[Federal Register Volume 72, Number 37 (Monday, February 26, 2007)]
[Rules and Regulations]
[Pages 8428-8570]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-2667]



[[Page 8427]]

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Part II





Environmental Protection Agency





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40 CFR Parts 59, 80, 85, and 86



Control of Hazardous Air Pollutants From Mobile Sources; Final Rule

Federal Register / Vol. 72, No. 37 / Monday, February 26, 2007 / 
Rules and Regulations

[[Page 8428]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 59, 80, 85, and 86

[EPA-HQ-OAR-2005-0036; FRL-8278-4]
RIN 2060-AK70


Control of Hazardous Air Pollutants From Mobile Sources

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is adopting controls on gasoline, passenger vehicles, and 
portable fuel containers (primarily gas cans) that will significantly 
reduce emissions of benzene and other hazardous air pollutants 
(``mobile source air toxics''). Benzene is a known human carcinogen, 
and mobile sources are responsible for the majority of benzene 
emissions. The other mobile source air toxics are known or suspected to 
cause cancer or other serious health effects. We are limiting the 
benzene content of gasoline to an annual refinery average of 0.62% by 
volume, beginning in 2011. In addition, for gasoline, we are 
establishing a maximum average standard for refineries of 1.3% by 
volume beginning on July 1, 2012, which acts as an upper limit on 
gasoline benzene content when credits are used to meet the 0.62 volume 
% standard. We are also limiting exhaust emissions of hydrocarbons from 
passenger vehicles when they are operated at cold temperatures. This 
standard will be phased in from 2010 to 2015. For passenger vehicles, 
we are also adopting evaporative emissions standards that are 
equivalent to those currently in effect in California. Finally, we are 
adopting a hydrocarbon emissions standard for portable fuel containers 
beginning in 2009, which will reduce evaporation and spillage of 
gasoline from these containers. These controls will significantly 
reduce emissions of benzene and other mobile source air toxics such as 
1,3-butadiene, formaldehyde, acetaldehyde, acrolein, and naphthalene. 
There will be additional substantial benefits to public health and 
welfare because of significant reductions in emissions of particulate 
matter from passenger vehicles.

DATES: This rule is effective on April 27, 2007.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-2005-0036. All documents in the docket are listed on the 
www.regulations.gov Web site. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically through http://
www.regulations.gov or in hard copy at the Air Docket, EPA/DC, EPA 
West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. The 
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 
Friday, excluding legal holidays. The telephone number for the Public 
Reading Room is (202) 566-1744, and the telephone number for the Air 
Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Mr. Chris Lieske, U.S. EPA, Office of 
Transportation and Air Quality, Assessment and Standards Division 
(ASD), Environmental Protection Agency, 2000 Traverwood Drive, Ann 
Arbor, MI 48105; telephone number: (734) 214-4584; fax number: (734) 
214-4816; e-mail address: lieske.christopher@epa.gov, or Assessment and 
Standards Division Hotline; telephone number: (734) 214-4636; e-mail 
address: asdinfo@epa.gov.

SUPPLEMENTARY INFORMATION:

Does This Action Apply to Me?

    Entities potentially affected by this action are those that produce 
new motor vehicles, alter individual imported motor vehicles to address 
U.S. regulation, or convert motor vehicles to use alternative fuels. It 
will also affect you if you produce gasoline motor fuel or manufacture 
portable gasoline containers. Regulated categories include:

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                                 NAICS codes   SIC codes
            Category                 \a\          \b\            Examples of potentially affected entities
----------------------------------------------------------------------------------------------------------------
Industry.......................       336111         3711  Motor vehicle manufacturers.
Industry.......................       335312         3621  Alternative fuel vehicle converters.
                                      424720         5172
                                      811198         7539
                                 ...........         7549
Industry.......................       811111         7538  Independent commercial importers.
                                      811112         7533
                                      811198         7549
Industry.......................       324110         2911  Gasoline fuel refiners.
Industry.......................       326199         3089  Portable fuel container manufacturers.
                                      332431         3411
----------------------------------------------------------------------------------------------------------------
\a\ North American Industry Classification System (NAICS).
\b\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your activities are regulated by this action, you should carefully 
examine the applicability criteria in 40 CFR parts 59, 80, 85, and 86. 
If you have any questions regarding the applicability of this action to 
a particular entity, consult the person listed in the preceding FOR 
FURTHER INFORMATION CONTACT section.

Outline of This Preamble

I. Summary
II. Overview of Final Rule
    A. Light-Duty Vehicle Emission Standards
    B. Gasoline Fuel Standards
    C. Portable Fuel Container (PFC) Controls
III. Why Is EPA Taking This Action?
    A. Statutory Requirements
    1. Clean Air Act Section 202(l)
    2. Clean Air Act Section 183(e)
    3. Energy Policy Act
    B. Public Health Impacts of Mobile Source Air Toxics (MSATs)
    1. What Are MSATs?
    2. Health Risk Associated With MSATs
    a. National Cancer Risk
    b. National Risk of Noncancer Health Effects
    c. Exposure Near Roads
    d. Exposure From Attached Garages

[[Page 8429]]

    3. What Are the Health Effects of Air Toxics?
    a. Overview of Potential Cancer and Noncancer Health Effects
    b. Health Effects of Key MSATs
    i. Benzene
    ii. 1,3-Butadiene
    iii. Formaldehyde
    iv. Acetaldehyde
    v. Acrolein
    vi. Polycyclic Organic Matter (POM)
    vii. Naphthalene
    viii. Diesel Exhaust
    c. Gasoline PM
    d. Near-Roadway Health Effects
    C. Ozone
    1. Background
    2. Health Effects of Ozone
    3. Plant and Ecosystem Effects of Ozone
    4. Current and Projected 8-hour Ozone Levels
    D. Particulate Matter
    1. Background
    2. Health Effects of PM
    3. Welfare Effects of PM
    a. Visibility
    i. Background
    ii Current Visibility Impairment
    iii. Future Visibility Impairment
    b. Atmospheric Deposition
    c. Materials Damage and Soiling
    4. Current and Projected PM2.5 Levels
    5. Current PM10 Levels
IV. What Are the Emissions, Air Quality, and Public Health Impacts 
of This Rule?
    A. Emissions Impacts of All Rule Provisions Combined
    1. How Will MSAT Emissions Be Reduced?
    2. How Will VOC Emissions Be Reduced?
    3. How Will PM Emissions Be Reduced?
    B. Emission Impacts by Provision
    1. Vehicle Controls
    a. Volatile Organic Compounds (VOC)
    b. Toxics
    c. PM2.5
    2. Fuel Benzene Standard
    3. PFC Standards
    a. VOC
    b. Toxics
    C. What Are the Air Quality, Exposure, and Public Health Impacts 
of This Rule?
    1. Mobile Source Air Toxics
    2. Ozone
    3. PM
    D. What Other Mobile Source Emissions Control Programs Reduce 
MSATs?
    1. Fuels Programs
    a. Gasoline Sulfur
    b. Gasoline Volatility
    c. Diesel Fuel
    d. Phase-Out of Lead in Gasoline
    2. Highway Vehicle and Engine Programs
    3. Nonroad Engine Programs
    4. Voluntary Programs
    5. Additional Programs Under Development That Will Reduce MSATs
    a. On-Board Diagnostics for Heavy-Duty Vehicles Over 14,000 
Pounds
    b. Standards for Small Nonroad Spark-Ignition Engines
    c. Standards for Locomotive and Marine Diesel Engines
    E. How Do These Mobile Source Programs Satisfy the Requirements 
of Clean Air Act Section 202(l)?
V. New Light-duty Vehicle Standards
    A. Introduction
    B. What Cold Temperature Requirements Are We Adopting?
    1. Why Are We Adopting a New Cold Temperature NMHC Standard?
    2. What Are the New NMHC Exhaust Emissions Standards?
    3. Feasibility of the Cold Temperature NMHC Standards
    a. Currently Available Emission Control Technologies
    b. Feasibility Considering Current Certification Levels, 
Deterioration and Compliance Margin
    c. Feasibility and Test Programs
    4. Standards Timing and Phase-In
    a. Phase-In Schedule
    b. Alternative Phase-In Schedules
    5. Certification Levels
    6. Credit Program
    a. How Credits Are Calculated
    b. Credits Earned Prior to Primary Phase-In Schedule
    c. How Credits Can Be Used
    d. Discounting and Unlimited Life
    e. Deficits Can Be Carried Forward
    f. Voluntary Heavy-Duty Vehicle Credit Program
    7. Additional Vehicle Cold Temperature Standard Provisions
    a. Applicability
    b. Useful Life
    c. High Altitude
    d. In-Use Standards for Vehicles Produced During Phase-In
    8. Monitoring and Enforcement
    C. What Evaporative Emissions Standards Are We Finalizing?
    1. Current Controls and Feasibility of the New Standards
    2. Evaporative Standards Timing
    3. Timing for Flex Fuel Vehicles
    4. In-Use Evaporative Emission Standards
    5. Existing Differences Between California and Federal 
Evaporative Emission Test Procedures
    D. Additional Exhaust Control Under Normal Conditions
    E. Vehicle Provisions for Small Volume Manufacturers
    1. Lead Time Transition Provisions
    2. Hardship Provisions
    3. Special Provisions for Independent Commercial Importers 
(ICIs)
VI. Gasoline Benzene Control Program
    A. Description of and Rationale for the Gasoline Benzene Control 
Program
    1. Gasoline Benzene Content Standard
    a. Description of the Average Benzene Content Standard
    b. Why Are We Finalizing a Benzene Content Standard?
    i. Standards That Would Include Toxics Other Than Benzene
    ii. Control of Gasoline Sulfur and/or Volatility for MSAT 
Reduction
    iii. Diesel Fuel Changes
    c. Why Are We Finalizing a Level of 0.62 vol% for the Average 
Benzene Standard?
    i. General Technological Feasibility of Benzene Control
    ii. Appropriateness of the 0.62 vol% Average Benzene Content 
Standard
    iii. Timing of the Average Standard
    d. Upper Limit Benzene Standard
    2. Description of the Averaging, Banking, and Trading (ABT) 
Program
    a. Overview
    b. Credit Generation
    i. Eligibility
    ii. Early Credit Generation
    iii. Standard Credit Generation
    c. Credit Use
    i. Early Credit Life
    ii. Standard Credit Life
    iii. Consideration of Unlimited Credit Life
    iv. Credit Trading Provisions
    3. Provisions for Small Refiners and Refiners Facing Hardship 
Situations
    a. Provisions for Small Refiners
    i. Definition of Small Refiner for Purposes of the MSAT2 Small 
Refiner Provisions
    ii. Small Refiner Status Application Requirements
    iii. Small Refiner Provisions
    iv. The Effect of Financial and Other Transactions on Small 
Refiner Status and Small Refiner Relief Provisions
    b. Provisions for Refiners Facing Hardship Situations
    i. Temporary Waivers Based on Extreme Hardship Circumstances
    ii. Temporary Waivers Based on Unforeseen Circumstances
    c. Option for Early Compliance in Certain Circumstances
    B. How Will the Gasoline Benzene Standard Be Implemented?
    1. General Provisions
    2. Small Refiner Status Application Requirements
    3. Administrative and Enforcement Provisions
    a. Sampling/Testing
    b. Recordkeeping/Reporting
    C. How Will the Program Relate to Other Fuel-Related Toxics 
Programs?
    D. How Does This Program Satisfy the Statutory Requirements of 
Clean Air Act Section 202(l)(2)?
VII. Portable Fuel Containers
    A. What Are the New HC Emissions Standards for PFCs?
    1. Description of Emissions Standard
    2. Determination of Best Available Control
    3. Diesel, Kerosene and Utility Containers
    4. Automatic Shut-Off
    B. Timing of Standard
    C. What Test Procedures Would Be Used?
    1. Diurnal Test
    2. Preconditioning To Ensure Durable In-Use Control
    a. Durability Cycles
    b. Preconditioning Fuel Soak
    c. Spout Actuation
    D. What Certification and In-Use Compliance Provisions Is EPA 
Adopting?
    1. Certification
    2. Emissions Warranty and In-Use Compliance
    3. Labeling
    E. How Would State Programs Be Affected by EPA Standards?
    F. Provisions for Small PFC Manufacturers
    1. First Type of Hardship Provision
    2. Second Type of Hardship Provision
VIII. What Are the Estimated Impacts of the Rule?
    A. Refinery Costs of Gasoline Benzene Reduction
    1. Methodology
    a. Overview of the Benzene Program Cost Methodology

[[Page 8430]]

    b. Changes to the Cost Estimation Methodology Used in the 
Proposed Rule
    c. Linear Programming Cost Model
    d. Refinery-by-Refinery Cost Model
    e. Price of Chemical Grade Benzene
    2. Summary of Costs
    a. Nationwide Costs of the Final Benzene Control Program
    b. Regional Costs
    c. Refining Industry Cost Study
    B. What Are the Vehicle Cost Impacts?
    C. What Are the PFC Cost Impacts?
    D. Cost per Ton of Emissions Reduced
    E. Benefits
    1. Unquantified Health and Environmental Benefits
    2. Quantified Human Health and Environmental Effects of the 
Final Cold Temperature Vehicle Standard
    3. Monetized Benefits
    4. What Are the Significant Limitations of the Benefit Analysis?
    5. How Do the Benefits Compare to the Costs of the Final 
Standards?
    F. Economic Impact Analysis
    1. What Is an Economic Impact Analysis?
    2. What Is the Economic Impact Model?
    3. What Economic Sectors Are Included in This Economic Impact 
Analysis?
    4. What Are the Key Features of the Economic Impact Model?
    5. What Are the Key Model Inputs?
    6. What Are the Results of the Economic Impact Modeling?
IX. Public Participation
X. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act (RFA), as Amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 
U.S.C. 601 et seq.
    1. Overview
    2. The Need for and Objectives of This Rule
    3. Summary of the Significant Issues Raised by the Public 
Comments
    4. Summary of Regulated Small Entities
    a. Highway Light-Duty Vehicles
    b. Gasoline Refiners
    c. Portable Fuel Container Manufacturers
    5. Description of the Reporting, Recordkeeping, and Other 
Compliance Requirements of the Rule
    6. Relevant Federal Rules
    7. Steps Taken To Minimize the Significant Economic Impact on 
Small Entities
    a. Significant Panel Findings
    b. Outreach With Small Entities (and the Panel Process)
    c. Small Business Flexibilities
    i. Highway Light-Duty Vehicles
    ii. Gasoline Refiners
    iii. Portable Fuel Containers
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
XI. Statutory Provisions and Legal Authority

I. Summary

    Mobile sources emit air toxics (also known as ``hazardous air 
pollutants'') that can cause cancer and other serious health effects. 
Mobile sources contribute significantly to the nationwide risk from 
breathing outdoor sources of air toxics. Mobile sources were 
responsible for about 44% of outdoor toxic emissions, almost 50% of the 
cancer risk, and 74% of the noncancer risk according to EPA's National-
Scale Air Toxics Assessment (NATA) for 1999. In addition, people who 
live or work near major roads or live in homes with attached garages 
are likely to have higher exposures and risk, which are not reflected 
in NATA.
    According to NATA for 1999, there are a few mobile source air 
toxics that pose the greatest risk based on current information about 
ambient levels and exposure. These include benzene, 1,3-butadiene, 
formaldehyde, acrolein, naphthalene, and polycyclic organic matter 
(POM). All of these compounds are gas-phase hydrocarbons except POM, 
which appears in the gas and particle phases. Benzene is the most 
significant contributor to cancer risk from all outdoor air toxics, 
according to NATA for 1999. NATA does not include a quantitative 
estimate of cancer risk for diesel exhaust, but it concludes that 
diesel exhaust is a mixture of pollutants that collectively poses one 
of the greatest relative cancer risks when compared with the other 
individual pollutants assessed. Although we expect significant 
reductions in mobile source air toxics in the future, cancer and 
noncancer health risks will remain a public health concern, and 
exposure to benzene will remain the largest contributor to this risk.
    In this rule, we are finalizing standards for passenger vehicles, 
gasoline, and portable fuel containers (typically gas cans). 
Specifically, we are finalizing standards for:
     exhaust hydrocarbon emissions from passenger vehicles 
during cold temperature operation;
     evaporative hydrocarbon emissions from passenger vehicles;
     the benzene content of gasoline; and
     hydrocarbon emissions from portable fuel containers that 
would reduce evaporation, permeation, and spillage from these 
containers.
    These standards will significantly reduce emissions of the many air 
toxics that are hydrocarbons, including benzene, 1,3-butadiene, 
formaldehyde, acetaldehyde, acrolein, and naphthalene. The fuel benzene 
standards and hydrocarbon standards for vehicles and portable fuel 
containers will together reduce total emissions of air toxics by 
330,000 tons in 2030, including 61,000 tons of benzene. As a result of 
this final rule, in 2030 passenger vehicles will emit 45% less benzene, 
gas cans will emit almost 80% less benzene, and gasoline will have 38% 
less benzene overall. Mobile sources were responsible for over 70% of 
benzene emissions in 1999.
    The reductions in mobile source air toxics emissions will reduce 
exposure and predicted risk of cancer and noncancer health effects, 
including in environments where exposure and risk may be highest, such 
as near roads, in vehicles, and in homes with attached garages. 
Nationwide, the cancer risk attributable to total MSATs emitted by all 
mobile sources will be reduced by 30%, and the risk from mobile source 
benzene will be reduced by 37%. At 2030 exposure levels, the highway 
vehicle contribution to MSAT cancer risk will be reduced on average 36% 
across the U.S., and the highway vehicle contribution to benzene cancer 
risk will be reduced on average by 43% across the U.S. Nationwide, the 
mobile source contribution to the respiratory hazard index will be 
reduced by 23%. In addition, the hydrocarbon reductions from the 
vehicle and gas can standards will reduce VOC emissions (which are 
precursors to ozone and PM2.5) by over 1.1 million tons in 
2030. The vehicle standards will reduce direct PM2.5 
emissions by over 19,000 tons in 2030 and will also reduce secondary 
formation of PM2.5. Although ozone and PM2.5 are 
considered criteria pollutants rather than ``air toxics,'' reductions 
in ozone and PM2.5 are nevertheless important co-benefits of 
this proposal.
    Section I.B.2 of this preamble provides more discussion of the 
public health and environmental impacts of mobile source air toxics, 
ozone, and PM. Details on health effects, emissions, exposure, and 
cancer risks are also located in Chapters 1-3 of the Regulatory Impact 
Analysis (RIA) for this rule.
    We estimate that the benefits of this rule will be about $6 billion 
in 2030, based on the direct PM2.5 reductions from the 
vehicle standards, plus unquantified benefits from reductions in mobile 
source air toxics and VOC. We estimate that the annual net social costs 
of this rule will be about $400 million

[[Page 8431]]

in 2030 (expressed in 2003 dollars). These net social costs include the 
value of fuel savings from the proposed gas can standards, which will 
be worth about $92 million in 2030.
    The rule will have an average cost of 0.27 cents per gallon of 
gasoline, less than $1 per vehicle, and less than $2 per gas can. The 
reduced evaporation from gas cans will result in fuel savings that will 
more than offset the increased cost for the gas can. In 2030, the long-
term cost per ton of the standards (in combination, and including fuel 
savings) will be $1,100 per ton of total mobile source air toxics 
reduced; $5,900 per ton of benzene reduced; and no cost for the 
hydrocarbon and PM reductions (because we expect the vehicle standards 
will have no cost in 2020 and beyond). Section VIII of the preamble and 
Chapters 8-13 of the RIA provide more details on the costs, benefits, 
and economic impacts of the standards. The impacts on small entities 
and the flexibilities we are finalizing are discussed in section X of 
this preamble and Chapter 14 of the RIA.

II. Overview of Final Rule

A. Light-Duty Vehicle Emission Standards

    As described in more detail in section V, we are adopting new 
standards for both exhaust and evaporative emissions from passenger 
vehicles. The new exhaust emissions standards will significantly reduce 
non-methane hydrocarbon (NMHC) emissions from passenger vehicles at 
cold temperatures. These hydrocarbons include many mobile source air 
toxics (including benzene), as well as VOC.
    As we discussed in the proposal, current vehicle emission standards 
are based on testing of NMHC that is generally performed at 75 [deg]F. 
Recent research and analysis indicates that these standards are not 
resulting in robust control of NMHC at lower temperatures. We believe 
that cold temperature NMHC control can be substantially improved using 
the same technological approaches that are generally already being used 
in the Tier 2 vehicle fleet to meet the stringent standards at 75 
[deg]F. These cold-temperature NMHC controls will also result in lower 
direct PM emissions at cold temperatures.
    Accordingly, consistent with the proposal, we are adopting a new 
NMHC exhaust emissions standard at 20 [deg]F for light-duty vehicles, 
light-duty trucks, and medium-duty passenger vehicles. Vehicles at or 
below 6,000 pounds gross vehicle weight rating (GVWR) will be subject 
to a sales-weighted fleet average NMHC level of 0.3 grams/mile. 
Vehicles between 6,000 and 8,500 pounds GVWR and medium-duty passenger 
vehicles will be subject to a sales-weighted fleet average NMHC level 
of 0.5 grams/mile. For lighter vehicles, the standard will phase in 
between 2010 and 2013. For heavier vehicles, the new standards will 
phase in between 2012 and 2015. The standards include a credit program 
and other provisions designed to provide flexibility to manufacturers, 
especially during the phase-in periods. These provisions are designed 
to allow the earliest possible phase-in of standards and help minimize 
costs and ease the transition to new standards. These standards in 
combination are expected to lead to emissions control over a wide range 
of in-use temperatures, and not just at 20 [deg]F and 75 [deg]F.
    We are also establishing, as proposed, a set of nominally more 
stringent evaporative emission standards for all light-duty vehicles, 
light-duty trucks, and medium-duty passenger vehicles. The standards 
are equivalent to California's Low Emission Vehicle II (LEV II) 
standards, and they reflect the evaporative emissions levels that are 
already being achieved nationwide. The standards codify the approach 
that most manufacturers are already taking for 50-state evaporative 
systems, and thus prevent backsliding in the future. The evaporative 
emission standards will take effect in 2009 for lighter vehicles and in 
2010 for the heavier vehicles.
    Section V of this preamble provides details on the exhaust and 
evaporative vehicle standards.

B. Gasoline Fuel Standards

    As we proposed, we are limiting the benzene content of all 
gasoline, both reformulated and conventional. Beginning January 1, 
2011, refiners must meet a refinery average gasoline benzene content 
standard of 0.62% by volume on all their gasoline. The program is 
described in more detail in section VI of this preamble. The standard 
does not apply to gasoline produced and/or sold for use in California 
because such gasoline is already covered under California's Phase 3 
Reformulated Gasoline (Ca3RFG) program.
    The benzene content standard, in combination with the existing 
gasoline sulfur standard, will result in air toxics emissions 
reductions that are greater than required under all existing gasoline 
toxics programs. As a result, upon full implementation in 2011, the 
regulatory provisions for the benzene control program will become the 
regulatory mechanism used to implement the reformulated gasoline (RFG) 
and Anti-dumping annual average toxics performance and benzene content 
requirements. The current RFG and Anti-dumping annual average 
provisions thus will be replaced by this benzene control program. This 
benzene control program will also replace the requirements of the 2001 
MSAT rule (``MSAT1''). In addition, the program will satisfy certain 
fuel MSAT conditions of the Energy Policy Act of 2005 and obviate the 
need to revise toxics baselines for reformulated gasoline otherwise 
required by that Act. In all of these ways, the existing national fuel-
related MSAT regulatory program will be significantly consolidated and 
simplified.
    We are finalizing a nationwide ABT program that allows refiners and 
importers to choose the most economical compliance strategy (investment 
in technology, credits, or both) for meeting the 0.62 vol% annual 
average standard. From 2007-2010, refiners can generate ``early 
credits'' by making qualifying benzene reductions earlier than 
required. Beginning in 2011 and continuing indefinitely, refiners and 
importers can generate ``standard credits'' by producing/importing 
gasoline with benzene levels below 0.62 volume percent (vol%) on an 
annual average basis. Credits may be used interchangeably towards 
company compliance with the 0.62 vol% standard, ``banked'' for future 
use, and/or transferred nationwide to other refiners/importers subject 
to the standard. In addition to the 0.62 vol% standard, refiners and 
importers must also meet a 1.3 vol% maximum average benzene standard 
beginning July 1, 2012. To comply with the maximum average standard, 
gasoline produced by a refinery or imported by an importer may not 
exceed 1.3 vol% benzene on an annual average basis.
    The ABT program allows us to set a numerically more stringent 
benzene standard than would otherwise be achievable (within the meaning 
of Clean Air Act section 202(l)(2)). The ABT program also allows 
implementation to occur earlier. Under this benzene content standard 
and ABT program, gasoline in all areas of the country will have lower 
benzene levels than they have today. Overall benzene levels will be 38% 
lower. This will reduce benzene emissions and exposure nationwide.
    The program includes special provisions for refiners facing 
hardship. Refiners approved as ``small refiners'' are eligible for 
certain temporary relief provisions. In addition, any refiner facing 
extreme unforeseen circumstances or extreme hardship

[[Page 8432]]

circumstances can apply for similar temporary relief.

C. Portable Fuel Container (PFC) Controls

    Portable fuel containers, such as gas cans and diesel and kerosene 
containers, are consumer products used to refuel a wide variety of 
equipment, including lawn and garden equipment, recreational equipment, 
and passenger vehicles that have run out of gas. As described in 
section VII, we are adopting standards for these containers that would 
reduce hydrocarbon emissions from evaporation, permeation, and 
spillage. The program we are finalizing is consistent with the 
proposal, except that instead of applying only to gasoline containers, 
it will also apply to diesel and kerosene containers. These standards 
will significantly reduce emissions of benzene and other gaseous 
toxics, as well as VOC. VOC is an ozone precursor, and certain aromatic 
species are believed to contribute to secondary organic PM 
2.5.
    We are finalizing a performance-based standard of 0.3 grams per 
gallon per day of hydrocarbons, determined based on the emissions from 
the can over a diurnal test cycle specified in the rule. The standard 
applies to containers manufactured on or after January 1, 2009. We are 
also establishing test procedures and a certification and compliance 
program, in order to ensure that containers meet the emission standard 
over a range of in-use conditions. The standards are based on the 
performance of best available control technologies, such as durable 
permeation barriers, automatically closing spouts, and cans that are 
well-sealed, and the standards will result in the use of these control 
technologies.
    California implemented an emissions control program for gas cans in 
2001, and since then, several other states have adopted the program. 
Last year, California adopted a revised program, which will take effect 
July 1, 2007. The revised California program is very similar to the 
program we are finalizing. Although a few aspects of the programs are 
different, we believe manufacturers will be able to meet both EPA and 
California requirements with the same container designs, resulting in 
equivalent emission reductions.

III. Why Is EPA Taking This Action?

    People experience elevated risk of cancer and other noncancer 
health effects from exposure to air toxics. Mobile sources are 
responsible for a significant portion of this risk. For example, 
benzene is the most significant contributor to cancer risk from all 
outdoor air toxics \1\, and most of the nation's benzene emissions come 
from mobile sources. These risks vary depending on where people live 
and work and the kinds of activities in which they engage. People who 
live or work near major roads, people that spend a large amount of time 
in vehicles or work with motorized equipment, and people living in 
homes with attached garages are likely to have higher exposures and 
higher risks. Although we expect significant reductions in mobile 
source air toxics in the future, predicted cancer and noncancer health 
risks are likely to remain a public health concern. Benzene will likely 
remain the largest contributor to this risk. In addition, some mobile 
source air toxics contribute to the formation of ozone and PM 
2.5, which contribute to serious public health problems. 
Section III.B of this preamble discusses the risks posed by outdoor 
toxics now and in the future. Sections III.C and III.D discuss the 
health and welfare effects of ozone and PM, respectively. The controls 
in this rule will significantly reduce exposure to emissions of mobile 
source air toxics (and reduce exposure to ozone and PM 2.5 
as well), thus reducing these public health concerns.
---------------------------------------------------------------------------

    \1\ Based on quantitative estimates of risk, which do not 
include risks associated with diesel particulate matter and diesel 
exhaust organic gases.
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A. Statutory Requirements

1. Clean Air Act Section 202(l)
    Section 202(l)(2) of the Clean Air Act requires EPA to set 
standards to control hazardous air pollutants (``air toxics'') from 
motor vehicles \2\, motor vehicle fuels, or both. These standards must 
reflect the greatest degree of emission reduction achievable through 
the application of technology which will be available, taking into 
consideration the motor vehicle standards established under section 
202(a) of the Act, the availability and cost of the technology, and 
noise, energy and safety factors, and lead time. The standards are to 
be set under Clean Air Act sections 202(a)(1) or 211(c)(1), and they 
are to apply, at a minimum, to benzene and formaldehyde emissions.
---------------------------------------------------------------------------

    \2\ ``Motor vehicles'' is a term of art, defined in Clean Air 
Act section 216(2) as ``any self-propelled vehicle designed for 
transporting persons or property on a street or highway.''
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    Section 202(a)(1) of the Clean Air Act directs EPA to set standards 
for new motor vehicles or new motor vehicle engines which EPA judges to 
cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare. We are issuing the 
vehicle emissions standards under this authority in conjunction with 
section 202(l)(2).
    Section 211(c)(1)(A) of the Clean Air Act authorizes EPA (among 
other things) to control the manufacture of fuel if any emission 
product of such fuel causes or contributes to air pollution which may 
reasonably be anticipated to endanger public health or welfare. We are 
issuing the benzene standard for gasoline under this authority in 
conjunction with section 202(l)(2).
    Clean Air Act section 202(l)(2) also requires EPA to revise its 
regulations controlling hazardous air pollutants from motor vehicles 
and fuels, ``from time to time.'' EPA's first rule under Clean Air Act 
section 202(l) was published on March 29, 2001, entitled, ``Control of 
Emissions of Hazardous Air Pollutants from Mobile Sources'' (66 FR 
17230). That rule committed to additional rulemaking that would 
evaluate the need for and feasibility of additional controls. Today's 
final rule fulfills that commitment.
2. Clean Air Act Section 183(e)
    Clean Air Act section 183(e)(3) requires EPA to list categories of 
consumer or commercial products that the Administrator determines, 
based on an EPA study of VOC emissions from such products, contribute 
at least 80 percent of the VOC emissions from such products in areas 
violating the national ambient air quality standard for ozone. EPA 
promulgated this list at 60 FR 15264 (March 23, 1995), but it did not 
consider or list portable fuel containers. After analyzing these 
containers' emissions inventory impacts, we recently published a 
Federal Register notice that added portable fuel containers to the list 
of consumer products to be regulated.\3\ EPA is required to develop 
rules reflecting ``best available controls'' to reduce VOC emissions 
from the listed products. ``Best available controls'' are defined in 
section 183(e)(1)(A) as follows:
---------------------------------------------------------------------------

    \3\ 71 FR 28320, May 16, 2006, ``Consumer and Commercial 
Products: Schedule for Regulation''.

    The term ``best available controls'' means the degree of 
emissions reduction that the Administrator determines, on the basis 
of technological and economic feasibility, health, environmental, 
and energy impacts, is achievable through the application of the 
most effective equipment, measures, processes, methods, systems, or 
techniques, including chemical reformulation, product or feedstock 
substitution, repackaging, and directions for use, consumption, 
---------------------------------------------------------------------------
storage, or disposal.

    Section 183(e)(4) also allows these standards to be implemented by 
means

[[Page 8433]]

of ``any system or systems of regulation as the Administrator may deem 
appropriate, including requirements for registration and labeling, 
self-monitoring and reporting * * * concerning the manufacture, 
processing, distribution, use, consumption, or disposal of the 
product.'' We are issuing a hydrocarbon standard for portable fuel 
containers under the authority of section 183(e).
3. Energy Policy Act
    Section 1504(b) of the Energy Policy Act of 2005 requires EPA to 
adjust the toxics emissions baselines for individual refineries for 
reformulated gasoline to reflect 2001-2002 fuel qualities. However, the 
Act provides that this action becomes unnecessary if EPA takes action 
which results in greater overall reductions of toxics emissions from 
vehicles in areas with reformulated gasoline. As described in section 
VI of this preamble, we believe the benzene content standard we are 
finalizing today will in fact result in greater overall reductions than 
would be achieved by adjusting the individual baselines under the 
Energy Policy Act. Accordingly, under the provisions of the Energy 
Policy Act, this rule obviates the need for readjusting emissions 
baselines for reformulated gasoline.

B. Public Health Impacts of Mobile Source Air Toxics (MSATs)

1. What Are MSATs?
    Section 202(l) refers to ``hazardous air pollutants from motor 
vehicles and motor vehicle fuels.'' We use the term ``mobile source air 
toxics (MSATs)'' to refer to compounds that are emitted by mobile 
sources and have the potential for serious adverse health effects. Some 
MSATs are known or suspected to cause cancer. Some of these pollutants 
are also known to have adverse health effects on people's respiratory, 
cardiovascular, neurological, immune, reproductive, or other organ 
systems, and they may also have developmental effects. Some may pose 
particular hazards to more susceptible and sensitive populations, such 
as pregnant women, children, the elderly, or people with pre-existing 
illnesses.
    Some MSATs of particular concern include benzene, 1,3-butadiene, 
formaldehyde, acrolein, naphthalene, polycyclic organic matter, and 
diesel particulate matter and diesel exhaust organic gases. These are 
compounds that EPA's National-Scale Air Toxics Assessment (NATA) for 
1999 \4\ identifies as the most significant contributors to cancer and 
noncancer health risk from breathing outdoor air toxics, and that have 
a significant contribution from mobile sources. Our understanding of 
what compounds pose the greatest risk will evolve over time, based on 
our understanding of the ambient levels and health effects associated 
with the compounds.
---------------------------------------------------------------------------

    \4\ http://www.epa.gov/ttn/atw/nata1999/.
---------------------------------------------------------------------------

    EPA has compiled a Master List of Compounds Emitted by Mobile 
Sources, based on an extensive review of the literature on exhaust and 
evaporative emissions from onroad and nonroad equipment. The list 
currently includes approximately 1,000 compounds, and it is available 
in the public docket for this rule and on the Web (http://www.epa.gov/
otaq/toxics.htm). Chapter 1 of the RIA provides a detailed discussion 
of information sources for identifying those compounds that have the 
potential for serious adverse health effects (i.e., could be considered 
``MSATs''). This discussion includes a list of those compounds that are 
emitted by mobile sources and listed in EPA's Integrated Risk 
Information System (IRIS).
    MSATs are emitted by motor vehicles, nonroad engines (such as lawn 
and garden equipment, farming and construction equipment, locomotives, 
and ships), aircraft, and their fuels. MSATs are emitted as a result of 
various processes. Some MSATs are present in fuel or fuel additives and 
are emitted to the air when the fuel evaporates or passes through the 
engine. Some MSATs are formed through engine combustion processes. Some 
compounds, like formaldehyde and acetaldehyde, are also formed through 
a secondary process when other mobile source pollutants undergo 
chemical reactions in the atmosphere. Finally, some air toxics, such as 
metals, result from engine wear or from impurities in oil or fuel.
    There are other sources of air toxics, including stationary 
sources, such as power plants, factories, oil refineries, dry cleaners, 
gas stations, and small manufacturers. They can also be produced by 
combustion of wood and other organic materials. There are also indoor 
sources of air toxics, such as solvent evaporation and outgassing from 
furniture and building materials.
2. Health Risk Associated With MSATs
    EPA's National-Scale Air Toxics Assessment (NATA) for 1999 provides 
some perspective on the average risk of cancer and noncancer health 
effects associated with breathing air toxics from outdoor sources, and 
the contribution of mobile sources to these risks.5, 6 NATA 
assessed 177 pollutants. It is worth noting that NATA does not include 
indoor sources of air toxics. Also, it assumes uniform outdoor 
concentrations within a census tract, and therefore does not reflect 
elevated concentrations and exposures near roadways or other sources 
within a census tract. Additional limitations and uncertainties 
associated with NATA are discussed in Section 3.2.1.3 of the RIA. 
Nevertheless, its findings are useful in providing a perspective on the 
magnitude of risks posed by outdoor sources of air toxics generally, 
and in identifying what pollutants and sources are important 
contributors to these health risks. Some of NATA's findings are 
discussed in the paragraphs below.
---------------------------------------------------------------------------

    \5\ http://www.epa.gov/ttn/atw/nata1999/.
    \6\ NATA does not include a quantitative estimate of cancer risk 
for diesel particulate matter and diesel exhaust organic gases. EPA 
has concluded that while diesel exhaust is likely to be a human 
carcinogen, available data are not sufficient to develop a confident 
estimate of cancer unit risk.
---------------------------------------------------------------------------

    For this rule, EPA also performed a national-scale assessment for 
1999 and future years using the same modeling tools and approach as the 
1999 NATA, but with updated emissions inventories and an updated 
exposure model. The exposure model accounts for higher toxics 
concentrations near roads. This updated national-scale analysis 
examined only those toxics that are emitted by mobile sources (i.e., a 
subset of the 177 pollutants included in NATA). However, the analysis 
includes all sources of those pollutants, including mobile, stationary, 
and area sources. The analysis is discussed in detail in Chapter 3 of 
the RIA, and some highlights of the findings are discussed immediately 
below.
    In addition to national-scale analysis, we have also evaluated more 
refined local-scale modeling, measured ambient concentrations, personal 
exposure measurements, and other data. This information is discussed in 
detail in Chapter 3 of the RIA. These data collectively show that while 
levels of air toxics are decreasing, potential public health risks 
remain a concern, and ambient levels and personal exposure vary 
significantly. These data indicate that concentrations of benzene and 
other air toxics can be higher near high-traffic roads, inside 
vehicles, and in homes with attached garages.
a. National Cancer Risk
    According to NATA, the average national cancer risk in 1999 from 
all outdoor sources of air toxics was estimated to be 42 in a million. 
That is, 42 out of one million people would be

[[Page 8434]]

expected to contract cancer from a lifetime of breathing air toxics at 
1999 levels. Mobile sources were responsible for 44% of outdoor toxic 
emissions and almost 50% of the cancer risk. Benzene is the largest 
contributor to cancer risk of all 133 pollutants quantitatively 
assessed in the 1999 NATA, and mobile sources are the single largest 
source of ambient benzene.
    According to the national-scale analysis performed for this rule, 
the national average cancer risk in 1999 from breathing outdoor sources 
of MSATs was about 25 in a million.\7\ Over 224 million people in 1999 
were exposed to a risk level above 10 in a million due to chronic 
inhalation exposure to MSATs. About 130 million people in 1999 were 
exposed to a risk level above 10 in a million due to chronic inhalation 
exposure to benzene alone. Mobile sources were responsible for over 70% 
of benzene emissions in 1999.
---------------------------------------------------------------------------

    \7\ This includes emissions from mobile and stationary sources 
of these pollutants.
---------------------------------------------------------------------------

    Although air toxics emissions are projected to decline in the 
future as a result of standards EPA has previously adopted, cancer risk 
will continue to be a public health concern. Without additional 
controls, the predicted national average cancer risk from MSATs in 2030 
is predicted to be above 20 in a million. In fact, in 2030 there will 
be more people exposed to levels of MSATs that result in the highest 
levels of risk. For instance, the number of Americans above the 10 in a 
million cancer risk level from exposure to MSATs is projected to 
increase from 223 million in 1999 to 272 million in 2030. Mobile 
sources will continue to be a significant contributor to risk in the 
future, accounting for 43% of total air toxic emissions in 2020, and 
55% of benzene emissions.
b. National Risk of Noncancer Health Effects
    According to national-scale modeling for 1999 done for this rule, 
nearly the entire U.S. population was exposed to an average level of 
air toxics that has the potential for adverse respiratory health 
effects (noncancer).\8\ We estimated this will continue to be the case 
in 2030, even though toxics levels will be lower.
---------------------------------------------------------------------------

    \8\ That is, the respiratory hazard index exceeded 1. See 
section III.B.3.a for more information.
---------------------------------------------------------------------------

    Mobile sources were responsible for 74% of the noncancer 
(respiratory) risk from outdoor air toxics in the 1999 NATA. The 
majority of this risk was from acrolein, and formaldehyde also 
contributed to the risk of respiratory health effects.\9\
---------------------------------------------------------------------------

    \9\ Acrolein was assigned an overall confidence level of 
``lower'' based on consideration of the combined uncertainties from 
the modeling estimates. In contrast, formaldehyde was assigned an 
overall confidence level of ``medium.''
---------------------------------------------------------------------------

    Although not included in NATA's estimates of noncancer risk, PM 
from gasoline and diesel mobile sources contributes significantly to 
the health effects associated with ambient PM, for which EPA has 
established National Ambient Air Quality Standards. There are extensive 
human data showing a wide spectrum of adverse health effects associated 
with exposure to ambient PM.\10\
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    \10\ U.S. Environmental Protection Agency (2004) Air Quality 
Criteria for Particulate Matter. Research Triangle Park, NC: 
National Center for Environmental Assessment--RTP Office; Report No. 
EPA/600/P-99/002aF, p. 8-318.
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c. Exposure Near Roads
    A substantial number of modeling assessment and air quality 
monitoring studies show elevated concentrations of multiple MSATs in 
close proximity to major roads. Exposure studies also indicate that 
populations spending time near major roadways likely experience 
elevated personal exposures to motor vehicle-related pollutants. In 
addition, these populations may experience exposures to differing 
physical and chemical compositions of certain air toxic pollutants 
depending on the amount of time spent in close proximity to motor 
vehicle emissions. Chapter 3.1 of the RIA provides a detailed 
discussion of air quality monitoring, personal exposure monitoring, and 
modeling assessments near major roadways.
    As part of the analyses underlying the final rule, we employed a 
new version of the Hazardous Air Pollutant Exposure Model (HAPEM), the 
exposure model used in NATA. HAPEM6 explicitly accounts for the 
gradient in outdoor concentrations that occurs near major roads, and 
the fraction of the population living near major roads.\11\ The HAPEM6 
analysis highlights the fact that residence near a major road is a 
substantial contributor to overall differences in exposure to directly-
emitted MSATs. As an example, while the average of within-tract median 
annual census tract exposure concentrations nationally is 1.4 [mu]g/
m3, the average 90th percentile of within-tract exposure 
concentration nationally is over 2 [mu]g/m3.
---------------------------------------------------------------------------

    \11\ U.S. EPA. 2007. The HAPEM6 User's Guide. Prepared for Ted 
Palma, Office of Air Quality Planning and Standards, Research 
Triangle Park, NC, by Arlene Rosenbaum and Michael Huang, ICF 
International, January 2007. This document is available in Docket 
EPA-HQ-OAR-2005-0036. http://www.epa.gov/ttn/fera/human_hapem.html.
---------------------------------------------------------------------------

    The potential population exposed to elevated concentrations near 
major roadways is large. A study of the populations nationally 
indicated that more than half of the population lives within 200 meters 
of a major road.\12\ It should be noted that this analysis relied on 
the Census Bureau definition of a major road, which is not based on 
traffic volume. Thus, some of the roads designated as ``major'' may 
carry a low volume of traffic. This estimate is consistent with other 
studies that have examined the proximity of population to major roads. 
These studies are discussed in Section 3.5 of the RIA. In addition, 
analysis of data from the Census Bureau's American Housing Survey 
suggests that approximately 37 million people live within 300 feet 
(~100 meters) of a 4-or-more lane highway, railroad, or airport.\13\ 
American Housing Survey statistics, as well as epidemiology studies, 
indicate that those houses located near major transportation sources 
are more likely to be lower in income or have minority residents than 
houses not located near major transportation sources. These data are 
also discussed in detail in Section 3.5 of the RIA.
---------------------------------------------------------------------------

    \12\ Major roads are defined as those roads defined by the U.S. 
Census as one of the following: ``limited access highway,'' 
``highway,'' ``major road (primary, secondary and connecting roads 
),'' or ``ramp.''
    \13\ United States Census Bureau. (2004) American Housing Survey 
web page. [Online at http://www.census.gov/hhes/www/housing/ahs/
ahs03/ahs03.html ] Table IA-6.
---------------------------------------------------------------------------

    Other population studies also indicate that a significant fraction 
of the population resides in locations near major roads. At present, 
the available studies use different indicators of ``major road'' and of 
``proximity,'' but the estimates range from 12.4% of student enrollment 
in California attending schools within 150 meters of roads with 25,000 
vehicles per day or more, to 13% of Massachusetts veterans living 
within 50 meters of a road with at least 10,000 vehicles per 
day.14, 15 Using a more general definition of a ``major 
road,'' between 22% and 51% of different study populations live near 
such roads.
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    \14\ Green, R.S.; Smorodinsky, S.; Kim, J.J.; McLaughlin, R.; 
Ostro, B. (2004) Proximity of California public schools to busy 
roads. Environ. Health Perspect. 112: 61-66.
    \15\ Garshick, E.; Laden, F.; Hart, J.E.; Caron, A. (2003) 
Residence near a major road and respiratory symptoms in U.S. 
veterans. Epidemiol. 14: 728-736.
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d. Exposure From Attached Garages
    People living in homes with attached garages are potentially 
exposed to substantially higher overall

[[Page 8435]]

concentrations of benzene, toluene, and other VOCs from mobile source-
related emissions. EPA has conducted a modeling analysis to examine the 
influence of attached garages on personal exposure to benzene (see 
Appendix 3A of RIA). Compared to national average exposure 
concentrations modeled in 1999 NATA, which does not account for 
emissions originating in attached garages, average exposure 
concentrations for people with attached garages could more than double. 
Other recent studies also emphasize the substantial role of attached 
garages in exposure to MSATs. Chapter 3 of the RIA discusses 
measurements of concentrations and exposure associated with attached 
garages and EPA's modeling analysis.
3. What Are the Health Effects of Air Toxics?
a. Overview of Potential Cancer and Noncancer Health Effects
    Air toxics can cause of variety of cancer and noncancer health 
effects. Inhalation cancer risks are usually estimated by EPA as ``unit 
risks,'' which represent the excess lifetime cancer risk estimated to 
result from continuous exposure to an agent at a concentration of 1 mu 
g/m\3\ in air. Some air toxics are known to be carcinogenic in animals 
but lack data in humans. Many of these have been assumed to be human 
carcinogens. Also, in the absence of evidence of a nonlinear dose-
response curve, EPA assumes these relationships between exposure and 
probability of cancer are linear. These unit risks are typically upper 
bound estimates. Upper bound estimates are more likely to overestimate 
than underestimate risk. Where there are strong epidemiological data, a 
maximum likelihood estimate (MLE) may be developed. An MLE is a best 
scientific estimate of risk. The benzene unit risk is an MLE. A 
discussion of the confidence in a quantitative cancer risk estimate is 
provided in the IRIS file for each compound. The discussion of the 
confidence in the cancer risk estimate includes an assessment of the 
source of the data (human or animal), uncertainties in dose estimates, 
choice of the model used to fit the exposure and response data and how 
uncertainties and potential confounders are handled.
    Potential noncancer chronic inhalation health risks are quantified 
using reference concentrations (RfCs) and noncancer chronic ingestion 
and dermal health risks are quantified using reference doses (RfDs). 
The RfC is an estimate (with uncertainty spanning perhaps an order of 
magnitude) of a daily exposure to the human population (including 
sensitive subgroups) that is likely to be without appreciable risk of 
deleterious effects during a lifetime. Sources of uncertainty in the 
development of the RfCs and RfDs include interspecies extrapolation 
(animal to human) and intraspecies extrapolation (average human to 
sensitive human). Additional sources of uncertainty can include the use 
of a lowest observed adverse effect level in place of a no observed 
adverse effect level, and other data deficiencies. A statement 
regarding the confidence in the RfC and/or RfD is developed to reflect 
the confidence in the principal study or studies on which the RfC or 
RfD are based and the confidence in the underlying database. Factors 
that affect the confidence in the principal study include how well the 
study was designed, conducted and reported. Factors that affect the 
confidence in the database include an assessment of the availability of 
information regarding identification of the critical effect, 
potentially susceptible populations and exposure scenarios relevant to 
assessment of risk.
    The RfC may be used to estimate a hazard quotient, which is the 
environmental exposure to a substance divided by its RfC. A hazard 
quotient greater than one indicates adverse health effects are 
possible. The hazard quotient cannot be translated to a probability 
that adverse health effects will occur, and is unlikely to be 
proportional to risk. It is especially important to note that a hazard 
quotient exceeding one does not necessarily mean that adverse health 
effects will occur. In NATA, hazard quotients for different respiratory 
irritants were also combined into a hazard index (HI). A hazard index 
is the sum of hazard quotients for substances that affect the same 
target organ or organ system. Because different pollutants may cause 
similar adverse health effects, it is often appropriate to combine 
hazard quotients associated with different substances. However, the HI 
is only an approximation of a combined effect because substances may 
affect a target organ in different ways.
b. Health Effects of Key MSATs
i. Benzene
    The EPA's IRIS database lists benzene, an aromatic hydrocarbon, as 
a known human carcinogen (causing leukemia) by all routes of 
exposure.\16\ A number of adverse noncancer health effects including 
blood disorders and immunotoxicity have also been associated with long-
term occupational exposure to benzene.\17\
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    \16\ U.S. EPA (2000). Integrated Risk Information System File 
for Benzene. This material is available electronically at http://
www.epa.gov/iris/subst/0276.htm.
    \17\ U.S. EPA (2002). Toxicological Review of Benzene (Noncancer 
Effects). National Center for Environmental Assessment, Washington, 
DC. Report No. EPA/635/R-02/001F. http://www.epa.gov/iris/
toxreviews/0276-tr.pdf.
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    Inhalation is the major source of human exposure to benzene in 
occupational and non-occupational settings. Long-term occupational 
inhalation exposure to benzene has been shown to cause cancers of the 
hematopoetic (blood cell) system in adults.\18\ Among these are acute 
nonlymphocytic leukemia \19\ and chronic lymphocytic 
leukemia.20, 21 Leukemias, lymphomas, and other tumor types 
have been observed in experimental animals exposed to benzene by 
inhalation or oral administration. Exposure to benzene and/or its 
metabolites has also been linked with chromosomal changes in

[[Page 8436]]

humans and animals22, 23 and increased proliferation of 
mouse bone marrow cells.24, 25
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    \18\ U.S. EPA (1998) Carcinogenic Effects of Benzene: An Update, 
National Center for Environmental Assessment, Washington, DC. 
EPA600-P-97-001F. Enter report number at the following search page, 
http://yosemite.epa.gov/ncepihom/nsCatalog.nsf//SearchPubs?Openform.
    \19\ Leukemia is a blood disease in which the white blood cells 
are abnormal in type or number. Leukemia may be divided into 
nonlymphocytic (granulocytic) leukemias and lymphocytic leukemias. 
Nonlymphocytic leukemia generally involves the types of white blood 
cells (leukocytes) that are involved in engulfing, killing, and 
digesting bacteria and other parasites (phagocytosis) as well as 
releasing chemicals involved in allergic and immune responses. This 
type of leukemia may also involve erythroblastic cell types 
(immature red blood cells). Lymphocytic leukemia involves the 
lymphocyte type of white blood cell that is responsible for antibody 
and cell-mediated immune responses. Both nonlymphocytic and 
lymphocytic leukemia may, in turn, be separated into acute (rapid 
and fatal) and chronic (lingering, lasting) forms. For example in 
acute myeloid leukemia there is diminished production of normal red 
blood cells (erythrocytes), granulocytes, and platelets (control 
clotting), which leads to death by anemia, infection, or hemorrhage. 
These events can be rapid. In chronic myeloid leukemia (CML) the 
leukemic cells retain the ability to differentiate (i.e., be 
responsive to stimulatory factors) and perform function; later there 
is a loss of the ability to respond.
    \20\ U.S. EPA (1985) Environmental Protection Agency, Interim 
quantitative cancer unit risk estimates due to inhalation of 
benzene, prepared by the Office of Health and Environmental 
Assessment, Carcinogen Assessment Group, Washington, DC for the 
Office of Air Quality Planning and Standards, Washington, DC, 1985.
    \21\ U.S. EPA (1993) Motor Vehicle-Related Air Toxics Study. 
Office of Mobile Sources, Ann Arbor, MI. http://www.epa.gov/otaq/
regs/toxics/tox_archive.htm.
    \22\ International Agency for Research on Cancer (IARC) (1982) 
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.
    \23\ U.S. EPA (1998) Carcinogenic Effects of Benzene: An Update, 
National Center for Environmental Assessment, Washington, DC. 
EPA600-P-97-001F. Enter report number at the following search page, 
http://yosemite.epa.gov/ncepihom/nsCatalog.nsf//SearchPubs?Openform.
    \24\ Irons, R.D., W.S. Stillman, D.B. Colagiovanni, and V.A. 
Henry (1992) 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.
    \25\ U.S. EPA (1998) Carcinogenic Effects of Benzene: An Update, 
National Center for Environmental Assessment, Washington, DC. 
EPA600-P-97-001F. Enter report number at the following search page, 
http://yosemite.epa.gov/ncepihom/nsCatalog.nsf//SearchPubs?Openform.
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    The latest assessment by EPA estimates the excess risk of 
developing leukemia from inhalation exposure to benzene at 2.2 x 
10-6 to 7.8 x 10-6 per [mu]g/m3. In 
other words, there is an estimated risk of about two to eight excess 
leukemia cases in one million people exposed to 1 [mu]g/m3 
of benzene over a lifetime.\26\ This range of unit risks reflects the 
MLEs calculated from different exposure assumptions and dose-response 
models that are linear at low doses. At present, the true cancer risk 
from exposure to benzene cannot be ascertained, even though dose-
response data are used in the quantitative cancer risk analysis, 
because of uncertainties in the low-dose exposure scenarios and lack of 
clear understanding of the mode of action. A range of estimates of risk 
is recommended, each having equal scientific plausibility. There are 
confidence intervals associated with the MLE range that reflect 
variation of the observed data used to develop dose-response values. 
For the upper end of the MLE range, the 5th and 95th percentile values 
are about a factor of 5 lower and higher than the best fit value. The 
upper end of the MLE range was used in NATA.
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    \26\ U.S. EPA (1998) Carcinogenic Effects of Benzene: An Update, 
National Center for Environmental Assessment, Washington, DC. 
EPA600-P-97-001F. Enter report number at the following search page, 
http://yosemite.epa.gov/ncepihom/nsCatalog.nsf//SearchPubs?Openform.
---------------------------------------------------------------------------

    It should be noted that not enough information is known to 
determine the slope of the dose-response curve at environmental levels 
of exposure and to provide a sound scientific basis to choose any 
particular extrapolation/exposure model to estimate human cancer risk 
at low doses. EPA risk assessment guidelines suggest using an 
assumption of linearity of dose response when (1) there is an absence 
of sufficient information on modes of action or (2) the mode of action 
information indicates that the dose-response curve at low dose is or is 
expected to be linear.\27\ Since the mode of action for benzene 
carcinogenicity is unknown, the current cancer unit risk estimate 
assumes linearity of the low-dose response. Data that were considered 
by EPA in its carcinogenic update suggested that the dose-response 
relationship at doses below those examined in the studies reviewed in 
EPA's most recent benzene assessment may be supralinear. Such a 
relationship could support the inference that cancer risks are as high 
or are higher than the estimates provided in the existing EPA 
assessment.\28\ Data discussed in the EPA IRIS assessment suggest that 
genetic abnormalities occur at low exposure in humans, and the 
formation of toxic metabolites plateaus above 25 ppm (80,000 [mu]/
m3).\29\ More recent data on benzene adducts in humans, 
published after the most recent IRIS assessment, suggest that the 
enzymes involved in benzene metabolism start to saturate at exposure 
levels as low as 1 ppm.30, 31, 32 These data highlight the 
importance of ambient exposure levels and their contribution to 
benzene-related adducts. Because there is a transition from linear to 
saturable metabolism below 1 ppm, the assumption of low-dose linearity 
extrapolated from much higher exposures could lead to substantial 
underestimation of leukemia risks. This is consistent with recent 
epidemiological data which also suggest a supralinear exposure-response 
relationship and which ``[extend] evidence for hematopoietic cancer 
risks to levels substantially lower than had previously been 
established.'' 33, 34, 35 These data are from the largest 
cohort studies done to date with individual worker exposure estimates. 
However, these data have not yet been formally evaluated by EPA as part 
of the IRIS review process, and it is not clear how they might 
influence low-dose risk estimates. A better understanding of the 
biological mechanism of benzene-induced leukemia is needed.
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    \27\ U.S. EPA (2005) Guidelines for Carcinogen Risk Assessment. 
Report No. EPA/630/P-03/001F. http://cfpub.epa.gov/ncea/raf/
recordisplay.cfm?deid=116283.
    \28\ U.S. EPA (1998) Carcinogenic Effects of Benzene: An Update. 
EPA/600/P-97/001F.
    \29\ Rothman, N; Li, GL; Dosemeci, M; et al. (1996) 
Hematotoxicity among Chinese workers heavily exposed to benzene. Am. 
J. Indust. Med. 29:236-246.
    \30\ Rappaport, S.M.; Waidyanatha, S.; Qu, Q.; Shore, R.; Jin, 
X.; Cohen, B.; Chen, L.; Melikian, A.; Li, G.; Yin, S.; Yan, H.; Xu, 
B.; Mu, R.; Li, Y.; Zhang, X.; and Li, K. (2002) Albumin adducts of 
benzene oxide and 1,4-benzoquinone as measures of human benzene 
metabolism. Cancer Research 62:1330-1337.
    \31\ Rappaport, S.M.; Waidyanatha, S.; Qu, Q.; Yeowell-
O'Connell, K.; Rothman, N.; Smith M.T.; Zhang, L.; Qu, Q.; Shore, 
R.; Li, G.; Yin, S. (2005) Protein adducts as biomarkers of human 
enzene metabolism. Chem Biol Interact. 153-154:103-109.
    \32\ Lin, Y-S., Vermeulen, R., Tsai, C.H., Suramya, W., Lan, Q., 
Rothman, N., Smith, M.T., Zhang, L., Shen, M., Songnian, Y., Kim, 
S., Rappaport, S.M. (2006) Albumin adducts of electrophilic benzene 
metabolites in benzene-exposed and control workers. Environ Health 
Perspec.
    \33\ Hayes, R.B.; Yin, S.; Dosemeci, M.; Li, G.; Wacholder, S.; 
Travis, L.B.; Li, C.; Rothman, N.; Hoover, R.N.; and Linet, M.S. 
(1997) Benzene and the dose-related incidence of hematologic 
neoplasms in China. J. Nat. Cancer Inst. 89:1065-1071.
    \34\ Hayes, R.B.; Songnian, Y.; Dosemeci, M.; and Linet, M. 
(2001) Benzene and lymphohematopoietic malignancies in humans. Am. 
J. Indust. Med. 40:117-126.
    \35\ Lan, Q.; Zhang, L., Li, G., Vermeulen, R., et al. (2004). 
Hematotoxicity in Workers Exposed to Low Levels of Benzene. Science 
306: 1774-1776.
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    Children may represent a subpopulation at increased risk from 
benzene exposure, due to factors that could increase their 
susceptibility. Children may have a higher unit body weight exposure 
because of their heightened activity patterns which can increase their 
exposures, as well as different ventilation tidal volumes and 
frequencies, factors that influence uptake. This could entail a greater 
lifetime risk of leukemia and other toxic effects from exposures 
occurring during childhood, if children are exposed to benzene at 
similar levels as adults. There is limited information from two studies 
regarding an increased risk to children whose parents have been 
occupationally exposed to benzene.36, 37 Data from animal 
studies have shown benzene exposures result in damage to the 
hematopoietic (blood cell formation) system during 
development.38, 39, 40

[[Page 8437]]

Also, key changes related to the development of childhood leukemia 
occur in the developing fetus.\41\ Several studies have reported that 
genetic changes related to eventual leukemia development occur before 
birth. For example, there is one study of genetic changes in twins who 
developed T cell leukemia at 9 years of age.\42\ An association between 
traffic volume, residential proximity to busy roads and occurrence of 
childhood leukemia has also been identified in some studies, although 
some studies show no association.
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    \36\ Shu, X.O.; Gao, Y.T.; Brinton, L.A.; et al. (1988) A 
population-based case-control study of childhood leukemia in 
Shanghai. Cancer 62:635-644.
    \37\ McKinney P.A.; Alexander, F.E.; Cartwright, R.A.; et al. 
(1991) Parental occupations of children with leukemia in west 
Cumbria, north Humberside, and Gateshead, Br. Med. J. 302:681-686.
    \38\ Keller, KA; Snyder, CA. (1986) Mice exposed in utero to low 
concentrations of benzene exhibit enduring changes in their colony 
forming hematopoietic cells. Toxicology 42:171-181.
    \39\ Keller, KA; Snyder, CA. (1988) Mice exposed in utero to 20 
ppm benzene exhibit altered numbers of recognizable hematopoietic 
cells up to seven weeks after exposure. Fundam. Appl. Toxicol. 
10:224-232.
    \40\ Corti, M; Snyder, CA. (1996) Influences of gender, 
development, pregnancy and ethanol consumption on the hematotoxicity 
of inhaled 10 ppm benzene. Arch. Toxicol. 70:209-217.
    \41\ U.S. EPA. (2002). Toxicological Review of Benzene 
(Noncancer Effects). National Center for Environmental Assessment, 
Washington, DC. Report No. EPA/635/R-02/001F. http://www.epa.gov/
iris/toxreviews/0276-tr.pdf.
    \42\ Ford, AM; Pombo-de-Oliveira, MS; McCarthy, KP; MacLean, JM; 
Carrico, KC; Vincent, RF; Greaves, M. (1997) Monoclonal origin of 
concordant T-cell malignancy in identical twins. Blood 89:281-285.
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    A number of adverse noncancer health effects, including blood 
disorders such as preleukemia and aplastic anemia, have also been 
associated with long-term exposure to benzene.43, 44 People 
with long-term occupational exposure to benzene have experienced 
harmful effects on the blood-forming tissues, especially in the bone 
marrow. These effects can disrupt normal blood production and suppress 
the production of important blood components, such as red and white 
blood cells and blood platelets, leading to anemia (a reduction in the 
number of red blood cells), leukopenia (a reduction in the number of 
white blood cells), or thrombocytopenia (a reduction in the number of 
blood platelets, thus reducing the ability of blood to clot). Chronic 
inhalation exposure to benzene in humans and animals results in 
pancytopenia,\45\ a condition characterized by decreased numbers of 
circulating erythrocytes (red blood cells), leukocytes (white blood 
cells), and thrombocytes (blood platelets).46, 47 
Individuals that develop pancytopenia and have continued exposure to 
benzene may develop aplastic anemia, whereas others exhibit both 
pancytopenia and bone marrow hyperplasia (excessive cell formation), a 
condition that may indicate a preleukemic state.48, 49 The 
most sensitive noncancer effect observed in humans, based on current 
data, is the depression of the absolute lymphocyte count in 
blood.50, 51
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    \43\ Aksoy, M. (1989) Hematotoxicity and carcinogenicity of 
benzene. Environ. Health Perspect. 82:193-197.
    \44\ Goldstein, B.D. (1988) Benzene toxicity. Occupational 
medicine. State of the Art Reviews 3: 541-554.
    \45\ Pancytopenia is the reduction in the number of all three 
major types of blood cells (erythrocytes, or red blood cells, 
thrombocytes, or platelets, and leukocytes, or white blood cells). 
In adults, all three major types of blood cells are produced in the 
bone marrow of the skeletal system. The bone marrow contains 
immature cells, known as multipotent myeloid stem cells, that later 
differentiate into the various mature blood cells. Pancytopenia 
results from a reduction in the ability of the red bone marrow to 
produce adequate numbers of these mature blood cells.
    \46\ Aksoy, M. (1991) Hematotoxicity, leukemogenicity and 
carcinogenicity of chronic exposure to benzene. In: Arinc, E.; 
Schenkman, J.B.; Hodgson, E., Eds. Molecular Aspects of 
Monooxygenases and Bioactivation of Toxic Compounds. New York: 
Plenum Press, pp. 415-434.
    \47\ Goldstein, B.D. (1988) Benzene toxicity. Occupational 
medicine. State of the Art Reviews 3: 541-554.
    \48\ Aksoy, M., S. Erdem, and G. Dincol. (1974) Leukemia in 
shoe-workers exposed chronically to benzene. Blood 44:837.
    \49\ Aksoy, M. and K. Erdem. (1978) A follow-up study on the 
mortality and the development of leukemia in 44 pancytopenic 
patients associated with long-term exposure to benzene. Blood 52: 
285-292.
    \50\ Rothman, N., G.L. Li, M. Dosemeci, W.E. Bechtold, G.E. 
Marti, Y.Z. Wang, M. Linet, L.Q. Xi, W. Lu, M.T. Smith, N. Titenko-
Holland, L.P. Zhang, W. Blot, S.N. Yin, and R.B. Hayes (1996) 
Hematotoxicity among Chinese workers heavily exposed to benzene. Am. 
J. Ind. Med. 29: 236-246.
    \51\ EPA 2005 ``Full IRIS Summary for Benzene (CASRN 71-43-2)'' 
Environmental Protection Agency, Integrated Risk Information System 
(IRIS), Office of Health and Environmental Assessment, Environmental 
Criteria and Assessment Office, Cincinnati, OH, http://www.epa.gov/
iris/subst/0276.htm.
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    EPA's inhalation reference concentration (RfC) for benzene is 30 
[mu]g/m3, based on suppressed absolute lymphocyte counts as 
seen in humans under occupational exposure conditions. The overall 
confidence in this RfC is medium. Since development of this RfC, human 
reports of benzene's hematotoxic effects have been published in the 
literature that provides data suggesting a wide range of hematological 
endpoints that are affected at occupational exposures of less than 5 
ppm (about 16 mg/m3)\52\ and at air levels of 1 ppm (about 3 
mg/m3) or less among genetically susceptible 
populations.\53\ One recent study found benzene metabolites in mouse 
liver and bone marrow at environmental doses, indicating that even 
concentrations in urban air can elicit a biochemical response in 
rodents that indicates toxicity.\54\ EPA has not formally evaluated 
these recent studies as part of the IRIS review process to determine 
whether or not they will lead to a change in the current RfC. EPA does 
not currently have an acute reference concentration for benzene. The 
Agency for Toxic Substances and Disease Registry Minimal Risk Level for 
acute exposure to benzene is 160 [mu]g/m3 for 1-14 days 
exposure.
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    \52\ Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. Cohen, et 
al. (2002). Hematological changes among Chinese workers with a broad 
range of benzene exposures. Am. J. Industr. Med. 42: 275-285.
    \53\ Lan, Q.; Zhang, L., Li, G., Vermeulen, R., et al. (2004). 
Hematotoxicity in Workers Exposed to Low Levels of Benzene. Science 
306: 1774-1776.
    \54\ Turtletaub, K.W. and Mani, C. (2003). Benzene metabolism in 
rodents at doses relevant to human exposure from Urban Air. Res Rep 
Health Effect Inst 113.
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ii. 1,3-Butadiene
    EPA has characterized 1,3-butadiene, a hydrocarbon, as a 
leukemogen, carcinogenic to humans by inhalation.55 56 The 
specific mechanisms of 1,3-butadiene-induced carcinogenesis are 
unknown; however, it is virtually certain that the carcinogenic effects 
are mediated by genotoxic metabolites of 1,3-butadiene. Animal data 
suggest that females may be more sensitive than males for cancer 
effects; nevertheless, there are insufficient data in humans from which 
to draw any conclusions on potentially sensitive subpopulations. The 
upper bound cancer unit risk estimate is 0.08 per ppm or 3 x 10 
-5 per [mu]g/m3 (based primarily on linear 
modeling and extrapolation of human data). In other words, it is 
estimated that approximately 30 persons in one million exposed to 1 
[mu]g/m3 of 1,3-butadiene continuously for their lifetime 
would develop cancer as a result of this exposure. The human 
incremental lifetime unit cancer risk estimate is based on 
extrapolation from leukemias observed in an occupational epidemiologic 
study.57 58 This estimate includes a two-fold adjustment to 
the epidemiologic-based unit cancer risk applied to reflect evidence 
from the rodent bioassays suggesting that the epidemiologic-based 
estimate (from males) may underestimate total cancer

[[Page 8438]]

risk from 1,3-butadiene exposure in the general population, 
particularly for breast cancer in females. A recent study extended the 
investigation of 1,3-butadiene exposure and leukemia among synthetic 
rubber industry workers.\59\ The results of this study strengthen the 
evidence for the relationship between 1,3-butadiene exposure and 
lymphohematopoietic cancer. This relationship was found to persist 
after controlling for exposure to other toxics in this work 
environment.
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    \55\ U.S. EPA. (2002). Health Assessment of 1,3-Butadiene. 
Office of Research and Development, National Center for 
Environmental Assessment, Washington Office, Washington, DC. Report 
No. EPA600-P-98-001F. http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=54499.
    \56\ EPA 2005 ``Full IRIS Summary for 1,3-butadiene (CASRN 106-
99-0)'' Environmental Protection Agency, Integrated Risk Information 
System (IRIS), Office of Health and Environmental Assessment, 
Environmental Criteria and Assessment Office, Cincinnati, OH, http:/
/www.epa.gov/iris/subst/0139.htm.
    \57\ Delzell, E, N. Sathiakumar, M. Macaluso, et al. (1995). A 
follow-up study of synthetic rubber workers. Submitted to the 
International Institute of Synthetic Rubber Producers. University of 
Alabama at Birmingham. October 2, 1995.
    \58\ EPA 2005 ``Full IRIS Summary for 1,3-butadiene (CASRN 106-
99-0)'' Environmental Protection Agency, Integrated Risk Information 
System (IRIS), Office of Health and Environmental Assessment, 
Environmental Criteria and Assessment Office, Cincinnati, OH, http:/
/www.epa.gov/iris/subst/0139.htm.
    \59\ Delzell, E., Sathiakumar, N., Graff, J., Macaluso, M., 
Maldonado, G., Matthews, R. (2006) An updated study of mortality 
among North American synthetic rubber industry workers. Health 
Effects Institute Report Number 132.
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    1,3-Butadiene also causes a variety of reproductive and 
developmental effects in mice; no human data on these effects are 
available. The most sensitive effect was ovarian atrophy observed in a 
lifetime bioassay of female mice.\60\ Based on this critical effect and 
the benchmark concentration methodology, an RfC was calculated. This 
RfC for chronic health effects is 0.9 ppb, or about 2 [mu]g/
m3. Confidence in the inhalation RfC is medium.
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    \60\ Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. (1996) 
Subchronic toxicity of 4-vinylcyclohexene in rats and mice by 
inhalation. Fundam. Appl. Toxicol. 32:1-10.
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iii. Formaldehyde
    Since 1987, EPA has classified formaldehyde, a hydrocarbon, as a 
probable human carcinogen based on evidence in humans and in rats, 
mice, hamsters, and monkeys.\61\ EPA's current IRIS summary provides an 
upper bound cancer unit risk estimate of 1.3 x 10-5 per 
[mu]g/m3.\62\ In other words, there is an estimated risk of 
about thirteen excess leukemia cases in one million people exposed to 1 
[mu]g/m3 of formaldehyde over a lifetime.
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    \61\ U.S. EPA (1987). Assessment of Health Risks to Garment 
Workers and Certain Home Residents From Exposure to Formaldehyde, 
Office of Pesticides and Toxic Substances, April 1987.
    \62\ U.S. EPA (1989). Integrated Risk Information System File 
for Formaldehyde. This material is available electronically at 
http://www.epa.gov/iris/subst/0419.htm.
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    EPA is currently reviewing recently published epidemiological data. 
For instance, research conducted by the National Cancer Institute (NCI) 
found an increased risk of nasopharyngeal cancer and 
lymphohematopoietic malignancies such as leukemia among workers exposed 
to formaldehyde.63 64 NCI is currently performing an update 
of these studies. A recent National Institute of Occupational Safety 
and Health (NIOSH) study of garment workers also found increased risk 
of death due to leukemia among workers exposed to formaldehyde.\65\ 
Extended follow-up of a cohort of British chemical workers did not find 
evidence of an increase in nasopharyngeal or lymphohematopoeitic 
cancers, but a continuing statistically significant excess in lung 
cancers was reported.\66\
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    \63\ Hauptmann, M.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; 
Blair, A. 2003. Mortality from lymphohematopoietic malignancies 
among workers in formaldehyde industries. Journal of the National 
Cancer Institute 95: 1615-1623.
    \64\ Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; 
Blair, A. 2004. Mortality from solid cancers among workers in 
formaldehyde industries. American Journal of Epidemiology 159: 1117-
1130.
    \65\ Pinkerton, L. E. 2004. Mortality among a cohort of garment 
workers exposed to formaldehyde: an update. Occup. Environ. Med. 61: 
193-200.
    \66\ Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended 
follow-up of a cohort of British chemical workers exposed to 
formaldehyde. J National Cancer Inst. 95:1608-1615.
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    Based on the developments of the last decade, in 2004, the working 
group of the International Agency for Research on Cancer concluded that 
formaldehyde is carcinogenic to humans (Group 1 classification) on the 
basis of sufficient evidence in humans and sufficient evidence in 
experimental animals--a higher classification than previous IARC 
evaluations. In addition, the National Institute of Environmental 
Health Sciences recently nominated formaldehyde for reconsideration as 
a known human carcinogen under the National Toxicology Program. Since 
1981 it has been listed as a ``reasonably anticipated human 
carcinogen.'' Recently the German Federal Institute for Risk Assessment 
determined that formaldehyde is a known human carcinogen.\67\
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    \67\ Bundesinstitut fur Risikobewertung (BfR) Toxicological 
Assessment of Formaldehyde. Opinion of BfR No. 023/2006 of 30 March 
2006. www.bfr.bund.de/cm/290/toxicological--assessment--of--
formaldehyde.pdf.
---------------------------------------------------------------------------

    In the past 15 years there has been substantial research on the 
inhalation dosimetry for formaldehyde in rodents and primates by the 
CIIT Centers for Health Research, with a focus on use of rodent data 
for refinement of the quantitative cancer dose-response 
assessment.68 69 70 CIIT's risk assessment of formaldehyde 
incorporated mechanistic and dosimetric information on formaldehyde. 
The risk assessment analyzed carcinogenic risk from inhaled 
formaldehyde using approaches that were consistent with EPA's draft 
guidelines for carcinogenic risk assessment. In 2001, Environment 
Canada relied on this cancer dose-response assessment in their 
assessment of formaldehyde.\71\ In 2004, EPA also relied on this cancer 
unit risk estimate during the development of the plywood and composite 
wood products national emissions standards for hazardous air pollutants 
(NESHAPs).\72\ In these rules, EPA concluded that the CIIT work 
represented the best available application of the available mechanistic 
and dosimetric science on the dose-response for portal of entry cancers 
due to formaldehyde exposures. EPA is reviewing the recent work cited 
above from the NCI and NIOSH, as well as the analysis by the CIIT 
Centers for Health Research and other studies, as part of a 
reassessment of the human hazard and dose-response associated with 
formaldehyde.
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    \68\ Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D 
Kalisak, J Preston, and FJ Miller. 2003. Biologically motivated 
computational modeling of formaldehyde carcinogenicity in the F344 
rat. Tox. Sci. 75: 432-447.
    \69\ Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D 
Kalisak, J Preston, and FJ Miller. 2004. Human respiratory tract 
cancer risks of inhaled formaldehyde: Dose-response predictions 
derived from biologically-motivated computational modeling of a 
combined rodent and human dataset. Tox. Sci. 82: 279-296.
    \70\ Chemical Industry Institute of Toxicology (CIIT). 1999. 
Formaldehyde: Hazard characterization and dose-response assessment 
for carcinogenicity by the route of inhalation. CIIT, September 28, 
1999. Research Triangle Park, NC.
    \71\ Health Canada. 2001. Priority Substances List Assessment 
Report. Formaldehyde. Environment Canada, Health Canada, February 
2001.
    \72\ U.S. EPA. 2004. National Emission Standards for Hazardous 
Air Pollutants for Plywood and Composite Wood Products Manufacture: 
Final Rule. (69 FR 45943, 7/30/04).
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    Noncancer effects of formaldehyde have been observed in humans and 
several animal species and include irritation to eye, nose and throat 
tissues in conjunction with increased mucous secretions.
iv. Acetaldehyde
    Acetaldehyde, a hydrocarbon, is classified in EPA's IRIS database 
as a probable human carcinogen and is considered toxic by 
inhalation.\73\ Based on nasal tumors in rodents, the upper confidence 
limit estimate of a lifetime extra cancer risk from continuous 
acetaldehyde exposure is about 2.2 x 10-6 per [mu]g/
m3. In other words, it is estimated that about 2 persons in 
one million exposed to 1 [mu]g/m3 acetaldehyde continuously 
for their lifetime (70 years) would develop cancer as a result of their 
exposure, although the risk could be as low as zero. In short-term (4 
week) rat studies, compound-related histopathological changes were 
observed only in the respiratory system at various concentration levels 
of exposure.74 75

[[Page 8439]]

    Data from these studies showing degeneration of the olfactory 
epithelium were found to be sufficient for EPA to develop an RfC for 
acetaldehyde of 9 [mu]g/m3. Confidence in the principal 
study is medium and confidence in the database is low, due to the lack 
of chronic data establishing a no observed adverse effect level and due 
to the lack of reproductive and developmental toxicity data. Therefore, 
there is low confidence in the RfC. The agency is currently conducting 
a reassessment of risk from inhalation exposure to acetaldehyde.
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    \73\ U.S. EPA. 1988. Integrated Risk Information System File of 
Acetaldehyde. This material is available electronically at http://
www.epa.gov/iris/subst/0290.htm.
    \74\ Appleman, L. M., R. A. Woutersen, V. J. Feron, R. N. 
Hooftman, and W. R. F. Notten. (1986). Effects of the variable 
versus fixed exposure levels on the toxicity of acetaldehyde in 
rats. J. Appl. Toxicol. 6: 331-336.
    \75\ Appleman, L.M., R.A. Woutersen, and V.J. Feron. (1982). 
Inhalation toxicity of acetaldehyde in rats. I. Acute and subacute 
studies. Toxicology. 23: 293-297.
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    The primary acute effect of exposure to acetaldehyde vapors is 
irritation of the eyes, skin, and respiratory tract.\76\ Some 
asthmatics have been shown to be a sensitive subpopulation to 
decrements in functional expiratory volume (FEV1 test) and 
bronchoconstriction upon acetaldehyde inhalation.\77\
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    \76\ U.S. EPA (1988). Integrated Risk Information System File of 
Acetaldehyde. This material is available electronically at http://
www.epa.gov/iris/subst/0290.htm.
    \77\ Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda, T. 
(1993) Aerosolized acetaldehyde induces histamine-mediated 
bronchoconstriction in asthmatics. Am. Rev. Respir. Dis.148(4 Pt 1): 
940-3.
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v. Acrolein
    Acrolein, a hydrocarbon, is intensely irritating to humans when 
inhaled, with acute exposure resulting in upper respiratory tract 
irritation and congestion. The Agency has developed an RfC for acrolein 
of 0.02 [mu]g/m3.\78\ The overall confidence in the RfC 
assessment is judged to be medium. The Agency is also currently in the 
process of conducting an assessment of acute health effects for 
acrolein. EPA determined in 2003 using the 1999 draft cancer guidelines 
that the human carcinogenic potential of acrolein could not be 
determined because the available data were inadequate. No information 
was available on the carcinogenic effects of acrolein in humans and the 
animal data provided inadequate evidence of carcinogenicity.
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    \78\ U.S. Environmental Protection Agency (2003) Integrated Risk 
Information System (IRIS) on Acrolein. National Center for 
Environmental Assessment, Office of Research and Development, 
Washington, D.C. 2003. This material is available electronically at 
http://www.epa.gov/iris/subst/0364.htm.
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vi. Polycyclic Organic Matter (POM)
    POM is generally defined as a large class of organic compounds 
which have multiple benzene rings and a boiling point greater than 100 
degrees Celsius. 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. One of these compounds, naphthalene, 
is discussed separately below.
    Polycyclic aromatic hydrocarbons (PAHs) are a chemical subset of 
POM. In particular, EPA frequently obtains data on 16 of these POM 
compounds. Recent studies have found that maternal exposures to PAHs in 
a population of pregnant women were associated with several adverse 
birth outcomes, including low birth weight and reduced length at birth, 
as well as impaired cognitive development at age 
three.79, 80 These studies are discussed in the Regulatory 
Impact Analysis.
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    \79\ Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect of 
transplacental exposure to environmental pollutants on birth 
outcomes in a multiethnic population. Environ Health Perspect. 111: 
201-205.
    \80\ Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, D.; 
Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann, D.; Kinney, P. 
(2006) Effect of prenatal exposure to airborne polycyclic aromatic 
hydrocarbons on neurodevelopment in the first 3 years of life among 
inner-city children. Environ Health Perspect 114: 1287-1292.
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vii. Naphthalene
    Naphthalene is a PAH compound consisting of two benzene rings fused 
together with two adjacent carbon atoms common to both rings. In 2004, 
EPA released an external review draft of a reassessment of the 
inhalation carcinogenicity of naphthalene.\81\ The draft reassessment, 
External Review Draft, IRIS Reassessment of the Inhalation 
Carcinogenicity of Naphthalene, U.S. EPA, completed external peer 
review in 2004 by Oak Ridge Institute for Science and Education.\82\ 
Based on external comments, additional analyses are being considered. 
California EPA has released a new risk assessment for naphthalene with 
a cancer unit risk estimate of 3x10 -5 per [mu]g/
m3.\83\ The California EPA value was used in the 1999 NATA 
and in the analyses done for this rule. In addition, IARC has 
reevaluated naphthalene and re-classified it as Group 2B: possibly 
carcinogenic to humans.\84\ Current risk estimates for naphthalene are 
based on extrapolations from rodent studies conducted at higher doses. 
At present, human data are inadequate for developing estimates.
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    \81\ U.S. EPA (1998) Integrated Risk Information System (IRIS) 
summary on Naphthalene. National Center for Environmental 
Assessment, Office of Research and Development, Washington, D.C. 
2003. This material is available electronically at http://
www.epa.gov/iris/subst/0436.htm.
    \82\ Oak Ridge Institute for Science and Education. (2004) 
External Peer Review for the IRIS Reassessment of the Inhalation 
Carcinogenicity of Naphthalene. August 2004. http://cfpub2.epa.gov/
ncea/cfm/recordisplay.cfm?deid=86019.
    \83\ California EPA. (2004) Long Term Health Effects of Exposure 
to Naphthalene. Office of Environmental Health Hazard Assessment. 
http://www.oehha.ca.gov/air/toxic_contaminants/draftnaphth.html.
    \84\ International Agency for Research on Cancer (IARC). (2002) 
Monographs on the Evaluation of the Carcinogenic Risk of Chemicals 
for Humans. Vol. 82. Lyon, France.
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    The current EPA IRIS assessment includes noncancer data on 
hyperplasia and metaplasia in nasal tissue that form the basis of an 
inhalation RfC of 3 [mu]g/m3.\85\ The principal study was 
given medium confidence because adequate numbers of animals were used, 
and the severity of nasal effects increased at the higher exposure 
concentration. However, the study produced high mortality and 
hematological evaluation was not conducted beyond 14 days. The database 
was given a low-to-medium confidence rating because there are no 
chronic or subchronic inhalation studies in other animal species, and 
there are no reproductive or developmental studies for inhalation 
exposure. In the absence of human or primate toxicity data, the 
assumption is made that nasal responses in mice to inhaled naphthalene 
are relevant to humans; however, it cannot be said with certainty that 
this RfC for naphthalene based on nasal effects will be protective for 
hemolytic anemia and cataracts, the more well-known human effects from 
naphthalene exposure. As a result, we have medium confidence in the 
RfC.
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    \85\ EPA 2005 ``Full IRIS Summary for Naphthalene (CASRN 91-20-
3)'' Environmental Protection Agency, Integrated Risk Information 
System (IRIS), Office of Health and Environmental Assessment, 
Environmental Criteria and Assessment Office, Cincinnati, OH http://
www.epa.gov/iris/subst/0436.htm.
---------------------------------------------------------------------------

viii. Diesel Exhaust
    In EPA's Diesel Health Assessment Document (HAD),\86\ diesel 
exhaust was classified as likely to be carcinogenic to humans by 
inhalation at environmental exposures, in accordance with the revised 
draft 1996/1999 EPA cancer guidelines. A number of other agencies 
(National Institute for Occupational Safety and Health, the 
International Agency for Research on Cancer, the World Health 
Organization, California EPA, and the U.S. Department of Health and 
Human Services) have made similar classifications. EPA concluded in the 
Diesel HAD that it is not possible currently to calculate a cancer unit 
risk for diesel exhaust due to a variety of factors that limit the 
current studies,

[[Page 8440]]

such as limited quantitative exposure histories in occupational groups 
investigated for lung cancer.
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    \86\ U.S. EPA (2002) Health Assessment Document for Diesel 
Engine Exhaust. EPA/600/8-90/057F Office of Research and 
Development, Washington, DC. This document is available 
electronically at http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=29060.
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    However, in the absence of a cancer unit risk, the EPA Diesel HAD 
sought to provide additional insight into the significance of the 
cancer hazard by estimating possible ranges of risk that might be 
present in the population. An exploratory analysis was used to 
characterize a possible risk range by comparing a typical environmental 
exposure level for highway diesel sources to a selected range of 
occupational exposure levels. The occupationally observed risks were 
then proportionally scaled according to the exposure ratios to obtain 
an estimate of the possible environmental risk. A number of 
calculations are needed to accomplish this, and these can be seen in 
the EPA Diesel HAD. The outcome was that environmental risks from 
diesel exhaust exposure could range from a low of 10-4 to 
10-5 to as high as 10-3, reflecting the range of 
occupational exposures that could be associated with the relative and 
absolute risk levels observed in the occupational studies. Because of 
uncertainties, the analysis acknowledged that the risks could be lower 
than 10-4 or 10-5, and a zero risk from diesel 
exhaust exposure was not ruled out.
    Noncancer health effects of acute and chronic exposure to diesel 
exhaust emissions are also of concern to the Agency. EPA derived an RfC 
from consideration of four well-conducted chronic rat inhalation 
studies showing adverse pulmonary effects.87 88 89 90 The 
RfC is 5 [mu]g/m3 for diesel exhaust as measured by diesel 
PM. This RfC does not consider allergenic effects such as those 
associated with asthma or immunologic effects. There is growing 
evidence, discussed in the Diesel HAD, that diesel exhaust can 
exacerbate these effects, but the exposure-response data are presently 
lacking to derive an RfC. The EPA Diesel HAD states, ``With DPM [diesel 
particulate matter] being a ubiquitous component of ambient PM, there 
is an uncertainty about the adequacy of the existing DE [diesel 
exhaust] noncancer database to identify all of the pertinent DE-caused 
noncancer health hazards'' (p. 9-19).
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    \87\ Ishinishi, N; Kuwabara, N; Takaki, Y; et al. (1988) Long-
term inhalation experiments on diesel exhaust. In: Diesel exhaust 
and health risks. Results of the HERP studies. Ibaraki, Japan: 
Research Committee for HERP Studies; pp. 11-84.
    \88\ Heinrich, U; Fuhst, R; Rittinghausen, S; et al. (1995) 
Chronic inhalation exposure of Wistar rats and two different strains 
of mice to diesel engine exhaust, carbon black, and titanium 
dioxide. Inhal. Toxicol. 7:553-556.
    \89\ Mauderly, JL; Jones, RK; Griffith, WC; et al. (1987) Diesel 
exhaust is a pulmonary carcinogen in rats exposed chronically by 
inhalation. Fundam. Appl. Toxicol. 9:208-221.
    \90\ Nikula, KJ; Snipes, MB; Barr, EB; et al. (1995) Comparative 
pulmonary toxicities and carcinogenicities of chronically inhaled 
diesel exhaust and carbon black in F344 rats. Fundam. Appl. Toxicol. 
25:80-94.
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    The Diesel HAD also briefly summarizes health effects associated 
with ambient PM and discusses the EPA's annual National Ambient Air 
Quality Standard (NAAQS) of 15 [mu]g/m3. There is a much 
more extensive body of human data showing a wide spectrum of adverse 
health effects associated with exposure to ambient PM, of which diesel 
exhaust is an important component. The PM2.5 NAAQS is 
designed to provide protection from the noncancer and premature 
mortality effects of PM2.5 as a whole, of which diesel PM is 
a constituent.
c. Gasoline PM
    Beyond the specific areas of quantifiable risk discussed above in 
section III.C, EPA is also currently investigating gasoline PM. 
Gasoline exhaust is a complex mixture that has not been evaluated in 
EPA's IRIS. Gasoline exhaust is a ubiquitous source of particulate 
matter, contributing to the health effects observed for ambient PM 
which is discussed extensively in the EPA Particulate Matter Criteria 
Document.\91\ The PM Criteria Document notes that the PM components of 
gasoline and diesel engine exhaust are hypothesized, important 
contributors to the observed increases in lung cancer incidence and 
mortality associated with ambient PM2.5.\92\ Gasoline PM is 
also a component of near-roadway emissions that may be contributing to 
the health effects observed in people who live near roadways (see 
section III.F). There is also emerging evidence for the mutagenicity 
and cytotoxicity of gasoline exhaust and gasoline PM. Seagrave et al. 
investigated the combined particulate and semivolatile organic 
fractions of gasoline engine emissions in various animal and bioassay 
tests.\93\ The authors suggest that emissions from gasoline engines are 
mutagenic and can induce inflammation and have cytotoxic effects.
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    \91\ U.S. EPA (2004) Air Quality Criteria for Particulate 
Matter: Volume 1. Research Triangle Park, NC: National Center for 
Environmental Assessment--RTP Office; Report No. EPA/600/P-99/002aF. 
Enter report number at the following search page, http://
yosemite.epa.gov/ncepihom/nsCatalog.nsf//SearchPubs?Openform.
    \92\ U.S. EPA (2004) Air Quality Criteria for Particulate 
Matter: Volume 1. Research Triangle Park, NC: National Center for 
Environmental Assessment--RTP Office; Report No. EPA/600/P-99/002aF, 
p. 8-318. Enter report number at the following search page, http://
yosemite.epa.gov/ncepihom/nsCatalog.nsf//SearchPubs?Openform.
    \93\ Seagrave, J.; McDonald, J.D.; Gigliotti, A.P.; Nikula, 
K.J.; Seilkop, S.K.; Gurevich, M. and Mauderly, J.L. (2002) 
Mutagenicity and in Vivo Toxicity of Combined Particulate and 
Semivolatile Organic Fractions of Gasoline and Diesel Engine 
Emissions. Toxicological Sciences 70:212-226.
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    EPA is working to improve the understanding of PM emissions from 
gasoline engines, including the potential range of emissions and 
factors that influence emissions. EPA led a cooperative test program 
that recently completed testing approximately 500 randomly procured 
vehicles in the Kansas City metropolitan area. The purpose of this 
study was to determine the distribution of gasoline PM emissions from 
the in-use light-duty fleet. Results from this study are expected to be 
available shortly. Preliminary results from this work show the 
influence of high emitters on overall gasoline PM emissions and, also, 
that gasoline PM emissions increase at lower ambient temperatures in 
the in-use fleet. Some source apportionment studies show gasoline and 
diesel PM can result in larger contributions to ambient PM than 
predicted by EPA emission inventories.\94\ \95\ These source 
apportionment studies were one impetus behind conducting the Kansas 
City study.
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    \94\ Fujita, E.; Watson, M.J.; Chow, M.C.; et al. (1998) 
Northern Front Range Air Quality Study, Volume C: Source 
apportionment and simulation methods and evaluation. Prepared for 
Colorado State University, Cooperative Institute for Research in the 
Atmosphere, by Desert Research Institute, Reno, NV.
    \95\ Schauer, J.J.; Rogge, W.F.; Hildemann, L.M.; et al. (1996) 
Source apportionment of airborne particulate matter using organic 
compounds as tracers. Atmos. Environ. 30(22):3837-3855.
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    Another issue related to gasoline PM is the effect of gasoline 
vehicles and engines on ambient PM, especially secondary PM. Ambient PM 
is composed of primary PM emitted directly into the atmosphere and 
secondary PM that is formed from chemical reactions in the atmosphere. 
The issue of secondary organic aerosol formation from aromatic 
precursors such as toluene is an important one to which EPA and others 
are paying significant attention. This is discussed in more detail in 
section 1.4.1 of the RIA.
d. Near-Roadway Health Effects
    Another approach to investigating the collective health effects of 
mobile source contaminants is to examine associations between living 
near major roads and different adverse health endpoints. These studies 
generally examine people living near heavily-trafficked roadways, 
typically within several hundred meters, where fresh

[[Page 8441]]

emissions from motor vehicles are not yet fully diluted with background 
air.
    Several studies have measured elevated concentrations of pollutants 
emitted directly by motor vehicles near roadways as compared to overall 
urban background levels. These elevated concentrations generally occur 
within approximately 200 meters of the road, although the distance may 
vary depending on traffic and environmental conditions. Pollutants 
measured with elevated concentrations include benzene, polycyclic 
aromatic hydrocarbons, carbon monoxide, nitrogen dioxide, black carbon, 
and coarse, fine, and ultrafine particulate matter. In addition, 
concentrations of road dust, and wear particles from tire and brake use 
also show concentration increases in proximity of major roadways.
    The near-roadway health studies provide stronger evidence for some 
health endpoints than others. Evidence of adverse responses to traffic-
related pollution is strongest for non-allergic respiratory symptoms, 
cardiovascular effects, premature adult mortality, and adverse birth 
outcomes, including low birth weight and size. Some evidence for new 
onset asthma is available, but not all studies have significant 
correlations. Lastly, among studies of childhood cancer, in particular 
childhood leukemia, evidence is inconsistent. Several small studies 
report positive associations, though such effects have not been 
observed in two larger studies. As described above, benzene and 1,3-
butadiene are both known human leukemogens in adults. As previously 
mentioned, there is evidence of increased risk of leukemia among 
children whose parents have been occupationally exposed to benzene. 
Though the near-roadway studies are equivocal, taken together with the 
laboratory studies and other exposure environments, the data suggest a 
potentially serious children's health concern could exist. Additional 
research is needed to determine the significance of this potential 
concern.
    Significant scientific uncertainties remain in our understanding of 
the relationship between adverse health effects and near-road exposure, 
including the exposures of greatest concern, the importance of chronic 
versus acute exposures, the role of fuel type (e.g. diesel or gasoline) 
and composition (e.g., % aromatics), relevant traffic patterns, the 
role of co-stressors including noise and socioeconomic status, and the 
role of differential susceptibility within the ``exposed'' populations. 
For a more detailed discussion, see Chapter 3 of the Regulatory Impact 
Analysis.
    These studies provide qualitative evidence that reducing emissions 
from on-road mobile sources will provide public health benefits beyond 
those that can be quantified using currently available information.

C. Ozone

    Many MSATs are part of a larger category of mobile source emissions 
known as volatile organic compounds (VOCs), which contribute to the 
formation of ozone. Mobile sources contribute significantly to national 
emissions of VOCs. In addition, PFCs are a source of VOCs. The vehicle 
and PFC standards in this final rule will help reduce emissions of 
VOCs.
1. Background
    Ground-level ozone pollution is formed by the reaction of VOCs and 
nitrogen oxides (NOX) in the lower atmosphere in the 
presence of heat and sunlight. These pollutants, often referred to as 
ozone precursors, are emitted by many types of pollution sources, such 
as highway and nonroad motor vehicles and engines, power plants, 
chemical plants, refineries, makers of consumer and commercial 
products, industrial facilities, and smaller area sources. The PFC 
controls being finalized in this action will help reduce VOC emissions 
by reducing evaporation, permeation and spillage from PFCs. The vehicle 
controls being finalized will also reduce VOC emissions; however, 
because these reductions will occur at cold temperatures the ozone 
benefits will be limited.
    The science of ozone formation, transport, and accumulation is 
complex.\96\ Ground-level ozone is produced and destroyed in a cyclical 
set of chemical reactions, many of which are sensitive to temperature 
and sunlight. When ambient temperatures and sunlight levels remain high 
for several days and the air is relatively stagnant, ozone and its 
precursors can build up and result in more ozone than typically would 
occur on a single high-temperature day. Ozone also can be transported 
into an area from pollution sources found hundreds of miles upwind, 
resulting in elevated ozone levels even in areas with low VOC or 
NOX emissions.
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    \96\ U.S. EPA, Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (Final). U.S. Environmental Protection 
Agency, Washington, DC, EPA/600/R-05/004aF-cF, 2006. This document 
is available in Docket EPA-HQ-OAR-2005-0036.
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    The current ozone National Ambient Air Quality Standards (NAAQS) 
established by EPA in 1997 has an 8-hour averaging time.\97\ The 8-hour 
ozone NAAQS is based on well-documented science demonstrating that more 
people were experiencing adverse health effects at lower levels of 
exertion, over longer periods, and at lower ozone concentrations than 
addressed by the previous one-hour ozone NAAQS. The current ozone NAAQS 
addresses ozone exposures of concern for the general population and 
populations most at risk, including children active outdoors, outdoor 
workers, and individuals with pre-existing respiratory disease, such as 
asthma. The 8-hour ozone NAAQS is met at an ambient air quality 
monitoring site when the average of the annual fourth-highest daily 
maximum 8-hour average ozone concentration over three years is less 
than or equal to 0.084 ppm.
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    \97\ EPA's review of the ozone NAAQS is underway and a proposal 
is scheduled for June 2007 with a final rule scheduled for March 
2008.
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2. Health Effects of Ozone
    The health and welfare effects of ozone are well documented and are 
assessed in the EPA's 2006 ozone Air Quality Criteria Document (ozone 
AQCD) and EPA staff papers.98 99 Ozone can irritate the 
respiratory system, causing coughing, throat irritation, and/or 
uncomfortable sensation in the chest. Ozone can reduce lung function 
and make it more difficult to breathe deeply, and breathing may become 
more rapid and shallow than normal, thereby limiting a person's 
activity. Ozone can also aggravate asthma, leading to more asthma 
attacks that require a doctor's attention and/or the use of additional 
medication. Animal toxicologic evidence indicates that with repeated 
exposure, ozone can inflame and damage the lining of the lungs, which 
may lead to permanent changes in lung tissue and irreversible 
reductions in lung function. People who are more susceptible to effects 
associated with exposure to ozone include children, the elderly, and 
individuals with respiratory disease such as asthma. There is also 
suggestive evidence that certain people may have greater genetic 
susceptibility. Those with greater exposures to ozone, for instance due 
to time spent outdoors (e.g., outdoor workers), are also of concern.
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    \98\ U.S. EPA, Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (Final). U.S. Environmental Protection 
Agency, Washington, DC, EPA/600/R-05/004aF-cF, 2006. This document 
is available in Docket EPA-HQ-OAR-2005-0036.
    \99\ U.S. EPA (2007) Review of National Ambient Air Quality 
Standards for Ozone, Assessment of Scientific and Technical 
Information, OAQPS Staff Paper, EPA-452/R-07-003. This document is 
available in Docket EPA-HQ-OAR-2005-0036.

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[[Page 8442]]

    The recent ozone AQCD also examined relevant new scientific 
information which has emerged in the past decade, including the impact 
of ozone exposure on such health effects as changes in lung structure 
and biochemistry, inflammation of the lungs, exacerbation and causation 
of asthma, respiratory illness-related school absence, hospital 
admissions and premature mortality. Animal toxicologic studies have 
suggested potential interactions between ozone and PM with increased 
responses observed to mixtures of the two pollutants compared to either 
ozone or PM alone. The respiratory morbidity observed in animal studies 
along with the evidence from epidemiologic studies supports a causal 
relationship between acute ambient ozone exposures and increased 
respiratory-related emergency room visits and hospitalizations in the 
warm season. In addition, there is suggestive evidence of a 
contribution of ozone to cardiovascular-related morbidity and non-
accidental and cardiopulmonary mortality.
3. Plant and Ecosystem Effects of Ozone
    Ozone contributes to many environmental effects, with impacts to 
plants and ecosystems being of most concern. Ozone can produce both 
acute and chronic injury in sensitive species depending on the 
concentration level and the duration of the exposure. Ozone effects 
also tend to accumulate over the growing season of the plant, so that 
even lower concentrations experienced for a longer duration have the 
potential to create chronic stress on vegetation. Ozone damage to 
plants includes visible injury to leaves and a reduction in food 
production through impaired photosynthesis, both of which can lead to 
reduced crop yields, forestry production, and use of sensitive 
ornamentals in landscaping. In addition, the reduced food production in 
plants and subsequent reduced root growth and storage below ground, can 
result in other, more subtle plant and ecosystems impacts. These 
include increased susceptibility of plants to insect attack, disease, 
harsh weather, interspecies competition and overall decreased plant 
vigor. The adverse effects of ozone on forest and other natural 
vegetation can potentially lead to species shifts and loss from the 
affected ecosystems, resulting in a loss or reduction in associated 
ecosystem goods and services. Lastly, visible ozone injury to leaves 
can result in a loss of aesthetic value in areas of special scenic 
significance like national parks and wilderness areas. The final 2006 
ozone AQCD presents more detailed information on ozone effects on 
vegetation and ecosystems.
4. Current and Projected 8-hour Ozone Levels
    Currently, ozone concentrations exceeding the level of the 8-hour 
ozone NAAQS occur over wide geographic areas, including most of the 
nation's major population centers.\100\ As of October 2006 
approximately 157 million people live in the 116 areas that are 
currently designated as not in attainment with the 8-hour ozone NAAQS. 
There are 461 full or partial counties that make up the 116 8-hour 
ozone nonattainment areas.
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    \100\ A map of the 8-hour ozone nonattainment areas is included 
in the RIA for this rule.
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    EPA has already adopted many emission control programs that are 
expected to reduce ambient ozone levels. These control programs include 
the Clean Air Interstate Rule (70 FR 25162, May 12, 2005), as well as 
many mobile source rules (many of which are described in section V.D). 
As a result of these programs, the number of areas that fail to meet 
the 8-hour ozone NAAQS is expected to decrease.
    Based on the recent ozone modeling performed for the CAIR 
analysis,\101\ barring additional local ozone precursor controls, we 
estimate 37 Eastern counties (where 24 million people are projected to 
live) will exceed the 8-hour ozone NAAQS in 2010. An additional 148 
Eastern counties (where 61 million people are projected to live) are 
expected to be within 10 percent of violating the 8-hour ozone NAAQS in 
2010.
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    \101\ Technical Support Document for the Final Clean Air 
Interstate Rule Air Quality Modeling. This document is available in 
Docket EPA-HQ-OAR-2005-0036.
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    States with 8-hour ozone nonattainment areas will be required to 
take action to bring these areas into compliance in the future. Based 
on the final rule designating and classifying 8-hour ozone 
nonattainment areas (69 FR 23951, April 30, 2004), most 8-hour ozone 
nonattainment areas will be required to attain the 8-hour ozone NAAQS 
in the 2007 to 2013 time frame and then be required to maintain the 8-
hour ozone NAAQS thereafter.\102\ The expected ozone inventory 
reductions from the standards being finalized in this action may be 
useful to states in attaining or maintaining the 8-hour ozone NAAQS.
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    \102\ The Los Angeles South Coast Air Basin 8-hour ozone 
nonattainment area will have to attain before June 15, 2021.
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    EPA's review of the ozone NAAQS is currently underway and a 
proposed decision in this review is scheduled for June 2007 with a 
final rule scheduled for March 2008. If the ozone NAAQS is revised, 
then new nonattainment areas could be designated. While EPA is not 
relying on it for purposes of justifying this rule, the emission 
reductions from this rulemaking would also be helpful to states if 
there is an ozone NAAQS revision.

D. Particulate Matter

    The cold temperature vehicle controls being finalized here will 
result in reductions of primary PM being emitted by vehicles. In 
addition, both the vehicle controls and the PFC controls will reduce 
VOCs that react in the atmosphere to form secondary PM2.5, 
namely organic carbonaceous PM2.5.
1. Background
    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. PM is further described 
by breaking it down into size fractions. PM10 refers to 
particles generally less than or equal to 10 micrometers ([mu]m) in 
diameter. PM2.5 refers to fine particles, those particles 
generally less than or equal to 2.5 [mu]m in diameter. Inhalable (or 
``thoracic'') coarse particles refer to those particles generally 
greater than 2.5 [mu]m but less than or equal to 10 [mu]m in diameter. 
Ultrafine PM refers to particles with diameters generally less than 100 
nanometers (0.1 [mu]m). Larger particles (>10 [mu]m) tend to be removed 
by the respiratory clearance mechanisms, whereas smaller particles are 
deposited deeper in the lungs.
    Fine particles are produced primarily by combustion processes and 
by transformations of gaseous emissions (e.g., SOx, 
NOX and VOCs) in the atmosphere. The chemical and physical 
properties of PM2.5 may vary greatly with time, region, 
meteorology and source category. Thus, PM2.5 may include a 
complex mixture of different pollutants including sulfates, nitrates, 
organic compounds, elemental carbon and metal compounds. These 
particles can remain in the atmosphere for days to weeks and travel 
through the atmosphere hundreds to thousands of kilometers.
    EPA has recently amended the PM NAAQS (71 FR 61144, October 17, 
2006). The final rule, signed on September 21, 2006 and published on 
October 17, 2006, addressed revisions to the primary and secondary 
NAAQS for PM to provide increased protection of public health and 
welfare, respectively.

[[Page 8443]]

The primary PM2.5 NAAQS include a short-term (24-hour) and a 
long-term (annual) standard. The level of the 24-hour PM2.5 
NAAQS has been revised from 65 [mu]g/m\3\ to 35 [mu]g/m\3\ to provide 
increased protection against health effects associated with short-term 
exposures to fine particles. The current form of the 24-hour 
PM2.5 standard was retained (e.g., based on the 98th 
percentile concentration averaged over three years). The level of the 
annual PM2.5 NAAQS was retained at 15 [mu]g/m\3\ continuing 
protection against health effects associated with long-term exposures. 
The current form of the annual PM2.5 standard was retained 
as an annual arithmetic mean averaged over three years, however, the 
following two aspects of the spatial averaging criteria were narrowed: 
(1) The annual mean concentration at each site shall be within 10 
percent of the spatially averaged annual mean, and (2) the daily values 
for each monitoring site pair shall yield a correlation coefficient of 
at least 0.9 for each calendar quarter. With regard to the primary 
PM10 standards, the 24-hour PM10 NAAQS was 
retained at a level of 150 [mu]g/m\3\ not to be exceeded more than once 
per year on average over a three-year period. Given that the available 
evidence does not suggest an association between long-term exposure to 
coarse particles at current ambient levels and health effects, EPA has 
revoked the annual PM10 standard.
    With regard to the secondary PM standards, EPA has revised these 
standards to be identical in all respects to the revised primary 
standards. Specifically, EPA has revised the current 24-hour 
PM2.5 secondary standard by making it identical to the 
revised 24-hour PM2.5 primary standard, retained the annual 
PM2.5 and 24-hour PM10 secondary standards, and 
revoked the annual PM10 secondary standards. This suite of 
secondary PM standards is intended to provide protection against PM-
related public welfare effects, including visibility impairment, 
effects on vegetation and ecosystems, and material damage and soiling.
2. Health Effects of PM
    Scientific studies show ambient PM is associated with a series of 
adverse health effects. These health effects are discussed in detail in 
the 2004 Particulate Matter Air Quality Criteria Document (PM AQCD) as 
well as the 2005 PM Staff Paper.103, 104 Further discussion 
of health effects associated with PM can also be found in the RIA for 
this final rule.
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    \103\ U.S. EPA (2004) Air Quality Criteria for Particulate 
Matter (Oct 2004), Volume I Document No. EPA600/P-99/002aF and 
Volume II Document No. EPA600/P-99/002bF. This document is available 
in Docket EPA-HQ-OAR-2005-0036.
    \104\ U.S. EPA (2005) Review of the National Ambient Air Quality 
Standard for Particulate Matter: Policy Assessment of Scientific and 
Technical Information, OAQPS Staff Paper. EPA-452/R-05-005. This 
document is available in Docket EPA-HQ-OAR-2005-0036.
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    Health effects associated with short-term exposures (e.g. hours to 
days) in ambient PM2.5 include premature mortality, 
increased hospital admissions, heart and lung diseases, increased 
cough, adverse lower-respiratory symptoms, decrements in lung function 
and changes in heart rate rhythm and other cardiac effects. Studies 
examining populations exposed to different levels of air pollution over 
a number of years, including the Harvard Six Cities Study and the 
American Cancer Society Study, show associations between long-term 
exposure to ambient PM2.5 and both total and 
cardiorespiratory mortality. In addition, the reanalysis of the 
American Cancer Society cohort shows an association between fine 
particle and sulfate concentrations and lung cancer mortality.
    Recently, several studies have highlighted the adverse effects of 
PM specifically from mobile sources.105, 106 Studies have 
also focused on health effects due to PM exposures on or near 
roadways.\107\ Although these studies include all air pollution 
sources, including both spark-ignition (gasoline) and diesel powered 
vehicles, they indicate that exposure to PM emissions near roadways, 
thus dominated by mobile sources, are associated with health effects. 
Additional information on near-roadway health effects can be found in 
section III.B.2.d of this preamble.
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    \105\ Laden, F.; Neas, L.M.; Dockery, D.W.; Schwartz, J. (2000) 
Association of Fine Particulate Matter from Different Sources with 
Daily Mortality in Six U.S. Cities. Environmental Health 
Perspectives 108: 941-947.
    \106\ Janssen, N.A.H.; Schwartz, J.; Zanobetti, A.; Suh, H.H. 
(2002) Air Conditioning and Source-Specific Particles as Modifiers 
of the Effect of PM10 on Hospital Admissions for Heart 
and Lung Disease. Environmental Health Perspectives 110: 43-49.
    \107\ Riediker, M.; Cascio, W.E.; Griggs, T.R.; Herbst, M.C.; 
Bromberg, P.A.; Neas, L.; Williams, R.W.; Devlin, R.B. (2003) 
Particulate Matter Exposures in Cars is Associated with 
Cardiovascular Effects in Healthy Young Men. Am. J. Respir. Crit. 
Care Med. 169: 934-940.
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3. Welfare Effects of PM
a. Visibility
i. Background
    Visibility can be defined as the degree to which the atmosphere is 
transparent to visible light.\108\ Visibility impairment manifests in 
two principal ways: as local visibility impairment and as regional 
haze.\109\ Local visibility impairment may take the form of a localized 
plume, a band or layer of discoloration appearing well above the 
terrain as a result from complex local meteorological conditions. 
Alternatively, local visibility impairment may manifest as an urban 
haze, sometimes referred to as a ``brown cloud.'' This urban haze is 
largely caused by emissions from multiple sources in the urban areas 
and is not typically attributable to only one nearby source or to long-
range transport. The second type of visibility impairment, regional 
haze, usually results from multiple pollution sources spread over a 
large geographic region. Regional haze can impair visibility over large 
regions and across states.
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    \108\ National Research Council, 1993. Protecting Visibility in 
National Parks and Wilderness Areas. National Academy of Sciences 
Committee on Haze in National Parks and Wilderness Areas. National 
Academy Press, Washington, DC. This document is available in Docket 
EPA-HQ-OAR-2005-0036. This book can be viewed on the National 
Academy Press Web site at http://www.nap.edu/books/0309048443/html/.
    \109\ See discussion in U.S. EPA, National Ambient Air Quality 
Standards for Particulate Matter; Proposed Rule; January 17, 2006, 
Vol 71, p. 2676. This information is available electronically at 
http://epa.gov/fedrgstr/EPA-AIR/2006/January/Day-17/a177.pdf.
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    Visibility is important because it has direct significance to 
people's enjoyment of daily activities in all parts of the country. 
Individuals value good visibility for the well-being it provides them 
directly, where they live and work, and in places where they enjoy 
recreational opportunities. Visibility is also highly valued in 
significant natural areas such as national parks and wilderness areas, 
and special emphasis is given to protecting visibility in these areas. 
For more information on visibility see the 2004 PM AQCD as well as the 
2005 PM Staff Paper.110 111
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    \110\ U.S. EPA (2004) Air Quality Criteria for Particulate 
Matter (Oct 2004), Volume I Document No. EPA600/P-99/002aF and 
Volume II Document No. EPA600/P-99/002bF. This document is available 
in Docket EPA-HQ-OAR-2005-0036.
    \111\ U.S. EPA (2005) Review of the National Ambient Air Quality 
Standard for Particulate Matter: Policy Assessment of Scientific and 
Technical Information, OAQPS Staff Paper. EPA-452/R-05-005. This 
document is available in Docket EPA-HQ-OAR-2005-0036.
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    Fine particles are the major cause of reduced visibility in parts 
of the United

[[Page 8444]]

States. To address the welfare effects of PM on visibility, EPA set 
secondary PM2.5 standards which would act in conjunction 
with the establishment of a regional haze program. In setting this 
secondary standard, EPA concluded that PM2.5 causes adverse 
effects on visibility in various locations, depending on PM 
concentrations and factors such as chemical composition and average 
relative humidity. The secondary (welfare-based) PM2.5 NAAQS 
was established as equal to the suite of primary (health-based) NAAQS. 
Furthermore, section 169 of the Act provides additional authorities to 
remedy existing visibility impairment and prevent future visibility 
impairment in the 156 national parks, forests and wilderness areas 
categorized as mandatory class I federal areas (62 FR 38680-81, July 
18, 1997).\112\ In July 1999 the regional haze rule (64 FR 35714) was 
put in place to protect the visibility in mandatory class I federal 
areas. Visibility can be said to be impaired in both PM2.5 
nonattainment areas and mandatory class I federal areas.
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    \112\ These areas are defined in section 162 of the Act as those 
national parks exceeding 6,000 acres, wilderness areas and memorial 
parks exceeding 5,000 acres, and all international parks which were 
in existence on August 7, 1977.
---------------------------------------------------------------------------

ii. Current Visibility Impairment
    Recently designated PM2.5 nonattainment areas indicate 
that, as of October 2006, almost 90 million people live in 
nonattainment areas for the 1997 PM2.5 NAAQS. Thus, at least 
these populations would likely be experiencing visibility impairment, 
as well as many thousands of individuals who travel to these areas. In 
addition, while visibility trends have improved in mandatory class I 
federal areas, the most recent data show that these areas continue to 
suffer from visibility impairment.\113\ In summary, visibility 
impairment is experienced throughout the U.S., in multi-state regions, 
urban areas, and remote mandatory class I federal 
areas.114 115 The mandatory class I federal areas are listed 
in Chapter 3 of the RIA for this action. The areas that have design 
values above the 1997 PM2.5 NAAQS are also listed in Chapter 
3 of the RIA for this action.
---------------------------------------------------------------------------

    \113\ U.S. EPA, Regulatory Impact Analysis for the Final Clean 
Air Interstate Rule. This document is available in Docket EPA-HQ-
OAR-2005-0036.
    \114\ U.S. EPA, Air Quality Designations and Classifications for 
the Fine Particles (PM2.5) National Ambient Air Quality 
Standards, December 17, 2004. (70 FR 943, January 5, 2005) This 
document is also available on the web at: http://www.epa.gov/
pmdesignations/.
    \115\ U.S. EPA, Regional Haze Regulations, July 1, 1999. (64 FR 
35714, July 1, 1999)
---------------------------------------------------------------------------

iii. Future Visibility Impairment
    Recent modeling for the Clean Air Interstate Rule (CAIR) was used 
to project visibility conditions in mandatory class I federal areas 
across the country in 2015. The results for the mandatory class I 
federal areas suggest that these areas are predicted to continue to 
have annual average deciview levels above background in the 
future.\116\ Modeling done for the PM NAAQS also projected 
PM2.5 levels in 2015. These projections include all sources 
of PM2.5, including the engines covered in this rule, and 
suggest that PM2.5 levels above the NAAQS will persist into 
the future.
---------------------------------------------------------------------------

    \116\ The deciview metric describes perceived visual changes in 
a linear fashion over its entire range, analogous to the decibel 
scale for sound. A deciview of 0 represents pristine conditions. The 
higher the deciview value, the worse the visibility, and an 
improvement in visibility is a decrease in deciview value.
---------------------------------------------------------------------------

    The vehicles that will be subject to the standards contribute to 
visibility concerns in these areas through both their primary PM 
emissions and their VOC emissions, which contribute to the formation of 
secondary PM2.5. The PFCs that will be subject to the 
standards also contribute to visibility concerns through their VOC 
emissions. Reductions in these direct PM and VOC emissions will help to 
improve visibility across the nation, including mandatory class I 
federal areas.
b. Atmospheric Deposition
    Wet and dry deposition of ambient particulate matter delivers a 
complex mixture of metals (e.g., mercury, zinc, lead, nickel, aluminum, 
cadmium), organic compounds (e.g., POM, dioxins, furans) and inorganic 
compounds (e.g., nitrate, sulfate) to terrestrial and aquatic 
ecosystems. EPA's Great Waters Program has identified 15 pollutants 
whose deposition to water bodies has contributed to the overall 
contamination loadings to these Great Waters. These 15 compounds 
include several heavy metals and a group known as polycyclic organic 
matter (POM). Within POM are the polycyclic aromatic hydrocarbons 
(PAHs). PAHs in the environment may be present in the gas or particle 
phase, although the bulk will be adsorbed onto airborne particulate 
matter. In most cases, human-made sources of PAHs account for the 
majority of PAHs released to the environment. The PAHs are usually the 
POMs of concern as many PAHs are probable human carcinogens.\117\ For 
some watersheds, atmospheric deposition represents a significant input 
to the total surface water PAH burden.118 119 Emissions from 
mobile sources have been found to account for a percentage of the 
atmospheric deposition of PAHs. For instance, recent studies have 
reported gasoline and diesel vehicles as major contributors in the 
atmospheric deposition of PAHs to Chesapeake Bay, Massachusetts Bay and 
Casco Bay.120 121 The vehicle controls being finalized may 
help to reduce deposition of heavy metals and POM.
---------------------------------------------------------------------------

    \117\ Deposition of Air Pollutants to the Great Waters--Third 
Report to Congress, Office of Air Quality Planning and Standards, 
June 2000, EPA453-R-00-005. This document is available in Docket 
EPA-HQ-OAR-2005-0036.
    \118\ Simcik, M.F.; Eisenrich, S.J.; Golden, K.A.; Liu, S.; 
Lipiatou, E.; Swackhamer, D.L.; and Long, D.T. (1996) Atmospheric 
Loading of Polycyclic Aromatic Hydrocarbons to Lake Michigan as 
Recorded in the Sediments. Environ. Sci. Technol. 30:3039-3046.
    \119\ Simcik, M.F.; Eisenrich, S.J.; and Lioy, P.J. (1999) 
Source Apportionment and Source/Sink Relationships of PAHs in the 
Coastal Atmosphere of Chicago and Lake Michigan. Atmospheric 
Environment 33: 5071-5079.
    \120\ Dickhut, R.M.; Canuel, E.A.; Gustafson, K.E.; Liu, K.; 
Arzayus, K.M.; Walker, S.E.; Edgecombe, G.; Gaylor, M.O.; and 
McDonald, E.H. (2000) Automotive Sources of Carcinogenic Polycyclic 
Aromatic Hydrocarbons Associated with Particulate Matter in the 
Chesapeake Bay Region. Environ. Sci. Technol. 34: 4635-4640.
    \121\ Golomb, D.; Barry, E.; Fisher, G.; Varanusupakul, P.; 
Koleda, M.; and Rooney, T. (2001) Atmospheric Deposition of 
Polycyclic Aromatic Hydrocarbons near New England Coastal Waters. 
Atmospheric Environment 35: 6245-6258.
---------------------------------------------------------------------------

c. Materials Damage and Soiling
    The deposition of airborne particles can also reduce the aesthetic 
appeal of buildings and culturally important articles through soiling, 
and can contribute directly (or in conjunction with other pollutants) 
to structural damage by means of corrosion or erosion.\122\ Particles 
affect materials principally by promoting and accelerating the 
corrosion of metals, by degrading paints, and by deteriorating building 
materials such as concrete and limestone. Particles contribute to these 
effects because of their electrolytic, hygroscopic, and acidic 
properties, and their ability to sorb corrosive gases (principally 
sulfur dioxide). The rate of metal corrosion depends on a number of 
factors, including the deposition rate and nature of the pollutant; the 
influence of the metal protective corrosion film; the amount of 
moisture present; variability in the electrochemical reactions; the 
presence and concentration of other surface electrolytes; and the 
orientation of the metal surface.
---------------------------------------------------------------------------

    \122\ U.S EPA (2005) Review of the National Ambient Air Quality 
Standards for Particulate Matter: Policy Assessment of Scientific 
and Technical Information, OAQPS Staff Paper. This document is 
available in Docket EPA-HQ-OAR-2005-0036.

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

[[Page 8445]]

4. Current and Projected PM2.5 Levels
    In 2005 EPA designated 39 nonattainment areas for the 1997 
PM2.5 NAAQS based on air quality design values (using 2001-
2003 or 2002-2004 measurements) and a number of other factors.\123\ 
(See 70 FR 943, January 5, 2005; 70 FR 19844, April 14, 2005.) These 
areas are comprised of 208 full or partial counties with a total 
population exceeding 88 million. As mentioned in section III.D.1, the 
1997 PM2.5 NAAQS was recently revised and the 2006 
PM2.5 NAAQS became effective on December 18, 2006. Table 
III.D-1 presents the number of counties in areas currently designated 
as nonattainment for the 1997 PM2.5 NAAQS as well as the 
number of additional counties which have monitored data that is 
violating the 2006 PM2.5 NAAQS. Nonattainment areas will be 
designated with respect to the new 2006 PM2.5 NAAQS in early 
2010.
---------------------------------------------------------------------------

    \123\ The full details involved in calculating a 
PM2.5 design value are given in Appendix N of 40 CFR Part 
50.

 Table III.D-1.--PM2.5 Standards: Current Nonattainment Areas and Other
                           Violating Counties
------------------------------------------------------------------------
                                             Number of
                                              counties    Population\1\
------------------------------------------------------------------------
1997 PM2.5 Standards: 39 areas currently            208       88,394,000
 designated...............................
2006 PM2.5 Standards: Counties with                  49       18,198,676
 violating monitors \2\...................
                                           -----------------------------
    Total.................................          257      106,592,676
------------------------------------------------------------------------
\1\ Population numbers are from 2000 census data.
\2\ This table provides an estimate of the counties violating the 2006
  PM2.5 NAAQS based on 2003-05 air quality data. The areas designated as
  nonattainment for the 2006 PM2.5 NAAQS will be based on 3 years of air
  quality data from later years. Also, the county numbers in the summary
  table include only the counties with monitors violating the 2006 PM2.5
  NAAQS. The monitored county violations may be an underestimate of the
  number of counties and populations that will eventually be included in
  areas with multiple counties designated nonattainment.

    Based on modeling performed for the PM NAAQS analysis, we estimate 
that 52 counties (where 53 million people are projected to live) will 
exceed the 2006 PM2.5 standard in 2015.124 125 In 
addition, 54 counties (where 27 million people are projected to live) 
are expected to be within 10 percent of violating the 2006 
PM2.5 NAAQS in 2015.
---------------------------------------------------------------------------

    \124\ Note that this analysis identifies only counties projected 
to have a violating monitor; when designated in the future, some 
areas may include additional contributing counties. Thus, the total 
number of counties designated in the future and the associated 
population would likely exceed these estimates.
    \125\ Regulatory Impact Analysis for the final PM NAAQS rule. 
This document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    Areas designated as not attaining the 1997 PM2.5 NAAQS 
will need to attain these standards in the 2010 to 2015 time frame, and 
then be required to maintain the NAAQS thereafter. The attainment dates 
associated with the potential nonattainment areas based on the 2006 
PM2.5 NAAQS would likely be in the 2015 to 2020 timeframe. 
The emissions standards being finalized in this action would become 
effective between 2009 and 2015, making the expected PM and VOC 
inventory reductions useful to states in attaining or maintaining the 
PM2.5 NAAQS.
5. Current PM10 Levels
    Air quality monitoring data indicates that as of October 2006 
approximately 28.5 million people live in 46 designated PM10 
nonattainment areas, which include all or part of 46 counties. The RIA 
for this rule lists the PM10 nonattainment areas and their 
populations, as of October 2006. The expected PM and VOC inventory 
reductions from the standards being finalized in this action could be 
useful to states in maintaining the PM10 NAAQS.

IV. What Are the Emissions, Air Quality, and Public Health Impacts of 
This Rule?

A. Emissions Impacts of All Rule Provisions Combined

    The emissions analysis presented in section IV.A of this preamble 
is described in more detail in Chapter 2.2.2. of the RIA. The emissions 
analysis has been updated since the proposal, largely to include the 
effects of the recently proposed Renewable Fuels Standard, which was 
required by the Energy Policy Act. The emissions analysis examines the 
0.62 vol% standard but does not include the 1.3% maximum average, 
because of the lead time necessary to conduct inventory modeling. Thus, 
the emission reductions from highway vehicles and other sources 
attributable to the fuel benzene standard are underestimated in many 
areas of the country, particularly in areas where fuel benzene levels 
were highest without control, such as the Northwest. This issue is 
discussed in more detail in the RIA.
1. How Will MSAT Emissions Be Reduced?
    Figure IV.A-1 depicts the estimated reduction in total air toxic 
emissions emitted by mobile sources between 1990 and 2030, with and 
without the standards being finalized in this rule. These estimates do 
not include diesel PM. Trends in diesel PM emissions are discussed in 
the regulatory impact analysis for this rule. Without standards being 
finalized in this rule, emissions of air toxics from mobile sources 
will be reduced by about 70% percent between 1990 and 2030, from about 
3.3 million tons to 1.3 million tons. This will occur despite a 
projected increase in vehicle miles traveled of over 100 percent, and a 
projected 150% increase in nonroad activity, based on units of work 
called horsepower hours. Without additional controls, air toxic 
emissions from mobile sources would begin to increase after 2015. 
Similar trends are observed for benzene (see Figure IV.A-2), with a 
reduction in emissions from about 380,000 tons in 1990 to less than 
170,000 tons in 2030, but emissions from mobile sources begin to 
increase again after 2015.

[[Page 8446]]

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[[Page 8447]]


[GRAPHIC] [TIFF OMITTED] TR26FE07.001

    Total emissions of MSATs from mobile and stationary sources in 2030 
will be 330,000 tons less than they would have been without this rule 
(Figure IV.A-3). Of these 330,000 tons of reductions, 310,000 will be 
from mobile sources, with the rest from portable fuel containers (PFCs) 
and gasoline distribution.\126\ Table IV.A-1 summarizes MSAT reductions 
by source sector in 2015, 2020, and 2030. In addition, total benzene 
emissions from mobile and stationary sources will be 61,000 tons less 
than they would have been without this rule (Figure IV.A-4). Table 
IV.A-2 depicts reductions in benzene by source sector from this rule.
---------------------------------------------------------------------------

    \126\ Reduction in fuel benzene will reduce emissions through 
the whole distribution chain.
---------------------------------------------------------------------------

    In 2030, annual benzene emissions from gasoline on-road mobile 
sources will be 45% lower as a result of this rule (Figure IV.A-5), and 
over 60% lower than they were in 1999. In addition, benzene emissions 
from gasoline nonroad equipment will be 14% lower in 2030, and over 45% 
lower than they were in 1999. Benzene emissions from PFCs will be 
reduced by almost 80% in 2030 (Figure IV.A-6), and benzene emissions 
from gasoline distribution by over 30% in 2030. For total MSAT 
emissions from on-road mobile sources, there will be a 38% reduction in 
MSAT emissions in 2030 (Figure IV.A-7), and a 65% reduction from 1999 
levels.
    Table IV.A-3 provides estimated reductions in emissions from 
individual MSATs in 2015, 2020 and 2030, from gasoline vehicles, 
gasoline nonroad engines, and PFCs as a result of the controls being 
finalized in this rule.

[[Page 8448]]

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[[Page 8449]]


[GRAPHIC] [TIFF OMITTED] TR26FE07.003


                         Table IV.A-1.--Estimated Reductions in MSAT Emissions From All Control Measures by Sector, 2015 to 2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2015                                 2020                                 2030
                                          --------------------------------------------------------------------------------------------------------------
             MSAT                 1999       Without                              Without                              Without
                                               rule      With rule   Reduction      rule      With rule   Reduction      rule      With rule   Reduction
                                              (tons)      (tons)      (tons)       (tons)      (tons)      (tons)       (tons)      (tons)      (tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline Onroad Mobile          1,452,739      675,781     558,666     117,115      693,189     507,782     185,408      808,141     505,074     303,067
 Sources.....................
Gasoline Nonroad Mobile           806,725      449,422     443,973       5,449      406,196     400,816       5,380      412,617     406,856       5,761
 Sources.....................
PFCs.........................      37,166       27,355       9,893      17,462       29,338      10,672      18,666       33,430      12,264      21,166
Gasoline Distribution........      57,765       62,870      62,059         811       64,942      64,092         850       64,942      64,092         850
                              --------------------------------------------------------------------------------------------------------------------------
    Total....................   2,354,395    1,215,428   1,074,591     140,837    1,193,665     983,362     210,303    1,319,130     988,286     330,844
--------------------------------------------------------------------------------------------------------------------------------------------------------


                       Table IV.A-2.--Estimated Reductions in Benzene Emissions from All Control Measures by Sector, 2015 to 2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2015                                 2020                                 2030
                                          --------------------------------------------------------------------------------------------------------------
           Benzene                1999       Without                              Without                              Without
                                               rule      With rule   Reduction      rule      With rule   Reduction      rule      With rule   Reduction
                                              (tons)      (tons)      (tons)       (tons)      (tons)      (tons)       (tons)      (tons)      (tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline Onroad Mobile            183,660       97,789      71,688      26,101      101,514      65,878      35,636      119,016      65,601      53,415
 Sources.....................
Gasoline Nonroad Mobile            68,589       41,343      35,825       5,518       40,161      34,717       5,444       42,994      37,167       5,827
 Sources.....................
PFCs.........................         853          992         215         777        1,063         232         831        1,210         267         944
Gasoline Distribution........       1,984        2,445       1,635         810        2,621       1,772         849        2,621       1,772         849
                              --------------------------------------------------------------------------------------------------------------------------
    Total....................     255,086      142,569     109,363      33,206      145,359     102,599      42,760      165,841     104,807      61,035
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 8450]]

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[[Page 8451]]

[GRAPHIC] [TIFF OMITTED] TR26FE07.005


[[Page 8452]]

[GRAPHIC] [TIFF OMITTED] TR26FE07.006


  Table IV.A-3.--Estimated Reductions in Emissions From Individual MSATs in 2015, 2020 and 2030, From Gasoline Vehicles, Gasoline Nonroad Engines, and
                           Portable Fuel Containers, Resulting From the Cumulative Impacts of the Controls in This Rule \127\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2015                                 2020                                 2030
                                  1999    --------------------------------------------------------------------------------------------------------------
             MSAT                (tons)      Without     With rule  Reductions    Without     With rule  Reductions    Without     With rule  Reductions
                                           rule (tons)    (tons)       (tons)   rule (tons)    (tons)       (tons)   rule (tons)    (tons)       (tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1,3-Butadiene................      31,234       14,771      13,259       1,512       15,037      12,535       2,501       17,054      12,834       4,220
2,2,4-Trimethylpentane.......     296,310      166,270     149,178      17,091      159,892     133,578      26,314      174,824     132,763      42,061
Acetaldehyde.................      27,800       21,223      18,154       3,069       22,156      17,011       5,145       25,754      17,213       8,541
Acrolein.....................       3,835        1,650       1,457         193        1,665       1,347         317        1,889       1,360         529
Benzene......................     250,227      140,124     107,728      32,396      142,737     100,827      41,911      163,221     103,035      60,186
Ethyl Benzene................     120,150       61,300      54,805       6,495       59,963      49,968       9,995       66,823      50,830      15,992
Formaldehyde.................      74,053       32,341      28,096       4,245       33,350      26,371       6,979       38,472      26,946      11,526
Hexane.......................     106,464       57,852      52,042       5,810       54,673      46,926       7,747       59,152      48,029      11,124
MTBE.........................     143,350            0           0           0            0           0           0            0           0           0
Propionaldehyde..............       4,142        2,195       1,965         231        2,249       1,869         380        2,565       1,932         633
Styrene......................      16,352        8,212       6,985       1,227        8,423       6,405       2,018        9,731       6,365       3,366
Toluene......................     729,908      390,688     347,363      43,325      380,420     312,542      67,878      420,534     310,654     109,880
Xylenes......................     487,768      252,993     228,561      24,432      245,180     206,913      38,267      270,775     208,839      61,936
                              --------------------------------------------------------------------------------------------------------------------------
    Total MSATs..............   2,291,593    1,149,618   1,009,592     140,026    1,125,744     916,291     209,453    1,250,794     920,800     329,994
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. How Will VOC Emissions Be Reduced?
---------------------------------------------------------------------------

    \127\ Napthalene reductions from controls in this rule are not 
quantified, due to limitations in modeling tools.
---------------------------------------------------------------------------

    VOC emissions will be reduced by the hydrocarbon emission standards 
for both light-duty vehicles and PFCs. As seen in the table and 
accompanying figure below Table IV.A-4 and Figure IV.A-8, annual VOC 
emission reductions from both of these sources will be 34% lower in 
2030 because of this rule, and 59% lower than in 1999.

[[Page 8453]]



  Table IV.A-4. Estimated Reductions in VOC Emissions from Light-Duty Gasoline Vehicles and PFCs, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                                  1999         2015         2020         2030
----------------------------------------------------------------------------------------------------------------
VOC Without Rule (tons).....................................    5,224,921    2,944,491    2,892,134    3,281,752
VOC With Vehicle and PFC Standards (tons)...................  ...........    2,420,860    2,146,476    2,153,735
VOC Reduction (tons)........................................  ...........      523,631      745,658    1,128,017
----------------------------------------------------------------------------------------------------------------

                                                                                                     [GRAPHIC] [TIFF OMITTED] TR26FE07.007
                                                                                                     
3. How Will PM Emissions Be Reduced?
    EPA expects that the cold-temperature vehicle standards will reduce 
exhaust emissions of direct PM2.5 by over 19,000 tons in 
2030 nationwide (see Table IV.A-5 below). Our analysis of the data from 
vehicles meeting Tier 2 emission standards indicate that PM emissions 
follow a monotonic relationship with temperature, with lower 
temperatures corresponding to higher vehicle emissions. Additionally, 
the analysis shows the ratio of PM to total non-methane hydrocarbons 
(NMHC) to be independent of temperature.\128\ Our testing indicates 
that strategies which reduce NMHC start emissions at cold temperatures 
also reduce direct PM emissions. Based on these findings, direct PM 
emissions at cold temperatures were estimated using a constant PM to 
NMHC ratio. PM emission reductions were estimated by assuming that NMHC 
reductions will result in proportional reductions in PM. This 
assumption is supported by test data. For more detail, see Chapter 2.1 
of the RIA.
---------------------------------------------------------------------------

    \128\ U.S. EPA. 2005. Cold-temperature exhaust particulate 
matter emissions. Memorandum from Chad Bailey to docket EPA-HQ-OAR-
2005-0036.

   Table IV.A-5. Estimated National Reductions in Direct PM2.5 Exhaust
  Emissions From Light-Duty Gasoline Vehicles and Trucks, 2015 to 2030
------------------------------------------------------------------------
                                            2015       2020       2030
------------------------------------------------------------------------
PM2.5 Reductions from Vehicle Standards      7,068     11,646     19,421
 (tons)................................
------------------------------------------------------------------------


[[Page 8454]]

B. Emission Impacts by Provision

1. Vehicle Controls
    We are finalizing a hydrocarbon standard for gasoline passenger 
vehicles at cold temperatures. This standard will reduce VOC at 
temperatures below 75 [deg]F, including air toxics such as benzene, 
1,3-butadiene, formaldehyde, acetaldehyde, and acrolein, and will also 
reduce emissions of direct and secondary PM. We are also finalizing new 
evaporative emissions standards for Tier 2 vehicles starting in 2009. 
These new evaporative standards reflect the emissions levels already 
being achieved by manufacturers.
a. Volatile Organic Compounds (VOC)
    Table IV.B-1 shows the VOC exhaust emission reductions from light-
duty gasoline vehicles and trucks that will result from the cold 
temperature hydrocarbon standard alone. The standards will reduce VOC 
emissions from these vehicles in 2030 by 31%. Overall VOC emissions 
from these vehicles will be reduced by 82% between 1999 and 2030 
(including the effects of these standards as well as other standards in 
place, such as Tier 2).

   Table IV.B.-1. Estimated National Reductions in Exhaust VOC Emissions From Light-Duty Gasoline Vehicles and
                                              Trucks, 1999 to 2030.
----------------------------------------------------------------------------------------------------------------
                                                1999          2010          2015          2020          2030
----------------------------------------------------------------------------------------------------------------
VOC Without Rule (tons)...................     4,899,891     2,990,760     2,614,987     2,538,664     2,878,836
VOC With Proposed Vehicle Standards (tons)  ............     2,839,012     2,293,703     2,009,301     1,996,074
VOC Reductions from Vehicle Standards       ............       151,748       321,284       529,363       882,762
 (tons)...................................
Percentage Reduction......................  ............             5            12            21            31
----------------------------------------------------------------------------------------------------------------

b. Toxics
    In 2030, we estimate that the vehicle standards will result in a 
38% reduction in total emissions of the MSATs and a 39% reduction in 
benzene emissions from light-duty vehicles and trucks (see Tables IV.B-
1 and IV.B-2). Between 1999 and 2030, total MSATs from light-duty 
gasoline vehicles and trucks will be reduced by 64%, and benzene by 
59%.

  Table IV.B.-1. Estimated National Reductions in Exhaust MSAT Emissions From Light-Duty Gasoline Vehicles and
                                              Trucks, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                1999          2010          2015          2020          2030
----------------------------------------------------------------------------------------------------------------
MSATs Without Rule (tons).................     1,376,002       695,408       650,012       669,707       783,648
MSATs With Vehicle Standards (tons).......  ............       644,312       542,281       492,700       488,824
MSAT Reductions from Vehicle Standards      ............        51,987       107,731       177,007       294,824
 (tons)...................................
Percentage Reduction......................  ............             7            17            26            38
----------------------------------------------------------------------------------------------------------------


 Table IV.B-2.--Estimated National Reductions in Benzene Exhaust Emissions From Light-Duty Gasoline Vehicles and
                                              Trucks, 1999 to 2030.
----------------------------------------------------------------------------------------------------------------
                                                         1999        2010        2015        2020        2030
----------------------------------------------------------------------------------------------------------------
Benzene Without Rule (tons).........................     173,474      99,559      95,234      99,225     116,742
Benzene With Vehicle Standards (tons)...............  ..........      91,621      78,664      72,128      71,704
Benzene Reductions from Vehicle Standards (tons)....  ..........       7,939      16,570      27,097      45,037
Percentage Reduction................................  ..........           8          17          27          39
----------------------------------------------------------------------------------------------------------------

c. PM2.5
    As discussed in Section IV.A.3, EPA expects that the cold-
temperature vehicle standards will reduce exhaust emissions of direct 
PM2.5 by over 19,000 tons in 2030 nationwide (see Table 
IV.A-5).
2. Fuel Benzene Standard
    The fuel benzene standard will reduce benzene exhaust and 
evaporative emissions from both on-road and nonroad mobile sources that 
are fueled by gasoline. In addition, the fuel benzene standard will 
reduce evaporative emissions from gasoline distribution and PFCs. 
Impacts on 1,3-butadiene, formaldehyde, and acetaldehyde emissions are 
not significant, but are presented in Chapter 2 of the RIA. We do not 
expect the fuel benzene standard to have quantifiable impacts on any 
other air toxics, total VOCs, or direct PM.
    Table IV.B-3 shows national estimates of total benzene emissions 
from these source sectors with and without the fuel benzene standard in 
2015. These estimates do not include effects of the vehicle or PFC 
standards (see section IV.A.1 for the combined effects of the 
controls). They also assume that the fuel program is fully phased in, 
which is a simplification of the actual phase-in. The fuel benzene 
standard will reduce total benzene emissions from on-road and nonroad 
gasoline mobile sources, PFCs, and gasoline distribution by 12% in 
2015.

[[Page 8455]]



        Table IV.B-3.--Estimated Reductions in Benzene Emissions From Gasoline Standard by Sector in 2015
----------------------------------------------------------------------------------------------------------------
                                                     Gasoline    Gasoline
                                                      on-road     nonroad                Gasoline
                                                      mobile      mobile      PFCs     distribution      Total
                                                      sources     sources
----------------------------------------------------------------------------------------------------------------
Benzene Without Rule (tons).......................      97,789      41,343      992            2,445     142,569
Benzene With Gasoline Standard (tons).............      86,875      35,825      619            1,635     124,954
Benzene Reductions from Gasoline Standard (tons)..      10,914       5,518      373              810      17,615
Percentage Reduction..............................          11          13       38               33          12
----------------------------------------------------------------------------------------------------------------

3. PFC Standards
a. VOC
    Table IV.B-4 shows the reductions in VOC emissions that we expect 
from the PFC standard. In 2015, VOC emissions From PFCs will be reduced 
by 61% because of reduced permeation, spillage, and evaporative losses.

              Table IV.B-4.--Estimated National Reductions in VOC Emissions From PFCs, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                         1999        2010        2015        2020        2030
----------------------------------------------------------------------------------------------------------------
VOC Without Rule (tons).............................     325,030     316,756     329,504     353,470     402,916
VOC With PFC Standard (tons)........................  ..........     256,175     127,157     137,175     216,294
VOC Reductions from PFC Standard (tons).............  ..........      60,580     202,347     216,294     245,255
Percentage Reduction................................  ..........          19          61          61          61
----------------------------------------------------------------------------------------------------------------

b. Toxics
    The PFC standard will reduce emissions of benzene, toluene, 
xylenes, ethylbenzene, n-hexane, 2,2,4-trimethylpentane, and MTBE. We 
estimate that benzene emissions from PFCs will be reduced by 68% (see 
Table IV.B-5) and, more broadly, air toxic emissions by 63% (see Table 
IV.B-6) in year 2015. These reductions do not include effects of the 
fuel benzene standard (see section IV.A-1 for the combined effects of 
the controls). Chapter 2 of the RIA provides details on the emission 
reductions of the other toxics.

            Table IV.B-5.--Estimated National Reductions in Benzene Emissions From PFCs, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                                       1999     2010     2015     2020     2030
----------------------------------------------------------------------------------------------------------------
Benzene Without Rule (tons)........................................      853      943      992     1063     1210
Benzene With PFC Standard (tons)...................................  .......      743      320      345      396
Benzene Reductions from PFC Standard (tons)........................  .......      200      672      718      814
Percentage Reduction...............................................  .......       21       68       68       67
----------------------------------------------------------------------------------------------------------------


          Table IV.B-6.--Estimated National Reductions in Total MSAT Emissions From PFCs, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                                       1999     2010     2015     2020     2030
----------------------------------------------------------------------------------------------------------------
MSATs Without Rule (tons)..........................................   37,167   26,189   27,355   29,338   33,430
MSATs With PFC Standard (tons).....................................  .......   21,010    9,998   10,785   12,394
MSAT Reductions from PFC Standard (tons)...........................  .......    5,179   17,357   18,553   21,036
Percentage Reduction...............................................  .......       20       63       63       63
----------------------------------------------------------------------------------------------------------------

C. What Are the Air Quality, Exposure, and Public Health Impacts of 
This Rule?

1. Mobile Source Air Toxics
    The controls being finalized in this rule will reduce both 
evaporative and exhaust emissions from motor vehicles and nonroad 
equipment. They will also reduce emissions from PFCs and stationary 
source emissions associated with gasoline distribution. Therefore, they 
will reduce exposure to mobile source air toxics for the general 
population, and also for people near roadways, in vehicles, in homes 
with attached garages, operating nonroad equipment, and living or 
working near sources of gasoline distribution emissions (such as bulk 
terminals, bulk plants, tankers, marine vessels, and service stations). 
Section III.B of this preamble and Chapter 3 of the RIA provide more 
details on these types of exposures.
    We performed national-scale air quality, exposure, and risk 
modeling in order to quantitatively assess the impacts of the standards 
being finalized. The exposure modeling for the final rule accounted for 
the spatial variability of outdoor concentrations of air toxics due to 
higher concentrations near roadways. This is a significant improvement 
over exposure modeling done for the proposal, and is discussed in more 
detail in Chapter 3 of the RIA. However, in addition to the limitations 
of the national-scale modeling tools (discussed in Chapter 3 of the 
RIA), this modeling did not account for the impacts of the recently 
proposed renewable fuel standard, as this standard was proposed 
subsequent to the development of inventories for air quality modeling. 
In addition, while the model includes the

[[Page 8456]]

0.62 vol% fuel benzene standard, it does not include the 1.3% maximum 
average.
    The standards being finalized in this rule will reduce both the 
number of people above the 1 in 100,000 cancer risk level, and the 
average population cancer risk, by reducing exposures to mobile source 
air toxics. The number of people above the 1 in 100,000 cancer risk 
level due to exposure to all mobile source air toxics from all sources 
will decrease by over 11 million in 2020 and by almost 17 million in 
2030. The number of people above the 1 in 100,000 cancer risk level 
from exposure to benzene from all sources will decrease by about 30 
million in 2020 and 46 million in 2030. It should be noted that if it 
were possible to estimate impacts of the standard on ``background'' 
concentrations \129\, the estimated overall risk reductions would be 
even larger. The standards will also reduce the number of people with a 
respiratory hazard index (HI) greater than one by about 10 million in 
2020, and 17 million in 2030. As previously discussed, a value of the 
HI greater than 1.0 can be best described as indicating that a 
potential may exist for adverse health effects.
---------------------------------------------------------------------------

    \129\ ``Background represents the contribution to ambient levels 
of air toxics from sources further away than 50 kilometers, as well 
as the contribution from uninventoried sources.
---------------------------------------------------------------------------

    Figure IV.C-1 depicts the impact on the mobile source contribution 
to nationwide average population cancer risk from total MSATs and 
benzene in 2030. Nationwide, the cancer risk attributable to total 
MSATs will be reduced by 30%, and the risk from mobile source benzene 
will be reduced by 37%. In 2030, the highway vehicle contribution to 
MSAT cancer risk will be reduced on average 36% across the U.S., and 
the highway vehicle contribution to benzene cancer risk will be reduced 
on average by 43% across the U.S. The methods and assumptions used to 
model the impact of the controls are described in more detail in 
Chapter 3 of the RIA.
    Figure IV.C-2 depicts the impact on the mobile source contribution 
to nationwide average respiratory hazard index (HI) in 2030. 
Nationwide, the mobile source contribution to the respiratory hazard 
index will be reduced by 23%. 
[GRAPHIC] [TIFF OMITTED] TR26FE07.008


[[Page 8457]]


[GRAPHIC] [TIFF OMITTED] TR26FE07.009

    Table IV.C-1 summarizes the change in median and 95th percentile 
inhalation cancer risks from benzene and all MSATs attributable to all 
outdoor sources in 2015, 2020, and 2030, with the controls being 
finalized in this rule. The reductions in risk would be larger if the 
modeling fully accounted for a number of factors, including exposure to 
benzene emissions from vehicles, equipment, and PFCs in attached 
garages and the impacts of the control program on ``background'' levels 
attributable to transport. Reductions are significantly larger for 
individuals in the 95th percentile than in the 50th percentile. Thus, 
this rule is providing bigger benefits to individuals experiencing the 
highest levels of risk.

Table IV.C--1. Change in Median and 95th Percentile Inhalation Cancer Risk from Benzene and All MSATs Attributable to Outdoor Sources in 2015, 2020, and
                                                   2030 With the Controls Being Finalized in This Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2015                              2020                              2030
                                                   -----------------------------------------------------------------------------------------------------
                                                         Median            95th            Median            95th            Median            95th
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MSATs:
    Without Controls..............................      1.50x10-\5\      4.75x10-\5\      1.53x10-\5\      4.93x10-\5\      1.61x10-\5\      5.28x10-\5\
    With Controls.................................      1.41x10-\5\      4.37x10-\5\      1.40x10-\5\      4.40x10-\5\      1.42x10-\5\      4.49x10-\5\
    Percent Change................................                6                8                8               11               12               15
Benzene:
    Without Controls..............................      6.86x10-\6\      1.82x10-\5\      6.93x10-\6\      1.86x10-\5\      7.37x10-\6\      2.06x10-\5\
    With Controls.................................      6.17x10-\6\      1.53x10-\5\      6.02x10-\6\      1.47x10-\5\      6.06x10-\6\      1.49x10-\5\
    Percent Change................................               10               16               13               21               18               28
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Ozone
    The vehicle and PFC standards will also reduce VOC emissions, which 
are a precursor to ozone. We have modeled the ozone impacts of the PFC 
standards. As described in more detail in Chapter 3.3 of the RIA, a 
metamodeling tool developed at EPA, the ozone response surface 
metamodel, was used to estimate the effects of the emission reductions. 
The ozone response surface metamodel was created using multiple runs of 
the Comprehensive Air Quality Model with Extensions (CAMx). Base and 
control CAMx metamodeling was completed for two future years (2020, 
2030) over a modeling domain that includes all or part of 37 Eastern 
U.S. states. For more information on the response surface metamodel, 
please see the RIA for this final rule or the Air Quality Modeling 
Technical Support Document (TSD).
    We have made estimates using the ozone response surface metamodel 
to illustrate the types of change in future ozone levels that we would 
expect to result from this rule, as described in Chapter 3 of the RIA. 
The PFC controls are projected to result in a very small

[[Page 8458]]

net improvement in future ozone, after weighting for population. 
Although the net future ozone improvement is small, some VOC-limited 
areas in the Eastern U.S. are projected to have non-negligible 
improvements in projected 8-hour ozone design values due to the PFC 
controls. We view these improvements as useful in meeting the 8-hour 
ozone NAAQS. These net ozone improvements are in addition to reductions 
in levels of benzene, a toxic ozone precursor, due to the PFC controls.
3. PM
    As described in section IV.A, the vehicle standards will reduce 
emissions of direct PM. The PM health benefits that would be associated 
with these reductions in PM emissions and exposure are discussed in 
section VIII.E of this preamble. The vehicle and PFC standards will 
also reduce VOC emissions, which contribute to the secondary formation 
of PM. In this rule we have not quantified the impact of the VOC 
emission reductions on ambient PM or associated health effects.

D. What Other Mobile Source Emissions Control Programs Reduce MSATs?

    As described in section IV.A, existing mobile source control 
programs in combination with this rule will reduce MSAT emissions (not 
including diesel PM) by 45% between 1999 and 2030. The existing mobile 
source programs include controls on fuels, highway vehicles, and 
nonroad engines and equipment. These programs are also reducing 
hydrocarbons and PM more generally, as well as oxides of nitrogen. The 
sections immediately below provide general descriptions of these 
programs that will be providing MSAT emission reductions, as well as 
voluntary programs such as the National Clean Diesel Campaign and Best 
Workplaces for Commuters. We also discuss some programs that are 
currently being developed. A more detailed description of mobile source 
programs is provided in Chapter 2 of the RIA.
1. Fuels Programs
    As described in section VI of this preamble, this rule would 
supersede the 2001 MSAT rule and certain provisions of the reformulated 
gasoline program and anti-dumping programs. These programs are 
described in Chapter 2 of the RIA.
a. Gasoline Sulfur
    EPA's gasoline sulfur program \130\ requires, beginning in 2006, 
that sulfur levels in gasoline could be no higher than 80 ppm as a per-
gallon cap, and must average 30 ppm annually. When fully effective, 
gasoline will have 90 percent less sulfur than before the program. 
Reduced sulfur levels are necessary to ensure that vehicle emission 
control systems are not impaired. These systems effectively reduce non-
methane organic gas (NMOG) emissions, of which some are air toxics, as 
well as emissions of NOX. With lower sulfur levels, emission 
control technologies can work longer and more efficiently. Both new and 
older vehicles benefit from reduced gasoline sulfur levels.
---------------------------------------------------------------------------

    \130\ 65 FR 6822 (February 10, 2000).
---------------------------------------------------------------------------

b. Gasoline Volatility
    A fuel's volatility defines its evaporation characteristics. A 
gasoline's volatility is commonly referred to as its Reid vapor 
pressure, or RVP. Gasoline summertime RVP ranges from about 6-9 psi, 
and wintertime RVP ranges from about 9-14 psi, when additional 
volatility is required for starting in cold temperatures. Gasoline 
vapors contain a subset of the liquid gasoline components, and thus can 
contain toxics compounds such as benzene. Since 1989, EPA has 
controlled summertime gasoline RVP primarily as a VOC and ozone 
precursor control, resulting in additional toxics pollutant reductions.
c. Diesel Fuel
    In early 2001, EPA issued rules requiring that diesel fuel for use 
in highway vehicles contain no more than 15 ppm sulfur beginning June 
1, 2006.\131\ This program contains averaging, banking and trading 
provisions during the transition to the 15 ppm level, as well as other 
compliance flexibilities. In June 2004, EPA issued rules governing the 
sulfur content of diesel fuel used in nonroad diesel engines.\132\ In 
the nonroad rule, sulfur levels are limited to a maximum of 500 ppm 
sulfur beginning in 2007 (current levels are approximately 3000 ppm). 
In 2010, nonroad diesel sulfur levels must not exceed 15 ppm.
---------------------------------------------------------------------------

    \131\ 66 FR 5002, January 18, 2001. See http://www.epa.gov/otaq/
highway-diesel/index.htm.
    \132\ 69 FR 38958, June 29, 2004.
---------------------------------------------------------------------------

    EPA's diesel fuel requirements are part of a comprehensive program 
to combine engine and fuel controls to achieve the greatest emission 
reductions. The diesel fuel provisions enable the use of advanced 
emission-control technologies on diesel vehicles and engines. The 
diesel fuel requirements will also provide immediate public health 
benefits by reducing PM emissions from current diesel vehicles and 
engines.
d. Phase-Out of Lead in Gasoline
    One of the first programs to control toxic emissions from motor 
vehicles was the removal of lead from gasoline. Beginning in the mid-
1970s, unleaded gasoline was phased in to replace leaded gasoline. The 
phase-out of leaded gasoline was completed January 1, 1996, when lead 
was banned from motor vehicle gasoline. The removal of lead from 
gasoline has essentially eliminated on-highway mobile source emissions 
of this highly toxic substance.
2. Highway Vehicle and Engine Programs
    The 1990 Clean Air Act Amendments set specific emission standards 
for hydrocarbons and for PM. Air toxics are present in both of these 
pollutant categories. As vehicle manufacturers develop technologies to 
comply with the hydrocarbon (HC) and particulate standards (e.g., more 
efficient catalytic converters), air toxics are reduced as well. Since 
1990, we have developed a number of programs to address exhaust and 
evaporative hydrocarbon emissions and PM emissions.
    Two of our recent initiatives to control emissions from motor 
vehicles and their fuels are the Tier 2 control program for light-duty 
vehicles and the 2007 heavy-duty engine rule. Together these two 
initiatives define a set of comprehensive standards for light-duty and 
heavy-duty motor vehicles and their fuels. In both of these 
initiatives, we treat vehicles and fuels as a system. The Tier 2 
control program establishes stringent tailpipe and evaporative emission 
standards for light-duty vehicles and a reduction in sulfur levels in 
gasoline fuel beginning in 2004.\133\ The 2007 heavy-duty engine rule 
establishes stringent exhaust emission standards for new heavy-duty 
engines and vehicles for the 2007 model year as well as reductions in 
diesel fuel sulfur levels starting in 2006.\134\ Both of these programs 
will provide substantial emissions reductions through the application 
of advanced technologies. We expect 90% reductions in PM from new 
diesel engines compared to engines under current standards.
---------------------------------------------------------------------------

    \133\ 65 FR 6697, February 10, 2000.
    \134\ 66 FR 5001, January 18, 2001.
---------------------------------------------------------------------------

    Some of the key earlier programs controlling highway vehicle and 
engine emissions are the Tier 1 and NLEV standards for light-duty 
vehicles and trucks; enhanced evaporative emissions standards; the 
supplemental federal test procedures (SFTP); urban bus standards;

[[Page 8459]]

and heavy-duty diesel and gasoline standards for the 2004/2005 time 
frame.
3. Nonroad Engine Programs
    There are various categories of nonroad engines, including land-
based diesel engines (e.g., farm and construction equipment), small 
land-based spark-ignition (SI) engines (e.g., lawn and garden 
equipment, string trimmers), large land-based SI engines (e.g., 
forklifts, airport ground service equipment), marine engines (including 
diesel and SI, propulsion and auxiliary, commercial and recreational), 
locomotives, aircraft, and recreational vehicles (off-road motorcycles, 
``all terrain'' vehicles and snowmobiles). Chapter 2 of the RIA 
provides more information about these programs.
    As with highway vehicles, the VOC standards we have established for 
nonroad engines will also significantly reduce VOC-based toxics from 
nonroad engines. In addition, the standards for diesel engines (in 
combination with the stringent sulfur controls on nonroad diesel fuel) 
will significantly reduce diesel PM and exhaust organic gases, which 
are mobile source air toxics.
    In addition to the engine-based emission control programs described 
below, fuel controls will also reduce emissions of air toxics from 
nonroad engines. For example, restrictions on gasoline formulation (the 
removal of lead, limits on gasoline volatility and RFG) are projected 
to reduce nonroad MSAT emissions because most gasoline-fueled nonroad 
vehicles are fueled with the same gasoline used in on-highway vehicles. 
An exception to this is lead in aviation gasoline. Aviation gasoline, 
used in general (as opposed to commercial) aviation, is a high octane 
fuel used in a relatively small number of aircraft (those with piston 
engines). Such aircraft are generally used for personal transportation, 
sightseeing, crop dusting, and similar activities.
4. Voluntary Programs
    In addition to the fuel and engine control programs described 
above, we are actively promoting several voluntary programs to reduce 
emissions from mobile sources, such as the National Clean Diesel 
Campaign, anti-idling measures, and Best Workplaces for Commuters 
SM. While the stringent emissions standards described above 
apply to new highway and nonroad diesel engines, it is also important 
to reduce emissions from the existing fleet of about 11 million diesel 
engines. EPA has launched a comprehensive initiative called the 
National Clean Diesel Campaign, one component of which is to promote 
the reduction of emissions in the existing fleet of engines through a 
variety of cost-effective and innovative strategies. The goal of the 
Campaign is to reduce emissions from the 11 million existing engines by 
2014. Emission reduction strategies include switching to cleaner fuels, 
retrofitting engines through the addition of emission control devices 
and engine replacement. For example, installing a diesel particulate 
filter achieves diesel particulate matter reductions of approximately 
90 percent (when combined with the use of ultra low sulfur diesel 
fuel). The Energy Policy Act of 2005 includes grant authorizations and 
other incentives to help facilitate voluntary clean diesel actions 
nationwide.
    The National Clean Diesel Campaign is focused on leveraging local, 
state, and federal resources to retrofit or replace diesel engines, 
adopt best practices and track and report results. The Campaign targets 
five key sectors: school buses, ports, construction, freight and 
agriculture. Almost 300 clean diesel projects have been initiated 
through the Campaign. These projects will reduce more than 20,000 PM 
lifetime tons. PM and NOX reductions from these programs 
will provide nearly $5 billion in health benefits.
    Reducing vehicle idling provides important environmental benefits. 
As a part of their daily routine, truck drivers often keep their 
vehicles running at idle during stops to provide power, heat and air 
conditioning. EPA's SmartWay SM Transport Partnership is 
helping the freight industry to adopt innovative idle reduction 
technologies and to take advantage of proven systems that provide 
drivers with basic necessities without idling the main engine. To date, 
there are 80 mobile and stationary idle-reduction projects throughout 
the country. Emission reductions, on an annual basis, from these 
programs are in excess of 157,000 tons of CO2, 2,000 tons of 
NOX and 60 tons of PM; over 14 million gallons of fuel are 
being saved annually. The SmartWay Transport Partnership also works 
with the freight industry by promoting a wide range of new technologies 
such as advanced aerodynamics, single-wide tires, weight reduction, 
speed control and intermodal shipping.
    Daily commuting represents another significant source of emissions 
from motor vehicles. EPA's Best Workplaces for Commuters SM 
program is working with employers across the country to reverse the 
trend of longer, single-occupancy vehicle commuting. OTAQ recognizes 
employers that have met the National Standard of Excellence for 
Commuter Benefits by adding them to the List of Best Workplaces for 
Commuters. These companies offer superior commuter benefits such as 
transit subsidies for rail, bus, and vanpools and promote flexi-place 
and telework. Emergency Ride Home programs provide a safety net for 
participants. More than 1,600 employers representing 3.5 million U.S. 
workers have been designated Best Workplaces for Commuters.
    Much of the growth in the Best Workplaces for Commuters program has 
been through metro area-wide campaigns. Since 2002, EPA has worked with 
coalitions in over 14 major metropolitan areas to increase the 
penetration of commuter benefits in the marketplace and the visibility 
of the companies that have received this distinguished designation. 
Another significant path by which the program has grown is through 
Commuter Districts including corporate and industrial business parks, 
shopping malls, business improvement districts and downtown commercial 
areas. To date EPA has granted the Best Workplaces for Commuters 
``District'' designation to over twenty locations across the country 
including sites in downtown Denver, Houston, Minneapolis, Tampa and 
Boulder.
5. Additional Programs Under Development That Will Reduce MSATs
a. On-Board Diagnostics for Heavy-Duty Vehicles Over 14,000 Pounds
    The Agency has proposed on-board diagnostics (OBD) requirements for 
heavy-duty vehicles over 14,000 pounds.\135\ In general, OBD systems 
monitor the operation of key emissions controls to detect any failure 
that would lead to emissions above the standards during the life of the 
vehicle. Given the nature of the heavy-duty trucking industry, 50-state 
harmonization of emissions requirement is an important consideration. 
Initially, the Agency signed a Memorandum of Agreement in 2004 with the 
California Air Resources Board which expressed both agencies' interest 
in working towards a single, nationwide program for heavy-duty OBD. 
Since that time, California has established their heavy-duty OBD 
program, which will begin implementation in 2010. EPA's program will 
also begin in 2010. These requirements will help ensure that the 
emission reductions we projected in the 2007 rulemaking for heavy-duty 
engines occur in-use.
---------------------------------------------------------------------------

    \135\ http://epa.gov/obd/regtech/heavy.htm.

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

[[Page 8460]]

b. Standards for Small Nonroad Spark-Ignition Engines
    We are developing a proposal for small nonroad spark-ignition 
engines, those typically used in lawn and garden equipment and in 
spark-ignition marine engines. This proposal is being developed in 
response to Section 428 of the Omnibus Appropriations Bill for 2004, 
which requires EPA to propose regulations under Clean Air Act section 
213 for new nonroad spark-ignition engines under 50 horsepower. We plan 
to propose standards that would further reduce engine and equipment 
emissions for these nonroad categories. We anticipate that any new 
standards would provide significant additional reductions in exhaust 
and evaporative HC (and VOC-based toxics) emissions.
c. Standards for Locomotive and Marine Diesel Engines
    We are planning to propose more stringent standards for large 
diesel engines used in locomotive and marine applications, as discussed 
in a recent Advance Notice of Proposed Rulemaking.\136\ New standards 
for marine diesel engines would apply to engines less than 30 liters 
per cylinder in displacement (all engines except for Category 3). We 
are considering standards modeled after our Tier 4 nonroad diesel 
engine program, which achieve substantial reductions in PM, HC, and 
NOX emissions. These standards would be based on the use of 
high efficiency catalyst aftertreatment and would also require fuel 
sulfur control.
---------------------------------------------------------------------------

    \136\ 69 FR 39276, June 29, 2004.
---------------------------------------------------------------------------

E. How Do These Mobile Source Programs Satisfy the Requirements of 
Clean Air Act Section 202(l)?

    The benzene and hydrocarbon standards in this action will reduce 
benzene, 1,3-butadiene, formaldehyde, acrolein, polycyclic organic 
matter, and naphthalene, as well as many other hydrocarbon compounds 
that are emitted by motor vehicles, including those that are discussed 
in more detail in Chapter 1 of the RIA. The emission reductions 
expected from today's controls are set out in section IV.A and B of 
this preamble and Chapter 2 of the RIA.
    EPA believes that the emission reductions from the standards 
finalized today for motor vehicles and their fuels, combined with the 
standards currently in place, represent the maximum achievable 
reductions of emissions from motor vehicles through the application of 
technology that will be available, considering costs and the other 
factors listed in section 202(l)(2). This conclusion applies whether 
one considers just the compounds listed in Table 1.1-1 of the RIA, or 
consider all of the compounds on the Master List of emissions, given 
the breadth of EPA's current control programs and the broad groups of 
emissions that many of the control technologies reduce. For example, 
EPA has already taken significant steps to reduce diesel emissions from 
motor vehicles (as well as other mobile sources). As explained above, 
we have adopted stringent standards for on-highway diesel trucks and 
buses and these standards control the air toxics emitted by these motor 
vehicles to the extent feasible.
    Emissions from motor vehicles can be chemically categorized as 
hydrocarbons, trace elements (including metals) and a few additional 
compounds containing carbon, nitrogen and/or halogens (e.g., chlorine). 
For the hydrocarbons, which are the vast majority of these compounds, 
we believe that with the controls finalized today, we will control the 
emissions of these compounds from motor vehicles to the maximum amount 
currently feasible or currently identifiable with available 
information. Section V of this preamble provides more details about why 
the standards represent maximum achievable reduction of hydrocarbons 
from motor vehicles. Motor vehicle controls do not reduce individual 
hydrocarbons selectively; instead, the maximum emission reductions are 
achieved by controls on hydrocarbons as a group. There are fuel 
controls that could selectively reduce individual air toxics (e.g., 
formaldehyde, acetaldehyde, 1,3-butadiene), as well as controls that 
reduce hydrocarbons more generally. Section VI of this preamble 
describes why the standards we are finalizing today represent the 
maximum emission reductions achievable through fuel controls, after 
considering the factors enumerated in section 202(l)(2) of the Clean 
Air Act.
    Motor vehicle emissions also contain trace elements, including 
metals, which originate primarily from engine wear and impurities in 
engine oil and gasoline or diesel fuel. EPA does not have authority to 
regulate engine oil, and there are no feasible motor vehicle controls 
to directly prevent engine wear. Nevertheless, oil consumption and 
engine wear have decreased over the years, decreasing emission of 
metals from these sources. Metals associated with particulate matter 
will be captured in emission control systems employing a particulate 
matter trap, such as will be used in heavy-duty vehicles meeting the 
2007 standards. We believe that currently, particulate matter traps, in 
combination with engine-out control, represent the maximum feasible 
reduction of both motor vehicle particulate matter and toxic metals 
present as a component of the particulate matter.
    The mobile source contribution to the national inventory for metal 
compounds is generally small. In fact, the emission rate for most 
metals from motor vehicles is small enough that quantitative 
measurement requires state-of-the art analytical techniques that are 
only recently being applied to this source category. We have efforts 
underway to gather information regarding trace metal emissions, 
including mercury emissions, from motor vehicles (see Chapter 1 of the 
RIA for more details).
    A few metals and other elements are used as fuel additives. These 
additives are designed to reduce the emission of regulated pollutants 
either in combination with or without an emission control device (e.g., 
a passive particulate matter trap). Clean Air Act section 211 (a) and 
(b) provide EPA with various authorities to require the registration of 
fuel additives by their manufacturers before their introduction into 
commerce. Registration involves certain data requirements that enable 
EPA to identify products whose emissions may pose an unreasonable risk 
to public health. In addition, this section provides EPA with authority 
to require health effects testing to fill any gaps in the data that 
would prevent a determination regarding the potential for risk to the 
public. It is under the section 211 registration program that EPA is 
currently generating the information needed to update an assessment of 
the potential human health risks related to having manganese in the 
national fuel supply. Clean Air Act section 211(c) provides the primary 
mechanism by which EPA would take actions necessary to minimize 
exposure to emissions of metals or other additives to diesel and 
gasoline.
    Existing regulations limit sulfur in gasoline and diesel fuel to 
the maximum amount feasible and will reduce emissions of all sulfur-
containing compounds (e.g., hydrogen sulfide, carbon disulfide) to the 
greatest degree achievable.137 138 139 For the remaining 
compounds (e.g., chlorinated

[[Page 8461]]

compounds), we currently have very little information regarding 
emission rates and conditions that impact emissions. This information 
would be necessary in order to evaluate potential controls under 
section 202(l). Emissions of hydrocarbons containing chlorine (e.g., 
dioxins/furans) would likely be reduced with control measures that 
reduce total hydrocarbons, just as these emissions were reduced with 
the use of catalytic controls that lowered exhaust hydrocarbons.
---------------------------------------------------------------------------

    \137\ 65 FR 6697, February 10, 2000.
    \138\ 66 FR 5001, January 18, 2001.
    \139\ 69 FR 38958, June 29, 2004 (standards for non-road diesel 
engines and fuels). Although non-road vehicles are not ``motor 
vehicles,'' and so are not subject to section 202(1)(2), EPA 
nevertheless has adopted standards resulting in the greatest 
feasible reductions of mobile source air toxics from these engines.
---------------------------------------------------------------------------

V. New Light-Duty Vehicle Standards

A. Introduction

    The program we are establishing for vehicles will achieve the same 
significant toxics reductions that we projected for the proposed rule 
(see generally 71 FR 15845-15848). The program is very similar to that 
proposed except for a few minor changes made in response to comments we 
received. These changes will improve the implementation of the program 
without significantly changing the program's overall emission 
reductions and environmental benefits. As described in this section, we 
are adopting stringent new nonmethane hydrocarbon standards for 
vehicles to reduce hydrocarbon (HC) emissions during vehicle cold 
temperature operation. As discussed in the proposal, the current HC 
emissions standards are measured within a range of specified warm 
temperatures, and the test procedure does not include cold 
temperatures. Data indicate that cold HC emissions currently are very 
high for many vehicles compared to emissions at normal test 
temperatures. The new cold temperature standards and program 
requirements will be phased in starting in 2010. When fully phased in, 
the new standards will further reduce overall vehicle HC emissions by 
about 31%, or by about 883,000 tons in 2030.
    By reducing overall HC emissions from vehicles, we will be 
significantly reducing several gaseous toxics including benzene, 
formaldehyde, 1,3-butadiene, and acetaldehyde. We also project that the 
cold temperature standard will provide concurrent reductions in direct 
PM emissions from vehicles, since the strategies manufacturers are 
expected to employ to reduce cold HC will reduce PM as well. Although 
Clean Air Act section 202(l) deals with control of air toxics, and not 
criteria pollutants like PM, this co-benefit of cold temperature 
control is significant.
    We are finalizing the new cold temperature standards and 
implementation schedule essentially as proposed. We are also adopting 
several other related provisions and requirements largely as proposed. 
Many of these provisions will help the manufacturers smoothly 
transition to the new standards in the shortest lead time possible. 
They include corporate average emissions standards, emissions credits, 
options for alternative phase-in schedules, and special provisions for 
small businesses. The program also includes certification and 
compliance provisions.
    We are also adopting new evaporative emissions standards, beginning 
in model year 2009. The new standards are essentially the same as those 
contained in the California LEVII program. Manufacturers have been 
selling 50-state evaporative systems that meet both the Tier 2 and 
LEVII requirements. Today's final rule will ensure that industry 
continues this practice.
    Sections V.B. and V.C. provide the details of the new cold 
temperature and evaporative emissions standards, respectively, and 
briefly discuss some of the comments we received on the proposed 
vehicles program. We have seriously considered all of the input from 
stakeholders in developing the final vehicles program and believe that 
the final rule appropriately addresses the concerns of all 
stakeholders. We provide a full discussion of the comments we received 
on vehicles in Chapter 3 of the Summary and Analysis of Comments for 
this rule.

B. What Cold Temperature Requirements Are We Adopting?

1. Why Are We Adopting a New Cold Temperature NMHC Standard?
    As emissions standards have become more stringent, manufacturers 
have concentrated primarily on controlling emissions performance just 
after the start of the engine in order to further reduce emissions. To 
comply with stringent hydrocarbon emission standards at 75 [deg]F, 
manufacturers developed new emission control strategies and practices 
that resulted in significant emissions reductions at that start 
temperature. We expected that proportional reductions in hydrocarbon 
emissions would occur at other colder start temperatures as a result of 
the more stringent standards. We believe that there is no engineering 
reason why proportional control should not be occurring on a widespread 
basis.
    In some cases, certification data for recent model year light-duty 
vehicles indicate that individual vehicles did demonstrate proportional 
improvements in hydrocarbon emission results at 20 [deg]F relative to 
their 75 [deg]F results, confirming our belief that proportional 
control is feasible and indeed is practiced at least occasionally. One 
manufacturer's certification results reflected proportional 
improvements across almost its entire vehicle lines, further supporting 
that proportional control is feasible. However, for most vehicles, 
certification reports show a sharp rise in hydrocarbon \140\ emissions 
at 20 [deg] F when compared to the reported 75 [deg] F hydrocarbon 
emission levels. Any rise in hydrocarbon emissions, specifically 
nonmethane hydrocarbons (NMHC), will result in proportional rise in 
VOC-based air toxics.\141\ While some increase in NMHC emissions can be 
expected simply due to combustion limitations of gasoline engines at 
colder temperatures, the reported levels of hydrocarbon emissions seem 
to indicate a significantly diminished use of hydrocarbon emissions 
controls occurring at colder temperatures. Thus, although all vehicle 
manufacturers have been highly successful at reducing emissions at the 
test start temperature range, in general, they do not appear to be 
capitalizing on NMHC emission control strategies and technologies at 
lower temperatures. This is likely because compliance with hydrocarbon 
standards is not required at 20 degree F temperatures. (see 71 FR at 
15845.) Today's rule remedies this by requiring such compliance.
---------------------------------------------------------------------------

    \140\ Most certification 20 [deg]F hydrocarbon levels are 
reported as total hydrocarbon (THC), but NMHC accounts for 
approximately 95% of THC as seen in results with both THC and NMHC 
levels reported. This relationship also is confirmed in EPA test 
programs supporting this rulemaking.
    \141\ ``VOC/PM Cold Temperature Characterization and Interior 
Climate Control Emissions/Fuel Economy Impact,'' Volume I and II, 
October 2005.
---------------------------------------------------------------------------

2. What Are the New NMHC Exhaust Emissions Standards?
    We are finalizing a set of standards that will achieve proportional 
NMHC control from the 75 [deg]F Tier 2 standards to the 20 [deg]F test 
point. We expect that by fully utilizing available Tier 2 hardware and 
software control strategies, manufacturers will be able to achieve this 
standard without major changes to Tier 2 vehicle designs or the use of 
additional technology. Table V.B-1 contains the final standards.

[[Page 8462]]



         Table V.B-1.--20 [deg]F FTP Exhaust Emission Standards
------------------------------------------------------------------------
                                              NMHC sales-weighted fleet
         Vehicle GVWR and category            average standard  (grams/
                                                        mile)
------------------------------------------------------------------------
<=6000 lbs: Light-duty vehicles (LDV) &                             0.3
 Light light-duty trucks (LLDT)............
>6000 lbs: Heavy light-duty trucks (HLDT)                           0.5
 up to 8,500 lbs & Medium-duty passenger
 vehicles (MDPV) up to 10,000 lbs..........
------------------------------------------------------------------------

    As shown in the table, we are finalizing, as proposed, two separate 
sales-weighted fleet average NMHC standards: 0.3 grams/mile for 
vehicles at or below 6,000 pounds (lbs) GVWR and 0.5 grams/mile for 
vehicles over 6,000 lbs, including MDPVs.\142\ NMHC emissions will be 
measured during the Cold Federal Test Procedure (FTP) test, which 
already requires hydrocarbon measurement.\143\ The new standard does 
not require additional certification testing beyond what is required 
today with ``worst case'' model selection of a durability test 
group.\144\
---------------------------------------------------------------------------

    \142\ Tier 2 created the medium-duty passenger vehicle (MDPV) 
category to include larger complete passenger vehicles, such as SUVs 
and vans, with a GVWR of 8,501-10,000 pounds GVWR. Large pick-ups 
above 8,500 pounds are not included in the MDPV category but are 
included in the heavy-duty vehicle category.
    \143\ 40 CFR Subpart C, Sec.  86.244-94 requires the measurement 
of all pollutants measured over the FTP except NOX.
    \144\ The existing cold FTP test procedures are specified in 40 
CFR Subpart C. In the final rule for fuel economy labeling, (71 FR 
77872, December 27, 2006), EPA revised the cold FTP test protocol to 
require manufacturers to run the heater and/or defroster while 
conducting the cold FTP test. This had previously been an optional 
provision. We do not believe this requirement will have a 
significant impact on emissions.
---------------------------------------------------------------------------

    The separate fleet average standards we are finalizing account for 
challenges related to vehicle weight. We examined certification data 
from Tier 2 and interim non-Tier 2 vehicles (i.e., vehicles not yet 
phased into the final Tier 2 program, but meeting interim standards 
established by Tier 2), and saw a general trend of increased 
hydrocarbon levels with heavier GVWR vehicles. Some comments suggested 
that the standard for HLDT/MDPVs should be the same standard as applies 
to LDVs or contain a second future phase that reduces emissions to 
those levels. At this time, we continue to believe that heavier 
vehicles have application-specific design limitations. Heavier vehicles 
generally produce higher emissions for several reasons. First, added 
weight requires additional work to accelerate the vehicle mass, 
generally resulting in higher emissions, particularly soon after engine 
start-up. Second, the design of these emission control systems may 
incorporate designs for specific duty cycles (i.e., trailer towing) 
that can negatively affect emissions, particularly during 20[deg] F 
cold starts. For example, since the catalyst may be located further 
away from the engine for protection from high exhaust temperatures 
during design-specific duty cycles, warm-up of the catalyst is 
typically delayed, especially at colder temperatures. Therefore, we 
believe the 0.3 g/mile fleet average standard for vehicles below 6,000 
lbs GVWR is not technically feasible at this time for heavier vehicles. 
We are thus finalizing a 0.5 g/mile standard for vehicles over 6000 lbs 
GVWR, including both HLDTs (6000 lbs to 8500 lbs) and MDPVs.
    We are finalizing the sales-weighted fleet average approach as 
proposed, as the way to achieve the greatest degree of emission control 
for Tier 2 vehicles. At the same time, this approach allows 
manufacturers sufficient lead time and flexibility to certify different 
vehicle groups to different levels, thus lowering the costs of the 
program. A fleet average provides manufacturers with flexibility to 
balance challenging vehicle families with ones that more easily achieve 
the standards. We believe this approach is appropriate because the base 
Tier 2 program is also based on emissions averaging, and will result in 
a mix of emissions control strategies across the fleet that have 
varying cold temperature capabilities. While the Tier 2 program 
continues to phase in, manufacturers are concurrently developing 
emissions control packages. The capabilities of each Tier 2 package 
will not be fully understood until manufacturers are able to evaluate 
the potential of the individual designs to control cold temperature 
emissions.
    We received several comments from state and environmental groups 
supporting the new cold temperature standards. Manufacturers indicated 
their support of the Agency's initiative to seek reductions in MSATs, 
and one manufacturer commented that cold temperature hydrocarbon 
control is both effective and logical. Manufacturers commented that the 
new standards would be very challenging, but that the flexibilities 
incorporated into the final rule will significantly help manufacturers 
achieve the new standards. One manufacturer with a product line limited 
to vehicles below 6,000 lbs GVWR suggested that the 0.3 g/mile standard 
was too stringent and unreasonable based on an assessment of their 
current vehicle emission levels. The manufacturer's comments did not 
provide data or further technical analysis to substantiate this claim. 
We know of no engineering basis for the standards not being technically 
achievable. Moreover, there are about nine other manufacturers with 
similar product lines exclusively below 6,000 lbs GVWR, and they did 
not provide similar comments. We continue to believe that with careful 
examination of existing emission control opportunities at colder 
temperatures on Tier 2 compliant vehicles, especially given the lead 
time provided, manufacturers will identify strategies to comply with 
the new standards across their product lines.
    We are establishing a Family Emissions Limit (FEL) structure in 
which manufacturers will determine individual FELs for each group of 
vehicles certified. These FELs are the standard for each individual 
group, and are averaged on a sales-weighted basis to demonstrate 
overall compliance with the fleet average standards. We are using the 
FEL-based approach for the new cold temperature NMHC standards because 
we believe it results in the same level of environmental benefit but 
adds flexibility and leads to cost-effective compliance strategies. The 
FEL approach is discussed further in section V.B.4 below.
    We are applying the new cold temperature NMHC standards to light-
duty gasoline-fueled vehicles. However, diesel vehicles, alternative-
fueled vehicles, and heavy-duty vehicles will not be subject to these 
standards, since we lack data on which to base standards. Section 
V.B.6.a provides a detailed discussion of applicability and comments 
received.
3. Feasibility of the Cold Temperature NMHC Standards
    We believe the new standards will be challenging but are attainable 
and provide the greatest emission reductions using technology that will 
be available.

[[Page 8463]]

The feasibility assessment described below is based on our analysis of 
the standard's stringency given current emission levels at 
certification (considering deterioration, compliance margin, and 
vehicle weight), available emission control techniques, and our own 
feasibility testing. In addition, sections V.B.3-6 describe the lead 
time and flexibility within the program structure, which also 
contribute to the achievability of the standards. There are a number of 
technologies discussed below that can be utilized to achieve these 
standards. We expect that manufacturers will employ these technologies 
in various combinations, which will likely vary from vehicle to vehicle 
depending on a vehicle's base emission control package developed for 
Tier 2 compliance. Moreover, as discussed in section V.D, due to 
current Tier 2 phase-in schedules, we are not yet in a position to 
evaluate fully the achievability of standards based on new technologies 
that may result when Tier 2 is fully phased in in model year 2009. 
Thus, we are not considering more stringent cold temperature NMHC 
standards that would require the application of new technology to Tier 
2 vehicles.
    Chapter 8 of the RIA contains vehicle and nationwide cost 
estimates, including capital and development costs. We believe the 
estimated costs are reasonable and the rule is cost-effective, as shown 
in section XIII, below. Given the emission control strategies currently 
available, we expect manufacturers to implement these technologies 
successfully without a significant impact on vehicle noise, energy 
consumption, or safety factors. Although new emissions control 
strategies are necessary at cold temperatures, we do not expect 
fundamental Tier 2 vehicle hardware to change.
    Manufacturers commented that the standards will be extremely 
challenging because the standards are based on full useful life 
performance and manufacturers must account for fuel quality in the 
field to ensure adequate performance. Manufacturers also noted that 
they must account for a host of requirements in addition to the new 
cold temperature standards, including Tier 2 and SFTP standards. In 
response, we understand the challenges involved in complying with the 
new cold temperature standards and we are providing the essential lead 
time for manufacturers to identify and resolve any related issues as 
part of overall vehicle development. We are also including several 
other provisions discussed below, including an averaging program, 
phase-in, emissions credits, deficit carry-forward, and in-use 
standards that provide manufacturers with flexibility in transitioning 
to the new standards.
a. Currently Available Emission Control Technologies
    We believe that the cold temperature NMHC standards for gasoline-
fueled vehicles being finalized today are challenging but attainable 
with Tier 2 (i.e., existing) level emission control technologies. Our 
determination of feasibility is based on the emission control hardware 
and calibration strategies used today on Tier 2 vehicles. These 
emission control technologies are utilized to meet the stringent Tier 2 
standards for HC at the FTP temperature range of 68 [deg]F to 86 
[deg]F, but are not generally used or activated at colder temperatures. 
As discussed in section V.D, the standards we are finalizing today will 
not force changes to Tier 2 compliance strategies. Many current engine 
families already achieve emissions levels at or below the emission 
standards being adopted (see RIA Chapter 5) and accomplish this through 
software and calibration control technologies. However, a significant 
number of engine families emit more than twice the level of the new 
standards most likely because they fail to use the Tier 2 control 
technologies at colder temperatures. We believe the new standards can 
be met by the application of calibration and software approaches 
similar to those currently used at 75 [deg]F. Although manufacturers 
could use additional hardware to facilitate compliance with the new 
standard, we are not projecting that they would choose to do so because 
the standards can be achieved through lower-cost calibration and 
software strategies. As described in section V.B.2.c, our own 
feasibility testing of a vehicle over 6000 lbs GVWR achieved NMHC 
reductions consistent with the standard through calibration approaches 
alone.
    In 2002, the European Union (EU) finalized a -7 [deg]C (20 [deg]F) 
cold HC requirement.\145\ While the European standard is based on a 
different drive cycle, manufacturers have developed individual 
strategies to comply with this standard. When the EU implemented the 
new cold HC standard in conjunction with a new 75 [deg]F standard 
(Euro4), many manufacturers responded by employing National Low 
Emission Vehicle (NLEV) \146\ level hardware and supplementing it with 
advanced cold start emission control strategies. The EU similarly 
determined that heavier weight vehicles may have duty-cycle based 
design limitations and also adopted a separate unique emission standard 
for these vehicles. Many manufacturers offer common vehicle models in 
both European and U.S. markets. Such manufacturers can leverage 
European models to transfer emission control technologies successfully 
used for 20 [deg]F hydrocarbon control in Europe to their U.S. model 
counterparts.
---------------------------------------------------------------------------

    \145\ European Union (EU) Type VI Test (-7[deg]C) required for 
new vehicle models certified as of 1/1/2002.
    \146\ NLEV voluntary program introduced California low emission 
cars and light-duty trucks (0-6000 lbs. GVW) into other states 
beginning in 1999.
---------------------------------------------------------------------------

    There are several strategies used in the vehicles that are 
achieving proportional improvements in NMHC emissions at 20 [deg]F FTP. 
Calibration and software strategies that can be used include lean limit 
fuel strategies, fuel injection timing,\147\ elevated idle speeds, 
retarded spark timing, redundant spark timing, and accelerated closed 
loop times. These strategies are consistently and successfully used at 
75 [deg]F to meet stringent Tier 2 standards. We expect that software 
and/or calibration changes will perform as well or better than added 
hardware. This is because some hardware such as the improved catalyst 
system may not be usable immediately following the cold start because 
it must warm-up to operate efficiently. Calibration and software 
strategies that minimize emissions produced by the engine during this 
period while simultaneously accelerating usage of the catalyst will be 
more effective than most new hardware options. See RIA Chapter 5 for 
further discussion.
---------------------------------------------------------------------------

    \147\ Meyer, Robert and John B. Heywood, ``Liquid Fuel Transport 
Mechanisms into the Cylinder of a Firing Port-Injected SI Engine 
During Start-up,'' SAE 970865, 1997.
---------------------------------------------------------------------------

    In addition to calibration strategies, some manufacturers may 
comply with the new standards by extending the use of existing Tier 2 
hardware to 20 [deg]F. An example of this is secondary air systems. 
Several European models sold in the U.S. market demonstrate excellent 
cold HC performance and utilize secondary air systems from 75 [deg]F to 
20 [deg]F start temperatures. The secondary air systems reduce 
emissions by injecting ambient air into the exhaust, thus supplying 
oxygen for more complete combustion. This also supplies supplemental 
heat to the catalyst. These systems have been used extensively to 
reduce hydrocarbon emissions at 75 [deg]F starts. Currently, auto

[[Page 8464]]

makers are equipping a portion of the Tier 2 fleet with secondary air 
systems for compliance with Tier 2 standards.
    Some manufacturers with vehicles containing secondary air systems 
claimed that they are not utilizing them at temperatures below freezing 
simply because of past engineering issues. Those successfully using 
secondary air at 20 [deg]F (mainly European companies) indicated that 
these challenges have been addressed through design changes. The 
robustness of these systems below freezing has also been confirmed with 
the manufacturers and with the suppliers of the secondary air 
components.\148\ While alternative technologies are available and 
produce comparable results, vehicles equipped with secondary air 
technology should meet the new 20 [deg]F standard by utilizing it at 
colder temperatures.
---------------------------------------------------------------------------

    \148\ Memo to docket ``Discussions Regarding Secondary Air 
System Usage at 20[deg]F with European Automotive Manufacturers and 
Suppliers of Secondary Air Systems,'' December 2005.
---------------------------------------------------------------------------

b. Feasibility Considering Current Certification Levels, Deterioration 
and Compliance Margin
    The standards we are finalizing will have a full useful life of 
120,000 miles, consistent with Tier 2 standards. We believe the 0.3 g/
mile FEL standard leaves adequate flexibility for compliance margins 
and any emissions deterioration concerns. Of the vehicles certified to 
Tier 2 with available cold temperature certification data, 
approximately 20% of vehicles below 6,000 lbs GVWR had HC levels in the 
range of 0.18 to 0.27 g/mile, which is two to three times the 75 [deg]F 
Tier 2 bin 5 full useful life standard. These reported HC levels are 
from Cold CO test results for certification test vehicles with 
typically only 4,000 mile aged systems, without full useful life 
deterioration applied. Rapid advances in emission control hardware 
technology have lowered deterioration factors used by manufacturers to 
demonstrate full useful life compliance, usually indicating little or 
no deterioration over a vehicle's lifetime. These deterioration factors 
are common across all required test cycles including cold temperature 
testing. Additionally, manufacturers typically incorporate a 20% to 30% 
compliance margin to account for in-use issues that may cause emissions 
variability. See RIA Chapter 5 for further discussion and details 
regarding current certification levels.
c. Feasibility and Test Programs
    While a few of the heavier vehicles achieved emission levels below 
the 0.5 g/mile level, there are only limited 20 [deg]F certification 
results for Tier 2 compliant vehicles over 6000 lbs GVWR because the 
Tier 2 standards are still phasing in for these vehicles. Prior to 
proposal, we conducted a feasibility study in 20 [deg]F conditions for 
Tier 2 vehicles over 6000 lbs GVWR. The test program further 
investigated the feasibility of compliance for heavier vehicles and 
assessed their capabilities with typical Tier 2 hardware. For one 
vehicle with models above and below 6,000 lbs GVWR, we reduced HC 
emissions by 60-70%, depending on the control strategy. This vehicle 
had a baseline level of about 1.0 g/mile. The results are well within 
the 0.5 g/mile standard including compliance margin, and within a 0.3 
g/mile level on some tests. We achieved these reductions through 
recalibration without the use of new hardware.
    Comments from the auto industry suggested that the original single 
vehicle feasibility test program and the approach used to reduce 
emission levels on the feasibility vehicle were too simplistic and did 
not fully account for competing requirements. The commenter stated that 
that Tier 2 FTP and SFTP requirements have affected hardware decisions, 
such as catalyst location, and make it more difficult to simultaneously 
obtain optimal performance at colder temperatures. For the final rule, 
we completed a second feasibility program to help address the comments 
regarding the first feasibility program. For the second feasibility 
test program, we tested a vehicle with some of the specific challenges 
listed by the auto industry which represented a worst case vehicle from 
the perspective of cold temperature emissions control including 
catalyst location and a large displacement engine. The second 
feasibility program utilized emission control methods already practiced 
in the production European version of the vehicle tested, helping to 
demonstrate that significant emission controls through calibration are 
available to manufacturers today. Simply utilizing the European 
emission controls resulted in a 32% reduction in NMHC emissions. The 
findings from both studies are provided in detail in the RIA.
    While the auto industry did not question the feasibility of the 
standards, they expressed concerns that EPA was not conveying the 
complexity of effort required for full product line manufacturers to 
meet the new standards. We believe that the feasibility program 
demonstrated that Tier 2 vehicles, including higher weight vehicles, 
currently have existing emission control capabilities to achieve the 
new standards. The extensive emission data from certification tests 
detailed in RIA Chapter 5 provides substantial support to the 
assessment that Tier 2 vehicles generally possess the necessary 
technology to achieve the new standards. In most cases, the 
technologies need to be activated and optimized at colder temperatures 
through calibration strategies. However, we recognize that 
manufacturers, particularly full line manufacturers, will have to do 
significant development work to bring their expansive Tier 2 product 
line into compliance with the new standards over the vehicles' full 
useful life. This is why we have included a phase-in of the standards 
over 6 model years.
4. Standards Timing and Phase-In
a. Phase-In Schedule
    As proposed, we will begin implementing the standard in the 2010 
model year (MY) for LDV/LLDTs and 2012 MY for HLDT/MDPVs. The 
implementation schedule, in Table V.B-2, begins three model years after 
the Tier 2 phase-in is complete for each vehicle class. Manufacturers 
will demonstrate compliance with phase-in requirements through sales 
projections, similar to Tier 2, as discussed below in Section V.B.7.

                    Table V.B-2.--Phase-In Schedule for 20 [deg]F NMHC Standard by Model Year
----------------------------------------------------------------------------------------------------------------
                  Vehicle GVWR (category)                     2010     2011     2012     2013     2014     2015
----------------------------------------------------------------------------------------------------------------
<=6000 lbs (LDV/LLDT).....................................      25%      50%      75%     100%  .......  .......
>6000 lbs HLDT and MDPV...................................  .......  .......      25%      50%      75%     100%
----------------------------------------------------------------------------------------------------------------


[[Page 8465]]

    We requested comments on the proposed start date and duration of 
the phase-in schedule. Generally, manufacturers supported the phase-in 
schedule. Commenters indicated that the stringency of the standards 
will increase the development workload and facility demands, but that 
the proposed rule recognized these cost issues and provided sufficient 
mechanisms for phase-in flexibility to help manufacturers transition to 
the new program. One manufacturer with only LDV and LLDT vehicles in 
their product line commented that the required phase-in percentage 
affects a larger portion of their products compared with other 
manufacturers with heavier vehicles, and therefore the phase-in should 
be extended to accommodate construction of new facilities. Conversely, 
a non-profit organization commented that EPA should begin the program 
earlier than we proposed. The organization cited our assessment that 
manufacturers could utilize primarily calibration and software changes, 
and not hardware changes, to achieve compliance. However, as discussed 
below, we believe that the finalized start date and phase-in schedule 
will achieve the greatest amount of emissions reductions in the 
shortest feasible amount of time.
    EPA must consider lead time in determining the greatest degree of 
emission reduction achievable under section 202(l) of the Clean Air 
Act. Also, for vehicles above 6,000 GVWR, section 202(a) of the Act 
requires that four years of lead time be provided to manufacturers. We 
believe that lead time and phase-in schedule is needed to allow 
manufacturers to develop compliant vehicles without significant 
disruptions in their product development cycles. The three-year period 
between completion of the Tier 2 phase-in and the start of the new cold 
NMHC standard should provide vehicle manufacturers sufficient lead time 
to design their compliance strategies and to determine the product 
development plans necessary to meet the new standards.
    We recognize that the new cold temperature standards we are 
finalizing could represent a significant new challenge for many 
manufacturers and development time will be needed. The issue of NMHC 
control at cold temperatures was not anticipated by many entities, and 
research and development to address the issue is consequently at a 
rudimentary stage for some manufacturers. Lead time is therefore 
necessary before compliance can be demonstrated. While certification 
will only require one vehicle model of a durability group to be tested, 
manufacturers must do development on all vehicle combinations to ensure 
full compliance within the durability test group. A phase-in is needed 
because manufacturers must develop control strategies for several 
vehicle lines. Since manufacturers cannot be expected to implement the 
standard over their entire product line in 2010, we believe a phase-in 
allows the program to begin sooner than would otherwise be feasible.
    As noted at proposal, the lead time and phase-in are also needed to 
address test facility availability issues (see 71 FR 15849). Prior to 
proposal, manufacturers raised concerns that a rapid phase-in schedule 
would lead to a significant increase in the demand for their cold 
testing facilities, which could necessitate substantial capital 
investment in new cold test facilities to meet development needs. This 
is because manufacturers would need to use their cold testing 
facilities not only for certification but also for vehicle development. 
Durability test groups may be large and diverse and therefore require 
significant development effort and cold test facility usage for each 
model. If vehicle development is compressed into too narrow a time 
window, significant numbers of new facilities would be needed. 
Manufacturers were also concerned that investment in new test 
facilities would be stranded at the completion of the initial 
development and phase-in period.
    We took these concerns into consideration when drafting our 
proposed rule and are finalizing the start date and phase-in as 
proposed because we continue to believe they address these issues 
adequately. Our finalized phase-in period accommodates test facilities 
and work load concerns by distributing these fleet phase-in percentage 
requirements over a four-year period for each vehicle weight category 
(six years total). The staggered start dates for the phase-in schedule 
between the two weight categories should further alleviate 
manufacturers' burden regarding construction of new test facilities. We 
recognize that some manufacturers may still determine that upgrades to 
their current cold facility are needed to handle increased workload, or 
that additional shifts must be added to their facility work schedules 
that are not in place today. The lead time provided and the four-year 
phase-in period provides needed time for vehicle manufacturers to 
develop a compliance schedule that does not significantly interfere 
with their future product plans. Manufacturers commented in support of 
the lead time and phase in provided, commenting that these program 
elements are needed to avoid high test facility costs.
b. Alternative Phase-In Schedules
    We are finalizing provisions, as proposed, that allow manufacturers 
to introduce vehicles earlier than required in exchange for flexibility 
to make offsetting adjustments, on a one-for-one basis, to the phase-in 
percentages in later years. Alternative phase-in schedules essentially 
credit the manufacturer for its early or accelerated efforts and allow 
the manufacturer greater flexibility in subsequent years during the 
phase-in. Under these alternative schedules, manufacturers would have 
to introduce vehicles that meet or surpass the NHMC average standards 
before they are required to do so, or else introduce vehicles that meet 
or surpass the standard in greater quantities than required.
    As proposed, we are finalizing provisions allowing manufacturers to 
apply for an alternative phase-in schedule that would still result in 
100% phase-in by 2013 and 2015, respectively, for the lighter and 
heavier weight categories. As with the primary phase-in, manufacturers 
would base an alternative phase-in on their projected sales estimates. 
An alternate phase-in schedule submitted by a manufacturer would be 
subject to EPA approval and would need to provide the same emissions 
reductions as the primary phase-in schedule. The alternative phase-in 
cannot be used to delay full implementation past the last year of the 
primary phase-in schedule (2013 for LDVs/LDTs and 2015 for HLDTs/
MDPVs).
    As proposed, this alternative phase-in schedule will be acceptable 
if it passes a specific mathematical test (see 71 FR 15849). We have 
designed the test to provide manufacturers a benefit from certifying to 
the standards early, while ensuring that significant numbers of 
vehicles are introduced during each year of the alternative phase-in 
schedule. Manufacturers will multiply their percent phase-in by the 
number of years the vehicles are phased in prior to the second full 
phase-in year. The sum of the calculation will need to be greater than 
or equal to 500, which is the sum from the primary phase-in schedule (4 
x 25 + 3 x 50 + 2 x 75 + 1 x 100 = 500). For example, the equation for 
LDVs/LLDTs will be as follows:

(6 x API2008) + (5 x API2009) + (4 x 
API2010) + (3 xAPI2011) + (2 x 
API2012) + (1 x API2013) >= 500%, where ``API'' 
is the anticipated

[[Page 8466]]

phase-in percentage for the referenced model year

    As described above, the final sum of percentages for LDVs/LDTs must 
equal or exceed 500 - the sum that results from a 25/50/75/100 percent 
phase-in. For example, a 10/25/50/55/100 percent phase-in for LDVs/LDTs 
that begins in 2009 will have a sum of 510 percent and is acceptable. A 
10/20/40/70/100 percent phase-in that begins the same year has a sum of 
490 percent and is not acceptable.
    To ensure that significant numbers of compliant LDVs/LDTs are 
introduced in the 2010 time frame (2012 for HLDT/MDPVs), manufacturers 
would not be allowed to use alternative phase-in schedules that delay 
the implementation of the requirements, even if the sum of the phase-in 
percentages ultimately meets or exceeds 500. Such a situation could 
occur if a manufacturer delayed implementation of its compliant 
production until 2011 and began an 80/85/100 percent phase-in that year 
for LDVs/LDTs. To protect against this possibility, we are finalizing, 
as proposed, that for any alternative phase-in schedule, the 
manufacturer's API x year factors for LDV/LLDTs from the 2010 and 
earlier model years (2012 and earlier for HLDT/MDPVs) sum to at least 
100. The early phase-in also encourages the early introduction of 
vehicles meeting the new standard or the introduction of such vehicles 
in greater quantity than required, achieving early emissions 
reductions.
    One commenter recommended that EPA carefully consider the added 
complexity of allowing alternative phase-in schedules before including 
these provisions in the final rule. In response, we allowed 
manufacturers the option of using similar alternative phase-ins for 
Tier 2 and these provisions have not proven to be detrimental in the 
implementation of the Tier 2 program. We believe the added flexibility 
provided to manufacturers helps them to meet the new requirements as 
soon as possible while also helping to minimize disruptions to their 
product plans. These benefits offset the complexity added by the 
alternative phase-in option.
    Manufacturers commented that EPA should remove the requirement for 
2010 to have a sum of 100 because it limits flexibility and could cause 
manufacturers to run a deficit early in the program. We are retaining 
this requirement as proposed, except for the option discussed in the 
next paragraph. In general, this requirement ensures that manufacturers 
introduce complying vehicles early in the phase-in. The alternative 
phase-in is not intended to postpone introduction of compliant 
vehicles; instead, it is to allow an accelerated introduction of 
vehicles and to allow manufacturers the flexibility of aligning 
compliance with production schedules. The commenter's suggestion of 
removing the sum of 100 provision for MY 2010 and earlier vehicles 
would essentially amount to delaying the program by one year. Since all 
manufacturers make LDV/LDTs, the sum of 100 provision ensures that 
environmental benefits are achieved as soon as possible, while the 
alternative phase-in provision as a whole provides additional 
flexibility to manufacturers.
    As described above, we proposed an early-year requirement for 
alternative phase-in schedules for HLDTs/MDPVs (see 71 FR 15850). 
Similar to the LDV/LDT requirement, we proposed that the API x year 
factors from the 2012 and earlier model years sum to at least 100. We 
are finalizing the option of electing an HLDT/MDPV alternative phase-in 
that meets the 500% criteria, including the 100% criteria for model 
years 2012 and earlier, as proposed. However, based upon comments 
received, we are revising this provision to allow additional 
flexibilities. The comments pointed out that such a requirement would 
pose significant hardship for limited-line manufacturers who produce 
only a narrow range of HLDTs/MDPVs. For example, a manufacturer who 
only sells one configuration in the HLDT/MDPV category would not have 
the option of certifying only 25% of these vehicles in 2012. To meet 
our proposed criteria, that manufacturer would have to ensure that the 
model is fully compliant in 2012 (i.e., 100% of their HLDTs/MDPVs), 
eliminating any flexibility for these manufacturers. To address this 
concern, we are allowing HLDT/MDPV manufacturers the additional option 
of employing a phase-in not meeting the early year requirement (sum of 
100 in 2012) as long as their full phase-in is accelerated. Under this 
option, we are requiring only that the full alternative phase-in 
equation may meet or exceed 600% for HLDTs/MDPVs. We believe this will 
still yield environmental benefits as quickly as possible, while not 
putting an unreasonable burden on limited-line manufacturers of HLDTs/
MDPVs. Manufacturers with limited HLDT/MDPV product offerings will 
still achieve 100 percent phase-in of the HLDTs/MDPVs before the end of 
the phase-in schedule in 2015. For example, a manufacturer that only 
has one HLDT/MDPV family and achieves 100% phase-in in 2013 would have 
a sum of 600% in the equation:

(6 x 0) + (5 x 0) + (4 x 0) + (3 x 100%) + (2 x 100%) + (1 x 100%) = 
600%

    As noted above, phase-in schedules, in general, add little 
flexibility for manufacturers with limited product offerings because a 
manufacturer with only one or two test groups cannot take full 
advantage of a 25/50/75/100 percent or similar phase-in. Therefore, 
consistent with our proposal which reflected the recommendations of the 
Small Advocacy Review Panel (SBAR Panel), which we discuss in more 
detail later in section V.E, manufacturers meeting EPA's definition of 
``small volume manufacturer'' will be exempt from the phase-in 
schedules and will be required simply to comply with the final 100% 
compliance requirement. This provision will only apply to small volume 
manufacturers and not to small test groups of larger manufacturers.
5. Certification Levels
    Manufacturers typically certify groupings of vehicles called 
durability groups and test groups, and they have some discretion on 
what vehicle models are placed in each group. A durability group is the 
basic classification used by manufacturers to group vehicles to 
demonstrate durability and to predict deterioration. A test group is a 
basic classification within a durability group used to demonstrate 
compliance with FTP 75 [deg]F standards.\149\ For Cold CO, 
manufacturers certify on a durability group basis, whereas for 75 
[deg]F FTP testing, manufacturers certify on a test group basis. In 
keeping with the current cold CO standards, we are requiring testing on 
a durability group basis for the cold temperature NMHC standard, as 
proposed (see 71 FR 15850). Manufacturers will have the option of 
certifying on the smaller test group basis, as is allowed under current 
cold CO standards. Testing on a test group basis will require more 
tests to be run by manufacturers but may provide them with more 
flexibility within the averaging program. In either case, the worst-
case vehicle within the group from an NMHC emissions standpoint must be 
tested for certification.
---------------------------------------------------------------------------

    \149\ 40 CFR 86.1803-01.
---------------------------------------------------------------------------

    For the new standard (and consistent with certification for most 
section 202 standards), manufacturers will declare a family emission 
limit (FEL) for each group either at, above, or below the fleet 
averaging standard. The FEL must be based on the certification NMHC 
level, including deterioration factor, plus the

[[Page 8467]]

compliance margin manufacturers feel is needed to ensure in-use 
compliance. The FEL becomes the standard for each group, and each group 
could have a different FEL so long as the projected sales-weighted 
average level met the fleet average standard at time of certification. 
Like the standard, the FEL will be set at one significant digit to the 
right of the decimal point. Manufacturers will compute a sales-weighted 
average for the NMHC emissions at the end of the model year and then 
determine credits generated or needed based on how much the average is 
above or below the standard.
    One commenter questioned if the FEL approach would interfere with 
the Tier 2 program, which uses bins rather than FELs. We do not believe 
that the two approaches create a conflict because compliance with Tier 
2 and the cold temperature standards operate independent of one 
another. Tier 2 standards and bins are not a factor when manufacturers 
demonstrate compliance with the cold temperature standards.
6. Credit Program
    As described above, we are finalizing proposed provisions allowing 
manufacturers to average the FELs for NMHC emissions by sales of their 
vehicles and comply with a corporate average NMHC standard (see 71 FR 
15850). In addition, we are finalizing, as proposed, banking and 
trading provisions: when a manufacturer's average NMHC emissions from 
vehicles certified and sold falls below the corporate average standard, 
the manufacturer may generate credits that it could save for later use 
(banking) or transfer to another manufacturer (trading). Manufacturers 
must consume any credits if their corporate average NMHC emissions were 
above the applicable standard for the weight class.
    As proposed, credits may be generated prior to, during, and after 
the phase-in period. Manufacturers could certify LDVs/LLDTs to 
standards as early as the 2008 model year (2010 for HLDTs/MDPVs) and 
receive early NMHC credits for their efforts. They could use credits 
generated under these ``early banking'' provisions after the phase-in 
begins in 2010 (2012 for HLDTs/MDPVs).
    One organization opposed the use of credits from one weight class 
to offset debits in another weight class. However, EPA views the 
averaging, banking, and trading (ABT) provisions as an important 
element in setting emission standards reflecting the greatest degree of 
emission reduction achievable, considering factors including cost and 
lead time. If there are vehicles that will be particularly costly or 
have a particularly hard time coming into compliance with the standard, 
the ABT program allows a manufacturer to adjust the compliance schedule 
accordingly, without special delays or exceptions having to be written 
into the rule. This is an important flexibility especially given the 
current uncertainty regarding optimal technology strategies for any 
given vehicle line. In these circumstances, ABT allows us to consider a 
more stringent emission standard than might otherwise be achievable 
under the Clean Air Act, since ABT reduces the cost and improves the 
technological feasibility of achieving the standard. By enhancing the 
technological feasibility and cost-effectiveness of the new standard, 
ABT allows the standard to be attainable earlier than might otherwise 
be possible. Also see, e.g., 69 FR 38996-97, (June 19, 2004), which 
discusses an ABT program for nonroad diesel engines, which allows for 
use of credits across engine families. This type of credit use can be 
important in enhancing standards' overall technical feasibility, cost-
effectiveness, and pace of implementation.
a. How Credits Are Calculated
    As proposed, the corporate average for each weight class will be 
calculated by computing a sales-weighted average of the FEL NMHC levels 
to which each group was certified. As discussed above, manufacturers 
will group vehicles into durability groups or test groups and establish 
an FEL for each group. This FEL becomes the standard for that group. 
Consistent with FEL practices in other vehicle standards, manufacturers 
may opt to select an FEL above the test level. The FEL will be used in 
calculating credits. The number of credits or debits will then be 
determined using the following equation:

Credits or Debits = (Standard - Sales-weighted average of FELs to 
nearest tenth) x Actual Sales

    If a manufacturer's average was below the 0.3 g/mi corporate 
average standard for LDVs/LDTs (below 0.5 g/mi for HLDTs/MDPVs), 
credits would be generated. These credits could then be used in a 
future model year when its average NMHC might exceed the 0.3 or the 0.5 
standard. Conversely, if the manufacturer's fleet average was above the 
corporate average standard, banked credits could offset the difference, 
or credits could be purchased from another manufacturer.
b. Credits Earned Prior to Primary Phase-In Schedule
    As proposed, we are finalizing provisions allowing manufacturers to 
earn early emissions credits if they introduce vehicles that comply 
with the new standards early and the corporate average of those 
vehicles is below the applicable standard. Early credits could be 
earned starting in model year 2008 for vehicles meeting the 0.3 g/mile 
standard and in 2010 for vehicles meeting the 0.5 g/mile standard. 
These emissions credits generated before the start of the phase-in 
could be used both during and after the phase-in period and have all 
the same properties as credits generated by vehicles subject to the 
primary phase-in schedule. As mentioned in section V.B.4.b above, we 
are also finalizing a provision that allows manufacturers to apply for 
an alternative phase-in schedule for vehicles that are introduced 
early. The alternative phase-in and early credits provisions would 
operate independent of one another.
c. How Credits Can Be Used
    A manufacturer can use credits in any future year when its 
corporate average is above the standard, or it can trade (transfer) the 
credits to other manufacturers. Because of separate sets of standards 
for the different weight categories, we are finalizing as proposed that 
manufacturers compute their corporate NMHC averages separately for LDV/
LLDTs and HLDTs/MDPVs. Credit exchanges between LDVs/LLDTs and HLDTs/
MDPVs will be allowed. This will provide added flexibility for fuller-
line manufacturers who may have the greatest challenge in meeting the 
new standards due to their wide disparity of vehicle types/weights and 
emissions levels.
d. Discounting and Unlimited Life
    Credits will allow manufacturers a way to address unexpected shifts 
in their sales mix. The NMHC emission standards in this program are 
quite stringent and do not present easy opportunities to generate 
credits. Therefore, we will not discount unused credits. Further, the 
degree to which manufacturers invest the resources to achieve extra 
NMHC reductions provides true value to the manufacturer and to the 
environment. We do not want to take measures to reduce the incentive 
for manufacturers to bank credits, nor do we want to take measures to 
encourage unnecessary credit use. Consequently, NMHC credits will not 
have a credit life limit. However, credits may only be used to offset 
deficits

[[Page 8468]]

accrued with respect to the new 0.3/0.5 g/mile cold temperature 
standards, and cannot be used in Tier 2 or other programs.
e. Deficits Can Be Carried Forward
    When a manufacturer has an NMHC deficit at the end of a model 
year--that is, its corporate average NMHC level is above the required 
corporate average NMHC standard--the manufacturer will be allowed to 
carry that deficit forward into the next model year. To prevent 
deficits from being carried forward indefinitely, we are finalizing, as 
proposed, that manufacturers will not be permitted to run a deficit for 
two years in a row. A deficit carry-forward may only occur after the 
manufacturer used any banked credits. If the deficit still exists and 
the manufacturer chooses not to, or is unable to, purchase credits, the 
deficit will be carried over. At the end of that next model year, the 
deficit must be covered with an appropriate number of credits that the 
manufacturer generated or purchased. Any remaining deficit means that 
the manufacturer is not in compliance and can be subject to an 
enforcement action.
    We believe that it is reasonable to provide this flexibility to 
carry a deficit for one year given the uncertainties that manufacturers 
face with changing market forces and consumer preferences, especially 
during the introduction of new technologies. These uncertainties can 
make it hard for manufacturers to accurately predict sales trends of 
different vehicle models.
f. Voluntary Heavy-Duty Vehicle Credit Program
    In addition to MDPV requirements in Tier 2, we also currently have 
chassis-based emissions standards for other complete heavy-duty 
vehicles (e.g., large pick-ups and cargo vans) above 8,500 pound GVWR. 
However, these standards do not include cold temperature CO standards. 
As noted below in section V.B.6.a, we did not propose to apply cold 
temperature NMHC standards to heavy-duty gasoline vehicles due to a 
current lack of emissions data on which to base such standards. 
Accordingly, the final rule does not contain any provisions for heavy-
duty vehicle standards or credit program.
    Our proposal discussed a few ideas for voluntary approaches where 
manufacturers could earn credits by including heavy-duty gasoline 
vehicles in the program. We only received one comment regarding a 
voluntary credit program for heavy-duty gasoline vehicles. The 
organization that submitted the comment opposed the creation of NMHC 
credits applicable to other vehicle categories generated by reductions 
from heavy-duty vehicles. In light of this lack of support, as well as 
insufficient data, we are not including a heavy-duty standard or credit 
program at this time. We plan to revisit the need for and feasibility 
of standards as data become available.
7. Additional Vehicle Cold Temperature Standard Provisions
a. Applicability
    As proposed, the new cold temperature NMHC standards apply to all 
gasoline-fueled light-duty vehicles and MDPVs sold nationwide. The cold 
NMHC standards do not apply to diesel vehicles, alternative-fueled 
vehicles, or to the non-gasoline portion of flex fuel vehicles 
(FFVs).\150\ We are finalizing as proposed that FFVs will still require 
certification to the applicable cold NMHC standard, though only when 
operated on gasoline. FFVs operating on ethanol are not subject to the 
cold standard. When manufacturers submit their application for 
certification for FFVs (such as FFVs that can run on gasoline or E85 
\151\), the FFVs must have been tested using gasoline. The application 
must also include a statement that either confirms the same control 
strategies used with gasoline will be used when operating on ethanol, 
or that identifies any differences as an Auxiliary Emission Control 
Device (AECD). Again, dedicated alternative-fueled vehicles are not 
covered.
---------------------------------------------------------------------------

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

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

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

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

[[Page 8469]]

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

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

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

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

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

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

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

[[Page 8470]]



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


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

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

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

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

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

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

[[Page 8471]]

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

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

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

C. What Evaporative Emissions Standards Are We Finalizing?

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

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

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

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

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

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

[[Page 8472]]

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

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

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

[[Page 8473]]

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

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

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

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

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

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

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

[[Page 8474]]

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


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

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

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

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

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

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

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

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

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

D. Additional Exhaust Control Under Normal Conditions

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

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

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

[[Page 8475]]

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

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

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

E. Vehicle Provisions for Small Volume Manufacturers

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

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

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

[[Page 8476]]

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

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

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

[[Page 8477]]

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

VI. Gasoline Benzene Control Program

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

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

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

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

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

[[Page 8478]]

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

A Standard for Total Toxics Performance

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

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

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

A Standard for Aromatic Compounds in Addition to Benzene

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

[[Page 8479]]

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

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

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

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

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

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

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

[[Page 8480]]

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

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

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

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

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

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

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

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

i. General Technological Feasibility of Benzene Control

Benzene Control Technologies

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

[[Page 8481]]

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

Impacts on Octane and Strategies for Recovering Octane Loss

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

[[Page 8482]]

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

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

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

[[Page 8483]]

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

[[Page 8484]]

could make complying with the program prohibitively expensive.
    The other option on which we solicited comment, a maximum average 
standard, would be more flexible. A maximum average standard would 
limit the average benzene content of the actual production at each 
refinery over the course of the year, regardless of the extent to which 
credits may have been used to comply with the 0.62 vol% average 
standard. Thus, a maximum average standard would allow for short-term 
benzene fluctuations as long as the annual average benzene level of 
actual production was less than that upper limit.
    Several commenters stated that an upper limit would add costs 
without resulting in additional benefits, and supported a program 
without upper limits. Other commenters, however, expressed serious 
concerns about the potential consequences of a program without upper 
limits. Several commenters were concerned that under the program as 
proposed, it would be possible for refiners to maintain benzene levels 
well above the standard indefinitely while complying through the use of 
credits, thus potentially reducing the benefits of the program where 
this gasoline is used. Some commenters noted that under the proposed 
program, gasoline in some areas could still have significantly higher 
benzene levels than in other parts of the country. These commenters 
believe that these projected disparities raise issues of fairness. 
While our modeling of the proposed average standard suggested that all 
refineries were likely to reduce their benzene levels to some extent 
and that there would be significant reductions in gasoline benzene 
levels in each PADD, the commenters noted that an upper limit would 
provide a guarantee of reduction to at least the level of the upper 
limit.
    After evaluating the results of our updated refinery analysis and 
considering all of the comments, we have reconsidered the 
appropriateness of an upper limit standard. For the reasons discussed 
above, we continue to believe that a per-gallon cap for CG would be 
inappropriate for a benzene control program due to actions refineries 
would need to take to protect against common fluctuations in benzene 
content, and the related adverse cost and energy implications if 
refineries invest in deeper benzene reductions or need to temporarily 
shut down. In contrast, the per-gallon cap for RFG of 1.3 vol%, which 
is currently in place, functions differently than would a per-gallon 
cap that applied to both the RFG and CG pools. The per-gallon cap for 
RFG alone is appropriate because the CG pool provides an outlet for 
batches of higher benzene RFG. However, if such a cap were applied to 
CG as well, refiners would be left without an outlet. As we said in the 
proposal, any meaningful level for a per-gallon cap applying to CG 
would thus overly restrict the normal fluctuations in gasoline benzene 
(see 71 FR 15869).
    On the other hand, we now believe that the program should include a 
maximum average benzene standard, set at an appropriate level. The 
maximum average standard has the strong advantage of ensuring that the 
benzene content of gasoline produced by each refinery (or imported by 
each importer) will average no higher than this standard, regardless of 
the use of credits, providing greater assurance that actual in-use 
benzene reductions more clearly reflect our modeled projections which 
form the basis for this rule. At the same time, the maximum average 
standard avoids the serious drawbacks of a per-gallon cap.
    Our refinery modeling is state of the art, but it cannot predict 
with high confidence each refinery's actions and how benzene trading 
will occur in each instance. We have done a refinery-by-refinery 
assessment of the most economical decisions we believe the industry 
will make to comply with the standard. However, in developing the 
model, we did not have access to specific information on many 
refineries, much of which is confidential business information. To fill 
these gaps, we used broader industry average information for a number 
of key model input parameters (including benzene levels in crude oil 
and in gasoline blendstocks, individual refinery unit throughput and 
operating conditions, distillation ``cut points,'' and future refinery 
expansions). Since there is wide variation in these important 
parameters among different refineries that impacts their baseline 
benzene levels and their opportunities for control, our model's 
assumptions inherently vary from actual refinery circumstances. 
Furthermore, by necessity, our model assumes that all refineries will, 
in effect, work collectively to make the most economical investment 
decisions on a nationwide basis, as though each knew in advance the 
investment decisions of the others. In reality, each individual 
refinery will be making its decisions independently of each other, 
based on very limited information about other refineries' actions. In 
addition, our model assumes that refiners will limit their actions to 
only treat the principal benzene-containing stream (reformate). There 
are individual circumstances where it may be economical to also treat 
other refinery streams. If the benzene in these other streams is indeed 
treated by some refineries, it is possible that sufficient credits 
might be generated to allow more refineries to avoid benzene reductions 
altogether by simply purchasing credits. Consequently, although our 
refinery-by-refinery modeling predicts significant benzene reductions 
in all areas nationwide, individual refineries might continue to have 
gasoline with higher benzene levels than the model predicts. This may 
also result in higher regional variation in gasoline benzene levels 
than the model predicts. Thus, we cannot dismiss this possibility with 
a high degree of confidence.
    For these reasons, we believe that the addition of a maximum 
average standard to the 0.62 average standard provides far greater 
assurance that refineries will control benzene in the future as 
projected--and certainly will not increase benzene levels to be greater 
than the level of the maximum average standard. Furthermore, through 
selection of an appropriate level for the maximum average standard, we 
believe that we are achieving this goal with a minimal impact on the 
overall costs of the program.
    We did not originally propose a maximum average standard, largely 
because of our interpretation of our modeling done for the proposal. 
That modeling indicated that adding a maximum average standard would 
result in significantly more benzene reduction in some areas, but that 
these increases would cause other areas to experience slightly smaller 
benzene reductions (see 71 FR 15903). Our updated modeling results are 
similar. In the proposal, we considered this potential for smaller 
benzene reductions in some areas to be a reason not to propose a 
maximum average standard. However, upon further evaluation of these 
modeling results, given the level of uncertainty in the model to 
predict individual refinery and regional benzene levels (as discussed 
above), we do not have confidence in the size of any offsetting 
increases in benzene levels in other areas, or even whether they would 
occur. In addition, we recognize that some of the refiners that the 
model predicts would reduce benzene slightly less (creating the 
apparent offsetting regional effects) may in fact decide to overcomply 
with the standard in order to maintain a compliance ``safety margin,'' 
regardless of the presence of a maximum average standard, and 
regardless of the strength of the market for the generated credits.

[[Page 8485]]

In light of this, we do not think it warrants giving up the benefits 
resulting from the inclusion of the maximum average standard.
    Absent concern about any measurable offsetting effects from a 
maximum average standard, we believe that the major benefit of such a 
standard can and should be pursued. That is, the program can achieve 
increased certainty that the significant gasoline benzene reductions 
across all parts of the nation that our modeling projects will indeed 
occur, and thus that regional variations in gasoline benzene levels 
will indeed be minimized as we project.
    We believe that setting the maximum average standard at a level of 
1.3 vol% accomplishes the goal of reasonably assuring lower benzene 
levels for all refineries while balancing the negative aspects of more- 
and less-stringent benzene standards. Virtually all the commenters who 
supported a maximum average standard agreed that 1.3 vol% would be a 
reasonable level for such a standard. EPA agrees. Implementing a 
maximum average standard lower than 1.3 vol% would begin to 
significantly increase the number of refineries that would need to 
install the more expensive benzene reduction equipment. This would 
quickly diminish the value of the flexibility provided by the ABT 
program and thus force an increasing number of refineries to make 
expenditures in benzene control that could otherwise be smaller or 
avoided entirely, significantly increasing the overall cost of the 
program. Conversely, a maximum average standard greater than 1.3 vol% 
would require progressively fewer refineries to take action to reduce 
their benzene levels. This would in turn provide less assurance that 
actual benzene levels would be broadly achieved. As shown in detail in 
Chapter 9 of the RIA, the addition of the 1.3 vol% standard has minimal 
impact on the overall costs of the program. It is for this reason that 
we find that the 0.62 vol% annual average standard, in tandem with the 
1.3 vol% maximum average standard, represents the greatest benzene 
reductions achievable considering cost, energy supply, and other 
enumerated statutory factors.
    We believe that it is very important to monitor levels of benzene 
as refiners and importers begin to respond to the average and maximum 
average standards. EPA currently collects information on benzene and 
several other gasoline parameters for every batch of gasoline produced 
in or imported into the U.S., and publishes it in aggregate form on the 
EPA Web site. By January 1, 2011, we plan to begin publishing a more 
detailed annual report on gasoline quality. We will present this data 
on a PADD-by-PADD basis (to the extent that protection of confidential 
business information allows). We expect that these reports will be a 
valuable tool to stakeholders and members of the public who are 
interested in following the real-world progress of this rule's gasoline 
benzene reductions.
    Among other changes discussed in section VIII below, our updated 
refinery-by-refinery model uses year-round 2004 gasoline production 
data as a starting point (replacing 2003 summer production data used in 
the proposal) and incorporates updated crude oil and benzene prices. 
The model thus generates updated predictions of the responses of 
refineries to the benzene standards. Our updated analysis shows that 
with the 0.62 vol% average standard and the maximum average benzene 
standard of 1.3 vol%, benzene levels will be reduced very significantly 
in all parts of the country. However, a degree of variation will 
continue to exist, due to the wide variety of refinery configurations, 
crude oil supplies, and approaches to benzene control, among other 
factors. This remaining variation is clearly legally permissible, 
notwithstanding the reasonable objective of assuring that reductions 
occur both regionally and nationally, because we do not read CAA 
section 202(l)(2) as requiring uniform gasoline benzene levels in each 
area of the country, since the standard is to be technology-based 
considering costs and other factors which vary considerably by region 
and by refinery. On the other hand, the maximum average standard will 
have the appropriate effect of directionally providing a greater degree 
of geographic uniformity of gasoline benzene levels and these levels 
remain achievable considering cost and the other enumerated factors. 
Reducing gasoline benzene levels on both a national and regional basis 
is within the discretion of the Administrator, since section 202(l)(2) 
does not specify whether the maximum degree of emission reductions are 
to be achieved nationally, regionally, or both.
    The 1.3 vol% maximum average standard will become effective 18 
months after the 0.62 vol% average standard, on July 1, 2012, and on 
July 1, 2016 for small refiners. While there is ample lead time for 
non-small refiners to meet the 0.62 vol% standard by January 1, 2011, 
we believe that staggering the implementation dates will ensure that 
the implementation of the programs by the refining industry is as 
smooth and efficient as possible. An important aspect of the design of 
this program as proposed is the recognition that not all of the benzene 
reduction would occur at once. As discussed in detail in section 
VI.A.2.b below, we expect that individual refiners will use the ABT 
program to schedule their benzene control expenditures in the most 
efficient way, using the early credit and standard credit provisions. 
This will essentially create a gradual phasing-in of the reductions in 
gasoline benzene content, beginning well before the initial compliance 
date of January 1, 2011 and spreading out industry-wide compliance 
activities over several years. Since the 1.3 vol% standard may not be 
met using credits, we have set the implementation dates for this 
standard such that the credit program can continue to be fully utilized 
for an additional 18 months after the effective date of the 0.62 vol% 
average standard to allow the intended phasing-in of the program to 
occur (i.e., there will be 18 additional months during which the 0.62 
vol% average standard may be achieved exclusively by using credits).
    We acknowledge that by incorporating the 1.3 vol% maximum average 
standard into the program, we are creating additional compliance 
challenges for a small number of refineries that might have relied on 
credits but will now need to install capital equipment to meet the 1.3 
vol% maximum average standard. Most refiners will need to take these 
steps by July 1, 2012. Small refiners will need to take these steps 
four years later, by July 1, 2016. Although we believe that most 
(possibly all) refiners will be able to install appropriate benzene 
control equipment by these future dates, there may be a small number of 
refiners that continue to face significant financial hurdles as these 
dates approach. We have considered this concern, and we believe that 
the leadtime provided, including the longer leadtime for small 
refiners, and the hardship relief provisions discussed below, are 
sufficient to address any circumstances of severe economic impacts on 
individual refineries. We are making clear that serious economic 
difficulties in meeting the 1.3 vol% maximum average standard may be a 
basis for granting relief under the ``extreme hardship'' provision 
discussed in sectionVI.A.3. below.
2. Description of the Averaging, Banking, and Trading (ABT) Program
a. Overview
    We are finalizing a nationwide averaging, banking, and trading 
(ABT) program that allows us to set a more

[[Page 8486]]

stringent annual average gasoline benzene standard than would otherwise 
be justifiable. The ABT program allows refiners and importers to choose 
the most economical compliance strategy (investment in technology, 
credits, or both) for meeting the 0.62 vol% annual average benzene 
standard. The flexibility afforded by the program is especially 
significant and needed given the considerable variation in existing 
gasoline benzene levels, which reflects important differences in crude 
oil composition and individual refinery design.
    From 2007-2010, refiners can generate ``early credits'' by making 
qualifying benzene reductions earlier than required. In 2011 and 
beyond, refiners and importers can generate ``standard credits'' by 
producing/importing gasoline with benzene levels below 0.62 volume 
percent (vol%) on an annual average basis. Credits may be used 
interchangeably towards compliance with the 0.62 vol% standard, 
``banked'' for future use, and/or transferred nationwide to other 
refiners/importers subject to the standard. In addition to the 0.62 
vol% standard, refiners and importers must also meet a 1.3 vol% maximum 
average benzene standard beginning July 1, 2012. To comply with the 
maximum average standard, gasoline produced by a refinery or imported 
by an importer may not exceed 1.3 vol% on an annual average basis. 
While the 1.3 vol% maximum average standard places a limitation on 
credit use, we believe that the ABT program still provides the refining 
industry with significant compliance flexibility as described below.
b. Credit Generation
i. Eligibility
    Under the ABT program, U.S. refiners (including ``small 
refiners''\190\) who produce gasoline by processing crude oil and/or 
intermediate feedstocks through refinery processing units (see Sec.  
80.1270) are eligible to generate both early and standard benzene 
credits. Foreign refiners with individual refinery baselines 
established under Sec.  80.910(d) who imported gasoline into the U.S. 
in 2004-2005 are also eligible to generate early credits. Importers, on 
the other hand, are only eligible to generate standard credits under 
the ABT program. As explained in the proposal, importers are precluded 
from generating early credits because, unlike refineries, they do not 
need additional lead time to comply with the standard since they are 
not investing in benzene control technology. Additionally, due to their 
variable operations, importers could potentially redistribute the 
importation of foreign gasoline to generate ``windfall'' early credits 
with no associated benzene emission reduction value (see 71 FR 15874).
---------------------------------------------------------------------------

    \190\ Refiners approved as small refiners under Sec.  80.1340.
---------------------------------------------------------------------------

    Benzene credits may only be generated on gasoline which is subject 
to the benzene requirements as described at Sec.  80.1235. This 
excludes California gasoline (gasoline produced or imported for use in 
California) but includes gasoline produced by California refineries for 
use outside of California. Despite the fact that California gasoline is 
not covered by this program, EPA sought comment on whether and how 
credits could be generated based on California gasoline benzene 
reductions and applied towards non-California gasoline compliance (see 
71 FR 15873). We did not receive any substantive comments on this 
matter but nonetheless considered the feasibility of such a program 
(described in more detail in the Summary and Analysis of Comments). We 
concluded that such a program could be very problematic to implement 
and, based on the apparent lack of interest by California gasoline 
refineries, it is likely that there would be very few participants. As 
a result, we have decided to maintain the proposed ABT provision which 
excludes California gasoline from generating credits.
ii. Early Credit Generation
    To encourage early innovation in gasoline benzene control 
technology, refiners are eligible to generate early credits for making 
qualifying benzene reductions prior to the start of the program. 
Refiners must first establish individual benzene baselines for each 
refinery planning on generating early credits (discussed further in 
section VI.B.1). Benzene baselines are defined as the annualized 
volume-weighted benzene content of gasoline produced at a refinery from 
January 1, 2004 through December 31, 2005. To qualify to generate early 
credits, refineries must make operational changes and/or improvements 
in benzene control technology to reduce gasoline benzene levels in 
accordance with Sec.  80.1275. Additionally, a refinery must produce 
gasoline with at least ten percent less benzene (on a volume-weighted 
annual average basis) than its 2004-2005 baseline. The first early 
credit generation period is from June 1, 2007 through December 31, 
2007, and subsequent early credit generation periods are the 2008, 
2009, and 2010 calendar years (2008 through 2014 calendar years for 
small refiners).
    We are setting a ten percent reduction trigger point for early 
credits to ensure that changes in gasoline benzene levels result from 
real refinery process improvements. Without a substantial trigger 
point, refiners could earn credits for the normal year-to-year 
fluctuations in benzene level at a given refinery allowed under MSAT1. 
These windfall credits could negatively impact the ABT program 
because--as reflections of normal variability--they would have no 
associated benzene emission reduction value. As described in the 
proposal, we believe that a percent reduction trigger point, as opposed 
to an absolute level or fixed reduction trigger point, is the most 
appropriate early credit validation tool considering the wide range in 
starting benzene levels. In addition, we believe that ten percent is an 
appropriate value for the trigger point because it prevents most 
windfall credit generation, yet is not so restrictive as to discourage 
refineries from making early benzene reductions (see 71 FR 15875).
    Once the ten percent reduction trigger point is met, refineries can 
generate credits based on the entire gasoline benzene reduction. For 
example, if in 2008 a refinery reduced its annual average benzene level 
from a baseline of 2.00 vol% to 1.50 vol% (below the trigger point of 
0.90 x 2.00 = 1.80 vol%), its early benzene credits would be determined 
based on the difference in annual benzene content (2.00 - 1.50 = 0.50 
vol%) divided by 100 and multiplied by the gallons of gasoline produced 
in 2008 (expressed in gallons of benzene).
    We proposed that refiners be prohibited from moving gasoline or 
gasoline blendstock streams from one refinery to another in order to 
generate early credits (see 71 FR 15875). We received comments 
indicating that many refiners trade blending components between 
refineries to maximize gasoline production while minimizing cost, and 
that such companies should not be prohibited from generating early 
credits. In fact, we are not prohibiting these types of normal refinery 
activities, nor are we prohibiting such refineries from participating 
in the early credit program. We are simply requiring that all 
refineries make real operational changes and/or improvements in benzene 
control technology to reduce gasoline benzene levels in order to be 
eligible to generate early credits. In most cases, moving gasoline 
blendstocks from one refinery to another does not result in a net 
benzene reduction (one refinery gets cleaner at the expense of another

[[Page 8487]]

getting dirtier). Accordingly, refineries that lower their benzene 
levels exclusively through blendstock trading (no additional qualifying 
reductions) are not eligible to generate early credits under the ABT 
program. An exception exists for refineries that transfer benzene-rich 
reformate streams for processing at other refineries with qualifying 
post-treatment capabilities, e.g., extraction or benzene saturation 
units. Under this scenario, the transferring refinery would be eligible 
to generate early credits because a real operational change to reduce 
gasoline benzene levels has been made. The regulations at Sec.  80.1275 
have been modified to more clearly reflect our intended early credit 
eligibility provisions, and specifically address blendstock trading.
iii. Standard Credit Generation
    Refiners and importers may generate standard credits for 
overcomplying with the 0.62 vol% gasoline benzene standard on a volume-
weighted annual average basis in 2011 and beyond (2015 and beyond for 
small refiners).\191\ For example, if in 2011 a refinery's annual 
average benzene level is 0.52, its standard benzene credits would be 
determined based on the margin of overcompliance with the standard 
(0.62-0.52 = 0.10 vol%) divided by 100 and multiplied by the gallons of 
gasoline produced during the 2011 calendar year (expressed in gallons 
of benzene). Likewise, if in 2012 the same refinery were to produce the 
same amount of gasoline with the same average benzene content, they 
would earn the same number of credits. The standard credit generation 
opportunities for overcomplying with the standard continue indefinitely 
(see 71 FR 15872).
---------------------------------------------------------------------------

    \191\ Standard credit generation begins in 2011, or 2015 for 
small refiners, regardless of whether a refinery pursues early 
compliance with the 0.62 vol% standard under Sec.  80.1334.
---------------------------------------------------------------------------

c. Credit Use
    As proposed, we are finalizing a program where refiners and 
importers can use benzene credits generated or obtained under the ABT 
program to meet the 0.62 vol% annual average standard in 2011 and 
beyond (2015 and beyond for small refiners). We are also finalizing a 
1.3 vol% maximum average standard which takes effect in July 2012 (July 
2016 for small refiners). The maximum average standard must be met 
based on actual refinery benzene levels, essentially placing a cap on 
total credit use. As discussed above in section VI.A.1.d, we believe 
this is an appropriate strategy for addressing the current disparity in 
gasoline benzene levels throughout the country.
    Overall, the ABT program will allow for a more gradual phase-in of 
the 0.62 vol% benzene standard and a more cost-effective program. The 
early credit program gives refiners an incentive to make initial 
gasoline benzene reductions sooner than required. The early credits 
generated can be used to provide refiners with additional lead time to 
make their final (more expensive) investments in benzene control 
technology. As a result, some benzene reductions will occur prior to 
the start of the program while others will lag (within the realms of 
the credit life provisions described below). We anticipate that there 
will be enough early credits generated to allow refiners to postpone 
their final investments by up to three years, which coincides with the 
maximum time afforded by the early credit life provisions. In addition, 
we predict that standard credits generated during the early credit lag 
period will allow for an additional 16 months of lead time. The result 
is a gradual phase-in of the 0.62 vol% benzene standard beginning in 
June 2007 and ending in July 2016, as shown below in Figure VI.A-1. 
Without early credits, refineries would be immediately constrained by 
the 0.62 vol% standard and likely forced to make their final 
investments sooner (including those necessary to meet the 1.3 vol% 
maximum average standard).

[[Page 8488]]

[GRAPHIC] [TIFF OMITTED] TR26FE07.010

    In addition to earlier benzene reductions and a more gradual phase-
in of the 0.62/1.3 vol% standards (as shown above), the ABT program 
results in a more cost-effective program for the refining industry. Our 
modeling shows that allowing refiners to average benzene levels 
nationwide to meet the 0.62 vol% standard reduces ongoing compliance 
costs by about 50% from 0.51 to 0.27 cents per gallon (refer to RIA 
Section 9.6.2). Our modeling further shows that the early credit 
program we are finalizing results in the lowest possible compliance 
costs during the phase-in period. Without an early credit program, the 
total amortized capital and operating costs incurred by the refining 
industry during the phase-in period is estimated to be $905 million 
(2003 dollars).\192\ With an early credit program, the total cost 
incurred during the same phase-in period is reduced to $608 million, 
providing about $300 million in savings. In the absence of an ABT 
program altogether, the total cost incurred during the phase-in period 
would be $1.7 billion. As a result, the ABT program in its entirety 
could save the refining industry up to $1.1 billion in compliance costs 
from 2007-2015. For a more detailed discussion on compliance costs, 
refer to section VIII.A. For more information on how the cost savings 
associated with the ABT program were derived, refer to RIA Section 
6.5.5.12.
---------------------------------------------------------------------------

    \192\ ABT program cost calculations consider future gasoline 
growth and the time value of money. The gasoline growth rate from 
2004-2012 was estimated by the refinery cost model and future growth 
rates were obtained from EIA's AEO 2006. The costs and resulting 
cost savings estimated for the phase-in period were calculated based 
on compliance costs presented in RIA Section 9.6.2 and adjusted back 
to 2007 to account for the time-value of money based on a 7% average 
rate of return.
---------------------------------------------------------------------------

    Under the ABT program, early and standard benzene credits can be 
used interchangeably towards compliance with the 0.62 vol% standard 
(within the realms of the credit life provisions described below). Each 
credit (expressed in gallons of benzene) can be used on a one-for-one 
basis to offset the same volume of benzene produced/imported in 
gasoline above the standard. For example, if in 2011 a refinery's 
annual average benzene level was 0.72, the number of benzene credits 
needed to comply would be determined based on the margin of 
undercompliance with the standard (0.72-0.62 = 0.10 vol%) divided by 
100 and multiplied by the gallons of gasoline produced during the 2011 
calendar year. The credits needed would be expressed in gallons of 
benzene.
    To enable enforcement of the program, the ABT program we are 
finalizing includes a limit on credit life (for both early and standard 
credits), a limit on the number of times credits may be traded, and a 
prohibition on outside parties taking ownership of credits. We believe 
that these provisions are necessary to ensure that the full benzene 
reduction potential of the program is realized and that the credit 
trading program is equitably administered among all participants. In 
the proposal, we acknowledged concerns that credit use limitations 
might in some circumstances unnecessarily hamper the credit market. 
Specifically, we requested comment on ways that some of the provisions 
might be reduced or eliminated while still maintaining an enforceable 
program (see 71 FR 15872). Although we received many comments on the 
proposed ABT program, we did not receive any substantive comments 
indicating that the proposed credit provisions would be a significant 
burden on refiners or importers. Likewise, we did not receive

[[Page 8489]]

any substantive comments suggesting that the removal of such 
restrictions would greatly improve the efficiency of the ABT program. 
For these reasons, we are finalizing such provisions for credit use 
(described in more detail below).
i. Early Credit Life
    Early credits must be used towards compliance within three years of 
the start of the program; otherwise they will expire and become 
invalid. In other words, early credits generated or obtained under the 
ABT program must be applied to the 2011, 2012, or 2013 compliance 
years. Similarly, early credits generated/obtained and ultimately used 
by small refiners must be applied to the 2015, 2016, or 2017 compliance 
years. The result is that no early credits may be used toward 
compliance with the 2014 year. This break in the early credit 
application period may help funnel surplus early credits facing 
expiration to small refiners in need.
ii. Standard Credit Life
    Standard credits must be used within five years from the year they 
were generated (regardless of when/if they are traded). For example, 
standard credits generated in 2011 would have to be applied towards the 
2012 through 2016 compliance year(s); otherwise they would expire and 
become invalid. To encourage trading to small refiners, there is a 
credit life extension for standard credits traded to and ultimately 
used by small refiners. These credits may be used towards compliance 
for an additional two years, giving standard credits a maximum seven-
year life. For example, the same above-mentioned standard credits 
generated in 2011, if traded and used by a small refiner, would have 
until 2018 to be applied towards compliance before they would expire.
iii. Consideration of Unlimited Credit Life
    Since compliance with the gasoline benzene standards is determined 
at the refinery or importer level, there are no enforceable downstream 
standards associated with this rulemaking. Thus, it is critical that 
EPA be able to conduct enforcement at the refinery or importer level. 
Additionally, since EPA enforcement activities are limited by the five-
year statute of limitations in the Clean Air Act, allowing credit life 
beyond five years poses serious enforcement issues. As a result, we are 
finalizing three-year early credit life and five-year standard credit 
life provisions (as just described above). We believe that these credit 
life provisions are limited enough to satisfy enforcement and trading 
concerns yet sufficiently long to provide necessary program 
flexibility. However, we recognize that extending credit life might 
result in increased program flexibility. Accordingly, in the proposal, 
EPA sought comment on different ways to structure the program that 
would allow for unlimited credit life. Specifically, we asked for 
comment on how unlimited credit life could be beneficial to the program 
and/or how the associated increase in recordkeeping and enforcement 
issues could be mitigated (see 71 FR 15872). Comments received provided 
no support for why unlimited credit life would improve program 
flexibility or how enforcement issues could be addressed. Furthermore, 
we did not receive any comments suggesting that the proposed credit 
life provisions would significantly hamper trading. As such, we are 
finalizing the credit life provisions as proposed.
iv. Credit Trading Provisions
    It is possible that benzene credits could be generated by one 
party, subsequently transferred or used in good faith by another, and 
later found to have been calculated or created improperly or otherwise 
determined to be invalid. If this occurs, as in past programs, both the 
seller and purchaser will have to adjust their benzene calculations to 
reflect the proper credits and either party (or both) could be 
determined to be in violation of the standards and other requirements 
if the adjusted calculations demonstrate noncompliance with the 0.62 
vol% standard.
    Credits must be transferred directly from the refiner or importer 
generating them to the party using them for compliance purposes. This 
ensures that the parties purchasing them are better able to assess the 
likelihood that the credits are valid. An exception exists where a 
credit generator transfers credits to a refiner or importer who 
inadvertently cannot use all the credits. In this case, the credits can 
be transferred a second time to another refiner or importer. After the 
second trade, the credits must be used or terminated. In the proposal, 
we requested comment on whether more than two trades should be 
allowed--specifically, whether three or four trades were more 
appropriate and/or more beneficial to the program (see 71 FR 15876). We 
did not receive any comments providing analytical support for an 
additional number of trades. We are finalizing a maximum of two trades, 
consistent with other recent rulemakings, in order to provide 
flexibility while still maintaining enforceability as discussed in the 
proposal.
    There are no prohibitions against brokers facilitating the transfer 
of credits from one party to another. Any person can act as a credit 
broker, regardless of whether such person is a refiner or importer, as 
long as the title to the credits is transferred directly from the 
generator to the user. This prohibition on outside parties taking 
ownership of credits was promulgated in response to problems 
encountered during the unleaded gasoline program and has since appeared 
in subsequent fuels rulemakings. To reevaluate potential stakeholder 
interest in removing this prohibition, EPA sought comment on this 
provision in the proposal--specifically, whether there were potential 
benefits to allowing other parties to take ownership of credits and how 
such a program would be enforced (see 71 FR 15876). We did not receive 
any comments on this issue and continue to believe that our proposal is 
appropriate. Therefore, to maintain maximum program enforceability and 
consistency with all of our other ABT programs for mobile sources and 
their fuels, we are maintaining our existing prohibition on outside 
parties taking ownership of credits.
    We are not imposing any geographic restrictions on credit trading. 
Credits may be traded nationwide between refiners or importers as well 
as within companies to meet the 0.62 vol% national average benzene 
standard. We believe that restricting credit trading could reduce 
refiners' incentive to generate credits and hinder trading essential to 
this program. In addition, since there are no fuel-availability issues 
associated with this rule (as opposed to the case of the ultra-low 
sulfur diesel program), there is no need to impose a geographic 
restriction.
3. Provisions for Small Refiners and Refiners Facing Hardship 
Situations
    In developing the MSAT2 program, we evaluated the need for and the 
ability of refiners to meet the proposed benzene standards as 
expeditiously as possible. We continue to believe that it is feasible 
and necessary for the vast majority of the program to be implemented in 
the time frame stated above to achieve the air quality benefits as soon 
as possible. Further, we believe that refineries owned by small 
businesses generally face unique hardship circumstances as compared to 
larger refiners. We are also finalizing provisions for other refiners 
to allow them to seek limited relief from hardship situations on a 
case-by-case

[[Page 8490]]

basis. These provisions are discussed in detail below.
a. Provisions for Small Refiners
    We proposed several special provisions for refiners that are 
approved as small refiners (see VI.A.3.a.ii below). This is due to the 
fact that small refiners generally have greater difficulty than larger 
companies (including those large companies that own small-capacity 
refineries) in raising capital for investing in benzene control 
equipment. Small refiners are also likely to have more difficulty in 
competing for engineering resources and in completing construction of 
the needed benzene control (and any necessary octane recovery) 
equipment in time to meet the required standards (see also the more 
detailed discussion at 71 FR 15877).
    As explained in the discussion of our compliance with the 
Regulatory Flexibility Act below in section XII.C and in the Final 
Regulatory Flexibility Analysis in Chapter 14 of the RIA, we carefully 
considered the impacts of the regulations on small businesses. Most of 
our analysis of small business impacts was performed as a part of the 
work of the Small Business Advocacy Review Panel (``SBAR Panel'', or 
``the Panel'') convened prior to the proposed rule, pursuant to the 
Regulatory Flexibility Act as amended by the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA). (The final report of the 
Panel is available in the docket.)
    For the SBREFA process, EPA conducted outreach, fact-finding, and 
analysis of the potential impacts of our regulations on small 
businesses. Based on these factors and analyses by all Panel members, 
the Panel concluded that small refiners in general would likely 
experience a significant and disproportionate financial hardship in 
reaching the objectives of the MSAT2 program. We proposed many of the 
provisions recommended by the Panel and we are finalizing these 
provisions in this action.
i. Definition of Small Refiner for Purposes of the MSAT2 Small Refiner 
Provisions
    The criteria to qualify for small refiner status for this program 
are in most ways the same as those required in the Gasoline Sulfur and 
the Highway and Nonroad Diesel rules. However, there are some 
differences; as stated in our more recent fuels programs, we believe 
that it is necessary to limit relief to those small entities most 
likely to experience adverse economic impacts from fuel regulations. We 
are finalizing the following provisions for determining small refiner 
status.
    To qualify as a small refiner, a refiner must demonstrate that it 
meets all of the following criteria: (1) Produced gasoline from crude 
during calendar year 2005; (2) had no more than 1,500 employees, based 
on the average number of employees for all pay periods from January 1, 
2005 to January 1, 2006; and, (3) had an average crude oil capacity 
less than or equal to 155,000 barrels per calendar day (bpcd) for 2005. 
We are likewise finalizing the provision requiring refiners to apply 
for, and for EPA to approve, a refiner's status as a ``small refiner''.
    Small refiner provisions are limited to refiners of gasoline from 
crude because they are the entities that bear the investment burden and 
the consequent economic hardship. Therefore, blenders, importers, and 
additive component producers are not eligible. For these same reasons, 
small refiner status is limited to those refiners that owned and 
operated the refinery during the period from January 1, 2005 through 
December 31, 2005. This is consistent with the approach taken in the 
Nonroad Diesel rule, but we are revising the text to be more clear on 
this issue.
    In determining its crude oil capacity and total number of 
employees, a refiner must include the crude oil capacity and number of 
employees of any subsidiary companies, any parent companies, any 
subsidiaries of the parent companies, and any joint venture partners. 
As stated in the proposal, there was confusion in past rules regarding 
ownership. Thus, we proposed defining a parent company as any company 
(or companies) with controlling ownership interest, and a subsidiary of 
a company as any company in which the refiner or its parent(s) has a 
controlling ownership interest (see 71 FR 15878). We requested comment 
on these clarifications in the proposal, but did not receive any 
comments on these aspects of the small refiner definition. Therefore, 
we are finalizing the definition of parent company and related 
clarifying provisions such that the employees and crude capacity of all 
parent companies, and all subsidiaries of all parent companies, must be 
taken into consideration when evaluating compliance with these 
criteria.
    We received comments regarding the small refiner employee count and 
crude capacity criteria. These commenters stated that they believed 
that EPA's criteria fail to provide relief to a small number of 
refiners whom they believe are similar in many respects to those 
refiners that will qualify as small under our criteria. The commenters 
pointed to recent Congressionally enacted programs, specifically the 
Energy Policy Act of 2005 (EPAct) and the American Jobs Creation Act of 
2004 (Jobs Act), which use definitions that are different from the SBA 
definition, and from the criteria EPA is adopting in this rule. The 
EPAct focuses on refinery size rather than company size, and the Jobs 
Act focuses on refinery-only employees rather than employees company-
wide. EPA has established the criteria for qualifying for small refiner 
relief based on the Small Business Administration's (SBA) small 
business definition (per 13 CFR 121.201).
    We do not believe that it would be appropriate to change the 
proposed small refiner employee count or crude capacity limit criteria 
to fit the definitions used in either of the two recent statutes. While 
Congress is able to establish special provisions for subsets of the 
industry in programs like those mentioned above, EPA appropriately 
focuses, under SBREFA and in this rulemaking, on consideration of 
relief on those refining companies that we believe are likely to face 
serious economic hardship as a result of compliance with the rule. 
Under programs subject to the EPAct and Jobs Act definitions, relief 
would be granted to refineries that are owned by larger companies, or 
companies that have additional sources of revenue (indicated by more 
employees and/or refining capacity), and also refineries owned by 
foreign governments. These definitions do not focus as directly on 
refiners which, due to their size, could incur serious adverse economic 
impact from fuel regulations; and EPA consequently is not adopting 
either of them in this rule. Further, SBA established its small 
business definition to set apart those companies which are most likely 
to be at an inherent economic disadvantage relative to larger 
businesses. We agree with the assessment that refiners of this size may 
be afforded special consideration under regulatory programs that have a 
significant economic impact on them (insofar as is consistent with 
Clean Air Act requirements). We continue to believe that it is most 
appropriate to remain consistent with our previous fuels programs and 
retain the criteria to qualify for small refiner status that have been 
used in the past (with some minor clarifications to avoid confusion), 
since these criteria best identify the class of small refiner which may 
incur disproportionate regulatory impact under the rule. We are 
therefore finalizing the small refiner qualification criteria that were 
proposed.
    As previously stated, our intent has been, and continues to be, 
limiting the small refiner relief provisions to the

[[Page 8491]]

small subset of refiners that are likely to be seriously economically 
challenged as a result of the new regulations. We assume that new 
owners that purchase a refinery after December 31, 2005 do so with full 
knowledge of the proposed regulation. Given that they have the 
resources available to purchase the refinery assets, they are not in an 
economic hardship situation. Therefore, they should include compliance 
planning as part of their purchase decision. Similar to earlier fuel 
rules, we are finalizing a provision that a refiner that restarts a 
refinery in the future is eligible for small refiner status. In such 
cases, we will judge eligibility under the employment and crude oil 
capacity criteria based on the most recent 12 consecutive months before 
the application, unless we conclude from data provided by the refiner 
that another period of time is more appropriate. However, unlike past 
fuel rules, this will be limited to a company that owned the refinery 
at the time that it was shut down. New purchasers will not be eligible 
for small refiner status for the reasons described above. Companies 
with refineries built after January 1, 2005 will also not be eligible 
for the small refiner hardship provisions, again for the reasons given 
above.
    Similar to previous fuel sulfur programs, we also proposed that 
refiners owned and controlled by an Alaska Regional or Village 
Corporation organized under the Alaska Native Claims Settlement Act are 
also eligible for small refiner status, based only on the refiner's 
employee count and crude oil capacity (see 71 FR 15878). We did not 
receive any comments on this provision, and we are finalizing it in 
this action.
ii. Small Refiner Status Application Requirements
    A refiner applying for status as a small refiner under this program 
is required to apply and provide EPA with several types of information 
by December 31, 2007. (The application requirements are summarized in 
section VI.B.2, below.) A refiner seeking small refiner status under 
this program must apply for small refiner status, regardless of whether 
the refiner had been approved or rejected for small refiner status 
under another fuel program. As with applications for relief under other 
rules, applications for small refiner status under this rule that are 
later found to contain false or inaccurate information will be void ab 
initio.
iii. Small Refiner Provisions

Delay in the Effective Date of the Standards

    We proposed that small refiners be allowed to postpone compliance 
with the 0.62 vol% benzene standard until January 1, 2015, four years 
after the general program would begin (see 71 FR 15878). At such time, 
approved small refiners would be required to meet the 0.62 vol% benzene 
standard. As stated in the proposal, this additional lead time is 
justified because small refiners face disproportionate challenges, 
which the additional lead time will help to mitigate. We requested 
comment on this proposed provision, and we received many comments 
supporting it and none opposing it.
    Normally a period of two to three years of lead time is required 
for a refiner to secure necessary financing and to carry out capital 
improvements for benzene control (see VI.A.1.c.i. above). Commenters 
specifically noted that additional lead time would allow small refiners 
to more efficiently obtain financing and contracts to carry out 
necessary capital projects (or to obtain credits) with less direct 
competition with non-small refiners for financing and for contractors 
to carry out capital improvements. Some commenters noted that they 
generally supported the proposed program of a 0.62 vol% benzene 
standard with no upper limit and the proposed small refiner relief. 
While we did not propose an upper limit, as discussed above in section 
VI.A.1, we have chosen to finalize a 1.3 vol% refinery maximum average.
    The additional lead time also allows EPA to make programmatic 
adjustments, if necessary, before small refiners are required to comply 
with the benzene standards. As discussed below, we are finalizing a 
requirement that EPA review the program in 2012, leaving a number of 
years to adjust the program before small refiners are required to meet 
the benzene standards. The additional lead time for small refiners will 
also provide these refiners with three years of lead time following the 
review to take the review results into account in completing capital 
projects if necessary or desirable to meet the benzene standards. Based 
on these assessments, we are therefore finalizing a four-year period of 
additional lead time for small refiners for compliance with the 0.62 
vol% benzene standard, until January 1, 2015 (and small refiners would 
continue to meet the requirements of MSAT1 until January 1, 2015). 
Further, we are finalizing an additional 4 years of lead time for small 
refiners to comply with the 1.3 vol% maximum average benzene standard, 
until July 1, 2016.

Early ABT Credit Generation Opportunities

    During the development of the proposal, we anticipated that many 
small refiners would likely find it more economical to purchase credits 
for compliance than to comply by making capital investments to reduce 
gasoline benzene. However, some small refiners indicated that they 
would make reductions to their gasoline benzene levels to fully or 
partially meet the proposed 0.62 vol% benzene standard. Therefore, we 
proposed that small refiners that take steps to meet the benzene 
requirement before January 1, 2015 would be eligible to generate early 
credits (see 71 FR 15879). Current and previous fuels programs allow 
for credit generation opportunities to encourage early compliance, and 
extending this opportunity to small refiners, based on the small 
refiner effective date, is consistent with this objective. Small 
refiners generally supported this provision and we did not receive any 
adverse comments on it.
    Early credit generation opportunities will provide more credits for 
the MSAT2 ABT program and will help to achieve the air quality goals of 
the MSAT2 program earlier than otherwise required. We are therefore 
finalizing an early credit generation provision for small refiners. 
This is similar to the general early credit generation provision that 
is provided to all refiners, except that small refiners may generate 
early credits until January 1, 2015. As discussed in section 
VI.A.2.b.ii above, refineries must reduce their 2004-2005 benzene 
levels by at least ten percent to generate early credits. This ten 
percent threshold is being set to ensure that changes in gasoline 
benzene levels result from real refinery process improvements, not just 
normal fluctuations in benzene levels at a given refinery (allowed 
under MSAT1). The small refiner early credit generation period will be 
from June 1, 2007 to December 31, 2014, after which standard credits 
may be generated indefinitely for those that overcomply with the 0.62 
vol% annual average standard.

Extended Credit Life

    During the SBREFA process, many small refiners expressed interest 
in relying upon credits as an ongoing compliance strategy for meeting 
the 0.62 vol% gasoline benzene standard. However, several small 
refiners voiced concerns surrounding the idea of relying on the credit 
market to avoid large

[[Page 8492]]

capital costs for benzene control. One of their primary concerns was 
that credits might not be available and/or traded to small refiners in 
need. To increase the certainty that credits would be available, we 
proposed a two-year credit life extension for credits generated by or 
traded to small refiners (see 71 FR 15879). Not only does this 
provision encourage trading to small refiners, it creates a viable 
outlet for credits facing expiration. Most small refiners supported the 
proposed credit life provision. However, one refiner suggested that we 
finalize unlimited credit life for credits traded to small refiners. 
Although unlimited credit life could have some perceived benefits, 
overall it poses serious enforcement problems. Therefore, for the 
reasons described above in VI.A.2.c.iii, we are not finalizing 
unlimited credit life for credits traded to small refiners. Further, we 
are finalizing a slightly modified version of the proposed small 
refiner extended credit life provision to better reflect its intended 
purpose. First, the two-year credit life extension pertains only to 
standard credits. The extension does not apply to early credits because 
refiners already have an incentive to trade early credits to small 
refiners. Based on the nature of the early credit life program (three-
year life based on the start of the program) and small refiners' 
delayed program start date (2015 as opposed to 2011), early credits 
traded to small refiners are already valid for an additional four 
years. Second, the two-year credit life extension applies only to 
standard credits traded to small refiners. There is no need to extend 
credit life for credits generated by small refiners, because in this 
event, the small refiner would already have the utmost certainty that 
the credits would be available for use.

ABT Program Review

    We proposed that we would perform a review of the ABT program (and 
thus, the small refiner flexibility options) by 2012, one year after 
the general program begins (see 71 FR 15879). Coupled with the small 
refiner four-year additional lead time provision, the ABT program 
review after the first year of the overall program will provide small 
refiners with roughly three years, after learning the results of the 
review, to obtain financing and perform engineering and construction. 
We are committing to this provision today. The review will take into 
account the number of early credits generated industry-wide each year 
prior to the start of the MSAT2 program, as well as the number of 
credits generated and transferred during the first year of the overall 
benzene control program. In part to support this review, we are 
requiring that refiners submit pre-compliance reports, similar to those 
required under the highway and nonroad diesel programs. In addition, 
the first compliance report that refiners submit (for the 2011 
compliance period) will provide important information on how many 
credits are actually being generated or utilized during the first year 
of the program.
    The ABT pre-compliance reports will be due annually on June 1 from 
2008 through 2011. The reports must include projections of how many 
credits will be generated and how many credits will need to be used at 
each refinery. The reports must also contain information on a refiner's 
plans (for each refinery) for compliance with the benzene standard, 
including whether or not the refiner will utilize credits alone to 
comply with the standard. Refiners must also report any early credits 
that may have been transferred to another entity prior to January 1, 
2011 and the sale price of those credits.
    In addition, ABT compliance reports will be due annually beginning 
February 28, 2012. For any refiner expecting to participate in the 
credit trading program (under Sec.  80.1275 and/or Sec.  80.1290, the 
report must include information on actual credit generation and usage. 
Refiners must also provide any updated information regarding plans for 
compliance. EPA will publish the results of these refinery compliance 
reports and the results of our review as soon as possible to provide 
small refiners with information on the ABT program roughly three years 
prior to the small refiner compliance date. EPA will maintain the 
confidentiality of information from individual refiners submitted in 
the reports. We will present generalized summaries of the reports 
annually.
    If, following the review, EPA finds that the credit market is not 
adequate to support the small refiner provisions, we will revisit the 
provisions to determine whether or not they should be altered or 
whether EPA can assist the credit market (and small refiners' access to 
credits). For example, the Panel suggested that EPA could consider 
actions such as: (1) The ``creation'' of credits by EPA that would be 
introduced into the credit market to ensure that there are additional 
credits available for small refiners; (2) a requirement that a 
percentage of all credits to be sold be set aside and only made 
available for small refiners; and (3) a requirement that credits sold, 
or a certain percentage of credits sold, be made available to small 
refiners before they are allowed to be sold to any other refiners.
    Further, we are finalizing an additional hardship provision to 
assist small refiners. This hardship provision would be for the case of 
a small refiner for which compliance with the 0.62 vol% benzene 
standard would be feasible only through the purchase of credits, but 
for whom purchase of credits is not economically feasible. This 
hardship provision will only be available following the ABT program 
review, since EPA wishes to use the most accurate information to assess 
credit availability and the working of the credit market. The provision 
will only be afforded to a small refiner on a case-by-case basis, and 
must be based on a showing by the refiner of the practical or economic 
difficulty in acquiring credits for compliance with the 0.62 vol% 
benzene standard (or some other type of similar situation that would 
render its compliance with the standard not economically feasible). The 
relief offered under this hardship provision is a further delay, on an 
individual refinery basis, for up to two years. Applications for relief 
under this provision must meet the requirements set out in Sec.  
80.1343. Following the two years, a small refiner will be allowed to 
request one or more extensions of the hardship until the refinery's 
material situation has changed. Finally, if a small refiner is unable 
to comply with the 1.3 vol% refinery maximum average, it may apply for 
relief from this standard under the general hardship provisions 
discussed below in section VI.A.3.b. Applications for relief from the 
1.3 vol% refinery maximum average must be received by January 1, 2013 
and must meet the requirements set out in Sec.  80.1335.
iv. The Effect of Financial and Other Transactions on Small Refiner 
Status and Small Refiner Relief Provisions
    We believe that the effects of financial (and other) transactions 
are also relevant to this action. We proposed these provisions (see 71 
FR 15880) and did not receive any comments on them. We continue to 
believe that these provisions are appropriate and are finalizing the 
provisions discussed below.

Large Refiner Purchasing a Small Refiner's Refinery

    One situation involves a ``non-small'' refiner that wishes to 
purchase a refinery owned by an approved small refiner. The small 
refiner may not have completed or even begun any necessary planning to 
meet the MSAT2 standards, since it would likely have planned to make 
use of the special small refiner

[[Page 8493]]

relief provisions. We assume that the refiner would have incorporated 
financial planning for compliance into its purchase decision. However, 
we recognize that a limited amount of time would be required for the 
physical completion of the refinery upgrades for compliance. (This 
situation would be similar to that addressed in the Nonroad Diesel 
program (96 FR 39051).)
    We therefore believe that an appropriate period of lead time for 
compliance with the MSAT2 requirements is warranted where a refiner 
purchases any refinery owned by a small refiner, whether by purchase of 
a refinery or purchase of the small refiner entity. A refiner that 
acquires a refinery from an approved small refiner will be provided 
with 30 additional months from the date of the completion of the 
purchase transaction (or until the end of the applicable small refiner 
relief interim period if it is within 30 months). During this 30-month 
period, production at the newly-acquired refinery may remain at the 
benzene levels that applied to that refinery for the previous small 
refiner owner, and all existing small refiner provisions and 
restrictions will also remain in place for that refinery. At the end of 
this period, the refiner must comply with the ``non-small refiner'' 
standards. There will not be an adverse environmental impact of this 
provision, since the small refiner would already have been provided 
relief prior to the purchase and this provision would be no more 
generous.
    We expect that in most (if not all) cases, the 30 months of 
additional lead time will be sufficient for the new refiner-owner to 
accomplish the necessary planning and any needed refinery upgrades. If 
a refiner nonetheless believes that the technical characteristics of 
its plans would require additional lead time, the refiner may apply for 
additional time and EPA will consider such requests on a case-by-case 
basis. Based on information provided in such an application and other 
relevant information, EPA will decide whether additional time is 
technically necessary and, if so, how much additional time would be 
appropriate. As discussed above, in no case will compliance dates be 
extended beyond the time frame of the applicable small refiner relief.

Small Refiner Losing Its Small Refiner Status Due To Merger or 
Acquisition

    Another type of potential transaction involves a refiner with 
approved small refiner status that later loses its small refiner status 
because it no longer meets the small refiner criteria. An approved 
small refiner that exceeds the small refiner employee or crude capacity 
limit due to merger or acquisition will lose its small refiner status. 
This includes exceedances of the employee or crude capacity criteria 
caused by acquisitions of assets such as plants and equipment, as well 
as acquisitions of business entities.
    Our intent has been, and continues to be, to limit the small 
refiner relief provisions to a small subset of refiners that are most 
likely to be significantly economically challenged, as discussed above. 
At the same time, it is also our intent to avoid stifling normal 
business growth. Therefore, under this program, a refiner will be 
disqualified from small refiner status if it exceeds the small refiner 
criteria through its involvement in transactions such as being acquired 
by or merging with another entity, through the small refiner itself 
purchasing another entity or assets from another entity, or when it 
ceases to process crude oil. However, if a small refiner grows through 
normal business practices, and exceeds the employee or crude capacity 
criteria without merger or acquisition, it will retain its small 
refiner status for this program.
    In the sole case of a merger between two approved MSAT2 small 
refiners, both small refiners will be allowed to retain their small 
refiner status under this program. As in past fuel rulemakings, we 
believe the justification for continued small refiner relief for each 
of the merged entities remains valid. Small refiner status for the two 
entities of the merger will not be affected, and hence the original 
compliance plans of the two refiners should not be impacted. Moreover, 
no environmental detriment will result from the two small refiners 
maintaining their small refiner status within the merged entity as they 
would have likely maintained their small refiner status had the merger 
not occurred. We did not receive any comments on this provision.
    We recognize that a small refiner that loses its small refiner 
status because of a merger with, or acquisition of, a non-small refiner 
would face the same type of technical lead time concerns discussed 
above for a non-small refiner acquiring a small refiner's refinery. 
Therefore, we are also providing the 30 months of additional lead time 
described above for non-small refiners purchasing a small refiner's 
refinery.
b. Provisions for Refiners Facing Hardship Situations
    The MSAT2 program includes a nationwide credit trading program of 
indefinite duration for the 0.62 vol% annual average benzene standard, 
and we expect that credits will be available at a reasonable cost 
industry-wide. However, as explained in the proposal (71 FR 15880-
15881), there could be circumstances when refiners would need hardship 
relief. We reiterate this conclusion here, especially given the 1.3 
vol% refinery maximum average benzene standard in the final rule. These 
hardship provisions are available to all refiners, small and non-small, 
with relief being available on a case-by-case basis following a showing 
of certain requirements (as described in the regulations at sections 
80.1335 and 80.1336). We believe that the inclusion of hardship 
provisions for refiners is a necessary part of adopting the benzene 
requirements as the maximum reduction achievable considering costs. 
Without a mechanism to consider economic hardship to particular 
refineries, the overall level of the standards would need to be higher 
to reflect the potential increased costs. Note, however, that we do not 
intend for these hardship waiver provisions to encourage refiners to 
delay planning and investments they would otherwise make.
    We are finalizing two forms of hardship relief: the first applies 
to situations of extreme and unusual hardship, and the second applies 
to situations where unforeseen circumstances prevent the refiner from 
meeting the benzene standards. These provisions are similar to the 
hardship provisions that were proposed, but with some modification 
because this final rule includes a 1.3 vol% refinery maximum average 
benzene standard, which cannot be satisfied through the use of credits. 
While we sought comment in the proposal on such a standard, we did not 
propose it, and therefore also did not propose any hardship relief 
specific to it.
    As discussed further below, the application requirements and 
potential relief available differ somewhat depending upon whether a 
refiner applies for hardship relief for the 0.62 vol% benzene standard, 
the 1.3 vol% refinery maximum average, or both (a refiner may apply for 
relief from both standards, but EPA will address them independently). 
This is partly due to the fact that a refiner may use credits to meet 
the 0.62 vol% benzene standard, but credits cannot be used for 
compliance with the 1.3 vol% refinery maximum average standard. EPA can 
impose appropriate conditions on any hardship relief. Note also that 
any hardship relief granted under this rule will be separate and apart 
from EPA's authority under the Energy Policy Act to issue temporary 
waivers for extreme and unusual supply circumstances, under amended 
section 211(c)(4). In general,

[[Page 8494]]

commenters stated that they supported the inclusion of hardship 
provisions, but they did not provide any specific comments regarding 
these provisions.
i. Temporary Waivers Based on Extreme Hardship Circumstances
    We are finalizing the proposed hardship relief provisions based on 
a showing of extreme hardship circumstances, with some slight 
modifications from the proposed extreme hardship relief provision (see 
71 FR 15881). We did not receive comment on the proposed hardship 
provision.
    Extreme hardship circumstances could exist based on severe economic 
or physical lead time limitations of the refinery to comply with the 
benzene standards required by the program. Such extreme hardship may be 
due to an inability to physically comply in the time available, an 
inability to secure sufficient financing to comply in the time 
available, or an inability to comply in the time available in a manner 
that would not place the refiner at an extreme competitive disadvantage 
sufficient to cause extreme economic hardship. A refiner seeking such 
hardship relief under this provision will have to demonstrate that 
these criteria were met. In addition to showing that unusual 
circumstances exist that impose extreme hardship in meeting the benzene 
standards, the refiner must show: (1) Circumstances exist that impose 
extreme hardship and significantly affect the ability to comply with 
the gasoline benzene standards by the applicable date(s); and (2) that 
it has made best efforts to comply with the requirements. Refiners 
seeking additional time must apply for hardship relief, and the 
hardship applications must contain the information required under Sec.  
80.1335.
    For relief from the 0.62 vol% benzene standard in extreme hardship 
circumstances, an aspect of the demonstration of best efforts to comply 
is that severe economic or physical lead time limitations exist and 
that the refinery has attempted, but was unable, to procure sufficient 
credits. EPA will determine an appropriate extended deficit carry-
forward time period based on the nature and degree of the hardship, as 
presented by the refiner in its hardship application, and on our 
assessment of the credit market at that time. Moreover, because we 
expect the credit program to be operating and robust, we believe that 
circumstances under which we would grant relief from the 0.62 vol% 
benzene standard will be rare, and should we grant relief, it would 
likely be for less than three years. Further, we may impose additional 
conditions to ensure that the refiner was making best efforts to comply 
with the benzene standards while offsetting any loss of emission 
control from the program (due to extended deficit carry-forward).
    For relief from the 1.3 vol% refinery maximum average benzene 
standard in extreme hardship circumstances, a refiner must show that it 
could not meet the 1.3 vol% standard, despite its best efforts, in the 
timeframe required due to extreme economic or technical problems. 
Extreme hardship relief from the 1.3 vol% refinery maximum average 
standard is available for both non-small and small refiners. This 
provision is intended to address unusual circumstances that should be 
apparent now, or well before the standard takes effect. Thus, refiners 
must apply for such relief by January 1, 2008, or January 1, 2013 for 
small refiners. If granted, such hardship relief would consist of 
additional time to comply with the 1.3 vol% refinery maximum average. 
The length of such relief and any conditions on that relief will be 
granted on a case-by-case basis, following an assessment of the 
refiner's hardship application, but could be for a longer period than 
for relief from the 0.62 vol% standard since credits cannot be used for 
compliance with the 1.3 vol% refinery maximum average.
ii. Temporary Waivers Based on Unforeseen Circumstances
    We are also finalizing the proposed temporary hardship provision 
based on unforeseen circumstances, which, at our discretion, will 
permit any refiner or importer to seek temporary relief from the 
benzene standards under certain rare circumstances (see 71 FR 15880). 
This waiver provision is similar to provisions in prior fuel 
regulations. It is intended to provide refiners and importers relief in 
unanticipated circumstances--such as a refinery fire or a natural 
disaster--that cannot be reasonably foreseen now or in the near future. 
We did not receive comments on this proposed hardship provision.
    To receive hardship relief based on unforeseen circumstances, a 
refiner or importer will be required to show that: (1) The waiver is in 
the public interest; (2) the refiner/importer was not able to avoid the 
noncompliance; (3) the refiner/importer will meet the benzene standard 
as expeditiously as possible; (4) the refiner/importer will make up the 
air quality detriment associated with the nonconforming gasoline, where 
practicable; and (5) the refiner/importer will pay to the U.S. Treasury 
an amount equal to the economic benefit of the noncompliance less the 
amount expended to make up the air quality detriment. These conditions 
are similar to those in the RFG, Tier 2 gasoline sulfur, and the 
highway and nonroad diesel regulations, and are necessary and 
appropriate to ensure that any waivers that are granted will be limited 
in scope. Such a request must be based on the refiner or importer's 
inability to produce compliant gasoline at the affected facility due to 
extreme and unusual circumstances outside the refiner or importer's 
control that could not have been avoided through the exercise of due 
diligence.
    For relief from the 0.62 vol% benzene standard based on unforeseen 
circumstances, the hardship request must also show that other avenues 
for mitigating the problem, such as the purchase of credits toward 
compliance under the credit provisions, had been pursued and yet were 
insufficient or unavailable. Hardship relief from that standard will 
allow a deficit to be carried forward for an extended, but limited, 
time period (more than the one year allowed by the rule). The refiner 
or importer must demonstrate that the magnitude of the impact was so 
severe as to require such an extension. EPA will determine an 
appropriate extended deficit carry-forward time period based on the 
nature and degree of the hardship, as presented by the refiner or 
importer in its hardship application, and on our assessment of the 
credit market at that time.
    For relief from the 1.3 vol% refinery maximum average benzene 
standard based on unforeseen circumstances, the hardship request must 
show that, despite its best efforts, the refiner or importer cannot 
meet the standard in the timeframe required. Relief will be granted on 
a case-by-case basis, following an assessment of the refiner's hardship 
application.
c. Option for Early Compliance in Certain Circumstances
    We are finalizing an option that would allow a refinery to begin 
compliance with the MSAT2 benzene standards earlier than 2011 instead 
of maintaining compliance with its MSAT1 baseline. See 71 FR 15881 for 
the proposal's discussion of this option.\193\ We are providing this 
option because refineries that meet the criteria discussed below are 
already providing the market with very clean gasoline from a mobile 
source air toxics

[[Page 8495]]

perspective. In the proposal, we took comment on such an option, 
stating that eligibility for this option would be limited to those that 
have historically better than average toxics performance, lower than 
average benzene and sulfur levels, and a significant volume of gasoline 
impacted by the phase-out of MTBE use. However, in order to qualify for 
this option, a refinery must produce gasoline by processing crude and 
other intermediate feedstocks and not merely be a blender or importer 
of gasoline, as discussed later.
---------------------------------------------------------------------------

    \193\ The 1.3 vol% maximum average standard was not discussed in 
the proposal vis-a-vis this early compliance option. However, any 
refinery approved for this option should easily meet the 1.3 vol% 
standard.
---------------------------------------------------------------------------

    A refinery that is approved for this option would comply with the 
0.62 vol% annual average and 1.3 vol% maximum average benzene standards 
and would not be required to continue to comply with its applicable 
toxics performance requirements, i.e., its MSAT1 baseline and its anti-
dumping or RFG toxics performance standards. We believe this option is 
appropriate because if qualifying refineries had to continue to comply 
with MSAT1 \194\ until 2011, they would likely be forced to reduce 
gasoline output in order to comply, while other refineries or 
importers, most likely with less clean MSAT1 baselines, would provide 
the replacement gasoline. The result would be less supply of these 
refineries' cleaner gasoline and more supply of fuel with higher toxics 
emissions, leading to a net detrimental effect on overall MSAT 
emissions in the surrounding region.
---------------------------------------------------------------------------

    \194\ While refineries are subject to MSAT1 and anti-dumping or 
RFG toxics performance requirements depending on the gasoline type 
(CG and/or RFG) they produce, in almost all cases, the MSAT1 
standard is more stringent than the corresponding anti-dumping or 
RFG toxics standard.
---------------------------------------------------------------------------

    We chose 2003 as the period for determining eligibility for this 
option because State MTBE bans began taking effect in 2004. Refiners 
who had used MTBE generally now use ethanol as the replacement source 
for oxygen. Although RFG no longer has an oxygen requirement \195\, 
MSAT1 baselines were established when that requirement was still in 
place. Even some CG producers used significant amounts of MTBE as 
reflected in their MSAT1 baselines. Ethanol provides less toxics 
reduction benefits than MTBE, and so the refinery must take other 
actions in order to continue to meet its MSAT1 standard. Consequently, 
while MSAT1 baseline adjustments in the past were limited to RFG, it 
may be possible for a refinery to also qualify to adopt MSAT2 early for 
its CG pool. Both qualification and the ability to adopt MSAT2 are 
allowed separately for RFG and CG. For example, a refinery that 
qualifies to adopt MSAT2 early for RFG will be permitted to do so for 
RFG alone while maintaining its MSAT1 baseline for its CG, or vice 
versa.
---------------------------------------------------------------------------

    \195\ 71 FR 26691, May 8, 2006.
---------------------------------------------------------------------------

    As mentioned in the proposal, the criteria for eligibility for 
early compliance are similar in concept to those EPA has used in 
granting refinery-specific adjustments to MSAT1 baselines, that is, 
significantly cleaner than the national average for toxics, benzene, 
and sulfur, and relatively high MTBE use. We re-evaluated those 
criteria to determine the numerical criteria that a refinery would have 
to meet in order to qualify for this option. Specifically, a refinery 
must at minimum meet the following criteria:

--2003 annual average benzene level less than or equal to 0.62 vol%
--2003 annual average MTBE use greater than 6.0 vol%
--2003 annual average sulfur level less than 140 ppm
--MSAT1 RFG baseline greater than 30.0% reduction or CG less than 80 
mg/mile

    Many refineries can reduce benzene and sulfur levels to reduce 
toxics emissions. However, those that used a significant amount of MTBE 
and already have low benzene and sulfur levels also have fairly 
stringent toxics emissions performance standards. As a result, they may 
have little ability to further reduce sulfur or benzene or make other 
refinery changes to offset the impact of switching from MTBE to 
ethanol. Refineries that are not in this situation are not so 
constrained. We believe that the criteria above are an appropriate 
screening to delineate between these two groups.
    To qualify for this provision we believe it is appropriate for a 
refinery to have used at least 6.0 vol% MTBE in their gasoline in their 
2003 baseline; when the oxygen provided by this amount of MTBE is 
provided instead by ethanol, a substantial loss in toxics performance 
results. A benzene average of less than or equal to the 0.62 vol% 
standard is appropriate because if a refinery's average benzene is 
higher, they would have to further reduce benzene to comply with the 
MSAT2 standard early. However, to qualify for this provision to switch 
to MSAT2 early, a refinery should have no viable options for reducing 
benzene further to continue to meet their MSAT1 baseline. We chose the 
140 ppm sulfur level because we found that even for refineries with 
significant MTBE use (in the 6-13 vol% range), the sulfur reductions 
brought about by the Tier 2 gasoline sulfur standard provided 
sufficient benefit to offset much of the increase in toxics emissions 
that results from eliminating MTBE and replacing it with ethanol. 
Finally, refineries should have had MSAT1 baseline toxics performance 
significantly cleaner than the average in order to qualify. The MSAT1 
baseline toxics performance thresholds listed above were set based on 
past experience with baseline adjustments where we found that only 
those with significantly clean baselines (in addition to low benzene, 
low sulfur, and high MTBE use) would have to reduce production in order 
to comply with their MSAT1 standard in the face of MTBE bans. Thus, we 
are limiting this provision to those with relatively clean baselines as 
our goal is preventing the perverse outcome that refineries with 
cleaner gasoline may be forced to reduce their production volume only 
to have it be made up by refineries with dirtier baselines. The 
threshold helps ensure that only those refineries in situations where 
such an outcome could realistically have otherwise occurred are 
permitted to exercise this option. Refineries that do not fulfill all 
of the threshold requirements may have to take further refinery 
processing-related actions to meet their MSAT1 baseline, but are 
unlikely to have to reduce production and/or have that production 
replaced by someone with a less clean standard.
    In addition to meeting the screening criteria mentioned, a refinery 
would still have to apply to EPA to use this compliance option and 
would need to demonstrate that it cannot further reduce its benzene or 
sulfur levels, nor make other refinery processing changes in order to 
maintain compliance with its MSAT1 baseline due to the impact of 
switching from MTBE to ethanol. Details of the application requirements 
and approval process are provided in section 80.1334 of the 
regulations. We estimate that less than 10 refineries may meet the 
screening criteria and thus potentially qualify for this option based 
on our analysis of their 2003 data and MSAT1 baselines. Note that this 
early compliance option will apply only to the type of gasoline that 
qualifies--RFG or CG--not to the refinery's total pool. In 2011, the 
MSAT2 benzene standards will apply to the refinery's total applicable 
gasoline pool.
    We are limiting this compliance option to refineries that produce 
gasoline by processing crude and intermediate feedstocks through 
refinery processing equipment. Thus, this option is not available to 
gasoline blenders and importers. While gasoline blenders and importers 
may have gasoline with significantly cleaner than average toxics

[[Page 8496]]

performance, benzene and sulfur levels, and may have used large amounts 
of MTBE, they have more options in the marketplace for obtaining 
qualifying gasoline and gasoline blending components. Refineries have 
comparatively less ability to adjust their refining operations, without 
significantly reducing volume, in order to accommodate the change from 
MTBE to ethanol.
    Few comments were received regarding this provision. All commenters 
supported the provision. Many of those suggested that it be available 
to any refinery. We continue to believe that this provision should 
apply only to those entities that meet the criteria above. Those that 
do not meet the criteria have the ability to further adjust their 
benzene and sulfur content values to be able to comply with their MSAT1 
baselines. If this provision was available to all refineries, it could 
result in an overall nationwide backsliding on MSAT1. The intent of 
this provision is to provide appropriate relief to a limited number of 
entities that have unique challenges, while at the same time ensuring 
that the net result is cleaner gasoline in the marketplace than would 
otherwise be there.
    EPA also took comment on when entities that are approved for this 
option should be allowed to begin compliance with the MSAT2 benzene 
standards. We received comment supporting allowing such compliance for 
the entire calendar year 2007, even though the rule will not be final 
until partway into that year. Other suggested options include the next 
calendar year, and partial year compliance for 2007. This latter option 
would likely be unworkable under MSAT1 due to differences between 
summer and winter MSAT performance. Thus, we decided that refineries 
that are approved for this option will be allowed to comply with the 
MSAT2 benzene standard for the entire 2007 period. We have also decided 
against requiring approved refineries to wait until the 2008 compliance 
period because we want to ensure that gasoline production from these 
refineries is maximized, and waiting until 2008 would not achieve that 
goal. Because this is an optional program for those that qualify, 
approved refiners may choose to comply with MSAT2 beginning in 2007, or 
beginning in 2008.
    As a final note on this subject, we also proposed that refineries 
that meet the criteria and are approved for early compliance with the 
MSAT2 benzene standards would not be allowed to generate early benzene 
credits (see 71 FR 15881). A few commenters thought that such 
refineries should be allowed to generate early credits. However, the 
criteria for generating early credits require that the refinery reduce 
benzene by 10% below its 2004-2005 baseline benzene level. The early 
compliance provision is predicated on the fact that an approved 
refinery has almost no ability to reduce benzene in order to maintain 
compliance with its MSAT1 baseline. If such a refinery were able to 
further reduce benzene, it would negate its need for early compliance 
with the MSAT2 benzene standard. Therefore, we are finalizing this 
early compliance option with this limitation as proposed.

B. How Will the Gasoline Benzene Standard Be Implemented?

    This section summarizes the main implementation provisions in the 
regulations and provides additional clarification in a few cases.
1. General Provisions
    Compliance with the 0.62 vol% annual average and 1.3 vol% maximum 
average benzene standards is determined over a refiner's or importer's 
total gasoline pool, RFG and conventional gasoline (CG) combined. For 
the 0.62 vol% standard, the first annual compliance period for non-
small refiners and for importers is 2011. For the 1.3 vol% standard, 
the first compliance period for these entities is July 1, 2012 through 
December 31, 2013. Thereafter, compliance is determined annually. Small 
refiners will comply with the 0.62 vol% on an annual basis beginning in 
2015. Compliance with the 1.3 vol% maximum average standard commences 
for small refiners on July 1, 2016. For small refiners, the first 
compliance period for the 1.3 vol% standard is July 1, 2016 through 
December 31, 2017. Thereafter, compliance is determined annually.
    Compliance with the benzene standards is achieved separately for 
each refinery of a refiner.\196\ For an importer, compliance is 
achieved over its total volume of imports, regardless of point of 
entry. As discussed in the proposal, gasoline produced by a foreign 
refiner is included in the compliance calculation of the importer of 
that gasoline, with certain exceptions for early credit generation and 
small foreign refiners.
---------------------------------------------------------------------------

    \196\ Aggregation of facilities for compliance is not allowed 
under this benzene control program. However, as pointed out in the 
proposal, the ABT program's credit generation and transfer 
provisions provide compliance flexibility similar to that provided 
by aggregation.
---------------------------------------------------------------------------

    Finished gasoline and gasoline blendstock that becomes finished 
gasoline solely upon the addition of oxygenate are included in the 
compliance determination. Gasoline produced for use in California is 
not included. Gasoline produced for use in the American territories--
Guam, Northern Mariana Islands, American Samoa--is not subject to the 
benzene standard. Gasoline produced for use in these areas is currently 
exempt from the MSAT1 standards, and for the same reasons we discussed 
in the MSAT1 final rule \197\, including distance from gasoline 
producers, low gasoline use, and distinct environmental conditions, we 
are exempting gasoline produced for these areas from this rule.
---------------------------------------------------------------------------

    \197\ 66 FR 17253, March 29, 2001.
---------------------------------------------------------------------------

    Oxygenate and butane blenders are not subject to the benzene 
standard unless they add other gasoline blending components beyond 
oxygenates and butane. Similarly, transmix processors are not subject 
to the benzene standard. We proposed that transmix processors would be 
subject to the benzene standard if they add gasoline blending 
components to the gasoline produced from transmix (see 71 FR 15891). 
One commenter suggested that only the blending component added to the 
gasoline produced from transmix should be subject to the standard 
because the transmix processor has no control over the benzene level in 
the gasoline produced from transmix, and the benzene in the gasoline 
produced from transmix would have already been accounted for by another 
entity. We agree with this comment, and have modified the final rule 
accordingly.
    As discussed earlier, this benzene program has both an early credit 
generation period and a standard credit generation period that begins 
when the program takes effect. Early credits may be generated from 
January 1, 2007 through December 31, 2010 by refineries with approved 
benzene baselines. For small refiners, early credit generation extends 
through December 31, 2014 for their refineries with approved benzene 
baselines. Benzene baselines are based on a refinery's 2004-2005 
average benzene content, and refiners can begin applying for benzene 
baselines as early as March 1, 2007. Although there is no single cut-
off date for applying for a baseline, refiners planning to generate 
early credits must submit individual refinery baseline applications at 
least 60 days prior to beginning credit generation at that refinery.
    As explained earlier, in order to generate early credits, a 
refinery's annual average benzene level must be at least 10 percent 
lower than its baseline benzene level, and the refinery must show that 
its low benzene levels result, in part, from operational changes and/

[[Page 8497]]

or improvements in benzene control technology since the baseline 
period. Foreign refiners who sent gasoline to the U.S. during 2004-2005 
under their foreign refiner baseline may generate early credits if they 
are able to establish a benzene baseline and agree to comply with other 
requirements that help to ensure enforcement of the regulation at the 
foreign refinery. Early credits generated or obtained under the ABT 
program must be used towards compliance within three years of the start 
of the program; otherwise they will expire and become invalid. In other 
words, early credits must be applied to the 2011, 2012, or 2013 
compliance years. In the case of small refiners, early credits must be 
applied to the 2015, 2016, or 2017 compliance years.
    Standard credits may be generated by refiners and importers 
beginning with the 2011 compliance period. Standard credits may be 
generated by small refiners beginning with the 2015 compliance period. 
For refiners, credits are generated on a refinery-by-refinery basis for 
each facility. For importers, credits are generated over the total 
volume imported, regardless of point of entry. Foreign refiners are not 
allowed to generate standard credits because compliance for their 
gasoline is the responsibility of the importer. In order to generate 
standard credits, a refinery's or importer's annual average benzene 
level must be less than 0.62 vol%. Standard credits are valid for five 
years from the year they were generated. A credit life extension exists 
for standard credits traded to and ultimately used by small refiners. 
These credits may be used towards compliance for an additional two 
years, giving standard credits a maximum seven-year life.
    Compliance with the 0.62 vol% standard is based on the annual 
average benzene content of the refinery's or importer's gasoline 
production or importation, any credits used, and any compliance deficit 
carried forward from the previous year. Credits may be used in any 
quantity and combination (i.e., early or standard credits) to achieve 
compliance with the 0.62 vol% benzene standard beginning with the first 
compliance period in 2011, or 2015 for approved small refiners. For the 
2011 and 2012 compliance periods, credits may be used in any amount, 
and from any starting average benzene level. For example, if the 
refinery's annual average benzene level at the end of 2011 is 1.89 
vol%, it may use credits to meet the 0.62 vol% standard for that 
compliance period. If its average benzene level at the end of 2012 is 
1.45 vol%, it may likewise use credits to meet the 0.62 vol% standard 
for that period.
    The first averaging period for the 1.3 vol% standard for non-small 
refiners and importers begins July 1, 2012 and ends December 31, 2013, 
an 18-month period. Similarly, the first averaging period for the 1.3 
vol% standard for small refiners begins July 1, 2016 and ends December 
31, 2017. Credits may not be used to achieve compliance with the 1.3 
vol% standard at any time. A refinery must make capital improvements 
and/or operational or blending practice changes such that it achieves 
an actual average benzene level of no greater than 1.3 vol% for the 
initial (18-month) compliance period, and each annual compliance period 
thereafter. (An importer must bring in gasoline with benzene levels 
that will average to 1.3 vol% or less during these same compliance 
periods.) Continuing from our previous example, if at the end of 2012, 
the refinery's average benzene level is 1.45 vol%, no further action is 
yet needed to meet the 1.3 vol% standard. However, the refinery must 
make capital improvements and/or operational or blending practice 
changes such that it achieves an actual average benzene level of no 
greater than 1.3 vol% for the 18-month period July 1, 2012-December 31, 
2013. We will assume for this example that the refinery has a 1.0 vol% 
average benzene level at the end of 2013. The refinery can then use 
credits to meet the 0.62 vol% standard.
    Lack of compliance with the 0.62 vol% standard creates a deficit 
that may be carried over to the next year's compliance determination. 
Lack of compliance with the 0.62 vol% standard could occur for a number 
of reasons, for example, a refinery or importer may choose not to use 
(buy) sufficient offsetting credits. However, in the next year, the 
refinery or importer must make up the deficit (through credit use and/
or refining or import improvements) and be in compliance with the 0.62 
vol% standard.\198\ There is no deficit carry-forward provision 
associated with the 1.3 vol% standard. If a refinery or importer is out 
of compliance with the 1.3 vol% standard, it is subject to enforcement 
action immediately.
---------------------------------------------------------------------------

    \198\ An extension of the period of deficit carryover may be 
allowed in certain hardship situations, as discussed in section A.3.
---------------------------------------------------------------------------

2. Small Refiner Status Application Requirements
    A refiner applying for status as a small refiner under this program 
is required to apply to and to provide EPA with several types of 
information by December 31, 2007. The application requirements are 
summarized below. A refiner seeking small refiner status under this 
program would need to apply to EPA for that status, regardless of 
whether or not the refiner had been approved for small refiner status 
under another fuel program. As with applications for relief under other 
rules, applications for small refiner status under this rule that are 
later found to contain false or inaccurate information would be void ab 
initio. Requirements for small refiner status applications include:

--The total crude oil capacity as reported to the Energy Information 
Administration (EIA) of the U.S. Department of Energy (DOE) for the 
most recent 12 months of operation. This would include the capacity of 
all refineries controlled by a refiner and by all subsidiaries and 
parent companies and their subsidiaries. We will presume that the 
information submitted to EIA is correct. In cases where a company 
disagreed with this information, the company could petition EPA with 
appropriate data to correct the record when the company submitted its 
application for small refiner status. EPA could accept such alternate 
data at its discretion.
--The name and address of each location where employees worked from 
January 1, 2005 through December 31, 2005; and the average number of 
employees at each location during this time period. This must include 
the employees of the refiner and all subsidiaries and parent companies 
and their subsidiaries.
--In the case of a refiner who reactivated a refinery that was shutdown 
or non-operational between January 1, 2005, and January 1, 2006, the 
name and address of each location where employees worked since the 
refiner reactivated the refinery and the average number of employees at 
each location for each calendar year since the refiner reactivated the 
refinery.
--The type of business activities carried out at each location.
--The small refiner option(s) the refiner intends to use for each 
refinery.
--Contact information for a corporate contact person, including: name, 
mailing address, phone and fax numbers, e-mail address.
--A letter signed by the president, chief operating officer, or chief 
executive officer of the company (or a designee) stating that the 
information contained in the application was true to the best of his/
her knowledge and that the company owned the refinery as of January 1, 
2007.

[[Page 8498]]

3. Administrative and Enforcement Provisions
    Most of the administrative and enforcement provisions are similar 
to those in effect for other gasoline programs, as discussed in the 
proposal. The discussion below highlights those areas that we wish to 
clarify and those that received significant comment.
a. Sampling/Testing
    Because compliance with this program and with the gasoline sulfur 
program will become the compliance mechanism for certain RFG and anti-
dumping requirements, some reporting simplifications will occur, as 
described below. However, sampling, testing, and reporting of all of 
the current fuel parameters will continue to be required. It is 
important to continue to monitor how refiners continue to achieve the 
toxics control required of RFG and CG through fuel composition changes, 
and how other toxics emissions may be affected by this MSAT2 benzene 
rule. Continued collection of all of the fuel parameters will 
facilitate future toxics evaluation activities.
    We proposed to require every-batch sampling for CG under this 
program, but indicated that results would not have to be available 
before the batch leaves the refinery (see 71 FR 15893). RFG already is 
every-batch tested, and the results must be available before the batch 
leaves the refinery because of RFG's 1.3 vol% per gallon cap. Several 
commenters stated that every-batch testing for CG was unnecessary 
because the benzene standard is an average standard, and that it would 
be costly, especially for small refiners. These commenters requested 
that continued composite sampling be allowed for conventional 
gasoline.\199\ Nevertheless, we are concerned about potential 
downstream benzene addition. Requiring every-batch testing for CG will 
allow for closer monitoring of the movement of high benzene streams. In 
this program, we are relying on there being no significant incentive to 
dump benzene-rich streams into gasoline downstream of the refinery 
where the benzene levels are originally measured. With every-batch 
benzene testing of all gasoline, we will be able to better discern if 
high benzene batches originated at the refinery, or downstream. With 
composite testing, it would be significantly more difficult to 
determine the source of the high benzene streams. Thus, we are 
finalizing every-batch benzene testing for all gasoline.
---------------------------------------------------------------------------

    \199\ Section 80.101(i).
---------------------------------------------------------------------------

b. Recordkeeping/Reporting
    This program will require some new records to be kept, such as the 
benzene baseline, credits generated, and credit transactions, and new 
reports to be filed (e.g., benzene pre-compliance reports). However, 
because the current regulations for RFG and anti-dumping toxics 
controls and MSAT1 controls are being removed, certain recordkeeping 
and reporting requirements will be reduced or eliminated, as detailed 
in the regulations. Because the program will not be fully implemented 
until small refiners are also subject to both the 0.62 vol% and the 1.3 
vol% benzene standards, the process of streamlining the reporting forms 
will not be complete until that time.
    As mentioned above, in order to provide an early indication of the 
credit market for refiners and importers planning on relying upon 
benzene credits as a compliance strategy in 2011 and beyond, we are 
requiring refiners to submit pre-compliance reports to us in the years 
leading up to start of the program. Pre-compliance reporting has proven 
to be an indispensable mechanism in implementing the gasoline and 
diesel sulfur programs, and we expect this to be the case in this 
program as well. Refiners are required to submit annual pre-compliance 
reports on June 1st of every year beginning in 2008 and continuing 
through 2011 (2015 for small refiners). The pre-compliance reports must 
contain engineering and construction plans as well as actual/projected 
gasoline production levels, actual/projected gasoline benzene levels, 
and actual/projected credit generation and use.
    Several commenters suggested that the RFG NOX retail 
survey be discontinued after 2006, and that the RFG toxics retail 
survey be discontinued after 2010. The surveys use fuel parameters of 
RFG sampled from retail stations to estimate VOC, NOX, and 
toxics emissions. There are also fuel benzene and oxygen content 
surveys. If a survey is ``failed'', gasoline sent to the area must meet 
a more stringent standard. Because we are finalizing, as proposed, 
provisions that make the gasoline sulfur program the sole regulatory 
mechanism used to implement gasoline NOX requirements, and 
the benzene control program the sole regulatory mechanism used to 
implement the toxics requirements of RFG \200\ and anti-dumping, we 
agree that the NOX and toxics surveys are no longer needed. 
A discussion of the origin of the survey program, and how the toxics 
and NOX requirements for CG and RFG will be met under the 
MSAT2 program is provided in Chapter 6.13 of the RIA for this 
rulemaking.
---------------------------------------------------------------------------

    \200\ The 1.3 vol% per gallon cap on RFG benzene remains.
---------------------------------------------------------------------------

C. How Will the Program Relate to Other Fuel-Related Toxics Programs?

    In the proposal we presented an analysis that examined 
quantitatively how the fuel performance under the new gasoline content 
standard and vehicle emissions standard as proposed would compare to 
current toxics performance requirements and to performance as modified 
by the Energy Policy Act of 2005. This analysis suggested that the fuel 
standard alone would exceed previous performance for RFG, and 
significantly exceed it for CG.
    We have updated the results of this analysis, using better 
estimates of future ethanol use developed for the RFS final rulemaking, 
as well as the updated benzene projections from the refinery-by-
refinery analysis done for this final rulemaking. As shown in Table 
VI.C-1, these updated analyses continue to support the conclusion that 
the MSAT2 fuel program will provide greater toxics reductions for both 
CG and RFG.

 Table VI.C-1.--Estimated Annual Average Total Toxics Performance of Light Duty Vehicles in mg/mi Under Current
                                            and Projected Scenarios.a
----------------------------------------------------------------------------------------------------------------
                                                 RFG by PADD                          CG by PADD
      Regulatory scenario         Fleet  -----------------------------------------------------------------------
                                   year      I        II      III       I        II      III       IV       V
----------------------------------------------------------------------------------------------------------------
MSAT1 Baseline \b\ (1998-2000).     2002      112      129       97      114      145      107      145      156
EPAct Baseline \b\ (RFG: 2001-      2002      104      121       87      114      145      107      145      156
 2002).........................
EPAct Baseline, 2011 \c\.......     2011       67       78       52       62       83       54       82       88
MSAT2 program, 2011 \c\ (Fuel       2011       66       76       52       60       77       52       74       81
 standard only)................

[[Page 8499]]

 
MSAT2 program, 2011 \c\ (Fuel +     2011       64       72       48       56       74       47       70       78
 vehicle standards)............
MSAT2 program, 2025 \c\ (Fuel +     2025       39       45       31       36       45       31       44      48
 vehicle standards)............
----------------------------------------------------------------------------------------------------------------
\a\ Total toxics performance for this analysis includes overall emissions of 1,3-butadiene, acetaldehyde,
  acrolein, benzene and formaldehyde as calculated by MOBILE6.2. Although POM appears in the Complex Model, it
  is not included here. However, it contributes a small and relatively constant mass to the total toxics figure
  (~4%), and therefore doesn't make a significant difference in the comparisons. Toxics performance figures here
  are for representative cities in each PADD, and therefore some geographical variation is not captured here.
\b\ Baseline figures generated in this analysis were calculated differently from the regulatory baselines
  determined as part of the MSAT1 program, and are only intended to be a point of comparison for future year
  cases.
\c\ Future year scenarios include (in addition to the MSAT2 standards, where stated) effects of the Tier 2
  vehicle and gasoline sulfur standards, and vehicle fleet turnover with time, as well as estimated effects of
  the renewable fuels standard and the phase-out of ether blending as developed in the RFS rulemaking.

D. How Does This Program Satisfy the Statutory Requirements of Clean 
Air Act Section 202(l)(2)?

    As discussed earlier in this section, we have concluded that the 
most effective and appropriate program for MSAT emission reduction from 
gasoline is a benzene control program. We are finalizing, as proposed, 
an average benzene content standard of 0.62 vol% along with a 
specially-designed ABT program, as well as a maximum average annual 
standard of 1.3 vol%. In sections VI.A.1.c and d above, we summarize 
our evaluation of the feasibility of the program, and in section VIII.A 
we summarize our evaluation of the costs of the program. The analyses 
supporting our conclusions in these sections are discussed in detail in 
Chapters 6 and 9 of the RIA.
    Taking all of this information into account, we believe that a more 
stringent program would not be achievable, taking costs into 
consideration. As we have discussed, making the 0.62 vol% standard more 
stringent would require more refiners to install the more expensive 
benzene control equipment, with very little incremental decrease in 
benzene emissions. Also, we have shown that refinery costs increase 
very rapidly as the level of the average standard is made more 
stringent, especially for certain individual technologically-challenged 
refineries. We discuss the costs of this program in detail in section 
VIII.A of this preamble and in Chapter 9 of the RIA. Moreover, the 0.62 
vol% standard achieves significant reductions in benzene levels 
nationwide, and achieves significant reductions in each PADD. The 1.3 
vol% annual average standard makes it more certain that the predicted 
emission reductions will in fact occur.
    Conversely, we believe that a less stringent national average 
standard than 0.62 vol% would not satisfy our statutory obligation to 
promulgate the most stringent standard achievable considering cost and 
other factors along with technological feasibility. Furthermore, as 
discussed in section VI.A, less stringent standards would not 
accomplish several important programmatic objectives, such as avoiding 
the triggering of the provisions in the 2005 EPAct to adjust the MSAT1 
baseline for RFG. We have also considered energy implications of the 
proposed program, as well as noise and safety, and we believe that the 
MSAT2 program will have very little impact on any of these factors 
(although, as explained in section VI.A above, some of the alternative 
toxic control strategies urged by commenters could have adverse energy 
supply implications). Analyses supporting these conclusions are also 
found in Chapter 9 of the RIA. We carefully considered lead time in 
establishing the stringency and timing of the proposed program (see 
section VI.A above).
    We have carefully reviewed the technological feasibility (see 
section VI.A.1.c.i above and chapter 6 of the RIA) and costs of this 
program. Based on the considerations outlined in this section VI, we 
conclude that this program meets the requirements of section 202(l)(2) 
of the Clean Air Act, reflecting ``the greatest degree of emission 
reduction achievable through the application of technology which is 
available, taking into consideration * * * the availability and costs 
of the technology, and noise, energy, and safety factors, and lead 
time.''

VII. Portable Fuel Containers

    As described in this section, we are adopting new HC emissions 
standards for portable gasoline containers (gas cans) essentially as 
proposed. We are also finalizing the same requirements for portable 
diesel and kerosene containers, containers which could easily be used 
for gasoline. Manufacturers must begin meeting the new requirements on 
January 1, 2009. These new emissions control requirements will reduce 
HC emissions from uncontrolled gasoline containers by about 75%, 
including reducing spillage losses. The final rule also includes new 
certification and compliance requirements that will help ensure that 
the containers achieve emissions control in use over the life of the 
container. The standards and program requirements we are finalizing are 
very similar to those adopted by California in 2005, so that 
manufacturers will be able to sell 50-state products. Overall, 
commenters were very supportive of the proposed new emissions control 
program for portable fuel containers.
    We are establishing the portable fuel container (PFC) standards and 
emissions control requirements under section 183(e) of the Clean Air 
Act, which directs EPA to study, list, and regulate consumer and 
commercial products that are significant sources of VOC emissions. In 
1995, after conducting a study and submitting a Report to Congress on 
VOC emissions from consumer and commercial products, EPA published an 
initial list of product categories to be regulated under section 
183(e). Based on criteria that we established pursuant to section 
183(e)(2)(B), we listed for regulation those consumer and commercial 
products that we considered at the time to be significant contributors 
to the ozone nonattainment problem, but we did not include PFC 
emissions.\201\ After analyzing the emissions inventory impacts of 
these containers, we published a Federal Register notice that added 
PFCs to the list of consumer

[[Page 8500]]

products to be regulated.\202\ We requested comment on the data 
underlying the listing but did not receive any comments.\203\ We 
continue to believe that the standards we proposed and are finalizing 
for fuel containers represent ``best available controls'' as required 
by section 183(e)(3)(A). Determination of the ``best available 
controls'' requires EPA to determine the degree of reduction achievable 
through use of the most effective control measures (which includes 
chemical reformulation, and other measures) after considering 
technological and economic feasibility, as well as health, energy, and 
environmental impacts.\204\
---------------------------------------------------------------------------

    \201\ 60 FR 15264 ``Consumer and Commercial Products: Schedule 
for Regulation,'' March 23, 1995.
    \202\ 71 FR 28320 ``Consumer and Commercial Products: Schedule 
for Regulation,'' May 16, 2006.
    \203\ See not only the notice cited in the previous note, but 
also 71 FR 15894 (``EPA will afford interested persons the 
opportunity to comment on the data underlying the listing before 
taking final action on today's proposal'').
    \204\ See section 183(e)(1); see also section 183(e)(4) 
providing broad authority to include ``systems of regulation'' in 
controlling VOC emissions from consumer products.
---------------------------------------------------------------------------

A. What Are the New HC Emissions Standards for PFCs?

1. Description of Emissions Standard
    We are finalizing as proposed a performance-based standard of 0.3 
grams per gallon per day (g/gal/day) of HC to control evaporative and 
permeation losses. The standard will be measured based on the emissions 
from the container over a diurnal test cycle. The cans will be tested 
as a system with their spouts attached. Manufacturers will test the 
containers by placing them in an environmental chamber which simulates 
summertime ambient temperature conditions and cycling the containers 
through the 24-hour temperature profile (72-96 [deg]F), as discussed 
below. The test procedures, which are described in more detail below, 
ensure that containers meet the emissions standard over a range of in-
use conditions such as different temperatures, different fuels, and 
taking into consideration factors affecting durability. EPA received 
only supportive comments on the proposed emissions standards.
2. Determination of Best Available Control
    We continue to believe that the 0.3 g/gal/day emissions standard 
and associated test procedures reflect the performance of the best 
available control technologies including durable permeation barriers, 
auto-closing spouts, and a can that is well-sealed to reduce 
evaporative losses. The standard is both economically and 
technologically feasible. To comply with California's program, gas can 
manufacturers have developed gas cans with low VOC emissions at a 
reasonable cost (see section XIII. for costs). Testing of cans designed 
to meet CARB standards has shown the new standards to be 
technologically feasible. When tested over cycles very similar to those 
we are adopting, emissions from these cans have been in the range of 
0.2-0.3 g/gal/day.\205\ These cans have been produced with permeation 
barriers representing a high level of control (over 90 percent 
reductions) and with auto-closing spouts, which are technologies that 
represent best available controls for gas cans. Establishing the 
standard at 0.3 g/gal/day will require the use of best available 
technologies. As discussed in the proposal, we are finalizing a level 
at the upper end of the tested performance range to account for product 
performance variability (see 71 FR 15896). In addition, we believe that 
current best designs can achieve these levels, so we do not believe 
that the standard forecloses use of any of the existing performing 
product designs. Our detailed feasibility analysis is provided in the 
Regulatory Impact Analysis. We did not receive any comments on our 
feasibility analysis.
---------------------------------------------------------------------------

    \205\ ``Quantification of Permeation and Evaporative Emissions 
From Portable Fuel Container'', California Air Resources Board, June 
2004.
---------------------------------------------------------------------------

    In addition to considering technological and economic feasibility, 
section 183(e)(1)(A) requires us to consider ``health, environmental, 
and energy impacts'' in assessing best available controls. 
Environmental and health impacts are discussed in section III. 
Moreover, control of spillage from containers may reduce fire hazards 
as well because cans would stay tightly closed if tipped over. We 
expect the energy impacts of gas can control to be positive, because 
the standards will reduce evaporative fuel losses.
3. Diesel, Kerosene and Utility Containers
    Diesel and kerosene containers are manufactured by the same 
manufacturers as are gasoline containers and are identical to gasoline 
containers except for color (diesel containers are yellow and kerosene 
containers are blue). In the proposal, we requested comment on applying 
the emissions control requirements being proposed for gasoline 
containers to diesel and kerosene containers (see 71 FR 15897). 
California included diesel and kerosene cans in their regulations 
largely due to the concern that they would be purchased as substitutes 
for gasoline containers. We received only supportive comments for 
including these containers in the program. Several states and state 
organizations urged EPA to include these containers in the EPA program, 
viewing their omission as a significant difference between the 
California program and EPA's proposed program.
    We recognize that using uncontrolled diesel and kerosene containers 
as a substitute for gasoline containers would result in a loss of 
emissions reductions. California collected limited survey data which 
indicated that about 60 percent of kerosene containers were being used 
for gasoline. In addition, keeping gasoline in containers marked for 
other fuels could lead to misfueling of equipment and possible safety 
issues. Finally, not including these containers would likely be viewed 
as a gap in EPA's program, resulting in states adopting or retaining 
their own emissions control program for PFCs. This would hamper the 
ability of manufacturers to have a 50-state product line. For these 
reasons, we are including diesel and kerosene containers in the 
program.
    We are also clarifying that utility jugs are considered portable 
gasoline containers and therefore are subject to the program. They are 
designed and marketed for use with gasoline, often to fuel recreational 
equipment such as all-terrain vehicles and personal watercraft. This 
interpretation is consistent with the scope of the California program. 
California recently issued a clarification that these containers are 
covered by their program, after some utility jug manufacturers failed 
to meet the existing California requirements.
4. Automatic Shut-Off
    We received a few comments encouraging EPA to consider or evaluate 
spillage control requirements. California's original program which 
began in 2001 required automatic shut-off as a way to reduce spillage. 
However, for reasons discussed in the proposal, we did not propose and 
are not finalizing automatic shut-off requirements (see 71 FR 15896). 
Automatic shut-off is supposed to stop the flow of fuel when the fuel 
reaches the top of the receiving tank in order to prevent over-filling. 
However, due to a wide variety of receiving fuel tank designs, the auto 
shut-off spouts do not work well with a variety of equipment types. In 
California, this problem led to spillage and consumer dissatisfaction, 
and California has removed automatic shut-off requirements from their 
program.

[[Page 8501]]

    We continue to believe that including an automatic shut-off 
requirement would be counterproductive at this time. We believe that 
the automatic closing cans, even without automatic shut-off 
requirements, will lead to reduced spillage. Consumers will be able to 
watch the fuel rise in the receiving tank and stop fuel flow using the 
automatic close features prior to overfill. As discussed in the 
proposal, automatic closure keeps the cans closed when they are not in 
use and provides more control to the consumer during use. We believe 
consumers will appreciate this feature and see it as an improvement 
over existing cans, whereas an automatic shut-off that worked with only 
some equipment types would not be acceptable.

B. Timing of Standard

    We are finalizing as proposed a start date for the new PFC 
standards of January 1, 2009. We received comments from state 
organizations recommending that the program start on January 1, 2008. 
In the proposal we recognized that adequate lead time is a key aspect 
of the standard's technological feasibility. Manufacturers have 
developed the primary technologies to reduce emissions from gas cans 
but will need a few years of lead time to certify products and ramp up 
production to a national scale. The certification process will take at 
least six months due to the required durability demonstrations 
described below, and manufacturers will need time to procure and 
install the tooling needed to produce gas cans with permeation barriers 
for nationwide sales. Commenters did not provide any new information to 
counter these points and we continue to believe for these reasons that 
the January 1, 2009 start date is appropriate.
    The standards apply to containers manufactured on or after the 
start date of the program and do not affect cans produced before the 
start date. As proposed, as of July 1, 2009, manufacturers and 
importers must not enter into U.S. commerce any products not meeting 
the emissions standards. This provides manufacturers with a 6-month 
period to clear any stocks of containers manufactured prior to the 
January 1, 2009 start of the program, allowing the normal sell-through 
of these cans to the retail level. Retailers may sell their stocks of 
containers through the course of normal business without restriction. 
Containers are required by this rule to be stamped with their 
production date (consistent with current industry practices), which 
will allow EPA to determine which cans are required to meet the new 
standards. We did not receive any comments on these aspects of the 
proposal or comments suggesting that the proposed lead times would not 
be adequate.

C. What Test Procedures Would Be Used?

    As proposed, we are finalizing a system of regulations for 
containers that includes test conditions designed to assure that the 
intended emission reductions occur over a range of in-use conditions 
such as operating at different temperatures, with different fuels, and 
considering factors affecting durability. These test procedures are 
authorized under section 183(e)(4) as part of a system of regulations 
to achieve the appropriate level of emissions reductions. Emission 
testing on all containers that manufacturers produce is not feasible 
due to the high annual production volumes and the cost and time 
involved with emissions testing. Instead, before the containers are 
introduced into commerce, the manufacturer will need to receive a 
certificate of conformity from EPA that the containers conform to the 
emissions standards, based on manufacturers' applications for 
certification. Manufacturers must submit test data on a sample of 
containers that are prototypes of the products the manufacturer intends 
to produce. The certificate issued by EPA will cover the range of 
production containers represented by the prototype container. As part 
of the application for certification, manufacturers also need to 
declare that their production cans will not deviate in materials or 
design from the prototype cans that are tested. If the production 
containers do deviate, then they will not be coved by the certificate 
and it will be a violation of the regulations to introduce such 
uncertified containers into commerce. Manufacturers must obtain their 
certification from EPA prior to introducing their products into 
commerce. The test procedures and certification requirements are 
described in detail below. Unless otherwise noted below, we did not 
receive comments on these test procedures.
    We are requiring that manufacturers test cans in their most likely 
storage configuration. The key to reducing evaporative losses from 
gasoline containers is to ensure that there are no openings on the cans 
that could be left open by the consumer. Traditional cans have vent 
caps and spout caps that are easily lost or left off cans, which leads 
to very high evaporative emissions. We expect manufacturers to meet the 
evaporative standards by using automatic closing spouts and by removing 
other openings that consumers could leave open. However, if 
manufacturers choose to design cans with an opening that does not close 
automatically, we are requiring that containers be tested in their open 
condition. If the containers have any openings that consumers could 
leave open (for example, vents with caps), these openings thus would 
need to be left open during testing. This applies to any opening other 
than where the spout attaches to the can. We believe it is important to 
take this approach because these openings could be a significant source 
of in-use emissions and there is a realistic possibility that these 
openings would be inadvertently left open in use.
    Except for pressure cycling, discussed below, spouts would be in 
place during testing because this would be the most likely storage 
configuration for the emissions compliant cans. Spouts would still be 
removable so that consumers would be able to refill the cans, but we 
would expect the containers to be resealed by consumers after being 
refilled in order to prevent spillage during transport. We do not 
believe that consumers would routinely leave spouts off cans because 
spouts are integral to the cans' use and it is obvious that they need 
to be sealed.
1. Diurnal Test
    We are finalizing as proposed a test procedure for diurnal 
emissions testing where the containers are placed in an environmental 
chamber or a Sealed Housing for Evaporative Determination (SHED), the 
temperature is varied over a prescribed temperature and time profile, 
and the hydrocarbons escaping from the can are measured. Containers are 
to be tested over the same 72-96 [deg]F (22.2-35.6 [deg]C) temperature 
profile used for automotive applications. This temperature profile 
represents a hot summer day when ground level ozone emissions would be 
highest. Three containers must be tested, each over a three-day test. 
Testing three cans for certification will help address variability in 
products or test measurements. All three cans must individually meet 
the standard. As noted above, cans must be tested in their most likely 
storage configuration.
    The final results are to be reported in grams per gallon, where the 
grams are the mass of hydrocarbons escaping from the container over 24 
hours and the gallons are the nominal can capacity. The daily emissions 
will then be averaged for each can to demonstrate compliance with the 
standard. This test captures hydrocarbons lost through permeation and 
any other evaporative

[[Page 8502]]

losses from the container as a whole. The grams of hydrocarbons lost 
may be determined by either weighing the gas can before and after the 
diurnal test cycle or measuring emissions directly using the SHED 
instrumentation.
    Consistent with the automotive test procedures, we are requiring 
that the testing take place using 9 pounds per square inch (psi) Reid 
Vapor Pressure (RVP) certification gasoline, which is the same fuel 
required by EPA to be used in its other evaporative test programs. We 
are requiring testing be done using E10 fuel (10% ethanol blended with 
the gasoline described above) to help ensure in-use emission reductions 
on ethanol-gasoline blends, which tend to have increased evaporative 
emissions with certain permeation barrier materials. We continue to 
believe that including ethanol in the test fuel will lead to the 
selection of materials by manufacturers that are consistent with ``best 
available control'' requirements for all likely contained gasolines, 
and is clearly appropriate given the expected increase over time of the 
use of ethanol blends of gasoline under the renewable fuel provisions 
of the Energy Policy Act of 2005.
    Diurnal emissions are not only a function of temperature and fuel 
volatility, but of the size of the vapor space in the container as 
well. We are finalizing as proposed that the fill level at the start of 
the test be 50% of the nominal capacity of the can. This would likely 
be the average fuel level of the gas can in-use. Nominal capacity of 
the cans is defined as the volume of fuel, specified by the 
manufacturer, to which the can could be filled when sitting on level 
ground. The vapor space that normally occurs in a container, even when 
``full,'' would not be considered in the nominal capacity of the can. 
All of these test requirements are meant to represent typical in-use 
storage conditions for containers, on which EPA can base its emissions 
standards. The above provisions for diurnal testing are included as a 
way to implement the standards effectively, which, in conjunction with 
the new emissions standard, will lead to the use of best available 
technology at a reasonable cost. We did not receive comment on these 
test procedures.
    Before testing for certification, the container must be run through 
the durability tests described below. Within 8 hours of the end of the 
soak period contained in the durability cycle, the cans are to be 
drained and refilled to 50 percent nominal capacity with fresh fuel, 
and then the spouts re-attached. When the can is drained, it must be 
immediately refilled to prevent it from drying out. The timing of these 
steps is needed to ensure that the stabilized permeation emissions 
levels are retained. The can will then be weighed and placed in the 
environmental chamber for the diurnal test. After each diurnal, the can 
must be re-weighed. In lieu of weighing the container, manufacturers 
may opt to measure emissions from the SHED directly. For any in-use 
testing of containers, the durability procedures will not be run prior 
to testing.
    California's test procedures are very similar to those described 
above. However, the California procedure contains a more severe 
temperature profile of 65-105 [deg]F. As proposed, we will allow 
manufacturers to use this temperature profile to test cans as long as 
other parts of the EPA test procedures are followed, including the 
durability provisions below.
2. Preconditioning to Ensure Durable In-Use Control
a. Durability Cycles
    As proposed, we are specifying three durability aging cycles to 
help ensure durable permeation barriers: slosh, pressure-vacuum 
cycling, and ultraviolet (UV) exposure. They represent conditions that 
are likely to occur in-use for gas cans, especially for those cans used 
for commercial purposes and carried on truck beds or trailers. The 
purpose of these deterioration cycles is to help ensure that the 
technology chosen by manufacturers is durable in-use, representing best 
available control, and the measured emissions are representative of in-
use permeation rates. Fuel slosh, pressure cycling, and ultraviolet 
(UV) exposure each impact the durability of certain permeation 
barriers, and we believe these cycles are needed to ensure long-term 
emissions control. Without these durability cycles, manufacturers could 
choose to use materials that meet the standard when they are new but 
have degraded performance in-use, leading to higher emissions. We do 
not expect these procedures to adversely impact the feasibility of the 
standards, because there are permeation barriers available at a 
reasonable cost that do not deteriorate significantly under these 
conditions (these permeation barriers are examples of best available 
controls).
    For slosh and pressure cycling, we are finalizing durability tests 
that are based on draft recommended SAE practice for evaluating 
permeation barriers.\206\ For slosh testing, the container is to be 
filled to 40 percent capacity with E10 fuel and rocked for 1 million 
cycles. The pressure-vacuum testing contains 10,000 cycles from -0.5 to 
2.0 psi. This pressure may be applied through the opening where the 
spout attaches, in order to avoid the need to drill a hole in the 
container. The third durability test is intended to assess potential 
impacts of ultraviolet (UV) sunlight (0.2 [mu]m-0.4 [mu]m) on the 
durability of a surface treatment. In this test, the container must be 
exposed to a UV light of at least 0.40 Watt-hour/meter \2\ /minute on 
the container surface for 15 hours per day for 30 days. Alternatively, 
containers may be exposed to direct natural sunlight for an equivalent 
period of time. We have also established these same durability 
requirements as part of our program to control permeation emissions 
from recreational vehicle fuel tanks.\207\ While there are obvious 
differences in the use of gas cans compared to the use of recreational 
vehicle fuel tanks, we believe the test procedures offer assurance that 
permeation controls used by manufacturers will be robust and will 
continue to perform as intended when in use.
---------------------------------------------------------------------------

    \206\ Draft SAE Information Report J1769, ``Test Protocol for 
Evaluation of Long Term Permeation Barrier Durability on Non-
Metallic Fuel Tanks,'' (Docket A-2000-01, document IV-A-24).
    \207\ Final Rule, ``Control of Emissions from Nonroad Large 
Spark-ignition engines, and Recreational Engines (Marine and Land-
based)'', 67 FR 68287, November 8, 2002.
---------------------------------------------------------------------------

    Manufacturers may also do an engineering evaluation, based on data 
from testing on their permeation barrier, to demonstrate that one or 
more of these factors (slosh, UV exposure, and pressure cycle) do not 
impact the permeation rates of their fuel containers and therefore that 
the durability cycles are not needed. Manufacturers may use data 
collected previously on gas cans or other similar containers made with 
the same materials and processes to demonstrate that the emissions 
performance of the materials does not degrade when exposed to slosh, 
UV, and/or pressure cycling. The test data must be collected under 
equivalent or more severe conditions as those noted above. EPA must 
approve an alternative demonstration method prior to its use for 
certification.
b. Preconditioning Fuel Soak
    It takes time for fuel to permeate through the walls of containers. 
Permeation emissions will increase over time as fuel slowly permeates 
through the container wall, until the permeation finally stabilizes 
when the saturation point is reached. We want to evaluate emissions 
performance once permeation

[[Page 8503]]

emissions have stabilized, to ensure that the emissions standard is met 
in-use. Therefore, as proposed, prior to testing the containers, the 
cans need to be preconditioned by allowing the cans to sit with fuel in 
them until the hydrocarbon permeation rate has stabilized. Under this 
step, the container is filled with a 10-percent ethanol blend in 
gasoline (E10), sealed, and soaked for 20 weeks at a temperature of 28 
 5 [deg]C. As an alternative, the fuel soak may be 
performed, for example, for 10 weeks at 43  5 [deg]C to 
shorten the test time, if the certifier can demonstrate that the 
hydrocarbon permeation rate has stabilized. During this fuel soak, the 
container must be sealed with the spout attached. This is 
representative of how the gas cans would be stored in-use. We have 
established these soak temperatures and durations based on protocols 
EPA has established to measure permeation from fuel tanks made of 
HDPE.\208\ These soak times should be sufficient to achieve stabilized 
permeation emission rates. However, if a longer time period is 
necessary to achieve a stabilized rate for a given container, the 
manufacturer must use a longer soak period (and/or higher temperature) 
consistent with good engineering judgment.
---------------------------------------------------------------------------

    \208\ Final Rule, ``Control of Emissions from Nonroad Large 
Spark-ignition engines, and Recreational Engines (Marine and Land-
based)'', 67 FR 68287, November 8, 2002.
---------------------------------------------------------------------------

    Durability testing that is performed with fuel in the container may 
be considered part of the fuel soak provided that the container 
continuously has fuel in it. This approach would shorten the total test 
time. For example, the length of the UV and slosh tests may be 
considered as part of the fuel soak provided that the container is not 
drained between these tests and the beginning of the fuel soak. In such 
cases, manufacturers must use the 40 percent fill level for the soak 
period. The reduced fill level will not affect the permeation rate of 
the container because the vapor space in the container will be 
saturated with fuel vapor.
c. Spout Actuation
    In its recently revised program for PFCs, California included a 
durability demonstration for spouts. We are finalizing as proposed a 
durability demonstration consistent with California's procedures. 
Automatically closing spouts are a key part of the emissions controls 
expected to be used to meet the new standards. If these spouts stick or 
deteriorate, in-use emissions could remain very high, at essentially 
uncontrolled levels. California requires manufacturers to actuate the 
spouts 200 times prior to the soak period and 200 times near the 
conclusion of the soak period to simulate spout use. The spouts' 
internal components would be required to be exposed to fuel by tipping 
the can between each cycle. Spouts that stick open or leak during these 
cycles would be considered failed. The total of 400 spout actuations 
represents about 1.5 actuations per week on average over the average 
container life of 5 years. In the absence of data, we believe this 
number of actuations appears to reasonably replicate the number that 
can occur in-use for high-end usage and will help ensure quality spout 
designs that do not fail in-use. We also believe that finalizing 
requirements consistent with California will help manufacturers to 
avoid duplicate testing.
    One commenter stated that 400 actuations over a short period of 
time is not representative of real life and that many containers will 
last 15-25 years. In response, we understand that 5 years is an 
estimate of the average life and that some containers will be used 
longer than 5 years. However, we continue to believe that the approach 
we are finalizing is reasonable. This provision is meant to help ensure 
that spouts are made of quality materials so that the emissions 
performance will not deteriorate readily during normal use. The 
provision also helps to ensure that spouts will not break easily or 
stick open during normal use, and helps to identify issues during the 
certification process prior to sale. In addition, this approach 
balances the need to ensure quality designs with the manufacturers' 
need to be able to conduct certification testing in a reasonable amount 
of time. This type of ``accelerated aging'' of components is a 
necessary part of many of EPA's mobile source emissions control 
programs.

D. What Certification and In-Use Compliance Provisions Is EPA Adopting?

1. Certification
    Section 183(e)(4) authorizes EPA to adopt appropriate systems of 
regulations to implement the program, including requirements ranging 
from registration and self-monitoring of products, to prohibitions, 
limitations, economic incentives and restrictions on product use. We 
are finalizing as proposed a certification mechanism pursuant to these 
authorities. Manufacturers are required to apply for and receive an EPA 
certificate of conformity, using the certification process specified in 
the regulations, before entering their containers into U.S. commerce. 
To have their products certified, manufacturers must first define their 
emission families. This is generally based on selecting groups of 
products that have similar emissions. For example, co-extruded 
containers of various geometries could be grouped together. The 
manufacturer must select a worst-case configuration for testing, such 
as the thinnest-walled container. Manufacturers may group gasoline, 
diesel, and kerosene containers together as long as the containers do 
not differ materially in a way that could be anticipated to cause 
differences in emissions performance. These determinations must be made 
using good engineering judgment and are subject to EPA review. Testing 
with those products, as specified above, must show compliance with 
emission standards. The manufacturers must then send us an application 
for certification. As proposed, we define the manufacturer as the 
entity that is in day-to-day control of the manufacturing process 
(either directly or through contracts with component suppliers) and 
responsible for ensuring that components meet emissions-related 
specifications. Importers are not considered a manufacturer under this 
program, and thus would not receive certificates. The manufacturers of 
the PFCs they import would have to certify the cans. Importers will 
only be able to import PFCs that are certified.
    After reviewing the information in the application, if all the 
required information is provided and it demonstrates compliance with 
the standards, then we will issue a certificate of conformity allowing 
manufacturers to introduce into commerce the containers from the 
certified emission family. We expect EPA review to typically take about 
90 days or less, but could be longer if we have questions regarding the 
application. The certificate of conformity will be for a production 
period of up to 5 years. Manufacturers are allowed to carry over 
certification test data if no changes are made to their products that 
would affect emissions performance. We may revoke or void a certificate 
if we find that data and information on which it is based is false or 
inaccurate. We will notify the manufacturer in writing and the 
manufacturer may request a hearing. Changes to the certified products 
that affect emissions require reapplication for certification. 
Manufacturers wanting to make changes without doing testing are 
required to present an engineering

[[Page 8504]]

evaluation demonstrating that emissions are not affected by the change.
    The manufacturer is responsible for meeting applicable emission 
standards. Importers are also responsible for the product meeting the 
standards. While we are not including requirements for manufacturers to 
conduct production-line testing, we may pursue EPA in-use testing of 
certified products to evaluate compliance with emission standards. If 
we find that containers do not meet emissions standards in use, we 
would consider the new information during future product certification. 
Also, we may require certification prior to the end of the 5-year 
production period otherwise allowed between certifications. The details 
of the certification process are provided in the regulatory text. We 
did not receive any comments on the certification procedures described 
above.
    EPA is authorized under the Independent Offices Appropriation Act 
of 1952 to establish fees for Government services and things of value 
that it provides. This provision encourages Federal regulatory agencies 
to recover, to the fullest extent possible, costs provided to 
identifiable recipients. The agency currently collects fees for 
compliance programs administered by EPA including those for 
certification of motor vehicles and motor vehicle engines. At this 
time, we are not finalizing a fee program for PFC certification. 
However, we may establish a certification fee for PFCs in a future 
rulemaking.
2. Emissions Warranty and In-Use Compliance
    We are finalizing as proposed an emissions warranty period of one 
year to be provided by the manufacturer of the PFC to the consumer. The 
warranty covers emissions-related materials defects and breakage under 
normal use. For example, the warranty covers failures related to the 
proper operation of the auto-closing spout or defects with the 
permeation barriers. We are also requiring that manufacturers submit a 
warranty and defect report documenting successful warranty claims and 
the reason for the claim to EPA annually so that EPA may monitor the 
program. Unsuccessful claims will not need to be submitted. We believe 
that this warranty will encourage designs that work well for consumers 
and are durable. Although it does not fully cover the average life of 
the product, it is not typical for very long consumer warranties to be 
offered with such products and therefore we believe a one-year warranty 
is reasonable. Also, the warranty period is more similar to the 
expected life of gas cans when used in commercial operations, which 
would need to be considered by the manufacturers in their designs. We 
did not receive any comments on these warranty provisions.
    EPA views this aspect of the final rule as another part of the 
``system of regulation'' it is finalizing to control VOC emissions from 
PFCs. A warranty will promote the objective of the rule by providing 
consumers with an opportunity to replace containers that have failed in 
use. The warranty provides an obvious remedy to consumers if issues 
arise. The provision also helps to ensure that manufacturers will 
``stand behind'' their product if they fail in use, thus improving 
product design and performance. Similarly, the defect reporting 
requirement will promote product integrity by allowing EPA to readily 
monitor in-use performance by tracking successful warranty claims.
    Gas cans have a typical life of about 5 years on average before 
they are scrapped. We are including durability provisions as part of 
certification testing to help ensure containers perform well in use. 
Under this final rule, we could test containers within their five-year 
useful life period to monitor in-use performance and take steps to 
correct in-use failures, including denying certification, for container 
designs that are consistently failing to meet emissions standards. 
(This provision thus would work in tandem with the warranty claim 
reporting provision contained in the preceding paragraph.)
3. Labeling
    Since the requirements will be effective based on the date of 
manufacture of the container, we are requiring as proposed that the 
date of manufacture must be indelibly marked on the can. This is 
consistent with current industry practices. This is needed so that we 
and others can recognize whether a unit is regulated or not. In 
addition, we are requiring a label providing the manufacturer name and 
contact information, a statement that the can is EPA certified, 
citation of EPA regulations, and a statement that it is warranted for 
one year from the date of purchase. The manufacturer name and contact 
information is necessary to verify certification. Indicating that a 
one-year warranty applies will ensure that consumers have knowledge of 
the warranty and a way to contact the manufacturer. Enforcement of the 
warranty is critical to the defect reporting system. In finalizing this 
labeling requirement, we further believe, pursuant to CAA section 
183(e)(8), that these labeling requirements will be useful in meeting 
the NAAQS for ozone. They provide necessary means of implementing the 
various measures described above which help ensure that VOC emission 
reductions from the proposed standard will in fact occur in use. We did 
not receive any comments on these labeling requirements.

E. How Would State Programs Be Affected By EPA Standards?

    Several states have adopted emissions control programs for PFCs. 
California implemented an emissions control program for PFCs in 2001. 
Fifteen other states, mostly in the northeast, have adopted or are 
considering adopting the California program.\209\ In 2005, California 
adopted a revised program, which will go into effect on July 1, 2007. 
The revised California program is very similar to the program we are 
finalizing. We believe that although a few aspects of the program we 
are finalizing are different, manufacturers will be able to meet both 
EPA and CARB requirements with the same container designs and therefore 
sell a single product in all 50 states. In most cases, we believe 
manufacturers will take this approach. By closely aligning with 
California where possible, we will allow manufacturers to minimize 
research and development (R&D) and emissions testing, while potentially 
achieving better economies of scale. It may also reduce administrative 
burdens and market logistics from having to track the sale of multiple 
can designs. We consider these to be important factors under CAA 
section 183(e) which requires us to consider economic feasibility of 
controls.
---------------------------------------------------------------------------

    \209\ Delaware, Maine, Maryland, Pennsylvania, New York, 
Connecticut, Massachusetts, New Jersey, Rhode Island, Vermont, 
Virginia, Washington DC, Texas, Ohio, and New Hampshire.
---------------------------------------------------------------------------

    States that have adopted the original California program will 
likely choose to either adopt the new California program or eliminate 
their state program in favor of the federal program. Because the 
programs are similar, we expect that most states will eventually choose 
to rely on implementation of the EPA program rather than continue their 
own program. Including diesel and kerosene containers in our final 
program further aligns the two programs and several states commented in 
support of this approach. We expect very little difference in the 
emissions reductions provided by the EPA and California programs in the 
long term.

[[Page 8505]]

F. Provisions for Small PFC Manufacturers

    As discussed in previous sections, prior to issuing our proposal 
for this rulemaking, we analyzed the potential impacts of these 
regulations on small entities. As a part of this analysis, we convened 
a Small Business Advocacy Review Panel (SBAR Panel, or ``the Panel''). 
During the Panel process, we gathered information and recommendations 
from Small Entity Representatives (SERs) on how to reduce the impact of 
the rule on small entities, and those comments are detailed in the 
Final Panel Report which is located in the public record for this 
rulemaking (Docket EPA-HQ-OAR-2005-0036). Based upon these comments, we 
proposed to include flexibility and hardship provisions for container 
manufacturers. Since nearly all manufacturers are small entities and 
they account for about 60 percent of sales, the Panel recommended that 
we extend the flexibility options and hardship provisions to all 
manufacturers. Our proposal was consistent with that recommendation. We 
did not receive any comments on our proposed flexibilities and are 
finalizing them as proposed. The flexibility provisions are 
incorporated into the program requirements described earlier in 
sections VII.B through VII.D. The hardship provisions are described 
below. For further discussion of the Panel process, see section X.C of 
this rule and/or the Final Panel Report.
    The Panel recommended and we are finalizing two types of hardship 
provisions for container manufacturers. These entities could, on a 
case-by-case basis, face hardship, and we are finalizing these 
provisions to provide what could prove to be needed safety valves for 
these entities. Thus, the hardship provisions are as follows:
1. First Type of Hardship Provision
    Container manufacturers may petition EPA for limited additional 
lead-time to comply with the standards. A manufacturer would have to 
demonstrate that it has taken all possible business, technical, and 
economic steps to comply but the burden of compliance costs prevents it 
from meeting the requirements of this subpart by the required 
compliance date and not having an extension would jeopardize the 
company's solvency. Hardship relief may include requirements for 
interim emission reductions.
2. Second Type of Hardship Provision
    Container manufacturers are permitted to apply for hardship relief 
if circumstances outside their control cause the failure to comply 
(i.e., an ``Act of God,'' a fire at the manufacturing plant, or the 
unforeseen shut down of a supplier with no alternative available), and 
if failure to sell the subject containers would jeopardize the 
company's solvency. The terms and timeframe of the relief will depend 
on the specific circumstances of the company and the situation 
involved.
    For both types of hardship provisions, the length of the hardship 
relief will be established, during the initial review, for not more 
than one year and will be reviewed annually thereafter as needed. As 
part of its application, a company is required to provide a compliance 
plan detailing when and how it will achieve compliance with the 
standards.

VIII. What Are the Estimated Impacts of the Rule?

A. Refinery Costs of Gasoline Benzene Reduction

    The benzene control program we are finalizing today is expected to 
result in many refiners investing in benzene control hardware and 
changing the operations in their refineries to reduce their gasoline 
benzene levels. The finalized benzene control program requires refiners 
and importers to reduce their gasoline benzene levels on average down 
to 0.62 vol% benzene. The averaging, banking and trading (ABT) 
provisions being finalized along with the 0.62 vol% average benzene 
control standard allows refineries that reduce their gasoline benzene 
levels below 0.62 vol% to earn credits and transfer those credits to 
other refineries which would find it more expensive to reduce their 
benzene levels down to the average standard. The ABT program will allow 
refiners to optimize their investments, which we believe will result in 
achieving the average benzene control standard nationwide at much lower 
costs. The final benzene control program also puts into place a 1.3 
vol% benzene maximum average standard which requires each refinery to 
reduce its gasoline benzene levels to or below this standard and will 
increase the benzene control costs only slightly compared to a benzene 
control program which does not contain a maximum average standard. We 
estimate that the national average refinery costs incurred to comply 
with the fully phased-in benzene control program will be 0.27 cents per 
gallon, averaged over all gasoline. This estimate includes the capital 
costs, which are amortized over the volume of gasoline produced.
    In this section we summarize the methodology used to estimate the 
costs of benzene control (including changes we have made since the 
proposal) and our estimated costs for the program. In addition we 
evaluate the cost estimate provided by the American Petroleum 
Institute. A detailed discussion of all of these analyses is found in 
Chapter 9 of the RIA.
1. Methodology
a. Overview of the Benzene Program Cost Methodology
    The basic methodology we used to estimate the cost of benzene 
control for the final rule is the same as that used for the proposed 
rule. Using a refinery-by-refinery cost model that we developed for 
this rulemaking, we projected which refineries implement what benzene 
control technology, and the cost of each refinery's benzene control 
step, to estimate compliance with the final benzene control program. We 
aggregated the individual refinery costs to develop a national average 
cost estimate for the final benzene control program. Based on the 
flexibilities offered by the ABT program, refiners are expected to come 
very close to achieving the 0.62 vol% average benzene standard on 
average with little overcompliance. For this reason, we modeled 
refiners achieving the average standard without any overcompliance. To 
the extent that any overcompliance does occur the costs and benefits of 
the benzene program will increase.
b. Changes to the Cost Estimation Methodology Used in the Proposed Rule
    In deriving the cost estimate for the final rule, we identified and 
made a number of changes to the refinery modeling methodology used for 
the proposed rule. One of the primary changes was to base the future 
year fuel prices on the Annual Energy Outlook (AEO) 2006 instead of AEO 
2005, which increased the crude oil price used in the analysis from $27 
per barrel to $47 per barrel. Other changes included: (1) Updating the 
refinery modeling base year to 2004 (used for calibrating each 
refinery's gasoline benzene levels); (2) modeling the baseline benzene 
levels and reductions on an annual basis instead of on a summer-only 
basis; (3) increasing the tax-hurdle rate of return to 15 percent from 
the 10 percent hurdle used in the proposed rule, and (4) including the 
treatment of the benzene in natural gasoline, which was assumed to be 
left untreated in the proposed rule analysis.

[[Page 8506]]

    In addition, we also made some adjustments that were based on 
comments we received on the cost analysis that we conducted for the 
proposal, as well as the peer review process that we undertook for the 
proposal's refinery cost model. One of the peer reviewers for the 
refinery-by-refinery cost model, and API in its comments on the 
proposed rule, provided capital cost estimates for the benzene control 
technologies.\210\ We reviewed these capital cost estimates and made 
some adjustments to somewhat increase the capital cost figures used in 
the final rule analysis. These changes were partially responsible for 
the higher costs reported here compared to those reported in the 
proposed rule. More complete descriptions of these and other changes 
made to the refinery cost model are contained in Chapter 9 the RIA.
---------------------------------------------------------------------------

    \210\ An important reason for the discrepancy between our 
capital cost estimate and that by API (which was about three times 
higher) was that we only estimated the capital costs related to the 
benzene control technologies, not those related to octane recovery 
and increased hydrogen production needed for saturation or to 
replace the octane lost due to reduced benzene production by the 
reformer. For the final rule, we estimated these additional capital 
costs and included them in our capital cost estimates.
---------------------------------------------------------------------------

c. Linear Programming Cost Model
    We considered performing our cost assessments using a linear 
programming (LP) cost model. LP cost models are based on a set of 
complex mathematical representations of refineries which, for national 
analyses, are usually conducted on a regional basis. This type of 
refining cost model has been used by the government and the refining 
industry for many years for estimating the cost and other implications 
of changes to fuel quality.
    The design of LP models lends itself to modeling situations where 
every refinery in a region is expected to use the same control strategy 
and/or has the same process capabilities. As we began to develop a 
gasoline benzene control program with an ABT program, it became clear 
that LP modeling was not well suited for evaluating such a program. 
Because refiners will be choosing a variety of technologies for 
controlling benzene, and because the program will be national and will 
include an ABT program, we initiated development of a more appropriate 
cost model, as described below. However, the LP model remained 
important for providing many of the inputs into the cost model 
developed for this rulemaking.
d. Refinery-by-Refinery Cost Model
    In contrast to LP models, refinery-by-refinery cost models are 
useful when individual refineries are expected to respond to program 
requirements in different ways and/or have significantly different 
process capabilities. Thus, in the case of modeling gasoline benzene 
control programs, we needed a model that could accurately simulate the 
variety of decisions refiners will make at different refineries, 
especially in the context of a nationwide ABT program. For this and 
other related reasons, we developed a refinery-by-refinery cost model 
specifically to evaluate the benzene control program.
    Our refinery-by-refinery benzene cost model incorporates the 
capacities of all the major units in each refinery in the country, as 
reported by the Energy Information Administration and in the Oil and 
Gas Journal. Regarding operational information, we know less about how 
specific refineries use the various units to produce gasoline and about 
such factors as octane and hydrogen costs for individual refineries. We 
used the LP model to estimate these factors on a regional basis, and we 
applied the average regional result to each refinery in that region 
(PADD). We calibrated the model for each individual refinery based on 
2004 gasoline volumes and benzene levels (from the RFG data base), 
which was the most recent year for which data was available. After 
calibration, each refinery's gasoline volume and benzene level closely 
matched their actual gasoline volumes and benzene levels. We also 
compared cost estimates of similar benzene control cases from both the 
refinery-by-refinery model and the LP model, and the results were in 
close agreement.\211\
---------------------------------------------------------------------------

    \211\ Despite our commitment to accurately model the baseline 
operations of each refinery, we recognize that without detailed 
refinery-specific operations information at our disposal, that our 
modeling may not be accurate in some specific cases. Particular 
refineries may choose a different benzene control path than that 
estimated by our analysis for a number of reasons, including 
differences in the baseline and our lack of knowledge for investment 
and ABT program use preferences for each refiner. We believe, 
though, that overall our refinery cost model captures the strategies 
and costs for complying with the benzene control program.
---------------------------------------------------------------------------

    Refinery-by-refinery cost models have been used in the past by both 
EPA and the oil industry for such programs as the highway and nonroad 
diesel fuel sulfur standards, and they are a proven means for 
estimating the cost of compliance for fuel control programs. For this 
refinery-by-refinery benzene cost model, we conducted a peer review 
process, and have received some comments on the design of our model. We 
summarize some of these comments here, and they are summarized and 
addressed in detail in the RIA. (See Chapter 9 of the RIA for our 
responses to these peer-review comments.) The oil industry has also 
conducted similar analyses using a refinery-by-refinery modeling 
technique, including the oil industry's cost analysis carried out for 
this rulemaking.
    Based on our understanding of the primary benzene control 
technologies (see section VI.A.1.c.i. above), the cost model assumes 
that four technologies will be used, as appropriate, for reducing 
benzene levels. All of these technologies focus on addressing benzene 
in the reformate stream. They are (1) routing the benzene precursors 
around the reformer (also called light naphtha splitting and reformer 
feed fractionation); (2) routing benzene precursors to an existing 
isomerization unit, if available; (3) benzene extraction (extractive 
distillation); and (4) benzene saturation. For the proposed rulemaking 
we assumed that only the usual feed or the product stream of the 
reformer will be processed by these benzene control technologies. 
However, since the proposal, we learned that another refinery stream--
natural gasoline--contains some benzene and will likely be treated by 
the saturation and extraction processes in refineries if they have or 
install these units. For the proposal, we assumed that natural gasoline 
would be blended directly into gasoline and not be treated by refiners 
if faced with a benzene control standard. However, most refiners have 
been combining natural gasoline with their crude oil to enable treating 
the sulfur in natural gasoline to help comply with the Tier 2 gasoline 
sulfur standard. Because the natural gasoline will be refined along 
with crude oil, the benzene in natural gasoline can and will be treated 
along with the benzene in crude oil.
    The nationwide ABT program is intended to optimize benzene 
reduction by allowing each refinery to individually choose the most 
cost-effective means of complying with the program. To model this 
phenomenon, we first established an estimated cost for the array of 
technologies that could be employed by each refinery to reduce its 
gasoline benzene levels. We then deployed these technologies to 
refineries with baseline benzene levels above the 1.3 vol% benzene 
maximum average standard to bring them into compliance with this 
standard. Next we ranked the refineries in order from lowest to highest 
benzene control cost per gallon of gasoline and estimated the impact of 
their projected benzene

[[Page 8507]]

control strategies on refinery benzene levels. The model then follows 
this ranking, starting with the lowest-cost refineries, and adds 
refineries and their associated control technologies one-by-one until 
the projected national average benzene level reaches 0.62 vol% benzene. 
This modeling strategy projects the benzene control technology that 
will be used by each refinery, as well as identifies those refineries 
that are expected to generate credits and those that are expected to 
use credits in lieu of investing in benzene control. The sum of the 
costs of the refineries expected to invest in benzene control provides 
the projected overall cost of the program.
    Finally, we projected how the ABT program will affect the program 
cost and benzene levels starting in 2007, when early credits can be 
generated. We assumed that refiners will use operational changes 
(benzene precursor rerouting, with isomerization if available) to the 
maximum extent possible in mid-2007, when they are able to start to 
generate credits. We also assumed that refiners will choose to 
accumulate additional early credits by making their initial lowest-cost 
capital investments for reducing their gasoline benzene levels, and 
that these changes will take effect in 2010. We modeled compliance by 
nonsmall and small refiners with the maximum average standard taking 
effect in mid-2012 and the beginning of 2015, respectively, as well as 
the final benzene control step to meet the 0.62 vol% standard--the 
phase-in of which depends on the aggregate amount of credits 
generated.\212\
---------------------------------------------------------------------------

    \212\ The ABT analysis assumed that small refiners would comply 
with the 1.3 vol% maximum average standard in January 2015 at the 
same time as the 0.62 vol% annual average standard. We are 
finalizing a later maximum average standard implementation date 
(July 2016), which will have very little effect on the overall 
program and therefore has not been incorporated into this analysis.
---------------------------------------------------------------------------

e. Price of Chemical Grade Benzene
    The price of chemical grade benzene is critical to the benzene 
control program because it defines the opportunity cost for benzene 
removed using benzene extraction and sold into the chemicals market. 
According to 2004 World Benzene Analysis authored by Chemical Market 
Associates Incorporated (CMAI), during the consecutive five-year period 
ending with 2004, the price of benzene averaged 24 dollars per barrel 
higher than regular grade gasoline. During the three consecutive year 
period ending with 2004, the price of benzene averaged 28 dollars per 
barrel higher than regular grade gasoline. However, during the first 
part of 2004, the price of benzene relative to gasoline rose steeply, 
primarily because of high energy prices adding to the cost of 
extracting benzene. The 2004 benzene price averaged 78 dollars per 
barrel higher than regular grade gasoline. Since early 2006, CMAI has 
been projecting that the future price of benzene relative to gasoline 
will return to more historic levels, in the range of 30 dollars per 
barrel higher than regular grade gasoline (in 2005, CMAI was projecting 
that the benzene price would be 20 dollars per barrel higher than 
gasoline). We have based our modeling for the final rule on the 30 
dollar per barrel value.
2. Summary of Costs
a. Nationwide Costs of the Final Benzene Control Program
    We have used the refinery-by-refinery cost model to estimate the 
costs of the benzene control program being finalized today. In general, 
the cost model indicates that among the four primary reformate-based 
technologies, benzene precursor rerouting will be the most cost-
effective. The next most cost-effective technologies are isomerization 
of the rerouted light straight run material, revamped extraction units 
and new installations of large extraction units. The model indicates 
that benzene saturation and small installations of new extraction units 
will be the least cost-effective.
    Based on the results of our analysis using the refinery-by-refinery 
model, we estimate that when the benzene control program is fully 
phased in, 78 refineries of the total 104 gasoline-producing refineries 
in the U.S. (outside of California) will have to put in new capital 
equipment or change their refining operations to reduce the benzene 
levels in their gasoline. Of these refineries, we estimate that 17 will 
use benzene precursor removal, 28 refineries will use benzene precursor 
removal coupled with isomerization, 16 will use extraction, and 17 will 
use benzene saturation. We project that 52 refineries will continue to 
produce gasoline with benzene levels greater than the average standard 
and will need to purchase credits to comply. Including the refineries 
with benzene levels currently below 0.62, we project that there will be 
a total of 50 refineries that will produce gasoline with benzene levels 
at 0.62 or lower and will generate credits for sale to other 
refineries. Finally, the model projects that 26 refineries will take no 
steps to reduce their gasoline benzene levels, which includes those 
which remain above the average benzene standard as well as those 
already below the average standard.
    Based on the results of our cost analysis, we estimate that the 
final benzene control program will cost 0.27 cents per gallon when it 
is fully phased in, assuming that capital investments are amortized at 
a 7 percent return on investment before taxes and expressed in 2003 
dollars. Our cost analysis projects that the ABT program will result in 
a phase-in of the benzene control standard from mid-2007 to early in 
2015. Starting in mid-2007 we believe that refiners will take the 
opportunity to achieve modest benzene reductions to generate early 
credits using simple operational changes. We project that these actions 
taken in mid-2007 will result in a reduction of the average U.S. 
gasoline benzene level from 0.99 to 0.81 vol% at an average cost of 
0.04 cents per gallon.
    To take full advantage of the flexibility provided to refiners by 
the ABT program to delay more expensive capital investments, refiners 
are expected to make additional early benzene reductions to generate 
more early credits, requiring modest investments in capital. Because of 
the time it takes to assess, design and install the capital equipment, 
we project that these additional early benzene reductions will not 
occur until the beginning of 2010, although in reality these 
investments and associated benzene reductions would likely occur before 
and after the beginning of 2010. These benzene reductions are expected 
to further reduce the average benzene level of U.S. gasoline to 0.74 
vol% and cost 0.05 cents per gallon averaged over all U.S. gasoline. 
Refiners are expected to make $324 million of capital investments to 
achieve this benzene reduction. In 2011 when the 0.62 vol% benzene 
control standard takes effect, we do not anticipate any further 
reduction in benzene because we project that the refining industry will 
be able to comply using early credits.
    In mid-2012, when refineries with high benzene levels need to 
comply with the 1.3 vol% maximum average standard, we anticipate that 
U.S. gasoline benzene levels will decline further, to 0.73 vol% 
benzene, and cost an additional 0.04 cents per gallon averaged over all 
U.S. gasoline. Refiners are expected to make another $153 million in 
capital investments. Although the early credit use period terminates at 
the end of 2013, refiners will again have flexibility in scheduling 
their most expensive capital

[[Page 8508]]

investments by using standard credits (which will have been accruing 
since the start of 2011). Because we expect that refiners will first 
use their early credits, the standard credits will be banked and will 
start to be used in 2014 to show compliance with the 0.62 vol% benzene 
standard. Our analysis suggests that the U.S. refining industry will be 
able to delay their highest capital investments until May 2015, when 
the standard credits accumulated since the beginning of 2011 run out. 
Small refiners must meet the 1.3 vol% maximum average standard which 
was assumed to occur at the beginning of 2015 so they also will be 
reducing their gasoline benzene levels to that standard or below.\213\ 
Taken together, these reductions in 2015 will bring the U.S. gasoline 
pool down to the 0.62 vol% benzene standard at an average cost of 0.14 
cents per gallon averaged over all U.S. gasoline, based on the addition 
of $634 million in capital investments.
---------------------------------------------------------------------------

    \213\ The ABT analysis assumed that small refiners would comply 
with the 1.3 vol% maximum average standard in January 2015 at the 
same time as the 0.62 vol% annual average standard. We are 
finalizing a later maximum average standard implementation date 
(July 2016), which will have very little effect on the overall 
program and therefore has not been incorporated into this analysis.
---------------------------------------------------------------------------

    To comply with the fully phased-in final benzene control program, 
refiners are expected to have made a total of $1110 million in capital 
investments. This will amount to an average of $14 million in capital 
investment in each refinery that adds such equipment.
    We also estimated annual aggregate costs, including the amortized 
capital costs, associated with the new fuel standard. As shown in Table 
VIII.A-1, these costs are projected to begin at $28 million in 2007 and 
increase to $363 million in 2015 when the benzene program is fully 
phased in. These aggregated costs continue to increase over time as 
fuel demand increases.

   Table VIII.A-1.--Per-Gallon and Annual Aggregate Fuel Costs for the
                      Final Benzene Control Program
                 (7% ROI before taxes and 2003 dollars)
------------------------------------------------------------------------
                                                 Per-gallon   Aggregate
                     Year                         cost (c/       cost
                                                    gal)      ($million)
------------------------------------------------------------------------
2007..........................................         0.02           28
2008..........................................         0.04           49
2009..........................................         0.04           50
2010..........................................         0.09          101
2011..........................................         0.09          104
2012..........................................         0.11          133
2013..........................................         0.13          164
2014..........................................         0.13          166
2015..........................................         0.27          363
2020..........................................         0.27          388
2025..........................................         0.27          412
2030..........................................         0.27          437
2035..........................................         0.27          464
------------------------------------------------------------------------

    Several observations can be made from these results of our 
nationwide cost analysis. First, significantly reducing gasoline 
benzene levels to low levels, coupled with the flexibility of an ABT 
program, will incur fairly modest aggregate program costs. This is 
primarily because we expect that refiners will optimize their benzene 
control strategies, resulting in large benzene reductions at a 
relatively low overall program cost. With higher benzene prices 
relative to those of gasoline projected to continue (even if they drop 
from the recent very high levels), extraction is expected to be a very 
low-cost technology--the primary reason why the cost of the overall 
program is very low. Also, precursor rerouting, either with or without 
isomerization in an existing unit, is a low-cost technology requiring 
little or no capital to realize. The model concludes that even the 
higher-cost benzene saturation technology will be fairly cost-effective 
overall because larger refineries that install this technology will 
take advantage of their economies of scale.
b. Regional Costs
    The benzene reductions estimated by the cost model and associated 
costs vary significantly by region. Table VIII.A-2 summarizes the 
estimated per-gallon costs for complying with the benzene control 
standard by PADD region.

         Table VIII.A-2.--Projected Benzene Control Costs by PADD for the Final Benzene Control Program
                                       (2003 dollars, 7% ROI before taxes)
----------------------------------------------------------------------------------------------------------------
                                                                                PADD
                                                           ---------------------------------------------
                                                                                                 5 (w/o    U.S.
                                                               1        2        3        4       CA)
----------------------------------------------------------------------------------------------------------------
Cost (c/gal)..............................................     0.14     0.35     0.15     0.55     1.21    0.268
----------------------------------------------------------------------------------------------------------------

    Table VIII.A-2 shows that the PADD-average costs are highest in 
PADD 5 followed next by PADD 4. In PADDs 1, 2 and 3, where reformulated 
gasoline programs have already forced gasoline benzene levels lower, 
the benzene control costs are lower. Extraction is the technology most 
used in PADDs 1 and 3, resulting in lower benzene control cost in these 
regions. Individual refineries show a wider range of control costs than 
the PADD-average costs. There are 20 refineries for which we estimate 
benzene control costs lower than 0.20 cents per gallon. Also, there are 
11 refineries, all of which are very small refineries, with costs in 
the range of 3 to 7 cents per gallon range.
c. Refining Industry Cost Study
    The American Petroleum Institute (API) conducted its own refinery 
modeling study to evaluate the cost of benzene control. The API study 
analyzed the cost of three different benzene control programs. Two of 
the benzene control programs analyzed by API were very different than 
our final benzene control program and we will not discuss them here 
(see Chapter 9 of the RIA). The third program analyzed by API was 
nearly identical to the final benzene control standard, and we have 
carefully compared API's cost analysis to ours.
    API analyzed a benzene control program with a nationwide 0.60 vol% 
benzene standard and with an ABT program and with no upper benzene 
limit. API also assumed that credits will not be traded freely, but 
instead that refining companies would hold onto 10 percent of their 
credits in case they have a future problem with their benzene control 
unit. Including the compliance margin and the 10 percent credit margin, 
the API study estimated that under its modeled benzene control program 
and associated assumptions that U.S. gasoline would average 0.56 vol% 
benzene. The API study estimates the cost of complying with its modeled 
benzene control program to be 1.00 cent

[[Page 8509]]

per gallon.\214\ This estimated benzene control cost is substantially 
higher than our estimated 0.27 cents per gallon cost for our nearly 
identical program. After comparing their methodology to ours we 
identified three primary differences which explain the large difference 
in costs.
---------------------------------------------------------------------------

    \214\ This cost estimate includes an adjustment we made to 
convert the API capital cost amortization from the after-tax 10 
percent rate of return that was the basis for the estimated costs in 
their report to a before-tax 7 percent rate of return, which is how 
our rules are estimated.
---------------------------------------------------------------------------

    The first difference is that API modeled a somewhat lower benzene 
control standard and assumed a credit generation margin which resulted 
in refiners achieving a much lower benzene level than the 0.62 vol% 
benzene control standard. A primary reason why the refining industry 
study modeled overcompliance with the benzene standard is due to an 
assumption that refiners will want to hold onto a substantial quantity 
of credits, yet the API cost study did not provide a justification for 
the accumulation of credits. EPA does not believe that refiners will 
significantly overcomply with the average benzene standard. This is 
because the 0.62 vol% benzene standard is an averaging standard which 
is met across the entire industry, not a cap standard, and can be met 
by the accumulation of gasoline batches with benzene levels higher or 
lower than the standard. Thus, if a refinery produced gasoline with 
lower or higher gasoline benzene levels over the first part of the 
year, the operations could be adjusted to balance out the gasoline 
benzene levels for the rest of the year. Also, our program includes 
several provisions which give refiners significant flexibility for 
compliance. For example, refiners could overcomply slightly with the 
standard early on in the program's implementation and hold onto the 
credits for up to five years before they expire. If a refinery's 
benzene control unit goes down, the refiner would be able to use those 
accumulated credits, the refiner could purchase credits from other 
refineries, or the refiner could create a benzene reduction deficit at 
that refinery and make it up the following year. With this degree of 
flexibility, any significant overcompliance with the 0.62 vol% average 
benzene standard is unnecessary.
    The second reason why the API costs are much higher than ours is 
because API used a more restrictive assumption with respect to benzene 
extraction--a more cost-effective benzene control technology than 
benzene saturation, as discussed above. API assumed that no new 
grassroots benzene extraction capacity will be installed in the future, 
but that existing extraction units could be expanded. We agree that 
existing units will likely be expanded. However, we also believe that 
several refineries will install new grassroots extraction units. Our 
premise is supported by CMAI projections of a robust benzene market in 
the future with benzene priced higher than its historical margin above 
gasoline. Higher benzene price margins will provide an incentive to 
refiners to add grassroots benzene extraction units, even in areas 
where benzene markets are smaller. For example, one refiner has 
indicated to us that if the proposed gasoline benzene standard was to 
be finalized, it would install a grassroots benzene extraction unit at 
one of its refineries in the Midwest, where the benzene market is small 
with less room for increased supply (although this benzene could be 
shipped down to the Gulf Coast). This is a strong indicator that new 
grassroots benzene extraction units will also be installed on the Gulf 
and East Coasts, where benzene markets are much larger with much more 
room to absorb increased supply.
    The third reason why the API benzene control costs are much higher 
than ours is their very high octane control costs. For both studies, 
the octane loss that occurs due to the modeled application of the 
various benzene control technologies is accounted for by assigning a 
dollar per octane-barrel cost to the octane loss. However, API's costs 
for restoring octane are higher than the future octane recovery costs 
that we are projecting. The octane costs used by API are higher because 
API used the rack price differential between premium and regular grade 
gasolines as summarized by the Energy Information Administration. 
However, the rack price differential between premium and regular grade 
gasolines reflects a significant amount of profit. For example, the 
cost difference to produce premium gasoline is usually only a few cents 
per gallon more than for producing regular grade gasoline, yet refiners 
and marketers usually charge 20 to 30 cents more per gallon for premium 
gasoline at retail. Some of this inflated price appears at the rack 
price differential between regular and premium grades of gasoline. In 
addition, future octane control costs, when the benzene control 
standard takes effect, are expected to be much lower due to the very 
large volume of ethanol that is expected to enter the gasoline market 
by then.
    Overall, we have carefully evaluated the differences between our 
cost analysis and that provided by API. Except for the differences 
described above, the assumptions used and the conclusions reached were 
very similar. We believe our revised analysis provides a more accurate 
assessment of the costs of the benzene control program.

B. What Are the Vehicle Cost Impacts?

    In assessing the economic impact of setting cold temperature 
emission standards, we have made a best estimate of the necessary 
vehicle modifications and their associated costs. In making our 
estimates we have relied on our own technology assessment, which 
includes information supplied by individual manufacturers and our own 
in-house testing. Estimated costs typically include variable costs (for 
hardware and assembly time) and fixed costs (for research and 
development, retooling, and certification). All costs are presented in 
2003 dollars. Full details of our cost analysis can be found in Chapter 
8 of the RIA.
    As described in section V, we are not expecting hardware changes to 
Tier 2 vehicles in response to new cold temperature standards. Tier 2 
vehicles are already being equipped with very sophisticated emissions 
control systems. We expect manufacturers to use these systems to 
minimize emissions at cold temperatures. We were able to demonstrate 
significant emissions reductions from a Tier 2 vehicle through 
recalibration alone. In addition, the standard we are finalizing is 
based on averaging which allows some vehicles to be above the numeric 
standard as long as those excess emissions are offset by vehicles below 
the standard. Averaging will help manufacturers in cases where they are 
not able to achieve the numeric standard for a particular vehicle 
group, thus helping manufacturers avoid costly hardware changes. The 
phase-in of standards and emissions credits provisions also help 
manufacturers avoid situations where expensive vehicle modifications 
will be needed to meet the new cold temperature NMHC standard. 
Therefore, we are not projecting hardware costs or additional assembly 
costs associated with meeting new cold temperature NMHC emissions 
standards.
    Manufacturers will incur research and development (R&D) costs 
associated with a new cold temperature standard, and some likely will 
need to upgrade testing facilities to handle an increased number of 
cold tests during vehicle development. We have estimated the fixed 
costs associated with R&D and test facilities. We project that 
manufacturers will recover R&D costs over a five-year

[[Page 8510]]

period and their facilities costs over a ten-year period. Long-term 
impacts on engine costs are expected to decrease as manufacturers fully 
amortize their fixed costs. Because manufacturers recoup fixed costs 
over a large volume of vehicles, average per vehicle costs due to the 
new cold temperature NMHC standards are expected to be low. We project 
that the average incremental costs associated with the new cold 
temperature standards will be less than $1 per vehicle.
    We did not receive comments on the methodology we used to derive 
average cost estimates. However, we did receive comments from one 
manufacturer with a limited product line who believes new hardware will 
be needed on its vehicles to meet the new cold temperature standards. 
Other manufacturers did not comment that hardware changes would be 
needed, and they generally supported our lead-time, phase-in, and other 
transitional provisions as providing the flexibility needed to meet the 
standards. We continue to believe that manufacturers will be able to 
meet the standards through vehicle development without additional 
hardware. However, we conducted a sensitivity analysis in response to 
this comment, assuming the commenter would use new hardware to meet the 
cold temperature standard. If one percent of new vehicles required 
additional hardware costing $100-$200 per vehicle, the average cost 
would increase from less than $1 to the range of $1.60-$2.60 per 
vehicle. The commenter did not provide cost information in their 
comments and we believe that the costs used in our sensitivity analysis 
are conservatively high, given the lead time provided for vehicle 
development and market pressures to keep costs in line with those of 
competitors. In any event, we believe the costs associated with the 
program are reasonable. Additional discussion of the comments received 
on the vehicle cold temperature standard is provided in Chapter 3 of 
the Summary and Analysis of Comments for this rule.
    We are not anticipating additional costs for the new evaporative 
emissions standard. As discussed in section V, we expect that 
manufacturers will continue to produce 50-state evaporative systems 
that meet LEV II standards. Therefore, harmonizing with California's 
LEV-II evaporative emission standards will streamline certification and 
be an ``anti-backsliding'' measure. It also codifies the approach 
manufacturers have already indicated they are taking for 50-state 
evaporative systems.
    We also estimated annual aggregate costs associated with the new 
cold temperature emissions standards. These costs are projected to 
increase with the phase-in of standards and peak in 2014 at about $13.4 
million per year, then decrease as the fixed costs are fully amortized. 
The projected aggregate costs are summarized below, with annual 
estimates provided in Chapter 8 of the RIA.

                                     Table VIII.B-1.--Annual Aggregate Costs
----------------------------------------------------------------------------------------------------------------
              2010                     2012            2014            2016            2018            2020
----------------------------------------------------------------------------------------------------------------
$11,119,000.....................     $12,535,000     $13,406,000     $12,207,000     $10,682,000              $0
----------------------------------------------------------------------------------------------------------------

C. What Are the PFC Cost Impacts?

    For PFCs, we have made a best estimate of the necessary 
technologies and their associated costs. Estimated costs include 
variable costs (for hardware and assembly time) and fixed costs (for 
research and development, retooling, and certification). The analysis 
also considers fuels savings associated with low emission PFCs. Cost 
estimates based on the projected technologies represent an expected 
change in the cost of PFCs as they begin to comply with new emission 
standards. All costs are presented in 2003 dollars. We did not receive 
comments on estimated costs for PFCs controls. Full details of our cost 
analysis, including fuel savings, can be found in Chapter 10 of the 
RIA.
    Table VIII.C-1 summarizes the projected near-term and long-term per 
unit average costs to meet the new emission standards. Long-term 
impacts on PFCs are expected to decrease as manufacturers fully 
amortize their fixed costs. We project that manufacturers will 
generally recover their fixed costs over a five-year period, so these 
costs disappear from the analysis after the fifth year of production. 
These estimates are based on the manufacturing cost rather than 
predicted price increases.\215\ The table also shows our projections of 
average fuel savings over the life of the PFC when used with gasoline. 
Fuel savings can be estimated based on the VOC emissions reductions due 
to controls.
---------------------------------------------------------------------------

    \215\ These costs numbers may not necessarily reflect actual 
price increases as manufacturer production costs, perceived product 
enhancements, and other market impacts will affect actual prices to 
consumers.

 Table VIII.C-1.--Estimated Average Per Unit PFC Costs and Lifetime Fuel
                                 Savings
------------------------------------------------------------------------
                                                                  Cost
------------------------------------------------------------------------
Near-Term Costs..............................................      $2.69
Long-Term Costs..............................................       1.52
Fuel Savings (NPV)...........................................       4.24
------------------------------------------------------------------------

    With current and projected estimates of PFC sales, we translate 
these costs into projected direct costs to the nation for the new 
emission standards in any year. A summary of the annual aggregate costs 
to manufacturers is presented in Table VIII.C-2. The annual cost 
savings due to fuel savings start slowly, then increase as greater 
numbers of compliant PFCs enter the market. Table VIII.C-2 also 
presents a summary of the estimated annual fuel savings. Aggregate 
costs are projected to peak in 2013 at about $61 million and then drop 
to about $34 million once fixed costs are recovered. The change in 
numbers beyond 2015 occurs due to projected growth in sales and 
population.

                            Table VIII.C-2.--Total Annualized Costs and Fuel Savings
----------------------------------------------------------------------------------------------------------------
                                                       2009            2013            2015            2020
----------------------------------------------------------------------------------------------------------------
Costs...........................................     $58,070,000     $60,559,000     $34,004,000     $37,543,000

[[Page 8511]]

 
Fuel Savings....................................      15,347,000      83,506,000     102,523,000     109,589,000
----------------------------------------------------------------------------------------------------------------

D. Cost per Ton of Emissions Reduced

    We have calculated the cost per ton of HC, benzene, total MSATs, 
and PM emissions reductions associated with the fuel, vehicle, and PFC 
programs using the costs described above and the emissions reductions 
described in section IV. More detail on the costs, emissions 
reductions, and cost per ton estimates can be found in the RIA. We have 
calculated the costs per ton using the net present value of the 
annualized costs of the program, including PFC gasoline fuel savings, 
from 2009 through 2030 and the net present value of the annual emission 
reductions through 2030. We have also calculated the cost per ton of 
emissions reduced in the year 2030 using the annual costs and emissions 
reductions in that year alone. This number represents the long-term 
cost per ton of emissions reduced. For fuels, the cost per ton 
estimates include costs and emission reductions that will occur from 
all motor vehicles and nonroad engines fueled with gasoline.\216\
---------------------------------------------------------------------------

    \216\ The proposed standards do not apply to nonroad engines, 
since section 202(l) authorizes controls only for ``motor 
vehicles,'' which term does not include nonroad vehicles (CAA 
section 216(2)). However, we are reducing benzene in all gasoline, 
including that used in nonroad equipment. Therefore, we are 
including both the costs and the benzene emissions reductions 
associated with the fuel used in nonroad equipment.
---------------------------------------------------------------------------

    For vehicles and PFCs, we are establishing NMHC and HC standards, 
respectively, which will also reduce benzene and other VOC-based 
toxics. For vehicles, we are also expecting direct PM reductions due to 
the NMHC standard.\217\ Section IV above provides an overview of how we 
are estimating benzene and PM reductions resulting from the NMHC 
standards for vehicles and benzene reductions resulting from the HC 
standard for PFCs. We have not attempted to apportion costs across 
these various pollutants for purposes of the cost per ton calculations 
since there is no distinction in the technologies, or associated costs, 
used to control the pollutants. Instead, we have calculated costs per 
ton by assigning all costs to each individual pollutant. If we 
apportioned costs among the pollutants, the costs per ton presented 
here would be proportionally lowered depending on what portion of costs 
were assigned to the various pollutants.
---------------------------------------------------------------------------

    \217\ Again, although gasoline PM is not a mobile source air 
toxic, the rule will result in emission reductions of gasoline PM, 
which reductions are accounted for in our analysis.
---------------------------------------------------------------------------

    The results for HC for vehicles and PFCs are provided in Table 
VIII.D-1 using both a three percent and a seven percent social discount 
rate. Again, this analysis assumes that all costs are assigned to HC 
control. The discounted cost per ton of HC reduced for the final rule 
as a whole would be $0 because the gasoline fuel savings from PFCs 
offsets the costs of PFC and vehicle controls. The table presents these 
as $0 per ton, rather than calculating a negative value that has no 
clear meaning. For vehicles in 2030, the cost per ton is $0 because by 
2030 all fixed costs have been recovered and there are no variable 
costs estimated for the new vehicle program.\218\
---------------------------------------------------------------------------

    \218\ We note that in determining whether the new vehicle 
controls represent the greatest emissions reductions achievable 
considering costs, we have considered the new cold-start standards 
separately from any other new control program. Similarly, in 
considering whether the new controls for PFCs represent the best 
available control considering economic feasibility, we considered 
the PFC standards separately from any other new control program.
---------------------------------------------------------------------------

    The cost per ton estimates for each individual program are 
presented separately in the tables below, and are part of the 
justification for each of the programs. For informational purposes, we 
also present the cost per ton for the three programs combined.

                  Table VIII.D-1.--HC Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-Term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................             $14             $18              $0
PFCs (without fuel savings).....................................             240             270             190
PFCs (with fuel savings)........................................               0               0               0
Combined (with fuel savings)....................................               0               0               0
----------------------------------------------------------------------------------------------------------------

    The cost per ton of benzene reductions for fuels, vehicles, and 
PFCs are shown in Table VIII.D-2 using the same methodology as noted 
above for HC. The results are calculated by assigning all costs to 
benzene control.

                Table VIII.D-2.--Benzene Aggregate Cost per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Fuels...........................................................         $22,400         $23,100         $22,500
Vehicles........................................................             270             360               0
PFCs (without fuels savings)....................................          74,500          82,900          56,200
PFCs (with fuel savings)........................................               0               0               0

[[Page 8512]]

 
Combined (with fuel savings)....................................           8,200           8,600           5,900
----------------------------------------------------------------------------------------------------------------

    The cost per ton of reductions of all MSAT reductions for fuels, 
vehicles, and PFCs are shown in Table VIII.D-3 using the same 
methodology as noted above for HC and benzene. The results are 
calculated by assigning all costs to MSAT control.

                 Table VIII.D-3.--MSAT Aggregate Cost per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Fuels...........................................................         $22,400         $23,100         $22,500
Vehicles........................................................              42              54               0
PFCs (without fuel savings).....................................           2,800           3,100           2,200
PFCs (with fuel savings)........................................               0               0               0
Combined (with fuel savings)....................................           1,700           1,800           1,100
----------------------------------------------------------------------------------------------------------------

    We have also calculated a cost per ton for direct PM reductions for 
vehicles. Again, this analysis assigns all related costs to direct PM 
reductions.

               Table VIII.D-4.--Direct PM Aggregate Cost per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................            $650            $870              $0
----------------------------------------------------------------------------------------------------------------

E. Benefits

    This section presents our analysis of the health and environmental 
benefits that will occur as a result of the final standards throughout 
the period from initial implementation through 2030. In terms of 
emission benefits, we expect to see significant reductions in mobile 
source air toxics (MSATs) from the vehicle, fuel and PFC standards; 
reductions in VOCs (an ozone and PM2.5 precursor) from the 
cold temperature vehicle and PFC standards; and reductions in direct 
PM2.5 from the cold temperature vehicle standards. When 
translating emission benefits to health effects and monetized values, 
however, we quantify only the PM-related benefits associated with the 
cold temperature vehicle standards.
    The reductions in PM2.5 from the cold temperature 
vehicle standards will result in significant reductions in premature 
deaths and other serious human health effects, as well as other 
important public health and welfare effects. We estimate that in 2030, 
the benefits we are able to monetize will be approximately $6.3 billion 
using a 3 percent discount rate and $5.7 billion using a 7 percent 
discount rate. Total social costs of the entire rule for the same year 
(2030) are $400 million. Details on the costs of the final standards 
are in section VIII.F. These estimates, and all monetized benefits 
presented in this section, are in year 2003 dollars.
    The PM2.5 benefits are scaled based on relative changes 
in direct PM2.5 emissions between this rule and the proposed 
Clean Air Nonroad Diesel (CAND) rule.\219\ As explained in Section 
12.2.1 of the RIA for this rule, the PM2.5 benefits scaling 
approach is limited to those studies, health impacts, and assumptions 
that were used in the proposed CAND analysis. As a result, PM-related 
premature mortality is based on the updated analysis of the American 
Cancer Society cohort (ACS; Pope et al., 2002). However, it is 
important to note that since the CAND rule, EPA's Office of Air and 
Radiation (OAR) has adopted a different format for its benefits 
analyses in which characterization of the uncertainty in the 
concentration-response function is integrated into the main benefits 
analysis. This new approach follows the recommendation of NRC's 2002 
report ``Estimating the Public Health Benefits of Proposed Air 
Pollution Regulations'' to begin moving the assessment of uncertainties 
from its ancillary analyses into its main benefits presentation through 
the conduct of probabilistic analyses. Within this context, additional 
data sources are available, including a recent expert elicitation and 
updated analysis of the Six-Cities Study cohort (Laden et al., 2006). 
Please see the PM NAAQS RIA for an indication of the sensitivity of our 
results to use of alternative concentration-response functions.
---------------------------------------------------------------------------

    \219\ Due to time and resource constraints, EPA scaled the final 
CAND benefits estimates from the benefits estimated for the CAND 
proposal. The scaling approach used in that analysis, and applied 
here, is described in the RIA for the final CAND rule.
---------------------------------------------------------------------------

    We also demonstrate that the final standards will reduce cancer and 
noncancer risk from reduced exposure to MSATs (as described in Section 
IV of this preamble). However, we do not

[[Page 8513]]

translate this risk reduction into benefits. We also do not quantify 
the benefits related to ambient reductions in ozone and 
PM2.5 due to the VOC emission reductions associated with the 
final standards. The following section describes in more detail why 
these benefits are not quantified.
1. Unquantified Health and Environmental Benefits
    This benefit analysis estimates improvements in health and human 
welfare that are expected as a result of the final standards, and 
monetizes those benefits. The benefits will come from reductions in 
emissions of air toxics (including benzene, 1,3-butadiene, 
formaldehyde, acetaldehyde, acrolein, naphthalene, and other air toxic 
pollutants discussed in section III), ambient ozone (as a result of VOC 
controls), and direct PM2.5 emissions.
    While there will be benefits associated with air toxic pollutant 
reductions, notably with regard to reductions in exposure and risk (see 
section IV), we do not attempt to monetize those benefits. This is 
primarily because available tools and methods to assess air toxics risk 
from mobile sources at the national scale are not adequate for 
extrapolation to incidence estimations or benefits assessment. The best 
suite of tools and methods currently available for assessment at the 
national scale are those used in the National-Scale Air Toxics 
Assessment (NATA; these tools are discussed in Chapter 3 of the RIA). 
The EPA Science Advisory Board specifically commented in their review 
of the 1996 NATA that these tools were not yet ready for use in a 
national-scale benefits analysis, because they did not consider the 
full distribution of exposure and risk, or address sub-chronic health 
effects.\220\ While EPA has since improved the tools, there remain 
critical limitations for estimating incidence and assessing benefits of 
reducing mobile source air toxics. We continue to work to address these 
limitations, and we are exploring the feasibility of a quantitative 
benefits assessment for air toxics through a benzene case study as part 
of the revised study of ``The Benefits and Costs of the Clean Air Act'' 
(also known as the ``Section 812'' report).\221\ In this case study, we 
are attempting to monetize the benefits of reduced cancer incidence, 
specifically leukemia, and are not addressing other cancer or noncancer 
endpoints.
---------------------------------------------------------------------------

    \220\ Science Advisory Board. 2001. NATA--Evaluating the 
National-Scale Air Toxics Assessment for 1996--an SAB Advisory. 
http://www.epa.gov/ttn/atw/sab/sabrev.html.
    \221\ The analytic blueprint for the Section 812 benzene case 
study can be found at http://www.epa.gov/air/sect812/
appendixi51203.pdf.
---------------------------------------------------------------------------

    We also do not estimate the monetized benefits of VOC controls in 
this benefits analysis. Though VOCs will be demonstrably reduced as a 
result of the cold temperature vehicle standards, we assume that these 
emissions will not have a measurable impact on ozone formation since 
the standards will reduce VOC emissions at cold ambient temperatures 
and ozone formation is primarily a warm ambient temperature issue. The 
PFC controls will likely result in ozone benefits, though we do not 
attempt to monetize those benefits. This is primarily due to the 
magnitude of, and uncertainty associated with, the estimated changes in 
ambient ozone associated with the final standards. In Section IV.C., we 
discuss that the ozone modeling conducted for the final PFC standards 
results in a net reduction in ambient ozone concentrations within the 
modeled domain (37 Eastern states and the District of Columbia). The 
net improvement is very small, however, and will likely lead to 
negligible monetized benefits. Instead, we acknowledge that this 
analysis may underestimate the benefits associated with reductions in 
ozone precursor emissions achieved by the various standards. We discuss 
these benefits qualitatively within the RIA.
    The VOC reductions resulting from the cold temperature vehicle 
standards and PFC standards will also likely reduce secondary 
PM2.5 formation. However, we did not quantify the impacts of 
these reductions on ambient PM2.5 or estimate any resulting 
benefits. As described further below, we estimated PM benefits by 
scaling from a previous analysis, and this analysis did not examine the 
relationship between VOC reductions and ambient PM. As a result, we did 
not quantify PM benefits associated with this rule's VOC reductions, 
and we acknowledge that this analysis may therefore underestimate 
benefits.
    Table VIII.E-1 lists each of the MSAT and ozone health and welfare 
effects that remain unquantified because of current limitations in the 
methods or available data. This table also includes the PM-related 
health and welfare effects that also remain unquantified due to current 
method and data limitations. Chapter 12 of the RIA for the final 
standards provides a qualitative description of the health and welfare 
effects not quantified in this analysis.

         Table VIII.E-1.--Unquantified and Non-Monetized Effects
------------------------------------------------------------------------
                                         Effects not included in primary
           Pollutant/effects                  estimates--changes in:
------------------------------------------------------------------------
Ozone Health \a\.......................  Premature mortality: short-term
                                          exposures \b\.
                                         Hospital admissions:
                                          respiratory.
                                         Emergency room visits for
                                          asthma.
                                         Minor restricted-activity days.
                                         School loss days.
                                         Asthma attacks.
                                         Cardiovascular emergency room
                                          visits.
                                         Acute respiratory symptoms.
                                         Chronic respiratory damage.
                                         Premature aging of the lungs.
                                         Non-asthma respiratory
                                          emergency room visits.
                                         Exposure to UVb (+/-) \e\.
Ozone Welfare..........................  Decreased outdoor worker
                                          productivity.
                                         Agricultural yields for
                                         --commercial forests.
                                         --some fruits and vegetables.
                                         --non-commercial crops.
                                         Damage to urban ornamental
                                          plants.
                                         Impacts on recreational demand
                                          from damaged forest
                                          aesthetics.
                                         Ecosystem functions.
                                         Exposure to UVb (+/-) \e\.
PM Health \c\..........................  Premature mortality--short-term
                                          exposures \d\.
                                         Low birth weight.
                                         Pulmonary function.
                                         Chronic respiratory diseases
                                          other than chronic bronchitis.
                                         Non-asthma respiratory
                                          emergency room visits.
                                         Exposure to UVb (+/-) \e\.
PM Welfare.............................  Visibility in many Class I
                                          areas.
                                         Residential and recreational
                                          visibility in non-Class I
                                          areas.
                                         Soiling and materials damage.
                                         Damage to ecosystem functions.
                                         Exposure to UVb (+/-) \e\.
MSAT Health \f\........................  Cancer (benzene, 1,3-butadiene,
                                          formaldehyde, acetaldehyde,
                                          naphthalene).
                                         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).

[[Page 8514]]

 
                                         Irritation of eyes and mucus
                                          membranes (formaldehyde).
                                         Respiratory irritation
                                          (formaldehyde).
                                         Asthma attacks in asthmatics
                                          (formaldehyde).
                                         Asthma-like symptoms in non-
                                          asthmatics (formaldehyde).
                                         Irritation of the eyes, skin,
                                          and respiratory tract
                                          (acetaldehyde).
                                         Upper respiratory tract
                                          irritation and congestion
                                          (acrolein).
                                         Neurotoxicity (n-hexane,
                                          toluene, xylenes).
MSAT Welfare \f\.......................  Direct toxic effects to
                                          animals.
                                         Bioaccumulation in the food
                                          chain.
                                         Damage to ecosystem function.
                                         Odor.
------------------------------------------------------------------------
\a\ In addition to primary economic endpoints, there are a number of
  biological responses that have been associated with ozone health
  effects including increased airway responsiveness to stimuli,
  inflammation in the lung, acute inflammation and respiratory cell
  damage, and increased susceptibility to respiratory infection.
\b\ Recent analyses provide evidence that short-term ozone exposure is
  associated with increased premature mortality. As a result, EPA is
  considering how to incorporate ozone mortality benefits into its
  benefits analyses as a separate estimate of the number of premature
  deaths that would be avoided due to reductions in ozone levels.
\c\ In addition to primary economic endpoints, there are a number of
  biological responses that have been associated with PM health effects
  including morphological changes and altered host defense mechanisms.
  The public health impact of these biological responses may be partly
  represented by our quantified endpoints.
\d\ While some of the effects of short-term exposures are likely to be
  captured in the estimates, there may be premature mortality due to
  short-term exposure to PM not captured in the cohort study upon which
  the primary analysis is based. However, the PM mortality results
  derived from the expert elicitation do take into account premature
  mortality effects of short-term exposures.
\e\ May result in benefits or disbenefits.
\f\ The categorization of unquantified toxic health and welfare effects
  is not exhaustive.

2. Quantified Human Health and Environmental Effects of the Final Cold 
Temperature Vehicle Standard
    In this section we discuss the benefits of the final cold 
temperature vehicle standard related to reductions in directly emitted 
PM2.5. To estimate PM2.5 benefits, we rely on a 
benefits transfer technique. The benefits transfer approach uses as its 
foundation the relationship between emission reductions and ambient 
PM2.5 concentrations modeled across the contiguous 48 states 
(and DC) for the Clean Air Nonroad Diesel (CAND) proposal.\222\ For a 
given future year, we first calculate the ratio between CAND direct 
PM2.5 emission reductions and direct PM2.5 
emission reductions associated with the final cold temperature vehicle 
control standard (cold temperature vehicle emission reductions/CAND 
emission reductions). We multiply this ratio by the percent that direct 
PM2.5 contributes towards population-weighted reductions in 
total PM2.5 due to the CAND standards. This calculation 
results in a ``benefits apportionment factor'' for the relationship 
between direct PM emissions and primary PM2.5, which is then 
applied to the BenMAP-based incidence and monetized benefits from the 
CAND proposal. In this way, we apportion the results of the proposed 
CAND analysis to its underlying direct PM emission reductions and scale 
the apportioned benefits to reflect differences in emission reductions 
between the two rules.\223\ This benefits transfer method is consistent 
with the approach used in other recent mobile and stationary source 
rules.\224\
---------------------------------------------------------------------------

    \222\ See 68 FR 28327, May 23, 2003.
    \223\ Note that while the final regulations also control VOCs, 
which contribute to PM formation, the benefits transfer scaling 
approach only scales benefits based on NOX, 
SO2, and direct PM emission reductions. PM benefits will 
likely be underestimated as a result, though we are unable to 
estimate the magnitude of the underestimation.
    \224\ See: Clean Air Nonroad Diesel final rule (69 FR 38958, 
June 29, 2004); Nonroad Large Spark-Ignition Engines and 
Recreational Engines standards (67 FR 68241, November 8, 2002); 
Final Industrial Boilers and Process Heaters NESHAP (69 FR 55217, 
September 13, 2004); Final Reciprocating Internal Combustion Engines 
NESHAP (69 FR 33473, June 15, 2004); Final Clean Air Visibility Rule 
(EPA-452/R-05-004, June 15, 2005); Ozone Implementation Rule 
(documentation forthcoming).
---------------------------------------------------------------------------

    Table VIII.E-2 presents the estimates of reduced incidence of 
PM2.5-related health effects for the years 2020 and 2030 for 
the final cold temperature vehicle control strategies. In 2030, we 
estimate that PM2.5-related annual benefits will result in 
approximately 880 fewer premature fatalities, 600 fewer cases of 
chronic bronchitis, 1,600 fewer non-fatal heart attacks, and 900 fewer 
hospitalizations (for respiratory and cardiovascular disease combined). 
In addition, we estimate that the emission controls will reduce days of 
restricted activity due to respiratory illness by about 600,000 days 
and reduce work-loss days by about 100,000 days. We also estimate 
substantial health improvements for children from reduced upper and 
lower respiratory illness, acute bronchitis, and asthma attacks.
    It is important to note that since the CAND rule, EPA's Office of 
Air and Radiation (OAR) has adopted a different format for its benefits 
analysis in which characterization of the uncertainty in the 
concentration-response function is integrated into the main benefits 
analysis. Within this context, additional data sources are available, 
including a recent PM-related premature mortality expert elicitation 
and updated analysis of the Six-Cities Study cohort (Laden et al., 
2006). Please see the PM NAAQS RIA for an indication of the sensitivity 
of our results to use of alternative concentration-response functions.
---------------------------------------------------------------------------

    \225\ Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. 
Krewski, K. Ito, and G.D. Thurston. 2002. ``Lung Cancer, 
Cardiopulmonary Mortality, and Long-term Exposure to Fine 
Particulate Air Pollution.'' Journal of American Medical Association 
287:1132-1141.
    \226\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. 1997. 
``The Relationship Between Selected Causes of Postneonatal Infant 
Mortality and Particulate Infant Mortality and Particulate Air 
Pollution in the United States.'' Environmental Health Perspectives 
105(6):608-612.

   Table VIII.E-2.--Estimated Annual Reductions in Incidence of Health
   Effects Related to the Final Cold Temperature Vehicle Standard \a\
------------------------------------------------------------------------
                                                2020 Annual  2030 Annual
                 Health effect                   incidence    incidence
                                                 reduction    reduction
------------------------------------------------------------------------
PM-Related Endpoints:
    Premature Mortality \b\ Adult, age 30+ and          480          880
     Infant, age <1 year......................

[[Page 8515]]

 
    Chronic bronchitis (adult, age 26 and               330          570
     over)....................................
    Non-fatal myocardial infarction (adult,             810        1,600
     age 18 and over).........................
    Hospital admissions--respiratory (all               260          530
     ages) \c\................................
    Hospital admissions--cardiovascular                 210          390
     (adults, age >18) \d\....................
    Emergency room visits for asthma (age 18            350          610
     years and younger).......................
    Acute bronchitis, (children, age 8-12)....          780        1,400
    Lower respiratory symptoms (children, age         9,300       16,000
     7-14)....................................
    Upper respiratory symptoms (asthmatic             7,000       12,000
     children, age 9-18)......................
    Asthma exacerbation (asthmatic children,         12,000       20,000
     age 6-18)................................
    Work loss days............................       62,000      100,000
    Minor restricted activity days (adults age      370,000     600,000
     18-65)...................................
------------------------------------------------------------------------
\a\ Incidence is rounded to two significant digits. Estimates represent
  benefits from the final rule nationwide, excluding Alaska and Hawaii.
\b\ PM-related adult mortality based upon the ACS cohort study (Pope et
  al., 2002).\225\ PM-related infant mortality based upon studies by
  Woodruff, Grillo, and Schoendorf, 1997.\226\ Due to analytical
  constraints associated with the PM benefits scaling approach, we are
  unable to present the premature mortality impacts associated with the
  recent Six-Cities study (Laden et al., 2006) or the impacts associated
  with the recent PM-related premature mortality expert elicitation
  (IEc, 2006). Chapter 12.6 of the RIA discusses the implications these
  new studies have on the benefits estimated for the final rule.
\c\ Respiratory hospital admissions for PM include admissions for
  chronic obstructive pulmonary disease (COPD), pneumonia and asthma.
\d\ Cardiovascular hospital admissions for PM include total
  cardiovascular and subcategories for ischemic heart disease,
  dysrhythmias, and heart failure.

    PM2.5 also has numerous documented effects on 
environmental quality that affect human welfare. These welfare effects 
include direct damages to property, either through impacts on material 
structures or by soiling of surfaces, and indirect economic damages 
through the loss in value of recreational visibility or the existence 
value of important resources. Additional information about these 
welfare effects can be found in Chapter 12 of the Regulatory Impact 
Analysis.
3. Monetized Benefits
    Table VIII.E-3 presents the estimated monetary value of reductions 
in the incidence of those health effects we are able to monetize for 
the final cold temperature vehicle standard. Total annual PM-related 
health benefits are estimated to be approximately $6.3 or $5.7 billion 
in 2030 (3 percent and 7 percent discount rate, respectively). These 
estimates account for growth in real gross domestic product (GDP) per 
capita between the present and 2030.
    Table VIII.E-3 indicates with a ``B'' those additional health and 
environmental benefits of the rule that we are unable to quantify or 
monetize. These effects are additive to the estimate of total benefits, 
and are related to the following sources:
     There are many human health and welfare effects associated 
with PM, ozone, and toxic air pollutant reductions that remain 
unquantified because of current limitations in the methods or available 
data. A listing of the benefit categories that could not be quantified 
or monetized in our benefit estimates are provided in Table VIII.E-1.
     The PM2.5 benefits scaled transfer approach, 
derived from the Clean Air Nonroad Diesel rule, does not account for 
VOCs as precursors to ambient PM2.5 formation. To the extent 
that VOC emission reductions associated with the final regulations 
contribute to reductions in ambient PM2.5, this analysis 
does not capture the related health and environmental benefits of those 
changes.
     The PM air quality model only captures the benefits of air 
quality improvements in the 48 states and DC; PM benefits for Alaska 
and Hawaii are not reflected in the estimate of benefits.

    Table VIII.E-3.--Estimated Annual Monetary Value of Reductions in Incidence of Health and Welfare Effects
                             Related to the Final Cold Temperature Vehicle Standard
                                             (Millions of 2003$) a,b
----------------------------------------------------------------------------------------------------------------
                                                                                  2020 estimated  2030 estimated
                 Health effect                              Pollutant                value of        value of
                                                                                    reductions      reductions
----------------------------------------------------------------------------------------------------------------
PM-Related Premature mortality c,d Adult, 30+
 years and Infant, <1 year:
    3 percent discount rate...................  PM2.5...........................          $3,100          $5,800
    7 percent discount rate...................  ................................           2,800           5,200
Chronic bronchitis (adults, 26 and over)......  PM2.5...........................             150             260
Non-fatal acute myocardial infarctions:
    3 percent discount rate...................  ................................              79             150
    7 percent discount rate...................  PM2.5...........................              76             140
Hospital admissions for respiratory causes....  PM2.5...........................             4.7              10
Hospital admissions for cardiovascular causes.  PM2.5...........................             5.0             9.1
Emergency room visits for asthma..............  PM2.5...........................            0.11            0.20
Acute bronchitis (children, age 8-12).........  PM2.5...........................            0.32            0.56
Lower respiratory symptoms (children, age 7-    PM2.5...........................            0.16            0.29
 14).
Upper respiratory symptoms (asthma, age 9-11).  PM2.5...........................            0.20            0.35
Asthma exacerbations..........................  PM2.5...........................            0.56             1.0

[[Page 8516]]

 
Work loss days................................  PM2.5...........................             9.1              14
Minor restricted activity days (MRADs)........  PM2.5...........................              21              35
Monetized Total\e\
Base estimate:
    3 percent discount rate...................  PM2.5...........................        3,300+ B        6,300+ B
    7 percent discount rate...................  ................................        3,000+ B        5,700+ B
----------------------------------------------------------------------------------------------------------------
\a\ Dollars are rounded to two significant digits. The PM estimates represent benefits from the final rule
  across the contiguous United States.
\b\ Monetary benefits adjusted to account for growth in real GDP per capita between 1990 and the analysis year
  (2020 or 2030).
\c\ Valuation of premature mortality based on long-term PM exposure assumes discounting over the SAB recommended
  20-year segmented lag structure described in the Regulatory Impact Analysis for the Final Clean Air Interstate
  Rule (March 2005). Results show 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines
  for preparing economic analyses (US EPA, 2000 and OMB, 2003).227,228
\d\ Adult mortality based upon the ACS cohort study (Pope et al., 2002). Infant mortality based upon studies by
  Woodruff, Grillo, and Schoendorf, 1997. Due to analytical constraints associated with the PM benefits scaling
  approach, we are unable to present the premature mortality impacts associated with the recent Six-Cities study
  (Laden et al., 2006) study or the impacts associated with the recent PM-related premature mortality expert
  elicitation (IEc, 2006). Chapter 12.6 of the RIA discusses the implications these new studies have on the
  benefits estimated for the final rule.
\e\ B represents the monetary value of health and welfare benefits not monetized. A detailed listing is provided
  in Table VIII.E-1.

4. What Are the Significant Limitations of the Benefit Analysis?
    The most significant limitation of this analysis is our inability 
to quantify a number of potentially significant benefit categories 
associated with improvements in air quality that would result from the 
final standards. Most notably, we are unable to estimate the benefits 
from reduced air toxics exposures because the available tools and 
methods to assess mobile source air toxics risk at the national scale 
are not adequate for extrapolation to incidence estimations or benefits 
assessment. We also do not quantify ozone benefits associated with the 
final PFC standards, despite the fact that there are net benefits, when 
population-weighted, in the ozone design value metric across the 
modeled domain (see section IV.C). We do not quantify these benefits 
because of their magnitude and the uncertainty associated with them.
---------------------------------------------------------------------------

    \227\ U.S. Environmental Protection Agency, 2000, Guidelines for 
Preparing Economic Analyses. http://yosemite.epa.gov/ee/epa/eed.nsf/
webpages/Guidelines.html.
    \228\ Office of Management and Budget, The Executive Office of 
the President, 2003. Circular A-4. http://www.whitehouse.gov/omb/
circlars.
---------------------------------------------------------------------------

    More generally, every benefit-cost analysis examining the potential 
effects of a change in environmental protection requirements is limited 
to some extent by data gaps, limitations in model capabilities (such as 
geographic coverage), and uncertainties in the underlying scientific 
and economic studies used to configure the benefit and cost models. 
Deficiencies in the scientific literature often result in the inability 
to estimate quantitative changes in health and environmental effects. 
Deficiencies in the economics literature often result in the inability 
to assign economic values even to those health and environmental 
outcomes which can be quantified. These general uncertainties in the 
underlying scientific and economics literature, which can cause the 
valuations to be higher or lower, are discussed in detail in the RIA 
and its supporting references. Key uncertainties that have a bearing on 
the results of the benefit-cost analysis of the final standards include 
the following:
     The exclusion of potentially significant and unquantified 
benefit categories (such as health, odor, and ecological benefits of 
reduction in air toxics, ozone, and PM);
     Errors in measurement and projection for variables such as 
population growth;
     Uncertainties in the estimation of future year emissions 
inventories and air quality;
     Uncertainties associated with the scaling of the PM 
results of the modeled benefits analysis to the final standards, 
especially regarding the assumption of similarity in geographic 
distribution between emissions and human populations and years of 
analysis;
     Uncertainty in the estimated relationships of health and 
welfare effects to changes in pollutant concentrations including the 
shape of the C-R function, the size of the effect estimates, and the 
relative toxicity of the many components of the PM mixture;
     Uncertainties in exposure estimation; and
     Uncertainties associated with the effect of potential 
future actions to limit emissions.
    As Table VIII.E-3 indicates, total benefits are driven primarily by 
the reduction in premature fatalities each year. Elaborating on the 
list of uncertainties above, some key assumptions underlying the 
primary estimate for the premature mortality category include the 
following:
    1. Inhalation of fine particles is causally associated with 
premature death at concentrations near those experienced by most 
Americans on a daily basis. Although biological mechanisms for this 
effect have not yet been completely established, the weight of the 
available epidemiological, toxicological, and experimental evidence 
supports an assumption of causality. The impacts of including a 
probabilistic representation of causality were explored in the expert 
elicitation-based results of the recently published PM NAAQS RIA. 
Because the analysis of the final cold temperature vehicle standard is 
constrained to the studies included in the CAND PM benefits scaling 
approach, we are unable to conduct the same analysis of expert 
elicitation-based mortality incidence for the final standards.\229\ 
However, we qualitatively describe the expert elicitation-based 
mortality results associated with the final PM NAAQS to provide an 
indication of the sensitivity of our PM-related premature mortality 
results to use of alternative

[[Page 8517]]

concentration-response functions. We present this discussion in the 
RIA.
---------------------------------------------------------------------------

    \229\ The scaling approach relies on the incidence and valuation 
estimates derived from the studies available at the time of the CAND 
analysis. Incidence estimates and monetized benefits derived from 
new information, including mortality derived from the full expert 
elicitation, are not available for scaling. Please refer to section 
2 of this preamble and Chapter 12 of the RIA for more information 
about the benefits scaling approach.
---------------------------------------------------------------------------

    2. Since the publication of CAIR and CAND, a follow up to the 
Harvard Six-Cities study on premature mortality was published (Laden et 
al., 2006 based on Dockery et al., 1993),230, 231 which both 
confirmed the effect size from the first study and provided additional 
evidence that reductions in PM2.5 directly result in reductions in the 
risk of premature death. The impacts of including this study in the 
primary analysis were explored in the results of the recently published 
PM NAAQS RIA. Because the analysis of the final cold temperature 
vehicle standard is constrained to the studies included in the CAND PM 
benefits scaling approach, we are unable to characterize PM-related 
mortality based on Laden et al. However, we discuss the implications of 
these results in the RIA for the final standards.
---------------------------------------------------------------------------

    \230\ Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 
2006. Reduction in Fine Particulate Air Pollution and Mortality. 
American Journal of Respiratory and Critical Care Medicine. 173: 
667-672.
    \231\ Dockery, D.W., C.A. Pope, X.P. Xu, J.D. Spengler, J.H. 
Ware, M.E. Fay, B.G. Ferris, and F.E. Speizer. 1993. ``An 
Association between Air Pollution and Mortality in Six U.S. 
Cities.'' New England Journal of Medicine 329(24):1753-1759.
---------------------------------------------------------------------------

    3. All fine particles, regardless of their chemical composition, 
are equally potent in causing premature mortality. This is an important 
assumption, because PM produced via transported precursors emitted from 
vehicles at cold temperatures may differ significantly from PM 
precursors released from electric generating units and other industrial 
sources. However, no clear scientific grounds exist for supporting 
differential effects estimates by particle type.
    4. The concentration-response function for fine particles is 
approximately linear within the range of ambient concentrations under 
consideration. Thus, the estimates include health benefits from 
reducing fine particles in areas with varied concentrations of PM, 
including both regions that may be in attainment with PM2.5 
standards and those that are at risk of not meeting the standards.
    Taking into account these uncertainties, we believe this benefit-
cost analysis provides a conservative estimate of the expected economic 
benefits of the final standards for cold temperature vehicle control in 
future years because of the exclusion of potentially significant 
benefit categories. Acknowledging benefits omissions and uncertainties, 
we present a best estimate of the total benefits based on our 
interpretation of the best available scientific literature and methods. 
Furthermore, our analysis reflects many methodological improvements 
that were incorporated into the analysis of the final Clean Air 
Interstate Rule (CAIR), including a revised value of a statistical 
life, a revised baseline rate of future mortality, and a revised 
mortality lag assumption. Details of these improvements can be found in 
the RIA for this rule and in the final CAIR rule RIA.\232\ Once again, 
however, it should be noted that since the CAIR rule, EPA's Office of 
Air and Radiation (OAR) has adopted a different format for its benefits 
analysis in which characterization of uncertainty is integrated into 
the main benefits analysis. Please see the PM NAAQS RIA for an 
indication of the uncertainty present in the base estimate of benefits 
and the sensitivity of our results to the use of alternative 
concentration-response functions.
---------------------------------------------------------------------------

    \232\ See Chapter 4 of the Final Clean Air Interstate Rule RIA 
(http://www.epa.gov/cair) for a discussion of EPA's ongoing efforts 
to address the NAS recommendations in its regulatory analyses.
---------------------------------------------------------------------------

    In contrast to the additional benefits of the final standards 
discussed above, it is also possible that this rule will result in 
disbenefits in some areas of the United States. The effects of ozone 
and PM on radiative transfer in the atmosphere can lead to effects of 
uncertain magnitude and direction on the penetration of ultraviolet 
light and climate. Ground level ozone makes up a small percentage of 
total atmospheric ozone (including the stratospheric layer) that 
attenuates penetration of ultraviolet--b (UVb) radiation to the ground. 
EPA's past evaluation of the information indicates that potential 
disbenefits would be small, variable, and with too many uncertainties 
to attempt quantification of relatively small changes in average ozone 
levels over the course of a year.\233\ EPA's most recent provisional 
assessment of the currently available information indicates that 
potential but unquantifiable benefits may also arise from ozone-related 
attenuation of UVb radiation.\234\ In addition, EPA believes that we 
are unable to quantify any net climate-related disbenefit or benefit 
associated with the combined ozone and PM reductions in this rule.
---------------------------------------------------------------------------

    \233\ EPA, 2005. Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (First External Review Draft). January. 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=114523.
    \234\ EPA, 2005. Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (Second External Review Draft). August. 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=137307.
---------------------------------------------------------------------------

5. How Do the Benefits Compare to the Costs of The Final Standards?
    The final rule provides three separate provisions that reduce air 
toxics emissions from mobile sources: cold temperature vehicle 
controls, a PFC emissions control program, and a control program 
limiting benzene in gasoline. A full appreciation of the overall 
economic consequences of these provisions requires consideration of the 
benefits and costs expected to result from each standard, not just 
those that could be expressed here in dollar terms. As noted above, due 
to limitations in data availability and analytical methods, our 
benefits analysis only monetizes the PM2.5 benefits from 
direct PM emission reductions associated with the cold temperature 
standards. There are a number of health and environmental effects 
associated with the final standards that we were unable to quantify or 
monetize (see Table VIII.E-1).
    Table VIII.E-4 contains the estimates of monetized benefits of the 
final cold temperature vehicle standards only and estimated social 
welfare costs for all of the final control programs.\235\ The annual 
social welfare costs of all provisions of the final rule are described 
more fully in Section VIII.F. It should be noted that the estimated 
social welfare costs for the vehicle program contained in this table 
are for 2019. The 2019 vehicle program costs are included for 
comparison purposes only and are therefore not included in the total 
2020 social costs. There are no compliance costs associated with the 
vehicle program after 2019; as explained elsewhere in this preamble, 
the vehicle compliance costs are primarily R&D and facilities costs 
that are expected to be recovered by manufacturers over the first ten 
years of the program.
---------------------------------------------------------------------------

    \235\ Social costs represent the welfare costs of the rule to 
society. These social costs do not consider transfer payments (such 
as taxes) that are simply redistributions of wealth.
---------------------------------------------------------------------------

    The results in Table VIII.E-4 suggest that the 2020 monetized 
benefits of the cold temperature vehicle standards are greater than the 
expected social welfare costs of that program in 2019. Specifically, 
the annual benefits of the program will be approximately $3,300 + B 
million or $3,000 + B million annually in 2020 (using a 3 percent and 7 
percent discount rate in the benefits analysis, respectively), compared 
to estimated social welfare costs of approximately $10.6 million in the 
last year of the program (2019). These benefits are expected to 
increase to $6,300 + B million or $5,700 + B million annually in 2030 
(using a 3 percent and

[[Page 8518]]

7 percent discount rate in the benefits analysis, respectively), even 
as the social welfare costs of that program fall to zero. Table VIII.E-
4 also presents the costs of the other rule provisions: a PFC emissions 
control program and a control program limiting benzene in gasoline. 
Though we are unable to present the benefits associated with these two 
programs, the benefits associated with the final cold temperature 
vehicle standards alone outweigh the costs of all three rule provisions 
combined.

      Table VIII.E-4.--Summary of Annual Benefits of the Final Cold
 Temperature Vehicle Standards and Costs of All Provisions of the Final
                               Standards a
                       [Millions of 2003 dollars]
------------------------------------------------------------------------
                                   2020 (Millions of   2030 (Millions of
           Description               2003 dollars)       2003 dollars)
------------------------------------------------------------------------
Estimated Social Welfare Costs b
    Cold Temperature Vehicle      $10.6 c...........  $0
     Standards.
    PFC Standards...............  $37.5.............  $45.7
    Fuel Standards d............  $402.6............  $445.8
    Total.......................  $440.1............  $491.5
    Fuel Savings................  -$80.7............  -$91.5
Net Social Welfare Costs          $359.4............  $400.0
------------------------------------------------------------------------
Total PM2.5-Related Health
 Benefits of the
Cold Temperature Vehicle
 Standards e
    3 percent discount rate.....  $3,300 + B f......  $6,300 + B f
    7 percent discount rate.....  $3,000 + B f......  $5,700 + B f
------------------------------------------------------------------------
a All estimates are rounded to two significant digits and represent
  annualized benefits and costs anticipated for the years 2020 and 2030,
  except where noted. Totals may not sum due to rounding.
b Note that costs are the annual costs of reducing all pollutants
  associated with each provision of the final MSAT control package in
  2020 and 2030 (unless otherwise noted). To estimate fixed costs
  associated with the vehicle standards, we use a 7 percent average
  before-tax rate of return over 5 years to amortize the capital fixed
  costs. For the fuel standards, we use a 7 percent before-tax rate of
  return over 15 years to amortize the capital costs. Note that by 2020,
  PFC container standard costs are only variable and do not use a rate
  of return assumption. See Chapters 8 and 9 for discussion of the
  vehicle and fuel standard costs, respectively. In Chapter 13, however,
  we do use both a 3 percent and 7 percent social discount rate to
  calculate the net present value of total social costs consistent with
  EPA and OMB guidelines for preparing economic analyses (US EPA, 2000
  and OMB, 2003).236, 237
c These costs are for 2019; the vehicle program compliance costs
  terminate after 2019 and are included for illustrative purposes. They
  are not included in the total social welfare cost sum for 2020.
d Our modeling for the total costs of the proposed gasoline benzene
  program included participation by California refineries (achieving
  benzene reductions below the 0.62 proposed benzene standard--thus
  generating credits), since it was completed before we decided that
  California gasoline would not be covered by the program. For the final
  rule, we exclude California refineries from the analysis. By excluding
  California refineries, other higher cost refineries will have to
  comply in their place, slightly increasing the costs for the program.
e Annual benefits reflect only direct PM reductions associated with the
  cold temperature vehicle standards. Annual benefits analysis results
  reflect the use of a 3 percent and 7 percent discount rate in the
  valuation of premature mortality and nonfatal myocardial infarctions,
  consistent with EPA and OMB guidelines for preparing economic analyses
  (US EPA, 2000 and OMB, 2003). Valuation of premature mortality based
  on long-term PM exposure assumes discounting over the SAB recommended
  20-year segmented lag structure described in the Regulatory Impact
  Analysis for the Final Clean Air Interstate Rule (March 2005).
  Valuation of nonfatal myocardial infarctions (MI) assumes discounting
  over a 5-year period, reflecting lost earnings and direct medical
  costs following a nonfatal MI. Note that we do not calculate a net
  present value of benefits associated with the cold temperature vehicle
  standards.
f Not all possible benefits or disbenefits are quantified and monetized
  in this analysis. B is the sum of all unquantified benefits and
  disbenefits. Potential benefit categories that have not been
  quantified and monetized are listed in Table VIII.E-1.

F. Economic Impact Analysis

    We prepared an Economic Impact Analysis (EIA) to estimate the 
economic impacts of this rule on the portable fuel container (PFC), 
gasoline fuel, and light-duty vehicle markets. In this section we 
briefly describe the Economic Impact Model (EIM) we developed to 
estimate both the market-level changes in price and outputs for 
affected markets and the social costs of the program and their 
distribution across affected stakeholders. We also present the results 
of our analysis.
---------------------------------------------------------------------------

    \236\ U.S. Environmental Protection Agency, 2000. Guidelines for 
Preparing Economic Analyses. http://yosemite.epa.gov/ee/epa/eed.nsf/
webpages/Guidelines.html.
    \237\ Office of Management and Budget, The Executive Office of 
the President, 2003. Circular A-4. http://www.whitehouse.gov/omb/
circulars.
---------------------------------------------------------------------------

    We estimate the net social costs of the program to be about $359.4 
million in 2020. This estimate reflects the estimated costs associated 
with compliance with the gasoline, PFC, and vehicle controls and the 
expected gasoline fuel savings from better evaporative controls on 
PFCs. The results of the economic impact modeling performed for the 
gasoline fuel and PFC control programs suggest that the social costs of 
those two programs are expected to be about $440.1 million in 2020, 
with consumers of these products expected to bear about 58.4 percent of 
these costs. We estimate gasoline fuel savings of about $80.7 million 
in 2020, which will accrue to consumers. There are no social costs 
associated with the vehicle program in 2020 (these accrue only in the 
10-year period from 2010 through 2019). These estimates, and all costs 
presented in this section, are in year 2003 dollars.
    With regard to market-level impacts in 2020, the maximum price 
increase for gasoline fuel is expected to be about 0.3 percent (0.5 
cents per gallon), for PADD 5. The price of PFCs is expected to 
increase by about 1.9 percent ($0.20 per can) in areas that already 
have PFC requirements and 32.5 percent ($1.52 per can) in areas that do 
not.
    Detailed descriptions of the EIM, the model inputs, modeling 
results, and several sensitivity analyses can be found in Chapter 13 of 
the Regulatory Impact Analysis prepared for this rule.
1. What Is an Economic Impact Analysis?
    An Economic Impact Analysis (EIA) is prepared to inform decision 
makers about the potential economic consequences of a regulatory 
action. The analysis consists of estimating the social costs of a 
regulatory program and the distribution of these costs across 
stakeholders. These estimated social costs can then be compared with 
estimated social benefits (as presented

[[Page 8519]]

in Section VIII.E). As defined in EPA's Guidelines for Preparing 
Economic Analyses, social costs are the value of the goods and services 
lost by society resulting from a) the use of resources to comply with 
and implement a regulation and b) reductions in output.\238\ In this 
analysis, social costs are explored in two steps. In the market 
analysis, we estimate how prices and quantities of goods affected by 
the emission control program can be expected to change once the program 
goes into effect. In the economic welfare analysis, we look at the 
total social costs associated with the program and their distribution 
across stakeholders.
---------------------------------------------------------------------------

    \238\ EPA Guidelines for Preparing Economic Analyses, EPA 240-R-
00-003, September 2000, p 113. A copy of this document can be found 
at http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/
Guidelines.html#download.
---------------------------------------------------------------------------

2. What Is the Economic Impact Model?
    The Economic Impact Model (EIM) is a behavioral model developed to 
estimate price and quantity changes and total social costs associated 
with the emission controls set out in this rule. The EIM simulates how 
producers and consumers of affected products can be expected to respond 
to an increase in production costs associated with compliance with the 
emission control program. In this EIM, compliance costs are directly 
borne by producers of affected goods. Depending on the producers' and 
consumers' sensitivity to price changes, producers may be able to pass 
some or all of these compliance costs on to the consumers of these 
goods in the form of higher prices. Consumers adjust their consumption 
of affected goods in response to these price changes. This information 
is passed back to the producers in the form of purchasing decisions. 
The EIM takes these behavioral responses into account to estimate new 
market equilibrium quantities and prices for all modeled sectors and 
the resulting distribution of social costs across these stakeholders 
(producers and consumers).
3. What Economic Sectors Are Included in this Economic Impact Analysis?
    There are three economic sectors affected by the control programs 
described in this rule: PFCs, gasoline fuel, and light-duty vehicles. 
In this Economic Impact Analysis we model only the impacts on the PFC 
and gasoline fuel markets. We did not model the impacts on the light-
duty vehicle market. This is because the compliance costs for the 
vehicle program are expected to be very small, less than $1 per vehicle 
and, even if passed on entirely, are unlikely to affect producer or 
consumer behavior. Therefore, we do not expect these controls to affect 
the quantity of vehicles produced or their prices. At the same time, 
however, the light-duty vehicle compliance costs are a cost to society 
and should be included in the economic welfare analysis. We do this by 
adding the vehicle program engineering compliance cost estimates to the 
estimated social costs of the gasoline and PFC programs.
    With regard to the gasoline fuel and PFC markets, we model the 
impacts on residential users of these products. This means that we 
focus the analysis on the use of these products for personal 
transportation (gasoline fuel) or residential lawns and garden care or 
recreational uses (PFCs) and do not separately model how the costs of 
complying with the standards may affect the production of goods and 
services that use gasoline fuel or PFCs as production inputs. We 
believe this approach is reasonable because the commercial share of the 
end-user markets for both gasoline fuel and PFCs is relatively 
small.239, 240 In addition, for most commercial users the 
share of the cost of these products to total production costs is also 
small (e.g., the cost of a PFC is only a very small part of the total 
production costs for an agricultural or construction firm). Therefore, 
a price increase of the magnitude anticipated for this control program 
is not expected to have a noticeable impact on prices or quantities of 
goods produced using these inputs (e.g., agricultural product or 
buildings).
---------------------------------------------------------------------------

    \239\ The U.S Department of Energy estimates that about 92 
percent of gasoline used in the United States for transportation is 
used in light-duty vehicles. About 6 percent is used for commercial 
or industrial transportation, and the remaining 2 percent is used in 
recreational marine vessels. See U.S Department of Energy, Energy 
Information Administration, 2004. ``Annual Energy Outlook 2004 with 
projections to 2025.'' Last updated June 2, 2004. Table A-2 and 
Supplemental Table 34. http://www.eia.doe.gov/oiaf/aeoref_tab.html.
    \240\ A recent study by CARB (1999) found that 94 percent of 
portable fuel containers in California were used by residential 
households California Environmental Protection Agency, Air Resources 
Board (CARB) 1999. See ``Hearing Notice and Staff Report, Initial 
Statement of Reasons for Proposed Rule Making Public Hearing to 
Consider the Adoption of Portable Fuel Container Spillage Control 
Regulation.'' Sacrament, CA: California Environmental Protection 
Agency, Air Resources Board (CARB). A copy of this document is 
available at http://www.arb.ca.gov/regact/spillcon/isor.pdf.
---------------------------------------------------------------------------

    With regard to the gasoline fuel analysis, it should be noted that 
this EIA does not include California fuels in the market analysis. 
California currently has state-level controls that address air toxics 
from gasoline. Also, consistent with the cost analysis, the economic 
impact analysis does not distinguish between reformulated and 
conventional gasoline fuels.
    The EIM models the economic impacts on two PFC markets (states that 
currently have requirements for PFCs and those that do not), and four 
gasoline fuel markets (PADDs 1+3, PADD 2, PADD 4, PADD 5). The markets 
included in this EIA are described in more detail in Chapter 13 of the 
RIA for this rule.
    In the EIM, the gasoline fuel and PFC markets are not linked (there 
is no feedback mechanism between the PFC and gasoline fuel model 
segments). This is because these two sectors represent different 
aspects of fuel consumption (fuel storage and fuel production) and 
production and consumption of PFCs is not expected to have an impact on 
the production and supply of gasoline, and vice versa. Production and 
consumption of each of these products are the result of other factors 
that have little cross-over impacts (the need for fuel storage; the 
need for personal transportation).
4. What Are the Key Features of the Economic Impact Model?
    A detailed description of the features of the EIM and the data used 
in the analysis is provided in Chapter 13 of the RIA prepared for this 
rule. The model methodology is firmly rooted in applied microeconomic 
theory and was developed following the methodology set out in the 
OAQPS's Economic Analysis Resource Document.\241\
---------------------------------------------------------------------------

    \241\ U.S. Environmental Protection Agency, Office of Air 
Quality Planning and Standards, Innovative Strategies and Economics 
Group, OAQPS Economic Analysis Resource Document, April 1999. A copy 
of this document can be found at http://www.epa.gov/ttn/ecas/
econdata/Rmanual2/.
---------------------------------------------------------------------------

    The EIM is a computer model comprised of a series of spreadsheet 
modules that simulate the supply and demand characteristics of the 
affected markets. The initial market equilibrium conditions are shocked 
by applying the compliance costs for the control program to the supply 
side of the markets (this is done by shifting the relevant supply 
curves by the amount of the compliance costs). The model equations can 
be analytically solved for equilibrium prices and quantities for the 
markets with the regulatory program and these new prices and quantities 
are used to estimate the social costs of the model and how those costs 
are shared among affected markets.
    The EIM is a partial equilibrium, intermediate-run model that 
assumes perfect competition in the relevant markets. As explained in 
EPA's Guidelines for Preparing Economic Analyses, ``partial 
equilibrium'' means that the model considers markets in

[[Page 8520]]

isolation and that conditions in other markets are assumed either to be 
unaffected by a policy or unimportant for social cost estimation.\242\ 
The use of the intermediate run means that some factors of production 
are fixed and some are variable. In very short analyses, all factors of 
production would be assumed to be fixed, leaving the producers with no 
means to respond to the increased production costs associated with the 
regulation (e.g., they cannot adjust labor or capital inputs). Under 
this time horizon, the costs of the regulation fall entirely on the 
producer. In the long run, all factors of production are variable and 
producers can adjust production in response to cost changes imposed by 
the regulation (e.g., using a different labor/capital mix). In the 
intermediate run there is some resource immobility which may cause 
producers to suffer producer surplus losses, but they can also pass 
some of the compliance costs to consumers.
---------------------------------------------------------------------------

    \242\ EPA Guidelines for Preparing Economic Analyses, EPA 240-R-
00-003, September 2000, p. 125-6.
---------------------------------------------------------------------------

    The perfect competition assumption is widely accepted economic 
practice for this type of analysis, and only in rare cases are other 
approaches used.\243\ It should be noted that the perfect competition 
assumption is not primarily about the number of firms in a market. It 
is about how the market operates: the nature of the competition among 
firms. Indicators that allow us to assume perfect competition include 
absence of barriers to entry, absence of strategic behavior among firms 
in the market, and product differentiation.
---------------------------------------------------------------------------

    \243\ See, for example, EPA Guidelines for Preparing Economic 
Analyses, EPA 240-R-00-003, September 2000, p 126.
---------------------------------------------------------------------------

    With regard to the fuel market, the Federal Trade Commission (FTC) 
has developed an approach to ensure competitiveness in gasoline fuel 
markets. It reviews oil company mergers and frequently requires 
divestiture of refineries, terminals, and gas stations to maintain a 
minimum level of competition. This is discussed in more detail in the 
industry profile prepared for this rule.\244\
---------------------------------------------------------------------------

    \244\ Section 3 Industry Organization, ``Characterizing Gasoline 
Markets: a Profile,'' Final Report, prepared for EPA by RTI, August 
2005.
---------------------------------------------------------------------------

    With regard to the PFC market, the small number of firms in the 
market is offset by several features of this market. Because PFCs are 
compact and lightweight, they are easy to transport far from their 
place of manufacture. This means that production is not limited to 
local producers. Although they vary by size and material, consumers are 
likely to view all PFCs designed for storing a particular fuel 
(gasoline, diesel fuel, kerosene) as good substitutes for the storage 
of that particular fuel. Because the products are similar enough to be 
considered homogeneous (e.g., perfectly substitutable), consumers can 
shift their purchases from one manufacturer to another. There are only 
minimal technical barriers to entry that would prevent new firms from 
freely entering the market, since manufacturing is based on well-known 
plastic processing methods. In addition, there is significant excess 
capacity, enabling competitors to respond quickly to changes in price. 
Excess production capacity in the general container manufacturing 
market also means that manufacturers could potentially switch their 
product lines to compete in this segment of the market, often without a 
significant investment. In addition, there is no evidence of high 
levels of strategic behavior in the price and quantity decisions of the 
firms. Finally, it should be noted that contestable market theory 
asserts that oligopolies and even monopolies will behave very much like 
firms in a competitive market if manufacturers have extra production 
capacity and this capacity could allow them to enter the market 
costlessly (i.e., there are no sunk costs associated with this kind of 
market entry or exit).\245\ As a result of all of these conditions, 
producers and consumers in the PFC market are expected to take the 
market price as given when making their production and consumption 
choices and the market can be modeled as a competitive market even 
though the number of producers is small.
---------------------------------------------------------------------------

    \245\ A monopoly or firms in oligopoly may not behave as 
neoclassical economic theories of the firm predict because they may 
be concerned about new entrants to the market. If super-normal 
profits are earned, potential competitors may enter the market. To 
respond to this threat, existing firm(s) in the market will keep 
prices and output at a level where only normal profits are made, 
setting price and output levels at or close to the competitive price 
and output. See Chapter 13 of the RIA for more information, Section 
13.2.3.
---------------------------------------------------------------------------

5. What Are the Key Model Inputs?
    Key model inputs for the EIM are the behavioral parameters, 
compliance costs estimates, and market equilibrium quantities and 
prices.
    The EIM is a behavioral model. The estimated social costs of this 
emission control program are a function of the ways in which producers 
and consumers of the PFC and gasoline fuel affected by the standards 
change their behavior in response to the costs incurred in complying 
with the standards. These behavioral responses are incorporated in the 
EIM through the price elasticity of supply and demand (reflected in the 
slope of the supply and demand curves), which measure the price 
sensitivity of consumers and producers. The price elasticities used in 
this analysis are described in Chapter 13 of the RIA. The gasoline 
elasticities were obtained from the literature and are -0.2 for demand 
and 0.2 for supply. This means that both the quantity supplied and 
demanded are expected to be fairly insensitive to price changes and 
that increases in prices are not expected to cause sales to fall or 
production to increase by very much. Because we were unable to find 
published supply and demand elasticities for the PFC market, we 
estimated these parameters using the procedures described in Chapter 13 
of the RIA. This approach yielded a demand elasticity of -0.01 and a 
supply elasticity of 1.5. The estimated demand elasticity is nearly 
perfectly inelastic (equal to zero), which means that changes in price 
are expected to have very little effect on the quantity of PFCs 
demanded. However, supply is fairly elastic, meaning producers are 
expected to respond to a change in price. Therefore, consumers are 
expected to bear more of the burden of PFC regulatory control costs 
than producers.
    Initial market equilibrium conditions are simulated using the same 
current year sales quantities and growth rates used in the engineering 
cost analysis. The initial equilibrium prices for PFCs and gasoline 
fuel were obtained from industry sources and published government data. 
The initial equilibrium market conditions are shocked by applying the 
engineering compliance cost estimates described earlier in this 
section. Although both the PFC and gasoline fuel markets are 
competitive markets, the model is shocked by applying the sum of 
variable and fixed costs. Two sets of compliance costs are used in the 
PFC market analysis, reflecting states with existing controls and 
states without existing controls. The compliance costs used to shock 
the gasoline fuel market are based on an average total cost (variable + 
fixed) analysis. An explanation for this approach can be found in 
Section 13.2.4.1 of the RIA prepared for this rule. These gasoline fuel 
compliance costs differ across PADDs but are the same across years. 
Because California already has existing gasoline fuel controls, fuel 
volumes for that state are not included in the market analysis.
    Additional costs that need to be considered in the EIM are the 
gasoline fuel savings associated with the PFC controls and the costs of 
the light-duty vehicle controls. The PFC controls are

[[Page 8521]]

expected to reduce gasoline evaporative emissions from fuel storage, 
leading to gasoline fuel savings for users of these containers. These 
gasoline fuel savings are not included in the market analysis for this 
economic impact analysis because these savings are not expected to 
affect consumer decisions with respect to the purchase of new 
containers. Gasoline fuel savings are included in the social cost 
analysis, however, because they are a savings that accrues to society. 
The estimated gasoline fuel savings are added to the estimated social 
costs as a separate line item. As noted above, the economic impacts of 
the light-duty vehicle controls are not modeled in the EIM. Instead, 
the estimated engineering compliance costs are used as a proxy, and are 
also added into the estimated social costs as a separate line item.
    The EIM relies on the estimated compliance costs for the PFC and 
gasoline fuel programs described elsewhere in this preamble. Thus, the 
EIM reflects cost savings associated with ABT or other flexibility 
programs to the extent they are included in the estimated compliance 
costs.
6. What Are the Results of the Economic Impact Modeling?
    Using the model and data described above, we estimated the economic 
impacts of the rule. The results of our modeling for selected years are 
summarized in this section. The year 2009 is presented because that is 
the first year in which both the PFC and the gasoline programs are in 
effect (the PFC program begins in 2009; the gasoline fuel program goes 
into effect January 1, 2011 but the compliance cost analysis includes a 
phase-in starting in 2007 that ends May 2015). The year 2012 is 
presented because it is a high cost year due to the way the fuel 
program compliance costs were estimated.\246\ The year 2015 is 
presented because beginning with that year compliance costs are 
stabilized for future years for both the gasoline and PFC programs (the 
vehicle program compliance costs continue for five more years). 
Detailed results for all years are included in the appendices to 
Chapter 13 of the RIA. Also included as an appendix to that chapter are 
sensitivity analyses for several key inputs.
---------------------------------------------------------------------------

    \246\ Actual fuel program compliance costs are expected to be 
spread more evenly across years.
---------------------------------------------------------------------------

    Market Impact Analysis. In the market analysis, we estimate how 
prices and quantities of goods affected by the emission control program 
can be expected to change once the program goes into effect. As 
explained above, we estimated market impacts for only the gasoline fuel 
and PFC markets. The analysis relies on the baseline equilibrium prices 
and quantities for each market and the price elasticity of supply and 
demand. It predicts market reactions to the increase in production 
costs due to the new compliance costs. It should be noted that this 
analysis does not allow any other factors to vary. In other words, it 
does not consider that manufacturers may adjust their production 
processes or marketing strategies in response to the control program.
    The market analysis results for 2009, 2012, 2015, and 2020 are 
presented in Table VIII.F-1. With regard to the gasoline fuel program, 
the market impacts are expected to be small, on average. The price of 
gasoline fuel is expected to increase by less than 0.5 percent, 
depending on PADD, with smaller increases during the program phase-in. 
The expected reduction in quantity of fuel produced is expected to be 
less than 0.1 percent.
    The market impacts for the PFC program are expected to be more 
significant. In 2009, the first year of the PFC program, the model 
predicts a price increase of about seven percent for PFCs in states 
that currently have regulations for PFCs and about 57 percent for those 
that do not. Even with these large price increases, however, the 
quantity produced is not expected to decrease by very much: less than 
0.6 percent. These percent price increases and quantity decreases are 
much smaller after the first five years. In 2015, the estimated PFC 
price increase is expected to be less than two percent for states that 
currently regulate PFCs and about 32.5 percent for states without such 
regulations. The quantity produced is expected to decrease by less than 
0.4 percent. The results for 2020 are substantially the same as 2015, 
with a larger decrease in the number of PFCs produced.

                                     Table VIII.F-1.--Summary of Market Impacts (2009, 2012, 2015, and 2020; 2003$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Change in price                     Change in quantity
                          Market                            Engineering cost ---------------------------------------------------------------------------
                                                                per unit           Absolute           Percent            Absolute           Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             [cent]/gallon      [cent]/gallon    .................             Million gallons
                                                          ----------------------------------------------------------------------------------------------
Gasoline Fuel:
    PADD 1 & 3...........................................              0.016              0.009              0.006               -0.9             -0.001
    PADD 2...............................................              0.091              0.050              0.033               -2.7             -0.007
    PADD 4...............................................              0.033              0.018              0.011               -0.1             -0.002
    PADD 5 (w/out CA)....................................              0.007              0.004              0.002               -0.0              0.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     $/can
                                                                       Thousand cans
                                                          ----------------------------------------------------------------------------------------------
Portable Fuel Containers:
    States with existing programs........................               0.77               0.76                6.9               -8.0              -0.07
    States without existing programs.....................               2.70               2.68               57.5             -104.7              -0.57
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                [cent]/gallon
                                                                      Million gallons
                                                          ----------------------------------------------------------------------------------------------
Gasoline Fuel:
    PADD 1 & 3...........................................              0.058              0.032              0.021               -3.3             -0.004
    PADD 2...............................................              0.308              0.168              0.111               -9.7             -0.022

[[Page 8522]]

 
    PADD 4...............................................              0.213              0.116              0.074               -0.8             -0.015
    PADD 5 (w/out CA)....................................              0.140              0.768              0.046               -0.8             -0.009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     $/can
                                                                       Thousand cans
                                                          ----------------------------------------------------------------------------------------------
Portable Fuel Containers:
    States with existing programs........................               0.77               0.76                6.9               -8.5              -0.07
    States without existing programs.....................               2.70               2.68               57.5             -111.1              -0.57
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 [cent]/gallon
                                                                      Million gallons
                                                          ----------------------------------------------------------------------------------------------
Gasoline Fuel:
    PADD 1 & 3...........................................              0.149              0.081              0.055               -8.9             -0.011
    PADD 2...............................................              0.307              0.167              0.111              -10.4             -0.022
    PADD 4...............................................              0.501              0.273              0.174               -1.8             -0.035
    PADD 5 (w/out CA)....................................              0.997              0.544              0.327               -6.1             -0.065
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     $/can
                                                                       Thousand cans
                                                          ----------------------------------------------------------------------------------------------
Portable Fuel Containers:
    States with existing programs........................               0.21               0.20                1.9               -2.4              -0.02
    States without existing programs.....................               1.53               1.52               32.5              -66.7              -0.32
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 [cent]/gallon
                                                                      Million gallons
                                                          ----------------------------------------------------------------------------------------------
Gasoline Fuel:
    PADD 1 & 3...........................................              0.149              0.081              0.055               -9.5             -0.011
    PADD 2...............................................              0.307              0.167              0.111              -10.7             -0.022
    PADD 4...............................................              0.501              0.273              0.174               -2.0             -0.035
    PADD 5 (w/out CA)....................................              0.997              0.544              0.327               -6.4             -0.065
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     $/can
                                                                       Thousand cans
                                                          ----------------------------------------------------------------------------------------------
Portable Fuel Containers:
    States with existing programs........................               0.21               0.20                1.9               -2.7              -0.02
    States without existing programs.....................               1.53               1.52               32.5              -73.6              -0.32
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Economic Welfare Analysis. In the economic welfare analysis, we 
look at the costs to society of the emission control program in terms 
of losses to key stakeholder groups that are the producers and 
consumers in the gasoline and PFC markets. These surplus losses are 
combined with estimated vehicle compliance costs, gasoline fuel 
savings, and government revenue losses to estimate the net economic 
welfare impacts of the program. Detailed economic welfare results for 
the rule are presented in Appendix C and are summarized below.
    The estimated annual net social costs (total social costs less 
gasoline fuel savings) for all years are presented in Table VIII.F-2. 
These social costs follow the trend of the fuel program compliance 
costs. Initially, the estimated social costs of the program are 
relatively small as the gasoline program begins to phase in. The net 
social costs increase to 2012, fall somewhat for 2013 and 2014 due to 
changes in the fuel program compliance costs, and then increase again 
in 2015, after which time the per-gallon costs are expected to be 
stable. Some of the decrease in social costs in 2014 is also due to a 
decrease in costs associated with the PFC program, since fixed costs 
are fully amortized by 2014. The slight decrease in 2020 is due to the 
end of the vehicle compliance costs, which are incurred in the 10-year 
period from 2010 through 2019.

   Table VIII.F-2.--Estimated Engineering Compliance and Social Costs
                              Through 2035
                [Including fuel savings; $million; 2003$]
------------------------------------------------------------------------
                                            Engineering
                  Year                      compliance     Social costs
                                               costs
------------------------------------------------------------------------
2007....................................           $29.5           $29.5
2008....................................            51.3            51.3
2009....................................            99.0            98.9
2010....................................           161.9           161.7
2011....................................           152.6           152.4
2012....................................           228.7           228.5
2013....................................           190.9           190.8
2014....................................           150.8           150.7
2015....................................           350.8           350.7
2016....................................           354.5           354.4
2017....................................           358.0           357.9
2018....................................           361.9           361.8
2019....................................           366.1           366.0
2020....................................           359.5           359.4
2021....................................           363.5           363.4
2022....................................           367.1           367.0
2023....................................           370.7           370.6
2024....................................           374.7           374.6
2025....................................           378.7           378.6
2026....................................           383.1           383.0

[[Page 8523]]

 
2027....................................           387.5           387.4
2028....................................           391.6           391.4
2029....................................           396.0           395.9
2030....................................           400.1           400.0
2031....................................           404.6           404.5
2032....................................           409.2           409.1
2033....................................           413.9           413.7
2034....................................           418.6           418.4
2035....................................           423.4           423.2
3% NPV (2006-2035)......................         5,356.8         5,354.6
7% NPV (2006-2035)......................         2,901.0         2,899.7
------------------------------------------------------------------------

    Table VIII.F-3 shows how the social costs are expected to be shared 
across stakeholders, for selected years. Information for all years can 
be found in Appendix C. According to these results, consumers are 
expected to bear approximately 99 percent of the cost of the PFC 
program. This reflects the inelastic price elasticity on the demand 
side of the market and the elastic price elasticity on the supply side. 
The burden of the gasoline fuel program is expected to be shared more 
evenly, with about 54.5 percent expected to be borne by consumers and 
about 45.5 percent expected to be borne by producers. In all years, the 
estimated loss to consumer welfare will be offset somewhat by the 
gasoline fuel savings associated with PFCs. Beginning at about $11 
million per year, these savings increase to about $76 million by 2015 
as compliant PFCs are phased in. These savings continue for the life of 
the PFCs; total annual savings increase as the number of cans 
increases.

                 Table VIII.F-3.--Summary of Estimated Social Costs, 2009, 2012, 2015, and 2020
                                                [$million; 2003$]
----------------------------------------------------------------------------------------------------------------
                                                                     Change in       Change in
                             Market                                  consumer        producer          Total
                                                                      surplus         surplus
----------------------------------------------------------------------------------------------------------------
                                                      2009
----------------------------------------------------------------------------------------------------------------
Gasoline U.S....................................................          -$28.5          -$23.8          -$52.3
                                                                         (54.6%)         (45.4%)  ..............
    PADD 1 & 3..................................................           -$6.7           -$5.6          -$12.2
    PADD 2......................................................          -$20.6          -$17.2          -$37.8
    PADD 4......................................................           -$0.9           -$0.7           -$1.6
    PADD 5 (w/out CA)...........................................           -$0.3           -$0.3           -$0.6
Portable Fuel Containers U.S....................................          -$57.5           -$0.4          -$57.9
                                                                         (99.3%)          (0.7%)  ..............
    States with existing programs...............................           -$8.9           -$0.1           -$8.9
    States without existing programs............................          -$48.7           -$0.3          -$49.0
                                                                 -----------------------------------------------
        Subtotal................................................          -$86.1          -$24.1         -$110.2
                                                                         (78.1%)           (22%)  ..............
                                                                 -----------------------------------------------
Fuel Savings....................................................  ..............  ..............           $11.3
Vehicle Program.................................................  ..............  ..............              $0
                                                                 -----------------------------------------------
        Total...................................................  ..............  ..............          -$98.9
----------------------------------------------------------------------------------------------------------------
                                                      2012
----------------------------------------------------------------------------------------------------------------
Gasoline U.S....................................................         -$110.7          -$92.3         -$203.0
                                                                         (54.5%)         (45.5%)  ..............
    PADD 1 & 3..................................................          -$24.8          -$20.7          -$45.5
    PADD 2......................................................          -$73.2          -$61.0         -$134.2
    PADD 4......................................................           -$5.9           -$4.9          -$10.9
    PADD 5 (w/out CA)...........................................           -$6.8           -$4.7          -$12.4
Portable Fuel Containers U.S....................................          -$61.1           -$0.4          -$61.5
                                                                         (99.3%)          (0.7%)  ..............
    States with existing programs...............................           -$9.4           -$0.1           -$9.5
    States without existing programs............................          -$51.7           -$0.4          -$52.1
                                                                 -----------------------------------------------
        Subtotal................................................         -$171.8          -$92.7         -$264.5
                                                                         (65.0%)         (35.0%)  ..............
                                                                 -----------------------------------------------
Fuel Savings....................................................  ..............  ..............           $48.5
Vehicle Program.................................................  ..............  ..............          -$12.5
        Total...................................................  ..............  ..............         -$228.5
----------------------------------------------------------------------------------------------------------------
                                                      2015
----------------------------------------------------------------------------------------------------------------
Gasoline U.S....................................................         -$207.0         -$172.5         -$379.4
                                                                         (54.5%)         (45.5%)  ..............
    PADD 1 & 3..................................................          -$66.3          -$55.3         -$121.6
    PADD 2......................................................          -$75.9          -$63.2         -$139.1

[[Page 8524]]

 
    PADD 4......................................................          -$14.5          -$12.1          -$26.6
    PADD 5 (w/out CA)...........................................          -$50.3          -$41.9          -$92.2
Portable Fuel Containers U.S....................................          -$33.7           -$0.2          -$34.0
                                                                         (99.3%)          (0.7%)  ..............
    States with existing programs...............................           -$2.7            $0.0           -$2.7
    States without existing programs............................          -$31.0           -$0.2          -$31.3
                                                                 -----------------------------------------------
        Subtotal................................................         -$240.7         -$172.7         -$413.4
                                                                         (58.2%)         (41.8%)  ..............
                                                                 -----------------------------------------------
Fuel Savings....................................................  ..............  ..............           $75.5
Vehicle Program.................................................  ..............  ..............          -$12.9
        Total...................................................  ..............  ..............         -$350.7
----------------------------------------------------------------------------------------------------------------
                                                      2020
----------------------------------------------------------------------------------------------------------------
Gasoline U.S....................................................         -$219.6         -$183.0         -$402.6
                                                                         (54.5%)         (45.5%)  ..............
    PADD 1 & 3..................................................          -$70.4          -$58.6         -$129.0
    PADD 2......................................................          -$80.5          -$67.1         -$147.6
    PADD 4......................................................          -$15.4          -$12.8          -$28.2
    PADD 5 (w/out CA)...........................................          -$53.4          -$44.5          -$97.8
Portable Fuel Containers U.S....................................          -$37.2           -$0.2          -$37.5
                                                                         (99.3%)          (0.7%)  ..............
    States with existing programs...............................           -$3.0            $0.0           -$3.0
    States without existing programs............................          -$34.3           -$0.2          -$34.5
                                                                 -----------------------------------------------
        Subtotal................................................         -$256.8         -$183.3         -$440.1
                                                                         (58.4%)         (41.6%)  ..............
                                                                 -----------------------------------------------
Fuel Savings....................................................  ..............  ..............           $80.7
Vehicle Program.................................................  ..............  ..............             -$0
                                                                 -----------------------------------------------
        Total...................................................  ..............  ..............         -$359.4
----------------------------------------------------------------------------------------------------------------

    The present value of net social costs (discounted back to 2006) of 
the standards through 2035, contained in Table VIII.F-2, is estimated 
to be about $5.4 billion (2003$). This present value is calculated 
using a social discount rate of three percent and the stream of 
economic welfare costs through 2035. We also performed an analysis 
using a seven percent social discount rate.\247\ Using that discount 
rate, the present value of the net social costs through 2035 is 
estimated to be about $2.9 billion (2003$).
---------------------------------------------------------------------------

    \247\ EPA presents the present value of cost and benefits 
estimates using both a three percent and a seven percent social 
discount rate. According to OMB Circular A-4, ``the 3 percent 
discount rate represents the `social rate of time preference' * * * 
[which] means the rate at which `society' discounts future 
consumption flows to their present value''; ``the seven percent rate 
is an estimate of the average before-tax rate of return to private 
capital in the U.S. economy * * * [that] approximates the 
opportunity cost of capital.''

          Table VIII.F-4.--Net Present of Estimated Social Costs 2007 through 2035, Discounted to 2006
                                                [$million; 2003$]
----------------------------------------------------------------------------------------------------------------
                                                                     Change in       Change in
                             Market                                  consumer        producer          Total
                                                                      surplus         surplus
----------------------------------------------------------------------------------------------------------------
Gasoline, U.S...................................................       -$3,115.4       -$2,596.2       -$5,711.6
                                                                         (54.5%)         (45.5%)
    PADD 1 & 3..................................................         -$959.7         -$799.8       -$1,759.5
    PADD 2......................................................       -$1,260.4       -$1,050.4       -$2,310.8
    PADD 4......................................................         -$210.8         -$175.6         -$386.4
    PADD 5 (w/out CA)...........................................         -$229.5         -$570.4       -$1,254.8
                                                                         -$684.5  ..............  ..............
Portable Fuel Containers US.....................................         -$754.9           -$5.0         -$759.9
                                                                         (99.3%)          (0.7%)
    States with existing programs...............................          -$78.7           -$0.5          -$79.3
    States without existing programs............................         -$676.2           -$4.5         -$680.7
                                                                 -----------------------------------------------

[[Page 8525]]

 
        Subtotal................................................        -$3870.3       -$2,601.2       -$6,471.6
                                                                           59.8%           40.2%
                                                                 -----------------------------------------------
Fuel Savings....................................................        $1,208.0  ..............        $1,208.0
Vehicle Program.................................................  ..............          -$91.1          -$91.1
                                                                 -----------------------------------------------
    Total.......................................................       -$2,662.3       -$2,692.3       -$5,354.6
----------------------------------------------------------------------------------------------------------------

    Table VIII.F-4 shows the distribution of total surplus losses for 
the cumulative net social costs of the rule. This analysis includes the 
estimated social costs from 2007 through 2035, discounted to 2006 at a 
3 percent discount rate. These results suggest that consumers will bear 
about 60 percent of the total social costs associated with the PFC and 
gasoline fuel programs for that period. The consumer share of the NPV 
social costs is about $3,870 million, or about 60 percent of the total. 
Of that loss of consumer surplus, about $3,115 million (about 80 
percent) is from the gasoline fuel program. When the total costs of the 
program are taken into account, including the fuel savings and the 
vehicle program costs, the loss of consumer surplus decreases to about 
$2,662.3 million (about 50 percent of the social costs of the program).

IX. Public Participation

    Many interested parties participated in the rulemaking process that 
culminates with this final rule. This process provided opportunity for 
submitting written public comments following the proposal that we 
published on March 29, 2006 (71 FR 15804). We considered these comments 
in developing the final rule. In addition, we held a public hearing on 
the proposed rulemaking on April 12, 2006, and we have considered 
comments presented at the hearing.
    Throughout the rulemaking process, EPA met with stakeholders 
including representatives from the fuel refining and distribution 
industry, automobile industry, emission control manufacturing industry, 
gas can industry, environmental organizations, states, interests, and 
others.
    We have prepared a detailed Summary and Analysis of Comments 
document, which describes comments we received on the proposal and our 
response to each of these comments. The Summary and Analysis of 
Comments is available in the docket for this rule at the internet 
address listed under ADDRESSES, as well as on the Office of 
Transportation and Air Quality Web site (http://www.epa.gov/otaq/
toxics.htm#mobile). In addition, comments and responses for key issues 
are included throughout this preamble.

X. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order (EO) 12866 (58 FR 51735, 
October 4, 1993), this action is an ``economically significant 
regulatory action'' because it is likely to ``have an annual effect on 
the economy of $100 million or more'' and ``raise novel legal and 
policy issues.'' Accordingly, EPA submitted this action to the Office 
of Management and Budget (OMB) for review under EO 12866, and any 
changes made in response to OMB recommendations have been documented in 
the docket for this action.
    A final Regulatory Impact Analysis has been prepared and is 
available in the docket for this rulemaking and at the docket internet 
address listed under ADDRESSES.

B. Paperwork Reduction Act

    The information collection requirements in this rule have been 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The 
information collection requirements are not enforceable until OMB 
approves them.
    The Agency will collect information to ensure compliance with the 
provisions in this rule. This includes a variety of requirements, both 
for vehicle manufacturers, fuel producers, and portable fuel container 
manufacturers. Information-collection requirements related to vehicle 
manufacturers are in EPA ICR 0783.52 (OMB Control Number 2060-
0104); requirements related to fuel producers are in EPA ICR 
1591.22 (OMB Control Number 2060-0277); requirements related 
to portable fuel container manufacturers are in EPA ICR 
2213.02. For vehicle and fuel standards, section 208(a) of the 
Clean Air Act requires that manufacturers provide information the 
Administrator may reasonably require to determine compliance with the 
regulations; submission of the information is therefore mandatory. We 
will consider confidential all information meeting the requirements of 
section 208(c) of the Clean Air Act. For portable fuel container 
standards, recordkeeping and reporting requirements for manufacturers 
would be pursuant to the authority of sections 183(e) and 111 of the 
Clean Air Act.
    As shown in Table X.B-1, the total annual burden associated with 
this rule is about 28,000 hours and $1,993,723, based on a projection 
of 521 respondents. The estimated burden for vehicle manufacturers and 
fuel producers is a total estimate for both new and existing reporting 
requirements. The portable fuel container requirements represent our 
first regulation of these containers, so those burden estimates reflect 
only new reporting requirements. Burden means the total time, effort, 
or financial resources expended by persons to generate, maintain, 
retain, or disclose or provide information to or for a Federal agency. 
This includes the time needed to review instructions; develop, acquire, 
install, and utilize technology and systems for the purposes of 
collecting, validating, and verifying information, processing and 
maintaining information, and disclosing and providing information; 
adjust the existing ways to comply with any previously applicable 
instructions and requirements; train personnel to be able to respond to 
a collection of information; search data sources; complete and review 
the collection of information; and transmit or otherwise disclose the 
information.

[[Page 8526]]



                   Table X.B-1.--Estimated Burden for Reporting and Recordkeeping Requirements
----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Annual burden
                         Industry sector                            respondents        hours       Annual costs
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................              35             770         $80,900
Fuels...........................................................             476          26,592      *1,888,032
Portable fuel containers........................................              10             638          24,791
                                                                 -----------------------------------------------
    Total.......................................................             521          28,000      1,993,723
----------------------------------------------------------------------------------------------------------------
*Does not include non-postage purchased services of approximately $1,988,000.

    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
    When this ICR is approved by OMB, the Agency will publish a 
technical amendment to 40 CFR part 9 and 48 CFR chapter 15 in the 
Federal Register to display the OMB control number for the approved 
information collection requirements contained in this final rule. EPA 
received various comments on the rulemaking provisions covered by the 
ICRs, but no comments on the paperwork burden or other information in 
the ICRs. All comments that were submitted to EPA are considered in the 
relevant Summary and Analysis of Comments, which can be found in the 
docket.

C. Regulatory Flexibility Act (RFA), as Amended by the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et 
seq.

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

------------------------------------------------------------------------
                                      Defined as small
                                      entity by SBA if     NAICS  Codes
             Industry                less than or equal         \a\
                                             to:
------------------------------------------------------------------------
Light-duty vehicles:
    --vehicle manufacturers         1,000 employees.....          336111
     (including small volume
     manufacturers).
    --independent commercial        $6 million annual             811111
     importers.                      sales.                       811112
                                                                  811198
    --alternative fuel vehicle      100 employees.......          424720
     converters.
                                    1,000 employees.....          335312
                                    $6 million annual             811198
                                     sales.
Gasoline fuel refiners............  1500 employees \b\..          324110
Portable fuel container
 manufacturers:
    --plastic container             500 employees.......          326199
     manufacturers.
    --metal gas can manufacturers.  1,000 employees.....         332431
------------------------------------------------------------------------
Notes:
\a\ North American Industrial Classification System
\b\ EPA has included in past fuels rulemakings a provision that, in
  order to qualify for EPA's small refiner flexibilities, a refiner must
  also produce no greater than 155,000 bpcd crude capacity.

    Pursuant to section 603 of the RFA, EPA prepared an initial 
regulatory flexibility analysis (IRFA) for the proposed rule and 
convened a Small Business Advocacy Review Panel (SBAR Panel, or the 
`Panel') to obtain advice and recommendations of representatives of the 
regulated small entities. A detailed discussion of the Panel's advice 
and recommendations is found in the Panel Report (see Docket EPA-HQ-
OAR-2005-0036). A summary of the Panel's recommendations is presented 
at 71 FR 15922 (March 29, 2006).
    As required by section 604 of the RFA, we also prepared a final 
regulatory flexibility analysis (FRFA) for today's final rule. The FRFA 
addresses the issues raised by public comments on the IRFA, which was 
part of the proposal of this rule. The FRFA is available for review in 
Chapter 14 of the RIA and is summarized below.
    Key elements of our FRFA include:
     A description of the reasons the Agency is considering 
this action, and the need for, and objectives of, the rule;
     A summary of the significant issues raised by the public 
comments on the IRFA, a summary of the Agency's assessment of those 
issues, and any changes made to the proposed rule as a result of those 
comments;
     A description of the types and number of small entities to 
which the rule will apply;
     A description of the reporting, recordkeeping, and other 
compliance requirements of the rule;
     An identification, to the extent practicable, of all 
relevant Federal rules that may duplicate, overlap, or conflict with 
the rule; and
     A description of the steps taken to minimize the 
significant economic impact on small entities consistent with

[[Page 8527]]

the stated objectives of the applicable statutes.
2. The Need for and Objectives of This Rule
    Mobile sources emit air toxics that can cause cancer and other 
serious health effects (Section III of this preamble and Chapter 1 of 
the Regulatory Impact Analysis for this rule describe these compounds 
and their health effects). Mobile sources contribute significantly to 
the nationwide risk from breathing outdoor sources of air toxics. In 
this action we are finalizing: Standards to limit the exhaust 
hydrocarbons from passenger vehicles during cold temperature operation; 
evaporative hydrocarbon emissions standards for passenger vehicles; 
limiting the average annual benzene content of gasoline; and 
hydrocarbon emissions standards for gas cans that would reduce 
evaporation, permeation, and spillage from these containers. (Detailed 
discussions of each of these programs are in sections V, VI, and VII of 
the preamble and Chapters 5, 6, and 7 of the RIA). Standards for 
vehicles and gasoline benzene control are being pursued under section 
202(l)(2) of the Clean Air Act (CAA), which directs EPA to establish 
requirements to control emissions of mobile source air toxics from new 
motor vehicles and fuels. Controls for gas cans are being pursued under 
CAA section 183(e), the provisions applying to consumer and commercial 
products.
3. Summary of the Significant Issues Raised by the Public Comments
    We did not receive comments on the proposed flexibilities and 
hardships for small volume vehicle manufacturers or gas can 
manufacturers. We received comments from small refiners supporting the 
inclusion of flexibility provisions and hardships for small gasoline 
refiners. These comments generally supported additional lead-time, 
credit generation provisions (early credit generation and extra credit 
life for credits generated by or transferred to small refiners), and a 
review of the credit program.
    Small refiners also indicated that they could incur significant 
economic impact in complying with the 1.3 vol% refinery maximum average 
benzene standard. Our economic analysis indicates that most small 
refiners will be able to comply with this standard without incurring 
significant adverse economic impact. We also believe that allowing 
additional lead time (until July 1, 2016) to meet this standard 
ameliorates potential economic impact. In addition, we believe that any 
other refiners that still demonstrate instances of severe economic 
impact can be accommodated through the hardship relief provision set 
out in the regulations at Sec.  80.1335. This issue is discussed in 
more detail in section VI.A.3, in chapter 14 of the final RIA, and in 
individual comment responses.
    We also received comments regarding the fact that two recent 
statutes use definitions that are not the same as the small refiner 
criteria that we proposed. The commenters generally stated that EPA 
should use one of the definitions from those statutes. However, we do 
not believe that it would be appropriate to change the small refiner 
employee count or crude capacity limit criteria to fit either of those 
programs' definitions; rather, we believe that it is prudent to 
continue using criteria similar to our current and previous fuel 
programs. (Please see section VI.A.3.a.i above for a more detailed 
discussion of this comment and our response.)
4. Summary of Regulated Small Entities
    The following section discusses the small entities directly 
regulated by this action.
a. Highway Light-Duty Vehicles
    In addition to the major vehicle manufacturers, three distinct 
categories of businesses relating to highway light-duty vehicles will 
be covered by the new vehicle standards: small volume manufacturers 
(SVMs), independent commercial importers (ICIs), and alternative fuel 
vehicle converters. SVMs are companies that sell less than 15,000 
vehicles per year, as defined in past EPA regulations, and this status 
allows vehicle models to be certified under a slightly simpler 
certification process. Independent commercial importers are companies 
that hold a Certificate (or certificates) of Conformity permitting them 
to alter imported vehicles to meet U.S. emission standards. Alternative 
fuel vehicle converters are businesses that convert gasoline or diesel 
vehicles to operate on alternative fuel, and converters must seek a 
certificate for all of their vehicle models. From an assessment 
performed for our SBREFA Panel process, we continue to believe that 
there are about 14 SVMs, 10 alternative fuel vehicle converters, and 10 
ICIs. Of these, EPA believes 5 SVMs, 6 converters, and all 10 ICIs 
would meet the small-entity criteria as defined by SBA (no major 
vehicle manufacturers meet the small-entity criteria). It is believed 
that these small entities comprise about 0.02 percent of the total 
light-duty vehicle sales in the U.S. for the year 2004.
b. Gasoline Refiners
    EPA's current assessment is that 14 refiners (owning 16 refineries) 
meet SBA's criterion of having 1,500 employees or less and our 
criterion of having a crude capacity of less than or equal to 155,000 
bpcd. It should be noted that because of the dynamics in the refining 
industry (i.e., mergers and acquisitions) and decisions by some 
refiners to enter or leave the gasoline market, the actual number of 
refiners that ultimately qualify for small refiner status under an MSAT 
program could be different than these estimates. Current data further 
indicates that these refiners produce about 2.5 percent of the total 
gasoline pool.
c. Portable Fuel Container Manufacturers
    EPA conducted an industry profile to identify the manufacturers of 
portable fuel containers--98 percent are plastic containers and 2 
percent are metal gas cans. Using this industry profile, EPA identified 
9 domestic manufacturers and 1 foreign manufacturer. Of these 9 U.S. 
manufacturers, 8 meet the SBA definition of a small entity. One small 
business accounted for over 50 percent of the U.S. sales in 2002, and 
the other small entities comprised about 10 percent of U.S. sales.
5. Description of the Reporting, Recordkeeping, and Other Compliance 
Requirements of the Rule
    For highway light-duty vehicles, the reporting, recordkeeping, and 
compliance requirements prescribed for this category in 40 CFR 86 will 
be continued. Key among these requirements are certification 
requirements and provisions related to reporting of production, 
emissions information, flexibility use, etc.
    For any fuel control program, EPA must have assurance that fuel 
produced by refiners meets the applicable standard, and that the fuel 
continues to meet the standard as it passes downstream through the 
distribution system to the ultimate end user. As stated in section VI 
above, the recordkeeping, reporting and compliance provisions of the 
MSAT program will be consistent with those currently in place for 
existing fuel programs. These provisions include: The submission of 
refinery pre-compliance reports (similar to those required under the 
highway and nonroad diesel fuel programs), the submission of refinery 
batch reports, small refiner status and small refiner baseline 
applications, and retention of

[[Page 8528]]

all records for this program for five years.
    For portable fuel containers, requirements similar to those in the 
California program (such as submitting emissions testing information, 
reporting of certification families, and use of transition provisions) 
were proposed and are being finalized today.
6. Relevant Federal Rules
    We are aware of a few other current or proposed Federal rules that 
are related to this rule. The primary related federal rules are the 
first MSAT rule (66 FR 17230, March 29, 2001), the Tier 2 Vehicle/
Gasoline Sulfur rulemaking (65 FR 6698, February 10, 2000), the fuel 
sulfur rules for highway diesel (66 FR 5002, January 18, 2001) and 
nonroad diesel (69 FR 38958, June 29, 2004), the Reformulated Gasoline 
and Anti-dumping rule (59 FR 7813 and 59 FR 7860, February 16, 1994), 
and the Cold Temperature Carbon Monoxide Rulemaking (57 FR 31888, July 
17, 1992).
    In addition, the Evaporative Emissions Streamlining Direct Final 
Rulemaking was issued on December 8, 2005 (70 FR 72917). For portable 
fuel containers, the Occupational Safety and Health Administration 
(OSHA) has safety regulations for containers used in workplace 
settings. Containers that meet OSHA's requirements, commonly called 
safety cans, are exempt from the California program, and we are thus 
exempting them from the EPA program.
    Section 1501 of the Energy Policy Act of 2005 requires the Agency 
to implement a Renewable Fuels Standard (RFS) program. Beginning in 
2006, this program will require increasing volumes of renewable fuel to 
be used in gasoline, until a total of 7.5 billion gallons is required 
in 2012. The most prevalent renewable fuel is expected to be ethanol. 
There are a wide variety of potential impacts of ethanol blending on 
MSAT emissions that will be evaluated as part of the RFS rulemaking 
process. In general, as ethanol use increases, other sources of octane 
in gasoline can decrease. Depending on these changes, the impact on 
benzene emissions will vary. The specific effects of ethanol on benzene 
are addressed in the Regulatory Impact Analysis (RIA) to this rule and 
in other fuels rulemakings, such as the RFS rule (71 FR 55552, 
September 22, 2006).
7. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities
a. Significant Panel Findings
    The SBAR Panel considered many regulatory options and flexibilities 
that would help mitigate potential adverse effects on small businesses 
as a result of this rule. During the SBREFA Panel process, the Panel 
sought out and received comments on the regulatory options and 
flexibilities that were presented to Small Entity Representatives 
(SERs) and Panel members. The major flexibilities and hardship relief 
provisions that were recommended by the Panel were proposed and are 
generally being finalized today (for more information regarding the 
Panel process, see Section 9 of the SBREFA Final Panel Report, which is 
available in the public docket for this rule).
b. Outreach With Small Entities (and the Panel Process)
    As required by section 609(b) of the RFA as amended by SBREFA, EPA 
conducted outreach to small entities and convened a SBAR Panel prior to 
proposing the MSAT rule to obtain advice and recommendations of 
representatives of the small entities that potentially would be subject 
to the rule's requirements.
    As part of the SBAR Panel process, we conducted outreach with 
representatives from the various small entities that would be affected 
by the rule. We met with these SERs to discuss the potential rulemaking 
approaches and potential options to decrease the impact of the 
rulemaking on their industries. The Panel received written comments 
from the SERs, specifically on regulatory alternatives that could help 
to minimize the rule's impact on small businesses.
    In general, SERs representing the portable fuel container industry 
raised concerns on how the MSAT rule's requirements would be 
coordinated with the California program and other requirements, and 
that there should be adequate opportunity for sell through at the start 
of the program. The small volume manufacturer, ICI, and vehicle 
converter SERs that participated had questions about the form of the 
new standards for light-duty vehicles, specifically testing and 
certification requirements. The gasoline refiner SERs generally stated 
that they believed that small refiners would face challenges in meeting 
a new standard. More specifically, they raised the concern that the 
rule could be very costly and dependence on credits may not be a 
comfortable situation; they were also concerned about the timing of the 
standards for this rule, given other upcoming fuel standards.
    The Panel agreed that EPA should consider the issues raised by the 
SERs (and discussions had by the Panel itself) and that EPA should 
consider comments on flexibility alternatives that would help to 
mitigate any negative impacts on small businesses. Alternatives 
discussed throughout the Panel process included those offered in 
previous or current EPA rulemakings, as well as alternatives suggested 
by SERs and Panel members, and the Panel recommended that all be 
considered in the development of the rule.
    A summary of the Panel's recommendations, what the Agency proposed, 
and what is being finalized today is discussed below. A detailed 
discussion of the regulatory alternatives and hardship provisions 
discussed and recommended by the Panel can be found in the SBREFA Final 
Panel Report. A complete discussion of the transition and hardship 
provisions that are being finalized today can be found in Sections V, 
VI, and VII (vehicle, fuels, and portable fuel container sections) of 
this preamble.
c. Small Business Flexibilities
i. Highway Light-Duty Vehicles
(a) Highway Light-Duty Vehicle Flexibilities
    For certification purposes (and for the sake of simplicity for 
Panel discussions regarding flexibility options), SVMs include ICIs and 
alternative fuel vehicle converters since they sell less than 15,000 
vehicles per year. Similar to the flexibility provisions implemented in 
the Tier 2 rule, the Panel recommended that we allow SVMs (includes all 
vehicle small entities that would be affected by this rule, which are 
the majority of SVMs) the following flexibility options for meeting 
cold temperature NMHC standards and evaporative emission standards:
    Cold NMHC Standards--The Panel recommended that SVMs simply comply 
with the standards with 100 percent of their vehicles during the last 
year of the four-year phase-in period. For example, if the standard for 
light-duty vehicles and light light-duty trucks (0 to 6,000 pounds 
GVWR) were to begin in 2010 and end in 2013 (25%, 50%, 75%, 100% phase-
in over four years), the SVM provision would be 100 percent in 2013. If 
the standard for heavy light-duty trucks and medium-duty passenger 
vehicles (greater than 6,000 pounds GVWR) were to start in 2012 (25%, 
50%, 75%, 100% phase-in over four years), the SVM provision would be 
100 percent in 2015.
    Evaporative Emission Standards--The Panel recommended that since 
the evaporative emissions standards will not have phase-in years, we 
allow SVMs to simply comply with standards during

[[Page 8529]]

the third year of the program (we have implemented similar provisions 
in past rulemakings). For a 2009 start date for light-duty vehicles and 
light light-duty trucks, SVMs would need to meet the evaporative 
emission standards in 2011. For a 2010 implementation date for heavy 
light-duty trucks and medium-duty passenger vehicles, SVMs would need 
to comply in 2012.
    We proposed the recommendations given by the Panel for these small 
business entities. We agree that SVMs may need additional lead time 
flexibility and the new cold NMHC standards for LDVs and LLDTs will 
begin in model year 2010 and end in model year 2013, therefore we are 
finalizing (as proposed) that the SVM provision would be 100 percent in 
model year 2013. Also, since the new cold NMHC standard for HLDTs and 
MDPVs will begin in 2012, we are finalizing as proposed that the SVM 
provision will be 100 percent in model year 2015. We believe that the 
Panel's recommendation for flexibilities with regard to the evaporative 
emission standards is reasonable. Therefore, for a 2009 model year 
start date for LDVs and LLDTs we proposed, and are finalizing, that 
SVMs meet the evaporative emission standards in model year 2011. For a 
model year 2010 implementation date for HLDTs and MDPVs, we proposed 
and are finalizing that SVMs comply in model year 2012. (Please see 
section V.E.1 for a greater discussion on flexibility provisions for 
small volume manufacturers.)
(b) Highway Light-Duty Vehicle Hardships
    In addition, the Panel recommended that hardship flexibility 
provisions be extended to SVMs for the cold temperature VOC and 
evaporative emission standards. The provisions that the Panel 
recommended are:
    SVMs would be allowed to apply (EPA would need to review and 
approve application) for up to an additional 2 years to meet the 100 
percent phase-in requirements for cold VOC and the delayed requirement 
for evaporative emissions. Appeals for such hardship relief must be 
made in writing, must be submitted before the earliest date of 
noncompliance, must include evidence that the noncompliance will occur 
despite the manufacturer's best efforts to comply, and must include 
evidence that severe economic hardship will be faced by the company if 
the relief is not granted.
    We proposed the Panel-recommended flexibility and hardship 
provisions described above, and we are finalizing these provisions in 
this action. (Please see section V.E.2 for a greater discussion on the 
hardship provisions for small volume manufacturers.)
(c) Special Provisions for Independent Commercial Importers (ICIs)
    Although the SBAR panel did not specifically recommend it, we 
proposed, and are finalizing, that ICIs may participate in the 
averaging, banking, and trading (ABT) program for cold temperature NMHC 
fleet average standards, but with appropriate constraints to ensure 
that fleet averages will be met. The existing regulations for ICIs 
specifically prohibit ICIs from participating in emission-related 
averaging, banking, and trading programs unless specific exceptions are 
provided. However, an exception for ICIs to participate in an 
averaging, banking, and trading program was made for the Tier 2 
NOX fleet average standards, and today we are finalizing as 
proposed to apply a similar exception for the cold temperature NMHC 
fleet average standards. We also proposed, and are finalizing, that 
ICIs not be allowed to utilize the deficit carry-forward provisions of 
the ABT program. (Please see section V.E.3 for a greater discussion on 
the hardship provisions for small volume manufacturers.)
ii. Gasoline Refiners
(a) Gasoline Refiner Flexibilities
    The Panel recommended that EPA propose certain provisions to 
encourage early compliance with lower benzene standards. The Panel 
recommended that EPA propose that small refiners be afforded the 
following flexibility options to help mitigate the impacts on small 
refiners:
    Delay in Standards--The Panel recommended that a four-year delay 
period be proposed for small refiners (in order to allow for a review 
of the ABT program, as discussed below, to occur one year after 
implementation but still roughly three years prior to the small refiner 
compliance deadline). It was noted by the small refiners that three 
years are generally needed for small refiners to obtain financing and 
perform engineering and construction. The Panel was also in support of 
allowing for refinery expansion within the delay option, and 
recommended that refinery expansion be provided for in the rule.
    Early ABT Credits--The Panel recommended that small refiners be 
eligible to generate early credits if they take some steps to meet the 
0.62 vol% benzene requirement prior to the effective date of the 
standard. Depending on the start date of the program, and coupled with 
the four-year delay option for small refiners, a small refiner could 
have a total credit generation period of five to seven years. The Panel 
was also in support of allowing refiners (small, as well as non-small, 
refiners) to generate credits for reductions to their benzene emissions 
levels, rather than credits only for meeting the 0.62 vol% benzene 
standard that is set by the rule.
    ABT Program Review--The Panel recommended a review of the credit 
trading program and small refiner flexibility options one year after 
the general program starts. The Panel further recommended that the 
review could take into account the number of early credits generated, 
as well as the number of credits generated and sold during the first 
year of the program. The Panel recommended that if the review were to 
conclude that changes to either the program or the small refiner 
provisions were necessary, EPA should also consider some of the 
suggestions provided by the small refiners (their comments are located 
in Appendix E of the Final Panel Report), such as:
     The general MSAT program should require pre-compliance 
reporting (similar to EPA's highway and nonroad diesel rules);
     Following the review, EPA should revisit the small refiner 
provisions if it is found that the credit trading market does not 
exist, or if credits are only available at a cost that would not allow 
small refiners to purchase credits for compliance;
     The review should offer ways either to help the credit 
market, or help small refiners gain access to credits (e.g., EPA could 
`create' credits to introduce to the market, EPA could impose 
additional requirements to encourage trading with small refiners, 
etc.).
     In addition, the Panel recommended that EPA consider in 
this rulemaking establishing an additional hardship provision to assist 
those small refiners that cannot comply with the MSAT with a viable 
credit market. (This suggested hardship provision was also suggested by 
the small refiners in their comments, located in Appendix E of the 
Final Panel Report). This hardship provision would address concerns 
that, for some small refineries, compliance may be technically feasible 
only through the purchase of credits and it may not be economically 
feasible to purchase those credits. This flexibility would be provided 
to a small refiner on a case-by-case basis following the review and 
based on a summary, by the refiner, of technical or financial 
infeasibility (or some other type of similar situation that would 
render its compliance with the standard difficult). This hardship

[[Page 8530]]

provision might include further delays and/or a slightly relaxed 
standard on an individual refinery basis for a duration of two years; 
in addition, this provision might allow the refinery to request, and 
EPA grant, multiple extensions of the flexibility until the refinery's 
material situation changes. The Panel also stated that it understood 
that EPA may need to modify or rescind this provision, should it be 
implemented, based on the results of the program review.
    We proposed and are finalizing the recommended four-year period of 
additional lead time (until January 1, 2015, four years after the 
general program start date) for compliance with the 0.62 vol% benzene 
standard. With respect to the 0.62 vol% standard, we agreed that a 
four-year period of additional lead time for small refiners would 
provide these refiners with roughly three years of lead time following 
the review of the credit program to complete capital projects if 
necessary or desirable to meet the 0.62 vol% benzene standard rather 
than to rely on credits. Further, we are finalizing an additional 18 
months of lead time for small refiners to comply with the 1.3 vol% 
maximum average benzene standard (similar to 18-month lead-time 
afforded under the general program), until July 1, 2016. We likewise 
believe that this additional lead-time will provide small refiners with 
appropriate additional opportunity to raise capital and complete 
projects necessary to comply with the maximum average benzene standard.
    With regard to credits, we proposed the Panel's recommendation that 
small refiners that take steps to meet the 0.62 vol% benzene 
requirement prior to January 1, 2015 would be eligible to generate 
early credits, and that credits remain available for small refiners for 
an additional amount of time. Early credit generation opportunities 
will provide more credits for the MSAT ABT program and will help to 
achieve the air quality goals of the MSAT program earlier than 
otherwise required. Therefore, we are finalizing an early credit 
generation provision for small refiners. Further, we believe that some 
incentive to trade credits with small refiners is warranted to help 
ensure that sufficient credits are available. Therefore, as stated 
above in section VI.A.3, we are finalizing the proposed provision that 
standard credits that are traded to, and ultimately used by, small 
refiners have an additional credit life of two years beyond the limit 
that is otherwise allowed.
    We proposed that we would perform a review of the ABT program (and 
thus, the small refiner flexibility options) by 2012, one year after 
the general program begins. We are finalizing this provision today. In 
part to support this review, we are also requiring that refiners submit 
pre-compliance reports. If, following the review, EPA finds that the 
credit market is not adequate to support the small refiner provisions, 
we will revisit the provisions to determine whether or not they should 
be altered or whether EPA can assist the credit market (and small 
refiners' access to credits) to enable a successful ABT program. We are 
finalizing an additional hardship provision to assist small refiners if 
it is found that some small refiners still cannot comply with the 0.62 
vol% benzene standard even with a viable credit market. The provision 
will only be available following the ABT program review and will only 
be afforded to small refiners on a case-by-case basis, and is in 
addition to the general refiner hardship provisions that are available 
to all refiners. Please see section VI.A.3.a.iii of this preamble for a 
more detailed discussion of this hardship provision.
(b) Gasoline Refiner Hardships
    During the Panel process, we stated that we intended to propose the 
extreme unforeseen circumstances hardship and extreme hardship 
provisions (for all gasoline refiners and importers), similar to those 
in prior fuels programs. A hardship based on extreme unforeseen 
circumstances is intended to provide short-term relief due to 
unanticipated circumstances beyond the control of the refiner, such as 
a natural disaster or a refinery fire; an extreme hardship is intended 
to provide short-term relief based on extreme circumstances (e.g., 
extreme financial problems, extreme operational or technical problems, 
etc.) that impose extreme hardship and thus significantly affect a 
refiner's ability to comply with the program requirements by the 
applicable dates. The Panel agreed with the proposal of such provisions 
and recommended that we include them in the MSAT rulemaking; thus, we 
proposed these provisions.
    We are finalizing the extreme hardship provision and the extreme 
unforeseen circumstances hardship provision with some modifications, as 
this final rule includes a 1.3 vol% refinery maximum average benzene 
standard. As discussed in more detail in section VI.A.3.b, relief will 
be granted on a case-by-case basis; however, it may differ somewhat 
depending upon whether a refiner applies for hardship relief for the 
0.62 vol% benzene standard or for the 1.3 vol% refinery maximum average 
standard (while a refiner may apply for relief from both standards, 
hardship relief will be addressed independently for each standard). 
This is partly due to the fact that a refiner may use credits to meet 
the 0.62 vol% benzene standard, but credits cannot be used for 
compliance with the 1.3 vol% refinery maximum average.
    Extreme hardship circumstances could exist based on severe economic 
or physical lead time limitations of the refinery to comply with the 
required benzene standards at the start of the program. For relief from 
the 0.62 vol% benzene standard in extreme hardship circumstances, 
relief will likely be in the form of an extension of the one-year 
deficit carry-forward allowed by the rule. Relief from the 1.3 vol% 
refinery maximum average benzene standard in extreme hardship 
circumstances would consist of additional time to comply with the 1.3 
vol% refinery maximum average. Refiners must apply by January 1, 2008 
(or, January 1, 2013 for approved small refiners) for extreme hardship 
relief from the 1.3 vol% refinery maximum average standard, as this 
provision is intended to address unusual circumstances that should be 
apparent now, or well before the standard takes effect.
    The extreme unforeseen circumstances hardship is available to both 
refiners and importers, and is intended to provide relief in extreme 
and unusual circumstances outside a refiner or importer's control that 
could not have been avoided through the exercise of due diligence. 
Hardship relief for the 0.62 vol% benzene standard will allow a deficit 
to be carried forward for an extended, but limited, time period (more 
than the one year allowed by the rule). Relief from the 1.3 vol% 
refinery maximum average benzene standard based on unforeseen 
circumstances will be granted on a case-by-case basis, following an 
assessment of the hardship application, and would generally be in the 
form of an extension of time to comply with the standard.
iii. Portable Fuel Containers
(a) Portable Fuel Container Flexibilities
    Since nearly all portable fuel container manufacturers are small 
entities and they account for about 60 percent of sales, the Panel 
planned to extend the flexibility options to all portable fuel 
container manufacturers. Moreover, implementation of the program would 
be much simpler by doing so. The recommended flexibilities are the 
following:
    Design Certification--The Panel recommended that we propose to 
permit portable fuel container manufacturers to

[[Page 8531]]

use design certification in lieu of running any or all of the 
durability aging cycles. Manufacturers could demonstrate the durability 
of their gas cans based in part on emissions test data from designs 
using the same permeation barriers and materials. Under a design-based 
certification program, a manufacturer would provide evidence in the 
application for certification that their container would meet the 
applicable standards based on its design (e.g., use of a particular 
permeation barrier). The manufacturer would submit adequate engineering 
and other information about its individual design such that EPA could 
determine that the emissions performance of their individual design 
would not be negatively impacted by slosh, UV exposure, and/or pressure 
cycling (whichever tests the manufacturer is proposing to not run prior 
to emissions testing).
    Broaden Certification Families--This approach would relax the 
criteria used to determine what constitutes a certification family. It 
would allow small businesses to limit their certification families (and 
therefore their certification testing burden), rather than testing all 
of the various size containers in a manufacturer's product line. Some 
small entities may be able to put all of their various size containers 
into a single certification family. Manufacturers would then certify 
their containers using the ``worst case'' configuration within the 
family. To be grouped together, containers would need to be 
manufactured using the same materials and processes even though they 
are of different sizes.
    Additional Lead-time--Since it may take additional time for the 
portable fuel container SERs to gather information to fully evaluate 
whether or not additional lead-time is needed beyond the 2009 start 
date, the Panel recommended that we discuss lead-time in the proposal 
and request comments on the need for additional lead-time to allow 
manufacturers to ramp up to a nationwide program.
    Product Sell-through--As with past rulemakings for other source 
sectors, the Panel recommended that EPA propose to allow normal sell 
through of portable fuel containers as long as manufacturers do not 
create stockpiles of noncomplying portable fuel containers prior to the 
start of the program.
    We proposed these Panel-recommended flexibilities for all portable 
fuel container manufacturers. As stated above, we did not receive any 
comments on the proposed flexibilities, and are therefore finalizing 
them as proposed (the flexibility provisions are incorporated into the 
program requirements described earlier in sections VII.B through 
VII.D).
(b) Portable Fuel Container Hardships
    The Panel recommended that EPA propose two types of hardship 
programs for small portable fuel container manufacturers.
    The first would allow small manufacturers to petition EPA for 
limited additional lead-time to comply with the standards. A 
manufacturer would have to demonstrate that it has taken all possible 
business, technical, and economic steps to comply, but the burden of 
compliance costs would have a significant adverse effect on the 
company's solvency. Hardship relief may include requirements for 
interim emission reductions.
    The second hardship provision would permit small manufacturers to 
apply for hardship relief if circumstances outside their control cause 
the failure to comply (i.e., supply contract broken by parts supplier) 
and if failure to sell the subject containers would have a major impact 
on the company's solvency. The terms and timeframe of the relief would 
depend on the specific circumstances of the company and the situation 
involved.
    We proposed, and are finalizing, the above hardship provisions for 
portable fuel container manufacturers. These entities could, on a case-
by-case basis, face hardship, and we are finalizing these provisions to 
provide what could prove to be needed safety valves for these entities. 
For both types of hardship provisions, the length of the hardship 
relief will be established, during the initial review, for not more 
than one year and will be reviewed annually thereafter as needed. 
(Please see section VII.F for a more detailed discussion of these 
hardship provisions.)
    As required by section 212 of SBREFA, EPA also is preparing a Small 
Entity Compliance Guide to help small entities comply with this rule. 
The compliance guide will be available on the Web at: http://
www.epa.gov/otaq/toxics.htm.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective, or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective, or least burdensome alternative if the 
Administrator publishes with the final rule an explanation of why that 
alternative was not adopted.
    Before EPA establishes any regulatory requirements that may 
significantly or uniquely affect small governments, including tribal 
governments, it must have developed under section 203 of the UMRA a 
small government agency plan. The plan must provide for notifying 
potentially affected small governments, enabling officials of affected 
small governments to have meaningful and timely input in the 
development of EPA regulatory proposals with significant federal 
intergovernmental mandates, and informing, educating, and advising 
small governments on compliance with the regulatory requirements.
    This 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 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. EPA believes that the final rule 
represents the least costly, most cost-effective approach to achieve 
the statutory requirements of the rule. The costs and benefits 
associated with the final rule are discussed above and in the 
Regulatory Impact Analysis, as required by the UMRA.

E. 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

[[Page 8532]]

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.''
    This final 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.
    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. EPA has also consulted 
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 solicited comment on the proposed rule 
from State and local officials.

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

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.''
    This final rule does not have tribal implications as specified in 
Executive Order 13175. This rule will be implemented at the Federal 
level and impose compliance costs only on vehicle manufacturers 
(includes alternative fuel vehicle converters and ICIs), fuel 
producers, and portable gasoline container manufacturers. Tribal 
governments will be affected only to the extent they purchase and use 
regulated vehicles, fuels, and portable gasoline containers. Thus, 
Executive Order 13175 does not apply to this rule.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    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 final rule is subject to the Executive Order because it is an 
economically significant regulatory action as defined by Executive 
Order 12866, and we believe that by addressing the environmental health 
or safety risk this action may have a disproportionate beneficial 
effect on children. Accordingly, we have evaluated the potential 
environmental health or safety effects of VOC and toxics emissions from 
gasoline-fueled mobile sources and gas cans on children. The results of 
this evaluation are described below and contained in sections III and 
IV.
    Exposure to a number of the compounds addressed in this rule may 
have a disproportionate effect on children. First, exposure to 
carcinogens that cause cancer through a mutagenic mode of action during 
childhood development may have an incrementally disproportionate 
impact. Because of their small size, increased activity, and increased 
ventilation rates compared to adults, children may have greater 
exposure to these compounds in the ambient air, on a unit body weight 
basis. Moreover, for PM, because children's breathing rates are higher, 
their exposures may be higher and because their respiratory systems are 
still developing, children may be more susceptible to problems from 
exposure to respiratory irritants.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This rule is not a ``significant energy action'' as defined in 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355 
(May 22, 2001)) because it is not likely to have a significant adverse 
effect on the supply, distribution, or use of energy. The gasoline 
benzene provisions of the final rule will shift about 12,500 barrels 
per day of benzene from the gasoline market to the petrochemical 
market. This volume represents about 0.1 percent of nationwide gasoline 
production. The actual impact of the rule on the gasoline market, 
however, is likely to be less due to offsetting changes in the 
production of petrochemicals, as well as expected growth in the 
petrochemical market absent this rule. The major sources of benzene for 
the petrochemical market other than reformate from gasoline production 
are also derived from gasoline components or gasoline feedstocks. 
Consequently, the expected shift toward more benzene production from 
reformate due to this final rule will be offset by less benzene 
produced from other gasoline feedstocks.
    The rule will require refiners to use a small additional amount of 
energy in processing gasoline to reduce benzene levels, primarily due 
to the increased energy used for benzene extraction. Our modeling of 
increased energy use indicates that the process energy used by refiners 
to produce gasoline would increase by about 0.6 percent (or, six-tenths 
of a percent). Overall, we believe that the final rule will result in 
no significant adverse energy impacts.
    The gasoline benzene provisions will not affect the current 
gasoline distribution practices.
    We discuss our analysis of the energy and supply effects of the 
gasoline benzene standard further in section VIII of this preamble and 
in Chapter 9 of the Regulatory Impact Analysis.
    The fuel supply and energy effects described above will be offset 
substantially by the positive effects on gasoline supply and energy use 
of the gas can standards also promulgated in today's action. These 
provisions will greatly reduce the gasoline lost to evaporation from 
gas cans. This will in turn reduce the demand for gasoline, increasing 
the gasoline supply and reducing the energy used in producing gasoline.

I. National Technology Transfer Advancement Act

    As noted in the proposed rule, Section 12(d) of the National 
Technology Transfer and Advancement Act of 1995 (``NTTAA''), Public Law 
104-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary 
consensus standards in its regulatory activities unless to do so 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) that are 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 rulemaking involves technical standards. Therefore, the Agency

[[Page 8533]]

conducted a search to identify potentially applicable voluntary 
consensus standards. However, we identified no such standards. 
Therefore, for the cold temperature NMHC standards, EPA will use the 
existing EPA cold temperature CO test procedures (manufacturers 
currently measure hydrocarbon emissions with current cold CO test 
procedures), which were adopted in a previous EPA rulemaking (1992). 
The fuel standards referenced in today's rule involve the measurement 
of gasoline fuel parameters. The measurement standards for gasoline 
fuel parameters referenced in today's rulemaking are government-unique 
standards that were developed by the Agency through previous 
rulemakings. Both the cold temperature CO test procedures and the 
measurement standards for gasoline fuel parameters have served the 
Agency's emissions control goals well since their implementation and 
have been well accepted by industry. For gas cans, EPA is promulgating 
new procedures for measuring hydrocarbon emissions.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has determined that this final rule will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it does not 
affect the level of protection provided to human health or the 
environment.
    The final rule will reduce VOC and toxic emissions from gasoline-
fueled mobile sources (particularly highway light-duty vehicles) and 
gas cans, and thus, it will decrease the amount of air pollution to 
which the entire population is exposed. The rule will also reduce PM 
emissions from highway light-duty vehicles. EPA evaluated the 
population residing close to high traffic density (near roadways), and 
we found that this population has demographic differences from the 
general population, including a greater fraction of lower income and 
minority residents. The rule will reduce emissions from roadways. Since 
those living near roadways are more likely to be lower income and 
minority residents, this population will have a disproportionate 
benefit from the rule. Thus, this rule does not have a 
disproportionately high adverse human health or environmental effect on 
minority populations.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States 
before the rule is published in the Federal Register. This rule is a 
``major rule'' as defined by 5 U.S.C. 804(2).

XI. Statutory Provisions and Legal Authority

    Statutory authority for the fuels controls in this final rule can 
be found in sections 202 and 211(c) of the Clean Air Act (CAA), as 
amended, 42 U.S.C. 7521 and 7545(c). Additional support for the 
procedural and enforcement-related aspects of the fuel controls in this 
final rule, including the recordkeeping requirements, come from 
sections 114(a) and 301(a) of the CAA, 42 U.S.C. 7414(a) and 7601(a).
    Statutory authority for the vehicle controls in this final rule can 
be found in sections 202, 206, 207, 208, and 301 of the CAA, 42 U.S.C. 
7521, 7525, 7541, 7542 and 7601.
    Statutory authority for the portable fuel container controls in 
this final rule can be found in sections 183(e) and 111 of the CAA, 42 
U.S.C. sections 7511b(e) and 7411.

List of Subjects

40 CFR Part 59

    Environmental protection, Administrative practice and procedure, 
Confidential business information, Incorporation by reference, 
Labeling, Consumer or Commercial Products pollution, Penalties, 
Reporting and recordkeeping requirements.

40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives, 
Gasoline, Imports, Incorporation by reference, Labeling, Motor vehicle 
pollution, Penalties, Reporting and recordkeeping requirements.

40 CFR Part 85

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

40 CFR Part 86

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

    Dated: February 9, 2007.
Stephen L. Johnson,
Administrator.

0
For the reasons set forth in the preamble, parts 59, 80, 85 and 86 of 
title 40 of the Code of Federal Regulations are amended as follows:

PART 59--NATIONAL VOLATILE ORGANIC COMPOUND EMISSION STANDARDS FOR 
CONSUMER AND COMMERCIAL PRODUCTS

0
1. The authority citation for part 59 is revised to read as follows:

    Authority: 42 U.S.C. 7414 and 7511b(e).

Subpart E--[Added and Reserved]

0
2a. Add and reserve Subpart E.
0
2b. A new Subpart F is added to part 59 to read as follows:
Subpart F--Control of Evaporative Emissions From New and In-Use 
Portable Fuel Containers

Overview and Applicability

Sec.
59.600 Does this subpart apply for my products?
59.601 Do the requirements of this subpart apply to me?
59.602 What are the general prohibitions and requirements of this 
subpart?
59.603 How must manufacturers apply good engineering judgment?
59.605 What portable fuel containers are excluded from this 
subpart's requirements?
59.607 Submission of information.

Emission Standards and Related Requirements

59.611 What evaporative emission requirements apply under this 
subpart?
59.612 What emission-related warranty requirements apply to me?
59.613 What operation and maintenance instructions must I give to 
buyers?
59.615 How must I label and identify the portable fuel containers I 
produce?

[[Page 8534]]

Certifying Emission Families

59.621 Who may apply for a certificate of conformity?
59.622 What are the general requirements for obtaining a certificate 
of conformity and producing portable fuel containers under it?
59.623 What must I include in my application?
59.624 How do I amend my application for certification?
59.625 How do I select emission families?
59.626 What emission testing must I perform for my application for a 
certificate of conformity?
59.627 How do I demonstrate that my emission family complies with 
evaporative emission standards?
59.628 What records must I keep and what reports must I send to EPA?
59.629 What decisions may EPA make regarding my certificate of 
conformity?
59.630 EPA testing.
59.650 General testing provisions.
59.652 Other procedures.
59.653 How do I test portable fuel containers?

Special Compliance Provisions

59.660 Exemption from the standards.
59.662 What temporary provisions address hardship due to unusual 
circumstances?
59.663 What are the provisions for extending compliance deadlines 
for manufacturers under hardship?
59.664 What are the requirements for importing portable fuel 
containers into the United States?

Definitions and Other Reference Information

59.680 What definitions apply to this subpart?
59.685 What symbols, acronyms, and abbreviations does this subpart 
use?
59.695 What provisions apply to confidential information?
59.697 State actions.
59.698 May EPA enter my facilities for inspections?
59.699 How do I request a hearing?

Subpart F--Control of Evaporative Emissions From New and In-Use 
Portable Fuel Containers

Overview and Applicability


Sec.  59.600  Does this subpart apply for my products?

    (a) Except as provided in Sec.  59.605 and paragraph (b) of this 
section, the regulations in this subpart F apply for all portable fuel 
containers (defined in Sec.  59.680) that are manufactured on or after 
January 1, 2009.
    (b) See Sec.  59.602 (a) and (b) to determine how to apply the 
provisions of this subpart for containers that were manufactured before 
January 1, 2009.


Sec.  59.601  Do the requirements of this subpart apply to me?

    (a) Unless specified otherwise in this subpart, the requirements 
and prohibitions of this subpart apply to all manufacturers and 
importers of portable fuel containers. Certain prohibitions in Sec.  
59.602 apply to all other persons.
    (b) New portable fuel containers that are subject to the emissions 
standards of this part must be covered by a certificate of conformity 
that is issued to the manufacturer of the container. If more than one 
person meets the definition of manufacturer for a portable fuel 
container, see Sec.  59.621 to determine if you are the manufacturer 
who may apply for and receive a certificate of conformity.
    (c) Unless specifically noted otherwise, the term ``you'' means 
manufacturers, as defined in Sec.  59.680.


Sec.  59.602  What are the general prohibitions and requirements of 
this subpart?

    (a) General prohibition for manufacturers and importers. No 
manufacturer or importer may sell, offer for sale, introduce or deliver 
for introduction into commerce in the United States, or import any new 
portable fuel container that is subject to the emissions standards of 
this subpart and is manufactured after December 31, 2008 unless it is 
covered by a valid certificate of conformity, it is labeled as 
required, and it complies with all of the applicable requirements of 
this subpart, including compliance with the emissions standards for its 
useful life. After June 30, 2009, no manufacturer or importer may sell, 
offer for sale, introduce or deliver into commerce in the United 
States, or import any new portable fuel container that was manufactured 
prior to January 1, 2009 unless it meets the requirements of this 
subpart.
    (b) General prohibition for wholesale distributors. No wholesale 
distributor may sell, offer for sale, or distribute any portable fuel 
container in the United States that is subject to the emissions 
standards of this subpart and is manufactured after December 31, 2008 
unless it is covered by a valid certificate of conformity and is 
labeled as required. After December 31, 2009, no wholesale distributor 
may sell, offer for sale, or distribute in the United States any 
portable fuel container that was manufactured prior to January 1, 2009 
unless it meets the requirements of this subpart. After December 31, 
2009, all new portable fuel containers shall be deemed to be 
manufactured after December 31, 2008 unless they are in retail 
inventory.
    (c) Reporting and recordkeeping. (1) You must keep the records and 
submit the reports specified in Sec.  59.628. Records must be retained 
for at least 5 years from the date of manufacture or importation and 
must be supplied to EPA upon request.
    (2) No person may alter, destroy, or falsify any record or report 
required by this subpart.
    (d) Testing and access to facilities. You may not keep us from 
entering your facility to observe tests or inspect facilities if we are 
authorized to do so. Also, you must perform the tests we require (or 
have the tests done for you). Failure to perform this testing is 
prohibited.
    (e) Warranty. You may not fail to offer, provide notice of, or 
honor the emissions warranty required under this subpart.
    (f) Replacement components. No person may sell, offer for sale, 
introduce or deliver for introduction into commerce in the United 
States, import, or install any replacement component for portable fuel 
containers subject to the standards of this subpart where the component 
has the effect of disabling, bypassing, or rendering inoperative the 
emissions controls of the containers.
    (g) Violations. If a person violates any prohibition or requirement 
of this subpart or the Act concerning portable fuel containers, it 
shall be considered a separate violation for each portable fuel 
container.
    (h) Assessment of penalties and injunctions. We may assess 
administrative penalties, bring a civil action to assess and recover 
civil penalties, bring a civil action to enjoin and restrain 
violations, or bring criminal action as provided by the Clean Air Act.


Sec.  59.603  How must manufacturers apply good engineering judgment?

    (a) In addition to other requirements and prohibitions set forth in 
this subpart, you must use good engineering judgment for decisions 
related to any requirements under this subpart. This includes your 
applications for certification, any testing you do to show that your 
portable fuel containers comply with requirements that apply to them, 
and how you select, categorize, determine, and apply these 
requirements.
    (b) Upon request, you must provide EPA a written description of the 
engineering judgment in question. Such information must be provided 
within 15 working days unless EPA specifies a different period of time 
to respond.
    (c) We may reject your decision if it is not based on good 
engineering judgment or is otherwise inconsistent with the requirements 
that apply, and we may--
    (1) Suspend, revoke, or void a certificate of conformity if we 
determine you used incorrect or incomplete

[[Page 8535]]

information or failed to consider relevant information, or that your 
decision was not based on good engineering judgment; or
    (2) Notify you that we believe any aspect of your application or 
other information submission may be incorrect or invalid due to lack of 
good engineering judgment or other cause. Unless a different period is 
specified, you will have 30 days to respond to our notice and 
specifically address our concerns. After considering your information, 
we will notify you regarding our finding, which may include the actions 
provided in paragraph (c)(1) of this section.
    (d) If you disagree with our conclusions under paragraph (c) of 
this section, you may file a request for a hearing with the Designated 
Compliance Officer as described in Sec.  59.699. In your request, you 
must specifically state your objections, and include relevant data or 
supporting analysis. The request must be signed by your authorized 
representative. If we agree that your request raises a substantial 
factual issue, we will hold the hearing according to Sec.  59.699.


Sec.  59.605  What portable fuel containers are excluded from this 
subpart's requirements?

    This section describes exclusions that apply to certain portable 
fuel containers. The prohibitions and requirements of this subpart do 
not apply for containers excluded under this section. Exclusions under 
this section are based on inherent characteristics of the containers. 
See Sec.  59.660 for exemptions that apply based on special 
circumstances.
    (a) Containers approved as safety cans consistent with the 
requirements of 29 CFR 1926.150 through 1926.152 are excluded. Such 
cans generally have a flash-arresting screens, spring-closing lids and 
spout covers and have been approved by a nationally recognized testing 
laboratory such as Factory Mutual Engineering Corp. or Underwriters 
Laboratories, Inc., or Federal agencies such as Bureau of Mines, or 
U.S. Coast Guard.
    (b) Containers with a nominal capacity of less than 0.25 gallons or 
more than 10.0 gallons are excluded.
    (c) Containers designed and marketed solely to deliver fuel 
directly to nonroad engines during engine operation, such as containers 
with a connection for a fuel line and a reserve fuel area, are 
considered to be nonroad fuel tanks, and are thus excluded.


Sec.  59.607  Submission of information.

    (a) You are responsible for all statements you make to us related 
to this subpart F, including information not required during 
certification. You are required to provide truthful and complete 
information. This subpart describes the consequences of failing to meet 
this obligation. The consequences also may include prosecution under 18 
U.S.C. 1001 and 42 U.S.C. 7431(c)(2).
    (b) We may require an officer or authorized representative of your 
company with knowledge of the information contained in the submittal to 
approve and sign any submission of information to us, and to certify 
that all the information submitted is accurate and complete.

Emission Standards and Related Requirements


Sec.  59.611  What evaporative emission requirements apply under this 
subpart?

    (a) Hydrocarbon emissions from portable fuel containers may not 
exceed 0.3 grams per gallon per day when measured with the test 
procedures in Sec. Sec.  59.650 through 59.653. This procedure measures 
diurnal venting emissions and permeation emissions.
    (b) For the purpose of this section, portable fuel containers 
include spouts, caps, gaskets, and other parts provided with the 
container.
    (c) The following general requirements also apply for all portable 
fuel containers subject to the standards of this subpart:
    (1) Prohibited controls. The following controls are prohibited:
    (i) For anyone to design, manufacture, or install emission control 
systems so they cause or contribute to an unreasonable risk to public 
health, welfare, or safety while operating.
    (ii) For anyone to design, manufacture, or install emission control 
systems with features that disable, deactivate, reduce effectiveness, 
or bypass the emission controls, either actively or passively. For 
example, you may not include a manual vent that the operator can open 
to bypass emission controls. You may ask us to allow such features if 
needed for safety reasons or if the features operate during emission 
tests described in subpart F of this part.
    (2) Leaks. You must design and manufacture your containers to be 
free of leaks. This requirement applies when your container is upright, 
partially inverted, or completely inverted.
    (3) Refueling. You are required to design your portable fuel 
containers to minimize spillage during refueling to the extent 
practical. This requires that you use good engineering judgment to 
avoid designs that will make it difficult to refuel typical vehicle and 
equipment designs without spillage.
    (d) Portable fuel containers must meet the standards and 
requirements specified in this subpart throughout the useful life of 
the container. The useful life of the container is five years beginning 
on the date of sale to the ultimate purchaser.


Sec.  59.612  What emission-related warranty requirements apply to me?

    (a) General requirements. You must warrant to the ultimate 
purchaser that the new portable fuel container, including all parts of 
its evaporative emission-control system, is:
    (1) Designed, built, and equipped so it conforms at the time of 
sale to the ultimate purchaser with the requirements of this subpart.
    (2) Is free from defects in materials and workmanship that may keep 
it from meeting these requirements.
    (b) Warranty notice and period. Your emission-related warranty must 
be valid for a minimum of one year from the date of sale to the 
ultimate purchaser.
    (c) Notice. You must provide a warranty notice with each container.


Sec.  59.613  What operation and maintenance instructions must I give 
to buyers?

    You must provide the ultimate purchaser of the new portable fuel 
container written instructions for properly maintaining and using the 
emission-control system.


Sec.  59.615  How must I label and identify the portable fuel 
containers I produce?

    This section describes how you must label your portable fuel 
containers.
    (a) At the time of manufacture, indelibly mark the month and year 
of manufacture on each container.
    (b) Mold into or affix a legible label identifying each portable 
fuel container. The label must be:
    (1) Attached so it is not easily removable.
    (2) Secured to a part of the container that can be easily viewed 
when the can is in use, not on the bottom of the container.
    (3) Written in English.
    (c) The label must include:
    (1) The heading ``EMISSION CONTROL INFORMATION''.
    (2) Your full corporate name, trademark and warranty contact 
information.
    (3) A standardized identifier such as EPA's standardized 
designation for the emission families, the model number, or the part 
number.
    (4) This statement: ``THIS CONTAINER COMPLIES WITH U.S. EPA 
EMISSION REGULATIONS FOR PORTABLE FUEL CONTAINERS (40 CFR Part 59).''.
    (5) This statement: ``THE EMISSIONS WARRANTY IS VALID FOR A MINIMUM 
OF ONE YEAR FROM DATE OF PURCHASE.''.

[[Page 8536]]

    (d) You may add information to the emission control information 
label to identify other emission standards that the container meets or 
does not meet (such as California standards). You may also add other 
information to ensure that the portable fuel container will be properly 
maintained and used.
    (e) You may request that we approve modified labeling requirements 
in this subpart F if you show that it is necessary or appropriate. We 
will approve your request if your alternate label is consistent with 
the requirements of this subpart.
    (f) You may identify the name and trademark of another company 
instead of their own on your emission control information label, 
subject to the following provisions:
    (1) You must have a contractual agreement with the other company 
that obligates that company to take the following steps:
    (i) Meet the emission warranty requirements that apply under Sec.  
59.612. This may involve a separate agreement involving reimbursement 
of warranty-related expenses.
    (ii) Report all warranty-related information to the certificate 
holder.
    (2) In your application for certification, identify the company 
whose trademark you will use and describe the arrangements you have 
made to meet your requirements under this section.
    (3) You remain responsible for meeting all the requirements of this 
subpart.

Certifying Emission Families


Sec.  59.621  Who may apply for a certificate of conformity?

    A certificate of conformity may be issued only to the manufacturer 
that completes the construction of the portable fuel container. In 
unusual circumstances, upon a petition by a manufacturer, we may allow 
another manufacturer of the container to hold the certificate of 
conformity. However, in order to hold the certificate, the manufacturer 
must demonstrate day-to-day ability to ensure that containers produced 
under the certificate will comply with the requirements of this 
subpart.


Sec.  59.622  What are the general requirements for obtaining a 
certificate of conformity and producing portable fuel containers under 
it?

    (a) You must send us a separate application for a certificate of 
conformity for each emission family. A certificate of conformity for 
containers is valid from the indicated effective date until the end of 
the production period for which it is issued. We may require new 
certification prior to the end of the production period if we finds 
that containers are not meeting the standards in use during their 
useful life.
    (b) The application must be written in English and contain all the 
information required by this subpart and must not include false or 
incomplete statements or information (see Sec. Sec.  59.607 and 
59.629).
    (c) We may ask you to include less information than we specify in 
this subpart, as long as you maintain all the information required by 
Sec.  59.628.
    (d) You must use good engineering judgment for all decisions 
related to your application (see Sec.  59.603).
    (e) An authorized representative of your company must approve and 
sign the application.
    (f) See Sec.  59.629 for provisions describing how we will process 
your application.
    (g) If we approve your application, we will issue a certificate 
that will allow you to produce the containers that you described in 
your application for a specified production period. Certificates do not 
allow you to produce containers that were not described in your 
application, unless we approve the additional containers under Sec.  
59.624.


Sec.  59.623  What must I include in my application?

    This section specifies the information that must be in your 
application, unless we ask you to include less information under Sec.  
59.622(c). We may require you to provide additional information to 
evaluate your application.
    (a) Describe the emission family's specifications and other basic 
parameters of the emission controls. List each distinguishable 
configuration in the emission family. Include descriptions and part 
numbers for all detachable components such as spouts and caps.
    (b) Describe and explain the method of emission control.
    (c) Describe the products you selected for testing and the reasons 
for selecting them.
    (d) Describe the test equipment and procedures that you used, 
including any special or alternate test procedures you used (see Sec.  
59.650).
    (e) List the specifications of the test fuel to show that it falls 
within the required ranges specified in Sec.  59.650.
    (f) Include the maintenance and use instructions and warranty 
information you will give to the ultimate purchaser of each new 
portable fuel container (see Sec.  59.613).
    (g) Describe your emission control information label (see Sec.  
59.615).
    (h) State that your product was tested as described in the 
application (including the test procedures, test parameters, and test 
fuels) to show you meet the requirements of this subpart.
    (i) Present emission data to show your products meet the applicable 
emission standards. Where applicable, Sec. Sec.  59.626 and 59.627 may 
allow you to submit an application in certain cases without new 
emission data.
    (j) Report all test results, including those from invalid tests or 
from any other tests, whether or not they were conducted according to 
the test procedures of Sec. Sec.  59.650 through 59.653. We may ask you 
to send other information to confirm that your tests were valid under 
the requirements of this subpart.
    (k) Unconditionally certify that all the products in the emission 
family comply with the requirements of this subpart, other referenced 
parts of the CFR, and the Clean Air Act.
    (l) Include estimates of U.S.-directed production volumes.
    (m) Include the information required by other sections of this 
subpart.
    (n) Include other relevant information, including any additional 
information requested by EPA.
    (o) Name an agent for service located in the United States. Service 
on this agent constitutes service on you or any of your officers or 
employees for any action by EPA or otherwise by the United States 
related to the requirements of this subpart.


Sec.  59.624  How do I amend my application for certification?

    Before we issue you a certificate of conformity, you may amend your 
application to include new or modified configurations, subject to the 
provisions of this section. After we have issued your certificate of 
conformity, you may send us an amended application requesting that we 
include new or modified configurations within the scope of the 
certificate, subject to the provisions of this section. You must amend 
your application if any changes occur with respect to any information 
included in your application.
    (a) You must amend your application before you take either of the 
following actions:
    (1) Add a configuration to an emission family. In this case, the 
configuration added must be consistent with other configurations in the 
emission family with respect to the criteria listed in Sec.  59.625.
    (2) Change a configuration already included in an emission family 
in a way that may affect emissions, or change any of the components you 
described in

[[Page 8537]]

your application for certification. This includes production and design 
changes that may affect emissions any time during the portable fuel 
containers' lifetime.
    (b) To amend your application for certification, send the 
Designated Compliance Officer the following information:
    (1) Describe in detail the addition or change in the configuration 
you intend to make.
    (2) Include engineering evaluations or data showing that the 
amended emission family complies with all applicable requirements. You 
may do this by showing that the original emission data are still 
appropriate with respect to showing compliance of the amended family 
with all applicable requirements.
    (3) If the original emission data for the emission family are not 
appropriate to show compliance for the new or modified configuration, 
include new test data showing that the new or modified configuration 
meets the requirements of this subpart.
    (c) We may ask for more test data or engineering evaluations. You 
must give us these within 30 days after we request them.
    (d) For emission families already covered by a certificate of 
conformity, we will determine whether the existing certificate of 
conformity covers your new or modified configuration. You may ask for a 
hearing if we deny your request (see Sec.  59.699).
    (e) For emission families already covered by a certificate of 
conformity and you send us a request to amend your application, you may 
sell and distribute the new or modified configuration before we make a 
decision under paragraph (d) of this section, subject to the provisions 
of this paragraph. If we determine that the affected configurations do 
not meet applicable requirements, we will notify you to cease 
production of the configurations and any containers from the new or 
modified configuration will not be considered covered by the 
certificate. In addition, we may require you to recall any affected 
containers that you have already distributed, including those sold to 
the ultimate purchasers. Choosing to produce containers under this 
paragraph (e) is deemed to be consent to recall all containers that we 
determine do not meet applicable emission standards or other 
requirements and to remedy the nonconformity at no expense to the 
owner. If you do not provide information required under paragraph (c) 
of this section within 30 days, you must stop producing the new or 
modified containers.


Sec.  59.625  How do I select emission families?

    (a) Divide your product line into families of portable fuel 
containers that are expected to have similar emission characteristics 
throughout the useful life.
    (b) Group containers in the same emission family if they are the 
same in all the following aspects:
    (1) Type of material (including pigments, plasticizers, UV 
inhibitors, or other additives that may affect control of emissions).
    (2) Production method.
    (3) Spout and cap design.
    (4) Gasket material and design.
    (5) Emission control strategy.
    (c) You may subdivide a group of containers that is identical under 
paragraph (b) of this section into different emission families if you 
show the expected emission characteristics are different.
    (d) You may group containers that are not identical with respect to 
the things listed in paragraph (b) of this section in the same emission 
family if you show that their emission characteristics will be similar 
throughout their useful life.


Sec.  59.626  What emission testing must I perform for my application 
for a certificate of conformity?

    This section describes the emission testing you must perform to 
show compliance with the emission standards in Sec.  59.611.
    (a) Test your products using the procedures and equipment specified 
in Sec. Sec.  59.650 through 59.653.
    (b) Select an emission-data unit from each emission family for 
testing. You must test a production sample or a preproduction product 
that will represent actual production. Select the configuration that is 
most likely to exceed (or have emissions nearest to) the applicable 
emission standard. For example, for a family of multilayer portable 
fuel containers, test the container with the thinnest barrier layer. 
Test three identical containers.
    (c) We may measure emissions from any of your products from the 
emission family. You must supply your products to us if we choose to 
perform confirmatory testing.
    (d) You may ask to use emission data from a previous production 
period (carryover) instead of doing new tests, but only if the 
emission-data from the previous production period remains the 
appropriate emission-data unit under paragraph (b) of this section. For 
example, you may not carryover emission data for your family of 
containers if you have added a thinner-walled container than was tested 
previously.
    (e) We may require you to test a second unit of the same or 
different configuration in addition to the unit tested under paragraph 
(b) of this section.
    (f) If you use an alternate test procedure under Sec.  59.652 and 
later testing shows that such testing does not produce results that are 
equivalent to the procedures specified in this subpart, we may reject 
data you generated using the alternate procedure and base our 
compliance determination on the later testing.


Sec.  59.627  How do I demonstrate that my emission family complies 
with evaporative emission standards?

    (a) For purposes of certification, your emission family is 
considered in compliance with an evaporative emission standard in Sec.  
59.611(a) if the test results from all portable fuel containers in the 
family that have been tested show measured emissions levels that are at 
or below the applicable standard.
    (b) Your emissions family is deemed not to comply if any container 
representing that family has test results showing an official emission 
level above the standard.
    (c) Round the measured emission level to the same number of decimal 
places as the emission standard. Compare the rounded emission levels to 
the emission standard.


Sec.  59.628  What records must I keep and what reports must I send to 
EPA?

    (a) Organize and maintain the following records:
    (1) A copy of all applications and any other information you send 
us.
    (2) Any of the information we specify in Sec.  59.623 that you were 
not required to include in your application.
    (3) A detailed history of each emission-data unit. For each 
emission-data unit, include all of the following:
    (i) The emission-data unit's construction, including its origin and 
buildup, steps you took to ensure that it represents production 
containers, any components you built specially for it, and all the 
components you include in your application for certification.
    (ii) All your emission tests, including documentation on routine 
and standard tests, as specified in Sec. Sec.  59.650 through 59.653, 
and the date and purpose of each test.
    (iii) All tests to diagnose emission-control performance, giving 
the date and time of each and the reasons for the test.

[[Page 8538]]

    (iv) Any other relevant events or information.
    (4) Production figures for each emission family divided by assembly 
plant.
    (5) If you identify your portable fuel containers by lot number or 
other identification numbers, keep a record of these numbers for all 
the containers you produce under each certificate of conformity.
    (b) Keep data from routine emission tests (such as test cell 
temperatures and relative humidity readings) for one year after we 
issue the associated certificate of conformity. Keep all other 
information specified in paragraph (a) of this section for five years 
after we issue your certificate.
    (c) Store these records in any format and on any media, as long as 
you can promptly send us organized, written records in English if we 
ask for them. You must keep these records readily available. We may 
review them at any time.
    (d) Send us copies of any maintenance instructions or explanations 
if we ask for them.
    (e) Send us an annual warranty report summarizing successful 
warranty claims by emission family under Sec.  59.612, including the 
reason for the claim. You must submit the report by July 1 for the 
preceding calendar year.


Sec.  59.629  What decisions may EPA make regarding my certificate of 
conformity?

    (a) If we determine your application is complete and shows that the 
emission family meets all the requirements of this subpart and the Act, 
we will issue a certificate of conformity for your emission family for 
the specified production period. We may make the approval subject to 
additional conditions.
    (b) We may deny your application for certification if we determine 
that your emission family fails to comply with emission standards or 
other requirements of this subpart or the Act. Our decision may be 
based on a review of all information available to us. If we deny your 
application, we will explain why in writing.
    (c) In addition, we may deny your application or suspend, revoke, 
or void your certificate if you do any of the following:
    (1) Refuse to comply with any testing or reporting requirements.
    (2) Submit false or incomplete information.
    (3) Render inaccurate any test data.
    (4) Deny us from completing authorized activities (see Sec.  
59.698). This includes a failure to provide reasonable assistance.
    (5) Produce portable fuel containers for importation into the 
United States at a location where local law prohibits us from carrying 
out authorized activities.
    (6) Fail to supply requested information or amend your application 
to include all portable fuel containers being produced.
    (7) Take any action that otherwise circumvents the intent of the 
Act or this subpart.
    (d) If we deny your application or suspend, revoke, or void your 
certificate, you may ask for a hearing (see Sec.  59.699).


Sec.  59.630  EPA testing.

    We may test any portable fuel container subject to the standards of 
this subpart.
    (a) Certification and production sample testing. Upon our request, 
a manufacturer must supply a prototype container or a reasonable number 
of production samples to us for verification testing. These samples 
will generally be tested using the full test procedure of Sec.  59.653.
    (b) In-use testing. We may test in-use containers using the test 
procedure of Sec.  59.653 without preconditioning.


Sec.  59.650  General testing provisions.

    (a) The test procedures of this subpart are addressed to you as a 
manufacturer, but they apply equally to anyone who does testing for 
you.
    (b) Unless we specify otherwise, the terms ``procedures'' and 
``test procedures'' in this subpart include all aspects of testing, 
including the equipment specifications, calibrations, calculations, and 
other protocols and procedural specifications needed to measure 
emissions.
    (c) The specification for gasoline to be used for testing is given 
in 40 CFR 1065.710. Use the grade of gasoline specified for general 
testing. Blend this grade of gasoline with reagent grade ethanol in a 
volumetric ratio of 90.0 percent gasoline to 10.0 percent ethanol. You 
may use ethanol that is less pure if you can demonstrate that it will 
not affect your ability to demonstrate compliance with the applicable 
emission standards.
    (d) Accuracy and precision of all temperature measurements must be 
2.2[deg] C or better.
    (e) Accuracy and precision of mass balances must be sufficient to 
ensure accuracy and precision of two percent or better for emission 
measurements for products at the maximum level allowed by the standard. 
The readability of the display may not be coarser than half of the 
required accuracy and precision.


Sec.  59.652  Other procedures.

    (a) Your testing. The procedures in this subpart apply for all 
testing you do to show compliance with emission standards, with certain 
exceptions listed in this section.
    (b) Our testing. These procedures generally apply for testing that 
we do to determine if your portable fuel containers complies with 
applicable emission standards. We may perform other testing as allowed 
by the Act.
    (c) Exceptions. We may allow or require you to use procedures other 
than those specified in this subpart as follows:
    (1) You may request to use special procedures if your portable fuel 
containers cannot be tested using the specified procedures. We will 
approve your request if we determine that it would produce emission 
measurements that represent in-use operation and we determine that it 
can be used to show compliance with the requirements of Sec.  59.611.
    (2) You may ask to use emission data collected using other 
procedures, such as those of the California Air Resources Board. We 
will approve this only if you show us that using these other procedures 
do not affect your ability to show compliance with the applicable 
emission standards. This generally requires emission levels to be far 
enough below the applicable emission standards so that any test 
differences do not affect your ability to state unconditionally that 
your containers will meet all applicable emission standards when tested 
using the specified test procedures.
    (3) You may request to use alternate procedures that are equivalent 
to allowed procedures, or more accurate or more precise than allowed 
procedures.
    (4) You may not use other procedures under this paragraph (c) until 
we approve your request.


Sec.  59.653  How do I test portable fuel containers?

    You must test the portable fuel container as described in your 
application, with the applicable spout attached except as otherwise 
noted. Tighten fittings in a manner representative of how they would be 
tightened by a typical user.
    (a) Preconditioning for durability. Complete the following steps 
before an emissions test, in any order, unless we determine that 
omission of one or more of these durability steps will not affect the 
emissions from your container.
    (1) Pressure cycling. Perform a pressure test by sealing the 
container and cycling it between +13.8 and -1.7 kPa (+2.0 and -0.5 
psig) for 10,000

[[Page 8539]]

cycles at a rate of 60 seconds per cycle. For this test, the spout may 
be removed and the pressure applied through the opening where the spout 
attaches. The purpose of this test is to represent environmental wall 
stresses caused by pressure changes and other factors (such as 
vibration or thermal expansion). If your container cannot be tested 
using the pressure cycles specified by this paragraph (a)(1), you may 
ask to use special test procedures under Sec.  59.652(c).
    (2) UV exposure. Perform a sunlight-exposure test by exposing the 
container to an ultraviolet light of at least 24 W/m2 (0.40 
W-hr/m2/min) on the container surface for at least 450 
hours. Alternatively, the container may be exposed to direct natural 
sunlight for an equivalent period of time, as long as you ensure that 
the container is exposed to at least 450 daylight hours.
    (3) Slosh testing. Perform a slosh test by filling the portable 
fuel container to 40 percent of its capacity with the fuel specified in 
paragraph (e) of this section and rocking it at a rate of 15 cycles per 
minute until you reach one million total cycles. Use an angle deviation 
of +15[deg] to -15[deg] from level.
    (4) Spout actuation. Perform the following spout actuation and 
inversion steps at the end on the slosh testing, and at the end of the 
preconditioning soak.
    (i) Perform one complete actuation/inversion cycle per day for ten 
days.
    (ii) One actuation/inversion cycle consists of the following steps:
    (A) Remove and replace the spout to simulate filling the container.
    (B) Slowly invert the container and keep it inverted for at least 5 
seconds to ensure that the spout and mechanisms become saturated with 
fuel. Any fuel leaking from any part of the container will denote a 
leak and must be reported as part of certification. Once completed, 
place the container on a flat surface in the upright position.
    (C) Actuate the spout by fully opening and closing without 
dispensing fuel. The spout must return to the closed position without 
the aid of the operator (e.g., pushing or pulling the spout closed). 
Repeat for a total of 10 actuations. If at any point the spout fails to 
return to the closed position, the container fails the test.
    (D) Repeat the step contained in paragraph (a)(4)(ii)(B) of this 
section (i.e., the inversion step).
    (E) Repeat the steps contained in paragraph (a)(4)(ii)(C) of this 
section (i.e., ten actuations).
    (b) Preconditioning fuel soak. Complete the following steps before 
a diurnal emission test:
    (1) Fill the portable fuel container with the specified fuel to its 
nominal capacity, seal it using the spout, and allow it to soak at 28 
5[deg] C for 20 weeks. Alternatively, the container may be 
soaked for 10 weeks at 43 5[deg] C. You may count the time 
of the preconditioning steps in paragraph (a) of this section as part 
of the preconditioning fuel soak, as long as the ambient temperature 
remains within the specified temperature range and the fuel tank is at 
least 40 percent full; you may add or replace fuel as needed to conduct 
the specified durability procedures.
    (2) Pour the fuel out of the container and immediately refill to 50 
percent of nominal capacity. Be careful to not spill any fuel on the 
container. Wipe the outside of the container as needed to remove any 
liquid fuel that may have spilled on it.
    (3) Install the spout assembly that will be used in the production 
containers. The spout and other openings (such as vents) on the 
container must be tested in their open condition unless they close 
automatically and are unlikely to be left open by the user during 
typical storage. All manual closures such as caps must be left off the 
container and spout during testing.
    (c) Reference container. A reference container is required to 
correct for buoyancy effects that may occur during testing. Prepare the 
reference tank as follows:
    (1) Obtain a second container of the same model as the test tank. 
You may not use a container that has previously contained fuel or any 
other contents that might affect the stability of its mass.
    (2) Fill the reference container with enough dry sand (or other 
inert material) so that the mass of the reference container is 
approximately the same as the test container when filled with fuel. Use 
good engineering judgment to determine how similar the mass of the 
reference container needs to be to the mass of the test container 
considering the performance characteristics of your balance.
    (3) Ensure that the sand (or other inert material) is dry. This may 
require heating the container or applying a vacuum to it.
    (4) Seal the container.
    (d) Diurnal test run. To run the test, take the following steps for 
a portable fuel container that was preconditioned as specified in 
paragraph (a) of this section.
    (1) Stabilize the fuel temperature within the portable fuel 
container at 22.2 [deg]C. Vent the container at this point to relieve 
any positive or negative pressure that may have developed during 
stabilization.
    (2) Weigh the sealed reference container and record the weight. 
Place the reference on the balance and tare it so that it reads zero. 
Place the sealed test container on the balance and record the 
difference between the test container and the reference container. This 
value is Minitial Take this measurement within 8 hours of 
filling the test container with fuel as specified in paragraph (b)(2) 
of this section.
    (3) Immediately place the portable fuel container within a well 
ventilated, temperature-controlled room or enclosure. Do not spill or 
add any fuel.
    (4) Close the room or enclosure.
    (5) Follow the temperature profile in the following table for all 
portable fuel containers. Use good engineering judgment to follow this 
profile as closely as possible. You may use linearly interpolated 
temperatures or a spline fit for temperatures between the hourly 
setpoints.

 Table 1 of Sec.   59.653--Diurnal Temperature Profile for Portable Fuel
                               Containers
------------------------------------------------------------------------
                                                               Ambient
                                                             Temperature
                       Time  (hours)                           ([deg]C)
                                                               Profile
------------------------------------------------------------------------
0..........................................................         22.2
1..........................................................         22.5
2..........................................................         24.2
3..........................................................         26.8
4..........................................................         29.6
5..........................................................         31.9
6..........................................................         33.9
7..........................................................         35.1
8..........................................................         35.4
9..........................................................         35.6
10.........................................................         35.3
11.........................................................         34.5
12.........................................................         33.2
13.........................................................         31.4
14.........................................................         29.7
15.........................................................         28.2
16.........................................................         27.2
17.........................................................         26.1
18.........................................................         25.1
19.........................................................         24.3
20.........................................................         23.7
21.........................................................         23.3
22.........................................................         22.9
23.........................................................         22.6
24.........................................................         22.2
------------------------------------------------------------------------

    (6) At the end of the diurnal period, retare the balance using the 
reference container and weigh the portable fuel container. Record the 
difference in mass between the reference container and the test. This 
value is Mfinal.
    (7) Subtract Mfinal from Minitial and divide 
the difference by the nominal capacity of the container (using at least 
three significant figures) to calculate the g/gallon/day emission rate 
as follows:


[[Page 8540]]


    Emission rate = (Minitial--Mfinal)/(nominal 
capacity)/(one day)

    (8) Round your result to the same number of decimal places as the 
emission standard.
    (9) Instead of determining emissions by weighing the container 
before and after the diurnal temperature cycle, you may place the 
container in a SHED meeting the specifications of 40 CFR 86.107-
96(a)(1) and measure emissions directly. Immediately following the 
stabilization in paragraph (d)(1) of this section, purge the SHED and 
follow the temperature profile from paragraph (d)(4) of this section. 
Start measuring emissions when you start the temperature profile and 
stop measuring emissions when the temperature profile concludes.
    (e) For metal containers, you may demonstrate for certification 
that your portable fuel containers comply with the evaporative emission 
standards without performing the pre-soak or container durability 
cycles (i.e., the pressure cycling, UV exposure, and slosh testing) 
specified in this section. For other containers, you may demonstrate 
compliance without performing the durability cycles specified in this 
section only if we approve it after you have presented data clearly 
demonstrating that the cycle or cycles do not negatively impact the 
permeation rate of the materials used in the containers.

Special Compliance Provisions


Sec.  59.660  Exemption from the standards.

    In certain circumstances, we may exempt portable fuel containers 
from the evaporative emission standards and requirements of Sec.  
59.611 and the prohibitions and requirements of Sec.  59.602. You do 
not need an exemption for any containers that you own but do not sell, 
offer for sale, introduce or deliver for introduction into U.S. 
commerce, or import into the United States. Submit your request for an 
exemption to the Designated Compliance Officer.
    (a) Portable fuel containers that are intended for export only and 
are in fact exported are exempt provided they are clearly labeled as 
being for export only. Keep records for five years of all portable fuel 
containers that you manufacture for export. Any introduction into U.S. 
commerce of such portable fuel containers for any purpose other than 
export is considered to be a violation of Sec.  59.602 by the 
manufacturer. You do not need to request this exemption.
    (b) You may ask us to exempt portable fuel containers that you will 
purchase, sell, or distribute for the sole purpose of testing them.
    (c) You may ask us to exempt portable fuel containers for the 
purpose of national security, as long as your request is endorsed by an 
agency of the federal government responsible for national defense. In 
your request, explain why you need the exemption.
    (d) You may ask us to exempt containers that are designed and 
marketed solely for rapidly refueling racing applications which are 
designed to create a leak proof seal with the target tank or are 
designed to connect with a receiver installed on the target tank. This 
exemption is generally intended for containers used to rapidly refuel a 
race car during a pit stop and similar containers. In your request, 
explain how why these containers are unlikely to be used for nonracing 
applications. We may limit these exemptions to those applications that 
are allowed to use gasoline exempted under 40 CFR 80.200(a).
    (e) EPA may impose reasonable conditions on any exemption, 
including a limit on the number of containers that are covered by an 
exemption.


Sec.  59.662  What temporary provisions address hardship due to unusual 
circumstances?

    (a) After considering the circumstances, we may exempt you from the 
evaporative emission standards and requirements of Sec.  59.611 of this 
subpart and the prohibitions and requirements of Sec.  59.602 for 
specified portable fuel containers that do not comply with emission 
standards if all the following conditions apply:
    (1) Unusual circumstances that are clearly outside your control and 
that could not have been avoided with reasonable discretion prevent you 
from meeting requirements from this subpart.
    (2) You exercised prudent planning and were not able to avoid the 
violation; you have taken all reasonable steps to minimize the extent 
of the nonconformity.
    (3) Not having the exemption will jeopardize the solvency of your 
company.
    (4) No other allowances are available under the regulations in this 
chapter to avoid the impending violation, including the provisions of 
Sec.  59.663.
    (b) To apply for an exemption, you must send the Designated 
Compliance Officer a written request as soon as possible before you are 
in violation. In your request, show that you meet all the conditions 
and requirements in paragraph (a) of this section.
    (c) Include in your request a plan showing how you will meet all 
the applicable requirements as quickly as possible.
    (d) You must give us other relevant information if we ask for it.
    (e) We may include reasonable additional conditions on an approval 
granted under this section, including provisions to recover or 
otherwise address the lost environmental benefit or paying fees to 
offset any economic gain resulting from the exemption.
    (f) We may approve renewable extensions of up to one year. We may 
review and revise an extension as reasonable under the circumstances.
    (g) Add a legible label, written in English, to a readily visible 
part of each container exempted under this section. This label must 
prominently include at least the following items:
    (1) Your corporate name and trademark.
    (2) The statement ``EXEMPT UNDER 40 CFR 59.662.''.


Sec.  59.663  What are the provisions for extending compliance 
deadlines for manufacturers under hardship?

    (a) After considering the circumstances, we may extend the 
compliance deadline for you to meet new emission standards, as long as 
you meet all the conditions and requirements in this section.
    (b) To apply for an extension, you must send the Designated 
Compliance Officer a written request. In your request, show that all 
the following conditions and requirements apply:
    (1) You have taken all possible business, technical, and economic 
steps to comply.
    (2) Show that the burden of compliance costs prevents you from 
meeting the requirements of this subpart by the required compliance 
date.
    (3) Not having the exemption will jeopardize the solvency of your 
company.
    (4) No other allowances are available under the regulations in this 
subpart to avoid the impending violation.
    (c) In describing the steps you have taken to comply under 
paragraph (b)(1) of this section, include at least the following 
information:
    (1) Describe your business plan, showing the range of projects 
active or under consideration.
    (2) Describe your current and projected financial standing, with 
and without the burden of complying in full with the applicable 
regulations in this subpart by the required compliance date.
    (3) Describe your efforts to raise capital to comply with 
regulations in this subpart.
    (4) Identify the engineering and technical steps you have taken or 
plan

[[Page 8541]]

to take to comply with regulations in this subpart.
    (5) Identify the level of compliance you can achieve. For example, 
you may be able to produce containers that meet a somewhat less 
stringent emission standard than the regulations in this subpart 
require.
    (d) Include in your request a plan showing how you will meet all 
the applicable requirements as quickly as possible.
    (e) You must give us other relevant information if we ask for it.
    (f) An authorized representative of your company must sign the 
request and include the statement: ``All the information in this 
request is true and accurate, to the best of my knowledge.''.
    (g) Send your request for this extension at least nine months 
before the relevant deadline.
    (h) We may include reasonable requirements on an approval granted 
under this section, including provisions to recover or otherwise 
address the lost environmental benefit. For example, we may require 
that you meet a less stringent emission standard.
    (i) We may approve renewable extensions of up to one year. We may 
review and revise an extension as reasonable under the circumstances.
    (j) Add a permanent, legible label, written in English, to a 
readily visible part of each container exempted under this section. 
This label must prominently include at least the following items:
    (1) Your corporate name and trademark.
    (2) The statement ``EXEMPT UNDER 40 CFR 59.663.''.


Sec.  59.664  What are the requirements for importing portable fuel 
containers into the United States?

    As specified in this section, we may require you to post a bond if 
you import into the United States containers that are subject to the 
standards of this subpart. See paragraph (f) of this section for the 
requirements related to importing containers that have been certified 
by someone else.
    (a) Prior to importing containers into the U.S., we may require you 
to post a bond to cover any potential compliance or enforcement actions 
under the Clean Air Act if you cannot demonstrate to us that you have 
assets of an appropriate liquidity readily available in the United 
States with a value equal to the retail value of the containers that 
you will import during the calendar year.
    (b) We may set the value of the bond up to five dollars per 
container.
    (c) You may meet the bond requirements of this section by obtaining 
a bond from a third-party surety that is cited in the U.S. Department 
of Treasury Circular 570, ``Companies Holding Certificates of Authority 
as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring 
Companies'' (http://www.fms.treas.gov/c570/c570.html#certified).
    (d) If you forfeit some or all of your bond in an enforcement 
action, you must post any appropriate bond for continuing importation 
within 90 days after you forfeit the bond amount.
    (e) You will forfeit the proceeds of the bond posted under this 
section if you need to satisfy any United States administrative final 
order or judicial judgment against you arising from your conduct in 
violation of this subpart.
    (f) This paragraph (f) applies if you import for resale containers 
that have been certified by someone else. You and the certificate 
holder are each responsible for compliance with the requirements of 
this subpart and the Clean Air Act. No bond is required under this 
section if either you or the certificate holder meet the conditions in 
paragraph (a) of this section. Otherwise, the importer must comply with 
the bond requirements of this section.

Definitions and Other Reference Information


Sec.  59.680  What definitions apply to this subpart?

    The following definitions apply to this subpart. The definitions 
apply to all subparts unless we note otherwise. All undefined terms 
have the meaning the Act gives to them. The definitions follow:
    Act means the Clean Air Act, as amended, 42 U.S.C. 7401-7671q.
    Adjustable parameter means any device, system, or element of design 
that someone can adjust and that, if adjusted, may affect emissions. 
You may ask us to exclude a parameter if you show us that it will not 
be adjusted in use in a way that affects emissions.
    Certification means relating to the process of obtaining a 
certificate of conformity for an emission family that complies with the 
emission standards and requirements in this subpart.
    Configuration means a unique combination of hardware (material, 
geometry, and size) and calibration within an emission family. Units 
within a single configuration differ only with respect to normal 
production variability.
    Container means portable fuel container.
    Designated Compliance Officer means the Manager, Engine Programs 
Group (6403-J), U.S. Environmental Protection Agency, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460.
    Designated Enforcement Officer means the Director, Air Enforcement 
Division (2242A), U.S. Environmental Protection Agency, 1200 
Pennsylvania Ave., NW.,Washington, DC 20460.
    Emission-control system means any device, system, or element of 
design that controls or reduces the regulated evaporative emissions 
from.
    Emission-data unit means a portable fuel container that is tested 
for certification. This includes components tested by EPA.
    Emission-related maintenance means maintenance that substantially 
affects emissions or is likely to substantially affect emission 
deterioration.
    Emission family has the meaning given in Sec.  59.625.
    Evaporative means relating to fuel emissions that result from 
permeation of fuel through the portable fuel container materials and 
from ventilation of the container.
    Good engineering judgment means judgments made consistent with 
generally accepted scientific and engineering principles and all 
available relevant information. See Sec.  59.603 for the administrative 
process we use to evaluate good engineering judgment.
    Hydrocarbon (HC) means total hydrocarbon (THC).
    Manufacture means the physical and engineering process of designing 
and/or constructing a portable fuel container.
    Manufacturer means any person who manufactures a portable fuel 
container for sale in the United States.
    Nominal capacity means the expected volumetric working capacity of 
a container.
    Official emission result means the measured emission rate for an 
emission-data unit.
    Portable fuel container means any reusable container designed and 
marketed (or otherwise intended) for use by consumers for receiving, 
transporting, storing, and dispensing gasoline, diesel fuel, or 
kerosene. For the purpose of this subpart, all utility jugs that are 
red, yellow or blue in color are deemed to be portable fuel containers, 
regardless of how they are labeled or marketed.
    Production period means the period in which a portable fuel 
container will be produced under a certificate of conformity. The 
maximum production period is five years.
    Revoke means to terminate the certificate or an exemption for an 
emission family. If we revoke a certificate or exemption, you must 
apply for a new certificate or exemption before continuing to introduce 
the affected

[[Page 8542]]

containers into commerce. This does not apply to containers you no 
longer possess.
    Round has the meaning given in 40 CFR 1065.1001.
    Suspend means to temporarily discontinue the certificate or an 
exemption for an emission family. If we suspend a certificate, you may 
not introduce into commerce portable fuel containers from that emission 
family unless we reinstate the certificate or approve a new one. If we 
suspend an exemption, you may not introduce into commerce containers 
that were previously covered by the exemption unless we reinstate the 
exemption.
    Total hydrocarbon means the combined mass of organic compounds 
measured by the specified procedure for measuring total hydrocarbon, 
expressed as a hydrocarbon with a hydrogen-to-carbon mass ratio of 
1.85:1.
    Ultimate purchaser means, with respect to any portable fuel 
container, the first person who in good faith purchases such a 
container for purposes other than resale.
    Ultraviolet light means electromagnetic radiation with a wavelength 
between 300 and 400 nanometers.
    United States means the States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana 
Islands, Guam, American Samoa, and the U.S. Virgin Islands.
    U.S.-directed production volume means the amount of portable fuel 
containers, subject to the requirements of this subpart, produced by a 
manufacturer for which the manufacturer has a reasonable assurance that 
sale was or will be made to ultimate purchasers in the United States.
    Useful life means the period during which a portable fuel container 
is required to comply with all applicable emission standards. See Sec.  
59.611.
    Void means to invalidate a certificate or an exemption ab initio 
(i.e. retroactively). Portable fuel containers introduced into U.S. 
commerce under the voided certificate or exemption is a violation of 
this subpart, whether or not they were introduced before the 
certificate or exemption was voided.
    We (us, our) means the Administrator of the Environmental 
Protection Agency and any authorized representatives.


Sec.  59.685  What symbols, acronyms, and abbreviations does this 
subpart use?

    The following symbols, acronyms, and abbreviations apply to this 
subpart:

CFR Code of Federal Regulations
EPA Environmental Protection Agency
HC hydrocarbon
NIST National Institute of Standards and Technology
THC total hydrocarbon
U.S.C. United States Code


Sec.  59.695  What provisions apply to confidential information?

    (a) Clearly show what you consider confidential by marking, 
circling, bracketing, stamping, or some other method.
    (b) We will store your confidential information as described in 40 
CFR part 2. Also, we will disclose it only as specified in 40 CFR part 
2. This applies both to any information you send us and to any 
information we collect from inspections, audits, or other site visits.
    (c) If you send us a second copy without the confidential 
information, we will assume it contains nothing confidential whenever 
we need to release information from it.
    (d) If you send us information without claiming it is confidential, 
we may make it available to the public without further notice to you, 
as described in 40 CFR 2.204.


Sec.  59.697  State actions.

    The provisions in this subpart do not preclude any State or any 
political subdivision of a State from:
    (a) Adopting and enforcing any emission standard or limitation 
applicable to anyone subject to the provisions of this part; or
    (b) Requiring the regulated entity to obtain permits, licenses, or 
approvals prior to initiating construction, modification, or operation 
of a facility for manufacturing a consumer product.


Sec.  59.698  May EPA enter my facilities for inspections?

    (a) We may inspect your portable fuel containers, testing, 
manufacturing processes, storage facilities (including port facilities 
for imported containers or other relevant facilities), or records, as 
authorized by the Act, to enforce the provisions of this subpart. 
Inspectors will have authorizing credentials and will limit inspections 
to reasonable times--usually, normal operating hours.
    (b) If we come to inspect, we may or may not have a warrant or 
court order.
    (1) If we do not have a warrant or court order, you may deny us 
entry.
    (2) If we have a warrant or court order, you must allow us to enter 
the facility and carry out the activities it describes.
    (c) We may seek a warrant or court order authorizing an inspection 
described in this section, whether or not we first tried to get your 
permission to inspect.
    (d) We may select any facility to do any of the following:
    (1) Inspect and monitor any aspect of portable fuel container 
manufacturing, assembly, storage, or other procedures, and any 
facilities where you do them.
    (2) Inspect and monitor any aspect of test procedures or test-
related activities, including test container selection, preparation, 
durability cycles, and maintenance and verification of your test 
equipment's calibration.
    (3) Inspect and copy records or documents related to assembling, 
storing, selecting, and testing a container.
    (4) Inspect and photograph any part or aspect of containers or 
components use for assembly.
    (e) You must give us reasonable help without charge during an 
inspection authorized by the Act. For example, you may need to help us 
arrange an inspection with the facility's managers, including clerical 
support, copying, and translation. You may also need to show us how the 
facility operates and answer other questions. If we ask in writing to 
see a particular employee at the inspection, you must ensure that he or 
she is present (legal counsel may accompany the employee).
    (f) If you have facilities in other countries, we expect you to 
locate them in places where local law does not keep us from inspecting 
as described in this section. We will not try to inspect if we learn 
that local law prohibits it, but we may suspend your certificate if we 
are not allowed to inspect.


Sec.  59.699  How do I request a hearing?

    (a) You may request a hearing under certain circumstances, as 
described elsewhere in this subpart. To do this, you must file a 
written request with the Designated Compliance Officer, including a 
description of your objection and any supporting data, within 30 days 
after we make a decision.
    (b) For a hearing you request under the provisions of this subpart, 
we will approve your request if we find that your request raises a 
substantial factual issue.
    (c) If we agree to hold a hearing, we will use the procedures 
specified in 40 CFR part 1068, subpart G.

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
3. The authority citation for part 80 is revised to read as follows:

    Authority: 42 U.S.C. 7414, 7521(1), 7545 and 7601(a).

[[Page 8543]]

Subpart D--[Amended]

0
4. Section 80.41 is amended as follows:
0
a. By redesignating paragraph (e) as paragraph (e)(1).
0
b. By adding paragraphs (e)(2) and (e)(3).
0
c. By redesignating paragraph (f) as paragraph (f)(1).
0
d. By adding paragraphs (f)(2) and (f)(3).


Sec.  80.41  Standards and requirements for compliance.

* * * * *
    (e) * * *
    (2)(i) The NOX emissions performance reduction specified 
in paragraph (e)(1) of this section shall no longer apply beginning 
January 1, 2007, except as provided in paragraph (e)(2)(ii) of this 
section.
    (ii) For a refiner subject to the small refiner gasoline sulfur 
standards at Sec.  80.240, the NOX emissions performance 
reduction specified in paragraph (e)(1) of this section shall no longer 
apply beginning January 1, 2008. For a refiner subject to the gasoline 
sulfur standards at Sec.  80.240 that has received an extension of its 
small refiner gasoline sulfur standards under Sec.  80.553, the 
NOX emissions performance reduction specified in paragraph 
(e)(1) of this section shall no longer apply beginning January 1, 2011.
    (3)(i) Beginning January 1, 2011, or January 1, 2015 for small 
refiners approved under Sec.  80.1340, the toxic air pollutants 
emissions performance reduction and benzene content specified in 
paragraph (e)(1) of this section shall apply to reformulated gasoline 
that is not subject to the benzene standard of Sec.  80.1230, pursuant 
to the provisions of Sec.  80.1235.
    (ii) The toxic air pollutants emissions performance reduction and 
benzene content specified in paragraph (e)(1) of this section shall not 
apply to reformulated gasoline produced by a refinery approved under 
Sec.  80.1334, pursuant to Sec.  80.1334(c).
    (f) * * *
    (2)(i) The NOX emissions performance reduction specified 
in paragraph (f)(1) of this section shall no longer apply beginning 
January 1, 2007, except as provided in paragraph (f)(2)(ii) of this 
section.
    (ii) For a refiner subject to the small refiner gasoline sulfur 
standards at Sec.  80.240, the NOX emissions performance 
reduction specified in paragraph (f)(1) of this section shall no longer 
apply beginning January 1, 2008. For a refiner subject to the gasoline 
sulfur standards at Sec.  80.240 that has received an extension of its 
small refiner gasoline sulfur standards under Sec.  80.553, the 
NOX emissions performance reduction specified in paragraph 
(f)(1) of this section shall no longer apply beginning January 1, 2011.
    (3)(i) Beginning January 1, 2011, or January 1, 2015 for small 
refiners approved under Sec.  80.1340, the toxic air pollutants 
emissions performance reduction and benzene content specified in 
paragraph (f)(1) of this section shall apply only to reformulated 
gasoline that is not subject to the benzene standard of Sec.  80.1230, 
pursuant to the provisions of Sec.  80.1235.
    (ii) The toxic air pollutants emissions performance reduction and 
benzene content specified in paragraph (f)(1) of this section shall not 
apply to reformulated gasoline produced by a refinery approved under 
Sec.  80.1334, pursuant to Sec.  80.1334(c).
* * * * *

0
5. Section 80.68 is amended as follows:
0
a. By redesignating paragraphs (a) through (c) as paragraphs (b) 
through (d), respectively.
0
b. By adding new paragraph (a).
0
c. In newly designated paragraph (b)(2) revise the reference ``(c)'' to 
read ``(d)''.
0
d. In newly designated paragraph (c) introductory text revise the 
reference ``(a)'' to read ``(b)''.
0
e. In newly designated paragraph (c)(2)(i) revise the reference 
``(b)(1)'' to read ``(c)(1)''.
0
f. In newly designated paragraph (c)(2)(ii) revise the reference 
``(c)'' to read ``(d)'', revise all references ``(b)(1)'' to read 
``(c)(1)'', and revise all references ``(b)(2)(i)'' to read 
``(c)(2)(i)''.
0
g. In newly designated paragraph (c)(3) revise the reference ``(c)'' to 
read ``(d)''.
0
h. In newly designated paragraph (c)(4)(i) revise the reference ``(a)'' 
to read ``(b)''.
0
i. In newly designated paragraph (d)(1)(ii)(A) revise the reference 
``(c)(6)'' to read ``(d)(6)''.
0
j. In newly designated paragraph (d)(1)(ii)(B) revise the reference 
``(c)(6)'' to read ``(d)(6)''.
0
k. In newly designated paragraph (d)(2)(i) revise the reference 
``(c)(6)'' to read ``(d)(6)''.
0
l. In newly designated paragraph (d)(8)(i)(C) revise the reference 
``(c)(8)(i)(B)'' to read ``(d)(8)(i)(B)''.
0
m. In newly designated paragraph (d)(9)(ii)(B) revise the reference 
``(c)(9)(i)(B)'' to read ``(d)(9)(i)(B)''.
0
n. In newly designated paragraph (d)(10)(v) revise the reference 
``(c)(10)(iv)'' to read ``(d)(10)(iv)''.
0
o. In newly designated paragraph (d)(11)(ii) revise the reference 
``(c)(11)(i)'' to read ``(d)(11)(i)''.
0
p. In newly designated paragraph (d)(13)(v)(G) revise the reference 
``(c)(8)(i)'' to read ``(d)(8)(i)''.


Sec.  80.68  Compliance surveys.

    (a)(1) Beginning January 1, 2007, the compliance surveys for 
NOX emissions performance under this section shall cease to 
be required.
    (2) Beginning January 1, 2011, the compliance surveys for toxics 
emissions performance under this section shall cease to be required.
* * * * *

Subpart E--[Amended]

0
6. Section 80.101 is amended by adding paragraphs (c)(3) and (c)(4) to 
read as follows:


Sec.  80.101  Standards applicable to refiners and importers.

* * * * *
    (c) * * *
    (3)(i) The NOX emissions standard specified in paragraph 
(b)(3)(i) of this section shall no longer apply beginning January 1, 
2007, except as provided in paragraph (c)(3)(ii) of this section.
    (ii) For a refiner subject to the small refiner gasoline sulfur 
standards at Sec.  80.240, the NOX emissions standard 
specified in paragraph (b)(3)(i) of this section shall no longer apply 
beginning January 1, 2008. For a refiner subject to the gasoline sulfur 
standards at Sec.  80.240 that has received an extension of its small 
refiner gasoline sulfur standards under Sec.  80.553, the 
NOX emissions standard specified in paragraph (b)(3)(i) of 
this section shall no longer apply beginning January 1, 2011.
    (4)(i) Beginning January 1, 2011, or January 1, 2015 for small 
refiners approved under Sec.  80.1340, the exhaust toxics emissions 
standard specified in paragraph (b)(3)(i) of this section shall apply 
only to conventional gasoline that is not subject to the benzene 
standard of Sec.  80.1230, pursuant to the provisions of Sec.  80.1235.
    (ii) The exhaust toxic emissions standard specified in paragraph 
(b)(3)(i) of this section shall not apply to conventional gasoline 
produced by a refinery approved under Sec.  80.1334, pursuant to Sec.  
80.1334(c).
* * * * *

Subpart F--[Amended]

0
7. Section 80.128 is amended by revising paragraph (a) to read as 
follows:

[[Page 8544]]

Sec.  80.128  Alternative agreed upon procedures for refiners and 
importers.

* * * * *
    (a) Read the refiner's or importer's reports filed with EPA for the 
previous year as required by Sec. Sec.  80.75, 80.83(g), 80.105, 80.990 
and 80.1354.
* * * * *

Subpart J--[Amended]

0
8. Section 80.815 is amended by redesignating paragraph (d)(1) as 
paragraph (d)(1)(i) and adding paragraph (d)(1)(ii) to read as follows:


Sec.  80.815  What are the gasoline toxics performance requirements for 
refiners and importers?

* * * * *
    (d) * * *
    (1) * * *
    (ii)(A) Beginning January 1, 2011, or January 1, 2015 for small 
refiners approved under Sec.  80.1340, the gasoline toxics performance 
requirements of this subpart shall apply only to gasoline that is not 
subject to the benzene standard of Sec.  80.1230, pursuant to the 
provisions of Sec.  80.1235.
    (B) The gasoline toxics performance requirements of this subpart 
shall not apply to gasoline produced by a refinery approved under Sec.  
80.1334, pursuant to Sec.  80.1334(c).
* * * * *

0
9. Section 80.1035 is amended by adding paragraph (h) to read as 
follows:


Sec.  80.1035  What are the attest engagement requirements for gasoline 
toxics compliance applicable to refiners and importers?

* * * * *
    (h) Beginning January 1, 2011, or January 1, 2015 for small 
refiners approved per Sec.  80.1340, the requirements of this section 
shall apply only to gasoline that is not subject to the benzene 
standard of Sec.  80.1230, pursuant to the provisions of Sec.  80.1235.

0
10. Subpart L is added to read as follows:
Subpart L--Gasoline Benzene
Sec.
80.1200-80.1219 [Reserved]

General Information

80.1220 What are the implementation dates for the gasoline benzene 
program?
80.1225 Who must register with EPA under the gasoline benzene 
program?

Gasoline Benzene Requirements

80.1230 What are the gasoline benzene requirements for refiners and 
importers?
80.1235 What gasoline is subject to the benzene requirements of this 
subpart?
80.1236 What requirements apply to California gasoline?
80.1238 How is a refinery's or importer's average benzene 
concentration determined?
80.1240 How is a refinery's or importer's compliance with the 
gasoline benzene requirements of this subpart determined?

Averaging, Banking and Trading (ABT) Program

80.1270 Who may generate benzene credits under the ABT program?
80.1275 How are early benzene credits generated?
80.1280 How are refinery benzene baselines calculated?
80.1285 How does a refiner apply for a benzene baseline?
80.1290 How are standard benzene credits generated?
80.1295 How are gasoline benzene credits used?

Hardship Provisions

80.1334 What are the requirements for early compliance with the 
gasoline benzene program?
80.1335 Can a refiner seek relief from the requirements of this 
subpart?
80.1336 What if a refiner or importer cannot produce gasoline 
conforming to the requirements of this subpart?

Small Refiner Provisions

80.1338 What criteria must be met to qualify as a small refiner for 
the gasoline benzene requirements of this subpart?
80.1339 Who is not eligible for the provisions for small refiners?
80.1340 How does a refiner obtain approval as a small refiner?
80.1342 What compliance options are available to small refiners 
under this subpart?
80.1343 What hardship relief provisions are available only to small 
refiners?
80.1344 What provisions are available to a non-small refiner that 
acquires one or more of a small refiner's refineries?

Sampling, Testing and Retention Requirements

80.1347 What are the sampling and testing requirements for refiners 
and importers?
80.1348 What gasoline sample retention requirements apply to 
refiners and importers?

Recordkeeping and Reporting Requirements

80.1350 What records must be kept?
80.1352 What are the pre-compliance reporting requirements for the 
gasoline benzene program?
80.1354 What are the reporting requirements for the gasoline benzene 
program?

Attest Engagements

80.1356 What are the attest engagement requirements for gasoline 
benzene compliance?

Violations and Penalties

80.1358 What acts are prohibited under the gasoline benzene program?
80.1359 What evidence may be used to determine compliance with the 
prohibitions and requirements of this subpart and liability for 
violations of this subpart?
80.1360 Who is liable for violations under the gasoline benzene 
program?
80.1361 What penalties apply under the gasoline benzene program?

Foreign Refiners

80.1363 What are the additional requirements under this subpart for 
gasoline produced at foreign refineries?

Subpart L--Gasoline Benzene


Sec. Sec.  80.1200-80.1219  [Reserved]

General Information


Sec.  80.1220  What are the implementation dates for the gasoline 
benzene program?

    (a) Benzene standard. (1) For the annual averaging period beginning 
January 1, 2011, and for each annual averaging period thereafter, 
gasoline produced at each refinery of a refiner or imported by an 
importer, must meet the benzene standard specified in Sec.  80.1230(a), 
except as otherwise specifically provided for in this subpart.
    (2) For the period July 1, 2012 through December 31, 2013, and for 
each annual averaging period thereafter, gasoline produced at each 
refinery of a refiner or imported by an importer, must meet the maximum 
average benzene standard specified in Sec.  80.1230(b), except as 
otherwise specifically provided for in this subpart.
    (3) Small refiners approved under Sec.  80.1340 may defer meeting 
the benzene standard specified in Sec.  80.1230(a) until the annual 
averaging period beginning January 1, 2015 and may defer meeting the 
benzene standard specified in Sec.  80.1230(b) until the averaging 
period beginning July 1, 2016, as described in Sec.  80.1342.
    (b) Early credit generation. (1) Effective with the averaging 
period beginning June 1, 2007, a refiner for each of its refineries 
that has an approved benzene baseline per Sec.  80.1285 may generate 
early benzene credits in accordance with the provisions of Sec.  
80.1275.
    (2) Early benzene credits may be generated through the end of the 
averaging period ending December 31, 2010, or through the end of the 
averaging period ending December 31, 2014 for small refiners approved 
under Sec.  80.1340.
    (c) Standard credit generation. (1) Effective with the annual 
averaging period beginning January 1, 2011, a refiner for any of its 
refineries or an importer for its imported gasoline, may generate 
standard benzene credits in accordance with the provisions of Sec.  
80.1290.
    (2) Effective with the annual averaging period beginning January 1,

[[Page 8545]]

2015, a small refiner approved under Sec.  80.1340, for any of its 
refineries, may generate standard benzene credits in accordance with 
the provisions of Sec.  80.1290.


Sec.  80.1225  Who must register with EPA under the gasoline benzene 
program?

    (a) Refiners and importers that are registered by EPA under Sec.  
80.76, Sec.  80.103, Sec.  80.190, or Sec.  80.810 are deemed to be 
registered for purposes of this subpart.
    (b) Refiners and importers subject to the requirements in Sec.  
80.1230 that are not registered by EPA under Sec. Sec.  80.76, 80.103, 
80.190 or 80.810 shall provide to EPA the information required in Sec.  
80.76 by September 30, 2010, or not later than three months in advance 
of the first date that such person produces or imports gasoline, 
whichever is later.
    (c) Refiners that plan to generate early credits under Sec.  
80.1275 and that are not registered by EPA under Sec. Sec.  80.76, 
80.103, 80.190, or 80.810 must provide to EPA the information required 
in Sec.  80.76 not later than 60 days prior to the end of the first 
year of credit generation.

Gasoline Benzene Requirements


Sec.  80.1230  What are the gasoline benzene requirements for refiners 
and importers?

    (a) Annual average benzene standard. (1) Except as specified in 
paragraph (c) of this section, a refinery's or importer's average 
gasoline benzene concentration in any annual averaging period shall not 
exceed 0.62 volume percent.
    (2) Compliance with the standard specified in paragraph (a)(1) of 
this section, or creation of a deficit in accordance with paragraph (c) 
of this section, is determined in accordance with Sec.  80.1240(a).
    (3) The annual averaging period for achieving compliance with the 
requirement of paragraph (a)(1) of this section is January 1 through 
December 31 of each calendar year beginning January 1, 2011, or 
beginning January 1, 2015 for small refiners approved under Sec.  
80.1340.
    (4) Refinery grouping per Sec.  80.101(h) does not apply to 
compliance with the gasoline benzene requirement specified in this 
paragraph (a).
    (5) Gasoline produced at foreign refineries that is subject to the 
gasoline benzene requirements per Sec.  80.1235 shall be included in 
the importer's compliance determination beginning January 1, 2011, or 
beginning January 1, 2015 for small foreign refiners approved under 
Sec.  80.1340.
    (b) Maximum average benzene standard. (1) A refinery's or 
importer's maximum average gasoline benzene concentration in any 
averaging period shall not exceed 1.30 volume percent.
    (2) Compliance with the standard specified in paragraph (b)(1) of 
this section is determined in accordance with Sec.  80.1240(b).
    (3) The averaging period for achieving compliance with the 
requirement of paragraph (b)(1) of this section is July 1, 2012 through 
December 31, 2013 and each calendar year thereafter, or July 1, 2016 
through December 31, 2017, and each calendar year thereafter for small 
refiners approved under Sec.  80.1340.
    (c) Deficit carry-forward. (1) A refinery or importer creates a 
benzene deficit for a given averaging period when its compliance 
benzene value, per Sec.  80.1240(a), is greater than the benzene 
standard specified in paragraph (a) of this section.
    (2) A refinery or importer may carry the benzene deficit forward to 
the calendar year following the year the benzene deficit is created but 
only if no deficit had been previously carried forward to the year the 
deficit is created. If a refinery or importer carries forward a 
deficit, the following provisions apply in the second year:
    (i) The refinery or importer must achieve compliance with the 
benzene standard specified in paragraph (a) of this section.
    (ii) The refinery or importer must achieve further reductions in 
its gasoline benzene concentrations sufficient to offset the benzene 
deficit of the previous year.
    (iii) Benzene credits may be used, per Sec.  80.1295, to meet the 
requirements of paragraphs (c)(2)(i) and (ii) of this section.
    (iv) A refinery that has banked credits per Sec.  80.1295(a)(3) 
must use all of its banked credits to achieve compliance with the 
benzene standard specified in paragraph (a) of this section before 
creating a deficit.
    (3) EPA may allow an extended period of deficit carry-forward if it 
grants hardship relief under Sec. Sec.  80.1335 or 80.1336 from the 
annual average standard specified in paragraph (a) of this section.


Sec.  80.1235  What gasoline is subject to the benzene requirements of 
this subpart?

    (a) For the purposes of determining compliance with the 
requirements of Sec.  80.1230, all of the following products that are 
produced or imported for use in the United States during a refinery's 
or importer's applicable compliance period are collectively 
``gasoline'' and are to be included in a refinery's or importer's 
compliance determination under Sec.  80.1240, except as provided in 
paragraph (b) of this section:
    (1) Reformulated gasoline.
    (2) Conventional gasoline.
    (3) Reformulated gasoline blendstock for oxygenate blending 
(``RBOB'').
    (4) Conventional gasoline blendstock that becomes finished 
conventional gasoline upon the addition of oxygenate (``CBOB'').
    (5) Blendstock that has been combined with finished gasoline, other 
blendstock, transmix, or gasoline produced from transmix to produce 
gasoline.
    (6) Blendstock that has been combined with previously certified 
gasoline (``PCG'') to produce gasoline. Such blendstock must be sampled 
in accordance with the provisions at Sec.  80.1347(a)(5).
    (b) The following products are not to be included in a refinery's 
or importer's compliance determination under Sec.  80.1240:
    (1) Blendstock that has not been combined with other blendstock or 
finished gasoline to produce gasoline.
    (2) Oxygenate added to finished gasoline, RBOB, or CBOB downstream 
of the refinery that produced the gasoline or import facility where the 
gasoline was imported.
    (3) Butane added to finished gasoline, RBOB, CBOB downstream of the 
refinery that produced the gasoline or import facility where the 
gasoline was imported.
    (4) Gasoline produced by separating gasoline from transmix.
    (5) PCG.
    (6) Gasoline produced or imported for use in Guam, American Samoa, 
and the Commonwealth of the Northern Mariana Islands.
    (7) Gasoline exported for use outside the United States.
    (8) Gasoline produced by a small refiner approved under Sec.  
80.1340 prior to January 1, 2015, or prior to the small refiner's first 
compliance period pursuant to Sec.  80.1342(a), whichever is earlier.
    (9) Gasoline that is used to fuel aircraft, racing vehicles or 
racing boats that are used only in sanctioned racing events, provided 
that --
    (i) Product transfer documents associated with such gasoline, and 
any pump stand from which such gasoline is dispensed, identify the 
gasoline either as gasoline that is restricted for use in aircraft, or 
as gasoline that is restricted for use in racing motor vehicles or 
racing boats that are used only in sanctioned events;
    (ii) The gasoline is completely segregated from all other gasoline 
throughout production, distribution and sale to the ultimate consumer; 
and
    (iii) The gasoline is not made available for use as motor vehicle

[[Page 8546]]

gasoline, or dispensed for use in motor vehicles, except for motor 
vehicles used only in sanctioned racing events.
    (10) California gasoline, as defined in Sec.  80.1236.


Sec.  80.1236  What requirements apply to California gasoline?

    (a) Definition. For purposes of this subpart, ``California 
gasoline'' means any gasoline designated by the refiner or importer as 
for use only in California and that is actually used in California.
    (b) California gasoline exemption. California gasoline that 
complies with all the requirements of this section is exempt from the 
requirements in Sec.  80.1230.
    (c) Requirements for California gasoline. The following 
requirements apply to California gasoline:
    (1) Each batch of California gasoline must be designated as such by 
its refiner or importer.
    (2) Designated California gasoline must be kept segregated from 
gasoline that is not California gasoline at all points in the 
distribution system.
    (3) Designated California gasoline must ultimately be used in the 
State of California and not used elsewhere in the United States.
    (4) In the case of California gasoline produced outside the State 
of California, the transferors and transferees must meet the product 
transfer document requirements under Sec.  80.81(g).
    (5) Gasoline that is ultimately used in any part of the United 
States outside of the State of California must comply with the 
requirements specified in Sec.  80.1230, regardless of any designation 
as California gasoline.


Sec.  80.1238  How is a refinery's or importer's average benzene 
concentration determined?

    (a) The average benzene concentration of gasoline produced at a 
refinery or imported by an importer for an applicable averaging period 
is calculated according to the following equation:
[GRAPHIC] [TIFF OMITTED] TR26FE07.012

Where:

Bavg = Average benzene concentration for the applicable 
averaging period (volume percent benzene).
i = Individual batch of gasoline produced at the refinery or 
imported during the applicable averaging period.
n = Total number of batches of gasoline produced at the refinery or 
imported during the applicable annual averaging period.
Vi = Volume of gasoline in batch i (gallons).
Bi = Benzene concentration of batch i (volume percent 
benzene), per Sec.  80.46(e).

    (b) A refiner or importer may include the volume of oxygenate added 
downstream from the refinery or import facility in the calculation 
specified in paragraph (a) of this section, provided the following 
requirements are met:
    (1) For oxygenate added to conventional gasoline, the refiner or 
importer must comply with the requirements of Sec.  80.101(d)(4)(ii) 
and the calculation methodologies of Sec.  80.101(g)(3).
    (2) For oxygenate added to RBOB, the refiner or importer must 
comply with the requirements of Sec.  80.69(a).
    (c) Refiners and importers must exclude from the calculation 
specified in paragraph (a) of this section all of the following:
    (1) Gasoline that was not produced at the refinery or imported by 
the importer.
    (2) Except as provided in paragraph (b) of this section, any 
blendstocks or unfinished gasoline transferred to others.
    (3) Gasoline that has been included in the compliance calculations 
for another refinery or importer.
    (4) Gasoline exempted from the standards under Sec.  80.1235(b).


Sec.  80.1240  How is a refinery's or importer's compliance with the 
gasoline benzene requirements of this subpart determined?

    (a) A refinery's or importer's compliance with the annual average 
benzene standard at Sec.  80.1230(a) is determined as follows:
    (1)(i) The compliance benzene value for a refinery or importer is:
    [GRAPHIC] [TIFF OMITTED] TR26FE07.013
    
Where:

CBVy = Compliance benzene value (gallons benzene) for 
year y.
Vy = Gasoline volume produced or imported in year y 
(gallons).
Bavg,y = Average benzene concentration in year y (volume 
percent benzene), calculated in accordance with Sec.  80.1238.
Dy-1 = Benzene deficit from the previous reporting 
period, per Sec.  80.1230(c) (gallons benzene).
BC = Banked benzene credits used to show compliance (gallons 
benzene).
OC = Benzene credits obtained by the refinery or importer used to 
show compliance (gallons benzene).

    (ii) Benzene credits used in the calculation specified in paragraph 
(a)(1)(i) of this section must be used in accordance with the 
requirements at Sec.  80.1295.
    (2)(i) If CBVy <= Vy x (0.62)/100, then 
compliance with the benzene requirement at Sec.  80.1230(a) is achieved 
for calendar year y.
    (ii) If CBVy > Vy x (0.62)/100, then 
compliance with the benzene requirement at Sec.  80.1230(a) is not 
achieved for calendar year y, and a deficit is created per Sec.  
80.1230(c). The deficit value to be included in the following year's 
compliance calculation per paragraph (a) of this section is calculated 
as follows:
[GRAPHIC] [TIFF OMITTED] TR26FE07.014

Where:

Dy = Benzene deficit created in compliance period y 
(gallons benzene).

    (b) Compliance with the maximum average benzene standard at Sec.  
80.1230(b) is achieved by a refinery or importer if the value of 
Bavg calculated in accordance with Sec.  80.1238(a) is no 
greater 1.30 volume percent for an applicable averaging period per 
Sec.  80.1230(b)(3).

Averaging, Banking and Trading (ABT) Program


Sec.  80.1270  Who may generate benzene credits under the ABT program?

    (a) Early benzene credits. Early benzene credits are credits 
generated prior to 2011, or prior to 2015 if generated by a small 
refiner approved under Sec.  80.1340.
    (1)(i) Early credits may be generated under Sec.  80.1275 by a 
refiner for any refinery it owns that has an approved benzene baseline 
under Sec.  80.1285, including a refinery of a foreign refiner that is 
subject to the provisions of Sec.  80.1363.
    (ii) The refinery specified in paragraph (a)(1)(i) of this section 
must process crude oil and/or intermediate feedstocks through refinery 
processing units.
    (iii) Early benzene credits shall be calculated separately for each 
refinery of a refiner.
    (iv) A refinery that is approved for early compliance under Sec.  
80.1334 may not generate early credits for the gasoline subject to the 
early compliance provisions.
    (2)(i) A refinery that was shut down during the entire 2004-2005 
benzene baseline period is not eligible to generate early credits under 
Sec.  80.1275.
    (ii) A refinery not in full production, excluding normal refinery 
downtime, or not showing consistent or regular gasoline production 
activity during 2004-2005 may be eligible to generate early benzene 
credits under Sec.  80.1275 upon petition to and approval by EPA, 
pursuant to Sec.  80.1285(d).

[[Page 8547]]

    (3) Importers may not generate early credits.
    (b) Standard benzene credits. Standard benzene credits are credits 
generated after 2010, or after 2014 if generated by a small refiner 
approved under Sec.  80.1340.
    (1) Unless otherwise provided for elsewhere in this subpart, 
standard credits may be generated under Sec.  80.1290 as follows:
    (i) A refiner may generate standard credits separately for each of 
its refineries.
    (ii) An importer may generate standard credits for all of its 
imported gasoline.
    (2) Oxygenate blenders, butane blenders, and transmix producers may 
not generate standard credits.
    (3) Foreign refiners may not generate standard credits.


Sec.  80.1275  How are early benzene credits generated?

    (a) For each averaging period per paragraph (b) of this section in 
which a refinery plans to generate early credits, its average gasoline 
benzene concentration calculated according to Sec.  80.1238(a) must be 
at least 10% lower than its benzene baseline concentration approved 
under Sec.  80.1280.
    (b) The early credit averaging periods are as follows:
    (1) For 2007, the seven-month period from June 1, 2007 through 
December 31, 2007.
    (2) For 2008, 2009 and 2010, the 12-month calendar year.
    (3) For small refiners approved under Sec.  80.1340, the 12-month 
calendar years 2011, 2012, 2013, and 2014 in addition to the periods 
specified in paragraphs (b)(1) and (b)(2) of this section.
    (c) The number of early benzene credits generated shall be 
calculated for each applicable averaging period as follows:
[GRAPHIC] [TIFF OMITTED] TR26FE07.015

Where:

ECy = Early credits generated in averaging period y 
(gallons benzene).
BBase = Baseline benzene concentration of the refinery 
(volume percent benzene), per Sec.  80.1280(a).
Bavg,y = Average benzene concentration of gasoline 
produced at the refinery during averaging period y (volume percent 
benzene), per Sec.  80.1238.
Ve,y = Total volume of gasoline produced at the refinery 
during averaging period y (gallons).

    (d) A refinery that plans to generate early credits must also show 
that it has met all of the following requirements prior to or during 
the first early credit averaging period, per paragraph (b) of this 
section, in which it generates early credits:
    (1) Since 2005, has made operational changes and/or improvements in 
benzene control technology to reduce gasoline benzene levels, including 
at least one of the following:
    (i) Treating the heavy straight run naphtha entering the reformer 
using light naphtha splitting and/or isomerization.
    (ii) Treating the reformate stream exiting the reformer using 
benzene extraction or benzene saturation.
    (iii) Directing additional refinery streams to the reformer for 
treatment described paragraphs (d)(1)(i) and (ii) of this section.
    (iv) Directing reformate streams to other refineries with treatment 
capabilities described in paragraph (d)(1)(ii) of this section.
    (2) Has not included gasoline blendstock streams transferred to, 
from, or between refineries, except as noted in paragraph (d)(1)(iv) of 
this section.
    (e) Early benzene credits calculated in accordance with paragraph 
(c) of this section shall be expressed to the nearest gallon. 
Fractional values shall be rounded down if less than 0.50, and rounded 
up if greater than or equal to 0.50.


Sec.  80.1280  How are refinery benzene baselines calculated?

    (a) A refinery's benzene baseline is based on the refinery's 2004-
2005 average gasoline benzene concentration, calculated according to 
the following equation:
[GRAPHIC] [TIFF OMITTED] TR26FE07.016

Where:

BBase = Benzene baseline concentration (volume percent 
benzene).
i = Individual batch of gasoline produced at the refinery 
from January 1, 2004 through December 31, 2005.
n = Total number of batches of gasoline produced at the refinery 
from January 1, 2004 through December 31, 2005 (or the total number 
of batches of gasoline pursuant to Sec.  80.1285(d)).
Vi = Volume of gasoline in batch i (gallons).
Bi = Benzene content of batch i (volume percent benzene).

    (b) A refiner for a refinery that included oxygenate blended 
downstream of the refinery in compliance calculations for RFG or 
conventional gasoline for calendar years 2004 or 2005 under Sec.  80.69 
or Sec.  80.101(d)(4) must include the volume and benzene concentration 
of this oxygenate in the benzene baseline calculation for that refinery 
under paragraph (a) of this section.


Sec.  80.1285  How does a refiner apply for a benzene baseline?

    (a) A benzene baseline application must be submitted for each 
refinery that plans to generate early credits under Sec.  80.1275. The 
application must include the information specified in paragraph (c) of 
this section and must be submitted to EPA at least 60 days before the 
first averaging period in which the refinery plans to generate early 
credits.
    (b) For U.S. Postal delivery, the benzene baseline application 
shall be sent to: Attn: MSAT2 Benzene, Mail Stop 6406J, U.S. 
Environmental Protection Agency, 1200 Pennsylvania Ave., NW., 
Washington, DC 20460. For commercial delivery: MSAT2 Benzene, 202-343-
9038, U.S. Environmental Protection Agency, 1310 L Street, NW., 
Washington, DC 20005.
    (c) The benzene baseline application must include the following 
information:
    (1) A listing of the names and addresses of all refineries owned by 
the company.
    (2) The benzene baseline for gasoline produced in 2004-2005 at the 
refinery, calculated in accordance with Sec.  80.1280.
    (3) Copies of the annual reports required under Sec.  80.75 for RFG 
and Sec.  80.105 for conventional gasoline.
    (4) A letter signed by the president, chief operating officer, or 
chief executive officer, of the company, or his/her designee, stating 
that the information contained in the benzene baseline determination is 
true to the best of his/her knowledge.
    (5) Name, address, phone number, facsimile number and e-mail 
address of a corporate contact person.
    (d) For a refinery that may be eligible to generate early credits 
under Sec.  80.1270(a)(2)(ii), a refiner may submit to EPA a benzene 
baseline application per the requirements of this section. The refiner 
must also submit information regarding the nature and cause of the 
refinery's production activity that resulted in irregular or less than 
full production, how it affected the baseline benzene concentration, 
and whether and how an alternative calculation to the calculation 
specified in Sec.  80.1280 produces a more representative benzene 
baseline value. Upon consideration of the submitted information, EPA 
may approve a benzene baseline for such a refinery.
    (e) EPA will notify the refiner of approval of the refinery's 
benzene baseline or any deficiencies in the

[[Page 8548]]

application. However, except for applications submitted in accordance 
with paragraph (d) of this section, the refinery's benzene baseline 
application may be considered approved 60 days after EPA's receipt of 
the baseline application, subject to paragraph (f) of this section.
    (f) If at any time the baseline submitted in accordance with the 
requirements of this section is determined to be incorrect, EPA will 
notify the refiner of the corrected baseline.


Sec.  80.1290  How are standard benzene credits generated?

    (a) The standard credit averaging periods are the calendar years 
beginning January 1, 2011, or beginning January 1, 2015 for small 
refiners approved under Sec.  80.1340.
    (b) [Reserved]
    (c)(1) The number of standard benzene credits generated shall be 
calculated annually for each applicable averaging period according to 
the following equation:
[GRAPHIC] [TIFF OMITTED] TR26FE07.017

Where:

SCy = Standard credits generated in year y (gallons 
benzene).
Bavg,y = Annual average benzene concentration for year y 
(volume percent benzene), per Sec.  80.1238.
Vy = Total volume of gasoline produced or imported in 
year y (gallons).

    (2) No credits shall be generated unless the value SCy 
is positive.
    (d) Standard benzene credits calculated in accordance with 
paragraph (c) of this section shall be expressed to the nearest gallon. 
Fractional values shall be rounded down if less than 0.50, and rounded 
up if greater than or equal to 0.50.


Sec.  80.1295  How are gasoline benzene credits used?

    (a) Credit use. (1) Gasoline benzene credits may be used to comply 
with the gasoline benzene standard of Sec.  80.1230(a) provided that--
    (i) The gasoline benzene credits were generated according to 
Sec. Sec.  80.1275 or 80.1290.
    (ii) The recordkeeping requirements for gasoline benzene credits 
under Sec.  80.1350 are met.
    (iii) The gasoline benzene credits are correctly reported according 
to Sec. Sec.  80.1352 and 80.1354.
    (iv) The conditions of this section are met.
    (2) Gasoline benzene credits generated under Sec. Sec.  80.1275 and 
80.1290 may be used interchangeably in all credit use scenarios, 
subject to the credit life provisions specified in paragraph (c) of 
this section.
    (3) Gasoline benzene credits may be used by a refiner or importer 
to comply with the gasoline benzene content standard of Sec.  
80.1230(a), may be banked by a refiner or importer for future use or 
transfer, may be transferred to another refinery or importer within a 
company (intracompany trading), or may be transferred to another 
refiner or importer outside of the company.
    (b) Credit transfers. (1) Gasoline benzene credits obtained from 
another refinery or importer may be used to comply with the gasoline 
benzene content requirement of Sec.  80.1230(a) provided the following 
conditions are met:
    (i) The credits are generated and reported according to the 
requirements of this subpart, and the transferred credits have not 
expired, per paragraph (c) of this section.
    (ii) Any credit transfer takes place no later than the last day of 
February following the calendar year averaging period when the credits 
are used.
    (iii) The credit has not been transferred more than twice. The 
first transfer by the refinery or importer that generated the credit 
may only be made to a refiner or importer that intends to use the 
credit; if the transferee cannot use the credit, it may make the 
second, and final, transfer only to a refiner or importer that intends 
to use or to terminate the credit. In no case may a credit be 
transferred more than twice before being used or terminated.
    (iv) The credit transferor has applied any gasoline benzene credits 
necessary to meet its own annual compliance requirements (including any 
deficit carried forward, pursuant to Sec.  80.1230(c), if applicable) 
before transferring any gasoline benzene credits to any other refiner 
or importer.
    (v) The credit transferor does not create a deficit as a result of 
a credit transfer.
    (vi) The transferor supplies records to the transferee indicating 
the year the gasoline benzene credits were generated, the identity of 
the refiner (and refinery) or importer that generated the gasoline 
benzene credits, and the identity of the transferring entity if it is 
not the same entity that generated the gasoline benzene credits.
    (2) In the case of gasoline benzene credits that have been 
calculated or created improperly, or that EPA has otherwise determined 
to be invalid, the following provisions apply:
    (i) Invalid gasoline benzene credits cannot be used to achieve 
compliance with the gasoline benzene content requirement of Sec.  
80.1230(a), regardless of the transferee's good-faith belief that the 
gasoline benzene credits were valid.
    (ii) The refiner or importer that used the gasoline benzene credits 
and any transferor of the gasoline benzene credits must adjust their 
credit records, reports, and compliance calculations as necessary to 
reflect the proper gasoline benzene credits.
    (iii) Any properly created gasoline benzene credits existing in the 
transferor's credit balance following the corrections and adjustments 
specified in paragraph (b)(2)(ii) of this section must first be applied 
to correct the invalid transfers to the transferee, before the 
transferor uses, trades or banks the gasoline benzene credits.
    (c) Credit life. (1)(i) Early credits, per Sec.  80.1275, may be 
used for compliance purposes under Sec.  80.1240(a) for any of the 
following annual averaging periods: 2011, 2102, 2013.
    (ii) Early credits, per Sec.  80.1275, may be used for compliance 
purposes under Sec.  80.1240(a) by small refiners approved under Sec.  
80.1340 for any of the following averaging periods: 2015, 2016, 2017.
    (2)(i) Standard credits, per Sec.  80.1290, may be used for 
compliance purposes under Sec.  80.1240(a) within five years from the 
year they were generated, except as noted under paragraph (c)(2)(ii) of 
this section. Example: Standard credits generated during 2011 may be 
used to achieve compliance under Sec.  80.1240(a) for any calendar year 
averaging period prior to the 2017 averaging period.
    (ii) Standard credits, per Sec.  80.1290, may be used for 
compliance purposes under Sec.  80.1240(a) within seven years from the 
year they were generated if traded to and ultimately used by a small 
refiner approved under Sec.  80.1340. Example: Standard credits 
generated in 2011 may be used to achieve compliance under Sec.  
80.1240(a) for any calendar year averaging period prior to the 2019 
averaging period if traded to and ultimately used by a small refiner 
approved under Sec.  80.1340.
    (d) Deficit provision limitation. A refiner or importer possessing 
gasoline benzene credits must use all gasoline benzene credits in its 
possession before applying the benzene deficit provisions of Sec.  
80.1230(c).

Hardship Provisions


Sec.  80.1334  What are the requirements for early compliance with the 
gasoline benzene program?

    (a)(1) A refinery may comply with the benzene requirements at Sec.  
80.1230 for its RFG and/or conventional gasoline (CG) prior to the 2011 
compliance

[[Page 8549]]

period if it applies for this early compliance option as specified in 
paragraph (b) of this section, and is approved by EPA.
    (2) Only refineries that produce gasoline by processing crude and/
or intermediate feedstocks through refinery processing units may apply 
for this early compliance option.
    (b) Refiners must submit an application in order to be considered 
for early compliance as described in this section.
    (1) Applications for early compliance as described in this section 
must be submitted to EPA by December 31, 2007.
    (2) Applications must be sent to: U.S. EPA, NVFEL-ASD, Attn: MSAT2 
Early Compliance, 2000 Traverwood Dr., Ann Arbor, MI 48105.
    (3) Application must be made separately for a refinery's RFG and CG 
pools.
    (4) The early compliance application must show that all the 
following criteria are met:
    (i) For an RFG early compliance application--
    (A) The refinery's RFG baseline value under Sec.  80.915 is greater 
than or equal to 30 percent reduction.
    (B) The refinery's 2003 RFG annual average benzene concentration 
was less than or equal to 0.62 vol%.
    (C) The refinery's 2003 RFG annual average sulfur concentration was 
less than or equal to 140 ppm.
    (D) The refinery's 2003 RFG annual average MTBE concentration was 
greater than or equal to 6 vol%.
    (ii) For a CG early compliance application--
    (A) The refinery's CG baseline under Sec.  80.915 is less than or 
equal to 80 mg/mile.
    (B) The refinery's 2003 CG annual average benzene concentration was 
less than or equal to 0.62 vol%.
    (C) The refinery's 2003 CG annual average sulfur concentration was 
less than or equal to 140 ppm.
    (D) The refinery's 2003 CG annual average MTBE concentration was 
greater than or equal to 6 vol%.
    (5) In addition, the application must demonstrate that the refinery 
has extremely limited ability to adjust its operations in order to 
comply with its applicable RFG or CG toxics performance requirements 
under Sec.  80.815.
    (6) The refiner must provide additional information as requested by 
EPA.
    (c)(1) If approved for early compliance with the provisions of this 
subpart, the refinery may comply with the provisions of Sec.  80.1230 
as follows:
    (i) For the compliance period beginning January 1, 2007, and each 
annual compliance period through 2010; or
    (ii) For the compliance period beginning January 1, 2008, and each 
annual compliance period through 2010.
    (2) The refinery must notify EPA under which compliance period 
specified in paragraph (c)(1) of this section it will begin compliance.
    (3) Beginning with the compliance period chosen pursuant to 
paragraph (c)(2) of this section--
    (i) For early compliance approved for a refinery's RFG pool, the 
toxics air pollutants emissions performance requirements specified in 
Sec. Sec.  80.41(e)(1) and (f)(1) and 80.815 shall not apply to the 
reformulated gasoline produced by the refinery.
    (ii) For early compliance approved for a refinery's CG pool, the 
annual average exhaust toxics emissions requirements specified in 
Sec. Sec.  80.101(c)(2) and 80.815 shall not apply to conventional 
gasoline produced by the refinery.
    (4) Refineries approved for early compliance under this section may 
not generate early credits under Sec.  80.1275.
    (d) If EPA finds that a refiner provided false or inaccurate 
information in its application for early compliance, the early 
compliance approval will be void ab initio.


Sec.  80.1335  Can a refiner seek relief from the requirements of this 
subpart?

    (a) A refiner may apply for relief from the requirements specified 
in Sec.  80.1230(a) or (b) for a refinery, if it can show that--
    (1) Unusual circumstances exist that impose extreme hardship and 
significantly affect the ability to comply with the gasoline benzene 
standards at Sec.  80.1230(a) or (b) by the applicable date(s); and
    (2) It has made best efforts to comply with the requirements of 
this subpart.
    (b) A refiner must apply for and be approved for relief under this 
section.
    (1) An application must include the following information:
    (i) A plan demonstrating how the refiner will comply with the 
requirements of Sec.  80.1230(a) or (b), as applicable, as 
expeditiously as possible. The plan shall include a showing that 
contracts are or will be in place for engineering and construction of 
benzene reduction technology, a plan for applying for and obtaining any 
permits necessary for construction, a description of plans to obtain 
necessary capital, and a detailed estimate of when the requirements of 
Sec.  80.1230(a) or (b), as applicable, will be met.
    (ii) A detailed description of the refinery configuration and 
operations including, at minimum, the following information:
    (A) The refinery's total reformer unit throughput capacity;
    (B) The refinery's total crude capacity;
    (C) Total crude capacity of any other refineries owned by the same 
entity;
    (D) Total volume of gasoline production at the refinery;
    (E) Total volume of other refinery products;
    (F) Geographic location(s) where the refinery's gasoline will be 
sold;
    (G) Detailed descriptions of efforts to obtain capital for refinery 
investments;
    (H) Bond rating of entity that owns the refinery; and
    (I) Estimated capital investment needed to comply with the 
requirements of this subpart.
    (iii) For a hardship related to complying with the requirement at 
Sec.  80.1230(a), detailed descriptions of efforts to obtain credits, 
including the prices of credits available, but deemed uneconomical by 
the refiner.
    (2) Applicants must also provide any other relevant information 
requested by EPA.
    (3) An application for relief from the requirements specified in 
Sec.  80.1230(b) must be submitted to EPA by January 1, 2008, or by 
January 1, 2013 for small refiners approved under Sec.  80.1340.
    (c)(1) Approval of a hardship application under this section for 
relief from the annual average benzene standard at Sec.  80.1230(a) 
shall be in the form of an extended period of deficit carry-forward, 
per Sec.  80.1230(c), for such period of time as EPA determines is 
appropriate.
    (2) Approval of a hardship application under this section for 
relief from the maximum average benzene standard at Sec.  80.1230(b) 
shall be in the form of a waiver of the standard for such period of 
time as EPA determines is appropriate.
    (3) EPA may deny any application for appropriate reasons, including 
unacceptable environmental impact.
    (d) EPA may impose any other reasonable conditions on relief 
provided under this section, including rescinding, or reducing the 
length of, the extended deficit carry-forward period if conditions or 
situations change between approval of the hardship application and the 
end of the approved relief period.


Sec.  80.1336  What if a refiner or importer cannot produce gasoline 
conforming to the requirements of this subpart?

    In extreme, unusual, and unforeseen circumstances (for example, a 
natural

[[Page 8550]]

disaster or a refinery fire) that are clearly outside the control of 
the refiner or importer and that could not have been avoided by the 
exercise of prudence, diligence, and due care, EPA may permit a 
refinery or importer to exceed the allowable average benzene levels 
specified in Sec.  80.1230(a) or (b), as applicable, if--
    (a) It is in the public interest to do so;
    (b) The refiner or importer exercised prudent planning and was not 
able to avoid the violation and has taken all reasonable steps to 
minimize the extent of the nonconformity;
    (c) The refiner or importer can show how the requirements at Sec.  
80.1230(a) or (b), as applicable, will be achieved as expeditiously as 
possible;
    (d) The refiner or importer agrees to make up any air quality 
detriment associated with the nonconformity, where practicable; and
    (e) The refiner or importer pays to the U.S. Treasury an amount 
equal to the economic benefit of the nonconformity minus the amount 
expended making up the air quality detriment pursuant to paragraph (d) 
of this section.

Small Refiner Provisions


Sec.  80.1338  What criteria must be met to qualify as a small refiner 
for the gasoline benzene requirements of this subpart?

    (a) A small refiner is any person that demonstrates that it--
    (1) Produced gasoline at a refinery by processing crude oil through 
refinery processing units from January 1, 2005 through December 31, 
2005.
    (2) Employed an average of no more than 1,500 people, based on the 
average number of employees for all pay periods from January 1, 2005 
through December 31, 2005.
    (3) Had a corporate average crude oil capacity less than or equal 
to 155,000 barrels per calendar day (bpcd) for 2005.
    (4) Following the submission of a small refiner application, 
pursuant to Sec.  80.1340, has been approved as a small refiner for 
this subpart.
    (b) For the purpose of determining the number of employees and the 
crude oil capacity under paragraph (a) of this section, the following 
determinations shall be observed:
    (1) The refiner shall include the employees and crude oil capacity 
of any subsidiary companies, any parent company, subsidiaries of the 
parent company in which the parent has a controlling interest, and any 
joint venture partners.
    (2) For any refiner owned by a governmental entity, the number of 
employees and total crude oil capacity as specified in paragraph (a) of 
this section shall include all employees and crude oil production of 
the government to which the governmental entity is a part.
    (3) Any refiner owned and controlled by an Alaska Regional or 
Village Corporation organized pursuant to the Alaska Native Claims 
Settlement Act (43 U.S.C. 1601) is not considered an affiliate of such 
entity, or with other concerns owned by such entity, solely because of 
their common ownership.
    (c) Notwithstanding the provisions of paragraph (a) of this 
section, a refiner that reactivates a refinery that it had previously 
operated, and that was shut down or non-operational for the entire 
period between January 1, 2005 and December 31, 2005, may apply for 
small refiner status in accordance with the provisions of Sec.  
80.1340.


Sec.  80.1339  Who is not eligible for the provisions for small 
refiners?

    The following are not eligible for the hardship provisions for 
small refiners:
    (a) A refiner with one or more refineries built after December 31, 
2005.
    (b) A refiner that exceeds the employee or crude oil capacity 
criteria under Sec.  80.1338 but that meets these criteria after 
December 31, 2005, regardless of whether the reduction in employees or 
crude capacity is due to operational changes at the refinery or a 
company sale or reorganization.
    (c) Importers.
    (d) A refiner that produce gasoline other than by processing crude 
oil through refinery processing units.
    (e)(1) A small refiner approved under Sec.  80.1340 that 
subsequently ceases production of gasoline from processing crude oil 
through refinery processing units, employs more than 1,500 people, or 
exceeds the 155,000 bpcd crude oil capacity limit after December 31, 
2005 as a result of merger with or acquisition of or by another entity, 
is disqualified as a small refiner, except that this shall not apply in 
the case of a merger between two previously approved small refiners. If 
disqualification occurs, the refiner shall notify EPA in writing no 
later than 20 days following this disqualifying event.
    (2) Except as provided under paragraph (e)(3) of this section, any 
refiner whose status changes as specified in paragraph (e)(1) under 
this paragraph (b) shall meet the applicable standards of Sec.  80.1230 
within 30 months of the disqualifying event for all its refineries. 
However, such period shall not extend beyond December 31, 2014.
    (3) A refiner may apply to EPA for an additional six months to 
comply with the standards of Sec.  80.1230 if it believes that more 
than 30 months will be required for the necessary engineering, 
permitting, construction, and start-up work to be completed. Such 
applications must include detailed technical information supporting the 
need for additional time. EPA will base its decision to approve 
additional time on the information provided by the refiner and on other 
relevant information. In no case will EPA extend the compliance date 
beyond December 31, 2014.
    (4) During the period provided under paragraph (e)(2) of this 
section, and any extension provided under paragraph (e)(3) of this 
section, the refiner may not generate gasoline benzene credits under 
Sec.  80.1275 or Sec.  80.1290.
    (f) A small refiner approved under Sec.  80.1340 which notifies EPA 
that it wishes to withdraw its small refiner status pursuant to Sec.  
80.1340(g).


Sec.  80.1340  How does a refiner obtain approval as a small refiner?

    (a) Applications for small refiner status must be submitted to EPA 
by December 31, 2007.
    (b) For U.S. Postal delivery, applications for small refiner status 
must be sent to: Attn: MSAT2 Benzene, Mail Stop 6406J, U.S. 
Environmental Protection Agency, 1200 Pennsylvania Ave., NW., 
Washington, DC 20460. For commercial delivery: MSAT2 Benzene, 202-343-
9038, U.S. Environmental Protection Agency, 1310 L Street, NW., 
Washington, DC 20005.
    (c) The small refiner status application must contain the following 
information for the company seeking small refiner status, and for all 
subsidiary companies, all parent companies, all subsidiaries of the 
parent companies, and all joint venture partners:
    (1) Employees. For joint ventures, the total number of employees 
includes the combined employee count of all corporate entities in the 
venture. For government-owned refiners, the total employee count 
includes all government employees.
    (i) Pursuant to paragraph (c) of this section, a listing of each 
company facility and each facility's address where any employee, as 
specified in paragraph (a)(1) of this section, worked during the 12 
months preceding January 1, 2006.
    (ii) The average number of employees at each facility based upon 
the number of employees for each pay period for the 12 months preceding 
January 1, 2006.
    (iii) The type of business activities carried out at each location.
    (iv) In the case of a refiner that reactivates a refinery that it 
previously owned and operated and that was shut down or non-operational 
between

[[Page 8551]]

January 1, 2005 and January 1, 2006, include the following:
    (A) Pursuant to paragraph (c) of this section, a listing of each 
company refinery each refinery's address where any employee, as 
specified in paragraph (a)(1) of this section, worked since the refiner 
acquired or reactivated the refinery.
    (B) The average number of employees at any such reactivated 
refinery during each calendar year since the refiner reactivated the 
refinery.
    (C) The type of business activities carried out at each location.
    (2) Crude oil capacity.
    (i) The total corporate crude oil capacity of each refinery as 
reported to the Energy Information Administration (EIA) of the U.S. 
Department of Energy (DOE), for the period January 1, 2005 through 
December 31, 2005.
    (ii) The information submitted to EIA is presumed to be correct. In 
cases where a company disagrees with this information, the company may 
petition EPA with appropriate data to correct the record when the 
company submits its application for small refiner status.
    (3) The type of business activity carried out at each location.
    (4) For each refinery, an indication of the small refiner 
option(s), pursuant to Sec.  80.1342, intended to be utilized at the 
refinery.
    (5) A letter signed by the president, chief operating officer or 
chief executive officer of the company, or his/her designee, stating 
that the information contained in the application is true to the best 
of his/her knowledge, and that the company owned the refinery as of 
January 1, 2006.
    (6) Name, address, phone number, facsimile number, and e-mail 
address of a corporate contact person.
    (d) Approval of a small refiner status application will be based on 
the information submitted under paragraph (c) of this section and any 
other relevant information.
    (e) EPA will notify a refiner of approval or disapproval of small 
refiner status by letter.
    (1) If approved, all refineries of the refiner may defer meeting 
the standard specified in Sec.  80.1230(a) until the annual averaging 
period beginning January 1, 2015, and the standard specified in Sec.  
80.1230(b) until the averaging period beginning July 1, 2016.
    (2) If disapproved, all refineries of the refiner must meet the 
standard specified in Sec.  80.1230(a) beginning with the annual 
averaging period beginning January 1, 2011, and must meet the standard 
specified in Sec.  80.1230(b) beginning with the averaging period 
beginning July 1, 2012.
    (f) If EPA finds that a refiner provided false or inaccurate 
information on its application for small refiner status, the refiner's 
small refiner status will be void ab initio.
    (g) Prior to January 1, 2014, and upon notification to EPA, a small 
refiner approved per this section may withdraw its status as a small 
refiner. Effective on January 1 of the year following such 
notification, the small refiner will become subject to the standards at 
Sec.  80.1230.


Sec.  80.1342  What compliance options are available to small refiners 
under this subpart?

    (a) A refiner that has been approved as a small refiner under Sec.  
80.1340 may--
    (1)(i) Defer meeting the standard specified in Sec.  80.1230(a) 
until the annual averaging period beginning January 1, 2015; or
    (ii) Meet the standard specified in Sec.  80.1230(a) in any annual 
averaging period from 2011 through 2014, inclusive, provided it 
notifies EPA in writing no later than November 15 prior to the year in 
which it will produce compliant gasoline.
    (2)(i) Defer meeting the standard specified in Sec.  80.1230(b) 
until the averaging period beginning July 1, 2016; or
    (ii) Meet the standard specified in Sec.  80.1230(b) in any 
averaging period specified in Sec.  80.1230(b)(3) prior to the 
averaging period beginning July 1, 2016 provided it notifies EPA in 
writing no later than November 15 prior to the year in which it will 
produce compliant gasoline.
    (b) Any refiner that makes an election under paragraphs (a)(1) or 
(a)(2) of this section must comply with the applicable benzene 
standards at Sec.  80.1230 beginning with the first averaging period 
subsequent to the status change.
    (c) The provisions of paragraph (a) of this section shall apply 
separately for each of an approved small refiner's refineries.


Sec.  80.1343  What hardship relief provisions are available only to 
small refiners?

    (a)(1) In the case of a small refiner approved under Sec.  80.1340 
for which compliance with the requirement at Sec.  80.1230(a) would be 
feasible only through the purchase of credits, but for whom purchase of 
credits is not practically or economically feasible, EPA may approve a 
delay of the requirements applicable to the first compliance period for 
that refiner for up to two years.
    (2) No delay in accordance with paragraph (a) of this section will 
be granted to any small refiner prior to the EPA issuing a review of 
the credit program.
    (3) A small refiner may request one or more extensions of an 
approved delay if it can continue to demonstrate extreme difficulty in 
achieving compliance, through the use of credits, with the annual 
average benzene standard at Sec.  80.1230(a).
    (b) In the case of a small refiner approved under Sec.  80.1340 for 
which compliance with the maximum average benzene requirement at Sec.  
80.1230(b) is not feasible, the refiner may apply for hardship relief 
under Sec.  80.1335.


Sec.  80.1344  What provisions are available to a non-small refiner 
that acquires one or more of a small refiner's refineries?

    (a) In the case of a refiner that is not an approved small refiner 
under Sec.  80.1340 and that acquires a refinery from a small refiner 
approved under Sec.  80.1340, the small refiner provisions of the 
gasoline benzene program of this subpart continue to apply to the 
acquired refinery for a period of up to 30 months from the date of 
acquisition of the refinery. In no case shall this period extend beyond 
December 31, 2014.
    (b) A refiner may apply to EPA for up to an additional six months 
to comply with the standards of Sec.  80.1230 for the acquired refinery 
if it believes that more than 30 months would be required for the 
necessary engineering, permitting, construction, and start-up work to 
be completed. Such applications must include detailed technical 
information supporting the need for additional time. EPA will base a 
decision to approve additional time on information provided by the 
refiner and on other relevant information. In no case shall this period 
extend beyond December 31, 2014.
    (c) A refiner that acquires a refinery from a small refiner 
approved per Sec.  80.1340 shall notify EPA in writing no later than 20 
days following the acquisition.

Sampling, Testing and Retention Requirements


Sec.  80.1347  What are the sampling and testing requirements for 
refiners and importers?

    (a) Sample and test each batch of gasoline. (1) The sampling and 
testing requirements specified in subpart D for reformulated gasoline 
shall continue to apply to reformulated gasoline and shall be extended 
to conventional gasoline (CG) for the purpose of complying with the 
benzene requirements of this subpart, except as modified by paragraphs 
(a)(2), (a)(3) and (a)(4) of this section.

[[Page 8552]]

    (2) Refiners and importers shall collect a representative sample 
from each batch of gasoline produced or imported, according to the 
earliest applicable date in the following schedule:
    (i) Beginning January 1, 2011;
    (ii) Beginning January 1, 2015 for small refiners approved under 
Sec.  80.1340;
    (iii) Beginning January 1 of the year prior to 2015 in which a 
small refiner approved under Sec.  80.1340 has opted, per Sec.  
80.1342(a), to begin meeting the standards at Sec.  80.1230;
    (iv) Beginning June 1, 2007, for any refinery planning to generate 
early credits for the averaging period specified at Sec.  
80.1275(b)(1);
    (v) Beginning January 1 of each averaging period specified at Sec.  
80.1275(b)(2) or (b)(3) for which the refinery plans to generate early 
credits;
    (vi) Beginning January 1 of the year, per Sec.  80.1334(c)(1), in 
which a refinery approved for early compliance under Sec.  80.1334 opts 
to begin early compliance. The provisions shall only apply to the type 
of gasoline, RFG or CG, for which early compliance was approved.
    (3)(i) Each sample shall be tested in accordance with the 
methodology specified at Sec.  80.46(e) to determine its benzene 
concentration for compliance with the requirements of this subpart.
    (ii) Independent sample analysis, under Sec.  80.65(f), is not 
required for conventional gasoline.
    (4) Any refiner or importer may release CG prior to obtaining the 
test results for benzene required under paragraph (a)(1) of this 
section.
    (5) Exclusion of previously certified gasoline.
    (i) Any refiner who uses previously certified reformulated or 
conventional gasoline or RBOB to produce conventional gasoline at a 
refinery, must exclude the previously certified gasoline (``PCG'') for 
purposes of demonstrating compliance with the benzene standards at 
Sec.  80.1230.
    (ii) To accomplish the exclusion required in paragraph (a)(5)(i) of 
this section, the refiner must determine the volume and benzene content 
of the previously certified gasoline used at the refinery and the 
volume and benzene content of gasoline produced at the refinery, and 
use the compliance calculation procedures in paragraphs (a)(5)(iii) and 
(a)(5)(iv) of this section.
    (iii) For each batch of previously certified gasoline that is used 
to produce conventional gasoline the refiner must include the volume 
and benzene content of the previously certified gasoline as a negative 
volume and a negative benzene content in the refiner's compliance 
calculations in accordance with the requirements at Sec.  80.1238.
    (iv) For each batch of conventional gasoline produced at the 
refinery using previously certified gasoline, the refiner must 
determine the volume and benzene content and include each batch in the 
refinery's compliance calculations at Sec.  80.1240 without regard to 
the presence of previously certified gasoline in the batch.
    (v) The refiner must use any previously certified gasoline that it 
includes as a negative batch in its compliance calculations pursuant to 
Sec.  80.1240 as a component in gasoline production during the annual 
averaging period in which the previously certified gasoline was 
included as a negative batch in the refiner's compliance calculations.
    (b) Batch numbering. The batch numbering convention of Sec.  
80.365(b) shall apply to batches of conventional gasoline beginning 
with earliest applicable date specified in paragraph (a)(2) of this 
section.


Sec.  80.1348  What gasoline sample retention requirements apply to 
refiners and importers?

    Beginning with earliest applicable date specified in Sec.  
80.1347(a)(2), the gasoline sample retention requirements specified in 
subpart H of this part for the gasoline sulfur provisions apply for the 
purpose of complying with the requirements of this subpart, except that 
in addition to including the sulfur test result as provided by Sec.  
80.335(a)(4)(ii), the refiner, importer, or independent laboratory 
shall also include with the retained sample the test result for benzene 
as conducted pursuant to Sec.  80.46(e).

Recordkeeping and Reporting Requirements


Sec.  80.1350  What records must be kept?

    (a) General requirements. The recordkeeping requirements specified 
in Sec. Sec.  80.74 and 80.104, as applicable, apply for the purpose of 
complying with the requirements of this subpart; however, duplicate 
records are not required.
    (b) Additional records that refiners and importers shall keep. (1) 
Beginning with earliest applicable date specified in Sec.  
80.1347(a)(2), any refiner for each of its refineries, and any importer 
for the gasoline it imports, shall keep records that include the 
following information, as applicable:
    (i) Its compliance benzene value per Sec.  80.1240, and the 
calculations used to obtain that value.
    (ii) Its benzene baseline value, per Sec.  80.1280, if the refinery 
or importer submitted a benzene baseline application to EPA per Sec.  
80.1285.
    (iii) The number of early benzene credits generated under Sec.  
80.1275, separately by year of generation.
    (iv) The number of early benzene credits obtained, separately by 
generating refinery and year of generation.
    (v) The number of valid credits in possession of the refinery or 
importer at the beginning of each averaging period, separately by 
generating facility and year of generation.
    (vi) The number of standard credits generated by the refinery or 
importer under Sec.  80.1290, separately by transferor (if applicable), 
by facility and by year of generation.
    (vii) The number of credits used, separately by generating facility 
and year of generation.
    (viii) If any credits were obtained from, or transferred to, other 
parties, for each other party, its name, its EPA refinery or importer 
registration number, and the number of credits obtained from, or 
transferred to, the other party, and the price per credit.
    (ix) The number of credits that expired at the end of each 
averaging period, separately by generating facility and year of 
generation.
    (x) The number of credits that will be carried over into a 
subsequent averaging period, separately by generating facility and year 
of generation.
    (xi) Contracts or other commercial documents that establish each 
transfer of credits from the transferor to the transferee.
    (xii) A copy of all reports submitted to EPA under Sec. Sec.  
80.1352 and 80.1354; however, duplicate records are not required.
    (2)(i) Beginning July 1, 2012, any refiner for each of its 
refineries, and any importer for the gasoline it imports, shall 
include, in the records required by paragraph (b)(1) of this section, 
its maximum average benzene value for the period July 1, 2012 through 
December 31, 2013, and for each annual compliance period thereafter.
    (ii) Notwithstanding the requirements specified in paragraph 
(b)(2)(i) of this section, beginning July 1, 2016, a small refiner 
approved under Sec.  80.1340, for each of its refineries, shall 
include, in the records required by paragraph (b)(1) of this section, 
its maximum average benzene value for the period July 1, 2016 through 
December 31, 2017, and for each annual compliance period thereafter.
    (3) Records of all supporting calculations pursuant to paragraphs

[[Page 8553]]

(b)(1) or (b)(2) of this section shall also be kept.
    (c) Length of time records shall be kept. Records required in this 
section shall be kept for five years from the date they were created, 
except that records relating to credit transfers shall be kept by the 
transferor for five years from the date the credits were transferred, 
and shall be kept by the transferee for five years from the date the 
credits were transferred, used or terminated, whichever is later.
    (d) Make records available to EPA. On request by EPA, the records 
specified in this section shall be provided to the Administrator. For 
records that are electronically generated or maintained, the equipment 
and software necessary to read the records shall be made available, or 
upon approval by EPA, electronic records shall be converted to paper 
documents which shall be provided to the Administrator.


Sec.  80.1352  What are the pre-compliance reporting requirements for 
the gasoline benzene program?

    (a) Except as provided in paragraph (c) of this section, a refiner 
for each of its refineries shall submit the following information, as 
applicable, to EPA by June 1, 2008 and annually thereafter through June 
1, 2011, or through June 1, 2015 for small refiners approved under 
Sec.  80.1340:
    (1) Changes to the information submitted in the company's 
registration;
    (2) Changes to the information submitted for any refinery or import 
facility registration;
    (3) Gasoline production.
    (i) An estimate of the average daily volume (in gallons) of 
gasoline produced at each refinery. This estimate shall include RFG, 
RBOB, conventional gasoline and conventional gasoline blendstock that 
becomes finished gasoline solely upon the addition of oxygenate but 
shall exclude gasoline exempted pursuant to Sec.  80.1235.
    (ii) The volume estimates specified in paragraph (a)(3)(i) of this 
section must be provided for the periods of June 1, 2007 through 
December 31, 2007, and calendar years 2008 through 2015.
    (4) Benzene concentration. An estimate of the average gasoline 
benzene concentration corresponding to the time periods specified in 
paragraph (a)(3)(ii) of this section.
    (5) ABT participation. For each year through 2015, the following 
information related to crdits shall be provided to EPA, if applicable:
    (i) If the refinery is expecting to generate benzene credits per 
Sec.  80.1275 and/or Sec.  80.1290, the actual or estimated, as 
applicable, numbers of early credits and standard credits expected to 
be generated.
    (ii) If the refinery is expecting to use benzene credits per Sec.  
80.1295, the actual or estimated, as applicable, numbers of early 
credits and standard credits expected to be banked, transferred or used 
to achieve compliance in accordance with Sec.  80.1240.
    (6) Information on any project schedule by quarter of known or 
projected completion date, by the stage of the project. See, for 
example, the five project phases described in EPA's June 2002 Highway 
Diesel Progress Review report (EPA420-R-02-016, http://www.epa.gov/
otaq/regs/hd2007/420r02016.pdf): Strategic planning, Planning and 
front-end engineering, Detailed engineering and permitting, Procurement 
and Construction, and Commissioning and startup.
    (7) Basic information regarding the selected technology pathway for 
compliance (e.g., precursor re-routing or other technologies, revamp 
vs. grassroots, etc.).
    (8) Whether capital commitments have been made or are projected to 
be made.
    (b) The pre-compliance reports due in 2008 and succeeding years 
must provide an update of the progress in each of these areas and 
include actual values where available.
    (c) The pre-compliance reporting requirements of this section do 
not apply to refineries that only produce products exempt from the 
requirements of this subpart per Sec.  80.1235(b).


Sec.  80.1354  What are the reporting requirements for the gasoline 
benzene program?

    (a) Beginning with earliest applicable date specified in Sec.  
80.1347(a)(2), any refiner for each of its refineries, and any importer 
for the gasoline it imports, shall submit to EPA an Annual Gasoline 
Benzene Report that contains the information required in this section, 
and such other information as EPA may require for each applicable 
averaging period.
    (b) The Annual Gasoline Benzene Report shall contain the following 
information:
    (1) Benzene volume percent and volume of any RFG, RBOB, and 
conventional gasoline, separately by batch, produced by the refinery or 
imported, and the sum of the volumes and the volume-weighted benzene 
concentration, in volume percent.
    (2)(i) The annual average benzene concentration, per Sec.  80.1238.
    (ii) The maximum average benzene concentration per Sec.  
80.1240(b).
    (3) Any benzene deficit from the previous reporting period, per 
Sec.  80.1230(b).
    (4) The number of banked benzene credits from the previous 
reporting period.
    (5) The number of benzene credits generated under Sec.  80.1275, if 
applicable.
    (6) The number of benzene credits generated under Sec.  80.1290, if 
applicable.
    (7) The number of benzene credits transferred to the refinery or 
importer, per Sec.  80.1295(c), and the cost of the credits, if 
applicable.
    (8) The number of benzene credits transferred from the refinery or 
importer, per Sec.  80.1295(c), and the price of the credits, if 
applicable.
    (9) The number of benzene credits terminated or expired.
    (10) The compliance benzene value per Sec.  80.1240.
    (11) The number of banked benzene credits.
    (12) Projected credit generation through compliance year 2015.
    (13) Projected credit use through compliance year 2015.
    (c) EPA may require submission of additional information to verify 
compliance with the requirements of this subpart.
    (d) The report required by paragraph (a) of this section shall be--
    (1) Submitted on forms and following procedures specified by the 
Administrator.
    (2) Submitted to EPA by the last day of February each year for the 
prior calendar year averaging period.
    (3) Signed and certified as correct by the owner or a responsible 
corporate officer of the refiner or importer.

Attest Engagements


Sec.  80.1356  What are the attest engagement requirements for gasoline 
benzene compliance?

    In addition to the requirements for attest engagements that apply 
to refiners and importers under Sec. Sec.  80.125 through 80.130, 
80.410, and 80.1030, the attest engagements for refiners and importers 
must include the following:
    (a) EPA Early Credit Generation Baseline Years' Reports. (1) Obtain 
and read a copy of the refinery's or importer's annual reports and 
batch reports filed with EPA for 2004 and 2005 that contain gasoline 
benzene and gasoline volume information.
    (2) Agree the yearly volumes of gasoline and benzene concentration, 
in volume percent and benzene gallons, reported to EPA in the reports 
specified in paragraph (a)(1) of this section with the inventory 
reconciliation analysis under Sec.  80.128.
    (3) Verify that the information in the refinery's or importer's 
batch reports

[[Page 8554]]

filed with EPA under Sec. Sec.  80.75 and 80.105, and any laboratory 
test results, agree with the information contained in the reports 
specified in paragraph (a)(1) of this section.
    (4) Calculate the average benzene concentration for all of the 
refinery's or importer's gasoline volume over 2004 and 2005 and verify 
that those values agree with the values reported to EPA per Sec.  
80.1285.
    (b) Baseline for Early Credit Generation. Take the following steps 
for the first attest reporting period following approval of a benzene 
baseline:
    (1) Obtain the EPA benzene baseline approval letter for the 
refinery to determine the refinery's applicable benzene baseline under 
Sec.  80.1285.
    (2) Obtain a written statement from the company representative 
identifying the benzene value used as the refinery's baseline and agree 
that number to paragraph (b)(1) of this section and to the reports to 
EPA.
    (c) Early Credit Generation. The following procedures shall be 
completed for a refinery or importer that generates early benzene 
credits per Sec.  80.1275:
    (1) Obtain the baseline benzene concentration and gasoline volume 
from paragraph (a)(4) of this section.
    (2) Obtain the annual benzene report per Sec.  80.1354.
    (3) If the benzene value under paragraph (c)(2) of this section is 
at least 10 percent less than the value in paragraph (c)(1) of this 
section, compute and report as a finding the difference according to 
Sec.  80.1275.
    (4) Compute and report as a finding the total number of benzene 
credits generated by multiplying the value calculated in paragraph 
(c)(3) of this section by the volume of gasoline listed in the report 
specified in paragraph (c)(2) of this section, and agree this number 
with the number reported to EPA.
    (d) Standard Credit Generation. The following procedures shall be 
completed for a refinery or importer that generates benzene credits per 
Sec.  80.1290:
    (1) Obtain the annual average benzene value from the annual benzene 
report per Sec.  80.1285.
    (2) If the annual average benzene value under paragraph (d)(1) of 
this section is less than 0.62 percent by volume, compute and report as 
a finding the difference according to Sec.  80.1290.
    (3) Compute and report as a finding the total number of benzene 
credits generated by multiplying the value calculated in paragraph 
(d)(2) of this section by the volume of gasoline listed in the report 
specified in paragraph (d)(1) of this section, and agree this number 
with the number reported to EPA.
    (e) Credits Required. The following attest procedures shall be 
completed for refineries and importers:
    (1) Obtain the annual average benzene concentration and volume from 
the annual benzene report per Sec.  80.1285.
    (2) If the value in paragraph (e)(1) of this section is greater 
than 0.62 percent by volume, compute and report as a finding the 
difference between 0.62 percent by volume and the value in paragraph 
(e)(1) of this section.
    (3) Compute and report as a finding the total benzene credits 
required by multiplying the value in paragraph (e)(2) of this section 
times the volume of gasoline in paragraph (e)(1) of this section, and 
agree this number with the report to EPA.
    (4) Obtain a statement from the refiner or importer as to the 
portion of the deficit under paragraph (e)(3) of this section that was 
resolved with credits, or that was carried forward as a deficit under 
Sec.  80.1230(b), and agree these figures with the report to EPA.
    (f) Credit Purchases and Sales. The following attest procedures 
shall be completed for a refinery or importer that is a transferor or 
transferee of credits during an averaging period:
    (1) Obtain contracts or other documents for all credits transferred 
to another refinery or importer during the year being reviewed; compute 
and report as a finding the number and year of creation of credits 
represented in these documents as being transferred; and agree these 
figures with the report to EPA.
    (2) Obtain contracts or other documents for all credits received 
during the year being reviewed; compute and report as a finding the 
number and year of creation of credits represented in these documents 
as being received; and agree with the report to EPA.
    (g) Credit Reconciliation. The following attest procedures shall be 
completed each year credits were in the refiner's or importer's 
possession at any time during the year:
    (1) Obtain the credits remaining or the credit deficit from the 
previous year from the refiner's or importer's report to EPA for the 
previous year.
    (2) Compute and report as a finding the net credits remaining at 
the conclusion of the year being reviewed by totaling credits as 
follows:
    (i) Credits remaining from the previous year; plus
    (ii) Credits generated under paragraphs (c) and (d) of this 
section; plus
    (iii) Credits purchased under paragraph (f) of this section; minus
    (iv) Credits sold under paragraph (f) of this section; minus
    (v) Credits used under paragraphs (e) of this section; minus
    (vi) Credits expired; minus
    (vii) Credit deficit from the previous year.
    (3) Agree the credits remaining or the credit deficit at the 
conclusion of the year being reviewed with the report to EPA.
    (4) If the refinery or importer had a credit deficit for both the 
previous year and the year being reviewed, report this fact as a 
finding.

Violations and Penalties


Sec.  80.1358  What acts are prohibited under the gasoline benzene 
program?

    No person shall--
    (a)(1) Produce or import gasoline subject to this subpart that does 
not comply with the applicable benzene standards under Sec.  80.1230.
    (2) Fail to meet any other requirements of this subpart.
    (b) Cause another person to commit an act in violation of paragraph 
(a) of this section.


Sec.  80.1359  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 the benzene standards of this subpart shall be 
determined based on the benzene concentration of the gasoline, measured 
using the methodologies specified in Sec.  80.46(e), and other 
allowable adjustments. Any evidence or information, including the 
exclusive use of such evidence or information, may be used to establish 
the benzene concentration of the gasoline if the evidence or 
information is relevant to whether the benzene concentration of the 
gasoline would have been in compliance with the standard if the 
appropriate sampling and testing methodologies 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 those specified in Sec.  80.46(e), business records, and 
commercial documents.
    (b) Determinations of compliance with the requirements of this 
subpart other than the benzene standards, and determinations of 
liability for any violation of this subpart, may be based on 
information from any source or location. Such information may include, 
but is not limited to, business records and commercial documents.

[[Page 8555]]

Sec.  80.1360  Who is liable for violations under the gasoline benzene 
program?

    (a) The following persons are liable for violations of prohibited 
acts:
    (1) Any refiner or importer that violates Sec.  80.1358(a) is 
liable for the violation.
    (2) Any person that causes another party to violate Sec.  
80.1358(a) is liable for a violation of Sec.  80.1358(b).
    (3) Any parent corporation is liable for any violations of this 
subpart that are committed by any of its wholly-owned subsidiaries.
    (4) Each partner to a joint venture, or each owner of a facility 
owned by two or more owners, is jointly and severally liable for any 
violation of this subpart that occurs at the joint venture facility or 
a facility that is owned by the joint owners, or a facility that is 
committed by the joint venture operation or any of the joint owners of 
the facility.
    (b) Any person who violates Sec.  80.1358 is liable for the 
violation.


Sec.  80.1361  What penalties apply under the gasoline benzene program?

    (a) Any person liable for a violation under Sec.  80.1360 is 
subject to civil penalties as specified in sections 205 and 211(d) 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) Any person liable under Sec.  80.1358(a) and (b) for a 
violation of the applicable benzene standards or causing another person 
to violate the requirements during any averaging period, is subject to 
a separate day of violation for each and every day in the averaging 
period. Any person liable under Sec.  80.1360(b) for a failure to 
fulfill any requirement of credit generation, transfer, use, banking, 
or deficit carry-forward correction is subject to a separate violation 
for each and every day in the averaging period in which invalid credits 
are generated, banked, transferred or used.
    (c) Any person liable under Sec.  80.1360(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.

Foreign Refiners


Sec.  80.1363  What are the additional requirements under this subpart 
for gasoline produced at foreign refineries?

    (a) Definitions.
    (1) A foreign refinery is a refinery that is located outside the 
United States, the Commonwealth of Puerto Rico, the Virgin Islands, 
Guam, American Samoa, and the Commonwealth of the Northern Mariana 
Islands (collectively referred to in this section as ``the United 
States'').
    (2) A foreign refiner is a person that meets the definition of 
refiner under Sec.  80.2(i) for a foreign refinery.
    (3) Benzene-FRGAS means gasoline produced at a foreign refinery 
that has been assigned an individual refinery benzene baseline under 
Sec.  80.1285, has been approved as a small refiner under Sec.  
80.1340, or has been granted temporary relief under Sec.  80.1335, and 
that is imported into the United States.
    (4) Non-Benzene-FRGAS means
    (i) Gasoline meeting any of the conditions specified in paragraph 
(a)(3) of this section that is not imported into the United States.
    (ii) Gasoline meeting any of the conditions specified in paragraph 
(a)(3) of this section during a year when the foreign refiner has opted 
to not participate in the Benzene-FRGAS program under paragraph (c)(3) 
of this section.
    (iii) Gasoline produced at a foreign refinery that has not been 
assigned an individual refinery benzene baseline under Sec.  80.1285, 
or that has not been approved as a small refiner under Sec.  80.1340, 
or that has not been granted temporary relief under Sec.  80.1335.
    (5) Certified Benzene-FRGAS means Benzene-FRGAS the foreign refiner 
intends to include in the foreign refinery's benzene compliance 
calculations under Sec.  80.1240 or credit calculations under Sec.  
80.1275 and does include in these calculations when reported to EPA.
    (6) Non-Certified Benzene-FRGAS means Benzene-FRGAS that is not 
Certified Benzene-FRGAS.
    (b) Baseline for Early Credits. For any foreign refiner to obtain 
approval under the benzene foreign refiner program of this subpart for 
any refinery in order to generate early credits under Sec.  80.1275, it 
must apply for approval under the applicable provisions of this 
subpart.
    (1) The refiner shall follow the procedures specified in Sec. Sec.  
80.1280 and 80.1285 to establish a baseline of the volume of gasoline 
that was produced at the refinery and imported into the United States 
during the applicable years.
    (2) In making determinations for foreign refinery baselines EPA 
will consider all information supplied by a foreign refiner, and in 
addition may rely on any and all appropriate assumptions necessary to 
make such determinations.
    (3) Where a foreign refiner submits a petition that is incomplete 
or inadequate to establish an accurate baseline, and the refiner fails 
to correct this deficiency after a request for more information, EPA 
will not assign an individual refinery baseline.
    (c) General requirements for Benzene-FRGAS foreign refiners. A 
foreign refiner of a refinery that is approved under the benzene 
foreign refiner program of this subpart must designate each batch of 
gasoline produced at the foreign refinery that is exported to the 
United States as either Certified Benzene-FRGAS or as Non-Certified 
Benzene-FRGAS, except as provided in paragraph (c)(3) of this section.
    (1) In the case of Certified Benzene-FRGAS, the foreign refiner 
must meet all requirements that apply to refiners under this subpart.
    (2) In the case of Non-Certified Benzene-FRGAS, the foreign refiner 
shall meet all the following requirements:
    (i) The designation requirements in this section;
    (ii) The recordkeeping requirements in this section and in Sec.  
80.1350;
    (iii) The reporting requirements in this section and in Sec. Sec.  
80.1352 and 80.1354;
    (iv) The product transfer document requirements in this section;
    (v) The prohibitions in this section and in Sec.  80.1358; and
    (vi) The independent audit requirements in this section and in 
Sec.  80.1356.
    (3)(i) Any foreign refiner that generates early benzene credits 
under Sec.  80.1275 shall designate all Benzene-FRGAS as Certified 
Benzene-FRGAS for any year that such credits are generated.
    (ii) Any foreign refiner that has been approved to produce gasoline 
subject to the benzene foreign refiner program for a foreign refinery 
under this subpart may elect to classify no gasoline imported into the 
United States as Benzene-FRGAS provided the foreign refiner notifies 
EPA of the election no later than November 1 preceding the beginning of 
the next compliance period.
    (iii) An election under paragraph (c)(3)(ii) of this section shall 
be for a 12 month compliance period and apply to all gasoline that is 
produced by the foreign refinery that is imported into the United 
States, and shall remain in effect for each succeeding year unless and 
until the foreign refiner notifies EPA of the termination of the 
election. The change in election shall take effect at the beginning of 
the next annual compliance period.
    (d) Designation, product transfer documents, and foreign refiner 
certification. (1) Any foreign refiner of a foreign refinery that has 
been approved by EPA to produce gasoline subject to the benzene foreign 
refiner program

[[Page 8556]]

must designate each batch of Benzene-FRGAS as such at the time the 
gasoline is produced, unless the refiner has elected to classify no 
gasoline exported to the United States as Benzene-FRGAS under paragraph 
(c)(3) of this section.
    (2) On each occasion when any person transfers custody or title to 
any Benzene-FRGAS prior to its being imported into the United States, 
it must include the following information as part of the product 
transfer document information:
    (i) Designation of the gasoline as Certified Benzene-FRGAS or as 
Non-Certified Benzene-FRGAS; and
    (ii) The name and EPA refinery registration number of the refinery 
where the Benzene-FRGAS was produced.
    (3) On each occasion when Benzene-FRGAS is loaded onto a vessel or 
other transportation mode for transport to the United States, the 
foreign refiner shall prepare a certification for each batch of the 
Benzene-FRGAS that meets the following requirements.
    (i) The certification shall include the report of the independent 
third party under paragraph (f) of this section, and the following 
additional information:
    (A) The name and EPA registration number of the refinery that 
produced the Benzene-FRGAS;
    (B) The identification of the gasoline as Certified Benzene-FRGAS 
or Non-Certified Benzene-FRGAS;
    (C) The volume of Benzene-FRGAS being transported, in gallons;
    (D) In the case of Certified Benzene-FRGAS:
    (1) The benzene content as determined under paragraph (f) of this 
section, and the applicable designations stated in paragraph (d)(2)(i) 
of this section; and
    (2) A declaration that the Benzene-FRGAS is being included in the 
applicable compliance calculations required by EPA under this subpart.
    (ii) The certification shall be made part of the product transfer 
documents for the Benzene-FRGAS.
    (e) Transfers of Benzene-FRGAS to non-United States markets. The 
foreign refiner is responsible to ensure that all gasoline classified 
as Benzene-FRGAS is imported into the United States. A foreign refiner 
may remove the Benzene-FRGAS classification, and the gasoline need not 
be imported into the United States, but only if:
    (1) The foreign refiner excludes:
    (i) The volume of gasoline from the refinery's compliance report 
under Sec.  80.1354; and
    (ii) In the case of Certified Benzene-FRGAS, the volume of the 
gasoline from the compliance report under Sec.  80.1354.
    (2) The foreign refiner obtains sufficient evidence in the form of 
documentation that the gasoline was not imported into the United 
States.
    (f) Load port independent sampling, testing and refinery 
identification.
    (1) On each occasion that Benzene-FRGAS is loaded onto a vessel for 
transport to the United States a foreign refiner shall have an 
independent third party:
    (i) Inspect the vessel prior to loading and determine the volume of 
any tank bottoms;
    (ii) Determine the volume of Benzene-FRGAS loaded onto the vessel 
(exclusive of any tank bottoms before loading);
    (iii) Obtain the EPA-assigned registration number of the foreign 
refinery;
    (iv) Determine the name and country of registration of the vessel 
used to transport the Benzene-FRGAS to the United States; and
    (v) Determine the date and time the vessel departs the port serving 
the foreign refinery.
    (2) On each occasion that Certified Benzene-FRGAS is loaded onto a 
vessel for transport to the United States a foreign refiner shall have 
an independent third party:
    (i) Collect a representative sample of the Certified Benzene-FRGAS 
from each vessel compartment subsequent to loading on the vessel and 
prior to departure of the vessel from the port serving the foreign 
refinery;
    (ii) Determine the benzene content value for each compartment using 
the methodology as specified in Sec.  80.46(e) by one of the following:
    (A) The third party analyzing each sample; or
    (B) The third party observing the foreign refiner analyze the 
sample;
    (iii) Review original documents that reflect movement and storage 
of the Certified Benzene-FRGAS from the refinery to the load port, and 
from this review determine:
    (A) The refinery at which the Benzene-FRGAS was produced; and
    (B) That the Benzene-FRGAS remained segregated from:
    (1) Non-Benzene-FRGAS and Non-Certified Benzene-FRGAS; and
    (2) Other Certified Benzene-FRGAS produced at a different refinery.
    (3) The independent third party shall submit a report:
    (i) To the foreign refiner containing the information required 
under paragraphs (f)(1) and (f)(2) of this section, to accompany the 
product transfer documents for the vessel; and
    (ii) To the Administrator containing the information required under 
paragraphs (f)(1) and (f)(2) of this section, within thirty days 
following the date of the independent third party's inspection. This 
report shall include a description of the method used to determine the 
identity of the refinery at which the gasoline was produced, assurance 
that the gasoline remained segregated as specified in paragraph (n)(1) 
of this section, and a description of the gasoline's movement and 
storage between production at the source refinery and vessel loading.
    (4) The independent third party must:
    (i) Be approved in advance by EPA, based on a demonstration of 
ability to perform the procedures required in this paragraph (f);
    (ii) Be independent under the criteria specified in Sec.  
80.65(f)(2)(iii); and
    (iii) Sign a commitment that contains the provisions specified in 
paragraph (i) of this section with regard to activities, facilities and 
documents relevant to compliance with the requirements of this 
paragraph (f).
    (g) Comparison of load port and port of entry testing. (1)(i) Any 
foreign refiner and any United States importer of Certified Benzene-
FRGAS shall compare the results from the load port testing under 
paragraph (f) of this section, with the port of entry testing as 
reported under paragraph (o) of this section, for the volume of 
gasoline and the benzene content value; except as specified in 
paragraph (g)(1)(ii) of this section.
    (ii) Where a vessel transporting Certified Benzene-FRGAS off loads 
this gasoline at more than one United States port of entry, and the 
conditions of paragraph (g)(2)(i) of this section are met at the first 
United States port of entry, the requirements of paragraph (g)(2) of 
this section do not apply at subsequent ports of entry if the United 
States importer obtains a certification from the vessel owner that 
meets the requirements of paragraph (s) of this section, that the 
vessel has not loaded any gasoline or blendstock between the first 
United States port of entry and the subsequent port of entry.
    (2)(i) The requirements of this paragraph (g)(2) apply if--
    (A) The temperature-corrected volumes determined at the port of 
entry and at the load port differ by more than one percent; or
    (B) The benzene content value determined at the port of entry is 
higher than the benzene content value determined at the load port, and 
the amount of this difference is greater than the reproducibility 
amount specified for the port of entry test result by the American 
Society of Testing and Materials (ASTM) for the test method specified 
at Sec.  80.46(e).

[[Page 8557]]

    (ii) The United States importer and the foreign refiner shall treat 
the gasoline as Non-Certified Benzene-FRGAS, and the foreign refiner 
shall exclude the gasoline volume from its gasoline volumes 
calculations and benzene standard designations under this subpart.
    (h) Attest requirements. Refiners, for each annual compliance 
period, must arrange to have an attest engagement performed of the 
underlying documentation that forms the basis of any report required 
under this subpart. The attest engagement must comply with the 
procedures and requirements that apply to refiners under Sec. Sec.  
80.125 through 80.130, Sec.  80.1356, and other applicable attest 
engagement provisions, and must be submitted to the Administrator of 
EPA for the prior annual compliance period within the time period 
required under Sec.  80.130. The following additional procedures shall 
be carried out for any foreign refiner of Benzene-FRGAS.
    (1) The inventory reconciliation analysis under Sec.  80.128(b) and 
the tender analysis under Sec.  80.128(c) shall include Non-Benzene-
FRGAS.
    (2) Obtain separate listings of all tenders of Certified Benzene-
FRGAS and of Non-Certified Benzene-FRGAS, and obtain separate listings 
of Certified Benzene-FRGAS based on whether it is small refiner 
gasoline, gasoline produced through the use of credits, or other 
applicable designation under this subpart. Agree the total volume of 
tenders from the listings to the gasoline inventory reconciliation 
analysis in Sec.  80.128(b), and to the volumes determined by the third 
party under paragraph (f)(1) of this section.
    (3) For each tender under paragraph (h)(2) of this section, where 
the gasoline is loaded onto a marine vessel, report as a finding the 
name and country of registration of each vessel, and the volumes of 
Benzene-FRGAS loaded onto each vessel.
    (4) Select a sample from the list of vessels identified in 
paragraph (h)(3) of this section used to transport Certified Benzene-
FRGAS, in accordance with the guidelines in Sec.  80.127, and for each 
vessel selected perform the following:
    (i) Obtain the report of the independent third party, under 
paragraph (f) of this section, and of the United States importer under 
paragraph (o) of this section.
    (A) Agree the information in these reports with regard to vessel 
identification, gasoline volumes and benzene content test results.
    (B) Identify, and report as a finding, each occasion the load port 
and port of entry benzene content and volume results differ by more 
than the amounts allowed in paragraph (g) of this section, and 
determine whether the foreign refiner adjusted its refinery 
calculations as required in paragraph (g) of this section.
    (ii) Obtain the documents used by the independent third party to 
determine transportation and storage of the Certified Benzene-FRGAS 
from the refinery to the load port, under paragraph (f) of this 
section. Obtain tank activity records for any storage tank where the 
Certified Benzene-FRGAS is stored, and pipeline activity records for 
any pipeline used to transport the Certified Benzene-FRGAS, prior to 
being loaded onto the vessel. Use these records to determine whether 
the Certified Benzene-FRGAS was produced at the refinery that is the 
subject of the attest engagement, and whether the Certified Benzene-
FRGAS was mixed with any Non-Certified Benzene-FRGAS, Non-Benzene-
FRGAS, or any Certified Benzene-FRGAS produced at a different refinery.
    (5) Select a sample from the list of vessels identified in 
paragraph (h)(3) of this section used to transport Certified and Non-
Certified Benzene-FRGAS, in accordance with the guidelines in Sec.  
80.127, and for each vessel selected perform the following:
    (i) Obtain a commercial document of general circulation that lists 
vessel arrivals and departures, and that includes the port and date of 
departure of the vessel, and the port of entry and date of arrival of 
the vessel.
    (ii) Agree the vessel's departure and arrival locations and dates 
from the independent third party and United States importer reports to 
the information contained in the commercial document.
    (6) Obtain separate listings of all tenders of Non-Benzene-FRGAS, 
and perform the following:
    (i) Agree the total volume and benzene content of tenders from the 
listings to the gasoline inventory reconciliation analysis in Sec.  
80.128(b).
    (ii) Obtain a separate listing of the tenders under this paragraph 
(h)(6) where the gasoline is loaded onto a marine vessel. Select a 
sample from this listing in accordance with the guidelines in Sec.  
80.127, and obtain a commercial document of general circulation that 
lists vessel arrivals and departures, and that includes the port and 
date of departure and the ports and dates where the gasoline was off 
loaded for the selected vessels. Determine and report as a finding the 
country where the gasoline was off loaded for each vessel selected.
    (7) In order to complete the requirements of this paragraph (h) an 
auditor shall:
    (i) Be independent of the foreign refiner;
    (ii) Be licensed as a Certified Public Accountant in the United 
States and a citizen of the United States, or be approved in advance by 
EPA based on a demonstration of ability to perform the procedures 
required in Sec. Sec.  80.125 through 80.130 and this paragraph (h); 
and
    (iii) Sign a commitment that contains the provisions specified in 
paragraph (i) of this section with regard to activities and documents 
relevant to compliance with the requirements of Sec. Sec.  80.125 
through 80.130 and this paragraph (h).
    (i) Foreign refiner commitments. Any foreign refiner shall commit 
to and comply with the provisions contained in this paragraph (i) as a 
condition to being approved as a foreign refiner under this subpart.
    (1) Any United States Environmental Protection Agency inspector or 
auditor must be given full, complete and immediate access to conduct 
inspections and audits of the foreign refinery.
    (i) Inspections and audits may be either announced in advance by 
EPA, or unannounced.
    (ii) Access will be provided to any location where:
    (A) Gasoline is produced;
    (B) Documents related to refinery operations are kept;
    (C) Gasoline or blendstock samples are tested or stored; and
    (D) Benzene-FRGAS is stored or transported between the foreign 
refinery and the United States, including storage tanks, vessels and 
pipelines.
    (iii) Inspections and audits may be by EPA employees or contractors 
to EPA.
    (iv) Any documents requested that are related to matters covered by 
inspections and audits must be provided to an EPA inspector or auditor 
on request.
    (v) Inspections and audits by EPA may include review and copying of 
any documents related to:
    (A) Refinery baseline establishment, if applicable, including the 
volume and benzene content of gasoline; transfers of title or custody 
of any gasoline or blendstocks whether Benzene-FRGAS or Non-Benzene-
FRGAS, produced at the foreign refinery during the period January 1, 
2004 through December 31, 2005, and any work papers related to refinery 
baseline establishment;
    (B) The volume and benzene content of Benzene-FRGAS;
    (C) The proper classification of gasoline as being Benzene-FRGAS or 
as

[[Page 8558]]

not being Benzene-FRGAS, or as Certified Benzene-FRGAS or as Non-
Certified Benzene-FRGAS, and all other relevant designations under this 
subpart;
    (D) Transfers of title or custody to Benzene-FRGAS;
    (E) Sampling and testing of Benzene-FRGAS;
    (F) Work performed and reports prepared by independent third 
parties and by independent auditors under the requirements of this 
section, including work papers; and
    (G) Reports prepared for submission to EPA, and any work papers 
related to such reports.
    (vi) Inspections and audits by EPA may include taking samples of 
gasoline, gasoline additives or blendstock, and interviewing employees.
    (vii) Any employee of the foreign refiner must be made available 
for interview by the EPA inspector or auditor, on request, within a 
reasonable time period.
    (viii) English language translations of any documents must be 
provided to an EPA inspector or auditor, on request, within 10 working 
days.
    (ix) English language interpreters must be provided to accompany 
EPA inspectors and auditors, on request.
    (2) An agent for service of process located in the District of 
Columbia shall be named, and service on this agent constitutes service 
on the foreign refiner or any employee of the foreign refiner for any 
action by EPA or otherwise by the United States related to the 
requirements of this subpart.
    (3) The forum for any civil or criminal enforcement action related 
to the provisions of this section for violations of the Clean Air Act 
or regulations promulgated thereunder shall be governed by the Clean 
Air Act, including the EPA administrative forum where allowed under the 
Clean Air Act.
    (4) United States substantive and procedural laws shall apply to 
any civil or criminal enforcement action against the foreign refiner or 
any employee of the foreign refiner related to the provisions of this 
section.
    (5) Submitting a petition for participation in the benzene foreign 
refiner program or producing and exporting gasoline under any such 
program, and all other actions to comply with the requirements of this 
subpart relating to participation in any benzene foreign refiner 
program, or to establish an individual refinery gasoline benzene 
baseline under this subpart constitute actions or activities covered by 
and within the meaning of the provisions of 28 U.S.C. 1605(a)(2), but 
solely with respect to actions instituted against the foreign refiner, 
its agents and employees in any court or other tribunal in the United 
States for conduct that violates the requirements applicable to the 
foreign refiner under this subpart, including conduct that violates the 
False Statements Accountability Act of 1996 (18 U.S.C. 1001) and 
section 113(c)(2) of the Clean Air Act (42 U.S.C. 7413).
    (6) The foreign refiner, or its agents or employees, will not seek 
to detain or to impose civil or criminal remedies against EPA 
inspectors or auditors, whether EPA employees or EPA contractors, for 
actions performed within the scope of EPA employment related to the 
provisions of this section.
    (7) The commitment required by this paragraph (i) shall be signed 
by the owner or president of the foreign refiner business.
    (8) In any case where Benzene-FRGAS produced at a foreign refinery 
is stored or transported by another company between the refinery and 
the vessel that transports the Benzene-FRGAS to the United States, the 
foreign refiner shall obtain from each such other company a commitment 
that meets the requirements specified in paragraphs (i)(1) through (7) 
of this section, and these commitments shall be included in the foreign 
refiner's petition to participate in any benzene foreign refiner 
program.
    (j) Sovereign immunity. By submitting a petition for participation 
in any benzene foreign refiner program under this subpart (and 
baseline, if applicable) under this section, or by producing and 
exporting gasoline to the United States under any such program, the 
foreign refiner, and its agents and employees, without exception, 
become subject to the full operation of the administrative and judicial 
enforcement powers and provisions of the United States without 
limitation based on sovereign immunity, with respect to actions 
instituted against the foreign refiner, its agents and employees in any 
court or other tribunal in the United States for conduct that violates 
the requirements applicable to the foreign refiner under this subpart, 
including conduct that violates the False Statements Accountability Act 
of 1996 (18 U.S.C. 1001) and section 113(c)(2) of the Clean Air Act (42 
U.S.C. 7413).
    (k) Bond posting. Any foreign refiner shall meet the requirements 
of this paragraph (k) as a condition to approval as benzene foreign 
refiner under this subpart.
    (1) The foreign refiner shall post a bond of the amount calculated 
using the following equation:

Bond = G x $0.01

Where:

Bond = amount of the bond in U.S. dollars

G = the largest volume of gasoline produced at the foreign refinery 
and exported to the United States, in gallons, during a single 
calendar year among the most recent of the following calendar years, 
up to a maximum of five calendar years: the calendar year 
immediately preceding the date the refinery's baseline petition is 
submitted, the calendar year the baseline petition is submitted, and 
each succeeding calendar year.

    (2) Bonds shall be posted by:
    (i) Paying the amount of the bond to the Treasurer of the United 
States;
    (ii) Obtaining a bond in the proper amount from a third party 
surety agent that is payable to satisfy United States administrative or 
judicial judgments against the foreign refiner, provided EPA agrees in 
advance as to the third party and the nature of the surety agreement; 
or
    (iii) An alternative commitment that results in assets of an 
appropriate liquidity and value being readily available to the United 
States, provided EPA agrees in advance as to the alternative 
commitment.
    (3) Bonds posted under this paragraph (k) shall--
    (i) Be used to satisfy any judicial judgment that results from an 
administrative or judicial enforcement action for conduct in violation 
of this subpart, including where such conduct violates the False 
Statements Accountability Act of 1996 (18 U.S.C. 1001) and section 
113(c)(2) of the Clean Air Act (42 U.S.C. 7413);
    (ii) Be provided by a corporate surety that is listed in the United 
States Department of Treasury Circular 570 ``Companies Holding 
Certificates of Authority as Acceptable Sureties on Federal Bonds''; 
and
    (iii) Include a commitment that the bond will remain in effect for 
at least five years following the end of latest annual reporting period 
that the foreign refiner produces gasoline pursuant to the requirements 
of this subpart.
    (4) On any occasion a foreign refiner bond is used to satisfy any 
judgment, the foreign refiner shall increase the bond to cover the 
amount used within 90 days of the date the bond is used.
    (5) If the bond amount for a foreign refiner increases, the foreign 
refiner shall increase the bond to cover the shortfall within 90 days 
of the date the bond amount changes. If the bond amount decreases, the 
foreign refiner may reduce the amount of the bond beginning 90 days 
after the date the bond amount changes.
    (l) [Reserved]
    (m) English language reports. Any report or other document 
submitted to

[[Page 8559]]

EPA by a foreign refiner shall be in English language, or shall include 
an English language translation.
    (n) Prohibitions. (1) No person may combine Certified Benzene-FRGAS 
with any Non-Certified Benzene-FRGAS or Non-Benzene-FRGAS, and no 
person may combine Certified Benzene-FRGAS with any Certified Benzene-
FRGAS produced at a different refinery, until the importer has met all 
the requirements of paragraph (o) of this section, except as provided 
in paragraph (e) of this section.
    (2) No foreign refiner or other person may cause another person to 
commit an action prohibited in paragraph (n)(1) of this section, or 
that otherwise violates the requirements of this section.
    (o) United States importer requirements. Any United States importer 
shall meet the following requirements:
    (1) Each batch of imported gasoline shall be classified by the 
importer as being Benzene-FRGAS or as Non-Benzene-FRGAS, and each batch 
classified as Benzene-FRGAS shall be further classified as Certified 
Benzene-FRGAS or as Non-Certified Benzene-FRGAS.
    (2) Gasoline shall be classified as Certified Benzene-FRGAS or as 
Non-Certified Benzene-FRGAS according to the designation by the foreign 
refiner if this designation is supported by product transfer documents 
prepared by the foreign refiner as required in paragraph (d) of this 
section, unless the gasoline is classified as Non-Certified Benzene-
FRGAS under paragraph (g) of this section. Additionally, the importer 
shall comply with all requirements of this subpart applicable to 
importers.
    (3) For each gasoline batch classified as Benzene-FRGAS, any United 
States importer shall perform the following procedures.
    (i) In the case of both Certified and Non-Certified Benzene-FRGAS, 
have an independent third party:
    (A) Determine the volume of gasoline in the vessel;
    (B) Use the foreign refiner's Benzene-FRGAS certification to 
determine the name and EPA-assigned registration number of the foreign 
refinery that produced the Benzene-FRGAS;
    (C) Determine the name and country of registration of the vessel 
used to transport the Benzene-FRGAS to the United States; and
    (D) Determine the date and time the vessel arrives at the United 
States port of entry.
    (ii) In the case of Certified Benzene-FRGAS, have an independent 
third party:
    (A) Collect a representative sample from each vessel compartment 
subsequent to the vessel's arrival at the United States port of entry 
and prior to off loading any gasoline from the vessel;
    (B) Obtain the compartment samples; and
    (C) Determine the benzene content value of each compartment sample 
using the methodology specified at Sec.  80.46(e) by the third party 
analyzing the sample or by the third party observing the importer 
analyze the sample.
    (4) Any importer shall submit reports within 30 days following the 
date any vessel transporting Benzene-FRGAS arrives at the United States 
port of entry:
    (i) To the Administrator containing the information determined 
under paragraph (o)(3) of this section; and
    (ii) To the foreign refiner containing the information determined 
under paragraph (o)(3)(ii) of this section, and including 
identification of the port at which the product was offloaded.
    (5) Any United States importer shall meet all other requirements of 
this subpart for any imported gasoline that is not classified as 
Certified Benzene-FRGAS under paragraph (o)(2) of this section.
    (p) Truck imports of Certified Benzene-FRGAS produced at a foreign 
refinery.
    (1) Any refiner whose Certified Benzene-FRGAS is transported into 
the United States by truck may petition EPA to use alternative 
procedures to meet the following requirements:
    (i) Certification under paragraph (d)(5) of this section;
    (ii) Load port and port of entry sampling and testing under 
paragraphs (f) and (g) of this section;
    (iii) Attest under paragraph (h) of this section; and
    (iv) Importer testing under paragraph (o)(3) of this section.
    (2) These alternative procedures must ensure Certified Benzene-
FRGAS remains segregated from Non-Certified Benzene-FRGAS and from Non-
Benzene-FRGAS until it is imported into the United States. The petition 
will be evaluated based on whether it adequately addresses the 
following:
    (i) Provisions for monitoring pipeline shipments, if applicable, 
from the refinery, that ensure segregation of Certified Benzene-FRGAS 
from that refinery from all other gasoline;
    (ii) Contracts with any terminals and/or pipelines that receive 
and/or transport Certified Benzene-FRGAS, that prohibit the commingling 
of Certified Benzene-FRGAS with any of the following:
    (A) Other Certified Benzene-FRGAS from other refineries.
    (B) All Non-Certified Benzene-FRGAS.
    (C) All Non-Benzene-FRGAS;
    (iii) Procedures for obtaining and reviewing truck loading records 
and United States import documents for Certified Benzene-FRGAS to 
ensure that such gasoline is only loaded into trucks making deliveries 
to the United States;
    (iv) Attest procedures to be conducted annually by an independent 
third party that review loading records and import documents based on 
volume reconciliation, or other criteria, to confirm that all Certified 
Benzene-FRGAS remains segregated throughout the distribution system and 
is only loaded into trucks for import into the United States.
    (3) The petition required by this section must be submitted to EPA 
along with the application for temporary refiner relief individual 
refinery benzene standard under this subpart.
    (q) Withdrawal or suspension of foreign refiner status. EPA may 
withdraw or suspend a foreign refiner's benzene baseline or standard 
approval for a foreign refinery where--
    (1) A foreign refiner fails to meet any requirement of this 
section;
    (2) A foreign government fails to allow EPA inspections as provided 
in paragraph (i)(1) of this section;
    (3) A foreign refiner asserts a claim of, or a right to claim, 
sovereign immunity in an action to enforce the requirements in this 
subpart; or
    (4) A foreign refiner fails to pay a civil or criminal penalty that 
is not satisfied using the foreign refiner bond specified in paragraph 
(k) of this section.
    (r) Early use of a foreign refiner benzene baseline.
    (1) A foreign refiner may begin using an individual refinery 
benzene baseline under this subpart before EPA has approved the 
baseline, provided that:
    (i) A baseline petition has been submitted as required in paragraph 
(b) of this section;
    (ii) EPA has made a provisional finding that the baseline petition 
is complete;
    (iii) The foreign refiner has made the commitments required in 
paragraph (i) of this section;
    (iv) The persons that will meet the independent third party and 
independent attest requirements for the foreign refinery have made the 
commitments required in paragraphs (f)(3)(iii) and (h)(7)(iii) of this 
section; and
    (v) The foreign refiner has met the bond requirements of paragraph 
(k) of this section.
    (2) In any case where a foreign refiner uses an individual refinery 
baseline

[[Page 8560]]

before final approval under paragraph (r)(1) of this section, and the 
foreign refinery baseline values that ultimately are approved by EPA 
are more stringent than the early baseline values used by the foreign 
refiner, the foreign refiner shall recalculate its compliance, ab 
initio, using the baseline values approved by the EPA, and the foreign 
refiner shall be liable for any resulting violation of the requirements 
of this subpart.
    (s) Additional requirements for petitions, reports and 
certificates. Any petition for approval to produce gasoline subject to 
the benzene foreign refiner program, any alternative procedures under 
paragraph (p) of this section, any report or other submission required 
by paragraph (c), (f)(2), or (i) of this section, and any certification 
under paragraph (d)(3) of this section shall be--
    (1) Submitted in accordance with procedures specified by the 
Administrator, including use of any forms that may be specified by the 
Administrator.
    (2) Be signed by the president or owner of the foreign refiner 
company, or by that person's immediate designee, and shall contain the 
following declaration:

    I hereby certify: (1) That I have actual authority to sign on 
behalf of and to bind [insert name of foreign refiner] with regard 
to all statements contained herein; (2) that I am aware that the 
information contained herein is being Certified, or submitted to the 
United States Environmental Protection Agency, under the 
requirements of 40 CFR part 80, subpart L, and that the information 
is material for determining compliance under these regulations; and 
(3) that I have read and understand the information being Certified 
or submitted, and this information is true, complete and correct to 
the best of my knowledge and belief after I have taken reasonable 
and appropriate steps to verify the accuracy thereof. I affirm that 
I have read and understand the provisions of 40 CFR part 80, subpart 
L, including 40 CFR 80.1363 apply to [insert name of foreign 
refiner]. Pursuant to Clean Air Act section 113(c) and 18 U.S.C. 
1001, the penalty for furnishing false, incomplete or misleading 
information in this certification or submission is a fine of up to 
$10,000 U.S., and/or imprisonment for up to five years.

PART 85--CONTROL OF AIR POLLUTION FROM MOBILE SOURCES

0
11a. The authority citation for part 85 continues to read as follows:

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

Subpart P--[Amended]

0
11b. Section 85.1515 is amended by adding paragraphs (c)(2)(vii), 
(c)(2)(viii), and (c)(8) to read as follows.


Sec.  85.1515  Emission standards and test procedures applicable to 
imported nonconforming motor vehicles and motor vehicle engines.

* * * * *
    (c) * * *
    (2) * * *
    (vii) Nonconforming LDV/LLDTs originally manufactured in OP years 
2009 and later must meet the evaporative emission standards in Table 
S09-1 in 40 CFR 86.1811-09(e). However, LDV/LLDTs originally 
manufactured in OP years 2009 and 2010 and imported by ICIs who qualify 
as small volume manufacturers as defined in 40 CFR 86.1838-01 are 
exempt from the LDV/LLDT evaporative emission standards in Table S09-1 
in 40 CFR 86.1811-09(e), but must comply with the Tier 2 evaporative 
emission standards in Table S04-3 in 40 CFR 86.1811-04(e).
    (viii) Nonconforming HLDTs and MDPVs originally manufactured in OP 
years 2010 and later must meet the evaporative emission standards in 
Table S09-1 in 40 CFR 86.1811-09(e). However, HLDTs and MDPVs 
originally manufactured in OP years 2010 and 2011 and imported by ICIs, 
who qualify as small volume manufacturers as defined in 40 CFR 86.1838-
01, are exempt from the HLDTs and MDPVs evaporative emission standards 
in Table S09-1 in 40 CFR 86.1811-09(e), but must comply with the Tier 2 
evaporative emission standards in Table S04-3 in 40 CFR 86.1811-04(e).
* * * * *
    (8)(i) Nonconforming LDV/LLDTs originally manufactured in OP years 
2010 and later must meet the cold temperature NHMC emission standards 
in Table S10-1 in 40 CFR 86.1811-10(g).
    (ii) Nonconforming HLDTs and MDPVs originally manufactured in OP 
years 2012 and later must meet the cold temperature NHMC emission 
standards in Table S10-1 in 40 CFR 86.1811-10(g).
    (iii) ICIs, which qualify as small volume manufacturers, are exempt 
from the cold temperature NMHC phase-in intermediate percentage 
requirements described in 40 CFR 86.1811-10(g)(3). See 40 CFR 86.1811-
04(k)(5)(vi) and (vii).
    (iv) As an alternative to the requirements of paragraphs (c)(8)(i) 
and (ii) of this section, ICIs may elect to meet a cold temperature 
NMHC family emission level below the cold temperature NMHC fleet 
average standards specified in Table S10-1 of 40 CFR 86.1811-10 and 
bank or sell credits as permitted in 40 CFR 86.1864-10. An ICI may not 
meet a higher cold temperature NMHC family emission level than the 
fleet average standards in Table S10-1 of 40 CFR 86.1811-10 as 
specified in paragraphs (c)(8)(i) and (ii) of this section, unless it 
demonstrates to the Administrator at the time of certification that it 
has obtained appropriate and sufficient NMHC credits from another 
manufacturer, or has generated them in a previous model year or in the 
current model year and not traded them to another manufacturer or used 
them to address other vehicles as permitted in 40 CFR 86.1864-10.
    (v) Where an ICI desires to obtain a certificate of conformity 
using a higher cold temperature NMHC family emission level than 
specified in paragraphs (c)(8)(i) and (ii) of this section, but does 
not have sufficient credits to cover vehicles imported under such 
certificate, the Administrator may issue such certificate if the ICI 
has also obtained a certificate of conformity for vehicles certified 
using a cold temperature NMHC family emission level lower than that 
required under paragraphs (c)(8)(i) and (ii) of this section. The ICI 
may then import vehicles to the higher cold temperature NMHC family 
emission level only to the extent that it has generated sufficient 
credits from vehicles certified to a family emission level lower than 
the cold temperature NMHC fleet average standard during the same model 
year.
    (vi) ICIs using cold temperature NMHC family emission levels higher 
than the cold temperature NMHC fleet average standards specified in 
paragraphs (c)(8)(i) and (ii) of this section must monitor their 
imports so that they do not import more vehicles certified to such 
family emission levels than their available credits can cover. ICIs 
must not have a credit deficit at the end of a model year and are not 
permitted to use the deficit carryforward provisions provided in 40 CFR 
86.1864-10.
    (vii) The Administrator may condition the certificates of 
conformity issued to ICIs as necessary to ensure that vehicles subject 
to this paragraph (c)(8) comply with the applicable cold temperature 
NMHC fleet average standard for each model year.
* * * * *

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

0
12. The authority citation for part 86 continues to read as follows:

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

[[Page 8561]]

Subpart H--[Amended]

0
13. Section 86.701-94 is amended by revising paragraph (a) to read as 
follows:


Sec.  86.701-94  General applicability.

    (a) The provisions of this subpart apply to: 1994 through 2003 
model year Otto-cycle and diesel light-duty vehicles; 1994 through 2003 
model year Otto-cycle and diesel light-duty trucks; and 1994 and later 
model year Otto-cycle and diesel heavy-duty engines; and 2001 and later 
model year Otto-cycle heavy-duty vehicles and engines certified under 
the provisions of subpart S of this part. The provisions of subpart B 
of this part apply to this subpart. The provisions of Sec.  86.1811-
04(a)(5) and (p) apply to 2004 and later model year light-duty 
vehicles, light-duty trucks, and medium duty passenger vehicles.
* * * * *

Subpart S--[Amended]

0
14. Section 86.1803-01 is amended by revising the definition of 
``Banking'' and adding the definition for ``Fleet average cold 
temperature NMHC standard'' in alphabetical order to read as follows:


Sec.  86.1803-01  Definitions.

* * * * *
    Banking means one of the following:
    (1) The retention of NOX emission credits for complete 
heavy-duty vehicles by the manufacturer generating the emission 
credits, for use in future model year certification programs as 
permitted by regulation.
    (2) The retention of cold temperature non-methane hydrocarbon 
(NMHC) emission credits for light-duty vehicles, light-duty trucks, and 
medium-duty passenger vehicles by the manufacturer generating the 
emission credits, for use in future model year certification programs 
as permitted by regulation.
* * * * *
    Fleet average cold temperature NMHC standard means, for light-duty 
vehicles, light-duty trucks and medium-duty passenger vehicles, an NMHC 
cold temperature standard imposed over an individual manufacturer's 
total 50-State U.S. sales (or a fraction of total U.S. sales during 
phase-in years), as ``U.S. sales'' is defined to include all national 
sales, including points-of-first sale in California, of a given model 
year. Manufacturers determine their compliance with such a standard by 
averaging, on a sales-weighted basis, the individual NMHC ``Family 
Emission Limits'' (FEL--as defined in this subpart) to which light-duty 
vehicles, light-duty trucks and medium-duty passenger vehicles were 
certified and sold for that model year.
* * * * *

0
15. Section 86.1805-04 is amended by adding paragraph (g) to read as 
follows:


Sec.  86.1805-04  Useful life.

* * * * *
    (g) Where cold temperature NMHC standards are applicable, the 
useful life requirement for compliance with the cold temperature NMHC 
standard only is as follows:
    (1) For LDV/LLDTs, 10 years or 120,000 miles, whichever occurs 
first.
    (2) For HLDT/MDPVs, 11 years or 120,000 miles, whichever occurs 
first.

0
16. A new Sec.  86.1809-10 is added to Subpart S to read as follows:


Sec.  86.1809-10  Prohibition of defeat devices.

    (a) No new light-duty vehicle, light-duty truck, medium-duty 
passenger vehicle, or complete heavy-duty vehicle shall be equipped 
with a defeat device.
    (b) The Administrator may test or require testing on any vehicle at 
a designated location, using driving cycles and conditions that may 
reasonably be expected to be encountered in normal operation and use, 
for the purposes of investigating a potential defeat device.
    (c) For cold temperature CO and cold temperature NMHC emission 
control, the Administrator will use a guideline to determine the 
appropriateness of the CO and NMHC emission control at ambient 
temperatures between 25 [deg]F (the upper bound of the temperatue test 
range) and 68 [deg]F (the lower bound of the FTP range). The guideline 
for CO emission congruity across the intermediate temperature range is 
the linear interpolation between the CO standard applicable at 25 
[deg]F and the CO standard applicable at 68 [deg]F. The guideline for 
NMHC emission congruity across the intermediate temperature range is 
the linear interpolation between the NMHC FEL pass limit (e.g. 0.3499 
g/mi for a 0.3 g/mi FEL) applicable at 20 [deg]F and the Tier 2 NMOG 
standard to which the vehicle was certified at 68 [deg]F, where the 
intermediate temperature NMHC level is rounded to the nearest hundredth 
for comparison to the interpolated line. For vehicles that exceed this 
CO emissions guideline or this NMHC emissions guideline upon 
intermediate temperature cold testing:
    (1) If the CO emission level is greater than the 20 [deg]F emission 
standard, the vehicle will automatically be considered to be equipped 
with a defeat device without further investigation. If the intermediate 
temperature NMHC emission level, rounded to the nearest hundredth, is 
greater than the 20 [deg]F FEL pass limit, the vehicle will be presumed 
to have a defeat device unless the manufacturer provides evidence to 
EPA's satisfaction that the cause of the test result in question is not 
due to a defeat device.
    (2) If the CO emission level does not exceed the 20 [deg]F emission 
standard, the Administrator may investigate the vehicle design for the 
presence of a defeat device under paragraph (d) of this section. If the 
intermediate temperature NMHC emission level, rounded to the nearest 
hundredth, does not exceed the 20 [deg]F FEL pass limit the 
Administrator may investigate the vehicle design for the presence of a 
defeat device under paragraph (d) of this section.
    (d) The following provisions apply for vehicle designs designated 
by the Administrator to be investigated for possible defeat devices:
    (1) The manufacturer must show to the satisfaction of the 
Administrator that the vehicle design does not incorporate strategies 
that unnecessarily reduce emission control effectiveness exhibited 
during the Federal Test Procedure or Supplemental Federal Test 
Procedure (FTP or SFTP) when the vehicle is operated under conditions 
that may reasonably be expected to be encountered in normal operation 
and use.
    (2) The following information requirements apply:
    (i) Upon request by the Administrator, the manufacturer must 
provide an explanation containing detailed information regarding test 
programs, engineering evaluations, design specifications, calibrations, 
on-board computer algorithms, and design strategies incorporated for 
operation both during and outside of the Federal emission test 
procedure.
    (ii) For purposes of investigations of possible cold temperature CO 
or cold temperature NMHC defeat devices under this paragraph (d), the 
manufacturer must provide an explanation to show, to the satisfaction 
of the Administrator, that CO emissions and NMHC emissions are 
reasonably controlled in reference to the linear guideline across the 
intermediate temperature range.
    (e) For each test group of Tier 2 LDV/LLDTs and HLDT/MDPVs and 
interim non-Tier 2 LDV/LLDTs and HLDT/MDPVs the manufacturer must 
submit, with the Part II certification application, an engineering 
evaluation demonstrating to the satisfaction of the Administrator that 
a discontinuity in emissions of non-methane organic gases, carbon 
monoxide, oxides of nitrogen and formaldehyde measured on the

[[Page 8562]]

Federal Test Procedure (subpart B of this part) does not occur in the 
temperature range of 20 to 86 [deg]F. For diesel vehicles, the 
engineering evaluation must also include particulate emissions.

0
17. A new Sec.  86.1810-09 is added to Subpart S to read as follows:


Sec.  86.1810-09  General standards; increase in emissions; unsafe 
condition; waivers.

    Section 86.1810-09 includes text that specifies requirements that 
differ from Sec.  86.1810-01. Where a paragraph in Sec.  86.1810-01 is 
identical and applicable to Sec.  86.1810-09, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1810-01.'' Where a corresponding paragraph of 
Sec.  86.1810-01 is not applicable, this is indicated by the statement 
``[Reserved].'' This section applies to model year 2009 and later 
light-duty vehicles and light-duty trucks fueled by gasoline, diesel, 
methanol, ethanol, natural gas and liquefied petroleum gas fuels. This 
section also applies to MDPVs and complete heavy-duty vehicles 
certified according to the provisions of this subpart. Multi-fueled 
vehicles (including dual-fueled and flexible-fueled vehicles) must 
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. 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.
    (a) through (e) [Reserved]. For guidance see Sec.  86.1810-01.
    (f) Altitude requirements. (1) All emission standards apply at low 
altitude conditions and at high altitude conditions, except for 
supplemental exhaust emission standards, cold temperature NMHC emission 
standards, and the evaporative emission standards as described in Sec.  
86.1811-09(e). Supplemental exhaust emission standards, as described in 
Sec.  86.1811-04(f), apply only at low altitude conditions. Cold 
temperature NMHC emission standards, as described in Sec.  86.1811-
10(g), apply only at low altitude conditions. Tier 2 evaporative 
emission standards apply at high altitude conditions as specified in 
Sec.  86.1810-01(f) and (j), and Sec.  86.1811-04(e).
    (2) For vehicles that comply with the cold temperature NMHC 
standards, manufacturers must submit an engineering evaluation 
indicating that common calibration approaches are utilized at high 
altitudes. Any deviation from low altitude emission control practices 
must be included in the auxiliary emission control device (AECD) 
descriptions submitted at certification. Any AECD specific to high 
altitude must require engineering emission data for EPA evaluation to 
quantify any emission impact and validity of the AECD.
    (g) through (p) [Reserved]. For guidance see Sec.  86.1810-01.

0
18. Section 86.1811-04 is amended by adding paragraphs (k)(5)(iv) 
through (vii) and (q)(1)(vi) through (ix) to read as follows:


Sec.  86.1811-04  Emission standards for light-duty vehicles, light-
duty trucks and medium-duty passenger vehicles.

* * * * *
    (k) * * *
    (5) * * *
    (iv) Vehicles produced by small volume manufacturers, as defined in 
Sec.  86.1838-01, are exempt from the LDV/LLDT evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) for model years 2009 
and 2010, but must comply with the Tier 2 evaporative emission 
standards in Table S04-3 in paragraph (e)(1) of this section for model 
years 2009 and 2010.
    (v) Vehicles produced by small volume manufacturers, as defined in 
Sec.  86.1838-01, are exempt from the HLDT/MDPV evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) for model years 2010 
and 2011, but must comply with the Tier 2 evaporative emission 
standards in Table S04-3 in paragraph (e)(1) of this section for model 
years 2010 and 2011.
    (vi) Small volume manufacturers, as defined in Sec.  86.1838-01, 
are exempt from the LDV/LLDT cold temperature NMHC phase-in 
requirements in Table S10-1 of Sec.  86.1811-10(g) for model years 
2010, 2011, and 2012, but must comply with the 100% requirement for 
2013 and later model years for cold temperature NMHC standards.
    (vii) Small volume manufacturers, as defined in Sec.  86.1838-01, 
are exempt from the HLDT/MDPV cold temperature NMHC phase-in 
requirements in Table S10-1 of Sec.  86.1811-10(g) for model years 
2012, 2013, and 2014, but must comply with the 100% requirement for 
2015 and later model years for cold temperature NMHC standards.
* * * * *
    (q) * * *
    (1) * * *
    (vi) Defer compliance with the LDV/LLDT evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) until 2013, and defer 
100% compliance with the LDV/LLDT evaporative emissions standards in 
Table S09-2 of Sec.  86.1811-09(e) until 2016. (The hardship relief may 
be extended one additional model year--two model years total.)
    (vii) Defer compliance with the HLDT/MDPV evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) until 2014, and defer 
100% compliance with the HLDT/MDPV evaporative emissions standards in 
Table S09-2 of Sec.  86.1811-09(e) until 2016. (The hardship relief may 
be extended one additional model year--two model years total.)
    (viii) Defer 100% compliance with the LDV/LLDT cold temperature 
NMHC standards in Table S10-X of Sec.  86.1811-10(g) until 2015. (The 
hardship relief may be extended one additional model year--two model 
years total.)
    (ix) Defer 100% compliance with the HLDT/MDPV cold temperature NMHC 
standards in Table S10-X of Sec.  86.1811-10(g) until 2017. (The 
hardship relief may be extended one additional model year--two model 
years total.)
* * * * *

0
19. A new Sec.  86.1811-09 is added to Subpart S to read as follows:


Sec.  86.1811-09  Emission standards for light-duty vehicles, light-
duty trucks and medium-duty passenger vehicles.

    Section 86.1811-09 includes text that specifies requirements that 
differ from Sec.  86.1811-04. Where a paragraph in Sec.  86.1811-04 is 
identical and applicable to Sec.  86.1811-09, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1811-04.'' Where a corresponding paragraph of 
Sec.  86.1811-04 is not applicable, this is indicated by the statement 
``[Reserved].''
    (a) Applicability. (1) This section contains regulations 
implementing emission standards for all LDVs, LDTs and MDPVs. This 
section applies to 2009 and later model year LDVs, LDTs and MDPVs 
fueled by gasoline, diesel, methanol, ethanol, natural gas and 
liquefied petroleum gas fuels, except as noted. Additionally, this 
section applies to hybrid electric vehicles (HEVs) and zero emission 
vehicles (ZEVs). Unless otherwise specified, multi-fueled vehicles must 
comply with all requirements established for each consumed fuel.
    (2) through (4) [Reserved]. For guidance see Sec.  86.1811-04.
    (5) The exhaust emission standards and evaporative emission 
standards of this section apply equally to certification and in-use 
LDVs, LDTs and

[[Page 8563]]

MDPVs, unless otherwise specified. See paragraph (t) of this section 
for interim evaporative emission in-use standards that are different 
than the certification evaporative emission standards specified in 
paragraph (e) of this section.
    (b) through (d) [Reserved]. For guidance see Sec.  86.1811-04.
    (e) Evaporative emission standards. Evaporative emissions from 
gasoline-fueled, natural gas-fueled, liquefied petroleum gas-fueled, 
ethanol-fueled and methanol-fueled vehicles must not exceed the 
standards in this paragraph (e). The standards apply equally to 
certification and in-use vehicles.
    (1) Diurnal-plus-hot soak evaporative hydrocarbon standards. (i) 
Hydrocarbons for LDV/LLDTs, HLDTs and MDPVs that are gasoline-fueled, 
dedicated natural gas-fueled, dedicated liquefied petroleum gas-fueled, 
dedicated ethanol-fueled, dedicated methanol-fueled and multi-fueled 
vehicles when operating on gasoline must not exceed the diurnal plus 
hot soak standards shown in Table S09-1 for the full three diurnal test 
sequence and for the supplemental two diurnal test sequence. The 
standards apply equally to certification and in-use vehicles, except as 
otherwise specified in paragraph (t) of this section. Table S09-1 
follows:

                  Table S09-1.--Light-Duty Diurnal Plus Hot Soak Evaporative Emission Standards
                                                [grams per test]
----------------------------------------------------------------------------------------------------------------
                                                                                                  Supplemental 2
                                                                                       3 day            day
                        Vehicle category                            Model year      diurnal+hot     diurnal+hot
                                                                                       soak            soak
----------------------------------------------------------------------------------------------------------------
LDVs............................................................            2009            0.50            0.65
LLDTs...........................................................            2009            0.65            0.85
HLDTs...........................................................            2010            0.90            1.15
MDPVs...........................................................            2010            1.00            1.25
----------------------------------------------------------------------------------------------------------------

    (ii) Hydrocarbons for LDV/LLDTs, HLDTs and MDPVs that are multi-
fueled vehicles operating on non-gasoline fuel must not exceed the 
diurnal plus hot soak standards shown in Table S09-2 for the full three 
diurnal test sequence and for the supplemental two diurnal test 
sequence. The standards apply equally to certification and in-use 
vehicles except as otherwise specified in paragraph (t) of this 
section. Table S09-2 follows:

   Table S09-2.--Light-Duty Diurnal Plus Hot Soak Evaporative Emission
        Standards: Non-Gasoline Portion of Multi-Fueled Vehicles
                            [grams per test]
------------------------------------------------------------------------
                                                          Supplemental 2
                                               3 day            day
            Vehicle category                diurnal+hot     diurnal+hot
                                               soak            soak
------------------------------------------------------------------------
LDVs....................................            0.50            0.65
LLDTs...................................            0.65            0.85
HLDTs...................................            0.90            1.15
MDPVs...................................            1.00            1.25
------------------------------------------------------------------------

    (iii) For multi-fueled vehicles operating on non-gasoline fuel, 
manufacturers must comply with the phase-in requirements in Table S09-3 
of this paragraph for the evaporative emission requirements specified 
in Table S09-2 of this section. Phase-in schedules are grouped together 
for LDV/LLDTs and HLDT/MDPVs. These requirements specify the minimum 
percentage of the manufacturer's LDV/LLDT/HLDT/MDPV 50-State sales, by 
model year, that must meet the requirements for their full useful 
lives. Table S09-3 follows:

 Table S09-3.--Phase-In Percentages for Light-Duty Diurnal Plus Hot Soak
  Evaporative Emission Standards: Non-Gasoline Portion of Multi-Fueled
                                Vehicles
------------------------------------------------------------------------
                                                          Percentage of
                                                          vehicles that
                                                            must meet
                      Model year                           evaporative
                                                            emission
                                                          requirements
------------------------------------------------------------------------
2012..................................................                30
2013..................................................                60
2014 and subsequent...................................               100
------------------------------------------------------------------------

    (2) through (6) [Reserved]. For guidance see Sec.  86.1811-04.
    (7) In cases where vehicles are certified to evaporative emission 
standards in Tables S09-1 and S09-2 of this section, the Administrator 
may accept evaporative emissions data for low altitude testing in 
accordance with California test conditions and test procedures (in lieu 
of the evaporative emission test condition and test procedure 
requirements of subpart B of this part).
    (f) through (s) [Reserved]. For guidance see Sec.  86.1811-04.
    (t) Evaporative emission in-use standards. (1) For LDVs and LLDTs 
certified prior to the 2012 model year, the Tier 2 LDV/LLDT evaporative 
emissions standards in Table S04-3 of Sec.  86.1811-04(e) shall apply 
to in-use vehicles for only the first three model years after an 
evaporative family is first certified to the LDV/LLDT evaporative 
emission standards in Table S09-1 of paragraph (e) of this section, as 
shown in Table S09-4. For example, evaporative families first certified 
to the LDV/LLDT standards in Table S09-1 in the 2011 model year must 
meet the Tier

[[Page 8564]]

2 LDV/LLDT evaporative emission standards (Table S04-3) in-use for 
2011, 2012, and 2013 model year vehicles (applying Tier 2 standards in-
use is limited to the first three years after introduction of a 
vehicle).
    (2) For HLDTs and MDPVs certified prior to the 2013 model year, the 
Tier 2 HLDT/MDPV evaporative emissions standards in Table S04-3 of 
Sec.  86.1811-04(e) shall apply to in-use vehicles for only the first 
three model years after an evaporative family is first certified to the 
HLDT/MDPV evaporative emission standards in Table S09-1 of paragraph 
(e) of this section, as shown in Table S09-5. For example, evaporative 
families first certified to the HLDT/MDPV standards in Table S09-1 in 
the 2012 model year must meet the Tier 2 HLDT/MDPV evaporative emission 
standards (Table S04-3) in-use for 2012, 2013, and 2014 model year 
vehicles (applying Tier 2 standards in-use is limited to the first 
three years after introduction of a vehicle).

    Table S09-4.--Schedule for In-Use LDV/LLDT Diurnal Plus Hot Soak
                     Evaporative Emission Standards
------------------------------------------------------------------------
           Model Year of Introduction              2009    2010    2011
------------------------------------------------------------------------
Models Years That Tier 2 Standards Apply to In-     2009    2010    2011
 use Vehicles...................................
                                                    2010    2011    2012
                                                    2011    2012    2013
------------------------------------------------------------------------


    Table S09-5--Schedule For In-Use HLDT/MDPV Diurnal Plus Hot Soak
                     Evaporative Emission Standards
------------------------------------------------------------------------
         Model Year of Introduction 2010           2010    2011    2012
------------------------------------------------------------------------
Models Years That Tier 2 Standards Apply to In-     2010    2011    2012
 use Vehicles...................................
                                                    2011    2012    2013
                                                    2012    2013    2014
------------------------------------------------------------------------


0
20. A new Sec.  86.1811-10 is added to Subpart S to read as follows:


Sec.  86.1811-10  Emission standards for light-duty vehicles, light-
duty trucks and medium-duty passenger vehicles.

    Section 86.1811-10 includes text that specifies requirements that 
differ from Sec.  86.1811-04 and Sec.  86.1811-09. Where a paragraph in 
Sec.  86.1811-04 or Sec.  86.1811-09 is identical and applicable to 
Sec.  86.1811-10, this may be indicated by specifying the corresponding 
paragraph and the statement ``[Reserved]. For guidance see Sec.  
86.1811-04'' or ``[Reserved]. For guidance see Sec.  86.1811-09.'' 
Where a corresponding paragraph of Sec.  86.1811-04 or Sec.  86.1811-09 
is not applicable, this is indicated by the statement ``[Reserved].''
    (a) [Reserved]. For guidance see Sec.  86.1811-09.
    (b) through (d) [Reserved]. For guidance see Sec.  86.1811-04.
    (e) [Reserved]. For guidance see Sec.  86.1811-09.
    (f) [Reserved]. For guidance see Sec.  86.1811-04.
    (g) Cold temperature exhaust emission standards. (1) Cold 
temperature CO standards. These cold temperature CO standards are 
applicable only to gasoline fueled LDV/Ts and MDPVs. Cold temperature 
CO exhaust emission standards apply over a useful life of 50,000 miles 
or 5 years (whichever occurs first) as follows:
    (i) For LDVs and LDT1s, the standard is 10.0 grams per mile CO.
    (ii) For LDT2s, LDT3s and LDT4s, and MDPVs, the standard is 12.5 
grams per mile CO.
    (iii) These standards do not apply to interim non-Tier 2 MDPVs.
    (2) Cold temperature NMHC standards. Full useful life fleet average 
cold temperature NMHC standards are applicable only to gasoline fueled 
LDV/LLDTs and HLDT/MDPVs, and apply equally to certification and in-use 
except as otherwise specified in paragraph (u) of this section for in-
use standards for applicable phase-in models. Testing with other fuels 
such as E85, or testing on diesel vehicles, is not required. Multi-
fuel, bi-fuel or dual-fuel vehicles must comply with requirements using 
gasoline only. For LDV/LLDTs, the useful life is 120,000 miles or 10 
years, whichever comes first. For HLDT/MDPVs, the useful life is 
120,000 miles or 11 years, whichever comes first. There is not an 
intermediate useful life standard for cold temperature NMHC standards.
    (i) The standards are shown in the following table:

    Table S10-1--Fleet Average Cold Temperature NMHC Full Useful Life
                       Exhaust Emission Standards
------------------------------------------------------------------------
                                                        Cold temperature
                                                           NMHC sales-
                Vehicle weight category                  weighted fleet
                                                        average standard
                                                           (grams/mile)
------------------------------------------------------------------------
LDVs & LLDTs (<=6,000 lbs GVWR).......................               0.3
HLDTs (>6,000-8,500 lbs GVWR) & MDPVs (>8,500-10,000                 0.5
 lbs GVWR)............................................
------------------------------------------------------------------------

    (ii) The manufacturer must calculate its fleet average cold 
temperature NMHC emission level(s) as described in Sec.  86.1864-10(m).
    (iii) During a phase-in year, the manufacturer must comply with the 
fleet average standards for the required phase-in percentage for that 
year as specified in paragraph (g)(3) of this section, or for the 
alternate phase-in percentage as permitted under paragraph (g)(4) of 
this section.
    (iv) For model years prior to 2010 (LDV/LLDTs) and 2012 (HLDT/
MDPVs), where the manufacturer desires to bank early NMHC credits as 
permitted under Sec.  86.1864-10(o)(5), the manufacturer must achieve a 
fleet average standard below the applicable standard. Manufacturers 
must determine compliance with the cold temperature NMHC fleet average 
standard according to Sec.  86.1864-10(o).
    (3) Phase-in of the cold temperature NMHC standards. Except as 
permitted in Sec.  86.1811-04(k)(5)(vi) and (vii) regarding small 
volume manufacturers, manufacturers must comply with the phase-in 
requirements in Tables S10-2 and S10-3. Separate phase-in schedules are 
provided for LDV/LLDTs and for HLDT/MDPVs. These requirements specify 
the minimum percentage of the manufacturer's LDV/LLDT and HLDT/MDPV 50-
State sales, by model year, that must meet the fleet average cold 
temperature NMHC standard for their full useful lives. LDVs and LLDTs 
must be grouped together to determine compliance with these phase-in 
requirements, and HLDTs and MDPVs must also be grouped together to 
determine compliance with these phase-in requirements. Tables S10-2 and 
S10-3 follow:

[[Page 8565]]



  Table S10-2--Phase-in Percentages for LDV/LLDT Cold Temperature NMHC
                              Requirements
------------------------------------------------------------------------
                                                           Percentage of
                                                          LDV/LLDTs that
                       Model year                            must meet
                                                            requirement
------------------------------------------------------------------------
2010....................................................              25
2011....................................................              50
2012....................................................              75
2013 and subsequent.....................................             100
------------------------------------------------------------------------


  Table S10-3--Phase-in Percentages for HLDT/MDPV Cold Temperature NMHC
                              Requirements
------------------------------------------------------------------------
                                                           Percentage of
                                                            HLDT/MDPVs
                       Model year                         that must meet
                                                            requirement
------------------------------------------------------------------------
2012....................................................              25
2013....................................................              50
2014....................................................              75
2015 and subsequent.....................................             100
------------------------------------------------------------------------

    (4) Alternate phase-in schedules for cold temperature NMHC 
standards. (i) Manufacturers may apply for alternate phase-in schedules 
that would still result in 100% phase-in by 2013 and 2015, 
respectively, for LDV/LLDTs and HLDT/MDPVs. An alternate phase-in 
schedule submitted by a manufacturer is subject to EPA approval. The 
alternate phase-in will not be used to delay full implementation past 
the last year of the primary phase-in schedule (2013 for LDV/LLDTs, 
2015 for HLDT/MDPVs). An alternate phase-in schedule will be acceptable 
if it satisfies the following conditions (where API = Anticipated 
Phase-In percentage for the referenced model year):
    LDV/LLDTs:

(6xAPI2008) + (5xAPI2009) + 
(4xAPI2010) + (3xAPI2011) + 
(2xAPI2012) + (1xAPI2013) [gteqt] 500%, and 
(6xAPI2008) + (5xAPI2009) + 
(4xAPI2010) [gteqt] 100%

    HLDT/MDPVs:

(6xAPI2010) + (5xAPI2011) + 
(4xAPI2012) + (3xAPI2013) + 
(2xAPI2014) + (1xAPI2015) [gteqt] 500%, and 
(6xAPI2010) + (5xAPI2011) + 
(4xAPI2012) [gteqt] 100%,
     or

(6xAPI2010) + (5xAPI2011) + 
(4xAPI2012) + (3xAPI2013) + 
(2xAPI2014) + (1xAPI2015) [gteqt] 600%

    (ii)(A) For LDV/LLDTs, if the sum of products in paragraph 
(g)(4)(i) of this section is greater than or equal to 500%, which is 
the sum of products from the primary phase-in schedule (4x25% + 3x50% + 
2x75% + 1x100% = 500%), then the alternate phase-in schedule is 
acceptable, except as prohibited in paragraphs (g)(4)(i) and (iii) of 
this section. In addition, manufacturers electing to use an alternate 
phase-in schedule for compliance with the cold temperature NMHC exhaust 
emission standards must ensure that the sum of products is at least 
100% for model years 2010 and earlier for LDV/LLDTs. For example, a 
phase-in schedule for LDV/LLDTs of 5/10/10/45/80/100 that begins in 
2008 would calculate as (6x5%) + (5x10%) + (4x10%) = 120% and would be 
acceptable for 2008-2010. The full phase-in would calculate as (6x5%) + 
(5x10%) + (4x10%) + (3x45%) + (2x80%) + (1x100%) = 515% and would be 
acceptable for 2008-2013.
    (B) For HLDT/MDPVs, if the sum of products in paragraph (g)(4)(i) 
of this section is greater than or equal to 500%, which is the sum of 
products from the primary phase-in schedule (4x25% + 3x50% + 2x75% + 
1x100% = 500%), then the alternate phase-in schedule is acceptable, 
except as prohibited in paragraphs (g)(4)(i) and (iii) of this section. 
In addition, manufacturers electing to use an alternate phase-in 
schedule for compliance with the cold temperature NMHC exhaust emission 
standards must ensure that the sum of products is at least 100% for 
model years 2012 and earlier for HLDT/MDPVs. Alternately, if the sum of 
products is greater than or equal to 600%, then the alternate phase-in 
schedule is acceptable, except as prohibited in paragraphs (g)(4)(i) 
and (iii) of this section. If the sum of products is greater than or 
equal to 600%, then there are no requirements on the sum of products 
for model years 2012 and earlier.
    (iii) Under an alternate phase-in schedule, the projected phase-in 
percentage is not binding for a given model year, provided the sums of 
the actual phase-in percentages that occur meet the appropriate total 
sums as required in the equations of paragraph (g)(4)(i) of this 
section, and provided that 100% actual compliance is reached for the 
appropriate model year, either 2013 for LDV/LLDTs or 2015 for HLDT/
MDPVs.
    (5) Manufacturers must determine compliance with required phase-in 
schedules as follows:
    (i) Manufacturers must submit information showing compliance with 
all phase-in requirements of this section with their Part I 
applications as required by Sec.  86.1844(d)(13).
    (ii) A manufacturer electing to use any alternate phase-in schedule 
permitted under this section must provide in its Application for 
Certification for the first year in which it intends to use such a 
schedule, and in each succeeding year during the phase-in, the intended 
phase-in percentages for that model year and the remaining phase-in 
years along with the intended final sum of those percentages as 
described in paragraph (g)(4)(i) of this section. This information may 
be included with the information required under Sec.  86.1844-
01(d)(13). In its year end annual reports, as required under Sec.  
86.1844-01(e)(4), the manufacturer must include sufficient information 
so that the Administrator can verify compliance with the alternate 
phase-in schedule established under paragraph (g)(4)(i) of this 
section.
    (6)(i) Sales percentages for the purpose of determining compliance 
with the phase-in of the cold temperature NMHC requirements must be 
based upon projected 50-State sales of LDV/LLDTs and HLDT/MDPVs of the 
applicable model year by the manufacturer to the point of first sale. 
Such sales percentages must be rounded to the nearest 0.1 percent.
    (ii) Alternatively, the manufacturer may petition the Administrator 
to allow actual volume produced for U.S. sales to be used in lieu of 
projected U.S. sales for purposes of determining compliance with the 
phase-in percentage requirements under this section. The manufacturer 
must submit its petition within 30 days of the end of the model year. 
For EPA to approve the use of actual volume produced for U.S. sales, 
the manufacturer must establish to the satisfaction of the 
Administrator, that actual production volume is functionally equivalent 
to actual sales volume of LDV/LLDTs and HLDT/MDPVs sold in all 50 U.S. 
States.
    (h) through (s) [Reserved]. For guidance see Sec.  86.1811-04.
    (t) [Reserved]. For guidance see Sec.  86.1811-09.
    (u) Cold temperature NMHC exhaust emission in-use standards for 
applicable phase-in models. An interim full useful life in-use 
compliance standard is calculated by adding 0.1 g/mi to the FEL to 
which each test group is newly certified, and applies to that test 
group only for the model years shown in Tables S10-4 and S10-5. 
Otherwise, the in-use standard is the certification standard from 
paragraph (g)(2) of this section. The standards apply for purposes of 
in-use testing only and does not apply to certification or Selective 
Enforcement Auditing. Tables S10-4 and S10-5 follow:

[[Page 8566]]



                        Table S10-4.--In-Use Standards for Applicable Phase-In LDV/LLDTs
----------------------------------------------------------------------------------------------------------------
                   Model Year of Introduction                      2008    2009    2010    2011    2012    2013
----------------------------------------------------------------------------------------------------------------
Models years that the interim in-use standard is available......    2008    2009    2010    2011    2012    2013
                                                                    2009    2010    2011    2012    2013    2014
                                                                    2010    2011    2012    2013    2014
                                                                    2011    2012    2013
----------------------------------------------------------------------------------------------------------------


                        Table S10-5.--In-Use Standards for Applicable Phase-In HLDT/MDPVs
----------------------------------------------------------------------------------------------------------------
                   Model Year of Introduction                      2010    2011    2012    2013    2014    2015
----------------------------------------------------------------------------------------------------------------
Models years that the interim in-use standard is available......    2010    2011    2012    2013    2014    2015
                                                                    2011    2012    2013    2014    2015    2016
                                                                    2012    2013    2014    2015    2016
                                                                    2013    2014    2015
----------------------------------------------------------------------------------------------------------------


0
21. Section 86.1823-01 is amended by revising paragraph (a)(3)(i)(C) to 
read as follows:


Sec.  86.1823-01  Durability demonstration procedures for exhaust 
emissions.

* * * * *
    (a) * * *
    (3) * * *
    (i) * * *
    (C) The DF calculated by these procedures will be used for 
determining compliance with FTP exhaust emission standards, SFTP 
exhaust emission standards, cold temperature NMHC emission standards, 
and cold temperature CO emission standards. At the manufacturer's 
option and using procedures approved by the Administrator, a separate 
DF may be calculated exclusively using cold temperature CO test data to 
determine compliance with cold temperature CO emission standards. 
Similarly, at the manufacturer's option and using procedures approved 
by the Administrator, a separate DF may be calculated exclusively using 
cold temperature NMHC test data to determine compliance with cold 
temperature NMHC emission standards. For determining compliance with 
full useful life cold temperature NMHC emission standards, the 68-86 
[deg]F 120,000 mile full useful life NMOG DF may be used. Also at the 
manufacturer's option and using procedures approved by the 
Administrator, a separate DF may be calculated exclusively using US06 
and/or air conditioning (SC03) test data to determine compliance with 
the SFTP emission standards.
* * * * *

0
22. Section 86.1827-01 is amended by revising paragraph (a)(5) to read 
as follows:


Sec.  86.1827-01  Test group determination.

* * * * *
    (a) * * *
    (5) Subject to the same emission standards (or FEL in the case of 
cold temperature NMHC standards), except that a manufacturer may 
request to group vehicles into the same test group as vehicles subject 
to more stringent standards, so long as all the vehicles within the 
test group are certified to the most stringent standards applicable to 
any vehicle within that test group. Light-duty trucks subject to the 
same emission standards as light-duty vehicles, with the exception of 
the light-duty truck idle CO standard and/or total HC standard, may be 
included in the same test group.
* * * * *

0
23. A new Sec.  86.1828-10 is added to Subpart S to read as follows:


Sec.  86.1828-10  Emission data vehicle selection.

    Section 86.1828-10 includes text that specifies requirements that 
differ from Sec.  86.1828-01. Where a paragraph in Sec.  86.1828-01 is 
identical and applicable to Sec.  86.1828-10, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1828-01.'' Where a corresponding paragraph of 
Sec.  86.1828-01 is not applicable, this is indicated by the statement 
``[Reserved].''
    (a) through (f) [Reserved]. For guidance see Sec.  86.1828-01.
    (g) Cold temperature NMHC testing. For cold temperature NMHC 
exhaust emission compliance for each durability group, the manufacturer 
must select the vehicle expected to emit the highest NMHC emissions at 
20 [deg]F on candidate in-use vehicles from the test vehicles specified 
in Sec.  86.1828-01(a). When the expected worst-case cold temperature 
NMHC vehicle is also the expected worst-case cold temperature CO 
vehicle as selected in paragraph (c) of this section, then cold testing 
is required only for that vehicle; otherwise, testing is required for 
both the worst-case cold temperature CO vehicle and the worst-case cold 
temperature NMHC vehicle.

0
24. Section 86.1829-01 is amended by revising paragraph (b)(3) to read 
as follows:


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

* * * * *
    (b) * * *
    (3) Cold temperature CO and cold temperature NMHC Testing. The 
manufacturer must test one EDV in each durability group for cold 
temperature CO and cold temperature NMHC exhaust emission compliance in 
accordance with the test procedures in subpart C of this part or with 
alternative procedures approved in advance by the Administrator. The 
selection of which EDV and test group within the durability group will 
be tested for cold temperature CO and cold temperature NMHC compliance 
will be determined under the provisions of Sec.  86.1828-10(c) and (g).
* * * * *

0
25. Section 86.1844-01 is amended by revising paragraph (d)(11) to read 
as follows:


Sec.  86.1844-01  Information requirements: application for 
certification and submittal of information upon request.

* * * * *
    (d) * * *
    (11) A list of all auxiliary emission control devices (AECD) 
installed on any applicable vehicles, including a justification for 
each AECD, the parameters they sense and control, a detailed 
justification of each AECD which results in a reduction in 
effectiveness of the emission control system, and rationale for why the 
AECD is not a defeat device as defined under Sec. Sec.  86.1809-01 and 
86.1809-10. For any AECD uniquely used at high altitudes, EPA may 
request engineering emission

[[Page 8567]]

data to quantify any emission impact and validity of the AECD. For any 
AECD uniquely used on multi-fuel vehicles when operated on fuels other 
than gasoline, EPA may request engineering emission data to quantify 
any emission impact and validity of the AECD.
* * * * *

0
26. A new Sec.  86.1848-10 is added to Subpart S to read as follows:


Sec.  86.1848-10  Certification.

    Section 86.1848-10 includes text that specifies requirements that 
differ from Sec.  86.1848-01. Where a paragraph in Sec.  86.1848-01 is 
identical and applicable to Sec.  86.1848-10, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1848-01.'' Where a corresponding paragraph of 
Sec.  86.1848-01 is not applicable, this is indicated by the statement 
``[Reserved].''
    (a) through (b) [Reserved]. For guidance see Sec.  86.1848-01.
    (c) The following conditions apply to all certificates:
    (1) The manufacturer must supply all required information according 
to the provisions of Sec. Sec.  86.1843-01 and 86.1844-01.
    (2) The manufacturer must comply with all certification and in-use 
emission standards contained in subparts S and H of this part both 
during and after model year production.
    (3) The manufacturer must comply with all implementation schedules 
sales percentages as required in Sec.  86.1810 or elsewhere in this 
part. Failure to meet a required implementation schedule sales 
percentage will be considered to be a failure to satisfy a condition 
upon which the certificate was issued and any vehicles or trucks sold 
in violation of the implementation schedule are not to be covered by 
the certificate.
    (4) For incomplete light-duty trucks and incomplete heavy-duty 
vehicles, a certificate covers only those new motor vehicles that, when 
completed by having the primary load-carrying device or container 
attached, conform to the maximum curb weight and frontal area 
limitations described in the application for certification as required 
in Sec.  86.1844-01.
    (5) The manufacturer must meet the in-use testing and reporting 
requirements contained in Sec. Sec.  86.1845-01, 86.1846-01, and 
86.1847-01, as applicable. Failure to meet the in-use testing or 
reporting requirements shall be considered a failure to satisfy a 
condition upon which the certificate was issued. A vehicle or truck is 
considered to be covered by the certificate only if the manufacturer 
fulfills this condition upon which the certificate was issued.
    (6) Vehicles are covered by a certificate of conformity only if 
they are in all material respects as described in the manufacturer's 
application for certification (Part I and Part II).
    (7) For Tier 2 and interim non-Tier 2 vehicles, all certificates of 
conformity issued are conditional upon compliance with all provisions 
of Sec. Sec.  86.1811-04, 86.1860-04, 86.1861-04 and 86.1862-04 both 
during and after model year production. The manufacturer must bear the 
burden of establishing to the satisfaction of the Administrator that 
the terms and conditions upon which the certificate(s) was (were) 
issued were satisfied. For recall and warranty purposes, vehicles not 
covered by a certificate of conformity will continue to be held to the 
standards stated or referenced in the certificate that otherwise would 
have applied to the vehicles.
    (i) Failure to meet the fleet average NOX requirements 
of 0.07g/mi, 0.3 g/mi or 0.2 g/mi, as applicable, will be considered to 
be a failure to satisfy the terms and conditions upon which the 
certificate(s) was (were) issued and the vehicles sold in violation of 
the fleet average NOX standard will not be covered by the 
certificate(s).
    (ii) Failure to comply fully with the prohibition against selling 
credits that it has not generated or that are not available, as 
specified in Sec.  86.1861-04, will be considered to be a failure to 
satisfy the terms and conditions upon which the certificate(s) was 
(were) issued and the vehicles sold in violation of this prohibition 
will not be covered by the certificate(s).
    (iii) Failure to comply fully with the phase-in requirements of 
Sec.  86.1811-04, will be considered to be a failure to satisfy the 
terms and conditions upon which the certificate(s) was (were) issued 
and the vehicles sold which do not comply with Tier 2 or interim non-
Tier 2 requirements, up to the number needed to comply, will not be 
covered by the certificate(s).
    (8) For LDV/LLDTs and HLDT/MDPVs, all certificates of conformity 
issued are conditional upon compliance with all provisions of 
Sec. Sec.  86.1811-10 and 86.1864-10 both during and after model year 
production. The manufacturer bears the burden of establishing to the 
satisfaction of the Administrator that the terms and conditions upon 
which the certificate(s) was (were) issued were satisfied. For recall 
and warranty purposes, vehicles not covered by a certificate of 
conformity will continue to be held to the standards stated or 
referenced in the certificate that otherwise would have applied to the 
vehicles.
    (i) Failure to meet the fleet average cold temperature NMHC 
requirements will be considered a failure to satisfy the terms and 
conditions upon which the certificate(s) was (were) issued and the 
vehicles sold in violation of the fleet average NMHC standard will not 
be covered by the certificate(s).
    (ii) Failure to comply fully with the prohibition against selling 
credits that are not generated or that are not available, as specified 
in Sec.  86.1864-10, will be considered a failure to satisfy the terms 
and conditions upon which the certificate(s) was (were) issued and the 
vehicles sold in violation of this prohibition will not be covered by 
the certificate(s).
    (iii) Failure to comply fully with the phase-in requirements of 
Sec.  86.1811-10 will be considered a failure to satisfy the terms and 
conditions upon which the certificate(s) was (were) issued and the 
vehicles sold that do not comply with cold temperature NMHC 
requirements, up to the number needed to comply, will not be covered by 
the certificate(s).
    (d) through (i) [Reserved]. For guidance see Sec.  86.1848-01.

0
27. A new Sec.  86.1864-10 is added to Subpart S to read as follows:


Sec.  86.1864-10  How to comply with the fleet average cold temperature 
NMHC standards.

    (a) Applicability. Cold temperature NMHC exhaust emission standards 
apply to the following vehicles, subject to the phase-in requirements 
in Sec.  86.1811-10(g)(3) and (4):
    (1) 2010 and later model year LDV/LLDTs.
    (2) 2012 and later model year HLDT/MDPVs.
    (3) Aftermarket conversion systems as defined in 40 CFR 85.502, 
including conversion of MDPVs.
    (4) Vehicles imported by ICIs as defined in 40 CFR 85.1502.
    (b) Useful life requirements. Full useful life requirements for 
cold temperature NMHC standards are defined in Sec.  86.1805-04(g). 
There is not an intermediate useful life standard for cold temperature 
NMHC standards.
    (c) Altitude. Altitude requirements for cold temperature NMHC 
standards are provided in Sec.  86.1810-09(f).
    (d) Small volume manufacturer certification procedures. 
Certification procedures for small volume manufacturers are provided in 
Sec.  86.1838-01.
    (e) Cold temperature NMHC standards. Fleet average cold temperature 
NMHC standards are provided in Sec.  86.1811-10(g)(2).

[[Page 8568]]

    (f) Phase-in. Phase-in of the cold temperature NMHC standards are 
provided in Sec.  86.1811-10(g)(3) and (4).
    (g) Phase-in flexibilities for small volume manufacturers. Phase-in 
flexibilities for small volume manufacturer compliance with the cold 
temperature NMHC standards are provided in Sec.  86.1811-04(k)(5).
    (h) Hardship provisions for small volume manufacturers. Hardship 
provisions for small volume manufacturers related to the cold 
temperature NMHC standards are provided in Sec.  86.1811-04(q)(1).
    (i) In-use standards for applicable phase-in models. In-use cold 
temperature NMHC standards for applicable phase-in models are provided 
in Sec.  86.1811-10(u).
    (j) Durability procedures and method of determining deterioration 
factors (DFs). The durability data vehicle selection procedures of 
Sec.  86.1822-01 and the durability demonstration procedures of Sec.  
86.1823-06 apply for cold temperature NMHC standards. For determining 
compliance with full useful life cold temperature NMHC emission 
standards, the 68-86 [deg]F, 120,000 mile full useful life NMOG DF may 
be used.
    (k) Vehicle test procedure. (1) The test procedure for 
demonstrating compliance with cold temperature NMHC standards is 
contained in subpart C of this part. With prior EPA approval, 
alternative testing procedures may be used, as specified in Sec.  
86.106-96(a), provided cold temperature NMHC emissions test results are 
equivalent or superior.
    (2) Testing of all LDVs, LDTs and MDPVs to determine compliance 
with cold temperature NMHC exhaust emission standards set forth in this 
section must be on a loaded vehicle weight (LVW) basis, as defined in 
Sec.  86.1803-01.
    (3) Testing for the purpose of providing certification data is 
required only at low altitude conditions and only for vehicles that can 
operate on gasoline, except as requested in Sec. Sec.  86.1810-09(f) 
and 86.1844-01(d)(11). If hardware and software emission control 
strategies used during low altitude condition testing are not used 
similarly across all altitudes for in-use operation, the manufacturer 
must include a statement in the application for certification, in 
accordance with Sec. Sec.  86.1844-01(d)(11) and 86.1810-09(f), stating 
what the different strategies are and why they are used. If hardware 
and software emission control strategies used during testing with 
gasoline are not used similarly with all fuels that can be used in 
multi-fuel vehicles, the manufacturer will include a statement in the 
application for certification, in accordance with Sec. Sec.  86.1844-
01(d)(11) and 86.1810-09(f), stating what the different strategies are 
and why they are used. For example, unless a manufacturer states 
otherwise, air pumps used to control emissions on dedicated gasoline 
vehicles or multi-fuel vehicles during low altitude conditions must 
also be used to control emissions at high altitude conditions, and 
software used to control emissions or closed loop operation must also 
operate similarly at low and high altitude conditions and similarly 
when multi-fueled vehicles are operated on gasoline and alternate 
fuels. These examples are for illustrative purposes only; similar 
strategies would apply to other currently used emission control 
technologies and/or emerging or future technologies.
    (l) Emission data vehicle (EDV) selection. Provisions for selecting 
the appropriate EDV for the cold temperature NMHC standards are 
provided in Sec. Sec.  86.1828-10(g) and 86.1829-01(b)(3).
    (m) Calculating the fleet average cold temperature NMHC standard. 
Manufacturers must compute separate sales-weighted fleet average cold 
temperature NMHC emissions at the end of the model year for LDV/LLDTs 
and HLDT/MDPVs, using actual sales, and certifying test groups to FELs, 
as defined in Sec.  86.1803-01. The FEL becomes the standard for each 
test group, and every test group can have a different FEL. The 
certification resolution for the FEL will be 0.1 grams/mile. LDVs and 
LLDTs must be grouped together when calculating the fleet average, and 
HLDTs and MDPVs must also be grouped together to determine the fleet 
average. Manufacturers must compute the sales-weighted cold temperature 
NMHC fleet averages using the following equation, rounded to the 
nearest 0.1 grams/mile:

Fleet average cold temperature NMHC exhaust emissions (grams/mile) = 
[Sigma](N x FEL) / Total number of vehicles sold of the applicable 
weight category (i.e., either LDV + LLDTs, or HLDT + MDPVs)
Where:
N = The number of LDVs and LLDTs, or HLDTs and MDPVs, sold within 
the applicable FEL, based on vehicles counted to the point of first 
sale.
FEL = Family Emission Limit (grams/mile).

    (n) Certification compliance and enforcement requirements for cold 
temperature NMHC standards. (1) Compliance and enforcement requirements 
are provided in Sec.  86.1864-10 and Sec.  86.1848-10(c)(8).
    (2) The certificate issued for each test group requires all 
vehicles within that test group to meet the emission standard or FEL to 
which the vehicles were certified.
    (3) Each manufacturer must comply with the applicable cold 
temperature NMHC fleet average standard on a sales-weighted average 
basis, at the end of each model year, using the procedure described in 
paragraph (m) of this section.
    (4) During a phase-in year, the manufacturer must comply with the 
applicable cold temperature NMHC fleet average standard for the 
required phase-in percentage for that year as specified in Sec.  
86.1811-10(g)(3) or (4).
    (5) Manufacturers must compute separate cold temperature NMHC fleet 
averages for LDV/LLDTs and HLDT/MDPVs. The sales-weighted cold 
temperature NMHC fleet averages must be compared with the applicable 
fleet average standard.
    (6) Each manufacturer must comply on an annual basis with the fleet 
average standards as follows:
    (i) Manufacturers must report in their annual reports to the Agency 
that they met the relevant corporate average standard by showing that 
their sales-weighted average cold temperature NMHC emissions of LDV/
LLDTs and HLDT/MDPVs, as applicable, are at or below the applicable 
fleet average standard;
    (ii) If the sales-weighted average is above the applicable fleet 
average standard, manufacturers must obtain and apply sufficient NMHC 
credits as permitted under paragraph (o)(8) of this section. A 
manufacturer must show via the use of credits that they have offset any 
exceedence of the corporate average standard. Manufacturers must also 
include their credit balances or deficits.
    (iii) If a manufacturer fails to meet the corporate average cold 
temperature NMHC standard for two consecutive years, the vehicles 
causing the corporate average exceedence will be considered not covered 
by the certificate of conformity (see paragraph (o)(8) of this 
section). A manufacturer will be subject to penalties on an individual-
vehicle basis for sale of vehicles not covered by a certificate.
    (iv) EPA will review each manufacturer's sales to designate the 
vehicles that caused the exceedence of the corporate average standard. 
EPA will designate as nonconforming those vehicles in test groups with 
the highest certification emission values first, continuing until 
reaching a number of vehicles equal to the calculated number of 
noncomplying vehicles as determined above. In a group where only a 
portion of vehicles would be deemed nonconforming, EPA will determine 
the

[[Page 8569]]

actual nonconforming vehicles by counting backwards from the last 
vehicle produced in that test group. Manufacturers will be liable for 
penalties for each vehicle sold that is not covered by a certificate.
    (o) Requirements for the cold temperature NMHC averaging, banking 
and trading (ABT) program. (1) Manufacturers must average the cold 
temperature NMHC emissions of their vehicles and comply with the cold 
temperature NMHC fleet average corporate standard. Manufacturers may 
generate credits during and after the phase-in period. Manufacturers 
may generate credits prior to the phase-in periods as described in 
paragraph (o)(5) of this section. A manufacturer whose cold temperature 
NMHC fleet average emissions exceed the applicable standard must 
complete the calculation in paragraph (o)(4) of this section to 
determine the size of its NMHC credit deficit. A manufacturer whose 
cold temperature NMHC fleet average emissions are less than the 
applicable standard must complete the calculation in paragraph (o)(4) 
of this section to generate NMHC credits.
    (2) There are no property rights associated with NMHC credits 
generated under this subpart. Credits are a limited authorization to 
emit the designated amount of emissions. Nothing in this part or any 
other provision of law should be construed to limit EPA's authority to 
terminate or limit this authorization through a rulemaking.
    (3) Each manufacturer must comply with the reporting and 
recordkeeping requirements of paragraph (p) of this section for NMHC 
credits, including early credits. The averaging, banking and trading 
program is enforceable through the certificate of conformity that 
allows the manufacturer to introduce any regulated vehicles into 
commerce.
    (4) Credits are earned on the last day of the model year. 
Manufacturers must calculate, for a given model year, the number of 
credits or debits it has generated according to the following equation, 
rounded to the nearest 0.1 grams/mile:

NMHC Credits or Debits = (Cold Temperature NMHC Standard--
Manufacturer's Sales-Weighted Fleet Average Cold Temperature NMHC 
Emissions) x (Total Number of Vehicles Sold)

Where:
Cold Temperature NMHC Standard = 0.3 grams/mile for LDV/LLDTs or 0.5 
grams/mile for HLDT/MDPV, per Sec.  86.1811-10(g)(2).
Manufacturer's Sales-Weighted Fleet Average Cold Temperature NMHC 
Emissions = average calculated according to paragraph (m) of this 
section.
Total Number of Vehicles Sold = Total 50-State sales based on the 
point of first sale.

    (5) The following provisions apply for early banking:
    (i) Manufacturers may certify LDV/LLDTs to the cold temperature 
NMHC exhaust standards in Sec.  86.1811-10(g)(2) for model years 2008-
2009 to bank credits for use in the 2010 and later model years. 
Manufacturers may certify HLDT/MDPVs to the cold temperature NMHC 
exhaust standards in Sec.  86.1811-10(g)(2) for model years 2010-2011 
to bank credits for use in the 2012 and later model years.
    (ii) This process is referred to as ``early banking'' and the 
resultant credits are referred to as ``early credits.'' To bank early 
credits, a manufacturer must comply with all exhaust emission standards 
and requirements applicable to LDV/LLDTs and/or HLDT/MDPVs. To generate 
early credits, a manufacturer must separately compute the sales-
weighted cold temperature NMHC average of the LDV/LLDTs and HLDT/MDPVs 
it certifies to the exhaust requirements and separately compute credits 
using the calculations in paragraph (o)(4) of this section. Early HLDT/
MDPV credits may not be applied to LDV/LLDTs before the 2010 model 
year. Early LDV/LLDT credits may not be applied to HLDT/ MDPV before 
the 2012 model year.
    (6) NMHC credits are not subject to any discount or expiration date 
except as required under the deficit carryforward provisions of 
paragraph (o)(8) of this section. There is no discounting of unused 
credits. NMHC credits have unlimited lives, subject to the limitations 
of paragraph (o)(2) of this section.
    (7) Credits may be used as follows:
    (i) Credits generated and calculated according to the method in 
paragraph (o)(4) of this section may be used only to offset deficits 
accrued with respect to the standard in Sec.  86.1811-10(g)(2). Credits 
may be banked and used in a future model year in which a manufacturer's 
average cold temperature NMHC level exceeds the applicable standard. 
Credits may be exchanged between the LDT/LLDT and HLDT/MDPV fleets of a 
given manufacturer. Credits may also be traded to another manufacturer 
according to the provisions in paragraph (o)(9) of this section. Before 
trading or carrying over credits to the next model year, a manufacturer 
must apply available credits to offset any credit deficit, where the 
deadline to offset that credit deficit has not yet passed.
    (ii) The use of credits shall not be permitted to address Selective 
Enforcement Auditing or in-use testing failures. The enforcement of the 
averaging standard occurs through the vehicle's certificate of 
conformity. A manufacturer's certificate of conformity is conditioned 
upon compliance with the averaging provisions. The certificate will be 
void ab initio if a manufacturer fails to meet the corporate average 
standard and does not obtain appropriate credits to cover its 
shortfalls in that model year or in the subsequent model year (see 
deficit carryforward provision in paragraph (o)(8) of this section). 
Manufacturers must track their certification levels and sales unless 
they produce only vehicles certified to cold temperature NMHC levels 
below the standard and do not plan to bank credits.
    (8) The following provisions apply if debits are accrued:
    (i) If a manufacturer calculates that it has negative credits (also 
called ``debits'' or a ``credit deficit'') for a given model year, it 
may carry that deficit forward into the next model year. Such a carry-
forward may only occur after the manufacturer exhausts any supply of 
banked credits. At the end of that next model year, the deficit must be 
covered with an appropriate number of credits that the manufacturer 
generates or purchases. Any remaining deficit is subject to an 
enforcement action, as described in this paragraph (o)(8). 
Manufacturers are not permitted to have a credit deficit for two 
consecutive years.
    (ii) If debits are not offset within the specified time period, the 
number of vehicles not meeting the fleet average cold temperature NMHC 
standards (and therefore not covered by the certificate) must be 
calculated by dividing the total amount of debits for the model year by 
the fleet average cold temperature NMHC standard applicable for the 
model year in which the debits were first incurred.
    (iii) EPA will determine the number of vehicles for which the 
condition on the certificate was not satisfied by designating vehicles 
in those test groups with the highest certification cold temperature 
NMHC emission values first and continuing until reaching a number of 
vehicles equal to the calculated number of noncomplying vehicles as 
determined above. If this calculation determines that only a portion of 
vehicles in a test group contribute to the debit situation, then EPA 
will designate actual vehicles in that test group as not covered by the 
certificate, starting with the last vehicle produced and counting 
backwards.

[[Page 8570]]

    (iv)(A) If a manufacturer ceases production of LDV/LLDTs and HLDT/
MDPVs, the manufacturer continues to be responsible for offsetting any 
debits outstanding within the required time period. Any failure to 
offset the debits will be considered a violation of paragraph (o)(8)(i) 
of this section and may subject the manufacturer to an enforcement 
action for sale of vehicles not covered by a certificate, pursuant to 
paragraphs (o)(8)(ii) and (iii) of this section.
    (B) If a manufacturer is purchased by, merges with, or otherwise 
combines with another manufacturer, the controlling entity is 
responsible for offsetting any debits outstanding within the required 
time period. Any failure to offset the debits will be considered a 
violation of paragraph (o)(8)(i) of this section and may subject the 
manufacturer to an enforcement action for sale of vehicles not covered 
by a certificate, pursuant to paragraphs (o)(8)(ii) and (iii) of this 
section.
    (v) For purposes of calculating the statute of limitations, a 
violation of the requirements of paragraph (o)(8)(i) of this section, a 
failure to satisfy the conditions upon which a certificate(s) was 
issued and hence a sale of vehicles not covered by the certificate, all 
occur upon the expiration of the deadline for offsetting debits 
specified in paragraph (o)(8)(i) of this section.
    (9) The following provisions apply to NMHC credit trading:
    (i) EPA may reject NMHC credit trades if the involved manufacturers 
fail to submit the credit trade notification in the annual report. A 
manufacturer may not sell credits that are not available for sale 
pursuant to the provisions in paragraphs (o)(7)(i) of this section.
    (ii) In the event of a negative credit balance resulting from a 
transaction that a manufacturer could not cover by the reporting 
deadline for the model year in which the trade occurred, both the buyer 
and seller are liable, except in cases involving fraud. EPA may void ab 
initio the certificates of conformity of all engine families 
participating in such a trade.
    (iii) A manufacturer may only trade credits that it has generated 
pursuant to paragraph (o)(4) of this section or acquired from another 
party.
    (p) Maintenance of records and submittal of information relevant to 
compliance with fleet average cold temperature NMHC standards. (1) 
Maintenance of records. (i) Manufacturers producing any light-duty 
vehicles, light-duty trucks, or medium-duty passenger vehicles subject 
to the provisions in this subpart must establish, maintain, and retain 
all the following information in adequately organized records for each 
model year:
    (A) Model year.
    (B) Applicable fleet average cold temperature NMHC standards.
    (C) Fleet average cold temperature NMHC value.
    (D) All values used in calculating the fleet average cold 
temperature NMHC value.
    (ii) Manufacturers producing any light-duty vehicles, light-duty 
trucks, or medium-duty passenger vehicles subject to the provisions in 
this subpart must establish, maintain, and retain all the following 
information in adequately organized records for each LDV/T or MDPV 
subject to this subpart:
    (A) Model year.
    (B) Applicable fleet average cold temperature NMHC standard.
    (C) EPA test group.
    (D) Assembly plant.
    (E) Vehicle identification number.
    (F) Cold temperature NMHC FEL to which the LDV, LDT, or MDPV is 
certified.
    (G) Information on the point of first sale, including the 
purchaser, city, and state.
    (iii) Manufacturers must retain all required records for a period 
of eight years from the due date for the annual report. Records may be 
stored in any format and on any media, as long as manufacturers can 
promptly send EPA organized, written records in English if we ask for 
them. Manufacturers must keep records readily available as EPA may 
review them at any time.
    (iv) The Administrator may require the manufacturer to retain 
additional records or submit information not specifically required by 
this section.
    (v) Pursuant to a request made by the Administrator, the 
manufacturer must submit to the Administrator the information that the 
manufacturer is required to retain.
    (vi) EPA may void ab initio a certificate of conformity for 
vehicles certified to emission standards as set forth or otherwise 
referenced in this subpart for which the manufacturer fails to retain 
the records required in this section or to provide such information to 
the Administrator upon request.
    (2) Reporting. (i) Each covered manufacturer must submit an annual 
report. The annual report must contain for each applicable cold 
temperature NMHC standard, the calculated fleet average cold 
temperature NMHC value, all values required to calculate the cold 
temperature NMHC emissions value, the number of credits generated or 
debits incurred, all the values required to calculate the credits or 
debits, the resulting balance of credits or debits, and sufficient 
information to show compliance with all phase-in or alternate phase-in 
requirements.
    (ii) For each applicable fleet average cold temperature NMHC 
standard, the annual report must also include documentation on all 
credit transactions the manufacturer has engaged in since those 
included in the last report. Information for each transaction must 
include all of the following:
    (A) Name of credit provider.
    (B) Name of credit recipient.
    (C) Date the trade occurred.
    (D) Quantity of credits traded.
    (E) Model year in which the credits were earned.
    (iii) Unless a manufacturer reports the data required by this 
section in the annual production report required under Sec.  86.1844-
01(e), a manufacturer must submit an annual report for each model year 
after production ends for all affected vehicles produced by the 
manufacturer subject to the provisions of this subpart and no later 
than May 1 of the calendar year following the given model year. Annual 
reports must be submitted to: Director, Compliance and Innovative 
Strategies Division, U.S. Environmental Protection Agency, 2000 
Traverwood, Ann Arbor, Michigan 48105.
    (iv) Failure by a manufacturer to submit the annual report in the 
specified time period for all vehicles subject to the provisions in 
this section is a violation of section 203(a)(1) of the Clean Air Act 
(42 U.S.C. 7522 (a)(1)) for each applicable vehicle produced by that 
manufacturer.
    (v) If EPA or the manufacturer determines that a reporting error 
occurred on an annual report previously submitted to EPA, the 
manufacturer's credit or debit calculations will be recalculated. EPA 
may void erroneous credits, unless traded, and will adjust erroneous 
debits. In the case of traded erroneous credits, EPA must adjust the 
selling manufacturer's credit balance to reflect the sale of such 
credits and any resulting credit deficit.
    (3) Notice of opportunity for hearing. Any revoking of the 
certificate under paragraph (p)(1)(vi) of this section will be made 
only after EPA has offered the affected manufacturer an opportunity for 
a hearing conducted in accordance with Sec.  86.614-84 for light-duty 
vehicles or Sec.  86.1014-84 for light-duty trucks and, if a 
manufacturer requests such a hearing, will be made only after an 
initial decision by the Presiding Officer.

[FR Doc. E7-2667 Filed 2-23-07; 8:45 am]
BILLING CODE 6560-50-P