Fueled New Technology 
Vehicles
    c. Use of Kerosene and Other Additives in Diesel Fuel
    4. What Are the Proposed Testing and Sampling Methods and 
Requirements?
    a. Testing Requirements and Test Methods
    b. Sampling Methods
    5. What Are the Proposed Recordkeeping Requirements?
    6. Are There Any Proposed Exemptions Under This Subpart?
    7. Would California Be Exempt From the Rule?
    8. What Are the Proposed Liability and Penalty Provisions for 
Noncompliance?
    a. Presumptive Liability Scheme of Current EPA Fuels Programs
    b. Affirmative Defenses for Liable Parties
    c. Penalties for Violations
    9. How Would Compliance With the Diesel Sulfur Standards Be 
Determined?
    B. Lubricity
    C. Would States Be Preempted From Adopting Their Own Sulfur 
Control Programs for Highway Diesel Fuel?
    D. Refinery Air Permitting
    E. Provisions for Qualifying Refiners
    1. Allow Small Refiners to Continue Selling 500 ppm Highway 
Diesel
    2. Temporary Waivers Based on Extreme Hardship Circumstances
    3. 50 ppm Sulfur Cap for Small Refiners
IX. Standards and Fuel for Nonroad Diesel Engines
X. Public Participation
    A. Submitting Written and E-mail Comments
    B. Public Hearings
XI. Administrative Requirements
    A. Administrative Designation and Regulatory Analysis
    B. Regulatory Flexibility Act
    1. Potentially Affected Small Businesses
    2. Small Business Advocacy Review Panel and the Evaluation of 
Regulatory Alternatives
    C. Paperwork Reduction Act
    D. Intergovernmental Relations
    1. Unfunded Mandates Reform Act
    2. Executive Order 13084: Consultation and Coordination With 
Indian Tribal Governments
    E. National Technology Transfer and Advancement Act
    F. Executive Order 13045: Children's Health Protection
    G. Executive 13132: Federalism
XII. Statutory Provisions and Legal Authority

I. A Brief Overview

    This proposal covers the second of two phases in a comprehensive 
nationwide program for controlling emissions from heavy-duty engines 
(HDEs) and vehicles. It builds upon the phase 1 program we proposed 
last October (64 FR 58472, October 29, 1999). That action reviewed and 
proposed to confirm the 2004 model year emission standards set in 1997 
(62 FR 54693, October 21, 1997), proposed stringent new emission 
standards for gasoline-fueled heavy-duty vehicles (HDVs), and proposed 
other changes to the heavy-duty program, including provisions to ensure 
in-use emissions control. Today's proposal takes the provisions of the 
October 1999 proposal as a point of departure.
    This second phase of the program looks beyond 2004, based on the 
use of high-efficiency exhaust emission control devices and the 
consideration of the vehicle and its fuel as a single system. In 
developing this proposal, we took into consideration comments received 
in response to an advance notice of proposed rulemaking (ANPRM) 
published in May of last year (64 FR 26142, May 13, 1999), and comments 
we received in response to our discussion of future standards in the 
heavy-duty 2004 standards proposal last October. We welcome comment on 
all facets of this proposal and its supporting analyses, including the 
levels and timing of the proposed emissions standards and diesel fuel 
quality requirements. We ask that commenters provide any technical 
information that supports the points made in their comments.
    This proposed program would result in particulate matter (PM) and 
oxides of nitrogen (NOX) emission levels that are 90% and 
95% below current standards levels, respectively. In order to meet 
these more stringent standards for diesel engines, the proposal calls 
for a 97% reduction in the sulfur content of diesel fuel. This proposal 
would make clean diesel fuel available in time for implementation of 
the light-duty Tier 2 standards. The heavy-duty engine standards would 
be effective starting in the 2007 model year and the low sulfur diesel 
fuel needed to facilitate the standards would be widely available by 
the middle of 2006. As a result, diesel vehicles would achieve 
gasoline-like exhaust emission levels, in addition to their inherent 
advantages over gasoline vehicles with respect to fuel economy, lower 
greenhouse gas emissions, and lower evaporative hydrocarbon emissions. 
We are also proposing more stringent standards for heavy-duty gasoline 
vehicles.
    The standards proposed would result in substantial benefits to 
public health and welfare and the environment through significant 
reductions in emissions of NOX, PM, nonmethane hydrocarbons 
(NMHC), carbon monoxide (CO), sulfur oxides (SOX), and air 
toxics. We project that by 2030, this proposed phase 2 program would 
reduce annual emissions of NOX, NMHC, and PM by 2.8 million, 
305,000 and 110,000 tons, respectively. Especially in the early years 
of this program, large reductions in the amount of direct and secondary 
PM caused by the existing fleet of heavy-duty vehicles would occur 
because of the improvement in diesel fuel quality.

A. What Is Being Proposed?

    There are two basic parts to this proposal: (1) New exhaust 
emission standards for heavy-duty highway engines and vehicles, and (2) 
new quality standards for highway diesel fuel. The systems approach of 
combining the engine and fuel standards into a single program is 
critical to the success of our overall efforts to reduce emissions, 
because the emission standards would not be feasible without the fuel 
change. This is because the emission standards, if promulgated, are 
expected to result in the use of high-efficiency exhaust emission 
control devices that would be damaged by sulfur in the fuel. This 
proposal, by providing extremely low sulfur diesel fuel, would also 
enable cleaner diesel passenger vehicles and light-duty trucks. This is 
because the same pool of highway diesel fuel also services these light-
duty diesel vehicles, and these vehicles can employ technologies 
similar to the high-efficiency heavy-duty exhaust emission control 
technologies that would be enabled by the fuel change. We believe these 
technologies are needed for diesel vehicles to comply with our recently 
adopted Tier 2 emissions standards for light-duty highway vehicles (65 
FR 6698, February 10, 2000).
    We believe that this systems approach is a comprehensive way to 
enable promising new technologies for clean diesel affecting all sizes 
of highway diesel engines and, eventually, diesel engines used in 
nonroad applications too. The fuel change, in addition to enabling new 
technologies, would also produce emissions and maintenance benefits in 
the existing fleet of highway diesel vehicles. These benefits would 
include reduced sulfate and sulfur oxides emissions, reduced engine 
wear and less frequent oil changes, and longer-lasting exhaust gas 
recirculation (EGR) components on engines equipped with EGR. Heavy-duty 
gasoline vehicles would also be expected to reach cleaner levels due to 
the transfer of recent technology developments for light-duty 
applications, and the recent action taken to reduce sulfur in gasoline 
as part of the Tier 2 rule.

[[Page 35434]]

    The basic elements of the proposal are outlined below. Detailed 
provisions and justifications for our proposal are discussed in 
subsequent sections.
1. Heavy-Duty Emission Standards
    We are proposing a PM emissions standard for new heavy-duty engines 
of 0.01 grams per brake-horsepower-hour (g/bhp-hr), to take full effect 
in the 2007 HDE model year. We are also proposing standards for 
NOX and NMHC of 0.20 g/bhp-hr and 0.14 g/bhp-hr, 
respectively. These NOX and NMHC standards would be phased 
in together between 2007 and 2010, for diesel engines. The phase-in 
would be on a percent-of-sales basis: 25 percent in 2007, 50 percent in 
2008, 75 percent in 2009, and 100 percent in 2010. Because of the more 
advanced state of gasoline engine emissions control technology, 
gasoline engines would be fully subject to these standards in the 2007 
model year, although we request comment on phasing these standards in 
as well. A potential delay in the implementation date of the gasoline 
engine and vehicle standards to the 2008 model year arising from issues 
connected with the 2004 model year standards is discussed in section 
III.D.2. In addition, we are proposing a formaldehyde (HCHO) emissions 
standard of 0.016 g/bhp-hr for all heavy-duty engines, to be phased in 
with the NOX and NMHC standards, and the inclusion of 
turbocharged diesels in the existing crankcase emissions prohibition, 
effective in 2007.
    Proposed standards for complete HDVs would be implemented on the 
same schedule as for engine standards. For certification of complete 
vehicles between 8500 and 10,000 pounds gross vehicle weight rating 
(GVWR), the proposed standards are 0.2 grams per mile (g/mi) for 
NOX, 0.02 g/mi for PM, 0.195 g/mi for NMHC, and 0.016 g/mi 
for formaldehyde.\1\ For vehicles between 10,000 and 14,000 pounds, the 
proposed standards are 0.4 g/mi for NOX, 0.02    g/mi for 
PM, 0.230 g/mi for NMHC, and 0.021 g/mi for formaldehyde. These 
standards levels are roughly comparable to the proposed engine-based 
standards in these size ranges. Note that these standards would not 
apply to vehicles above 8500 pounds that we classify as medium-duty 
passenger vehicles as part of our Tier 2 program.
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    \1\ Vehicle weight ratings in this proposal refer to GVWR (the 
curb weight of the vehicle plus its maximum recommended load of 
passengers and cargo) unless noted otherwise.
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    Finally, we are proposing to revise the evaporative emissions 
standards for heavy-duty engines and vehicles, effective on the same 
schedule as the gasoline engine and vehicle exhaust emission standards. 
The proposed standards for 8500 to 14,000 pound vehicles are 1.4 and 
1.75 grams per test for the 3-day diurnal and supplemental 2-day 
diurnal tests, respectively. Slightly higher standards levels of 1.9 
and 2.3 grams per test would apply for vehicles over 14,000 pounds. 
These proposed standards represent more than a 50 percent reduction in 
the numerical standards as they exist today.
2. Fuel Quality Standards
    We are proposing that diesel fuel sold to consumers for use in 
highway vehicles be limited in sulfur content to a level of 15 parts 
per million (ppm), beginning June 1, 2006. This proposed sulfur 
standard is based on our assessment of how sulfur-intolerant advanced 
exhaust emission control technologies will be, and a corresponding 
assessment of the feasibility of low-sulfur fuel production and 
distribution. We are seeking comment on voluntary options for providing 
refiners with flexibility in complying with the low sulfur highway 
diesel fuel program. In addition, we request comment on some potential 
flexibility provisions to assist small refiners in complying with the 
program.
    With minor exceptions, existing compliance provisions for ensuring 
diesel fuel quality that have been in effect since 1993 would remain 
unchanged (55 FR 34120, August 21, 1990).

B. Why Is EPA Making This Proposal?

1. Heavy-Duty Vehicles Contribute to Serious Air Pollution Problems
    As will be discussed in detail in section II, emissions from heavy-
duty vehicles contribute greatly to a number of serious air pollution 
problems, and will continue to do so into the future absent further 
controls to reduce these emissions. First, heavy-duty vehicles 
contribute to the health and welfare effects of ozone, PM, 
NOX, SOX, and volatile organic compounds (VOCs), 
including toxic compounds such as formaldehyde. These adverse effects 
include premature mortality, aggravation of respiratory and 
cardiovascular disease (as indicated by increased hospital admissions 
and emergency room visits, school absences, work loss days, and 
restricted activity days), changes in lung function and increased 
respiratory symptoms, changes to lung tissues and structures, altered 
respiratory defense mechanisms, chronic bronchitis, and decreased lung 
function. Ozone also causes crop and forestry losses, while PM also 
causes damage to materials, and soiling. Second, both NOX 
and PM contribute to substantial visibility impairment in many parts of 
the U.S. Third, NOX emissions from heavy-duty trucks 
contribute to the acidification, nitrification and eutrophication of 
water bodies.
    Millions of Americans live in areas with unhealthful air quality 
that currently endangers public health and welfare. Without emission 
reductions from the proposed standards for heavy-duty vehicles, there 
is a significant risk that an appreciable number of areas across the 
country will violate the 1-hour ozone national ambient air quality 
standard (NAAQS) during the period when these standards will take 
effect. Furthermore, our analysis shows that PM10 
concentrations in 10 areas with a combined population of 27 million 
people face a significant risk of exceeding the PM10 NAAQS 
without significant additional controls in 2007 or thereafter. Under 
the mandates and authorities in the Clean Air Act, federal, State, and 
local governments are working to bring ozone and particulate levels 
into compliance with the 1-hour ozone and PM10 NAAQS through 
State Implementation Plan (SIP) attainment and maintenance plans, and 
to ensure that future air quality reaches and continues to achieve 
these health-based standards. The reductions proposed in this 
rulemaking would play a critical part in these important efforts.
    Emissions from heavy-duty vehicles account for substantial portions 
of the country's ambient PM and NOX levels. (NOX 
is a key precursor to ozone formation). By 2007, we estimate that 
heavy-duty vehicles will account for 29 percent of mobile source 
NOX emissions and 14 percent of mobile source PM emissions. 
These proportions are even higher in some urban areas, such as in 
Albuquerque, where HDVs contribute 37 percent of the mobile source 
NOX emissions and 20 percent of the mobile source PM 
emissions. The PM and NOX standards for heavy-duty vehicles 
proposed in this rule would have a substantial impact on these 
emissions. By 2030, NOX emissions from heavy-duty vehicles 
under today's proposed standards would be reduced by 2.8 million tons, 
and PM emissions would decline by about 110,000 tons, dramatically 
reducing this source of NOX and PM emissions. Urban areas, 
which include many poorer neighborhoods, can be disproportionately 
impacted by HDV emissions, and these neighborhoods would thus receive a 
relatively larger portion of the benefits expected from new HDV 
emissions controls. Over time,

[[Page 35435]]

the relative contribution of diesel engines to air quality problems 
will go even higher if diesel-equipped light-duty vehicles become more 
popular, as is expected by some automobile manufacturers.
    In addition to its contribution to PM inventories, diesel exhaust 
PM is of special concern because it has been implicated in an increased 
risk of lung cancer and respiratory disease in human studies. The EPA 
draft Health Assessment Document for Diesel Emissions is currently 
being revised based on comments received from the Clean Air Scientific 
Advisory Committee (CASAC) of EPA's Science Advisory Board. The current 
EPA position is that diesel exhaust is a likely human carcinogen and 
that this cancer hazard applies to environmental levels of exposure.\2\ 
In the draft Health Assessment Document for Diesel Emissions, EPA 
provided a qualitative perspective that the upper bounds on 
environmental cancer risks may exceed 10-6 and could be as 
high as 10-3. Several other agencies and governing bodies 
have designated diesel exhaust or diesel PM as a ``potential'' or 
``probable'' human carcinogen. In addition, diesel PM poses 
nonmalignant respiratory hazards to humans, not unlike, in some 
respects, hazards from exposure to ambient PM2.5, to which 
diesel PM contributes. State and local governments, in their efforts to 
protect the health of their citizens and comply with requirements of 
the Clean Air Act (CAA or ``the Act''), have recognized the need to 
achieve major reductions in diesel PM emissions, and have been seeking 
Agency action in setting stringent new standards to bring this 
about.\3\
---------------------------------------------------------------------------

    \2\ Environmental Protection Agency (1999) Health Assessment 
Document for Diesel Emissions: SAB Review Draft. EPA/600/8-90/057D 
Office of Research and Development, Washington, D.C. The document is 
available electronically at www.epa.gov/ncea/diesel.htm
    \3\ For example, see letter dated July 13, 1999 from John Elston 
and Richard Baldwin on behalf of the State and Territorial Air 
Pollution Program Administrators and the Association of Local Air 
Pollution Control Officials (docket A-99-06, item II-D-78).
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2. Technology-Based Solutions
    Although the air quality problems caused by diesel exhaust are 
formidable, we believe they can be resolved through the application of 
high-efficiency emissions control technologies. As discussed in detail 
in section III, the development of diesel emissions control technology 
has advanced in recent years so that very large emission reductions (in 
excess of 90 percent) are possible, especially through the use of 
catalytic emission control devices installed in the vehicle's exhaust 
system (and integrated with the engine controls). These devices are 
often referred to as ``exhaust emission control'' or ``aftertreatment'' 
devices. Exhaust emission control devices, in the form of the well-
known catalytic converter, have been used in gasoline-fueled 
automobiles for 25 years, but have had only limited application in 
diesel vehicles.
    Because the Clean Air Act requires us to set heavy-duty engine 
standards that reflect the greatest degree of emission reduction 
achievable through the application of available technology (subject to 
a number of criteria as discussed in section I.B.3), this notice 
proposes these standards, and proposes a justification for their 
adoption based on the air quality need, their technological 
feasibility, costs, and other criteria listed in the Act (see section 
III of this document). As part of this proposal, we are also proposing 
changes to diesel fuel quality in order to enable these advanced 
technologies (section IV). Heavy-duty gasoline engines would also be 
able to reach the significantly cleaner levels envisioned in this 
proposal by relying on the transfer of recent technology developments 
for light-duty applications, given the recent action taken to reduce 
sulfur in gasoline (65 FR 6698, February 10, 2000).
    We believe the proposed standards would require the application of 
high-efficiency PM and NOX exhaust emission controls to 
heavy-duty diesel vehicles. High-efficiency PM exhaust emission control 
technology has been available for several years, although engine 
manufacturers have generally not needed this technology in order to 
meet our PM emission standards. This technology has continued to 
improve over the years, especially with respect to durability and 
robust operation in use. It has also proven extremely effective in 
reducing exhaust hydrocarbon emissions. Thousands of such advanced-
technology systems are now in use in fleet programs, especially in 
Europe. However, as discussed in detail in section III, these advanced-
technology systems are very sensitive to sulfur in the fuel. For the 
technology to be viable and capable of meeting the proposed standards, 
we believe, based on information currently available, that it will 
require diesel fuel with sulfur content at the 15 ppm level.
    Similarly, high-efficiency NOX exhaust emission control 
technology will be needed if heavy-duty vehicles are to attain the 
proposed standards. We believe this technology, like the PM technology, 
is dependent on 15 ppm diesel fuel sulfur levels to be feasible, 
marketable, and capable of achieving the proposed standards. High-
efficiency NOX exhaust emission control technology has been 
quite successful in gasoline direct injection engines that operate with 
an exhaust composition fairly similar to diesel exhaust. However, as 
discussed in section III, application of this technology to diesels has 
some additional challenges and so has not yet gotten to the field trial 
stage. We are confident that the certainty of low-sulfur diesel fuel 
that would be provided by promulgation of the proposed fuel standard 
would allow the application of this technology to diesels to progress 
rapidly, and would result in systems capable of achieving the proposed 
standards. However, we acknowledge that our proposed NOX 
standard represents an ambitious target for this technology, and so we 
are asking for comment on the appropriateness of a technology review of 
diesel NOX exhaust emission controls.
    The need to reduce the sulfur in diesel fuel is driven by the 
requirements of the exhaust emission control technology that we project 
would be needed to meet the proposed standards. The challenge in 
accomplishing the sulfur reduction is driven by the feasibility of 
needed refinery modifications, and by the costs of making the 
modifications and running the equipment. In consideration of the 
impacts that sulfur has on the efficiency, reliability, and fuel 
economy impact of diesel engine exhaust emission control devices, we 
believe that controlling the sulfur content of highway diesel fuel to 
the 15 ppm level will be necessary. Furthermore, although the refinery 
modifications and process changes needed to meet a 15 ppm restriction 
are expected to be substantial, we propose that this level is both 
feasible and cost effective. However, we are asking for comment on 
various concepts to provide implementation flexibility for refiners.
3. Basis for Action Under the Clean Air Act
    Section 202(a)(1) of the Act directs us to establish standards 
regulating the emission of any air pollutant from any class or classes 
of new motor vehicles or engines that, in the Administrator's judgment, 
cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare. Section 202(a)(3) 
requires that EPA set standards for heavy-duty trucks that reflect the 
greatest degree of emission reduction achievable through the 
application of technology which we determine will be available for the

[[Page 35436]]

model year to which the standards apply. We are to give appropriate 
consideration to cost, energy, and safety factors associated with the 
application of such technology. We may revise such technology-based 
standards, taking costs into account, on the basis of information 
concerning the effects of air pollution from heavy-duty vehicles or 
engines and other sources of mobile source related pollutants on the 
public health and welfare. Section 202(a)(3)(C) requires that 
promulgated standards apply for no less than three years and go into 
effect no less than 4 years after promulgation. This proposal has been 
developed in conformance with these statutory requirements.
    We believe the evidence provided in section III and the draft 
Regulatory Impact Analysis (RIA) indicates that the stringent 
technology-forcing standards proposed today are feasible and reflect 
the greatest degree of emission reduction achievable in the model years 
to which they apply. We have given appropriate consideration to costs 
in choosing these standards. Our review of the costs and cost-
effectiveness of these proposed standards indicate that they would be 
reasonable and comparable to the cost-effectiveness of other emission 
reduction strategies that have been required or could be required in 
the future. We have also reviewed and given appropriate consideration 
to the energy factors of this rule in terms of fuel efficiency and 
effects on diesel production and distribution, as discussed below, as 
well as any safety factors associated with these proposed standards.
    The information regarding air quality and the contribution of 
heavy-duty engines to air pollution in section II and the Draft RIA 
provides strong evidence that emissions from such engines significantly 
and adversely impact public health or welfare. First, there is a 
significant risk that several areas will fail to attain or maintain 
compliance with the NAAQS for 1-hour ozone concentrations or 
PM10 concentrations during the period that these proposed 
new vehicle and engine standards would be phased into the vehicle 
population, and that heavy-duty engines contribute to such 
concentrations, as well as to concentrations of other NAAQS-related 
pollutants. Second, EPA currently believes that diesel exhaust is a 
likely human carcinogen. The risk associated with exposure to diesel 
exhaust includes the particulate and gaseous components. Some of the 
toxic air pollutants associated with emissions from heavy-duty vehicles 
and engines include benzene, formaldehyde, acetaldehyde, dioxin, 
acrolein, and 1,3-butadiene. Third, emissions from heavy-duty engines 
contribute to regional haze and impaired visibility across the nation, 
as well as acid deposition, POM deposition, eutrophication and 
nitrification, all of which are serious environmental welfare problems.
    Based on this evidence, EPA believes that, for purposes of section 
202(a)(1), emissions of NOX, VOCs, SOX and PM 
from heavy-duty trucks can reasonably be anticipated to endanger the 
public health or welfare. In addition, this evidence indicates that it 
would not be appropriate to modify the technology based standards 
pursuant to section 202(a)(3)(B). EPA believes that it is required 
under section 202(a)(3)(A) to set technology based standards that meet 
the criteria of that provision, and is not required to make an 
affirmative determination under section 202(a)(1). Instead EPA is 
authorized to take air quality into consideration under section 
202(a)(3)(B) in deciding whether to modify or not set standard under 
section 202(a)(3)(A). In this case, however, EPA believes the evidence 
would fully support a determination under section 202(a)(1) to set 
standards, and a determination not to modify such standards under 
section 202(a)(3)(B).
    In addition, there is significant evidence that emissions from 
heavy-duty trucks contribute to levels of ozone such that large 
segments of the national population are expected to experience 
prolonged exposure over several hours at levels that present serious 
concern for the public health and welfare. The same is true for 
exposure to fine PM. These public health and welfare problems are 
expected to occur in many parts of the country, including areas that 
are in compliance with the 1-hour ozone and PM10 NAAQS 
(PM10 is particulate matter that is 10 microns or smaller). 
This evidence is an additional reason why the controls proposed today 
are justified and appropriate under the Act. While EPA sees this as 
additional support for this action, EPA also believes that the evidence 
of air pollution problems summarized above and described in greater 
detail elsewhere is an adequate justification for this rule independent 
of concern over prolonged exposure to ozone levels.
    Section 211(c) of the CAA allows us to regulate fuels where 
emission products of the fuel either: (1) Cause or contribute to air 
pollution that reasonably may be anticipated to endanger public health 
or welfare, or (2) will impair to a significant degree the performance 
of any emission control device or system which is in general use, or 
which the Administrator finds has been developed to a point where in a 
reasonable time it would be in general use were such a regulation to be 
promulgated. This proposal meets each of these criteria. The discussion 
of the first test is substantially the same as the above discussion for 
the heavy-duty engine standards, because SOx emissions from heavy-duty 
diesel vehicles are due to sulfur in diesel fuel. The substantial 
adverse effect of high diesel sulfur levels on diesel control devices 
or systems expected to be used to meet the heavy-duty standards is 
discussed in depth in section III.F and in the Draft RIA. In addition, 
our authority under section 211(c) is discussed in more detail in 
appendix A to the draft RIA.

C. Putting This Proposal in Perspective

    There are several helpful perspectives to establish in 
understanding the context for this proposal: the growing popularity of 
diesel engines, past progress and new developments in diesel emissions 
control, Tier 2 light-duty emission standards and other related EPA 
initiatives (besides the above-discussed rulemaking for highway heavy-
duty engine emission standards in 2004), and recent actions and plans 
to control diesel emissions by the States and in other countries.
1. Diesel Popularity
    The diesel engine is increasingly becoming a vital workhorse in the 
United States, moving much of the nation's freight, and carrying out 
much of its farm, construction, and other labor. Diesel engine sales 
have grown impressively over the last decade, so that now about a 
million new diesel engines are put to work in the U.S. every year. 
Unfortunately, these diesel engines emit large quantities of harmful 
pollutants annually.
    Furthermore, although diesel emissions in this country come mostly 
from heavy-duty trucks and nonroad equipment, an additional source may 
grow out of auto manufacturers' plans to greatly increase the sales of 
diesel-powered light-duty vehicles (LDVs) and especially of light-duty 
trucks (LDTs), a category that includes the fast-selling sport-utility 
vehicles, minivans, and pickup trucks. These plans reflect the 
continuation of an ongoing dieselization trend, a trend recently most 
evident in the growing popularity of diesel-powered light heavy-duty 
trucks (8500 to 19,500 pounds). Diesel market penetration is working 
its way from larger to smaller highway applications and to a broader 
array of nonroad equipment applications. Finally, especially in Europe 
where diesels have

[[Page 35437]]

already gained a broad consumer acceptance, the diesel engine is 
increasingly viewed as an attractive technology option for reducing 
emissions of gases that contribute to global warming, because it has 
greater operating efficiency than a gasoline engine.
2. Past Progress and New Developments
    Since the 1970's, highway diesel engine designers have employed 
numerous strategies to meet our emissions standards, beginning with 
smoke controls, and focusing in the 1990's on increasingly stringent 
NOX, hydrocarbon, and PM standards. These strategies have 
generally focused on reducing engine-out emissions and not on exhaust 
emission controls, although low-efficiency oxidation catalysts have 
been applied in some designs to reduce PM (and even their effectiveness 
has been limited by sulfur in the fuel). On the fuel side, we set 
quality standards that provided emissions benefits by limiting the 
amount of sulfur and aromatics in highway diesel fuel beginning in 1993 
(55 FR 34120, August 21, 1990). Our most recent round of standard 
setting for heavy-duty highway diesels occurred in 1997 (62 FR 54693, 
October 21, 1997), effective with the 2004 model year. These standards 
were recently reviewed in a proposed rulemaking (64 FR 58472, October 
29, 1999), which proposed to confirm them. These actions will result in 
engines that emit only a fraction of the NOX, hydrocarbons, 
and PM produced by engines manufactured just a decade ago. We consider 
this an important first phase of our current initiative to reconcile 
the diesel engine with the environment.
    Nevertheless, certain characteristics inherent in the way diesel 
fuel combustion occurs have prevented achievement of emission levels 
comparable to those of today's gasoline-fueled vehicles. Although 
diesel engines provide advantages in terms of fuel economy, durability, 
and evaporative emissions, and have inherently low exhaust emissions of 
hydrocarbons and carbon monoxide, controlling NOX emissions 
is a greater challenge for diesel engines than for gasoline engines, 
primarily because of the ineffectiveness of three-way catalysis in the 
oxygen-rich and relatively cool diesel exhaust environment. Similarly, 
PM emissions, which are inherently low for properly operating gasoline 
engines, are more difficult to control in diesel engines, because the 
diesel combustion process tends to form soot particles. The challenge 
is somewhat complicated by the fact that historical diesel 
NOX control approaches tend to increase PM, and vice versa, 
but both are harmful pollutants that need to be controlled.
    Considering the air quality impacts of diesel engines and the 
potential for growth of diesels in the lighter-duty portion of the 
market, it is imperative that progress in diesel emissions control 
continue. Fortunately, encouraging progress is now being made in the 
design of exhaust emission control devices for diesel applications, 
driven in part by the challenge presented by the stringent Tier 2 
standards for light-duty vehicles. As discussed in detail in section 
III, promising new exhaust emission control technologies for 
NOX, PM, and hydrocarbon reduction show potential for a 
major advancement in diesel emissions control of a magnitude comparable 
to that ushered in by the automotive catalytic converter in the 1970's. 
However, changes in diesel fuel quality will be needed to enable these 
high-efficiency exhaust emission control devices. With these promising 
technologies, diesel vehicles have potential to achieve gasoline-like 
exhaust emission levels, in addition to their inherent advantages over 
gasoline vehicles with respect to fuel economy, lower greenhouse gas 
emissions, and lower evaporative hydrocarbon emissions.
3. Tier 2 Emissions Standards
    Auto manufacturers' design plans for new light-duty diesel vehicle 
models will be greatly affected by our recent adoption of stringent new 
emission standards for light-duty highway vehicles (referred to as 
``Tier 2'' standards) that will phase in between 2004 and 2009. These 
Tier 2 standards will require significant improvements in electronic 
engine controls and catalysts on gasoline vehicles. (We anticipate that 
these advances will be transferred over to heavy-duty gasoline vehicles 
in meeting the standards proposed in this document). The Tier 2 
NOX and PM standards (that apply equally to gasoline and 
diesel vehicles) are far more challenging for diesel engine designers 
than the most stringent light- or heavy-duty vehicle standards 
promulgated to date, and so will require the use of advanced emission 
control technologies. However, the low sulfur highway diesel fuel 
proposed in this notice would make it possible for designers to employ 
advanced exhaust emission control technologies in these light-duty 
applications, and the timing of the proposed fuel change provides for 
the use of these devices in time to satisfy Tier 2 phase-in 
requirements.
    The Tier 2 program phases in interim and final standards over a 
number of years, providing manufacturers the option of delaying some of 
their production of final Tier 2 designs until later in the phase-in. 
For vehicles up to 6000 lbs GVWR (LDVs) and light light-duty trucks 
(LLDTs)), the interim standards begin in 2004 and phase out by 2007, as 
they are replaced by the final Tier 2 standards. For vehicles between 
6000 and 8500 lbs ( heavy light-duty trucks (HLDTs)), the interim 
standards begin in 2004 and phase out by 2009 as they are replaced by 
the final Tier 2 standards. A new category of vehicles between 8,500 
and 10,000 lbs, medium-duty passenger vehicles (MDPVs), will follow the 
same phase-in schedule as HLDTs.
    Our assessment in the Tier 2 final rule is that the interim 
standards are feasible for diesel vehicles without a need for fuel 
quality changes. Manufacturers can take advantage of the flexibilities 
provided in the Tier 2 program to delay the need for light-duty diesels 
to meet the final Tier 2 levels until late in the phase-in period (as 
late as 2007 for LDVs and LLDTs, and 2009 for HLDTs and MDPVs). 
However, low sulfur fuel is expected to be needed for diesel vehicles 
designed to meet the final NOX and PM standards, because 
these vehicles are likely to employ light-duty versions of the sulfur-
sensitive exhaust emission control technologies discussed in Section 
III. The gasoline quality changes and light-duty gasoline engine 
developments that will result from the Tier 2 rule would also help make 
it feasible for heavy-duty gasoline engines to meet the standards 
proposed in this document.
4. Mobile Source Air Toxics Rulemaking
    Passenger cars, on-highway trucks, and nonroad equipment emit 
hundreds of different compounds and elements. Several of these are 
considered to be known, likely, or possible human carcinogens. These 
include diesel exhaust, plus several VOCs such as acetaldehyde, 
benzene, 1,3-butadiene, formaldehyde, and acrolein. Trace metals may 
also be present in heavy-duty diesel engine emissions, resulting from 
metals in fuels and lubricating oil, and from engine wear. Several of 
these metals have carcinogenic and mutagenic effects.
    These and other mobile source air toxics are already controlled 
under existing programs established under Clean Air Act sections 202(a) 
(on-highway engine requirements), 211 (the fuel requirements), and 213 
(nonroad engine requirements). Although these programs are primarily 
designed for control of criteria pollutants, especially ozone and 
PM10, they also achieve

[[Page 35438]]

important reductions in air toxics through VOC and hydrocarbon 
controls.
    In addition to these programs, section 202(l)(2) of the Act directs 
us to consider additional controls to reduce emissions of hazardous air 
pollutants from motor vehicles, their fuels, or both. Those standards 
are to reflect the greatest degree of emission reduction achievable 
through the application of technology which will be available, taking 
into account existing standards, costs, noise, energy, and safety 
factors. We anticipate that this section 202(l)(2) rulemaking, which we 
expect to propose in July 2000 and finalize in December 2000, will 
consist of three parts. First, we will identify a list of hazardous air 
pollutants emitted from motor vehicles and determine which of these 
endanger human health and welfare. Diesel particulate matter will be 
considered as part of this determination because, as discussed in 
section II, human epidemiological studies have suggested that diesel 
exhaust is associated with increased risk of adverse respiratory 
effects and lung cancer. Second, we will consider more comprehensively 
the contribution of mobile sources to the nation's air toxics inventory 
and evaluate the toxics benefits of existing and proposed emission 
control programs. The benefits of the program proposed in today's 
action will be included in this analysis. Finally, we will consider 
whether additional controls are appropriate at this time, given 
technological feasibility, cost, and the other criteria specified in 
the Act.
5. Nonroad Engine Standards and Fuel
    Although this proposal covers only highway diesel engines and fuel, 
it is clear that potential requirements for nonroad diesel engines and 
fuel are related. It is expected that nonroad diesel fuel quality, 
currently unregulated, may need to be controlled in the future in order 
to reduce the large contribution of nonroad engines to NOX 
and PM inventories. Refiners, fuel distributors, states, environmental 
organizations, and others have asked that we provide as much 
information as possible about the future specifications for both types 
of fuel as early as possible.
    We do plan to give further consideration to further control of 
nonroad engine emissions. As discussed below in section IX, an 
effective control program for these engines requires the resolution of 
several major issues relating to engine emission control technologies 
and how they are affected by fuel sulfur content. The many issues 
connected with any rulemaking for nonroad engines and fuel warrant 
serious attention, and we believe it would be premature today for us to 
attempt to propose resolutions to them. We plan to initiate action in 
the future to formulate thoughtful proposals covering both nonroad 
diesel fuel and engines.
6. Actions in California
    The California Air Resources Board (ARB) and local air quality 
management districts within California are also pursuing measures to 
better control diesel emissions. Key among these efforts is work 
resulting from the Board's designation of particulate emissions from 
diesel-fueled engines as a toxic air contaminant (TAC) on August 27, 
1998. TACs are air pollutants that may cause or contribute to an 
increase in death or serious illness or may pose a present or future 
hazard to human health. The TAC designation was based on research 
studies showing that emissions from diesel-fueled engines may cause 
cancer in animals and humans, and that workers exposed to higher levels 
of emissions from diesel-fueled engines are more likely to develop lung 
cancer.
    The ARB has now begun a public process to evaluate the need to 
further reduce the public's exposure to organic gases and PM emissions 
from diesel-fueled engines, and the feasibility and cost of doing 
so.\4\ This evaluation is being done in consultation with the local air 
districts, affected industries, and the public, and will result in a 
report on the appropriate degree of control. Based on this report, if 
cost effective measures are identified that will reduce public 
exposure, then specific control measures applicable in California will 
be developed in a public process.
---------------------------------------------------------------------------

    \4\ Regularly updated information on this effort can be obtained 
at a website maintained by the ARB staff: www.arb.ca.gov/toxics/
diesel/diesel.htm
_____________________________________-

 The ARB also recently adopted stringent new emission requirements 
for urban transit buses and is considering similar requirements for 
school buses.\5\ This program is aimed at encouraging the use of clean 
alternative fuels and high-efficiency diesel emission control 
technologies. Their program includes requirements for zero-emissions 
buses, fleet average NOX levels, and retrofits for PM 
control, as well as model year 2007 NOX and PM standards 
levels of 0.2 and 0.01 g/bhp-hr, respectively (equal to the levels 
proposed in this document). It also requires that all diesel fuel used 
by transit agencies after July 1, 2002 must meet a cap of 15 ppm 
sulfur. This is the same as the sulfur level proposed in this document, 
but in batch amounts and on a much earlier schedule to support the 
ARB's proposed PM retrofit schedule.
---------------------------------------------------------------------------

    \5\ ``Notice of Public Hearing To Consider the Adoption of a 
Public Transit Bus Fleet Rule and Emission Standards For New Urban 
Buses'', California ARB, November 30, 1999, and ARB Resolution 00-2, 
dated February 24, 2000.
---------------------------------------------------------------------------

    California's urban bus program is focused on only a portion of the 
highway diesel fleet and fuel, characterized by short-range trips and 
captive fuel supplies. The large amount of interstate truck traffic in 
California and the fact that these trucks can travel many miles between 
refuelings would dramatically reduce the effectiveness of a more 
comprehensive State program, and would also subject California 
businesses to competitive disadvantages. As a result, the ARB has 
stressed the need for action at a Federal level, and is depending on 
our efforts to control HDV NOX and PM emissions and to 
regulate diesel fuel. We agree that a national program is appropriate 
to ensure the effectiveness of such a program.
7. Retrofit Programs
    Many States facing air quality improvement challenges have 
expressed strong interest in programs that would reduce emissions from 
existing highway and nonroad diesel engines through the retrofitting of 
these engines with improved emission control devices. The urban bus 
program proposed by the California ARB includes such a retrofit 
requirement as one of its major components (see section I.C.6). These 
retrofit programs are appealing because the slow turnover of the diesel 
fleet to the new low-emitting engines makes it difficult to achieve 
near-term air quality goals through new engine programs alone. Some of 
the exhaust emission control technologies discussed in this proposal 
are especially appealing for use in retrofits because they can be 
fitted to an existing vehicle as add-on devices without major engine 
modifications, although some of the more sophisticated systems that 
require careful control of engine parameters may be more challenging.
    Because of the uncertainty at this time in how and when such 
programs may be implemented, this proposal does not calculate any 
benefits from them. Nevertheless, we believe that this proposed program 
can enable the viability of these retrofit technologies. We expect that 
large emission benefits from the existing fleet could be realized as a 
result of the fuel changes we are proposing here, combined with 
retrofit versions of the technologies that would be developed in 
response to the proposed engine standards. These

[[Page 35439]]

benefits would be especially important in the early years of the 
program when new vehicles standards are just beginning to have an 
impact, and when States and local areas need to gain large reductions 
to attain air quality goals.
8. Actions in Other Countries
    There is substantial activity taking place in many countries of the 
world related to the regulation of diesel fuel and engines. The large 
light-duty vehicle market share enjoyed by diesels in many European 
countries has helped to stir innovation in dealing with diesel 
emissions problems. Advanced emissions control technologies are being 
evaluated there in the in-use fleet and experience gained from these 
trials is helping to inform the diesel emissions control discussion in 
the U.S. In addition, several European countries have low sulfur diesel 
fuel, with maximum sulfur levels varying from 10 to 50 ppm, and so 
experience gained from the use of these fuels, though not completely 
transferable to the U.S. situation, also helps to inform the 
discussion. European Union countries will limit sulfur in diesel fuel 
to 50 ppm by 2005, and even more aggressive plans are being discussed 
or implemented. The United Kingdom made a rapid conversion to 50 ppm 
maximum sulfur diesel fuel last year by offering tax incentives. This 
change occurred with much smaller refinery investments than had been 
predicted, and some refinery production there is actually at levels 
well below the 50 ppm cap. Germany is moving forward with plans to 
introduce a 10 ppm sulfur cap for diesel fuel by 2003, also via tax 
incentives, and is attempting to get the 50 ppm specification that was 
adopted by the European Commission revised downward to the 10 ppm cap 
level.
    One European country has had extensive experience with the 
transition to low sulfur diesel fuel. In the early 1990's, Sweden 
decided to take advantage of the environmental benefits of 10 ppm 
sulfur/low aromatics fuel by introducing it with a reduction in the 
diesel fuel tax. The program has been quite successful, and in excess 
of 90 percent of the road fuel used there is of this 10 ppm maximum 
sulfur class.\6\ The ability of the Swedish fuel distributors to 
maintain these low sulfur levels at the fuel stations has also been 
quite good.
---------------------------------------------------------------------------

    \6\ Memo from Thomas M. Baines to Docket A-99-06, October 29, 
1999, Docket #A-99-06, Item II-G-12.
---------------------------------------------------------------------------

    Section VII.H discusses how differences between the future fuel 
specifications in the U.S. and those in Canada and Mexico may affect 
the emissions control program proposed in this document.

II. The Air Quality Need and Projected Benefits

A. Overview

    Heavy-duty vehicle emissions contribute to air pollution with a 
wide range of adverse health and welfare impacts. Emissions of VOC, CO, 
NOX, SOX, and PM from HD vehicles contribute a 
substantial percentage to ambient concentrations of ozone, PM, sulfur 
and nitrogen compounds, aldehydes, and substances known or considered 
likely to be carcinogens. VOC and diesel PM emissions include some 
specific substances known or suspected to cause cancer, and diesel 
exhaust emissions are associated with non-cancer health effects. These 
ambient concentrations in turn cause human health effects and many 
welfare effects including visibility reductions, acid rain, 
nitrification and eutrophication of water bodies.
    Emissions from heavy-duty vehicles, which are predominantly diesel-
powered, account for substantial portions of the country's ambient PM 
and ground-level ozone levels. (NOX is a key precursor to 
ozone formation). By 2007, we estimate that heavy-duty vehicles would 
account for 29 percent of mobile source NOX emissions, and 
14 percent of mobile source PM emissions. These proportions are even 
higher in some urban areas, such as New York and Los Angeles. Urban 
areas, which include many poorer neighborhoods, can be 
disproportionately impacted by HDV emissions because of heavy traffic 
in and out of densely populated urban areas. Of particular concern is 
human epidemiological evidence linking diesel exhaust to an increased 
risk of lung cancer. Based on information provided in the draft Health 
Assessment Document for Diesel Emissions \7\ and other sources of 
information, we believe that emissions from heavy-duty diesel vehicles 
contribute to air pollution that warrants regulatory attention under 
section 202(a)(3) of the Act.
---------------------------------------------------------------------------

    \7\ EPA is revising this draft document in response to comments 
by the CASAC.
---------------------------------------------------------------------------

    Thirty-six metropolitan areas with a total population of 111 
million people have recently violated or are currently violating the 1-
hour ozone NAAQS, and have ozone modeling or other factors which 
indicate a risk of NAAQS violations in 2007 or beyond. Another six 
areas with 11 million people have recently experienced ozone 
concentrations within 10 percent of exceeding the NAAQS between 1996 
and 1998 and have some evidence of a risk of future violations. Ten 
PM10 nonattainment areas with 27 million people face a 
significant risk of experiencing particulate matter levels that violate 
the PM10 standard during the time period when this proposal 
would take effect. Without reductions from these proposed standards, 
there is a significant risk that an appreciable number of these areas 
would violate the 1-hour ozone and PM10 standards during the 
time period when these proposed standards would apply to heavy-duty 
vehicles. Under the mandates and authorities in the Clean Air Act, 
federal, State, and local governments are working to bring ozone and 
particulate levels into compliance with the 1-hour ozone and 
PM10 NAAQS through SIP attainment and maintenance plans, and 
to ensure that future air quality continues to achieve these health-
based standards. The reductions proposed in this rulemaking would 
assist these efforts.
    The proposed heavy-duty vehicle and engine emission standards, 
along with the diesel fuel sulfur standard proposed today, would have a 
dramatic impact in reducing the large contribution of HDVs to air 
pollution. The proposed standards would result in substantial benefits 
to public health and welfare through significant annual reductions in 
emissions of NOX, PM, NMHC, carbon monoxide, sulfur dioxide, 
and air toxics. For example, we project a 2 million ton reduction in 
NOX emissions from HD vehicles in 2020, which would increase 
to 2.8 million tons in 2030 when the current HD vehicle fleet is 
completely replaced with newer HD vehicles that comply with these 
proposed emission standards. When coupled with the emission reductions 
projected to result from the Phase 1 (model year 2004) HDV standards, 
the emission reductions from heavy-duty vehicles are projected to be as 
large as the substantial reductions the Agency expects from light-duty 
vehicles as a result of its recently promulgated Tier 2 rulemaking.

B. Public Health and Welfare Concerns

    The following subsections present the available information on the 
air pollution situation that is likely to exist without this rule for 
each ambient pollutant. We also present information on the improvement 
that would result from this rule. The Agency's analysis and this 
proposal are supported by the numerous letters received from States and 
environmental organizations calling for significant emission reductions 
from heavy-duty vehicles in order to enable

[[Page 35440]]

these areas to achieve and sustain clean, healthful air.\8\
---------------------------------------------------------------------------

    \8\ Letters from States and environmental organizations are 
located in the docket for this proposal.
---------------------------------------------------------------------------

1. Ozone and Its Precursors

a. Health and Welfare Effects From Short-Term Exposures to Ozone

    NOX and VOC are precursors in the photochemical reaction 
which forms tropospheric ozone. A large body of evidence shows that 
ozone can cause harmful respiratory effects including chest pain, 
coughing, and shortness of breath, which affect people with compromised 
respiratory systems most severely. When inhaled, ozone can cause acute 
respiratory problems; aggravate asthma; cause significant temporary 
decreases in lung function of 15 to over 20 percent in some healthy 
adults; cause inflammation of lung tissue; may increase hospital 
admissions and emergency room visits; and impair the body's immune 
system defenses, making people more susceptible to respiratory 
illnesses. Children and outdoor workers are likely to be exposed to 
elevated ambient levels of ozone during exercise and, therefore, are at 
greater risk of experiencing adverse health effects. Beyond its human 
health effects, ozone has been shown to injure plants, reducing crop 
yields.

b. Current and Future Nonattainment Status With the 1-Hour Ozone NAAQS

    Exposure to levels of ozone that are not in compliance with the 1-
hour ozone NAAQS are a serious public health and welfare concern. The 
following sections discuss the present situation and outlook regarding 
attainment in areas of the country where ozone levels presently fail to 
comply with this NAAQS, or where they have come close to failing to 
comply in recent years.
    Over the last decade, emissions have declined and national air 
quality has improved for all six criteria pollutants, including 
ozone.\9\ Some of the greatest emissions reductions have taken place in 
densely-populated urban areas, where emissions are heavily influenced 
by mobile sources such as cars and trucks. For example, VOC and 
NOX emissions in several urban areas in the Northeast 
declined by 15 percent and 14 percent from 1990 to 1996.\10\ However, 
when ozone trends are normalized for annual weather variations between 
1989 and 1998, they reveal a downward trend in the early 1990's 
followed by a leveling off, or an upturn in ozone levels, over the past 
several years in many urban areas.\11\
---------------------------------------------------------------------------

    \9\ National Air Quality and Emissions Trends Report, 1997, US 
EPA, December 1998.
    \10\ National Emissions Trends database.
    \11\ Trends in Daily Maximum 1-hour Ozone in Selected Urban 
Areas, 1989-1998.
---------------------------------------------------------------------------

    Despite impressive improvements in air quality over the last 
decade, present concentrations of ground-level ozone continue to 
endanger public health and welfare in many areas. As of December, 1999, 
92 million people (1990 census) lived in 32 metropolitan areas 
designated nonattainment under the 1-hour ozone NAAQS.\12\ In addition, 
there are 14 areas with a 1996 population of 17 million people not 
currently listed as non-attainment areas because the 1-hour ozone 
standard was revoked for these areas (we have proposed to re-instate 
the standard).\13\ These 14 areas are relevant to this proposal because 
ozone concentrations above the health-based ozone standard, should they 
occur, endanger public health and welfare independent of the 
applicability of the 1-hour standard or an area's official attainment 
or nonattainment status. Ozone also has negative environmental impacts. 
For example, exposure of vegetation to ozone can inhibit 
photosynthesis, and alter carbohydrate allocation, which in turn can 
suppress the growth of crops, trees, shrubs and other plants.
---------------------------------------------------------------------------

    \12\ Memorandum to Air Docket, January 12, 2000. Information on 
ozone nonattainment areas and population as of December 13, 1999 
from US EPA website www.epa.gov/airs/nonattn.html, USA Air Quality 
Nonattainment Areas, Office of Air Quality Planning and Standards. 
The reader should note that the 32 areas mentioned here are 
designated nonattainment areas, while the 36 areas noted in the 
overview section have recent (1995-1998) or current violations, and 
predicted exceedances in 2007 or 2030 based on air quality modeling 
or other evidence discussed in more detail later in this preamble, 
and in the draft RIA.
    \13\ 64 FR 57424 (October 25, 1999)
---------------------------------------------------------------------------

    The next two sections present lists of metropolitan areas, in two 
tables, with potential for violating the ozone standard in the future. 
The first section presents a table with 33 metropolitan areas that were 
predicted by Tier 2 modeling to have exceedances in either 2007 or 
2030, and accompanying text identifies an additional nine areas for 
which we have other evidence of a risk of future exceedances. The 
second section discusses the air quality prospects for these 42 areas, 
which are divided into several groups. These groups are presented in 
Table II.B-2.

i. Ozone Predictions Made in the Tier 2 Rulemaking and Other 
Information on Ozone Attainment Prospects

    In conjunction with its Tier 2 rulemaking efforts, the Agency 
performed ozone air quality modeling for nearly the entire Eastern U.S. 
covering metropolitan areas from Texas to the Northeast, and for a 
western U.S. modeling domain. The ozone modeling we did as part of the 
Tier 2 rulemaking predicted that without further emission reductions, a 
significant number of areas recently experiencing ozone exceedances 
across the nation are at risk of failing to meet the 1-hour ozone NAAQS 
in 2007 and beyond, even with Tier 2 and other controls currently in 
place.
    The general pattern observed from the Tier 2 ozone modeling is a 
broad reduction between 1996 and 2007 in the geographic extent of ozone 
concentrations above the 1-hour NAAQS, and in the frequency and 
severity of exceedances. Despite this improvement from 1996 to 2007, 
many ozone exceedances were predicted to occur in 2007 even with 
reductions from Tier 2 standards and other controls currently in place, 
affecting 33 metropolitan areas across the nation. Assuming no 
additional emission reductions beyond those that will be achieved by 
current control programs,\14\ a slight decrease below 2007 levels in 
modeled concentrations and frequencies of exceedances was predicted for 
2030 for most areas. Exceedances were still predicted in 2030 in most 
of the areas where they were predicted in 2007.\15\
---------------------------------------------------------------------------

    \14\ Current control programs assumed for the predictions 
summarized here included the Tier 2/Gasoline Sulfur program and some 
specific programs that are legally required but not yet fully 
adopted, such as the regional Ozone Transport Rule and not-yet-
adopted MACT standards that will affect VOC emissions.
    \15\ Achieving attainment with the ozone standard is only one 
measure of air quality improvement. EPA found that the Tier 2 
program significantly lowers the model-predicted number of 
exceedances of the ozone standard by one tenth in 2007, and by 
almost one-third in 2030 across the nation (Tier 2 RIA).
---------------------------------------------------------------------------

    Although we did not model ozone concentrations for years between 
2007 and 2030, we may expect that they would broadly track the national 
emissions trends. Based on these emission trends alone, national ozone 
concentrations, on average, would be projected to decline after 2007 
largely due to penetration of Tier-2 compliant vehicles into the light 
duty vehicle fleet, but begin to increase around 2015 or 2020 due to 
economic growth until they reach the 2030 levels just described. 
However, the change in ozone levels from the expected NOX 
reduction is relatively small compared to the effects of variations in 
ozone due to meteorology. Furthermore, in some areas, where growth 
exceeds national averages, emissions levels would begin increasing 
sooner and reach higher levels in 2030.

[[Page 35441]]

    Table II.B-1 lists the 33 areas with predicted 1-hour ozone 
exceedances in 2007 and/or 2030 based on the Tier 2 modeling, after 
accounting for the emission reductions from the Tier 2 program and 
other controls. \16\ There are areas that are not included in this 
table that will be discussed shortly. A factor to consider with respect 
to the ozone predictions in Table II.B-1 is that recent improvements to 
our estimates of the current and future mobile source NOX 
inventory have resulted in an increase in our estimate of aggregate 
NOX emissions from all sources by more than eight percent 
since the air quality modeling performed for the Tier 2 rule. The 
adjusted NOX inventory level in 2015 is greater than the 
NOX inventory used in the Tier 2 air quality analysis for 
2030. If we were to repeat the ozone modeling now for the 2015 time 
frame, using the new emissions estimates, it would most likely predict 
exceedances in 2015 for all the areas that had 2030 exceedances 
predicted in the modeling done for the Tier 2 rulemaking. As summarized 
in Table II.B-1, the Tier 2 modeling predicted that there will be 33 
areas in 2007 or 2030 with about 89 million people predicted to exceed 
the 1-hour ozone standard, even after Tier 2 and other controls 
currently in place. Additional information on ozone modeling is found 
in the draft RIA and the technical support document for the Tier 2 
rule, which is in the docket for this rulemaking. We request comment on 
the inventory estimates and ozone air quality modeling analysis 
described in this proposal.
---------------------------------------------------------------------------

    \16\ Table II.B-1 excludes areas for which the Tier 2 modeling 
predicted exceedances in 1996 but for which the actual ozone design 
values in 1995-1997 and 1996-1998 were both less than 90 percent of 
the NAAQS. For these areas, we considered the ozone model's 
predictions of 2007 or 2030 exceedances to be too uncertain to play 
a supportive role in our rulemaking determinations. Also, 2007 ozone 
was not modeled for western areas. For 2030, all areas were modeled 
for fewer episode days which, along with a general model under-
prediction bias, may result in an underestimation of 2030 
exceedances. Without these factors, there could have been more 
western areas listed in Table II.B-1, and more areas with predicted 
exceedances in 2030.

  Table II.B-1.--Metropolitan Areas With Predicted Exceedances in 2007 or 2030 From Tier 2 Air Quality Modeling
                 Including Emission Reductions From Tier 2 and Other Current/Committed Controls
----------------------------------------------------------------------------------------------------------------
                                                                                                1996 Population
               CMSA/MSAs                     2007 Control case          2030 Control case          (millions)
----------------------------------------------------------------------------------------------------------------
Boston, MA CMSA........................              X                          X                            5.6
Chicago, IL CMSA.......................              X                          X                            8.6
Cincinnati, OH CMSA**..................              X              .........................                1.9
Cleveland, OH CMSA*....................              X                          X                            2.9
Detroit, MI CMSA*......................              X                          X                            5.3
Houston, TX CMSA.......................              X                          X                            4.3
Milwaukee, WI CMSA.....................              X                          X                            1.6
New York City, NY CMSA.................              X                          X                           19.9
Philadelphia, PA CMSA..................              X                          X                            6.0
Washington,-Baltimore, DC-VA-WV-MD CMSA              X                          X                            7.2
Atlanta, GA MSA........................              X                          X                            3.5
Barnstable, MA MSA.....................              X                          X                            0.2
Baton Rouge, LA MSA....................              X                          X                            0.6
Benton Harbor, MI MSA..................              X                          X                            0.2
Biloxi, MS MSA*........................              X                          X                            0.3
Birmingham, AL MSA.....................              X                          X                            0.9
Charlotte, NC MSA......................              X                          X                            1.3
Grand Rapids, MI MSA...................              X                          X                            1.0
Hartford, CT MSA.......................              X                          X                            1.1
Houma, LA MSA..........................              X                          X                            0.2
Huntington, WV MSA.....................              X              .........................                0.3
Indianapolis, IN MSA...................              X              .........................                1.5
Louisville, KY MSA.....................              X                          X                            1.0
Memphis, TN MSA........................              X                          X                            1.1
Nashville, TN MSA......................              X                          X                            1.1
New London, CT MSA.....................              X                          X                            1.3
New Orleans, LA MSA*...................              X                          X                            0.3
Pensacola, FL MSA*.....................              X              .........................                0.4
Pittsburgh, PA MSA.....................              X              .........................                2.4
Providence, RI MSA.....................              X                          X                            1.1
Richmond, VA MSA.......................              X              .........................                0.9
St. Louis, MO MSA......................              X                          X                            2.5
Tampa, FL MSA*.........................              X                          X                            2.2
33 areas / 88.7 million people.........  32 areas/86.3 million      28 areas/83.7 million      .................
                                          people                     people
----------------------------------------------------------------------------------------------------------------
* These areas have registered recent (1995-1998) ozone levels within 10% of the 1-hour ozone standard.
** Based on more recent air quality monitoring data not considered in the Tier 2 analysis, and on 10-year
  emissions projections, we expect to redesignate Cincinnati-Hamilton to attainment soon.

    Ozone modeling for the Tier 2 rulemaking did not look at the effect 
on ozone attainment and maintenance beyond current/committed controls 
and the Tier 2/Gasoline Sulfur Program itself. Therefore, Table II.B-1 
should be interpreted as indicating what areas are at risk of ozone 
violations in 2007 or 2030 without federal or state measures that may 
be adopted and implemented after this rulemaking is proposed. We expect 
many of the areas listed in Table

[[Page 35442]]

II.B-1 to adopt additional emission reduction programs, but the Agency 
is unable to quantify the future reductions from additional State 
programs since they have not yet been adopted.
    In addition, Table II.B-1 reflects only the ozone predictions made 
in the modeling for the Tier 2 rulemaking. The Tier 2 modeling did not 
predict (or did not provide information regarding) 2007 or 2030 
violations for a number of areas for which other available ozone 
modeling has shown 2007 violations, or for which the history and 
current degree of nonattainment indicates some risk of ozone violations 
in 2007 or beyond. These nine areas had a 1996 population of 30 million 
people. They include seven ozone nonattainment areas in California (Los 
Angeles, San Diego, Southeast Desert, Sacramento, Ventura County, San 
Joaquin Valley, and San Francisco), and two Texas areas (Beaumont-Port 
Arthur and Dallas). A more detailed discussion is presented in the 
Draft RIA. The following section will discuss the air quality prospects 
of these 42 areas (i.e., the 33 shown in Table II.B-1, plus the nine 
additional areas identified in this paragraph).
    For the final rule, the Agency plans to use the same modeling 
system as was used in its Tier 2 air quality analysis with updated 
inventory estimates for 2030 and a further characterization of the 
inventory estimates for the interim period between 2007 and 2030 We 
plan to release the products of these revised analyses into the public 
record on a continuous basis as they are developed. Interested parties 
should check docket number A-99-06 periodically for updates.

ii. Areas At Risk of Exceeding the 1-Hour Ozone Standard

    This section presents the Agency's conclusions about the risk of 
future nonattainment for the 42 areas identified above. These areas are 
listed in Table II.B-2, and are subdivided into three groups. The 
following discussion follows the groupings from top to bottom. A more 
detailed discussion is found in the Draft RIA.
    In general, EPA believes that the proposed new standards for heavy-
duty vehicles are warranted by a sufficient risk that without these 
standards, some areas would experience violations of the 1-hour NAAQS 
at some time during the period when this rulemaking would achieve its 
emission reductions, despite efforts that EPA, States and localities 
are now making through SIPs to reach attainment and to preserve 
attainment by developing and implementing maintenance plans. Because 
ozone concentrations causing violations of the 1-hour ozone standard 
are well established to endanger public health and welfare, this 
indicates that it is appropriate for the Agency to propose setting new 
standards for heavy-duty vehicles.
    Our belief regarding the risk of future violations of the 1-hour 
NAAQS is based upon our consideration of predictive ozone air quality 
modeling and analysis we performed for U.S. metropolitan areas for the 
recent Tier 2 rulemaking, and the predictive ozone modeling and other 
information that has come to us through the SIP process, and other 
local air quality modeling for certain areas. We have assessed this 
information in light of our understanding of the factors that influence 
ozone concentrations, taking due consideration of current and future 
federal, state and local efforts to achieve and maintain the ozone 
standard through air quality planning and implementation.
    Ten metropolitan areas that fall within ozone nonattainment areas 
have statutorily-defined attainment dates of 2007 or 2010, or have 
requested attainment date extensions to 2007 (including two requests on 
which we have not yet proposed any action). These 10 areas are listed 
at the top of Table II.B-2, and are New York City, Houston, Hartford, 
New London, Chicago, Milwaukee, Dallas, Beaumont-Port Arthur, Los 
Angeles, and Southeast Desert. The Los Angeles (South Coast Air Basin) 
ozone attainment demonstration is fully approved, but it is based in 
part on reductions from new technology measures and actions that have 
yet to be identified. Accordingly, the State will be able to benefit 
from, and will need, the reductions from this proposed rule in order to 
meet the NOX and VOC shortfalls identified in the South 
Coast Air Basin's SIP. The 2007 attainment demonstration for the 
Southeast Desert area is also approved. However, because ozone travels 
from the South Coast to the Southeast Desert, attainment in the 
Southeast Desert may depend on progress in reducing ozone levels in the 
South Coast Air Basin.
    The process of developing adequate attainment plans has been 
difficult. While the efforts by EPA and the States have been more 
prolonged than expected, they are nearing completion. Of the remaining 
eight areas discussed above, two--Chicago and Milwaukee--do not have 
EPA-identified shortfalls in their 1998 attainment demonstrations. 
However, these two areas are revising their local ozone air quality 
modeling, which will be taken into account in the final rule. We have 
recently proposed to approve attainment plans for New York, Houston, 
Hartford and New London, and we hope to receive attainment plans and 
propose such approval soon for Dallas and Beaumont-Port Arthur. EPA has 
proposed, or expects to propose, that attainment in 2007 in each of 
these six areas depends upon either achieving specified additional 
emission reductions in the area itself, or achieving ozone reductions 
in an upwind nonattainment area that has such a shortfall. Those areas 
with shortfalls will be able to take credit for the expected reductions 
from the proposed rule in their attainment demonstrations, once the 
rule is promulgated. We expect to rely in part on these reductions in 
reaching our final conclusion as to whether each of the eight areas for 
which we have reviewed an attainment demonstration, or expect to review 
an attainment demonstration soon, is more likely than not to attain on 
its respective date, whether or not the State formally relies on these 
reductions as part of its strategy to fill the identified shortfall in 
its attainment demonstration, if any.
    The proposed new standards for heavy-duty vehicles would help 
address some of the uncertainties and risks that are inherent in 
predicting future air quality over a long period. Actual ozone levels 
may be affected by increased economic growth, unusually severe weather 
conditions, and unexpectedly large changes in vehicle miles traveled. 
For example, the emissions and air quality modeling that forms the 
basis for the 2007-to-2030 emissions and ozone trend described earlier 
used a 1.7 percent national VMT growth rate. Historical growth in 
national VMT for LDVs over the last 30 years has averaged 2.7 percent 
per year, but over the past 10 years, annual VMT growth has fluctuated 
from 1.2 percent to 3.5 percent. The growth rates can also vary from 
locality to locality. The reported annual VMT growth rate experienced 
in Atlanta, a fast-growing metropolitan area, was six percent from 
1986-1997, or more than twice the 30-year national average, and year-
to-year variations in Atlanta's reported annual VMT ranged from a 12% 
increase to no increase over the same period. While some factors 
influencing previous VMT growth rates, such as increased participation 
of women in the workforce, may be declining, other factors, such as 
widening suburbanization, more suburb-to-suburb commuting and the rise 
of healthier and wealthier older age drivers, may result in increased 
VMT growth rates.\17\ Activity by other source

[[Page 35443]]

types also varies due to economic factors. Actual future VMT and other 
economic growth in specific areas may vary from the best predictions 
that have been used in each attainment demonstration. Over a number of 
years, differences in annual growth can cause substantial differences 
in total emissions. These uncertainties, and others, dictate that a 
prudent course for the Agency is to protect public health by increasing 
our confidence that the necessary reductions will be in place. This 
proposed rulemaking would provide significant and needed reductions to 
those areas at risk of violating the 1-hour ozone standard during the 
time period when this rule would take effect.
---------------------------------------------------------------------------

    \17\ See Tier 2 Response to Comments document for a longer 
decision.
---------------------------------------------------------------------------

    The reductions from this proposal would begin in 2007 and would 
continue to grow over time as the existing heavy-duty fleet is replaced 
by newer vehicles meeting the proposed emission standards. Even 
assuming attainment is achieved, areas that wish a redesignation to 
attainment may rely on further reductions generated by this rulemaking 
to support their 10-year maintenance plan. Even if an area does not 
choose to seek redesignation, the continuing reductions from this 
proposed rulemaking would help ensure maintenance with the 1-hour 
standard after attainment is reached.
    Thus, a total of six metropolitan areas need additional measures to 
meet the shortfalls in the applicable attainment demonstrations, or are 
subject to ozone transport from an upwind area that has an identified 
shortfall. In addition, two areas are expected to need additional 
emission reductions to demonstrate attainment in future SIPs. EPA 
believes that the States responsible may need, among other reductions, 
the level of reductions provided by this rule in order to fill the 
shortfalls. We expect to rely in part on these reductions in reaching 
our final conclusion as to whether each of the eight areas for which we 
have reviewed an attainment demonstration is more likely than not to 
attain on its respective date, whether or not the State formally relies 
on these reductions as part of its strategy to fill the identified 
shortfall in its attainment demonstration. As to all ten areas, even if 
all shortfalls were filled by the States, there is some risk that at 
least some of the areas will not attain the standards by their 
attainment dates of 2007, or 2010 for Los Angeles. In that event, the 
reductions associated with this proposed program, which increase 
substantially after 2007, would help assure that any residual failures 
to attain are remedied. Finally, there is also some risk that the areas 
will be unable to maintain attainment after 2007. Considered 
collectively, there is a significant risk that some areas would not be 
in attainment throughout the period when the proposed rule would reduce 
heavy-duty vehicle emissions.
    The next group of 26 areas have required attainment dates prior to 
2007, or have no attainment date but are subject to a general 
obligation to have a SIP that provides for attainment and maintenance. 
EPA and the States are pursuing the established statutory processes for 
attaining and maintaining the ozone standard where it presently 
applies. EPA has also proposed to re-apply the ozone standard to the 
remaining areas. The Agency believes that there is a significant risk 
that future air quality in a number of these areas would exceed the 
ozone standard at some time in the 2007 and later period. This belief 
is based on three factors: (1) Recent exceedances in 1995-1997 or 1996-
1998, (2) predicted exceedances in 2007 or 2030 after accounting for 
reductions from Tier 2 and other local or regional controls currently 
in place or required, and (3) our assessment of the magnitude of recent 
violations, the variability of meteorological conditions, transport 
from areas with later attainment dates, and other variables inherent in 
predicting future attainment such as the potential for some areas to 
experience unexpectedly high economic growth rates, growth in vehicle 
miles traveled, varying population growth from area to area, and 
differences in vehicle choice.
    Only a subset of these areas have yet adopted specific control 
measures that have allowed the Agency to fully approve an attainment 
plan. For some of these areas, we have proposed a finding, based on all 
the available evidence, that the area will attain on its attainment 
date. In one case, we have proposed that an area will maintain over the 
required 10-year time period. However, in many cases, these proposals 
depend on the State adopting additional emission reduction measures. 
The draft RIA provides more information on our recent proposals on 
attainment demonstrations and maintenance plans.\18\ Until the SIPs for 
these areas are actually submitted, reviewed and approved, there is 
some risk that these areas will not adopt fully approvable SIPs. 
Furthermore, some of these areas are not under a current requirement to 
obtain EPA approval for an attainment plan. The mechanisms to get to 
attainment in areas without a requirement to submit an attainment 
demonstration are less automatic, and more uncertain. Even with 
suitable plans, implementation success is uncertain, and therefore 
there is some risk that 2007 attainment, or maintenance thereafter, 
would not happen.
---------------------------------------------------------------------------

    \18\ We have recently proposed favorable action, in some cases 
with a condition that more emission reductions be obtained, on 
attainment demonstrations in these areas with attainment dates prior 
to 2007: Philadelphia, Washington-Baltimore, Atlanta, and St. Louis. 
We expect to give final approval soon to a maintenance plan and 
redesignation to attainment for Cincinnati.
---------------------------------------------------------------------------

    Finally, there are six additional metropolitan areas, with another 
11.4 million people in 1996, for which the available ozone modeling and 
other evidence is less clear regarding the need for additional 
reductions. These areas include Biloxi-Gulfport-Pascagoula, MS, 
Cleveland-Akron, OH, Detroit-Ann Arbor-Flint, MI, New Orleans, LA, 
Pensacola, FL, and Tampa, FL. Our own ozone modeling predicted these 
six areas to need further reductions to avoid exceedances in 2007 or 
2030. The recent air quality monitoring data for these six areas shows 
ozone levels with less than a 10 percent margin below the NAAQS. This 
suggests that ozone concentrations in these areas may remain below the 
NAAQS for some time, but we believe there is still a risk of that 
future ozone levels will be above the NAAQS because meteorological 
conditions may be more severe in the future.
    In sum, without these reductions, there is a significant risk that 
an appreciable number of the 42 areas, with a population of 123 million 
people in 1996, will violate the 1-hour ozone standard during the time 
period when these proposed standards will apply to heavy-duty vehicles. 
The 42 areas consist of the 27 areas with predicted exceedances in 2007 
or 2030 under Tier 2 air quality modeling and recent violations of the 
1-hour ozone standard, plus seven California areas (South Coast Air 
Basin, San Diego, Ventura County, Southeast Desert, San Francisco, San 
Joaquin Valley, Sacramento), two Texas areas (Dallas and Beaumont-Port 
Arthur), and six areas that have recent ozone concentrations within 10% 
of exceeding the standard and predicted exceedances. Additional 
information about these areas is provided in the draft RIA.

iii. Conclusion

    We have reviewed the air quality situation of three broad groups of 
areas: (1) Those areas with recent violations of the ozone standard and 
attainment dates in 2007 or 2010, (2) those areas with recent 
violations and attainment dates (if any) prior to 2007, and (3) those 
areas with recent ozone concentrations within 10% of a violation of the 
1-hour ozone

[[Page 35444]]

standard, with predicted exceedances, and without proposed or approved 
SIP attainment demonstrations. In general, the evidence summarized in 
this section, and presented in more detail in the draft RIA, supports 
the Agency's belief that emissions of NOX and VOC from 
heavy-duty vehicles in 2007 and later will contribute to a national 
ozone air pollution problem that warrants regulatory attention under 
section 202(a)(3) of the Act.

                              Table II.B-2
------------------------------------------------------------------------
                                       Proposed
     Metropolitan area/State       reinstatement of     1996 population
                                    ozone standard       (in millions)
------------------------------------------------------------------------
Areas with 2007/2010 Attainment
 Dates (Established or
 Requested):
    New York City, NY-NJ-CT.....                                   19.9
    Houston, TX.................                                    4.3
    Hartford, CT................                                    1.1
    New London, CT..............                                    1.3
    Chicago, IL-IN..............                                    8.6
    Milwaukee, WI...............                                    1.6
    Dallas, TX..................                                    4.6
    Beaumont-Port Arthur, TX....                                    0.4
    Los Angeles, CA.............                                   15.5
    Southeast Desert, CA........                                    0.4
      Subtotal of 10 areas......                                   57.7
Areas with Pre-2007 Attainment
 Dates or No Specific Attainment
 Date, with a Recent History of
 Nonattainment:**
    Atlanta, GA.................                                    3.5
    Philadelphia-Wilmington-                                        6.0
     Atlantic City, PA-NJ-DE-MD.
    Sacramento, CA..............                                    1.5
    San Joaquin Valley, CA                                          2.7
     *possible future
     reclassification and change
     of attainment date to 2005.
    Ventura County, CA..........                                    0.7
    Washington-Baltimore, DC-MD-                                    7.2
     VA-WV......................
    Charlotte-Gastonia, NC......                  X                 1.3
    Grand Rapids, MI............                  X                 1.0
    Huntington-Ashland, WV-KY...                  X                 0.3
    Indianapolis, IN............                  X                 1.5
    Memphis, TN.................                  X                 1.1
    Nashville, TN...............                  X                 1.1
    Barnstable-Yarmouth, MA.....                  X                 0.2
    Boston-Worcester-Lawrence,                    X                 5.6
     MA.........................
    Houma, LA...................                  X                 0.2
    Providence-Fall River-                        X                 1.1
     Warwick, RI-MA.............
    Richmond-Petersburg, VA.....                  X                 1.0
    Benton Harbor, MI...........                  X                 0.2
    Baton Rouge, LA.............                                    0.6
    Birmingham, AL..............                                    0.9
    Cincinnati-Hamilton, OH-KY-                                     1.9
     IN*........................
    Louisville, KY-IN...........                                    0.3
    Pittsburgh, PA MSA..........                                    2.4
    San Diego, CA...............                                    2.8
    San Francisco Bay Area, CA..                                    6.2
    St. Louis, MO-IL............                                    2.5
      Subtotal of 26 areas......                                   53.8
Areas with Pre-2007 Attainment
 Dates and Recent Concentrations
 within 10% of an Exceedance,
 But With No Recent History of
 Nonattainment:
    Biloxi-Gulfport-Pascagoula,                   X                 0.3
     MS MSA.....................
    Cleveland-Akron, OH CMSA....                  X                 2.9
    Detroit-Ann Arbor-Flint, MI                   X                 5.3
     CMSA.......................
    New Orleans, LA MSA.........                  X                 0.3
    Pensacola, FL MSA...........                  X                 0.4
    Tampa, FL MSA...............                  X                 2.2
      Subtotal of 6 areas.......                                   11.4
Total 1996 Population of All
 Areas at Risk of Exceeding the
 Ozone Standard in 2007 or
 Thereafter:
    42 Areas--total population..                                 122.9
------------------------------------------------------------------------
*Based on more recent air quality monitoring data not considered in the
  Tier 2 analysis, and on 10-year emissions projections, we expect to
  redesignate Cincinnati-Hamilton to attainment soon.
**The list includes certain areas that are currently not violating the 1-
  hour NAAQS.

c. Public Health and Welfare Concerns From Prolonged and Repeated 
Exposures to Ozone

    A large body of scientific literature regarding health and welfare 
effects of ozone has associated health effects with certain patterns of 
ozone exposures that do not include any hourly ozone concentration 
above the 0.12 parts per million (ppm) level of the 1-hour NAAQS. The 
science indicates that there are health effects attributable to 
prolonged and repeated exposures to lower ozone concentrations. Studies 
of 6 to 8 hour exposures showed health effects from prolonged and 
repeated exposures at moderate levels of exertion to ozone 
concentrations as low as 0.08

[[Page 35445]]

ppm. Prolonged and repeated ozone concentrations at these levels are 
common in areas throughout the country, and are found in areas that are 
exceeding, and areas that are not exceeding, the 1-hour ozone standard. 
For example, in 1998, almost 62 million people lived in areas with 2 or 
more days with concentrations of 0.09 ppm or higher, excluding areas 
currently violating the 1-hour NAAQS. Since prolonged exposures at 
moderate levels of ozone are more widespread than exceedances of the 1-
hour ozone standard, and given the continuing nature of the 1-hour 
ozone problem described above, adverse health effects from this type of 
ozone exposure can reasonably be anticipated to occur in the future in 
the absence of this rule. Adverse welfare effects can also be 
anticipated, primarily from damage to vegetation. See the draft RIA for 
further details.
    Studies of acute health effects have shown transient pulmonary 
function responses, transient respiratory symptoms, effects on exercise 
performance, increased airway responsiveness, increased susceptibility 
to respiratory infection, increased hospital and emergency room visits, 
and transient pulmonary respiratory inflammation. Such acute health 
effects have been observed following prolonged exposures at moderate 
levels of exertion at concentrations of ozone well below the current 
standard of 0.12 ppm. The effects are more pronounced at concentrations 
above 0.09 ppm, affecting more subjects or having a greater effect on a 
given subject in terms of functional changes or symptoms. A more 
detailed discussion may be found in the Draft RIA.
    With regard to chronic health effects, the collective data have 
many ambiguities, but provide suggestive evidence of chronic effects in 
humans. There is a biologically plausible basis for considering the 
possibility that repeated inflammation associated with exposure to 
ozone over a lifetime, as can occur with prolonged exposure to moderate 
ozone levels below peak levels, may result in sufficient damage to 
respiratory tissue that individuals later in life may experience a 
reduced quality of life, although such relationships remain highly 
uncertain.
    We believe that the evidence in the Draft RIA regarding the 
occurrence of adverse health effects due to prolonged and repeated 
exposure to ozone concentrations in the range discussed above, and 
regarding the populations that are expected to receive exposures at 
these levels, supports a conclusion that emissions of NOX, 
and VOC from heavy-duty vehicles in 2007 and later will be contributing 
to a national air pollution problem that warrants regulatory attention 
under section 202(a)(3) of the Act.
    Ozone has many welfare effects, with damage to plants being of most 
concern. Plant damage affects crop yields, forestry production, and 
ornamentals. The adverse effect of ozone on forests and other natural 
vegetation can in turn cause damage to associated ecosystems, with 
additional resulting economic losses. Ozone concentrations of 0.10 ppm 
can be phytotoxic to a large number of plant species, and can produce 
acute injury and reduced crop yield and biomass production. Ozone 
concentrations at or below 0.10 ppm have the potential over a longer 
duration of creating chronic stress on vegetation that can result in 
reduced plant growth and yield, shifts in competitive advantages in 
mixed populations, decreased vigor, and injury from other environmental 
stresses. The forestry, crop and other environmental damage from ozone 
in times and places where the 1-hour NAAQS is attained adds support to 
the Agency's belief that there will be air pollution in 2007 and 
thereafter that warrants regulatory attention under section 202(a)(3) 
of the Act.
2. Particulate Matter

a. Health and Welfare Effects

i. Particulate Matter Generally

    Particulate matter (PM) represents a broad class of chemically and 
physically diverse substances. It can be principally characterized as 
discrete particles that exist in the condensed (liquid or solid) phase 
spanning several orders of magnitude in size. All particles equal to 
and less than 10 microns are called PM10. Fine particles can 
be generally defined as those particles with an aerodynamic diameter of 
2.5 microns or less (also known as PM2.5), and coarse 
fraction particles are those particles with an aerodynamic diameter 
greater than 2.5 microns, but equal to or less than a nominal 10 
microns. The health and environmental effects of PM are strongly 
related to the size of the particles.
    The emission sources, formation processes, chemical composition, 
atmospheric residence times, transport distances and other parameters 
of fine and coarse particles are distinct. Fine particles are directly 
emitted from combustion sources and are formed secondarily from gaseous 
precursors such as sulfur dioxide, nitrogen oxides, or organic 
compounds. Fine particles are generally composed of sulfate, nitrate, 
chloride and ammonium compounds; organic and elemental carbon; and 
metals. Combustion of coal, oil, diesel, gasoline, and wood, as well as 
high temperature process sources such as smelters and steel mills, 
produce emissions that contribute to fine particle formation. In 
contrast, coarse particles are typically mechanically generated by 
crushing or grinding and are often dominated by resuspended dusts and 
crustal material from paved or unpaved roads or from construction, 
farming, and mining activities. Fine particles can remain in the 
atmosphere for days to weeks and travel through the atmosphere hundreds 
to thousands of kilometers, while coarse particles deposit to the earth 
within minutes to hours and within tens of kilometers from the emission 
source.
    Particulate matter, like ozone, has been linked to a range of 
serious respiratory health problems. Scientific studies suggest a 
likely causal role of ambient particulate matter (which is attributable 
to a number of sources including diesel) in contributing to a series of 
health effects. The key health effects categories associated with 
ambient particulate matter include premature mortality, aggravation of 
respiratory and cardiovascular disease (as indicated by increased 
hospital admissions and emergency room visits, school absences, work 
loss days, and restricted activity days), aggravated asthma, acute 
respiratory symptoms, including aggravated coughing and difficult or 
painful breathing, chronic bronchitis, and decreased lung function that 
can be experienced as shortness of breath. For additional information 
on health effects, see the draft RIA. Both fine and coarse particles 
can accumulate in the respiratory system. Exposure to fine particles is 
most closely associated with such health effects as premature mortality 
or hospital admissions for cardiopulmonary disease. PM also causes 
damage to materials and soiling. It is a major cause of substantial 
visibility impairment in many parts of the U.S.
    Diesel particles are a component of both coarse and fine PM, but 
fall mostly in the fine range. Noncancer health effects associated with 
exposure to diesel PM overlap with some health effects reported for 
ambient PM including respiratory symptoms (cough, labored breathing, 
chest tightness, wheezing), and chronic respiratory disease (cough, 
phlegm, chronic bronchitis and some evidence for decreases in pulmonary 
function).

[[Page 35446]]

ii. Special Considerations for Diesel PM

    Primary diesel particles mainly consist of carbonaceous material, 
ash (trace metals), and sulfuric acid. Many of these particles exist in 
the atmosphere as a carbon core with a coating of organic carbon 
compounds, sulfuric acid and ash, sulfuric acid aerosols, or sulfate 
particles associated with organic carbon.
    Most diesel particles are in the fine and ultrafine size range. 
Diesel PM contains small quantities of numerous mutagenic and 
carcinogenic compounds. While representing a very small portion (less 
than one percent) of the national emissions of metals, and a small 
portion of diesel particulate matter (one to five percent), we note 
that several trace metals of toxicological significance are also 
emitted by diesel engines in small amounts including chromium, 
manganese, mercury and nickel. In addition, small amounts of dioxins 
have been measured in diesel exhaust, some of which may partition into 
the particle phase, though the impact of these emissions on human 
health is not clear.
    Because the chemical composition of diesel PM includes these 
hazardous air pollutants, or air toxics, diesel PM emissions are of 
concern to the agency beyond their contribution to general ambient PM. 
Moreover, as discussed in detail in the draft RIA, there have been 
health studies specific to diesel PM emissions which indicate potential 
hazards to human health that appear to be specific to this emissions 
source. For chronic exposure, these hazards included respiratory system 
toxicity and carcinogenicity. Acute exposure also causes transient 
effects (a wide range of physiological symptoms stemming from 
irritation and inflammation mostly in the respiratory system) in humans 
though they are highly variable depending on individual human 
susceptibility.

b. Potential Cancer Effects of Diesel Exhaust

    The EPA draft Health Assessment Document for Diesel Emissions 
(draft Assessment) is currently being revised based on comments 
received from the Clean Air Scientific Advisory Committee (CASAC) of 
EPA's Science Advisory Board.\19\ The current EPA position is that 
diesel exhaust is a likely human lung carcinogen and that this cancer 
hazard exists for occupational and environmental levels of 
exposure.\20\
---------------------------------------------------------------------------

    \19\ U.S. EPA (1999) Health Assessment Document for Diesel 
Emissions: SAB Review Draft. EPA/600/8-90/057D Office of Research 
and Development, Washington, DC. The document is available 
electronically at www.epa.gov/ncea/diesel.htm.
    \20\ The EPA designation of diesel exhaust as a likely human 
carcinogen is subject to further comment by CASAC in 2000. The 
designation of diesel exhaust as a likely human carcinogen under the 
1996 Proposed Guidelines for Carcinogen Risk Assessment is very 
similar to the current 1986 Guidelines for Carcinogen Risk 
Assessment that designate diesel exhaust as a probable carcinogen 
(B-1 carcinogen). The new guidelines, once finalized, will 
incorporate a narrative approach to assist the risk manager in the 
interpretation of the carcinogen's mode of action, the weight of 
evidence, and any risk related exposure-response or protective 
exposure recommendations.
---------------------------------------------------------------------------

    In evaluating the available research for the draft Assessment, EPA 
found that individual epidemiological studies numbering about 30 show 
increased lung cancer risks associated with diesel emissions within the 
study populations of 20 to 89 percent depending on the study. 
Analytical results of pooling the positive study results show that on 
average the risks were increased by 33 to 47 percent. Questions remain 
about the influence of other factors (e.g., effect of smoking), the 
quality of the individual epidemiology studies, exposure levels, and 
consequently the precise magnitude of the increased risk of lung 
cancer. From a weight of the evidence perspective, EPA believes that 
the epidemiology evidence, as well as supporting data from certain 
animal and mode of action studies, support the Agency's proposed 
conclusion that exposure to diesel exhaust is likely to pose a human 
health hazard at occupational exposure levels, as well as to the 
general public exposed to typically lower environmental levels of 
diesel exhaust.
    Risk assessments on epidemiological studies in the peer-reviewed 
literature which have attempted to assess the lifetime risk of lung 
cancer in workers occupationally exposed to diesel exhaust suggests 
that lung cancer risk may range from 10-4 to 
10-.\21\ \22\ \23\ The Agency recognizes the significant 
uncertainties in these studies, and has not used these estimates to 
assess the possible cancer unit risk associated with ambient exposure 
to diesel exhaust.
---------------------------------------------------------------------------

    \21\ California Environmental Protection Agency, Office of 
Health Hazard Assessment (CAL-EPA, OEHHA) (1998) Proposed 
Identification of Diesel Exhaust as a Toxic Air Contaminant. 
Appendix III Part B Health Risk Assessment for Diesel Exhaust. April 
22, 1998.
    \22\ Steenland, K., Deddens, J., Stayner, L. (1998) Diesel 
Exhaust and Lung Cancer in the Trucking Industry: Exposure-Response 
Analyses and Risk Assessment. Am. J Indus. Medicine 34:220-228.
    \23\ Harris, J.E. (1983) Diesel emissions and Lung Cancer. Risk 
Anal. 3:83-100.
---------------------------------------------------------------------------

    While available evidence supports EPA's conclusion that diesel 
exhaust is a likely human lung carcinogen, and thus is likely to pose a 
cancer hazard to humans, the absence of quantitative estimates of the 
lung cancer unit risk for diesel exhaust limits our ability to quantify 
with confidence the actual magnitude of the cancer risk. In the draft 
1999 Assessment, EPA acknowledged these limitations and provided a 
discussion of the possible cancer risk consistent with general 
occupational epidemiological findings of increased lung cancer risk and 
relative exposure ranges in the occupational and environmental 
settings. \24\ The Agency believes that the techniques that were used 
in the draft Assessment to qualitatively gauge the potential for and 
possible magnitude of risk are reasonable. The details of this approach 
are provided in the draft RIA.
---------------------------------------------------------------------------

    \24\ See Chapter 8.3 and 9.6 of the draft Health Assessment for 
Diesel Exhaust. U.S. EPA (1999) Health Assessment Document for 
Diesel Emissions: SAB Review Draft. EPA/600/8-90/057D Office of 
Research and Development, Washington, D.C. The document is available 
electronically at www.epa.gov/ncea/diesel.htm.
---------------------------------------------------------------------------

    In the absence of a quantitative unit cancer risk to assess 
environmental risk, EPA has considered the relevant epidemiological 
studies and principles for their assessment, the risk from occupational 
exposure as assessed by others, and relative exposure margins between 
occupational and ambient environmental levels of diesel exhaust 
exposure. Based on this epidemiological and other information, there is 
the potential that upper bounds on environmental cancer risks from 
diesel exhaust may exceed 10-6 and could be as high as 
10-3. \25\ While uncertainty exists in estimating risk, the 
likely hazard to humans together with the potential for significant 
environmental risks leads the Agency to believe that diesel exhaust 
emissions should be reduced in order to protect the public's health. We 
believe that this is a prudent measure in light of the designation of 
diesel exhaust as a likely human carcinogen, the exposure of almost the 
entire population to diesel exhaust, the significant and consistent 
finding of an increase in lung cancer risk in workers exposed to diesel 
exhaust, and the potential overlap and/or small difference between some 
occupational and environmental exposures.
---------------------------------------------------------------------------

    \25\ As used in this proposal, environmental risk is defined as 
the risk (i.e. a mathematical probability) that lung cancer would be 
observed in the population after a lifetime exposure to diesel 
exhaust. Exposure levels may be occupational lifetime or 
environmental lifetime exposures. A population risk in the magnitude 
of 10-6 translates as the probability of lung cancer 
being evidenced in one person in one million over a lifetime 
exposure.
---------------------------------------------------------------------------

    As discussed in section I.C.6, ``Actions in California'', the 
Office of Environmental Health Hazard

[[Page 35447]]

Assessment (OEHHA, California EPA) has identified diesel PM as a toxic 
air contaminant. \26\ California is in the process of determining the 
need for, and appropriate degree of control measures for diesel PM. 
Apart from the EPA draft Assessment and California EPA's actions, 
several other agencies and governing bodies have designated diesel 
exhaust or diesel PM as a ``potential'' or ``probable'' human 
carcinogen. \27\ \28\ \29\ The International Agency for Research on 
Cancer (IARC) considers diesel exhaust a ``probable'' human carcinogen 
and the National Institutes for Occupational Safety and Health have 
classified diesel exhaust a ``potential occupational carcinogen.'' 
Thus, the concern for the health hazard resulting from diesel exhaust 
exposures is widespread.
---------------------------------------------------------------------------

    \26\ Office of Environmental Health Hazard Assessment (1998) 
Health risk assessment for diesel exhaust, April 1998. California 
Environmental Protection Agency, Sacramento, CA.
    \27\ National Institute for Occupational Safety and Health 
(NIOSH) (1988) Carcinogenic effects of exposure to diesel exhaust. 
NIOSH Current Intelligence Bulletin 50. DHHS, Publication No. 88-
116. Centers for Disease Control, Atlanta, GA.
    \28\ International Agency for Research on Cancer (1989) Diesel 
and gasoline engine exhausts and some nitroarenes, Vol. 46. 
Monographs on the evaluation of carcinogenic risks to humans. World 
Heath Organization, International Agency for Research on Cancer, 
Lyon, France.
    \29\ World Health Organization (1996) Diesel fuel and exhaust 
emissions: International program on chemical safety. World Health 
Organization, Geneva, Switzerland.
---------------------------------------------------------------------------

c. Noncancer Effects of Diesel Exhaust

    The noncancer effects of diesel exhaust emissions are also of 
concern to the Agency. EPA believes that chronic diesel exhaust 
exposure, at sufficient exposure levels, increases the hazard and risk 
of an adverse consequence (including respiratory tract irritation/
inflammation and changes in lung function). The draft 1999 Assessment 
discussed an existing inhalation reference concentration (RfC) for 
chronic effects that EPA intends to revise in the next draft Assessment 
in response to CASAC comments. The revised RfC will be reviewed by 
CASAC at a future meeting. An RfC provides an estimate of the 
continuous human inhalation exposure (including sensitive subgroups) 
that is likely to be without an appreciable risk of deleterious 
noncancer effects during a lifetime.

d. Attainment and Maintenance of the PM10 NAAQS

    Under the CAA, we are to regulate HD emissions if they contribute 
to air pollution that can reasonably be anticipated to endanger public 
health and welfare. We have already addressed the question of what 
concentration patterns of PM endanger public health, in setting the 
NAAQS for PM10 in 1987. The PM NAAQS were revised in 1997, 
largely by adding new standards for fine particles (PM2.5) 
and modifying the form of the daily PM10 standard. On 
judicial review, the revised standards were remanded for further 
proceedings, and the revised PM10 standards were vacated. 
EPA has sought Supreme Court review of that decision; pending final 
resolution of the litigation, the 1987 PM10 standards 
continue to apply.

i. Current PM10 Nonattainment

    The most recent PM10 monitoring data indicates that 12 
designated PM10 nonattainment areas, with a population of 19 
million in 1990, violated the PM10 NAAQS in the period 1996-
1998. Table II.B-3 lists the 12 areas. The table also indicates the 
classification and 1990 population for each area.

Table II.B-3.--PM10 Nonattainment Areas Violating the PM10 NAAQS in 1996-
                                 1998 a
------------------------------------------------------------------------
                                                        1990 population
              Area                   Classification        (millions)
------------------------------------------------------------------------
Clark Co., NV...................  Serious............              0.741
El Paso, TX b...................  Moderate...........              0.515
Hayden/Miami, AZ................  Moderate...........              0.003
Imperial Valley, CA b...........  Moderate...........              0.092
Owens Valley, CA................  Serious............              0.018
San Joaquin Valley, CA..........  Serious............              2.564
Mono Basin, CA..................  Moderate...........              0.000
Phoenix, AZ.....................  Serious............              2.238
Fort Hall Reservation, ID.......  Moderate...........              0.001
Los Angeles South Coast Air       Serious............              13.00
 Basin, CA.
Nogales, AZ.....................  Moderate...........              0.019
Wallula, WA c...................  Moderate...........              0.048
                                                      ------------------
      Total population..........                                  19.24
------------------------------------------------------------------------
\a\ In addition to these designated nonattainment areas, there are 15
  unclassified counties, with a 1996 population of 4.2 million, for
  which States have reported PM10 monitoring data for this period
  indicating a PM10 NAAQS violation. Although we do not believe that we
  are limited to considering only designated nonattainment areas as part
  of this rulemaking, we have focused on the designated areas in the
  case of PM10. An official designation of PM10 nonattainment indicates
  the existence of a confirmed PM10 problem that is more than a result
  of a one-time monitoring upset or a result of PM10 exceedances
  attributable to natural events. We have not yet excluded the
  possibility that one or the other of these is responsible for the
  monitored violations in 1996-1998 in the 15 unclassified areas. We
  adopted a policy in 1996 that allows areas whose PM10 exceedances are
  attributable to natural events to remain unclassified if the State is
  taking all reasonable measures to safeguard public health regardless
  of the source of PM10 emissions. Areas that remain unclassified areas
  are not required to submit attainment plans, but we work with each of
  these areas to understand the nature of the PM10 problem and to
  determine what best can be done to reduce it.
\b\ EPA has determined that PM10 nonattainment in these areas is
  attributable to international transport. While reductions in heavy-
  duty vehicle emissions cannot be expected to result in attainment,
  they will reduce the degree of PM10 nonattainment to some degree.
\c\ The violation in this area has been determined to be attributable to
  natural events.

ii. Risk of Future Exceedances of the PM10 Standard

    The proposed new standards for heavy-duty vehicles will benefit 
public health and welfare through reductions in direct diesel particles 
and NOX, VOCs, and SOX which contribute to 
secondary formation of particulate matter. Because ambient particle 
concentrations causing violations of the PM10 standard are 
well established to endanger public health and welfare, this 
information supports the proposed new standards for heavy-duty 
vehicles. The Agency's recent PM modeling analysis

[[Page 35448]]

performed for the Tier 2 rulemaking predicts that a significant number 
of areas across the nation are at risk of failing to meet the 
PM10 NAAQS even with Tier 2 and other controls currently in 
place. These reductions will assist states as they work with the Agency 
through SIP development and implementation of local controls to move 
their areas into attainment by the applicable deadline, and maintain 
the standards thereafter.
    The Agency believes that the PM10 concentrations in 10 
areas shown in Table II.B-4 have a significant risk of exceeding the 
PM10 standard without further emission reductions during the 
time period when this rulemaking would take effect. This belief is 
based on the PM10 modeling conducted for the Tier 2 
rulemaking. Table II.B-4 presents information about these 10 areas and 
subdivides them into two groups. The first group of six areas are 
designated PM10 nonattainment areas which had recent 
monitored violations of the PM10 NAAQS in 1996-1998 and were 
predicted to be in nonattainment in 2030 in our PM10 air 
quality modeling. These areas have a population of over 19 million. 
Included in the group are the nonattainment areas that are part of the 
Los Angeles, Phoenix, and Las Vegas metropolitan areas, where traffic 
from heavy-duty vehicles is substantial. These six areas would clearly 
benefit from the reductions in emissions that would occur from the 
proposed new standards for heavy-duty vehicles.
    The second group of four counties listed in Table II.B-4 with a 
total of 8 million people in 1996 also had predicted exceedances of the 
PM10 standard. However, while these four areas registered, 
in either 1997 or 1998, single-year annual average monitored 
PM10 levels of at least 90 percent of the PM10 
NAAQS, these areas did not exceed the formal definition of the 
PM10 NAAQS over the three-year period ending in 1998.\30\ 
Unlike the situation for ozone, for which precursor emissions are 
generally declining over the next 10 years or so before beginning to 
increase, we estimate that emissions of PM10 will rise 
steadily unless new controls are implemented. The small margin of 
attainment which the four areas currently enjoy will likely erode; the 
PM air quality modeling suggests that it will be reversed. We therefore 
consider these four areas to each individually have a significant risk 
of exceeding the PM10 standard without further emission 
reductions. The emission reductions from the proposed new standards for 
heavy-duty vehicles would help these areas with attainment and maintain 
in conjunction with other processes that are currently moving these 
areas towards attainment.
---------------------------------------------------------------------------

    \30\ In fact, in two of these areas, New York Co., NY and Harris 
Co., TX, the average PM10 level in 1998 was above the 50 
micrograms per cubic meter value of the NAAQS. These two areas are 
not characterized in Table II.B-4 as areas with a high risk of 
failing to attain and maintain because lower PM10 levels 
in 1996 and 1997 caused their three-year average PM10 
level to be lower than the NAAQS. Official nonattainment 
determinations for the annual PM10 NAAQS are made based 
on the average of 12 quarterly PM10 averages.

 Table II.B-4.--Areas With Significant Risk of Exceeding the PM10 NAAQS
                   Without Further Emission Reductions
------------------------------------------------------------------------
                                                     1990 population
                      Area                              (millions)
------------------------------------------------------------------------
Areas Currently Exceeding the PM10 Standard:
    Clark Co., NV..............................                    0.741
    El Paso, TX a..............................                    0.515
    Imperial Valley, CA a......................                    0.092
    San Joaquin Valley, CA.....................                    2.564
    Phoenix, AZ................................                    2.238
    Los Angeles South Coast Air Basin, CA......                   13.00
                                                ------------------------
      Subtotal for 6 Areas.....................                   19.15
                                                ========================
Areas within 10% of Exceeding the PM10
 Standard:
    New York Co., NY...........................                    1.49
    Cuyahoga Co., OH...........................                    1.41
    Harris, Co., TX............................                    2.83
    San Diego Co., CA..........................                    2.51
                                                ------------------------
      Subtotal for 4 Areas.....................                    8.24
                                                ========================
      Total 1996 Population of All 10 Areas at                    27.39
       Risk of Exceeding the PM10 Standard: 10
       Areas, Total 1990 Population............
------------------------------------------------------------------------
\a\ EPA has determined that PM10 nonattainment in these areas is
  attributable to international transport. While reductions in heavy-
  duty vehicle emissions cannot be expected to result in attainment,
  they will reduce the degree of PM10 nonattainment to some degree.

    Future concentrations of ambient particulate matter may be 
influenced by the potentially significant influx of diesel-powered cars 
and light trucks into the light duty vehicle fleet. At the present 
time, virtually all cars and light trucks being sold are gasoline 
fueled. However, the possibility exists that diesels will become more 
prevalent in the car and light-duty truck fleet, since automotive 
companies have announced their desire to increase their sales of diesel 
cars and light trucks. For the Tier 2 rulemaking, the Agency performed 
a sensitivity analysis using A.D.Little's ``most likely'' increased 
growth scenario of diesel penetration into the light duty vehicle fleet 
which culminated in a 9 percent and 24 percent penetration of diesel 
vehicles in the LDV and LDT markets, respectively, in 2015 (see Tier 2 
RIA, Table III.A.-13). This scenario is relevant for the purpose of 
this rulemaking because, according to the analysis performed in Tier 2, 
an increased number of diesel-powered light duty vehicles will increase 
LDV PM emissions by about 13 percent in 2010 rising to 19 percent in 
2030, even with the stringent new PM standards established under the 
Tier 2 rule. If manufacturers elect to certify a portion of their 
diesel-powered LDVs to the least-stringent PM standard available under 
the Tier 2 bin structure, the increase in LDV PM emissions could be

[[Page 35449]]

even greater, thus potentially exacerbating PM10 
nonattainment problems.
    EPA recognizes that the SIP process is ongoing and that many of the 
six current nonattainment areas in Table II.B-4 are in the process of, 
or will be adopting additional control measures to achieve the 
PM10 NAAQS in accordance with their attainment dates under 
the Clean Air Act. EPA believes, however, that as in the case of ozone, 
there are uncertainties inherent in any demonstration of attainment 
that is premised on forecasts of emission levels and meteorology in 
future years. Therefore, even if these areas adopt and submit SIPs that 
EPA is able to approve as demonstrating attainment of the 
PM10 standard, the modeling conducted for Tier 2 and the 
history of PM10 levels in these areas indicates that there 
is still a significant risk that these areas would need the reductions 
from the proposed heavy-duty vehicle standards to maintain the 
PM10 standards in the long term. The other four areas in 
Table II.B-4 also have a significant risk of experiencing violations of 
the PM10 standard.
    In sum, the Agency believes that all 10 areas have a significant 
risk of experiencing particulate matter levels that violate the 
PM10 standard during the time period when this proposed rule 
would take effect. These 10 areas have a combined population of 27 
million, and are located throughout the nation. In addition, this list 
does not fully consider the possibility that there are other areas 
which are now meeting the PM10 NAAQS that have at least a 
significant probability of requiring further reductions to continue to 
maintain it.

e. Public Health and Welfare Concerns From Exposure to Fine PM

    Many epidemiologic studies have shown statistically significant 
associations of ambient PM levels with a variety of human health 
endpoints in sensitive populations, including mortality, hospital 
admissions and emergency room visits, respiratory illness and symptoms 
measured in community surveys, and physiologic changes in mechanical 
pulmonary function. These effects have been observed in many areas with 
ambient PM levels at or below the current PM10 NAAQS. The 
epidemiologic science points to fine PM as being more strongly 
associated with some health effects, such as premature mortality, than 
coarse fraction PM.
    Associations of both short-term and long-term PM exposure with most 
of the above health endpoints have been consistently observed. (A more 
detailed discussion may be found in the RIA.) The general internal 
consistency of the epidemiologic data base and available findings have 
led to increasing public health concern, due to the severity of several 
studied endpoints and the frequent demonstration of associations of 
health and physiologic effects with ambient PM levels at or below the 
current PM10 NAAQS. The weight of epidemiologic evidence 
suggests that ambient PM exposure has affected the public health of 
U.S. populations. Specifically, increased mortality associated with 
fine PM was observed in cities with longer-term average fine PM 
concentrations in the range of 16 to 21 ug/m3. For example, over 113 
million people (46 percent of continental US population, 1990) lived in 
areas in 1996 where long term ambient fine particulate matter levels 
were at or above 16 g/m3, which is the long term 
average PM2.5 concentration that prevailed in Boston during 
the study which found that acute mortality was statistically 
significantly associated with daily fine PM concentrations.\31\ It is 
reasonable to anticipate that sensitive populations exposed to similar 
or higher levels, now and in the 2007 and later time frame, will also 
be at increased risk of premature mortality associated with exposures 
to fine PM. In addition, statistically significant relationships have 
also been observed in U.S. cities between PM levels and increased 
respiratory symptoms and decreased lung functions in children.
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    \31\ In the absence of quality-assured PM2.5 
monitoring data, we have used an air quality model called Regional 
Modeling System for Aerosols and Deposition (REMSAD) to estimate 
recent PM2.5 concentrations across the U.S. for 1996. 
Essentially, REMSAD is a three-dimensional grid-based Eulerian air 
quality model designed to simulate long-term (e.g., annual) 
concentrations and deposition of atmospheric pollutants (e.g., 
particulates and toxics) over large spatial scales (e.g., over the 
contiguous United States). A more detailed explanation of the 
methodology is found in the draft RIA.
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    While uncertainty remains in the published data base regarding 
specific aspects about the nature and magnitude of the overall public 
health risk imposed by ambient PM exposure, we believe that the body of 
health evidence is supportive of our view that PM exposures that can 
reasonably be anticipated to occur in the future are a serious public 
health concern warranting a requirement to reduce emissions from heavy-
duty vehicles, even at levels below the PM10 NAAQS. EPA 
believes the risk is significant from an overall public health 
perspective because of the large number of individuals in sensitive 
populations that we expect to be exposed to ambient fine PM in the 2007 
and later time frame, as well as the importance of the negative health 
affects.
    We believe the evidence regarding the occurrence of adverse health 
effects due to exposure to fine PM concentrations, and regarding the 
populations that are expected to receive exposures at these levels, 
supports a proposed conclusion that emissions from heavy-duty vehicles 
that lead to the formation of fine PM in 2007 and later will be 
contributing to a national air pollution problem that warrants action 
under section 202(a)(3).

f. Visibility and Regional Haze Effects of Ambient PM

    Visibility impairment, also called regional haze, is a complex 
problem caused by a variety of sources, both natural and anthropogenic 
(e.g., motor vehicles). Regional haze masks objects on the horizon and 
reduces the contrast of nearby objects. The formation, extent, and 
intensity of regional haze are functions of meteorological and chemical 
processes, which sometimes cause fine particle loadings to remain 
suspended in the atmosphere for several days and to be transported 
hundreds of kilometers from their sources (NRC, 1993).
    Visibility has been defined as the degree to which the atmosphere 
is transparent to visible light (NRC, 1993). Visibility impairment is 
caused by the scattering and absorption of light by particles and gases 
in the atmosphere. Fine particles (0.1 to 1.0 microns in diameter) are 
more effective per unit mass concentration at impairing visibility than 
either larger or smaller particles (NAPAP, 1991). Most of the diesel 
particle mass emitted by diesel engines falls within this fine particle 
size range. Light absorption is often caused by elemental carbon, a 
product of incomplete combustion from activities such as burning diesel 
fuel or wood. These particles cause light to be scattered or absorbed, 
thereby reducing visibility.
    Heavy-duty vehicles contribute a significant portion of the 
emissions of direct PM, NOX, and SOX that result 
in ambient PM that contributes to regional haze and impaired 
visibility. The Grand Canyon Visibility Transport Commission's report 
found that reducing total mobile source emissions is an essential part 
of any program to protect visibility in the Western U.S. The Commission 
identified mobile source pollutants of concern as VOC, NOX, 
and elemental and organic carbon. The Western Governors Association, in 
later commenting on the Regional Haze Rule and on protecting the 16 
Class I

[[Page 35450]]

areas on the Colorado Plateau, stated that the federal government, and 
particularly EPA, must do its part in regulating emissions from mobile 
sources that contribute to regional haze in these areas. As described 
more fully later in this section, today's proposal would result in 
large reductions in these pollutants. These reductions are expected to 
provide an important step towards improving visibility across the 
nation. Emissions reductions being achieved to attain the 1-hour ozone 
and PM10 NAAQS will assist in visibility improvements, but 
not substantially. Moreover, the timing of the reductions from the 
proposed standards fits very well with the goals of the regional haze 
program. We will work with the regional planning bodies to make sure 
they have the information to take account of the reductions from any 
final rule resulting from this proposal in their planning efforts.
    The Clean Air Act contains provisions designed to protect national 
parks and wilderness areas from visibility impairment. In 1999, EPA 
promulgated a rule that will require States to develop plans to 
dramatically improve visibility in national parks. Although it is 
difficult to determine natural visibility levels, we believe that 
average visual range in many Class I areas in the United States is 
significantly less (about 50-66% of natural visual range in the West, 
about 20% of natural visual range in the East) than the visual range 
that would exist without anthropogenic air pollution. The final 
Regional Haze Rule establishes a 60-year time period for planning 
purposes, with several near term regulatory requirements, and is 
applicable to all 50 states. One of the obligations is for States to 
conduct visibility monitoring in mandatory Class I Federal areas and 
determine baseline conditions using data for year 2000 to 2004. 
Reductions of particles, NOX, sulfur, and VOCs from this 
rulemaking would have a significant impact on moving all states towards 
achieving long-term visibility goals, as outlined in the 1999 Regional 
Haze Rule.

g. Other Welfare Effects Associated With PM

    The deposition of airborne particles reduces the aesthetic appeal 
of buildings, and promotes and accelerates the corrosion of metals, 
degrades paints, and deteriorates building materials such as concrete 
and limestone. This materials damage and soiling are related to the 
ambient levels of airborne particulates, which are emitted by heavy-
duty vehicles. Although there was insufficient data to relate materials 
damage and soiling to specific concentrations, and thereby to allow the 
Agency to establish a secondary PM standard for these impacts, we 
believe that the welfare effects are real and that heavy-duty vehicle 
PM, NOX, SOX, and VOC contribute to materials 
damage and soiling.

h. Conclusions Regarding PM

    There is a significant risk that, despite statutory requirements 
and EPA and state efforts towards attainment and maintenance, some 
areas of the U.S. will violate the PM10 NAAQS in 2007 and 
thereafter. We believe that the information provided in this section 
shows that there will be air pollution that warrants regulatory 
attention under section 202(a)(3) of the Act. Heavy-duty vehicles 
contribute substantially to PM10 levels, as shown in section 
II.C below.
    It is also reasonable to anticipate that concentrations of fine PM, 
as represented for example by PM2.5 concentrations, will 
endanger public health and welfare also even if all areas attain and 
maintain the PM10 NAAQS. Heavy-duty vehicles will also 
contribute to this air pollution problem.
    There are also important environmental impacts of PM10, 
such as regional haze which impairs visibility. Furthermore, while the 
evidence on soiling and materials damage is limited and the magnitude 
of the impact of heavy-duty vehicles on these welfare effects is 
difficult to quantify, these welfare effects support our belief 
information that this proposal is necessary and appropriate.
3. Other Criteria Pollutants
    The standards being proposed today would help reduce levels of 
three other pollutants for which NAAQS have been established: carbon 
monoxide (CO), nitrogen dioxide (NO2), and sulfur dioxide 
(SO2). The extent of nonattainment for these three 
pollutants is small, so the primary effect of today's proposal would be 
to provide areas concerned with maintaining their attainment status a 
greater margin of safety. As of 1998, every area in the United States 
has been designated to be in attainment with the NO2 NAAQS. 
As of 1997, only one area (Buchanan County, Missouri) did not meet the 
primary SO2 short-term standard, due to emissions from the 
local power plant. In 1997, only 6 of 537 monitoring sites reported 
ambient CO levels in excess of the CO NAAQS. There are currently 20 
designated CO nonattainment areas, with a combined population of 34 
million. There are also 23 designated maintenance areas with an 
additional combined population of 34 million. The broad trends indicate 
that ambient levels of CO are declining.
4. Other Air Toxics
    In addition to NOx and particulates, heavy-duty vehicle 
emissions contain several other substances that are known or suspected 
human or animal carcinogens, or have serious noncancer health effects. 
These include benzene,1,3-butadiene, formaldehyde, acetaldehyde, 
acrolein, and dioxin. For some of these pollutants, heavy-duty engine 
emissions are believed to account for a significant proportion of total 
nation-wide emissions. Although these emissions will decrease in the 
short term, they are expected to increase in 2007-2020 without the 
proposed emission limits, as the number of miles traveled by heavy-duty 
trucks increases. In the Draft RIA, we present current and projected 
exposures to benzene, 1,3-butadiene, formaldehyde, and acetaldehyde 
from all on-highway motor vehicles.
    By reducing hydrocarbon and other organic emissions, both in gas 
phase and bound to particles, the emission control program proposed in 
today's action would have a significant impact on direct emissions of 
air toxics from HDVs. We are also proposing a new formaldehyde standard 
for heavy-duty vehicles. Today's action would reduce exposure to these 
substances and therefore help reduce the impact of HDV emissions on 
cancer and non-cancer health effects. We are currently conducting a 
risk assessment to assess the risk of cancer in the population that can 
be attributed to motor vehicle emissions of benzene, 1,3-butadiene, 
formaldehyde, and acetaldehyde.

a. Benzene

    Highway mobile sources account for 52 percent of nationwide 
emissions of benzene and HDVs account for 7 percent of all highway 
vehicle benzene emissions.\32\ The EPA has recently reconfirmed that 
benzene is a known human carcinogen by all routes of exposure 
(including leukemia at high, prolonged air exposures), and is 
associated with additional health effects including genetic changes in 
humans and animals and increased proliferation

[[Page 35451]]

of bone marrow cells in mice.\33\ \34\ \35\ EPA believes that the data 
indicate a causal relationship between benzene exposure and acute 
lymphocytic leukemia and suggest a relationship between benzene 
exposure and chronic non-lymphocytic leukemia and chronic lymphocytic 
leukemia. Respiration is the major source of human exposure and at 
least half of this exposure is attributable to gasoline vapors and 
automotive emissions. A number of adverse noncancer health effects 
including blood disorders, such as preleukemia and aplastic anemia, 
have also been associated with low-dose, long-term exposure to benzene.
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    \32\ 1990 Emissions Inventory of Forty Potential Section 112(k) 
Pollutants: Supporting Data for EPA's Section 112(k) Regulatory 
Strategy--Final Report. Emission Factors and Inventory Group, Office 
of Air Quality Planning and Standards, May, 1999.
    \33\ International Agency for Research on Cancer, IARC 
monographs on the evaluation of carcinogenic risk of chemicals to 
humans, Volume 29, Some industrial chemicals and dyestuffs, 
International Agency for Research on Cancer, World Health 
Organization, Lyon, France, p. 345-389, 1982.
    \34\ Irons, R.D., W.S. Stillman, D.B. Calogiovanni, and V.A. 
Henry, Synergistic action of the benzene metabolite hydroquinone on 
myelopoietic stimulating activity of granulocyte/macrophage colony-
stimulating factor in vitro, Proc. Natl. Acad. Sci. 89:3691-3695, 
1992.
    \35\ Environmental Protection Agency, Carcinogenic Effects of 
Benzene: An Update, National Center for Environmental Assessment, 
Washington, DC. 1998.
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b. 1,3-Butadiene

    Highway mobile sources account for 51 percent of the annual 
emissions of 1,3-butadiene and HDVs account for 15 percent of the 
highway vehicle portion. Today's program would play an important role 
in reducing in the mobile contribution of 1,3-butadiene. This compound 
causes a variety of reproductive and developmental effects in mice and 
rats exposed to long-term, low doses. There is, however, no human data 
on 1,3-butadiene. EPA's recently prepared draft health assessment 
document presents evidence that suggests this substance is a known 
human carcinogen.\36\ The Environmental Health Committee of EPA's 
Science Advisory Board, in reviewing EPA's draft Health Assessment for 
1,3-butadiene, recommended that 1,3-butadiene should be classified as a 
probable human carcinogen.\37\
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    \36\ Environmental Protection Agency, Health Risk Assessment of 
1,3-Butadiene. EPA/600/P-98/001A, February 1998.
    \37\ An SAB Report: Review of the Health Risk Assessment of 1,3-
Butadiene. EPA-SAB-EHC-98, August, 1998.
---------------------------------------------------------------------------

c. Formaldehyde

    Highway mobile sources contribute 27 percent of the national 
emissions of formaldehyde, and HDVs account for 35 percent of the 
highway portion. EPA has classified formaldehyde as a probable human 
carcinogen based on evidence in humans and in rats, mice, hamsters, and 
monkeys.\38\ Epidemiological studies in occupationally exposed workers 
suggest that long-term inhalation of formaldehyde may be associated 
with tumors of the nasopharyngeal cavity (generally the area at the 
back of the mouth near the nose), nasal cavity, and sinus. Formaldehyde 
exposure also causes a range of noncancer health effects, including 
irritation of the eyes (tearing of the eyes and increased blinking) and 
mucous membranes. Sensitive individuals may experience these adverse 
effects at lower concentrations than the general population and in 
persons with bronchial asthma, the upper respiratory irritation caused 
by formaldehyde can precipitate an acute asthmatic attack.
---------------------------------------------------------------------------

    \38\ Environmental Protection Agency, Assessment of health risks 
to garment workers and certain home residents from exposure to 
formaldehyde, Office of Pesticides and Toxic Substances, April 1987.
---------------------------------------------------------------------------

d. Acetaldehyde

    Highway mobile sources contribute 20 percent of the national 
acetaldehyde emissions and HDVs are responsible for approximately 33 
percent of these highway mobile source emissions. Acetaldehyde is 
classified as a probable human carcinogen and is considered moderately 
toxic by the inhalation, oral, and intravenous routes. The primary 
acute effect of exposure to acetaldehyde vapors is irritation of the 
eyes, skin, and respiratory tract. At high concentrations, irritation 
and pulmonary effects can occur, which could facilitate the uptake of 
other contaminants.

e. Acrolein

    HDVs are responsible for approximately 53 percent of the mobile 
source highway emissions and about 8% of the total inventory (1996 
NTI). Acrolein is extremely toxic to humans when inhaled, with acute 
exposure resulting in upper respiratory tract irritation and 
congestion. The Agency has developed a reference concentration for 
inhalation (RfC) of acrolein of 0.02 micrograms/m3.\39\ 
Although no information is available on its carcinogenic effects in 
humans, based on laboratory animal data, EPA considers acrolein a 
possible human carcinogen.
---------------------------------------------------------------------------

    \39\ U.S. EPA (1993) Environmental Protection Agency, Integrated 
Risk Information System (IRIS), Office of Health and Environmental 
Assessment, Environmental Criteria and Assessment Office, 
Cincinnati, OH.
---------------------------------------------------------------------------

f. Dioxins

    Recent studies have confirmed that dioxins are formed by and 
emitted from heavy-duty diesel trucks. These trucks are estimated to 
account for 1.2 percent of total dioxin emissions. In general, dioxin 
exposures of concern have primarily been noninhalation exposures 
associated with human ingestion of certain foods (e.g., beef, 
vegetables, and dairy products contaminated by dioxin). EPA has 
classified dioxin as a probable human carcinogen. Acute and chronic 
effects have also been reported for dioxin from oral and inhalation 
routes of exposure.\40\
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    \40\ U.S. EPA (1994) Health Assessment Document for 2,3,7,8-
Tetrachlorodibenzo-p-dioxin (TCDD) and Related Compounds: Volume III 
Summary Draft Document. EPA/600/BP-92/001c.
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5. Other Environmental Effects

a. Acid Deposition

    Acid deposition, or acid rain as it is commonly known, occurs when 
SO2 and NOX react in the atmosphere with water, 
oxygen, and oxidants to form various acidic compounds that later fall 
to earth in the form of precipitation or dry deposition of acidic 
particles.\41\ It contributes to damage of trees at high elevations and 
in extreme cases may cause lakes and streams to become so acidic that 
they cannot support aquatic life. In addition, acid deposition 
accelerates the decay of building materials and paints, including 
irreplaceable buildings, statues, and sculptures that are part of our 
nation's cultural heritage. To reduce damage to automotive paint caused 
by acid rain and acidic dry deposition, some manufacturers use acid-
resistant paints, at an average cost of $5 per vehicle--a total of $61 
million per year if applied to all new cars and trucks sold in the U.S.
---------------------------------------------------------------------------

    \41\ Much of the information in this subsection was excerpted 
from the EPA document, Human Health Benefits from Sulfate Reduction, 
written under Title IV of the 1990 Clean Air Act Amendments, U.S. 
EPA, Office of Air and Radiation, Acid Rain Division, Washington, DC 
20460, November 1995.
---------------------------------------------------------------------------

    Acid deposition primarily affects bodies of water that rest atop 
soil with a limited ability to neutralize acidic compounds. The 
National Surface Water Survey (NSWS) investigated the effects of acidic 
deposition in over 1,000 lakes larger than 10 acres and in thousands of 
miles of streams. It found that acid deposition was the primary cause 
of acidity in 75 percent of the acidic lakes and about 50 percent of 
the acidic streams, and that the areas most sensitive to acid rain were 
the Adirondacks, the mid-Appalachian highlands, the upper Midwest and 
the high elevation West. The NSWS found that approximately 580 streams 
in the Mid-Atlantic Coastal Plain are acidic primarily due to acidic 
deposition. Hundreds of the lakes in the Adirondacks surveyed in the 
NSWS

[[Page 35452]]

have acidity levels incompatible with the survival of sensitive fish 
species. Many of the over 1,350 acidic streams in the Mid-Atlantic 
Highlands (mid-Appalachia) region have already experienced trout losses 
due to increased stream acidity. Emissions from U.S. sources contribute 
to acidic deposition in eastern Canada, where the Canadian government 
has estimated that 14,000 lakes are acidic. Acid deposition also has 
been implicated in contributing to degradation of high-elevation spruce 
forests that populate the ridges of the Appalachian Mountains from 
Maine to Georgia. This area includes national parks such as the 
Shenandoah and Great Smoky Mountain National Parks.
    The SOX and NOX reductions from today's 
proposal would help reduce acid rain and acid deposition, thereby 
helping to reduce acidity levels in lakes and streams throughout the 
country and help accelerate the recovery of acidified lakes and streams 
and the revival of ecosystems adversely affected by acid deposition. 
Reduced acid deposition levels would also help reduce stress on 
forests, thereby accelerating reforestation efforts and improving 
timber production. Deterioration of our historic buildings and 
monuments, and of buildings, vehicles, and other structures exposed to 
acid rain and dry acid deposition also would be reduced, and the costs 
borne to prevent acid-related damage may also decline. While the 
reduction in sulfur and nitrogen acid deposition would be roughly 
proportional to the reduction in SOX and NOX 
emissions, respectively, the precise impact of today's proposal would 
differ across different areas.

b. Eutrophication and Nitrification

    Nitrogen deposition into bodies of water can cause problems beyond 
those associated with acid rain. The Ecological Society of America has 
included discussion of the contribution of air emissions to increasing 
nitrogen levels in surface waters in a recent major review of causes 
and consequences of human alteration of the global nitrogen cycle in 
its Issues in Ecology series.\42\ Long-term monitoring in the United 
States, Europe, and other developed regions of the world shows a 
substantial rise of nitrogen levels in surface waters, which are highly 
correlated with human-generated inputs of nitrogen to their watersheds. 
These nitrogen inputs are dominated by fertilizers and atmospheric 
deposition.
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    \42\ Vitousek, Peter M., John Aber, Robert W. Howarth, Gene E. 
Likens, et al. 1997. Human Alteration of the Global Nitrogen Cycle: 
Causes and Consequences. Issues in Ecology. Published by Ecological 
Society of America, Number 1, Spring 1997.
---------------------------------------------------------------------------

    Human activity can increase the flow of nutrients into those waters 
and result in excess algae and plant growth. This increased growth can 
cause numerous adverse ecological effects and economic impacts, 
including nuisance algal blooms, dieback of underwater plants due to 
reduced light penetration, and toxic plankton blooms. Algal and 
plankton blooms can also reduce the level of dissolved oxygen, which 
can also adversely affect fish and shellfish populations. This problem 
is of particular concern in coastal areas with poor or stratified 
circulation patterns, such as the Chesapeake Bay, Long Island Sound, or 
the Gulf of Mexico. In such areas, the ``overproduced'' algae tends to 
sink to the bottom and decay, using all or most of the available oxygen 
and thereby reducing or eliminating populations of bottom-feeder fish 
and shellfish, distorting the normal population balance between 
different aquatic organisms, and in extreme cases causing dramatic fish 
kills.
    Collectively, these effects are referred to as eutrophication, 
which the National Research Council recently identified as the most 
serious pollution problem facing the estuarine waters of the United 
States (NRC, 1993). Nitrogen is the primary cause of eutrophication in 
most coastal waters and estuaries.\43\ On the New England coast, for 
example, the number of red and brown tides and shellfish problems from 
nuisance and toxic plankton blooms have increased over the past two 
decades, a development thought to be linked to increased nitrogen 
loadings in coastal waters. Airborne NOX contributes from 12 
to 44 percent of the total nitrogen loadings to United States coastal 
water bodies. For example, approximately one-quarter of the nitrogen in 
the Chesapeake Bay comes from atmospheric deposition.
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    \43\ Much of this information was taken from the following EPA 
document: Deposition of Air Pollutants to the Great Waters-Second 
Report to Congress, Office of Air Quality Planning and Standards, 
June 1997, EPA-453/R-97-011. A Third Report to Congress on 
Deposition of Air Pollutants to the Great Waters will be forthcoming 
the the next month. We will update this section with information 
from the Third Report in the final rule.
---------------------------------------------------------------------------

    Excessive fertilization with nitrogen-containing compounds can also 
affect terrestrial ecosystems.\44\ Research suggests that nitrogen 
fertilization can alter growth patterns and change the balance of 
species in an ecosystem. In extreme cases, this process can result in 
nitrogen saturation when additions of nitrogen to soil over time exceed 
the capacity of the plants and microorganisms to utilize and retain the 
nitrogen. This phenomenon has already occurred in some areas of the 
U.S.
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    \44\ Terrestrial nitrogen deposition can act as a fertilizer. In 
some agricultural areas, this effect can be beneficial.
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    Deposition of nitrogen from heavy-duty vehicles contributes to 
these problems. In the Chesapeake Bay region, modeling shows that 
mobile source deposition occurs in relatively close proximity to 
highways, such as the I-95 corridor which covers part of the Bay 
surface. The proposed new standards for heavy-duty vehicles would 
reduce total NOX emissions by 2.8 million tons in 2030. The 
NOX reductions should reduce the eutrophication problems 
associated with atmospheric deposition of nitrogen into watersheds and 
onto bodies of water, particularly in aquatic systems where atmospheric 
deposition of nitrogen represents a significant portion of total 
nitrogen loadings.

c. POM Deposition

    EPA's Great Waters Program has identified 15 pollutants whose 
deposition to water bodies has contributed to the overall contamination 
loadings to the these Great Waters.\45\ One of these 15 pollutants, a 
group known as polycyclic organic matter (POM), are compounds that are 
mainly adhered to the particles emitted by mobile sources and later 
fall to earth in the form of precipitation or dry deposition of 
particles. The mobile source contribution of the 7 most toxic POM is at 
least 62 tons/year and represents only those POM that adhere to mobile 
source particulate emissions.\46\ The majority of these emissions are 
produced by diesel engines.
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    \45\ Much of this information was taken from the following EPA 
document: Deposition of Air Pollutants to the Great Waters-Second 
Report to Congress, Office of Air Quality Planning and Standards, 
June 1997, EPA-453/R-97-011. You are referred to that document for a 
more detailed discussion. A Third Report to Congress on Deposition 
of Air Pollutants to the Great Waters will be forthcoming the the 
next month. We will update this section with information from the 
Third Report in the final rule.
    \46\ The 1996 National Toxics Inventory, Office of Air Quality 
Planning and Standards, October 1999.
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    POM is generally defined as a large class of chemicals consisting 
of organic compounds having multiple benzene rings and a boiling point 
greater than 100 deg.C. Polycyclic aromatic hydrocarbons are a chemical 
class that is a subset of POM. POM are naturally occurring substances 
that are byproducts of the incomplete combustion of fossil fuels and 
plant and animal biomass (e.g., forest fires). Also, they occur as 
byproducts from steel and

[[Page 35453]]

coke productions and waste incineration.
    Evidence for potential human health effects associated with POM 
comes from studies in animals (fish, amphibians, rats) and in human 
cells culture assays. Reproductive, developmental, immunological, and 
endocrine (hormone) effects have been documented in these systems. Many 
of the compounds included in the class of compounds known as POM are 
classified by EPA as probable human carcinogens based on animal data.
    The particulate reductions from today's proposal would help reduce 
not only the particulate emissions from highway diesel engines but also 
the deposition of the POM adhering to the particles, thereby helping to 
reduce health effects of POM in lakes and streams, accelerate the 
recovery of affected lakes and streams, and revive the ecosystems 
adversely affected.

C. Contribution from Heavy-Duty Vehicles

    Nationwide, heavy-duty vehicles contribute about 15 percent of the 
total NOX inventory, and 29 percent of the mobile source 
inventory. Heavy-duty NOX emissions also contribute to fine 
particulate concentrations in ambient air due to the transformation in 
the atmosphere to nitrates. The NOX reductions resulting 
from today's proposed standards would therefore have a considerable 
impact on the national NOX inventory. Light and heavy-duty 
mobile sources account for 24 percent of the PM10 (excluding 
the contribution of miscellaneous and natural sources), and heavy-duty 
vehicles account for 14 percent of the mobile source portion of 
national PM10 emissions. The heavy-duty portion of the 
inventory is often greater in the cities, and the reductions proposed 
in this rulemaking would have a relatively greater benefit in those 
areas.
1. NOX Emissions
    Heavy-duty vehicles are important contributors to the national 
inventories of NOX emissions, and they contribute moderately 
to national VOC pollution. The Draft RIA for this proposal describes in 
detail recent emission inventory modeling completed by EPA. HDVs are 
expected to contribute approximately 15 percent of annual 
NOX emissions in 2007 (Table II.C-1).

    Table II.C-1.--2007 Heavy-Duty Vehicle Contribution to Urban NOX
                               Inventories
                          [Amounts in percent]
------------------------------------------------------------------------
                                                                 Portion
                                                        Portion     of
             Metropolitan statistical area                 of     mobile
                                                         total    source
                                                          NOX      NOX
------------------------------------------------------------------------
National..............................................      15%      29%
Albuquerque...........................................      25%      38%
Atlanta...............................................      23%      36%
San Francisco.........................................      23%      29%
Spokane...............................................      23%      29%
Seattle...............................................      22%      26%
Dallas................................................      22%      28%
Charlotte.............................................      21%      34%
Washington............................................      20%      37%
Los Angeles...........................................      20%      26%
San Antonio...........................................      20%      31%
New York..............................................      19%      30%
Miami.................................................      18%      23%
Phoenix...............................................      18%      28%
Philadelphia..........................................      18%      30%
Cleveland.............................................      17%      30%
St. Louis.............................................      16%      34%
------------------------------------------------------------------------

    The contribution of heavy-duty vehicles to NOX 
inventories in many MSAs is significantly greater than that reflected 
in the national average. For example, HDV contributions to 
NOX in Albuquerque, Atlanta, San Francisco, Spokane, 
Seattle, and Dallas are projected to be 22 to 25 percent of the MSA-
specific inventories in 2007, which is significantly higher than the 
national average. These data are based largely on our Tier 2 
inventories and have been adjusted to reflect new information regarding 
the VMT split between light-duty and heavy-duty vehicles as discussed 
in the draft RIA. These data will be further updated for the final rule 
to reflect more recent modeling.
2. PM Emissions
    Nationally, we estimate that primary emissions of PM10 
to be about 33.2 million tons/year in 2007. Fugitive dust, other 
miscellaneous sources and crustal material (wind erosion) comprise 
approximately 90 percent of the 2007 PM10 inventory. 
However, there is evidence from ambient studies that emissions of these 
materials may be overestimated and/or that once emitted they have less 
of an influence on monitored PM concentration than this inventory share 
would suggest. Mobile sources account for 24 percent of the 
PM10 inventory (excluding the contribution of miscellaneous 
and natural sources) and highway heavy-duty engines, the subject of 
today's action, account for 14 percent of the mobile source portion of 
national PM10 emissions.
    The contribution of heavy-duty vehicle emissions to total PM 
emissions in some metropolitan areas is substantially higher than the 
national average. This is not surprising, given the high density of 
these engines operating in these areas. For example, in Albuquerque, 
Pittsburgh, St. Louis, and Atlanta, the estimated 2007 highway heavy-
duty vehicle contribution to mobile source PM10 ranges from 
16 to 21 percent, and the national percent contribution to mobile 
sources for 2007 is projected to be about 14 percent. As illustrated in 
Table II.C-2 , heavy-duty vehicles operated Washington, Fairbanks, 
Billings, and Detroit also account for a slightly higher portion of the 
mobile source PM inventory than the national average. These data are 
based largely on our Tier 2 inventories and have been adjusted to 
reflect new information regarding the VMT split between light-duty and 
heavy-duty vehicles as discussed in the draft RIA. These data will be 
further updated for the final rule to reflect more recent modeling. 
Importantly, these estimates do not include the contribution from 
secondary PM which is an important component of diesel PM.

   Table II.C-2.--2007 Heavy-Duty Vehicle Contribution to Urban Mobile
                          Source PM Inventories
------------------------------------------------------------------------
                                                                PM10
                                                            contribution
               Metropolitan statistical area                  from HDVs
                                                            (in percent)
------------------------------------------------------------------------
National..................................................           14
Albuquerque...............................................           21
Pittsburgh................................................           18
St. Louis.................................................           17
Atlanta...................................................           16
Washington................................................           15
Fairbanks.................................................           15
Billings..................................................           15
Detroit...................................................           15
------------------------------------------------------------------------

    In addition to the national inventories, investigations have been 
conducted in certain urban areas which provide information about the 
contribution of HD diesel vehicles and engines to ambient 
PM2.5 concentrations. This is particularly relevant as 
diesel PM, for the most part, is composed of fine particles under 2.5 
microns. Information about ambient concentrations of diesel PM and the 
relative contribution of diesel engines to ambient PM levels is 
available from source-receptor models, dispersion models, and elemental 
carbon measurements. The most commonly used receptor model for 
quantifying concentrations of diesel PM at a

[[Page 35454]]

receptor site is the chemical mass balance model (CMB). Input to the 
CMB model includes PM measurements made at the receptor site as well as 
measurements made of each of the source types suspected to impact the 
site. Because of problems involving the elemental similarity between 
diesel and gasoline emission profiles and their co-emission in time and 
space, it is necessary to carefully quantify chemical molecular species 
that provide markers for separation of these sources. Recent advances 
in chemical analytical techniques have facilitated the development of 
sophisticated molecular source profiles, including detailed speciation 
of organic compounds, which allow the apportionment of PM to gasoline 
and diesel sources with increased certainty. Older studies that made 
use of only elemental source profiles have been published and are 
summarized here, but are subject to more uncertainty. It should be 
noted that since receptor modeling is based on the application of 
source profiles to ambient measurements, this estimate of diesel PM 
concentrations does not distinguish between on-road and non-road 
sources for diesel PM. In addition, this model accounts for primary 
emissions of diesel PM only; the contribution of secondary aerosols is 
not included.
    Dispersion models estimate ambient levels of PM at a receptor site 
on the basis of emission factors for the relevant sources and the 
investigator's ability to model the advection, mixing, deposition, and 
chemical transformation of compounds from the source to the receptor 
site. Dispersion models can provide the ability to distinguish on-
highway from off-highway diesel source contributions and can be used to 
estimate the concentrations of secondary aerosols from diesel exhaust. 
Dispersion modeling is being conducted by EPA to estimate county-
specific concentrations of, and exposures to, several toxic species, 
including diesel PM. Results from this model are expected in 2000.
    Elemental carbon is a major component of diesel exhaust, 
contributing approximately 60-80 percent of diesel particulate mass, 
depending on engine technology, fuel type, duty cycle, lube oil 
consumption, and state of engine maintenance.\47\ \48\ \49\ \50\ In 
most ambient environments, diesel PM is one of the major contributors 
to elemental carbon, with other potential sources including gasoline 
exhaust; combustion of coal, oil, or wood; charbroiling; cigarette 
smoke; and road dust. Because of the large portion of elemental carbon 
in diesel PM, and the fact that diesel exhaust is one of the major 
contributors to elemental carbon in most ambient environments, diesel 
PM concentrations can be bounded using elemental carbon measurements. 
One approach for calculating diesel PM concentrations from elemental 
carbon measurements is presented in the draft Health Assessment 
Document for Diesel Emissions. The surrogate diesel PM calculation is a 
useful approach for estimating diesel PM in the absence of a more 
sophisticated modeling analysis for locations where elemental carbon 
concentrations are available.
---------------------------------------------------------------------------

    \47\ Zaebst, D.D., Clapp D.E., Blake L.M., Marlow D.A., 
Steenland K., Hornung R.W., Scheutzle D. and J. Butler (1991) 
Quantitative Determination of Trucking Industry Workers Exposures to 
Diesel Exhaust Particles. Am. Ind. Hyg. Assoc. J., 52:529-541.
    \48\ Graboski, M. S., McCormick, R.L., Yanowitz, J., and L.B.A. 
Ryan (1998) Heavy-Duty Diesel Testing for the Northern Front Range 
Air Quality Study. Colorado Institute for Fuels and Engine Research.
    \49\ Warner-Selph, M. A., Dietzmann, H.E. (1984) 
Characterization of Heavy-Duty Motor Vehicle Emissions Under 
Transient Driving Conditions. Southwest Research Institute. EPA-600/
3-84-104.
    \50\ Pierson, W.R., Brachazek, W. W. (1983) Particulate Matter 
Associated with Vehicles on the Road. Aerosol Sci. & Tech. 2:1-40.
---------------------------------------------------------------------------

    Ambient concentrations of diesel PM reported for the period before 
1990 when no nationwide PM controls were in place for HDVs suggest that 
annually averaged diesel PM levels in urban and suburban environments 
ranged from approximately 1.9 to 11.6 micrograms/m3 (Table 
II.C-3a and Table II.C-3b). On individual days, diesel PM 
concentrations as high as 22 micrograms/m3 were reported. 
Studies reporting annual average diesel PM concentrations in urban and 
suburban areas after 1990 indicate that diesel PM concentrations range 
from approximately 0.5 to 3.6 micrograms/m3, with studies 
over short periods amidst dense bus traffic averaging 29.2 micrograms/
m3 and ranging up to 46.7 micrograms/m3 (Table 
II.C-3a and Table II.C-3b). Dispersion modeling conducted in Southern 
California reported that the highway contribution to the reported 
diesel PM levels ranged from 63-89 percent of the total diesel PM 
(Table II.C-3b). In the two dispersion model studies reporting diesel 
PM in Southern California in August 1987 and September 1996, secondary 
formation of diesel PM accounted for 27 percent to 67 percent of the 
total diesel PM (Table II.C-3b). Using elemental carbon as a surrogate 
for diesel PM suggests that diesel PM concentrations measured in some 
urban and rural areas in the 1990s range from approximately 0.4 to 4.5 
micrograms/m3 in urban environments and 0.2 to 1.3 
micrograms/m3 in rural environments (Table II.C-3c).

 Table II.C-3a.--Ambient Diesel PM Concentrations and Contribution to Total Ambient PM10 and PM2.5 From Chemical
                                              Mass Balance Studies
----------------------------------------------------------------------------------------------------------------
                                                                                   Diesel PM2.5   Diesel PM % of
                  Location                             Year of sampling            g/m3     total PM
----------------------------------------------------------------------------------------------------------------
West LA, CA................................  1982, annual.......................             4.4              13
Pasadena, CA...............................  1982, annual.......................             5.3              19
Rubidoux, CA...............................  1982, annual.......................             5.4              13
Downtown LA, CA a..........................  1982, annual.......................            11.6              36
Phoenix area, AZ b.........................  1989-90, Winter....................          * 4-22              50
Phoenix, AZ c..............................  1994-95, Winter....................           0-5.3            0-27
California, 15 Air Basins d................  1988-92, annual....................       * 0.2-3.6        
Manhattan, NY e............................  1993, Spring, 3 d..................     * 13.2-46.7           31-68
Welby and Brighton, CO f...................  1996-97, Winter, 60 d..............           0-7.3           0-26
----------------------------------------------------------------------------------------------------------------
* PM10. The reader should note that 80-95% of diesel PM is PM2.5.
 Not Available.
a Schauer, J.J., Rogge, W.F., Hildemann, L.M., Mazureik, M.A., Cass, G.R., and B.R.T. Simoneit (1996) Source
  Apportionment of Airborne particulate Matter Using Organic Compounds as Tracers. Atmos. Environ. 30(22):3837-
  3855.

[[Page 35455]]

 
b Chow, J.C., Watson, J.G., Richards, L.W., Haase, D.L., McDade, C., Dietrich, D.L., Moon, D., and C. Sloane
  (1991) The 1989-1990 Phoenix PM10 Study. Volume II: Source Apportionment. Final Report. DRI Document No.
  8931.6F1, prepared for Arizona Department of Environmental Air Quality, Phoenix, AZ, by Desert Research
  Institute, Reno, NV.
c Maricopa Association of Governments. The 1999 Brown Cloud Project for the Maricopa Association of Governments
  Area, Revised Draft Report, November 1999.
d California Environmental Protection Agency (1998) Report to the Air Resources Board on the Proposed
  Identification of Diesel Exhaust as a Toxic Air Contaminant. Appendix III, Part A: Exposure Assessment, April
  1998.
e Wittorff, D.N., Gertler, A.W., Chow, J.C., Barnard, W.R. Jongedyk, H.A. The Impact of Diesel Particulate
  Emissions on Ambient Particulate Loadings. Air & Waste Management Association 87th Annual Meeting, Cincinnati,
  OH, June 19-24, 1994.
f Fujita, E., Watson, J.G., Chow, J.C., Robinson, N.F., Richards, L.W., Kumar, N. (1998) The Northern Front Rage
  Air Quality Study Final Report Volume C: Source Apportionment and Simulation Methods and Evaluation. http://
nfraqs.cira.colostate.edu/


 Table II.C-3b.--Ambient Diesel PM Concentrations and Contribution to Total Ambient PM2.5 From Dispersion
                                                Modeling Studies
----------------------------------------------------------------------------------------------------------------
                                                                                   Diesel PM2.5   Diesel PM % of
                  Location                             Year of sampling            /m3      total PM
----------------------------------------------------------------------------------------------------------------
Azusa, CA..................................  1982, annual.......................          ** 1.4               5
Pasadena, CA...............................  1982, annual.......................          ** 2.0               7
Anaheim, CA................................  1982, annual.......................          ** 2.7              12
Long Beach, CA.............................  1982, annual.......................          ** 3.5              13
Downtown LA, CA............................  1982, annual.......................          ** 3.5              11
Lennox, CA.................................  1982, annual.......................          ** 3.8              13
West LA, CA a..............................  1982, annual.......................          ** 3.8              16
Claremont, CA b............................  18-19 Aug 1987.....................             2.4               8
Long Beach, CA.............................  24 Sept 1996.......................       +1.9(2.6)               8
Fullerton, CA..............................  24 Sept 1996.......................      + 2.4(3.9)               9
Riverside, CA c............................  25 Sept 1996.......................     + 4.4(13.3)             12
----------------------------------------------------------------------------------------------------------------
+ Value in parenthesis includes secondary diesel PM (nitrate, ammonium, sulfate and hydrocarbons) due to
  atmospheric reactions of primary diesel emissions of NOX, SO2 and hydrocarbons.
** On-road diesel vehicles only; All other values are for on-road plus nonroad diesel emissions.
a Cass, G.R. and H.A. Gray (1995) Regional Emissions and Atmospheric Concentrations of Diesel Engine Particulate
  Matter: Los Angeles as a Case Study. In: Diesel Exhaust: A Critical Analysis of Emissions, Exposure, and
  Health Effects. A Special Report of the Institute's Diesel Working Group. Health Effects Institute, Cambridge,
  MA, pp. 125-137.
b Kleeman, M.J., Cass, G.R. (1999a) Identifying the Effect of Individual Emissions Sources on Particulate Air
  Quality Within a Photochemical Aerosol Processes Trajectory Model. Atmos. Eviron. 33:4597-4613.
c Kleeman, M.J., Hughes, L.S., Allen, J.O., Cass, G.R. (1999b) Source Contributions to the Size and Composition
  Distribution of Atmospheric Particles: Southern California in September 1996. Environ. Sci. Technol. 33:4331-
  4351.


 Table II.C-3c.--Ambient Diesel PM Concentrations and Contribution to Total Ambient PM2.5 From Elemental Carbon
                                                  Measurements
----------------------------------------------------------------------------------------------------------------
                                                                                   Diesel PM2.5
                  Location                             Year of sampling             g/   Diesel PM % of
                                                                                       m\3\          total PM
----------------------------------------------------------------------------------------------------------------
Boston, MA.................................  1995, annual.......................         0.7-1.7            3-15
Rochester, NY..............................  1995, annual.......................         0.4-0.8             2-9
Quabbin, MA................................  1995, annual.......................         0.2-0.6             1-6
Reading, MA................................  1995, annual.......................         0.4-1.3             2-7
Brockport, NY a............................  1995, annual.......................         0.2-0.5             1-5
Washington, DC b...........................  1992-1995, annual..................         1.3-1.8            6-10
South Coast Air Basin c....................  1995-1996, annual..................         2.4-4.5        
----------------------------------------------------------------------------------------------------------------
 The Multiple Air Toxics Exposure Study in the South Coast Air Basin reported average annual values for 8 sites
  in the South Coast Basin.
 Not Available.
a Salmon, L.G., Cass, G.R., Pedersen, D.U., Durant, J.L., Gibb, R., Lunts, A., and M. Utell (1997) Determination
  of fine particle concentration and chemical composition in the northeastern United States, 1995. Progress
  Report to Northeast States for Coordinated Air Use Management (NESCAUM), September 1999.
b Sisler, J.F. (1996) Spatial and Seasonal Patterns and Long Term Variability of the Composition of the Haze in
  the United States: An Analysis of Data from the IMPROVE Network. Cooperative Institute for Research in the
  Atmosphere. Colorado State University. ISSN: 0737-5352-32.
c South Coast Air Quality Management District (2000) Multiple Air Toxics Exposure Study in the South Coast Air
  Basin (MATES-II), Final Report and Appendices, March 2000.

    The city-specific emission inventory analysis and independent 
investigations of ambient PM2.5 summarized here indicate 
that the contribution of diesel engines to PM inventories in several 
urban areas around the U.S. is much higher than indicated by the 
national PM emission inventories only. One possible explanation for 
this is the concentrated use of diesel engines in certain local or 
regional areas which is not well represented by the national, yearly 
average presented in national PM emission inventories. Another reason 
may be underestimation of the in-use diesel PM emission rates. Our 
current modeling incorporates deterioration only as would be 
experienced in properly maintained, untampered vehicles. We are 
currently in the process of reassessing the rate of in-use 
deterioration of diesel engines and vehicles which could greatly 
increase the contribution of HDVs to diesel PM.
    Moreover, heavy-duty vehicles will have a more important 
contributing role in ambient PM2.5 concentrations than in 
ambient PM10 concentrations. In addition, the absolute 
contribution from heavy-duty vehicles is larger in relationship to the 
numerically lower PM2.5 standard, making them more

[[Page 35456]]

important to attainment and maintenance.
3. Environmental Justice
    Environmental justice is a priority for EPA. The Federal government 
documented its concern over this issue through issuing Executive Order 
12898, Federal Actions To Address Environmental Justice in Minority 
Populations and Low-Income Populations (February 11, 1994). This Order 
requires that federal agencies make achieving environmental justice 
part of their mission. Similarly, the EPA created an Office of 
Environmental Justice (originally the Office of Environmental Equity) 
in 1992, commissioned a task force to address environmental justice 
issues, oversees a Federal Advisory Committee addressing environmental 
justice issues (the National Environmental Justice Advisory Council), 
and has developed an implementation strategy as required under 
Executive Order 12898.
    Environmental justice is a movement promoting the fair treatment of 
people of all races, income, and culture with respect to the 
development, implementation, and enforcement of environmental laws, 
regulations, and policies. Fair treatment implies that no person or 
group of people should shoulder a disproportionate share of any 
negative environmental impacts resulting from the execution of this 
country's domestic and foreign policy programs.
    For the last several years, environmental organizations and 
community-based citizens groups have been working together to phase out 
diesel buses in urban areas. For example, the Natural Resources Defense 
Council initiated a ``Dump Dirty Diesel'' campaign in the mid-1990s to 
press for the phase out of diesel buses in New York City. Other 
environmental organizations operating in major cities such as Boston, 
Newark, and Los Angeles have joined this campaign. The Coalition for 
Clean Air worked with NRDC and other experts to perform exposure 
monitoring in communities located near distribution centers where 
diesel truck traffic is heavy. These two organizations concluded that 
facilities with heavy truck traffic are exposing local communities to 
diesel exhaust concentrations far above the average levels in outdoor 
air. The report states: ``These affected communities, and the workers 
at these distribution facilities with heavy diesel truck traffic, are 
bearing a disproportionate burden of the health \51\-\62\ 
risks.'' \63\ Other diesel ``hot spots'' identified by the groups are 
bus terminals, truck and bus maintenance facilities, retail 
distribution centers, and busy streets and highways.
---------------------------------------------------------------------------

    \51\-\62\ [Reserved]
    \63\ Exhausted by Diesel: How America's Dependence on Diesel 
Engines Threatens Our Health, Natural Resources Defense Council, 
Coalition for Clean Air, May 1998.
---------------------------------------------------------------------------

    Although the new standards proposed in this rulemaking would not 
reroute heavy-duty truck traffic or relocate bus terminals, they would 
be expected to improve air quality across the country and would provide 
increased protection to the public against a wide range of health 
effects, including chronic bronchitis, respiratory illnesses, and 
aggravation of asthma symptoms. These air quality and public health 
benefits could be expected to mitigate some of the environmental 
justice concerns related to heavy-duty vehicles since the proposal 
would provide relatively larger benefits to heavily impacted areas.

D. Anticipated Emissions Benefits

    This subsection presents the emission benefits we anticipate from 
heavy-duty vehicles as a result of our proposed NOX, PM, and 
NMHC emission standards for heavy-duty engines. The graphs and tables 
that follow illustrate the Agency's projection of future emissions from 
heavy-duty vehicles for each pollutant. The baseline case represents 
future emissions from heavy-duty vehicles at present standards 
(including the MY2004 standards). The controlled case quantifies the 
future emissions of heavy-duty vehicles if the new standards proposed 
in this rulemaking are finalized and implemented.
1. NOX Reductions
    The Agency expects substantial NOX reductions on both a 
percentage and a tonnage basis from this proposal. As illustrated in 
the following graph, the air quality benefit expected from this 
proposal is a reduction in NOX emissions from HDVs of 2.0 
million tons in 2020.\64\ The Draft RIA provides additional projections 
between 2007 and 2030. As stated previously, HDVs contribute about 15 
percent to the national NOX inventory for all sources. The 
NOX standards proposed in this rule would have a substantial 
impact on the total NOX inventory so that in 2030, HDVs 
under today's proposed standards would account for only 3 percent of 
the national NOX inventory. Figure II.D-1 shows our national 
projections of total NOX emissions with and without the 
proposed engine controls. This includes both exhaust and crankcase 
emissions. The proposed standards should result in about a 90 percent 
reduction in NOX from new engines.\65\
---------------------------------------------------------------------------

    \64\ The baseline used for this calculation is the 2004 HDV 
standards (64 FR 58472). These reductions are in addition to the 
NOX emissions reductions projected to result from the 
2004 HDV standards.
    \65\ We include in the NOX projections excess 
emissions, developed by the EPA's Office of Enforcement and 
Compliance, that were emitted from many model year 1988-98 diesel 
engines. This is described in more detail in Chapter 2 of the draft 
RIA.

BILLING CODE 6560-50-P

[[Page 35457]]

[GRAPHIC] [TIFF OMITTED] TP02JN00.000

2. PM Reductions
    As stated previously, HDVs contribute about 14 percent to the 
national PM10 inventory for mobile sources. The 90 percent 
reduction in the PM standard for HDVs proposed in this rule would have 
a substantial impact on the mobile source PM inventory, so that in 2030 
HDVs under today's proposed standards would account for only 3 percent 
of the national mobile source PM inventory.
    The majority of the projected PM reductions are directly a result 
of the proposed exhaust PM standard. However, a modest amount of PM 
reductions would come from reducing sulfur in the fuel. For the 
existing fleet of heavy-duty vehicles, a small fraction of the sulfur 
in diesel fuel is emitted directly into the atmosphere as direct 
sulfate, and a portion of the remaining fuel sulfur is transformed in 
the atmosphere into sulfate particles, referred to as indirect sulfate. 
Reducing sulfur in the fuel decreases the amount of direct sulfate PM 
emitted from heavy-duty diesel engines and the amount of heavy-duty 
diesel engine SOX emissions that are transformed into 
indirect sulfate PM in the atmosphere.\66\ For engines meeting the 
proposed standards, we consider low sulfur fuel to be necessary to 
enable the PM control technology. In other words, we do not claim an 
additional benefit beyond the proposed standard for reductions in 
direct sulfate PM. However, once the proposed low sulfur fuel 
requirements go into effect, pre-2007 model year engines would also be 
using low sulfur fuel. Because these engines would be certified with 
high sulfur fuel, they would achieve reductions in PM beyond their 
certification levels.
---------------------------------------------------------------------------

    \66\ Sulfate forms a significant portion of total fine 
particulate matter in the Northeast. Chemical speciation data in the 
Northeast collected in 1995 shows that the sulfate fraction of fine 
particulate matter ranges from 20 and 27 percent of the total fine 
particle mass. Determination of Fine Particle and Coarse Particle 
Concentrations and Chemical Composition in the Northeastern United 
States, 1995, NESCAUM, prepared by Cass, et al., September 1999.
---------------------------------------------------------------------------

    Figure II.D-2 shows our national projections of total HDV PM 
emissions with and without the proposed engine controls. This figure 
includes crankcase emissions and the direct sulfate PM benefits due to 
the use of low sulfur fuel by the existing fleet. These direct sulfate 
PM benefits from the existing fleet are also graphed separately. The 
proposed standards should result in about a 90 percent reduction in 
total PM from new engines. The proposed low sulfur fuel should result 
in about a 95 percent reduction in direct sulfate PM from pre-2007 
engines. Due to complexities of the conversion and removal processes of 
sulfur dioxide, we do not attempt to quantify the indirect sulfate 
reductions that would be derived from this rulemaking. Nevertheless, 
the Agency believes that these indirect sulfate PM reductions are 
likely to contribute significant additional benefits to public health 
and welfare. The air quality benefit of the new PM standards and low 
sulfur diesel fuel are presented in Figure II.D-2, indicating a 83,000 
ton direct PM reduction in 2020.

[[Page 35458]]

[GRAPHIC] [TIFF OMITTED] TP02JN00.001

3. NMHC Reductions
    The standards described in section III are designed to be feasible 
for both gasoline and diesel heavy-duty vehicles. The NMHC standards 
are expected to be more of a challenge for the gasoline vehicles than 
for the diesel vehicles, however. (The converse is true for the PM 
standards.) Based on our analysis of the aftertreatment technology 
described in section III, diesel engines meeting the proposed PM 
standard are expected to have NMHC emissions levels well below the 
standard in use. Furthermore, although the proposed standards give 
manufacturers the same phase-in for NMHC as for NOX, we 
model the NMHC reductions for diesel vehicles to be fully in place in 
2007. We believe the use of aftertreatment for PM control would cause 
the NMHC levels to be below the proposed standards as soon as the PM 
standard goes into effect in 2007. We request comment on this 
assumption.
    HDVs account for about 3 percent of national VOC and 8 percent from 
mobile sources in 2007. Figure II.D-3 shows our national projections of 
total NMHC emissions with and without the proposed engine controls. 
This includes both exhaust emissions and evaporative emissions. As 
presented in Figure II.D-3, the Agency projects a reduction of 230,000 
tons of NMHC in 2020 due to the proposed standards.

[[Page 35459]]

[GRAPHIC] [TIFF OMITTED] TP02JN00.002

 BILLING CODE 6560-50-C
    4. Additional Emissions Benefits
    This subsection looks at tons/year emission inventories of CO, 
SOX, and air toxics from HDEs. Although we are not including 
stringent standards for these pollutants in our proposed standards, we 
believe the proposed standards would result in reductions in CO, 
SOX, and air toxics. Here, we present our anticipated 
benefits.

a. CO Reductions

    In 2007, HDVs are projected to contribute to approximately 5 
percent of national CO and 9 percent of CO from mobile sources. 
Although it does not propose new CO emission standards, today's 
proposal would nevertheless be expected to result in a considerable 
reduction in CO emissions from heavy-duty vehicles. CO emissions from 
heavy-duty diesel vehicles, although already very low, would likely be 
reduced by an additional 90 percent due to the presence of 
aftertreatment devices. CO emissions from heavy-duty gasoline vehicles 
would also likely decline as the NMHC emissions are decreased. Table 
II.D-1 presents the projected reductions in CO emissions from HDVs.

                Table II.D-1.--Estimated Reductions in CO
------------------------------------------------------------------------
                                             CO benefit (thousand short
               Calendar year                            tons)
------------------------------------------------------------------------
2007......................................  71
2010......................................  405
2015......................................  911
2020......................................  1,250
2030......................................  1,640
------------------------------------------------------------------------

b. SOX Reductions

    HDVs are projected to emit approximately 0.5 percent of national 
SOX and 7 percent of mobile source SOX in 2007. 
We are proposing significant reductions in diesel fuel sulfur to enable 
certain emission control devices to function properly. We expect 
SOX emissions to decline as a direct benefit of low sulfur 
diesel fuel. The majority of these benefits would be from heavy-duty 
highway diesel vehicles; however, some benefits would also come from 
highway fuel burned in other applications. As discussed in greater 
detail in the section on PM reductions, the amount of sulfate particles 
(direct and indirect) formed as a result of diesel exhaust emissions 
would decline for all HD diesel engines operated on low sulfur diesel 
fuel, including the current on-highway HD diesel fleet, and those non-
road HD diesel engines that may operate on low sulfur diesel fuel in 
the future. Table II.D-2 presents our estimates of SOX 
reductions resulting from the proposed low sulfur fuel.

    Table II.D-2.--Estimated Reductions in SOX Due to Low Sulfur Fuel
------------------------------------------------------------------------
                                                                  SOX
                                                                benefit
                        Calendar year                          (thousand
                                                                 short
                                                                 tons)
------------------------------------------------------------------------
2007........................................................        101
2010........................................................        106
2015........................................................        115
2020........................................................        124
2030........................................................        139
------------------------------------------------------------------------

c. Air Toxics Reductions

    This proposal establishes new hydrocarbon and formaldehyde 
standards for heavy-duty vehicles. Hydrocarbons are a broad class of 
chemical compounds containing carbon and hydrogen. Many forms of 
hydrocarbons, such as formaldehyde, are directly hazardous and 
contribute to what are collectively called ``air toxics.'' Air toxics 
are pollutants known to cause or suspected of causing cancer or other 
serious human health effects or ecosystem damage. The Agency has 
identified as least 20 compounds emitted from on-road gasoline vehicles 
that have toxicological potential, 19 of which are emitted by diesel 
vehicles as well as an additional 20 compounds which have been listed 
as toxic air

[[Page 35460]]

contaminants by California ARB.\67\ \68\ This proposal also seeks to 
reduce emissions of diesel exhaust and diesel particulate matter (see 
section II.B for a discussion of health effects).
---------------------------------------------------------------------------

    \67\ National Air Quality and Emissions Trends Report, 1997, 
(EPA 1998), p. 74.
    \68\ California Environmental Protection Agency (1998) Report to 
the Air Resources Board on the Proposed Identification of Diesel 
Exhaust as a Toxic Air Contaminant, Appendix III, Part A: Exposure 
Assessment, April 1998.
---------------------------------------------------------------------------

    Our assessment of heavy-duty vehicle (gasoline and diesel) air 
toxics focuses on the following compounds with cancer potency estimates 
that have significant emissions from heavy-duty vehicles: benzene, 
formaldehyde, acetaldehyde, and 1,3-butadiene. These compounds are an 
important, but limited, subset of the total number of air toxics that 
exist in exhaust and evaporative emissions from heavy-duty vehicles. 
The reductions in air toxics quantified in this section represent only 
a fraction of the total number and amount of air toxics reductions 
expected from the proposed new hydrocarbon standards.
    For this analysis, we estimate that air toxic emissions are a 
constant fraction of hydrocarbon exhaust emissions. Because air toxics 
are a subset of hydrocarbons, and new emission controls are not 
expected to preferentially control one type of air toxic over another, 
the selected air toxics chosen for this analysis are expected to 
decline by the same percentage amount as hydrocarbon exhaust emissions. 
We have not performed a separate analysis for the new formaldehyde 
standard since compliance with the hydrocarbon standard should result 
in compliance with the formaldehyde standard for all petroleum-fueled 
engines. The Draft RIA provides more detail on this analysis. Table 
II.D-3 shows the estimated air toxics reductions associated with the 
anticipated reductions in hydrocarbons.

                                Table II.D-3.--Estimated Reductions in Air Toxics
                                                  [Short tons]
----------------------------------------------------------------------------------------------------------------
                                                                                                         1,3-
                       Calendar year                          Benzene    Formaldehyde  Acetaldehyde   Butadiene
----------------------------------------------------------------------------------------------------------------
2007......................................................          153           831           318           65
2010......................................................          932         4,750         1,870          382
2015......................................................        2,080        11,400         4,460          909
2020......................................................        2,780        15,800         6,120        1,250
2030......................................................        3,510        20,500         7,850        1,600
----------------------------------------------------------------------------------------------------------------

E. Clean Heavy-Duty Vehicles and Low-Sulfur Diesel Fuel Are Critically 
Important for Improving Human Health and Welfare

    Despite continuing progress in reducing emissions from heavy-duty 
engines, emissions from these engines continue to be a concern for 
human health and welfare. Ozone continues to be a significant public 
health problem, and affects not only people with impaired respiratory 
systems, such as asthmatics, but healthy children and adults as well. 
Ozone also causes damage to plants and has an adverse impact on 
agricultural yields. Diesel exhaust also continues to be a significant 
public health concern.
    Today's proposal would reduce NOX, VOC, CO, PM, and 
SOX emissions from these heavy-duty vehicles substantially. 
These reductions would help reduce ozone levels nationwide and reduce 
the frequency and magnitude of predicted exceedances of the ozone 
standard. These reductions would also help reduce PM levels, both by 
reducing direct PM emissions and by reducing emissions that give rise 
to secondary PM. The NOX and SOX reductions would 
help reduce acidification problems, and the NOX reductions 
would help reduce eutrophication problems. The PM and NOX 
standard proposed today would help improve visibility. All of these 
reductions could be expected to have a beneficial impact on human 
health and welfare by reducing exposure to ozone, PM, and other air 
toxics and thus reducing the cancer and noncancer effects associated 
with exposure to these substances.

III. Heavy-Duty Engine and Vehicle Standards

    In this section, we describe the vehicle and engine standards we 
are proposing today to respond to the serious air quality needs 
discussed in section II. Specifically, we discuss:
     The CAA and why we are proposing new heavy-duty standards.
     The technology opportunity for heavy-duty vehicles and 
engines.
     Our proposed HDV and HDE standards, and our proposed 
phase-in of those standards.
     Why we believe the stringent standards being proposed 
today are feasible in conjunction with the low-sulfur gasoline required 
under the recent Tier 2 rule and the low-sulfur diesel fuel being 
proposed today.
     The effects of diesel fuel sulfur on the ability to meet 
the proposed standards, and what happens if high sulfur diesel fuel is 
used.
     A possible reassessment of the technology and diesel fuel 
sulfur level needed for diesels to comply with today's proposed 
NOX standard.
    We welcome comment on the levels and timing of the proposed 
emissions standards, and on the technological feasibility discussion 
and supporting analyses. We also request comment on the timing of the 
proposed diesel fuel standard in conjunction with these proposed 
emission standards. We ask that commenters provide any technical 
information that supports the points made in their comments.

A. Why Are We Setting New Heavy-Duty Standards?

    We are proposing heavy-duty vehicle and engine standards and 
related provisions under section 202(a)(3) of the CAA which authorizes 
EPA to establish emission standards for new heavy-duty motor vehicles 
(see 42 U.S.C. 7521(a)(3)). Section 202(a)(3)(A) requires that such 
standards ``reflect the greatest degree of emission reduction 
achievable through the application of technology which the 
Administrator determines will be available for the model year to which 
such standards apply, giving appropriate consideration to cost, energy, 
and safety factors associated with the application of such 
technology.'' Section 202(a)(3)(B) allows EPA to take into account air 
quality information in revising such standards. Because heavy-duty 
engines contribute greatly to a number of serious air pollution 
problems, especially the health and welfare effects of ozone, PM, and 
air toxics, and because millions of Americans live in areas that exceed 
the

[[Page 35461]]

national air quality standards for ozone or PM, we believe the air 
quality need for tighter heavy-duty standards is well founded. This, 
and our belief that a significant degree of emission reduction from 
heavy-duty vehicles and engines is achievable through the application 
of new diesel emission control technology, further refinement of well 
established gasoline emission controls, and reductions of diesel fuel 
sulfur levels, leads us to believe that new emission standards are 
warranted.

B. Technology Opportunity for Heavy-Duty Vehicles and Engines

    For the past 30 or more years, emission control development for 
gasoline vehicles and engines has concentrated most aggressively on 
exhaust emission control devices. These devices currently provide as 
much as or more than 95 percent of the emission control on a gasoline 
vehicle. In contrast, the emission control development work for diesels 
has concentrated on improvements to the engine itself to limit the 
emissions leaving the combustion chamber.
    However, during the past 15 years, more development effort has been 
put into diesel exhaust emission control devices, particularly in the 
area of PM control. Those developments, and recent developments in 
diesel NOX control devices, make the advent of diesel 
exhaust emission controls feasible. Through use of these devices, we 
believe emission control similar to that attained by gasoline 
applications will be possible with diesel applications. However, 
without low-sulfur diesel fuel, these technologies cannot be 
implemented on heavy-duty or light-duty diesel applications.
    Several exhaust emission control devices have been developed to 
control harmful diesel PM constituents--the diesel oxidation catalyst 
(DOC), and the many forms of particulate filters, or traps. DOCs have 
been shown to be durable in use, but they control only a relatively 
small fraction of the total PM and, consequently, do not address our PM 
concerns sufficiently. Uncatalyzed diesel particulate traps 
demonstrated high efficiencies many years ago, but the level of the PM 
standard was such that it could be met through less costly ``in-
cylinder'' control techniques. Catalyzed diesel particulate traps have 
the potential to provide major reductions in diesel PM emissions and 
provide the durability and dependability required for diesel 
applications. Therefore, as discussed in the feasibility portion of 
this section, at this time we believe the catalyzed PM trap will be the 
control technology of choice for future control of diesel PM emissions. 
However, as discussed in detail in the draft RIA, we believe that 
catalyzed PM traps cannot be brought to market on diesel applications 
unless low-sulfur diesel fuel is available.
    Diesel NOX control is arguably at an earlier stage of 
development than is diesel PM control. Even so, several exhaust 
emission control technologies are being developed to control 
NOX emissions, and the industry seems focused on a couple of 
these as the most promising technologies for enabling lower 
NOX emission standards. Diesel selective catalytic 
reduction, or SCR, has been developed to the point of nearing market 
introduction in Europe. SCR has significant NOX control 
potential, but it also has many roadblocks to marketability in this 
country. These roadblocks, discussed in more detail in the draft RIA, 
include infrastructure issues that we believe would prove exceedingly 
difficult and potentially costly to overcome. Because of that, we 
believe that the NOX adsorber is the best technology for 
delivering significant diesel NOX reductions while also 
providing market and operating characteristics necessary for the U.S. 
market.\69\ However, as is discussed in detail in the draft RIA, the 
NOX adsorber, like the catalyzed PM trap, cannot be brought 
to market on diesel applications unless low-sulfur diesel fuel is 
available.
---------------------------------------------------------------------------

    \69\ The NOX adsorber was originally developed for 
stationary source emission control and was subsequently developed 
for use in the lean operating environment of gasoline direct 
injection engines.
---------------------------------------------------------------------------

    Improvements have also been made to gasoline emission control 
technology during the past few years, even the past 12 months. Such 
improvements include those to catalyst designs in the form of improved 
washcoats and improved precious metal dispersion. Much effort has also 
been put into improved cold start strategies that allow for more rapid 
catalyst light-off. This can be done by retarding the spark timing to 
increase the temperature of the exhaust gases, and by using air-gap 
manifolds, exhaust pipes, and catalytic converter shells to decrease 
heat loss from the system.
    These improvements to gasoline emission control have been made in 
response to the California LEV-II standards and the federal Tier 2 
standards. Some of this development work was contributed by EPA in a 
very short timeframe and with very limited resources in support of our 
Tier 2 program.\70\ These improvements should transfer well to the 
heavy-duty gasoline segment of the fleet. With such migration of light-
duty technology to heavy-duty vehicles and engines, we believe that 
considerable improvements to heavy-duty emissions can be realized, thus 
enabling much more stringent standards.
---------------------------------------------------------------------------

    \70\ See Chapter IV.A of the final Tier 2 Regulatory Impact 
Analysis, contained in Air Docket A-97-10.
---------------------------------------------------------------------------

    The following discussion provides more detail on the technologies 
we believe are most capable of enabling very stringent heavy-duty 
emission standards. The goal of this discussion is to highlight the 
emission reduction capability of these emission control technologies 
and to highlight their critical need for diesel sulfur levels as low as 
those being proposed today. But first, we present the details of the 
emission standards being proposed today.

C. What Engine and Vehicle Standards Are We Proposing?

1. Heavy-Duty Engine Standards

a. Federal Test Procedure

    The emission standards being proposed today for heavy-duty engines 
are summarized in Table III.C-1.

          Table III.C-1.--Proposed Full Useful Life Heavy-Duty Engine Emission Standards and Phase-Ins
----------------------------------------------------------------------------------------------------------------
                                                                       Phase-in by model year  (In percent)
                                                    Standard (g/ -----------------------------------------------
                                                       bhp-hr)       2007        2008        2009        2010
----------------------------------------------------------------------------------------------------------------
Diesel........................  NOX                        0.20
                                NMHC                       0.14          25          50          75         100
                                HCHO                       0.016
Gasoline......................  NOX                        0.20
                                NMHC                       0.14                         100

[[Page 35462]]

 
                                HCHO                       0.016
Diesel & Gasoline.............  PM                         0.01                         100
----------------------------------------------------------------------------------------------------------------

    With respect to PM, this proposed new standard would represent a 90 
percent reduction for most heavy-duty diesel engines from the current 
PM standard, which was not proposed to change in model year 2004.\71\ 
The current PM standard for most heavy-duty engines, 0.1 g/bhp-hr, was 
implemented in the 1994 model year; the PM standard for urban buses 
implemented in that same year was 0.05 g/bhp-hr. The proposed PM 
standard of 0.01 g/bhp-hr is projected to require the addition of a 
highly efficient PM trap to diesel engines, including urban buses; it 
is not expected to require the addition of any new hardware for 
gasoline engines. We request comment on the feasibility and 
appropriateness of this proposed PM standard.
---------------------------------------------------------------------------

    \71\ From 64 FR 58472, October 29, 1999, ``* * * diesel fuel 
quality, and in particular, diesel fuel sulfur level, can play an 
important role in enabling certain PM and NOX control 
technologies. Some DOCs and continuously regenerable PM traps, as 
well as current generation lean NOX adsorber catalysts 
can be poisoned by high sulfur levels. Given this information, EPA 
has not included more stringent PM standards for the 2004 model year 
or later in today's proposal.''
---------------------------------------------------------------------------

    With respect to NMHC and NOX, these new standards would 
represent roughly a 90 percent reduction in diesel NOX and 
roughly a 70 percent reduction in diesel NMHC levels compared to the 
2004 heavy-duty diesel engine standard. The 2004 heavy-duty diesel 
engine standard is 2.5 g/bhp-hr NMHC+NOX, with a cap on NMHC 
of 0.5 g/bhp-hr. Like the PM standard, the proposed NOX 
standard is projected to require the addition of highly efficient 
NOX aftertreatment to diesel engines. For gasoline engines, 
the standard proposed in the 2004 heavy-duty rule is 1.0 g/bhp-hr 
NMHC+NOX. Therefore, for gasoline engines, the standards 
proposed today would represent roughly a 70 percent reduction. We 
request comment on the feasibility and appropriateness of these 
proposed NOX and NMHC standards.
    With respect to formaldehyde, a hazardous air pollutant that is 
emitted by heavy-duty engines and other mobile sources, we are 
proposing standards to prevent excessive emissions. The standards are 
comparable in stringency to the formaldehyde standards recently 
finalized in the Tier 2 rule for passenger vehicles; they are also 
consistent with the CARB LEV II formaldehyde standards. These standards 
would be especially important for methanol-fueled engines because 
formaldehyde is chemically similar to methanol and is one of the 
primary byproducts of incomplete combustion of methanol. Formaldehyde 
is also emitted by engines using petroleum fuels (i.e., gasoline or 
diesel fuel), but to a lesser degree than is typically emitted by 
methanol-fueled engines. We recognize that petroleum-fueled engines 
able to meet the proposed NMHC standards should comply with the 
formaldehyde standards with large compliance margins. Based upon the 
analysis of similar standards recently finalized for passenger 
vehicles, we believe that formaldehyde emissions from petroleum-fueled 
engines when complying with the PM, NMHC, and NOX standards 
should be as much as 90 percent below the standards.\72\ Thus, to 
reduce testing costs, we are proposing a provision that would permit 
manufacturers of petroleum-fueled engines to demonstrate compliance 
with the formaldehyde standards based on engineering analysis. This 
provision would require manufacturers to make a demonstration in their 
certification application that engines having similar size and emission 
control technology have been shown to exhibit compliance with the 
applicable formaldehyde standard for their full useful life. This 
demonstration would be similar to that recently finalized for light-
duty vehicles to demonstrate compliance with the Tier 2 formaldehyde 
standards.
---------------------------------------------------------------------------

    \72\ See the Tier 2 Response to Comments document contained in 
Air Docket A-97-10.
---------------------------------------------------------------------------

    Because the NOX exhaust emission control technology we 
expect would be required to meet the proposed NOX standard 
is at an early stage of development, we believe a phase-in of the 
NOX standard is appropriate. With a phase-in, manufacturers 
are able to introduce the new technology on a limited number of 
engines, thereby gaining valuable experience with the technology prior 
to implementing it on their entire fleet. Also, we are proposing that 
the NOX, HCHO, and NMHC standards be phased-in together for 
diesel engines. That is, engines would be expected to meet each of 
these proposed new standards, not just one or the other. We propose 
this because the standard as proposed in the 2004 heavy-duty rule would 
be a combined NMHC+NOX standard. Separating the phase-ins 
for NMHC and NOX would create a problem because it would not 
be clear to what NMHC standard an engine would certify were it to 
certify to the proposed NOX standard independent of 
certifying to the proposed NMHC standard (and vice versa for engines 
certifying to the proposed NMHC standard independent of the proposed 
NOX standard).\73\ We request comment on the phase-in for 
diesel engines of these proposed NOX, HCHO, and NMHC 
standards and the requirement that they be phased-in together. We also 
request comment on alternative phase-in schedules and percentages, such 
as a phase-in over three years (2007-2009), a phase-in over two years 
(2007-2008), and no phase-in (100% in 2007). We are not proposing a 
phase-in for gasoline engines because we want to maintain consistency 
with the proposed heavy-duty gasoline vehicle standards which are not 
phased-in; those standards are discussed below.\74\ Nonetheless, we 
request comment on possible alternative phase-ins for the proposed 
gasoline engine standards, such as a phase-in consistent with the 
proposed phase-in for diesel engine standards shown in Table III.C-

[[Page 35463]]

1, or a phase-in consistent with that used for heavy light-duty trucks 
and medium-duty passenger vehicles under the light-duty highway Tier 2 
program.
---------------------------------------------------------------------------

    \73\ Note that, despite the concurrent phase-in of 
NOX and NMHC standards for diesel engines, the NMHC 
standards should be easily met through use of a PM trap as is fully 
discussed in section III.E. Since the PM standards would be 
implemented on 100 percent of new engines in the 2007 model year, 
all new engines would have a PM trap and would, therefore, control 
NMHC emissions to levels below the proposed standards. Therefore, 
while the NMHC standard is phased-in with NOX due to the 
2004 combining of the NOX and NMHC standards, the 
proposed NMHC standards would be met by all new engines in the 2007 
model year. This is reflected in our emission inventory analysis as 
was discussed in section II.
    \74\ Please refer to section III.D.2 below for a discussion of 
implementing these proposed standards in the 2007 or 2008 model 
years, and the relationship between today's proposed implementation 
and the implementation of the proposed 2004 emission standards.
---------------------------------------------------------------------------

    The specifics of the Averaging, Banking, and Trading program 
associated with today's proposed standards are discussed in section VII 
of this preamble. The reader should refer to that section for more 
details.

b. Not-to-Exceed and Supplemental Steady-State Test

    To help ensure that heavy-duty engine emissions are controlled over 
the full range of speed and load combinations commonly experienced in 
use, we have previously proposed to apply Not-To-Exceed (NTE) limits to 
heavy-duty diesel engines (64 FR 58472, October 29, 1999). As proposed, 
the NTE approach establishes an area (the ``NTE zone'') under the 
torque curve of an engine where emissions must not exceed a specified 
value for any of the regulated pollutants.\75\ As proposed, the 
specified value under which emissions must remain is 1.25 times the FTP 
standards. The NTE standard would apply under any conditions that could 
reasonably be expected to be seen by that engine in normal vehicle 
operation and use. In addition, we have proposed that the whole range 
of real ambient conditions be included in NTE testing.
---------------------------------------------------------------------------

    \75\ Torque is a measure of rotational force. The torque curve 
for an engine is determined by an engine ``mapping'' procedure 
specified in the Code of Federal Regulations. The intent of the 
mapping procedure is to determine the maximum available torque at 
all engine speeds. The torque curve is merely a graphical 
representation of the maximum torque across all engine speeds.
---------------------------------------------------------------------------

    Similarly, to help ensure that heavy-duty engine emissions are 
controlled during steady-state type driving (such as a line-haul truck 
operating on a freeway), we have previously proposed a new supplemental 
steady-state test (64 FR 58472, October 29, 1999). The supplemental 
steady-state test consists of 13 steady-state modes, each weighted 
according to the amount of time that might be expected at each mode 
during typical real world conditions. As proposed, the supplemental 
steady-state test has emission limits of 1.0 times the FTP standards.
    Today's document proposes to apply the heavy-duty diesel NTE and 
supplemental steady-state test provisions intended to be finalized as 
part of the 2004 standards rulemaking. The October 29, 1999, proposal 
for that rule contained the description of these provisions. We expect 
that a number of modifications will be made to those provisions in the 
FRM for that rule based on feedback received during the comment period. 
While the details of the final provisions are not yet available, we 
will provide the necessary information in the docket for this rule as 
soon as it becomes available in order to allow for comment.
    We have not proposed that the NTE requirements, or the supplemental 
steady-state test, apply to heavy-duty gasoline engines. However, we 
are working with several industry members to pursue a proposal in a 
separate action with the intention of having NTE requirements in place 
for heavy-duty gasoline engines beginning in the 2004 model year.\76\ 
Today's proposal intends that those provisions, when developed, would 
apply to the gasoline engines subject to today's proposed standards as 
well. We currently have no intention of pursuing supplemental steady-
state test requirements for heavy-duty gasoline engines.
---------------------------------------------------------------------------

    \76\ Letters from Margo Oge, EPA, to Kelly Brown, Ford Motor 
Company, and Samuel. Leonard, General Motors Corp., both dated 
September 17, 1999; and letter from Samuel. Leonard, GM, and Kelly 
Brown, Ford, to Margo Oge, EPA, dated August 10,1999; all of these 
letters are available in EPA Air Docket #A-98-32.
---------------------------------------------------------------------------

    We request comment and data on the feasibility of technology 
meeting the proposed emission standards in the context of the NTE and 
supplemental steady-state tests as proposed in the 2004 heavy-duty 
rule, and the potential changes to the supplemental tests should 
changes be made from what was proposed. As stated above, should such 
changes be made, we will provide the necessary information in the 
docket for this rule as soon as it becomes available in order to allow 
for comment.

c. Crankcase Emissions Control

    Crankcase emissions are the pollutants that are emitted in the 
gases that are vented from an engine's crankcase. These gases are also 
referred to as ``blowby gases'' because they result from engine exhaust 
from the combustion chamber ``blowing by'' the piston rings into the 
crankcase. These gases are vented to prevent high pressures from 
occurring in the crankcase. Our existing emission standards prohibit 
crankcase emissions from all highway engines except turbocharged heavy-
duty diesel engines. The most common way to eliminate crankcase 
emissions has been to vent the blowby gases into the engine air intake 
system, so that the gases can be recombusted. We made the exception for 
turbocharged heavy-duty diesel engines because of concerns in the past 
about fouling that could occur by routing the diesel particulates 
(including engine oil) into the turbocharger and aftercooler. Our 
concerns are now alleviated by newly developed closed crankcase 
filtration systems, specifically designed for turbocharged heavy-duty 
diesel engines. These new systems (discussed more fully in section 
III.E and in Chapter III of the draft RIA) are already required for new 
on-highway diesel engines under the EURO III emission standards.
    We are proposing to eliminate the exception for turbocharged heavy-
duty diesel engines starting in the 2007 model year. This is an 
environmentally significant proposal since most heavy-duty diesel 
trucks use turbocharged engines, and a single engine can emit over 100 
pounds of NOx, NMHC, and PM from the crankcase over the 
lifetime of the engine. We request comment on this proposal.
2. Heavy-Duty Vehicle Standards

a. Federal Test Procedure

    The emission standards being proposed today for heavy-duty vehicles 
are summarized in Table III.C-2. We have already proposed that all 
complete heavy-duty gasoline vehicles, whether for transporting 
passengers or for work, be chassis certified (64 FR 58472, October 29, 
1999). Current federal regulations do not require that complete diesel 
vehicles over 8,500 pounds be chassis certified, instead requiring 
certification of their engines. Today's proposal does not make changes 
to those requirements.
    The Tier 2 final rule created a new vehicle category called 
``medium-duty passenger vehicles''.\77\ These vehicles, both gasoline 
and diesel, are required to meet requirements of the Tier 2 program, 
which carries with it a chassis certification requirement. As a result, 
applicable complete diesel vehicles must certify using the chassis 
certification test procedure. Today's proposed chassis standards for 
2007 and later model year heavy-duty gasoline vehicles would apply to 
the remaining (work-oriented) complete gasoline vehicles under 14,000 
pounds.
---------------------------------------------------------------------------

    \77\ Medium-duty passenger vehicles are defined as any complete 
vehicle between 8,500 and 10,000 pounds GVWR designed primarily for 
the transportation of persons. The definition specifically excludes 
any vehicle that (1) has a capacity of more than 12 persons total 
or, (2) is designed to accommodate more than 9 persons in seating 
rearward of the driver's seat or, (3) has a cargo box (e.g., pick-up 
box or bed) of six feet or more in interior length. (See the Tier 2 
final rulemaking, 65 FR 6698, February 10, 2000)

[[Page 35464]]



   Table III.C-2.--Proposed 2007+ Full Useful Life Heavy-Duty Vehicle Exhaust Emission Standards for Complete
                                               Gasoline Vehicles*
                                                  [grams/mile]
----------------------------------------------------------------------------------------------------------------
                     Weight range (GVWR)                          NOX          NMHC         HCHO          PM
----------------------------------------------------------------------------------------------------------------
8500 to 10,000 lbs..........................................          0.2        0.195        0.016         0.02
10,000 to 14,000 lbs........................................          0.4        0.230        0.021        0.02
----------------------------------------------------------------------------------------------------------------
* Does not include medium-duty passenger vehicles.

    These NOX standards represent a 78 percent reduction and 
a 60 percent reduction from the standards for 8,500-10,000 pound and 
10,000-14,000 pound vehicles, respectively, proposed in the 2004 heavy-
duty rule. The 2004 heavy-duty rule would require such vehicles to meet 
the California LEV-I NOX standards of 0.9 g/mi and 1.0 g/mi, 
respectively. The proposed NOX standards shown in Table 
III.C-2 are consistent with the CARB LEV-II NOX standard for 
low emission vehicles (LEVs). We have proposed, and CARB has put into 
place in their LEV-II program, a slightly higher NOX 
standard for 10,000 to 14,000 pound vehicles because these vehicles are 
tested at a heavier payload. The increased weight results in using more 
fuel per mile than vehicles tested at lighter payloads; therefore, they 
tend to emit slightly more grams per mile than lighter vehicles.\78\
---------------------------------------------------------------------------

    \78\ Engine standards, in contrast, are stated in terms of grams 
per unit power rather than grams per mile. Therefore, engine 
emission standards need not increase with weight because heavier 
engines do not necessarily emit more per horsepower even though they 
tend to emit more per mile.
---------------------------------------------------------------------------

    The NMHC standards represent a 30 percent reduction from the 
proposed 2004 standards for 8500-10,000 and 10,000-14,000 pound 
vehicles. The 2004 heavy-duty rule would require such vehicles to meet 
NMHC standard levels of 0.28 g/mi and 0.33 g/mi, respectively (equal to 
the California LEV-I nonmethane organic gases (NMOG) standard levels). 
The proposed NMHC standards are consistent with the CARB LEV-II NMOG 
standards for LEVs in each respective weight class. The NMHC standard 
for 10,000-14,000 pound vehicles is higher than for 8,500-10,000 pound 
vehicles for the same reason as stated above for the higher 
NOX standard for such vehicles.
    The formaldehyde standards are comparable in stringency to the 
formaldehyde standards recently finalized in the Tier 2 rule for 
passenger vehicles; they are also consistent with today's proposed 
engine standards and the CARB LEV II formaldehyde standards. 
Formaldehyde is a hazardous air pollutant that is emitted by heavy-duty 
vehicles and other mobile sources, and we are proposing these 
formaldehyde standards to prevent excessive formaldehyde emissions. 
These standards would be especially important for methanol-fueled 
vehicles because formaldehyde is chemically similar to methanol and is 
one of the primary byproducts of incomplete combustion of methanol. 
Formaldehyde is also emitted by vehicles using petroleum fuels (i.e., 
gasoline or diesel fuel), but to a lesser degree than is typically 
emitted by methanol-fueled vehicles. We recognize that petroleum-fueled 
vehicles able to meet the proposed NMHC standards should comply with 
the formaldehyde standards with large compliance margins. Based upon 
the analysis of similar standards recently finalized for passenger 
vehicles, we believe that formaldehyde emissions from petroleum-fueled 
vehicles when complying with the PM, NMHC and NOX standards 
should be as much as 90 percent below the standards.\79\ Thus, to 
reduce testing costs, we are proposing a provision that would permit 
manufacturers of petroleum-fueled vehicles to demonstrate compliance 
with the formaldehyde standards based on engineering analysis. This 
provision would require manufacturers to make a demonstration in their 
certification application that vehicles having similar size and 
emission control technology have been shown to exhibit compliance with 
the applicable formaldehyde standard for their full useful life. This 
demonstration would be similar to that recently finalized for light-
duty vehicles to demonstrate compliance with the Tier 2 formaldehyde 
standards.
---------------------------------------------------------------------------

    \79\ See the Tier 2 Response to Comments document contained in 
Air Docket A-97-10.
---------------------------------------------------------------------------

    The PM standard represents over an 80 percent reduction from the 
CARB LEV-II LEV category PM standard of 0.12 g/mi. Note that the PM 
standard shown in Table III.C-2 represents not only a stringent PM 
level, but a new standard for federal HDVs where none existed before. 
The California LEV-II program for heavy-duty vehicles, and the federal 
Tier 2 standards for over 8,500 pound vehicles designed for 
transporting passengers, both contain PM standards. The PM standard 
proposed today is consistent with the Tier 2 bin 8 level of 0.02 g/mi.
    The standards shown in Table III.C-2 are, we believe, comparable in 
stringency to the proposed diesel and gasoline engine standards shown 
in Table III.C-1. We request comment on this issue, including any 
supporting data. We also request comment on other possible vehicle 
exhaust emission standards. For example, the CARB LEV-II ULEV standards 
are identical in NOX levels, but have NMOG levels of 0.143 
and 0.167 g/mi for 8,500 to 10,000 pound and 10,000 to 14,000 pound 
vehicles, respectively. We request comment on whether these standards 
(0.143 and 0.167 g/mi NMHC for 8,500 to 10,000 pound and 10,000 to 
14,000 pound vehicles, respectively), or lower standards, may be more 
appropriate emission standards. We also request comment on whether we 
should instead include a 40 percent/60 percent split of standards at 
the LEV-II LEV and ULEV levels, respectively. To clarify, the CARB LEV-
II program requires a compliance split of vehicles certified to the LEV 
versus the ULEV levels; that split is 40 percent LEV and 60 percent 
ULEV. We request comment on whether we should employ such a split.
    We are not proposing a phase-in for the HDV standards. As proposed, 
the HDV standards would apply only to complete gasoline vehicles, 
consistent with our current regulations. We believe that emission 
control technology for gasoline engines is in an advanced enough state 
to justify a simple implementation requirement in the 2007 model year. 
However, please refer to section III.D.2, below, for a discussion of 
the appropriate implementation schedule associated with these proposed 
standards, and the relationship between today's proposed implementation 
and the implementation of the proposed 2004 emission standards. We 
believe that our proposed implementation schedule provides consistency 
with our Tier 2 standards and our expectation of probable certification 
levels for similarly sized light-duty trucks and medium-duty

[[Page 35465]]

passenger vehicles. Although these vehicles are allowed to certify at 
fairly high emission levels under the Tier 2 bin structure, we believe 
that Tier 2 gasoline applications will be designed to certify to 
standards of 0.20 g/mi NOX and 0.09 g/mi NMHC by the 2007 
model year, and possibly lower to allow for diesels certifying in 
higher emission bins within the NOX averaging scheme. This 
makes the proposed HDV standards and associated phase-in consistent 
with Tier 2. We request comment on the appropriateness of not having a 
phase-in associated with the vehicle standards. We also request comment 
on possible alternative phase-ins for the proposed gasoline vehicle 
standards, such as a phase-in consistent with the proposed phase-in for 
diesel engine standards shown in Table III.C-1, or a phase-in 
consistent with that used for heavy light-duty trucks and medium-duty 
passenger vehicles under the light-duty highway Tier 2 program.
    Consistent with current regulations, we are not proposing to allow 
complete heavy-duty diesel vehicles to certify to the heavy-duty 
vehicle standards. Instead, manufacturers would be required to certify 
the engines intended for such vehicles to the engine standards shown in 
Table III.C-1. However, we request comment on whether complete heavy-
duty diesel vehicles should be allowed, or perhaps should be required, 
to certify to the vehicle standards. Any comments on this topic should 
also address whether a phase-in, consistent with the phase-in of engine 
standards, would be appropriate.
    The specifics of the Averaging, Banking, and Trading program 
associated with today's proposed standards are discussed in section VII 
of this document. The reader should refer to that section for more 
details.
    We request comment on the feasibility and appropriateness of the 
proposed standards for heavy-duty complete vehicles shown in Table 
III.C-2.

b. Supplemental Federal Test Procedure

    We are not proposing new supplemental FTP (SFTP) standards for 
heavy-duty vehicles. The SFTP standards control off-cycle emissions in 
a manner analogous to the NTE requirements for engines. We believe that 
the SFTP standards are an important part of our light-duty program just 
as we believe the NTE requirements will be an important part of our 
heavy-duty diesel engine program. Although we are not proposing SFTP 
standards for heavy-duty vehicles, we intend to do so via a separate 
rulemaking. We request comment on such an approach, and on appropriate 
SFTP levels for heavy-duty vehicles along with supporting data.
3. Heavy-Duty Evaporative Emission Standards
    We are proposing new evaporative emission standards for heavy-duty 
vehicles and engines. The proposed standards are shown in Table III.C-
3. These standards would apply to heavy-duty gasoline-fueled vehicles 
and engines, and methanol-fueled heavy-duty vehicles and engines. 
Consistent with existing standards, only the standard for the three day 
diurnal test sequence would apply to liquid petroleum gas (LPG) fueled 
and natural gas fueled HDVs.

   Table III.C-3.--Proposed Heavy-Duty Evaporative Emission Standards*
                            [Grams per test]
------------------------------------------------------------------------
                                                            Supplemental
                                                   3 day        2 day
                    Category                     diurnal +    diurnal +
                                                  hot soak   hot soak**
------------------------------------------------------------------------
8,500-14,000 lbs...............................        1.4         1.75
>14,000 lbs....................................        1.9         2.3
------------------------------------------------------------------------
* Proposed to be implemented on the same schedule as the proposed
  gasoline engine and vehicle exhaust emission standards shown in Tables
  III.C-1 and III.C-2. These proposed standards would not apply to
  medium-duty passenger vehicles, and would not apply to diesel fueled
  vehicles.
** Does not apply to LPG or natural gas fueled HDVs.

    These proposed standards represent more than a 50 percent reduction 
in the numerical standards as they exist today. The 2004 heavy-duty 
rule (64 FR 58472, October 29, 1999) proposed no changes to the 
numerical value of the standard, but it did propose new evaporative 
emission test procedures for heavy-duty complete gasoline vehicles.\80\ 
Those test procedures would effectively increase the stringency of the 
standards, even though the numerical value was not proposed to change. 
For establishing evaporative emission levels from complete heavy-duty 
vehicles, the standards shown in Table III.C-3 presume the test 
procedures proposed in the 2004 heavy-duty rule.
---------------------------------------------------------------------------

    \80\ The proposed test procedure changes sought to codify a 
commonly approved waiver allowing heavy-duty gasoline vehicles to 
use the light-duty driving cycle for demonstrating evaporative 
emission compliance. The urban dynamometer driving schedule (UDDS) 
used for heavy-duty vehicles is somewhat shorter than that used for 
light-duty vehicles, both in terms of mileage covered and minutes 
driven. This results in considerably less time for canister purge 
under the heavy-duty procedure than under the light-duty procedure. 
We recognize this discrepancy and have routinely provided waivers 
under the enhanced evaporative program that allow the use of the 
light-duty procedures for heavy-duty certification testing. We do 
not believe that this approach impacts the stringency of the 
standards. Further, it is consistent with CARB's treatment of 
equivalent vehicles.
---------------------------------------------------------------------------

    The proposed standards for 8,500 to 14,000 pound vehicles are 
consistent with the Tier 2 standards for medium-duty passenger vehicles 
(MDPV). MDPVs are of consistent size and have essentially identical 
evaporative emission control systems as the remaining work-oriented 
HDVs in the 8,500 to 10,000 pound weight range. Therefore, the 
evaporative emission standards should be equivalent. We are proposing 
those same standards for the 10,000 to 14,000 pound HDVs because, 
historically, the evaporative emission standards have been consistent 
throughout the 8,500 to 14,000 pound weight range. We believe that the 
HDVs in the 10,000 to 14,000 pound range are essentially equivalent in 
evaporative emission control system design as the lighter HDVs; 
therefore, continuing this historical approach is appropriate.
    We are proposing slightly higher evaporative emission standards for 
the over 14,000 pound HDVs because of their slightly larger fuel tanks 
and vehicle sizes. This is consistent with past evaporative emission 
standards. The levels chosen for the over 14,000 pound HDVs maintains 
the same ratio relative to the 8,500 to 14,000 pound HDVs as exists 
with current evaporative standards. To clarify, the current standards 
for the 3 day diurnal test are 3 and 4 grams/test for the 8,500 to 
14,000 and the over 14,000 pound categories, respectively. The ratio of 
3:4 is maintained for the proposed 2007 standards, 1.4:1.9.
    The proposed standards levels are slightly higher than the 
California LEV-II standards levels. The California standards levels are 
1.0 and 1.25 for the 3-day and the 2-day tests, respectively. We 
believe that our standards are appropriate for federal vehicles 
certified on the higher-volatility federal test fuel.
    We are proposing that the proposed evaporative emission standards 
be implemented on the same schedule as the proposed gasoline engine and 
vehicle exhaust standards shown in Tables III.C-1 and III.C-2. We 
request comment on this proposal. Also, we are proposing the revised 
durability provisions finalized in the Tier 2 rulemaking, which require 
durability demonstration using fuel containing at least 10 percent 
alcohol. Alcohol can break down the materials used in evaporative 
emission control systems. Therefore, a worst case durability 
demonstration would include a worst case alcohol level in the fuel (10 
percent) as some areas of the country

[[Page 35466]]

use alcohol fuels to improve their air quality. We request comment on 
extending this durability provision to HDVs.
    We request comment on the feasibility and appropriateness of the 
proposed evaporative emission standards shown in Table III.C-3.

D. Standards Implementation Issues

1. Alternative Approach to Phase-In
    Although we are proposing the standards and diesel phase-ins shown 
in Section III.C, we request comment on the possibility of structuring 
the proposed diesel engine standards as a ``declining'' standard rather 
than the standard level ``phase-in'' being proposed. Under such an 
approach, the final NOX and NMHC standards of 0.20 and 0.14 
g/bhp-hr would be achieved via a ramping down of the standards from the 
NOX and NMHC levels assumed under the 2004 
NMHC+NOX standard (i.e., 2.0 g NOX and 0.5 g 
NHMC) to the final levels provided it did not compromise the air 
quality benefits in any given year. Such a declining standard would 
result in 2007 standards for all engines lower than the 2004 standards, 
but not as low as today's proposed standards. The 2008 standards for 
all engines would then be lower than the 2007 standards, and the 2009 
standards for all engines would be lower than the 2008 standards. In 
2010, the standards would become 0.20 g/bhr-hr NOX and 0.14 
g/bhp-hr NMHC.
    Under such a declining standard approach, an engine manufacturer 
would probably have to redesign most, if not all, of its engines to 
reduce their emissions from the 2004 standard levels to the 2007 model 
year declining standard levels. In contrast, under the proposed 
approach, 25 percent of an engine manufacturer's engines would have to 
certify to the 0.20/0.14 g/bhp-hr standards. Although the phase-in 
levels would be more stringent, the manufacturer would have to redesign 
only that 25 percent of its engines during the 2007 model year. The 
same would be true for the ensuing years. Under the declining standard 
approach, some level of redesign would probably have to be done on 
every engine in every year to meet the declining standard unless a 
manufacturer had extensive ABT credits at its disposal to apply against 
the standard. Under the phase-in, each new model year would entail a 
redesign of only 25 percent of a manufacturer's engines. In the end, 
both approaches result in the entire fleet meeting the proposed 
standard levels in 2010, but both achieve that in different ways.
    We request comment on this declining standard approach for the 
diesel engine standards. We also request suggestions on appropriate 
declining standards for each model year that would result in stringency 
levels and emission reductions consistent with those of the proposed 
phase-in approach.
    We also request comment on the possibility of structuring the 
phase-in of the proposed diesel engine standards as a ``cumulative'' 
phase-in rather than the 25-50-75-100 percent phase-in being proposed. 
Under such an approach, a manufacturer could phase-in compliance with 
the proposed standards in whatever percentages were most beneficial to 
that manufacturer, provided the cumulative total in each year met or 
exceeded the cumulative total of the proposed phase-in. Whatever the 
phase-in schedule chosen by the manufacturer, all of its engines sold 
in model year 2010 would be required to demonstrate compliance with the 
proposed standards. For example, a manufacturer could phase-in its 
engines according to a schedule of 50-50-50-100 percent, or 35-50-65-
100 percent, or 30-60-60-100, etc. Note that the cumulative percentages 
would have to be based on cumulative engine sales to avoid the 
possibility that variations in market conditions would not compromise 
air quality benefits. We believe that such a phase-in could provide 
manufacturers with more flexibility in product planning while possibly 
enhancing the air quality benefits of the proposed standards because 
some manufacturers may accelerate their phase-in. Manufacturers should 
indicate their interest in such an approach in their comments and 
should indicate how they might utilize it.
2. Implementation Schedule for Gasoline Engine and Vehicle Standards
    The October 1999 proposal of new heavy-duty engine and vehicle 
standards included revised standards for gasoline heavy-duty engines 
and vehicles (64 FR 58472, October 29, 1999). These standards were 
proposed to take effect in the 2004 model year. Commenters on that 
proposal raised concerns that these standards could not take effect 
until model year 2005 or later because of the applicability of Clean 
Air Act section 202(a)(3)(C) to these engines and vehicles. Those 
commenters argued that this provision requires 4 years of 
implementation leadtime following the promulgation of new or revised 
standards, and that these standards had not been promulgated in a final 
rule in time to satisfy this leadtime provision. We are still in the 
process of finalizing this rule and so at this time we are not able to 
announce the outcome of the leadtime issue. However, we do expect that, 
should the gasoline engine and vehicle standards be delayed to model 
year 2005, the standards being proposed today for gasoline engines and 
vehicles would first apply in model year 2008, rather than 2007, due to 
another part of the Clean Air Act section 202(a)(3)(C) provision that 
requires 3 model years of stability between changed standards. We 
invite comment on the appropriateness of this expectation and on any 
issues that might arise in connection with the model year 2008 
implementation schedule.

E. Feasibility of the Proposed New Standards

    For more detail on the arguments supporting our assessment of the 
technological feasibility of today's proposed standards, please refer 
to the Draft RIA in the docket for this rule. The following discussion 
summarizes the more detailed discussion found in the Draft RIA.
1. Feasibility of Stringent Standards for Heavy-Duty Diesel
    Diesel engines have made great progress in lowering engine-out 
emissions from 6.0 g/bhp-hr NOX and 0.6 g/bhp-hr PM in 1990 
to 4.0 g/bhp-hr NOX and 0.1 g/bhp-hr PM in 1999. These 
reductions came initially with improvements to combustion and fuel 
systems. Introduction of electronic fuel systems in the early 1990s 
allowed lower NOX and PM levels without sacrificing fuel 
economy. This, combined with increasing fuel injection pressures, has 
been the primary technology that has allowed emission levels to be 
reduced to current 1999 levels. Further engine-out NOX 
reductions to the levels necessary to comply with the 2004 standard of 
2.5   g/bhp-hr NOX+NMHC will come primarily from the 
addition of cooled EGR.
    Engine out emission reductions beyond the 2.5 g/bhp-hr level are 
expected with low sulfur fuel and more experience with cooled EGR 
systems. Low sulfur fuel will allow more EGR to be used at lower 
temperatures because of the reduced threat of sulfuric acid formation. 
In addition, recirculating the exhaust gases from downstream of a PM 
trap may allow different EGR pumping configurations to be feasible. 
Such pumping configurations could provide a better NOX/fuel 
consumption tradeoff.
    These potential engine-out emission reductions are expected to be 
modest and are not expected to be sufficient to meet the emission 
standards proposed

[[Page 35467]]

today. However, they would allow greater flexibility in choosing the 
combination of technologies used to meet the proposed emission 
standards. With lower engine-out emissions, it might be most cost 
effective to use smaller and less expensive exhaust emission control 
devices, for instance. Also, the combination of engine-out and exhaust 
emission control could be chosen for the best fuel economy. The fuel 
economy trade-offs between lower engine-out emissions and more 
effective exhaust emission control might be such that a combination of 
the two methods provide fuel economy that is better than either method 
on its own. As a result, additional engine-out emission reductions are 
expected to add additional flexibility in combination with exhaust 
emission control in jointly optimizing costs, fuel economy, and 
emissions.

a. Meeting the Proposed PM Standard

    Diesel PM consists of three primary constituents: unburned carbon 
particles, which make up the largest portion of the total PM; the 
soluble organic fraction (SOF), which consists of unburned hydrocarbons 
that have condensed into liquid droplets or have condensed onto 
unburned carbon particles; and sulfates, which result from oxidation of 
fuel borne sulfur in the engine's exhaust.
    Several exhaust emission control devices have been developed to 
control harmful diesel PM constituents--the diesel oxidation catalyst 
(DOC), and the many forms of particulate filters, or traps. DOCs have 
been shown to be durable in use, but they effectively control only the 
SOF portion of the total PM which, especially on today's engines, 
constitutes only around 10 to 30 percent of the total PM. Therefore, 
the DOC does not address our PM concerns sufficiently.
    At this time, only the PM trap is capable of providing the level of 
control sought by today's proposed PM standards. In the past, the PM 
trap has demonstrated highly efficient trapping efficiency, but 
regeneration of the collected PM has been a serious challenge. The PM 
trap works by passing the exhaust through a ceramic or metallic filter 
to collect the PM. The collected PM, mostly carbon particles but also 
the SOF portion, must then be burned off the filter before the filter 
becomes plugged. This burning off of collected PM is referred to as 
``regeneration,'' and can occur either:
     on a periodic basis by using base metal catalysts or an 
active regeneration system such as an electrical heater, a fuel burner, 
or a microwave heater; or,
     on a continuous basis by using precious metal catalysts.
    Uncatalyzed diesel particulate traps demonstrated high PM trapping 
efficiencies many years ago, but the level of the PM standard was such 
that it could be met through less costly ``in-cylinder'' control 
techniques. Also, the regeneration characteristics were not dependable. 
As a result, some systems employed electrical heaters or fuel burners 
to improve upon regeneration, but these complicated the system design 
and still could not provide the durability and dependability required 
for HD diesel applications.
    We believe the most desirable PM trap, and the type of trap that 
will prove to be the industry's technology of choice, is one capable of 
regenerating on an essentially continuous basis. We also believe that 
such traps are the most promising for enabling very low PM emissions 
because:
     They are highly efficient at trapping all forms of diesel 
PM;
     They employ precious metals to reduce the temperature at 
which regeneration occurs, thereby allowing for passive regeneration 
under normal operating conditions typical of a diesel engine;\81\
---------------------------------------------------------------------------

    \81\ For PM trap regeneration without precious metals, 
temperatures in excess of 650 deg.C must be obtained. At such high 
temperatures, carbon will burn provided sufficient oxygen is 
present. However, although the largest heavy-duty diesels may 
achieve temperatures of 650 deg.C under some operating conditions, 
smaller diesel engines, particularly light-duty and light heavy-duty 
diesel engines, will rarely achieve such high temperatures. For 
example, exhaust temperatures on the HDE Federal Test Procedure 
cycle typically range from 100 deg.C to 450 deg.C. Precious metal 
catalyzed traps use platinum to oxidize NO in the exhaust to 
NO2, which is capable of oxidizing carbon at temperatures 
as low as 250 deg.C to 300 deg.C.
---------------------------------------------------------------------------

     Because they regenerate continuously, they have lower 
average backpressure thereby reducing potential fuel economy impacts; 
and,
     Because of their passive regeneration characteristics, 
they need no extra burners or heaters like would be required by an 
active regeneration system thereby reducing potential fuel economy 
impacts.
    These catalyzed PM traps are able to provide in excess of 90 
percent control of diesel PM. However, as discussed in detail in the 
Draft RIA, the catalyzed PM trap cannot regenerate properly with 
current fuel sulfur levels as such sulfur levels inhibit the NO to 
NO2 reaction to the point of stopping trap regeneration.\82\ 
Also, because SO2 is so readily oxidized to SO3, 
very low PM standards cannot be achieved with current sulfur levels 
because of the resultant increase in sulfate PM emissions.\83\
---------------------------------------------------------------------------

    \82\ Cooper and Thoss, Johnson Matthey, SAE 890404.
    \83\ See the Draft RIA for more detail on the relationship of 
fuel sulfur to sulfate make.
---------------------------------------------------------------------------

    More than one exhaust emission control manufacturer is known to be 
developing these precious metal catalyzed, passively regenerating PM 
traps and to have them in broad field test programs in areas where low 
sulfur diesel fuel is currently available. In field trials, they have 
demonstrated highly efficient PM control and promising durability with 
some units accumulating in excess of 360,000 miles of field use.\84\ 
The experience gained in these field tests also helps to clarify the 
need for very low sulfur diesel fuel. In Sweden and some European city 
centers where below 10 ppm diesel fuel sulfur is readily available, 
more than 3,000 catalyzed diesel particulate filters have been 
introduced into retrofit applications without a single failure. The 
field experience in areas where sulfur is capped at 50 ppm has been 
less definitive. In regions without extended periods of cold ambient 
conditions, such as the United Kingdom, field tests on 50 ppm cap low 
sulfur fuel have been extremely positive, matching the success at, 10 
ppm. However, field tests in Finland where colder winter conditions are 
sometimes encountered (similar to northern parts of the United States) 
have revealed a failure rate of 10 percent. This 10 percent failure 
rate has been attributed to insufficient trap regeneration due to fuel 
sulfur in combination with low ambient temperatures.\85\ As the ambient 
conditions in Sweden are expected to be no less harsh than Finland, we 
are left to conclude that the increased failure rates noted here are 
due to the higher fuel sulfur level in a 50 ppm cap fuel versus a 10 
ppm cap fuel. From these results, we can also theorize that lighter 
applications (such as large pick-up trucks and other light heavy-duty 
applications), having lower exhaust temperatures than heavier 
applications, may experience similar results and would, therefore, need 
very low sulfur fuel. These results are understood to be due to the 
effect of sulfur on the trap's ability to create sufficient 
NO2 to carry out proper trap regeneration. Without the 
NO2, the trap continues to trap at high efficiency, but it 
is unable to oxidize, or regenerate, the trapped PM. The possible 
result is a plugged trap.
---------------------------------------------------------------------------

    \84\ Allansson, et at., SAE 2000-01-0480.
    \85\ Letter from Dr. Barry Cooper to Don Lopinski US EPA, EPA 
Docket A-99-06.
---------------------------------------------------------------------------

    Diesel particulate traps reduce particulate matter (PM) by 
capturing and burning particles. Ninety percent of

[[Page 35468]]

the PM mass resides in particle sizes that are less than 1000 
nanometers (nm) in diameter, and half of these particles are less than 
200 nm. Fortunately, PM traps have very high particle capture 
efficiencies. PM less than 200 nm is captured efficiently by diffusion 
onto surfaces within the trap walls. Larger particles are captured 
primarily by inertial impaction onto surfaces due to the tortuous path 
that exhaust gas must take to pass through the porous trap walls. 
Capture efficiency for elemental carbon (soot) and metallic ash is 
nearly 100 percent; therefore, significant PM can only form downstream 
of the trap. Volatile PM forms from sulfate or organic vapors via 
nucleation, condensation, and/or adsorption during initial dilution of 
raw exhaust into the atmosphere. Kleeman,\86\ et. al., and 
Kittelson,\87\ et. al., independently demonstrated that these volatile 
particles reside in the ultra-fine PM range (i.e. 100 nm range).
---------------------------------------------------------------------------

    \86\ Kleeman, M.J., Schauer, J.J., Cass, G.R., 2000, Size and 
Composition Distribution of Fine Particulate Matter Emitted From 
Motor Vehicles, Environmental Science and Technology, Vol. 34, No. 
7.
    \87\ Kittelson, D.B., 2000, Presentation on Fuel and Lube Oil 
Sulfer and Oxidizing Aftertreatment System Effects on Nano-particle 
Emissions from Diesel Engines. Presented in United Kingdom April 12, 
2000.
---------------------------------------------------------------------------

    Modern catalyzed PM traps have been shown to be very effective at 
reducing PM mass. In addition, they can significantly reduce the 
overall number of emitted particles when operated on low sulfur fuel. 
Hawker, et al., found that a modern catalyzed PM trap reduced particle 
count by over 95 percent, including ultrafine particles ( 50 nm) at 
most of the tested conditions. The lowest observed efficiency in 
reducing particle number was 86 percent. No generation of particles by 
the PM trap was observed under any tested conditions.\88\ Kittelson, et 
al., confirmed that ultrafine particles can be reduced by a factor of 
ten by oxidizing volatile organics, and by an additional factor of ten 
by reducing sulfur in the fuel. Catalyzed PM traps efficiently oxidize 
nearly all of the volatile organic PM precursors, and elimination of as 
much fuel sulfur as possible will dramatically reduce the number of 
ultrafine PM emitted from diesel engines. Therefore, the combination of 
PM traps with low sulfur fuel is expected to result in a very large 
reduction in PM mass, and ultrafine particles will be almost completely 
eliminated.
---------------------------------------------------------------------------

    \88\ Hawker, P., et al., Effect of a Continuously Regenerating 
Diesel Particulate Filter on Non-Regulated Emissions and Particle 
Size Distribution, SAE 980189.
---------------------------------------------------------------------------

    Now that greater than 90 percent effective PM emission control has 
been demonstrated, focus has turned to bringing PM exhaust emission 
control to market. One of the drivers is the Euro IV PM standard set to 
become effective in 2005.\89\ This standard sets a PM trap forcing 
emission target. In anticipation of the 2005 introduction date, field 
tests are already underway in several countries with catalyzed 
particulate filters. We believe the experience gained in Europe with 
these technologies will coincide well with the emission standards in 
this proposal. The timing of today's proposal harmonizes the heavy-duty 
highway PM technologies with those expected to be used to meet the 
light-duty highway Tier 2 standards. Our own testing with fuel sulfur 
levels below 10 ppm shows that these systems are viable.\90\ With this 
level of effort already under way, we believe that the proposed PM 
standards which would require a 90 percent reduction in the mass of 
particulate emissions could be met provided low sulfur fuel is made 
available.
---------------------------------------------------------------------------

    \89\ The Euro IV standards are 2.6 g/hp-hr NOX and 
0.015 g/hp-hr PM.
    \90\ Memorandum from Charles Schenk, EPA, to Air Docket A-99-06, 
``Summary of EPA PM Efficiency Data,'' May 8, 2000.
---------------------------------------------------------------------------

    The data currently available show that catalyzed particulate 
filters can provide significant reductions in PM. Catalyzed particulate 
filters, in conjunction with low sulfur fuel, have been shown to be 
more than 90 percent efficient over the FTP and at most supplemental 
steady-state modes.\91\ However, with the application of exhaust 
emission control technology and depending on the sulfur level of the 
fuel, there is the potential for sulfate production during some 
operating modes covered by the NTE and the supplemental steady-state 
test. We believe that, with the 15 ppm diesel sulfur level proposed 
today, the NTE and the supplemental steady-state test, as proposed in 
the 2004 heavy-duty rule, would be feasible. This belief, as discussed 
in greater detail in the draft RIA, is supported by data generated as 
part of the Diesel Emission Control Sulfur Effects (DECSE) test 
program.\92\ We request comment and relevant data on this issue.
---------------------------------------------------------------------------

    \91\ Demonstration of Advanced Emission Control Technologies 
Enabling Diesel-Powered Heavy-Duty Engines to Achieve Low Emission 
Levels, Manufacturers of Emissions Controls Association, June 1999.
    \92\ Diesel Emission Control Sulfur Effects (DECSE) Program--
Phase II Interim Data Report No. 4, Diesel Particulate Filters--
Final Report, January 2000, Table C1, www.ott.doe.gov/decse.
---------------------------------------------------------------------------

    We request comment on the potential need to remove, clean, and 
reverse these traps at regular intervals to remove ash build-up 
resulting from engine oil. Small amounts of oil can enter the exhaust 
via the combustion chamber (past the pistons, rings and valve seals), 
and via the crankcase ventilation system. This can lead to ash build-
up, primarily as a result of the metallic oil additives used to provide 
pH control. Such pH control is necessary, in part, to neutralize 
sulfuric acid produced as a byproduct of burning fuel containing 
sulfur. However, with reduced fuel sulfur, these oil additives could be 
reduced, thereby reducing the rate of ash build-up and lengthening any 
potential cleaning intervals. It may also be possible to use oil 
additives that are less prone to ash formation to reduce the need for 
periodic maintenance. We believe that catalyzed PM traps should be able 
to meet the required emissions reduction goals over their useful life 
with minimal maintenance. Nonetheless, we request comment on the 
appropriate minimum allowable maintenance interval for PM traps. 
Commenters should consider whether the maintenance interval should 
include design provisions to ensure quick and easy maintenance and 
should make suggestions for how performance of the maintenance by the 
owner would be ensured.

b. Meeting the Proposed NOX Standard

    The NOX standard proposed today requires approximately a 
90 percent reduction in NOX emissions beyond the levels 
expected from the 2004 emission standards. Historically, catalytic 
reduction of NOX emissions in the oxygen-rich environment 
typical of diesel exhaust has been difficult because known 
NOX reduction mechanisms tend to be highly selective for 
oxygen rather than NOX. Nonetheless, there are exhaust 
emission control devices that reduce the NOX to form 
harmless oxygen and nitrogen. These devices are the lean NOX 
catalyst, the NOX adsorber, selective catalytic reduction 
(SCR), and non-thermal plasma.
    The lean NOX catalyst has been shown to provide up to a 
30 percent NOX reduction under limited steady-state 
conditions. Despite a large amount of development effort, 
NOX reductions over the heavy-duty transient federal test 
procedure (FTP) have been demonstrated only on the order of 12 
percent.\93\ Consequently, the lean NOX

[[Page 35469]]

catalyst does not appear to be capable of enabling the significantly 
lower NOX emissions required by the proposed NOX 
standard.
---------------------------------------------------------------------------

    \93\ Kawanami, M., et al., Advanced Catalyst Studies of Diesel 
NOX Reduction for On-Highway Trucks, SAE 950154.
---------------------------------------------------------------------------

    NOX adsorbers were first introduced in the power 
generation market less than five years ago. Since then, NOX 
adsorber systems in stationary source applications have enjoyed 
considerable success. In 1997, the South Coast Air Quality Management 
District of California determined that a NOX adsorber system 
provided the ``Best Available Control Technology'' NOX limit 
for gas turbine power systems.\94\ Average NOX control for 
these power generation facilities is in excess of 92 percent.\95\
---------------------------------------------------------------------------

    \94\ Letter from Barry Wallerstein, Acting Executive Officer, 
SCAQMD, to Rober Danziger, Goal Line Environmental Technologies, 
dated December 8, 1997, www.glet.com.
    \95\ Reyes and Cutshaw, SCONOX Catalytic Absorption 
System, December 8, 1998. www.glet.com.
---------------------------------------------------------------------------

    Recently, the NOX adsorber's stationary source success 
has caused some to turn their attention to applying NOX 
adsorber technology to lean burn engines in mobile source applications. 
With only a few years of development effort, NOX adsorber 
catalysts have been developed and are now in production for gasoline 
direct injection vehicles in Japan. The 2000 model year will see the 
first U.S. application of this technology with the introduction of the 
Honda Insight, which will be certified to the California LEV-I ULEV 
category standard.
    Although diesel vehicle manufacturers have not yet announced 
production plans for NOX adsorber-based systems, they are 
known to have development efforts underway to demonstrate their 
potential. In Europe, both Daimler-Chrysler and Volkswagen, driven by a 
need to meet stringent Euro IV emission standards, have published 
results showing how they would apply the NOX adsorber 
technology to their diesel powered passenger cars. Volkswagen reports 
that it has already demonstrated NOX emissions of 0.137    
g/km (0.22 g/mi) on a diesel powered Passat passenger car equipped with 
a NOX adsorber catalyst.\96\
---------------------------------------------------------------------------

    \96\ Pott, E., et al., Potential of NOX-Trap Catalyst 
Application for DI-Diesel Engines.
---------------------------------------------------------------------------

    Likewise, in the United States, heavy-duty engine manufacturers 
have begun investigating the use of NOX adsorber 
technologies as a more cost effective means to control NOX 
emissions when compared to more traditional in-cylinder approaches. 
Cummins Engine Company reported, at DOE's 1999 Diesel Engine Emissions 
Reduction workshop, that they had demonstrated an 80 percent reduction 
in NOX emissions over the Supplemental Steady State test and 
58 percent over the heavy-duty FTP cycle using a NOX 
adsorber catalyst.
    In spite of these promising developments, work in the United States 
on NOX adsorbers has been limited in comparison to the rest 
of the world for at least a couple of reasons: (1) prior to today's 
proposal, emission standards have not necessitated the use of 
NOX exhaust emission controls on heavy-duty diesel engines; 
and, (2) there has not been a commitment in the U.S. to guarantee the 
availability of low sulfur diesel fuel. This is in stark contrast to 
Europe where the Euro IV and Euro V emission standards, along with the 
commitment to low sulfur diesel fuel, have led to rapid advancements of 
NOX exhaust emission control technology. We believe, based 
on input from industry members that develop and manufacture emission 
control devices such as NOX adsorbers, that the prospect of 
low sulfur diesel fuel in the U.S. market will drive rapid advancement 
of this promising NOX control technology.\97\
---------------------------------------------------------------------------

    \97\ Letter from Bruce Bertelsen, Executive Director, 
Manufacturers of Emission Controls Association, to Margo Oge, EPA, 
dated April 5, 2000.
---------------------------------------------------------------------------

    NOX adsorbers work by providing a NOX storage 
feature, a NOX adsorber, during periods of fuel lean 
operation. This is then combined with the typical three-way catalyst, 
like those used for years in stoichiometric gasoline applications. The 
combination of adsorber plus three-way catalyst allows storage of 
NOX on the adsorber during fuel lean-oxygen rich operation, 
then removal of NOX from the adsorber and reduction of 
NOX over the three-way catalyst during fuel rich-oxygen lean 
operation. This removal of NOX from the adsorber is termed 
``NOX regeneration'' and generally requires purposeful 
controlled addition of small amounts of fuel into the exhaust stream at 
regular intervals.
    Improving NOX reduction efficiencies over the diesel 
exhaust temperature range is key to meeting the proposed standards. 
Current NOX adsorbers, for instance, have a high reduction 
efficiency (over 90 percent NOX reduction) over a fairly 
broad temperature range (exhaust temperatures from 250 deg.C to 
450 deg.C) allowing today's proposed standard to be met over this 
range.\98\ Extending the range of high NOX reduction 
efficiency at both high temperatures and low temperatures will allow 
higher average reduction efficiencies over the FTP and in use. The 
performance of the NOX adsorber may vary somewhat with 
exhaust temperature across the NTE. For that reason, engine-out 
NOX emissions will have to be flattened over the NTE to 
accommodate these variations in NOX reduction performance. 
We believe that such an approach would allow the NOX NTE and 
supplemental steady-state composite to be met. We seek comment and data 
on the relationship between NOX adsorber performance and 
engine operating mode.
---------------------------------------------------------------------------

    \98\ Dou, D., Bailey, O., Investigation of NOX 
Adsorber Catalyst Deactivation, SAE 982594.
---------------------------------------------------------------------------

    The greatest hurdle to the application of the NOX 
adsorber technology has been its sensitivity to sulfur in diesel fuel. 
The NOX adsorber stores sulfur emissions in a manner 
directly analogous to its storage of NOX under lean 
conditions. Unfortunately, the stored sulfur is not readily removed 
from the adsorber during the type of operating conditions under which 
NOX is readily removed. This leads to an eventual loss of 
NOX adsorber function and, thus, a loss of NOX 
emission control. This potential loss of NOX adsorber 
function can most effectively be addressed through the reduction of 
sulfur in diesel fuel. For a more complete description of the 
sensitivity of this technology to sulfur in diesel fuel, and for an 
explanation of the need for low sulfur diesel fuel, please refer to 
section III.F.
    The preceding discussion of NOX adsorbers assumes that 
SOX (SO2 and SO3) emissions will be 
``trapped'' on the surface of the catalyst effectively poisoning the 
device and requiring a ``desulfation'' (sulfur removal event) to 
recover catalyst efficiency. We believe that, at the proposed 15 ppm 
cap fuel sulfur level, this strategy will allow effective 
NOX control with moderately frequent desulfation and with a 
modest fuel consumption of one percent, which we anticipate will be 
more that offset by reduced reliance on current more expensive (from a 
fuel economy standpoint) NOX control strategies (see 
discussion in section III.F for estimates of overall fuel economy 
impacts). In order to reduce the fuel economy impact and to simplify 
engine control, some manufacturers are investigating the use of 
SOX ``traps'' (sometimes called SOX 
``adsorbers'') to remove sulfur from the exhaust stream prior to it 
flowing through the NOX adsorber catalyst.
    The SOX trap is, in essence, a modified NOX 
adsorber designed to preferentially store (trap) sulfur on its surface 
rather than NOX. It differs from a NOX adsorber 
in that it is not effective at storing NOX and it more 
easily releases stored sulfur. A SOX trap placed upstream of 
a NOX adsorber could effectively remove very modest

[[Page 35470]]

amounts of sulfur from the exhaust, thereby limiting sulfur's effect on 
the NOX adsorber. Unfortunately, the SOX trap 
like the NOX adsorber, will eventually fill every available 
storage site with sulfate and will cease to function unless the sulfur 
is removed. Desulfating the SOX adsorber on the vehicle is 
problematic since it would be upstream of the NOX adsorber 
which could then be poisoned quite rapidly by the SOX 
released from the SOX trap. This problem could presumably be 
solved through some form of NOX adsorber by-pass during 
SOX trap desulfation (although control of NOX 
during this event may be problematic). Alternatively, removal and 
replacement of the SOX adsorber on a fixed service interval 
would solve this problem, albeit at some cost. In an oral presentation 
made to EPA, an engine manufacturer estimated the storage capacity of a 
SOX trap at approximately one pound of SO2 per 
cubic foot of catalyst.\99\ For fuel with a seven ppm average sulfur 
level, this would mean replacement of a 48 liter SOX trap 
approximately every 100,000 miles.\100\ This more than doubles the 
catalyst size we have projected for a typical heavy heavy-duty vehicle 
in this proposal, while only providing protection for a small fraction 
of its useful life. Because of practical limitations on SOX 
trap size, we do not believe that the use of SOX traps can 
avoid the need for very low-sulfur diesel fuel, and we have received no 
information from manufacturers that contradicts this belief. We invite 
comment on the use of a SOX trap to protect NOX 
adsorbers and on the appropriateness of SOX traps being 
replaced on a fixed interval as described here. Further, we request 
comment and supporting data to indicate the interval at which 
SOX traps would require replacement.
---------------------------------------------------------------------------

    \99\ Memorandum from Byron Bunker, US EPA to Air Docket A-99-06, 
``Meeting between EPA, OMB, representatives of major oil companies, 
and representatives of major diesel engine manufacturers,'' Item II-
E-17.
    \100\ This estimate assumes that a heavy-duty vehicle averages 
six miles per gallon of fuel, that diesel fuel weighs seven pounds 
per gallon, that diesel fuel has seven ppm sulfur, and that a sulfur 
trap could store one pound of SO2 in a cubic foot of 
catalyst.
---------------------------------------------------------------------------

    Selective Catalytic Reduction (SCR), like NOX adsorber 
technology, was first developed for stationary applications and is 
currently being refined for the transient operation found in mobile 
applications.\101\ With the SCR system, a urea solution is injected 
upstream of the catalyst which breaks down the urea into ammonia and 
carbon dioxide. Catalysts containing precious metals (platinum) can be 
used at the inlet and outlet of SCR systems designed for mobile 
applications to improve low temperature NOX reduction 
performance and to oxidize any ammonia that may pass through the SCR, 
respectively. Such SCR systems are referred to as ``Compact SCR.'' The 
use of these platinum catalysts enable Compact SCR systems to achieve 
large NOX reductions, but introduce sensitivity to sulfur in 
much the same way as for diesel particulate filter technologies. Sulfur 
in diesel fuel inhibits low temperature performance and results in high 
sulfate make leading directly to higher particulate emissions. For a 
further discussion of Compact SCR system sensitivity to sulfur in 
diesel fuel, and of its need for low sulfur diesel fuel, refer to 
section III.F.
---------------------------------------------------------------------------

    \101\ SRC systems being developed for mobile applications are 
more appropriately called ``compact SCR'' systems, which incorporate 
on oxidation catalyst. Generally, reference to SCR throughout this 
preamble should be taken to mean compact SCR.
---------------------------------------------------------------------------

    The reduction efficiency window for Compact SCR is similar to the 
NOX adsorber, with greater than 80 percent efficiency at 
exhaust temperatures as low as 250 deg.C.\102\ Peak efficiency values 
of over 90 percent are possible under certain conditions, but the cool 
exhaust temperature characteristics of diesel engines make excursions 
outside the optimum efficiency window of current Compact SCR systems 
quite frequent. As a result, the cycle average NOX reduction 
efficiency is on the order of 77 percent over the heavy-duty FTP.\103\ 
Over the Supplemental Steady State test modes, the SCR has been shown 
to have 65-99 percent efficiency.\104\ The high efficiency over a broad 
temperature range should also allow the NTE to be met. With additional 
development effort, we believe the NOX reduction efficiency 
of SCR can be further improved to meet NOX levels as low as 
those proposed today.
---------------------------------------------------------------------------

    \102\ Klein, H., et al., NOX Reduction for Diesel 
Vehicles, Degussa-Huls AG, Corning Clean Diesel Workshop, Sept. 27-
29, 1999.
    \103\ ``Demonstration of Advanced Emission Control Technologies 
Enabling Diesel-Powered Heavy-Duty Engines to Achieve Low Emission 
Levels,'' Manufacturers of Emission Controls Association, June 1999.
    \104\ ``Demonstration of Advanced Emission Control Technologies 
Enabling Diesel-Powered Heavy-Duty Engines to Achieve Low Emission 
Levels,'' Manufacturers of Emission Controls Association, June 1999.
---------------------------------------------------------------------------

    However, significant challenges remain for Compact SCR systems to 
be applied to mobile source applications. In addition to the need for 
very low sulfur diesel fuel to achieve high NOX conversion 
efficiencies and to control sulfate PM emissions, Compact SCR systems 
require vehicles to be refueled with urea. The infrastructure for 
delivering urea at the pump needs to be in place for these devices to 
be feasible in the marketplace; and before development of the 
infrastructure can begin, the industry must decide upon a standardized 
method of delivery for the urea supply. In addition to this, there 
would need to be adequate safeguards in place to ensure the urea is 
used throughout the life of the vehicle, since, given the added cost of 
urea, there would be incentive not to refill the urea tank. Because 
urea is required for the SCR system to function, urea replenishment 
would need to be assured.
    Another, very recent approach to NOX reduction is the 
non-thermal plasma assisted catalyst. This system works by applying a 
high voltage across two metal plates in the exhaust stream to form ions 
that serve as oxidizers. Essentially, the plasma would displace a 
conventional platinum based oxidation catalyst in function. Once 
oxidized to NO2, NOX can be more readily reduced 
over a precious metal catalyst. While the concept is promising, this 
technology is so new that essentially no data exists showing its 
effectiveness at controlling NOX. We expect that, if and 
when the non-thermal plasma approach to NOX control becomes 
viable, it will also require the use of low sulfur diesel fuel due to 
its reliance on a precious metal catalyst to reduce the 
NO2.\105\
---------------------------------------------------------------------------

    \105\ ``The Impact of Sulfur in Diesel Fuel on Catalyst Emission 
Control Technology,'' report by the Manufacturers of Emission 
Controls Association, March 15, 1999.
---------------------------------------------------------------------------

    Based on the discussion above, we believe that NOX 
aftertreatment technology, in combination with low sulfur diesel fuel, 
is capable of meeting the very stringent NOX standards we 
have proposed. The clear intent that this proposal provides to make 
very low sulfur diesel fuel available in the future and to establish 
emission standards which necessitate advanced NOX controls 
should enable rapid development of these technologies. The 
NOX adsorber technology has shown incredible advancement in 
the last five years, moving from stationary source applications to 
lean-burn gasoline, and now to heavy-duty diesel engines. Given this 
rapid progress, the availability of very low sulfur diesel fuel, and 
the lead time provided by today's proposal, we believe that applying 
NOX adsorbers to heavy-duty diesel engines would enable 
manufacturers to comply with our proposed standards. Compact SCR has 
been slower in developing than NOX adsorbers but could be 
applied to mobile source applications if the

[[Page 35471]]

difficult urea infrastructure issues can be addressed.

c. Meeting the Proposed NMHC Standard

    Meeting the NMHC standards proposed today should not present any 
special challenges to diesel manufacturers. Since all of the devices 
discussed above--catalyzed particulate filters, NOX 
adsorbers, and SCR--contain platinum and other precious metals to 
oxidize NO to NO2, they are also very efficient oxidizers of 
hydrocarbons. Reductions of greater than 95 percent have been shown 
over transient FTP and supplemental steady-state modes.\106\ Given that 
typical engine-out NMHC is expected to be in the 0.2 g/bhp-hr range for 
engines meeting the 2004 standards, this level of NMHC reduction will 
easily allow the 0.14 g/bhp-hr NMHC standard to be met over the 
transient FTP, the supplemental steady-state test, and the NTE zone.
---------------------------------------------------------------------------

    \106\ ``The Impact of Sulfur in Diesel Fuel on Catalyst Emission 
Control Technology,'' report by the Manufacturers of Emission 
Controls Association, March 15, 1999, pp. 9 & 11.
---------------------------------------------------------------------------

d. Meeting the Crankcase Emissions Requirements

    The most common way to eliminate crankcase emissions has been to 
vent the blow-by gases into the engine air intake system, so that the 
gases can be recombusted. Until today's proposal, we have required that 
crankcase emissions be controlled only on naturally aspirated diesel 
engines. We have made an exception for turbocharged heavy-duty diesel 
engines because of concerns in the past about fouling that could occur 
by routing the diesel particulates (including engine oil) into the 
turbocharger and aftercooler. However, this is an environmentally 
significant exception since most heavy-duty diesel trucks use 
turbocharged engines, and a single engine can emit over 100 pounds of 
NOX, NMHC, and PM from the crankcase over the lifetime of 
the engine.
    Therefore, we have proposed to eliminate this exception. We 
anticipate that the heavy-duty diesel engine manufacturers will be able 
to control crankcase emissions through the use of closed crankcase 
filtration systems or by routing unfiltered blow-by gases directly into 
the exhaust system upstream of the emission control equipment. The 
closed crankcase filtration systems work by separating oil and 
particulate matter from the blow-by gases through single or dual stage 
filtration approaches, routing the blow-by gases into the engine's 
intake manifold and returning the filtered oil to the oil sump. These 
systems are required for new heavy-duty diesel vehicles in Europe 
starting this year. Oil separation efficiencies in excess of 90 percent 
have been demonstrated with production ready prototypes of two stage 
filtration systems.\107\ By eliminating 90 percent of the oil that 
would normally be vented to the atmosphere, the system works to reduce 
oil consumption and to eliminate concerns over fouling of the intake 
system when the gases are routed through the turbocharger. An 
alternative approach would be to route the blow-by gases into the 
exhaust system upstream of the catalyzed diesel particulate filter 
which would be expected to effectively trap and oxidize the engine oil 
and diesel PM. This approach may require the use of low sulfur engine 
oil to ensure that oil carried in the blow-by gases does not compromise 
the performance of the sulfur sensitive emission control equipment. We 
request comment on the use of either approach to crankcase emissions 
control.
---------------------------------------------------------------------------

    \107\ Letter from Marty Barris Donaldson Corporation to Byron 
Bunker US EPA, March 2000. EPA Air Docket A-99-06.
---------------------------------------------------------------------------

e. The Complete System

    We expect that the technologies described above would be integrated 
into a complete emission control system. The engine-out emissions will 
be traded off against the exhaust emission control package in such a 
way that the result is the most beneficial from a cost, fuel economy 
and emissions standpoint. The engine-out characteristics will also have 
to be tailored to the needs of the exhaust emission control devices 
used. The NOX adsorber, for instance, will require periods 
of oxygen depleted exhaust flow in order to regenerate. This may be 
most efficiently done by reducing the air-fuel ratio that the engine is 
operating under during the regeneration to reduce the oxygen content of 
the exhaust. Further, it is envisioned that the PM device will be 
integrated into the exhaust system upstream of the NOX 
reduction device. This placement would allow the PM trap to take 
advantage of the engine-out NOX as an oxidant for the 
particulate, while removing the particulate so that the NOX 
exhaust emission control device will not have to deal with large PM 
deposits which may cause a deterioration in performance. Of course, 
there is also the possibility of integrating the PM and NOX 
exhaust emission control devices into a single unit to replace a 
muffler and save space. Particulate free exhaust may also allow for new 
options in EGR system design to optimize its efficiency.
    We expect that the exhaust emission control emission reduction 
efficiency will vary with temperature and space velocity \108\ across 
the NTE zone. Consequently, to maintain the NTE emission cap, the 
engine-out emissions would have to be calibrated with exhaust emission 
control performance characteristics in mind. This would be accomplished 
by lowering engine-out emissions where the exhaust emission control was 
less efficient. Conversely, where the exhaust emission control is very 
efficient at reducing emissions, the engine-out emissions could be 
tuned for higher emissions and better fuel economy. These trade-offs 
between engine-out emissions and exhaust emission control performance 
characteristics are similar to those of gasoline engines with three-way 
catalysts in today's light-duty vehicles. Managing and optimizing these 
trade-offs will be crucial to effective implementation of exhaust 
emission control devices on diesel applications.
---------------------------------------------------------------------------

    \108\ The term, ``space velocity,'' is a measure of the volume 
of exhaust gas that flows through a device.
---------------------------------------------------------------------------

2. Feasibility of Stringent Standards for Heavy-Duty Gasoline
    Gasoline emission control technology has evolved rapidly in recent 
years. Emission standards applicable to 1990 model year vehicles 
required roughly 90 percent reductions in exhaust NMHC and CO emissions 
and a 75 percent reduction in NOX emissions compared to 
uncontrolled emissions. Today, some vehicles' emissions are well below 
those necessary to meet the current federal heavy-duty gasoline 
standards, the proposed 2004 heavy-duty gasoline standards, and the 
California Low-Emission Vehicle standards for medium-duty vehicles. The 
continuing emissions reductions have been brought about by ongoing 
improvements in engine air-fuel management hardware and software plus 
improvements in exhaust system and catalyst designs.
    We believe that the types of changes being seen on current vehicles 
have not yet reached their technological limits and continuing 
improvement will allow them to meet today's proposed standards. The 
Draft RIA describes a range of specific emission control techniques 
that we believe could be used. There is no need to invent new 
technologies, although there will be a need to apply existing 
technology more effectively and more broadly. The focus of the effort 
will be in the application and optimization of these existing 
technologies.

[[Page 35472]]

    In our light-duty Tier 2 rule, we have required that gasoline 
sulfur levels be reduced to a 30 ppm average, with an 80 ppm maximum. 
This sulfur level reduction is the primary enabler for the Tier 2 
standards. Similarly, we believe that the gasoline sulfur reduction, 
along with refinements in existing gasoline emission control 
technology, will be sufficient to allow heavy-duty gasoline vehicles 
and engines to meet the emission standards sought by today's proposal.
    However, we recognize that the emission standards are stringent, 
and considerable effort would have to be undertaken. For example, we 
expect that every engine would have to be recalibrated to improve upon 
its cold start emission performance. Manufacturers would have to 
migrate their light-duty calibration approaches to their heavy-duty 
offerings to provide cold start performance in line with what they will 
have to achieve to meet the Tier 2 standards.
    We also project that the proposed 2007 heavy-duty standards would 
require the application of advanced engine and catalyst systems similar 
to those projected for their light-duty counterparts. Historically, 
manufacturers have introduced technology on light-duty gasoline 
applications and then applied those technologies to their heavy-duty 
gasoline applications. The proposal would allow manufacturers to take 
this same approach for 2007. In other words, we expect that 
manufacturers would meet the proposed 2007 standards through the 
application of technology developed to meet light-duty Tier 2 standards 
for 2004.
    Improved calibration and systems management would be critical in 
optimizing the performance of the engine with the advanced catalyst 
system. Precise air/fuel control must be tailored for emissions 
performance and must be optimized for both FTP and SFTP type driving. 
Calibration refinements may also be needed for EGR system optimization 
and to reduce cold start emissions through methods such as spark timing 
retard. We also project that electronic control modules with expanded 
capabilities would be needed on some vehicles and engines.
    We also expect increased use of other technologies in conjunction 
with those described above. We expect some increased use of air 
injection to improve upon cold start emissions. We may also see air-gap 
manifolds, exhaust pipes, and catalytic converter shells as a means of 
improving upon catalyst light-off times thereby reducing cold start 
emissions. Other, non-catalyst related improvements to gasoline 
emission control technology include, as already stated, higher speed 
computer processors which enable more sophisticated engine control 
algorithms and improved fuel injectors providing better fuel 
atomization thereby improving fuel combustion.
    Catalyst system durability is, and will always be, a serious 
concern. Historically, catalysts have deteriorated when exposed to very 
high temperatures. This has long been a concern especially for heavy-
duty work vehicles. However, catalyst manufacturers continue to make 
strides in the area of thermal stability and we expect that 
improvements in thermal stability will continue for the next generation 
of catalysts.
    We believe that, by optimizing all of these technologies, 
manufacturers will be able to achieve the proposed emission levels. 
Advanced catalyst systems have already shown potential to reduce 
emissions to close to the proposed levels. Some current California 
vehicles are certified to levels below 0.2 g/mi NOX. 
California tested an advanced catalyst system on a vehicle loaded to a 
test weight comparable to a heavy-duty vehicle test weight and achieved 
NOX and NMOG levels of 0.1 g/mi and 0.16 g/mi, respectively. 
The California vehicle with the advanced catalyst had not been 
optimized as a system to take full advantage of the catalyst's 
capabilities.
    The ABT program can also be an important tool for manufacturers in 
implementing a new standard. The program allows manufacturers to 
transition to the more stringent standards by introducing emissions 
controls over a longer period of time, as opposed to a single model 
year. Manufacturers plan their product introductions well in advance. 
With ABT, manufacturers can better manage their product lines so that 
the new standards don't interrupt their product introduction plans. 
Also, the program allows manufacturers to focus on higher sales volume 
vehicles first and use credits for low sales volume vehicles.
    We request comment on the feasibility of the proposed standards and 
request data that would help us evaluate advanced system durability.
3. Feasibility of the Proposed Evaporative Emission Standards
    The proposed evaporative emission standards appear to be feasible 
now. Many designs have been certified that already meet these 
standards. A review of 1998 model year certification data indicates 
that five of eight evaporative system families in the 8,500 to 14,000 
pound range comply with the proposed 1.4 g/test standard, while all 
evaporative system families in the over 14,000 pound range comply with 
the proposed 1.9 g/test standard.
    The proposed evaporative emission standards would not require the 
development of new materials or, in many cases, even the new 
application of existing materials. Low permeability materials and low 
loss connections and seals are already used to varying degrees on 
current vehicles. Today's proposed standards would likely ensure their 
consistent use and discourage manufacturers from switching to cheaper 
materials or designs to take advantage of the large safety margins they 
have under current standards.
    There are two approaches to reducing evaporative emissions for a 
given fuel. One is to minimize the potential for permeation and leakage 
by reducing the number of hoses, fittings and connections. The second 
is to use less permeable hoses and lower loss fittings and connections. 
Manufacturers are already employing both approaches.
    Most manufacturers are moving to ``returnless'' fuel injection 
systems. Through more precise fuel pumping and metering, these systems 
eliminate the return line in the fuel injection system. The return line 
carries unneeded fuel from the fuel injectors back to the fuel tank. 
Because the fuel injectors are in such close contact with the hot 
engine, the fuel returned from the injectors to the fuel tank has been 
heated. This returned fuel is a significant source of fuel tank heat 
and vapor generation. The elimination of the return line also reduces 
the total length of hose on the vehicle through which vapors can 
permeate, and it reduces the number of fittings and connections through 
which fuel can leak.
    Low permeability hoses and seals, and low loss fittings are 
available and are already used on many vehicles. Fluoropolymer 
materials can be added as liners to hose and component materials to 
yield large reductions in permeability over such conventional materials 
as monowall nylon. In addition, fluoropolymer materials can greatly 
reduce the adverse impact of alcohols in gasoline on permeability of 
evaporative components, hoses and seals.

F. Need for Low-Sulfur Diesel Fuel

    The following discussion will build upon the brief sulfur 
sensitivity points made earlier in this section by providing a more in 
depth discussion of sulfur's effect on the most promising diesel 
exhaust emission control technologies. In order to evaluate the effect 
of sulfur

[[Page 35473]]

on diesel exhaust control technologies, we used three key factors to 
categorize the impact of sulfur in fuel on emission control function. 
These factors were efficiency, reliability, and fuel economy. Taken 
together these three factors lead us to believe that diesel fuel sulfur 
levels of 15 ppm will be required in order to make feasible the 
proposed heavy-duty vehicle emission standards (a discussion of higher 
sulfur fuel standards, and what they might mean is included in Section 
VI.B). Brief summaries of these factors are provided below. A more in-
depth review is given in the following subsections and the RIA 
associated with this proposal.
    The efficiency of emission control technologies to reduce harmful 
pollutants is directly affected by sulfur in diesel fuel. Initial and 
long term conversion efficiencies for NOX, NMHC, CO and 
diesel PM emissions are significantly reduced by catalyst poisoning and 
catalyst inhibition due to sulfur. NOX conversion 
efficiencies with the NOX adsorber technology in particular 
are dramatically reduced in a very short time due to sulfur poisoning 
of the NOX storage bed. In addition, total PM control 
efficiency is negatively impacted by the formation of sulfate PM. As 
explained in detail in the following sections, all of the advanced 
NOX and PM technologies described here have the potential to 
make significant amounts of sulfate PM under operating conditions 
typical of heavy-duty vehicles. The formation of sulfate PM is likely 
to be in excess of the total PM standard proposed today, unless diesel 
fuel sulfur levels are at or below 15 ppm. Based on the strong negative 
impact of sulfur on emission control efficiencies for all of the 
technologies evaluated, we believe that 15 ppm represents an upper 
threshold of acceptable diesel fuel sulfur levels.
    Reliability refers to the expectation that emission control 
technologies must continue to function as required under all operating 
conditions for the life of the vehicle. As discussed in the following 
sections, sulfur in diesel fuel can prevent proper operation of both 
NOX and PM control technologies. This can lead to permanent 
loss in emission control effectiveness and even catastrophic failure of 
the systems. Sulfur in diesel fuel impacts reliability by decreasing 
catalyst efficiency (poisoning of the catalyst), increasing diesel 
particulate filter loading, and negatively impacting system 
regeneration functions. Among the most serious reliability concerns 
with sulfur levels greater than 15 ppm are those associated with 
failure to properly regenerate. In the case of the NOX 
adsorber, failure to regenerate will lead to rapid loss of 
NOX emission control as a result of sulfur poisoning of the 
NOX adsorber bed. In the case of the diesel particulate 
filter, sulfur in the fuel reduces the reliability of the regeneration 
function. If regeneration does not occur, catastrophic failure of the 
filter could occur. It is only by the availability of very low-sulfur 
diesel fuels that these technologies become feasible. The analysis 
given in the following section makes clear that diesel fuel sulfur 
levels will need to be consistent with today's proposed standard in 
order to ensure robust operation of the technologies under the variety 
of operating conditions anticipated to be experienced in the field.
    Fuel economy impacts due to sulfur in diesel fuel affect both 
NOX and PM control technologies. The NOX adsorber 
sulfur regeneration cycle (desulfation cycle) can consume significant 
amounts of fuel unless fuel sulfur levels are very low. The larger the 
amount of sulfur in diesel fuel, the greater the adverse effect on fuel 
economy. As sulfur levels increase above 15 ppm, the adverse effect on 
fuel economy becomes more significant, increasing above one percent and 
doubling with each doubling of fuel sulfur level. Likewise, PM trap 
regeneration is inhibited by sulfur in diesel fuel. This leads to 
increased PM loading in the diesel particulate filter and increased 
work to pump exhaust across this restriction. With very low sulfur 
diesel fuel, diesel particulate filter regeneration can be optimized to 
give a lower (on average) exhaust backpressure and thus better fuel 
economy. Thus for both NOX and PM technologies the lower the 
fuel sulfur level the better.
1. Diesel Particulate Filters and the Need for Low-Sulfur Fuel
    As discussed earlier in this section, un-catalyzed diesel 
particulate filters require exhaust temperatures in excess of 650 deg.C 
in order for the collected PM to be oxidized by the oxygen available in 
diesel exhaust. That temperature threshold for oxidation of PM by 
exhaust oxygen can be decreased to 450 deg.C through the use of base 
metal catalytic technologies. Unfortunately, for a broad range of 
operating conditions diesel exhaust is significantly cooler than 
400 deg.C. If oxidation of the trapped PM could be assured to occur at 
exhaust temperatures lower than 300 deg.C, then diesel particulate 
filters would be expected to be robust for most applications and 
operating regimes. The only means that we are aware of to ensure 
oxidation of PM (regeneration of the trap) at such low exhaust 
temperatures is by using oxidants which are more readily reduced than 
oxygen. One such oxidant is NO2.
    NO2 can be produced in diesel exhaust through the 
oxidation of the nitrogen monoxide (NO), created in the engine 
combustion process, across a catalyst. The resulting NO2-
rich exhaust is highly oxidizing in nature and can oxidize trapped 
diesel PM at temperatures as cool as 250 deg.C.\109\ Some platinum 
group metals are known to be good catalysts to promote the oxidation of 
NO to NO2. Therefore in order to ensure passive regeneration 
of the diesel particulate filters, significant amounts of platinum 
group metals (primarily platinum) are being used in the wash-coat 
formulations of advanced diesel particulate filters. The use of 
platinum to promote the oxidation of NO to NO2 introduces 
several system vulnerabilities affecting both the durability and the 
effectiveness of the catalyzed diesel particulate filter when sulfur is 
present in diesel exhaust. The two primary mechanisms by which sulfur 
in diesel fuel limits the robustness and effectiveness of diesel 
particulate filters are inhibition of trap regeneration (i.e., 
inhibition of the oxidation of NO to NO2) and a dramatic 
loss in total PM control effectiveness due to the formation of sulfate 
PM. Unfortunately, these two mechanisms trade-off against one another 
in the design of diesel particulate filters. Changes to improve the 
reliability of regeneration by increasing catalyst loadings lead to 
increased sulfate emissions and thus loss of PM control effectiveness. 
Conversely, changes to improve PM control by reducing the use of 
platinum group metals and, therefore, limiting ``sulfate make'' leads 
to less reliable regeneration. We believe the only means of achieving 
good PM emission control and reliable operation is to reduce sulfur in 
diesel fuel to the level proposed today, as shown in the following 
subsections.
---------------------------------------------------------------------------

    \109\ Hawker, P. et al, Experience with a New Particulate Trap 
Technology in Europe, SAE 970182.
---------------------------------------------------------------------------

a. Inhibition of Trap Regeneration Due to Sulfur

    The passively regenerating diesel particulate filter technologies 
rely on the generation of a very strong oxidant, NO2, to 
ensure that the carbon captured by the PM trap's filtering media is 
oxidized under normal operating conditions. NO2 is produced 
through the oxidation of NO in the exhaust across a platinum catalyst. 
This oxidation is inhibited by the presence of

[[Page 35474]]

SO2 in the exhaust stream because the preferential reaction 
across the platinum is oxidation of SO2 to SO3, 
rather than oxidation of NO to NO2.\110\ This inhibition 
limits the total amount of NO2 available for oxidation of 
the trapped diesel PM, thereby raising the minimum exhaust temperature 
required to ensure trap regeneration. Without sufficient 
NO2, the amount of PM trapped in the diesel particulate 
filter will continue to increase and can lead to excessive exhaust back 
pressure, low engine power, and even catastrophic failure of the diesel 
particulate filter itself.
---------------------------------------------------------------------------

    \110\ Hawker, P. et al, Experience with a New Particulate Trap 
Technology in Europe, SAE 970182.
---------------------------------------------------------------------------

    Full field test evaluations and retrofit applications of these 
catalytic trap technologies are occurring in parts of Europe where low-
sulfur diesel fuel is already available.\111\ The experience gained in 
these field tests helps to clarify the need for very low-sulfur diesel 
fuel. In Sweden and some European city centers where below 10 ppm 
diesel fuel sulfur is readily available, more than 3,000 catalyzed 
diesel particulate filters have been introduced into retrofit 
applications without a single failure. Given the large number of 
vehicles participating in these test programs and the extended time 
periods of operation (some vehicles have been operating with traps for 
more than 4 years and in excess of 300,000 miles \112\), this is a 
strong indication of the robustness of this technology on 10 ppm low-
sulfur diesel fuel. The field experience in areas where sulfur is 
capped at 50 ppm has been less definitive. In regions without extended 
periods of cold ambient conditions, such as the United Kingdom, field 
tests on 50 ppm cap low-sulfur fuel have also been positive, matching 
the success at 10 ppm. However, field tests in Finland where colder 
winter conditions are sometimes encountered (similar to many parts of 
the United States) have revealed a failure rate of 10 percent. This 10 
percent failure rate has been attributed to insufficient trap 
regeneration due to fuel sulfur in combination with low ambient 
temperatures.\113\ As the ambient conditions in Sweden are expected to 
be no less harsh than Finland, we are left to conclude that the 
increased failure rates noted here are due to the higher fuel sulfur 
level in a 50 ppm cap fuel versus a 10 ppm cap fuel. The failure of 
some fraction of the traps to regenerate on 50 ppm cap fuel is believed 
to be primarily due to inhibition of the NO to NO2 
conversion as described here.
---------------------------------------------------------------------------

    \111\ Through tax incentives 50 ppm cap sulfur fuel is widely 
available in the United Kingdom and 10 ppm sulfur fuel is available 
in Sweden and in certain European city centers.
    \112\ Allansson, et al. SAE 2000-01-0480.
    \113\ Letter from Dr. Barry Cooper, Johnson Matthey, to Don 
Kopinski, US EPA, Air Docket A-99-06.
---------------------------------------------------------------------------

    The failure mechanisms experienced by diesel particulate filters 
due to low NO2 availability vary significantly in severity 
and long term consequences. In the most fundamental sense, the failure 
is defined as an inability to oxidize the stored particulate at a rate 
fast enough to prevent net particulate accumulation over time. The 
excessive accumulation of PM over time blocks the passages through the 
filtering media, making it more restrictive to exhaust flow. In order 
to continue to force the exhaust through the now more restrictive 
filter the exhaust pressure upstream of the filter must increase. This 
increase in exhaust pressure is commonly referred to as increasing 
``exhaust backpressure'' on the engine.
    The increased exhaust backpressure represents increased work being 
done by the engine to force the exhaust gas through the increasingly 
restrictive particulate filter. Unless the filter is frequently 
cleansed of the trapped PM, this increased work can lead to reductions 
in engine performance and increases in fuel consumption. This loss in 
performance may be noted by the vehicle operator in terms of poor 
acceleration and generally poor driveability of the vehicle. In some 
cases, engine performance can be so restricted that the engine stalls, 
stranding the vehicle. This progressive deterioration of engine 
performance as more and more PM is accumulated in the filter media is 
often referred to as ``trap plugging.'' Trap plugging also has the 
potential to cause engine damage. If the exhaust backpressure gets high 
enough to open the exhaust valves prematurely, the exhaust valves can 
then strike the piston causing catastrophic engine failure. Whether 
trap plugging occurs, and the speed at which it occurs, will be a 
function of many variables in addition to the fuel sulfur level; these 
variables include the vehicle application, its duty cycle, and ambient 
conditions. However, if the fuel sulfur level is sufficient to prevent 
trap regeneration in any real world conditions experienced, trap 
plugging can occur. This is not to imply that any time a vehicle is 
refueled once with high sulfur fuel trap plugging will occur. Rather, 
it is important to know that the use of fuel with sulfur levels higher 
than 15 ppm significantly increases the chances of particulate filter 
failure.
    Catastrophic failure of the filter can occur when excessive amounts 
of PM are trapped in the filter due to a lack of NO2 for 
oxidation. This failure occurs when excessive amounts of trapped PM 
begin to oxidize at high temperatures (combustion-like temperatures of 
over 1000 deg.C) leading to a ``run-away'' combustion of the PM. This 
can cause temperatures in the filter media to increase in excess of 
that which can be tolerated by the particulate filter itself. For the 
cordierite material commonly used as the trapping media for diesel 
particulate filters, the high thermal stresses caused by the high 
temperatures can cause the material to crack or melt. This can allow 
significant amounts of the diesel particulate to pass through the 
filter without being captured during the remainder of the vehicle's 
life. That is, the trap is destroyed and PM emission control is lost.
    As shown above, sulfur in diesel fuel inhibits NO oxidation leading 
to increased exhaust backpressure, reduced fuel economy, compromised 
reliability, and potentially engine damage. Therefore, we believe that, 
in order to ensure reliable and economical operation over a wide range 
of expected operating conditions, diesel fuel sulfur levels should be 
at or below 15 ppm. With these very low sulfur levels we believe, as 
demonstrated by experience in Europe, that catalyzed diesel particulate 
filters will prove to be both durable and effective at controlling 
diesel particulate emissions to the very low levels that would be 
required by today's proposed standard. We request comment on the 
inhibition of trap regeneration due to fuel sulfur, along with 
supporting data.

b. Loss of PM Control Effectiveness

    In addition to inhibiting the oxidation of NO to NO2, 
the sulfur dioxide (SO2) in the exhaust stream is itself 
oxidized to sulfur trioxide (SO3) at very high conversion 
efficiencies by the precious metals in the catalyzed particulate 
filters. The SO3 serves as a precursor to the formation of 
hydrated sulfuric acid (H2SO4+H2O), or 
sulfate PM, as the exhaust leaves the vehicle tailpipe. Virtually all 
of the SO3 is converted to sulfate under dilute exhaust 
conditions in the atmosphere as well in the dilution tunnel used in 
heavy-duty engine testing. Since virtually all sulfur present in diesel 
fuel is converted to SO2, the precursor to SO3, 
as part of the combustion process, the total sulfate PM is directly 
proportional to the amount of sulfur present in diesel fuel. Therefore, 
even though diesel particulate filters are very effective at trapping 
the carbon and the SOF portions of the total PM, the

[[Page 35475]]

overall PM reduction efficiency of catalyzed diesel particulate filters 
drops off rapidly with increasing sulfur levels due to the production 
of sulfate PM.
    SO2 oxidation is promoted across a catalyst in a manner 
very similar to the oxidation of NO, except it is converted at higher 
rates, with peak conversion rates in excess of 50 percent. The 
SO2 oxidation rate for a platinum based oxidation catalyst 
typical of the type which might be used in conjunction with, or as a 
washcoat on, a catalyzed diesel particulate filter can vary 
significantly with exhaust temperature. At the low temperatures typical 
of some urban driving and the heavy-duty federal test procedure (HD-
FTP), the oxidation rate is relatively low, perhaps no higher than ten 
percent. However at the higher temperatures that might be more typical 
of non-urban highway driving conditions and the Supplemental Steady 
State Test (also called the EURO III or 13 mode test), the oxidation 
rate may increase to 50 percent or more. These high levels of sulfate 
make across the catalyst are in contrast to the very low SO2 
oxidation rate typical of diesel engines (less than 2 percent). This 
variation in expected diesel exhaust temperatures means that there will 
be a corresponding range of sulfate production expected across a 
catalyzed diesel particulate filter.
    The U.S. Department of Energy in cooperation with industry 
conducted a study entitled Diesel Emission Control Sulfur Effects 
(DECSE) to provide insight into the relationship between advanced 
emission control technologies and diesel fuel sulfur levels. Interim 
report number four of this program gives the total particulate matter 
emissions from a heavy-duty diesel engine operated with a diesel 
particulate filter on several different fuel sulfur levels. A straight 
line fit through this data is presented in Table III.F-1 below showing 
the expected total direct PM emissions from a heavy-duty diesel engine 
on the supplemental steady state test cycle.\114\
---------------------------------------------------------------------------

    \114\ Note that direct emissions are those pollutants emitted 
directly from the engine or from the tailpipe depending on the 
context in which the term is used, and indirect emissions are those 
pollutants formed in the atmosphere through the combination of 
direct emissions and atmospheric constituents.

 Table III.F-1.--Estimated PM Emissions From a Heavy-Duty Diesel Engine
               at the Indicated Average Fuel Sulfur Levels
------------------------------------------------------------------------
                                              Supplemental steady state
                                           -----------------------------
          Avg. Fuel Sulfur [ppm]                               Relative
                                             Tailpipe PM [g/   to 3 ppm
                                                 bhp-hr]        sulfur
------------------------------------------------------------------------
3.........................................            0.003   ..........
7 *.......................................            0.006         100%
15 *......................................            0.009         200%
30........................................            0.017         470%
150.......................................            0.071      2,300%
------------------------------------------------------------------------
* The PM emissions at these sulfur levels are based on a straight-line
  fit to the DECSE data; PM emissions at other sulfur levels are actual
  DECSE data. (Diesel Emission Control Sulfur Effects (DECSE) Program--
  Phase II Interim Data Report No. 4, Diesel Particulate Filters-Final
  Report, January 2000, Table C1.) Although DECSE tested diesel
  particulate filters at these fuel sulfur levels, they do not conclude
  that the technology is feasible at all levels, but they do note that
  testing at 150 ppm is a moot point as the emission levels exceed the
  engine's baseline emission level.

    Table III.F-1 makes it clear that there are significant PM emission 
reductions possible with the application of catalyzed diesel 
particulate filters and low-sulfur diesel fuel. At the observed sulfate 
PM conversion rates, the DECSE program results show that the proposed 
total PM standard is feasible for diesel particulate filter equipped 
engines operated on fuel with a sulfur level at or below 15 ppm. The 
results also show that diesel particulate filter control effectiveness 
is rapidly degraded at higher diesel fuel sulfur levels due to the high 
sulfate PM make observed with this technology.
    It is clear that PM reduction efficiencies are limited by sulfur in 
diesel fuel and that, in order to realize the PM emissions benefits 
sought in this rule, diesel fuel sulfur levels must be as low as 
possible. As discussed in Section IV, we believe that a 15 ppm sulfur 
cap for highway diesel fuel is the correct level given consideration to 
all factors. We request comment on the loss of PM control effectiveness 
due to fuel sulfur along with supportive data.

c. Increased Maintenance Cost for Diesel Particulate Filters Due to 
Sulfur

    In addition to the direct performance and durability concerns 
caused by sulfur in diesel fuel, it is also known that sulfur can lead 
to increased maintenance costs, shortened maintenance intervals, and 
poorer fuel economy for particulate filters. Diesel particulate filters 
are highly effective at capturing the inorganic ash produced from 
metallic additives in engine oil. This ash is accumulated in the filter 
and is not removed through oxidation, unlike the trapped carbonaceous 
PM. Periodically the ash must be removed by mechanical cleaning of the 
filter with compressed air or water. This maintenance step is 
anticipated to occur on intervals of well over one hundred thousand 
miles. However, sulfur in diesel fuel increases this ash accumulation 
rate through the formation of metallic sulfates in the filter, which 
increases both the size and mass of the trapped ash. By increasing the 
ash accumulation rate, the sulfur shortens the time interval between 
the required maintenance of the filter and negatively impacts fuel 
economy. We request comment on the issue of PM filter maintenance costs 
and maintenance intervals along with supportive data.
2. Diesel NOX Catalysts and the Need for Low-Sulfur Fuel
    All of the NOX exhaust emission control technologies 
discussed previously in Section III are expected to utilize platinum to 
oxidize NO to NO2 to improve the NOX reduction 
efficiency of the catalysts at low temperatures or as in the case of 
the NOX adsorber, as an essential part of the process of 
NOX storage. This reliance on NO2 as an integral 
part of the reduction process means that the NOX exhaust 
emission control technologies, like the PM exhaust emission control 
technologies, will have problems with sulfur in diesel fuel. In 
addition NOX adsorbers have the added constraint that the 
adsorption function itself is blocked by the presence of sulfur. These 
limitations due to sulfur in the fuel affect both overall performance 
of the technologies and, in fact, the very feasibility of the 
NOX adsorber technology.

a. Sulfate Particulate Production for NOX Control 
Technologies

    Two advanced NOX control technologies that are likely to 
be able to meet the NOX emission standard being proposed 
today are advanced NOX adsorber catalyst systems and 
advanced Compact-SCR systems. The NOX adsorber technology 
relies on an oxidation function to convert NO to NO2 over 
the catalyst bed. For the NOX adsorber this is a fundamental 
step prior to the storage of NO2 in the catalyst bed as a 
nitrate. Without this oxidation function the catalyst will only trap 
that small portion of NOX emissions from a diesel engine 
which is NO2. This would reduce the NOX adsorber 
effectiveness for NOX reduction from in excess of 90 percent 
to something well below 20 percent. The NOX adsorber relies 
on platinum to provide this oxidation function due to the need for high 
NO

[[Page 35476]]

oxidation rates under the relatively cool exhaust temperatures typical 
of diesel engines.
    The Compact-SCR technology, like the NOX adsorber 
technology, uses an oxidation catalyst to promote the oxidation of NO 
to NO2 at the low temperatures typical of much of diesel 
engine operation. By converting a portion of the NOX 
emissions to NO2 upstream of the ammonia SCR reduction 
catalyst, the overall NOX reductions are improved 
significantly at low temperatures. As discussed previously in section 
III, platinum group metals, primarily platinum, are known to be good 
catalysts to promote NO oxidation, even at low temperatures. Therefore, 
future Compact-SCR systems are expected to rely on a platinum oxidation 
catalyst in order to provide the required NOX emission 
control.
    The NOX adsorber technology may be able to limit its 
impact on sulfate PM emissions by releasing stored sulfur as 
SO2 under rich operating conditions. The Compact-SCR 
technology, on the other hand, has no means to limit sulfate emissions 
other than through lower catalytic function or lowering sulfur in 
diesel fuel. The degree to which the NOX control 
aftertreatment technologies increase the production of sulfate PM 
through oxidation of SO2 to SO3 varies somewhat 
from technology to technology, but it is expected to be similar in 
magnitude and environmental impact to that for the PM control 
technologies discussed previously. Thus, we believe that diesel fuel 
sulfur levels will likely need to be below 15 ppm in order to apply 
these advanced NOX control technologies (see discussion in 
section III.F.1). Without this low-sulfur fuel, the advanced 
NOX control technologies are expected to create PM emissions 
in excess of the PM standard regardless of the engine-out PM levels. We 
invite comment on sulfate PM production by NOX control 
technologies due to fuel sulfur along with supportive data.

b. Sulfur Poisoning (Sulfate Storage) on NOX Adsorbers

    The NOX adsorber technology relies on the ability of the 
catalyst to store NOX as a nitrate on the surface of the 
catalyst, or adsorber (storage) bed, during lean operation. Because of 
the similarities in chemical properties of SOX and 
NOX, the SO2 present in the exhaust is also 
stored by the catalyst surface as a sulfate. The sulfate compound that 
is formed is significantly more stable than the nitrate compound and is 
not released and reduced during the NOX release and 
reduction step. Since the NOX adsorber is essentially 100 
percent effective at capturing SO2 in the adsorber bed, the 
poisoning of the catalyst occurs rapidly. As a result, sulfate 
compounds quickly occupy all of the NOX storage sites on the 
catalyst thereby rendering the catalyst ineffective for NOX 
reduction (poisoning the catalyst).
    The stored sulfur compounds can be removed by exposing the catalyst 
to hot (over 650  deg.C) and rich (air-fuel ratio below the 
stoichiometric ratio of 14.5 to 1) conditions for a brief period.\115\ 
\116\ Under these conditions, the stored sulfate is released and 
reduced in the catalyst.\117\ Because the exhaust must be taken to a 
hot and rich condition, there is a fuel consumption impact associated 
with the desulfation cycle. We have developed a spreadsheet model that 
estimates the frequency of desulfation cycles from published data and 
then estimates the fuel economy impact from this event.\118\ Table III-
F.2 shows the estimated fuel economy impact for desulfation of a 
NOX adsorber at different fuel sulfur levels assuming a 
desired 90 percent NOX conversion efficiency. The estimates 
in the table are based on assumed average fuel sulfur levels associated 
with different sulfur level caps.
---------------------------------------------------------------------------

    \115\ [Reserved]
    \116\ Dou, Danan and Bailey, Owen, ``Investigation of 
NOX Adsorber Catalyst Deactivation,'' SAE 982594.
    \117\ Guyon, M. et al., ``Impact of Sulfur on NOX 
Trap Catalyst Activity--Study of the Regeneration Conditions,'' SAE 
982607.
    \118\ Memo from Byron Bunker, to docket A-99-06, ``Estimating 
Fuel Economy Impacts of NOX Adsorber De-Sulfurization.''

 Table III.F-2.--Estimated Fuel Economy Impact From Desulfation of a 90%
                         Efficient NOX Adsorber
------------------------------------------------------------------------
                                                                 Fuel
            Fuel sulfur cap [ppm]              Average fuel    economy
                                               sulfur [ppm]    penalty
------------------------------------------------------------------------
500..........................................          350           27%
50...........................................           30            2%
25...........................................           15            1%
15...........................................            7            1%
5............................................            2            1%
------------------------------------------------------------------------

    The table highlights that the fuel economy penalty associated with 
sulfur in diesel fuel is noticeable even at average sulfur levels as 
low as 15 ppm and increases rapidly with higher sulfur levels. It also 
shows that the use of a NOX adsorber at the proposed 15 ppm 
sulfur cap would be expected to result in a fuel economy impact of less 
than 1 percent absent other changes in engine design. However, as 
discussed in Section G below, we anticipate that other engine 
modifications could be made to offset this fuel economy impact. For 
example, a NOX control device in the exhaust system could 
allow use of fuel saving engine strategies, such as advanced fuel 
injection timing, that could be used to offset the increased fuel 
consumption associated with the NOX adsorber. The result is 
that low-sulfur fuel enables the NOX adsorber, which in turn 
enables fuel saving engine modifications. Such a system level fuel 
economy impact, which we estimate to be zero under a 15 ppm cap 
program, is discussed below in section III.G.
    Future improvements in the NOX adsorber technology are 
expected and needed if the technology is to provide the environmental 
benefits we have projected today. Some of these improvements are likely 
to include improvements in the means and ease of removing stored sulfur 
from the catalyst bed. However because the stored sulfate species are 
inherently more stable than the stored nitrate compounds (from stored 
NOX emissions), we expect that a separate release and 
reduction cycle (desulfation cycle) will always be needed in order to 
remove the stored sulfur. Therefore, we believe that fuel with a sulfur 
level at or below 15 ppm sulfur will be necessary in order to avoid an 
unacceptable fuel economy impact. We request comment on sulfur 
poisoning of NOX adsorbers by fuel sulfur along with 
supportive data.

c. Sulfur Impacts on Catalytic Efficiency

    The technologies discussed in today's proposal generally rely on 
some form of catalytic function in order to promote favorable chemical 
reactions needed in order to accomplish the desired NOX 
emission reductions. In each case platinum and/or other precious group 
metal catalysts are anticipated to be used to accomplish these 
functions. From our experience with gasoline three-way catalysts and 
from the extensive body of work in the literature we know that these 
catalytic functions are inhibited by sulfur. Sulfur deposits on the 
precious metal sites in the catalyst and causes a decrease in the 
catalytic function of the device. This causes an increase in the light-
off temperature for the catalyst along with a significant reduction in 
the oxidation and reduction efficiencies of all of the devices.\119\ As 
discussed at length in the Tier 2 rulemaking, sulfur reductions in the 
fuel are a very effective way to reduce catalyst poisoning of this type 
in

[[Page 35477]]

order to maintain high catalyst efficiency and to ensure reliable 
operation. We invite comment on fuel sulfur impact on catalyst 
efficiency along with supportive data.
---------------------------------------------------------------------------

    \119\ The Impact of Sulfur in Diesel Fuel on Catalyst Emissions 
Control Technology--Manufacturers of Emission Controls Association 
(MECA), March 15, 1999, www.meca.org.
---------------------------------------------------------------------------

3. What About Sulfur in Engine Lubricating Oils?
    Current engine lubricating oils have sulfur contents which can 
range from 2,500 ppm to as high as 8,000 ppm by weight. Since engine 
oil is consumed by heavy-duty diesel engines in normal operation, it is 
important that we account for the contribution of oil derived sulfur in 
our analysis of the need for low-sulfur diesel fuel. One way to give a 
straightforward comparison of this effect is to express the sulfur 
consumed by the engine as an equivalent fuel sulfur level. This 
approach requires that we assume specific fuel and oil consumption 
rates for the engine. Using this approach, estimates ranging from two 
to seven ppm diesel fuel sulfur equivalence have been made for the 
sulfur contribution from engine oil.\120,\ \121\ If values at the upper 
end of this range accurately reflect the contribution of sulfur from 
engine oil to the exhaust this would be a concern as it would represent 
50 percent of the total sulfur in the exhaust under a 15 ppm diesel 
fuel sulfur cap (with an average sulfur level assumed to be 
approximately seven ppm). However, we believe that this simplified 
analysis, while valuable in demonstrating the need to investigate this 
issue further, overstates the likely sulfur contribution from engine 
oil by a significant amount.
---------------------------------------------------------------------------

    \120\ Whitacre, Shawn. ``Catalyst Compatible'' Diesel Engine 
Oils, DECSE Phase II, Presentation at DOE/NREL Workshop ``Exploring 
Low Emission Diesel Engine Oils.'' January 31, 2000.
    \121\ This estimate assumes that a heavy-duty diesel engine 
consumes 1 quart of engine oil in 2,000 miles of operation, consumes 
fuel at a rate of 1 gallon per 6 miles of operation and that engine 
oil sulfur levels range from 2,000 to 8,000 ppm.
---------------------------------------------------------------------------

    Current heavy-duty diesel engines operate with open crankcase 
ventilation systems which ``consume'' oil by carrying oil from the 
engine crankcase into the environment. This consumed oil is correctly 
included in the total oil consumption estimates, but should not be 
included in estimates of oil entering the exhaust system for this 
analysis, since as currently applied this oil is not introduced into 
the exhaust. At present we estimate that the majority of lube oil 
consumed by an engine meeting the 0.1 g/bhp-hr PM standard is lost 
through crankcase ventilation, rather than through the exhaust. Based 
on assumed engine oil to PM conversion rates and historic soluble 
organic fraction breakdowns we have estimated the contribution of 
sulfur from engine oil to be less than two ppm fuel equivalency. With 
the proposal today to close the crankcase, coupled with the use of 
closed crankcase ventilation systems that separate in excess of 90 
percent of the oil from the blow-by gases, we believe that this very 
low contribution of lube oil to sulfur in the exhaust can be 
maintained. For a further discussion of our estimates of the sulfur 
contribution from engine oil refer to the draft RIA associated with 
this proposal.
    Although there are good indications to date that oil borne sulfur 
is not a significant contributor to exhaust sulfur, EPA remains 
concerned about this issue. We invite comment on the potential for 
engine lubricating oils to introduce significant amounts of sulfur into 
the exhaust. Of particular value to EPA is data indicating the expected 
oil consumption rates of future engines and estimates of future engine 
oil characteristics specifically with regard to sulfur content. We also 
invite comment on the potential for new ``low-sulfur'' engine oils to 
be developed for these vehicles equipped with sulfur sensitive emission 
control technologies.

G. Fuel Economy Impact of Advanced Emission Control Technologies

    The advanced emission control technologies expected to be applied 
in order to meet the proposed NOX and PM standards involve 
wholly new system components integrated into engine designs and 
calibrations, and as such may be expected to change the fuel 
consumption characteristics of the overall engine design. After 
reviewing the likely technology options available to the engine 
manufacturers, we believe that the integration of the engine and 
exhaust emission control systems into a single synergistic emission 
control system will lead to heavy-duty vehicles which can meet 
demanding emission control targets without increasing fuel consumption 
beyond today's levels.
1. Diesel Particulate Filters and Fuel Economy
    Diesel particulate filters are anticipated to provide a step-wise 
decrease in diesel particulate (PM) emissions by trapping and oxidizing 
the diesel PM. The trapping of the very fine diesel PM is accomplished 
by forcing the exhaust through a porous filtering media with extremely 
small openings and long path lengths.\122\ This approach results in 
filtering efficiencies for diesel PM greater than 90 percent but 
requires additional pumping work to force the exhaust through these 
small openings. The additional pumping work is anticipated to increase 
fuel consumption by approximately one percent.\123\ However, we believe 
this fuel economy impact can be regained through optimization of the 
engine-PM trap-NOX adsorber system, as discussed below. We 
request comment and data on the magnitude of the fuel economy impact of 
diesel particulate filters.
---------------------------------------------------------------------------

    \122\ Typically the filtering media is a porous ceramic monolith 
or a metallic fiber mesh.
    \123\ Engine, Fuel, and Emissions Engineering, Incorporated, 
``Economic Analysis of Diesel Aftertreatment System Changes Made 
Possible by Reduction of Diesel Fuel Sulfur Content,'' December 14, 
1999, Air Docket A-99-06.
---------------------------------------------------------------------------

2. NOX Control Technologies and Fuel Economy
    NOX adsorbers are expected to be the primary 
NOX control technology introduced in order to provide the 
reduction in NOX emissions envisioned in this proposal. 
NOX adsorbers work by storing NOX emissions under 
fuel lean operating conditions (normal diesel engine operating 
conditions) and then by releasing and reducing the stored 
NOX emissions over a brief period of fuel rich engine 
operation. This brief periodic NOX release and reduction 
step is directly analogous to the catalytic reduction of NOX 
over a gasoline three-way-catalyst. In order for this catalyst function 
to occur the engine exhaust constituents and conditions must be similar 
to normal gasoline exhaust constituents. That is, the exhaust must be 
fuel rich (devoid of excess oxygen) and hot (over 250C). Although it is 
anticipated that diesel engines can be made to operate in this way, it 
is assumed that fuel economy while operating under these conditions 
will be worse than normal. We have estimated that the fuel economy 
impact of the NOX release and reduction cycle would, all 
other things being equal, increase fuel consumption by approximately 
one percent. Again, we believe this fuel economy impact can be regained 
through optimization of the engine-PM trap-NOX adsorber 
system, as discussed below.
    In addition to the NOX release and regeneration event, 
another step in NOX adsorber operation may affect fuel 
economy. As discussed earlier, NOX adsorbers are poisoned by 
sulfur in the fuel even at the low sulfur levels we are proposing. As 
discussed in the draft RIA, we anticipate that the sulfur poisoning of 
the NOX adsorber can be reversed through a periodic 
``desulfation'' event. The desulfation of the NOX adsorber 
is accomplished in a similar manner to the NOX release and 
regeneration cycle described above. However it is anticipated that the

[[Page 35478]]

desulfation event will require extended operation of the diesel engine 
at rich conditions.\124\ This rich operation will, like the 
NOX regeneration event, require an increase in the fuel 
consumption rate and will cause an associated decrease in fuel economy. 
With a 15 ppm fuel sulfur cap, we are projecting that fuel consumption 
for desulfation would increase by one percent or less, which we believe 
can be regained through optimization of the engine-PM trap-
NOX adsorber system as discussed below.
---------------------------------------------------------------------------

    \124\ Dou, D. and Bailey, O., ``Investigation of NOX 
Adsorber Catalyst Deactivation'' SAE982594.
---------------------------------------------------------------------------

    While NOX adsorbers require non-power producing 
consumption of diesel fuel in order to function properly and, 
therefore, have an impact on fuel economy, they are not unique among 
NOX control technologies in this way. In fact NOX 
adsorbers are likely to have a very favorable NOX to fuel 
economy trade-off when compared to other NOX control 
technologies like cooled EGR and injection timing retard that have 
historically been used to control NOX emissions. EGR 
requires the delivery of exhaust gas from the exhaust manifold to the 
intake manifold of the engine and causes a decrease in fuel economy for 
two reasons. The first of these reasons is that a certain amount of 
work is required to pump the EGR from the exhaust manifold to the 
intake manifold; this necessitates the use of intake throttling or some 
other means to accomplish this pumping. The second of these reasons is 
that heat in the exhaust, which is normally partially recovered as work 
across the turbine of the turbocharger, is instead lost to the engine 
coolant through the cooled EGR heat exchanger. In the end, cooled EGR 
is only some 50 percent effective at reducing NOX. 
Nonetheless, cooled EGR, which we anticipate to be the technology of 
choice for meeting the proposed 2004 heavy-duty standards, still has a 
considerable advantage over the previous solutions such as injection 
timing retard. Injection timing retard is the strategy that has 
historically been employed to control NOX emissions. By 
retarding the introduction of fuel into the engine, and thus delaying 
the start of combustion, both the peak temperature and pressure of the 
combustion event are decreased; this lowers NOX formation 
rates and, ultimately, NOX emissions. Unfortunately, this 
also significantly decreases the thermal efficiency of the engine 
(decreases fuel economy) while also increasing PM emissions. As an 
example, retarding injection timing eight degrees can decrease 
NOX emissions by 45 percent, but this occurs at a fuel 
economy penalty of more than seven percent.\125\
---------------------------------------------------------------------------

    \125\ Herzog, P. et al., NOX Reduction Strategies for 
DI Diesel Engines, SAE 920470, Society of Automotive Engineers 1992 
(from Figure 1).
---------------------------------------------------------------------------

    Today, most diesel engines rely on injection timing control 
(retarding injection timing) in order to meet the 4.0 g/bhp-hr 
NOX emission standard. For 2002/2004 model year compliance, 
we expect that engine manufacturers will use a combination of cooled 
EGR and injection timing control to meet the 2.0 g/bhp-hr 
NOX standard. Because of the more favorable fuel economy 
trade-off for NOX control with EGR when compared to timing 
control, we have forecast that less reliance on timing control will be 
needed in 2002/2004. Therefore, fuel economy will not be changed even 
at this lower NOX level.
    NOX adsorbers have a significantly more favorable 
NOX to fuel economy trade-off when compared to cooled EGR or 
timing retard alone, or even when compared to cooled EGR and timing 
retard together.\126\ We expect NOX adsorbers to be able to 
accomplish greater than 90 percent reduction in NOX 
emissions, while only increasing fuel consumption by a very reasonable 
two percent or less. Therefore, we expect manufacturers to take full 
advantage of the NOX control capabilities of the 
NOX adsorber and project that they will decrease reliance on 
the more expensive (from a fuel economy standpoint) technologies, 
especially injection timing retard. We would therefore predict, that 
the fuel economy impact currently associated with NOX 
control from timing retard would be decreased by at least three 
percent. In other words, through the application of advanced 
NOX exhaust emission control technologies, which are enabled 
by the use of low-sulfur diesel fuel, we expect the NOX 
trade-off with fuel economy to continue to improve significantly when 
compared to today's technologies. This will result in both much lower 
NOX emissions, and potentially overall improvements in fuel 
economy. Improvements could easily offset the fuel consumption of the 
NOX adsorber itself and, in addition, the one percent fuel 
economy loss projected to result from the application of PM filters. 
Consequently, we are projecting no fuel economy penalty to result from 
this rule. We invite comment and data concerning the relationships 
between the various types of NOX control technologies and 
fuel economy as described here and in the cited references. In 
particular we ask for comments and data on NOX adsorber fuel 
economy and methods of recovering that fuel economy through injection 
timing changes.
---------------------------------------------------------------------------

    \126\ Zelenka, P. et al., Cooled EGR--A Key Technology for 
Future Efficient HD Diesels, SAE 980190, Society of Automotive 
Engineers 1998. Figure 2 from this paper gives a graphical 
representation of how new technologies (including aftertreatment 
technologies) can shift the trade-off between NOX 
emissions and fuel economy.
---------------------------------------------------------------------------

3. Emission Control Systems for 2007 and Net Fuel Economy Impacts
    We anticipate that, in order to meet the stringent NOX 
and PM emission standards proposed today, the manufacturers would 
integrate engine-based emission control technologies and post-
combustion emission control technologies into a single systems-based 
approach that would fundamentally shift historic trade-offs between 
emissions control and fuel economy. As outlined in the preceding two 
sections, individual components in this system would introduce new 
constraints and opportunities for improvements in fuel efficient 
control of emissions. Having considered the many opportunities to 
fundamentally improve these relationships, we believe that it is 
unlikely that fuel economy will be lower than today's levels and, in 
fact, may improve through the application of these new technologies and 
this new systems approach. Therefore, for our analysis of economic 
impacts in section V, no penalty or benefit for changes to fuel economy 
are considered. We request comment on our analysis of the likely fuel 
economy offsets of the NOX and PM emission control 
technologies that would be needed in order to meet today's proposed 
standards.

H. Future Reassessment of Diesel NOX Control Technology

    We are considering conducting a future reassessment of diesel 
NOX control technologies and associated fuel sulfur 
requirements, and we request comment on the need for such a 
reassessment. Given the relative state of development of NOX 
emission control technology versus PM and NMHC control technologies, we 
would expect to focus the control technology reassessment solely on 
NOX control technologies. We believe that the clear intent 
of this proposal to provide low-sulfur diesel fuel will allow the 
development of this technology to progress rapidly, and will result in 
systems capable of achieving the proposed standards. However, we 
acknowledge that our proposed NOX standard represents an 
ambitious target for this technology, and that the degree of 
uncertainty surrounding the feasibility of high-efficiency 
NOX control technology would be higher if

[[Page 35479]]

fuel sulfur levels higher than the proposed level were adopted. We also 
recognize that technology evolution may affect the sulfur level at 
which these technologies are enabled.
    Therefore, we are evaluating whether or not the proposed program 
could benefit from a future reassessment of the control effectiveness 
of diesel NOX exhaust emission control technologies and 
associated fuel sulfur requirements. We would expect to conduct such a 
reassessment in the 2003 timeframe, though we welcome comment on 
whether such a reassessment will be needed and on the appropriate 
timing for it. We also welcome comment on the extent to which a review 
of NOX control technology should also include a review of 
the appropriate diesel fuel sulfur level for enabling the 
NOX control technology, including consideration of impacts 
that a revised fuel requirement would have on PM control technology. 
Another possible area for consideration during the reassessment could 
be non-conformance penalties (NCPs) and the role they might play in 
this program. NCPs would allow engine manufacturers to produce and sell 
noncomplying engines under limited circumstances in exchange for paying 
a penalty to the government. We welcome comment on the role NCPs may 
play.
    In conducting the review, we would expect to determine whether or 
not there was a need to formally consider a change in the final 
regulations adopted for this program. If such a change were determined 
to be necessary, we would conduct a formal rulemaking, including 
conducting public hearings.

I. Encouraging Innovative Technologies

    We encourage comments on approaches that could provide increased 
incentives for the development and introduction of clean advanced 
engine technologies. Some such approaches have been suggested by 
stakeholders or have been a part of other EPA rules. One of these would 
be to develop a program for providing a special designation for engines 
or vehicles that are significantly below the standards or use specific 
innovative propulsion technologies. EPA finalized such a designation, 
the ``Blue Sky Series Engine'' program, as a part of the 1998 nonroad 
diesel standards final rule. Incorporating such a designation could be 
very valuable for use in programs developed by states, municipalities, 
or corporations to highlight or reward the purchase and use of 
especially clean or innovative vehicles and engines. We request comment 
on how we might structure a program like the ``Blue Sky Series'' 
program in the context of today's proposal, including what criteria we 
should use to qualify an engine or vehicles for such a designation.
    It has also been suggested that we might adapt the proposed ABT 
program described in section VII.C. below to provide extra incentives 
for manufacturers that encourage innovative technologies. For example, 
manufacturers might get additional credits under the ABT program if 
they introduce extra clean models or if they meet future standards 
early. We believe our current ABT program, with the proposed revisions 
discussed below, should encourage manufacturers to seriously consider 
any technologies that can economically reach the very low emission 
levels proposed today. Nevertheless, we request comment on the need for 
and appropriateness of such additional provisions under the ABT 
program.

IV. Diesel Fuel Requirements

    As discussed in section III above, we believe that advanced exhaust 
emission control technology exists and is being developed that can 
reduce emissions of NOX and PM to very low levels. However, 
those exhaust emission control technologies will require changes to 
diesel fuel in order to operate efficiently and reach the new engine 
emissions standards we are proposing in today's NPRM. This section will 
present our proposed changes to diesel fuel that are intended to enable 
heavy-duty engines to meet our proposed new emission standards. We will 
also describe the extent and applicability of the proposed diesel fuel 
program, the means through which we expect refiners to meet the new 
diesel fuel standards, and incentives we are providing refiners for 
early introduction. The economic and environmental impacts of the 
proposed diesel fuel program will be covered in subsequent sections in 
combination with the implications of the proposed engine standards.

A. Why Do We Believe New Diesel Fuel Sulfur Controls Are Necessary?

    In section III, we discussed our proposed finding that new 
standards for heavy-duty engines can be established on the basis of 
exhaust emission controls which we believe will be fully viable and 
widely available for the 2007 model year. However, we also discussed 
our understanding that those exhaust emission control technologies have 
a significant and irreversible sensitivity to the sulfur content of the 
fuel. Deep sulfur reductions are necessary to enable both the 
NOX and PM emission control technology that we believe 
vehicles would need to use to achieve the emission standards we are 
proposing today. Since we believe that new standards for heavy-duty 
engines are an appropriate next step for reducing ambient pollution, 
and it is these very exhaust emission control technologies which 
manufacturers are likely to use in order to reach these low emission 
levels, we are proposing to reduce the sulfur content of highway diesel 
fuel.
    Engine manufacturers and representatives of States, and 
environmental and public health organizations have expressed general 
support for a highway diesel fuel sulfur reduction strategy similar to 
the gasoline sulfur reduction program. However, some stakeholders, in 
particular refiners, have expressed concern that the sulfur sensitivity 
of heavy-duty diesel exhaust emission controls has not been quantified 
with a sufficient degree of certainty to provide a basis for setting a 
specific low sulfur standard. Although it is likely that the efficiency 
of exhaust emission control technology improves with decreasing fuel 
sulfur levels all the way down to nominally zero levels, we believe 
that it is possible to set a non-zero sulfur standard that sufficiently 
enables high-efficiency control technology. The sulfur standard we are 
proposing and the associated justification is described in more detail 
in section IV.B below.
    Sulfur appears to be the only diesel fuel property that must be 
changed in order for the prospective exhaust emission control 
technologies to operate effectively. Changes in other fuel properties, 
such as cetane, aromatics, density, and high-end distillation, might 
all provide small emission benefits for engines meeting our proposed 
standards, but those benefits would be very small in comparison to the 
sulfur standard. They would also not enable new advances in emission 
control technology, and so would not likely produce significant step 
changes in heavy-duty engine emissions. See section VI.B for a more 
complete discussion of non-sulfur property changes for diesel fuel.
    Finally, there is also an expectation on the part of some 
automobile manufacturers that diesel engines will be used more 
frequently in light-duty vehicles in the coming decade. However, any 
light-duty diesel vehicles will be required to meet our final Tier 2 
standards, which we believe will require the use of the same high 
efficiency exhaust emission control technologies envisioned for heavy-
duty applications. Although we are not proposing a change to diesel 
fuel specifically for light-duty diesel

[[Page 35480]]

vehicles, it is our expectation that the availability of a low-sulfur 
fuel intended primarily to enable heavy-duty engines to meet our 
proposed new standards would enable automobile manufacturers to produce 
light-duty diesel vehicles that could meet the Tier 2 standards. We 
would like comment on whether any other changes to diesel fuel 
specifically for light-duty diesel vehicles are necessary, and on the 
appropriateness, benefits, and costs of doing so.

B. What New Sulfur Standard Are We Proposing for Diesel Fuel?

    We are proposing to require substantial reductions in diesel fuel 
sulfur levels nationwide. Our proposal would require that all highway 
diesel fuel produced or imported by refiners and importers be subject 
to a maximum sulfur level of 15 ppm by weight. The technological need 
for low-sulfur diesel fuel and the reasons for our proposed sulfur 
standard are discussed in section III above. However, we are also 
seeking comment on whether the sulfur standard should be set as high as 
50 ppm or as low as 5 ppm, as well as what the associated costs and 
benefits would be of a higher or lower level. (See section VI.B. for 
further discussion of various sulfur standards.)
    We believe our proposed diesel fuel sulfur program balances the 
goal of achieving dramatic reductions in emissions from heavy-duty 
vehicles with the goal of providing sufficient lead-time for the engine 
emission control technology to develop and for the refining industry to 
transition to a lower sulfur diesel fuel. Nevertheless, as noted 
elsewhere, we are seeking comments on all these issues. We are aware of 
diesel fuel industry concerns about their ability to consistently 
deliver fuel meeting this low cap requirement. We are also aware that 
some engine manufacturers are concerned that even fuel meeting the 15 
ppm cap requirement may not adequately enable the exhaust emission 
control technologies. In determining the appropriate sulfur level and 
scope for our proposed program, we considered the implications of 
diesel fuel sulfur on the emission control hardware of both heavy-duty 
and light-duty vehicles (that is, light-duty diesel vehicles that are 
required to meet our Tier 2 emission standards). Specifically, we 
analyzed the degree to which the emission control devices described in 
section III, above, may tolerate diesel fuel sulfur. We also evaluated 
the environmental implications of sulfur control beyond the expected 
NOX and PM benefits (see section II) and the costs of 
controlling fuel sulfur content, and we considered the ability of all 
refiners and importers to meet the proposed diesel fuel sulfur standard 
at essentially the same time (see section IV.D). We hope to benefit 
from further discussion of all of these issues during the public 
comment period.
    The following sections describe in more detail the standard we are 
proposing and the reasons why we are proposing a program that applies 
year-round and nationwide.
1. Why Is EPA Proposing a 15 ppm Cap and Not a Higher or Lower Level?
    There are five key factors which, when taken together, lead us to 
propose that a diesel fuel sulfur cap of 15 ppm is both necessary to 
enable the NOX and PM exhaust emission control technology 
(and thereby allow the proposed emission standards to be met), and 
appropriate, taking into consideration the challenges involved in 
providing low-sulfur fuel. These factors, as discussed in more detail 
in sections III and IV.D, are the implications that sulfur levels in 
excess of 15 ppm would have for the efficiency, reliability, and fuel 
economy impacts of the exhaust emission control systems, and the 
feasibility and costs of producing low-sulfur diesel fuel.
    The efficiency of emission control technologies at reducing harmful 
pollutants is directly impacted by sulfur in diesel fuel. Initial and 
long term conversion efficiencies for NOX, NMHC, CO and 
diesel PM emissions are significantly reduced by catalyst poisoning and 
catalyst inhibition due to sulfur. NOX conversion 
efficiencies with the NOX adsorber technology in particular 
are dramatically reduced in a very short time due to sulfur poisoning 
of the NOX storage bed. In addition total PM control 
efficiency is negatively impacted by the formation of sulfate PM. The 
formation of sulfate PM is likely to be in excess of the total PM 
standard proposed today, unless diesel fuel sulfur levels are below 15 
ppm.
    The reliability of the emission control technologies to continue to 
function as required under all operating conditions for the life of the 
vehicle is also directly impacted by sulfur in diesel fuel. As 
discussed in section III, sulfur in diesel fuel can prevent proper 
operation and regeneration of both NOX and PM control 
technologies leading to permanent loss in emission control 
effectiveness and even catastrophic failure of the systems. We believe 
that diesel fuel with sulfur levels less than 15 ppm will be required 
to provide a level of reliability for these technologies to allow their 
introduction into the marketplace.
    The sulfur content of diesel fuel will also affect the fuel economy 
of vehicles equipped with NOX and PM exhaust emission 
control technologies. As discussed in detail in section III, 
NOX adsorbers are expected to consume diesel fuel in order 
to cleanse themselves of stored sulfates and maintain efficiency. The 
larger the amount of sulfur in diesel fuel, the greater this impact on 
fuel economy. As sulfur levels increase above 15 ppm the fuel economy 
impact transitions from merely noticeable to levels most diesel vehicle 
operators would consider unacceptable (see discussion in section III). 
Likewise PM trap regeneration is inhibited by sulfur in diesel fuel. 
This leads to increased PM loading in the diesel particulate filter, 
increased exhaust backpressure, and poorer fuel economy. Thus for both 
NOX and PM technologies the lower the fuel sulfur level the 
better the fuel economy of the vehicle.
    As a result of these factors, we believe that 15 ppm represents an 
upper threshold of diesel fuel sulfur levels that would make these 
technologies viable, and are therefore proposing to cap in-use sulfur 
levels there. In comments received on the ANPRM, as well as in 
subsequent meetings and discussions, however, we have often heard 
different points of view on this issue expressed by the vehicle and 
engine manufacturers, and by oil refiners.
    Some vehicle and engine manufacturers have argued for a maximum cap 
on the sulfur content of diesel fuel of 5 ppm, believing that this 
level is necessary. As we discuss in section III, however, we believe 
that a cap of 15 ppm (likely resulting in an in-use sulfur level 7 to 
10 ppm) would be sufficient to ensure the reliability of PM exhaust 
emission control technology (avoid potential for irreversible failure) 
and enable it to reach the very high efficiencies needed over the wide 
range of vehicle operation and conditions that would be needed for the 
engines to comply with our proposed standards. Although at the current 
stage of development, high efficiency NOX technology is 
extremely sulfur intolerant, work is already underway to develop 
capability in the technology to tolerate at least some sulfur in the 
fuel. As discussed in section III, however, it is likely that to 
maintain the very high operational efficiencies of the emission control 
equipment that we believe would be needed to meet the proposed emission 
standards, and to avoid a significant fuel economy penalty, the sulfur 
level in the fuel would still have to be very low.

[[Page 35481]]

    We believe that requiring a cap lower than 15 ppm would not be 
necessary to enable the exhaust emission control technology to meet the 
very low NOX and PM emission standards proposed. A cap lower 
than 15 ppm would provide little additional emission reduction but 
would increase the cost. Consequently, requiring a sulfur cap lower 
than that necessary to enable the exhaust emission control technology 
to meet the emission standards would be inappropriate. Further 
discussion and analysis of alternative sulfur standards is contained in 
section VI.
    Conversely, many oil refiners have argued for a higher maximum cap 
(if any) on the content of sulfur in diesel fuel, typically on the 
order of 50 ppm. They argue that the cost of reducing the sulfur level 
below a cap of 50 ppm (and average of 30 ppm) becomes prohibitively 
high. They further argue that diesel engine exhaust emission control 
technology is still in its infancy and will likely develop rapidly over 
the next several years to the point where it is much less sulfur 
sensitive than the technology of today. As discussed in section III, we 
also believe that the diesel engine exhaust emission control technology 
will develop rapidly over the coming years, and in particular are 
projecting that the sensitivity of NOX adsorber technology 
to fuel sulfur will improve considerably through the development of 
techniques to effectively regenerate themselves of stored sulfur 
compounds. The Manufacturers of Emission Controls Association (MECA) 
recently sent a letter strongly supporting this position, stating ``we 
strongly believe that NOX adsorber technology will be 
commercially available in 2007 to help heavy-duty diesel engines meet 
the stringent NOX standards being considered by EPA and that 
any current engineering challenges involved with this technology will 
be addressed provided that very low sulfur fuel is available.'' \127\ 
Based on available information and our projections from that 
information, we believe that a cap higher than 15 ppm sulfur, and in 
particular a cap as high as 50 ppm would not enable the exhaust 
emission control technology needed to achieve the proposed emission 
standards and furthermore may severely compromise the reliability of 
the systems and result in unacceptable fuel economy impacts. In 
addition, as discussed in section IV.D below, although we acknowledge 
that the cost to desulfurize diesel fuel does increase with more 
stringent sulfur levels, we believe that these costs would not be 
prohibitively high, and maintain that the environmental benefits of the 
program are sufficient to justify the costs of the program at a sulfur 
cap level of 15 ppm.
---------------------------------------------------------------------------

    \127\ Letter to Carol Browner, Administrator of EPA from Bruce 
Bertelsen, Executive Director of Manufacturers of Emission Controls 
Association, May 3, 2000.
---------------------------------------------------------------------------

    Based on our assessment of the efficiency, reliability, and fuel 
economy impacts of sulfur on diesel engine exhaust emission control 
technology, and the cost and feasibility factors associated with 
reducing the sulfur content of diesel fuel, we propose to adopt 15 ppm 
as the appropriate sulfur cap. However, we have analyzed the impacts on 
technology enablement, costs, and benefits from controlling fuel sulfur 
to a 15 ppm average level with a 25 ppm cap, as well as from capping 
fuel sulfur at 5 ppm and 50 ppm. These levels have been put forward by 
various stakeholders as either necessary (in the case of a 5 ppm cap) 
or adequate (in the case of a 50 ppm cap) for enabling high-efficiency 
diesel exhaust emission controls, and so we believe that assessments of 
these levels is appropriate. These assessments are discussed in section 
VI.B. We request comment on the appropriate level of the highway diesel 
fuel sulfur standard, and on our assessment of alternative standards.
2. Why Propose a Cap and Not an Average?
    We are proposing a cap on the sulfur content of diesel fuel in 
order to protect the vehicle aftertreatment technologies that we expect 
would be used to meet the proposed standards for heavy-duty engines and 
vehicles. An average standard by itself would not be sufficient to 
ensure that sulfur levels higher than those that could be tolerated by 
the exhaust emission control technology would not be used in vehicles 
for extended periods of time. Consequently, we do not believe that an 
average standard can stand by itself and would at minimum have to be 
coupled with a cap.
3. Should the Proposed 15 ppm Cap Standard Also Have an Average 
Standard?
    Although our current 500 ppm sulfur limit for diesel fuel provides 
no averaging flexibility, in the years since that limit was set our 
motor vehicle fuel regulations have frequently incorporated provisions 
allowing regulated industries to average regulated parameters around a 
standard, often with a capped upper limit. In fact this approach was 
taken in the recently promulgated control of gasoline sulfur levels, in 
which we adopted a 30 ppm average level with an 80 ppm cap.
    Despite the ability of averaging provisions in some programs to 
increase compliance flexibility and in some cases reduce overall costs 
while still achieving the environmental objectives, we are not 
proposing such provisions for the diesel fuel sulfur standard we are 
proposing today. Basing the fuel program around an average sulfur level 
could risk failure in meeting the whole objective of sulfur control 
(the enablement of sulfur-sensitive technologies) and thereby the 
environmental objectives of the program, or else could require the 
adoption of a cap so low as to make the average level largely 
irrelevant. The exhaust emission control technologies enabled by diesel 
sulfur control appear to be far more sensitive to and far less 
forgiving of variations in fuel sulfur level than advanced Tier 2 
gasoline technologies. Enough is known about the exhaust emission 
control technologies to convince us that the proposed sulfur level will 
likely represent an enablement threshold level, above which increases 
in emissions and potentially system failures could be expected. 
Consumption of diesel fuel with sulfur levels above this threshold 
could be very problematic.
    Some commenters who responded to our diesel fuel ANPRM did express 
interest in an averaged fuel sulfur standard, but only from the 
viewpoint that the flexibility provided by averaging is generally 
desirable, and not with specific solutions to the above-discussed 
problems created by this approach. Other commenters opposed an 
averaging requirement due to the test burden associated with 
demonstrating compliance under such a program. We request specific 
suggestions on how to structure a viable averaging requirement in 
conjunction with a 15 ppm cap, and whether it would be desirable to do 
so. One benefit of having only a cap instead of an average is that it 
allows for a simplified enforcement scheme. Imposing an average 
standard in addition to the cap would require additional product 
sampling, recordkeeping, and reporting requirements to demonstrate 
compliance with the standard. Thus, depending on how the program is 
structured, the flexibility of an average standard may not be worth the 
additional cost and complexity that would result, particularly with a 
cap set at 15 ppm.
    Some have suggested that it may be possible to set an average 
standard of 10 ppm coupled with a higher cap. They

[[Page 35482]]

suggest that a 10 ppm average would achieve essentially the same 
average in-use sulfur level as the proposed 15 ppm cap, and that as 
long as the cap is sufficiently protective of the exhaust 
aftertreatment technology, then the refining and distribution systems 
may have greater flexibility in complying with the standard, allowing 
for lower costs and less potential for disruptions of fuel supply. We 
request comment on whether it would be possible to have a higher cap as 
long as the average remained essentially unchanged and if so, what cap 
would be appropriate. If such an approach could enable the technology, 
we seek comment on the extent to which it would help address the 
concerns refiners have raised with very low sulfur levels with respect 
to the potential for fuel shortages and price increases.
    If an averaged fuel sulfur standard were to be adopted (at any 
sulfur level), one added flexibility option that has been suggested to 
facilitate it is an averaging, banking and trading program. Because we 
believe that the exhaust emission control devices would require ultra-
low sulfur diesel fuel, this flexibility would be focused on the 
average component of the standard, rather than on the cap component. 
Refineries would have the option to average across batches, to bank 
credits for use in the future, and to purchase credits from other 
refineries. In addition, under this concept the Agency could offer 
additional ``average credits'' at a predetermined price to refineries. 
This could provide more certainty about the cost of complying with the 
average component of the standard by establishing a ceiling price on 
these tradable and bankable credits. These credits could be used for a 
refinery to comply with the average requirement; however, refineries' 
use of these credits would still be subject to the cap standard. We 
request comment on the concept of an averaging, banking, and trading 
program in the context of an average standard, including: (1) whether 
the additional flexibility of offering additional ``average credits'' 
at a predetermined price would benefit refineries; and, (2) what the 
appropriate predetermined price for EPA-offered ``average credits'' 
should be.
4. Why We Believe Our Diesel Fuel Sulfur Program Should Be Year-round 
and Nationwide
    We believe it is necessary for all highway diesel fuel to meet the 
proposed 15 ppm sulfur limit at all times. To relax this requirement 
would jeopardize many of the environmental benefits of the proposed 
program. Although NOX benefits are only realized in the 
summer, PM and air toxics benefits are realized year-round. Moreover, 
the exhaust emission control devices require low-sulfur diesel fuel 
year-round. The use of highway fuel with a sulfur content greater than 
our proposed sulfur standard could damage the emission control 
technology of 2007 and later model year vehicles and engines. Once 
vehicles are equipped with the new exhaust emission control devices, 
they can only be fueled with the low-sulfur fuel. This precludes any 
consideration of a seasonal program. In addition, because diesel 
vehicles travel across the country transporting goods from region to 
region and state to state, low-sulfur diesel fuel will have to be 
available nationwide (see discussion in section VI.C. for possible 
exceptions. The health effects associated with diesel PM emissions are 
not area-specific, nor are the adverse effects of high sulfur diesel on 
engines with exhaust emission control. For these reasons, we do not 
believe that any regional or seasonal exemptions from the proposed 
sulfur requirements would be practical.

C. When Would the New Diesel Sulfur Standard Go Into Effect?

    Since the need for low-sulfur diesel is dictated by the 
implementation of new engine standards, the proposed sulfur standard 
would become effective commensurate with the introduction of the first 
heavy-duty engines meeting our proposed standards. As described in 
section III.H, the phase-in of the engine standards is proposed to 
begin with the 2007 model year. Since light-heavy-duty trucks might be 
introduced as early as January 2 of the previous calendar year but are 
often introduced beginning about July 1, we are proposing that all 
highway diesel fuel sold at retail stations and wholesale purchaser-
consumers meet the proposed sulfur standard by June 1, 2006. We believe 
that this one month lead time will be sufficient to provide confidence 
that the fuel available for purchase on July 1 will comply with the 
proposed sulfur cap. We are also proposing that highway diesel fuel at 
the terminal level be required to meet the proposed sulfur standard as 
of May 1, 2006, and that highway diesel fuel produced by refiners (and 
imported) meet the proposed sulfur standard by April 1, 2006. We 
believe these earlier compliance requirements at terminals and 
refineries would be necessary to provide an orderly transition to low-
sulfur fuel and to avoid the market disruptions that occurred when the 
sulfur level of diesel fuel was lowered to 500 ppm in 1993 with only a 
retail compliance date. The three months between April and July should 
allow sufficient time for fuel to move through the distribution system, 
for existing tankage to transition down to the lower sulfur level that 
would be required. It would also ensure that all fuel is complying with 
the proposed sulfur standard and is available for use in heavy-duty 
engines when 2007 model year engines are introduced to the market. We 
request comment on this proposed approach.
    We believe that the lead-time issue is particularly important, 
because not only would failure to meet the standards at the retail 
level cause emission increases from new technology vehicles, but 
violations of the standard due to insufficient turnover in the 
distribution system could potentially permanently disable the emission 
control systems of new technology vehicles and could cause driveability 
problems for the operators of such vehicles. We would like to take 
comment on these dates for the start of our low-sulfur diesel program, 
and in particular on whether the three-month lead time is more than 
adequate, adequate, or less than adequate for an orderly transition.
    Some parties have suggested that low-sulfur diesel should be 
required at the same time as low-sulfur gasoline, in 2004. They point 
out that refinery synergies are optimized when refiners are forced to 
address both requirements at the same time instead of sequentially. The 
earlier introduction of low-sulfur diesel would also provide both 
reductions in sulfur dioxide and sulfate PM emissions for the in-use 
fleet prior to 2007, and would give engine manufacturers greater 
flexibility to make use of sulfur-sensitive technologies such as cooled 
EGR.
    We do not believe that it is appropriate to require all on-highway 
diesel fuel to meet our proposed sulfur standard prior to the 
introduction of heavy-duty engines meeting our proposed standards. By 
proposing a 2006 start year for the low-sulfur diesel program, we are 
giving refiners a long lead-time to begin the planning process for 
meeting our proposed requirements. They always have the flexibility to 
make a single set of refinery changes prior to 2004 that will allow 
them to meet both the low-sulfur gasoline and our proposed low-sulfur 
diesel requirements by 2004. Although we are not requiring it, we would 
encourage the introduction of highway diesel fuel that meets the 
proposed sulfur standard prior to 2006, as discussed in section IV.F.
    Finally, some parties have suggested that low-sulfur diesel is 
necessary by 2004 to ensure that light-duty vehicles

[[Page 35483]]

can meet our Tier 2 standards using diesel fuel. Although some analysts 
have predicted a greater proportion of diesel-powered light-duty 
vehicles in the coming decade, we do not believe that they can justify 
the introduction of low-sulfur diesel prior to 2006. As discussed in 
more detail in section VI.A.2, we believe diesel-powered light-duty 
vehicles will not actually need low-sulfur diesel fuel prior to 2006, 
given the flexibility offered by the Tier 2 program's bin structure. It 
would also appear that light-duty vehicles would not produce lower 
emissions using lower-sulfur diesel fuel than they would using 
gasoline, since all light-duty must meet the same Tier 2 standards. 
There would be no emission benefits associated with introducing low-
sulfur diesel fuel prior to 2006, for use in light-duty vehicles, and 
thus it would be difficult to justify the costs. We welcome comments on 
requiring low-sulfur diesel fuel prior to 2006 for use in light-duty 
vehicles. We also welcome comments on the appropriateness of a 2006 
start date for the diesel fuel sulfur standard.

D. Why We Believe the Proposed Diesel Sulfur Standard Is 
Technologically Feasible

    In addition to evaluating the merits of diesel powered highway 
vehicles operating on low-sulfur diesel fuel, we also considered the 
ability of refiners to reduce diesel fuel sulfur in essentially every 
gallon of highway diesel fuel by mid-2006. Based on this evaluation, we 
believe it is technically feasible for refiners to meet the proposed 
standards and that it is possible for them to do so in the proposed 
time frame. We are summarizing our analysis here and we refer the 
reader to the Draft RIA for more details. We welcome comments on all 
aspects of this analysis.
1. What Technology Would Refiners Use?
    Conventional diesel desulfurization technologies have been 
available and in use for many years. Conventional hydrotreating 
technology involves combining hydrogen with the distillate (material 
falling into the boiling range of diesel fuel) at moderate pressures 
and temperatures and flowing the mixture through a fixed bed of 
catalyst. EPA required refiners and diesel fuel distributors and 
marketers to provide diesel fuel for highway vehicles which does not 
exceed 500 ppm by weight in sulfur starting in October 1993. As a 
result, most U.S. refiners installed diesel desulfurization units to 
reduce their onroad diesel fuel from the pre-control average of about 
3000 ppm, to the current average of about 350 ppm.
    Based on our review of the literature and discussions with vendors 
of catalyst technology and desulfurization technology, the most 
difficult challenge to reducing sulfur to extremely low levels via 
conventional hydrotreating is the presence of certain aromatic 
compounds. These aromatic compounds are referred to as sterically 
hindered, because the physical arrangement of the atoms of these 
compounds hinders interaction between the sulfur atom and the 
catalyst.\128\ One method to desulfurize these compounds is to design 
the shape of catalyst surfaces so that these sterically hindered 
compounds can more easily approach the catalytic material. Another 
approach is to saturate one or more of the aromatic rings present, 
which makes the sulfur atom more accessible to the catalytic surface.
---------------------------------------------------------------------------

    \128\ Typical compounds which are difficult to desulfurize are 
4-methyl, dibenzothiophene and 4,6-dimethyl, dibenzothiophene. The 
methyl group(s) attached to the aromatic rings make it very 
difficult for the sulfur atom to physically approach the catalyst, 
which is essential for the desulfurization process to proceed.
---------------------------------------------------------------------------

    Refiners produce diesel fuel from a variety of distillate blending 
streams in the refinery. The largest component is straight run 
distillate, which comes straight from crude oil, hence the name 
straight run. The second largest component is light cycle oil (LCO) 
which comes from the fluidized catalytic cracker, or FCC unit. This 
unit primarily produces gasoline from material having a higher 
molecular weight than either gasoline or diesel fuel, but also produces 
a significant amount of distillate. About 62 percent of today's highway 
diesel fuel contains some LCO. The third largest component is light 
coker gas oil, which comes from the coker, which also produces lighter 
molecular weight material from heavier material. Both straight run 
distillate and light coker gas oil contain relatively low levels of 
sterically hindered compounds. LCO contains a much higher concentration 
of sterically hindered compounds. Thus, the difficulty of achieving the 
15 ppm sulfur cap being proposed today is primarily a function of the 
amount of light cycle oil (LCO) that a refiner processes into its 
highway diesel pool.\129\
---------------------------------------------------------------------------

    \129\ LCOs are not homogeneous and can vary dramatically in 
chemical composition from refiner to refiner. The discussion here 
applies to a typical LCO composition.
---------------------------------------------------------------------------

    We project that all refiners would be technically capable of 
meeting the proposed sulfur cap with extensions of the same 
conventional hydrotreating which they are using to meet the current 
highway diesel fuel standard. This extension would likely mean adding a 
second stage of conventional hydrotreating. In a two-stage process, 
hydrogen sulfide is removed from the treated distillate after the first 
reactor and fresh hydrogen added prior to the second reactor. This 
stripping of the hydrogen sulfide serves two purposes. First and 
foremost, it reduces the concentration of hydrogen sulfide throughout 
the second reactor. This speeds up the desufurization reactions 
substantially. Second, it reduces the concentration of hydrogen sulfide 
at the end of the second reactor. This is the point where hydrogen 
sulfide can react with the treated distillate, forming new sulfur 
compounds (essentially adding sulfur back into the fuel). This process 
is termed recombination and low hydrogen sulfide concentrations 
decrease it dramatically. Finally, reducing the concentration of 
hydrogen sulfide increases the concentration of hydrogen, again 
speeding up the desulfurization reactions.
    Converting an existing one-stage hydrotreater into a two-stage 
hydrotreater would involve adding an additional reactor, a hot hydrogen 
sulfide stripper, modifications to the compressor to increase pressure 
to the new reactor and possibly a pressure-swing adsorption (PSA) unit 
to increase hydrogen purity. Essentially all of the units comprising 
the existing hydrotreater would still be used.
    We project that all refiners could utilize recently developed, high 
activity catalysts, which increase the amount of sulfur which can be 
removed relative to the catalysts which were available when the current 
desulfurization units were designed and built. The cost of these 
advanced catalysts is very modest relative to less active catalysts, 
but they would significantly reduce the size of the new reactors 
described above. We also project that refiners and technology vendors 
could achieve the 15 ppm cap without significant saturation of aromatic 
compounds. This will be achieved through the selection of catalysts and 
through the control of operating conditions, particularly temperature.
    The above projections are based primarily on information received 
from a number of refining technology vendors, supported by published 
literature, as no operating experience at sulfur levels below 10 ppm 
currently exists with this technology on diesel fuel feedstocks typical 
of U.S. refiners. All the vendors supplying information to EPA and 
others studying diesel fuel desulfurization projected that the 15 ppm 
cap can be met using diesel fuel

[[Page 35484]]

hydrotreaters which operate at hydrogen pressures ranging from 600-900 
pounds per square inch (psi) and with total reactor volumes of roughly 
2-3 times those of current diesel fuel hydrotreaters. A number of oil 
refiners informed us that they believe that much larger reactors would 
be required. API believes that both higher pressures and larger 
reactors will be needed. Either change would increase our projected 
costs (described in section V.D.1 below).
    Based on our review of the literature, we do not believe that these 
extremely large reactors would be required to meet the proposed sulfur 
cap. However, 15 ppm sulfur diesel fuel is not yet being produced 
commercially from feedstocks typical of the U.S. Thus, we request 
comments on the sufficiency of 600-900 psi operating pressures for 
diesel fuel hydrotreaters to meet the proposed sulfur cap. We also 
request comment on the sufficiency of total reactor volumes which are 
2-3 times greater than those currently being utilized under the 500 ppm 
sulfur cap in order to meet a 15 ppm cap.
    Other options are available to refiners. Some refiners could choose 
to add an FCC feed hydrotreater. This improves the yield of high value 
products from the FCC unit and reduces the sulfur content of both FCC 
naphtha and LCO. FCC naphtha is the primary source of sulfur in 
gasoline, for which EPA recently set stringent standards. However, 
while hydrotreating the FCC feed reduces the sulfur content of the LCO 
produced by the FCC unit, it can increase the concentration of 
sterically hindered compounds. Also, FCC feed hydrotreating is much 
more costly than distillate hydrotreating or ring opening technology. 
Thus, we are not projecting that any refiners would utilize this 
technology to meet the proposed diesel fuel sulfur cap.
    Refiners could also add a hydrocracker to process their LCO if they 
have not already done so. This would increase the production of high 
value gasoline with a very low sulfur content. However, hydrocrackers 
are very costly to build and operate, so a refiner choosing to do so 
would likely do so for reasons beyond removing sulfur from diesel fuel.
    In addition to these major technological options, most refiners 
would also have to add other more minor units to support the new 
desulfurization unit. These units could include hydrogen plants, sulfur 
recovery plants, amine plants and sour water scrubbing facilities. All 
of these units are already operating in refineries but may have to be 
expanded or enlarged.
2. Are These Technologies Commercially Demonstrated?
    As mentioned above, conventional diesel desulfurization 
technologies have been available and in use for many years. U.S. 
refiners have roughly seven years of experience with this technology in 
producing highway diesel fuel with less than 500 ppm sulfur. Refiners 
in California also have the same length of experience with meeting the 
California 500 ppm cap on sulfur and an additional aromatics 
standard.\130\ In order to meet both sulfur and aromatics standards, 
refineries in California are producing highway and nonroad diesel fuel 
with an average sulfur level of 150 ppm.
---------------------------------------------------------------------------

    \130\ California allows refiners to use an engine test to 
certify an alternative fuel mixture which meets or exceeds the NOx 
reducing performance of a 10 volume percent maximum aromatics and a 
500 ppm maximum sulfur diesel fuel.
---------------------------------------------------------------------------

    Some refiners in Europe are producing a very low-sulfur, low 
aromatics diesel fuel for use in the cities in Sweden (Class I Swedish 
Diesel) using two-stage hydrotreating. This ``Swedish city diesel'' is 
averaging under 10 ppm sulfur and under 10 volume percent aromatics. 
While clearly demonstrating the feasibility of consistently producing 
diesel fuel with less than 10 ppm sulfur from selected feedstocks, 
there are a few differences between the Swedish fuel and typical U.S. 
diesel fuel. First, the tight aromatics specification applicable to 
Swedish City diesel fuel usually requires the use of ring-opening or 
dearomatization catalysts in the second stage of the two-stage 
hydrotreating unit. This eases the task of desulfurizing any sterically 
hindered compounds present. Second, Swedish Class I diesel fuel also 
must meet a tight density specification. This, coupled with the fact 
that European diesel fuel contains less LCO than U.S. diesel fuel, 
significantly reduces the amount of sterically hindered compounds 
present in the feed to the desulfurization unit. Third, it is not clear 
whether any refiner is producing a large fraction of their distillate 
production to this specification. Thus, the European experience 
demonstrates the efficacy of the two-stage process and its ability to 
produce very low sulfur diesel fuel. However, doing so without 
saturating most of the aromatics present and with heavier feedstock has 
only been demonstrated in pilot plants and not commercially.
    Europe has adopted a 50 ppm cap sulfur standard for all diesel fuel 
which takes effect in 2005. Some countries, including England, have 
implemented tax incentives for refiners to produce this fuel sooner. 
The great majority of diesel fuel in England already meets the 50 ppm 
specification. Refiners have reported no troubles with this technology. 
This diesel fuel is being produced in one-stage hydrotreaters. However, 
as mentioned above, European diesel fuel contains less LCO than diesel 
fuel in the U.S., so the use of one-stage conventional hydrotreating to 
meet very low sulfur levels is applicable, but not sufficient to 
demonstrate feasibility in the U.S. Germany has also established a tax 
incentive, but for diesel fuel containing 10 ppm or less sulfur. One 
European technology vendor indicated that they have already licensed 
two desulfurization units to German refiners planning to produce diesel 
fuel to obtain this tax credit.
    Overall, conventional diesel desulfurization ring-opening and 
dearomatization technologies have all been installed and are operating 
in one or more refineries. Thus, there should not be much concern among 
refiners whether these technologies will work reliably in general. 
Refiners' primary concern would be focused on the treatment of any LCO 
currently being blended into highway diesel fuel. They would be 
particularly concerned with the ability to desulfurize this material to 
very low sulfur levels using conventional technology and, absent that, 
ways to shift this material to other valuable fuel pools or treat it 
more severely in available hydrotreaters or hydrocrackers. Of course, 
refiners would also be concerned with the reliability of the technology 
in complying with a 15 ppm cap day in and day out.
    In addition to these more traditional technologies, Energy 
Biosystems recently announced the availability of their 
biodesulfurization technology for desulfurizing diesel fuel. 
Biodesulfurization is a process which uses bacteria which has been 
genetically enhanced to biologically remove the sulfur atoms from 
petroleum compounds. This process is still being developed and is 
expected to begin commercial demonstration in the next couple of years. 
At the present time, the goal of the developers is to produce diesel 
fuel with less than 50 ppm sulfur. It is not known whether this 
technology would be capable of meeting the proposed cap of 15 ppm. This 
process has the advantage of operating at ambient temperature and 
pressures, and requires no hydrogen. The economics of the process, 
however, rely on a market for its by-products, which may limit its 
widespread application. Because of

[[Page 35485]]

uncertainties in this technology's ability to achieve the proposed 15 
ppm cap, we did not factor it into our cost projections. We request 
comment on the availability of this technology in the relevant time 
frame for this proposed rulemaking.
3. Are There Unique Concerns for Small Refiners?
    We have heard concerns that small refiners would bear 
proportionately higher economic burdens if they were required to 
produce diesel fuel meeting the same sulfur levels as larger 
refineries. The most significant concern expressed to us has been their 
more limited ability to obtain the capital necessary to make the 
refinery modifications necessary to produce low sulfur diesel fuel 
compared to the larger refiner. To address these and other concerns 
related to small refiners, we have participated in a review and 
evaluation process specific to small businesses under the Small 
Business Regulatory Enforcement Flexibility Act (SBREFA). More 
information can be found in our response to the Regulatory Flexibility 
Act (see section XI.B). In short, we are seeking comment on provisions 
that would assist small refiners in addressing unique challenges, as 
discussed in section VIII.E.
4. Can Refiners Comply with an April 1, 2006 Start Date?
    We believe that our proposal that the program begin on April 1, 
2006 would provide more than an adequate amount of time for refiners to 
plan their investment, complete the design package and complete the 
construction and startup of the new or modified desulfurization unit 
and other associated units in their refineries. In response to our 
proposed Tier 2 gasoline desulfurization rulemaking, the American 
Petroleum Institute (API) commented that 4 years is needed for refiners 
to complete this cycle of planning, design, construction and startup. 
While we believe 4 years to be more than sufficient, we have initiated 
this rulemaking sufficiently early to provide over 5 years of lead 
time. We recognize that most refiners will have to make investments in 
their refineries to desulfurize their gasoline during this time, so the 
additional time from final rule to implementation is expected to be 
valuable for refiners. Similarly, by informing refiners now (i.e., 
before they make their gasoline desulfurization investments) of our 
proposed highway diesel fuel desulfurization program we hope to allow 
refiners to coordinate their investments and produce both low-sulfur 
gasoline and low-sulfur onroad diesel at a lower cost. The additional 
time between promulgation and implementation is important because of 
the number of refiners which are expected to have to make these 
investments. Unlike the gasoline sulfur program which really only 
affected refineries outside of California, this program would affect 
the California refiners as well, in addition to a number of refineries 
which produce onroad diesel fuel but no gasoline.\131\ However, the 
total capital cost of the investments projected to be required to meet 
the proposed diesel fuel sulfur cap is less than that for the Tier 2 
gasoline sulfur standards.
---------------------------------------------------------------------------

    \131\ By far most of California gasoline meets a 30 ppm 
averaging standard, except for a small volume which is exported out 
of the state. However, since the California refiners already have 
the desulfurization units in place to desulfurize the majority of 
their gasoline, they are expected to use those same units to 
desulfurize the exported gasoline as well.
---------------------------------------------------------------------------

    A particular concern has been raised to the Agency regarding the 
capability of the engineering and construction (E&C) industries to be 
able to design and build diesel fuel hydrotreaters while at the same 
time doing the same for gasoline, as well as accomplishing their other 
objectives. We believe that the E&C industry is capable of supplying 
the oil refining industry with the equipment necessary to comply with 
the proposed diesel fuel sulfur cap on time.\132\ We believe that this 
is facilitated by the extended phase-in we allowed regarding compliance 
with the Tier 2 gasoline sulfur standards. For example, we project that 
only roughly a third of all gasoline-producing refineries outside of 
California will be building gasoline desulfurization equipment for 
start-up in early 2006 and 2007. Thus, most of the construction related 
to gasoline desulfurization will be completed prior to the proposed 
implementation of the diesel fuel sulfur cap. Also, low sulfur gasoline 
and diesel fuel standards scheduled for Europe and Canada become 
effective in 2005. We believe that this precedes the proposed highway 
diesel fuel sulfur cap sufficiently to enable the availability of 
European equipment fabrication capacity to be available to meet the 
needs of the proposed sulfur cap in the U.S. Thus, we do not foresee 
any shortage in either E&C industry personnel or equipment fabrication 
capacity. We request comment on these findings.
---------------------------------------------------------------------------

    \132\ Rykowski, Richard A., ``Implementation of Ultra Low Sulfur 
Diesel Fuel: Construction Capacity and Aggregate Capital 
Investment,'' EPA Memorandum to the Record, Docket A-99-06.
---------------------------------------------------------------------------

    We are aware that the National Petroleum Council (NPC) is 
conducting a Refining Study which also addresses this issue. It appears 
from a publically available draft final report that the NPC may 
conclude otherwise. We plan to consider the findings of this study once 
it becomes final.
    Another issue related to the feasibility of the April 1, 2006 start 
date relates to refiners' ability to hook up their new equipment to 
their existing diesel fuel hydrotreaters while still providing the 
nation with diesel fuel during the transition. This issue is relevant 
since: (1) we expect most refiners to revamp their current equipment, 
as opposed to building entirely new equipment and (2) all refiners face 
the same April 1, 2006 deadline. We expect that any new equipment 
required as part of the revamp would be able to be constructed on-site 
while the current equipment is operating. Inter-connecting the new and 
old equipment would occur prior to April 2006 when the current 
hydrotreater is scheduled to be down for maintenance. Existing 
equipment which would require modification, such as compressors and 
heat exchangers, would be modified during this time, as well. Diesel 
fuel hydrotreaters currently operate roughly two years in between 
scheduled maintenance. Thus, there should be at least one and possibly 
two scheduled maintenance periods between the time when refiners could 
have project designs completed, permits issued, as appropriate, and 
April 2006. Under this schedule of refinery maintenance, modifying 
current diesel fuel hydrotreaters to meet the proposed sulfur cap 
should not impact diesel fuel production. If refiners had to schedule 
additional down time in order to complete the revamp, then diesel fuel 
production could be affected. We expect that any such shortfall would 
be made up by other refiners or the previous build-up of inventory. We 
request comment on the ability of the industry to continue to supply 
highway diesel fuel while it is modifying equipment in order to comply 
with the proposed sulfur cap.
    Concerns have also been raised with respect to the refining 
industry's ability to raise the capital necessary to make the refinery 
modifications necessary to meet a 15 ppm sulfur cap on diesel fuel, 
while at the same time expending capital to reduce the sulfur level in 
gasoline as a result of the recently promulgated Tier 2 standards. This 
has led to concerns that some refiners may refrain from investing to 
continue to produce highway diesel fuel, which could cause a shortage 
when the program is implemented. As discussed in section IV.B. of the 
draft RIA, we have designed these programs in a

[[Page 35486]]

manner which will serve to maximize refiner flexibility and minimize 
costs. Furthermore, as discussed in section V.D.1., we believe that 
despite the capital cost of desulfurizing their highway diesel fuel, 
other options for marketing the distillate streams from their 
refineries will be limited. Finally, as discussed in section VI.A., we 
are also considering various phase-in approaches for implementing the 
low sulfur diesel standard. A phase-in could help spread out the 
design, construction, and capital expenditure of refinery modifications 
necessary to comply with the proposed diesel fuel sulfur standard. We 
request comment on the necessity and ability of a phase-in to address 
these concerns.
    In summary, we believe that meeting a 15 ppm cap is achievable with 
the diesel desulfurization technologies available now. We are confident 
that we are providing more than a sufficient amount of time between 
when this rule is expected to be finalized and the proposed startup 
date of the program. This timing should allow for a smooth transition 
of low-sulfur fuel into the marketplace. We request comments on all of 
these issues. In particular, we request comment and supporting 
information on the challenges refiners would face in competing for 
engineering and construction resources and obtaining capital for diesel 
fuel sulfur control. We also seek comment with supporting information 
on the potential for diesel fuel shortages at the beginning of the 
program that some believe might result from individual refinery 
decisions to shift all or a portion of their production to other 
distillate products or export, and on the ability of the market to self 
correct if a shortage does occur.
5. Can a 15 ppm Cap on Sulfur Be Maintained by the Distribution System?
    The proposed cap on sulfur content would apply to on-highway diesel 
fuel at the refinery gate, and at every point along the distribution 
system through to the end-user. The current distribution system for 
petroleum distillates currently carries products with sulfur contents 
that range from 30 ppm to over 10,000 ppm. The system includes 
pipelines, tankers, tanks, and delivery trucks. To date, this system 
has not been required to deliver a product with the purity which would 
be required under this proposal. Consequently, to ensure the sulfur 
standard is not exceeded during the fuel's journey to the end-user, the 
refiner would actually produce diesel fuel sufficiently below the cap 
to account for its own compliance margin (estimated to be 7 ppm on 
average), as well as for test variability and potential downstream 
contamination. Under the current sulfur cap of 500 ppm, refiners 
typically provide ample margin, producing fuel with roughly 350 ppm 
sulfur. With a sulfur cap of 15 ppm, the absolute magnitude of the 
margin refiners could provide would obviously be much smaller. In 
addition, the impact of contamination in the distribution system would 
be potentially much more severe. If the proposed 15 ppm cap on the 
sulfur content of on highway diesel fuel were adopted, other products 
in the distribution system such as nonroad diesel fuel would have 
sulfur concentrations over 200 times that of highway diesel fuel 
instead of the 10-fold factor at present. Additives to diesel fuel 
added in small amounts downstream which sometimes contain high sulfur 
concentrations levels may also become much more of a concern (see 
section IV.D.6.c). If as expected, refiners would produce highway 
diesel fuel with an average sulfur content of approximately 7 ppm to 
comply with the proposed sulfur standard, and variability in measuring 
diesel sulfur content is limited to less than +/-4 ppm, downstream 
sulfur contamination would need to be limited to less than 3 ppm to 
maintain compliance with the proposed 15 ppm cap. Petroleum marketers 
and distributors have cautioned that the distribution system is 
unfamiliar with limiting sulfur contamination to such a low level.
    Current industry practices may need to be modified to control and 
limit sulfur contamination in the distribution system. Current 
practices which are critical to minimizing contamination and which may 
need to be more carefully performed include:

--Properly leveling tank trucks to ensure that they can drain 
completely of high-sulfur product prior to being filled with the 
proposed diesel fuel.
--Allowing sufficient time for transport tanks to drain of high-sulfur 
product prior to being filled with the proposed diesel fuel.
--Purging delivery hoses of higher sulfur product prior to their use to 
deliver the proposed diesel fuel.

    To adequately limit sulfur contamination, we believe that such 
practices would need to be followed each and every time with adequate 
care taken to ensure their successful and full completion. Some 
distributors may find it necessary to conduct an employee education 
program to emphasize their importance. We request comment on our 
assessment for each segment in the distribution chain, including tank 
trucks, tank wagons, rail tankers, barges, and marine tankers.
    As discussed in section V.D.3 of today's document, there may be an 
increase in distribution costs associated with an increase in pipeline 
interface volumes and the need to sample and test each batch of on 
highway diesel fuel at the terminal level for its sulfur content. There 
could also be an increase in the occurrence of noncomplying fuel 
showing up in the distribution system. As is the case today, this could 
cause temporary, local market shortages of fuel meeting the proposed 
sulfur cap. This off-specification fuel would also either have to be 
downgraded to off-highway, or re-refined, though we have assumed that 
the frequency of such occurrence would be low enough as to not impact 
the costs of the program noticeably. The potential sources of sulfur 
contamination in the distribution system, what controls we believe 
would be necessary to ensure downstream compliance with the proposed 
sulfur standard, and the costs associated with such controls are 
discussed in more detail in the Draft RIA. We request comment on the 
challenges that each segment of the distribution chain would face in 
controlling sulfur contamination, on the extent that each segment might 
reasonably be expected to limit sulfur contamination, and on the 
associated costs.
6. What Are the Potential Impacts of the Proposed Sulfur Change on 
Lubricity, Other Fuel Properties, and Specialty Fuels?

a. What Is Lubricity and Why Might It be a Concern?

    Diesel fuel lubricity properties are depended on by the engine 
manufacturers to lubricate and protect moving parts within fuel pumps 
and injection systems for reliable performance. Unit injector systems 
and in-line pumps, commonly used in heavy-duty engines, are actuated by 
cams lubricated with crankcase oil, and have minimal sensitivity to 
fuel lubricity. However, rotary and distributor type pumps, commonly 
used in light and medium-duty diesel engines, are completely fuel 
lubricated, resulting in high sensitivity to fuel lubricity.
    Experience has shown that it is very rare for a naturally high-
sulfur fuel to have poor lubricity, although, most studies show 
relatively poor overall correlation between sulfur content and 
lubricity. Considerable research remains to be performed for a better 
understanding of the fuel components most responsible for lubricity.

[[Page 35487]]

Consequently, we are uncertain about the impact of today's proposal on 
fuel lubricity. Nevertheless, there is evidence that the typical 
process used to remove sulfur from diesel fuel (hydrotreating) can 
impact lubricity depending on the severity of the treatment process and 
characteristics of the crude. If refiners use hydrotreating to achieve 
the proposed sulfur limit, there may be reductions in the concentration 
of those components of diesel fuel which contribute to adequate 
lubricity. As a result, the lubricity of some batches of fuel may be 
reduced compared to today's levels, resulting in an increased need for 
the use of lubricity additives in highway diesel fuel.
    Blending small amounts of lubricity-enhancing additives increases 
the lubricity of poor-lubricity fuels to acceptable levels. At the 
present time, it is believed that oil companies are treating diesel 
fuel in this way on a batch to batch basis, when poor lubricity fuel is 
expected. This practice of treating fuel on an as-needed and voluntary 
basis has been effective in ensuring good diesel fuel lubricity for the 
diesel heavy-duty vehicle fleet. Our review of the technical literature 
\133\ indicates that the U.S. military also uses lubricity-enhancing 
additives in its diesel fuel. The U.S. military has found that the 
traditional corrosion inhibitor additives that it uses have been highly 
effective in reducing fuel system component wear. Consequently, the 
U.S. Army now blends MIL-I-25017E corrosion inhibitor additive to all 
fuels when poor lubricity is expected, and regularly for Jet A-1, JP-5 
and JP-8 fuels. We believe that this practice would continue, with some 
portion of the fuel refined to the proposed standard being treated with 
lubricity-enhancing additives. For a more detailed discussion of diesel 
fuel lubricity and current industry practices, please refer to the 
Draft RIA for this proposal. We have included a 0.2 cents per gallon 
cost in our calculations to account for the potential increased use of 
lubricity additives (see section V.D.2).
---------------------------------------------------------------------------

    \133\ See the draft RIA for a more detailed discussion.
---------------------------------------------------------------------------

b. Voluntary Approach for the Maintenance of Fuel Lubricity

    If action on fuel lubricity does prove necessary, we believe a 
voluntary approach would provide customer protection from engine 
failures due to low lubricity, while providing the maximum flexibility 
for industry. In a voluntary approach we would encourage, but not 
require, fuel producers and distributors to monitor and provide fuel 
with adequate lubricity to protect diesel engine fuel systems. This 
approach recognizes the uncertainties of measuring fuel lubricity, and 
allows flexibility as research produces better information and improved 
test methods. The voluntary approach discussed here would be a 
continuation of current industry practices for diesel fuel produced to 
meet the current Federal and California 500 ppm sulfur diesel fuel 
specifications, and benefits from the considerable experience gained 
since 1993. The advantage of this approach is avoidance of an 
additional regulatory scheme and associated burdens. On the down side, 
voluntary measures do not guarantee results. We believe the risk in 
this case is small. Refiners and distributors have an incentive to 
supply fuel products that will not damage consumer equipment. Even if 
occasional batches of poor lubricity fuel are distributed, they would 
likely be ``treated'' with residual quantities of good lubricity fuel 
in storage tanks, tanker trucks, retail tanks, and vehicle fuel tanks 
(even at very low treatment levels lubricity enhancing additives 
provide significant protection; see the discussion in the Draft RIA for 
this proposal). Further, we expect that the American Society for 
Testing and Materials intends to address lubricity in its ASTM D-975 
specifications for diesel fuel quality after its concerns about test 
issues have been resolved.
    We are asking for comments on the alternative of specifying minimum 
fuel lubricity, and suggestions for the appropriate lubricity standard 
and test method. Under this approach, we would require fuel producers 
to monitor and provide minimum lubricity. This would be similar to the 
approach of Canada and our understanding of the usage requirements of 
the U.S. military. The advantage of this approach is to guarantee the 
minimum quality of fuel in the market. On the down side, such a new 
specification would need to be tied specifically to emissions or 
emission control hardware, and we question whether such a requirement 
is appropriate considering the uncertainty about the adequacy of the 
existing test methods. The American Society for Testing and Materials 
has declined to specify a lubricity standard in its ASTM D-975 
specifications for diesel fuel quality until its concerns about test 
issues have been resolved. Also, this approach would require an 
enforcement scheme and associated compliance burden. Further, we 
believe that this approach would probably not be significantly more 
effective than the voluntary approach. Refiners and distributors have 
an incentive to supply fuel products that will not damage consumer 
equipment, and the U.S. commercial market has adequately addressed 
similar concerns in the past.
    The U.S. Department of Defense (DOD) expressed strong reservations 
about the ability of the proposed voluntary approach to ensure adequate 
fuel lubricity and requested that EPA establish a uniform requirement 
to ensure that diesel fuel introduced into commerce has adequate 
lubricity. Absent such a requirement, DOD related that the military 
would face a considerable burden to ensure that highway diesel fuel 
used in military vehicles provides sufficient lubricity. DOD stated 
that since they rely on the commercial market to supply highway diesel 
to military users and are currently experiencing lubricity problems in 
certain parts of the country during the winter months, a reduction in 
diesel sulfur would increase the risk and scope of lubricity problems. 
DOD also stated that due to harsher operating conditions, engines used 
in their vehicles (especially tactical vehicles) are more vulnerable to 
lubricity problems than the same engines operated in commercial 
vehicles. In addition, at some U.S. military installations DOD uses 
highway diesel fuel in their off highway vehicles as well as their 
highway vehicles. We request comment on the unique challenges that our 
proposed voluntary approach would place on the military and on the 
appropriate means to address DOD's concerns.

c. What Are the Possible Impacts of Potential Changes in Fuel 
Properties Other Than Sulfur on the Materials Used in Engines and Fuel 
Supply Systems?

    With the introduction of low-sulfur diesel fuel in the United 
States in 1993, some diesel engine fuel pumps with a Nitrile material 
for O-ring seals began to leak. Fuel pumps using a Viton material for 
the seals did not experience leakage. The leakage from the Nitrile 
seals was determined to be due to low aromatics levels in some low-
sulfur fuel, not the low sulfur levels. In the process of lowering the 
sulfur content of some fuel, some of the aromatics had been removed. 
Normally, the aromatics in the fuel penetrate the Nitrile material and 
cause it to swell, thereby providing a seal with the throttle shaft. 
When low-aromatics fuel is used after conventional fuel has been used, 
the aromatics already in the swelled O-ring will leach out into the 
low-aromatics fuel.

[[Page 35488]]

Subsequently, the Nitrile O-ring will shrink and pull away, thus 
causing leaks, or the stress on the O-ring during the leaching process 
will cause it to crack and leak. Not all low-sulfur fuels caused this 
problem, because the amount and type of aromatics varied. Although 
manufacturers have apparently resolved this issue, and we have no 
evidence that further desulfurization will cause further changes in O-
ring shape or other concerns, we request comments on this or other 
potential impacts of fuel properties on the materials used in engines 
and fuel supply systems.

d. What Impact Would the 15 ppm Cap Have on Diesel Performance 
Additives?

    Our proposal to limit the sulfur content of performance additives 
used in diesel fuel to less than 15 ppm (see section VIII) would 
require that the use of certain high-sulfur diesel fuel additives be 
discontinued. Our review of EPA's Fuel and Fuel Additives database 
indicates that alternative additives that perform the same function and 
which do not contain sulfur are readily available. Our evaluation 
suggests that discontinuing the use of the limited number of diesel 
additives with a high sulfur content would not result in significant 
increased costs or an undue hardship to additive and fuel manufacturers 
(see the draft RIA). We request comment on the difference in price 
between high- and low-sulfur performance additives and whether there 
are differences in their efficiency. As an alternative to the proposed 
15 ppm cap on the sulfur content of performance additives, we are 
requesting comment on whether additives not meeting the 15 ppm sulfur 
cap should be allowed to be added to diesel fuel downstream in de 
minimis amounts, as long as the final blend still meets the 15 ppm cap.

e. What Are the Concerns Regarding the Potential Impact on the 
Availability and Quality of Specialty Fuels?

    The Department of Defense (DOD) has expressed concerns regarding 
the potential impact of today's proposed rule on the availability and 
quality of military fuels, especially the aviation fuels JP-5 and JP-8. 
DOD is concerned that today's rule might reduce the number of 
refineries that produce military fuels by limiting the slate of fuels 
that refiners can economically produce or the number of refiners that 
continue to produce military fuels. DOD notes that the special flash 
point requirement for military JP-5 fuel already limits DOD's supply 
base and that the proposed rule may make some refiners opt out of 
manufacturing this speciality fuel, which would reduce supply 
availability and increase costs. DOD also states that the increased 
hydroprocessing severity and other refinery process modifications 
necessary to meet the proposed sulfur standard could impact certain 
chemical/physical characteristics that are part of their fuel 
specifications. DOD relates that previous environmentally-driven 
changes to gasoline and diesel specifications have caused a degradation 
in the quality of the jet fuel. For example, DOD states that they have 
noticed a reduction and continued decline in jet fuel stability.
    DOD is also concerned that refiners that currently blend more than 
10 percent light cycle oil (LCO) into their highway diesel fuel might 
shift some LCO into off-highway distillate fuels. DOD relates that this 
would adversely affect the quality of off highway fuels used by the 
military such as their naval distillate fuel F-76. DOD states that they 
have experienced quality problems with LCO component streams that were 
not adequately hydrotreated causing a highly unstable finished product. 
Storage stability is an important issue for DOD since military naval 
fuel F-76 is often stored for extended periods (longer than six months) 
and unstable LCO used to manufacture F-76 could compromise mission 
readiness. The potential changes that refiners might make in the way 
they process LCO streams and incorporate such streams into their slate 
of distillate fuels is discussed in section V.D.1 and in the Draft RIA.
    We believe that concerns related to the quality of specialty fuels 
can continue to be addressed by actions taken by the manufacturers and 
purchasers of such fuels without the need for intervention by EPA. We 
also anticipate that demand for such fuels will be sufficient to 
encourage their continued availability. We request comment on the 
potential impact of today's proposed rule on the quality and 
availability of specialty fuels such as those used by the U.S. 
military, on what actions might be necessary to mitigate such impacts, 
and on the associated costs. Comment is specifically requested on the 
need for the military to modify its specifications and/or enhance 
enforcement of these specifications to achieve their fuel quality goals 
if the proposed sulfur standards are adopted, and on the costs 
associated with such changes.

E. Who Would Be Required to Meet This Proposed New Diesel Sulfur 
Standard?

    As discussed earlier, the highway diesel fuel sulfur content 
standard being proposed today is a per-gallon cap of 15 ppm. We believe 
that heavy-duty diesel trucks subject to the standards we are proposing 
today would require the consistent use of diesel fuel with a sulfur cap 
of 15 ppm to avoid the potentially severe emission, performance, and 
durability problems that arise from operation on higher-sulfur fuel. On 
this basis we believe that the proposed sulfur standard should apply to 
the diesel fuel at the point of sale to the ultimate consumer. In other 
words, the proposed cap on sulfur content should apply at all points in 
the diesel fuel production and distribution system, including the 
retail level.
    We understand that there are production and distribution practices, 
such as blending of additives and winter viscosity improvers such as 
kerosene or No. 1 diesel fuel, that could cause the sulfur level of 
diesel fuel to vary as it travels from refinery to end-point consumers. 
Along with concerns about contamination and test method 
reproducibility, these issues suggest that we should include some sort 
of tolerance along with our proposed sulfur cap. However, we are 
concerned that such tolerances on top of the 15 ppm cap may not be 
appropriate given the sensitivity of diesel exhaust emission control 
technology to fuel sulfur above the proposed sulfur cap. In practice, 
therefore, refiners will likely be required by the downstream 
distribution system to produce diesel fuel having a sulfur content 
significantly below the proposed sulfur cap to ensure that downstream 
practices do not end up producing a retail-level fuel with sulfur 
levels higher than the proposed maximum. Thus, all parties in the 
distribution system, including refiners and importers, would be 
prohibited from selling, storing, transporting, dispensing, 
introducing, or causing or allowing the introduction of highway diesel 
fuel whose sulfur content exceeds the proposed sulfur cap. The 
advantage of such an approach is that, as downstream distribution 
practices and sulfur measurement accuracy improves, refiners will be 
able to reduce production costs by producing fuel closer to the 
proposed sulfur cap. Alternatively, we could enforce the proposed 15 
ppm sulfur cap at retail and enforce a lower cap at the refinery level. 
This cap would likely have to be less than 10 ppm to allow for 
downstream contamination, additive blending, and test method 
variability.

[[Page 35489]]

However, we believe it is more appropriate to leave this tolerance to 
the market.

F. What Might Be Done To Encourage the Early Introduction of Low-Sulfur 
Diesel Fuel?

    As discussed in section IV.C, we are proposing that the entire 
highway diesel pool be required to meet a lower standard on sulfur 
content beginning June 1, 2006.\134\ This should provide certainty that 
low-sulfur diesel fuel will be available for model year (MY) 2007 
heavy-duty diesel engines by July 1, 2006. If low-sulfur diesel fuel 
was available prior to July 1, 2006, engine manufacturers have 
indicated that fleet trials might be conducted of the sulfur-sensitive 
exhaust emission control equipment intended for use in heavy-duty 
vehicles to meet the proposed MY 2007 emissions standards. The 
information gained from these trials could be used to improve the 
efficiency and durability of such exhaust emission control equipment. 
This could lower the cost of the exhaust emission control equipment and 
help ensure the smooth implementation of the proposed MY 2007, heavy-
duty standards. If low-sulfur diesel fuel was available earlier than 
July 1, 2006, it might also facilitate the early introduction of 
sulfur-sensitive exhaust emission control equipment in light-duty 
diesel vehicles. Automobile manufacturers expressed interest in using 
sulfur-sensitive exhaust emission control equipment in some of their 
light-duty vehicles beginning in MY 2004, so that they might benefit 
from in-use experience prior to the anticipated use of such equipment 
in all MY 2007, light-duty diesel vehicles. In addition, early 
availability of some low sulfur diesel fuel would have the added 
advantage of allowing the distribution system a chance to develop 
experience handling diesel fuel with such a low sulfur level before the 
standards would take effect.
---------------------------------------------------------------------------

    \134\ This is the proposed retail-level compliance date. The 
proposed compliance date at the refinery level is April 1, 2006.
---------------------------------------------------------------------------

    We believe that some low-sulfur diesel fuel meeting the proposed 15 
ppm sulfur cap would be available in advance of when we are proposing 
that it must be produced by refiners. Most refiners will need to 
install new equipment to meet the proposed sulfur standard. Since the 
technical and construction resources needed for such refinery upgrades 
is limited, a number of refiners are likely to have the new 
desulfurization equipment installed well in advance of the proposed 
compliance date. Refiners who produce low-sulfur diesel early would 
want to market it as a premium fuel rather than losing the added value 
by selling it as current highway diesel fuel. Some refiners have 
already begun programs to market low-sulfur diesel as a premium fuel. 
For example, ARCO Products Company recently announced a fleet program 
to demonstrate the emissions benefits of its EC--D (emission control) 
diesel which has a lower sulfur and aromatics content, and a higher 
cetane rating than current highway diesel fuel.\135\ Engine and vehicle 
manufacturers are assisting in the overall program design and 
implementation of the program. Emission control equipment manufacturers 
are supplying exhaust emission control equipment which works more 
effectively with low-sulfur fuel. ARCO has also begun marketing diesel 
fuel in California with a maximum sulfur content of 15 ppm. This fuel 
is being made available, upon request, to operators of urban municipal 
fleets retrofitted with catalytic exhaust emission controls in 
connection with the California ARB's proposed urban bus program (see 
section I.C.6). \136\ Mobil Corporation, Ford Motor Company, Navistar, 
and Volkswagen also have a cooperative program underway to evaluate the 
emissions benefits of new engine/aftertreatment technologies using a 
lower-sulfur diesel fuel (also with reduced polynuclear aromatic 
content). We are interested in encouraging additional programs between 
refiners and vehicle manufacturers to introduce vehicles equipped with 
exhaust emission control technologies which benefit from the use of 
low-sulfur diesel fuel prior to the date when we are proposing that 
such fuel must be made available.
---------------------------------------------------------------------------

    \135\ ARCO Products Company news release dated October 7, 1999, 
Docket A-99-06 Item II-G-13.
    \136\ ARCO Products Company news release dated December 15, 
1999.
---------------------------------------------------------------------------

    There are numerous strategies involving voluntary market incentives 
that could help promote the early introduction of low-sulfur diesel 
fuel. Under existing voluntary emission credits programs, a system 
might be created whereby refiners that produce low-sulfur fuel early 
could generate emission reduction credits that could then be sold 
through a market mechanism to other entities that could use such 
credits to meet their emission compliance goals. We welcome comments on 
whether additional incentives are needed and feasible to encourage the 
early introduction of low-sulfur diesel fuel for use in vehicles 
equipped to provide lower emissions with the use of such a fuel. We 
also request comments on how such incentives might be structured under 
a phase in of low sulfur highway diesel fuel (see section VI.A).

V. Economic Impact

    This section discusses the projected economic impact and cost 
effectiveness of the proposed emission standards and low-sulfur fuel 
requirement. We welcome comment on the estimated cost for research and 
development and the necessary lead time to develop these technologies 
for heavy-duty vehicles. Additionally we invite the reader to review 
all of the underlying cost assumptions made in the accompanying draft 
RIA and ask for comment on the validity of these assumptions. Full 
details of our cost and cost effectiveness analyses can be found in the 
Draft RIA.

A. Cost for Diesel Vehicles To Meet Proposed Emissions Standards

1. Summary of New System and Operating Costs
    The technologies described in section III show a good deal of 
promise for controlling emissions, but also make clear that much effort 
remains to develop and optimize these new technologies for maximum 
emission-control effectiveness with minimum negative impacts on engine 
performance, durability, and fuel consumption. On the other hand, it 
has become clear that manufacturers have a great potential to advance 
beyond the current state of understanding by identifying aspects of the 
key technologies that contribute most to hardware or operational costs 
or other drawbacks and pursuing improvements, simplifications, or 
alternatives to limit those burdens. To reflect this investment in 
long-term cost savings potential, the cost analysis includes an 
estimated $385 million in R&D outlays for heavy-duty engine designs and 
$220 million in R&D for catalysts systems giving a total R&D outlay for 
improved emission control of more than $600 million. The cost and 
technical feasibility analyses accordingly reflect substantial 
improvements on the current state of technology due to these future 
developments.
    Estimated costs are broken into additional hardware costs and life-
cycle operating costs. The incremental hardware costs for new engines 
are comprised of variable costs (for hardware and assembly time) and 
fixed costs (for R&D, retooling, and certification). Total operating 
costs include the estimated incremental cost for low-sulfur diesel 
fuel, any expected

[[Page 35490]]

increases in maintenance cost, or fuel consumption costs along with any 
decreases in operating cost expected due to low-sulfur fuel. Cost 
estimates based on these projected technology packages represent an 
expected incremental cost of engines in the 2007 model year. Costs in 
subsequent years would be reduced by several factors, as described 
below. Separate projected costs were derived for engines used in three 
service classes of heavy-duty diesel engines. All costs are presented 
in 1999 dollars.
    The costs of these new technologies for meeting the proposed 2007 
model year standards are itemized in the Draft RIA and summarized in 
Table V.A-1. For light heavy-duty vehicles, the cost of a new 2007 
model year engine is estimated to increase by $1,688 and operating 
costs over a full life-cycle to increase by about $431. For medium 
heavy-duty vehicles the cost of a new engine is estimated to increase 
by $2,213, with life-cycle operating costs increasing to $826. 
Similarly, for heavy heavy-duty engines, the vehicle cost is expected 
to increase by $2,768, and estimated additional life-cycle operating 
costs are $3,362. The higher incremental increase in operating costs 
for the heavy heavy-duty vehicles is due to the larger number of miles 
driven over their lifetime (714,000 miles on average) and their 
correspondingly high lifetime fuel usage. Emission reductions are also 
proportional to VMT and so are significantly higher for heavy heavy-
duty vehicles.
    We also believe there are factors that would cause cost impacts to 
decrease over time, making it appropriate to distinguish between near-
term and long term costs. 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.\137\ Our analysis, as described in more 
detail in the draft RIA, 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 (2009 model year) and by reducing variable costs again by 
20 percent starting with the fifth year of production. We invite 
comment on this methodology to account for the learning curve phenomena 
and also request comment on whether learning is likely to reduce costs 
in this industry. Additionally, since fixed costs are assumed to be 
recovered over a five-year period, these costs are not included in the 
analysis after the first five model years. Finally, manufacturers are 
expected to apply ongoing research to make emission controls more 
effective and to have lower operating cost over time. However, because 
of the uncertainty involved in forecasting the results of this 
research, we have conservatively not accounted for it in this analysis. 
Table V.A-1 lists the projected costs for each category of vehicle in 
the near- and long-term. For the purposes of this analysis, ``near-
term'' costs are those calculated for the 2007 model year and ``long 
term'' costs are those calculated for 2012 and later model years.
---------------------------------------------------------------------------

    \137\ ``Learning Curves in Manufacturing,'' Linda Argote and 
Dennis Epple, Science, February 23, 1990, Vol. 247, pp. 920-924.
---------------------------------------------------------------------------

    We welcome comment on the degree to which this program may 
influence sales of new heavy-duty vehicles in the early years of the 
program, and the resulting impact this would have on our projected 
program benefits and costs. Costlier model year 2007 vehicles may 
induce some potential purchasers of these vehicles to instead buy 2006 
models to save money, or to defer a purchase longer than they otherwise 
might have. On the other hand, we would anticipate that the very low 
emissions characteristics of these new vehicles would cause many buyers 
for whom cleaner diesels would be good for business (for example, urban 
transit authorities and touring or shuttle services) to retire older 
higher-emitting vehicles early.

  Table V.A-1.--Projected Incremental System Cost and Life Cycle Operating Cost for Heavy-Duty Diesel Vehicles
                             [Net present values in the year of sale, 1999 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Life-cycle
                 Vehicle class                             Model year              Hardware cost     operating
                                                                                                       cost*
----------------------------------------------------------------------------------------------------------------
Light heavy-duty..............................  Near term.......................          $1,688            $431
                                                Long term.......................             982             413
Medium heavy-duty.............................  Near term.......................           2,213             826
                                                Long term.......................           1,188             800
Heavy heavy-duty..............................  Near term.......................           2,768           3,362
                                                Long term.......................           1,572           3,265
Urban Bus.....................................  Near term.......................           2,268           3,942
                                                Long term.......................           1,252          3,874
----------------------------------------------------------------------------------------------------------------
* Incremental life-cycle operating costs include the incremental costs to refine and distribute low sulfur
  diesel fuel, the service cost of closed crankcase filtration systems, and the lower maintenance costs realized
  through the use of low sulfur diesel fuel (see discussion in section V.3).

2. New System Costs for NOX and PM Emission Control
    Several new technologies are projected for complying with the 
proposed 2007 model year emission standards. We are projecting that 
NOX adsorbers and catalyzed diesel particulate filters would 
be the most likely technologies applied by the industry in order to 
meet our proposed emissions standards. The fact that manufacturers 
would have several years before implementation of the proposed new 
standards ensures that the technologies used to comply with the 
standards would develop significantly before reaching production. This 
ongoing development could lead to reduced costs in three ways. First, 
we expect research will lead to enhanced effectiveness for individual 
technologies, allowing manufacturers to use simpler packages of 
emission control technologies than we would predict given the current 
state of development. Similarly, we anticipate that the continuing 
effort to improve the emission control technologies will include 
innovations that allow lower-

[[Page 35491]]

cost production. Finally, we believe that manufacturers would focus 
research efforts on any drawbacks, such as fuel economy impacts or 
maintenance costs, in an effort to minimize or overcome any potential 
negative effects.
    We anticipate that in order to meet the proposed standards, 
industry would introduce a combination of primary technology upgrades 
for the 2007 model year. Achieving very low NOX emissions 
will require basic research on NOX emission control 
technologies and improvements in engine management to take advantage of 
the exhaust emission control system capabilities. The manufacturers are 
expected to take a systems approach to the problem optimizing the 
engine and exhaust emission control system to realize the best overall 
performance possible. Since most research to date with exhaust emission 
control technologies has focused on retrofit programs there remains 
room for significant improvements by taking such a systems approach. 
The NOX adsorber technology in particular is expected to 
benefit from re-optimization of the engine management system to better 
match the NOX adsorbers performance characteristics. The 
majority of the $600 million dollars we have estimated for research is 
expected to be spent on developing this synergy between the engine and 
NOX exhaust emission control systems. PM control 
technologies are expected to be less sensitive to engine operating 
conditions as they have already shown good robustness in retrofit 
applications with low-sulfur diesel fuel.
    The NOX adsorber system that we are anticipating would 
be applied in 2007 consists of a catalyst which combines traditional 
gasoline three-way conversion technology with a newly developed 
NOX storage function, a reductant metering system and a 
means to control engine air fuel (A/F) ratio. The NOX 
adsorber catalyst itself is a relatively new device, but is benefitting 
in its development from over 20 years of gasoline three-way catalyst 
development. In order for it to function properly, a systems approach 
that includes a reductant metering system and control of engine A/F 
ratio is also necessary. Many of the new air handling and electronic 
system technologies developed in order to meet the 2004 heavy-duty 
engine standards can be applied to accomplish the NOX 
adsorber control functions as well. Some additional hardware for 
exhaust NOX or O2 sensing and for fuel metering 
will likely be required. We have estimated that this additional 
hardware will increase new engine costs by approximately $350 for a 
heavy heavy-duty diesel engine. The Draft RIA also calculates an 
increase in warranty costs for this additional hardware. In total the 
new NOX control technologies required in order to meet the 
proposed 2007 emission standards are estimated to increase light heavy-
duty engine costs by $890, medium heavy-duty engine costs by $1,047 and 
heavy heavy-duty engine costs by $1,410 in the year 2007. In the year 
2012 and beyond the incremental costs are expected to decrease to $570 
for a light heavy-duty engine, $670 for a medium heavy-duty engine and 
to $902 for a heavy heavy-duty engine.
    Catalyzed diesel particulate filters are experiencing widespread 
retrofit use in much of Europe as low-sulfur diesel fuel becomes 
readily available. These technologies are proving to be robust in their 
non-optimized retrofit applications requiring no modification to engine 
or vehicle control functions. We therefore anticipate that catalyzed 
diesel particulate filters can be integrated with new diesel engines 
with only a minimal amount of engine development. We do not anticipate 
that additional hardware beyond the diesel particulate filter itself 
and an exhaust pressure sensor for OBD will be required in order to 
meet the proposed PM standard. We estimate in 2007 that diesel 
particulate filter systems will add $633 to the cost of a light heavy-
duty vehicle, $796 to the cost of a medium heavy-duty vehicle and 
$1,028 to the cost of a heavy heavy-duty vehicle. By 2012 these costs 
are expected to decrease to $389, $491, and $638 respectively. These 
cost estimates are comparable to estimates made by the Manufacturers of 
Emission Controls Association for these technologies.\138\
---------------------------------------------------------------------------

    \138\ Letter from Bruce Bertelsen, Manufacturers of Emission 
Controls Association (MECA) to William Charmley, US EPA, December 
17, 1998. The letter documents a MECA member survey of expected 
diesel particulate filter costs. EPA Air Docket A-99-06.
---------------------------------------------------------------------------

    We have proposed to eliminate the exemption that allows turbo-
charged heavy-duty diesel engines to vent crankcase gases directly to 
the environment, so called open crankcase systems, and have projected 
that manufacturers will rely on engineered closed crankcase ventilation 
systems which filter oil from the blow-by gases. We have estimated the 
initial cost of these systems in 2007 to be $37, $42, and $49 for 
light, medium and heavy heavy-duty diesel engines respectively. 
Additionally we expect a portion of the oil filtration system to be a 
service replacement oil filter which will be replaced on a 30,000 mile 
service interval with a service cost of $10, $12, and $15 for light, 
medium, and heavy heavy-duty diesel engines respectively. These cost 
are summarized with the other cost for emission controls in Table V.A-1 
and are included in the aggregate cost reported in section V.E.
3. Operating Costs Associated With NOX and PM Control
    The Draft RIA assumes that a variety of new technologies will be 
introduced to enable heavy-duty vehicles to meet the new emissions 
standards we are proposing. Primary among these are advanced emission 
control technologies and low-sulfur diesel fuel. The many benefits of 
low-sulfur diesel fuel are described in section III, and the 
incremental cost for low-sulfur fuel is described in section V.D. The 
new emission control technologies are themselves not expected to 
introduce additional operating costs in the form of increased fuel 
consumption. Operating costs are estimated in the Draft RIA over the 
life of the vehicle and are expressed as a net present value (NPV) in 
1999 dollars for comparison purposes.
    Total operating cost estimates include both the expected increases 
in maintenance and fuel costs (both the incremental cost for low-sulfur 
fuel and any fuel consumption penalty) due to the emission control 
systems application and the predicted decreases in maintenance cost due 
to the use of low-sulfur fuel. Today's proposal estimates some increase 
in operating costs due to the incremental cost of low-sulfur diesel 
fuel but no net increase in fuel consumption with the application of 
the new emission control technologies (see discussion in section 
III.G). The net increase in operating costs are summarized in Table 
V.A-1. While we are using these incremental operating cost estimates 
for our cost effectiveness calculations, it is almost certain that the 
manufacturers will improve existing technologies or introduce new 
technologies in order to offset at least some of the increased 
operating costs. We request comment on these operating cost estimates 
and on ways in which industry may be able to offset these operating 
costs.
    We estimate that the low-sulfur diesel fuel we are proposing to 
require in order to enable these technologies would have an incremental 
cost of approximately $0.044/gallon as discussed in section V.D. The 
proposed low-sulfur diesel fuel may also provide additional benefits by 
reducing the engine maintenance costs associated with corrosion due to 
sulfur in the current diesel fuel. These benefits, which are discussed 
further in section V.C and in the draft RIA, include extended oil

[[Page 35492]]

change intervals due to the slower acidification rate of the engine oil 
with low-sulfur diesel fuel. Service intervals for the EGR system are 
also expected to increase due to lower-sulfur induced corrosion than 
will occur with today's higher-sulfur fuel. This lengthening of service 
intervals provides a significant savings to the end user. As described 
in more detail in the Draft RIA we anticipate that low-sulfur diesel 
fuel would provide additional cost savings to the consumer of $153 for 
light heavy-duty vehicles, $249 for medium heavy-duty vehicles and $610 
for heavy heavy-duty vehicles. The operating costs for replacement 
filters in the closed crankcase filtration systems are estimated to be 
$48 for light heavy-duty vehicles, $72 for medium heavy-duty vehicles 
and $268 for heavy heavy-duty vehicles in 2007 and in the long term are 
expected to decrease to $31 for a light heavy-duty vehicle, $46 for a 
medium heavy-duty vehicle and $172 for a heavy heavy-duty vehicle. 
Factoring the cost savings due to low sulfur diesel fuel into the 
additional cost for low-sulfur diesel fuel and the service cost of the 
closed crankcase ventilation system yields a net increase in vehicle 
operating costs of $431 for a light heavy-duty vehicle, $826 for a 
medium heavy-duty vehicle and $3,362 for a heavy heavy-duty vehicle. 
These life cycle operating costs are also summarized in Table V.A-1. 
The net increase in operating cost can also be expressed as an average 
annual operating cost for each class of heavy-duty vehicle. Expressed 
as an approximate annual per vehicle cost, the additional operating 
cost is estimated as $50 for a light heavy-duty vehicle, $100 for a 
medium heavy-duty vehicle, and $400 for a heavy heavy-duty vehicle.

B. Cost for Gasoline Vehicles to Meet Proposed Emissions Standards

1. Summary of New System Costs
    To perform a cost analysis for the proposed standards, we first 
determined a package of likely technologies that manufacturers could 
use to meet the proposed standards and then determined the costs of 
those technologies. In making our estimates we have relied on our own 
technology assessment which included publicly available information, 
such as that developed by California, as well as confidential 
information supplied by individual manufacturers, and the results of 
our own in-house testing.
    In general, we expect that heavy-duty gasoline vehicles would (like 
Tier 2 light duty vehicles) be able to meet these standards through 
refinements of current emissions control components and systems rather 
than through the widespread use of new technology. More specifically, 
we anticipate a combination of technology upgrades such as the 
following:
     Improvements to the catalyst system design, structure, and 
formulation, plus an increase in average catalyst size and loading.
     Air and fuel system modifications including changes such 
as improved oxygen sensors, and calibration changes including improved 
precision fuel control and individual cylinder fuel control.
     Exhaust system modifications, possibly including air 
gapped components, insulation, leak free exhaust systems, and thin wall 
exhaust pipes.
     Increased use of fully electronic exhaust gas 
recirculation (EGR).
     Increased use of secondary air injection.
     Use of ignition spark retard on engine start-up to improve 
upon cold start emission control.
     Use of low permeability materials and minor improvements 
to designs, such as the use of low-loss connectors, in evaporative 
emission control systems.
    We expect that the technologies needed to meet these proposed 
heavy-duty gasoline standards would be very similar to those required 
to meet the Tier 2 standards for vehicles over 8,500 pounds GVWR. Few 
heavy-duty gasoline vehicles currently rely on technologies such as 
close coupled catalysts and secondary air injection, but we expect they 
would do so to in order to meet the proposed 2007 standards.
    For each group we developed estimates of both variable costs (for 
hardware and assembly time) and fixed costs (for R&D, retooling, and 
certification). Cost estimates based on the current projected costs for 
our estimated technology packages represent an expected incremental 
cost of vehicles in the near-term. For the longer term, we have 
identified factors that would cause cost impacts to decrease over time. 
First, since fixed costs are assumed to be recovered over a five-year 
period, these costs disappear from the analysis after the fifth model 
year of production. Second, the analysis incorporates the expectation 
that manufacturers and suppliers would apply ongoing research and 
manufacturing innovation 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 
and use, they are able to apply innovations to simplify machining and 
assembly operations, use lower cost materials, and reduce the number or 
complexity of component parts.\139\ These reductions in production 
costs are typically associated with every doubling of production 
volume. Our analysis incorporates the effects of this ``learning 
curve'' by projecting that a portion of the variable costs of producing 
the new vehicles decreases by 20 percent starting with the third year 
of production. We applied the learning curve reduction only once since, 
with existing technologies, there would be less opportunity for 
lowering production costs than would be the case with the adoption of 
new technology. We did not apply the learning curve reduction to 
precious metal costs, nor did we apply it for the evaporative 
standards. We invite comment on this methodology to account for the 
learning curve phenomena and also request comment on whether learning 
is likely to reduce costs in this industry.
---------------------------------------------------------------------------

    \139\ See Chapter V of the final Tier 2 Regulatory Impact 
Analysis, contained in Air Docket A-97-10.
---------------------------------------------------------------------------

    We have prepared our cost estimates for meeting the new heavy-duty 
gasoline standards using a baseline of current technologies for heavy-
duty gasoline vehicles and engines. Finally, we have incorporated what 
we believe to be a conservatively high level of R&D spending at 
$2,500,000 per engine where no California counterpart exists. We have 
included this large R&D effort because calibration and system 
optimization is likely to be a critical part of the effort to meet the 
standards. However, we believe that the R&D costs may be generous 
because the projection probably underestimates the carryover of 
knowledge from the development required to meet the light-duty Tier 2 
and CARB LEV-II standards.
    Table V.B-1 provides our estimates of the per vehicle increase in 
purchase price for heavy-duty gasoline vehicles and engines. The near-
term cost estimates in Table V.B-1 are for the first years that 
vehicles meeting the standards are sold, prior to cost reductions due 
to lower productions costs and the retirement of fixed costs. The long-
term projections take these cost reductions into account. We request 
comment on the costs shown in Table V.B-1 and the analysis behind them.

[[Page 35493]]



 Table V.B-1.--Projected Incremental System Cost and Life Cycle Operating Cost for Heavy-Duty Gasoline Vehicles
                             [Net present values in the year of sale, 1999 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                    Incremental     Life-cycle
                 Vehicle class                             Model year               system cost   operating cost
----------------------------------------------------------------------------------------------------------------
Heavy-Duty Gasoline...........................  Near term.......................            $182              $0
                                                Long term.......................             152               0
----------------------------------------------------------------------------------------------------------------

2. Operating Costs Associated With Meeting the Heavy-Duty Gasoline 
Standard
    Low sulfur gasoline is a fundamental enabling technology which will 
allows heavy-duty gasoline vehicles to meet the very low emission 
standards being proposed today. The low sulfur gasoline required under 
the Tier 2 proposal will enable advanced exhaust emission control for 
heavy-duty vehicles as well. Today's proposal puts no additional 
requirements on gasoline sulfur levels and as such should not directly 
increase gasoline fuel costs. Additionally, the new technologies being 
employed in order to meet the new standards are not expected to 
increase fuel consumption for heavy-duty gasoline vehicles. In fact, 
there may be some small improvement in fuel economy from the 
application of improved fuel and air control systems on these engines. 
Therefore, in the absence of changes to gasoline specifications and 
with no decrease in fuel economy, we do not expect any increase in 
vehicle operating costs.

C. Benefits of Low-Sulfur Diesel Fuel for the Existing Diesel Fleet

    We estimate that the proposed low-sulfur diesel fuel would provide 
additional benefits to the existing heavy-duty vehicle fleet as soon as 
the fuel is introduced. We believe these benefits could offer 
significant cost savings to the vehicle owner without the need for 
purchasing any new technologies. The Draft RIA has catalogued a variety 
of benefits from the proposed low-sulfur diesel fuel. These benefits 
are summarized in Table V.C-1.

 Table V.C-1.--Components Potentially Affected by Lower Sulfur Levels in
                               Diesel Fuel
------------------------------------------------------------------------
                                    Effect of lower    Potential impact
       Affected components              sulfur         on engine system
------------------------------------------------------------------------
Piston Rings....................  Reduce corrosion    Extended engine
                                   wear.               life and less
                                                       frequent
                                                       rebuilds.
Cylinder Liners.................  Reduce corrosion    Extended engine
                                   wear.               life and less
                                                       frequent
                                                       rebuilds.
Oil Quality.....................  Reduce deposits     Reduce wear on
                                   and less need for   piston ring and
                                   alkaline            cylinder liner
                                   additives.          and less frequent
                                                       oil changes.
Exhaust System (tailpipe).......  Reduces corrosion   Less frequent part
                                   wear.               replacement.
EGR.............................  Reduces corrosion   Less frequent part
                                   wear.               replacement.
------------------------------------------------------------------------

    The actual value of these benefits over the life of the vehicle 
would depend upon the length of time that the vehicle operates on low-
sulfur diesel fuel and the degree to which vehicle operators change 
engine rebuild patterns to take advantage of these benefits. For a 
vehicle near the end of its life in 2007 the benefits would be quite 
small. However for vehicles produced in the years immediately preceding 
the introduction of low-sulfur fuel the savings would be substantial. 
The Draft RIA estimates that a heavy heavy-duty vehicle introduced into 
the fleet in 2006 would realize savings of $610 over its life. This 
savings could alternatively be expressed in terms of fuel costs as 
approximately 1 cent per gallon as discussed in the draft RIA. These 
savings would occur without additional new cost to the vehicle owner 
beyond the incremental cost of the low-sulfur diesel fuel, although 
these savings would require changes to existing maintenance schedules. 
Such changes seem likely given the magnitude of the savings and the 
nature of the regulated industry.
    The maintenance benefits we project come primarily from extended 
oil change intervals. We have no quantitative data on how much longer 
these intervals might be. Based on discussions with some engine 
manufacturers, we believe it is reasonable to assume that engine oil 
change intervals will increase by 10 percent for each class of engine 
(in both new and existing fleets). We seek comment on this key 
assumption and on these projected savings and all of the assumptions 
behind them; details of the analysis behind these savings can be found 
in the draft RIA contained in the docket for this rule.

D. Cost of Proposed Fuel Change

    We estimate that the overall cost associated with lowering the 
sulfur cap from the current level of 500 ppm to the 15 ppm level 
proposed today will be approximately 4.4 cents per gallon. As discussed 
in sections V.A. and V.C., this cost would be offset by a one cent per 
gallon savings (or more) from the reduction in vehicle maintenance 
savings that result from the use of the cleaner fuel. The fuel cost is 
comprised of a number of components associated with refining and 
distributing the fuel. The majority of the fuel cost is expected to be 
the refining cost which is estimated to be approximately 4.0 cents per 
gallon, which includes the cost of producing more volume of diesel fuel 
because desulfurization decreases the energy density of the fuel. The 
remaining 0.4 cents per gallon in fuel costs is associated with an 
anticipated increase in the use of additives to maintain fuel lubricity 
at a cost of 0.2 cents per gallon, and an increase in distribution 
costs of 0.2 cents per gallon. The increase in distribution costs 
comprises 0.1 cents per gallon to distribute the additional volume of 
diesel fuel needed to compensate for the decrease in fuel energy 
density, and 0.1 cents per gallon to maintain product integrity in the 
distribution system. These cost estimates are discussed in more detail 
below and in the Draft RIA.

[[Page 35494]]

When the 4.4 cent per gallon cost is applied to the expected low sulfur 
diesel fuel sales volume of approximately 40 billion gallons at the 
start of the program, it equates to an annual cost of roughly $1.8 
billion per year. This fuel cost would be offset by a reduction in 
maintenance costs of roughly $0.4 billion per year.
1. Refinery Costs
    As explained in Section IV, refiners would have to install capital 
equipment to meet the proposed diesel fuel sulfur standard. Presuming 
that refiners will want to minimize the cost involved and use 
conventional technology, refiners are expected to build onto their 
existing desulfurization unit by adding another hydrotreating reactor 
and other related equipment.
    In our analysis, we estimated the cost of lowering onroad diesel 
fuel sulfur levels for a national average refinery starting from the 
current national average sulfur level of about 350 ppm down to 7 ppm. 
We believe that a refinery's average diesel fuel sulfur level would be 
roughly 7 ppm under a 15 ppm cap standard. We then calculated a 
national aggregate cost and cents-per-gallon cost. Based on this 
analysis we estimate that, on average, individual refiners in the years 
2004-05 would be expected to invest about $30 million for capital 
equipment and spend about $8 million per year for each refinery to 
cover the operating costs associated with these desulfurization units. 
Since this average represents a diverse size range of refineries, some 
refineries would pay more and others less than this average cost. When 
the average per-refinery cost is aggregated for all the onroad diesel 
fuel expected to be produced in this country in 2007, we estimate that 
the total investment for desulfurizing diesel fuel would be about $1.9, 
$2.0, and $0.2 billion in 2004, 2005, and 2006, respectively, as 
discussed in section IV.B. Operating costs for these units are expected 
to be about $1.1 billion per year.
    Using our estimated capital and operating costs we calculated the 
average per-gallon cost of reducing diesel fuel sulfur down to meet the 
proposed 15 ppm cap standard. Using a capital cost amortization factor 
based on a seven percent rate of return on investment before taxes, we 
estimated the average national cost for desulfurizing onroad diesel 
sulfur to be about 4.0 cents per gallon. This cost is our estimated 
cost to society of producing onroad diesel to meet a 15 ppm cap 
standard that we used for estimating cost effectiveness.
    There is currently no commercial experience in the U.S. and only a 
limited amount of information in the public literature on the costs 
associated with reducing the sulfur level in diesel fuel to very low 
levels on an ongoing operational basis. Experience in Sweden involves 
other changes to the fuel as well that would tend to drive up the costs 
considerably. The EMA recently commissioned a study by Mathpro of the 
economics of controlling the sulfur content of highway and nonroad 
diesel fuel to various sulfur levels as low as 2 ppm. Unfortunately, 
none of the scenarios modeled in the EMA study are consistent with our 
proposal today. Furthermore, some of the assumptions made in the 
analysis are inconsistent with our standard assumptions for economic 
analysis. For example, Mathpro used a higher rate of return on new 
capital than the rate we use. Nevertheless, some insight can be gained 
from a broad comparison of Mathpro's and our cost projections. The 
proposed sulfur cap for highway diesel fuel is very roughly bracketed 
by two Mathpro sulfur control scenarios: (1) a highway diesel fuel 
standard of 20 ppm on average with a nonroad diesel fuel standard of 
350 ppm on average, and (2) an highway diesel fuel standard of 2 ppm on 
average with a nonroad diesel fuel standard of 20 ppm on average. 
Mathpro's projected refining costs for these two scenarios range from 4 
to just under 6 cents per gallon (citing their costs for revamping 
current diesel fuel hydrotreaters with reactors in series, which is 
equivalent to our technology projections). Considering that Mathpro 
uses a higher rate of return on capital and that both of their 
scenarios included controlling nonroad diesel fuel, the two sets of 
cost projections appear to be roughly consistent. This serves to give 
us some confidence that our cost estimate for a sulfur cap of 15 ppm on 
highway diesel fuel is reasonable. This is discussed in further detail 
in the Draft RIA.
    Although API assisted in the study, API has expressed some concern 
about the accuracy of the EMA cost estimates. API highlighted their 
concerns on the EMA study in a memo to the Director the Office of 
Transportation Air Quality, which is included in the docket.\140\ While 
API expressed their belief that the cost outcomes of the EMA study are, 
in general, reasonable, they expressed serious concerns about the cost 
of producing diesel with sulfur levels below 20 ppm (roughly equivalent 
to a 30 ppm cap). API believes that, particularly at extremely low 
sulfur levels, the measures needed to be taken would result in 
significantly higher costs than estimated by EMA. We request comment on 
this assessment.
---------------------------------------------------------------------------

    \140\ Edward H. Murphy, API to Margo Oge, US EPA, October 
26,1999.
---------------------------------------------------------------------------

    We acknowledge that some refiners likely face higher 
desulfurization costs than others. This is generally the case with any 
fuel quality regulation, since the crude oils processed by, as well as 
the configurations and product slates of individual refineries vary 
dramatically. As mentioned in section IV, API believes that those 
refiners facing higher than average costs may decide to leave the 
highway diesel fuel market. They argue this is especially a possibility 
if they are faced with a sulfur standard below a 30 ppm average (or 50 
ppm cap), which they believe will require very large investments for 
high pressure hydrotreating to maintain current highway diesel 
production volumes. API also believes that many refiners may reduce 
their production of highway diesel fuel, by switching the feedstocks 
(i.e., LCO) which are most difficult to desulfurize to other markets, 
thus avoiding the higher investments associated with high pressure 
hydrotreating. If some refiners reduce highway diesel fuel production, 
that could present an opportunity for other refiners, who choose to 
make the investment, of higher prices for the new 15 ppm sulfur 
product. Whether the potential for higher prices would be sufficient 
and be apparent with sufficient leadtime to allow refiners to make an 
added investment by the time the proposed rule is effective is 
currently unclear.
    For example, the refining industry actually overbuilt 
desulfurization capacity for the current 500 ppm standard, as evidenced 
by the significant use in the off-highway market of diesel fuel 
produced to the current highway diesel sulfur standard of 500 ppm. Some 
of this overproduction may have been due to limitations in the 
distribution system to distribute both highway and off-highway grades 
of diesel fuel. Despite the overall market overproduction, a number of 
small refiners did decide to switch from the highway diesel fuel market 
to the off-highway diesel fuel market, presumably for economic reasons.
    Another incentive for refiners to invest in highway diesel fuel 
desulfurization equipment is the potential for a growing light-duty 
diesel market. Many vehicle manufacturers have announced plans to equip 
their light-duty vehicles and, particularly, light-duty trucks with 
diesel engines. Refiners may want to ensure their

[[Page 35495]]

presence in this growing and potentially profitable market.
    Alternative markets for distillate products are limited in the U.S. 
The domestic off-highway diesel fuel and heating oil markets are much 
smaller than the highway diesel fuel market. The domestic off-highway 
diesel fuel and heating oil markets are currently in balance, 
considering the fact that some highway diesel fuel is currently being 
sold into these markets. Assuming that the distribution system can be 
changed to segregate highway and other distillate fuels more 
economically, some amount of current highway diesel fuel production 
could switch to these other markets with no loss of highway diesel fuel 
supply. In addition, although the off-highway diesel fuel market is 
growing, this growth will occur gradually over the next 6 years and not 
occur on April 1, 2006. The heating oil market is very seasonal (strong 
in the winter and weak in the summer), regional (strong in the 
Northeast) and not growing. Thus, overall, we do not see much 
opportunity for large domestic producers of highway diesel fuel to be 
able to shift their production to these other domestic markets.
    Export opportunities for diesel fuel are also limited to some 
degree. Japan and Europe will have stringent sulfur caps in place by 
2005 and have cetane requirements well beyond the cetane levels of 
current U.S. diesel fuel. Asia, while growing in demand for diesel 
fuel, has also been the focus of new grassroots refinery production and 
again has high cetane requirements. Thus, the primary areas for export 
of diesel fuel of average U.S. quality would appear to be Africa and 
Latin America.
    Refiners have also raised the possibility of exporting some of 
their more difficult to desulfurize diesel feedstocks such as LCO to 
other distillate markets. While this may be a possibility to some 
degree as discussed in Section IV and the draft RIA, the opportunities 
to do so appear to be limited. We have not conducted a detailed 
analysis of the potential for this exportation. Refiners would have to 
hydrotreat this material to lower its sulfur content in order to meet 
the European Union 50 ppm sulfur cap (and increase its cetane) in order 
for it to be used as a diesel fuel blendstock. Otherwise, its only use 
without additional treating would be in heating fuel. With Europe and 
developing countries expected to experience increasing demand for non-
diesel, distillate fuel, there may be economic opportunities for 
exporting such fuel.
    We request comments on the possibility that the proposed sulfur cap 
would cause some refiners to abandon the U.S. highway diesel fuel 
market or to reduce highway diesel fuel production, as well as on the 
impact that this would have on diesel fuel supply and price in the U.S. 
We also request comment on whether refiners would likely desire to 
shift all their LCO to non-highway diesel fuel markets or just the 
heavier portion which contains the most sterically hindered compounds. 
We also request comment on the economic viability of alternative 
markets for current highway diesel fuel or its more difficult to 
desulfurize components. We also request comments on the ability of 
overseas refiners providing highway diesel fuel under the proposed 
sulfur cap should domestic refiners reduce production. Finally, as 
discussed in section VI.A., we are also considering various phase-in 
approaches for implementing the low sulfur diesel standard. A phase-in 
could help spread out the design, construction, and capital expenditure 
of refinery modifications necessary to comply with the proposed diesel 
fuel sulfur standard, and in so doing could further minimize any risk 
of supply shortages. We request comment on the appropriateness and 
ability of a phase-in to address these concerns.
2. Cost of Possibly Needed Lubricity Additives
    As discussed in section IV, the refinery processes needed to 
achieve the sulfur standard have some potential to degrade the natural 
lubricity characteristics of the fuel. Consequently an increase in the 
use of lubricity additives for diesel fuel may be anticipated over the 
amounts used today. We contacted various producers of lubricity 
additives to get their estimates of what costs might be incurred for 
this increase in the use of lubricity additives. The cost estimates 
varied from 0.1 to 0.5 cents per gallon. This range is to be expected 
since the cost will be a strong function of not only the additive type, 
but also the assumed treatment rate and the volume of fuel that needs 
to be treated, both of which will be, to some extent, a function of the 
sulfur cap. As described in more detail in the Draft RIA, we have 
included in the fuel cost estimate an average cost of 0.2 cents per 
gallon for lubricity additives over the entire pool of low-sulfur 
highway diesel fuel. This estimate is comparable to an estimate made by 
Mathpro in a study sponsored by the EMA. We request comment on our cost 
estimate. In particular, we request comment on whether there may be 
unique costs for the military to maintain the lubricity of their 
distillate fuels. We request that such comments addressing this issue 
include a detailed discussion of the volumes of fuel effected, current 
lubricity additive use, and the additional measures that might be 
needed (and associated costs) to maintain the appropriate level of fuel 
lubricity.
3. Distribution Costs
    Under the proposed 15 ppm sulfur cap, we project that distribution 
costs would increase by a total of 0.2 cents per gallon as discussed 
below.
    If the proposed sulfur standard is adopted, there would be a 
greater difference between the sulfur content of highway diesel fuel 
and other distillate products than presently exists.\141\ For example, 
off-highway diesel fuel currently has a sulfur content that is 
approximately ten times that of highway diesel. Under the proposed 
sulfur standard, off-highway diesel fuel would have a sulfur content 
over two hundred times that of highway diesel fuel. This could 
potentially make it more difficult to limit the sulfur contamination of 
highway diesel fuel with other distillate products as the fuel travels 
through the distribution system. As discussed in section IV, standard 
industry practices, if followed carefully, should be able to virtually 
eliminate the potential contamination. To do so, however, is expected 
to result in slightly increased costs in a few different parts of the 
distribution system.
---------------------------------------------------------------------------

    \141\ Highway diesel fuel currently must have a sulfur content 
of no more than 500 ppm and typically has an average sulfur content 
of 350 ppm. Off-highway diesel fuel sulfur content is currently 
unregulated and is approximately 3,500 ppm on average. The maximum 
allowed sulfur content of heating oil is 5,000 ppm. The maximum 
allowed sulfur content of kerosene (and jet fuel) is 3,000 ppm.
---------------------------------------------------------------------------

    We identified three segments in the distribution system (pipeline 
operators, terminal operators, and tank-truck operators) that might 
experience increased costs due to increased difficulty in limiting 
sulfur contamination under the proposed sulfur standard. As discussed 
in the Draft RIA, we estimate that the total increase in diesel 
distribution costs associated with adequately limiting sulfur 
contamination under today's proposal would be no more than 0.1 cents 
per gallon for the distribution system as a whole. The majority of this 
increased cost is attributed to the unavoidable mixing of highway 
diesel with other products that occurs in pipeline shipments. The 
amount of interface (e.g., mixture of a highway diesel batch and a 
nonroad diesel batch) that must be downgraded to a lower

[[Page 35496]]

price product is expected to grow with a lower sulfur cap for highway 
diesel, resulting in a slightly increased cost for pipeline shipments. 
A slight increase in distribution costs is also expected to result at 
terminals due to the anticipated need for additional quality assurance 
testing at very low sulfur levels. We believe that, although tank-truck 
operators may need to more carefully observe current industry practices 
used to limit product contamination, this will not result in a 
significant increase in costs.
    We invite comment on the amount of sulfur contamination which might 
be expected from each segment of the distribution system, the measures 
that might be taken to limit contamination, and the costs associated 
with these measures. We also request comment on the level of sulfur 
contamination in the distribution system that might be considered 
unavoidable without the imposition of an undue burden on diesel 
distributors and how this bears on the question of what sulfur level 
the refiner would need to meet at the refinery gate (the compliance 
margin) to ensure that highway diesel fuel does not exceed the proposed 
cap on sulfur content. Please refer to section IV.E for discussion of 
the compliance margin that we anticipate refiners will need to provide.
    The energy density of diesel fuel would be decreased as a side 
effect of reducing sulfur content to the proposed 15 ppm cap. 
Consequently, to meet the same level of consumer demand an increased 
volume of diesel fuel would need to move through the distribution 
system. The cost of distributing this increased volume of diesel fuel 
was calculated within the model that used to evaluate refining costs 
(see the Draft RIA). Spread over the total volume of diesel fuel 
distributed, the additional cost is estimated at 0.1 cents per gallon. 
We request comment on this cost estimate.

E. Aggregate Costs

    Using current data for the size and characteristics of the heavy-
duty vehicle fleet and making projections for the future, the diesel 
per-engine, gasoline per-vehicle, and per-gallon fuel costs described 
above can be used to estimate the total cost to the nation for the 
emission standards in any year. Figure V.E-1 portrays the results of 
these projections.\142\ All capital costs have been amortized.
---------------------------------------------------------------------------

    \142\ Figure V.E-1 is based on the amortized engine, vehicle and 
fuel costs as described in the Draft RIA. Actual capital 
investments, particularly important for fuels, would occur prior to 
and during the initial years of the program.

BILLING CODE 6560-50-P
[GRAPHIC] [TIFF OMITTED] TP02JN00.003

BILLING CODE 6560-50-C
    As can be seen from the figure, the annual costs start out at less 
than a billion dollars in year 2006 and increase over the phase-in 
period to about $2.8 billion in 2015. Thereafter, total annualized 
costs are projected to continue increasing due to the effects of 
projected growth in engine sales and fuel consumption. The Draft RIA 
provides further detail regarding these cost projections.
    Future consumption of today's proposed low sulfur diesel fuel may 
be influenced by a potential influx of diesel-powered cars and light 
trucks into the light-duty fleet. At the present time, virtually all 
cars and light trucks being sold are gasoline fueled. However, the 
possibility exists that diesels will become more prevalent in the car 
and light-duty truck fleet, since automotive companies have announced 
their desire to increase their sales of diesel cars and light trucks. 
For the Tier 2 rulemaking, the Agency performed a sensitivity analysis 
using A.D.Little's ``most likely'' increased growth scenario of diesel 
penetration into the light-duty vehicle fleet which culminated in a 9 
percent and 24 percent penetration of diesel vehicles in the LDV and 
LDT markets,

[[Page 35497]]

respectively, in 2015 (see Tier 2 RIA, Table III.A. 13). Were this 
scenario to play out, the increased number of diesel-powered cars and 
light-duty trucks would increase the societal costs (those costs, in 
total, paid by consumers) for the proposed higher priced diesel fuel 
because more diesel fuel would be consumed. However, were more diesel 
vehicles to penetrate the light-duty fleet, less gasoline would be 
consumed than was estimated in our Tier 2 cost analysis. Also, diesel 
vehicles tend to get higher fuel economy. In the end, the effect of 
increased dieselization of the light-duty fleet may have little or no 
impact on the aggregate costs estimated for today's proposal. While we 
have not fully analyzed this light-duty diesel penetration scenario, we 
request comment on it and relevant data which would allow us to perform 
a sensitivity analysis.

F. Cost Effectiveness

    One tool that can be used to assess the value of new standards for 
heavy-duty vehicles and engines is cost effectiveness, in which the 
costs incurred to reach the standards are compared to the mass of 
emission reductions. This analysis results in the calculation of a $/
ton value, the purpose of which is to show that the reductions from the 
engine and fuel controls being proposed today are cost effective, in 
comparison to alternative means of control. This analysis involves a 
comparison of our program not only to past measures, but also to other 
potential future measures that could be implemented. Both EPA and 
states have already adopted numerous control measures, and remaining 
measures tend to be more expensive than those previously employed. As 
we and States tend to employ the most cost effective available measures 
first, more expensive ones must be adopted to achieve further emission 
reductions.
1. What Is the Cost Effectiveness of This Proposed Program?
    We have calculated the cost-effectiveness of our proposed diesel 
engine/gasoline vehicle/diesel sulfur standards based on two different 
approaches. The first considers the net present value of all costs 
incurred and emission reductions generated over the life of a single 
vehicle meeting our proposed standards. This per-vehicle approach 
focuses on the cost-effectiveness of the program from the point of view 
of the vehicles and engines which will be used to meet the new 
requirements. However, the per-vehicle approach does not capture all of 
the costs or emission reductions from our proposed diesel engine/
gasoline vehicle/diesel sulfur program since it does not account for 
the use of low sulfur diesel fuel in current diesel engines. Therefore, 
we have also calculated an 30-year net present value cost-effectiveness 
using the net present value of costs and emission reductions for all 
in-use vehicles over a 30-year time frame. The baseline or point of 
comparison for this evaluation is the previous set of engine, vehicle, 
and diesel sulfur standards (in other words, the applicable 2004 model 
year standards).
    As described earlier in the discussion of the cost of this program, 
the cost of complying with the new standards will decline over time as 
manufacturing costs are reduced and amortized capital investments are 
recovered. To show the effect of declining cost in the per-vehicle 
cost-effectiveness analysis, we have developed both near term and long 
term cost-effectiveness values. More specifically, these correspond to 
vehicles sold in years one and six of the vehicle and fuel programs. 
Chapter VI of the RIA contains a full description of this analysis, and 
you should look in that document for more details of the results 
summarized here.
    The 30-year net present value approach to calculating the cost-
effectiveness of our program involves the net present value of all 
nationwide emission reductions and costs for a 30 year period beginning 
with the start of the diesel fuel sulfur program and introduction of 
model year 2007 vehicles and engines in year 2006. This 30-year 
timeframe captures both the early period of the program when very few 
vehicles that meet our proposed standards will be in the fleet, and the 
later period when essentially all vehicles in the fleet will meet our 
proposed standards. We have calculated the 30-year net present value 
cost-effectiveness using the net present value of the nationwide 
emission reductions and costs for each calender year. These emission 
reductions and costs are given for every calendar year in the RIA, in 
addition to details of the methodology we used to calculate the 30-year 
net present value cost-effectiveness.
    Our per-vehicle and 30-year net present value cost-effectiveness 
values are given in Tables V.F-1 and V.F-2. Table V.F-1 summarizes the 
per-vehicle, net present value lifetime costs, NMHC + NOX 
and PM emission reductions, and resulting cost-effectiveness results 
for our proposed diesel engine/gasoline vehicle/diesel sulfur standards 
using sales weighted averages of the costs (both near term and long 
term) and emission reductions of the various vehicle and engine classes 
affected. Table V.F-2 provides the same information from the program 
30-year net present value perspective. It includes the net present 
value of the 30 year stream of vehicle and fuel costs, NMHC + 
NOX and PM emission reductions, and the resulting 30-year 
net present value cost-effectiveness. Diesel fuel costs applicable to 
diesel engines have been divided equally between the adsorber and trap, 
since low sulfur diesel is intended to enable all technologies to meet 
our proposed standards. In addition, since the trap produces reductions 
in both PM and hydrocarbons, we have divided the total trap costs 
equally between compliance with the proposed PM standard and compliance 
with the proposed NMHC standard.
    Tables V.F-1 and V.F-2 also display cost-effectiveness values based 
on two approaches to account for the reductions in SO2 
emissions associated with the reduction in diesel fuel sulfur. While 
these reductions are not central to the program and are therefore not 
displayed with their own cost-effectiveness, they do represent real 
emission reductions due to our program. The first set of cost-
effectiveness numbers in the tables simply ignores these reductions and 
bases the cost-effectiveness on only the emission reductions from our 
proposed program. The second set accounts for these ancillary 
reductions by crediting some of the cost of the program to 
SO2. The amount of cost allocated to SO2 is based 
on the cost-effectiveness of SO2 emission reductions that 
could be obtained from alternative, potential future EPA programs. The 
SO2 credit was applied only to the PM calculation, since 
SO2 reductions are primarily a means to reduce ambient PM 
concentrations.

[[Page 35498]]



      Table V.F-1.--Per-Engine Cost Effectiveness of the Proposed Standards for 2007 and Later MY Vehicles
----------------------------------------------------------------------------------------------------------------
                                                                        Discounted                   Discounted
                                                           Discounted    lifetime     Discounted   lifetime cost
                       Pollutants                           lifetime     emission   lifetime cost  effectiveness
                                                           vehicle &    reductions  effectiveness   per ton with
                                                           fuel costs     (tons)       per ton      SO2 credit a
----------------------------------------------------------------------------------------------------------------
Near-term costs b:
    NOX+NMHC............................................        $1535       0.8838        $1,736         $1,736
    PM..................................................          872       0.0672        12,977          6,338
Long-term costs:
    NOX+NMHC............................................         1121       0.8838         1,268          1,268
    PM..................................................          652       0.0672         9,704         3,065
----------------------------------------------------------------------------------------------------------------
\a\ $446 credited to SO2 (at $4800/ton) for PM cost effectiveness.
\b\ As described above, per-engine cost effectiveness does not include any costs or benefits from the existing,
  pre-control, fleet of vehicles that would use the low sulfur diesel fuel proposed in this document.


                  Table V.F-2.--30-year Net Present Value a Cost Effectiveness of the Standards
----------------------------------------------------------------------------------------------------------------
                                                            30-year
                                                             n.p.v.      30-year                      30-year
                                                            engine,       n.p.v.       30-year      n.p.v. cost
                                                           vehicle, &   reduction    n.p.v. cost   effectiveness
                                                           fuel costs   (tons) (in  effectiveness   per ton with
                                                              (in       millions)      per ton      SO2 credit b
                                                           billions)
----------------------------------------------------------------------------------------------------------------
NOX + NMHC..............................................        $28.9         18.9        $1,531         $1,531
PM......................................................          8.8         0.79        11,248         1,850
----------------------------------------------------------------------------------------------------------------
 a This cost effectiveness methodology reflects the total fuel costs incurred in the early years of the program
  when the fleet is transitioning from pre-control to post-control diesel vehicles. In 2007 10% of highway
  diesel fuel is anticipated to be consumed by 2007 MY vehicles. By 2012 this increases to >50% for 2007 and
  later MY vehicles.
b $7.4 billion credited to SO2 (at $4800/ton).

2. Comparison With Other Means of Reducing Emissions
    In comparison with other mobile source control programs, we believe 
that our program represents a cost effective strategy for generating 
substantial NOX, NMHC, and PM reductions. This can be seen 
by comparing the cost effectiveness of today's program with a number of 
mobile source standards that EPA has adopted in the past. Table V.F-3 
summarizes the cost effectiveness of several past EPA actions for 
NOX+ NMHC. Table V.F-4 summarizes the cost effectiveness of 
several past EPA actions for PM.

 Table V.F-3.--Cost Effectiveness of Previous Mobile Source Programs for
                                NOX+NMHC
------------------------------------------------------------------------
                        Program                               $/ton
------------------------------------------------------------------------
Tier 2 vehicle/gasoline sulfur........................       1,311-2,211
2004 Highway HD diesel................................           207-405
Nonroad diesel engine.................................           416-660
Tier 1 vehicle........................................       2,010-2,732
NLEV..................................................             1,888
Marine SI engines.....................................       1,146-1,806
On-board diagnostics..................................             2,263
Marine CI engines.....................................           23-172
------------------------------------------------------------------------
Note.--costs adjusted to 1998 dollars.


 Table V.F-4.--Cost Effectiveness of Previous Mobile Source Programs for
                                   PM
------------------------------------------------------------------------
                        Program                               $/ton
------------------------------------------------------------------------
Marine CI engines.....................................         511-3,797
1996 urban bus........................................     12,000-19,200
Urban bus retrofit/rebuild............................            29,600
1994 highway HD diesel................................    20,450-23,940
------------------------------------------------------------------------
Note.--costs adjusted to 1998 dollars.

    We can see from these tables that the cost effectiveness of our 
proposed diesel engine/gasoline vehicle/diesel sulfur standards falls 
within the range of these other programs for both NOX+NMHC 
and PM. Our proposed program overlaps the range of the recently 
promulgated standards for Tier 2 light-duty vehicles and gasoline 
sulfur shown in Table V.F-3. Our proposed program also overlaps the 
cost-effectiveness of past programs for PM. It is true that some 
previous programs have been more cost efficient than the program we are 
proposing today. However, it should be expected that the next 
generation of standards will be more expensive than the last, since the 
least costly means for reducing emissions is generally pursued first.
    In evaluating the cost effectiveness of our proposed diesel engine/
gasoline vehicle/diesel sulfur program, we also considered whether our 
proposal is cost effective in comparison with possible stationary 
source controls. In the context of the Agency's rulemaking which would 
have revised the ozone and PM NAAQS,\143\ the Agency compiled a list of 
additional known technologies that could be considered in devising new 
emission reductions strategies.\144\ Through this broad review, over 50 
technologies were identified that could reduce NOx, VOC, or PM. The 
cost effectiveness of these technologies averaged approximately $5,000/
ton for VOC, $13,000/ton for NOX, and $40,000/ton for PM. 
Although a $10,000/ton limit was actually used in the air quality 
analysis presented in the NAAQS revisions rule, these values clearly 
indicate that, not only are future emission control strategies likely 
to be more expensive (less cost effective) than past strategies, but 
the cost effectiveness of our proposed program falls well

[[Page 35499]]

below the average of those choices, and is near the lower end of the 
range of potential future strategies.
---------------------------------------------------------------------------

    \143\ This rulemaking was remanded by the DC Circuit Court on 
May 14, 1999. However, the analyses completed in support of that 
rulemaking are still relevant, since they were designed to 
investigate the cost effectiveness of a wide variety of potential 
future emission control strategies.
    \144\ ``Regulatory Impact Analyses for the Particulate Matter 
and Ozone National Ambient Air Quality Standards and Proposed 
Regional Haze Rule,'' Appendix B, ``Summary of control measures in 
the PM, regional haze, and ozone partial attainment analyses,'' 
Innovative Strategies and Economics Group, Office of Air Quality 
Planning and Standards, U.S. Environmental Protection Agency, 
Research Triangle Park, NC, July 17, 1997.
---------------------------------------------------------------------------

    In summary, we believe that the weight of the evidence from 
alternative means of providing substantial NOX+NMHC and PM 
emission reductions indicates that our proposed diesel engine/gasoline 
vehicle/diesel sulfur program is cost effective. We believe this is 
true from the perspective of other mobile source control programs and 
from the perspective of other stationary source technologies that might 
be considered. We request comment on the cost-effectiveness of this 
program.

G. Does the Value of the Benefits Outweigh the Cost of the Proposed 
Standards?

    In addition to cost-effectiveness, further insight regarding the 
merits of the standards can be provided by benefit-cost analysis. The 
purpose of this section is to propose the methods to be used in 
conducting an analysis of the economic benefits of the final rule for 
heavy-duty vehicles and diesel fuel, and to discuss the potential for 
economic benefits associated with the rule. While the quantification of 
the benefits will not be available until the final rule, it is our 
belief that, based on the similarity between today's proposed rule and 
Tier 2/gasoline sulfur rule in terms of the costs per ton of emissions 
reduced and types of health and welfare benefits expected, the health 
and welfare benefits would substantially outweigh the costs.
1. What Is the Purpose of This Benefit-Cost Comparison?
    Benefit-cost analysis (BCA) is a useful tool for evaluating the 
economic merits of proposed changes in environmental programs and 
policies. In its traditional application, BCA estimates the economic 
``efficiency'' of proposed changes in public policy by organizing the 
various expected consequences and representing those changes in terms 
of dollars. Expressing the effects of these policy changes in dollar 
terms provides a common basis for measuring and comparing these various 
effects. Because improvement in economic efficiency is typically 
defined to mean maximization of total wealth spread among all members 
of society, traditional BCA must be supplemented with other analyses in 
order to gain a full appreciation of the potential merits of new 
policies and programs. These other analyses may include such things as 
examinations of legal and institutional constraints and effects; 
engineering analyses of technology feasibility, performance and cost; 
or assessment of the air quality need.
    In addition to the economic efficiency focus of most BCAs, the 
technique is also limited in its ability to project future economic 
consequences of alternative policies in a definitive way. Critical 
limitations on the availability, validity, or reliability of data; 
limitations in the scope and capabilities of environmental and economic 
effect models; and controversies and uncertainties surrounding key 
underlying scientific and economic literature all contribute to an 
inability to estimate the economic effects of environmental policy 
changes in exact and unambiguous terms. Under these circumstances, we 
consider it most appropriate to view BCA as a tool to inform, but not 
dictate, regulatory decisions such as the ones reflected in today's 
proposed rule.
    Despite the limitations inherent in BCA of environmental programs, 
we consider it useful to analyze the potential benefits of today's 
proposed action both in terms of physical changes in human health and 
welfare and environmental change, and in terms of the estimated 
economic value of those physical changes.
2. What Is Our Overall Approach to the Benefit-Cost Analysis?
    The basic question we will seek to answer in the BCA is: ``What are 
the net yearly economic benefits to society of the reduction in air 
pollutant emissions likely to be achieved by the proposed rule for 
heavy-duty vehicles and diesel fuel?'' In designing an analysis to 
answer this question, we will model the benefits in a future year 
(2030) that is representative of full-implementation of the program. We 
will also adopt an analytical structure and sequence similar to that of 
the benefit analysis for the Tier 2/gasoline sulfur rulemaking and used 
for the ``section 812 studies'' \145\ to estimate the total benefits 
and costs of the entire Clean Air Act. Moreover, we will use many of 
the same models and assumptions actually used in the section 812 
studies, and other Regulatory Impact Analyses (RIA's) prepared by the 
Office of Air and Radiation. By adopting the major design elements, 
models, and assumptions developed for the section 812 studies and other 
RIA's, we will largely rely on methods which have already received 
extensive review by the independent Science Advisory Board (SAB), by 
the public, and by other federal agencies. In addition to the 2030 
analysis, we plan to provide further characterization of the benefits 
for the interim period between 2007 and 2030.
---------------------------------------------------------------------------

    \145\ The ``section 812 studies'' refers to (1) US EPA, Report 
to Congress: The Benefits and Costs of the Clean Air Act, 1970 to 
1990, October 1997 (also known as the ``section 812 Retrospective); 
and (2) the first in the ongoing series of prospective studies 
estimating the total costs and benefits of the Clean Air Act (see 
EPA report number: EPA-410-R-99-001, November 1999).
---------------------------------------------------------------------------

3. What Are the Significant Limitations of the Benefit-Cost Analysis?
    Every BCA examining the potential effects of a change in 
environmental protection requirements is limited to some extent by data 
gaps, limitations in model capabilities (such as geographic coverage), 
and uncertainties in the underlying scientific and economic studies 
used to configure the benefit and cost models. Deficiencies in the 
scientific literature often result in the inability to estimate changes 
in health and environmental effects, such as potential increases in 
premature mortality associated with increased exposure to carbon 
monoxide. Deficiencies in the economics literature often result in the 
inability to assign economic values even to those health and 
environmental outcomes which can be quantified, such as changes in 
visibility in residential areas. While these general uncertainties in 
the underlying scientific and economics literatures will be discussed 
in detail in the RIA for the final action, the key uncertainties are:
     The exclusion of potentially significant benefit 
categories (e.g., health and ecological benefits of incidentally 
controlled hazardous air pollutants),
     Errors in measurement and projection for variables such as 
population growth,
     Variability in the estimated relationships of health and 
welfare effects to changes in pollutant concentrations.
    In addition to these uncertainties and shortcomings which pervade 
all analyses of criteria air pollutant control programs, a number of 
limitations apply specifically to a BCA. Though we will use the best 
data and models available, we will likely be required to adopt a number 
of simplifying assumptions and to use data sets which, while reasonably 
close, will not match precisely the conditions and effects expected to 
result from implementation of the standards. For example, to estimate 
the effects of the program at full implementation we will need to 
project vehicle miles traveled and populations in the year 2030. These 
assumptions may play a significant role in determining the magnitude of 
the benefits estimate. In addition, the emissions data sets which

[[Page 35500]]

will be used for the analysis may not anticipate the emissions 
reductions realized by other future actions and by expected near-future 
control programs. For example, it is possible that the proposed heavy-
duty vehicle and diesel fuel sulfur standards will not be the governing 
vehicle emissions standards in 2030. In the years before 2030, the 
benefits from the proposed rule for heavy-duty vehicles and diesel fuel 
will be less than in 2030 because the heavy-duty fleet will not be 
fully phased in.
    The key limitations and uncertainties unique to the BCA of the 
final rule, therefore, will include:
     Uncertainties in the estimation of future year emissions 
inventories and air quality,
     Uncertainties associated with the extrapolation of air 
quality monitoring data to some unmonitored areas required to better 
capture the effects of the standards on affected populations, and
     Uncertainties associated with the effect of potential 
future actions to limit emissions.
    Despite these uncertainties, we believe the BCA will provide a 
reasonable indication of the expected economic benefits of the proposed 
rule for heavy-duty vehicles and diesel fuel in 2030 under one set of 
assumptions. This is because the analysis will focus on estimating the 
economic effects of the changes in air quality conditions expected to 
result from today's proposed action, rather than focusing on developing 
a precise prediction of the absolute levels of air quality likely to 
prevail in 2030. An analysis focusing on the changes in air quality can 
give useful insights into the likely economic effects of emission 
reductions of the magnitude expected to result from today's proposed 
rule.
4. How Will the Benefit-Cost Analysis Change From the Tier 2 Benefit-
Cost Analysis?
    We will evaluate the economics and scientific literature prior to 
conducting the benefit-cost analysis for the final rule. Our final 
benefit-cost methodology will reflect the most up to date set of health 
and welfare effects and the most current economic valuation methods. In 
addition, we will use updated emission inventories. We will also be 
evaluating the air quality models used to predict changes in future air 
quality for use in the benefits analysis.
5. How Will We Perform the Benefit-Cost Analysis?
    The analytical sequence begins with a projection of the mix of 
technologies likely to be deployed to comply with the new standards, 
and the costs incurred and emissions reductions achieved by these 
changes in technology. The proposed rule for heavy-duty vehicles and 
diesel fuel has various cost and emission related components. These 
components would begin at various times and in some cases would phase 
in over time. This means that during the early years of the program 
there would not be a consistent match between cost and benefits. This 
is especially true for the vehicle control portions of the program, 
where the full vehicle cost would be incurred at the time of vehicle 
purchase, while the cost for low sulfur diesel fuel along with the 
emission reductions and benefits would occur throughout the lifetime of 
the vehicle.
    To develop a benefit-cost number that is representative of a fleet 
of heavy-duty vehicles, we need to have a stable set of cost and 
emission reductions to use. This means using a future year where the 
fleet is fully turned over and there is a consistent annual cost and 
annual emission reduction. For the proposed rule for heavy-duty 
vehicles and diesel fuel, this stability would not occur until well 
into the future. For this analysis, we selected the year 2030. The 
resulting analysis will represent a snapshot of benefits and costs in a 
future year in which the heavy-duty fleet consists almost entirely of 
heavy-duty vehicles meeting the proposed standards. As such, it depicts 
the maximum emission reductions (and resultant benefits) and among the 
lowest costs that would be achieved in any one year by the program on a 
``per mile'' basis. (Note, however, that net benefits would continue to 
grow over time beyond those resulting from this analysis, because of 
growth in population and vehicle miles traveled.) Thus, based on the 
long-term costs for a fully turned over fleet, the resulting benefit-
cost ratio will be close to its maximum point (for those benefits which 
we have been able to value).
    To present a BCA, we are designing the cost estimate to reflect 
conditions in the same year as the benefit valuation. Costs, therefore, 
will be developed for the year 2030 fleet. For this purpose we will use 
the long term cost once the capital costs have been recovered and the 
manufacturing learning curve reductions have been realized, since this 
will be the case in 2030.
    We will also make adjustments in the costs to account for the fact 
that there is a time difference between when some of the costs are 
expended and when the benefits are realized. The vehicle costs are 
expended when the vehicle is sold, while the fuel related costs and the 
benefits are distributed over the life of the vehicle. We will resolve 
this difference by using costs distributed over time such that there is 
a constant cost per ton of emissions reduction and such that the net 
present value of these distributed costs corresponds to the net present 
value of the actual costs.
    The resulting adjusted costs will be somewhat greater than the 
expected actual annual cost of the program, reflecting the time value 
adjustment. Thus, the costs will not represent expected actual annual 
costs for 2030. Rather, they will represent an approximation of the 
steady-state cost per ton that would likely prevail in that time 
period. The benefit cost ratio for the earlier years of the program 
would be expected to be lower than that based on these costs, since the 
per-vehicle costs are larger in the early years of the program while 
the benefits are smaller.
    In order to estimate the changes in air quality conditions which 
would result from these emissions reductions, we will develop two 
separate, year 2030 emissions inventories to be used as inputs to the 
air quality models. The first, baseline inventory, will reflect the 
best available approximation of the county-by-county emissions for 
NOX, VOC, and SO2 expected to prevail in the year 
2030 in the absence of the standards. To generate the second, control 
case inventory, we will first estimate the change in vehicle emissions, 
by pollutant and by county, expected to be achieved by the 2030 control 
scenario described above. We will then take the baseline emissions 
inventory and subtract the estimated reduction for each county-
pollutant combination to generate the second, control case emissions 
inventory. Taken together, the two resulting emissions inventories will 
reflect two alternative states of the world and the differences between 
them will represent our best estimate of the reductions in emissions 
which would result from our control scenario.
    With these two emissions inventories in hand, the next step will be 
to ``map'' the county-by-county and pollutant-by-pollutant emission 
estimates to the input grid cells of appropriately selected air quality 
and deposition models. One such model, called the Urban Airshed Model 
(UAM), is designed to estimate the tropospheric ozone concentrations 
resulting from a specific inventory of emissions of ozone precursor 
pollutants, particularly NOX and NMHC. Another model, called 
the Climatological Regional Dispersion Model Source-Receptor Matrix 
model (S-R Matrix), is designed to estimate the changes in ambient 
particulate matter and visibility which would result from a specific 
set of changes in emissions of primary

[[Page 35501]]

particulate matter and secondary particulate matter precursors, such as 
SO2, NOX, and NMHC. Also, nitrogen loadings to 
watersheds can be estimated using factors derived from previous 
modeling from the Regional Acid Deposition Model (RADM). By running 
both the baseline and control case emissions inventories through models 
such as these, we will be able to estimate the expected 2030 air 
quality conditions and the changes in air quality conditions which 
would result from the emissions reductions expected to be achieved by 
the proposed rule for heavy-duty vehicles and diesel fuel.
    After developing these two sets of year 2030 air quality profiles, 
we will use the same health and environmental effect models used in the 
section 812 studies to calculate the differences in human health and 
environmental outcomes projected to occur with and without the proposed 
standards. Specifically, we will use the Criteria Air Pollutant 
Modeling System (CAPMS) to estimate changes in human health outcomes, 
and the Agricultural Simulation Model (AGSIM) to estimate changes in 
yields of a selected few agricultural crops. In addition, the impacts 
of reduced visibility impairment and estimates of the effect of changes 
in nitrogen deposition to a selection of sensitive estuaries will be 
estimated using slightly modified versions of the methods used in the 
section 812 studies. At proposal, we expect that several air quality-
related health and environmental benefits, however, will not be able to 
be calculated for the BCA of today's proposed standards. Changes in 
human health and environmental effects due to changes in ambient 
concentrations of carbon monoxide (CO), gaseous sulfur dioxide 
(SO2), gaseous nitrogen dioxide (NO2), and 
hazardous air pollutants will likely not be included. In addition, some 
health and environmental benefits from changes in ozone and PM may not 
be included in our analysis (i.e., commercial forestry benefits). 
However, if our review of the economics and scientific literature 
reveals new information that will allow us to quantify these effects, 
they will be considered for inclusion in the estimate of total benefits 
for the final rule. Table IV-X lists the set of effects that we expect 
to be able to quantify for the BCA of the final rule, along with those 
effects which are known to exist, but that are currently 
unquantifiable.
    To characterize the total economic value of the reductions in 
adverse effects achieved across the lower 48 states, we plan to use the 
same set of economic valuation coefficients and models used in the 
section 812 studies and the Tier 2 benefits analysis, as approved by 
the SAB. The set of coefficients and their sources are listed in the 
final Tier 2 RIA. However, any new methods uncovered in our evaluation 
of the economic and scientific literature may be incorporated into our 
final analysis. The net monetary benefits of the proposed rule for 
heavy-duty vehicles and diesel fuel will then be calculated by 
subtracting the estimated costs of compliance from the estimated 
monetary benefits of the reductions in adverse health and environmental 
effects.
    The last step of the analysis will be to characterize the 
uncertainty surrounding our estimate of benefits. Again, we will follow 
the recommendations of the SAB for the presentation of uncertainty. 
They recommend that a primary estimate should be presented along with a 
description of the uncertainty associated with each endpoint.
    Therefore, for the final rule for heavy-duty vehicles and diesel 
fuel, the benefit analysis will adopt an approach similar to the 
section 812 study and the final Tier 2/gasoline sulfur benefit-cost 
analysis. Our analysis will first present our estimate for a primary 
set of benefit endpoints followed by a presentation of ``alternative 
calculations'' of key health and welfare endpoints to characterize the 
uncertainty in this primary set. However, the adoption of a value for 
the projected reduction in the risk of premature mortality is the 
subject of continuing discussion within the economic and public policy 
analysis community within and outside the Administration. In response 
to the sensitivity on this issue, we will provide estimates reflecting 
two alternative approaches. The first approach--supported by some in 
the above community and preferred by EPA--uses a Value of a Statistical 
Life (VSL) approach developed for the Clean Air Act section 812 
benefit-cost studies. This VSL estimate of $5.9 million (1997$) was 
derived from a set of 26 studies identified by EPA using criteria 
established in Viscusi (1992), as those most appropriate for 
environmental policy analysis applications.

                      Table V.G-1.--Human Health and Welfare Effects of Pollutants Affected by the Proposed Heavy-duty Vehicle Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Alternative quantified and/or
            Pollutant                 Quantified and monetized effects                monetized effects                     Unquantified effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ozone Health.....................  Minor restricted activity days/acute    ......................................  Premature mortality; a Increased
                                    respiratory symptoms; Hospital                                                  airway responsiveness to stimuli;
                                    admissions--respiratory and                                                     Inflammation in the lung; Chronic
                                    cardiovascular; Emergency room visits                                           respiratory damage; Premature aging
                                    for asthma.                                                                     of the lungs; Acute inflammation and
                                                                                                                    respiratory cell damage; Increased
                                                                                                                    susceptibility to respiratory
                                                                                                                    infection; Non-asthma respiratory
                                                                                                                    emergency room visits.
Ozone Welfare....................  Decreased worker productivity;          ......................................  Decreased yields for commercial
                                    Decreased yields for commercial                                                 forests; Decreased yields for fruits
                                    crops.                                                                          and vegetables.
PM Health........................  Premature mortality; Bronchitis--       ......................................  Infant mortality; Low birth weight;
                                    chronic and acute; Hospital                                                     Changes in pulmonary function;
                                    admissions--respiratory and                                                     Chronic respiratory diseases other
                                    cardiovascular; Emergency room visits                                           than chronic bronchitis;
                                    for asthma; Lower and upper                                                     Morphological changes; Altered host
                                    respiratory illness; Shortness of                                               defense mechanisms; Cancer; Non-
                                    breath; Minor restricted activity                                               asthma respiratory emergency room
                                    days/acute respiratory symptoms; Work                                           visits.
                                    loss days.

[[Page 35502]]

 
PM Welfare.......................  Visibility in California,               Visibility in Northeastern,             .....................................
                                    Southwestern, and Southeastern Class    Northwestern, and Midwestern Class I
                                    I areas.                                areas; Household soiling.
Nitrogen and Sulfate Deposition    ......................................  Costs of nitrogen controls to reduce    Impacts of acidic sulfate and nitrate
 Welfare.                                                                   eutrophication in selected eastern      deposition on commercial forests;
                                                                            estuaries.                              Impacts of acidic deposition to
                                                                                                                    commercial freshwater fishing;
                                                                                                                    Impacts of acidic deposition in
                                                                                                                    terrestrial ecosystems; Impacts of
                                                                                                                    nitrogen deposition on commercial
                                                                                                                    fishing, agriculture, and forests;
                                                                                                                    Impacts of nitrogen deposition on
                                                                                                                    recreation in estuarine ecosystems;
                                                                                                                    Reduced existence values for
                                                                                                                    currently healthy ecosystems.
CO Health........................  ......................................  ......................................  Premature mortality; a Behavioral
                                                                                                                    effects; Hospital admissions--
                                                                                                                    respiratory, cardiovascular, and
                                                                                                                    other; Other cardiovascular effects;
                                                                                                                    Developmental effects; Decreased
                                                                                                                    time to onset of angina.
HAPS Health......................  ......................................  ......................................  Cancer (benzene, 1,3-butadiene,
                                                                                                                    formaldehyde, acetaldehyde); Anemia
                                                                                                                    (benzene); Disruption of production
                                                                                                                    of blood components (benzene);
                                                                                                                    Reduction in the number of blood
                                                                                                                    platelets (benzene); Excessive bone
                                                                                                                    marrow formation (benzene);
                                                                                                                    Depression of lymphocyte counts
                                                                                                                    (benzene); Reproductive and
                                                                                                                    developmental effects (1,3-
                                                                                                                    butadiene); Irritation of eyes and
                                                                                                                    mucus membranes (formaldehyde);
                                                                                                                    Respiratory irritation
                                                                                                                    (formaldehyde); Asthma attacks in
                                                                                                                    asthmatics (formaldehyde).
HAPS Welfare.....................  ......................................  ......................................  Direct toxic effects to animals;
                                                                                                                    Bioaccumlation in the food chain.
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Premature mortality associated with ozone is not separately included in this analysis. It is assumed that the Pope, et al. C-R function for premature
  mortality captures both PM mortality benefits and any mortality benefits associated with other air pollutants.

    An alternative, age-adjusted approach is preferred by some others 
in the above community both within and outside the Administration. This 
approach was also developed for the Section 812 studies and addresses 
concerns with applying the VSL estimate--reflecting a valuation derived 
mostly from labor market studies involving healthy working-age manual 
laborers--to PM-related mortality risks that are primarily associated 
with older populations and those with impaired health status. This 
alternative approach leads to an estimate of the value of a statistical 
life year (VSLY), which is derived directly from the VSL estimate. It 
differs only in incorporating an explicit assumption about the number 
of life years saved and an implicit assumption that the valuation of 
each life year is not affected by age.\146\ The mean VSLY is $360,000 
(1997$); combining this number with a mean life expectancy of 14 years 
yields an age-adjusted VSL of $3.6 million (1997$).
---------------------------------------------------------------------------

    \146\ Specifically, the VSLY estimate is calculated by 
amortizing the $5.9 million mean VSL estimate over the 35 years of 
life expectancy asssociated with subjects in the labor market 
studies. The resulting estimate, using a 5 percent discount rate, is 
$360,000 per life-year saved in 1997 dollars. This annual average 
value of a life-year is then multiplied times the number of years of 
remaining life expectancy for the affected population (in the case 
of PM-related premature mortality, the average number of $ life-
years saved is 14).
---------------------------------------------------------------------------

    Both approaches are imperfect, and raise difficult methodological 
issues which are discussed in depth in the recently published Section 
812 Prospective Study, the draft EPA Economic Guidelines, and the peer-
review commentaries prepared in support of each of these documents. For 
example, both methodologies embed assumptions (explicit or implicit) 
about which there is little or no definitive scientific guidance. In 
particular, both methods adopt the assumption that the risk versus 
dollars trade-offs revealed by available labor market studies are 
applicable to the risk versus dollar trade-offs in an air pollution 
context.
    EPA currently prefers the VSL approach because, essentially, the 
method reflects the direct application of what EPA considers to be the 
most reliable estimates for valuation of premature mortality available 
in the current economic literature. While there are several differences 
between the labor market studies EPA uses to derive a VSL estimate and 
the particulate matter air pollution context addressed here, those 
differences in the affected populations and the nature of the risks 
imply both upward and downward adjustments. For example, adjusting for 
age differences may imply the need to adjust the $5.9 million VSL 
downward as would adjusting for health differences, but the involuntary 
nature of air pollution-related risks and the lower level of risk-
aversion of the

[[Page 35503]]

manual laborers in the labor market studies may imply the need for 
upward adjustments. In the absence of a comprehensive and balanced set 
of adjustment factors, EPA believes it is reasonable to continue to use 
the $5.9 million value while acknowledging the significant limitations 
and uncertainties in the available literature. Furthermore, EPA prefers 
not to draw distinctions in the monetary value assigned to the lives 
saved even if they differ in age, health status, socioeconomic status, 
gender or other characteristic of the adult population.
    Those who favor the alternative, age-adjusted approach (i.e. the 
VSLY approach) emphasize that the value of a statistical life is not a 
single number relevant for all situations. Indeed, the VSL estimate of 
$5.9 million (1997 dollars) is itself the central tendency of a number 
of estimates of the VSL for some rather narrowly defined populations. 
When there are significant differences between the population affected 
by a particular health risk and the populations used in the labor 
market studies--as is the case here--they prefer to adjust the VSL 
estimate to reflect those differences. While acknowledging that the 
VSLY approach provides an admittedly crude adjustment (for age though 
not for other possible differences between the populations), they point 
out that it has the advantage of yielding an estimate that is not 
presumptively biased. Proponents of adjusting for age differences using 
the VSLY approach fully concur that enormous uncertainty remains on 
both sides of this estimate--upwards as well as downwards--and that the 
populations differ in ways other than age (and therefore life 
expectancy). But rather than waiting for all relevant questions to be 
answered, they prefer a process of refining estimates by incorporating 
new information and evidence as it becomes available.
    The presentation of the alternative calculations for certain 
endpoints will demonstrate how much the overall benefit estimate might 
vary based on the value EPA gives to a parameter (which has some 
uncertainty associated with it) underlying the estimates for human 
health and environmental effect incidence and the economic valuation of 
those effects. These alternative calculations will represent conditions 
that are possible to occur, however, EPA has selected the best 
supported values based on current scientific literature for use in the 
primary estimate. The alternate calculations will include:
     Presentation of an estimated confidence interval around 
the Primary estimate of benefits to characterize the standard error in 
the C-R and valuation studies used in developing benefit estimates for 
each endpoint;
     Valuing PM-related premature mortality based on a 
different C-R study;
     Value of avoided premature mortality incidences based on 
statistical life years;
     Consideration of reversals in chronic bronchitis treated 
as lowest severity cases;
     Value of visibility changes in all Class I areas;
     Value of visibility changes in Eastern U.S. residential 
areas;
     Value of visibility changes in Western U.S. residential 
areas;
     Value of reduced household soiling damage; and
     Avoided costs of reducing nitrogen loadings in east coast 
estuaries.
    For instance, the estimate of the relationship between PM exposure 
and premature mortality from the study by Dockery, et al. is a 
plausible alternative to the Pope, et al. study used for the Primary 
estimate of benefits. The SAB has noted that ``the study had better 
monitoring with less measurement error than did most other studies'' 
(EPA-SAB-COUNCIL-ADV-99-012, 1999). The Dockery study had a more 
limited geographic scope (and a smaller study population) than the 
Pope, et al. study and the Pope study appears more likely to mitigate a 
key source of potential confounding. The Dockery study also covered a 
broader age category (25 and older compared to 30 and older in the Pope 
study) and followed the cohort for a longer period (15 years compared 
to 8 years in the Pope study). For these reasons, the Dockery study is 
considered to be a plausible alternative estimate of the avoided 
premature mortality incidences that are expected to be associated with 
the final heavy-duty rule rule. The alternative estimate for mortality 
can be substituted for the valuation component in our primary estimate 
of mortality benefits to observe how the net benefits of the program 
may be influenced by this assumption. Unfortunately, it is not possible 
to combine all of the assumptions used in the alternate calculations to 
arrive at different total benefit estimates because it is highly 
unlikely that the selected combination of alternative values would all 
occur simultaneously. Therefore, it will be more appropriate to 
consider each alternative calculation individually to assess the 
uncertainty in the estimate.
    In addition to the estimate for the primary set of endpoints and 
alternative calculations of benefits, our RIA for the final rule will 
also present an appendix with supplemental benefit estimates and 
sensitivity analyses of other key parameters in the benefit analysis 
that have greater uncertainty surrounding them due to limitations in 
the scientific literature. Supplemental estimates will be presented for 
premature mortality associated with short-term exposures to PM and 
ozone, asthma attacks, occurrences of moderate or worse asthma 
symptoms, and the avoided incidences of premature mortality in infants.
    Even with our efforts to fully disclose the uncertainty in our 
estimate, this uncertainty presentation method does not provide a 
definitive or complete picture of the true range of monetized benefits 
estimates. This proposed approach, to be implemented in the BCA for the 
final rule, will not reflect important uncertainties in earlier steps 
of the analysis, including estimation of compliance technologies and 
strategies, emissions reductions and costs associated with those 
technologies and strategies, and air quality and deposition changes 
achieved by those emissions reductions. Nor does this approach provide 
a full accounting of all potential benefits associated with the 
proposed rule for heavy-duty vehicles and diesel fuel, due to data or 
methodological limitations. Therefore, the uncertainty range will only 
be representative of those benefits that we will be able to quantify 
and monetize.
6. What Types of Results Will Be Presented in the Benefit-Cost 
Analysis?
    The BCA for the final rule for heavy-duty vehicles and diesel fuel 
will reflect a single year ``snapshot'' of the yearly benefits and 
costs expected to be realized once the standards have been fully 
implemented and non-compliant vehicles have all been retired. Near-term 
costs will be higher than long-run costs as vehicle manufacturers and 
oil companies invest in new capital equipment and develop and implement 
new technologies. In addition, near-term benefits will be lower than 
long-run benefits because it will take a number of years for compliant 
heavy-duty vehicles to fully displace older, more polluting vehicles. 
However, we will adjust the cost estimates upward to compensate for 
some of this discrepancy in the timing of benefits and costs and to 
ensure that the long-term benefits and costs are calculated on a 
consistent basis. Because of the adjustment process, the cost estimates 
should not be interpreted as reflecting the actual costs expected to be 
incurred in the year 2030. Actual program costs can be found earlier in 
this preamble.
    With respect to the benefits, the BCA for the final rule for heavy-
duty vehicles and diesel fuel will follow the

[[Page 35504]]

presentation format used in the Tier 2 BCA, presenting several 
different measures of benefits which will be useful to compare and 
contrast to the estimated compliance costs. These benefit measures 
include (a) the tons of emissions reductions achieved, (b) the 
reductions in incidences of adverse health and environmental effects, 
and (c) the estimated economic value of those reduced adverse effects. 
Calculating the cost per ton of pollutant reduced is particularly 
useful for comparing the cost-effectiveness of the new standards or 
programs against existing programs or alternative new programs 
achieving reductions in the same pollutant or combination of 
pollutants. Considering the absolute numbers of avoided adverse health 
and environmental effects can also provide valuable insights into the 
nature of the health and environmental problem being addressed by the 
proposed rule as well as the magnitude of the total public health and 
environmental gains potentially achieved. Finally, when considered 
along with other important economic dimensions--including environmental 
justice, small business financial effects, and other outcomes related 
to the distribution of benefits and costs among particular groups--the 
direct comparison of quantified economic benefits and economic costs 
can provide useful insights into the potential magnitude of the 
estimated net economic effect of the rule, keeping in mind the limited 
set of effects we expect to be able to monetize.

VI. Alternative Program Options

    In the course of developing the proposal, we considered a broad 
range of options, many of which were raised by commenters on the ANPRM. 
Various options were considered for the best manner to implement a 
change to diesel fuel, on how to structure a sulfur standard, on fuel 
changes other than sulfur, and on the geographic scope of the program. 
This section helps to explain many alternative program options that we 
considered in designing today's proposal. In this section, we also are 
seeking comment on voluntary phase-in options for implementing the fuel 
program (see section VI.A.2), and on issues connected with the use of 
JP-8 fuel in highway-going military vehicles (see section VI.D).

A. What Other Fuel Implementation Options Have We Considered?

    A broad spectrum of approaches for implementing the fuel program 
were either raised by the Agency in the ANPRM, received as public 
comments on the ANPRM, or raised by various parties during the 
development of this proposal. Below, we discuss some of the options we 
have considered, including alternatives on which we are seeking 
comment.
1. What Are the Advantages and Disadvantages of a Phase-in Approach to 
Implementing the Low Sulfur Fuel Program?
    EPA is proposing, as discussed in section IV.C., that the entire 
pool of highway diesel fuel be converted to low sulfur diesel fuel all 
at once in 2006. In the early years of the program, the use of low 
sulfur diesel fuel will result in reductions in the amount of direct 
and secondary particulate matter from the existing fleet of heavy-duty 
vehicles. Nevertheless, the primary benefit of the fuel change is the 
emission reductions that would occur over time from the new vehicle 
fleet as a result of the enablement of advanced aftertreatment exhaust 
emission control technologies. Consequently, we believe there may be 
some advantages, particularly in the early years, to allowing some 
flexibility in the program so that not all of the highway diesel fuel 
pool must be converted to low sulfur all at once. First, owners of old 
vehicles could continue to refuel on higher-sulfur (500 ppm) diesel 
fuel, potentially saving money for consumers. Second, we believe a 
phase-in approach, if designed properly, has the potential to be 
beneficial for refiners, by reducing the fuel production costs in the 
early years of the program. This flexibility could reduce operating 
costs, if the entire volume of highway fuel does not have to meet the 
low sulfur standard. If coupled with averaging, banking and trading 
provisions, some refineries may be able to delay desulfurization 
investments for several years. Even for refiners planning to 
desulfurize their entire highway fuel pool to low sulfur levels at the 
beginning of the program, there may be circumstances where the actual 
fuel produced is slightly off-spec (i.e., above the low sulfur 
standard). A phase-in approach could allow refiners to continue selling 
that fuel to the highway market (as 500 ppm fuel), rather than to other 
distillate markets. Refiners could also have more flexibility to 
continue producing highway diesel (as 500 ppm fuel) during unit 
downtime (e.g., turnarounds and upsets).
    While a phase-in approach could provide flexibility for refiners 
and potentially lower costs for consumers, a number of concerns would 
need to be addressed before such an approach could be implemented. 
These include: ensuring sufficient availability of the low sulfur fuel 
when and where it is needed, minimizing the potential for misfueling, 
minimizing the risk of spot outages, and minimizing impacts on the fuel 
distribution and retail industries. These issues are discussed further 
below. It is not obvious at what level the fuel production and 
distribution systems can provide two grades of highway diesel fuel 
while minimizing the potential for localized supply shortages and price 
spikes, and misfueling problems. For example, we expect that in the 
first year of the program only about 10 percent of highway diesel fuel 
would be consumed by 2007 model year vehicles requiring the use of low 
sulfur fuel. In a perfect world where the distribution system could, 
without additional cost, make low sulfur diesel fuel widely available 
(in addition to the current 500 ppm fuel), only about 10 percent of the 
highway diesel fuel produced by refiners in the first year would then 
have to be low sulfur. Unfortunately, since this perfect world does not 
exist, the question remains whether, and to what extent, the system can 
distribute two grades of highway diesel fuel in a way that takes 
advantage of any flexibilities offered, and ensures sufficient supply 
of fuel for the new vehicles that need it.
    During the process of developing this proposal (including comments 
received on the ANPRM), many industry stakeholders (many diesel 
distributors, marketers, larger refiners, and end-users such as 
truckers and centrally-fueled fleets) have commented on ways to 
implement the fuel program. While each stakeholder may have had 
different assumptions behind their position (including assumptions 
about the structure of a phase-in, and expectations about the resulting 
costs and fuel prices), many stakeholders have encouraged EPA to 
implement any fuel change all at once, rather than incur the added 
distribution costs and marketplace complication of phasing in a new 
grade of highway diesel fuel. The following sections discuss some of 
the challenges in implementing a phase-in approach.

a. Availability of Low Sulfur Diesel Fuel

    Because new vehicles would need to be fueled exclusively with low 
sulfur diesel, for a phase-in approach to be workable, low sulfur 
diesel fuel would have to be available in all parts of the country. It 
is not clear what minimum level of availability would be necessary to 
meet the needs of diesel vehicles. The trucking industry has indicated 
that a limited number of phased-in fueling locations would not meet the 
needs of the trucking industry.

[[Page 35505]]

    We seek comment on what level of availability would be appropriate 
under a phase-in approach, to ensure that the low sulfur diesel fuel is 
available, within a reasonable distance, to all consumers in all parts 
of the country. For example, would sufficient availability be achieved 
if all major truck stops across the country offered low sulfur fuel, or 
if some minimum percentage of diesel retailers in different geographic 
areas offered low sulfur fuel? Are there studies on fuel availability 
that would serve to inform efforts to assure adequate availability? We 
request that commenters consider what fraction of truck stops and other 
retail outlets would need to make low sulfur fuel available within any 
given area in order to ensure reasonable availability from the public's 
perspective.

b. Misfueling

    Any phase-in approach would introduce an additional grade of 
highway diesel fuel into the market, by allowing both high and low-
sulfur grades to coexist, with a potential for a price differential 
between the grades. Many industry stakeholders, including diesel 
marketers, truck stop operators, and engine manufacturers, have 
commented that misfueling would be significant under a phase-in 
approach.\147\ That is, customers with new vehicles that need low-
sulfur fuel might use the higher-sulfur fuel, mistakenly or 
deliberately, which could increase emissions and damage the emissions 
control technology on the vehicle. Diesel marketers have also raised 
the issue that a phase-in system could create incentives for consumers 
to tamper with the emission control equipment of new vehicles, if they 
believe that will enable them to use a lower priced fuel. Therefore, we 
are concerned about the potential for misfueling, as it could reduce 
the emission benefits of the program. However, if a phase-in approach 
were to work well and misfueling were not an issue, we would expect to 
achieve the same environmental benefits as the proposed single fuel 
approach.
---------------------------------------------------------------------------

    \147\ Comment letters from the Engine Manufacturers Association 
(Item II-D-35), National Association of Truck Stop Operators 
(Included in Report of the Small Business Advocacy Review (SBAR) 
Panel, Appendix B, Page 30), and Petroleum Marketers Association of 
America (Included in SBAR Panel Report, Appendix B, Page 38).
---------------------------------------------------------------------------

    Some degree of misfueling occurs even today with a single grade of 
highway diesel fuel, due to the availability of tax exempt off-highway 
diesel fuel. The opportunity for misfueling with off-highway diesel 
fuel, however, is somewhat limited by the limited number of highway 
diesel refueling locations that market both grades of diesel fuel. 
Nevertheless, since off-highway diesel fuel will still be available 
even under a complete switch of highway diesel fuel to low sulfur, the 
problem of misfueling is not entirely unique to the phase-in approach. 
It is, however, true that the greater availability of 500 ppm diesel 
fuel alongside the low sulfur fuel will make misfueling easier. Thus, 
the appropriate question to ask when considering a phase-in approach is 
not ``will people misfuel?'' but ``to what extent?'' and ``how can the 
design of the program minimize the potential for misfueling?''
    One factor that might encourage misfueling would be the existence 
of a price differential between low sulfur diesel fuel and 500 ppm 
fuel. For many diesel vehicles, particularly line-haul tractor 
trailers, the fuel cost can be as much as 20 percent of annual 
operating costs, so drivers have a strong incentive to save on fuel 
costs. On the other hand, there are also several factors that might 
serve as a deterrent to misfueling. First, the potential risk 
associated with voiding a manufacturer emission warranty or damaging 
the engine and exhaust system on an expensive vehicle might cause 
owners and operators of heavy-duty trucks to be more circumspect in 
ensuring that their vehicles are fueled properly. Second, misfueled 
vehicles could experience a loss in performance, such as poor 
acceleration or even engine stalling (as discussed in section 
III.F.1.a). Third, under the proposed regulations it would be unlawful 
for any person to misfuel.
    Depending on the potential for misfueling, EPA may need to require 
that new vehicles be fitted with a unique nozzle interface, with a 
corresponding size nozzle for the low-sulfur diesel. This would be 
analogous to the nozzle interface approach used to discourage 
misfueling in the unleaded gasoline program. However, diesel marketers 
have indicated that they do not support the use of unique nozzle 
interfaces for the low sulfur fuel, particularly if it would affect 
volume delivery. They have expressed the concern that a smaller nozzle 
size would reduce the volume of fuel delivered, result in slower 
refuelings, and increase wait times at retail stations. Further, based 
on our experience with unleaded gasoline,\148\ it is likely that people 
intent on misfueling would quickly find ways around a unique nozzle/
nozzle interface. We request comment on ways to structure a unique 
nozzle/nozzle interface approach that would discourage misfueling while 
avoiding these problems. We also request comment on any alternative 
methods that could be used to discourage misfueling.
---------------------------------------------------------------------------

    \148\ ``An Analysis of the Factors Leading to the Use of Leading 
to the Use of Leaded Gasoline in Automobiles Requiring Unleaded 
Gasoline,'' September 29, 1978, Sobotka & Company, Inc. See also 
``Motor Vehicle Tampering Survey--1983,'' July 1984, U.S. EPA, 
Office of Air and Radiation, Docket A-99-06. See also ``Anti-
Tampering and Anti-Misfueling Programs to Reduce In-Use Emissions 
From Motor Vehicles,'' May 25, 1983 (EPA/AA/83-3). Contained in 
Docket A-99-06.
---------------------------------------------------------------------------

    We invite comment on the potential for misfueling under phase-in 
approaches, what factors would influence misfueling, and how the 
potential for misfueling might vary under the different phase-in 
approaches described in subsection 2 below. We further seek comment on 
how these phase-in approaches could be designed to minimize the 
potential for misfueling.

c. Distribution System Impacts

    While providing flexibility for refiners and potentially lower 
costs to consumers, a phase-in approach would rely on the fuel 
distribution infrastructure being able to accommodate the second grade 
of highway diesel fuel. The economics of modifying the distribution 
infrastructure to handle two grades of highway diesel fuel would affect 
the extent to which refiners can take advantage of the flexibility, and 
consumers enjoy the cost-savings, of a phase-in. There are a vast array 
of businesses in the diesel fuel distribution system, encompassing 
thousands of companies, including pipelines, bulk terminals, bulk 
plants, petroleum marketers (who carry the fuel from bulk terminals and 
bulk plants via transport trucks and fuel tank wagons to retail outlets 
and fleet customers), fuel oil dealers, service stations, truck stops, 
and centrally-fueled fleets (commercial fleets, federal/state/local 
government fleets, and farms). Based on available data, the vast 
majority of these are small businesses according to the Small Business 
Administration's definitions.\149\ These businesses may make 
investments and change their practices to accommodate two grades of 
highway diesel fuel. The economics of a phase-in could be viewed as 
follows: Through intermediate price mark-ups on the product, the system 
would distribute some of the cost savings experienced by the refiners 
and consumers to those making capital investments. If the potential 
cost savings

[[Page 35506]]

were not sufficient to justify such investments, then those investments 
would not occur and the entire system would convert to low sulfur 
diesel. We seek comment on how the economics of a phase-in would 
actually play out.
---------------------------------------------------------------------------

    \149\ For more information, see the Report of the Small Business 
Advocacy Review Panel, contained in the docket.
---------------------------------------------------------------------------

    If the cost savings of a phase-in are substantial, many bulk 
terminals and bulk plants may find it economical to add new tank 
capacity to accommodate a second grade of highway diesel fuel. However, 
if the cost savings of a phase-in are modest, fewer terminal operators 
would profit from such investments, since some have commented on the 
costs, space constraints, and permitting difficulties associated with 
new tankage.\150\ The magnitude of the cost savings also affects the 
role of diesel marketers in this market. Some marketers have commented 
that if some terminals offer two grades while others offer only one 
grade, the costs of transporting fuel would increase since some trucks 
would have to travel greater distances to alternate terminals or bulk 
plants.\151\ The share of the cost savings that marketers could enjoy 
from the mark-up on diesel products would have to at least equal the 
higher transport costs for them to offer to handle two grades of fuel.
---------------------------------------------------------------------------

    \150\ Letter from Independent Terminal Operators Association, 
July 13, 1999 (Item # II-D-80).
    \151\ Letter from Petroleum Marketers Association of America, 
November 8, 1999, Docket A-99-06.
---------------------------------------------------------------------------

    Similarly, many service stations, truck stops, and centrally-fueled 
fleets would be faced with a decision of whether to add additional 
underground storage tanks to carry the extra grade of diesel fuel. 
Retailers with more than one diesel tank, such as many truck stops and 
some fleets, could choose to demanifold existing tanks (involving 
breaking concrete) in order to dedicate one or more tanks to the new 
fuel. Those that find it economical to do so will undertake the 
investment and offer two grades, while those that would not find the 
investment profitable would forego this option.
    Generally we would expect that where businesses could profit from 
managing two grades they would do so and provide some 500 ppm diesel to 
the market. Thus, the impact to the distribution system of a phase-in 
would include costs from new investments, but these could be 
compensated by higher profits. Where the costs of handling two fuels in 
the distribution system are larger than the cost savings enjoyed by 
refineries (and passed down to consumers in lower fuel prices), then 
only low sulfur diesel would be offered. Some refiners and distributors 
have expressed the concern, however, that these additional investments 
would be ``stranded'' after the phase-in period ends. A key question 
will be whether each party in the refining/distribution system can 
accurately anticipate what the others will do, so as to avoid 
unnecessary investments (e.g., if the system should switch over the low 
sulfur more quickly than expected). Since the diesel fleet transitions 
over relatively quickly (greater than 50 percent of VMT is typically 
driven by new diesel vehicles after just 5 years), there may be limited 
time to recoup any investment made to handle an additional grade of 
highway diesel fuel. We request comment overall on the economics of a 
phase-in approach.
    In addition to overall impacts on the distribution system, an 
additional grade of highway diesel fuel could reduce the flexibility of 
the distribution system to carry all grades of fuels that it does 
today. This may particularly be a concern with specialty fuels or 
segregated shipments of fuel through pipelines that require separate 
tankage such as those utilized by the Department of Defense (DOD). DOD 
stated that since its specialty fuels (F-76, JP-5, and JP-8) are not 
fungible fuels, if today's rule places additional stress on an already 
capacity-strained pipeline system, it may limit DOD's ability to 
transport adequate volumes of their specialty fuels to meet operational 
readiness requirements. Consequently we request comment on this 
particular impact on the distribution system in regard to accommodating 
a second grade of highway diesel fuel.

d. Uncertainty in the Transition to Low Sulfur

    We believe the proposed single fuel approach provides more 
certainty to the market for making the large investments needed to 
introduce low-sulfur fuel. Yet even under a single fuel approach, 
refiners have indicated that there is uncertainty in refiner decisions 
to invest or not (or to underinvest) in desulfurization, which could 
lead to a risk of supply shortfalls and high prices. Refiners may make 
this choice to exit the highway diesel market, or to reduce production 
volume of highway diesel fuel, especially if faced with uncertainty 
about the ability to recover their investments (see further discussion 
in section V.D.1). A phase-in approach could minimize any potential for 
such a shortfall in the overall highway diesel fuel supply. Under a 
phase-in, the level of uncertainty is different, however, in that since 
the highway diesel pool would be split into two grades, refiners would 
need to predict in advance the relative demand for each grade.
    Under the phase-in flexibility approaches (described in the 
following section), the presumption is that the fuel production and 
distribution system will react to both the market demand and the 
incentive of the various programs to produce and distribute the low 
sulfur fuel at reasonable prices to all parts of the country. Turning 
any of these approaches into a reality requires embracing the 
possibility that the market reacts differently than anticipated. For 
example, diesel retailers have indicated that it would be extremely 
difficult to predict how retailers would respond to making low sulfur 
fuel available, given the many factors that influence retail decisions. 
Consequently, refiners might have little certainty about continued 
markets for 500 ppm fuel when making their investment decisions and all 
of them might choose to convert to low sulfur. Given the lead time 
needed for additional desulfurization capacity at refineries to come on 
line, it is important for a smooth transition to low sulfur diesel fuel 
that predictions of demand be similar to the actual demand. Each of the 
phase-in approaches described in the following section is intended to 
be designed to allow the market the flexibility to find a lower cost 
option than full initial conversion to low sulfur fuel if such a 
solution exists, and to default to a full low sulfur program if such a 
solution does not exist. Each approach is, however, subject to 
different sources of uncertainty. We request comment on the ability of 
refiners to accurately predict demand for desulfurization capacity 
under a phase-in approach. Commenters should discuss this issue in the 
context of the phase-in approaches described below and in the context 
of the proposed single fuel approach.

e. Cost Considerations Under a Phase-in Approach

    Because it avoids the need to produce all of the fuel to the low 
sulfur standard in the first year, a phase-in approach could provide an 
opportunity for cost savings to refiners and could significantly lower 
overall diesel fuel production costs. Consumers of pre-2007 diesel 
vehicles could also realize a savings if the current 500 ppm fuel were 
still available and priced lower than the new low sulfur fuel. In a 
perfect world with a distribution system capable of distributing a 
second grade of highway diesel fuel at no cost, if low sulfur 
production could be matched with the demand from new vehicles, the 
fraction of highway diesel fuel that would have to be low sulfur would 
increase from approximately 9% in

[[Page 35507]]

2007 to approximately 60% in 2012 based on typical fleet turnover 
rates. Thus, the amount of low sulfur fuel refiners would have to 
produce in the early years of the program could be reduced 
significantly, with a corresponding reduction in production costs 
theoretically as high as $4 billion, using our estimated per gallon 
fuel costs discussed in section IV. This theoretical distribution 
system does not exist and there would be a number of important and 
potentially significant costs incurred in the distribution system that 
could impact these savings. As discussed above, a wide array of 
entities in the distribution system, including refiners, bulk 
terminals, pipelines, bulk plants, petroleum marketers, fuel oil 
dealers service stations, truck stops, and centrally fuelled fleets 
would have to make investment decisions in order to distribute a second 
grade of highway diesel fuel. We seek comment on the potential cost 
savings associated with a phase-in approach, including the potential 
costs of managing two grades of highway diesel fuel in the distribution 
system, how these costs would vary depending on the relative volumes of 
the two grades of highway diesel fuel, the necessary margin for 
businesses in the distribution system to find it economic to manage two 
grades of highway fuel, and how these cost savings and margins could 
vary depending on the range of ways the distribution system might 
respond.
2. What Phase-in Options Is EPA Seeking Comment on in Today's Proposal?
    In this section, we are requesting comment on three different 
phase-in approaches for implementing a program for low sulfur highway 
diesel fuel.

a. Refiner Compliance Flexibility

    Despite the concerns described above with a phase-in approach for 
implementing the diesel fuel sulfur control program, EPA nevertheless 
believes that a program, if voluntary, can be devised which can address 
these concerns and take advantage of at least some of the benefits a 
phase-in approach has to offer. Consequently, as part of our proposed 
program for implementing low sulfur highway diesel, as described in 
section IV.C, we also are seeking comment on a voluntary option that 
would provide compliance flexibilities for refiners, while still 
achieving the environmental benefits of the program. In this section, 
we describe this refiner compliance flexibility concept and seek 
comment on all aspects of its design. We also discuss how this 
compliance flexibility relates to the options for small refiner 
flexibility (which we're seeking comment on in section VIII.E).

i. Overview of Compliance Flexibility

    We are seeking comment on a voluntary compliance flexibility that 
would allow refiners to continue producing fuel at the 500 ppm level 
for a fraction of their total highway diesel fuel volume in the first 
few years of the program. The fraction of 500 ppm fuel allowed to be 
produced by refiners would phase-down over a period of several years. 
Specifically, we request comment on the appropriate fraction of highway 
diesel fuel allowed to be produced as 500 ppm fuel beginning in 2006. 
Three possible scenarios are shown in Table VI.A-1 below. The level at 
which this flexibility begins would significantly affect its design. We 
are seeking comment on a range of production percentages for the 500 
ppm fuel. We are particularly interested in the degree to which 
percentages of 500 ppm at the higher end of this range could pose 
challenges for ensuring sufficient availability of the low sulfur fuel 
and minimizing the potential for misfueling. In addition, we request 
comment on the extent to which different proportions of 500 ppm fuel 
will pose different challenges for the distribution system. Several 
issues and implications of setting the 500 ppm production limits at 
higher or lower levels are discussed below. We seek comment on our 
assumptions and the implications of these issues for the design of such 
a compliance flexibility program. Further, we request comment on the 
number of years this flexibility should be provided.

                Table VI.A-1.--Two Possible Scenarios for Implementing the Compliance Flexibility
----------------------------------------------------------------------------------------------------------------
                                                       Percent of highway diesel fuel permitted to be 500 ppm
                                                  --------------------------------------------------------------
                                                     2006     2007     2008     2009     2010     2011     2012
----------------------------------------------------------------------------------------------------------------
Scenario A.......................................       20       20       10       10        0        0        0
Scenario B.......................................       50       50       30       15        0        0        0
Scenario C.......................................       75       75       60       45       30       15        0
----------------------------------------------------------------------------------------------------------------

    We believe this compliance flexibility would be potentially 
beneficial for refiners. This flexibility could reduce operating costs, 
by not requiring the entire volume of highway fuel to meet the low 
sulfur standard. With averaging, banking and trading provisions as a 
component of this compliance flexibility (as discussed below), some 
refineries may be able to delay desulfurization investments for several 
years. Even for refiners planning to desulfurize their entire highway 
fuel pool to low sulfur levels at the beginning of the program, there 
may be circumstances where the actual fuel produced is slightly off-
spec (i.e., above the low sulfur standard). This flexibility would 
allow refiners to continue selling that fuel to the highway market (as 
500 ppm fuel), rather than to other distillate markets. Refiners would 
also have more flexibility to continue producing highway diesel (as 500 
ppm fuel) during unit downtime (e.g., turnarounds and upsets).
    This approach would need appropriate safeguards to minimize 
contamination of the low sulfur fuel and misfueling. Thus, low sulfur 
highway diesel would have to remain a segregated product throughout its 
distribution (see further discussion of segregation requirements in 
section VI.A.2.a.v). Further, any retail pumps carrying 500 ppm fuel 
would have to be prominently labeled to prevent misfueling of 2007 and 
later model year vehicles. We seek comment on whether other measures to 
discourage misfueling might also be necessary. For example, the use of 
a unique refueling nozzle/vehicle nozzle interface could further 
discourage misfueling, although we question the need to pursue this 
approach if the 500 ppm fuel were in the market in relatively low 
volumes and only during the initial years when new vehicles still 
comprise a relatively small percent of the fleet. Other issues 
regarding the potential for misfueling are discussed in subsection 1 
above.
    We also propose an averaging, banking and trading (ABT) program as 
part of this compliance flexibility. Refiners owning more than one 
refinery would be allowed to average their

[[Page 35508]]

production volumes across refineries in determining compliance. This 
could provide flexibility for some refining companies to delay making 
desulfurization investments at some smaller refineries for several 
years. Refiners also could generate credits based on the volume of low 
sulfur fuel produced above the required percentage. For example, if a 
refinery were required to produce a minimum of 80 percent of its 
highway diesel pool as low sulfur in the first year, and that refinery 
actually produced 100 percent of its highway diesel as low sulfur that 
year, it could generate credits based on the volume of the ``extra'' 20 
percent of low sulfur fuel it produced. Those credits could be sold or 
traded with another refinery, which could in turn use the credits to 
produce a greater percentage of 500 ppm sulfur highway diesel fuel. 
More details on how these ABT provisions could be structured are 
discussed in section VI.A.2.a.iv below.
    We believe a credit trading program may be particularly beneficial 
for refiners whose volumes of highway diesel are relatively small. It 
is possible that the credits generated by a refiner producing a large 
volume of low sulfur diesel could potentially be sufficient to offset a 
smaller refiner's entire highway diesel production, thereby enabling a 
smaller refiner to comply solely by the use of credits--and avoid 
desulfurization investments--for several years.
    While we believe that a credit trading program could add meaningful 
flexibility under this approach, we are concerned about the potential 
for shortfalls in supply of low sulfur highway diesel in those areas 
supplied exclusively or primarily by refiners complying by the use of 
credits (i.e., producing only 500 ppm fuel). This situation could 
potentially occur, for example, in the Rocky Mountain area, or other 
areas served primarily by smaller refineries, or areas with relatively 
isolated fuel distribution systems. This concern becomes more salient 
as the percentage of 500 ppm fuel allowed to be produced increases. If 
the flexibility were to begin with 20 percent (of 500 ppm fuel) in the 
first year, the likelihood of a supply shortfall would be less likely 
than if the program begins with 50 percent (of 500 ppm fuel). 
Therefore, we seek comment on the extent to which this situation could 
occur and ways to structure the credit trading system to prevent low 
sulfur fuel supply shortfalls in any area, perhaps through regional 
restrictions in credit trading, or providing incentives for refiners to 
supply sufficient volumes of low sulfur fuel. We have been, and will 
continue, working with the Western states (for example, through the 
Western Governors Association) to discuss the best ways of implementing 
the program in that area.
    Alternatively, we request comment on a regional approach to 
designing a compliance flexibility (for example, different refiner 
production levels and/or availability provisions for different areas of 
the country). We seek comment on whether and how this compliance 
flexibility could be enhanced by such a regional approach, including 
information and data that would help us to better understand regional 
differences in highway diesel fuel supply, demand and distribution.
    Refiners have expressed concern that under some phase-in approaches 
it might be difficult for them to recover their capital investments. We 
request comment this issue, including how the potential for cost 
recovery under a phase-in approach compares with that under the single-
fuel approach, and what the implications are for the optimal production 
level of low sulfur diesel under the compliance flexibility approach.
    We also invite comment on an alternative in which we simply 
establish a minimum production percentage for low sulfur fuel in the 
beginning of the program, and allow the market to take over in 
determining the appropriate supply and distribution from that point on. 
One concern with this approach is that it would perpetuate the 
potential for misfueling for as long as two grades of highway fuel 
remained in the market. We request comment on how long two grades of 
highway diesel would likely coexist in the market under this approach. 
Further, the level of this minimum low sulfur production percentage 
would have to be carefully designed to assure sufficient availability 
throughout the country. If you believe this or other alternative 
approaches would make the program more useful, please share your 
specific suggestions with us.

ii. What Are the Key Considerations in Designing the Compliance 
Flexibility?

    A key consideration in designing this compliance flexibility is 
whether or not it should be accompanied by a retailer availability 
requirement. Under an availability requirement, diesel retailers would 
have to offer low sulfur fuel, but would have the flexibility to offer 
the 500 ppm fuel as well. We believe the need for an availability 
requirement is linked to the refiners' 500 ppm fuel production limits. 
At a 500 ppm fuel production limit beginning at 20 percent, our 
concerns for lack of availability and misfueling would likely be low 
enough not to warrant a retailer availability requirement or additional 
misfueling controls such as special nozzles. Our presumption is that if 
at least 80 percent of the highway fuel volume is low sulfur (i.e., a 
maximum 20 percent is 500 ppm), the low sulfur fuel should be 
sufficiently available across the country. Alternatively, if refiners 
were allowed to produce some greater proportion of their highway diesel 
fuel as 500 ppm fuel in the first few years, there would be a greater 
likelihood of low sulfur fuel supply shortfalls, lack of availability, 
and misfueling , and there would be a more compelling need to ensure 
that some minimum fraction of diesel retailers offered the low sulfur 
fuel. We request comment on the level of the 500 ppm fuel production 
limit at which concerns about low sulfur shortfalls, lack of 
availability, and misfueling would be great enough to warrant imposing 
a retailer availability requirement. We ask that commenters also 
consider whether they would prefer a ``blended'' program (i.e., a 
program with both a production limit on 500 ppm fuel and some form of a 
retailer availability requirement) to a program that permits a slightly 
lower level of 500 ppm fuel, but with no availability requirement.
    In considering this issue, note that the percentage of low sulfur 
diesel fuel produced would not necessarily match the availability 
level. For example, if 80 percent of the highway fuel pool were low 
sulfur, this would not necessarily translate into the low sulfur fuel 
being available at 80 percent of retail stations currently selling 
diesel fuel. Since large retail stations (e.g., large truck stops) and 
centrally-fueled fleets represent a disproportionate share of the 
diesel sales volume, it is possible that the percentage of retail 
stations offering low sulfur fuel could be much lower than 80 percent 
of the diesel retail stations. If this were the case, would there still 
be concerns with lack of availability of the low sulfur fuel (e.g., 
even with 20 percent of highway fuel as low sulfur)?
    We believe there are merits to designing this compliance 
flexibility in a way that avoids the need for a retailer availability 
requirement. With no availability requirement, retailers would be free 
to choose to sell 500 ppm fuel only, low sulfur fuel only, or both. We 
have heard from refiners and diesel marketers that they believe that 
retailers, if faced with an availability requirement, would likely 
decide not to carry both grades of fuel but, rather, would switch over 
to the low sulfur fuel to avoid the expense of installing new tanks and 
pumps. If this were true, an

[[Page 35509]]

availability requirement could have the effect of significantly 
limiting a refiner's markets for its 500 ppm fuel, thus, limiting the 
benefits of the compliance flexibility approach. Nevertheless, we seek 
comment on whether an availability requirement for low sulfur diesel 
fuel should be a condition for retailers marketing 500 ppm fuel.
    We seek comment on whether a retailer availability requirement 
would diminish the utility of the compliance flexibility approach, and 
at what point in designing this option (e.g., at what 500 ppm fuel 
production limit) a retailer availability requirement would become 
necessary to encourage sufficient availability of low sulfur fuel.
    Since this compliance flexibility is voluntary, we anticipate that 
refiners would only produce and market 500 ppm fuel under the allowed 
percentages to the extent that the costs of distributing it are offset 
by savings elsewhere. The distribution system has only a limited 
ability to accommodate a second grade of highway diesel without 
incurring significant costs (e.g., installing new tankage). Therefore, 
while refiners may be able to reduce the costs of diesel fuel 
production if higher percentages of high sulfur diesel fuel are 
permitted, they may find it difficult to market 500 ppm fuel in volumes 
much above even the 20 percent level, due to distribution system costs. 
We request comment on the degree to which the distribution and retail 
costs associated with accommodating two grades of highway diesel fuel 
depend on the relative volumes of those fuels. For example, how would 
the costs incurred in the distribution system vary as the amount of 500 
ppm fuel produced by refiners increases from zero to 50 percent, or 
even beyond?

iii. How Does This Compliance Flexibility Relate to the Options for 
Small Refiner Flexibility?

    In section VIII.E., we seek comment on three approaches for small 
refiner flexibility. One of these approaches would allow small refiners 
to continue selling 500 ppm fuel for an unspecified period of time 
(although we seek comment on an appropriate duration for this 
flexibility). If the compliance flexibility approach described here 
were implemented for the refining industry as a whole, we seek comment 
on the best ways to meld this flexibility with approaches for 
minimizing the burden on small refiners. For example, we seek comment 
on whether it would be appropriate to either relax or remove any 500 
ppm production limits for small refiners. In other words, we may 
consider allowing small refiners to continue selling their full 
production volume of highway diesel as 500 ppm fuel for some period of 
time (likely at least as long as the compliance flexibility provided to 
the refining industry as a whole, if not for some or an unlimited 
number of years beyond that). We request comment on the appropriate 
duration of this flexibility for small refiners. Further, we seek 
comment on whether small refiners should be allowed to generate and 
sell credits under the compliance flexibility's ABT program, even if 
small refiners are not required to produce any portion of their highway 
fuel as low sulfur diesel. The ABT approach could minimize the burden 
on small refiners by allowing them to make some additional profit to 
offset their desulfurization investments, thus giving them an incentive 
to produce low sulfur highway diesel fuel earlier than they otherwise 
would. We seek comment on other ways this compliance flexibility could 
be crafted to minimize burden on small refiners and to better meld with 
the approaches for small refiner flexibility described in section 
VIII.E.
    It should be noted that our approach to allow small refiners to 
continue selling 500 ppm highway diesel (on which we're seeking public 
comment in section VIII.E.1.) does not include a retailer availability 
requirement. During the SBREFA process, small refiners expressed 
concern that an availability requirement would significantly limit 
their potential markets for 500 ppm fuel, since they believe that few 
retail outlets would be willing to offer both grades of highway diesel 
due to the significant costs of installing new tanks and pumps. 
Therefore, if this option for small refiner flexibility is promulgated 
in the final rule, we would reconsider its design in light of any 
decisions made for compliance flexibilities for the whole refining 
industry (e.g., the issue of whether an availability requirement would 
be necessary).

iv. How Would the Averaging, Banking and Trading Program Work?

    This section discusses in more detail how we envision an averaging, 
banking and trading (ABT) program working in conjunction with the 
compliance flexibility approach. The goal of the ABT provisions is to 
maximize the flexibility provided by the program without diminishing 
its environmental benefits. We envision that this ABT program could 
apply to the program regardless of the actual level of the minimum 
refiner production requirement for low sulfur highway diesel. We 
request comment on all aspects of these ABT provisions. If you have 
ideas on how these provisions could be structured differently to 
enhance the program, please share your specific suggestions with us.

Averaging

    Refiners and importers could be allowed to meet the required 
minimum percentage of low sulfur fuel production averaged over their 
entire corporate highway diesel pool. The minimum required percentage 
of low sulfur fuel production under the compliance flexibility would be 
determined on an annual average basis, across all refineries owned by 
that refiner (or all highway diesel fuel imported by the importer in 
the calendar year). Thus, within a given refining company, the volume 
of low sulfur fuel produced at one refinery could be below the minimum 
required percentage, so long as the volume produced at another refinery 
exceeded the minimum percentage by a sufficient amount such that the 
minimum required percent of low sulfur volume was met at the corporate 
level.

Generating Credits

    Beginning in 2006, refineries and importers could generate credits 
based on the volume of low sulfur fuel produced above the required 
percentage. For example, a refinery produced 10 million gallons of 
highway diesel fuel in 2006 and was required to produce a minimum of 80 
percent of its highway diesel volume (8 million gallons) as low sulfur 
that year. That refinery actually produced 100 percent of its highway 
diesel as low sulfur that year. Thus, it could generate credits based 
on the volume of the ``extra'' 20 percent of low sulfur fuel it 
produced above the required minimal percentage `` that is, 2 million 
gallons of credits. Under this program, we do not envision a need to 
establish a baseline volume of diesel fuel, since credits would be 
generated based on the volume of low sulfur diesel fuel actually 
produced above the required percentage.
    Credits could be generated in each year that the compliance 
flexibility provisions are in place. In other words, if the duration of 
the compliance flexibility were for four years (i.e., refiners were 
allowed to continue producing some specified percentage of 500 ppm fuel 
for four years after the start of the low sulfur program), from 2006 
through 2009, credits could be generated in each of those years.
    We seek comment on whether there could be circumstances where the 
use of low sulfur highway diesel could be shown to demonstrate 
environmental benefits significant enough to warrant

[[Page 35510]]

the generation of early credits. To the extent there may be 
circumstances that warrant early credit generation, we seek comment on 
whether there should be an appropriate discount factor applied to such 
credits, to ensure they would be comparable with the environmental 
benefits achieved by the use of low sulfur fuel in vehicles meeting 
today's proposed standards. See section IV.F.
    As an additional aspect to implementing the compliance flexibility 
program, we seek comment on whether it would be advantageous for EPA to 
offer to sell additional ABT credits to refineries at a predetermined 
price. This would provide more certainty about the cost of supplying 
low sulfur diesel fuel by establishing a ceiling price on the ABT 
credits. We request comment on (1) what should be the appropriate 
predetermined price for these ABT credits; (2) whether there should be 
a cap on the total number of credits available from EPA to assure 
availability of low sulfur diesel; and (3) if there is a cap, whether 
credits should be sold on a first-come, first-serve basis.

Using Credits

    Refiners and importers would be able to use credits to demonstrate 
compliance with the minimum required percentage of low sulfur highway 
diesel fuel, if they are unable to meet this requirement with actual 
highway diesel fuel production. Although credits would not officially 
exist until the end of the calendar year (based on the generating 
refinery's actual low sulfur fuel production) there is nothing to 
prevent companies from contracting with each other for credit sales 
prior to the end of the year, based on anticipated production. The 
actual credit transfer would not take place until the end of the year. 
All credit transfer transactions would have to be concluded by the last 
day of February after the close of the annual compliance period (e.g., 
February 28, 2007 for the 2006 compliance period).
    For example, refiners who wish to purchase credits to comply with 
the 2006 required percentage of low sulfur fuel could do so based on 
the generating refinery's projections of low sulfur fuel production. By 
the end of February the following year, both the purchaser and the 
seller would need to reconcile the validity of the credits, as well as 
their compliance with the required percentages of low sulfur fuel 
produced.
    We seek comment on allowing an individual refinery that does not 
meet the required percentage of low sulfur fuel production in a given 
year to carry forward a credit deficit for one year. Under this 
provision, the refinery would have to make up the credit deficit and 
come into compliance with the required low sulfur production percentage 
in the next calendar year, or face penalties. This provision would give 
some relief to refiners faced with an unexpected shutdown or that 
otherwise were unable to obtain sufficient credits to meet the required 
percentage of low sulfur fuel production.
    We recognize that there is potential for credits to be generated by 
one party and subsequently purchased and used in good faith by another 
party, yet later found to have been calculated or created improperly, 
or otherwise determined to be invalid. Our preference would be to hold 
the credit seller, as opposed to the credit purchaser, liable for the 
violation. Generally, we would anticipate enforcing a compliance 
shortfall (caused by the good faith purchase of invalid credits) 
against a good faith purchaser only in cases where the seller is unable 
to recover valid credits to cover the compliance shortfall. Moreover, 
in settlement of such cases, we would strongly encourage the seller to 
purchase credits to cover the good faith purchaser's credit shortfall.
    We believe that any person could act as a broker in facilitating 
credit transactions, whether or not such person is a refiner or 
importer, so long as the title to the credits are transferred directly 
from the generator to the purchaser. Whether credits are transferred 
directly from the generator to the purchaser, or through a broker, the 
purchaser needs to have sufficient information to fully assess the 
likelihood that credits would be valid. Any party that can generate and 
hold credits could also resell them, but the credits should not be 
resold more than twice. Repeated sales of credits could significantly 
reduce the ability to verify the validity of those credits.

How Long Would Credits Last?

    The goal of these ABT provisions is to provide refiners additional 
flexibility in the early years of the low sulfur fuel program. After 
the first few years of the program, there would be a significantly 
greater proportion of aftertreatment-equipped vehicles in the fleet. It 
would be important to ensure a full transition to the new low sulfur 
fuel to prevent misfueling of those vehicles and preserve the 
environmental benefits of the program. Therefore, we do not currently 
envision allowing credits to be used more than a few years beyond the 
compliance flexibility period. We seek comment on whether credit 
lifetime should be limited, and if so on the appropriate length of time 
credits should be allowed to be used (in other words, the ``lifetime'' 
of credits).

v. Compliance, Recordkeeping, and Reporting Requirements

    This section describes the types of provisions we believe the 
regulations would need to include if a compliance flexibility approach 
were adopted, to ensure that diesel fuel subject to the 500 ppm sulfur 
standard would not be introduced into model year 2007 and later diesel 
vehicles.
    Refiners and importers of 500 ppm highway diesel fuel would be 
required to designate all highway diesel fuel produced as meeting the 
500 ppm sulfur standard or meeting the proposed 15 ppm standard. Such 
refiners and importers would be required to maintain records regarding 
each batch of motor vehicle diesel fuel produced or imported, including 
the volume of each batch, and would be required to maintain records, 
and to report regarding credits earned and credit transactions. 
Reporting would also be required regarding volumes of highway diesel 
fuel produced or imported.
    All parties in the distribution system that chose to carry 500 ppm 
fuel would be required to segregate that fuel from 15 ppm sulfur fuel, 
and would be responsible for ensuring that fuel designated as 15 ppm or 
500 ppm meets the respective sulfur standards, throughout the 
distribution system. Such segregation requirements would likely be 
modeled after those of the reformulated gasoline (RFG) program (e.g., 
the RFG program's requirements for product transfer documents, 
refiners' designations of the standards to which each batch of fuel 
applies, and registration requirements for refiners producing both 
highway diesel fuels). However, the RFG program's segregation 
provisions are somewhat different, in that they were designed to 
segregate RFG from conventional gasoline by geographic area. In the 
highway diesel program, the segregation provisions would be much more 
widespread, because both grades of highway fuel could be distributed 
throughout the country, depending on how refiners choose to take 
advantage of the compliance flexibility. We seek comment on the need to 
require refiners producing 500 ppm fuel to conduct some form of 
downstream quality assurance sampling, similar to the surveys required 
under the RFG program.
    Further, all parties in the distribution system would be subject to 
prohibitions against selling, transporting, storing, or introducing or 
causing or allowing the introduction of diesel fuel having a

[[Page 35511]]

sulfur content greater than: (1) the proposed 15 ppm standard into 
highway diesel vehicles manufactured in the 2007 model year and beyond; 
and (2) 500 ppm into any highway vehicle. Under the proposed 
presumptive liability scheme (as discussed in section VIII.A.8), if a 
violation is found at any point in the distribution system, all parties 
in the distribution system for the fuel in violation are responsible 
unless they can establish a defense. Because of our concerns for 
contamination and misfueling with having two grades of highway diesel 
in the market, we seek comment on whether a refiner should lose its 
flexibility to continue producing 500 ppm fuel if it is found liable 
for a violation.
    All parties handling 500 ppm fuel also would be required to 
maintain product transfer documents for five years that indicate to 
which highway diesel fuel standard the fuel is subject. Pump labels 
would be required at retail outlets and wholesale purchaser-consumer 
facilities providing notice regarding the different highway fuel types 
and the vehicles they may/may not be used in. As mentioned above, 
nozzle requirements might also be considered if the minimum volume 
requirement for low sulfur diesel is low enough to warrant it.
    The rule would prohibit any refiner from producing more 500 ppm 
highway diesel fuel than allotted, and would prohibit any party from 
distributing or selling diesel fuel not meeting the proposed 15 ppm 
standard unless it is properly designated and accompanied by 
appropriate product transfer documents. The rule would also prohibit 
any person from introducing or causing or allowing the introduction of 
highway diesel fuel not meeting the 15 ppm sulfur standard into any 
model year 2007 or later vehicle.
    As with any ABT program, we would need refiners to keep appropriate 
records, and to file necessary reports, to ensure compliance as well as 
the integrity of any credit generation, trading, and use. If this 
program is promulgated in the final rule, we would envision that 
refiners would likely be required to keep records of key information 
pertaining to the ABT program. Beginning the first year that credits 
are generated, any refiner for each of its refineries, and any importer 
for the highway diesel fuel it imports, would keep information 
regarding credits generated, separately kept according to the year of 
generation. We envision that refiners would keep records of the 
following information, at a minimum, and report such information to EPA 
on an annual basis, for any year in which credits are generated, 
transferred, or used:
     The total volume of highway diesel fuel produced
     The total volume of highway diesel fuel produced meeting 
the 500 ppm sulfur standard
     The total volume of highway diesel fuel produced meeting 
the low sulfur standard
     The total volume of highway diesel fuel produced 
(delineating both 500 ppm fuel and low sulfur fuel) after inclusion of 
any credits
     The number of credits in the refiner's or importer's 
possession at the beginning of the averaging period
     The number of credits used
     If any credits were obtained from or transferred to other 
parties, for each other party, its name, its EPA refiner or importer 
registration number, and the number of credits obtained from or 
transferred to the other party;
     The number of credits in the refiner's or importer's 
possession that will carry over into the next averaging period
     Contracts or other commercial documents that establish 
each transfer of credits from the transferor to the transferee
     The calculations used to determine compliance with the 
minimum required percentage of low sulfur highway diesel fuel
     The calculations used to determine the number of credits 
generated

b. Refiner-Ensured Availability

    An alternative concept suggested to the Agency to accomplish the 
objective of ensuring widespread availability of low sulfur diesel fuel 
while still allowing flexibility for producing less than all of the 
diesel fuel pool as low sulfur is to have the refiners ensure that it 
is widely available. The base program would still be a requirement that 
refiners produce only highway diesel fuel which meets the sulfur 
standard proposed today. However, refiners could voluntarily choose to 
participate in a program where they would be allowed to sell a larger 
fraction of their highway diesel fuel as 500 ppm fuel, in exchange for 
ensuring that low sulfur diesel fuel is made widely available at the 
retail level.
    This concept may entail a refinery contracting with, or purchasing 
credits from, retailers, who in exchange for incentives from the 
refiner, agree to make low sulfur diesel fuel available. This could 
mean that the retailer decides to switch over entirely to selling low 
sulfur diesel fuel, or that they offer both low sulfur and high sulfur 
diesel fuel simultaneously. The retailer would have to make a showing 
that: (1) the low sulfur diesel was ``meaningfully'' available; (2) 
there was an assured supply chain for obtaining low sulfur diesel fuel; 
and (3) the diesel fuels were segregated and properly labeled at the 
pumps. ``Meaningfully'' available might mean having dedicated pumps and 
tankage for low sulfur diesel with a capacity in the thousands of 
gallons range, and operating all year long. To be clear, the contract/
credits would be for making low sulfur diesel available for sale, not 
necessarily selling a given volume of low sulfur diesel.
    The relief that refiners receive in exchange for providing for low 
sulfur availability could be calculated on the basis of the retailer's 
total diesel sales volume. For example, the refiner would be permitted 
to produce a certain volume of highway diesel fuel at the current 500 
ppm cap in proportion to the total diesel sales volume of the retailers 
that the refiner contracts with (or purchases credits from). A ratio 
could be applied to the retailer's sales volume to ensure sufficient 
retail availability.
    An example of how this concept might work is as follows: A refinery 
producing highway diesel fuel contracts with several truck stops and 
service stations to make low sulfur fuel available at their stations. 
The refiner would then be permitted to produce 500 ppm grade diesel 
fuel in an amount up to the combined diesel sales volume (or some 
multiple thereof) for these retailers. The retailers may receive their 
low sulfur diesel fuel from this refiner or from other refiners to 
comply with the contract.
    Under this approach, refiners would likely make arrangements with, 
or purchase credits from, the largest retailers (since they have the 
largest fuel volumes), in order to minimize transaction costs. Because 
the largest 5 percent of diesel retail stations represent 60 percent of 
the sales volume, \152\ to achieve any meaningful availability of low 
sulfur fuel at retail stations, the program may require a considerably 
larger percentage of the sales volume to be targeted by weighting more 
heavily credits generated by smaller retail outlets.
---------------------------------------------------------------------------

    \152\ Memorandum to Docket A-99-06 from Jeffrey Herzog, EPA, 
entitled: ``Diesel Throughput Volume by Percentage of Diesel Fuel 
Retailers,'' May 5, 2000.
---------------------------------------------------------------------------

    We ask for comment on this concept, on its advantages and 
disadvantages compared to other implementation options, on the 
percentage of retail outlets that may be sufficient under this concept 
to achieve satisfactory low

[[Page 35512]]

sulfur diesel fuel availability, on means of ensuring adequate 
geographic distribution of low sulfur diesel fuel throughout the year, 
and on the appropriate means of calculating the volumes that refiners 
should be permitted to produce as high sulfur in exchange for making 
low sulfur available. We also request comment on how such a program 
could be implemented and enforced. In particular, we request comment on 
the type of recordkeeping and reporting EPA should require in ensuring 
a refiner actually has legitimate credits, contracts or other binding 
arrangements with retailers to make low sulfur diesel fuel 
``meaningfully'' available. We further request comment on whether and 
what type of recordkeeping and reporting may be necessary for retailers 
and distributors, particularly if the program were structured to allow 
retailers to generate and sell credits.

c. Retailer Availability Requirement

    One way of ensuring widespread availability of the low sulfur fuel 
under a phase-in approach would be to require retailers selling highway 
diesel to make available the low-sulfur diesel (i.e., a retailer 
availability requirement). Retailers would be free to sell the current 
500 ppm sulfur fuel as well, but at a minimum would have to offer the 
low sulfur fuel. This approach could either be a stand-alone program 
design (i.e., with no refiner production requirement for a minimum 
amount of low sulfur diesel), or could be coupled with a refiner 
production requirement. Retailers would be responsible for getting low-
sulfur diesel from the distribution system. The premise of this 
approach is that the fuel distribution system would react to the market 
demands, and supply and distribute the second grade of fuel in all 
parts of the country.
    In order to turn this premise into a reality, the fundamental 
issues associated with a phase-in approach, as discussed in subsection 
1 above, would have to be addressed. Consequently, in the context of an 
availability requirement, we seek comment on how to resolve the 
concerns raised in subsection 1. With regard to the structure of such 
an availability requirement, we seek comment on when it should begin, 
whether it could be limited to just a fraction of the diesel fuel 
retail outlets, and what fraction would constitute acceptable 
availability in the marketplace. We specifically request comment on the 
merits of limiting an availability requirement to the larger diesel 
retailers. Under such an approach, the larger diesel retailers would 
have to carry low sulfur diesel, but could also choose to carry the 500 
ppm grade as well. Smaller retailers not subject to the availability 
requirement would have the flexibility to choose to carry only the low 
sulfur grade, only the 500 ppm grade, or both. For example, we seek 
comment on the merits of limiting the requirement to only truck stops 
selling more than 200,000 gallons of diesel fuel per month, and other 
retail outlets selling more than 20,000 gallons of diesel per month, as 
suggested by some Panel members during the Small Business Advocacy 
Review process. We encourage commenters to consider other appropriate 
throughput thresholds, for both truck stops and service stations that 
could limit an availability requirement to the larger retailers, while 
still ensuring sufficient availability.
    While desirable to limit the fraction of retailers subject to an 
availability requirement, ensuring sufficient availability is 
complicated by the fact that diesel fuel is sold at a portion of all 
retail outlets today. \153\ If less than 100 percent of diesel retail 
outlets are required to make the new fuel available, how would we 
ensure availability in all parts of the country? Commenters should 
consider the distribution of diesel fuel outlets around the country, 
and the distances between outlets in addressing this issue. How would 
the rest of the distribution system respond to supply the low sulfur 
fuel to the retail outlets needing to make it available? To help 
protect against fuel shortages either nationally or regionally, would 
an availability requirement need to be coupled with a production 
requirement on refiners to ensure supply of a minimum amount of low-
sulfur diesel fuel? If so, how should such a production requirement be 
structured? Conversely, could an availability requirement be coupled 
with a production requirement in a way that would allow a larger 
percentage of 500 ppm fuel production in the early years? (See the 
discussion above in subsection 2.a.ii)
---------------------------------------------------------------------------

    \153\ ``Summary Data on Diesel Fuel Retailers,'' Memo to the 
docket from Jeffrey Herzog, EPA, March 23, 2000 (Docket item # II-B-
07).
---------------------------------------------------------------------------

    With regard to the impacts on the diesel fuel retail and 
distribution system, numerous parties in the industry have commented 
that managing two grades of highway diesel in the distribution system 
would raise their costs. We seek comment on what actions retailers, 
centrally fueled fleets, wholesalers, terminals, pipelines, and 
refiners would take to manage two grades of highway diesel, and in 
particular on the cost impacts resulting from those actions. We 
especially seek comment on what cost savings refiners might realize 
under such an approach, and whether these savings would be greater than 
the costs incurred by the distribution system to distribute a second 
grade of highway diesel fuel. In this context, we also seek comment on 
how refiners would plan their refinery changes given the uncertainty of 
low sulfur diesel demand from retailers under such a phase-in approach. 
When would they make their capital investments, and for what volume of 
fuel would they plan to build desulfurization capacity? How would they 
predict demand in the time frame when they would need to make their 
capital investments? How would they adjust to different volumes from 
predicted demand levels, and what would be the implications?
    Commenters should address this approach from the perspective of the 
issues discussed above in subsection A.1 (including misfueling, 
distribution system impacts, potential costs, etc). We are also 
interested in the implications of such an approach on prices in the 
wholesale and retail markets, and on the ability of retailers and 
distributors to recover costs under such an approach.
    We also invite comment on the merits of applying an averaging, 
banking and trading program within the context of a retailer 
availability requirement. Such a credit trading program could entail 
elements similar to the program described in subsection 2.a.v. for 
refiners under the compliance flexibility approach, but would be 
tailored specifically to retailers subject to an availability 
requirement. Commenters should address how such a credit trading 
program might be structured, if they believe it should differ 
significantly from the refiner-based approach discussed above.
    Finally, the trucking industry and diesel marketers have also 
commented that an availability requirement would be administratively 
intensive for the Agency to implement and enforce, especially in 
verifying actual fuel availability. Therefore, we ask comment on ways 
to streamline the enforcement of such a program to avoid unnecessary 
burden on both industry and the Agency.
2. Why Is a Regulation Necessary to Implement the Fuel Program?
    Some commenters on the ANPRM suggested simply leaving it up to the 
market to introduce low-sulfur highway diesel fuel--that is, establish 
no regulatory requirements for refiners to produce the fuel and no 
requirements for retailers to sell the fuel. The

[[Page 35513]]

commenters' line of reasoning for this suggestion is as follows. The 
vehicle and engine manufacturers would be forced by emission standards 
to introduce vehicles meeting stringent emission standards. Since the 
engines and vehicles would need low-sulfur diesel fuel to meet the 
emission standards, then the vehicle purchasers would have to refuel 
only with low-sulfur diesel fuel. The fuel production and distribution 
system would then respond to the demand and provide the fuel if, when, 
and where necessary.
    Such an approach raises many of the same issues discussed above 
with respect to phase-in approaches (e.g., fuel availability, 
misfueling, and uncertainties in the transition to low sulfur). These 
concerns, however, would be heightened by the fact that no regulatory 
measures would be in place to mitigate them. We seek comment on whether 
a market-based approach could adequately ensure availability of the low 
sulfur fuel for the vehicles that need it.
3. Why Not Just Require Low-Sulfur Diesel Fuel for Light-Duty Vehicles 
and Light-Duty Trucks?
    In the ANPRM, we requested and received considerable comment on 
focusing the rulemaking effort on providing low-sulfur diesel fuel for 
light-duty vehicles and trucks only. By providing a clean grade of 
diesel fuel, exhaust emission control technology would be enabled. This 
in turn would give light-duty diesel vehicles a much better chance of 
meeting the final Tier 2 emission standards. The appeal of a light-duty 
only approach is that the program would be relatively small and could 
set the stage for future expansion of low-sulfur diesel fuel into the 
heavy-duty market if the demand developed.
    Based on the comments received on the ANPRM and our own analysis, 
however, there appears to be little justification for such a regulatory 
approach. First, and most importantly, such an approach would provide 
no environmental benefit to justify the costs of the program. Under the 
Tier 2 program, all LDVs and LDTs must meet on average a certain 
NOX emission standard. There are a number of emission 
standards or ``bins'' that individual vehicles can be certified to, but 
an overall fleet average emission standard must still be met. 
Consequently, regardless of whether or not the Tier 2 fleet is 
comprised of a large number of diesel vehicles, the same overall fleet 
average NOX emission rate will be achieved. The only 
anticipated difference would be in particulate emissions where, even 
though the emission standards are the same, in-use emissions are 
assumed to be somewhat lower for gasoline vehicles than for diesel 
vehicles. In contrast, today's proposed program for setting new 
emission standards for heavy-duty engines and vehicles in conjunction 
with lower sulfur highway diesel fuel would achieve significant 
reductions in NOX and particulate matter, as discussed 
further in section II.
    Secondly, the comments received on the ANPRM from the fuel 
production and distribution system indicated that such an approach 
would be very costly. The Engine Manufacturers Association conducted a 
study of the cost increase associated with distributing a unique grade 
of diesel fuel for just light-duty vehicles and trucks.\154\ The 
results of this study indicated that the distribution costs alone 
(i.e., not including refiner production costs) for such a fuel could be 
3 to 4 cents per gallon. Moreover, this study made some simplifying 
assumptions that served to underestimate actual volume of highway 
diesel fuel that would have to be produced and the costs. The study 
assumed a production volume of 5 percent low sulfur diesel, which is 
not realistic because many retailers might choose to switch over 
entirely to the low sulfur fuel. Thus, refiners would have to make the 
investments to produce a considerably larger volume of low sulfur 
diesel fuel than might be required for new light-duty vehicles and 
trucks only.
---------------------------------------------------------------------------

    \154\ ``Very-Low-Sulfur Diesel Distribution Cost,'' Baker & 
O'Brien Inc., for the Engine Manufacturers Association, August 1999.
---------------------------------------------------------------------------

    Third, commenters indicated that such an approach may be 
impractical. In areas where there are few fuel distribution options 
(e.g., areas not served by pipelines, areas with few diesel retail 
outlets), the low-sulfur diesel fuel may not be made available or, if 
it is, it could only be sold at retail prices considerably higher than 
the refiners' cost to produce the fuel. Consumer demand for light-duty 
diesel vehicles could be reduced by both unavailability of the low 
sulfur fuel and uncertainty about it being available at reasonable 
prices.
    Finally, a light-duty only approach would appear to be 
inappropriate in light of our demonstrated air quality need for 
additional emission reductions and the opportunity available with 
recent advancements in diesel engine exhaust emission control 
technology to obtain these emission reductions from heavy-duty engines. 
If the technology necessary to meet very low emission standards for 
light-duty diesel vehicles is feasible with the control of diesel fuel 
sulfur, and if that same technology is applicable to heavy-duty diesel 
vehicles, then we have an obligation under the Clean Air Act to 
consider emission standards for heavy-duty vehicles that would be 
enabled by that technology as well. Given the air quality need, we 
would be remiss in our obligations under section 202(a)(3)(A) of the 
Act which requires us to set the most stringent standards feasible for 
heavy-duty vehicles, taking into consideration cost and other factors. 
EPA can revise such standards, however, based on available information 
regarding the effects of air pollutants from heavy-duty engines on 
public health or welfare.
4. Why Not Phase-Down the Concentration of Sulfur in Diesel Fuel Over 
Time as Was Done With Gasoline in the Tier 2 Program?
    There are a number of ways a fuel change can be introduced over 
time. The most recent example is in the Tier 2 rulemaking where the 
concentration of sulfur in gasoline was phased-down over time. Such an 
approach is not workable for diesel fuel, however, due to the demands 
of the exhaust emission control technology. As discussed in section 
III, the efficiency of both the NOX and PM exhaust emission 
control drops off quickly if the vehicle is operated on sulfur levels 
higher than the standard proposed. Thus, the vehicles would be unable 
to meet the emission standards, and there would be very little if any 
emission benefit to be gained until the end of any such phase-down. 
Furthermore, as discussed in section III, in some applications it is 
possible that operation on higher sulfur levels may not only cause 
permanent damage to the PM trap, but also could result in vehicle 
driveability and safety concerns. Consequently, it is imperative that 
aftertreatment-equipped vehicles are fueled exclusively with fuel 
meeting the proposed low sulfur levels, and that the low sulfur fuel 
remain segregated in the distribution system.
    This contrasts with the gasoline sulfur control program, where the 
impact of sulfur on the exhaust emission control technology was thought 
to be less severe and emission benefits accrued even at the phased-down 
sulfur levels. Furthermore, if gasoline vehicles are operated on higher 
sulfur fuel, no driveability concerns are anticipated; higher sulfur 
diesel would have detrimental effects on the driveability of diesel 
engines. Thus, in the gasoline sulfur program there was not a need to 
require that low sulfur gasoline remain segregated from the remaining 
gasoline pool while sulfur levels are being phased-down. Here there is 
a need to

[[Page 35514]]

segregate low sulfur highway diesel fuel to ensure the new technology 
vehicles are not damaged by higher sulfur levels.

B. What Other Fuel Standards Have We Considered in Developing This 
Proposal?

1. What About Setting the 15 ppm Sulfur Level as an Average?
    We have considered several potential diesel fuel sulfur 
alternatives in developing today's proposed rulemaking, including two 
alternatives centered around a 15 ppm sulfur level: a cap at this level 
as proposed, and an average at this level with a 25 ppm cap to ensure 
that sulfur levels would not exceed a 15 ppm average level by too much. 
The analyses of technology enablement, costs, emission reductions, and 
cost effectiveness discussed in the preceding sections are based on a 
15 ppm cap. In this section we provide the results of these analyses 
for the 15 ppm average sulfur level case.

a. Emission Control Technology Enablement Under a 15 ppm Average 
Standard

    Having a 15 ppm average standard with a 25 ppm cap would increase 
uncertainty around the advanced technologies required here and would 
therefore be less attractive to diesel engine and vehicle 
manufacturers. As discussed at length in Section III, fuel sulfur 
adversely impacts the effectiveness of all known and projected exhaust 
emission control devices. Despite these adverse effects, it may be 
possible that the design, precious metal loading, and application of 
exhaust emission control devices could be fundamentally similar under 
both a 15 ppm cap and a 15 ppm average. However, we would expect that 
the exhaust emission control devices would not operate at the same 
level of efficiency as expected under the 15 ppm cap program and there 
would be some sacrifice in the durability and reliability of these 
devices due to the higher sulfur level.
    PM trap regeneration would be compromised due to sulfur's adverse 
impacts on the NO to NO2 conversion necessary for completely 
passive PM trap regeneration.\155\ Because of this effect, concerns 
have been raised that a 15 average/25 cap program would require that 
some vehicle applications, particularly lighter applications having 
lower operating temperatures, incorporate some form of active PM trap 
regeneration strategy. Such an active regeneration strategy could take 
the form of a fueling strategy capable of increasing exhaust 
temperature as opposed to an electrical heater or some other ``added'' 
hardware. The active regeneration scheme would likely be incorporated 
into the design as a backup, or protective measure, and would not 
function at all times. Instead, the active regeneration would kick in 
under conditions such as very cold ambient temperature conditions or 
extended idles where exhaust temperatures might be too low for too long 
to enable passive regeneration. There are also concerns that fuel 
economy would be reduced both due to the use of active regeneration and 
due to the higher, on average, PM trap backpressure. This would likely 
occur due to the slightly higher soot loading, on average, resulting 
from less efficient passive trap regeneration. This higher backpressure 
would probably occur on all applications, not just the lighter 
applications. Nonetheless, we believe that the fuel economy effect 
would probably not be greater than one percent.
---------------------------------------------------------------------------

    \155\ Cooper and Thoss, Johnson Matthey, SAE 890404.
---------------------------------------------------------------------------

    Under a 15 ppm average standard, we would expect the in-use average 
sulfur level to be roughly double the in-use average under a 15 ppm cap 
program. The higher in-use sulfur level would roughly double in-use PM 
emissions. Since an average limit would be in place and be enforced, 
and since in-use emissions would be expected to approximate the 
average, we might consider allowing engine manufacturers to certify 
their engines on diesel fuel meeting the average sulfur level rather 
than the cap. If this approach were taken, setting the sulfur standard 
at a 15 ppm average instead of a 15 ppm cap would not necessitate an 
increase in the PM standard. However, in-use PM emissions would nearly 
double due to the increased average fuel sulfur level (when compared to 
the 15 ppm cap base case).
    Regarding the NOX adsorber, we believe that a 15 
average/25 cap program may have the potential to enable NOX 
adsorber technology, though with increased uncertainty. However, while 
the NOX adsorber would continue to adsorb and subsequently 
reduce NOX despite the higher sulfur fuel, the frequency of 
sulfur regeneration events, referred to as desulfation in section III, 
would roughly double relative to the rate with a 15 ppm cap. The 
increased frequency of desulfation would increase fuel consumption 
probably on the order of one percent and would be realized on all 
diesel applications equipped with NOX adsorber 
technology.\156\ Additionally, the increased frequency of desulfation 
may adversely impact NOX adsorber durability because the 
thermal strain placed on the adsorber during any desulfation event 
would increase in frequency. Also, because of the increased frequency 
of desulfation events, there would be a corresponding decrease in the 
likelihood of being able to perform the desulfation during ideal 
operating conditions. This may cause more thermal strain on the 
NOX adsorber and/or less efficient desulfation with a 
corresponding increase in fuel usage. The result would be a decrease in 
our level of confidence that the NOX adsorber would be 
capable of fulfilling the demands of heavy-duty diesel engines in terms 
of fuel consumption and durability.
---------------------------------------------------------------------------

    \156\ See section III and Table III.F-2 for more detail on 
desulfation and the associated fuel economy impacts.
---------------------------------------------------------------------------

    Note that, although the analysis finds that a 15 ppm average/25 ppm 
cap standard has potential to be adequate for enabling high-efficiency 
exhaust emissions controls, this finding involves a significantly 
higher level of uncertainty than the proposed 15 ppm sulfur cap, 
because it is based on the assumption that exhaust emission control 
designs could be focused on the average fuel sulfur levels. 
Manufacturers have commented that the possibility of some in-use fuel 
at near-cap levels would necessitate designing to accommodate this 
level, and they contend that this would not allow the high-efficiency 
technology to be enabled. If so, the technology enablement for this 
case would likely be similar to that for the 50 ppm cap case.

b. Vehicle and Operating Costs for Diesel Vehicles To Meet the Proposed 
Emissions Standards With a 15 ppm Average Standard

    As pointed out above, we believe it may be possible that the 
design, precious metal loading, and application of exhaust emission 
control devices could be fundamentally similar under both a 15 ppm cap 
and a 15 ppm average. Therefore, we believe that having a 15 ppm 
average sulfur standard would have no quantifiable impact on the cost 
of emission control hardware relative to the costs associated with a 15 
ppm cap standard. However, as mentioned, we would expect a one percent 
fuel economy decrease (i.e., a one percent increase in fuel 
consumption) due to the increased frequency of desulfation of the 
NOX adsorber. This reduction in fuel economy would result in 
consumption

[[Page 35515]]

of more fuel and, therefore, higher costs. We have estimated the 
discounted lifetime cost of this one percent fuel economy impact at 
$108, $207, $755, and $893 for a light, medium, and heavy heavy-duty 
diesel, and urban buses, respectively. See the draft RIA for details on 
how this cost was calculated.

c. Diesel Fuel Costs Under a 15 ppm Average Standard

    Having a 15 ppm average with a 25 ppm cap sulfur standard would be 
directionally more attractive to the petroleum industry because of the 
slightly higher sulfur levels. Overall, we would expect this approach 
to provide more flexibility to refiners and distributors, and 
directionally help in addressing concerns that have been expressed 
about the difficulties of distributing diesel fuel with very low sulfur 
specifications. The cost of meeting a 15 ppm sulfur average at the 
refinery (with a 25 ppm cap) would be significantly less than meeting 
the proposed cap of 15 ppm. We project that roughly half of all 
refiners would be able to meet a 15 ppm average by modifying their 
existing one-stage hydrotreating unit by adding a hydrogen sulfide 
scrubbing unit, a PSA unit to increase hydrogen purity and a second 
reactor. A new, high activity catalyst would also replace today's 
catalyst. Refiners who would be capable of meeting a 15 ppm average 
with a one-stage unit would likely be those blending low amounts of 
light cycle oil (LCO) into their diesel fuel or those having 
substantial excess hydrotreating capacity in their current unit. The 
remaining refiners would require essentially the same two-stage 
hydrotreating unit that would be required to meet the proposed 15 ppm 
cap. In all cases, hydrogen consumption would be somewhat less than 
that required to meet the proposed 15 ppm cap standard.
    As for fuel distribution, under the proposed 15 ppm cap on diesel 
sulfur content, we estimate that sulfur contamination in the 
distribution system can be adequately controlled at modest additional 
cost through the consistent and careful observation of current industry 
practices. A 0.2 cent per gallon increase in distribution cost is 
anticipated due to the need for an increase in pipeline shipment 
interface volumes, increased quality testing at product terminals, and 
the need to distribute an increased volume of fuel to meet the same 
level of consumer demand due to a reduction in energy density. Having a 
15 ppm average standard would mean that the increase in pipeline 
interface volumes would likely be somewhat smaller than under the 
proposed 15 ppm cap. However, we do not expect that the savings in 
interface volumes would be proportional to the difference between the 
standards. This is due to the similarity of the alternative standards 
with the proposed 15 ppm sulfur cap relative to their comparison with 
the sulfur level of other products in the distribution system such as 
nonroad diesel fuel (3,400 ppm average sulfur content). Consequently, 
we estimate that distribution costs under a 15 ppm average standard 
would only be marginally lower (approximately 0.003 cents per gallon 
less) than under the proposed 15 ppm cap.
    Overall, we project that the average cost of meeting the 15 ppm 
average at the refinery would be about 3.0 cents per gallon, about 1.0 
cents per gallon less than the corresponding cost for fuel meeting a 15 
ppm sulfur cap. Adding the cost of lubricity additives and increase in 
distribution costs, the final cost for the 15 ppm average/25 ppm cap 
fuel would be 3.4 cents/gallon, as compared to 4.4 cents per gallon 
under the proposed 15 ppm cap standard.

d. Emission Reductions Under a 15 ppm Average Standard

    As discussed above, we believe that the same basic exhaust emission 
control technology could be used to reduce exhaust emissions from HDDEs 
even if we required a 15 ppm average rather than a 15 ppm cap. However, 
as pointed out above, there would likely be penalties in durability, 
fuel consumption, and emissions.
    At this higher fuel sulfur level, we believe that the particulate 
trap will still result in large reductions of HC, CO, and carbon soot. 
We also believe that the 0.2 g/bhp-hr NOX standard may be 
achieved using a NOX adsorber. Nonetheless, the total PM 
reductions would be lower under a 15 ppm average standard. Sulfur in 
the fuel impacts the amount of direct sulfate PM in the exhaust gas. We 
estimate that a 15 ppm average standard would result in almost double 
the total PM emissions as compared to a 15 ppm cap standard because the 
15 ppm cap is assumed to result in a 7 ppm in-use average. Table VI.B-1 
presents projected nationwide HDDE PM emissions for the baseline and 
control case for a 15 ppm average/25 ppm sulfur cap standard along with 
the corresponding reductions. For comparison, the same information is 
shown for the proposed 15 ppm cap. Refer to the draft RIA for details 
of this analysis.

                    Table VI.B-1.--HDDE PM Emissions With a 15 ppm Average/25 ppm Sulfur Cap
                                              [Thousand short tons]
----------------------------------------------------------------------------------------------------------------
                                                                               15 ppm average   15 ppm cap  (for
                                                                             ------------------    comparison)
                       Calendar year                            Baseline                       -----------------
                                                                                 Controlled        Controlled
----------------------------------------------------------------------------------------------------------------
2007......................................................               100                89                88
2010......................................................                94                60                59
2015......................................................                93                33                30
2020......................................................                98                19                15
2030......................................................               119                13                 8
----------------------------------------------------------------------------------------------------------------

    A higher average sulfur level also results in lower SOX 
emission reductions. We assume that the sulfur in the fuel that is not 
converted to sulfate PM is converted to SO2. Because we base 
SOX emissions on the amount of sulfur flowing through the 
engine, the increase in fuel consumption also negatively impacts 
SOX emissions. Table VI.B-2 presents projected nationwide 
HDDE SOX reductions for a 15 ppm average/25 ppm sulfur cap 
standard and for the proposed 15 ppm cap.

[[Page 35516]]



Table VI.B-2.--HDDE SOX Emission Reductions With a 15 ppm Average/25 ppm
                               Sulfur Cap
                          [Thousand short tons]
------------------------------------------------------------------------
                                                   15 ppm
                 Calendar year                    average     15 ppm cap
------------------------------------------------------------------------
2007..........................................           86           88
2010..........................................           91           93
2015..........................................           99          102
2020..........................................          107          109
2030..........................................          120          123
------------------------------------------------------------------------

e. Cost Effectiveness of a 15 ppm Average Standard

    The methodology used to determine the cost-effectiveness of a 15 
ppm average sulfur standard follows that described in Section V for our 
proposed 15 ppm cap standard. The alternative standard of 15 ppm on 
average does have impacts on specific values in the calculations, 
including lower desulfurization and distribution, lower in-use PM 
benefits, and lower SO2 benefits all of which were pointed 
out above. Engine costs are assumed not to change under either a 15 ppm 
cap or 15 ppm average standard. We have calculated cost-effectiveness 
using both the per-vehicle and aggregate approaches, consistent with 
our cost-effectiveness presentation in Section V for our proposed 
program. The results are shown in Tables VI.B-3 and VI.B-4 which can be 
directly compared to Tables V.F-1 and V.F-2, respectively, showing 
values for the proposed 15 ppm cap standard. Details of the 
calculations are presented in the draft RIA which can be found in the 
docket for this rulemaking.

          Table VI.B-3.--Per-Vehicle Cost-Effectiveness of a 15 ppm Average/25 ppm Cap Sulfur Standard
----------------------------------------------------------------------------------------------------------------
                                                                                                   Discounted
                                          Discounted         Discounted         Discounted       lifetime cost
             Pollutants                lifetime vehicle  lifetime emission    lifetime cost    effectiveness per
                                         & fuel costs    reductions (tons)  effectiveness per     ton with SO2
                                                                                   ton              credit a
----------------------------------------------------------------------------------------------------------------
Near-term costs:b
    NOX + NMHC......................             $1,565               0.88             $1,800             $1,800
    PM..............................                774              0.064             12,100              5,200
Long-term costs:
    NOX + NMHC......................             $1,151               0.88             $1,300             $1,300
    PM..............................                554              0.064              8,700             1,800
----------------------------------------------------------------------------------------------------------------
a $440 credited to SO2 (at $4800/ton) for PM cost effectiveness.
b As described above, per-engine cost effectiveness does not include any costs or benefits from the existing,
  pre-control, fleet of vehicles that would use the low sulfur diesel fuel proposed in this document.


   Table VI.B-4.-- 30-Year Net Present Value Cost-Effectiveness of a 15 ppm Average/25 ppm Cap Sulfur Standard
----------------------------------------------------------------------------------------------------------------
                                                                                                    30-year NPV
                                                    30-year NPV     30-year NPV     30-year NPV        cost
                                                       costs         reduction         cost        effectiveness
                                                     (billion)    (million tons)   effectiveness   per ton with
                                                                                      per ton      SO2  credit a
----------------------------------------------------------------------------------------------------------------
NOX + NMHC......................................           $26.4           18.9           $1,400          $1,400
PM..............................................            $8.0            0.75         $10,700         $1,100
----------------------------------------------------------------------------------------------------------------
a $7.2 billion credited to SO2 (at $4800/ton).

2. What About a 5 ppm Sulfur Level?
    Some diesel engine and automobile manufacturers have expressed 
support for a sulfur cap of 5 ppm (sometimes termed ``near-zero'') for 
some or all of the highway diesel fuel pool.\157\ They view the 
technology solutions envisioned in this rulemaking to be infeasible at 
higher fuel sulfur levels. Although the feasibility analysis results of 
this proposal lead us to disagree with this conclusion, we have 
evaluated the impact that a 5 ppm sulfur cap would have on technology 
enablement, vehicle and fuel costs, and emissions reductions. The 
results of this analysis are provided below. Analysis details are 
provided in the Draft RIA. We encourage comment on our assessment, 
preferably accompanied by data and analysis supporting the commenter's 
views.
---------------------------------------------------------------------------

    \157\ See for example letter from Patrick Charbonneau of 
Navistar to Robert Perciasepe of EPA dated July 21, 1999, EPA, 
docket A-99-06.
---------------------------------------------------------------------------

    Capping diesel fuel sulfur at 5 ppm would clearly strengthen the 
viability of new emissions control technologies enabled at 15 ppm, 
although we are aware of no additional technologies that this lower 
sulfur level would enable. PM traps would emit somewhat less sulfate 
PM, but non-sulfate PM emissions and certification test measurement 
tolerances would effectively limit the extent to which the standard 
could be lowered from the proposed 0.01 g/bhp-hr level at this time. 
Given the level of precision implicit in the 0.01 numerical standard, 
we would not expect a 5 ppm sulfur cap to result in a lower PM 
standard. Nevertheless, there would be an in-use benefit compared to a 
15 ppm cap, because the average fuel sulfur would be lower (perhaps 2-3 
ppm compared to about 7 ppm) and so new vehicles

[[Page 35517]]

would emit less sulfate PM, providing a projected 86,000 ton per year 
PM benefit in these vehicles in 2020, compared to 83,000 tons per year 
achieved under a 15 ppm cap. We have assumed that the small margins 
involved and the extremely high trapping efficiencies of filters that 
are already readily available would give manufacturers no incentive to 
take advantage of the lower sulfate emissions to design for higher non-
sulfate emissions under the standard.
    Lower sulfate PM emissions in the existing fleet would provide a 
105 tons per year additional PM benefit (in 2007 when this benefit 
peaks) from adoption of a 5 ppm sulfur cap compared to a 15 ppm cap. 
However this is quite small compared to the corresponding 7100 ton per 
year existing fleet PM benefit of reducing fuel sulfur from typical 
current average levels of around 340 ppm to levels near 15 ppm, which 
in turn is a small fraction of the total direct PM emissions benefit of 
the 15 ppm cap, most of which comes from enabling PM traps on new 
engines (see Figure II.D-2). SOX and SOX-derived 
secondary PM would also be reduced in about the same small proportion.
    The robustness of the PM trap regeneration process would also be 
directionally aided by the near zero sulfur fuel, because less of the 
catalyst sites that promote regeneration would be blocked by sulfur 
poisoning. (This phenomenon is described in section III.F.1.a). In 
fact, designers could further increase regeneration robustness by 
increasing precious metal loading without fear of inordinate sulfate 
production because of the lower fuel sulfur level (though at added 
cost). However, we have not quantified this directional benefit or cost 
difference because we deem the 15 ppm level adequate for robust 
regeneration already.
    Five ppm sulfur fuel would also benefit NOX adsorber 
technology. Adsorber desulfation would be needed about four times less 
often than that required under a 15 ppm sulfur cap, providing a 
projected 1 percent improvement in fuel economy. There may also be a 
small gain in NOX adsorber durability due to the less 
frequent thermal cycling built into the desulfation process. However, 
available evidence suggests that at any fuel sulfur level under 15 ppm, 
these cycles are not likely to be so numerous or severe over the 
vehicle life as to seriously constrain durability. NOX 
emissions would not be much affected because the basic NOX 
storage and removal processes would occur in much the same way, and 
desulfation events would be programmed to occur frequently enough to 
maintain NOX reduction efficiencies high enough to meet the 
standard with a minimum of fuel consumption.
    We have not performed an extensive analysis of the refining cost of 
meeting a 5 ppm sulfur cap. However, Mathpro, under contract to EMA, 
did estimate the refining cost of producing diesel fuel with an average 
sulfur level of 2 ppm, a reasonable average under a 5 ppm cap. Mathpro 
examined two sets of cases where average on-highway diesel fuel sulfur 
levels were reduced from 20 ppm to 2 ppm, one with nonroad diesel fuel 
sulfur at 350 ppm (Cases 1 and MP1) and the other with nonroad diesel 
fuel sulfur at 20 ppm (Cases 4 and 8). From these cases, Mathpro's 
estimated cost of reducing highway diesel fuel sulfur from 20 ppm to 2 
ppm ranges from 1.7 to 2.1 cents per gallon. Assuming a linear 
relationship between sulfur and cost per gallon in this range, the cost 
of reducing average sulfur levels from 7 ppm (that projected under the 
proposed 15 ppm cap) to 2 ppm would be 0.7-0.8 cents per gallon. 
Although it is possible that the cost per ppm of sulfur reduced would 
actually increase as sulfur was reduced, the extent of this increase is 
difficult to estimate. Thus, the best cost that we can project at this 
time is 0.7-0.8 cents per gallon, incremental to the cost of the 15 ppm 
sulfur cap program.
    Although we have not attempted to analyze in detail the cost 
impacts of distributing a fuel with a cap on sulfur content as low as 5 
ppm, the American Petroleum Institute recently had a contractor do 
so.\158\ That study estimated that, compared to current costs, 
distribution costs would increase by 0.9 to 2.1 cents per gallon if a 5 
ppm standard were adopted for the entire highway diesel pool.\159\ The 
following reasons were cited for why, as the sulfur specification is 
decreased, it becomes more difficult to maintain product purity and 
supply:
---------------------------------------------------------------------------

    \158\ ``Costs/Impacts of Distributing Potential Ultra Low Sulfur 
Diesel, Turner, Mason, & Company Consulting Engineers,'' February 
2000. EPA Docket A-99-06, item II-G-49.
    \159\ ``Costs/Impacts of Distributing Potential Ultra Low Sulfur 
Diesel, Turner, Mason, & Company Consulting Engineers,'' February 
2000. EPA Docket A-99-06, item II-G-49.
---------------------------------------------------------------------------

--There is increased difficulty and cost associated with correcting 
off-specification batches in the distribution system.
--Measurement accuracy becomes more limiting.
--The pipeline compliance margin becomes more limiting at refineries.
--Supply outages due to off-specification product will become more 
common.
--The difference between the sulfur content of highway diesel fuel and 
that of abutting higher sulfur products in the pipeline system becomes 
larger.

    Even with the estimated increase in distribution costs, the report 
still concluded that it was probably impractical to attain continuous 
supply availability of diesel fuel in all areas and outlets within the 
current distribution system at a 5 ppm cap on fuel sulfur content. If 
such problems are to be avoided, additional, more costly measures may 
be necessary. Should a segregated distribution system be needed to 
control contamination, including dedicated pipelines and tank trucks, 
the costs would be considerably higher than the 0.9 to 2.1 cents per 
gallon estimated in the report.
    We too are concerned that the measures which form the basis for the 
0.9 to 2.1 cents per gallon cost estimate in the API-sponsored study 
may not ensure widespread compliance. Under a 5 ppm standard, sulfur 
measurement variability would need to be reduced appreciably from 
current tolerances, perhaps to a level of 1 ppm or less, and the test 
equipment purchases and quality control steps needed to attain this 
could prove costly. Yet the bulk of the impact would come from the 
major shift likely to be needed in the practices used to avoid 
contamination in the distribution system. Assuming an extremely 
demanding maximum sulfur specification of 3 ppm at the refinery gate 
and a test variability of 1 ppm, only 1 ppm contamination through the 
distribution system could be tolerated, and this would need to be 
maintained nationwide and year round in a distribution system that 
routinely handles products with sulfur levels of up to several thousand 
ppm. Refiners would also need to take additional measures to meet the 3 
ppm refinery gate standard that would likely be set by pipeline 
operators. Similar to the distribution system, the measures that 
refiners would need to take to further reduce sulfur content and limit 
process variability are unclear, and might prove quite costly.
    The overall cost of a program with a 5 ppm sulfur cap is comprised 
of the program's cost in producing and distributing the fuel, offset by 
the cost of the projected 1 percent fuel economy gain. As the sulfur 
level reaches this very low level, the types of process changes in the 
refinery and fuel distribution systems necessary to eliminate 
contamination and maintain sufficient process flexibility in the system 
become much more uncertain. Consequently, serious concerns have

[[Page 35518]]

been raised concerning the ability to achieve a 5 ppm sulfur cap 
without drastic and costly changes to how diesel fuel is produced and 
distributed today. Nevertheless, assuming the average of the per gallon 
production and distribution cost ranges discussed above, this 
corresponds to a net $47.1 billion 30-year NPV cost, compared to $37.7 
billion for the 15 ppm sulfur cap proposal. Considering the 
NOX emissions benefits (unchanged from the 15 ppm sulfur cap 
case) and the PM emissions benefits (slightly improved), the resulting 
aggregate cost effectiveness is projected to be $1900 per ton of 
NOX+NMHC and $4500 per ton of PM (including the 
SO2 credit). These compare to $1500 per ton of 
NOX+NMHC and $1900 per ton of PM for the 15 ppm sulfur cap 
proposal.
3. What About a 50 ppm Sulfur Level?
    The American Petroleum Institute has proposed that we set a sulfur 
cap for highway diesel fuel of 50 ppm with a required refinery output 
average of 30 ppm, along with other proposal elements.\160\ API's 
proposal is based on their assessment of technological need and 
viability. Key to API's position is the view that, ``while EPA may set 
standards to encourage advanced technology, EPA must not base a sulfur 
level on a particular technology the Agency predicts might prove 
viable.'' However, we believe that we must set standards in the context 
of real technologies that can be expected to be feasible, rather than 
as a means of generally encouraging advanced technology. With this in 
mind, we have analyzed the impact that a 50 ppm sulfur cap would have 
on technology enablement, vehicle and fuel costs, and emissions 
reductions. The results of this analysis are provided below. Analysis 
details are provided in the Draft RIA. We encourage comment on this 
assessment, preferably accompanied by data and analysis supporting the 
commenter's views.
---------------------------------------------------------------------------

    \160\ Letter from Red Cavaney of API to EPA Administrator Carol 
Browner, dated February 7, 2000, EPA docket A-99-06.
---------------------------------------------------------------------------

    As discussed in detail in section III.F, we believe that diesel 
fuel needs to be desulfurized to the 15 ppm level to enable emission 
control technologies capable of meeting the proposed standards. Setting 
a fuel sulfur cap of 50 ppm would require that the PM standard be set 
at a less stringent level to accommodate the approximate tripling of 
sulfate PM production in the trap compared to a 15 ppm cap. However, we 
believe increased fuel sulfur would have an even larger effect on 
robust trap regeneration than on sulfate production, bringing into 
question the very viability of PM traps at the higher sulfur levels. As 
discussed in section III.F.1, field experience in Sweden, where below 
10 ppm diesel fuel sulfur is readily available, has been good. 
Experience has also been good in regions without extended periods of 
cold ambient conditions (such as the United Kingdom) using 50 ppm cap 
low sulfur fuel. However, field tests in Finland, where colder winter 
conditions are sometimes encountered (similar to many parts of the 
United States), have revealed a failure rate of 10 percent, due to 
insufficient trap regeneration. We believe that failures of the 
severity experienced with 50 ppm fuel in Finland would be unacceptable. 
These problems could become even more pronounced in light-duty 
applications, which tend to involve cooler exhaust streams, making 
regeneration more difficult. Field data with such applications is still 
sparse.
    One means of attempting to resolve these problems is through use of 
an active regeneration mechanism, such as electric heaters or fuel 
burners. These could potentially introduce additional hardware and fuel 
consumption costs. They would also raise reliability concerns, based on 
past experience with such approaches. Active regeneration failures in 
PM traps would be of more concern than in NOX exhaust 
emission control devices because they involve the potential for 
complete exhaust stream plugging, runaway regeneration at very high 
temperatures, trap melting, engine stalling, and stranding of motorists 
in severe weather. As a result, we do not consider dependence on active 
PM trap regeneration to be a sufficient basis for establishing PM trap 
feasibility.
    NOX adsorber technology would likely be infeasible with 
50 ppm sulfur fuel as well, due to the rapid poisoning of 
NOX storage sites. Desulfation would be needed much more 
frequently and with a much higher resulting fuel consumption. Even if 
the fuel economy penalty could somehow be justified, we expect that 
overly frequent desulfation could cause unacceptable adsorber 
durability or driveability problems (because of the difficulty in 
timing the desulfation to avoid driving modes in which it might be 
noticed by the driver). A less stringent NOX standard could 
help to mitigate these concerns by allowing the NOX storage 
bed to sulfate up to a greater degree before desulfating. However, this 
might then cause deeper sulfate penetration into the storage bed and 
thus possible long-term degradation because of the difficulty of 
removing this deeper sulfate.
    Instead, we expect that diesel fuel with an average fuel sulfur 
level of 30 ppm and a cap of 50 ppm could enable lean NOX 
catalyst technology (described in section III.E). These devices can 
provide modest NOX reductions and, because of their reliance 
on precious metal catalyst, also serve the function of a diesel 
oxidation catalyst, removing some of the gaseous hydrocarbons and the 
soluble organic fraction of PM. Unfortunately, lean NOX 
catalysts also share the oxidation catalyst's tendency to convert fuel 
sulfur into sulfate PM, and do so even more aggressively because they 
require higher precious metal loadings to reduce NOX. They 
also require a fairly large addition of diesel fuel to accomplish 
NOX reduction, typically about 4 percent or more of total 
fuel consumption. The injected fuel also makes it difficult to achieve 
an overall hydrocarbon reduction, despite the potential to convert much 
of the engine-out hydrocarbons over the catalyst. Typically, current 
lean NOX catalyst designs actually show a net hydrocarbon 
increase.
    We have assumed that lean NOX catalysts could be 
developed over time to deliver 20 percent reductions in NOX 
(well beyond their current proven performance over the Federal Test 
Procedure) with a net PM reduction of 20 percent and no net increase in 
gaseous hydrocarbons with a 4 percent fuel economy penalty. Although 
this PM reduction level is below that achieved by current diesel 
oxidation catalysts, it represents an ambitious target to designers 
attempting to balance NOX reduction with sulfate production 
from the still substantial sulfur in the fuel. We have estimated that 
lean NOX catalysts (including their diesel oxidation 
catalyst function) would add an average long term cost of $603 to a 
heavy-duty vehicle, inclusive of maintenance savings realized through 
the use of low sulfur fuel. This is lower than the cost increase for 
technologies enabled by 15 ppm sulfur fuel.
    Based on the 20% expected emission reductions, we believe the 
appropriate emissions standards at a 30 ppm average / 50 ppm cap diesel 
sulfur level would be 1.8 g/bhp-hr NOX and 0.08 g/hp-hr PM. 
Because the enabled technologies do not allow very large emission 
reductions and stringent emission standards, it is conceivable that 
continued progress in engine design may eventually allow these 
standards to be met through improvements in EGR and combustion 
optimization, although we cannot outline such a technology path at this 
time. It is likely that such a path would still involve a substantial 
fuel economy penalty.

[[Page 35519]]

    The 50 ppm sulfur cap would therefore result in projected 
NOX and PM emission reductions in 2020 of 540,000 and 17,000 
tons per year, respectively, compared to 2.0 million and 83,000 tons 
per year for a 15 ppm cap. It should be noted that virtually none of 
the PM reduction comes from a reduction in the soot component of PM.
    The cost of meeting a 50 ppm sulfur cap at the refinery would be 
substantially less costly than meeting the proposed cap of 15 ppm. In 
some cases, refiners may be able to meet a 50 ppm cap with only 
relatively minor capital investment of a few million dollars for a new 
hydrogen sulfide scrubbing unit and a PSA unit to increase hydrogen 
purity. New, high activity catalyst would also replace today's 
catalyst. In other cases, refiners would also have to add a second 
reactor. Finally, some refiners would require essentially the same two-
stage hydrotreating unit that would be required to meet the proposed 15 
ppm standard. In all cases, hydrogen consumption would be somewhat less 
than that required to meet the proposed 15 ppm standard.
    Refiners who would be capable of meeting a 50 ppm cap with only 
minor capital investment would likely be those not blending any LCO 
into their diesel fuel, or those having substantial excess 
hydrotreating capacity in their current unit. We estimate that about 15 
percent of on-highway diesel fuel production would fall into this 
category. Refiners blending some LCO into their diesel fuel (e.g., 15 
percent or less), or with somewhat greater levels of LCO but also 
having significant excess current hydrotreating capacity, would likely 
be capable of meeting a 50 ppm cap with an additional reactor. We 
estimate that about 35 percent of on-highway diesel fuel production 
would fall into this category. Finally, about 50 percent of on-highway 
diesel fuel production would likely require a two-stage hydrotreating 
unit due to their higher LCO fraction or lack of excess current 
hydrotreating capacity. Overall, we project that the average cost of 
meeting the 50 ppm standard at the refinery would be about 2.3 cents 
per gallon, about 1.7 cents per gallon less than the corresponding cost 
for fuel meeting a 15 ppm sulfur cap.
    It would be slightly less expensive to distribute the 50 ppm sulfur 
fuel than the15 ppm sulfur fuel. The pipeline interface between highway 
diesel fuel and higher sulfur products that must be sold with the 
higher sulfur product to ensure quality of the highway diesel fuel 
could be reduced. We estimate the cost savings per gallon of diesel 
fuel to be about 0.01 cents.
    The overall cost of a program with a 50 ppm sulfur cap with a 30 
ppm average is comprised of the hardware cost of lean NOX 
catalyst technology, the cost increase in producing and distributing 
the fuel, and the cost of the projected 4% fuel economy loss. This 
corresponds to a net $35.4 billion 30-year NPV cost, compared to $37.7 
billion for the 15 ppm sulfur cap proposal. Considering the PM and 
NOX emissions benefits, the resulting aggregate cost 
effectiveness is projected to be $3600 per ton of NOX+NMHC 
and $56,700 per ton of PM (including the SO2 credit). These 
compare to $1500 per ton of NOX+NMHC and $1900 per ton of PM 
for the 15 ppm sulfur cap proposal. The large difference in PM cost 
effectiveness is primarily due to the fuel economy penalty and the fact 
that none of the fuel cost could be allocated to hydrocarbon control, 
because of the lack of a hydrocarbon benefit.
    Table VI.B-5 summarizes key emissions and cost impacts of a program 
adopting the sulfur levels analyzed. Note that, although the analysis 
finds that a 15 ppm average/25 ppm cap standard has potential to be 
adequate for enabling high-efficiency exhaust emissions controls, this 
finding involves a significantly higher level of uncertainty than the 
proposed 15 ppm sulfur cap, because it is based on the assumption that 
exhaust emission control designs could be focused on the average fuel 
sulfur levels. We believe that the possibility of some in-use fuel at 
near-cap levels would necessitate designing to accommodate this level, 
and they contend that this would not allow the high-efficiency 
technology to be enabled. If so, the technology enablement for this 
case would likely be similar to that for the 50 ppm cap case. The 
analysis results show that the 50 ppm cap case does not enable high-
efficiency exhaust control technology at all.

                                  Table VI.B-5.--Summary of Emissions and Cost Impacts at Different Fuel Sulfur Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             2020 emission reductions                              Cost impacts
                                                               (thousand tons/year)      ---------------------------------------------------------------
                      Sulfur level                       --------------------------------                      Fuel                       Aggregate  30-
                                                                                             Vehicle c      consumption   Fuel  ( cents/    yr NPV  ($
                                                                NOX             PM                           (percent)         gal)          billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 ppm cap...............................................           2,020              86          $1,133              -1       d 6.0-7.3          d 47.1
15 ppm cap..............................................           2,020              83           1,133               0             4.4            37.7
25 ppm cap w/15 ppm average a...........................           2,020              79           1,133               1             3.4            34.5
50 ppm cap w/30 ppm averageb ...........................             538              17             603               4             2.7           35.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Note that this sulfur level involves significant increased uncertainty with respect to technology enablement. Manufacturers have commented that the
  possibility of some in-use fuel at or near the 25 ppm cap level would necessitate designing to accommodate this level, thus precluding high-efficiency
  technology enablement, and making technology for this case similar to that for the 50 ppm cap case.
\b\ This sulfur level is not expected to enable high-efficiency exhaust control technology.
\c\ Costs of added hardware combined with lifetime maintenance cost impacts; figures shown for comparison purposes are long-term costs for heavy heavy-
  duty vehicles.
\d\ Fuel cost based on industry analyses of refinery and distribution costs; costs could range much higher depending on fuel segregation measures
  required.

    We welcome comments on all aspects of these analyses for 
alternative fuel sulfur standards, including the technology enablement 
assessments, vehicle and fuel costs, emissions reductions, and cost 
effectiveness.
4. What Other Fuel Properties Were Considered for Highway Diesel Fuel?
    In addition to changes in highway diesel fuel sulfur content, we 
also considered changes to other fuel properties such as cetane number, 
aromatics, density, or distillation. Each of these fuel properties has 
the potential to affect the combustion chemistry within the engine, and 
so aid in reducing emissions of regulated pollutants. Indeed, some 
manufacturers have made public statements to the effect that an 
idealized highway diesel fuel is necessary in order to optimize

[[Page 35520]]

the efficiency of the next generation of heavy-duty diesel vehicles.
    The focus of the fuel changes we are proposing today is to enable 
diesel engines to meet much more stringent emission standards. As 
described earlier in this section, we believe that diesel engines can 
meet much more stringent emission standards using advanced exhaust 
emission control systems, but the performance of these systems is 
dramatically reduced by sulfur. Thus, we have determined that sulfur in 
diesel fuel would need to be lowered. It does not appear that other 
fuel properties have the same sort of effect on advanced exhaust 
emission controls, and as a result we do not believe that changes in 
fuel properties other than sulfur are necessary in order for heavy-duty 
engines to reach the low emission levels offered by the advanced 
exhaust emission controls discussed above. In fact, after conducting a 
research study on this topic, industry members concluded that, ``If in 
the future, fuel sulfur levels are significantly reduced in order to 
enable efficient exhaust emission controls, then it should be 
recognized that the exhaust emission control device becomes the primary 
driver on tailpipe emissions and that all other fuel properties will 
have only minor or secondary effects on the tailpipe emissions.'' \161\
---------------------------------------------------------------------------

    \161\ Lee, et al., SAE 982649.
---------------------------------------------------------------------------

    Emission reductions can also be achieved through changes in diesel 
fuel properties as a direct means for reducing engine-out emissions. In 
this approach, it is not the exhaust emission control which is being 
``enabled,'' but rather the combustion process itself which is being 
optimized. This approach has the advantage that the effects are fleet-
wide and immediate upon introduction of the new fuel, whereas new 
engine standards do not produce significant emission reductions until 
the fleet turns over. However, regulated changes in diesel fuel 
properties may produce emission reductions that disappear over time, if 
compliance test fuel is changed concurrently with the changes to in-use 
fuel (to assure that such fuel remains representative of in-use fuels). 
Manufacturers will redesign their new engines to take advantage of any 
benefit a cleaner fuel provides, resulting in engines still meeting the 
same emission standards in-use. Consequently, it would only be those 
engines sold before the compliance test fuel changes that would be 
likely to produce emission benefits, and as these engines drop out of 
the fleet, so also would the benefit of changes to diesel fuel.
    Even so, it is useful to consider what emission reductions are 
achievable through changes to non-sulfur diesel fuel properties. The 
non-sulfur fuel properties most often touted as good candidates for 
producing emission reductions from heavy-duty engines are cetane number 
and aromatics content. According to correlations between these fuel 
properties and emissions that have been presented in various published 
documents, the effects are rather small. We have estimated that an 
increase in cetane number from 44 to 50 would reduce both 
NOX and PM emissions by about 1 percent for the in-use fleet 
in calender year 2004.\162\ Likewise a reduction in total aromatics 
content from 34 volume percent to 20 volume percent would reduce both 
NOX and PM emissions by about 3 percent. We expect changes 
in other fuel properties to produce emission reductions that are no 
greater than these effects. These reductions are insignificant in 
comparison to the emission benefits projected to result from today's 
proposal, and would come at a considerable refining cost. As a result, 
at this time we do not believe that it is appropriate to require 
changes to non-sulfur diesel fuel properties as a means for producing 
reductions in engine-out emissions. There may, however, be performance 
or engine design optimization benefits associated with non-sulfur 
changes to diesel fuel that could justify their cost. Therefore we 
welcome cross-industry collaboration on voluntary diesel fuel 
improvements beyond the sulfur reduction proposed in this notice, and 
we continue to solicit information on the impact of non-sulfur fuel 
changes on exhaust emission control, engine-out emissions, and engine 
design and performance.
---------------------------------------------------------------------------

    \162\ ``Exhaust emissions as a function of fuel properties for 
diesel-powered heavy-duty engines,'' memorandum from David Korotney 
to EPA Air Docket A-99-06, September 13, 1999.
---------------------------------------------------------------------------

C. Should Any States or Territories Be Excluded From This Rule?

1. What Are the Anticipated Impacts of Using High-Sulfur Fuel in New 
and Emerging Diesel Engine Technologies if Areas Are Excluded From This 
Rule?
    Section III discusses the technological feasibility of the emission 
standards being proposed today and the critical need to have sulfur 
levels reduced to 15 ppm for the technology to achieve these emission 
standards. The implications to be drawn from section III with regard to 
exemptions from the sulfur standards for States and Territories is 
fairly straightforward. If vehicles and engines employing these 
technologies to achieve the proposed emission standards will be 
operated in these states or territories, then low-sulfur diesel fuel 
must be available for their use.
    Some have suggested allowing persons in Alaska to remove emission 
control equipment to enhance the viability of using high-sulfur fuel. 
In addressing this issue, we note that, under the Clean Air Act, it is 
prohibited in all 50 states to remove emission control equipment from 
an engine, unless that equipment is damaged or not properly 
functioning, and then is replaced with equivalent properly functioning 
equipment.
2. Alaska

a. Why is Alaska Unique?

    There are important nationwide environmental and public health 
benefits that can be achieved with cleaner diesel engines and fuel, 
particularly from reduced particulate emissions, nitrogen oxides, and 
air toxics (as further discussed in section II). Therefore, it is also 
important to implement this program in Alaska. Any 2007 and later model 
year diesel vehicles in Alaska would have to be fueled with low sulfur 
highway diesel, or risk potential damage to the aftertreatment 
technologies or even the engines themselves. Although the engine 
standards proposed today do not have different technology and cost 
implications for Alaska as compared to the rest of the country, the low 
sulfur fuel program would have different implications (described 
below). Therefore, in evaluating the best approach for implementing the 
low sulfur fuel program, it is important to consider the extremely 
unique factors in Alaska.
    Section 211(i)(4) provides that the states of Alaska and Hawaii may 
seek an exemption from the 500 ppm sulfur standard in the same manner 
as provided in section 325 of the Clean Air Act. Section 325 provides 
that upon request of Guam, American Samoa, the Virgin Islands, or the 
Commonwealth of the Northern Mariana Islands, EPA may exempt any person 
or source, or class of persons or sources, in that territory from any 
requirement of the CAA, with some specific exceptions. The requested 
exemption could be granted if EPA determines that compliance with such 
requirement is not feasible or is unreasonable due to unique 
geographical, meteorological, or economic factors of the territory, or 
other local factors as EPA considers significant.
    Unlike the rest of the nation, Alaska is currently exempt from the 
500 ppm

[[Page 35521]]

sulfur standard for highway diesel fuel (as discussed in section c 
below). Since the beginning of the 500 ppm highway diesel fuel program, 
we have granted Alaska exemptions from meeting the sulfur standard and 
dye requirements, because of its unique geographical, meteorological, 
air quality, and economic factors. These unique factors are described 
in more detail in the Draft Regulatory Impact Analysis contained in the 
docket.
    Second, in Alaska, unlike in the rest of the country, diesel fuel 
consumption for highway use represents only five percent of the State's 
total distillate fuel consumption, because of the relatively small 
numbers of vehicles in the State. Most of this fuel is produced by 
refineries located in Alaska, primarily because of the more severe 
cloud point specification needed for the extremely low temperatures 
experienced in much of Alaska during the winter. There are four 
commercial refineries in Alaska. Only one of these refineries currently 
has any desulfurization capacity, which is relatively small. 
Consequently, because these refineries would have to reduce sulfur from 
uncontrolled levels to meet the proposed 15 ppm standard, these 
refineries could incur substantially higher costs than those in the 
rest of the nation. Given the very small highway diesel demand, 
however, it is doubtful that more than one or two Alaska refineries 
would choose to produce low sulfur highway fuel, and these refiners 
could even decide to import it from refineries outside of Alaska.
    Third, Alaska's highway diesel vehicle fleet is relatively small, 
particularly outside the Federal Aid Highway System. The State 
estimates that there are less than 9000 diesel vehicles in the entire 
State, with less than 600 of these vehicles in all of rural Alaska. The 
State also indicates that these vehicles are predominantly older than 
the average elsewhere.\163\
---------------------------------------------------------------------------

    \163\ See further discussion in the Draft RIA (Chapter VIII).
---------------------------------------------------------------------------

    Finally, Alaska's fuel distribution system faces many unique 
challenges. Unlike the rest of the country, because of its current 
exemption from the 500 ppm sulfur standard, Alaska does not currently 
segregate highway diesel fuel from that used for off-road, marine, 
heating oil, and other distillate uses. Therefore, the distribution 
system costs for segregating a low sulfur grade of diesel for highway 
uses will be significant. The existing fuel storage facilities limit 
the number of fuel types that can be stored. In addition to significant 
obstacles to expanding tankage in Alaska, the cost of constructing 
separate storage facilities, and providing separate tanks for 
transporting low-sulfur diesel fuel (e.g., by barge or truck), could be 
significant. Most of Alaska's communities rely on barge deliveries, and 
ice formation on the navigable waters during the winter months 
restricts fuel delivery to these areas. Construction costs are 30 
percent higher in Alaska than in the lower-48 states, due to higher 
costs for freight deliveries, materials, electrical, mechanical, and 
labor. There is also a shorter period of time during which construction 
can occur, because of seasonal extremes in temperature and the amount 
of daily sunlight.

b. What Flexibilities Are We Proposing for Alaska?

    Because of the unique circumstances in Alaska, we are proposing an 
alternative option for implementing the low sulfur fuel program in 
Alaska. We are proposing to provide the State an opportunity to develop 
an alternative low sulfur transition plan for Alaska. We would intend 
to facilitate the development of this plan by working in close 
cooperation with the State and key stakeholders. This plan would need 
to ensure that sufficient supplies of low sulfur diesel fuel are 
available in Alaska to meet the demand of any new 2007 and later model 
year diesel vehicles. Given that Alaska's demand for highway diesel 
fuel is very low and only a small number of new diesel vehicles are 
introduced each year, it may be possible to develop an alternative 
implementation plan for Alaska in the early years of the program that 
provides low sulfur diesel only in sufficient quantities to meet the 
demand from the small number of new diesel vehicles. This would give 
Alaska refiners more flexibility during the transition period because 
they would not have to desulfurize the entire highway diesel volume. 
Our goal in offering this additional flexibility would be to transition 
Alaska into the low sulfur fuel program in a manner that minimizes 
costs, while still ensuring that the new vehicles receive the low 
sulfur fuel they need. We expect that the transition plan would begin 
to be implemented at the same time as the national program, but the 
State would have an opportunity to determine what volumes of low sulfur 
fuel would need to supplied, and in what timeframes, in different areas 
of the State.
    At a minimum, such a transition plan would need to: (1) Ensure an 
adequate supply (either through production or imports), (2) ensure 
sufficient retail availability of low sulfur fuel for new vehicles in 
Alaska, (3) address the growth of supply and availability over time as 
more new vehicles enter the fleet, (4) include measures to prevent 
misfueling, and (5) ensure enforceability. We would anticipate that, to 
develop a workable transition plan, the State would likely work in 
close cooperation with refiners and other key stakeholders, including 
retailers, distributors, truckers, engine manufacturers, environmental 
groups, and other interested groups. For example, the State would 
likely rely on input from the trucking industry in determining the 
expected low sulfur fuel volume needed in Alaska, based on the 
anticipated number of new vehicles, and how this volume is expected to 
grow during the first few years of the program. Similarly, the State 
would likely rely on the Alaska refiners' input regarding plans for 
supplying (either through production or imports) low sulfur fuel to 
meet the expected demand. Further, the State would likely rely on input 
and cooperation from retailers and distributors to determine at which 
locations the low sulfur fuel should be made available. Retailers 
offering low sulfur fuel would have to take measures to prevent 
misfueling, such as pump labeling. All parties in the distribution 
system would need to ensure the low sulfur fuel remains segregated and 
take measures to prevent sulfur contamination, in the same manner as 
described for the national program in section VIII.
    If the State anticipates that the primary demand for low sulfur 
fuel will be along the highway system (e.g., to address truck traffic 
from the lower 48 states) in the early years of the program, then the 
initial stages of the transition plan could be focused in these areas. 
We believe it would be appropriate for the State to consider an 
extended transition schedule for implementing the low sulfur program in 
rural Alaska, as part of the state's overall plan, based on when they 
anticipate the introduction of a significant number of 2007 and later 
model year vehicles in the remote areas.
    Under such an approach, the State would be given the opportunity to 
develop such a transition plan, as an alternative to the national 
program, and submit it to EPA. Our goal would be to help facilitate the 
development of the plan, by working closely with the State and the 
stakeholder group so they would have an opportunity to address EPA's 
concerns in their submittal. We envision that the State would develop 
and submit this plan to EPA within about one year of the final diesel 
rule. Our goal would be to conduct a rulemaking and publish a final 
rule

[[Page 35522]]

promulgating a new regulatory scheme for Alaska, if appropriate. The 
goal would be to issue a final rule within one year of Alaska's 
submittal of the plan, so that refiners and other affected parties 
would have certainty as to their regulatory requirements. We request 
comment on the timing for the State to submit such an alternative plan, 
and for EPA to conduct the rulemaking action. If the State chose not to 
submit an alternative plan, or if the plan did not provide a reasonable 
alternative for Alaska as described above, then Alaska would be subject 
to the national program.
    We seek comment on all aspects of this approach, and on other 
approaches that may have merit, to provide additional flexibility in 
transitioning the low sulfur fuel program for Alaska.

c. How Do We Propose to Address Alaska's Petition Regarding the 500 ppm 
Standard?

Background

    On February 12, 1993, Alaska submitted a petition under section 325 
of the Act to exempt highway vehicle diesel fuel in Alaska from 
paragraphs (1) and (2) of section 211(i) of the Act, except for the 
minimum cetane index requirement.\164\ The petition requested that we 
temporarily exempt highway vehicle diesel fuel in communities served by 
the Federal Aid Highway System from meeting the sulfur content 
specified in section 211(i) of the Act and the dye requirement for non-
highway diesel fuel of 40 CFR 80.29, until October 1, 1996. The 
petition also requested a permanent exemption from those requirements 
for areas of Alaska not reachable by the Federal Aid Highway System--
the remote areas. On March 22, 1994, (59 FR 13610), we granted the 
petition based on geographical, meteorological, air quality, and 
economic factors unique to Alaska.
---------------------------------------------------------------------------

    \164\ Copies of information regarding Alaska's petition for 
exemption and subsequent requests by Alaska and actions by EPA are 
available in public docket A-96-26.
---------------------------------------------------------------------------

    On December 12, 1995, Alaska submitted a petition for a permanent 
exemption for all areas of the State served by the Federal Aid Highway 
System, that is, those areas covered only by the temporary exemption. 
On August 19, 1996, we extended the temporary exemption until October 
1, 1998 (61 FR 42812), to give us time to consider comments to that 
petition that were subsequently submitted by stakeholders. On April 28, 
1998 (63 FR 23241) we proposed to grant the petition for permanent 
exemption. Substantial public comments and substantive new information 
were submitted in response to the proposal. To give us time to consider 
those comments and new information, we extended the temporary exemption 
for another nine months until July 1, 1999 (September 16, 1998, 63 FR 
49459). During this time period, we started work on a nationwide rule 
to consider more stringent diesel fuel requirements, particularly for 
the sulfur content (i.e., today's proposed rule). To coordinate the 
decision on Alaska's request for a permanent exemption with this 
nationwide rule on diesel fuel quality, we extended the temporary 
exemption until January 1, 2004 (June 25, 1999 64 FR 34126).

Today's Proposed Action

    As mentioned above, Alaska has submitted a petition for a permanent 
exemption from the 500 ppm standard for areas not served by the Federal 
Aid Highway System. Our goal is to take action on this petition in a 
way that minimizes costs through Alaska's transition to the low sulfur 
program. The cost of compliance could be reduced if Alaska refiners 
were given the flexibility to meet the low sulfur standard in one step, 
rather than two steps (i.e., once for the current 500 ppm sulfur 
standard in 2004 when the temporary exemption expires, and again for 
the proposed 15 ppm standard in 2006). Therefore, we propose to extend 
the temporary exemption for the areas of Alaska served by the Federal 
Aid Highway System from January 1, 2004 (the current expiration date) 
to the proposed effective date for the proposed 15 ppm sulfur standard 
(i.e., April 1, 2006 at the refinery level; May 1, 2006 at the terminal 
level; and June 1, 2006 at all downstream locations).
    As discussed in section b above, we are proposing to allow Alaska 
to develop a transition plan for implementing the 15 ppm sulfur 
program. During this transition period, it is possible that both 15 ppm 
(for proposed 2007 and later model year vehicles) and higher sulfur 
(for older vehicles) highway fuels might be available in Alaska. To 
avoid the two-step sulfur program described above, we seek comment on 
whether we should consider additional extensions to the temporary 
exemption of the 500 ppm standard beyond 2006 (e.g., for that portion 
of the highway pool that is available for the older technology vehicles 
during Alaska's transition period). We would expect that any additional 
temporary extensions, if appropriate, would be made in the context of 
the separate rulemaking taking action on Alaska's transition plan (as 
described in the previous section).
    As in previous actions to grant Alaska sulfur exemptions, we would 
not base any vehicle or engine recall on emissions exceedences caused 
by the use of high-sulfur (>500 ppm) fuel in Alaska during the period 
of the temporary sulfur exemption. In addition, manufacturers may have 
a reasonable basis for denying emission related warranties where damage 
or failures are caused by the use of high-sulfur (>500 ppm) fuel in 
Alaska.
    Finally, the costs of complying could be reduced significantly if 
Alaska were not required to dye the non-highway fuel. Dye contamination 
of other fuels, particularly jet fuel, is a serious potential problem. 
This is a serious issue in Alaska since the same transport and storage 
tanks used for jet fuel are generally also used for other diesel 
products, including off-highway diesel products which are required to 
be dyed under the current national program. This issue is discussed 
further in the Draft RIA (Chapter VIII). Therefore, we also propose to 
grant Alaska's request for a permanent exemption from the dye 
requirement of 40 CFR 80.29 and 40 CFR 80.446 for the entire State.
    We are interested in comments on all aspects of this proposal.
3. American Samoa, Guam, and the Commonwealth of Northern Mariana 
Islands

a. Why Are We Considering Excluding American Samoa, Guam, and the 
Commonwealth of Northern Mariana Islands?

    Prior to the effective date of the current highway diesel sulfur 
standard of 500 ppm, the territories of American Samoa, Guam and the 
Commonwealth of Northern Mariana Islands (CNMI) petitioned EPA for an 
exemption under section 325 of the Act from the sulfur requirement 
under section 211(i) of the Act and associated regulations at 40 CFR 
80.29. The petitions were based on geographical, meteorological, air 
quality, and economic factors unique to those territories. We 
subsequently granted the petitions.\165\ With today's proposal we need 
to evaluate whether to include or exclude the territories in areas for 
which the fuel sulfur standard would apply.
---------------------------------------------------------------------------

    \165\ See 57 FR 32010, July 20, 1992 for American Samoa; 57 FR 
32010, July 30, 1992 for Guam; and 59 FR 26129, May 19, 1994 for 
CNMI.
---------------------------------------------------------------------------

b. What are the Relevant Factors?

    The key relevant factors unique to these territories, briefly 
discussed below, are discussed in detail in the

[[Page 35523]]

Draft RIA. These U.S. Territories are islands with limited 
transportation networks. Consequently among these three territories 
there are currently only approximately 1300 registered diesel vehicles. 
Diesel fuel consumption in these vehicles represents just a tiny 
fraction of the total diesel fuel volume consumed in these places; the 
bulk of diesel fuel is burned in marine, nonroad, and stationary 
applications. Consequently highway diesel vehicles are believed to have 
a negligible impact on the air quality in these territories, which, 
with minor exceptions, is very good.
    All three of these territories lack internal petroleum supplies and 
refining capabilities and rely on long distance imports. Given their 
remote location from the U.S. mainland, petroleum products are imported 
from east rim nations, particularly Singapore. Although Australia, the 
Philippines, and certain other Asian countries have or will soon 
require low-sulfur diesel fuel, this requirement is a 500 ppm sulfur 
limit, not the proposed 15 ppm sulfur limit. Compliance with low-sulfur 
requirements for highway fuel would require construction of separate 
storage and handling facilities for a unique grade of diesel fuel for 
highway purposes, or importation of low-sulfur diesel fuel for all 
purposes, either of which would significantly add to the already high 
cost of diesel fuel in territories which rely heavily on United States 
support for their economies.

c. What Are the Options and Proposed Provisions for the Territories?

    We could include or exclude the territories in the areas for which 
the proposed diesel fuel sulfur standard would apply. As in the early 
1990's when the 500 ppm sulfur standard was implemented, we believe 
that compliance with the proposed 15 ppm sulfur standard would result 
in relatively small environmental benefit, but major economic burden. 
We are also concerned about the impact to vehicle owners and operators 
of running the new and upcoming engine and emission control 
technologies using high-sulfur fuel. We believe that for the sulfur 
exemption to be viable for vehicle owners and operators, they would 
need access to either low-sulfur fuel or vehicles meeting the pre-2007 
HDV emission standards that could be run on high-sulfur fuel without 
significant engine damage or performance degradation.
    We are proposing to exclude American Samoa, Guam and CNMI from the 
proposed diesel fuel sulfur requirement of 15 ppm because of the high 
economic cost of compliance and minimal air quality benefits. We are 
also proposing to exclude, but not prohibit, the territories from the 
2007 heavy-duty diesel vehicle and engine emissions standards, and 
other requirements associated with those emission standards based on 
the increased costs associated with implementing the vehicle and fuel 
standards together in these territories. Thus, the territories would 
continue to have access to 2006 diesel vehicle and engine technologies. 
This exclusion from standards would not apply to gasoline engines and 
vehicles because gasoline that complies with our regulations will be 
available, and so concerns about damage to engines and emissions 
control systems will not exist. As proposed this exclusion from 
standards does not apply to light-duty diesel vehicles and trucks 
because gasoline vehicles meeting the emission standards and capable of 
fulfilling the same function would be available.
    We are proposing to continue requiring all diesel motor vehicles 
and engines to be certified and labeled to the applicable requirements 
(either to the 2006 model year standards and associated requirements, 
or to the standards and associated requirements applicable for the 
model year of production) and warranted, as otherwise required under 
the Clean Air Act and EPA regulations. Special recall and warranty 
considerations due to the use of exempted high-sulfur fuel are proposed 
to be the same as those proposed for Alaska during its proposed 
transition period. To protect against this exclusion being used to 
circumvent the emission requirements applicable to the rest of the 
United States (i.e., continental United States, Alaska, Hawaii, Puerto 
Rico and the U.S. Virgin Islands) after 2006 by routing pre-2007 
technology vehicles and engines through one of these territories, we 
propose to restrict the importation of vehicles and engines from these 
territories into the rest of the United States. After the 2006 model 
year, diesel vehicles and engines certified under this exclusion to 
meet the 2006 model year emission standards for sale in American Samoa, 
Guam and CNMI would not be permitted entry into the rest of the United 
States.
    We request comment on these exclusions and particularly on whether 
it should be extended to light-duty diesel vehicle and truck standards 
as well.

D. What About the Use of JP-8 Fuel in Diesel-Equipped Military 
Vehicles?

    In 1995, EPA issued a letter to the Deputy Under Secretary of 
Defense for Environmental Security which concluded that the military 
specification fuel known as JP-8 did not meet the definition of diesel 
fuel under EPA's regulations and was, therefore, not subject to the 
0.05 percent by weight sulfur standard. EPA also determined that 
despite the slightly higher sulfur levels, the use of JP-8 in motor 
vehicles by the military would not be a violation of EPA regulations as 
a matter of policy. This decision was made after careful consideration 
of the impact on operational readiness, logistical considerations and 
cost for the military. EPA also evaluated data presented by the 
military which compared the emissions of vehicles operated on typical 
highway diesel and JP-8. These data supported the conclusion that there 
would not be a significant adverse environmental consequence from the 
limited use of JP-8 fuel. EPA's evaluation of the emissions impact was, 
of course, based on the results of tests conducted using vehicles 
representative of diesel emission control technology and diesel fuel in 
use at that time.
    The technical basis for EPA's decision on this matter may be 
affected by the prospect of military vehicles equipped with the highly 
sulfur sensitive technology that is expected to be used on vehicles and 
engines designed to meet the standards for 2007 and beyond. We request 
comment from interested parties on how to best deal with this 
situation, including comment on the extent to which national security 
exemptions pursued under 40 CFR 85.1708 may affect resolution of the 
issue.

VII. Requirements for Engine and Vehicle Manufacturers

A. Compliance With Standards and Enforcement

    We are not proposing any changes to the enforcement scheme 
currently applicable to vehicles and engines under Title II of the CAA. 
Thus, they would continue to apply to the vehicles and engines subject 
to today's proposed standards. This includes the enforcement provisions 
relating to the manufacture, importation and in-use compliance of these 
vehicles and engines (see sections 202-208 of the CAA). Manufacturers 
are required to obtain a certificate of conformity for their engine 
designs prior to introducing them into commerce, and are subject to 
Selective Enforcement Audits during production. Although there are

[[Page 35524]]

currently no regulatory requirements for manufacturers to test in-use 
engines, they are responsible for the emission performance of their 
engines in use. If we determine that a substantial number of properly 
maintained and used engines in any engine family is not complying with 
the standards in use, then we may require the manufacturer to recall 
the engines and remedy the noncompliance. Failure by a manufacturer to 
comply with the certification, warranty, reporting, and other 
requirements of Title II can result in sanctions including civil 
penalties and injunctive relief (see sections 202-208 of the CAA). 
Other enforcement provisions regulating persons in addition to 
manufacturers would also be applicable to the affected diesel vehicles, 
including provisions such as the tampering and defeat device 
prohibitions. It is also important to note that, because the CAA 
defines manufacturer to include importers, all of these requirements 
and prohibitions apply equally to importers.
    Consideration has been given to in-use issues that may arise from 
use of the new exhaust emission control technology. While it is 
believed that the technology is sufficient to ensure that emission 
control devices and elements of design will be effective throughout the 
useful life of the vehicle, some concern has been expressed regarding 
the possibility that instances of driveability or other operational 
problems could occur in-use. One example brought up, is the possibility 
that a vehicle could experience severe driveability problems if the PM 
trap becomes plugged. At this time, however, we are confident that the 
technologies will be developed to prevent these types of problems from 
occurring provided the vehicle is operated on the appropriate fuel. 
Nevertheless, comments are requested on any in-use problems that may 
arise as a result of inclusion of exhaust emission control technology. 
Your comments should address the nature of the problem, likelihood of 
its occurrence and options for ensuring it does not occur.
    Another issue related to certification is what (if any) maintenance 
we should allow for adsorbers and traps. Our existing regulations 
define these to be critical emission-related components, which means 
that the amount of maintenance of them that the manufacturer is allowed 
to conduct during durability testing (or specify in the maintenance 
instructions that it gives to operators) is limited. We believe that 
this is appropriate because, as we already noted, we expect that these 
technologies will be very durable in use and will last the full useful 
life with little or no scheduled maintenance. However, our existing 
regulations (40 CFR 86.004-25) would allow a manufacturer to specify 
something as drastic as replacement of the adsorber catalyst bed or the 
trap filter after as little as 100,000-150,000 miles if there was a 
``reasonable likelihood'' that the maintenance would get done. We are 
concerned that some manufacturers may underdesign the adsorbers and 
traps compared to the level of durability that is achievable. If this 
occurred, even if most users replaced their adsorber or trap according 
to the manufacturer's schedule, there would certainly be some users 
that did not. Therefore, we are proposing to require that these 
technologies be designed to last for the full useful life of the 
engine. More specifically, the proposed regulations state that 
scheduled replacement of the PM filter element or catalyst bed is not 
allowed during the useful life. Only cleaning and adjustment will be 
allowed as scheduled maintenance.
    It may be appropriate to establish non-conformance penalties (NCPs) 
for the standards being proposed today. NCPs are monetary penalties 
that manufacturers can pay instead of complying with an emission 
standard. In order for us to establish NCPs for a specific standard, we 
would have to find that: (1) Substantial work will be required to meet 
the standard for which the NCP is offered; and (2) there is likely to 
be a ``technological laggard'' (i.e., a manufacturer that cannot meet 
the standard because of technological (not economic) difficulties and, 
without NCPs, might be forced from the marketplace). According to the 
CAA (section 206(g)), such NCPs ``shall remove any competitive 
disadvantage to manufacturers whose engines or vehicles achieve the 
required degree of emission reduction.'' We also must determine 
compliance costs so that appropriate penalties can be established. We 
have established NCPs in past rulemakings. However, since the 
implementation of our averaging, banking and trading program, their use 
has been rare. We believe manufacturers have taken advantage of the 
averaging, banking and trading program as a preferred alternative to 
incurring monetary losses. At this time, we have insufficient 
information to evaluate these criteria for heavy-duty engines. While we 
believe that substantial work will be required to meet the 2007 
standards, we currently have no information indicating that a 
technological laggard is likely to exist. Recognizing that it may be 
premature for manufacturers to comment on these criteria, since 
implementation of these standards is still more than six years away, we 
expect to consider NCPs in a future action. We welcome comment on this 
approach.
    Today's proposal includes PM standards for heavy-duty gasoline 
engines. Because gasoline engines have inherently low PM emissions, it 
may be appropriate in some cases to waive the requirement to measure PM 
emissions. Therefore, we are proposing to maintain the flexibility to 
allow manufacturers to certify gasoline engines without measuring PM 
emissions, provided they have previous data, analyses, or other 
information demonstrating that they comply with the standards. The 
flexibility is the same as that allowed for PM emissions from light-
duty gasoline vehicles and for CO emissions from heavy-duty diesel 
engines.

B. Certification Fuel

    It is well established that measured emissions are affected by the 
properties of the fuel used during the test. For this reason, we have 
historically specified allowable ranges for test fuel properties such 
as cetane and sulfur content. These specifications are intended to 
represent most typical fuels that are commercially available in use. 
Because today's action is proposing to lower the upper limit for sulfur 
content in the field, we are also proposing a new range of allowable 
sulfur content for testing that would be 7 to 15 ppm (by weight). 
Beginning in the 2007 model year, these specifications would apply to 
all emission testing conducted for Certification and Selective 
Enforcement Audits, as well as any other laboratory engine testing for 
compliance purposes. Because the same in use fuel is used for light-and 
heavy-duty highway diesel vehicles, we are also proposing to change the 
sulfur specification for light-duty diesel vehicle testing to the same 
7 to 15 ppm range, beginning in the 2007 model year. We request comment 
on these test fuel specifications. We also request comment regarding 
whether the range of allowable test fuel properties should include the 
full range of in-use properties or include the most typical range 
around the average properties (e.g., 7 to 10 ppm sulfur).

C. Averaging, Banking, and Trading

    We are proposing to continue the basic structure of the existing 
ABT program for heavy-duty diesel engines. (Note that this includes the 
Otto-cycle engine and vehicle ABT programs that were proposed on 
October 29, 1999, 64 FR 58472.) This program allows manufacturers to 
certify that their

[[Page 35525]]

engine families comply with the applicable standards on average. More 
specifically, manufacturers are allowed to certify their engine 
families with various family emission limits (FELs), provided the 
average of the FELs does not exceed the standard when weighted by the 
numbers of engines produced in each family for that model year. To do 
this, they generate certification emission credits by producing engine 
families that are below the applicable standard. These credits can then 
be used to offset the production of engines in engine families that are 
certified to have emissions in excess of the applicable standards. 
Manufacturers are also allowed to bank these credits for later use or 
trade them to other manufacturers. We are proposing some restrictions 
to prevent manufacturers from producing very high-emitting engines and 
unnecessarily delaying the transition to the new exhaust emission 
control technology. These restrictions are described below. We are 
continuing this ABT program because we believe that it would provide 
the manufacturers significant compliance flexibility. This compliance 
flexibility would be a significant factor in the manufacturers' ability 
to certify a full line of engines in 2007 and would help to allow 
implementation of the new, more stringent standard as soon as 
permissible under the CAA. This is especially true given the very low 
levels of the proposed standards. In some ways the ABT program is 
intended to serve the same purpose as the phase-in for diesel engines. 
As is described below, we have proposed some restrictions to make this 
program compatible with the phase-in. Thus your comments on this ABT 
program should address how it fits with the phase-in, and vice versa.
    The existing ABT program includes limits on how high the emissions 
from credit-using engines can be. These limits are referred to as FEL 
caps. No engine family may be certified above these caps using credits. 
These limits provide the manufacturers compliance flexibility while 
protecting against the introduction of unnecessarily high-emitting 
engines. In today's action, we are proposing to establish lower caps 
for those engines that are required to comply with the proposed 
standards. Specifically, we are proposing that the engines subject to 
the new standards have NOX emissions no higher than 0.50 g/
bhp-hr, and PM emissions no higher than 0.02 g/bhp-hr. Without this 
cap, we are concerned that one or more manufacturer(s) could use the 
ABT program to unnecessarily delay the introduction of exhaust emission 
control technologies. Allowing this would be contrary to one of the 
goals of the phase-in program, which is to allow manufacturers to gain 
experience with these technologies on a limited scale before they are 
applied to their full production. Similarly, we are proposing FEL caps 
of 1.0 g/mi NOX and 0.03 g/mi PM for chassis-certified 
heavy-duty vehicles. We request comment on the need for and the levels 
of these FEL caps.
    We are proposing separate averaging sets during the phase-in 
period. In one set, engines would be certified to the 2.4 g/bhp-hr 
NOX+NMHC standard (which applies for model years 2004-2006), 
and would be subject to the restrictions and allowances established for 
those model years. In the other set, engines would be certified to the 
proposed 0.20 g/bhp-hr NOX standard, and would be subject to 
the restrictions and allowances proposed today. Averaging would not be 
allowed between these two sets within the same model year. The reason 
for this is similar to that for the low FEL caps. Allowing averaging 
between the sets would be contrary to one of the goals of the phase-in 
program, which is to allow manufacturers to introduce engines with 
ultra-low emission technologies on a limited scale before they are 
applied to their full production. We are concerned that manufacturers 
could delay the introduction of NOX aftertreatment 
technology, diminishing the projected benefits of the proposed program 
during the phase-in. We request comment on the need for this 
restriction. As a part of this restriction of cross-set averaging, we 
are also proposing that banked NOX+NMHC and PM credits 
generated from 2006 and earlier engines may not be used to comply with 
the stricter standards that apply to 2007 and later engines (unless 
such credits are generated from engines that meet all of the stricter 
standards early). We are also requesting comments on alternatives to 
these restrictions, such as only allowing banked credits generated from 
engines below some threshold (e.g., 1.5 g/bhp-hr NOX+NMHC or 
0.05 g/bhp-hr PM) to be used for compliance with the 2007 standards. 
Under the threshold approach, the credits would be calculated in 
reference to the threshold rather than the applicable standard. Your 
alternatives should address our two primary concerns: (1) Ensuring that 
manufacturers produce engines during the phase-in period that are 
equipped with the advanced NOX aftertreatment controls; and 
(2) ensuring that the program produces equivalent or greater emission 
reductions during the phase-in period.
    We propose to apply these same restrictions to the 2007 chassis-
based standards. This would affect the averaging program that was 
proposed previously for model year 2004 (October 29, 1999, 64 FR 
58472). We believe that these restrictions are equally necessary for 
the chassis-based program, but are also open to alternatives. We are 
particularly interested in the possibility of using the Tier 2 pull-
ahead approach that would allow manufacturers to phase in the new 
standards on a per-vehicle basis rather than on a total gram basis. 
Under this approach, for each ``2007-technology'' vehicle that a 
manufacturer introduced before 2007, it could produce one ``2006-
technology'' vehicle in 2007 or later. We recognize that this approach 
would be complicated for heavy-duty vehicles because of the different 
weight classes, but believe that this problem could be addressed with 
appropriate weighting factors (e.g, setting one 14,000 lb vehicle as 
equivalent to two 8,500 lb vehicles). While it is less clear that such 
an approach would work for the engine programs, we would welcome such 
comments.
    The Agency continues to be interested in the potential of early 
benefits to be gained from retrofitting highway engines. Thus, we are 
also asking for comment on various concepts by which manufacturers 
could earn credits potentially to be used in a variety of programs. An 
example of such credits in the 2007 MY program might include 
consideration by EPA of the retiring of retrofit credits in deciding 
whether to make a discretionary determination under section 207(c) of 
substantial non-conformity. For discussion of related issues, see the 
final rule for spark-ignition marine engines (61 FR 52088, 52095, 
October 4, 1996), and the final rule for locomotive engines (63 FR 
18978, 18988, April 16, 1998). We ask for comment as to what emission 
benefits could be achieved by this concept and by what legal authority 
such credits could be applied. Such systems would bring existing 
highway engines into compliance with the standards being proposed for 
new engines, or alternately with some less stringent standards levels 
that still achieve large emission reductions. We ask comment on how 
such an emissions reduction calculation should be formulated and how 
such benefits and resulting credits should be applied. Certification 
requirements for such retrofit systems could be developed along the 
lines of those adopted in EPA's urban bus retrofit program (58 FR 
21359, April 21, 1993). Credits would be

[[Page 35526]]

calculated based on the expected lifetime emissions benefits of the 
retrofit systems. Because this benefit depends on the remaining life of 
the retrofitted vehicle, and this could vary considerably, any emission 
reduction formula would require the certainty to account for this in 
the calculation, such as by estimating an average remaining life for 
retrofits in each engine family, or by using a vehicle age-dependent 
proration factor for each retrofitted system, similar to the approach 
taken in the locomotive emissions rule (see Appendix K of the 
Regulatory Support Document for the locomotives final rule. 63 FR 
18977, April 16, 1998).

D. Chassis Certification

    Heavy-duty vehicles under 14,000 pounds can generally be split into 
two groupings, complete and incomplete vehicles. Complete vehicles are 
those that are manufactured with their cargo carrying container 
attached. These vehicles consist almost entirely of pick-up trucks, 
vans, and sport utility vehicles. Incomplete vehicles are those chassis 
that are manufactured by the primary vehicle manufacturer without their 
cargo carrying container attached. These chassis may or may not have a 
cab attached. The incomplete chassis are then manufactured into a 
variety of vehicles such as recreational vehicles, tow trucks, dump 
trucks, and delivery vehicles.
    Recently, we proposed to require all complete Otto-cycle vehicles 
between 8,500 and 14,000 pounds to be certified to vehicle-based 
standards rather than engine-based standards beginning in model year 
2004 (October 29, 1999, 64 FR 58472). Under this proposal manufacturers 
would test the vehicles in essentially the same manner light-duty 
trucks are tested. We continue to believe this approach is reasonable 
and are thus proposing to continue it with the more stringent 
standards. We request comment regarding the possible mandatory or 
voluntary application of this program to complete diesel vehicles under 
14,000 pounds.

E. FTP Changes to Accommodate Regeneration of Aftertreatment Devices

    It is possible that some of the exhaust emission control devices 
used to meet the proposed standard will have discrete regeneration 
events that could effect emission characteristics. For example, 
NOX adsorbers and actively regenerated PM traps each 
incorporate discrete regenerations. The NOX adsorber stores 
NOX under normal conditions until the NOX storage 
capacity is nearly full, at which point, the regeneration event is 
triggered to purge the stored NOX and reduce it across a 
catalyst. Actively regenerated PM traps incorporate heating devices to 
periodically initiate regeneration. In both cases, we would expect that 
these regeneration events would be controlled by the engine computer, 
and would thus be generally predictable. Even passively regenerating 
catalytic PM trap designs can have discrete regeneration events.
    Discrete regeneration events can be important because it is 
possible for exhaust emissions to increase during the regeneration 
process. The regeneration of a NOX adsorber for instance, 
could result in increased particulates, NMHC and NOX due to 
the rich exhaust gas required to purge and reduce the NOX. 
We expect that in most cases, the regeneration events would be 
sufficiently frequent to be included in the measured emissions. Our 
feasibility analysis projects very frequent regeneration of the 
NOX adsorbers, and continuously regenerating PM traps. 
Nevertheless, this issue becomes a regulatory concern because it is 
also conceivable that these emission storage devices could be designed 
in such a way that a regeneration event would not necessarily occur 
over the course of a single heavy-duty FTP cycle, and thus be 
unmeasured by the current test procedure. Since these regeneration 
events could produce increased emissions during the regeneration 
process, it will be important to make sure that regeneration is 
captured as part of the certification testing. We seek comment on the 
need to measure regeneration emissions as part of each emission test, 
and the best method of making such measurements.
    In order to verify the emission levels during regeneration, we 
propose that the transient FTP applicable for certification be repeated 
until a regeneration occurs. The transient FTP will be repeated until a 
regeneration event is confirmed. The emissions measured during the 
cycle in which the regeneration occurs must be below the applicable 
transient cycle standard. For example, if an actively regenerated 
heavy-duty PM trap does not regenerate over the cold-soak-hot cycle, 
the hot portion of the cycle will be repeated until a regeneration is 
observed. The specific hot cycle with the highest emissions would be 
used as the representative hot cycle, and its emissions would be 
weighted with the cold cycle emissions (as is currently required) to 
determine compliance with the composite emission standard for the cold-
soak-hot cycle. We seek comment on the proposed method of capturing 
regeneration emissions and whether we should allow the manufacturers to 
use the average hot-start emissions rather than the worst case.
    This proposal is based on the assumption that the systems would 
include a fairly high frequency of regeneration events (e.g., one 
regeneration event per hour). We seek comment on the need to capture 
regeneration emissions as part of the certification testing if the 
regeneration events occur much less frequently. Similarly, we request 
comment on the need to measure emissions during desulfurization of the 
NOX adsorber. Would it be appropriate to allow manufacturers 
to use a mathematical adjustment of measured emissions to account for 
increased emissions during infrequent regeneration or desulfurization 
events? For example, if a system required a desulfurization after every 
20 transient cycles, and PM emissions increased by 20 percent during 
desulfurization, would it be appropriate to adjust measured emissions 
upward by one percent (20 percent divided by 20 cycles)?

F. On-Board Diagnostics

    OBD systems help ensure continued compliance with emission 
standards during in-use operation, and they help mechanics to properly 
diagnose and repair malfunctioning vehicles while minimizing the 
associated time and effort. We implemented OBD requirements on light-
duty applications in the 1994 model year (58 FR 9468, February 19, 
1993). We recently proposed OBD requirements for 8500 to 14,000 pound 
heavy-duty gasoline and diesel applications (October 29, 1999, 64 FR 
58472). The 8500 to 14,000 pound requirements are scheduled for 
implementation in the 2004 model year with a phase-in running through 
the 2006 model year; the 2007 model year would be the first year of 100 
percent OBD compliance on 8500 to 14,000 pound applications. We are 
currently working with industry to develop OBD requirements for the 
over 14,000 pound heavy-duty gasoline and diesel engines. Those 
requirements will be proposed in a separate rulemaking and are 
anticipated to be effective on or before the 2007 model year; 
consequently, we are not proposing them here.
    As discussed in the October 29, 1999, proposed rule, OBD system 
requirements would allow for potential inclusion of heavy-duty vehicles 
and engines in inspection/maintenance programs via a simple check of 
the OBD system. The OBD system must monitor emission control components 
for any malfunction or deterioration that could cause exceedance of 
certain emission thresholds. The OBD system also

[[Page 35527]]

notifies the driver when repairs are needed via a dashboard light, or 
malfunction indicator light (MIL), when the diagnostic system detects a 
problem.
    An OBD system is important on heavy-duty vehicles and engines for 
many reasons. In the past, heavy-duty diesel engines have relied 
primarily on in-cylinder modifications to meet emission standards. For 
example, emission standards have been met through changes in injection 
timing, piston design, combustion chamber design, use of four valves 
per cylinder rather than two valves, and piston ring pack design and 
location improvements. In contrast, the proposed 2004 and 2007 
standards represent a significant technological challenge that would 
require use of EGR and exhaust emission control devices whose 
deterioration or malfunction can easily go unnoticed by the driver. The 
same argument is true for heavy-duty gasoline vehicles and engines; 
while emission control is managed both with engine design elements and 
exhaust emission control devices, the latter are the primary emission 
control features. Because deterioration and malfunction of these 
devices can go unnoticed by the driver, and because their sole purpose 
is emissions control, some form of detection is crucial. An OBD system 
is well suited to detect such deterioration or malfunction.
    Today's proposal does not contain any new OBD requirements. The 
vehicles and engines designed to comply with today's proposed emission 
standards would be required to comply with the OBD requirements already 
in place or proposed for implementation in the 2004 model year (i.e., 
light-duty and heavy-duty through 14,000 pounds). However, because some 
of the existing OBD requirements are based on multipliers of the 
applicable emission standards, we request comment regarding the effect 
of the low levels of the proposed standards on these OBD requirements. 
We believe that these requirements will be feasible for these engines. 
If you believe that the OBD requirements will not be feasible, you 
should include in your comments suggestions for how they should be 
revised to make them feasible.
    We are also requesting comment regarding whether there are new OBD 
requirements that should be adopted for these exhaust emission control 
technologies. Comments supporting new requirements should indicate 
whether they would be intended only to prevent emission problems, or 
would also be intended to prevent performance problems, such as exhaust 
emission control plugging.

G. Supplemental Test Procedures

    To ensure better control of in-use emissions, we recently proposed 
(October 29, 1999, 64 FR 58472) \166\ to add two supplemental sets of 
requirements for heavy-duty diesel engines: (1) A supplemental steady-
state test and accompanying limits; and (2) NTE Limits. Both types of 
these proposed supplemental emission requirements are expressed as 
multiples of the normal duty cycle-weighted emission standards, or FEL 
if the engine is certified under the ABT program, whichever is 
applicable. For example, the diesel engine NTE limit for NOX 
+ NMHC emissions from 2004 engines would be 1.25 times the 2.4 g/bhp-hr 
emission standard, or 1.25 times the applicable FEL. Although we are 
not proposing any changes to these requirements, we are requesting 
comment on the feasibility of technologies needed to meet the standards 
being proposed in this notice, in the context of applying these 
multipliers to these new standards.
---------------------------------------------------------------------------

    \166\ Today's notice proposes to apply the heavy-duty diesel NTE 
and supplemental steady-state test provisions intended to be 
finalized as part of the 2004 standards rulemaking. The October 29, 
1999 proposal for that rule contained the description of these 
provisions. We expect that a number of modifications will be made to 
those provisions in the FRM for that rule based on feedback received 
during the comment period. While the details of the final provisions 
are not yet available, we will provide the necessary information in 
the docket for this rule as soon as it becomes available in order to 
allow for comment.
---------------------------------------------------------------------------

    Like current requirements, these new requirements would apply to 
certification, production line testing, and vehicles in actual use. All 
existing provisions regarding standards (e.g., warranty, certification, 
recall) would be applicable to these new requirements as well. The 
steady-state test was proposed because it represents a significant 
portion of in-use operation of heavy-duty diesel engines that is not 
adequately represented by the FTP. The combination of these 
supplemental requirements is intended to provide assurance that engine 
emissions achieve the expected level of in-use emissions control over 
expected operating regimes in-use. We stated in the previous NPRM that 
we believed that compliance with these requirements would not require 
manufacturers to add additional emission control technologies, but 
would require manufacturers to put forth some effort to better optimize 
their engines with respect to emissions over a broader range of 
operating conditions. You should read the previous NPRM for more 
detail. You should also read the comments that we received in response 
to this proposal. In those comments, some engine manufacturers raised 
concerns regarding the feasibility of implementing these requirements 
in the 2004 model year, in the context of the technologies expected to 
be seen in the 2004 time frame (principally cooled EGR, advanced fuel 
injection systems, advanced turbo-charging systems).\167\ Many of these 
comments question the feasibility of meeting the proposed NTE emission 
limits under the high-load regions of the proposed NTE zone, 
particularly under conditions of high temperature and/or altitude. 
These comments are highlighted here because the resolution of these 
issues for the 2004 diesel engine standards, may also be relevant to 
today's rulemaking.
---------------------------------------------------------------------------

    \167\ See, for example, comments from Engine Manufacturers 
Association, Detroit Diesel Corporation, Navistar International 
Transportation Corp., Mack Trucks Inc., in EPA Air Docket No. A-98-
32.
---------------------------------------------------------------------------

    We plan to apply these requirements with the proposed 2007 
standards in the same manner as they would be applied with the 2004 
standards, if adopted. There is some concern that certain exhaust 
emission control devices, though capable of providing large emission 
reductions and performing robustly over a wide range of expected 
operating conditions, may have degraded performance in some conditions 
included in the NTE or supplemental steady-state testing requirements. 
We are thus asking for comments and supporting data related to this 
concern. Your comments should address the following questions:

--What is the relative ability of the emission control technologies 
being considered in today's action to control emissions over the full 
range of speeds and loads typically encountered in actual use? Are 
there areas of the map in which the emission controls are significantly 
less effective?
--What is the relative need for emission reduction for different areas 
of the speed-load map?
--How do the emission control technologies being considered in today's 
action perform at different ambient conditions?
--Are the multipliers proposed previously the most appropriate 
multipliers for ensuring in-use emissions control on exhaust emission 
control-equipped engines?
--Are there other cost effective approaches to controlling in-use 
emissions for engines equipped with exhaust emission controls?
--Are the technological issues raised in the 2004 rulemaking equally 
applicable to diesel engines featuring

[[Page 35528]]

advanced exhaust emission controls and designed to meet the proposed 
2007 standards?

H. Misfueling Concerns

    As explained in Section III, the emissions standards contained in 
this proposal will likely make it necessary for manufacturers to employ 
exhaust emission control devices that require low-sulfur fuel to ensure 
proper operation. This proposal therefore restricts the sulfur content 
of highway diesel fuel sold in the U.S. There are, however, some 
situations in which vehicles requiring low-sulfur fuel may be 
accidentally or purposely misfueled with higher-sulfur fuel. Vehicles 
operated within the continental U.S. may cross into Canada and Mexico, 
countries which have not confirmed that they plan to adopt the same low 
sulfur requirements we are proposing here. In addition, high-sulfur 
nonroad fuel may illegally be used by some operators to fuel highway 
vehicles. Any of these misfueling events could seriously degrade the 
emission performance of sulfur-sensitive exhaust emission control 
devices, or perhaps destroy their functionality altogether.
    There are, however, some factors that help to mitigate concerns 
about misfueling. Most operators are very conscious of the need to 
ensure proper fueling and maintenance of their vehicles. The fear of 
large repair and downtime costs may often outweigh the temptation to 
save money through misfueling.
    The likelihood of misfueling in Canada and Mexico is lessened by 
current cross-border shipment practices and prospects for eventual 
harmonization of standards. Canada has historically placed a priority 
on harmonization with U.S. vehicle emission standards. They have also 
placed a priority on harmonization with U.S. fuels standards, as they 
import a significant amount of fuel from the U.S. and do not want to 
become a ``dumping ground'' for fuel that does not comply with U.S. 
fuel standards. We think it likely therefore that Canada will harmonize 
with the U.S. revised engine standards and the fuel sulfur levels 
required to support those standards. This will offer vehicle owners the 
option of refueling with low-sulfur fuel there. Even if Canada were to 
lag the U.S. in mandating low-sulfur fuels, these fuels would likely 
become available along major through routes to serve the needs of U.S. 
commercial traffic that have the need to purchase it. In addition, 
there is less potential for U.S. commercial vehicles needing low-sulfur 
fuel to refuel in Canada because Canadian fuel is currently more costly 
than U.S. fuel. As a result, most vehicles owners will prefer to 
purchase fuel in the U.S., prior to entering Canada, whenever possible. 
This is facilitated by large tractor-trailer trucks that can have long 
driving ranges--up to 2,000 miles or so--and the fact that most of the 
Canadian population lives within 100 miles of the United States/Canada 
border.
    In Mexico, the entrance of trucks beyond the border commercial zone 
has been prohibited since before the conclusion of the North American 
Free Trade Agreement in 1994. This prohibition applies in the U.S. as 
well, as entrance of trucks into the U.S. beyond the border commerce 
zone is also not allowed. Since these prohibitions are contrary to the 
intent of the Free Trade Agreement, a timetable was established to 
eliminate them.\168\ However, these prohibitions are a point of 
contention between the U.S. and Mexico and remain in force at this 
time.
---------------------------------------------------------------------------

    \168\ See NAFTA, Volume II, Annex I, Reservations for Existing 
Measures and Liberalization Commitments, Pages I-M-69 and 70, and 
Pages I-U-19 and 20.
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    The NAFTA negotiations included creation of a ``corridor'' where 
commercial truck travel occurs, and where Mexico is obligated to 
provide ``low-sulfur'' fuel. At the time of the NAFTA negotiations, 
``low-sulfur'' fuel was considered 500 ppm, which was the level needed 
to address the needs of engines meeting the 1994 emission standards. 
The travel prohibition currently in place may be lifted at some point. 
At that time, the issue of assuring, for U.S. vehicles, fuel with a 
sulfur level needed by the technology that results from this regulation 
may need to be addressed.
    Even considering these mitigating factors, we believe it is 
reasonable to propose two additional measures with very minor costs to 
manufacturers and consumers. First, we are proposing a requirement that 
heavy-duty vehicle manufacturers notify each purchaser of a model year 
2007 or later diesel-fueled vehicle that the vehicle must be fueled 
only with the low-sulfur diesel fuel meeting our regulations. We 
believe this requirement is necessary to alert vehicle owners to the 
need to seek out low-sulfur fuel when operating in areas such as Canada 
and Mexico where it may not be widely available. We are also proposing 
that model year 2007 and later heavy-duty diesel vehicles must be 
equipped by the manufacturer with labels on the dashboard and near the 
refueling inlet that say: ``Ultra-Low Sulfur Diesel Fuel Only.'' We 
request comment on the need for these measures, alternative suggestions 
for wording, whether or not these requirements should exist for only a 
limited number of years, and whether any vehicles certified to the new 
standards without the need for low-sulfur fuel should be exempted. We 
also request comment on whether additional measures are needed to 
preclude misfueling, such as requiring that the new technology vehicles 
be equipped with refueling inlet restrictors that can only accept 
refueling nozzles from pumps that dispense low-sulfur fuel. We would 
also need to require that these pumps (or the high-sulfur fuel pumps) 
be correspondingly equipped with specialized nozzles or other devices 
to complement the vehicle refueling inlet restrictor.

I. Light-Duty Provisions

    We are proposing that the heavy-duty vehicle labeling and purchaser 
notification requirements discussed in section VII.H be applied to the 
light-duty diesel vehicles certified to the final Tier 2 standards as 
well, because these vehicles are expected to require the low-sulfur 
fuel and so would be equally susceptible to misfueling damage.

J. Correction of NOX Emissions for Humidity Effects

    Engine-out emissions of NOX are known to be affected 
significantly by the amount of moisture in the intake air. The water 
absorbs heat which lowers combustion temperatures, and thus lowers 
NOX emissions. Our existing regulations include equations 
that give correction factors to eliminate this effect. For example, if 
the equation indicated that NOX emissions measured on a 
relatively high humidity day would be about three percent lower than 
would be expected with standard humidity, they would be multiplied by 
1.03 to correct them to standard conditions. However, these equations 
were developed many years ago, based on data from older technology 
engines. We are concerned that these equations may not be valid for 
engines equipped with catalytic emission controls. It is possible that 
with catalytic systems, the effect may be very different. Perhaps with 
these newer technologies, the effect will not be significant and 
correction factors will not be needed. Therefore, we are requesting 
comment regarding the accuracy of the existing equations for engines 
equipped with NOX adsorbers, and the need for such 
correction factors for the 2007 standards. To the extent possible, your 
comments should address the broader issue of the need for correction 
factors for NOX and other

[[Page 35529]]

pollutants based on changing ambient conditions. This issue was also 
discussed in the October 29, 1999 proposal (64 FR 58472). You should 
read that discussion and the comments that we received in response to 
that proposal.

VIII. Requirements for Refiners, Importers, and Fuel Distributors

A. Compliance and Enforcement

1. Overview
    The proposed rule would create a national, industry-wide sulfur cap 
standard for highway diesel fuel of 15 ppm. This standard could be 
enforced through sampling and testing at all points in the distribution 
system, combined with inspection of fuel delivery records and other 
commercial documents. The compliance requirements of this proposed rule 
would thus be very similar to the current diesel sulfur rule, except 
that the sulfur standard would be substantially more stringent.\169\ 
Since the 15 ppm cap would be the maximum acceptable sulfur level at 
the retail level, pipelines might set more stringent refiner 
specifications to account for test variability and contamination. See 
section VIII.A.2 for a discussion of the refinery level standard and 
enforcement testing.
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    \169\ 40 CFR 80.29-80.30.
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    Under the proposed rule, all parties in the distribution system 
would continue to be subject to the current diesel fuel requirements 
and prohibitions concerning aromatics and cetane (40 CFR 80.29(a)). 
Furthermore, until the proposed implementation dates, all of the 
requirements and prohibitions of the presently effective diesel fuel 
control rule will remain in effect with the limited modification 
concerning sulfur test methods as discussed in section VIII.A.4.
    Diesel fuel not covered by today's proposed rule includes that used 
for off-highway mobile source purposes such as aircraft, off-road 
machinery and equipment, locomotives, boats and marine vessels, and for 
stationary source purposes such as utilities (electrical power 
generation), portable generators, air compressors, steam boilers, etc. 
Also excluded is highway diesel fuel exported for sale outside the 
United States and its territories, and that specified for research and 
development subject to certain restrictions. Today's proposal would 
allow the use of used motor oil in pre-2007 model year and specially 
certified 2007 and later model year highway engines subject to certain 
restrictions (see section VIII.A.3.b).
    It should be noted that, while this preamble uses the common 
vernacular ``highway diesel fuel,'' the terminology used in the 
proposed regulations refers to ``motor vehicle diesel fuel'' in order 
to be consistent with the definitions and authorities under the Clean 
Air Act (see sections 202(a), 211(c), and 216(2)). The definition of 
``motor vehicle diesel fuel'' clarifies that nonroad engines and 
nonroad vehicles are not motor vehicles or motor vehicle engines. This 
is intended to clarify the definition. Diesel fuel that is available 
for use by both motor vehicles and engines and nonroad vehicles and 
engines would be treated as motor vehicle diesel fuel and still subject 
to the low sulfur diesel standard. For example, a diesel fuel pump used 
by nonroad equipment and motor vehicles must carry diesel fuel meeting 
the low sulfur diesel fuel requirements for motor vehicles.
2. What Are the Requirements for Refiners and Importers?

a. General Requirements

    The sulfur sensitivity of emission controls on model year 2007 and 
later vehicles requires that the sulfur content of diesel fuel at the 
retail pump must not exceed 15 ppm (see section III). Thus, the 
proposed rule would require refiners and importers, and all other 
parties in the distribution system, to comply with the industry-wide 
sulfur cap standard of 15 ppm for all highway diesel fuel, unless 
specifically exempted (see sections VIII.A.6 and 7).
    Under the proposed approach, there would be no published 
enforcement test tolerance. If an enforcement test tolerance were 
allowed, a more stringent refinery level sulfur standard would be 
required to ensure the proposed 15 ppm retail level cap is attained. We 
expect that the diesel fuel refining and distribution industry would 
establish appropriate upstream commercial specifications to ensure the 
15 ppm standard is met downstream. These parties are in the best 
position to determine what the refinery level commercial specifications 
need to be, and they are in control of the means to achieve those 
specifications. Further, they may take advantage of improvements over 
time in testing precision and contamination prevention measures to 
adjust their operations to minimize costs. However, we recognize that 
because of concerns about test variability and contamination in the 
fuel distribution system, pipelines may set sulfur specifications that 
would be more stringent than the regulatory standard.\170\
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    \170\ See section IV.D. regarding the anticipated sulfur level 
at the refinery gate necessary to accommodate variability in 
production, variability in the proposed sulfur measurement procedure 
(discussed in detail in section VII.A.), and contamination in the 
distribution system.
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    As discussed below, we are not proposing that refiners or importers 
engage in mandatory sampling and testing of every batch of diesel fuel 
they produce or import under the proposed industry-wide sulfur cap 
program. However, if some approach is finalized other than what has 
been proposed, then every-batch testing by refiners and importers, and 
associated recordkeeping and reporting requirements, may be necessary.

b. Dyes and Markers

    Under the federal tax code requirements and the current EPA diesel 
fuel rule, diesel fuel intended for highway use can generally be 
distinguished by its color from fuel intended for off-highway use.\171\ 
The current EPA diesel fuel regulations, at 40 CFR 80.29(b), provides 
that any diesel fuel that does not show visible evidence of dye solvent 
red 164 (which has a characteristic red color in fuel) is considered to 
be available for use as diesel highway fuel and is subject to the 
requirements and prohibitions associated with diesel highway fuel. 
However, under the tax code, highway diesel fuel sold for certain tax 
exempt uses may also be dyed red. Therefore, some red-dyed diesel fuel 
is legal highway fuel under the EPA diesel fuel rule.
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    \171\ See section 4082 of the Internal Revenue Code.
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    Diesel fuel for off-highway use would continue to be dyed red under 
today's proposal, except in Alaska (see section VI.C). We do not 
believe that any additional dye requirement is needed to enhance 
compliance or enforcement effectiveness of the proposed rule.
3. What Requirements Apply Downstream?

a. General Requirements

    Due to the adverse effects of diesel fuel containing more than 15 
ppm sulfur on model year 2007 and later vehicles, as discussed in 
section III, diesel fuel at all levels of the distribution system would 
be required to meet the 15 ppm standard. The proposed rule would 
stagger the implementation dates for compliance with the standard, 
based on a facility's position in the distribution system as a refiner, 
distributor, or retailer. As with other fuels programs, EPA enforcement 
personnel would sample and test for compliance with

[[Page 35530]]

this downstream standard at all points in the distribution system. 
Under the proposed presumptive liability scheme, if a violation is 
found at any point in the distribution system, all parties in the 
distribution system for the fuel in violation are responsible unless 
they can establish a defense. See section VIII.A.8 regarding liability, 
penalty and defense provisions.
    Under the proposed diesel sulfur program, it is imperative that 
distribution systems segregate highway diesel fuel from high sulfur 
distillate products such as home heating oil and nonroad diesel fuel. 
The sulfur content of those products is frequently as high as 3,000 
ppm. Our concern extends to potential misfueling at retail outlets and 
wholesale purchaser-consumer facilities, even if segregation of the 
different grades of diesel fuel has been maintained in the distribution 
system.
    Misfueling model year 2007 and later diesel vehicles with higher 
sulfur fuel could severely damage their emission controls and cause 
driveability problems. In order to discourage accidental misfueling of 
highway vehicles with higher sulfur distillates such as nonroad diesel 
fuel we are proposing that these fuel pumps be labeled. The proposed 
rule would require that retailers and wholesale purchaser-consumers 
selling or dispensing nonroad diesel fuel or other high sulfur 
distillates in addition to highway diesel fuel must label any 
dispensers of this higher sulfur fuel. The label would have to indicate 
that the fuel is high sulfur and state that the fuel is illegal for use 
in motor vehicles.
    All parties in the distribution system would be subject to 
prohibitions against selling, transporting, storing, or introducing or 
causing or allowing the introduction of diesel fuel having a sulfur 
content exceeding 15 ppm into highway diesel vehicles. Certain product 
transfer document (PTD) information requirements would apply to all 
parties in the distribution system. See section VIII.A.5.

b. Use of Used Motor Oil in Diesel-Fueled New Technology Vehicles

    We are aware of the practice of disposing of used motor oil by 
blending it with diesel fuel for use as fuel in diesel vehicles. Such 
practices range from dumping used motor oil directly into the vehicle 
fuel tank, to dumping it into the fuel storage tanks, to blending small 
amounts of motor oil from the vehicle crank case into the fuel system 
as the vehicle is being operated. To the extent such practices could 
cause vehicles to exceed their emissions standards, the person blending 
the oil, or causing or permitting such blending, could be considered to 
be rendering emission controls inoperative in violation of section 203 
of the CAA and potentially liable for a civil penalty.\172\
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    \172\ Section 203(a)(3) of the Act, 42 U.S.C. 7522(a)(3).
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    With today's proposal our concerns with this practice are increased 
considerably. Today's formulations of motor oil contain very high 
levels of sulfur. Depending on how the oil is blended, it could 
increase the sulfur content of the fuel burned in the vehicle by as 
much as 200 ppm. As discussed elsewhere in this notice, we believe this 
practice would render inoperative not only the emission control 
technology on the vehicle, but potentially render the vehicle 
undriveable as well. Therefore, in today's notice we are proposing to 
prohibit any person from introducing or causing or allowing the 
introduction of used motor oil, or diesel fuel containing used motor 
oil, into the fuel delivery systems of vehicles manufactured in model 
year 2007 and later. The only exception to this would be where the 
engine is explicitly certified to the emission standard with oil added, 
the oil is added in a manner consistent with the certification, and the 
sulfur level of the oil is representative of commercially available 
oils. Today's proposal would not change existing requirements regarding 
the use of used motor oil in pre-2007 model year engines. However, the 
proposal would prevent the addition of used oil to diesel fuel prior to 
its introduction into the vehicle fuel tank. We request comment on this 
proposal, and in particular on whether an additional constraint can or 
should be placed on the sulfur content of motor oil to preclude the 
possibility that vehicle exhaust emission control technology would not 
be adversely impacted should used motor oil be added to a vehicle's 
fuel tank.

c. Use of Kerosene and Other Additives in Diesel Fuel

    We are aware that kerosene is commonly added to diesel fuel to 
reduce fuel viscosity in cold weather. Other additives are added to 
diesel fuel for various purposes, including viscosity, lubricity, and 
pour point. We are not proposing to limit this practice. However under 
today's proposal, additives used in highway diesel fuel would be 
required to meet the same 15 ppm standard proposed for highway diesel 
fuel. To help ensure this, we are proposing that kerosene or other 
additives meeting the 15 ppm standard, and distributed for use in motor 
vehicles would be required to be accompanied by PTDs accurately stating 
that the additive meets the 15 ppm standard. As an alternative for such 
additives sold in cans or other containers, the required sulfur content 
identification could be posted on the container itself. This 
identification would be necessary to allow downstream parties to be 
able to determine if additives such as kerosene meet the required 15 
ppm sulfur limit. Any party who blends high sulfur additives into 
highway diesel fuel, uses such additives as highway diesel fuel, or who 
causes highway diesel fuel to exceed the standard due to the addition 
of kerosene or other additives, would be subject to liability for 
violating the rule. We are requesting comment on this proposal and any 
alternative that would inform transferees of diesel fuel additives of 
the appropriateness of their use in highway diesel fuel.
    We are not proposing that refiners or importers of kerosene or 
other additives which could be used in highway diesel fuel, would have 
an affirmative duty to produce additives that meet the proposed 15 ppm 
sulfur standard. This is because we believe that refiners will produce 
low sulfur kerosene, for example, in the same refinery processes that 
produce low sulfur diesel fuel, and that the market will drive supply 
of low sulfur kerosene for those areas and seasons where the product is 
needed for blending with highway diesel fuel. We request comment on 
whether there should be an affirmative requirement for refiners or 
terminals to supply low sulfur kerosene or whether all number one 
kerosene should be required to meet the 15 ppm sulfur standard.
    We also request comment on whether additives not meeting the 15 ppm 
sulfur cap should be allowed to be added to diesel fuel downstream in 
de minimis amounts, and if so, how such a program could be structured 
to ensure that the additives would not cause the 15 ppm sulfur cap to 
be exceeded. In addition we request comment on whether any regulatory 
constraint at all need be placed on the sulfur level of diesel 
additives, and whether instead the liability mechanisms contained in 
this proposal are sufficient to protect against downstream parties 
adding additives to diesel fuel that would cause the fuel delivered to 
consumers to exceed the cap.
4. What Are the Proposed Testing and Sampling Methods and Requirements?

a. Testing Requirements and Test Methods

    We do not believe an every-batch testing requirement for refiners 
and

[[Page 35531]]

importers is necessary under the proposed rule. This is primarily 
because refiners will likely voluntarily test every batch of fuel 
produced to ensure it meets the 15 ppm sulfur standard, and because 
pipeline operators will require test results before agreeing to ship 
low sulfur highway diesel fuel. However, we are proposing to designate 
a test method that would be used as the benchmark for all compliance 
testing. We are requesting comment on whether every-batch testing 
should be required in light of the requirement (discussed in section 
VIII.A.5) for refiners to issue PTDs stating that the product meets the 
applicable sulfur standard.
    We propose to designate ASTM D 2622-98 with the minor modification 
discussed below as the benchmark test method for quantifying the sulfur 
content of diesel fuel for compliance determination. We are also 
proposing that this test method would be the benchmark method to 
determine compliance under the current sulfur control regulations. This 
method is an updated version of the designated method under the current 
highway diesel fuel rule. This test method is currently in wide use by 
refiners and laboratories both for gasoline and diesel testing. This 
method does not currently include test repeatability or reproducibility 
information for diesel fuel having a sulfur content below 60 ppm.\173\ 
Nevertheless, in EPA's review of the test method, we believe that when 
applied to low sulfur diesel fuel with the proposed modification, the 
method has acceptable precision at sulfur levels below 15 ppm.
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    \173\ Repeatability is defined by ASTM as the difference between 
two test results, obtained by the same operator with the same 
apparatus under constant operating conditions on identical test 
material, that would, in the long run, in the normal and correct 
operation of the test method, be exceeded only in one case in 
twenty. Reproducibility is defined by ASTM as the difference between 
two single and independent results obtained by different operators 
working in different laboratories on identical test materials that 
would, in the long run, in the normal and correct operation of the 
test method, be exceeded only in one case in twenty.
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    We have had success in improving the precision of the ASTM D 2622-
98 procedure in measuring low levels of diesel fuel sulfur through a 
simple modification of the calibration method. This modification 
includes two small changes. The first is the substitution of a 
measurement blank that more closely resembles the boiling point range 
and density of diesel fuel. The second is a change to the calibration 
line to ensure that it goes through zero. This modification is detailed 
in the proposed regulatory text. Using this modification, we have had 
success in the correlation of test results with industry laboratories 
on samples with sulfur content in the range of 1 to 20 ppm. We will 
continue to investigate the proposed modification to the ASTM D 2622-98 
procedure. Based on current information, we believe that lab-to-lab 
reproducibility can be limited to a maximum of +/-4 ppm at sulfur 
levels in the 1-20 ppm range. We do not anticipate that this 
modification will add appreciably to the cost of sulfur testing.
    We are requesting comments on performance data for diesel fuel 
analysis using ASTM D 2622 at sulfur levels below 60 ppm, on additional 
modifications to the procedure which might be needed to limit 
variability, and on the cost of such modifications. Specifically, 
comment is requested on whether only end-window type scanning 
instruments should be used because additional variability is introduced 
through the use side-window type instruments. \174\ If the use of side-
window type scanning instruments must be disallowed, comment is 
requested on the extent such instruments are used and on the cost of 
changing them to an end-window configuration.
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    \174\ Side-window vs end-window refers to the location of the 
sample cup.
---------------------------------------------------------------------------

    While we are proposing to designate the modified ASTM D 2622-98 
procedure as the designated test method, we do not believe that such 
designation should preclude regulated parties from using alternative 
methods that afford them sufficient confidence that they are 
demonstrably in compliance. Therefore, we are proposing that 
alternative methods may be used for quality assurance purposes provided 
that the proper correlation is established between the alternative 
method and the benchmark method.\175\ Since EPA enforcement testing 
would be conducted using the modified ASTM D 2622 procedure, parties 
would need to have considerable confidence in any alternative methods 
they may use. We believe that for quality assurance testing, an 
approach that could provide more flexibility and potentially save costs 
for industry would be to allow other appropriate ASTM test methods, so 
long as they are conducted properly and the results correlate to the 
designated method. Although these test results could be used by the 
government to demonstrate noncompliance, this should not be a 
substantial concern since any test result that demonstrates 
noncompliance should lead to appropriate action on the part of the 
regulated party, as would a test result from the use of the designated 
method. We seek comment on this approach.
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    \175\ EPA is preparing to propose, in another action, a set of 
criteria by which alternative methods for measuring fuel parameters 
may be evaluated and controlled in practice. We are not proposing to 
prescribe these criteria and statistical quality control methods in 
this rulemaking, but suggest that their use will enhance the 
credibility of measurements made with alternative methods and 
offered in situations where testing is necessary to establish a 
defense.
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    EPA's proposed designation of the modified ASTM D 2622-98 procedure 
is based on a review of currently available methods. Should superior 
methods be developed in the future, EPA will certainly consider an 
orderly process of redesignation to take advantage of newer 
technologies.
    One commenter to the ANPRM stated that ASTM D 2622 may not be 
suitable for determining the sulfur content of biodiesel. We request 
comment on whether ASTM D 2622-98 is appropriate for determining the 
sulfur content of biodiesel, or mixtures of biodiesel and conventional 
diesel fuel, and if not, what test methods are appropriate, and any 
data supporting these conclusions.
    We are also proposing a test method for the determination of sulfur 
in motor oil, since that may be relevant if any engine manufacturers 
choose to certify engines with the addition of motor oil to the fuel. 
The test method we are proposing is ASTM D 4927-96, Standard Test 
Methods for Elemental Analysis of Lubricant and Additive Components--
Barium, Calcium, Phosphorus, Sulfur, and Zinc by Wavelength-Dispersive 
Fluorescence Spectroscopy. This method uses the same apparatus as D 
2622-998, but includes specific methodology to compensate for 
interferences caused by the additives present in motor oil. We request 
comment on this test method.

b. Sampling Methods

    We are proposing the use of sampling methods that were proposed for 
use in the Tier 2/gasoline sulfur rule. \176\ These proposed sampling 
methods are ASTM D 4057-95 (manual sampling) and D 4177-95 (automatic 
sampling from pipelines/in-line blending). We are proposing to require 
the use of these ASTM methods instead of the methods currently provided 
in 40 CFR part 80, appendix G, for determining compliance under both 
the newly proposed 15 ppm sulfur standard, and the 500 ppm standard 
currently in place. That is because the proposed methods have been 
updated by ASTM, and the

[[Page 35532]]

updates have provided clarification and have eliminated certain 
requirements that are not necessary for sampling petroleum products 
such as diesel fuel.
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    \176\ 64 FR 26004, at 26098 (May 13, 1999). These methods are 
also proposed for use under the RFG and CG rules. See 62 FR 37337 
(July 11, 1997).
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5. What Are the Proposed Recordkeeping Requirements?
    We are proposing that refiners and importers provide information on 
commercial PTDs that identify diesel fuel for highway use and that it 
complies with the 15 ppm sulfur standard (unless exempted). We believe 
this additional information on commercial PTDs is necessary because of 
the importance of avoiding commingling of high sulfur distillate 
products with highway diesel fuel. It is proposed that all parties in 
the distribution chain, from the refiner or importer to the retailer or 
wholesale purchaser-consumer would be required to retain copies of 
these PTDs for a period of 5 years. This is the same period of time 
required in other fuels rules, and it coincides with the applicable 
statute of limitations. We believe that for other reasons, most parties 
in the distribution system would maintain such records for this length 
of time even without the requirement.
    We are proposing that the current diesel rule's PTD requirement 
regarding the identification of dyed, tax-exempt highway diesel fuel 
would be retained. This provision is useful for wholesale purchaser-
consumers who need to know that the tax exempt highway diesel fuel is 
appropriate for highway use despite the presence of red dye. We are 
also proposing that product codes may be used to convey the information 
required to be included in PTD's, for all parties except for transfers 
to truck carriers, retailers or wholesale purchaser-consumers. This 
provision is consistent with other fuel programs. However, we are 
seeking comment on also allowing product codes to be used for transfers 
to truck carriers, retailers or wholesale purchaser-consumers.
    We are proposing that records of any test results performed by any 
regulated party for quality assurance purposes or otherwise, must be 
maintained for 5 years, along with supporting documentation such as 
date of sampling and testing, batch number, tank number, and volume of 
product. Also, business records regarding actions taken in response to 
any violations discovered would be required to be maintained.
    As noted above, we are also proposing that commercial PTDs for 
kerosene or other products sold for blending into highway diesel fuel 
must indicate that the product meets the 15 ppm federal sulfur standard 
for use in diesel motor vehicles. We believe that such PTDs are already 
a part of normal business practices and therefore such a requirement 
would add little if any burden. We invite comment on this proposal.
    Given the importance of avoiding highway diesel fuel sulfur 
contamination under today's proposed rule, we are also concerned that 
additional measures may be needed to assure off-highway distillates are 
not commingled with, or used as, highway diesel fuel. Such high sulfur 
products could easily raise the sulfur level of low sulfur highway 
diesel fuel, and damage emission controls on new vehicles and cause 
driveability problems. Therefore, we request comment on whether 
shipment of distillate products such as nonroad diesel fuel and home 
heating oil should be required to be accompanied by PTDs stating that 
the products do not meet highway diesel standards and are illegal for 
use in highway vehicles.
6. Are There Any Proposed Exemptions Under This Subpart?
    We are proposing to exempt from the sulfur requirements diesel fuel 
used for research, development, and testing purposes. We recognize that 
there may be legitimate research programs that require the use of 
diesel fuel with higher sulfur levels than allowed under today's 
proposed rule. As a result, today's proposal contains provisions for 
obtaining an exemption from the prohibitions for persons distributing, 
transporting, storing, selling, or dispensing diesel fuel that exceeds 
the standards, where such diesel fuel is necessary to conduct a 
research, development, or testing program.
    Under the proposal, parties would be required to submit to EPA an 
application for exemption that would describe the purpose and scope of 
the program and the reasons why the use of the higher-sulfur diesel 
fuel is necessary. Upon presentation of the required information, the 
exemption would be granted at the discretion of the Administrator, with 
the condition that EPA could withdraw the exemption ab initio in the 
event the Agency determines the exemption is not justified. Fuel 
subject to this exemption would be exempt from the other provisions of 
this subpart, provided certain requirements are met. These requirements 
include such conditions as the segregation of the exempt fuel from non-
exempt highway diesel fuel, identification of the exempt fuel on 
product transfer documents, and the replacement, repair, or removal 
from service of emission systems damaged by the use of the high sulfur 
fuel.
    We believe that the proposal includes the least onerous 
requirements for industry that also would ensure that higher-sulfur 
diesel fuel would be used only for legitimate research purposes. We 
request comment on these proposed provisions.
    We are requesting comment on the need to provide an exemption from 
the sulfur content and other requirements of this proposal for diesel 
fuel used in racing vehicles. We see no advantage to racing vehicles 
for having fuel with higher sulfur levels (or lower cetane or higher 
aromatic levels) than would be required by today's proposal. 
Conversely, we are concerned about the potential for misfueling that 
could result from having a racing fuel with higher sulfur in the 
marketplace that would be intended for use only in racing or 
competition versions of highway vehicles. Consequently, we are not 
proposing that diesel fuel used in racing vehicles be exempted from the 
diesel fuel requirements proposed today. We request comment on this 
decision and whether an exemption should be allowed for racing diesel 
fuel.
7. Would California Be Exempt From the Rule?
    Although California is currently considering diesel fuel 
regulations, we do not propose to exempt California from the federal 
rule at this time.\177\ California has received an exemption from 
certain compliance related provisions under the Federal reformulated 
gasoline (RFG) program, on the grounds that California has implemented 
a program in covered areas that meets or exceeds Federal RFG standards 
and because the California ARB has sufficient resources and authority 
to enforce the program to ensure equivalent environmental benefits are 
realized. These exemptions cover such enforcement provisions as 
recordkeeping, reporting, and test methods. California gasoline is not 
exempted from the standards for Federal RFG or conventional gasoline. 
See 40 CFR 80.81. We have also proposed full exemption for California 
from the proposed gasoline sulfur standards and other provisions of 
that rule because California has an effective gasoline sulfur program 
that is different from the

[[Page 35533]]

proposed federal rule. Although it would be premature to grant similar 
exemptions to the California low-sulfur diesel program at this time, 
EPA may revisit the issue of enforcement exemptions when such action is 
timely, and we invite public comment on this approach. Exemptions for 
other states and territories are discussed in section VI.C.
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    \177\ On November 10, 1998, The California ARB held a workshop 
to comply with the Governor's Executive Order W-144-97. At that 
workshop the ARB discussed the possibility of amending Title 13 of 
the California Code of Regulations, Section 2281, ``Sulfur Content 
of Diesel Fuel.'' Under that section, California currently enforces 
a 500 ppm sulfur standard for highway diesel fuel. The ARB is 
considering a diesel fuel standard that may be as stringent as, or 
more stringent than, the standard we are proposing today.
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8. What Are the Proposed Liability and Penalty Provisions for 
Noncompliance?
    Today's proposed rule contains provisions for liability and 
penalties that are similar to the liability and penalty provisions of 
the other EPA fuels regulations. Under the proposed rule, regulated 
parties would be liable for committing certain prohibited acts, such as 
selling or distributing diesel fuel that does not meet the sulfur 
standards, or causing others to commit prohibited acts. In addition, 
parties would be liable for a failure to meet certain affirmative 
requirements, or causing others to fail to meet affirmative 
requirements. All parties in the diesel fuel distribution system, 
including refiners, importers, distributors, carriers, retailers, and 
wholesale purchaser-consumers, would be liable for a failure to fulfill 
the recordkeeping requirements and the PTD requirements.

a. Presumptive Liability Scheme of Current EPA Fuels Programs

    All EPA fuels programs include a presumptive liability scheme for 
violations of prohibited acts. Under this approach, liability is 
imposed on two types of parties: (1) The party in the fuel distribution 
system that controls the facility where the violation was found or had 
occurred; and (2) those parties, typically upstream in the fuel 
distribution system from the initially listed party, (such as the 
refiner, reseller, and any distributor of the fuel), whose prohibited 
activities could have caused the program non-conformity to exist.\178\ 
This presumptive liability scheme has worked well in enabling us to 
enforce our fuels programs, since it creates comprehensive liability 
for substantially all the potentially responsible parties. The 
presumptions of liability may be rebutted by establishing an 
affirmative defense.
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    \178\ An additional type of liability, vicarious liability, is 
also imposed on branded refiners under these fuels programs.
---------------------------------------------------------------------------

    To clarify the inclusive nature of these presumptive liability 
schemes, today's proposed rule would explicitly include causing another 
person to commit a prohibited act and causing the presence of non-
conforming diesel fuel (or kerosene or other additives for motor 
vehicle use) to be in the distribution system as prohibitions. This is 
consistent with the provisions and implementation of other fuels 
programs.
    Today's proposed rule, therefore, provides that most parties 
involved in the chain of distribution would be subject to a presumption 
of liability for actions prohibited, including causing non-conforming 
diesel fuel to be in the distribution system and causing violations by 
other parties. Like the other fuels regulations, a refiner also would 
be subject to a presumption of vicarious liability for violations by 
any downstream facility that displays the refiner's brand name, based 
on the refiner's ability to exercise control at these facilities. 
Carriers, however, would be liable only for violations arising from 
product under their control or custody, and not for causing non-
conforming diesel fuel to be in the distribution system, except where 
specific evidence of causation exists.

b. Affirmative Defenses for Liable Parties

    The proposal includes affirmative defenses for each party that is 
deemed liable for a violation, and all presumptions of liability are 
refutable. The proposed defenses are similar to the defenses available 
to parties for violations of the RFG regulations. We believe that these 
defense elements set forth reasonably attainable criteria to rebut a 
presumption of liability. The defenses include a demonstration that: 
(1) The party did not cause the violation; (2) the party has PTDs 
indicating that the fuel was in compliance at its facility; and (3) 
except for retailers and wholesale purchaser-consumers, the party 
conducted a quality assurance program. For parties other than tank 
truck carriers, the quality assurance program would be required to 
include periodic sampling and testing of the diesel fuel. For tank 
truck carriers, the quality assurance program would not need to include 
periodic sampling and testing, but in lieu of sampling and testing, the 
carrier would be required to demonstrate evidence of an oversight 
program for monitoring compliance, such as appropriate guidance to 
drivers on compliance with applicable requirements and the periodic 
review of records concerning diesel fuel quality and delivery.
    As in the other fuels regulations, branded refiners would be 
subject to more stringent standards for establishing a defense because 
of the control such refiners have over branded downstream parties. 
Under today's rule, in addition to the other presumptive liability 
defense elements, branded refiners would be required to show that the 
violation was caused by an action by another person in violation of 
law, an action by another person in violation of a contractual 
agreement with the refiner, or the action of a distributor not subject 
to a contract with the refiner but engaged by the refiner for the 
transportation of the diesel fuel.
    Based on experience with other fuels programs, we believe that a 
presumptive liability approach would increase the likelihood of 
identifying persons who cause violations of the sulfur standards. We 
normally do not have the information necessary to establish the cause 
of a violation found at a facility downstream of the refiner or 
importer. We believe that those persons who actually handle the fuel 
are in the best position to identify the cause of the violation, and 
that a refutable presumption of liability would provide an incentive 
for parties to be forthcoming with information regarding the cause of 
the violation. In addition to identifying the party that caused the 
violation, providing evidence to rebut a presumption of liability would 
serve to establish a defense for the parties who are not responsible. 
Presumptive liability is familiar to both industry and to EPA, and we 
believe that this approach would make the most efficient use of EPA's 
enforcement resources. For these reasons, we are proposing a liability 
scheme for the diesel fuel sulfur program based on a presumption of 
liability. We request comment on the proposed liability provisions.

c. Penalties for Violations

    Section 211(d)(1) of the CAA provides for penalties for violations 
of the fuels regulations.\179\ Today's rule proposes penalty provisions 
that would apply this CAA penalty provision to the diesel fuel sulfur 
rule. The proposal would subject any person who violates any 
requirement or prohibition of the diesel fuel sulfur rule to a civil 
penalty of up

[[Page 35534]]

to $27,500 for every day of each such violation and the amount of 
economic benefit or savings resulting from the violation. A violation 
of a sulfur cap standard would constitute a separate day of violation 
for each day the diesel fuel giving rise to the violation remains in 
the diesel fuel distribution system. The length of time the diesel fuel 
in question remains in the distribution system would be deemed to be 
twenty-five days unless there is evidence that the diesel fuel remained 
in the diesel fuel distribution system for fewer than or more than 
twenty-five days. The penalty provisions proposed in today's rule are 
similar to the penalty provisions for violations of the RFG regulations 
and the Tier 2 gasoline sulfur rule. EPA requests comment on these 
provisions.
---------------------------------------------------------------------------

    \179\ Section 211(d)(1) reads, in pertinent part: ``(d)(1) Civil 
Penalties.--Any person who violates . . the regulations prescribed 
under subsection (c) . . of this section . . shall be liable to the 
United States for a civil penalty of not more than the sum of 
$25,000 for every day of such violation and the amount of economic 
benefit or saving resulting from the violation. . . . Any violation 
with respect to a regulation prescribed under subsection (c). . . of 
this section which establishes a regulatory standard based upon a 
multi-day averaging period shall constitute a separate day of 
violation for each and every day in the averaging period. . . . '' 
Pursuant to the Debt Collection Improvement Act of 1996 (31 U.S.C. 
3701 note), the maximum penalty amount prescribed in section 
211(d)(1) of the CAA was increased to $27,500. (See 40 CFR part 19.)
---------------------------------------------------------------------------

9. How Would Compliance with the Diesel Sulfur Standards Be Determined?

    We have often used a variety of evidence to establish non-
compliance with the requirements imposed under our current fuels 
regulations. Test results of the content of diesel fuel or gasoline 
have been used to establish violations, both in situations where the 
sample has been taken from the facility at which the violation 
occurred, and where the sample has been obtained from other parties' 
facilities when such test results have had probative value of the 
fuel's characteristics at points upstream or downstream. The Agency has 
also commonly used documentary evidence to establish non-compliance or 
a party's liability for non-compliance. Typical documentary evidence 
has included PTDs identifying the fuel as inappropriate for the 
facility it is being delivered to, or identifying parties having 
connection with the non-complying fuel.
    We propose that compliance with the sulfur standards would be 
determined based on the sulfur level of the diesel fuel, as measured 
using the regulatory testing method. We further propose that any 
evidence from any source or location could be used to establish the 
diesel fuel sulfur level, provided that such evidence is relevant to 
whether the sulfur level would have been in compliance if the 
regulatory sampling and testing methodology had been correctly 
performed.
    Compliance with the standard would be determined using the 
specified sampling and test methodologies. While other information 
could be used, including test results using different test methods, 
such other information may only be used if it is relevant to 
determining whether the sulfur level would meet the standard had 
compliance been properly measured using the specified test method. The 
proposal would establish the regulatory test method as the benchmark 
against which other evidence is measured. EPA intends to use the 
regulatory test method for enforcement testing purposes.
    Today's proposal is consistent with the approach adopted in the 
Tier 2 gasoline sulfur rule (65 FR 6698, February 10, 2000). EPA 
intends to undertake rulemaking in the near future to revise the 
current fuels regulations to include the same language for the use of 
other evidence as is proposed today. We seek comment on this approach.
    The proposed rule would also clarify that any probative evidence 
obtained from any source or location may be used to establish non-
compliance with requirements other than the sulfur standard, such as 
recordkeeping requirements, as well as to establish which parties have 
facility control or some other basis for liability for sulfur rule 
noncompliance. Since proof of these elements is not predicated on 
establishing sulfur levels, whether or not regulatory test methods are 
used is not significant. EPA is seeking comment on this approach for 
monitoring and determining compliance with the applicable requirements.
    To ensure the effectiveness and the ability to adequately enforce 
the sulfur standards, it is reasonable for EPA to consider evidence 
other than actual test results using the regulatory test method, where 
such evidence can be related to the test results. As described above, 
test results using the regulatory test method are often not available. 
In such circumstances, it is reasonable to consider other evidence of 
compliance, such as test results using other methods or commercial 
documents, if such evidence can be shown to be relevant to determining 
whether the diesel fuel would meet the standard if tested using the 
regulatory methods. The proposal would only permit the use of other 
evidence that is relevant to such a determination, and is therefore 
reasonably limited to allow for effective enforcement, without creating 
uncertainty about compliance.

B. Lubricity

    We strongly encourage, but do not believe it necessary to require, 
fuel producers and distributors to voluntarily monitor and provide 
diesel fuel with lubricity characteristics at least as good as those of 
current fuel. We believe this voluntary action is reasonable and has a 
high likelihood of success, because the issues surrounding the impact 
of sulfur reduction on lubricity are well established. Refiners and 
distributors have an incentive to supply fuel products that will not 
damage or create problems with consumer equipment. For a further 
discussion of diesel fuel lubricity, and why we believe a voluntary 
approach will be effective, please refer to the earlier discussion in 
section IV.D.6. We request comment on this approach, on whether or not 
a regulatory requirement is needed, and on whether there are concerns 
unique to the military.

C. Would States Be Preempted from Adopting Their Own Sulfur Control 
Programs for Highway Diesel Fuel?

    When we adopt federal fuel standards, states are preempted from 
adopting state-level controls with respect to the same fuel 
characteristics or components. Section 211(c)(4)(A) of the CAA 
prohibits states from prescribing or attempting to enforce controls or 
prohibitions respecting any fuel characteristic or component if EPA has 
prescribed a control or prohibition applicable to such fuel 
characteristic or component under section 211(c)(1) of the Act. This 
preemption applies to all states except California, as explained in 
section 211(c)(4)(B) of the Act. For states other than California, the 
Act provides two mechanisms for avoiding preemption. First, section 
211(c)(4)(A)(ii) creates an exception to preemption for a state 
prohibition or control that is identical to a prohibition or control 
adopted by EPA. Second, a state may seek EPA approval of a SIP revision 
containing a fuel control measure, as described in section 211(c)(4)(C) 
of the Act. EPA may approve such a SIP revision, and thereby ``waive'' 
preemption, only if it finds the state control or prohibition ``is 
necessary to achieve the national primary or secondary ambient air 
quality standard which the plan implements.''
    When we adopted the current diesel fuel sulfur standards pursuant 
to our authority under section 211(c)(1) of the Act in 1990, States 
were preempted from also doing so under the provisions of section 
211(c)(4)(A). The diesel sulfur standards proposed today merely modify 
the existing standards and as a result do not initiate any new 
preemption of State authority. The provisions of this proposal would 
merely continue the already existing State preemption provisions with 
respect to highway diesel fuel sulfur.

D. Refinery Air Permitting

    Prior to making diesel desulfurization changes, some refineries 
could be required to obtain a preconstruction

[[Page 35535]]

permit, under the New Source Review (NSR) program, from the applicable 
state/local air pollution control agency.\180\ We believe that today's 
proposal provides sufficient lead time for refiners to obtain any 
necessary NSR permits well in advance of the proposed compliance date. 
For the recently promulgated gasoline sulfur control program, refiners 
had expressed concerns that permit delays might impede their ability to 
meet compliance dates. EPA committed to undertake several actions to 
minimize the possibility of any delays for refineries obtaining major 
NSR permits for gasoline desulfurization projects. These actions 
include providing federal guidance on emission control technologies and 
the appropriate use of motor vehicle emission reductions (resulting 
from the use of low sulfur fuel), where available, as emission offsets, 
as well as forming EPA permit teams to assist states in quickly 
resolving issues, where needed. These three items are discussed in more 
detail in the Tier 2 final rule and interested parties should refer to 
that discussion for additional details regarding permitting 
considerations in the gasoline sulfur program (see 65 FR 6773, Feb. 10, 
2000).
---------------------------------------------------------------------------

    \180\ Hydrotreating diesel fuel involves the use of process 
heaters, which have the potential to emit pollutants associated with 
combustion, such as NOX, PM, CO and SO2. In addition, 
reconfiguring refinery processes to add desulfurization equipment 
could increase fugitive VOC emissions. The emissions increases 
associated with diesel desulfurization will vary widely from 
refinery to refinery, depending on many source-specific factors, 
such as crude oil supply, refinery configuration, type of 
desulfurization technology, amount of diesel fuel produced, and type 
of fuel used to fire the process heaters.
---------------------------------------------------------------------------

    However, given that the proposed diesel sulfur program would 
provide several more years of lead time than was provided under the 
gasoline sulfur program, refiners should have ample time to obtain any 
necessary preconstruction permits. As we learned in finalizing the 
gasoline sulfur program, state/local permitting agencies are prepared 
to process refinery permits within the needed time frames, so long as 
refiners begin discussing potential permit issues with them early in 
the process and submit their permit applications in a timely manner. 
EPA believes that this will be the case for diesel fuel. We request 
comment on the interaction of this proposed rule and the permitting 
process and whether the permitting approaches discussed in the Tier 2 
final rule should be continued, and if necessary updated, to assist 
refineries in obtaining any necessary permits for refinery diesel 
desulfurization changes.

E. Provisions for Qualifying Refiners

    As explained in the Regulatory Flexibility Analysis discussion in 
section XI.B of this document, we have considered the impacts of these 
proposed regulations on small businesses. As part of this process, we 
convened a Small Business Advocacy Review Panel (Panel) for this 
proposed rulemaking, as required under the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA). The Panel was charged with 
reporting on the comments of small business representatives regarding 
the likely implications of possible control programs, and to make 
findings on a number of issues, including:
     A description and estimate of the number of small entities 
to which the proposed rule would apply;
     A description of the projected reporting, recordkeeping, 
and other compliance requirements of the proposed rule;
     An identification of other relevant federal rules that may 
duplicate, overlap, or conflict with the proposed rule; and
     A description of any significant alternatives to the 
proposed rule that accomplish the objectives of the proposal and that 
may minimize any significant economic impact of the proposed rule on 
small entities.
    The Panel's final report is available in the docket. In summary, 
the Panel concluded that small refiners would likely be directly 
affected by the proposed program.
    In addition, the Panel concluded that small diesel distributors and 
retailers also would likely be directly affected by the fuel program's 
compliance requirements, but that under the approach we are proposing 
today these requirements would pose minimal burden. Therefore, the 
Panel did not recommend any regulatory relief for this group of small 
businesses under the program proposed today.
    We understand that the proposed low sulfur standards will require 
significant economic investment by the refining industry. We also 
recognize that refineries owned by small businesses could experience 
more difficulty in complying with the proposed standards on time 
because, as a group, they have less ability to raise capital necessary 
for desulfurization investments, face proportionately higher costs due 
to economies of scale, and may be less successful in competing for 
limited construction and engineering resources. Some of the small 
refiners with whom we and the Panel met indicated their belief that, 
because of the extreme level of economic hardship their businesses 
would face in meeting the new standards, their businesses might close 
without additional time to comply or certain flexibility alternatives. 
The Panel recommended that EPA seek comment on various flexibilities 
that potentially could alleviate the burden on small refiners.
    Upon evaluating the potential impacts of our proposed diesel sulfur 
requirements on small refiners and careful review of the Panel's 
recommendations, we are seeking comment on three approaches that could 
provide flexibility for small refiners. We believe that these 
approaches could provide meaningful flexibility for small refiners in 
meeting the proposed standards, although we do have concerns that 
certain approaches, to varying extents, may compromise the 
environmental benefits of the program (as discussed below), while still 
ensuring that the vast majority of the program is implemented as 
expeditiously as practical in order to achieve the air quality benefits 
sooner. Therefore, we invite comment on the appropriateness of any or 
all of these approaches in light of the environmental goals, the 
relative usefulness in allowing additional time and flexibility for 
small refiners to comply with the proposed low sulfur targets, and 
information and ideas on appropriate implementation mechanisms. These 
approaches are summarized in subsection 1 below.
    Elsewhere, in section VI, we seek comment on various alternatives 
for phasing in the fuel program. Some small refiners have commented 
that some form of a phase-in approach could potentially mitigate the 
hardship they would experience under the proposed fuel standards. (See 
the discussion in section VI for a discussion of the potential impacts 
of a phase-in approach on entities in the distribution system).
    In addition to considering the following flexibility approaches for 
small refiners, we are interested in exploring appropriate flexibility 
options for farmer cooperatives. There are currently four refiner co-
ops, yet only one meets SBA's definition of a small business. The 
farmer cooperatives have expressed concern that they have the same 
difficulty as small refiners in obtaining access to capital for 
desulfurization investments. Farmers are both the customer and the 
member owner of their cooperatives. Because cooperatives do not have an 
investor/stockholder form of ownership, they are

[[Page 35536]]

not able to access equity markets that provide capital to larger 
refiners. The added costs of financing projects through traditional 
loans is eventually borne by farmers. The refiner co-ops have also 
expressed concern that the highway diesel sulfur program could result 
in higher fuel prices for farmers, and could potentially reduce 
refining capacity and diesel fuel supply in rural America. To help 
address these concerns, we are requesting comment on the following 
flexibility approaches for farmer cooperatives as well. We also seek 
comment on other appropriate flexibility approaches for farmer 
cooperatives that may have merit.
1. Allow Small Refiners to Continue Selling 500 ppm Highway Diesel
    First, we are seeking comment on an option for small refiner 
flexibility that would allow small refiners to continue selling their 
current 500 ppm highway diesel, provided there are adequate safeguards 
to prevent contamination and misfueling. This option would effectively 
delay the ultra-low sulfur compliance date for small refiners, and 
allow them to continue selling their current fuel to the highway diesel 
market. Under this approach, retailers would not have an availability 
requirement; rather, retailers would be free to choose to sell only 500 
ppm fuel (from small refiners), only ultra-low sulfur fuel, or both.
    During the Panel process, small refiners expressed varying views on 
this flexibility approach. At least one small refiner supported this 
option, while others expressed the concern that they would not be able 
to find markets for the 500 ppm fuel once large refiners begin 
producing exclusively ultra-low sulfur highway diesel (i.e., as soon as 
the rule were implemented). Those small refiners doubtful of continued 
500 ppm markets think it is unlikely that retailers would either 
continue to sell only 500 ppm diesel instead of ultra-low sulfur, or 
that retailers would make the investments to market both grades. Their 
key assumption is that there would be no price differential between the 
ultra-low sulfur fuel and the 500 ppm fuel and, thus, no incentive for 
marketers to want the ``old'' fuel. Small refiners noted that, although 
ultra-low sulfur fuel would be more costly to produce than the current 
grade, vertically integrated refiners with control over the marketing 
of their refinery products would have incentives to price below cost in 
order to eliminate the potential for niche markets that would be of 
value to any small refiners seeking to avail themselves of this 
flexibility option. Small diesel distributors and retailers commented 
that marketers also don't anticipate a price differential, but 
acknowledged that a market for small refiner's 500 ppm likely would 
last as long as there were a price differential. Nevertheless, most 
small refiners with whom we and the Panel met strongly supported this 
option, largely because it potentially could benefit at least a few 
small refiners. At the same time, they believed it should not be the 
only flexibility option provided for small refiners. We believe that 
seeking public comment on this option will give all small refiners an 
opportunity to continue exploring the extent of potential markets for 
the 500 ppm fuel, and thus, the potential viability of this flexibility 
option.
    We also request comment on an appropriate duration for this option. 
We seek comment on the need for, and appropriateness of, an unlimited 
exemption, as well as whether such an exemption should be limited to a 
specific timeframe (e.g., two years, ten years, etc.). We note that by 
limiting this flexibility to two years, for example, during which time 
the new vehicle fleet would still be relatively small, the potential 
for misfueling would be minimized. We also question how long this 
flexibility option may remain viable, since many small refiners 
commented during the Panel process that they do not expect markets for 
the 500 ppm fuel to remain after larger refiners begin producing 
exclusively ultra-low sulfur fuel. Nevertheless, we request comment on 
the need for, and potential impacts of, a longer exemption. A longer 
duration for this flexibility option would give participating refiners 
more time to stagger their diesel desulfurization investments. The 
number of vehicles potentially affected by misfueling or contamination 
would still be fairly limited under this approach, since small refiners 
produce only approximately four percent of all the highway diesel fuel 
produced in the U.S. Moreover, the potential for misfueling would be 
further limited because most small refiners distribute highway diesel 
in a fairly local area. (Some small refiners, however, distribute a 
portion of their diesel fuel outside their local area via pipeline or 
barge. See further discussion below about the potential need to 
prohibit pipeline/barge shipments of 500 ppm highway diesel under this 
option). An unlimited exemption would allow the market to determine the 
duration of flexibility provided to small refiners. There would be 
diminishing returns to small refiners from such an option over time, as 
a growing portion of the vehicle miles traveled would be from vehicles 
with emission control devices requiring ultra-low sulfur, and so small 
refiners would eventually switch over to producing low sulfur highway 
diesel fuel.
    To ensure that this flexibility option would not compromise the 
expected environmental benefits of today's proposal, there would have 
to be certain safeguards with refiners as well as downstream parties to 
prevent contamination of the ultra-low sulfur fuel, and to prevent 
misfueling of new vehicles. We seek comment on how best to prevent 
misfueling and contamination of the ultra-low sulfur fuel under this 
approach for small refiner flexibility. Specifically, we request 
comment on the following measures to prevent misfueling and 
contamination:
     Small refiners could make an initial demonstration to EPA 
of how they would ensure the fuel remains segregated through the 
distribution system to its end use.
     Small refiners could be prohibited from distributing 500 
ppm highway diesel via pipeline or barge. As the fuel is piped or 
barged to locations further from the refinery, it would likely become 
more difficult to ensure proper segregation and labeling. We have 
learned through the Panel process that most small refiners distribute 
highway diesel in a fairly local area; it appears that only a few small 
refiners distribute highway diesel via pipeline or barge. All small 
refiners (even those that distribute highway diesel via pipeline or 
barge) also distribute fuel to the local area, which should provide 
adequate potential markets for the 500 ppm fuel. This provision may be 
less necessary in the context of a broader program, such as the 
approaches discussed in section VI.A.
     There could be some general requirements on any entities 
carrying the fuel downstream of the refiner, such as a condition to 
keep the fuel segregated and maintain records (e.g., product transfer 
documents).
     Retailers who choose to sell the 500 ppm fuel could be 
required to label pumps, clearly indicating that the fuel is higher 
sulfur and should not be used in new (e.g., 2007 model year or later) 
diesel vehicles.
    We also seek comment on how to best prevent small refiners from 
increasing the refinery's production capacity (selling 500 ppm highway 
diesel under such a program) without also increasing the refinery's 
desulfurization capacity. Specifically, we request comment on whether 
it would be appropriate and necessary to limit the volume of 500

[[Page 35537]]

ppm highway fuel produced by a refinery owned by a small refiner to the 
lesser of: (1) 105 percent of the highway volume it produced on average 
in 1998 and 1999; or (2) the volume of highway diesel fuel produced 
from crude oil on average in the calendar year. Such limits to a small 
refiner's 500 ppm production expansion could also serve to limit the 
potential for fuel shortages of the ``new'' fuel in local areas where 
small refiners have or will gain significant market share as a result 
being allowed to continue producing and selling 500 ppm highway diesel 
fuel. This issue is discussed further below.
    We believe that safeguards such as these would add minimal burden 
on small refiners or any party choosing to distribute or sell small 
refiner highway diesel, but would be critical to preventing misfueling 
and potential damage to new vehicles--and thus critical to preserving 
the environmental benefits of the program. These types of safeguards 
are typical of EPA fuel programs where more than one fuel is introduced 
into commerce.
    We also would need to ensure that this type of flexibility would 
not result in lack of availability of low sulfur highway diesel in 
markets served primarily by small refiners. We seek comment on whether 
there is a potential for lack of availability of the low sulfur fuel 
under this approach and, if so, how to prevent this.
    Finally, we seek comment on the appropriate definition of a small 
refiner under such a program. If such a flexibility option is 
promulgated under the final rule, EPA would envision considering a 
refiner as a small refiner if both of the following criteria are met:
     No more than 1500 employees corporate-wide, based on the 
average number of employees for all pay periods from January 1, 1999 to 
January 1, 2000.
     A corporate crude capacity less than or equal to 155,000 
barrels per calendar day (bpcd) for 1999.
    In determining the total number of employees and crude capacity, a 
refiner would include the employees and crude capacity of any 
subsidiary companies, any parent company and subsidiaries of the parent 
company, and any joint venture partners. This definition of small 
refiner mirrors the one recently promulgated under the Tier 2/gasoline 
sulfur program, except that the time period used to determine the 
employee number and crude capacity criteria has been updated to reflect 
the most recent calendar year. This is consistent with the Small 
Business Administration's regulations, which specify that, where the 
number of employees is used as a size standard, the size determination 
is based on the average number of employees for all pay periods during 
the preceding 12 months (13 CFR 121.106). However, because the gasoline 
sulfur standards and the proposed diesel sulfur standards would impact 
small refiners in relatively the same timeframes, we believe it is 
reasonable to consider any small refiner approved by EPA as meeting the 
small refiner definition under the gasoline sulfur program (40 CFR 
80.235) as a small refiner under the highway diesel sulfur rule as 
well. We request comment on this provision.
2. Temporary Waivers Based on Extreme Hardship Circumstances
    We are also seeking comment on a case-by-case approach to 
flexibility that would provide a process for all domestic and foreign 
refiners, including small refiners, to seek case-by-case approval of 
applications for temporary waivers to the diesel sulfur standards, 
based on a demonstration of extreme hardship circumstances. Small 
refiners have expressed their belief that there may be no ``one size 
fits all'' approach to flexibility--given the wide variety of refinery 
circumstances and configurations. Although this option was first raised 
in the context of small refiner flexibility during the Panel process, 
we believe that it could be extended to any qualifying refiner meeting 
the criteria described below. We recognize that there may be case-by-
case flexibilities that are feasible, environmentally neutral, and 
warranted to meet the unique needs of an individual refiner, but that, 
if applied across the board, might jeopardize the environmental 
benefits of the program. This provision would further our overall 
environmental goals of achieving low sulfur highway diesel fuel as soon 
as possible. By providing short-term relief to those refiners that need 
additional time because they face hardship circumstances, we can adopt 
a program that reduces diesel sulfur beginning in 2006 for the majority 
of the industry that can comply by then. We envision that this option 
would be modeled after a similar provision in the recently-promulgated 
gasoline sulfur program. This case-by-case provision could be in 
addition to or in place of the small refiner option discussed above.
    We understand that the ultra-low sulfur standards for highway 
diesel fuel will require significant economic investments by the 
refining industry. We recognize that refineries owned by small 
businesses could experience more difficulty in complying with the 
standards on time because, as a group, they have less ability to raise 
capital necessary for desulfurization investments, face proportionately 
higher costs due to economies of scale, and may be less successful in 
competing for limited construction and engineering resources. However, 
because the refining industry encompasses a wide variety of individual 
circumstances, it is possible that other refiners also may face 
particular difficulty in complying with the proposed sulfur standards 
on time. For example, as discussed above the farmer cooperatives have 
expressed concern that they would face considerable difficulty in 
obtaining access to capital for desulfurization investments. Because 
farmer cooperatives do not have an investor/stockholder form of 
ownership, they are not able to access equity markets that provide 
capital to larger refiners; thus, the added costs of financing projects 
through traditional loans is eventually borne by farmers.This option 
would allow any refiner to request additional flexibility based on a 
showing of unusual circumstances that result in extreme hardship and 
significantly affect the refiner's ability to comply by the applicable 
date, despite its best efforts. However, we would not intend for this 
waiver provision to encourage refiners to delay planning and 
investments they would otherwise make in anticipation of receiving 
relief from the applicable requirements.
    An example of case-by-case flexibility under this approach might be 
to allow a refiner to continue selling 500 ppm highway diesel fuel for 
an extended time period, so long as that fuel were properly segregated 
and labeled at pump stands (see the discussion of possible compliance 
measures in section E.1. above).
    To further preserve the environmental benefits of the program, 
recognizing the constraints it places on any flexibility, we currently 
believe that it would be necessary to segregate the fuel pool for any 
highway diesel fuel sold under an approved hardship waiver. 
Consequently, any additional compliance flexibilities would carry with 
them certain safeguards for preventing contamination and misfueling. We 
welcome comment on these compliance measures and any other 
alternatives. These provisions would be analogous to those discussed 
above under section E.1. Further, as part of such a flexibility, we 
would need to ensure that there was not a significant potential for 
lack of availability of the low sulfur fuel for those refiners that are 
the primary supplier of highway diesel fuel in a given area (as 
discussed in section E.1 above). We seek comment on whether there is a 
significant potential

[[Page 35538]]

for lack of availability of the low sulfur fuel under this approach 
and, if so, how to prevent this situation.
    During the Panel process, several small refiners that produce both 
gasoline and highway diesel expressed concern about the difficulty in 
obtaining financing for the significant capital costs of desulfurizing 
both these fuels in relatively the same timeframes. Similar concerns 
have been expressed by farmer cooperatives and other refiners. Small 
refiners suggested that they might be able to desulfurize highway 
diesel fuel under the schedule proposed today, if additional 
flexibility could be provided in meeting the gasoline sulfur standards, 
which would allow them to stagger their investments. We estimate that 
approximately nine small refiners (owning 11 refineries) would be 
subject to both the gasoline and highway diesel sulfur standards. As 
another example of case-by-case flexibility under the hardship 
approach, we request comment on whether and to what extent we should 
consider additional flexibilities in meeting the gasoline sulfur 
standards, for those refiners that produce both gasoline and highway 
diesel fuel, and meet the highway diesel fuel standards on time. For 
example, we invite comment on whether it would be necessary and 
appropriate to take into consideration compliance with the diesel 
sulfur rule as part of a small refiner's application demonstrating 
significant economic hardship under the gasoline sulfur program's small 
refiner hardship extension provision (40 CFR 80.260). In evaluating 
applications for any case-by-case consideration of additional 
flexibility under the gasoline sulfur program, we would fully consider 
the environmental consequences of such an approach. For example, we 
would consider such factors as the relative volumes of gasoline and 
highway diesel fuel produced by the refiner, where these fuels are 
sold, and the projected emission impacts of vehicles using the 
refiner's gasoline and diesel fuels. If we were to consider such a 
case-by-case approach to compliance under the gasoline and diesel 
sulfur programs, we believe the gasoline sulfur program requirements 
may have to be changed to allow for the consideration of appropriate 
criteria related to compliance with the highway diesel sulfur rule. We 
seek comment on how such an approach could be accommodated under the 
gasoline sulfur program and the environmental implications of this 
approach. We also seek comment on the criteria that should be 
considered in granting gasoline hardship relief based on early diesel 
compliance.
    Small refiners have recommended that the Agency could provide some 
flexibility by granting the hardship extension on an automatic, rather 
than case by case basis, if they agree to meet the highway diesel 
sulfur standards at the same time as the national program. They 
commented that this approach would provide more certainty for their 
planning purposes in determining how to comply with the requirements of 
both programs. The gasoline sulfur program provides that small refiners 
can apply for and receive an extension of their interim standards, if 
we determine that the small refiner has made the best efforts possible 
to achieve compliance with the national standards by January 1, 2008, 
but has been unsuccessful for unanticipated reasons beyond its control. 
We would consider granting the hardship extension for a time period not 
to extend beyond calendar year 2009, based on several factors, 
including the small refiner's compliance plan and demonstration of 
progress toward producing gasoline meeting the national sulfur 
standards by the end of 2009. (See 40 CFR 80.255 and 80.260). We have 
concerns about making the small refiner gasoline hardship extension 
``automatic'', as this approach could undermine some of the 
environmental benefits of the Tier 2/gasoline sulfur program, and is 
not consistent with the purpose of the hardship extension. We would 
need to consider the environmental impacts of such an extension, by 
evaluating, for example, the small refiners' relative production of 
highway diesel fuel as compared to gasoline and the air quality 
concerns in the locations where both products are sold. We believe it 
would be more environmentally protective to make this determination on 
a case-by-case basis. Nevertheless, we seek comment on the approach of 
granting a small refiner an automatic hardship extension under the 
gasoline sulfur program if they demonstrate that they will comply on 
time with the national program for highway diesel fuel. We also seek 
comment on whether this approach should be applied on a case-by-case, 
rather than automatic, basis.
    As another example of case-by-case flexibility under this approach, 
we request comment on whether it would be appropriate, as part of a 
review of a refiner's application for hardship relief under the diesel 
sulfur program, to consider granting a delay of diesel sulfur standards 
for those refiners that agree to meet the gasoline sulfur standards 
under a schedule more accelerated than that required under the gasoline 
sulfur program. Any consideration of such delays would require full 
consideration of the environmental implications of such a delay, as 
well as of other relevant factors.
    There are several factors we would consider in evaluating an 
application for a hardship waiver. These factors could include refinery 
configuration, severe economic limitations, and other factors that 
prevent compliance in the lead time provided. Applications for a waiver 
would need to include information that would allow us to evaluate all 
appropriate factors. We would consider the total crude capacity of the 
refinery and its parent corporation, whether the refinery configuration 
or operation is unique or atypical, how much of a refinery's diesel is 
produced using an FCC unit, its hydrotreating capacity relative to its 
total crude capacity, highway diesel production relative to other 
refinery products, and other relevant factors. A refiner also may face 
severe economic limitations that result in a demonstrated inability to 
raise the capital necessary to make desulfurization investments by the 
compliance date, which could be shown by an unfavorable bond rating, 
inadequate resources of the refiner and its parent and/or subsidiaries, 
or other relevant factors. Finally, we would consider where the highway 
diesel would be sold in evaluating the environmental impacts of 
granting a waiver. We seek comment on these criteria for evaluating a 
refiner's hardship application, and on whether there are other criteria 
that should also be considered.
    This hardship provision would be intended to address unusual 
circumstances, such as unique and atypical refinery operations or a 
demonstrated inability to raise capital. These kinds of circumstances 
should be apparent soon after the final rule is promulgated, so 
refiners seeking additional time under this provision should be able to 
apply for relief within a relatively short timeframe (e.g., nine months 
to one year) after promulgation of the final rule. We request comment 
on an appropriate timeframe for refiners to submit hardship 
applications to EPA. A refiner seeking a waiver would need to show that 
unusual circumstances exist that impose extreme hardship and 
significantly affect its ability to meet the standards on time, and 
that it has made best efforts to comply with the standards. Applicants 
for a hardship waiver also would need to submit a plan demonstrating 
how the standards would be achieved as expeditiously as possible. The 
plan would need to

[[Page 35539]]

include a timetable for obtaining the necessary capital, contracting 
for engineering and construction resources, and obtaining permits. We 
request comment on the information that should be contained in a 
hardship application, as well as the demonstrations that refiners 
should be required to make in such applications. Once all applications 
are received, we would consider the appropriate process to follow in 
reviewing and acting on applications, including whether to conduct a 
notice and comment decision-making process. We would review and act on 
applications, and, if a waiver were granted, would specify a time 
period for the waiver.
    During the SBREFA Panel process, small refiners commented that they 
need certainty as to their regulatory requirements, and any 
flexibilities, well in advance of compliance dates so that they can 
seek financing. Therefore, we also seek comment on how such a hardship 
provision could be administered in a manner that provides the most 
certainty to small refiners as to any potential hardship relief, well 
in advance of the compliance deadline. Specifically, we request comment 
on an appropriate timeframe within which the Agency should respond to 
hardship applications (for example, one year from the date of receipt).
    Because of the significant environmental benefits of lowering 
sulfur in highway diesel fuel, we would administer any hardship 
provision in a manner that continues to ensure the environmental 
benefits of the regulation. To limit the potential environmental impact 
of this hardship provision, we would reserve the discretion to deny 
applications where we find that granting a waiver would result in an 
unacceptable environmental impact. While any hardship determination 
would be made on a case-by-case basis, we would not anticipate granting 
waivers that apply to more than a minimal amount of the total national 
pool of highway diesel fuel, or to more than a minimal percentage of 
the highway diesel supply in an area with significant air quality 
problems. The level of this minimal amount of fuel would be considered 
in light of any additional flexibility options provided for refiners 
and would be established in a way that maintains the environmental 
goals of the program.
    As a condition of any waiver granted, we would likely impose other 
reasonable requirements, such as anti-backsliding requirements to 
ensure no deterioration in the sulfur level of highway diesel fuel 
produced, or limitations on the volume of highway diesel fuel produced 
under the waiver (e.g., at or near current production levels). This 
latter measure would prevent refiners from increasing the refinery's 
production capacity without also increasing the desulfurization 
capacity. Specifically, we would limit the volume of highway diesel 
produced by a refinery covered by a hardship waiver to the lesser of: 
(1) 105 percent of the highway volume it produced on average in 1998 
and 1999; or (2) the volume of highway diesel fuel produced from crude 
oil on average in the calendar year. We request comment on the need for 
such a hardship provision and how it should be structured.
3. 50 ppm Sulfur Cap for Small Refiners
    In section IV.B, we fully discuss the basis for the 15 ppm sulfur 
standard proposed, based on the needs of diesel engine technology and 
on the criteria mandated by the Clean Air Act, and we seek comment on 
this level. In section III.F, we also discuss the level of sensitivity 
these new emission control technologies have to sulfur in the fuel, and 
potential consequences of the vehicles using fuel with a sulfur content 
higher than that proposed.
    During the Panel process, small refiners expressed strong concern 
about their ability to meet a sulfur standard in the 5 to 40 ppm range 
discussed. Several small refiners have commented that capital, 
operating, and maintenance costs of meeting a 50 ppm cap are 
significantly less than the costs of meeting more stringent standards. 
Because small refiners produce relatively smaller volumes, their 
capital (and other fixed) costs per barrel produced are significantly 
higher than their larger competitors. They also cannot take advantage 
of the significant economies of scale that exist in the refining 
industry and may be less successful in competing for limited 
construction and engineering resources. Small refiners have suggested 
that a 50 ppm may afford them the flexibility to purchase sufficient 
blendstocks on the market to blend with their production and still 
comply with a 50 ppm cap. However, at the proposed 15 ppm standard this 
flexibility may no longer exist. Nevertheless, they are still 
interested in the Agency considering a cap for small refiners of 50 
ppm. Therefore, we request comment on a 50 ppm cap for small refiners, 
and on any underlying data and analyses that would be relevant to a 
decision in the final rule on whether to incorporate a 50 ppm cap for 
small refiners. For this approach to work, to keep from damaging the 
vehicle exhaust emission control technologies and also maintain their 
effectiveness (as discussed in section III.F.), small refiner's fuel 
would somehow have to be blended downstream of the refinery to 15 ppm 
(i.e., in the distribution system). However, we question whether small 
refiners' 50 ppm fuel could simply be ``blended away'' with ultra-low 
sulfur fuel in the distribution system (i.e., after the fuel leaves the 
refiner's control). Information submitted by small refiners indicates 
that most sell highway diesel fuel directly via the refinery rack, for 
distribution to local truck stops, service stations, and fleet 
customers. Only a few small refiners distribute highway diesel via 
pipelines. Therefore, small refiners' highway diesel fuel indeed would 
go directly into vehicles, and commonly would not be ``blended'' to a 
significant extent with other refiners' fuel within the distribution 
system (i.e., downstream of the refinery). Nevertheless, we believe it 
is appropriate to seek comment on this approach, and welcome any data 
and analyses that would influence a final decision about this approach.

IX. Standards and Fuel for Nonroad Diesel Engines

    Although today's proposal covers only highway diesel engines and 
highway diesel fuel, our potential plans for nonroad diesel engines--
and especially the sulfur content of nonroad diesel fuel--are clearly 
related. For example, depending on whether and how nonroad diesel fuel 
is regulated, factors including the costs, leadtime, environmental 
impacts, and impacts on competitive relationships in the marketplace 
associated with today's proposed program could be affected. We would 
need to address these factors in any future regulatory action on 
nonroad diesel fuel.
    Because of these relationships, various stakeholders interested in 
today's proposal have asked to also know the potential requirements 
that could apply to nonroad diesel fuel. This section summarizes the 
background of this issue and our current thinking about future 
regulation of nonroad diesel engines and fuel.
    After establishing an initial set of emission standards for nonroad 
diesel engines in 1994, EPA proposed in 1997, and finalized in 1998, a 
comprehensive program of emission standards for most diesel engines 
designed for nonroad use.\181\ This program established 
NMHC+NOX and PM standards that are phasing in over the 1999-
2006 time frame, with engines of different

[[Page 35540]]

horsepower ranges coming into the program in different years. At the 
same time, we set long-term (``Tier 3'') NMHC+NOX 
standards--but not PM standards--for medium and high horsepower 
engines, to begin in 2006. Built into the 1998 final rule was a plan to 
reassess the Tier 3 NMHC+NOX standards and to establish PM 
standards in the 2001 time frame. The 1998 rule also anticipated an EPA 
reassessment of the Tier 2 NMHC+NOX standards for the 
smaller engines (less than 50 horsepower), which are to be phased in 
beginning in 2004.
---------------------------------------------------------------------------

    \181\ See the final rule, 63 FR 56968, October 23, 1998 for more 
about the history of these regulations.
---------------------------------------------------------------------------

    EPA did not include nonroad diesel fuel in the diesel fuel sulfur 
restrictions established in 1993 for highway diesel fuel. We estimate 
that the average sulfur content for nonroad diesel fuel is currently 
around 3000 ppm, as compared to the cap for highway diesel fuel of 500 
ppm.\182\
---------------------------------------------------------------------------

    \182\ Information from recent national fuel surveys by the 
National Institute for Petroleum and Energy Research (NIPER) and the 
Alliance of Automobile Manufacturers.
---------------------------------------------------------------------------

    We believe that any specific new requirements for nonroad diesel 
fuel we might propose would need to be carefully considered in the 
context of a proposal for further nonroad diesel engine emission 
standards. This is because of the close interrelationship between fuels 
and engines--the best emission control solutions may not come through 
either fuel changes or engine improvements alone, but perhaps through 
an appropriate balance between the two. This is especially significant 
to the extent that manufacturers would need to address potential 
challenges related to simultaneously meeting the standards that may be 
proposed. Thus we need to address issues in both the fuel and engine 
arenas together.
    The many issues connected with any rulemaking for nonroad engines 
and fuel warrant serious attention, and we believe it would be 
premature today for us to attempt to propose resolutions to them. We 
plan to initiate action in the future to formulate thoughtful proposals 
covering both nonroad diesel fuel and engines.

X. Public Participation

    Publication of this document opens a formal comment period on this 
proposal. You may submit comments during the period indicated under 
DATES above. We encourage everyone who has an interest in the program 
described in this preamble and the associated rulemaking documents to 
offer comment on all aspects of the action. Throughout this proposal 
you will find requests for specific comment on various topics.
    We consider and respond in the final rule to every comment we 
receive before the end of the comment period. We give equal weight to 
all comments regardless of whether they are submitted on paper, 
electronically, or in person at a public hearing. The most useful 
comments are generally those supported by appropriate and detailed 
rationales, data, and analyses. We also encourage commenters who 
disagree with the proposed program to suggest and analyze alternate 
approaches to meeting the air quality goals of this proposed program.
    We have previously received many comments from a range of 
interested parties on our ANPRM and as part of the our outreach to 
small entities (see section XI.B). These comments are found in the 
docket, and information gathered from them is reflected in the 
proposal.

A. Submitting Written and E-mail Comments

    If you would like to submit comments in writing, please send them 
to the contact listed in FOR FURTHER INFORMATION CONTACT above on or 
before the end of the comment period. You can send your comments by e-
mail to the following address: diesel@epa.gov. It is usually best to 
include your comments in the body of the email message rather than as 
an attachment.
    Commenters who wish to submit proprietary information for 
consideration should clearly separate such information from other 
comments. Such submissions should be clearly labeled as ``Confidential 
Business Information'' and be sent to the contact person in FOR FURTHER 
INFORMATION CONTACT (not to the public docket). This will help ensure 
that proprietary information is not placed in the public 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 must be sent 
to the contact person for inclusion in the public docket.
    We will disclose information covered by a claim of confidentiality 
only to the extent allowed by the procedures set forth in 40 CFR part 
2. If no claim of confidentiality accompanies a submission when we 
receive it, we will make it available to the public without further 
notice to the commenter.

B. Public Hearings

    We will hold public hearings in New York City, NY, Chicago, IL, 
Atlanta, GA, Los Angeles, CA, and Denver, CO. See ADDRESSES near the 
beginning of this document for the locations of the hearings. If you 
would like to present testimony at one or more of the public hearings, 
we ask that you notify the contact person listed above ten days before 
the date of the hearing at which you plan to testify. We also suggest 
that you bring about fifty copies of the statement or material to be 
presented for the EPA panel and audience. In addition, it is helpful if 
the contact person receives a copy of the testimony or material before 
the hearing. An overhead projector and a carousel slide projector will 
be available.
    The hearings will be conducted informally, and technical rules of 
evidence will not apply. We will, however, prepare a written transcript 
of each hearing. The official record of the hearings will be kept open 
until the end of the comment period to allow submittal of supplementary 
information. Each hearing will begin at 10:00 a.m. local time. In 
general, we expect to organize the hearings in a panel format, with 
representatives of several different perspectives on each panel. We 
will reserve the last part of each hearing for any previously 
unscheduled testimony. There will be a sign-in sheet, and we will hear 
the testimony of anyone signed in by 6:30 p.m. local time.

XI. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

    Under Executive Order 12866 (58 FR 51735, Oct. 4, 1993), the Agency 
is required to determine whether this regulatory action would be 
``significant'' and therefore subject to review by the Office of 
Management and Budget (OMB) and the requirements of the Executive 
Order. The order defines a ``significant regulatory action'' as any 
regulatory action that is likely to result in a rule that may:
     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;
     Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
     Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or,
     Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.

[[Page 35541]]

    Pursuant to the terms of Executive Order 12866, EPA has determined 
that this proposal is a ``significant regulatory action'' because the 
proposed engine standards, diesel fuel sulfur standards, and other 
proposed regulatory provisions, if implemented, would have an annual 
effect on the economy in excess of $100 million. Accordingly, a Draft 
RIA has been prepared and is available in the docket for this 
rulemaking. This action was submitted to the OMB for review as required 
by Executive Order 12866. Written comments from OMB on today's action 
and responses from EPA to OMB comments are in the public docket for 
this rulemaking.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, 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. To 
accompany today's proposal, an Initial Regulatory Flexibility Analysis 
(IRFA) has been prepared by the Agency to evaluate the economic impacts 
of today's proposal on small entities.\183\ The key elements of the 
IRFA include:
---------------------------------------------------------------------------

    \183\ The Initial RFA is contained in Chapter VII of the Draft 
RIA.

--The number of affected small entities;
--The projected reporting, recordkeeping, and other compliance 
requirements of the proposed rule, including the classes of small 
entities that would be affected and the type of professional skills 
necessary for preparation of the report or record;
--Other federal rules that may duplicate, overlap, or conflict with the 
proposed rule; and,
--Any significant alternatives to the proposed rule that accomplish the 
stated objectives of applicable statutes and that minimize significant 
economic impacts of the proposed rule on small entities.

    The Agency convened a Small Business Advocacy Review Panel (the 
Panel) under section 609(b) of the Regulatory Flexibility Act as added 
by SBREFA. The purpose of the Panel was to collect the advice and 
recommendations of representatives of small entities that could be 
directly affected by today's proposed rule and to report on those 
comments and the Panel's findings as to issues related to the key 
elements of the IRFA under section 603 of the Regulatory Flexibility 
Act. The report of the Panel has been placed in the rulemaking 
record.\184\ The IRFA can be found in the Draft RIA associated with 
today's proposal.
---------------------------------------------------------------------------

    \184\ Report of the Small Business Advocacy Review Panel on 
Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine 
Standards and Diesel Fuel Sulfur Control Requirements, March 24, 
2000.
---------------------------------------------------------------------------

    The contents of both today's proposal and the IRFA reflect the 
recommendations in the Panel's report. We summarize our outreach to 
small entities and our responses to the recommendations of the Panel 
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. Potentially Affected Small Businesses
     Today's proposed program, which would establish new emission 
standards for heavy-duty engines and new standards for the sulfur 
content of highway diesel fuel, would directly affect manufacturers of 
heavy-duty engines and petroleum refiners that produce highway diesel 
fuel, respectively. In addition, but to a lesser extent, the program 
would directly affect diesel distributors and marketers.
    We have not identified any manufacturers of heavy-duty engines that 
meet SBA's definition of a small business. However, we have identified 
several petroleum refiners that produce highway diesel fuel and meet 
the SBA's definitions for a small business for the industry category. 
According to the SBA's definition of a small business for a petroleum 
refining company (Standard Industrial Classification (SIC) 2911), a 
company must have 1500 or fewer employees to qualify as an SBA small 
business. Of the approximately 158 refineries in the U.S. today, we 
estimate that approximately 22 refiners (owning 26 refineries) have 
1500 or fewer employees and produce highway diesel fuel. Two of these 
refineries are currently shutdown, but have indicated that they expect 
to reopen this year. We estimate that these 22 small refiners comprise 
3.7 percent of nationwide crude capacity and produce approximately four 
percent of highway diesel fuel.
    EPA also has identified several thousand businesses in the diesel 
distribution and marketing industry that meet SBA's definitions of 
small business. More information about these industries is contained in 
the IRFA. Under today's proposal, there are some, fairly minimal, 
regulatory requirements on these parties downstream of the refineries 
related to segregating the low sulfur highway diesel fuel throughout 
the distribution system. However, these proposed compliance provisions 
for downstream parties are fairly consistent with those in place today 
for other fuel programs, including the current highway diesel fuel 
program, and are not expected to impose significant new burdens on 
small entities.
2. Small Business Advocacy Review Panel and the Evaluation of 
Regulatory Alternatives
    The Small Business Advocacy Review Panel was convened by EPA on 
November 12, 1999. The Panel consisted of representatives of the Small 
Business Administration (SBA), the Office of Management and Budget 
(OMB) and EPA. During the development of today's proposal, EPA and the 
Panel were in contact with representatives from the small businesses 
that would be subject to the provisions in today's proposal. In 
addition to verbal comments from industry noted by the Panel at 
meetings and teleconferences, written comments were received from each 
of the affected industry segments or their representatives. The Panel 
report contains a summary of these comments, the Panel's 
recommendations on options that could mitigate the adverse impacts on 
small businesses. Today's proposal requests comment on the alternatives 
and issues suggested by the Panel for implementing the fuel program.
    The Panel considered a range of options and regulatory alternatives 
for providing small businesses with flexibility in complying with new 
sulfur standards for highway diesel fuel. As part of the process, the 
Panel requested and received comment on several early ideas for 
flexibility that were suggested by SERs and Panel members. Taking into 
consideration the comments received on these ideas, as well as 
additional business and technical information gathered about 
potentially affected small entities, we summarize the Panel's 
recommendations below.
    The Panel recommended that EPA seek comment on an option that would 
provide a process for refiners to seek case-by-case approval of 
applications for temporary waivers to the diesel sulfur standards, 
based on a demonstration of extreme hardship circumstances. Small 
refiners commented to the Panel that there is no ``one size fits all'' 
approach to flexibility--given the wide variety of refinery 
circumstances and

[[Page 35542]]

configurations. Thus, the Panel believed that it would be appropriate 
for EPA to consider a case-by-case approach to flexibility. The Panel 
further recognized that there may be case-by-case flexibilities that 
are feasible, environmentally neutral, and warranted to meet the unique 
needs of an individual refiner, but that, if applied across the board, 
might jeopardize the environmental benefits of the program. The Panel 
envisioned that this option would be modeled after a similar provision 
in the recently-promulgated gasoline sulfur program. This option would 
allow domestic and foreign refiners, including small refiners, to 
request additional flexibility based on a showing of unusual 
circumstances that result in extreme hardship and significantly affect 
the ability to comply by the applicable date, despite their best 
efforts.
    In addition, the Panel recommended that EPA seek comment on two 
options for small refiner flexibility. First, the Panel recommended 
that EPA seek comment on a 50 ppm cap for small refiners, as well as 
any data or underlying analyses that could support such a decision. 
Second, the Panel recommended that EPA seek comment on an option that 
would allow small refiners to continue selling their current 500 ppm 
highway diesel, provided there are adequate safeguards to prevent 
contamination and misfueling. The Panel further recommended that EPA 
request comment on an appropriate duration for this option. This option 
would effectively delay the low sulfur compliance date for small 
refiners, and allow them to continue selling their current fuel to the 
highway diesel market. To ensure the environmental benefits of the rule 
were achieved while implementing this flexibility option, there would 
have to be certain safeguards with refiners as well as downstream 
parties to prevent contamination of the ultra-low sulfur fuel, and to 
prevent misfueling of new vehicles.
    The Panel also discussed the merits of phasing in the fuel program, 
and alternatives that could potentially limit the burden of such a 
program on small refiners and distributors.
    The Panel's recommendations are discussed in detail in the Panel 
Report, contained in the docket. In addition, EPA's request for comment 
on these options is contained in section VIII.E of this preamble.
    The Initial Regulatory Flexibility Analysis evaluates the financial 
impacts of the proposed heavy-duty engine standards and fuel controls 
on small entities. EPA believes that the regulatory alternatives we 
seek comment on in this proposal could provide substantial relief to 
qualifying small businesses from the potential adverse economic impacts 
of complying with today's proposed rule.

C. Paperwork Reduction Act

    The information collection requirements (ICR) for this proposed 
rule will be submitted for approval to OMB under the Paperwork 
Reduction Act, 44 U.S.C. 3501 et seq. The Agency may not conduct or 
sponsor an information collection, and a person is not required to 
respond to a request for information, unless the information collection 
request 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.
    The information collection requirements associated with today's 
proposed rule pertain to the proposed requirements for diesel fuel 
sulfur content. A draft information collection request document 
entitled, ``Draft Information Collection Request--Recordkeeping 
Requirements for the Fuel Quality Regulations for Diesel Fuel Sold in 
2006 and Later Years' has been prepared and is available from the Air 
Docket at the location indicated in ADDRESSES section or from the 
person(s) listed in FOR FURTHER INFORMATION CONTACT section. We request 
comments on the costs associated with the regulatory language as 
proposed and with regard to other specific approaches outlined in this 
notice that may affect information collection burdens.
    The Paperwork Reduction Act stipulates that ICR documents estimate 
the burden of activities that would be required of regulated parties 
within a three year time period. Consequently, the draft ICR document 
that accompanies today's proposed rule provides estimates for the 
activities that would be required under the first three years of the 
proposed program. Many of the reporting and recordkeeping requirements 
for refiners and importers regarding the sulfur content of diesel fuel 
on which the proposed rule would rely currently exist under EPA's 500 
ppm highway diesel fuel and anti-dumping programs.\185\ The ICR for the 
500 ppm program covered start up costs associated with reporting diesel 
fuel sulfur content under the 500 ppm program. Consequently, much of 
the cost of the information collection requirements under the proposed 
diesel sulfur control program has already been accounted for under the 
500 ppm program.
---------------------------------------------------------------------------

    \185\ ``Regulations of Fuel and Fuel Additives; Fuel Quality 
Regulations for Highway Diesel Sold in 1993 and Later Calendar 
Years; Recordkeeping Requirements,'' OMB Control Number 2060-0308, 
EPA ICR Number 1718.12 (expires July 31, 2001). Copies of this ICR 
may be obtained from Sandy Farmer, Office of Policy, Regulatory 
Information Division, U.S. Environmental Protection Agency (Mail 
Code 2137), 401 M Street, SW, Washington, DC 20460. Please mark 
requests, ``Attention: Desk Officer for EPA'' and include the ICR in 
any correspondence.
---------------------------------------------------------------------------

    We request comments on the Agency's need for the information 
proposed to be collected, the accuracy of our estimates of the 
associated burdens, and any suggested methods for minimizing the 
burden, including the use of automated techniques for the collection of 
information. Comments on the draft ICR should be sent to: the Office of 
Policy, Regulatory Information Division, U.S. Environmental Protection 
Agency (Mail Code 2136), 401 M Street, SW, Washington, DC 20460, marked 
``Attention: Director of OP;'' and to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, 725 17th Street, 
NW, Washington, DC 20503, marked ``Attention: Desk Officer for EPA.'' 
Include the ICR number in any such correspondence. OMB is required to 
make a decision concerning the ICR between 30 and 60 days after 
publication of a proposed rule. Therefore, comments to OMB on the ICR 
are most useful if received within 30 days of the publication date of 
this proposal. Any comments from OMB and from the public on the 
information collection requirements in today's proposal will be placed 
in the docket and addressed by EPA in the final rule.
    Copies of the ICR documents can be obtained from Sandy Farmer, 
Office of Policy, Regulatory Information Division, U.S. Environmental 
Protection Agency (Mail Code 2137), 401 M Street, SW, Washington, DC 
20460, or by calling (202) 260-2740. Insert the ICR title and/or OMB 
control number in any correspondence. Copies may also be downloaded 
from the Internet at http://www.epa.gov/ncepihom/catalog.html.

D. Intergovernmental Relations

1. 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

[[Page 35543]]

private sector, of $100 million or more for any single year. Before 
promulgating a 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 that is not the least 
costly, most cost effective, or least burdensome alternative if EPA 
provides an explanation in the final rule of why such an alternative 
was adopted.
    Before we establish any regulatory requirement that may 
significantly or uniquely affect small governments, including tribal 
governments, we must develop a small government plan pursuant to 
section 203 of the UMRA. Such a plan must provide for notifying 
potentially affected small governments, and enabling officials of 
affected small governments to have meaningful and timely input in the 
development of our regulatory proposals with significant federal 
intergovernmental mandates. The plan must also provide for informing, 
educating, and advising small governments on compliance with the 
regulatory requirements.
    This proposed rule contains no federal mandates for state, local, 
or tribal governments as defined by the provisions of Title II of the 
UMRA. The rule imposes no enforceable duties on any of these 
governmental entities. Nothing in the proposed rule would significantly 
or uniquely affect small governments.
    EPA has determined that this rule contains federal mandates that 
may result in expenditures of more than $100 million to the private 
sector in any single year. As discussed at length in section VI of this 
proposal, EPA considered and evaluated a wide range of regulatory 
alternatives before arriving at the program proposed today. EPA 
believes that the proposed program represents the least costly, most 
cost effective approach to achieve the air quality goals of the 
proposed rule. Nevertheless, as is clear in section VI and throughout 
the preamble, we continue to investigate and seek comment on 
alternatives that may achieve the proposals objectives but at a lower 
cost. See the ``Administrative Designation and Regulatory Analysis'' 
(section XI.A) for further information regarding these analyses.
2. Executive Order 13084: Consultation and Coordination With Indian 
Tribal Governments
    Under Executive Order 13084, EPA may not issue a regulation that is 
not required by statute, that significantly or uniquely affects the 
communities of Indian Tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal governments, or EPA consults with those 
governments. If EPA complies by consulting, Executive Order 13084 
requires EPA to provide to the OMB, in a separately identified section 
of the preamble to the rule, a description of the extent of EPA's prior 
consultation with representatives of affected tribal governments, a 
summary of the nature of their concerns, and a statement supporting the 
need to issue the regulation. In addition, Executive Order 13084 
requires EPA to develop an effective process permitting elected 
officials and other representatives of Indian tribal governments ``to 
provide meaningful and timely input in the development of regulatory 
policies on matters that significantly or uniquely affect their 
communities.''
    Today's rule does not significantly or uniquely affect the 
communities of Indian Tribal governments. The proposed engine 
emissions, diesel fuel, and other related requirements for private 
businesses in this proposal would have national applicability, and thus 
would not uniquely affect the communities of Indian Tribal Governments. 
Further, no circumstances specific to such communities exist that would 
cause an impact on these communities beyond those discussed in the 
other sections of this proposal. Thus, EPA's conclusions regarding the 
impacts from the implementation of today's proposed rule discussed in 
the other sections of this proposal are equally applicable to the 
communities of Indian Tribal governments. Accordingly, the requirements 
of section 3(b) of Executive Order 13084 do not apply to this rule.

E. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), section 12(d) of Public Law 104-113, directs EPA 
to use voluntary consensus standards in its regulatory activities 
unless it would be inconsistent with applicable law or otherwise 
impractical. Voluntary consensus standards are technical standards 
(e.g., materials specifications, test methods, sampling procedures, and 
business practices) developed or adopted by voluntary consensus 
standards bodies. The NTTAA directs EPA to provide Congress, through 
OMB, explanations when the Agency decides not to use available and 
applicable voluntary consensus standards.
    This proposed rule references technical standards adopted by the 
Agency through previous rulemakings. No new technical standards are 
proposed in this proposal. The standards referenced in today's proposed 
rule involve the measurement of diesel fuel parameters and engine 
emissions. The measurement standards for diesel fuel parameters 
referenced in today's proposal are all voluntary consensus standards. 
The engine emissions measurement standards referenced in today's 
proposed rule are government-unique standards that were developed by 
the Agency through previous rulemakings. These standards have served 
the Agency's emissions control goals well since their implementation 
and have been well accepted by industry. EPA is not aware of any 
voluntary consensus standards for the measurement of engine emissions. 
Therefore, the Agency proposes to use the existing EPA-developed 
standards found in 40 CFR part 86 for the measurement of engine 
emissions.
    EPA welcomes comments on this aspect of the proposed rulemaking 
and, specifically, invites the public to identify potentially-
applicable voluntary consensus standards and to explain why such 
standards should be used in this regulation.

F. Executive Order 13045: Children's Health Protection

    Executive Order 13045, ``Protection of Children from Environmental 
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies 
to any rule that (1) is determined to be ``economically significant'' 
as defined under Executive Order 12866, and (2) concerns an 
environmental health or safety risk that EPA has reason to believe may 
have a disproportionate effect on children. If the regulatory action 
meets both criteria, section 5-501 of the Order directs the Agency to 
evaluate the environmental health or safety effects of the planned rule 
on children, and explain why the planned regulation is preferable to 
other potentially effective and reasonably feasible alternatives 
considered by the Agency.
    This proposed rule is subject to the Executive Order because it is 
an economically significant regulatory

[[Page 35544]]

action as defined by Executive Order 12866 and it concerns in part an 
environmental health or safety risk that EPA has reason to believe may 
have a disproportionate effect on children.
    This rulemaking will achieve significant reductions of various 
emissions from heavy-duty engines, primarily NOX, but also 
PM. These pollutants raise concerns regarding environmental health or 
safety risks that EPA has reason to believe may have a disproportionate 
effect on children, such as impacts from ozone, PM and certain toxic 
air pollutants. See section II and the Draft RIA for a further 
discussion of these issues.
    The effects of ozone and PM on children's health were addressed in 
detail in EPA's rulemaking to establish the NAAQS for these pollutants, 
and EPA is not revisiting those issues here. EPA believes, however, 
that the emission reductions from the strategies proposed in this 
rulemaking will further reduce air toxics and the related adverse 
impacts on children's health. EPA will also be addressing the issues 
raised by air toxics from engines and their fuels in a separate 
rulemaking that EPA will initiate in the near future under section 
202(l) of the Act. That rulemaking will address the emissions of 
hazardous air pollutants from engines and fuels, and the appropriate 
level of control of HAPs from these sources.
    In this proposal, EPA has evaluated several regulatory strategies 
for reductions in emissions from heavy-duty engines. (See section III 
of this proposal as well as the Draft RIA.) For the reasons described 
there, EPA believes that the strategies proposed are preferable under 
the CAA to other potentially effective and reasonably feasible 
alternatives considered by the Agency, for purposes of reducing 
emissions from these sources as a way of helping areas achieve and 
maintain the NAAQS for ozone and PM. Moreover, EPA believes that it has 
selected for proposal the most stringent and effective control 
reasonably feasible at this time, in light of the technology and cost 
requirements of the Act.

G. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    Under section 6 of Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing the proposed regulation. EPA also may not issue a regulation 
that has federalism implications and that preempts State law, unless 
the Agency consults with State and local officials early in the process 
of developing the proposed regulation.
    Section 4 of the Executive Order contains additional requirements 
for rules that preempt State or local law, even if those rules do not 
have federalism implications (i.e., the rules will not have substantial 
direct effects on the States, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government). Those 
requirements include providing all affected State and local officials 
notice and an opportunity for appropriate participation in the 
development of the regulation. If the preemption is not based on 
express or implied statutory authority, EPA also must consult, to the 
extent practicable, with appropriate State and local officials 
regarding the conflict between State law and Federally protected 
interests within the agency's area of regulatory responsibility.
    This proposed rule does not have federalism implications. It will 
not have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. Section 211(d)(4)(A) of the CAA 
prohibits states from prescribing or attempting to enforce controls or 
prohibitions respecting any fuel characteristic or component if EPA has 
prescribed a control or prohibition applicable to such fuel 
characteristic or component under section 211(c)(1) of the Act. This 
proposed rule merely modifies existing EPA diesel fuel and heavy-duty 
vehicle standards and therefore will merely continue an existing 
preemption of State and local law as discussed in section VIII.C. Thus, 
Executive Order 13132 does not apply to this rule.
    Although section 6 of Executive Order 13132 does not apply to this 
rule, EPA did consult with representatives of various State and local 
governments in developing this rule. In particular EPA consulted with 
the State of Alaska in the design of the program as it applies to them, 
as discussed in section VI. EPA also talked to representatives from the 
State of California as well as representatives from STAPPA/ALAPCO, 
which represents state and local air pollution officials.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA specifically solicits comment on this proposed rule 
from State and local officials.

XII. Statutory Provisions and Legal Authority

    Statutory authority for the engine controls proposed in this notice 
can be found in sections 202, 203, 206, 207, 208, and 301 of the CAA, 
as amended, 42 U.S.C. 7521, 7522, 7525, 7541, 7542, and 7601.
    Statutory authority for the fuel controls proposed in this document 
comes from section 211(c) and 211(i) of the CAA, which allows EPA to 
regulate fuels that either contribute to air pollution which endangers 
public health or welfare or which impair emission control equipment 
which is in general use or has been in general use. Additional support 
for the procedural and enforcement-related aspects of the fuel's 
controls in today's proposal, including the proposed recordkeeping 
requirements, comes from sections 114(a) and 301(a) of the CAA.

List of Subjects

40 CFR Part 69

    Environmental protection. Air pollution control.

40 CFR Part 80

    Environmental protection, Diesel fuel, Fuel additives, Gasoline, 
Imports, Labeling, Motor vehicle pollution, Penalties, Reporting and 
recordkeeping requirements.

40 CFR Part 86

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


[[Page 35545]]


    Dated: May 17, 2000.
Carol M. Browner,
Administrator.
    For the reasons set forth in the preamble, we propose to amend 
Parts 69, 80 and 86 of chapter I of Title 40 of the Code of Federal 
Regulations to read as follows:

PART 69--[AMENDED]

    1. The authority citation for part 69 is revised to read as 
follows:

    Authority: 42 U.S.C. 7545(c), (g) and (i), and 7625-1.

Subpart E--Alaska

    2. Section 69.51 of subpart E is revised to read as follows:


Sec. 69.51  Title II exemptions and exclusions.

    (a) Diesel fuel that is designated for use only in Alaska and is 
used only in Alaska, is exempt from the sulfur standard of 40 CFR 
80.29(a)(1)(i) and the dye provisions of 40 CFR 80.29(a)(1)(iii) and 40 
CFR 80.29(b) until the implementation dates set out in 40 CFR 80.440, 
provided that:
    (1) The fuel is segregated from non-exempt diesel fuel from the 
point of such designation; and
    (2) On each occasion that any person transfers custody or title to 
the fuel, except when it is dispensed at a retail outlet or wholesale 
purchaser-facility, the transferor must provide to the transferee a 
product transfer document stating:

    This diesel fuel is for use only in Alaska. It is exempt from 
the federal low sulfur standards applicable to motor vehicle diesel 
fuel and red dye requirements applicable to non-motor vehicle diesel 
fuel only if it is used in Alaska.

    (b) Beginning on the implementation dates set out in Sec. 80.440, 
diesel fuel that is designated for use only in Alaska or is used only 
in Alaska, is subject to the applicable provisions of 40 CFR part 80, 
subpart I, except as provided under paragraph (c) of this section. 
Alaska may submit for EPA approval an alternative plan for implementing 
the sulfur standard in Alaska by [date one year after the effective 
date of the final rule]. EPA shall approve or disapprove the plan 
within one year of receiving Alaska's submission.
    (c) If such diesel fuel is designated as fuel that does not comply 
with the standards and requirements for motor vehicle diesel fuel under 
40 CFR part 80, subpart I, it is exempt from the dye presumption of 40 
CFR 80.446(b)(2) provided that:
    (1) The fuel is segregated from all motor vehicle diesel fuel.
    (2) On each occasion that any person transfers custody or title to 
the fuel, except when it is dispensed at a retail outlet or wholesale 
purchaser-facility, the transferor must provide to the transferee a 
product transfer document complying with the requirements of 40 CFR 
80.462(a) and (d) and stating:

    This diesel fuel is for use only in Alaska and is not for use in 
motor vehicles. It is exempt from the red dye requirement applicable 
to non-motor vehicle diesel fuel only if it is used in Alaska.

    (3) Any pump dispensing the fuel must comply with the labeling 
requirements in 40 CFR 80.453.

PART 80--[AMENDED]

    3. The authority citation for part 80 continues to read as follows:

    Authority: Sections 114, 211, and 301(a) of the Clean Air Act, 
as amended (42 U.S.C. 7414, 7545 and 7601(a)).

    4. Section 80.2 is amended by revising paragraphs (x) and (y) and 
adding paragraphs (bb) and (nn), to read as follows:


Sec. 80.2  Definitions.

* * * * *
    (x) Diesel fuel means any fuel sold in any state and suitable for 
use in diesel motor vehicles, diesel motor vehicle engines or diesel 
nonroad engines, and which is commonly or commercially known as diesel 
fuel.
    (y) Motor vehicle diesel fuel means any diesel fuel, or any 
distillate product, that is used, intended for use, or made available 
for use, as a fuel in diesel motor vehicles or diesel motor vehicle 
engines. Motor vehicles or motor vehicle engines do not include nonroad 
vehicles or nonroad engines.
* * * * *
    (bb) Sulfur percentage is the percentage of sulfur in diesel fuel 
by weight, as determined using the applicable sampling and testing 
methodologies set forth in Sec. 80.461.
* * * * *
    (nn) Batch of motor vehicle diesel fuel means a quantity of diesel 
fuel which is homogeneous with regard to those properties that are 
specified for motor vehicle diesel fuel under subpart I of this part.
* * * * *
    5. Section 80.29 is amended by revising paragraphs (a)(1) 
introductory text and (b), to read as follows:


Sec. 80.29  Controls and prohibitions on diesel fuel quality.

    (a) Prohibited activities. (1) Beginning October 1, 1993 and 
continuing until the implementation dates for subpart I of this part as 
specified in Sec. 80.440, except as provided in 40 CFR 69.51, no 
person, including but not limited to, refiners, importers, 
distributors, resellers, carriers, retailers or wholesale purchaser-
consumers, shall manufacture, introduce into commerce, sell, offer for 
sale, supply, store, dispense, offer for supply or transport any diesel 
fuel for use in motor vehicles, unless the diesel fuel:
* * * * *
    (b) Determination of compliance. (1) Any diesel fuel which does not 
show visible evidence of being dyed with dye solvent red 164 (which has 
a characteristic red color in diesel fuel) shall be considered to be 
available for use in diesel motor vehicles and motor vehicle engines, 
and shall be subject to the prohibitions of paragraph (a) of this 
section.
    (2) Compliance with the sulfur, cetane, and aromatics standards in 
paragraph (a) of this section shall be determined based on the level of 
the applicable component or parameter, using the sampling methodologies 
specified in Sec. 80.330(b), as applicable, and the appropriate testing 
methodologies specified in Sec. 80.461(a) or (b) for sulfur, 
Sec. 80.2(w) for cetane index, and Sec. 80.2(z) for aromatic content. 
Any evidence or information, including the exclusive use of such 
evidence or information, may be used to establish the level of the 
applicable component or parameter in the diesel fuel, if the evidence 
or information is relevant to whether that level would have been in 
compliance with the standard if the appropriate sampling and testing 
methodology had been correctly performed. Such evidence may be obtained 
from any source or location and may include, but is not limited to, 
test results using methods other than the compliance methods in this 
paragraph (b), business records, and commercial documents.
    (3) Determination of compliance with the requirements of this 
section other than the standards described in paragraph (a) of this 
section, and determination of liability for any violation of this 
section, may be based on information obtained from any source or 
location. Such information may include, but is not limited to, business 
records and commercial documents.
* * * * *
    6. Section 80.30 is amended by revising paragraphs (g)(2)(ii) and 
(g)(4)(i), and adding paragraph (h), to read as follows:

[[Page 35546]]

Sec. 80.30  Liability for violations of diesel fuel controls and 
prohibitions.

* * * * *
    (g) Defenses. * * *
* * * * *
    (2) * * *
    (ii) Test results, performed in accordance with the applicable 
sampling and testing methodologies set forth in Secs. 80.2(w), 80.2(z), 
80.2(bb), and 80.461, which evidence that the diesel fuel determined to 
be in violation was in compliance with the diesel fuel standards of 
Sec. 80.29(a) when it was delivered to the next party in the 
distribution system;
* * * * *
    (4) * * *
    (i) Test results, performed in accordance with the applicable 
sampling and testing methodologies set forth in Secs. 80.2(w), 80.2(z), 
80.2(bb), and 80.461, which evidence that the diesel fuel determined to 
be in violation was in compliance with the diesel fuel standards of 
Sec. 80.29(a) when it was delivered to the next party in the 
distribution system;
* * * * *
    (h) Detection of violations. In paragraphs (a) through (f) of this 
section, the term ``is detected at'' means that the violation existed 
at the facility in question, and the existence of the violation at that 
facility may be established through evidence obtained or created at 
that facility, at any other location, and by any party.
    7. Subpart I is added to read as follows:

Subpart I--Diesel Fuel Sulfur Control

Sec.

General Information

80.440   What are the implementation dates for the diesel fuel 
sulfur control program?
80.441   What diesel fuel is subject to the provisions of this 
subpart?
80.442-80.445   [Reserved]

Motor Vehicle Diesel Fuel Standards and Requirements

80.446   What are the standards and dye requirements for motor 
vehicle diesel fuel?
80.447   What are the standards and identification requirements for 
additives that are blended into or are offered for sale for use in 
motor vehicle diesel fuel?
80.448   May used motor oil be dispensed into diesel motor vehicles?
80.449   What diesel fuel designation requirements apply to refiners 
and importers?
80.450-80.452   [Reserved]
80.453   What labeling requirements apply to retailers and wholesale 
purchaser-consumers?
80.454-80.460   [Reserved]

Sampling and Testing

80.461   What are the sampling and test methods for sulfur?

Recordkeeping and Reporting Requirements

80.462   What are the product transfer document requirements for 
motor vehicle diesel fuel?
80.463   What are the product transfer document requirements for 
additives to be used in motor vehicle diesel fuel?
80.464   What records must be kept?
80.465   [Reserved]

Exemptions

80.466   What are the requirements for obtaining an exemption for 
motor vehicle diesel fuel used for research, development or testing 
purposes?
80.467   What are the requirements for an exemption for motor 
vehicle diesel fuel for use in the Territories?
80.468-80.469   [Reserved]

Violation Provisions

80.470   What acts are prohibited under the diesel fuel sulfur 
control program?
80.471   What evidence may be used to determine compliance with the 
prohibitions and requirements of this subpart and liability for 
violations of this subpart?
80.472   Who is liable for violations of this subpart?
80.473   What defenses apply to persons deemed liable for a 
violation of a prohibited act?
80.474   What penalties apply under this subpart?

Subpart I--Diesel Fuel Sulfur Control General Information


Sec. 80.440  What are the implementation dates for the diesel fuel 
sulfur control program?

    (a) [Reserved]
    (b) Standards applicable to refiners and importers. Beginning April 
1, 2006, standards for motor vehicle diesel fuel under Sec. 80.446 
apply to motor vehicle diesel fuel produced by any refinery or imported 
by any importer.
    (c) Standards applicable downstream of the refinery or importer. 
Beginning May 1, 2006, standards for motor vehicle diesel fuel under 
Sec. 80.446 apply to motor vehicle diesel fuel at any facility in the 
diesel fuel distribution system downstream of the refinery or importer 
except at retail outlets and wholesale purchaser-consumer facilities.
    (d) Standards applicable to retailers and wholesale purchaser-
consumers. Beginning June 1, 2006, standards for motor vehicle diesel 
fuel under Sec. 80.446 and Sec. 80.453 apply to motor vehicle diesel 
fuel at any facility in the diesel fuel distribution system.
    (e) [Reserved]
    (f) Other provisions. All other provisions of this subpart apply 
April 1, 2006.


Sec. 80.441  What diesel fuel is subject to the provisions of this 
subpart?

    (a) Included fuel. The provisions of this subpart apply to motor 
vehicle diesel fuel as defined in Sec. 80.2(y), and to diesel fuel 
additives and motor oil that are used as fuel in diesel motor vehicles 
or are blended with diesel fuel for use in diesel motor vehicles at any 
point downstream of the refinery, as provided in Secs. 80.447 and 
80.448.
    (b) Excluded fuel. The provisions of this subpart do not apply to 
motor vehicle diesel fuel that is designated for export outside the 
United States, and identified for export by a transfer document as 
required under Sec. 80.462.


Secs. 80.442--80.445  [Reserved]

Motor Vehicle Diesel Fuel Standards and Requirements


Sec. 80.446  What are the standards and dye requirements for motor 
vehicle diesel fuel?

    (a) Standards. All motor vehicle diesel fuel is subject to the 
following per-gallon standards:
    (1) Sulfur content. 15 parts per million (ppm);
    (2) Cetane index and aromatic content. (i) A minimum cetane index 
of 40; or
    (ii) A maximum aromatic content cap of 35 volume percent.
    (b) Dye requirements. (1) All motor vehicle diesel fuel shall be 
free of visible presence of dye solvent red 164 (which has a 
characteristic red color in diesel fuel), except for motor vehicle 
diesel fuel that is used in a manner that is tax exempt under section 
4082 of the Internal Revenue Code (26 U.S.C. 4082).
    (2) Any diesel fuel that does not show visible presence of dye 
solvent red 164 shall be considered to be motor vehicle diesel fuel and 
subject to all the requirements of this subpart for motor vehicle 
diesel fuel, except for diesel fuel designated for use only in:
    (i) Guam, American Samoa, or the Commonwealth of the Northern 
Mariana Islands as provided under Sec. 80.467;
    (ii) The State of Alaska as provided under 40 CFR 69.51; or
    (iii) Jet aircraft, research and development testing, or for 
export.


Sec. 80.447  What are the standards and identification requirements for 
additives that are blended into or are offered for sale for use in 
motor vehicle diesel fuel?

    (a) Any additive that is blended into motor vehicle diesel fuel 
downstream of the refinery or is offered for sale for use in diesel 
motor vehicles shall have a sulfur content not exceeding 15 ppm.
    (b) Transfer of the diesel fuel additive shall be accompanied by a 
transfer document under Sec. 80.463, except as

[[Page 35547]]

provided in paragraph (c) of this section.
    (c) For additives sold in containers for use by the ultimate 
consumer of diesel fuel, each transferor shall include on the additive 
container, in a legible and conspicuous manner, the following accurate 
printed statement:

    This diesel fuel additive complies with the federal sulfur 
content requirements for use in diesel motor vehicles.


Sec. 80.448  May used motor oil be dispensed into diesel motor 
vehicles?

    No person shall introduce used motor oil, or used motor oil blended 
with diesel fuel, into model year 2007 or later diesel motor vehicles, 
unless the following requirements have been met:
    (a) The engine manufacturer has received a Certificate of 
Conformity for the vehicle engine under 40 CFR part 86 that is 
explicitly based on the addition of motor oil having the greatest 
sulfur content of any motor oil that is commercially available; and
    (b) The oil is added in a manner consistent with the conditions of 
the certificate.


Sec. 80.449  What diesel fuel designation requirements apply to 
refiners and importers?

    Any refiner or importer shall accurately and clearly designate all 
fuel it produces or imports for use in motor vehicles as motor vehicle 
diesel fuel.


Secs. 80.450-80.452  [Reserved]


Sec. 80.453  What labeling requirements apply to retailers and 
wholesale purchaser-consumers?

    Any retailer or wholesale purchaser-consumer who sells, dispenses, 
or offers for sale or dispensing, non-road diesel fuel and motor 
vehicle diesel fuel, must prominently and conspicuously display in the 
immediate area of each pump stand from such fuel is offered for sale or 
dispensing, the following legible label, in block letters of no less 
than 36-point bold type, printed in a color contrasting with the 
background, and placed in a location that is readily visible to the 
fuel recipient:

    This is high sulfur diesel fuel which is not to be used in any 
highway motor vehicle. The use of high sulfur diesel fuel in highway 
motor vehicles may damage emissions controls, harm engine 
operations, and void your emissions warranty.


Secs. 80.454-80.460  [Reserved]

Sampling and Testing


Sec. 80.461  What are the sampling and test methods for sulfur?

    (a) Diesel fuel. For purposes of Sec. 80.446, the sulfur content of 
diesel fuel is the sulfur content as determined by:
    (1) Sampling method. The applicable sampling methodology provided 
in Sec. 80.330(b).
    (2) Test method for sulfur. The American Society for Testing and 
Materials (ASTM) standard method D 2622-98, entitled ``Standard Test 
Method for Sulfur in Petroleum Products by Wavelength Dispersive X-ray 
Fluorescence Spectrometry,'' modified as follows:
    (i)(A) The blank stock used as a diluent for all calibration 
standards and sample dilutions must be prepared by mixing the following 
compounds at the specified proportions: 15 grams tert-butylbenzene, 15 
grams decane, 15 grams dodecane, 15 grams tetradecane, 15 grams 
hexadecane, 15 grams tetralin, 5 grams octadecane, 5 grams napthalene.
    (B) The weight tolerances are +/-5 percent for each compound. The 
compounds must have a minimum purity of 99 percent.
    (ii) Standards must be prepared by gravimetric dilution of the 
appropriate pure or certified sulfur compounds in the blank stock.
    (iii) A standard series of 5 calibration points at standard levels 
must be run. An additional blank calibration standard must be included 
using the blank stock prepared pursuant to the requirements of this 
section.
    (iv) A graph of the calibration points must be prepared. This graph 
must show the calibration data to be linear with minimal deviation from 
the least squares line. Any deviation from linearity and/or any 
standard that does not appear to lie on the least squares line must be 
investigated.
    (v) A new regression line must be calculated using the calibration 
point from the blank and the single standard that falls closest to the 
least squares line that was derived using all of the calibration 
points. This is simply a recalculation using the same data, additional 
standard analyses are not necessary for this recalculation. For this 
recalculation, it is preferred that the non-zero standard be in the 
upper portion of the calibration.
    (vi) Analyzing the blank as an unknown, the blank must return a 
zero within +/-1 ppm.
    (vii) The following guidelines are useful in limiting test 
variability: For ongoing verification when samples are in the single 
digit range, it is good practice to include more duplicates and include 
both blank samples and control fluid samples. For higher level samples, 
it is good practice to analyze samples in batches of 12. One duplicate 
and one control fluid sample should be analyzed with each batch of 12 
samples. For lower level work, it is good practice to run samples in 
batches of 6. One duplicate, one control fluid, and one blank should be 
analyzed with each batch of 6 samples. As a general comment, care must 
be taken not to pollute the blank with sulfur from higher samples or 
standards through the process of preparing standards and analyzing the 
blanks.
    (3) Quality assurance test method. Any ASTM sulfur test method may 
be used for quality assurance testing under Sec. 80.473, if the 
protocols of the ASTM method are followed and the alternative method is 
correlated to the method provided in paragraph (b) of this section.
    (b) Motor Oil. For purposes of Sec. 80.448, the sulfur content of 
unused motor oil for use in diesel fuel is the sulfur content as 
determined by the use of American Society for Testing and Materials 
(ASTM) standard method D 6443-99, entitled ``Standard Test Method for 
Determination of Calcium, Chlorine, Copper, Magnesium, Phosphorous, 
Sulfur, and Zinc, in Unused Lubricating Oils and Additives by 
Wavelength Dispersive X-ray Fluorescence Spectrometry (Mathematical 
Correction Procedure).''
    (c) Incorporation by reference. ASTM Standard Method D 6443-99 is 
incorporated by reference. This incorporation by reference was approved 
by the Director of the Federal Register in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. Copies may be obtained from the American 
Society for Testing and Materials, 100 Bar Harbor Dr., West 
Conshohocken, PA 19428. Copies may be inspected at the Air Docket 
Section (LE-131), room M-1500, U.S. Environmental Protection Agency, 
Docket No. A-99-06, 401 M Street, SW, Washington, DC 20460, or at the 
Office of the Federal Register, 800 North Capitol Street, NW, Suite 
700, Washington, DC.

Recordkeeping and Reporting Requirements


Sec. 80.462  What are the product transfer document requirements for 
motor vehicle diesel fuel?

    On each occasion that any person transfers custody or title to 
motor vehicle diesel fuel, except when such fuel is dispensed into 
motor vehicles at a retail outlet or wholesale purchaser-facility, the 
transferor must provide to the transferee a product transfer document 
identifying the fuel as motor vehicle diesel fuel, and which:

[[Page 35548]]

    (a) Identifies the name and address of the transferor and 
transferee, and the date of transfer;
    (b) Except as provided in 40 CFR 69.51, includes an accurate 
statement, as applicable, that:
    (1) ``This fuel complies with the 15 ppm sulfur standard for motor 
vehicle diesel fuel.'';
    (2) ``This is high sulfur motor vehicle diesel fuel for use only in 
Guam, American Samoa, or the Northern Mariana Islands.'';
    (3) ``This diesel fuel is for export use only.''; or
    (4) ``This diesel fuel is for research, development, or testing 
purposes only.''
    (c) For motor vehicle diesel fuel that contains visible evidence of 
the dye solvent red 164, the following accurate statement:

    This fuel is motor vehicle diesel fuel for tax-exempt use only, 
in accordance with Section 4082 of the Internal Revenue Code.

    (d) Except for transfers to truck carriers, retailers or wholesale 
purchaser-consumers, product codes may be used to convey the 
information required by paragraph (a) of this section if such codes are 
clearly understood by each transferee.


Sec. 80.463  What are the product transfer document requirements for 
additives to be used in motor vehicle diesel fuel?

    (a) Except as provided in Sec. 80.447(c), on each occasion that any 
person transfers custody or title to an additive for use in motor 
vehicle diesel fuel, to a party in the motor vehicle diesel fuel 
distribution system downstream of the refiner, the transferor must 
provide to the transferee a product transfer document which identifies 
the type of additive, and which:
    (1) Identifies the name and address of the transferor and 
transferee, and the date of transfer; and
    (2) Includes the following accurate statement:

    This additive complies with the federal 15 ppm sulfur standard 
for motor vehicle diesel fuel.

    (b) Except for transfers of motor vehicle diesel fuel to truck 
carriers, retailers or wholesale purchaser-consumers, product codes may 
be used to convey the information required under paragraph (a) of this 
section, if such codes are clearly understood by each transferee.


Sec. 80.464  What records must be kept?

    (a) Records that must be kept. Beginning April 1, 2006, any person 
who produces, imports, sells, offers for sale, dispenses, distributes, 
supplies, offers for supply, stores, or transports motor vehicle diesel 
fuel subject to the provisions of this subpart must keep the following 
records:
    (1) The product transfer documents required under Secs. 80.462 and 
80.463.
    (2) For any sampling and testing for sulfur content, cetane index 
or aromatics content of motor vehicle diesel fuel or additives, 
conducted as part of a quality assurance program or otherwise:
    (i) The location, date, time and storage tank or truck 
identification for each sample collected;
    (ii) The name and title of the person who collected the sample and 
the person who performed the testing; and
    (iii) The results of the tests for diesel fuel properties as 
required under this subpart and the volume of product in the storage 
tank or container from which the sample was taken.
    (3) The actions the party has taken, if any, to stop the sale or 
distribution of any diesel fuel found not to be in compliance with the 
standards specified in this subpart, and the actions the party has 
taken, if any, to identify the cause of any noncompliance and prevent 
future instances of noncompliance.
    (4) Business records establishing compliance with the designation 
and/or segregation requirements pursuant to the requirements of this 
subpart.
    (b) [Reserved]
    (c) Additive distribution system records. Beginning April 1, 2006, 
any person who produces, imports, sells, offers for sale, dispenses, 
distributes, supplies, offers for supply, stores, or transports an 
additive for use in motor vehicle diesel fuel and who is required to 
transfer or receive a product transfer document for that additive 
pursuant to Sec. 80.463, must maintain such documents.
    (d) Length of time records must be kept. The records required under 
this section must be maintained for five years from the date they were 
created.
    (e) Make records available to EPA. The records required to be 
maintained under this section must be made available to the 
Administrator or the Administrator's authorized representative upon 
request.


Sec. 80.465  [Reserved]

Exemptions


Sec. 80.466  What are the requirements for obtaining an exemption for 
motor vehicle diesel fuel used for research, development or testing 
purposes?

    (a) Written request for R&D exemption. Any person may receive an 
exemption from the provisions of this subpart for motor vehicle diesel 
fuel used for research, development, or testing (``R&D'') purposes by 
submitting the information listed in paragraph (c) of this section to:
    (1) Director (6406J), Transportation and Regional Programs 
Division, U.S. Environmental Protection Agency, Ariel Rios Building, 
1200 Pennsylvania Avenue, NW., Washington, DC 20460 (postal mail); or
    (2) Director (6406J), Transportation and Regional Programs 
Division, U.S. Environmental Protection Agency, 501 3rd Street, NW., 
Washington, DC 20001 (express mail/courier); and
    (3) Director (2242A), Air Enforcement Division, U.S. Environmental 
Protection Agency, Ariel Rios Building, 1200 Pennsylvania Avenue, NW., 
Washington, DC 20460.
    (b) Criteria for an R&D exemption. For an R&D exemption to be 
granted, the person requesting an exemption must:
    (1) Demonstrate a purpose that constitutes an appropriate basis for 
exemption;
    (2) Demonstrate that an exemption is necessary;
    (3) Design an R&D program to be reasonable in scope; and
    (4) Exercise a degree of control consistent with the purpose of the 
program and EPA's monitoring requirements.
    (c) Information required to be submitted. To demonstrate each of 
the elements in paragraphs (b)(1) through (4) of this section, the 
person requesting an exemption must include the following information 
in the written request required under paragraph (a) of this section:
    (1) A concise statement of the purpose of the program demonstrating 
that the program has an appropriate R&D purpose.
    (2) An explanation of why the stated purpose of the program cannot 
be achieved in a practicable manner without performing one or more of 
the prohibited acts under this subpart.
    (3) To demonstrate the reasonableness of the scope of the program:
    (i) An estimate of the program's duration in time and, if 
appropriate, mileage;
    (ii) An estimate of the maximum number of vehicles or engines 
involved in the program;
    (iii) The manner in which the information on vehicles and engines 
used in the program will be recorded and made available to the 
Administrator upon request; and
    (iv) The quantity of diesel fuel which does not comply with the 
requirements of Secs. 80.446 through 80.448.
    (4) With regard to control, a demonstration that the program 
affords EPA a monitoring capability, including:

[[Page 35549]]

    (i) The site(s) of the program (including facility name, street 
address, city, county, state, and zip code);
    (ii) The manner in which information on vehicles and engines used 
in the program will be recorded and made available to the Administrator 
upon request;
    (iii) The manner in which information on the diesel fuel used in 
the program (including quantity, fuel properties, name, address, 
telephone number and contact person of the supplier, and the date 
received from the supplier), will be recorded and made available to the 
Administrator upon request;
    (iv) The manner in which the party will ensure that the R&D fuel 
will be segregated from motor vehicle diesel fuel and fuel pumps will 
be labeled to ensure proper use of the R&D diesel fuel;
    (v) The name, address, telephone number and title of the person(s) 
in the organization requesting an exemption from whom further 
information on the application may be obtained; and
    (vi) The name, address, telephone number and title of the person(s) 
in the organization requesting an exemption who is responsible for 
recording and making available the information specified in this 
paragraph, and the location where such information will be maintained.
    (d) Additional requirements. (1) The product transfer documents 
associated with R&D motor vehicle diesel fuel must comply with 
requirements of Sec. 80.462(b)(5).
    (2) The R&D diesel fuel must be designated by the refiner or 
supplier, as applicable, as R&D diesel fuel.
    (3) The R&D diesel fuel must be kept segregated from non-exempt 
motor vehicle diesel fuel at all points in the distribution system.
    (4) The R&D diesel fuel must not be sold, distributed, offered for 
sale or distribution, dispensed, supplied, offered for supply, 
transported to or from, or stored by a diesel fuel retail outlet, or by 
a wholesale purchaser-consumer facility, unless the wholesale 
purchaser-consumer facility is associated with the R&D program that 
uses the diesel fuel.
    (5) At the completion of the program, any emission control systems 
or elements of design which are damaged or rendered inoperative shall 
be replaced, or the responsible person will be liable for a violation 
of the Clean Air Act Section 203(a)(3) unless sufficient evidence is 
supplied that the emission controls or elements of design were not 
damaged.
    (e) [Reserved]
    (f) Mechanism for granting of an exemption. A request for an R&D 
exemption will be deemed approved by the earlier of sixty (60) days 
from the date on which EPA receives the request for exemption, 
(provided that EPA has not notified the applicant of potential 
disapproval by that time), or the date on which the applicant receives 
a written approval letter from EPA.
    (1) The volume of diesel fuel subject to the approval shall not 
exceed the estimated amount in paragraph (c)(3)(iv) of this section, 
unless EPA grants a greater amount in writing.
    (2) Any exemption granted under this section will expire at the 
completion of the test program or three years from the date of 
approval, whichever occurs first, and may only be extended upon re-
application consistent will all requirements of this section.
    (3) The passage of sixty (60) days will not signify the acceptance 
by EPA of the validity of the information in the request for an 
exemption. EPA may elect at any time to review the information 
contained in the request, and where appropriate may notify the 
responsible person of disapproval of the exemption.
    (4) In granting an exemption the Administrator may include terms 
and conditions, including replacement of emission control devices or 
elements of design, that the Administrator determines are necessary for 
monitoring the exemption and for assuring that the purposes of this 
subpart are met.
    (5) Any violation of a term or condition of the exemption, or of 
any requirement of this section, will cause the exemption to be void ab 
initio.
    (6) If any information required under paragraph (c) of this section 
should change after approval of the exemption, the responsible person 
must notify EPA in writing immediately. Failure to do so may result in 
disapproval of the exemption or may make it void ab initio, and may 
make the party liable for a violation of this subpart.
    (g) Effects of exemption. Motor vehicle diesel fuel that is subject 
to an R&D exemption under this section is exempt from other provisions 
of this subpart provided that the fuel is used in a manner that 
complies with the purpose of the program under paragraph (c) of this 
section and the requirements of this section.
    (h) Notification of Completion. The party shall notify EPA in 
writing within thirty (30) days of completion of the R&D program.


Sec. 80.467  What are the requirements for an exemption for motor 
vehicle diesel fuel for use in the Territories?

    The sulfur standards and dye requirement of Sec. 80.446(a)(1) and 
(b) do not apply to diesel fuel that is produced, imported, sold, 
offered for sale, supplied, offered for supply, stored, dispensed, or 
transported for use in the Territories of Guam, American Samoa or the 
Commonwealth of the Northern Mariana Islands provided that such diesel 
fuel is:
    (a) Designated by the refiner or importer as high sulfur diesel 
fuel only for use in Guam, American Samoa, or the Commonwealth of the 
Northern Mariana Islands;
    (b) Used only in Guam, American Samoa, or the Commonwealth of the 
Northern Mariana Islands;
    (c) Accompanied by documentation that complies with the product 
transfer document requirements of Sec. 80.462(b)(3); and
    (d) Segregated from non-exempt highway and other diesel fuel at all 
points in the distribution system from the point the diesel fuel is 
designated as exempt fuel only for use in Guam, American Samoa, or the 
Commonwealth of the Northern Mariana Islands, while the exempt fuel is 
in the United States but outside these Territories.


Secs. 80.468-469  [Reserved]

Violation Provisions


Sec. 80.470  What acts are prohibited under the diesel fuel sulfur 
program?

    No person shall:
    (a) Standard or dye violation. Produce, import, sell, offer for 
sale, dispense, supply, offer for supply, store or transport motor 
vehicle diesel fuel that does not comply with the applicable standards 
and dye requirements under Sec. 80.446.
    (b) Additive violation. Blend or permit the blending into motor 
vehicle diesel fuel downstream of the refinery, or use, or permit the 
use, as motor vehicle diesel fuel, of additives which do not comply 
with the requirements of Sec. 80.447.
    (c) Motor Oil violation. Introduce into diesel motor vehicles, or 
permit the introduction into such vehicles of motor oil, or motor oil 
blended with diesel fuel, which does not comply with the requirements 
of Sec. 80.448.
    (d) Introduction violation. Introduce, or permit the introduction 
of, fuel into diesel motor vehicles which does not comply with the 
standards of Sec. 80.446.
    (e) Cause another party to violate. Cause another person to commit 
an act in violation of paragraphs (a) through (d) of this section.

[[Page 35550]]

    (f) Cause violating fuel or additive to be in the distribution 
system. Cause diesel fuel to be in the diesel fuel distribution system 
which does not comply with the applicable standard or dye requirements 
of Sec. 80.446, or cause any diesel fuel additive to be in the 
distribution system which does not comply with the sulfur standard of 
Sec. 80.447.


Sec. 80.471  What evidence may be used to determine compliance with the 
prohibitions and requirements of this subpart and liability for 
violations of this subpart?

    (a) Compliance with sulfur, cetane, and aromatics standards. 
Compliance with the standards in Secs. 80.446 and 80.448 shall be 
determined based on the level of the applicable component or parameter, 
using the sampling methodologies specified in Sec. 80.330(b), as 
applicable, and the appropriate testing methodologies specified in 
Sec. 80.461(a) or (b) for sulfur, Sec. 80.2(w) for cetane index, and 
Sec. 80.2(z) for aromatic content. Any evidence or information, 
including the exclusive use of such evidence or information, may be 
used to establish the level of the applicable component or parameter in 
the diesel fuel, or motor oil to be used in diesel fuel, if the 
evidence or information is relevant to whether that level would have 
been in compliance with the standard if the appropriate sampling and 
testing methodology had been correctly performed. Such evidence may be 
obtained from any source or location and may include, but is not 
limited to, test results using methods other than the compliance 
methods in this paragraph, business records, and commercial documents.
    (b) Compliance with other requirements. Determination of compliance 
with the requirements of this subpart other than the standards 
described in paragraph (a) of this section and in Secs. 80.446 and 
80.448, and determination of liability for any violation of this 
subpart, may be based on information obtained from any source or 
location. Such information may include, but is not limited to, business 
records and commercial documents.


Sec. 80.472  Who is liable for violations of this subpart?

    (a) Persons liable for violations of prohibited acts.--(1) 
Standard, dye, additives, motor oil, and introduction violations. (i) 
Any refiner, importer, distributor, reseller, carrier, retailer, or 
wholesale purchaser-consumer who owned, leased, operated, controlled or 
supervised a facility where a violation of Sec. 80.470(a) through (d) 
occurred, is deemed liable for the applicable violation.
    (ii) Any person who violates Sec. 80.470(a) through (d) is liable 
for the violation.
    (iii) Any person who causes another person to violate 
Sec. 80.470(a) through (d) is liable for a violation of Sec. 80.470(e).
    (iv) Any refiner, importer, distributor, reseller, carrier, 
retailer, or wholesale purchaser-consumer who produced, imported, sold, 
offered for sale, dispensed, supplied, offered to supply, stored, 
transported, or caused the transportation or storage of, diesel fuel 
that violates Sec. 80.470(a), is deemed in violation of Sec. 80.470(e).
    (2) Cause violating diesel fuel or additive to be in the 
distribution system. Any refiner, importer, distributor, reseller, 
carrier, retailer, or wholesale purchaser-consumer who owned, leased, 
operated, controlled or supervised a facility from which motor vehicle 
diesel fuel or additive was released into the distribution system which 
does not comply with the applicable standards or dye requirement of 
Sec. 80.446 or Sec. 80.447, is deemed in violation of Sec. 80.470(f).
    (3) Branded refiner/importer liability. Any refiner or importer 
whose corporate, trade, or brand name, or whose marketing subsidiary's 
corporate, trade, or brand name appeared at a facility where a 
violation of Sec. 80.470(a) occurred, is deemed in violation of 
Sec. 80.470(a).
    (4) Carrier causation. In order for a carrier to be liable under 
paragraph (a)(1)(iii) or (iv) of this section, EPA must demonstrate, by 
reasonably specific showing by direct or circumstantial evidence, that 
the carrier caused the violation.
    (5) Parent corporation. Any parent corporation is liable for any 
violations of this subpart that are committed by any subsidiary.
    (6) Joint venture. Each partner to a joint venture is jointly and 
severally liable for any violation of this subpart that occurs at the 
joint venture facility or is committed by the joint venture operation.
    (b) Persons liable for failure to meet other provisions of this 
subpart. Any refiner, importer, distributor, reseller, carrier, 
retailer, or wholesale purchaser-consumer who:
    (1) Fails to meet a provision of this subpart not addressed in 
paragraph (a) of this section is liable for a violation of that 
provision; or
    (2) Causes another person to fail to meet a provision of this 
subpart not addressed in paragraph (a) of this section, is liable for 
causing a violation of that provision.


Sec. 80.473  What defenses apply to persons deemed liable for a 
violation of a prohibited act?

    (a) Presumptive liability defenses. Any person deemed liable for a 
violation of a prohibition under Sec. 80.472 (a)(1)(i) or (a)(1)(iv), 
(a)(2) or (a)(3), will not be deemed in violation if the person 
demonstrates that:
    (1) The violation was not caused by the person or the person's 
employee or agent;
    (2) Product transfer documents account for fuel or additive found 
to be in violation and indicate that the violating product had met the 
applicable requirements when it was under the party's control; and
    (3) The person conducted a quality assurance sampling and testing 
program, as described in paragraph (d) of this section. A carrier may 
rely on the quality assurance program carried out by another party, 
including the party who owns the diesel fuel in question, provided that 
the quality assurance program is carried out properly. Retailers and 
wholesale purchaser-consumers are not required to conduct quality 
assurance programs.
    (b) Branded refiner defenses. In the case of a violation found at a 
facility operating under the corporate, trade or brand name of a 
refiner or importer, or a refiner's or importer's marketing subsidiary, 
the refiner or importer must show, in addition to the defense elements 
required under paragraphs (a)(1) and (a)(2) of this section, that the 
violation was caused by:
    (1) An act in violation of law (other than the Clean Air Act or 
this part 80), or an act of sabotage or vandalism;
    (2) The action of any refiner, importer, retailer, distributor, 
reseller, oxygenate blender, carrier, retailer or wholesale purchaser-
consumer in violation of a contractual agreement between the branded 
refiner or importer and the person designed to prevent such action, and 
despite periodic sampling and testing by the branded refiner or 
importer to ensure compliance with such contractual obligation; or
    (3) The action of any carrier or other distributor not subject to a 
contract with the refiner or importer, but engaged for transportation 
of diesel fuel, despite specifications or inspections of procedures and 
equipment which are reasonably calculated to prevent such action.
    (c) Causation demonstration. Under paragraph (a)(1) of this section 
for any person to show that a violation was not caused by that person, 
or under paragraph (b) of this section to show that a violation was 
caused by any of the specified actions, the person must

[[Page 35551]]

demonstrate by reasonably specific showing, by direct or circumstantial 
evidence, that the violation was caused or must have been caused by 
another person and that the person asserting the defense did not 
contribute to that other person's causation.
    (d) Quality assurance and testing program. (1) To demonstrate an 
acceptable quality assurance program under paragraph (a)(2) of this 
section, a person must present evidence of the following:
    (i) A periodic sampling and testing program to ensure the motor 
vehicle diesel fuel or additive the person sold, dispensed, supplied, 
stored, or transported, meets the applicable standards; and
    (ii) On each occasion when motor vehicle diesel fuel or additive is 
found not in compliance with the applicable standard:
    (A) The person immediately ceases selling, offering for sale, 
dispensing, supplying, offering for supply, storing or transporting the 
non-complying product; and
    (B) The person promptly remedies the violation and the factors that 
caused the violation (for example, by removing the non-complying 
product from the distribution system until the applicable standard is 
achieved and taking steps to prevent future violations of a similar 
nature from occurring).
    (2) For any carrier who transports motor vehicle diesel fuel or 
additive in a tank truck, the quality assurance program required under 
this paragraph (d) need not include periodic sampling and testing of 
the motor vehicle diesel fuel or additive in the tank truck, but in 
lieu of such tank truck sampling and testing, the carrier shall 
demonstrate evidence of an oversight program for monitoring compliance 
with the requirements of this subpart relating to the transport or 
storage of such product by tank truck, such as appropriate guidance to 
drivers regarding compliance with the applicable sulfur standard and 
product transfer document requirements, and the periodic review of 
records received in the ordinary course of business concerning motor 
vehicle diesel fuel or additive quality and delivery.


Sec. 80.474  What penalties apply under this subpart?

    (a) Any person liable for a violation under Sec. 80.472 is subject 
to civil penalties as specified in section 205 of the Clean Air Act for 
every day of each such violation and the amount of economic benefit or 
savings resulting from each violation.
    (b)(1) Any person liable under Sec. 80.472(a)(1) for a violation of 
an applicable standard or requirement under Sec. 80.446, or of causing 
another party to violate such standard or requirement, is subject to a 
separate day of violation for each and every day the non-complying 
motor vehicle diesel fuel remains any place in the distribution system.
    (2) Any person liable under Sec. 80.472(a)(2) for causing motor 
vehicle diesel fuel to be in the distribution system which does not 
comply with an applicable standard or requirement of Sec. 80.446, is 
subject to a separate day of violation for each and every day that the 
non-complying motor vehicle diesel fuel remains any place in the motor 
vehicle diesel fuel distribution system.
    (3) For purposes of this paragraph (b), the length of time the 
motor vehicle diesel fuel in question remained in the motor vehicle 
diesel fuel distribution system is deemed to be twenty-five days, 
unless a person subject to liability or EPA demonstrates by reasonably 
specific showings, by direct or circumstantial evidence, that the non-
complying motor vehicle diesel fuel remained in the distribution system 
for fewer than or more than twenty-five days.
    (c) Any person liable under Sec. 80.472(a)(1) for blending into 
motor vehicle diesel fuel an additive violating the sulfur standard 
under Sec. 80.447(a)(1), or of causing another party to violate that 
requirement, is subject to a separate day of violation for each and 
every day the non-complying motor vehicle diesel fuel remains any place 
in the system.
    (d) Any person liable under Sec. 80.472(b) for failure to meet, or 
causing a failure to meet, a provision of this subpart is liable for a 
separate day of violation for each and every day such provision remains 
unfulfilled.

PART 86--[AMENDED]

    8. The authority citation for part 86 continues to read as follows:

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

    9. Section 86.004-2 of subpart A is amended by adding in 
alphabetical order a definition of ``U.S.-directed production'' to read 
as follows:


Sec. 86.004-2  Definitions.

* * * * *
    U.S.-directed production means the engines or vehicles 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.
* * * * *
    10. Section 86.004-40 of subpart A is amended by revising the 
introductory text to read as follows:


Sec. 86.004-40  Heavy-duty engine rebuilding practices.

    The provisions of this section are applicable to heavy-duty engines 
subject to model year 2004 or later standards and are applicable to the 
process of engine rebuilding (or rebuilding a portion of an engine or 
engine system). 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 under section 
203(a)(3) of the Clean Air Act (42 U.S.C. 7522(a)(3)).
* * * * *
    11. A new Sec. 86.007-10 is added to subpart A to read as follows:


Sec. 86.007-10  Emission standards for 2007 and later model year Otto-
cycle heavy-duty engines and vehicles.

    This Sec. 86.007-10 includes text that specifies requirements that 
differ from Sec. 86.099-10. Where a paragraph in Sec. 86.099-10 is 
identical and applicable to Sec. 86.007-10, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.099-10.''
    (a)(1) Exhaust emissions from new 2007 and later model year Otto-
cycle HDEs shall not exceed:
    (i)(A) Oxides of Nitrogen (NOX). 0.20 grams per brake 
horsepower-hour (0.075 grams per megajoule).
    (B) A manufacturer may elect to include any or all of its Otto-
cycle HDE families in any or all of the NOX and 
NOX plus NMHC emissions ABT programs for HDEs, within the 
restrictions described in Sec. 86.007-15 or Sec. 86.004-15. If the 
manufacturer elects to include engine families in any of these 
programs, the NOX FEL may not exceed 0.50 grams per brake 
horsepower-hour (0.19 grams per megajoule). This ceiling value applies 
whether credits for the family are derived from averaging, banking, or 
trading programs.
    (ii)(A) Non-methane Hydrocarbons (NMHC) for engines fueled with 
either gasoline, natural gas, or liquefied petroleum gas. 0.14 grams 
per brake horsepower-hour (0.052 gram per megajoule).
    (B) Non-methane Hydrocarbon Equivalent (NMHCE) for engines fueled 
with methanol. 0.14 grams per brake

[[Page 35552]]

horsepower-hour (0.052 gram per megajoule).
    (iii)(A) Carbon monoxide. 14.4 grams per brake horsepower-hour 
(5.36 grams per megajoule).
    (B) Idle Carbon Monoxide. For all Otto-cycle HDEs utilizing 
aftertreatment technology: 0.50 percent of exhaust gas flow at curb 
idle.
    (iv) Particulate. 0.01 gram per brake horsepower-hour (0.0037 gram 
per megajoule).
    (v) Formaldehyde. 0.016 grams per brake horsepower-hour (0.0060 
gram per megajoule)
    (2) The standards set forth in paragraph (a)(1) of this section 
refer to the exhaust emitted over the operating schedule set forth in 
paragraph (f)(1) of appendix I to this part, and measured and 
calculated in accordance with the procedures set forth in subpart N or 
P of this part.
    (3) [Reserved]
    (4) [Reserved]
    (b) Evaporative emissions from heavy-duty vehicles shall not exceed 
the following standards. The standards apply equally to certification 
and in-use vehicles. The spitback standard also applies to newly 
assembled vehicles. For certification vehicles only, manufacturers may 
conduct testing to quantify a level of nonfuel background emissions for 
an individual test vehicle. Such a demonstration must include a 
description of the source(s) of emissions and an estimated decay rate. 
The demonstrated level of nonfuel background emissions may be 
subtracted from emission test results from certification vehicles if 
approved in advance by the Administrator.
    (1) Hydrocarbons (for vehicles equipped with gasoline-fueled, 
natural gas-fueled or liquefied petroleum gas-fueled engines). (i) For 
vehicles with a Gross Vehicle Weight Rating of up to 14,000 lbs:
    (A)(1) For the full three-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements: 1.4 grams per 
test.
    (2) For the supplemental two-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements (gasoline-fueled 
vehicles only): 1.75 grams per test.
    (B) Running loss test (gasoline-fueled vehicles only): 0.05 grams 
per mile.
    (C) Fuel dispensing spitback test (gasoline-fueled vehicles only): 
1.0 gram per test.
    (ii) For vehicles with a Gross Vehicle Weight Rating of greater 
than 14,000 lbs:
    (A)(1) For the full three-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements: 1.9 grams per 
test.
    (2) For the supplemental two-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements (gasoline-fueled 
vehicles only): 2.3 grams per test.
    (B) Running loss test (gasoline-fueled vehicles only): 0.05 grams 
per mile.
    (2) Total Hydrocarbon Equivalent (for vehicles equipped with 
methanol-fueled engines). (i) For vehicles with a Gross Vehicle Weight 
Rating of up to 14,000 lbs:
    (A)(1) For the full three-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements: 1.4 grams carbon 
per test.
    (2) For the supplemental two-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements: 1.75 grams carbon 
per test.
    (B) Running loss test: 0.05 grams carbon per mile.
    (C) Fuel dispensing spitback test: 1.0 gram carbon per test.
    (ii) For vehicles with a Gross Vehicle Weight Rating of greater 
than 14,000 lbs:
    (A)(1) For the full three-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements: 1.9 grams carbon 
per test.
    (2) For the supplemental two-diurnal test sequence described in 
Sec. 86.1230-96, diurnal plus hot soak measurements: 2.3 grams carbon 
per test.
    (B) Running loss test: 0.05 grams carbon per mile.
    (3)(i) For vehicles with a Gross Vehicle Weight Rating of up to 
26,000 lbs, the standards set forth in paragraphs (b)(1) and (b)(2) of 
this section refer to a composite sample of evaporative emissions 
collected under the conditions and measured in accordance with the 
procedures set forth in subpart M of this part.
    (ii) For vehicles with a Gross Vehicle Weight Rating of greater 
than 26,000 lbs., the standards set forth in paragraphs (b)(1)(ii) and 
(b)(2)(ii) of this section refer to the manufacturer's engineering 
design evaluation using good engineering practice (a statement of which 
is required in Sec. 86.098-23(b)(4)(ii)).
    (4) All fuel vapor generated in a gasoline-or methanol-fueled 
heavy-duty vehicle during in-use operations shall be routed exclusively 
to the evaporative control system (e.g., either canister or engine 
purge). The only exception to this requirement shall be for 
emergencies.
    (c) No crankcase emissions shall be discharged into the ambient 
atmosphere from any new 2007 or later model year Otto-cycle HDE.
    (d) Every manufacturer of new motor vehicle engines subject to the 
standards prescribed in this section shall, prior to taking any of the 
actions specified in section 203(a)(1) of the Act, test or cause to be 
tested motor vehicle engines in accordance with applicable procedures 
in subpart N or P of this part to ascertain that such test engines meet 
the requirements of this section. (e)[Reserved]. For guidance see 
Sec. 86.099-10.
    12. A new Sec. 86.007-11 is added to subpart A to read as follows:


Sec. 86.007-11  Emission standards for 2007 and later model year diesel 
heavy-duty engines and vehicles.

    Section 86.007-11 includes text that specifies requirements that 
differ from Sec. 86.004-11. Where a paragraph in Sec. 86.004-11 is 
identical and applicable to Sec. 86.007-11, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.004-11.''
    (a)(1) Exhaust emissions from new 2007 and later model year diesel 
HDEs shall not exceed the following:
    (i)(A) Oxides of Nitrogen (NOX). 0.20 grams per brake 
horsepower-hour (0.075 gram per megajoule).
    (B) A manufacturer may elect to include any or all of its diesel 
HDE families in any or all of the NOX and NOX 
plus NMHC emissions ABT programs for HDEs, within the restrictions 
described in Sec. 86.007-15 or Sec. 86.004-15. If the manufacturer 
elects to include engine families in any of these programs, the 
NOX FELs may not exceed 0.50 grams per brake horsepower-hour 
(0.19 grams per megajoule). This ceiling value applies whether credits 
for the family are derived from averaging, banking, or trading 
programs.
    (ii)(A) Non-methane Hydrocarbons (NMHC) for engines fueled with 
either diesel fuel, natural gas, or liquefied petroleum gas. 0.14 grams 
per brake horsepower-hour (0.052 gram per megajoule).
    (B) Non-methane Hydrocarbon Equivalent ( NMHCE) for engines fueled 
with methanol. 0.14 grams per brake horsepower-hour (0.052 gram per 
megajoule).
    (iii) Carbon monoxide. (A) 15.5 grams per brake horsepower-hour 
(5.77 grams per megajoule).
    (B) 0.50 percent of exhaust gas flow at curb idle (methanol-, 
natural gas-, and liquefied petroleum gas-fueled diesel HDEs only).
    (iv) Particulate. (A) 0.01 gram per brake horsepower-hour (0.0037 
gram per megajoule).
    (B) A manufacturer may elect to include any or all of its diesel 
HDE families in any or all of the particulate ABT programs for HDEs, 
within the

[[Page 35553]]

restrictions described in Sec. 86.007-15 or superseding applicable 
sections. If the manufacturer elects to include engine families in any 
of these programs, the particulate FEL may not exceed 0.02 gram per 
brake horsepower-hour (0.0075 gram per megajoule).
    (v) Formaldehyde. 0.016 grams per brake horsepower-hour (0.0060 
gram per megajoule).
    (2) The standards set forth in paragraph (a)(1) of this section 
refer to the exhaust emitted over the operating schedule set forth in 
paragraph (f)(2) of appendix I to this part, and measured and 
calculated in accordance with the procedures set forth in subpart N or 
P of this part, except as noted in Sec. 86.007-23(c)(2).
    (3)(i) The weighted average exhaust emissions, as determined under 
Sec. 86.1360-2004(e)(5) pertaining to the supplemental steady-state 
test cycle, for each regulated pollutant shall not exceed 1.0 times the 
applicable emission standards or FELs specified in paragraph (a)(1) of 
this section.
    (ii) Exhaust emissions shall not exceed the Maximum Allowable 
Emission Limits (for the corresponding speed and load), as determined 
under Sec. 86.1360-2004(f), when the engine is operated in the steady-
state control area defined under Sec. 86.1360-2004(d).
    (4)(i) The weighted average emissions, as determined under 
Sec. 86.1370 pertaining to the not-to-exceed test procedures, for each 
regulated pollutant shall not exceed 1.25 times the applicable emission 
standards or FELs specified in paragraph (a)(1) of this section, except 
as noted in paragraph (a)(4)(ii) of this section.
    (ii) Exhaust emissions shall not exceed either the Maximum 
Allowable Emission Limits (for the corresponding speed and load), as 
determined under Sec. 86.1360(f) or the exhaust emissions specified in 
paragraph (a)(4)(i) of this section, whichever is numerically lower, 
when the engine is operated in the steady-state control area defined 
under Sec. 86.1360(d).
    (b)[Reserved]. For guidance see Sec. 86.004-11.
    (c) No crankcase emissions shall be discharged into the ambient 
atmosphere from any new 2007 or later model year diesel HDE.
    (d) Every manufacturer of new motor vehicle engines subject to the 
standards prescribed in this section shall, prior to taking any of the 
actions specified in section 203(a)(1) of the Act, test or cause to be 
tested motor vehicle engines in accordance with applicable procedures 
in subpart I or N of this part to ascertain that such test engines meet 
the requirements of paragraphs (a), (b), (c), and (d) of this section.
    (e)[Reserved]. For guidance see Sec. 86.004-11.
    (f) Optional phase-in provisions. For model years 2007, 2008, and 
2009, manufacturers may certify some of their engine families to the 
combined NOx plus NMHC standard applicable to model year 2006 engines 
under Sec. 86.004-11, in lieu of the separate NOX, NMHC, and 
formaldehyde standards specified in this section. These engines must 
comply with all other requirements applicable to model year 2007 
engines.
    (1) The following sales limits apply:
    (i) For model year 2007, the combined number of engines in the 
engine families certified to the 2006 combined NOX plus NMHC 
standard may not exceed 75 percent of the manufacturer's U.S.-directed 
production of heavy-duty diesel motor vehicle engines for model year 
2007.
    (ii) For model year 2008, the combined number of engines in the 
engine families certified to the 2006 combined NOX plus NMHC 
standard may not exceed 50 percent of the manufacturer's U.S.-directed 
production of heavy-duty diesel motor vehicle engines for model year 
2008.
    (iii) For model year 2009, the combined number of engines in the 
engine families certified to the 2006 combined NOX plus NMHC 
standard may not exceed 25 percent of the manufacturer's U.S.-directed 
production of heavy-duty diesel motor vehicle engines for model year 
2009.
    (2) During the phase-in period, manufacturers may not average 
together (as part of the ABT program) engine families certified to the 
NOX plus NMHC standards applicable to model year 2006 and 
engine families certified to the separate NOX and NMHC 
standards specified in this section.
    (g)(1) Diesel heavy-duty engines and vehicles for sale in Guam, 
American Samoa, or the Commonwealth of the Northern Mariana Islands 
shall be subject to the same standards and requirements as apply to 
2006 model year diesel heavy-duty engines and vehicles, but only if the 
vehicle or engine bears a permanently affixed label stating:

    THIS ENGINE (or VEHICLE, as applicable) CONFORMS TO US EPA 
EMISSION STANDARDS APPLICABLE TO MODEL YEAR 2006. THIS ENGINE (or 
VEHICLE, as applicable) DOES NOT CONFORM TO US EPA EMISSION 
REQUIREMENTS IN EFFECT AT TIME OF PRODUCTION AND MAY NOT BE IMPORTED 
INTO THE UNITED STATES OR ANY TERRITORY OF THE UNITED STATES EXCEPT 
GUAM, AMERICAN SAMOA, OR THE COMMONWEALTH OF THE NORTHERN MARIANA 
ISLANDS.

    (2) The importation or sale of such a vehicle or engine for use at 
any location other than Guam, American Samoa, or the Commonwealth of 
the Northern Mariana Islands shall be considered a violation of section 
203(a)(1) of the Clean Air Act. In addition, vehicles or vehicle 
engines subject to this exemption may not subsequently be imported or 
sold into any state or territory of the United States other than Guam, 
American Samoa, or Commonwealth of the Northern Mariana Islands.
    13. A new Sec. 86.007-15 is added to Subpart A to read as follows:


Sec. 86.007-15  NOX and particulate averaging, trading, and 
banking for heavy-duty engines.

    Section 86.007-15 includes text that specifies requirements that 
differ from Sec. 86.004-15. Where a paragraph in Sec. 86.004-15 is 
identical and applicable to Sec. 86.007-15, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.004-15.''
    (a) through (k) [Reserved]. For guidance see Sec. 86.004-15.
    (l) The following provisions apply for model year 2007 and later 
engines. These provisions apply instead of the provisions of 
Sec. 86.004-15 (a) through (k) to the extent that they are in conflict.
    (1) Credits are calculated as NOX credits. Banked 
NOX plus NMHC credits and PM credits generated in prior 
model years (before 2007) may not be used in the 2007 and later 
NOX and PM averaging programs, unless:
    (i) The engines generating the credits meet all of the applicable 
standards listed in Sec. 86.007-10 (a)(1) or Sec. 86.007-11 (a)(1); or
    (ii) The engines using the credits are certified under the 
Sec. 86.007-11(f).
    (2) The FEL must be expressed to the same number of decimal places 
as the standard (one-hundredth of a gram per brake horsepower-hour).
    (3) Credits are rounded to the nearest one-hundredth of a Megagram.
    (4) Credits generated for 2007 and later model year engine families 
are not discounted, and do not expire.
    14. A new Sec. 86.007-23 is added to Subpart A to read as follows:


Sec. 86.007-23  Required data.

    Section 86.007-23 includes text that specifies requirements that 
differ from Sec. 86.095-23, Sec. 86.098-23, or Sec. 86.001-23. Where a 
paragraph in Sec. 86.095-23, Sec. 86.098-23, or Sec. 86.001-23 is 
identical and applicable to Sec. 86.007-23, this may

[[Page 35554]]

be indicated by specifying the corresponding paragraph and the 
statement ``[Reserved]. For guidance see Sec. 86.095-23.'', 
``[Reserved]. For guidance see Sec. 86.098-23.'', or ``[Reserved]. For 
guidance see Sec. 86.001-23.''.

(a) through (b)(1) [Reserved]. For guidance see Sec. 86.098-23.
(b)(2) [Reserved]. For guidance see Sec. 86.001-23.
(b)(3) and (b)(4) [Reserved]. For guidance see Sec. 86.098-23.

    (c) Emission data--(1) Certification vehicles. The manufacturer 
shall submit emission data (including, methane, methanol, formaldehyde, 
and hydrocarbon equivalent, as applicable) on such vehicles tested in 
accordance with applicable test procedures and in such numbers as 
specified. These data shall include zero-mile data, if generated, and 
emission data generated for certification as required under 
Sec. 86.000-26(a)(3). In lieu of providing emission data the 
Administrator may, on request of the manufacturer, allow the 
manufacturer to demonstrate (on the basis of previous emission tests, 
development tests, or other information) that the engine will conform 
with certain applicable emission standards of this part Standards 
eligible for such manufacturer requests are those for idle CO 
emissions, smoke emissions, or particulate emissions from methanol-
fueled diesel-cycle certification vehicles, those for particulate 
emissions from gasoline-fueled or methanol-fueled Otto-cycle 
certification vehicles, and those for formaldehyde emissions from 
petroleum-fueled vehicles. Also eligible for such requests are 
standards for total hydrocarbon emissions from model year 1994 and 
later certification vehicles. By separate request, including 
appropriate supporting test data, the manufacturer may request that the 
Administrator also waive the requirement to measure particulate or 
formaldehyde emissions when conducting Selective Enforcement Audit 
testing of Otto-cycle vehicles.
    (2) Certification engines. The manufacturer shall submit emission 
data on such engines tested in accordance with applicable emission test 
procedures of this subpart and in such numbers as specified. These data 
shall include zero-hour data, if generated, and emission data generated 
for certification as required under Sec. 86.000-26(c)(4). In lieu of 
providing emission data on idle CO emissions or particulate emissions 
from methanol-fueled diesel-cycle certification engines, on particulate 
emissions from Otto-cycle engines, on CO emissions from petroleum-
fueled or methanol-fueled diesel certification engines, or on 
formaldehyde emissions from petroleum-fueled engines the Administrator 
may, on request of the manufacturer, allow the manufacturer to 
demonstrate (on the basis of previous emission tests, development 
tests, or other information) that the engine will conform with the 
applicable emission standards of this part . In lieu of providing 
emission data on smoke emissions from methanol-fueled or petroleum-
fueled diesel certification engines, the Administrator may, on the 
request of the manufacturer, allow the manufacturer to demonstrate (on 
the basis of previous emission tests, development tests, or other 
information) that the engine will conform with the applicable emissions 
standards of this part In lieu of providing emissions data on smoke 
emissions from petroleum-fueled or methanol-fueled diesel engines, or 
on formaldehyde emissions from petroleum-fueled engines when conducting 
Selective Enforcement Audit testing under subpart K of this part, the 
Administrator may, on separate request of the manufacturer, allow the 
manufacturer to demonstrate (on the basis of previous emission tests, 
development tests, or other information) that the engine will conform 
with the applicable smoke emissions standards of this part.

(d) through (e)(1) [Reserved]. For guidance see Sec. 86.098-23.
(e)(2) and (e)(3) [Reserved]. For guidance see Sec. 86.001-23.
(f) through (g) [Reserved]. For guidance see Sec. 86.095-23.
(h) through (k) [Reserved]. For guidance see Sec. 86.098-23.
(l) [Reserved]. For guidance see Sec. 86.095-23.
(m) [Reserved]. For guidance see Sec. 86.098-23.

    15. A new Sec. 86.007-25 is added to Subpart A to read as follows:


Sec. 86.007-25  Maintenance.

    Section 86.007-25 includes text that specifies requirements that 
differ from Sec. 86.094-25, Sec. 86.098-25, or Sec. 86.004-25. Where a 
paragraph in Sec. 86.094-25, Sec. 86.098-25, or Sec. 86.004-25 is 
identical and applicable to Sec. 86.007-25, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.094-25.'', ``[Reserved]. For guidance see 
Sec. 86.098-25.'', or ``[Reserved]. For guidance see Sec. 86.004-25.''

(a) through (b)(3)(v)(H) [Reserved]. For guidance see Sec. 86.004-25.
(b)(3)(vi)(A) through (b)(3)(vi)(D) [Reserved]. For guidance see 
Sec. 86.094-25.
(b)(3)(vi)(E) through (b)(3)(vi)(J) [Reserved]. For guidance see 
Sec. 86.098-25.
(b)(4) introductory text through (b)(4)(iii)(C) [Reserved]. For 
guidance see Sec. 86.004-25.

    (b)(4)(iii)(D) Particulate trap or trap oxidizer systems including 
related components (adjustment and cleaning only for filter element, 
replacement of the filter element is not allowed during the useful 
life).
    (b)(4)(iii)(E) [Reserved]. For guidance see Sec. 86.004-25.
    (F) Catalytic converter (adjustment and cleaning only for catalyst 
beds, replacement of the bed is not allowed during the useful life).
    (b)(4)(iii)(G) through (b)(6) [Reserved]. For guidance see 
Sec. 86.004-25.
    (b)(7) through (h) [Reserved]. For guidance see Sec. 86.094-25.
    16. A new Sec. 86.007-35 is added to Subpart A to read as follows:


Sec. 86.007-35  Labeling.

    Section 86.007-35 includes text that specifies requirements that 
differ from Sec. 86.095-35. Where a paragraph in Sec. 86.095-35 is 
identical and applicable to Sec. 86.007-35, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.095-35.''.
    (a) Introductory text through (a)(1)(iii)(L) [Reserved]. For 
guidance see Sec. 86.095-35.
    (a)(1)(iii)(M) [Reserved]
    (a)(1)(iii)(N)(1) For vehicles exempted from compliance with 
certain revised performance warranty procedures, as specified in 
Sec. 86.096-21(j), a statement indicating the specific performance 
warranty test(s) of 40 CFR part 85, subpart W, not to be performed.
    (2) For vehicles exempted from compliance with all revised 
performance warranty procedures, as specified in Sec. 86.096-21(k), a 
statement indicating:
    (i) That none of the performance warranty tests of 40 CFR part 85, 
subpart W, is to be performed, and
    (ii) The name of the Administrator-approved alternative test 
procedure to be performed.
    (2) Light-duty truck and heavy-duty vehicles optionally certified 
in accordance with the light-duty truck provisions.
    (i) A legible, permanent label shall be affixed in a readily 
visible position in the engine compartment.
    (ii) The label shall be affixed by the vehicle manufacturer who has 
been issued the certificate of conformity for such vehicle, in such a 
manner that it cannot be removed without destroying or defacing the 
label. The label shall not

[[Page 35555]]

be affixed to any equipment which is easily detached from such vehicle.
    (iii) The label shall contain the following information lettered in 
the English language in block letters and numerals, which shall be of a 
color that contrasts with the background of the label:
    (A) The label heading: Important Vehicle Information;
    (B) Full corporate name and trademark of the manufacturer;
    (C) Engine displacement (in cubic inches or liters), engine family 
identification, and evaporative/refueling family;
    (a)(2)(iii)(D) through (a)(2)(iii)(E) [Reserved]. For guidance see 
Sec. 86.095-35.
    (a)(2)(iii)(F) [Reserved]
    (a)(2)(iii)(G) through (a)(2)(iii)(K) [Reserved]. For guidance see 
Sec. 86.095-35.
    (a)(2)(iii)(L) [Reserved]
    (a)(2)(iii)(M) through (a)(2)(iii)(N) [Reserved]. For guidance see 
Sec. 86.095-35.
    (a)(2)(iii)(O)(1) For vehicles exempted from compliance with 
certain revised performance warranty procedures, as specified in 
Sec. 86.096-21(j), a statement indicating the specific performance 
warranty test(s) of 40 CFR part 85, subpart W, not to be performed.
    (2) For vehicles exempted from compliance with all revised 
performance warranty procedures, as specified in Sec. 86.096-21(k), a 
statement indicating:
    (i) That none of the performance warranty tests of 40 CFR part 85, 
subpart W, is to be performed, and
    (ii) The name of the Administrator-approved alternative test 
procedure to be performed.
    (a)(3) heading through (b) [Reserved]. For guidance see 
Sec. 86.095-35.
    (c) Model year 2007 and later diesel heavy-duty vehicles, and 
diesel-fueled Tier 2 vehicles as defined in Subpart S of this Part, 
must include permanent readily visible labels on the dashboard (or 
instrument panel) and near the fuel inlet that states ``Ultra Low 
Sulfur Diesel Fuel Only''.
    (d) through (i) [Reserved]. For guidance see Sec. 86.095-35.
    17. A new Sec. 86.007-38 is added to Subpart A to read as follows:


Sec. 86.007-38  Maintenance Instructions.

    Section 86.007-38 includes text that specifies requirements that 
differ from those specified in Sec. 86.094-38 or Sec. 86.004-38. Where 
a paragraph in Sec. 86.094-38 or Sec. 86.004-38 is identical and 
applicable to Sec. 86.007-38, this may be indicated by specifying the 
corresponding paragraph and the statement ``[Reserved]. For guidance 
see Sec. 86.094-38.'', or ``[Reserved]. For guidance see Sec. 86.004-
38.''

(a) through (f) [Reserved]. For guidance see Sec. 86.004-38.
(g) [Reserved]. For guidance see Sec. 86.094-38.
(h) [Reserved]. For guidance see Sec. 86.004-38.

    (i) For each new diesel-fueled engine subject to the standards 
prescribed in Sec. 86.007-11, as applicable, the manufacturer shall 
furnish or cause to be furnished to the ultimate purchaser a statement 
that ``This engine must be operated only with ultra low sulfur diesel 
fuel (i.e., diesel fuel meeting EPA specifications for highway diesel 
fuel, including a 15 ppm sulfur cap).''
    18. A new Sec. 86.113-07 is added to subpart B to read as follows:


Sec. 86.113-07  Fuel specifications.

    Section 86.113-07 includes text that specifies requirements that 
differ from Sec. 86.113-94 or Sec. 86.113-04. Where a paragraph in 
Sec. 86.113-94 or Sec. 86.113-04 is identical and applicable to 
Sec. 86.113-07, this may be indicated by specifying the corresponding 
paragraph and the statement ``[Reserved]. For guidance see Sec. 86.113-
94 or ``[Reserved]. For guidance see Sec. 86.113-04''.

(a) [Reserved]. For guidance see Sec. 86.113-04.
(b)(1) [Reserved]. For guidance see Sec. 86.113-94.

    (b)(2) Petroleum fuel for diesel vehicles meeting the following 
specifications, or substantially equivalent specifications approved by 
the Administrator, must be used in exhaust emissions testing. The grade 
of petroleum diesel fuel recommended by the engine manufacturer, 
commercially designated as ``Type 2-D'' grade diesel, must be used:

----------------------------------------------------------------------------------------------------------------
               Item                                          ASTM test method No.             Type 2-D
----------------------------------------------------------------------------------------------------------------
(i) Cetane Number.................                          D613                   40-50
----------------------------------------------------------------------------------------------------------------
(ii) Cetane Index.................                          D976                   40-50
----------------------------------------------------------------------------------------------------------------
(iii) Distillation range:
    (A) IBP.......................   deg.F                  D86                    340-400
                                    ( deg.C)                                        (171.1-204.4)
----------------------------------------------------------------------------------------------------------------
    (B) 10 pct. point.............   deg.F                  D86                    400-460
                                    ( deg.C)                                        (204.4-237.8)
----------------------------------------------------------------------------------------------------------------
    (C) 50 pct. point.............   deg.F                  D86                    470-540
                                    ( deg.C)                                        (243.3-282.2)
----------------------------------------------------------------------------------------------------------------
    (D) 90 pct. point.............   deg.F                  D86                    560-630
                                    ( deg.C)                                        (293.3-332.2)
----------------------------------------------------------------------------------------------------------------
    (E) EP........................   deg.F                  D86                    610-690
                                    ( deg.C)                                        (321.1-365.6)
----------------------------------------------------------------------------------------------------------------
(iv) Gravity......................   deg.API                D287                   32-37
----------------------------------------------------------------------------------------------------------------
(v) Total sulfur..................  ppm                     D2622                  7-15
----------------------------------------------------------------------------------------------------------------
(vi) Hydrocarbon composition:
    Aromatics, minimum (Remainder   pct.                    D5186                  27
     shall be paraffins,
     naphthenes, and olefins).
----------------------------------------------------------------------------------------------------------------

[[Page 35556]]

 
(vii) Flashpoint, min.............   deg.F                  D93                    130
                                    ( deg.C)                                        (54.4)
----------------------------------------------------------------------------------------------------------------
(viii) Viscosity..................  centistokes             D445                   2.0-3.2
----------------------------------------------------------------------------------------------------------------

    (3) Petroleum fuel for diesel vehicles meeting the following 
specifications, or substantially equivalent specifications approved by 
the Administrator, shall be used in service accumulation. The grade of 
petroleum diesel fuel recommended by the engine manufacturer, 
commercially designated as ``Type 2-D'' grade diesel fuel, shall be 
used:

----------------------------------------------------------------------------------------------------------------
               Item                                          ASTM test method No.             Type 2-D
----------------------------------------------------------------------------------------------------------------
(i) Cetane Number.................                          D613                   38-58
----------------------------------------------------------------------------------------------------------------
(ii) Cetane Index.................                          D976                   min. 40
----------------------------------------------------------------------------------------------------------------
(iii) Distillation range:
    90 pct. point.................   deg.F                  D86                    540-630
----------------------------------------------------------------------------------------------------------------
(iv) Gravity......................   deg.API                D287                   30-39
----------------------------------------------------------------------------------------------------------------
(v) Total sulfur..................  ppm                     D2622                  7-15
----------------------------------------------------------------------------------------------------------------
(vi) Flashpoint, min..............   deg.F                  D93                    130
                                    ( deg.C)                                       (54.4)
----------------------------------------------------------------------------------------------------------------
(vii) Viscosity...................  centistokes             D445                   1.5-4.5
----------------------------------------------------------------------------------------------------------------

    (b)(4) through (g) [Reserved]. For guidance see Sec. 86.113-94.
    19. A new Sec. 86.1313-07 of subpart N is added to read as follows:


Sec. 86.1313-07  Fuel specifications.

    Section 86.1313-07 includes text that specifies requirements that 
differ from Sec. 86.1313-94. Where a paragraph in Sec. 86.1313-94 is 
identical and applicable to Sec. 86.1313-07, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.1313-94.''.
    (a) through (b)(1) [Reserved]. For guidance see Sec. 86.1313-94.
    (b)(2) Petroleum fuel for diesel engines meeting the specifications 
in Table N07-2, or substantially equivalent specifications approved by 
the Administrator, shall be used in exhaust emissions testing. The 
grade of petroleum fuel used shall be commercially designated as ``Type 
2-D'' grade diesel fuel except that fuel commercially designated as 
``Type 1-D'' grade diesel fuel may be substituted provided that the 
manufacturer has submitted evidence to the Administrator demonstrating 
to the Administrator's satisfaction that this fuel will be the 
predominant in-use fuel. Such evidence could include such things as 
copies of signed contracts from customers indicating the intent to 
purchase and use ``Type 1-D'' grade diesel fuel as the primary fuel for 
use in the engines or other evidence acceptable to the Administrator. 
Table N07-2 follows:

                                                   Table N07-2
----------------------------------------------------------------------------------------------------------------
                                                      ASTM  test
             Item                                    method  No.            Type 1-D              Type 2-D
----------------------------------------------------------------------------------------------------------------
(i) Cetane Number............                     D613               40-54                  40-50
----------------------------------------------------------------------------------------------------------------
(ii) Cetane Index............                     D976               40-54                  40-50
----------------------------------------------------------------------------------------------------------------
(iii) Distillation range:
    (A) IBP..................  F                  D86                330-390                340-400
                               (C)                                   (165.6-198.9)          (171.1-204.4)
----------------------------------------------------------------------------------------------------------------
    (B) 10 pct. point........  F                  D86                370-430                400-460
                               (C)                                   187.8-221.1)           (204.4-237.8)
----------------------------------------------------------------------------------------------------------------
    (C) 50 pct. point........  F                  D86                410-480                470-540
                               C)                                    (210.0-248.9)          (243.3-282.2)
----------------------------------------------------------------------------------------------------------------

[[Page 35557]]

 
    (D) 90 pct. point........  F                  D86                460-520                560-630
                               (C)                                   (237.8-271-1)          (293.3-332.2)
----------------------------------------------------------------------------------------------------------------
    (E) EP...................  F                  D86                500-560                610-690
                               (C)                                   (260.0-293.3)          (321.1-365.6)
----------------------------------------------------------------------------------------------------------------
(iv) Gravity.................  API                D287               40-44                  32-37
----------------------------------------------------------------------------------------------------------------
(v) Total sulfur.............  ppm                D2622              7-15                   7-15
----------------------------------------------------------------------------------------------------------------
(vi) Hydrocarbon composition:
    Aromatics, minimum         pct                D5186              8                      27
     (Remainder shall be
     paraffins, naphthenes,
     and olefins).
----------------------------------------------------------------------------------------------------------------
(vii) Flashpoint, min........  F                  93                 120                    130
                               (C)                                   (48.9)                 (54.4)
----------------------------------------------------------------------------------------------------------------
(viii) Viscosity.............  centistokes        D445               1.6-2.0                2.0-3.2
----------------------------------------------------------------------------------------------------------------

    (3) Petroleum diesel fuel for diesel engines meeting the 
specifications in table N07-3, or substantially equivalent 
specifications approved by the Administrator, shall be used in service 
accumulation. The grade of petroleum diesel fuel used shall be 
commercially designated as ``Type 2-D'' grade diesel fuel except that 
fuel commercially designated as ``Type 1-D'' grade diesel fuel may be 
substituted provided that the manufacturer has submitted evidence to 
the Administrator demonstrating to the Administrator's satisfaction 
that this fuel will be the predominant in-use fuel. Such evidence could 
include such things as copies of signed contracts from customers 
indicating the intent to purchase and use ``Type 1-D'' grade diesel 
fuel as the primary fuel for use in the engines or other evidence 
acceptable to the Administrator. Table N07-03 follows:

                                                   Table N07-3
----------------------------------------------------------------------------------------------------------------
                                                      ASTM  test
             Item                                    method  No.            Type 1-D              Type 2-D
----------------------------------------------------------------------------------------------------------------
(i) Cetane Number............                     D613               40-56                  38-58
----------------------------------------------------------------------------------------------------------------
(ii) Cetane Index............                     D976               min. 40                min. 40
----------------------------------------------------------------------------------------------------------------
(iii) Distillation range:
    90 pct. point............  F                  D86                440-530                540-630
                               (C)                                   226.7-276-7)           (293.3-332.2)
----------------------------------------------------------------------------------------------------------------
(iv) Gravity.................  API                D287               39-45                  30-39
----------------------------------------------------------------------------------------------------------------
(v) Total sulfur.............  ppm                D2622              7-15                   7-15
----------------------------------------------------------------------------------------------------------------
(vi) Flashpoint, min.........  F                  D93                130                    130
                               (C)                                   (54.4)                 (54.4)
----------------------------------------------------------------------------------------------------------------
(vii) Viscosity..............  centistokes        D445               1.2-2.2                1.5-4.5
----------------------------------------------------------------------------------------------------------------

    (b)(4) through (g) [Reserved]. For guidance see Sec. 86.1313-94.
    20. A new Sec. 86.1337-07 is added to subpart N to read as follows:


Sec. 86.1337-07  Engine dynamometer test run.

    Section 86.1337-07 includes text that specifies requirements that 
differ from Sec. 86.1337-96. Where a paragraph in Sec. 86.1337-96 is 
identical and applicable to Sec. 86.1337-07, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec. 86.1337-96.''.

(a) through (c) [Reserved]. For guidance see Sec. 86.1337-96.

    (d) For engines equipped with an aftertreatment device that is 
intermittently regenerated:
    (1) Repeat the ``hot start cycle'' until the regeneration event 
occurs;
    (2) Complete the ``hot start cycle'' in which the regeneration 
event occurs;
    (3) Measure emission during each of the ``hot start cycles''; and
    (4) Use the measured emission values for the ``hot start cycle'' 
with the highest emissions as the ``hot start cycle'' emissions for 
calculations in Sec. 86.1342. (Note: If the highest emission values for 
each pollutant do not occur in the same ``hot start cycle'', then use 
the emissions for the cycle in which the emissions come closest to 
causing an exceedance of an applicable standard.)

[[Page 35558]]

    21. A new Sec. 86.1808-07 is added to subpart S to read as follows:


Sec. 86.1808-07  Maintenance instructions.

    Section 86.1808-07 includes text that specifies requirements that 
differ from those specified in Sec. 86.1808-01. Where a paragraph in 
Sec. 86.1808-01 is identical and applicable to Sec. 86.1808-07, this 
may be indicated by specifying the corresponding paragraph and the 
statement ``[Reserved]. For guidance see Sec. 86.1808-01.''.

(a) through (f) [Reserved]. For guidance see Sec. 86.1808-01.

    (g) For each new diesel-fueled Tier 2 vehicle, the manufacturer 
shall furnish or cause to be furnished to the purchaser a statement 
that ``This vehicle must be operated only with ultra low sulfur diesel 
fuel (i.e., diesel fuel meeting EPA specifications for highway diesel 
fuel, including a 15 ppm sulfur cap).''.
    22. Section 86.1810-01 is amended by revising the introductory text 
to read as follows:


Sec. 86.1810-01  General standards; increase in emissions; unsafe 
conditions; waivers.

    This section applies to model year 2001 and later light-duty 
vehicles and light-duty trucks fueled by gasoline, diesel, methanol, 
natural gas and liquefied petroleum gas fuels. This section also 
applies to complete heavy-duty vehicles certified according to the 
provisions of this subpart. Multi-fueled vehicles (including dual-
fueled and flexible-fueled vehicles) shall comply with all requirements 
established for each consumed fuel (or blend of fuels in the case of 
flexible fueled vehicles). The standards of this subpart apply to both 
certification and in-use vehicles unless otherwise indicated. For Tier 
2 and interim non-Tier 2 vehicles, this section also applies to hybrid 
electric vehicles and zero emission vehicles. Unless otherwise 
specified, requirements and provisions of this subpart applicable to 
methanol fueled vehicles are also applicable to Tier 2 and interim non-
Tier 2 ethanol fueled vehicles.
* * * * *
    23. A new Sec. 86.1816-07 is added to subpart S, to read as 
follows:


Sec. 86.1816-07  Emission standards for complete heavy-duty vehicles.

    Section 86.1816-07 includes text that specifies requirements that 
differ from those specified in Sec. 86.1816-04.\1\ Where a paragraph in 
Sec. 86.1816-04 is identical and applicable to Sec. 86.1816-07, this 
may be indicated by specifying the corresponding paragraph and the 
statement ``[Reserved]. For guidance see Sec. 86.1816-04.'' This 
section applies to 2007 and later model year complete heavy-duty 
vehicles (excluding MDPVs) fueled by gasoline, methanol, natural gas 
and liquefied petroleum gas fuels except as noted. Multi-fueled 
vehicles shall comply with all requirements established for each 
consumed fuel. For methanol fueled vehicles, references in this section 
to hydrocarbons or total hydrocarbons shall mean total hydrocarbon 
equivalents and references to non-methane hydrocarbons shall mean non-
methane hydrocarbon equivalents.
    (a) Exhaust emission standards. (1) Exhaust emissions from 2007 and 
later model year complete heavy-duty vehicles at and above 8,500 pounds 
Gross Vehicle Weight Rating but equal to or less than 10,000 Gross 
Vehicle Weight Rating pounds shall not exceed the following standards 
at full useful life:
---------------------------------------------------------------------------

    \1\ Section 86.1816-04 was proposed to be added at 64 FR 58559, 
October 29, 1999.
---------------------------------------------------------------------------

    (i) [Reserved]
    (ii) Non-methane hydrocarbons. 0.195 grams per mile; this 
requirement may be satisfied by measurement of non-methane hydrocarbons 
or total hydrocarbons, at the manufacturer's option.
    (iii) Carbon monoxide. 7.3 grams per mile.
    (iv) Oxides of nitrogen. 0.20 grams per mile.
    (v) Particulate. 0.02 grams per mile.
    (vi) Formaldehyde. 0.016 grams per mile.
    (2) Exhaust emissions from 2007 and later model year complete 
heavy-duty vehicles above 10,000 pounds Gross Vehicle Weight Rating but 
less than 14,000 pounds Gross Vehicle Weight Rating shall not exceed 
the following standards at full useful life:
    (i) [Reserved]
    (ii) Non-methane hydrocarbons. 0.23 grams per mile; this 
requirement may be satisfied by measurement of non-methane hydrocarbons 
or total hydrocarbons, at the manufacturer's option.
    (iii) Carbon monoxide. 8.1 grams per mile.
    (iv) Oxides of nitrogen. 0.40 grams per mile.
    (v) Particulate. 0.02 grams per mile.
    (vi) Formaldehyde. 0.021 grams per mile.
    (b) [Reserved]
    (c) [Reserved]
    (d) Evaporative emissions. Evaporative hydrocarbon emissions from 
gasoline-fueled, natural gas-fueled, liquefied petroleum gas-fueled, 
and methanol-fueled complete heavy-duty vehicles shall not exceed the 
following standards. The standards apply equally to certification and 
in-use vehicles. The spitback standard also applies to newly assembled 
vehicles.
    (1) For the full three-diurnal test sequence, diurnal plus hot soak 
measurements: 1.4 grams per test.
    (2) Gasoline and methanol fuel only. For the supplemental two-
diurnal test sequence, diurnal plus hot soak measurements: 1.75 grams 
per test.
    (3) Gasoline and methanol fuel only. Running loss test: 0.05 grams 
per mile.
    (4) Gasoline and methanol fuel only. Fuel dispensing spitback test: 
1.0 grams per test.
    (e) through (h) [Reserved]. For guidance see Sec. 86.1816-04.
    24. A new Sec. 86.1824-07 is added to subpart S, to read as 
follows:


Sec. 86.1824-07  Durability demonstration procedures for evaporative 
emissions.

    Section 86.1824-07 includes text that specifies requirements that 
differ from those specified in Sec. 86.1801-01. Where a paragraph in 
Sec. 86.1824-01 is identical and applicable to Sec. 86.1824-07, this 
may be indicated by specifying the corresponding paragraph and the 
statement ``[Reserved]. For guidance see Sec. 86.1824-01.''. This 
section applies to gasoline-, methanol-, natural gas- and liquefied 
petroleum gas-fueled LDV/Ts, MDPVs, and HDVs.
    (a) through (f) [Reserved]. For guidance see Sec. 86.1824-01.
    25. Section 86.1829-01 is amended by revising paragraph 
(b)(1)(iii)(B) and adding paragraph (b)(1)(iii)(F) to read as follows:

[[Page 35559]]

Sec. 86.1829-01  Durability and emission testing requirements; waivers.

* * * * *
    (b)* * *(1) * * *
    (iii) * * *
    (B) In lieu of testing an Otto-cycle light-duty vehicle, light-duty 
truck, or heavy-duty vehicle for particulate emissions for 
certification, a manufacturer may provide a statement in its 
application for certification that such vehicles comply with the 
applicable standards. Such a statement must be based on previous 
emission tests, development tests, or other appropriate information.
* * * * *
    (F) In lieu of testing a petroleum-fueled heavy-duty vehicle for 
formaldehyde emissions for certification, a manufacturer may provide a 
statement in its application for certification that such vehicles 
comply with the applicable standards. Such a statement must be based on 
previous emission tests, development tests, or other appropriate 
information.
* * * * *
[FR Doc. 00-12952 Filed 6-1-00; 8:45 am]
BILLING CODE 6560-50-P