Phase 2 Emission Standards for New Nonroad Spark-Ignition Nonhandheld Engines At or Below 19 Kilowatts

Related Material

Other Related Documents

[Federal Register: March 30, 1999 (Volume 64, Number 60)]
[Rules and Regulations]
[Page 15207-15255]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30mr99-6]

[[Page 15207]]

_______________________________________________________________________

Part II

Environmental Protection Agency

_______________________________________________________________________

40 CFR Part 90

Phase 2 Emission Standards for New Nonroad Spark-Ignition Nonhandheld
Engines At or Below 19 Kilowatts; Final Rule

[[Page 15208]]

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 90

[FRL-6308-6]
RIN 2060-AE29

Phase 2 Emission Standards for New Nonroad Spark-Ignition
Nonhandheld Engines At or Below 19 Kilowatts

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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

SUMMARY: In this action, EPA is finalizing a second phase of emission
regulations to control emissions from new nonroad spark-ignition
nonhandheld engines at or below 19 kilowatts (25 horsepower). These
engines are used principally in lawn and garden equipment in
applications such as lawnmowers and garden tractors. The standards will
result in an estimated 59 percent reduction of emissions of
hydrocarbons plus oxides of nitrogen from those achieved under the
current Phase 1 standards applicable to nonhandheld engines. The
standards will result in important reductions in emissions which
contribute to excessively high ozone levels in many areas of the United
States.
In compliance with the Paperwork Reduction Act, this document
announces that the information collection requirements contained in
this final rule have not been submitted to the Office of Management and
Budget for approval.

DATES: The amendments to 40 CFR part 90 are effective June 1, 1999.

ADDRESSES: Materials relevant to this final rule, including the Final
Regulatory Impact Analysis are contained in Public Docket A-96-55,
located at room M-1500, Waterside Mall (ground floor), U.S.
Environmental Protection Agency, 401 M Street, S.W., Washington, DC
20460. The docket may be inspected from 8:00 a.m. until 5:30 p.m.,
Monday through Friday. A reasonable fee may be charged by EPA for
copying docket materials.
For further information on electronic availability of this final
rulemaking, see SUPPLEMENTARY INFORMATION below.

FOR FURTHER INFORMATION CONTACT: Robert Larson, U.S. EPA, Engine
Programs and Compliance Division, (734) 214-4277,
larson.robert@epamail.epa.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Content of the Final Rule
A. Emission Standards and Related Provisions
1. Class Structure
2. HC+NO_X Emission Standards
3. NMHC+NO_X Standards for Class I and II Natural Gas
Fueled Engines
4. CO Emission Standards
5. Useful Life Categories
6. Selection of Useful Life Category
7. Emission Standard Feasibility at Longer Useful Life
B. Averaging, Banking, and Trading
C. Test Procedures
D. Compliance Program
1. Certification
2. Production Line Testing--Cumulative Summation Procedure
3. Selective Enforcement Auditing
4. Voluntary In-Use Testing
E. Flexibilities
1. Carry-Over Certification
2. Small Volume Engine Manufacturer Definition
3. Small Volume Engine Family Definition
4. Flexibilities for Small Volume Engine Families and Small
Volume Engine Manufacturers
5. Flexibilities for Small Volume Equipment Manufacturers and
Small Volume Equipment Models
6. Small Volume Equipment Manufacturer Definition
7. Small Volume Equipment Model Definition
8. Hardship Provision
F. Nonregulatory Programs
1.Voluntary ``Green'' Labeling Program
2.Voluntary Fuel Spillage Reduction Program
G. General Provisions
1. Model Year and Annual Production Period Flexibilities
2. Definition of Handheld Engines
3. Small Displacement Nonhandheld Engine Class
4. Liquefied Petroleum Gas Fueled Indoor Power Equipment
5. Dealer Responsibility
6. Engines Used in Recreational Vehicles and Applicability of
the Small SI Regulations to Model Airplanes
7. Engines Used in Rescue and Emergency Equipment
8. Replacement Engines
9. Record keeping and Information Requirements
10. Engine Labeling
11. Emission Warranty
12. Other
III. Projected Impacts
A. Environmental Benefit Assessment
1. Roles of HC and NO_X in Ozone Formation
2. Health and Welfare Effects of Tropospheric Ozone
3. Estimated Emissions Impact of Final Regulations
4. Health and Welfare Effects of CO Emissions
5. Health and Welfare Effects of Hazardous Air Pollutant
Emissions
6. Particulate Matter
B. Costs and Cost-Effectiveness
1. Engine Technologies
2. Engine Costs
3. Equipment Costs
4. Operating Costs
5. Cost Per Engine and Cost-Effectiveness
IV. Public Participation
V. Administrative Requirements
A. Administrative Designation and Regulatory Analysis
B. Regulatory Flexibility
C. Paperwork Reduction Act
D. Unfunded Mandates Reform Act
E. Congressional Review Act
F. National Technology Transfer and Advancement Act
G. Executive Order 13045
H. Executive Order 12875: Enhancing the Intergovernmental
Partnership
I. Executive Order 13084: Consultation and Coordination with
Indian tribal Governments
VI. Statutory Authority

Regulated Entities

Entities potentially regulated by this action are those that
manufacture or introduce into commerce new nonhandheld small spark-
ignition nonroad engines or equipment. Regulated categories and
entities include:

------------------------------------------------------------------------
Category Examples of regulated entities
------------------------------------------------------------------------
Industry............................... Manufacturers or importers of
new nonroad small (at or below
19 kW) spark-ignition
nonhandheld engines and
equipment.
------------------------------------------------------------------------

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 company is regulated by this action, you should carefully examine
the applicability criteria in section Sec. 90.1 of title 40 of the Code
of Federal Regulations. If you have questions regarding the
applicability of this action to a particular entity, consult the person
listed in the preceding FOR FURTHER INFORMATION CONTACT section.

Obtaining Electronic Copies of the Regulatory Documents

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

[[Page 15209]]

1. http://www.epa.gov/fedrgstr/EPA-AIR/

(either select desired date or use Search feature)

2. http://www.epa.gov/OMSWWW/

(look in What's New or under the specific rulemaking topic)
Please note that due to differences between the software used to
develop the document and the software into which the document may be
downloaded, changes in format, page length, etc., may occur.

I. Introduction

A. Background

On January 27, 1998, EPA issued a Notice of Proposed Rulemaking
(NPRM) proposing a second phase of regulations to control emissions
from new handheld and nonhandheld nonroad SI engines at or below 19
kilowatts (25 horsepower) (``small SI engines'') (63 FR 3950). This
action was preceded by a March 27, 1997, Advanced Notice of Proposed
Rulemaking (62 FR 14740). EPA solicited comment on virtually all
aspects of the NPRM. EPA held a public hearing on February 6, 1998, and
the public comment period for the NPRM closed March 13, 1998. Today's
action finalizes this rulemaking activity for nonhandheld engines in
adopting a Phase 2 set of emission standards and compliance program
requirements for Class I and Class II nonhandheld engines. EPA is not
at this time finalizing a Phase 2 program for handheld engines, as
described in more detail below. EPA will further address the Phase 2
program for handheld engines in future Federal Register notices.
Today's action is taken in response to Section 213(a)(3) of the
Clean Air Act which requires EPA's standards for nonroad engines and
vehicles to achieve the greatest degree of emission reduction
achievable through the application of technology which the
Administrator determines will be available, giving appropriate
consideration to cost, lead time, noise, energy and safety factors. The
standards and other compliance program requirements being adopted today
satisfy this Clean Air Act mandate.
The NPRM contained lengthy discussion of the proposed standards,
the expected costs of their implementation, and the potential costs and
benefits of adopting more stringent standards such as those that were
then under consideration by the California Air Resources Board (ARB).
In the NPRM, EPA explicitly asked for comment regarding the level of
the proposed standards and the impacts and timing for implementing more
stringent standards, so as to allow it to establish the most
appropriate standards in the final rule. In particular, EPA requested
comment on the impacts and timing for implementing emission standards
that would require the same types of technology as anticipated by
proposed rules under consideration at that time by the California ARB.
After the close of the comment period and upon reviewing the
information supplied during the comment period, EPA determined that it
was desirable to get further details regarding the technological
feasibility, cost and lead time implications of meeting standards more
stringent than those contained in the NPRM. EPA's NPRM already
contained estimates of the costs and feasibility of more stringent
standards. Some commenters had charged that, based on these
discussions, EPA's proposed standards would not be stringent enough to
satisfy the stringency requirements of Clean Air Act Section 213(a)(3).
For the purpose of gaining additional information on feasibility, cost
and lead time implications of more stringent standards, EPA had several
meetings, phone conversations, and written correspondence with specific
engine manufacturers, with industry associations representing engine
and equipment manufacturers, with developers of emission control
technologies and suppliers of emission control hardware, with
representatives of state regulatory associations, and with members of
Congress. EPA also sought information relating to the impact on
equipment manufacturers, if any, of changes in technology potentially
required to meet more stringent standards than were contained in the
NPRM. Additionally, EPA received numerous comments on the NPRM
requesting closer harmonization with the compliance program provisions
adopted by the State of California. In some cases, EPA also discussed
these harmonization issues with manufacturers and industry association
representatives to improve the Agency's understanding of the needs and
benefits to the industry of such harmonization.
As EPA has stated on prior occasions, in adopting this final rule
EPA wished to consider all relevant information that became available
during the rule development process. This includes information received
during the comment period on the NPRM, and, to the extent possible,
important information which became available after the formal NPRM
comment period had concluded. To the extent that post-NPRM information
has expanded or updated the knowledge of the Agency regarding
technological feasibility, production lead time estimates for
incorporating improved designs, costs to manufacturers, costs to
consumers and similar factors, it is reasonable to expect that the
improved information may result in changing assessments of how a
pending rule can best achieve regulatory goals compared to what had
been expected at the time of the NPRM. This is especially true in the
case of a rulemaking concerning an industry, like small SI engines,
that is undergoing relatively rapid technological innovation.
EPA published a Notice of Availability highlighting the additional
information gathered in response to the NPRM (see 63 FR 66081, December
1, 1998). After analyzing this information, the Agency concluded that
more stringent standards for Class I nonhandheld engines, used in
applications such as residential lawn mowers, consistent with those
adopted by California are indeed achievable on the national scale. This
final rule for nonhandheld engines adopts emission standards
considerably more stringent than those proposed for Class I nonhandheld
engines. The technologies (principally conversion of side-valve engines
to clean overhead valve designs) that EPA anticipates will be used in
achieving compliance with the Class I standard are well known and were
discussed in the NPRM.
However, since the publication of the NPRM, there have been rapid
advances in emission reduction technologies for handheld engines. EPA
has received information which could potentially support handheld
standards much more stringent that those proposed in the NPRM. In light
of this new information, and in the interest of providing an
opportunity for public comment on this new technology and on more
stringent levels for handheld engine emission standards, EPA intends to
address Phase 2 regulations for handheld engines (such as trimmers,
brush cutters, and chainsaws) in a separate Supplemental Notice of
Proposed Rulemaking (SNPRM) in June of 1999, with a final rule in March
of 2000.
The reader is referred to the Notice of Availability, the NPRM
itself, as well as to the docket for this rulemaking, for the range of
additional information upon which the Agency has relied in adopting
this final program for small SI nonhandheld engines.

B. Overview of Final Program

The following provides an overview of the provisions in these Phase
2 rules for nonhandheld engines. Additional

[[Page 15210]]

detail explaining the program as well as discussion of information and
analyses which led to the adoption of these requirements is contained
in subsequent sections.
As proposed and consistent with Phase 1 rules, these Phase 2 rules
distinguish between engines used in handheld equipment and those used
in nonhandheld equipment. In today's action, Phase 2 emission standards
are set for distinct engine size categories referred to as ``engine
classes'' within the nonhandheld engine equipment designation. The
following table summarizes the HC+NO_X emission standards for
Class I and Class II nonhandheld engines and when these standards take
effect for each engine class.

Table 1.--Phase 2 HC +NO_X Emission Standards for Class I and Class II
----------------------------------------------------------------------------------------------------------------
NPRM FRM
----------------------------------------------------------------------------
Engine class HC+NO_X (g/kW- HC+NO_X (g/kW-
hr) Time line hr) Time line
----------------------------------------------------------------------------------------------------------------
Class I............................ 25.0 2001 16.1 August 1, 2007; in
addition, any Class I
engine family initially
produced on or after
August 1, 2003 must meet
the Phase 2 Class I
standards before they may
be introduced into
commerce.
Class II........................... 12.1 2001-2005 12.1 2001-2005.
----------------------------------------------------------------------------------------------------------------

As indicated in this table, the emission standards being finalized
for Class I engines are considerably more stringent than the base
emission levels included in the proposal. This reflects the Agency's
analysis of the information EPA received in direct response to the
questions posed in the NPRM concerning the desirability and feasibility
of more stringent standards than the base levels proposed, as well as
other information made available to the Agency before and since the
proposal. The level of these standards will result in an estimated 59
percent annual reduction in combined hydrocarbon and oxides of nitrogen
(HC+NO_X) emissions from these small SI nonhandheld engines
compared to the Phase 1 emission requirements for these engines when
the effects of this Phase 2 rule are fully phased in.
Another feature of the Phase 2 nonhandheld standards is that they
are phased in over a number of years, allowing the manufacturers an
orderly and efficient transition of engine designs and technologies
from those complying with the existing Phase 1 standards to those
necessary to meet the Phase 2 requirements. Thus, for example, the
manufacturers of Class II engines are required to meet a gradually
decreasing standard on average for this segment of their product line
during model years 2001 through 2005. During this time frame, EPA
anticipates that such a manufacturer would continue to change more and
more of its Class II engines designs to designs capable of meeting the
final 12.1 g/kW-hr standards, averaging emission performance with older
designs and thus meeting on average the declining standard in effect
for that model year (see preamble Section II.A.2). Finally, by 2005 in
this example, the manufacturer would have had sufficient time and
resources to change the designs and production tooling to meet the 12.1
g/kW-hr standard on average for all its Class II engines. Similarly, a
two-stage schedule has been developed to uniquely meet the industry
needs for converting the Class I engines. For these nonhandheld
classes, EPA has concluded that the phased-in and two-stage
implementation schedules are necessary in order to make the ultimate
standards achievable through the application of the specific
technologies that EPA analyzed for nonhandheld engines.
These standards and the other compliance program elements being
adopted today also consider expected in-use deterioration. In contrast
to the Phase 1 rules which only regulate the emission performance of
engines when new, the Phase 2 standards being adopted today also
reflect expected deterioration in emission performance as an engine is
used. Manufacturers will be required to evaluate the emission
deterioration performance of their engine designs and certify their
designs to meet these standards after anticipated emission
deterioration of a typical in-use engine over its useful life.
Different useful life ranges have been adopted based on the type of
engine and equipment in which the engine is installed. For example, a
Class II nonhandheld engine will be certified for from 250 to 1000
hours of use based on design features and the intended use of the
installation (a high priced piece of industrial equipment would more
likely be equipped with an engine with design features intended to make
it most durable and thus certified to the emission standards assuming
1000 hours of in-use operation, for example).
The certification program requires that the manufacturer determine
an appropriate methodology for accumulating hours of operation to
``age'' an engine in a manner which duplicates the same type of wear
and other deterioration mechanisms expected under typical consumer use
which could affect emission performance. EPA expects bench testing will
be used to conduct this aging operation because this can save time and
perhaps money, but actual in-use operation (e.g., cutting grass) will
also be allowed. Emission tests will be conducted when the engine is
new and when it has finished accumulating the equivalent of its useful
life. The engine must pass standards both when it is new and at the end
of its designated useful life to qualify for certification.
Additionally, the new engine and fully aged engine emission test levels
are compared to determine the expected deterioration in emission
performance for other engines of this design; such engines may be
tested as they come off the end of a production line, in which case
their new engine emission levels are adjusted by the deterioration
factor determined from the certification engine to predict useful life
emission performance.
Selection of engines for testing as they come off the production
line will be conducted according to the provisions of the Production
Line Testing (PLT) program. This program is explained in more detail in
a following section but, briefly, its intent is to allow a sampling of
engines as produced throughout the production period to be tested for
emission performance to assure that the design intent as certified
prior to production has been successfully transferred by the
manufacturer to mass production in a production line setting. The
volume of PLT testing required by the manufacturer depends on how close
the test results from the initial engines tested are to the standards;
if these test

[[Page 15211]]

engines indicate the design is particularly low emitting, few engines
need be tested, while those designs with emission levels very close to
the standards will need additional tests to make sure the design is
being produced with acceptable emission performance.
While this compliance program will not require the manufacturer to
conduct any in-use testing to verify continued satisfactory emission
performance in the hands of typical consumers, an optional program for
such in-use testing is being provided. EPA believes it is important for
manufacturers to conduct in-use testing to assure the success of their
designs and to factor back into their design and/or production process
any information suggesting emission problems in the field. While not
mandating such a program, EPA encourages such testing by allowing a
manufacturer to avoid the cost of the PLT program for a portion of its
product line by instead supplying data from in-use engines. Under this
voluntary in-use testing program, up to twenty percent of the engine
families certified in a year can be designated for in-use testing by
the manufacturer. For these families, no PLT testing will be required
for two model years including that model year. Instead, the
manufacturer will select a minimum of three engines off the assembly
line or from another source of new engines and emission test them when
aged to at least 75 percent of their useful life under typical in-use
operating conditions for this engine. The information relating to this
in-use testing program will be shared with EPA. If any information
derived from this program indicates a substantial in-use emission
performance problem, EPA anticipates the manufacturer will seek to
determine the nature of the emission performance problem and what
corrective actions might be appropriate. EPA will offer its assistance
in analysis of the reasons for unexpectedly high in-use emission
performance and what actions might be appropriate for reducing these
high emissions. Whether or not a manufacturer chooses to conduct such a
voluntary in-use testing program, EPA may choose to conduct its own in-
use compliance program. If EPA were to determine that an in-use
noncompliance investigation was appropriate, the Agency expects it
would conduct its own in-use testing program, separate from this
voluntary manufacturer testing program, to determine whether a specific
class or category of engines is complying with applicable in-use
standards.
All these general provisions of this compliance program are also
expected to become part of California's compliance program for these
classes of small engines.¹ Importantly, the testing and data
requirements, engine family descriptors, compliance statements and
similar testing and information requirements of these federal Phase 2
nonhandheld regulations are, to the best of EPA's knowledge, the same
general compliance program requirements adopted by the California ARB.
This is advantageous to manufacturers marketing the same product
designs in California as in the other states, as they need prepare only
one set of certification application information, supplying one copy to
the ARB for certification in the State of California and one copy to
EPA for federal certification. This similar treatment under the
regulations also extends to the PLT program and the optional in-use
testing program, such that any test data and related information
developed for the ARB should also satisfy the federal regulatory
requirements being adopted today.
---------------------------------------------------------------------------

\1\ While the voluntary in-use test program may not be codified
in the California ARB Tier 2 rules for these engines, the ARB has
agreed to adopt this same voluntary in-use test program and allow
for the same decreased PLT testing.
---------------------------------------------------------------------------

In addition to the regulatory provisions outlined above, this rule
adopts special provisions for small volume engine manufacturers, small
volume engine families produced by other engine manufacturers, and
small volume equipment manufacturers who rely on other manufacturers to
supply them with these small SI nonhandheld engines. These special
small volume provisions lessen the demonstration requirements and in
some cases delay the effective dates of the standards so as to smooth
the transition to these Phase 2 requirements. This is especially
important for these small volume applications since the eligible
manufacturers involved may not have the resources to ensure that
engines complying with these Phase 2 standards will be available under
the time frames otherwise established under these regulations. Since
these provisions are limited to small volume applications, the risk to
air quality is negligible. However, without these provisions, the
economic impacts to small volume manufacturers could be increased and
the possibility of reduced product offering would be great, especially
for those products intended to serve niche markets which satisfy
special needs. These flexibilities are explained more fully in section
II.B. and are detailed in the regulations.

II. Content of the Final Rule

The following sections provide additional detail on the provisions
of the final rule outlined above.

A. Emission Standards and Related Provisions

1. Class Structure
This final rule maintains the same basic class structure as
implemented in the Phase 1 regulations for these nonhandheld engines.
The Phase 1 rules established separate classes based on engine size in
recognition of the greater difficulty in controlling emissions from
smaller displacement engines compared to larger displacement engines.
That rule also separated engine classes into those intended for use in
equipment typically carried by the operator during its use such as
chain saws or string trimmers (referred to as handheld equipment) and
those engines normally used in equipment which is not carried by the
operator including, for example, lawnmowers and generators (this
equipment being referred to as nonhandheld). These usage distinctions
seemed appropriate because the small engine industry is for the most
part split between these two categories, with very few manufacturers
making both handheld engines and nonhandheld engines, and because the
nature of these two industry segments is quite different with, for
example, the handheld engine manufacturers for the most part producing
engines specifically for use in their own equipment (i.e., engine and
equipment manufacturers) while nonhandheld engine manufacturers
typically do not also make equipment but rather are suppliers of
engines to the equipment industry; other characteristics important to
regulatory analysis also differ between these two industry segments.
Thus, it still seems appropriate to consider these industries
separately, and thus the class structure adopted today maintains the
distinction between handheld and nonhandheld classes, with today's rule
establishing the Phase 2 program for nonhandheld Class I and Class II.
In addition, as discussed above, a Phase 2 program for handheld engines
is not being adopted in today's action, but will be addressed in future
Federal Register notices.
2. HC+NO_X Emission Standards
More stringent HC+NO_X emission standards are being
finalized for Class I engines than were proposed, and the
HC+NO_X emission standards for Class II engines are being
adopted as proposed. The Clean Air Act at section 213 (a) (3) requires
the Agency to adopt standards that result in the greatest emission

[[Page 15212]]

reductions achievable through the application of technology which the
Administrator determines will be available, giving appropriate
consideration to cost, lead time, noise, energy and safety factors. As
a result of information now available, much of it in the form of
comments received during the NPRM comment period, EPA has determined
that standards more stringent than those proposed for Class I engines
are feasible during the next decade. With the adoption of these Class I
and Class II standards, emissions will be reduced an estimated 59
percent compared to the Phase 1 nonhandheld engines. The standards
being adopted today reach the goal of maximum achievable reductions for
nonhandheld engines under section 213 of the Clean Air Act. The nation
should continue to benefit from improved emission performance for this
category of engines at least through 2010 as these standards take
effect and fleet turnover to cleaner engines occurs.
The following table compares the proposed levels of standards and
the final levels of standards being adopted today.

Table 2.--Phase 2 HC +NO_X Emission Standards for Class I and Class II
----------------------------------------------------------------------------------------------------------------
NPRM FRM
----------------------------------------------------------------------------
Engine Class HC+NO_X (g/kW- HC+NO_X (g/kW-
hr) Time line hr) Time line
----------------------------------------------------------------------------------------------------------------
Class I............................ 25.0 2001 16.1 August 1, 2007; in
addition, any Class I
engine family initially
produced on or after
August 1, 2003 must meet
the Phase 2 Class I
standards before they may
be introduced into
commerce.
Class II........................... 12.1 2001-2005 12.1 2001-2005.
----------------------------------------------------------------------------------------------------------------

For Class I, the NPRM acknowledged that a standard of the level
being adopted today was technically feasible. Indeed, one of the
technology changes available to achieve these standards (adopting an
overhead valve configuration) has already been done on some Class I
engines and is also anticipated to be a primary choice for
manufacturers of Class II engines to meet their Phase 2 emission
levels. The issues impacting a decision on the most appropriate Class I
standards, rather, concerned the lead time necessary for the industry
to convert their Class I designs and production facilities to meet
these standards, the cost of this conversion, and the subsequent
potential adverse impact on sales of any such increase in cost passed
along to consumers. Both the industry and EPA now have an improved
understanding of the lead time necessary to convert Class I engines to
designs capable of meeting these low emission standards and the costs
that would result. While the manufacturers' uncertainties regarding
consumer acceptance may not be fully resolved, EPA believes the
anticipated price increases resulting from this action will not have a
significant adverse impact on sales, principally due to the fact that
once fleet turnover becomes significant and Class I overhead valve
engine products do not have to compete with side-valve engine products,
consumer acceptance of overhead valve engines should no longer be an
issue. Furthermore, major manufacturers of Class I engines support the
adoption of these standards in the time frame required ².
Specifically, Class I engines must all meet the 16.1 g/kW-hr
HC+NO_X standard starting with engines produced on or after
August 1, 2007. Additionally, all new engine families first produced on
or after August 1, 2003 will also need to comply with this standard.
This latter provision recognizes that manufacturers adopting new engine
designs in a time frame so close to the 2007 production requirement to
meet the standard should be anticipating meeting that standard in their
design strategy. Furthermore, sufficient time exists between now and
August 1, 2003 to allow for new designs to meet the Phase 2 standard.
Finally, EPA expects the manufacturers will take advantage of this
production window between August 2003 and August 2007 to smooth the
transition to a fully complying product line by August 2007 by phasing
in production of Phase 2 engines during these four years. Thus, the
environment should benefit by the early introduction of complying
engines, and the manufacturers will benefit by the flexibility to
introduce engines during this transition period in a manner and
schedule which best fits their individual needs.
---------------------------------------------------------------------------

\2\ See docket A-96-55, memorandum IV-E-68, entitled ``Meeting
with Tecumseh Products Company, Briggs & Stratton and Latham &
Watkins''.
---------------------------------------------------------------------------

This standard for Class I engines is identical to the standard
adopted by the State of California as part of its Tier 2 regulations
for this class of small spark-ignition engines. However, these federal
regulations tend to allow additional time in consideration of the need
to convert perhaps additional designs not targeted, at least initially,
for the California market, and of the significantly greater cost and
logistical burden of converting production facilities to meet the much
larger federal sales volumes. Nevertheless, this alignment in standards
should assist the industry in targeting production and distribution of
engines since, when fully implemented, an engine meeting California
standards will also meet federal standards (and vice versa); such an
engine can be sold anywhere in the United States.
While EPA anticipates manufacturers may choose to meet the Class I
Phase 2 standard by converting their engines to OHV designs (similar to
the case for Class II engines as explained in the NPRM), other options
are also available such as the adoption of improved fuel metering and/
or the use of a catalytic converter. The standards adopted today do not
rely on only one technology, nor do they mandate use of any specific
technology.
As proposed, the final rule adopts standards of 12.1 g/kW-hr
HC+NO_X for Class II engines, phased in over the 2001 through
2005 model years. Again, when coupled with the actions being taken with
regard to Class I engines, this standard and phase in schedule is
technically feasible and provides sufficient lead time for changing
engine designs and production facilities.
3. NMHC+NO_X Standards for Class I and II Natural Gas Fueled
Engines
As proposed, EPA is adopting separate optional standards for small
SI nonhandheld engines fueled by natural gas. For typical gasoline-
fueled engines, the methane portion is around 5 to 10 percent of total
hydrocarbons. However, for engines fueled with natural gas, the methane
portion can be around 70 percent. The methane from these

[[Page 15213]]

engines has a very low ozone forming potential compared to the other
hydrocarbons in the engine's exhaust. Therefore, from an ozone forming
potential perspective, it is appropriate to provide an alternative set
of emission standards for engines fueled with natural gas. These
standards have been adjusted to provide equivalent stringency to the
HC+NO_X standards for gasoline-fueled engines as are being
adopted today. Aside from these standards, all other aspects of this
rule pertain equally to engines fueled with natural gas as those fueled
with gasoline.

Table 3.--Phase 2 NMHC +NO_X Emission Standards for Class I and II
------------------------------------------------------------------------
NMHC+NO_X (g/kW-
Engine Class hr) Time line
------------------------------------------------------------------------
Class I........................ 14.8 August 1, 2007; in
addition, any Class I
engine family
initially produced on
or after August 1,
2003 must meet the
Phase 2 Class I
standards before they
may be introduced into
commerce.
Class II1...................... 11.3 2001-2005.
------------------------------------------------------------------------

4. CO Emission Standards
This final rule adopts the CO emission standards contained in the
proposal for Class I and Class II engines (e.g., 610 g/kW-hr), and
thereby maintains the same CO emission standard as in the Phase 1 rules
(e.g., 519 g/kW-hr), when adjusted for deterioration. At this time, it
does not appear that additional reductions in CO emissions from these
engines will be needed to allow most areas of the country to attain the
CO ambient air quality standard. However, it should be noted that many
of the emission control techniques likely to be adopted to meet the
Phase 2 HC+NO_X standards, in particular the conversion from
side-valve to clean overhead valve designs, improved fuel metering, and
combustion chamber improvements, should also result in lower CO
emissions. So, although the final CO standard remains the same as the
proposed standard, EPA expects some CO emission reduction will occur as
a result of the technology adopted to comply with the more stringent
HC+NO_X standards. EPA is not able at this time, however, to
quantify the expected level of CO reductions to a sufficiently precise
degree that the Agency can confidently set a more stringent standard
than was proposed.
5. Useful Life Categories
Along with adopting a more stringent numerical standard for Class I
engines, the minimum certification demonstration useful life has also
been extended from 66 hours to 125 hours. The higher useful life
designation is technically appropriate; the lower 66 hour value was
proposed as a means of saving the industry cost during certification
demonstration (see discussion in the NPRM, at 63 FR 3969). However, the
extra cost is relatively small while the higher hours of operation
provide an improved opportunity to assess emission deterioration.
Additionally, the 125 hour designation is aligned with California's
requirements. Thus, a manufacturer intending to sell Class I engines in
both the State of California and federally (the vast majority of
engines) would have to accumulate 125 hours of service during
certification to meet the California requirement; in this case, no
extra burden is placed on the manufacturer by adopting this requirement
federally. The minimum certification demonstration useful life for
Class II engines is 250 hours, as proposed.
6. Selection of Useful Life Category
EPA proposed that the engine manufacturers would be responsible for
assuring that the correct useful life was used for certification
demonstration and labeling purposes (see proposed 90.105(a)). Specific
criteria were proposed which the manufacturers could use in documenting
their determinations of useful life category selection. Comments
received suggested such a requirement was overly rigid and unnecessary.
EPA remains very concerned that the manufacturers select the most
appropriate useful life category for each engine to assure it is
properly evaluated during certification and to assure that any
averaging, banking and trading program which allows the exchange of
emission credits across engine families in different useful life
categories is also fair and environmentally sound. However, so as not
to add potentially unnecessary burden on the industry, these rules
adopt a less rigid methodology for determining useful life categories.
The proposal provided for EPA intervention in the selection of the
appropriate useful life category for an engine. This potential
intervention would have the effect of adding uncertainty for the
manufacturer, and of limiting its ability to fully plan and execute in
a timely fashion its product certification program. The program being
adopted today rests the responsibility with the industry to make their
best, most conscientious selection. We expect that manufacturers of
Class I and II engines will have a good idea of the types of equipment
their engines are typically used in and, from their marketing
information, a reasonably accurate projection of the relative volumes
in such typical applications. Additionally, based on design features
these manufacturers build into their engines, they have a good idea of
the expected useful life in such applications. Relying on this
information, manufacturers should be able to make good selections of
appropriate useful life categories for their engines. While these final
rules leave that responsibility to the manufacturer, EPA expects to
periodically review the manufacturers' decisions to assure ourselves
that this regulation is being properly implemented and to determine
whether modifications to these rules are appropriate. We note that this
approach results in the same regulatory requirement as the State of
California, eliminating any extra burden in this regard due to federal
rules.
7. Emission Standards Feasibility at Longer Useful Life
In response to the NPRM, some commenters suggested the standard
should be proportionately higher for engines certified to higher useful
life ages. The reasoning given was that since engines are expected to
have emissions deterioration with accumulation of hours of use, the
more the hours of use the higher the amount of deterioration and thus
the higher should be the standards. However, this presumes no design
difference between an engine intended for a useful life of, for
example, 250 hours versus one designed

[[Page 15214]]

for a useful life of 1000 hours. This is not the case. Engines designed
for higher useful life markets have superior design features (such as
advance fuel metering designs including fuel injection) which should
result in an ability to calibrate for lower emissions when the engine
is new and also have a lower rate of emission deterioration during
service accumulation. The combined impact of such trends will allow
engines designed for a high useful life to meet the same standards as
engines designed for a shorter useful life. Thus, these final rules
adopt the same standard for all engines in a nonhandheld class
regardless of their intended useful life.

B. Averaging, Banking, and Trading

In this final rule, EPA is establishing a certification averaging,
banking, and trading (ABT) program for Phase 2 nonroad SI nonhandheld
engines at or below 19 kW. Averaging means the exchange of emission
credits among engine families within a given engine manufacturer's
product line. Averaging allows a manufacturer to certify one or more
engine families to Family Emissions Limits (FELs) above the applicable
emission standard. However, the increased emissions would have to be
offset by one or more engine families certified to FELs below the same
emission standard, such that the average emissions in a given model
year from all of the manufacturer's families (weighted by various
parameters including engine power, useful life, and number of engines
produced) are at or below the level of the emission standard. Banking
means the retention of emission credits by the engine manufacturer
generating the credits for use in future model year averaging or
trading. Trading means the exchange of emission credits between engine
manufacturers which then can be used for averaging purposes, banked for
future use, or traded to another engine manufacturer.
The new program would be the first ABT program for nonroad SI
engines, since the Phase 1 rule did not include an ABT program. EPA
believes this new program is an important element in making the
stringent Phase 2 emissions standards adopted in this final rule
achievable with regard to technological feasibility, lead time, and
cost. The new ABT program is intended to enhance the flexibility
offered to engine manufacturers that will be needed in changing their
entire product lines to meet the stringent HC+NO_X standards
being adopted. The ABT program also encourages the early introduction
of cleaner engines certified under the Phase 2 requirements, thus
securing earlier emission benefits.
EPA believes that the new ABT program is consistent with the
statutory requirements of section 213 of the Clean Air Act. Although
the language of section 213 is silent on the issue of averaging, it
allows EPA considerable discretion in determining what regulations are
most appropriate for implementing section 213. The statute does not
specify that a specific standard or technology must be implemented, and
it requires EPA to consider costs, lead time, and other factors in
making its determination of ``the greatest degree of emissions
reduction achievable through the application of technology which the
Administrator determines will be available.'' Section 213(a)(3) also
indicates that EPA's regulations may apply to nonroad engine classes in
the aggregate, and need not apply to each nonroad engine individually.
Finally, EPA believes the ABT program is consistent with the statutory
requirements of the Clean Air Act.
The ABT program being finalized with today's action is similar in
many ways to the program proposed for nonhandheld engines. Changes to
the proposed program have been made in response to comments received on
the proposal and the revised standards for Class I engines. The
following discussion summarizes the main provisions of the ABT program
being finalized and explains the main differences from the proposed ABT
program.
As noted above, the ABT program will apply to Phase 2 small SI
nonhandheld engines. The ABT program will be available for
HC+NO_X emissions but will not be available for CO emissions.
The ABT program will also apply to natural gas-fueled engines. All
credits for natural gas-fueled engines will be determined against the
applicable NMHC+NO_X standards. In addition, manufacturers
will be allowed to freely exchange NMHC+NO_X credits from
engines fueled by natural gas with HC+NO_X credits from
engines fueled by fuels other than natural gas in the ABT program.
Cross-class exchange of ABT credits between nonhandheld engine
families will not be restricted. EPA had proposed restricting using
credits from Class I engines in determining compliance of Class II
engines since the standard proposed for Class I engines was
considerably less stringent than that proposed for Class II engines; it
would have been quite easy to generate credits in Class I and use them
to offset FELs above the standard for Class II engines. However,
because of the tighter standards being adopted for Class I engines and
the one restriction (discussed below) regarding generation of credits
from Class II engines, EPA is far less concerned that credits from
Class I could result in delays in technology improvement for Class II,
and does not believe that any cross-class restrictions for nonhandheld
engines are necessary. Therefore, all restrictions on cross-class
credit exchanges for small SI nonhandheld engines have been eliminated.
As part of the ABT program, EPA is setting upper limits on the FEL
values that may be declared by manufacturers under the Phase 2
standards. (The FEL is established by the manufacturer and takes the
place of the emission standard for all compliance determinations.) The
proposed FEL upper limits were based on the previous set of standards
(i.e., the Phase 1 standards) for nonhandheld engines after accounting
for in-use deterioration, which is typically how EPA establishes such
limits. Therefore, EPA is adopting HC+NO_X FEL upper limits
of 32.2 g/kW-hr for Class I engines and 26.8 g/kW-hr for Class II
engines as proposed, even though the HC+NO_X emission
standard adopted for Class I engines is more stringent than originally
proposed.
EPA is finalizing one limitation that applies to Class II engines
only. As proposed, because of concerns over the potential to generate
significant credits from existing Phase 1 engines against the Phase 2
standards, EPA is requiring that a manufacturer's production-weighted
average of HC+NO_X FELs for Class II engines may not exceed
13.6 g/kW-hr in model year 2005, 13.1 g/kW-hr in model year 2006, and
12.6 g/kW-hr in model years 2007 and later. This calculation is based
strictly on the FELs and does not allow the manufacturer to factor in
the use of credits, as is done when a manufacturer demonstrates
compliance with the HC+NO_X standard of 12.1 g/kW-hr. EPA
believes this approach will ensure that Class II engines are converted
to OHV or OHV-comparable technology in a reasonable time frame while
still encouraging the early introduction of cleaner, more durable
technology and ensuring that manufacturers have the flexibility
provided by an ABT program to comply with the new standards. For Class
I, EPA does not have a similar concern since the standards being
adopted are expected to provide only limited opportunity to generate
large amounts of credits from existing engines.
All credits will be calculated based on the difference between the
manufacturer-established FEL and the Phase 2 HC+NO_X standard
for the

[[Page 15215]]

applicable model year using the following equation.

Credits=(Standard--FEL) x Production x Power x Useful life x Load
Factor

At the time of certification, manufacturers must also supply
information to EPA on the terms used in the above noted equation.
``Production'' represents the manufacturer's U.S. production of engines
for the given engine family, excluding exported engines and engines
that will be sold in California. ``Power'' represents the maximum modal
power of the certification test engine over the certification test
cycle. ``Useful Life'' is the regulatory useful life established by the
manufacturer for the given engine family. ``Load Factor'' is a constant
that is dependent on the test cycle over which the engine is certified.
Under the new ABT program for small SI nonhandheld engines, credits
will have an unlimited credit life and will not be discounted in any
manner.
The equation being adopted for credit calculation in today's action
has been revised from the proposal in two ways. First, EPA proposed
that manufacturers use the 49-state sales of an engine family instead
of 49-state production levels. However, because of the non-integrated
nature of the nonroad small SI market, EPA believes it would be very
difficult for manufacturers to determine actual sales. EPA believes
that production levels should provide an appropriately accurate
estimate of sales. Second, EPA proposed that manufacturers use a sales-
weighted average maximum modal power for all of the engine
configurations within an engine family as opposed to the maximum modal
power of the certification test engine. Because a large fraction of
engine families include multiple configurations, EPA believes it would
create unnecessary burden on engine manufacturers to determine the
maximum modal power of every engine configuration. Using a consistent
approach for estimating the maximum modal power based on the
certification test engine simplifies the program for manufacturers. At
the same time, it should not have any significant impact on the
relative number of credits generated under the program from engines
with FELs below the standards versus engines with FELs above the
standards.
Under the new ABT program, manufacturers of small SI nonhandheld
engines will be allowed to use portions of the ABT program prior to
implementation of the Phase 2 standards to provide an incentive to
accelerate introduction of cleaner technologies into the marketplace.
The Agency believes that making bankable credits available prior to the
effective date of the new standards will reward those manufacturers who
take on the responsibility of complying with the Phase 2 requirements
sooner than required and will result in early environmental benefits.
Under the early banking provisions for small SI engines, manufacturers
will be allowed to begin using the averaging and banking portions of
the ABT program beginning with the 1999 model year for engines
certified to the Phase 2 requirements and produced after the effective
date of this action. However, as was the case with certain provisions
included in the proposal, the ability of a manufacturer to generate
early credits also is being limited by the regulatory provisions being
adopted today. The protocols adopted in these regulations assure that a
manufacturer will only generate credits from engines cleaner than those
otherwise anticipated to be available. In this way, manufacturers are
rewarded for the extra effort of designing and producing lower emitting
engines and the environment benefits from this extra effort. The
regulatory provisions adopted today assure that the amount of credits
received for the early introduction of a low emitting engine are
appropriate considering both the current designs of engines and the
changes in emission performance necessary to meet the Phase 2 standards
as well as the degree to which the industry and consumers would benefit
from the opportunity to generate early credits.
For Class I and Class II engines, manufacturers may generate early
credits to be used for averaging or banking purposes from only those
engine families certified with FELs at or below the final Phase 2
standard (i.e., 16.1 g/kW-hr HC+NO_X for Class I engines, and
12.1 g/kW-hr HC+NO_X for Class II engines (or 14.8 g/kW-hr
NMHC+NO_X for Class I and 11.3 g/kW-hr NMHC+NO_X
for Class II natural gas-fueled engines)). As proposed, all early
credits for Class II engines will be calculated against the initial
Phase 2 HC+NO_X standard of 18.0 g/kW-hr. For Class I
engines, because the Phase 2 standards initially only apply to new
engine family designs produced for the first time on or after August 1,
2003, EPA will allow manufacturers to generate early credits from any
other Class I engines (i.e., those produced before August 1, 2003) if
they are certified with an FEL at or below 16.1 g/kW-hr; the amount of
the credit will be determined by the difference between the engine
family's FEL and a HC+NO_X level of 20.5 g/kW-hr. The
manufacturer may continue generating early credits from such Class I
engine families for as long as it continues producing the engine family
until August 1, 2007 since, at that time, all Class I engines families
are subject to the Phase 2 standards. The 20.5 g/kW-hr level is based
on the same assumption as the initial Class II phase-in standard that
half of the engines are at the Phase 1 Class I standard and the other
half are at the Phase 2 Class I standard adopted today. (Any Class I
engine family for which a manufacturer wishes to start generating
credits for the first time after August 1, 2003, will not be eligible
for early credits. Such families will be eligible to generate credits
under the standard provisions of the ABT program against the Phase 2
standard of 16.1 g/kW-hr.)
All engines for which the manufacturer generates early credits must
comply with all requirements for Phase 2 engines (e.g., the Production
Line Testing program requirements). Manufacturers of nonhandheld
engines will not be allowed to trade their early engine credits to
other manufacturers until the first effective model year of the Phase 2
standards for the applicable engine class.
To be eligible for early credits for an engine family, EPA had
originally proposed that a nonhandheld engine manufacturer would have
to certify and comply with the initial Phase 2 standards for its entire
production line in the class containing that family. EPA proposed this
requirement as a means of limiting the ability of the manufacturer to
generate inappropriately large amounts of early credits. However,
because EPA is adopting significantly tighter standards for Class I
engines than originally proposed, the ability of the manufacturer of
Class I engines to easily generate large amounts of early credits is
greatly diminished. Additionally, EPA believes all current
manufacturers of Class II engines would meet this requirement with
their currently certified Phase 1 engines, in which case the proposed
restriction would have no effect. Therefore, EPA is not adopting such a
requirement in today's action.
In establishing the set of declining standards for Class II
engines, EPA assumed a certain phase-in of OHV or comparably clean and
durable technology during the transition years. In order to encourage
manufacturers to meet the assumed phase-in schedule, EPA proposed to
limit the use of credits in two situations that were dependent on
whether the manufacturer met the

[[Page 15216]]

assumed OHV phase in schedule. First, manufacturers would only be
allowed to trade credits from Class II engines to Class I engines if
they met the assumed phase-in schedule. Second, manufacturers would
only be allowed to use early banked Class II credits beginning in 2001
or later if they met the OHV or comparably clean engine production
phase-in schedule estimates for that model year. Because EPA is
finalizing significantly tighter Class I standards and because EPA is
adopting caps on the long term levels of FELs, EPA does not believe
that the proposed limits on the use of credits which were tied to
whether a manufacturer was meeting the assumed OHV technology phase in
are necessary. These aspects of the final rule should eliminate EPA's
concern that introduction of OHV or comparably clean engine technology
could be delayed. Therefore, EPA is not finalizing the limits on the
use of credits that were dependent on a manufacturer showing compliance
with the assumed OHV phase-in schedule for Class II engines.
As discussed in section II.E. of today's notice, EPA is finalizing
several compliance flexibility provisions for engine manufacturers and
equipment manufacturers that allow the limited use of Phase 1 engines
in the Phase 2 time frame. Phase 1 engines sold by engine manufacturers
under the flexibility provisions will be excluded from the ABT program.
In other words, engine manufacturers will not have to use credits to
certify Phase 1 engines used for the flexibility provisions even though
they would likely exceed the newly adopted Phase 2 standards.
Another flexibility provision described in section II.E. of today's
notice allows engine manufacturers to certify Class II side-valve
engine families with annual sales of 1,000 units or less to an
HC+NO_X cap of 24.0 g/kW-hr starting with the 2010 model
year. For such engine families, the ABT program allows manufacturers to
exclude such engine families for the 2010 model year and later. As
noted in section II.E., EPA is dropping the portion of the proposed
flexibility for small volume Class II SV engine families for model
years 2001 through 2009 that would have allowed them to meet the 24.0
g/kW-hr HC plus NO_X level and be included in the ABT program
(for model years 2001 through 2004) if they exceeded this level. In its
place, the Agency is adopting a flexibility that allows small volume
engine families to meet the Phase 1 requirements for model years 2001
through 2009. Class II SV engine families taking advantage of this
flexibility during the 2001 to 2009 model years would be excluded from
the ABT program.
As noted elsewhere in today's notice, EPA is adopting a number of
provisions that address post-certification compliance aspects of the
new standards for nonhandheld engines. In one specific case, EPA is
allowing manufacturers to use credits from the certification ABT
program to address excess emissions situations determined after the
time of certification. As noted in the discussion on compliance, EPA
does not believe that the typical type of enforcement action that could
be taken when a substantial nonconformity is identified (i.e., an
engine family recall order) would generally be workable for small SI
engines given the nature of the market. Instead, for the purposes of
implementing the PLT program, EPA is adopting provisions to allow
manufacturers to use engine certification ABT credits to offset limited
emission performance shortfalls for past production of engines
determined through the PLT program as described in section II.D. of
today's notice. Under the adopted provisions, manufacturers are allowed
to use all engine credits available to them to offset such emission
performance shortfalls without any cross-class restrictions.
EPA is not allowing manufacturers to automatically use ABT credits
to remedy a past production nonconformance situation in the Selective
Enforcement Audit (SEA) program. As described in today's action, EPA
expects to primarily rely on the PLT program to monitor the emissions
performance of production engines. However, EPA expects that SEAs may
be conducted in certain cases. Therefore, as discussed in section
II.D., if EPA determines that an engine family is not complying with
the standards as the result of an SEA, EPA plans to work with the
manufacturer on a case-by-case basis to determine an appropriate method
for dealing with the nonconformity. The option(s) agreed upon by EPA
and the engine manufacturer may, or may not, include the use of ABT
credits to make up for any ``lost'' emission benefits uncovered by the
SEA.

C. Test Procedures

The test procedure being adopted for the Phase 2 nonhandheld
program is the steady state procedure currently used in Phase 1, with
several modifications. These test procedure modifications were proposed
for the reasons contained in the proposal (63 FR at 3976-77). No
adverse comment was received on these proposals. First, engines
equipped with an engine speed governor must use the governor to control
engine speed during the test cycle modes with the exception of Mode 1
or Mode 6. Second, the proposed test procedure for NMHC is being
adopted. This test procedure will allow proper measurement of methane
emissions from spark-ignition engines and permit appropriate
determination of the NMHC emission for natural gas-fueled engines.
Additionally, several cycle operational modifications have also been
adopted as recommended by EMA (see section 4 of the Summary and
Analysis of Comments).
Finally, one comment was received in regards to special test
procedures accepted by EPA during the Phase 1 rulemaking and their
continued use into Phase 2. EPA will continue to accept special test
procedures during Phase 2 (including those approved under Phase 1) as
long as they continue to result in emission compliance determinations
expected to be equivalent to those resulting from use of the Phase 2
test procedures. Under this approach, manufacturers who test their
engines using fuel satisfying California's requirements are allowed, as
under Phase 1 rules, to adjust their test results in a manner which EPA
determines would yield the same emission levels had the engines been
tested using the test fuels meeting the specifications in the federal
regulations.

D. Compliance Program

The compliance program being adopted today for Phase 2 nonhandheld
engines is comprised of three parts: a pre-production certification
program during which the manufacturer evaluates the expected emission
performance of the engine design including the durability of that
emission performance; an assembly line test program which samples
product coming off the assembly line to assure the design as certified
continues to have acceptable emission performance when put into mass
production; and a voluntary in-use test program during which
participating manufacturers evaluate the in-use emission performance of
their product under typical operating conditions. Standards have been
set for each class. The manufacturer divides its product offering based
upon specific design criteria which have a potential for significantly
different emission performance; these subdivisions are called engine
families. Each engine family is required to meet the standard
applicable for the class in which that engine resides unless the
manufacturer chooses to participate in the ABT program also being
adopted today.

[[Page 15217]]

The ABT program has already been described (see section II.B. for
discussion of the ABT program). The other provisions of the compliance
program are explained in more detail below. In all cases, to the best
of EPA's knowledge, the requirements of this federal compliance program
are sufficiently similar to the requirements of the California Air
Resources Board program for these engines such that for engine families
sold in both the State of California and federally, the engines
selected for testing, the test procedures under which they are tested
and the data and other information required to be supplied by
regulations will be the same under both programs. Thus, we expect that
a manufacturer will compile one application for certification
satisfying the information needs of both programs and thus saving the
manufacturer time and expense. Similarly, the EPA and California
compliance programs are expected to share information such that any
production line testing or in-use testing conducted for one program
will satisfy the similar needs of the other program, again minimizing
the burden on the manufacturers.
1. Certification
This section addresses the certification program finalized today
for nonhandheld engine manufacturers. The proposed rule discussed the
certification program at 63 FR 3981. Several comments were submitted in
response to the proposal. EPA addresses these comments and provides
detailed explanations of why the Agency retained provisions as proposed
or changed the proposed provisions in the Summary and Analysis of
Comments document at section 5. The certification process as required
in the Act is an annual process and requires that manufacturers
demonstrate that regulated engines will meet appropriate standards
throughout their useful lives. The Act prohibits the sale, importation
or introduction into commerce of regulated engines when not covered by
a certificate.
The proposal would have required nonhandheld engine manufacturers
to estimate the in-use deterioration of their engine families by
different methods depending on the type of engine technology (see 63 FR
3981). For manufacturers of nonhandheld side valve (SV) engines or
engines with aftertreatment (i.e., catalysts), the proposal would have
required that one engine from each engine family be either field aged
or bench aged to its full useful life to demonstrate compliance. If a
manufacturer were to choose the bench aging option, the emission
results would have had to be adjusted using the field/bench adjustment
program. The field/bench adjustment program was described in the
proposal at 63 FR 3977. These results, either the field aged or
adjusted bench aged, would have been used to calculate a deterioration
factor which would then be applied to the results of testing done on
new engines in the certification, PLT or SEA programs. For
manufacturers of nonhandheld engines with overhead valve technology,
the proposal would have allowed manufacturers to use an industry-wide
assigned deterioration factor for certification. Manufacturers of
overhead valve nonhandheld engines would have also been allowed under
the proposal to establish their own deterioration factors by field
aging a minimum of three engines per family to their full useful lives,
provided they established deterioration factors for all of their engine
families within a useful life category. Manufacturers of overhead valve
engines would have been required to participate in an industry-wide
Field Durability and In-use Performance Demonstration Program. This
program is described in the proposal at 63 FR 3989 and its primary
purpose was to verify whether the industry-wide assigned deterioration
factors were appropriate.
EPA received a significant number of comments regarding the
complexity of the proposed certification program, the inappropriateness
of an assigned deterioration factor for all useful life categories for
nonhandheld engines with overhead valve technology, the prohibitive
expense of field aging engines, and the advantages of harmonizing EPA's
final certification program with that of the California Air Resources
Board. EPA now believes the complexity of the proposed program would
make it difficult to manage and organize the certification program for
both industry and the Agency. EPA also believes that harmonizing its
programs with the California Air Resources Board will allow the
industry to more efficiently comply with the final emission standards
and requirements. Additionally, EPA is concerned the field/bench
adjustment program may not be statistically reliable enough to
establish appropriate deterioration factors (in an effort to control
the cost of this program, only a minimum amount of data was proposed to
be required; this small amount of data hurts the statistical
reliability of any resulting decision).
Based on comments received and EPA's further evaluation of the
proposed certification program, EPA is finalizing the certification
program with the following significant changes to the proposal. These
changes, and other less significant changes, are also discussed in the
Summary and Analysis of Comments document. In today's final rule, EPA
is adopting a significantly less complex certification program that
harmonizes with the certification program adopted by the California Air
Resources Board as part of its Tier 2 regulations. In this program,
manufacturers of nonhandheld engines of all technologies are required
to demonstrate that their regulated engines comply with appropriate
emission standards throughout the engines' useful lives. To account for
emission deterioration over time, manufacturers must establish
deterioration factors for each regulated pollutant for each engine
family. The final rule allows manufacturers to establish deterioration
factors by using bench aging procedures which appropriately predict the
in-use emission deterioration expected over the useful life of an
engine or an in-use evaluation which directly accounts for this
deterioration. As is the case with many EPA mobile source regulations,
multiplicative deterioration factors may not be less than one.
Additionally, where appropriate and with suitable justification,
deterioration factors may be carried over from one model year to
another and from one engine family to another.
Today's final rule also provides flexibility for small volume
engine manufacturers and small volume engine families, allowing
manufacturers to optionally use assigned deterioration factors
established by the Agency. The deterioration factors, either assigned
or generated, are used to determine whether an engine family complies
with each emission standard in the certification program, the
production line testing program, and the Selective Enforcement Auditing
program.
As in Phase 1, manufacturers can submit certification applications
to the Agency electronically, either on a computer disk or through
electronic mail, making the certification application process efficient
for both manufacturers and the Agency. Also, EPA and the California Air
Resources Board will have a common application format allowing
manufacturers to more easily apply for certification.
2. Production Line Testing--Cumulative Summation Procedure
This section addresses the production line testing (PLT) program
finalized today for nonhandheld engine manufacturers. The proposed rule
discussed the PLT program at 63 FR 3984-89. Several comments were

[[Page 15218]]

submitted in response to the proposal. EPA addresses these comments and
provides detailed explanations of why the Agency retained provisions as
proposed or changed the proposed provisions in the Summary and Analysis
of Comments document at section 5. The PLT program adopted in today's
rule requires manufacturers to conduct manufacturer-run testing
programs using the Cumulative Summation Procedure (CumSum).³
EPA is finalizing the program as proposed with the following
significant modifications. These changes, and other less significant
changes, are also discussed in the Summary and Analysis document. The
proposal would have required manufacturers of handheld engine families
to participate in the PLT program while allowing nonhandheld
manufacturers the option of participating in the PLT program or
electing to remain eligible for traditional Selective Enforcement
Audits. EPA received comments both in favor of finalizing this option
for nonhandheld manufacturers and removing this option and requiring
all manufacturers, handheld and nonhandheld, to participate in the PLT
program. Because the SEA program can only provide a single snapshot of
a manufacturer's production, while the PLT program has the ability to
evaluate a manufacturer's production throughout the model year, EPA
believes that the PLT program provides a better evaluation of a
manufacturer's production than the SEA program. Further, the PLT
program does not disrupt a manufacturer's normal day to day activities.
Therefore, the proposed option for nonhandheld manufacturers to elect
to continue to rely on Selective Enforcement Audits is not being
finalized, and nonhandheld manufacturers are required to conduct PLT
programs using the CumSum approach in today's final rule.
---------------------------------------------------------------------------

\3\ The CumSum procedure has been promulgated for marine engines
in EPA's spark-ignition marine rule at 40 CFR Part 91 (61 FR 52088,
October 4, 1996). In this section, ``PLT'' refers to the
manufacturer-run CumSum procedure. ``PLT'' does not include
Selective Enforcement Auditing (SEA), which is addressed separately
in Section II.D.3 of this preamble.
---------------------------------------------------------------------------

The PLT proposal also included an opportunity for the Agency to
approve alternative methods to the CumSum approach if those alternative
methods met certain statistical criteria, including: the alternative
methods produce substantially the same levels of producer and consumer
risk as CumSum, provide for continuous sampling, and include an
appropriate decision mechanism for determining noncompliance. EPA
received comments in support of the proposal to allow manufacturers to
submit alternative test schemes for PLT, but also suggesting that the
above criteria were too restrictive and would result in a program so
closely aligned with CumSum that, by implication, the manufacturer
would have no reason to pursue the alternative. Therefore, these
commenters recommended EPA should either make the criteria less
restrictive, or remove the specific criteria altogether. EPA believes
that the proposed criteria would be crucial to developing any
alternative production line testing program, and that the Agency could
not approve an alternative program with less restrictive criteria. EPA
also believes the CumSum procedure is an accurate and appropriate
production line testing program for those manufacturers covered by the
production line testing requirements. Therefore, in response to
industry comments suggesting that there would be little utility in
being able to seek approval of alternate methods under EPA's proposed
criteria, EPA is not adopting the proposed option that would have
allowed manufacturers to apply for alternative PLT methods.
The CumSum program, as finalized, requires manufacturers to conduct
testing on each of their engine families (except where relieved of this
requirement under provisions granting small volume flexibility). The
maximum sample size that could be required for each engine family is 30
engines or 1 percent of a family's projected production, and the number
of tests ultimately required is determined by the results of the
testing. EPA and the California ARB have harmonized their PLT programs
and both will require manufacturers to use the CumSum procedure for
testing production engines. Manufacturers will be able to submit PLT
reports to the Agency electronically, either on a computer disk or
through electronic mail, which will save both the industry and EPA time
and money.
As mentioned in the discussion on ABT, above, manufacturers may,
for a limited amount of production, use ABT credits to offset the
estimated excess emission of previously produced noncomplying engine
designs as determined in the PLT program. For future production, the
manufacturer would be expected to correct the noncompliance problem
causing the emission noncompliance either by changing the production
process, changing the design (which would require recertification) or
raising the FEL to compensate for the higher emissions (also requiring
recertification). In the event a manufacturer raises an FEL as a result
of a PLT failure, it may do so for future production as well as past
production. EPA expects few instances in which the manufacturer will
correct a PLT failure through raising the FEL since that would imply
the manufacturer incorrectly set the initial FEL levels for that
family; frequent use of this remedy would suggest the manufacturer was
incapable of correctly setting the FELs for its product, in which case
EPA would have to reconsider allowing a manufacturer to participate in
the ABT program at its option. It should also be noted that, as
proposed, compliance with the standards will be required of every
covered engine. Thus, every engine that failed a PLT rest would be
considered in noncompliance with the standards and must be brought into
compliance. EPA's rules allowing the use of the average of tests to
determine compliance with the PLT program is intended only as a tool to
decide when it is appropriate to suspend or revoke the certificate of
conformity for that engine family, and is not meant to imply that not
all engines have to comply with the standards or applicable FEL.
Under the flexibilities section, we also note that small volume
manufacturers and small volume engine families need not be included in
the PLT program at the manufacturer's option. Finally, EPA proposed
that exceptionally low emitting engines could also be exempted from PLT
testing at the manufacturer's option, however, they would also not be
able to generate ABT credits. Manufacturers have indicated that they
would much rather have the credits available from a low emitting engine
design than the alternative of reduced PLT testing. Therefore, this
proposed option has not been adopted.
3. Selective Enforcement Auditing
The proposal discussed Selective Enforcement Auditing (SEA) at 63
FR 3987-88. The SEA program is not the Agency's preferred production
line testing program for small nonhandheld engines, and the CumSum
approach is being finalized as the PLT program that manufacturers will
conduct. Specific comments submitted regarding SEA, and EPA's
responses, are discussed in the Summary and Analysis of Comments
document at section 5. The SEA program is included in today's final
rule as a ``backstop'' to the CumSum program and would be used in cases
where there is evidence of improper testing or of a nonconformity that
is not being addressed by the CumSum program. The SEA program, as
finalized, will also apply to engine

[[Page 15219]]

families optionally certified to the small volume manufacturer
provisions and the small volume engine family provisions, in cases
where manufacturers elect not to conduct PLT testing for such families.
However, as for other families, EPA does not expect families certified
under the small volume provisions will be routinely tested through an
SEA program.
In contrast to the PLT program, manufacturers who fail an SEA will
not have the automatic option of using ABT credits to remedy
noncomplying engines already introduced into commerce. The PLT program
was designed to allow a manufacturer to continually evaluate its entire
production and quickly respond to the results throughout the model
year. EPA believes that allowing a manufacturer to use credits, for a
limited amount of engines, to remedy past production emission failures
is consistent with the continual evaluation provided by the PLT
program. The SEA program, in contrast, is designed to be a one time,
unannounced inspection of a manufacturer's production line with
definitive passing or failing results. EPA believes that is this type
of a compliance program, where at most only a few engine families might
be tested each year, manufacturers must place more emphasis on the
transition from certification to the production line and must set
initial FELs accurately. To encourage accurate FEL settings at the time
of certification, the SEA program does not allow manufacturers to
automatically remedy SEA failures by retroactively adjusting FELs.
Remedies for the SEA failure are best determined on a case-by-case
basis which might include the use of ABT credits if agreeable to both
EPA and the manufacturers.
4. Voluntary In-Use Testing
This section addresses the voluntary in-use testing program
finalized today for nonhandheld engine manufacturers. The proposed rule
discussed the in-use testing program at 63 FR 3989. Several comments
were submitted in response to the proposal. EPA addresses these
comments and provides detailed explanations of why the Agency retained
provisions as proposed or changed the proposed provisions in the
Summary and Analysis of Comments document at section 5. The proposal
would have required manufacturers of nonhandheld engines manufactured
with overhead valve technology to conduct up to a total of 24 emissions
tests on engines that were field aged to their full useful lives. The
primary function of these in-use tests was to verify that the industry-
wide deterioration factors predicted for the overhead valve engines
were appropriate. Based on industry comments regarding the prohibitive
expense of conducting field aged in-use tests, EPA is not adopting the
proposed in-use programs in today's rule.
However, EPA still desires meaningful in-use data so that it can
more appropriately assess the actual emissions inventory of this
industry. Therefore, EPA is adopting a voluntary in-use testing
program. The voluntary in-use testing program gives nonhandheld engine
manufacturers the option of using a portion of their PLT resources to
generate field aged emissions data. At the start of each model year,
manufacturers may elect to place up to 20 percent of their engine
families in this voluntary program. For those families in this program,
manufacturers would not be required to conduct PLT for two model years,
the current year and the subsequent year (the California Air Resources
Board has indicated that they would also exempt families in this in-use
testing program from their PLT requirements). Instead, manufacturers
would place a minimum of three randomly selected production engines in
existing consumer owned, independently owned, or manufacturer owned
fleets. Manufacturers would install the engines in equipment that
represents at least 50 percent of the production for an engine family
and age the engine/equipment combination in actual field conditions to
at least 75 percent of each engine's useful life. Once an engine in
this program has been sufficiently field aged, the manufacturer would
conduct an emissions test on that engine. Manufacturers would have
three calendar years from the date they notified the Agency of their
intent to include a family in the program to complete testing.
While this compliance program will not require the manufacturer to
conduct any in-use testing to verify continued satisfactory emission
performance in the hands of typical consumers, an optional program for
such in-use testing is being provided. EPA believes it is important for
manufacturers to conduct in-use testing to assure the success of their
designs and to factor back into their design and/or production process
any information suggesting emission problems in the field. If any
information derived from this program indicates a substantial in-use
emission performance problem, EPA anticipates the manufacturer will
seek to determine the nature of the emission performance problem and
what corrective actions might be appropriate. EPA will offer its
assistance in analysis of the reasons for unexpectedly high in-use
emission performance and what actions might be appropriate for reducing
these high emissions. Whether or not a manufacturer chooses to conduct
such a voluntary in-use testing program, EPA may choose to conduct its
own in-use compliance program. If EPA were to determine that an in-use
noncompliance investigation was appropriate, the Agency expects it
would conduct its own in-use testing program, separate from this
voluntary manufacturer testing program, to determine whether a specific
class or category of engines is complying with applicable in-use
standards.
Although EPA is not finalizing the mandatory in-use testing
programs proposed, the Agency is finalizing the in-use noncompliance
provisions as proposed (see 63 FR 4026: Subpart I 90.808). Under these
provisions, if the Agency determines that a substantial number of
engines within an engine family, although properly used and maintained,
do not conform to the appropriate emission standards, the manufacturer
will be required to remedy the problem and conduct a recall of the
noncomplying engine family as required by CAA section 207. However, we
also recognize the practical difficulty in implementing an effective
recall program as it would likely be impossible to properly identify
the owners of equipment using small engines (there is no national
requirement to register the ownership of such equipment), and it is
also highly questionable whether owners or operators of such equipment
would respond to an emission-related recall notice. Therefore, under
the final program EPA's intent is to allow manufacturers to nominate
alternative remedial measures to address potential non-compliance
situations, as the proposed rulemaking notice discussed (see 63 FR
3992). EPA expects that, if successfully implemented, the use of these
alternatives should obviate the need for the Agency to make findings of
substantial nonconformity. In evaluating these alternatives, EPA would
consider those alternatives which (1) represent a new initiative that
the manufacturer was not otherwise planning to perform at that time and
that has a nexus to the emission problem demonstrated by the subject
engine family; (2) cost substantially more than foregone compliance
costs and consider the time value of the foregone compliance costs and
the foregone environmental benefit of the subject family; (3) offset at
least

[[Page 15220]]

100 percent of the exceedance of the standard or FEL; and (4) are able
to be implemented effectively and expeditiously and completed in a
reasonable time. These criteria would function as ground rules for
evaluating projects to determine whether their nature and burden is
appropriate to remedy the environmental impact of the nonconformity
while providing assurance to the manufacturer that EPA would not
require excessive projects.
In addition to being evaluated according to the above criteria,
alternatives would be subject to a cost cap. EPA would apply a cost cap
of 75 percent above and beyond the foregone costs adjusted to present
value, provided the manufacturer can appropriately itemize and justify
these costs. EPA believes that this is an appropriate value which is
both ``substantial'' and sufficient to encourage manufacturers to
produce emission durable engines.
Given the important role that alternative remedial measures may
play, EPA intends to develop guidance regarding alternative remedial
measures. EPA will seek the input of the regulated industry, as well as
other concerned stakeholders, in developing such guidance.

E. Flexibilities

In the NPRM, EPA proposed a number of flexibilities to ease the
transition from the Phase 1 to the Phase 2 program, to ensure that the
Phase 2 standards are cost-effective and achievable, and to reduce the
compliance burden while maintaining the environmental benefits of the
rule. Several comments were received on the flexibilities proposed,
some supporting the proposals and others offering recommended changes.
In addition, the need for modifications to the proposed set of
flexibilities evolved out of the investigations which led to other
changes to the proposal including the adoption of more stringent Class
I standards than were proposed. The following is a summary of the
revised flexibilities for this rulemaking.
1. Carry-Over Certification
Consistent with other mobile source emission certification
programs, EPA will allow a manufacturer to use test data and other
relevant information from a previous model year certification program
to satisfy the same requirements for the existing model year
certification program as long as the data and other information are
still valid. Such ``carry-over'' of data and information is common in
mobile source programs where the engine family being certified in the
current model year is identical to the engine family previously
certified.
2. Small Volume Engine Manufacturer Definition
EPA proposed a number of flexibilities for engine manufacturers
defined as small volume engine manufacturers; these flexibilities are
identified in section II.E.4, below. While supporting these
flexibilities, EMA and OPEI, on behalf of their members, commented that
revisions to the definitions of small volume equipment manufacturer and
small volume engine manufacturer were appropriate to protect the
interests of engine manufacturers who would or would not meet the
proposed definition. Specifically, EMA and OPEI recommended eliminating
the ``small engine manufacturer'' definition altogether, and relying
instead on an expanded definition of small volume engine family to meet
the goal of assuring an adequate supply of engines for niche equipment
applications, especially as produced by small volume equipment
manufacturers. According to EMA and OPEI, providing any additional
relief to small volume engine manufacturers would put these
manufacturers at an unfair competitive advantage over engine
manufacturers whose production volumes were too large to qualify for
this relief.
The issue of the small volume engine family definition is discussed
in the subsequent section. Regarding the availability of flexibilities
targeted specifically for the small volume engine manufacturers, EPA
remains convinced that the relatively small technical and production
resources available to the smallest engine manufacturers makes their
job of complying with Phase 2 emission standards significantly more
difficult than for larger manufacturers with comparably greater
technical and financial resources available to apply toward solving
this problem. Consequently, without some additional flexibilities under
these regulations, the small volume manufacturer would be much less
likely to produce engines complying with the Phase 2 regulations or, if
able to make the necessary design changes, would only be able to spread
the cost of such changes over considerably fewer production engines. In
such a case, not only would small volume engine manufacturers be
financially stressed compared to their larger competitors, but they
might need to pass along to their consumers a higher per unit price
increase in an attempt to recover at least part of their cost of
compliance. Higher price increases would make their product less
competitive. In the extreme, either due to pricing pressures or simply
due to the limitations in technical capability, without additional
flexibilities, small volume engine manufacturers might not be able to
continue providing engines to their customers. The engine manufacturers
could go out of business and their customers could suffer from a lack
of engine supply. This potential for loss in engine availability would
more likely fall on the shoulders of small equipment manufacturers who
provide niche products and who are the more typical customers of the
small volume engine manufacturers.
EPA continues to believe flexibilities aimed at the small volume
engine manufacturer are appropriate and is retaining the definition of
small volume engine manufacturers as proposed. As proposed, to qualify
as a small volume engine manufacturer a nonhandheld engine manufacturer
may produce no more than 10,000 engines annually.
3. Small Volume Engine Family Definition
EPA proposed that manufacturers of small volume nonhandheld engine
families (those families with annual production of 1000 units or less)
be provided cost saving flexibilities. These flexibilities are
described in section II.E.4. Without such flexibilities, the cost and
other difficulties of modifying these small volume engine families to
comply with the Phase 2 standards may be difficult enough that the
manufacturer might either be unable to complete the modification of the
engine design in time or may choose for economic reasons to discontinue
production of the small volume engine family. The impact of such a
scenario would of course fall on the engine manufacturer through
reduced engine sales, but would also fall perhaps even more
significantly on small volume equipment applications, the most typical
use for these small volume engine families. Due to the unique character
of these small volume equipment applications, it is quite possible the
equipment manufacturer might not be able to find a suitable replacement
engine. In such case, the equipment manufacturer would also be
significantly impacted through lost sales, and consumers would be
harmed through the loss in availability of the equipment.
As noted in the prior section, EMA and OPEI commented that EPA
should redefine the small volume family production volume limit from
the 1000 unit maximum proposed for nonhandheld engine families to a
level of less than 5,000 units. Tecumseh

[[Page 15221]]

requested the addition of an option of 1 percent of a manufacturer's
total production as the upper limit for determining small volume engine
families.
EPA has re-examined the production limits for small volume engine
families and has determined that the interests of preserving the
availability of small volume families would be better served by raising
the small volume engine family definition to 5,000 for nonhandheld
engine families. A larger number of niche equipment applications will
now be served and the risk of loss in engine availability reduced. At
the same time, the potential for adverse emission impacts remains very
small. Given this provision 99 percent of nonhandheld engines will
still be covered by the full compliance program and subject to the
earliest practical implementation of the rule.
The recommendation by Tecumseh to base the small volume definition
optionally on a varying scale equal to one percent (1 percent) of the
engine manufacturer's sales volume is rejected as departing from the
basis that absolute size of the family dictates whether it is a niche
application. Furthermore, a small volume engine definition based on the
total production volume of the manufacturer would disproportionately
benefit the largest manufacturers who, in all other respects, tend to
be in the best position to comply with the Phase 2 regulations.
4. Flexibilities for Small Volume Engine Families and Small Volume
Engine Manufacturers
The flexibilities proposed for small volume engine manufacturers
and small volume engine families received general support in comments
to the NPRM. One modification to the proposed flexibilities is being
adopted. To provide additional time to convert the many small volume
engine families to designs complying with the Phase 2 standards and to
provide additional lead time for small volume manufacturers, EPA is now
adopting a provision that would allow the use of Phase 1 engines
through model year 2009. Therefore, all manufacturers will have until
2010 to certify small volume nonhandheld engine families to Phase 2
requirements. Similarly, small volume engine manufacturers will have
until 2010 to certify all of their Class I and Class II engine families
to Phase 2 requirements.
EPA proposed allowing small volume engine families and small volume
engine manufacturers to continue producing Phase 1 engines until the
last year of the phase in of the Phase 2 standard applicable to the
engine's class. However, since the Class I standards being adopted
today are significantly more stringent than the standards upon which
this proposed flexibility was based, the number of engine families
required to be modified and, especially, the degree of modification
necessary has increased. This adds significantly to the technical and
resource burden on the engine manufacturer. As anticipated in the
proposal, EPA expects the major engine manufacturers will choose to
modify their small volume engine families last as these represent niche
markets. Additionally, these niche applications may represent some of
the more difficult engine applications due to their unique
requirements. The experience gained in designing, producing and getting
in-use feedback on their larger engine family designs should be helpful
in minimizing the cost and assuring the performance of the small volume
engines. The design challenges for the small volume engine manufacturer
have similarly increased suggesting more time to accomplish the
transition to Phase 2 standards would be warranted. EPA expects
manufacturers will take advantage of the extra time being adopted today
to smooth the transition to Phase 2 standards by bringing the small
volume engines into compliance throughout this time period. Due to the
fact that the circumstances vary greatly from one manufacturer to
another, it would be inappropriate to mandate a percent phase-in
schedule or some other mandatory rate of phase-in for these small
volume engine families and small volume manufacturers. Therefore, only
a final compliance requirement of model year 2010 is being adopted. EPA
has also considered the air quality impact of this flexibility and
determined that one percent of the total small engine production is
likely to take advantage of this option to delay compliance with the
Phase 2 standards with a negligible impact on the emission benefits
expected from this rule.
The following summarizes the flexibilities available to
manufacturers of small volume engine families and small volume engine
manufacturers for these engines.
a. Can certify to Phase 1 standards and regulations until 2010 for
eligible engine families; these engine families are excluded from ABT;
b. Can certify using assigned deterioration factors;
c. Can elect to not participate in PLT; SEA is still applicable.
Regarding the exclusion from ABT of engine families which take
advantage of delaying implementation of the Phase 2 standards, this
provision is being adopted to protect against a situation in which a
manufacturer may choose to redesign and produce a small volume engine
family with low emissions (e.g., meeting the Phase 2 standards) but
still certify it under these small volume provisions and generate
credits all the way up to the Phase 1 standards level. Since this
flexibility is intended to provide small volume manufacturers and
manufacturers of small volume engine families the flexibility to delay
implementation of the Phase 2 standard if necessary, it would be
inappropriate and unfair to other manufacturers to also allow them to
generate extra credits even after redesigning their product.
5. Flexibilities for Small Volume Equipment Manufacturers and Small
Volume Equipment Models
EPA proposed flexibilities based upon equipment manufacturer needs
aimed at assuring the continued supply under the Phase 2 regulations of
engines for unique, typically small volume applications. These
flexibilities included allowing the small volume equipment manufacturer
to continue using Phase 1 compliant engines up until the third year
after phase-in of the final Phase 2 standards for that engine class if
the equipment manufacturer was unable to find a suitable Phase 2 engine
before then. Second, EPA proposed to allow individual small volume
equipment models to continue using Phase 1 compliant engines throughout
the time period the Phase 2 regulation is in effect if no suitable
Phase 2 engine was available and the equipment was in production at the
time these Phase 2 rules were adopted. Finally, EPA proposed a hardship
provision that would allow any equipment manufacturer for any of its
applications to continue using a Phase 1 engine for up to one more year
beyond the last phase-in of the final standard for that engine class if
the requirement to otherwise use a Phase 2 compliant engine would cause
substantial financial hardship.
In this final rule, EPA is adopting flexibilities which can be
exercised by small volume equipment manufacturers. These flexibilities
were supported by comments to the proposal and are adopted as proposed
except that the criteria for determining whether someone is a small
volume equipment manufacturer has been revised (see discussion in the
following section II.E.6). Specifically, as proposed and for the
reasons described in the proposal, the small volume equipment
manufacturer will be allowed to use Phase 1 engines for up to three
years beyond the last phase-in year for the standard applicable to that
engine class

[[Page 15222]]

(or engine class and equipment category combination in the case of
Class III and IV engines) if they demonstrate to EPA that no suitable
Phase 2 engine is available. Secondly, small volume equipment models
will be allowed to use Phase 1 compliant engines throughout the time
the Phase 2 rule is in effect as long as that piece of equipment is in
production as of the effective date of this rule and the manufacturer
demonstrates to EPA that no suitable Phase 2 engine is available.
Finally, EPA is adopting the hardship provision which will allow
equipment manufacturers an additional year beyond the final phase-in of
a standard to start using a Phase 2 compliant engine if they can
demonstrate that earlier use would cause a significant financial
hardship.
6. Small Volume Equipment Manufacturer Definition
EPA proposed that small volume equipment manufacturers would be
defined as those whose annual production for sale in the U.S. across
all models would be 2500 or fewer nonhandheld engines.
EMA and OPEI commented that the Small Business Administration
definition of a small manufacturer should be used instead of the
definition proposed by EPA for small volume equipment manufacturers.
Under this definition, according to EMA and OPEI, equipment
manufacturers who employed fewer than 500 persons would all be eligible
for the small volume flexibilities. Alternatively, EMA and OPEI
recommended that the small volume equipment manufacturer definition be
expanded to include all equipment manufacturers using nonhandheld
engines who produce 5000 or fewer units annually.
EPA has considered the recommendations received in comments to the
NPRM and analyzed the production data available to the Agency. As
explained in the proposal, opting to use a definition of 500 or fewer
employees as recommended by EMA and OPEI would capture a group of
equipment manufacturers with a wide-range of equipment production
volumes including some who produce up to 700,000 units annually. It
would also include a group of equipment manufacturers with a wide range
of financial capabilities, including some which have much larger
revenue streams compared to those that would be covered by the proposed
definition. EPA believes the impact of this rule is more closely tied
to the volume of units produced by the manufacturer (for example, if
the equipment needed to be modified to accommodate a Phase 2 engine,
the impact would best be analyzed as a per unit impact) than to the
number of persons employed by a firm. Therefore, establishing
flexibilities under these emission rules should be based on the
production volume of the manufacturer, not the number of employees.
However, EPA agrees there would be advantages in expanding the
definition of small volume equipment manufacturer to include slightly
larger manufacturers who are still, compared to the rest of the
industry, amongst the smallest. Therefore, EPA is adopting a small
volume equipment definition of 5000 or fewer annual production for
equipment using nonhandheld engines. This limit covers approximately
two percent of the annual sales in each category. Providing the
flexibilities outlined above in section II.E.5 allows significant
relief to these smallest equipment manufacturers while at the same time
assuring the vast majority of equipment uses the lowest emitting
engines available.
7. Small Volume Equipment Model Definition
The small volume equipment model definition proposed would cover
nonhandheld models of 500 or less annual production. As proposed, such
small volume equipment models can use Phase 1 engines throughout Phase
2 if the manufacturer of these equipment models can demonstrate no
Phase 2 compliant engine is available for existing models; if the
equipment is ``significantly modified'' then this exemption ends, since
during this modification design accommodations could be made to accept
an engine meeting Phase 2 standards. This provision was proposed to
permit unnecessary equipment redesign when the emission benefit from
such a redesign would be negligible.
Comments were received from EMA and OPEI recommending raising the
production limit to 5000 units for nonhandheld applications rather than
the 500 annual production limit proposed. EPA's analysis of production
data indicates that the 500 cutoff would exempt less than approximately
one percent of annual sales from required use of Phase 2 engines but
approximately 73 percent of the equipment models, thus providing
substantial relief to many small volume applications without
compromising the air quality benefits of this final rule. In contrast,
a level such as 5000 for the cutoff of a small volume equipment model
definition would benefit more equipment manufacturers (up to 87 percent
of the equipment models) but at a significant air quality loss, as up
to six percent of the units sold could be exempt. This is too great of
an emissions penalty and therefore this option is rejected. EPA is
adopting as proposed a definition of small volume equipment model as
500 or fewer units annual production for nonhandheld equipment.
8. Hardship provision
EMA commented that manufacturers should not have to demonstrate a
major impact on company solvency and that substantial negative economic
impact or loss of market share should be enough in order to qualify for
relief under the proposed hardship provision.
This hardship provision is intended to cover those extreme and
unanticipated circumstances which, despite the equipment manufacturer's
best efforts, place it in a situation where a lack of Phase 2 complying
engines will cause such great harm to the company that the ability of
the company to stay in business is at stake. It is not intended to
protect an equipment manufacturer against any financial harm or
potential loss of market share. EPA believes the original intent of
this provision is reasonable and that the proposed criteria are
reasonable. Equipment manufacturers in less dire situations may benefit
from the other flexibilities being adopted today. The rules for this
hardship provision are being adopted as proposed.

F. Nonregulatory Programs

EPA discussed a voluntary ``green'' labeling program and a
voluntary fuel spillage and evaporative emission reduction program in
the preamble to the NPRM. These programs are discussed in this section
of the preamble. The particulate matter (PM) and hazardous air
pollutant (HAP) testing program for handheld engines discussed in the
NPRM will be addressed in the upcoming SNPRM for handheld engines.
1. Voluntary ``Green'' Labeling Program
EPA discussed the concept of a voluntary program for labeling
engines with superior emission performance as a way of providing public
recognition and also allowing consumers to easily determine which
engines have especially clean emission performance. EPA discussed a
threshold of around 50 percent of the proposed standard (e.g., around
12.5 g/kW-hr for Class I engines) as the level below which engines
would qualify for ``green'' labeling. EPA requested comment on all
aspects of the program, as well as indication of interest on the part
of consumer groups, engine and

[[Page 15223]]

equipment manufacturers, and others in working with the Agency to
develop and implement the program.
EPA received support for the voluntary ``green'' labeling program
concept from several commenters, as well as suggestions for the design
of such a program. Other commenters argued that a green labeling
program is inconsistent with ABT, and still others supported a
mandatory comprehensive labeling program to identify emissions levels
above and below standards.
EPA remains committed to promoting clean technology, and is
interested in developing a green labeling program for small SI engines
in a way that does not confuse consumers or undermine environmental
goals of the Phase 2 regulations. In the design of a program, it would
be necessary to review appropriate levels for a green label, given the
increased stringency of Class I standards in the final program, as well
as to consider the appropriate interface between a green labeling
program and the ABT program that is being finalized for nonhandheld
engines. EPA will continue to pursue the development of voluntary green
labeling program for small SI engines as a nonregulatory program.
2. Voluntary Fuel Spillage and Evaporative Emission Reduction Program
In the preamble to the NPRM, EPA discussed interest in involving
stakeholders in the design of a voluntary fuel spillage and evaporative
emission reduction program specifically for the small engine industry
and its customers. EPA requested comment on the proposed voluntary
partnership program, and indication of interest in participating in the
partnership. Comments on this concept included both disappointment that
EPA has not done more in these areas, as well as a willingness on the
part of several commenters to work with EPA. EPA remains committed to
developing voluntary programs to address fuel spillage and evaporative
emission reductions, but these programs are not part of the regulations
being adopted today. At this time, EPA has not been able to determine
the technical feasibility of substantially controlling fuel spillage
and evaporative emissions from the small engine equipment sector and
therefore has not been able to determine that a program mandating such
controls would be achievable for this industry.

G. General Provisions and Recommendations

In the NPRM for the Phase 2 program, EPA discussed a number of
general provisions impacting Phase 2 engines, including: model year and
annual production period flexibilities, definition of handheld engines,
small displacement nonhandheld engine class, liquefied petroleum gas
fueled indoor power equipment, dealer responsibility, engines used in
recreational equipment, engines used in rescue and emergency equipment,
and replacement engines. EPA received comments on several of these
issues, as well as recommendations on other general issues. These
general provisions and other recommendations and issues are discussed
in this section of the preamble. See Section 8 of the Summary and
Analysis of Comments for additional discussion of these issues.
1. Model Year Definition and Annual Production Period Flexibilities
The final program includes the same model year definition as was in
effect for Phase 1, and annual production period flexibilities which
were established under Phase 1 only for Class II engines. While EPA is
finalizing the model year definition in effect for the Phase 1 program
for the Phase 2 program, and is also finalizing flexibilities similar
to those in Phase 1 for the start-up of the Phase 2 program for Class
II nonhandheld engines, EPA is also clarifying in this final rule the
standards to which Class II Phase 2 engine would be subject at the
start-up of the program. Under the final rule, Class II engine families
are required to be certified to the Phase 2 program by September 1,
2001. In addition, engine families first certified to the Phase 2
program on or before August 31, 2001, and designated as ``2001 model
year'' families, are required to meet the 2001 emission standards
(e.g., 18.0 g/kW-hr HC+NO_X). These engine families are also
required to re-certify for the 2002 model year by January 1, 2002.
Engine families first certified to the Phase 2 program on or before
August 31, 2001, and designated as ``2002 model year'' families, are
required to meet the 2002 model year standards (e.g., 16.6 g/kW-hr
HC+NO_X).
2. Definition of Handheld Engine
EPA is finalizing the same definition for handheld engine as was in
effect for Phase 1. Commenters suggested a displacement cutoff to
determine which engines would meet less stringent ``handheld''
standards, but EPA is not adopting this suggestion. In response to
comments from Honda and others, in a separate regulatory action, EPA
intends to propose modifications to criteria for determining whether an
engine could be classified as handheld that, if finalized, would be
applicable for the remainder of Phase 1 and also apply for the Phase 2
program. The expected proposed modification would permit a manufacturer
to exceed the weight limits (14 kg for generators or pumps, or 20 kg
for one-person augers) in cases where the manufacturer could
demonstrate that the extra weight was the result of using a four stroke
engine or other technology cleaner than the otherwise currently allowed
two stroke engine.
3. Small Displacement Nonhandheld Engine Class
EPA is not adopting a small displacement nonhandheld Class in
today's rule. As discussed in the preamble to the NPRM, although EPA
had considered establishing a new class for the smallest nonhandheld
engines, such a class and separate standards for the class were not
proposed. Rather, EPA requested comment on the need for such a class
and what size engines should be included. Comments and additional
information were received on this issue, some of which supported
setting standards equivalent to the handheld standards for engines of
the same displacement. EPA believes that the appropriate standards for
these smallest nonhandheld engine classes should be considered in
context with the standards adopted for similar size engines used in
handheld applications. Therefore, EPA is deferring a decision on this
issue and will reconsider it as part of the previously mentioned
planned supplementary proposal for handheld engines.
4. Liquefied Petroleum Gas Fueled Indoor Power Equipment
As proposed, the final Phase 2 program is applicable to
manufacturers of liquefied petroleum gas (LPG) fueled indoor power
equipment. Comments to the NPRM on this issue included a suggestion
that EPA exempt from regulation small manufacturers of propane-powered
spark-ignited engines used solely for indoor applications and subject
to OSHA indoor air quality standards and objections to EPA's assertion
of jurisdiction over such equipment. The commenters suggested that
since OSHA sets permissible exposure limits for indoor air toxins and
since these particular pieces of equipment are designed solely for use
indoors, EPA has neither the need nor the right to regulate such
equipment. In

[[Page 15224]]

response, however, OSHA does not set equipment emission standards; EPA
has that responsibility. Additionally, the emissions from this
equipment can be effectively controlled through the EPA regulations
being adopted today. While many of the manufacturers of propane-powered
spark-ignition engines are small volume manufacturers, the regulations
being adopted today also minimize the regulatory burden on these
manufacturers.
Comments were also received requesting EPA regulations allow the
testing and reporting of emission on a concentration basis rather than
a mass basis. Measurement of concentration of emissions can be less
expensive than mass emissions and EPA understands that at least some
manufacturers of propane-powered spark-ignition engines are already
using such equipment to check the performance of their engines after
they have been converted to run on propane. However, while
concentration measurements can give an indication of the emission
performance of an engine, it is a far less adequate test than the mass-
based emission test adopted with the Phase 1 rules and being continued
with today's action.
Another comment came from a supplier of gasoline engines whose
engines have been used in propane-powered equipment after conversion to
run on this alternative fuel. This manufacturer is concerned that, even
though it is not responsible for the changes made to the engine to
allow use of propane, its name nevertheless remains on the engine after
the conversion and it may be subject to warranty claims which result
from the conversion and are therefore not the fault of the original
engine manufacturer. Thus this original engine manufacturer requested
EPA mandate that all companies which convert gasoline-fueled engines to
run on propane be required to declare themselves engine manufacturers
and satisfy the certification and other compliance responsibilities of
this rule including emission warranty. Such persons or companies
currently engaged in making these conversions have the option of not
declaring themselves a manufacturer or certifying if they can assure
themselves and EPA that the conversions they are making do not increase
the emissions of the engine ⁴. However, in making these
modifications, the modifier also assumes responsibility for any
emission-related problems due to the modification; such emission-
related problems would not be the responsibility of the original engine
manufacturer. While sympathetic toward the original engine
manufacturer's concern of potentially increased warranty burden, EPA is
retaining the policy of allowing modifications to certified engines so
long as the modifier has good reason to believe such modifications do
not increase emissions. Under such a policy, no emission increase
should occur. Requiring the modifier to re-certify, in this case, would
have no expected emission benefit but would add greatly to the burden
on the modifier.
---------------------------------------------------------------------------

\4\ See EPA publications ``Mobile Source Enforcement Memorandum
No. 1A'' (6-25-74); ``Addendum to Mobile Source Enforcement
Memorandum 1A'' (9-4-97); and, ``Revision to Addendum to Mobile
Source Enforcement Memorandum 1A'' (6-1-98), docket A-96-55, items
IV-B-02, IV-B-03 and IV-B-04 respectively.
---------------------------------------------------------------------------

5. Dealer Responsibility
The preamble to the proposed Phase 2 program clarified that the
Phase 2 program adds no additional responsibilities for dealers. As in
the NPRM, the final rule contains no new constraints or
responsibilities for dealers and repair facilities beyond those
contained in the Phase 1 rule.
6. Engines Used in Recreational Vehicles and Applicability of the Small
SI Regulations to Model Airplanes
EPA is not adopting any revisions to the provisions relating to
engines used in recreational vehicles established in the Phase 1
program. No revisions were proposed by the Phase 2 NPRM. EPA does
intend to address recreational vehicle issues in a separate regulatory
action. This separate rulemaking will address the applicability of the
small SI regulations to engines used in model airplane applications,
and EPA expects to propose to consider engines that serve ``only to
propel a flying vehicle * * * through air'' to be recreational engines
provided they also meet the other existing criteria that apply to that
term. As ``recreational'' engines they would be effectively excluded
from the small SI program.
7. Engines Used in Rescue and Emergency Equipment
EPA is finalizing the provision, as proposed, that for the
remainder of Phase 1 as well as for Phase 2, exempts engines which are
used exclusively in emergency and rescue equipment from compliance with
any standards if the equipment manufacturer can demonstrate that no
certified engine is available to power the equipment as safely and
practically. No comments were received on this proposal.
8. Replacement Engines
EPA proposed to continue replacement engine provisions from the
August 7, 1997 rulemaking (62 FR 42638), which amended the Phase 1 rule
to allow engine manufacturers to sell uncertified engines from
replacement purposes subject to certain controls designed to prevent
abuse. In addition, the Phase 2 proposal contained additional
safeguards and reporting and record keeping requirements to further
ensure against abuse.
The final Phase 2 program for replacement engines goes beyond the
August 7, 1997 rule in one area. It includes the amendment which
permits uncontrolled engines to be sold for pre-regulatory equipment,
and Phase 1 engines to be sold for equipment built with Phase 1
engines, subject to the above constraints (90.1003(b)(5)(iv)). The
final rule does not include other provisions from the Phase 2 proposal
that were added to the August 7, 1997 rule. Based on comments from
manufacturers, and an assessment that eliminating these provisions will
result in no loss of environmental benefits, EPA has decided to
eliminate these other requirements in interest of reducing the record
keeping and reporting burden on manufacturers. Note that EPA intends to
propose minor modifications to the replacement engine regulations in a
separate regulatory action in order to clarify the responsibilities of
importers.
9. Record keeping and Information Requirements
The ICRs have been revised for final rule and estimate the average
annual public reporting burden for the collection of information
required under the rule for a typical engine manufacturer (see section
V.C. of preamble). In addition, EPA has significantly streamlined the
compliance program requirements for final rule.
10. Engine Labeling
EPA proposed two alternatives for engine labeling. These
alternatives differed only in the treatment of useful life hours. As
indicated in the preamble to the NPRM, EPA believes inclusion of the
number of hours of emission compliance for which the engine is properly
certified would provide an important tool to consumers in making their
purchase decisions between competing engines. EPA anticipates
manufacturers will use the useful life hours of the engine as a
marketing tool. For example a manufacturer might advertise that an
engine family is

[[Page 15225]]

certified as emissions durable to 1000 hours. Thus, inclusion of
meaningful useful life hours would have the potential of providing a
market place mechanism regarding manufacturers who design engines for
longer useful life periods.
The two alternatives for designating useful life on the engine
label were to (1) simply state the useful life hours or (2) use a
designator of useful life hours, for example, A, B, or C, and then
adding words on the label to direct the consumer to the owner's label
for an explanation of the meaning of A, B and C. This latter option was
proposed only for nonhandheld engines and was based on the concern
expressed by nonhandheld engine manufacturers during the development of
the Statement of Principles for these engines that consumers could be
confused by the meaning of the useful life period if the specific
number of hours was included on the label. However, as indicated in the
preamble to the NPRM, EPA was concerned that an ``A, B, C'' designation
may not provide the same useful information to the consumer as directly
including the useful hours on the label and specifically requested
comment on this issue.
In their comments on the proposal, EMA and OPEI indicated they
remained concerned that consumers might believe the emissions
compliance period could mean something else, for example, the expected
life for which the engine would provide satisfactory product
performance to the consumer. EMA and OPEI indicated ``(c)onsumer
purchasers are not sophisticated enough to understand the difference
between the EPA term of art ``useful life'' and the expected time of
ownership of their newly purchased lawnmower. Nor will they understand
the difference between emission performance and product performance.''
Therefore, they recommended adopting an option whereby the engine
manufacturer could indicate A, B, or C on its required engine label,
make reference to the owner's manual for additional explanation and
explain in the owner's manual the meaning of A, B, and C where it would
be easier to provide an adequate explanation of the meaning behind an
emission performance period. In contrast, the North American Equipment
Dealers Association (NAEDA) commented that a buyer would not know the
meaning of useful life designations such as A, B, or C prior to the
purchase of the equipment since the explanation of these designations
would only appear in the owner's manual which is not normally
accessible to the consumer prior to purchase. Also, Honda commented
specifically that engine labeling requirements should be harmonized
between California and federal rules to allow an engine to be labeled
for different standards and different classes. This recommendation from
Honda aligns with numerous other general comments on the importance of
harmonization between California and federal rules.
EPA remains concerned that an ``A, B, C'' designation of useful
life may not be as informative of the expected emission performance
period as a direct listing of the certified hours. Especially in light
of NAEDA's comment, EPA is concerned about the ability of consumers to
use such designations to make informed purchase decisions if their only
source of explanation is the owner's manual. However, it is also not
clear that including the hours listing directly on the label is the
optimum alternative since, as suggested by EMA and OPEI comments,
consumers may not fully understand the meaning of the emissions
performance useful life hours listing and could instead, for example,
believe the hours refer to perhaps a parts warranty period for the
equipment in which the engine is installed. EPA is also aware of
labeling options being considered by California that would allow
removing the actual hours of operation from the engine label and
including additional information on the product, perhaps not
permanently affixed to the engine, which would satisfy the need to
properly inform consumers. Allowing such labeling would also serve the
goal of harmonization as supported by Honda.
Therefore, EPA is finalizing regulations which, as proposed, allow
the manufacturer to use an engine label which includes the actual
emissions period useful life as certified by the engine manufacturer or
a label which includes an ``A, B or C'' designation and refers to the
owners manual for further information. Based on conversations with both
EMA and OPEI representatives, EPA also expects to work in partnership
with the industry in developing consumer outreach material to better
inform consumers of the emission improvements available through
purchase of equipment using Phase 2 engines. EPA expects such outreach
material will better serve the informational needs of consumers than
the just relying on either of these labeling options. Additionally, the
rules allow other labeling options which the Administrator determines
satisfies the information intent of the label. This option is intended
to allow for the nationwide use of the California labeling system. In
evaluating the adequacy of an alternative label, EPA would consider the
extent to which the manufacturer's alternative engine label combined
with other readily accessible consumer information adequately informs
the consumer of the emission performance of the engine.
11. Emission Warranty
As proposed, EPA is not adopting revisions to the base emission
performance warranty period of two years of engine use from the date of
sale for this nonhandheld program. EPA will address comments from
handheld manufacturers that relate specifically to whether additional
flexibility is needed for some handheld products in the supplemental
proposal for the Phase 2 handheld program. In addition, EPA is not
adopting the proposed separate Phase 1 and Phase 2 provisions which
would have required differing warranty statements. The final provisions
specifying what manufacturers must warrant, therefore, remains
unchanged from the existing rule.
12. Other Issues
A number of other of issues were considered in the development of
this final rule, based on comments received on the proposal. These
include defect reporting requirements, aftermarket provisions, closed
crankcase provisions and exclusion from HC+NO_X standards for
engines used exclusively in the wintertime, CO adjustments for open
crankcase breathers, NO_X converter placement during testing,
usage meters, and metric units. Comments received on these issues, and
EPA's response to those comments, can be found in Section 8 of the
Summary and Analysis of Comments document.

III. Projected Impacts

A. Environmental Benefit Assessment

National Ambient Air Quality Standards (NAAQS) have been set for
criteria pollutants which adversely affect human health, vegetation,
materials and visibility. Concentrations of ozone (O<INF>3</INF>) are
impacted by HC and NO_X emissions. Ambient concentrations of
CO are, of course, impacted by CO emissions. EPA believes that the
standards set in this rule would reduce emissions of HC and
NO_X and help most areas of the nation in their progress
towards compliance with the NAAQS for ozone. The following provides a
summary of the roles of HC and NO_X in ozone formation, the
estimated emissions impact of this rule, and the health and welfare
effects of ozone, CO,

[[Page 15226]]

hazardous air pollutants, and particulate matter. Much of the
evaluation of the health and environmental effects related to HC,
NO_X and CO found in this section is also discussed in the
Regulatory Impact Analysis (RIA).
1. Roles of HC and NO_X in Ozone Formation
Both HC and NO_X contribute to the formation of
tropospheric ozone through a complex series of reactions. In a 1991
report, researchers emphasize that both HC and NO_X controls
are needed in most areas of the United States.⁵ EPA's
primary reason for controlling emissions from small SI nonhandheld
engines is the role of their HC emissions in forming ozone. Of the
major air pollutants for which NAAQS have been designated under the
CAA, the most widespread problem continues to be ozone, which is the
most prevalent photochemical oxidant and an important component of
smog. The primary ozone NAAQS represents the maximum level considered
protective of public health by the EPA. Ozone is a product of the
atmospheric chemical reactions involving oxides of nitrogen and
volatile organic compounds. These reactions occur as atmospheric oxygen
and sunlight interact with hydrocarbons and oxides of nitrogen from
both mobile and stationary sources.
---------------------------------------------------------------------------

\5\ National Research Council, Rethinking the Ozone Problem in
Urban and Regional Air Pollution, National Academy Press, 1991.
---------------------------------------------------------------------------

A critical part of this problem is the formation of ozone both in
and downwind of large urban areas. Under certain weather conditions,
the combination of NO_X and HC has resulted in urban and
rural areas exceeding the national ambient ozone standard by as much as
a factor of three. Thus it is important to control HC over wider
regional areas if these areas are to come into compliance with the
ozone NAAQS.
2. Health and Welfare Effects of Tropospheric Ozone
Ozone is a powerful oxidant causing lung damage and reduced
respiratory function after relatively short periods of exposure
(approximately one hour). The oxidizing effect of ozone can irritate
the nose, mouth, and throat causing coughing, choking, and eye
irritation. In addition, ozone can also impair lung function and
subsequently reduce the respiratory system's resistance to disease,
including bronchial infections such as pneumonia.
Elevated ozone levels can also cause aggravation of pre-existing
respiratory conditions such as asthma.⁶ Ozone can cause a
reduction in performance during exercise even in healthy persons. In
addition, ozone can also cause alterations in pulmonary and extra
pulmonary (nervous system, blood, liver, endocrine) function.
---------------------------------------------------------------------------

\6\ United States Environmental Protection Agency, Review of the
National Ambient Air Quality Standards for Ozone--Assessment of
Scientific and Technical Information: OAQPS Staff Paper, EPA-450/2-
92-001, June 1989, pp. VI-11 to 13.
---------------------------------------------------------------------------

The newly revised primary NAAQS ⁷ for ozone based on an
8-hour standard of 0.08 parts per million (ppm) is set at a level that,
with an adequate margin of safety, is protective of public health. EPA
also believes attainment of the new primary standard will substantially
protect vegetation. Ozone effects on vegetation include reduction in
agricultural and commercial forest yields, reduced growth and decreased
survivability of tree seedlings, increased tree and plant
susceptibility to disease, pests, and other environmental stresses, and
potential long-term effects on forests and ecosystems.
---------------------------------------------------------------------------

\7\ See 62 FR 38896, Friday, July 18, 1997.
---------------------------------------------------------------------------

High levels of ozone have been recorded even in relatively remote
areas, since ozone and its precursors can travel hundreds of miles and
persist for several days in the lower atmosphere. Ozone damage to
plants, including both natural forest ecosystems and crops, occurs at
ozone levels between 0.06 and 0.12 ppm.⁸ Repeated exposure
to ozone levels above 0.04 ppm can cause reductions in the yields of
some crops above ten percent.⁹ While strains of some crops
are relatively resistant to ozone, many crops experience a loss in
yield of 30 percent at ozone concentrations below the pre-revised
primary NAAQS.¹⁰ The value of crops lost to ozone damage,
while difficult to estimate precisely, is on the order of $2 billion
per year in the United States.¹¹ The effect of ozone on
complex ecosystems such as forests is even more difficult to quantify.
However, there is evidence that some forest types are negatively
affected by ambient levels of ozone.¹² Specifically, in the
San Bernadino Mountains of southern California, ozone is believed to be
the agent responsible for the slow decline and death of ponderosa pine
trees in these forests since 1962.¹³
---------------------------------------------------------------------------

\8\ U.S. EPA, Review of NAAQS for Ozone, p. X-10.
\9\ U.S. EPA, Review of NAAQS for Ozone, p. X-10.
\10\ See 62 FR 38856, Friday, July 18, 1997.
\11\ U.S. EPA, Review of NAAQS for Ozone, p. X-22.
\12\ U.S. EPA, Review of NAAQS for Ozone, p. X-27.
\13\ U.S. EPA, Review of NAAQS for Ozone, p. X-29.
---------------------------------------------------------------------------

Finally, by trapping energy radiated from the earth, tropospheric
ozone may contribute to heating of the earth's surface, thereby
contributing to global warming (that is, the greenhouse
effect),¹⁴ although tropospheric ozone is also known to
reduce levels of UVB radiation reaching the earth's surface, the
increase of which is expected to result from depletion of stratospheric
ozone.¹⁵
---------------------------------------------------------------------------

\14\ NRC, Rethinking the Ozone Problem, p. 22.
\15\ The New York Times, September 15, 1992, p. C4.
---------------------------------------------------------------------------

3. Estimated Emissions Impact of the Final Regulation
The emission standards set by today's action should reduce average
in-use exhaust HC+NO_X emissions from small SI nonhandheld
engines approximately 59 percent beyond Phase 1 standards for
nonhandheld engines by year 2027, by which time a complete fleet
turnover is realized. This translates into an annual nationwide
reduction of roughly 395,000 tons of exhaust HC+NO_X in year
2027 over that expected from Phase 1. Reductions in CO beyond Phase 1
levels, due to improved technology, are also to be expected by year
2027.
Along with the control of all hydrocarbons, these standards should
be effective in reducing emissions of those hydrocarbons considered to
be hazardous air pollutants (HAPs), including benzene and 1,3-
butadiene. However, the magnitude of reduction would depend on whether
the control technology reduces the individual HAPs in the same
proportion as total hydrocarbons.
These emission reduction estimates are based on in-use population
projections using growth estimates, engine attrition (scrappage),
activity indicators and new and in-use engine emission factors. Data on
activity indicators were based on the Phase 1 small SI regulation.
Estimates of engine populations were based on population data available
from the PSR databases ¹⁶ and data provided by Engine and
Equipment manufacturers and on a study done for the California Air
Resources Board by Booz Allen & Hamilton (BAH). Population projections
into the future are based on a linear growth assumption. Attrition
rates (based on the probability that an engine remains in service into
a specific calendar year) for all engines included in this analysis are
developed on the

[[Page 15227]]

assumption that the equipment attrition function may be represented by
a cumulative Normal distribution function. The in-use emission factor
is based on a multiplicative deterioration factor which is a function
of the square root of hours of equipment usage.
---------------------------------------------------------------------------

\16\ Power Systems Research, Engine Data and Parts Link data
bases, St. Paul, Minnesota, 1992.
---------------------------------------------------------------------------

1992.
For the analysis summarized in Table 4, emission inventories were
developed using EPA's NONROAD Model for the two regulated nonhandheld
engine classes as well as for all pieces of equipment using engines
covered by this rule. The total annual nationwide HC, NO_X
and CO emissions from small SI nonhandheld engines included in this
rule were estimated for both the baseline (that is, with Phase 1
controls applied) and controlled (Phase 2) scenarios.
For the controlled scenario, EPA assumed all nonhandheld engines
would be converted to overhead valve technology. As for deterioration
factors, they were determined in some cases using manufacturer-supplied
confidential in-use emission data and for others EPA depended on
relevant information from EPA's certification data base.

Table 4: Projected Annual Nationwide Exhaust HC+NO_X Emissions
[Tons/year]
----------------------------------------------------------------------------------------------------------------
Without
proposed With proposed Tons reduced Percentage
Year controls controls from Phase 1 reduction
(Phase 1) baseline
----------------------------------------------------------------------------------------------------------------
2000............................................ 427,063 427,063
2005............................................ 453,129 347,065 106,064 23.4
2010............................................ 499,648 242,370 257,278 51.5
2015............................................ 547,514 226,571 320,943 58.6
2020............................................ 596,343 243,118 353,225 59.2
2025............................................ 651,818 269,871 381,947 59.3
----------------------------------------------------------------------------------------------------------------

4. Health and Welfare Effects of CO Emissions
Carbon monoxide (CO) is a colorless, odorless gas which can be
emitted or otherwise enters into ambient air as a result of both
natural processes and human activity. Although CO exists as a trace
element in the troposphere, much of human exposure resulting in
elevated levels of carboxyhemoglobin (COHb) in the blood is due to
incomplete fossil fuel combustion, as occurs in small SI engines.
The concentration and direct health effect of CO exposure are
especially important in small SI nonhandheld engines because the
operator of a small SI engine application is typically near the
equipment as it functions. In some applications, the operator must be
adjacent to the exhaust outlet and is in the direct path of the exhaust
as it leaves the engine. According to numbers published in the Nonroad
Engine and Vehicle Emission Study (NEVES), a 4-stroke, 2.9 kW lawnmower
engine emits 1051.1 g/hr CO.
The toxicity of CO effects on blood and tissues, and how these
effects manifest themselves as organ function changes, have also been
topics of substantial research efforts. Such studies provided
information for establishing the National Ambient Air Quality Standard
for CO. The current primary and secondary NAAQS for CO are 9 parts per
million for the one-hour average and 35 parts per million for the
eight-hour average.
5. Health and Welfare Effects of Hazardous Air Pollutant Emissions
The focus of today's action is reduction of HC emissions as part of
the solution to the ozone nonattainment problem. However, direct health
effects are also a reason for concern due to direct human exposure to
emissions from small SI nonhandheld engines during operation of
equipment using such engines. Of specific concern is the emission of
hazardous air pollutants (HAPs). In some applications, the operator
must be adjacent to the exhaust outlet and is in the direct path of the
exhaust as it leaves the engine. Today's regulatory action should be
effective in reducing HAPs such as benzene and 1,3-butadiene, in so far
as these are components of the HC emissions being reduced by the Phase
2 standards.
Benzene is a clear, colorless, aromatic hydrocarbon which is both
volatile and flammable. Benzene is present in both exhaust and
evaporative emissions. Health effects caused by benzene emissions
differ based on concentration and duration of exposure. The
International Agency for Research on Cancer (IARC), classified benzene
as a Group I carcinogen, namely an agent carcinogenic to humans.
Occupational studies continue to provide the bulk of evidence of
benzene's carcinogenicity. Workers are exposed at much higher levels
than is the general public. Human epidemiologic studies of highly
exposed occupational cohorts have demonstrated that exposure to benzene
can cause acute nonlymphocytic leukemia and other blood disorders, that
is, preleukemia and aplastic anemia. Additionally, changes in blood and
bone marrow consistent with hematotoxicity are recognized in humans and
experimental animals. Benzene has also been linked with genetic changes
in humans and animals.
1,3-butadiene is a colorless, flammable gas at room temperature.
This suspected human carcinogen is insoluble in water and its two
conjugated double bonds make it highly reactive. 1,3-butadiene is
formed in internal combustion engine exhaust by the incomplete
combustion of the fuel and is assumed not present in evaporative and
refueling emissions. The Health Risk Assessment of 1,3-Butadiene (EPA/
600/P-98/001A, February 1998), concludes that 1,3-butadiene is a known
human carcinogen, based on three types of evidence: (1) Excess leukemia
in workers occupationally exposed to 1,3-butadiene (by inhalation), (2)
occurrence of a variety of tumors in mice and rats by inhalation, and
(3) evidence in animals and humans that 1,3-butadiene is metabolized
into genotoxic metabolites. Other health effects due to very high
levels of exposure include heart, blood and lung diseases.
Since air toxic levels generally decrease in proportion to overall
emissions once emission control technology is applied, the amount of
benzene and 1,3-butadiene produced by new small SI engines should
diminish after this rule becomes effective. Consequently, exposure to
HAPs from new nonhandheld engines would be reduced, as would associated
health and

[[Page 15228]]

environmental effects. Although there is little data on direct health
effects of small SI engines, the Swedish study concludes benzene
emissions from chain saw engines as being rather high. No study has
been conducted involving the health effects of HAP emissions
specifically from nonhandheld engines.
6. Particulate Matter
Particulate matter, a term used for a mixture of solid particles
and liquid droplets found in the air, has been linked to a range of
serious respiratory health problems. These fine particles are of health
concern because they easily reach the deepest recesses of the lungs.
Batteries of scientific studies have linked particulate matter,
especially fine particles (alone or in combination with other air
pollutants), with a series of significant health problems including
premature death, aggravated asthma and chronic bronchitis and increased
hospital admissions. EPA has recently (July 1997) announced new NAAQS
standards for particulate matter (PM) , by adding two new primary PM2.5
standards set at concentrations of 15 micrograms per cubic meter
(<greek-m>^/<greek-m>³), annual arithmetic mean,
and 65 <greek-m>^/<greek-m>³, 24-hour average, to
provide increased protection against the PM-related health effects
found in community studies.

B. Cost and Cost-Effectiveness

EPA has calculated the cost-effectiveness of this rule by
estimating costs and emission benefits for these engines. EPA made best
estimates of the combination of technologies that an engine
manufacturer might use to meet the new standards, best estimates of
resultant changes to equipment design, engine manufacturer compliance
program costs and engine fuel savings in order to assess the expected
economic impact of the Phase 2 emission standards. Emission benefits
are taken from the results of the environmental benefit assessment (see
section III.A, above). The cost-effectiveness result of this rule is
$852 per ton of HC+NO_X when fuel savings are not taken into
account. When fuel savings are also considered, the cost-effectiveness
calculation results in--$507 per ton of HC+NO_X. This section
describes the background and analysis behind these results.
The analysis for this rulemaking is based on data from engine
families certified to EPA's Phase 1 standards, as of September 1998,
and information on the latest technology development and related
emission levels since the publication of the NPRM. The analysis does
not include any production volumes that are covered by California ARB's
standards. California ARB will implement emission standards for many of
these engines prior to the federal Phase 2 regulations. Therefore, this
rule only accounts for costs for each engine sold outside California
and those engines sold in California that are not covered by the
California ARB rules, such as those used in farm and construction
equipment. Although EPA expects that engines already designed to meet
California ARB's current standards would incur no additional design
cost to meet federal standards, no effort was made to estimate which
models would be sold in California and subject to California ``Tier 1''
standards.¹⁹ Rather, for the purpose of this final rule, any
Phase 1 engine design that would need to be modified to meet Phase 2
standards was assumed to incur the full cost of that modification,
including design cost. Similarly, the cost to equipment manufacturers
was assumed to be fully attributed to this federal rule even if an
equipment manufacturer would have to make the same modifications in
response to the California ARB regulation. The details of EPA's cost
and cost-effectiveness analyses can be found in Chapters 4 and 7 of the
Final Regulatory Impact Analysis (RIA) for this rule.
---------------------------------------------------------------------------

\19\ For purposes of analyzing small engine and equipment
manufacturer impacts of this rule, including the benefits of the
small volume flexibilities being adopted, EPA considered that those
manufacturers who are located in California are likely to be
marketing their engines and equipment in California and thus will be
directly impacted by California's rules, not EPA's Phase 2 rules;
this assumption, however, was not used in the development of the
overall cost and cost effectiveness of EPA's Phase 2 rules.
Therefore, these industry cost values are slightly overstated and
the cost effectiveness numbers are slightly overstated.
---------------------------------------------------------------------------

1. Engine Technologies
Table 5 lists the changes in technology, compared to Phase 1
engines, that have been considered in the cost estimation for this
rulemaking. As discussed in section IV.A of this preamble, the
standards would require different engine improvements amongst the
nonhandheld and handheld engines and engine designs within those
classes. For example, Class I and II side valve (SV) design engines are
expected to require conversion to clean overhead valve (OHV) designs to
reduce new engine out emissions and increase emission durability. Some
OHV engine families in Class I and II are expected to decrease
emissions through the use of enleanment, increased cooling and internal
redesign such as piston ring design improvements. Additional detail
regarding the impact of these modifications can be found in Chapters 3
and 4 for the Final RIA.

Table 5.--Potential Technology Improvements per Class and Engine Design
------------------------------------------------------------------------
Class Engine design Technologies
------------------------------------------------------------------------
I........................... 4 stroke--SV........ Clean OHV or other
innovative fuel
system
technologies.
I........................... 4 stroke--OHV....... Carburetor
Improvements.
Combustion Chamber
Improvements and
Intake System.
Improved Oil
Consumption (Piston
oil control rings,
valve stem seals).
I........................... 2 stroke............ Conversion to 4-
stroke and clean
OHV.
II.......................... 4 stroke--SV........ Conversion to clean
OHV.
II.......................... 4 stroke--OHV....... Carburetor
Improvements.
Combustion Chamber
Improvements and
Intake System.
Improved Oil
Consumption (Piston
oil control rings,
valve stem seals).
------------------------------------------------------------------------

[[Page 15229]]

2. Engine Costs
The engine cost increase is based on incremental purchase prices
for new engines and is comprised of variable costs (for hardware,
assembly time and compliance programs), and fixed costs (for R&D and
retooling). Variable costs were applied on a per engine basis and fixed
costs were amortized at seven percent over five years. Engine
technology cost estimates were based on the study by ICF and EF&EE in
October 1996 entitled ``Cost Study for Phase Two Small Engine Emission
Regulations'' and confidential cost estimates provided by industry.
Details of the assumed costs and analysis can be found in Chapters 4
and 7 of the RIA.
Analysis of the EPA Phase 1 certification database, as of September
1998, was conducted to determine a potential impact of the Phase 2
standards on each manufacturer assuming use of the ABT program
available to engine manufacturers. While ABT is permitted across
classes, this analysis considered only ABT within each class since some
manufacturers produce substantially in only one nonhandheld class. The
choice of technologies for emission improvement of these engine
families was based on the engine family that would be most influential
in reducing a manufacturer's overall average emission level within that
class. In addition, costs in the NPRM for conversion from SV to OHV
were updated based on a letter received from one major engine
manufacturer which asserted the NPRM cost estimates were incomplete.
The cost analysis was updated with consideration of confidential cost
information from several engine manufacturers in order to most
accurately reflect expected costs.
For Class I, review of the September 1998 EPA Phase 1 database
showed that 31 percent of the engine families, 8 SV engine families and
11 Class I OHV engine families, will need to incorporate at least some
of the technologies listed in Table 5. For Class II, review of the
September 1998 EPA Phase 1 certification database shows that 17 percent
of the engine families, 4 Class II SV engine families and 22 OHV engine
families, will need to incorporate emission improvements from amongst
those listed in Table 5. The incorporation of such technologies will
require both variable and fixed expenditures.
The Phase 2 emission standards for this diverse industry will
impact companies differently depending on a company's current product
offering and related deteriorated emission characteristics used in
establishing FELs for use in averaging emissions across engine
families. Some large companies may improve the emission characteristics
of their large volume engine families to provide credits for their
smaller volume families. These companies may also improve a few engine
families notably or all of their engine families slightly. The real
world impact on engine manufacturers will be influenced by many factors
including their ability to reduce the emissions from their major impact
engine family in light of competition with others in the marketplace.
3. Equipment Costs
While equipment manufacturers would bear no responsibility for
meeting emission standards, they may need to make changes in the design
of their equipment models to accommodate the Phase 2 engines. EPA's
treatment of the impacts of the program therefore includes an analysis
of costs for equipment manufacturers. The 1996 PSR EOLINK database was
utilized as the source of information for equipment manufacturers, with
models and sales estimates covering all classes. The costs for
equipment conversion for nonhandheld equipment was derived from the
ICF/EF&EE cost study ²⁰ and improved through the work by ICF
and EPA on the small business impact analyses for this rulemaking. For
Class I EPA conducted its own analysis using PSR estimated production
data and employment and financial information from Dunn and Bradstreet.
Full details of EPA's cost analysis can be found in Chapter 4 of the
RIA. EPA has assumed that capital costs would be amortized at seven
percent over ten years.
---------------------------------------------------------------------------

\20\ ICF and Engine, Fuel and Emissions Engineering,
Incorporated; ``Cost Study for Phase Two Small Engine Emission
Regulations'', Draft Final Report, October 25, 1996, in EPA Air
Docket A-93-29, Item #II-A-04.
---------------------------------------------------------------------------

This rulemaking assumes that the majority of Class I engines will
be converted from SV to OHV design in order to meet the emission
standards. The major equipment types that use Class I engines are
lawnmowers, generator sets, pumps, and tillers. For lawnmowers, it is
assumed that the Class I engine redesign would have a minimal impact on
equipment redesign for small volume manufacturers and a potential
impact on larger volume manufacturers. This understanding is based on
several factors. First, it is EPA's understanding that the smaller
volume, and some larger volume, equipment manufacturers for niche
markets allow space for a variety of engines to be used on their
equipment. Therefore these equipment manufacturers will have nearly no
equipment impacts. Second, it is EPA's understanding that some larger
equipment manufacturers may have incorporated close packaging around
the engine in order to be unique in the marketplace. However, the
conversion from SV to OHV is not required until August 1, 2007 (except
for new engine models initially produced on or after August 1, 2003)
and therefore it is assumed that this long lead time will provide
equipment manufacturers the time to incorporate equipment redesigns and
replace tooling dies prior to this date and within the cycle of
equipment redesign and/or tooling replacements. The same assumptions
have been made for the applications of generator sets, pumps and
tillers.
The Class II engine change from SV to OHV design will have a large
impact on equipment changes. Review of the PSR database for equipment
manufacturers that utilize Class II SV engines reveals that the
majority (90 percent) of small engine equipment is produced from 32
companies with the remaining 353 companies representing only 10 percent
of the overall production. EPA's work analyzing small business impacts,
as summarized in the work with ICF Incorporated,²¹ indicates
that many of the small businesses, indicated by the PSR database to use
SV Class II engines, have already converted or are in the process of
converting to using OHV engine design due to market forces or changes
in their engine manufacturer's offerings. These companies tend to
produce professional or commercial equipment and competition has driven
the use of OHV engines. The study also revealed that at least one
equipment manufacturer that produces a large volume of equipment has
already switched its lines from SV to OHV. For this analysis, EPA
assumed that, except for this one large manufacturer, all other
manufacturers will convert their engines to the use of OHV designs in
direct response to this rule with all such cost attributable to this
rule. EPA has assumed that any switch from SV to OHV engines by
equipment manufacturers is a cost incurred due to this rulemaking. The
cost estimates were based on equipment application (garden tractor,
tiller, commercial turf, etc.) and in the case of the commercial turf
equipment, on the power of the engine within that application.
---------------------------------------------------------------------------

\21\ ``Small Business Impact Analysis of New Emission Standards
for Small Spark-Ignition Nonroad Engines and Equipment'', ICF
Incorporated, September 1997, located in EPA Air Docket A-96-55,
Item#II-A-01 .

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

[[Page 15230]]

4. Operating Costs
The total life-cycle operating costs for this rulemaking include
any expected decreases in fuel consumption. Life cycle costs have been
calculated per class using the NONROAD emission model. The model
calculates fuel savings from the years of implementation to 2027 and
takes into account factors including equipment scrappage, projected
yearly sales increase per equipment type and engine power. Details on
the assumptions and calculations on fuel savings are included in
Chapter 4 and 7 of the RIA.
A fuel consumption savings of 15 percent has been assumed from
Class I and Class II SV engines as they are converted to OHV design.
OHV designs are expected to result in improved fuel economy since data
show that OHV engines can run at leaner air-to-fuel ratios than SV
engines.
5. Cost Per Engine and Cost-Effectiveness
a. Cost Per Engine
Total costs for this rulemaking vary per year as engine families
are phased-in to compliance with the Phase 2 standards over several
years, capital costs are recovered and compliance programs are
conducted. The term ``uniform annualized cost'' is used to express the
cost of this rulemaking over the years of this analysis.
The methodology used for estimating the uniform annualized cost per
engine is as follows. Cost estimates from 1995 to 1997, for technology
and compliance programs respectively, were estimated and calculated to
1998 dollars through multiplication of the estimates by the applicable
GDP implicit price deflators. The Phase 1 database was then analyzed,
using ABT per manufacturer, to determine (1) the number of engine
families per class, (2) the total number of engines per engine design,
and (3) the year of technology implementation. The total estimated
variable and capital costs per year were then calculated by multiplying
the number of engine families and corresponding production volume by
the fixed and variable costs per technology grouping, respectively. For
compliance program costs, the costs for certification bench aging were
estimated based on the number of families in the 1998 database and the
expected certification date in the phase in. The variable costs are
marked up to estimate cost to the consumer. Markups include 16 percent
by the engine manufacturer, 5 percent by the equipment manufacturer and
5 percent by the mass merchandiser. All costs per year were then
discounted seven percent to the first year of Phase 2 regulation per
class, 2007 for Class I and 2001 for Class II. A uniform annualized
cost was then calculated. Costs per engine are calculated from the
uniform annualized cost for the first full year of implementation of
the Phase 2 standard, 2007, and the last year of this analysis, 2027.
The average cost per engine is calculated from these two values and the
results are presented in Table 6 in 1998 dollars.
The yearly fuel savings (tons/yr) per class were calculated using
the NONROAD model. The yearly fuel savings (tons/yr) from 2001-2027
were converted to savings ($) through conversion to gallons per year
multiplied by $0.794 (a 1995 average refinery price to end user,
without taxes adjusted to 1998 dollars). The yearly fuel savings were
then discounted by 7 percent to the first year of Phase 2 regulation,
for each Class. The yearly results were totaled and then divided by an
annualized factor to yield the uniform annualized fuel savings. The
fuel savings for each engine class was calculated for the production
years of 2010 and 2025. The average of these two values was utilized as
the average fuel savings per engine per class per year as is shown in
Table 6.
The average resultant cost per engine class is calculated by
subtracting the average fuel savings from the average cost, see Table
6. See Chapter 7 of the RIA for more details of this analysis.

Table 6.--Engine Yearly Fuel Savings and Resultant Cost per Engine, Engine Costs Based on Uniform Annualized
Costs
[1998$]
----------------------------------------------------------------------------------------------------------------
Cost per Savings per Resultant cost
Class engine engine per engine
----------------------------------------------------------------------------------------------------------------
I............................................................... $19.63 $14.22 $5.41
II.............................................................. 12.64 55.72 ($43.08)
----------------------------------------------------------------------------------------------------------------

b. Cost-Effectiveness
EPA has estimated the cost-effectiveness (i.e., the cost per ton of
emission reduction) of the HC+NO_X standard over the typical
lifetime of the nonhandheld equipment that would be covered by today's
rule. EPA has examined the cost-effectiveness by performing a
nationwide cost-effectiveness analysis in which the net present value
of the cost of compliance per year is divided by the fleet turnover.
The resultant cost-effectiveness is $852 cost/ton HC+NO_X
without fuel savings and -$507 with fuel savings. Chapter 7 of the RIA
contains a more detailed discussion of the cost-effectiveness analysis.
The overall cost-effectiveness of this rule on HC+NO_X
emission reductions, with fuel savings, is shown in Table 7. Table 7
contains the cost effectiveness of other nonroad rulemakings, which
reflect fuel savings, to which the cost-effectiveness of this
rulemaking can be compared.

Table 7.--Cost-Effectiveness of the Phase 2 Standards With Fuel Savings Compared to Other Nonroad Rules
----------------------------------------------------------------------------------------------------------------
NPV cost/NPV
Standard ton (With Pollutants
fuel savings)
----------------------------------------------------------------------------------------------------------------
Phase 2 Small SI Nonhandheld Engines <19 kW Phase 2........ -$507 HC+NO_X
Small SI Engines <19 kW Phase 1............................ 217 HC+NO_X
Spark Ignition Marine Engines.............................. 1000 HC

[[Page 15231]]

Nonroad CI Tier \2/3\ Standards............................ 410-650 HC+NO_X
----------------------------------------------------------------------------------------------------------------
Note: Not all in the same year dollars Cost Per Engine and Cost-Effectiveness.

IV. Public Participation

The process for developing this final rule provided several
opportunities for formal public comment. EPA published an Advance
Notice of Proposed Rulemaking (ANPRM) in March 1997 (see 62 FR 14740,
March 27, 1997) which announced the signing of two Statements of
Principles (SOPs) with the small engine industry and several other
interested parties. The ANPRM and included SOPs outlined programs which
would increase the stringency of the small engine regulations compared
to Phase 1 rules. Comments were received in response to this ANPRM
which, in combination with the programs outlined in the ANPRM, formed
the basis of the Notice of Proposed Rulemaking (NPRM) which was
published in January 1998 (63 FR 3950, January 27, 1998). A public
hearing was held on February 11, 1998 during which oral testimony was
received on the proposal. Written comments were received during the
formal comment period for the proposal and some additional written
comments were received after the formal comment period closed. To
expand upon comments received during the comment period and to address
specific questions EPA had of the industry regarding technical
feasibility and cost of some options for the final standards, EPA also
solicited and received additional information after the close of the
formal comment period and participated in a number of phone
conversations and meetings with industry representatives for this
purpose. All of this information including documentation of phone calls
and meetings has been included in the docket for this final rule. Since
considerable information was received after the formal comment period
closed, a notice of availability of this supplemental information was
also published on December 1, 1998 (63 FR 66081) alerting interested
parties to the availability of this supplemental information. All
information received, regardless of the date of receipt, was, to the
maximum extent possible, considered in the development of this final
rule. EPA has prepared a detailed Summary and Analysis of Comments
document which describes the comments received since the publication of
the NPRM and presents the Agency's response to each of these comments.
The Summary and Analysis of Comments document is available in the
docket for this rule.

V. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

Under Executive Order 12866, the Agency must assess whether this
regulatory action is ``significant'' and therefore subject to Office of
Management and Budget (OMB) review and the requirements of the
Executive Order (58 FR 51735, Oct. 4, 1993). The order defines
``significant regulatory action'' as any regulatory action that is
likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
(2) create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or,
(4) raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.

Pursuant to the terms of Executive Order 12866, EPA has determined that
this rulemaking is a ``significant regulatory action'' because the new
standards and other regulatory provisions, are expected to have an
annual effect on the economy in excess of $100 million. A Regulatory
Impact Analysis has been prepared and is available in the docket
associated with this rulemaking. This action was submitted to OMB for
review as required by Executive Order 12866. Any written comments from
OMB are in the public docket for this rulemaking.

B. Regulatory Flexibility

EPA has determined that it is not necessary to prepare a regulatory
flexibility analysis in connection with this final rule. The Agency has
also determined that this rule will not have a ``significant impact on
a substantial number of small entities.''
EPA has identified industries that are subject to this rule and has
contacted small entities and small entity representatives to gain a
better understanding of potential impacts of the Phase 2 program on
their businesses. This information was useful in estimating potential
impacts of this rule on affected small entities, the details of which
are more fully discussed in Chapter 8 of the Final RIA. Small not-for-
profit organizations and small governmental jurisdictions are not
expected to be impacted by this proposal. Thus EPA's impact analysis
focuses on small businesses. For purposes of the impact analysis,
``small business'' is defined by number of employees, according to
published Small Business Administration (SBA) definitions.
The Agency desires to minimize, to the extent appropriate, impacts
on those companies which may be adversely affected, and to ensure that
the emissions standards are achievable. Thus, flexibility provisions
for the rule (discussed in section II.E.) were developed based on
analysis of information gained through discussions with potentially
affected small entities as well as analysis of other sources of
information, as detailed in Chapter 8 of the Final RIA. Many of the
flexibilities in today's rule should benefit both engine and equipment
manufacturers qualifying as small.
The economic impact of the final rule on small engine and equipment
manufacturers was evaluated using a ``sales test'' approach which
calculates annualized compliance costs as a function of sales revenue.
The ratio is an indication of the severity of the potential impacts.
EPA expects that, at worst, four small engine manufacturers and 70
small equipment manufacturers would be impacted by more than one
percent of their sales revenue. EPA

[[Page 15232]]

guidance provides that if fewer than 100 small entities are affected by
more than one percent of their annual sales income, this does not
amount to a ``significant impact on a substantial number'' of small
entities. This base case analysis assumes that no manufacturers take
advantage of the flexibilities being offered and that there would be no
passthrough of costs in price increases, and can therefore be
characterized as depicting worst-case impacts. Thus, EPA expects
today's rule to have a minimal impact on small business entities.
However, EPA is finalizing a number of flexibilities to further
reduce the burden of compliance on small-volume engine or equipment
manufacturers and small-volume product lines. The Agency received a
number of comments from engine manufacturers which were generally
supportive of the flexibilities initially proposed, but which suggested
changes in production caps and other provisions. EPA has incorporated
many of these suggested changes to the extent possible, keeping in mind
equity and air quality considerations. Given the flexibilities being
afforded to the engine and equipment manufacturers, the results of the
analysis suggest that of those small entities analyzed, only three
small business engine manufacturers and three small business equipment
manufacturers would likely experience an impact of greater than one
percent of their sales revenue. These six companies represent only
about three percent of the total number of small business manufacturers
on which the analysis was based. Other outreach activities have also
indicated that the impact of today's rule can be minimized given
sufficient lead time to incorporate the new technology with normal
model changes. Again, the Agency has not attempted to quantify the
beneficial impact on small business manufacturers of the lead time
provided (which can include delaying the impact of these rules up until
the 2010 model year).
Some, but not all, of the flexibility provisions were considered in
the impact assessment on small entities (see Chapter 8 of the Final
RIA). Those flexibilities not considered include a hardship relief
provision (described in section II.E.), which was developed to further
ensure the standards can be achieved. Although it is difficult to
project utilization of such a provision, EPA expects that it could
further reduce the economic impact of the rule.
The results of the impact analysis show minimal impacts on small
businesses. EPA expects that such impacts will be negligible if small
companies take advantage of the above mentioned flexibilities, and if
companies are able to pass through most of their costs through to
customers, as was considered likely by most small companies contacted.
Many of these entities are involved in filling niche markets, and are
thus in a better position to pass these costs along to the ultimate
consumers. Furthermore, EPA's outreach activities with small entities
indicated that many engine and equipment manufacturers have already
begun the switch from side-valve engine technology to producing or
using overhead valve engine technology for reasons other than today's
rule. They should therefore not incur substantial additional costs as a
result of this program. The ample lead time being afforded by today's
rule should also allow for an orderly transition to the more advanced
technology.

C. Paperwork Reduction Act

The information collection requirements in this rule will be
submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An
Information Collection Request (ICR) document has been prepared by EPA
and a copy may be obtained from Sandy Farmer by mail at OPPE Regulatory
Information Division; U.S. Environmental Protection Agency (2137); 401
M St., SW., Washington, DC 20460, by e-mail at
farmer.sandyepamail.epa.gov, or by calling (202) 260-2740. A copy may
also be downloaded off the internet at http://www.epa.gov/icr. The
information requirements are not effective until OMB approves them.
The information planned to be collected via this final rule is
necessary to assure that the engine manufacturers required to seek
certification of their engines have fulfilled all the essential
requirements of these regulations. In particular, this information will
document the design of the engine for which certification is sought,
the type(s) of equipment in which it is intended to be used and the
emission performance of these engines based upon testing performed by
or on behalf of the engine manufacturer. Additional, essential
information is necessary to document the results of testing performed
by the manufacturer under a mandated production line testing program to
determine that the engines, as manufactured continue to have acceptable
emission performance. Finally, if the manufacturer elects to conduct
testing of in-use engines under a voluntary in-use testing program
adopted in these final regulations, information is necessary to
document the results of that in-use testing program.
Table 8 provides a listing of this rulemaking's information
collection requirements along with the appropriate information
collection request (ICR) numbers. The cost of this burden has been
incorporated into the cost estimate for this rule. The Agency has
estimated that the public reporting burden for the collection of
information required under this rule would average approximately
156,816 hours annually for the industry at an estimated annual cost of
$9,489,386. The hours spent by an individual manufacturer on
information collection activities in any given year would be highly
dependent upon manufacturer specific variables, such as the number of
engine families, production changes, emission defects etc.

Table 8: Public Reporting Burden
------------------------------------------------------------------------
Type of information OMB Control No.
------------------------------------------------------------------------
Certification....................................... 2060-0338
Averaging, banking and trading...................... 2060-0338
Production line testing............................. N/A
Pre-certification and testing exemption............. 2060-0007
Engine exclusion determination...................... 2060-0124
Emission defect information......................... 2060-0048
Importation of nonconforming engines................ 2060-0294
------------------------------------------------------------------------

[[Page 15233]]

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.
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.

D. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act'') requires that the Agency prepare a budgetary impact
statement before promulgating a rule that includes a Federal mandate
that may result in expenditure by State, local, and tribal governments,
in aggregate, or by the private sector, of $100 million or more in any
one year. Section 203 requires the Agency to establish a plan for
obtaining input from and informing, educating, and advising and small
governments that may be significantly or uniquely affected by the rule.
Under section 205 of the Unfunded Mandates Act, the Agency must
identify and consider a reasonable number of regulatory alternatives
before promulgating a rule for which a budgetary impact statement must
be prepared. The Agency must select from those alternatives the least
costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule, unless the Agency explains why
this alternative is not selected or the selection of this alternative
is inconsistent with law.
Because this final rule is estimated to result in the expenditure
by State, local and tribal governments or the private sector of greater
than $100 million in any one year, the Agency has prepared a budgetary
impact statement and has addressed the selection of the least costly,
most cost-effective or least burdensome alternative. While this rule
does not impose enforceable obligations on state, local, and tribal
governments, which do not produce small SI nonhandheld engines or
equipment, EPA has estimated the rule to cost the private sector an
annualized cost of $230 million per year. However, the Agency has
appropriately considered cost issues in developing this rule as
required by section 213(a)(3) of the Clean Air Act, and has designed
the rule such that it will in EPA's view be a cost-effective program.
Because small governments would not be significantly or uniquely
affected by this rule, the Agency is not required to develop a plan
with regard to small governments.
The unfunded mandates statement under section 202 must include: (1)
A citation of the statutory authority under which the rule is adopted;
(2) an assessment of the costs and benefits of the rule including the
effect of the mandate on health, safety and the environment; (3) where
feasible, estimates of future compliance costs and disproportionate
impacts upon particular geographic or social segments of the nation or
industry; (4) where relevant, an estimate of the effect on the national
economy; and (5) a description of the EPA's consultation with state,
local, and tribal officials. Since this rule is estimated to impose
costs to the private sector in excess of $100 million per year, it is
considered a significant regulatory action. Therefore, EPA has prepared
the following statement with respect to UMRA sections 202 through 205.
1. Statutory Authority
This rule establishes standards for emissions of HC+NO_X
and CO from small nonroad SI nonhandheld engines pursuant to section
213 of the Clean Air Act. Section 216 defines the terms ``nonroad
engine'' and ``nonroad vehicle.'' Section 213(a)(3) requires these
standards to achieve the greatest degree of emission reduction
achievable through the application of technology which the
Administrator determines will be available for the engines or vehicles
to which such standards apply, giving appropriate consideration to the
cost of applying such technology within the period of time available to
manufacturers and to noise, energy, and safety factors associated with
the application of such technology. Section 213(b) requires the
standards to take effect at the earliest possible date considering the
lead time necessary to permit the development and application of the
requisite technology, giving appropriate consideration to the cost of
compliance within such period and energy and safety. Section 213(d)
provides that the standards shall be subject to sections 206, 207, 208
and 209 of the CAA, with such modifications of the applicable
regulations implementing such sections as the Administrator deems
appropriate, and shall be enforced in the same manner as standards
prescribed under section 202. Therefore, the statutory authority for
this rule is as follows: sections 203, 204, 205, 206, 207, 208, 209,
213, 215, 216, and 301(a) of the Clean Air Act, as amended. Moreover,
this rule is being issued pursuant to a court order entered in Sierra
Club v. Browner, No. 93-0124 and consolidated cases (D.D.C.).
2. Social Costs and Benefits
The social costs and benefits of this rule are discussed in detail
in sections III.A. and III.B. of this notice, and in Chapters 3 through
8 of the Final RIA. Those discussions are incorporated into this
statement by reference.
3. Effects on the National Economy
As stated in the UMRA, macroeconomic effects tend to be measurable,
in nationwide economic models, only if the economic effect of the
regulation reaches 0.25 to 0.5 percent of gross domestic product (in
the range of $15 billion to $30 billion). A regulation with a smaller
aggregate effect is highly unlikely to have any measurable impact in
macroeconomic terms unless it is highly focused on a particular
geographic region or economic sector. Because the economic impact of
the small SI nonhandheld engine Phase 2 rule is far less than these
thresholds, no estimate of this rule's effect on the national economy
has been conducted.
4. Consultation with Government Officials
Today's rule does not create a mandate on state, local or tribal
governments, since it does not impose any enforceable duties on these
entities which do not produce small SI nonhandheld engines or
equipment. Thus, EPA did not consult with state, local or tribal
governments in the context of discussing mandated costs that would
apply to such governments. However, EPA did consult with state
governmental representatives, and with representatives of associations
representing state air regulatory agencies, in the contexts of
developing the most stringent achievable regulations and of addressing
state ozone attainment needs. The consulted entities include the
California ARB, the Wisconsin DNR, and NESCAUM. These consultations are
documented in the

[[Page 15234]]

record for this rule, and are reflected and discussed in the SOPs, the
ANPRM, the NPRM, the Notice of Availability, and today's final
rulemaking notice.
5. Regulatory Alternatives Considered
The Clean Air Act requires that standards under section 213(a)(3)
result in the greatest degree of emission reductions achievable from
available technology, considering costs, lead time, noise, energy and
safety factors. While EPA has substantial discretion to weigh these
different factors in setting standards under section 213(a)(3), EPA may
not simply select the least costly, most cost-effective, or least
burdensome method of achieving the objectives of the rule if such
method does not obtain the greatest achievable emission reduction. In
order to ensure the cost-effectiveness of this rule and still fulfill
the intent of the Clean Air Act, EPA has adopted numerous flexibility
provisions that reduce the burden of the Phase 2 program for small
volume manufacturers and manufacturers of small volume models and
families. These provisions are discussed in section II.E. of today's
notice. Moreover, the technological options considered for the rule's
standards and related provisions are discussed in section II.A. of the
notice. Section II.B. discusses the ABT program adopted for the final
rule, and section II.D. discusses the compliance program for Phase 2
nonhandheld engines. In EPA's view, these discussions demonstrate that
the Agency is adopting the most cost-effective rule allowed under
section 213(a)(3) for nonhandheld Phase 2 engines, and the Agency
incorporates them into this statement.

E. 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 prior
to publication of the rule in the Federal Register. This rule is a
``major rule'' as defined by 5 U.S.C. 804(2). This rule will be
effective June 1, 1999.

F. National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law No. 104-113, Section 12(d) (15
U.S.C. 272 note), directs EPA to use voluntary consensus standards in
its regulatory activities unless doing 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 final rule involves technical standards. While commenters
suggested the use of ISO 8178 test procedures for measuring emissions,
the Agency has decided not to rely on the ISO procedures in this
rulemaking. The Agency has determined that these procedures would be
impractical because they rely too heavily on reference testing
conditions. Since the test procedures in these regulations need to be
used not only for certification, but also for production line testing,
selective enforcement audits, and in-use testing, they must be broadly
based. In-use testing is best done outside tightly controlled
laboratory conditions so as to be representative of in-use conditions.
EPA has determined that the ISO procedures are not sufficiently broadly
usable in their current form for this program, and therefore cannot be
adopted by reference. EPA has instead chosen to continue to rely on the
procedures outlined in 40 CFR Part 90. EPA is hopeful that future ISO
test procedures will be developed that are usable for the broad range
of testing needed, and that such procedures could then be adopted by
reference.

G. Executive Order 13045

Executive Order 13045, entitled ``Protection of Children from
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23,
1997), applies to any rule that: (1) Was initiated after April 21, 1997
or for which a Notice of Proposed Rulemaking was published after April
21, 1998; (2) is determined to be ``economically significant'' as
defined under Executive Order 12866; and (3) 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 all
three criteria, the Agency must 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 not subject to Executive Order 13045, because
substantive actions were initiated before April 21, 1997 and EPA
published a Notice of Proposed Rulemaking before April 21, 1998.
Moreover, this rulemaking does not involve risk assessments in which
EPA would consider risks to infants and children. This is because
today's rule is intended to result in the greatest achievable emissions
reductions that are technically feasible, rather than to achieve a
threshold of protecting public health and the environment. Therefore,
EPA does not have reason to believe this action involves environmental
health and safety risks that present a disproportionate risk to
children.

H. Executive Order 12875: Enhancing the Intergovernmental Partnership

Under Executive Order 12875, EPA may not issue a regulation that is
not required by statute and that creates a mandate upon a State, local
or tribal government, unless the Federal government provides the funds
necessary to pay the direct compliance costs incurred by those
governments, or EPA consults with those governments. If EPA complies by
consulting, Executive Order 12875 requires EPA to provide to the Office
of Management and Budget a description of the extent of EPA's prior
consultation with representatives of affected State, local and tribal
governments, the nature of their concerns, copies of any written
communications from the governments, and a statement supporting the
need to issue the regulation. In addition, Executive Order 12875
requires EPA to develop an effective process permitting elected
officials and other representatives of State, local and tribal
governments ``to provide meaningful and timely input in the development
of regulatory proposals containing significant unfunded mandates.''
Today's rule does not create a mandate on State, local or tribal
governments. The rule does not impose any enforceable duties on these
entities, which do not produce small SI nonhandheld engines or
equipment. Accordingly, the requirements of section 1(a) of Executive
Order 12875 do not apply to this rule.

[[Page 15235]]

I. Executive Order 13084: Consultation and Coordination With Indian
Tribal Governments

Under Executive Order 13084, EPA may not issue a regulation that is
not required by statute, that significantly or uniquely affects the
communities of Indian tribal governments, and that imposes substantial
direct compliance costs on those communities, unless the Federal
government provides the funds necessary to pay the direct compliance
costs incurred by the tribal governments, or EPA consults with those
governments. If EPA complies by consulting, Executive Order 13084
requires EPA to provide to the Office of Management and Budget a
description of the extent of EPA's prior consultation with
representatives of affected tribal governments and a statement
supporting the need to issue the regulation. In addition, Executive
Order 13084 requires EPA to develop an effective process permitting
elected officials and other representatives of Indian tribal
governments ``to provide meaningful and timely input in the development
of regulatory policies on matters that significantly or uniquely affect
their communities.''
Today's rule does not significantly or uniquely affect the
communities of Indian tribal governments because it imposes no
enforceable obligations on them. Accordingly, the requirements of
section 3(b) of Executive Order 13084 do not apply to this rule.

VI. Statutory Authority

Authority for the actions set forth in this rule is granted to EPA
by sections 202, 203, 204, 205, 206, 207, 208, 209, 213, 215, 216, and
301(a) of the Clean Air Act as amended (42 U.S.C. 7521, 7522, 7523,
7524, 7525, 7541, 7542, 7543, 7547, 7549, 7550, and 7601(a)).

List of Subjects in 40 CFR Part 90

Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Labeling, Nonroad source pollution, Reporting and record keeping
requirements, Research, Warranties.

Dated: March 3, 1999.
Carol M. Browner,
Administrator.
For the reasons set out in the preamble, title 40, chapter I of the
Code of Federal Regulations is amended as follows:

PART 90--CONTROL OF EMISSIONS FROM NONROAD SPARK-IGNITION ENGINES

1. The authority citation for part 90 continues to read as follows:

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

Subpart A--General

2. Section 90.1 is amended by removing the period at the end of
paragraph (b)(5)(iv) and by adding a semicolon in its place and adding
paragraphs (b)(6) and (d) and by revising paragraph (c) to read as
follows:

Sec. 90.1 Applicability.

* * * * *
(b) * * *
(6) Engines that are used exclusively in emergency and rescue
equipment where no certified engines are available to power the
equipment safely and practically, but not including generators,
alternators, compressors or pumps used to provide remote power to a
rescue tool. The equipment manufacturer bears the responsibility to
ascertain on an annual basis and maintain documentation available to
the Administrator that no appropriate certified engine is available
from any source.
(c) Engines subject to the provisions of this subpart are also
subject to the provisions found in subparts B through M of this part,
except that subparts C, H, and M of this part apply only to Phase 2
engines as defined in this subpart.
(d) Certain text in this part is identified as pertaining to Phase
1 or Phase 2 engines. Such text pertains only to engines of the
specified Phase. If no indication of Phase is given, the text pertains
to all engines, regardless of Phase.
3. Section 90.3 is amended by adding the following definitions in
alphabetical order to read as follows:

Sec. 90.3 Definitions.

* * * * *
Aftertreatment means the passage of exhaust gases through a device
or system such as a catalyst whose purpose is to chemically alter the
gases prior to their release to the atmosphere.
* * * * *
DF or df means deterioration factor.
Eligible production or U.S. production means Phase 2 engines
produced for purposes of being used in the United States, and includes
any engine exported and subsequently imported in a new piece of
equipment, but excludes any engine introduced into commerce, by itself
or in a piece of equipment, for use in a state that has established its
own emission requirements applicable to such engines pursuant to a
waiver granted by EPA under section 209(e) of the Clean Air Act.
Equipment manufacturer means a manufacturer of equipment using
engines covered by the provisions of this Part who does not also
manufacture engines covered by the provisions of this Part.
* * * * *
Family Emission Limit or FEL means an emission level that is
declared by the manufacturer to serve in lieu of an emission standard
for the purposes of certification, production line testing, and
Selective Enforcement Auditing for engines participating in the
averaging, banking and trading program. A declared FEL will also serve
in lieu of an emission standard where the manufacturer elects to
perform voluntary in-use testing under this part. An FEL must be
expressed to the same number of decimal places as the applicable
emission standard.
* * * * *
HC+NO_X means total hydrocarbons plus oxides of nitrogen.
* * * * *
New Class I engine family means any group of engines that employ a
design that is different from engine families that the engine
manufacturer has previously certified, and does not include any engine
family certified on the basis of carryover data or any engine family
that differs from another engine family solely as a result of a running
change.
NMHC+NO_X means nonmethane hydrocarbons plus oxides of
nitrogen.
* * * * *
Overhead valve engine means an otto-cycle, four stroke engine in
which the intake and exhaust valves are located above the combustion
chamber within the cylinder head. Such engines are sometimes referred
to as ``valve-in-head'' engines.
Phase 1 engine means any handheld or nonhandheld engine, that was
produced under a certificate of conformity issued under the regulations
in this part to the standard levels defined for Phase 1.
Phase 2 engine means any nonhandheld engine that was produced under
a certificate of conformity under the regulations in this part to the
standards defined for Phase 2 engines.
* * * * *

[[Page 15236]]

Round, rounded or rounding means, unless otherwise specified, that
numbers will be rounded according to ASTM-E29-93a, which is
incorporated by reference in this part pursuant to Sec. 90.7.
* * * * *
Side valve engine means an otto-cycle, four stroke engine in which
the intake and exhaust valves are located to the side of the cylinder,
not within the cylinder head. Such engines are sometimes referred to as
``L-head'' engines.
Small volume engine family means any nonhandheld engine family
whose eligible production in a given model year are projected at the
time of certification to be no more than 5,000 engines.
Small volume engine manufacturer means, for nonhandheld engines,
any engine manufacturer whose total eligible production of nonhandheld
engines are projected at the time of certification of a given model
year to be no more than 10,000 nonhandheld engines.
Small volume equipment manufacturer means, for nonhandheld
equipment, any equipment manufacturer whose production of nonhandheld
equipment subject to regulation under this part or powered by engines
regulated under this part, does not exceed 5,000 pieces for a given
model year or annual production period excluding that equipment
intended for introduction into commerce for use in a state that has
established its own emission requirements applicable to such equipment
or engines in such equipment, pursuant to a waiver granted by EPA under
section 209(e) of the Clean Air Act.
Small volume equipment model means, for nonhandheld equipment, any
unique model of equipment whose production subject to regulations under
this part or powered by engines regulated under this part, does not
exceed 500 pieces for a given model year or annual production period
excluding that equipment intended for introduction into commerce for
use in a state that has established its own emission requirements
applicable to such equipment or engines in such equipment, pursuant to
a waiver granted by EPA under section 209(e) of the Clean Air Act.
* * * * *

Subpart B--Emission Standards and Certification Provisions

4. Section 90.103 is amended by revising paragraph (a) introductory
text, and paragraphs (a)(3) and (a)(5) and by adding paragraphs (a)(6)
through (a)(8) to read as follows:

Sec. 90.103 Exhaust emission standards.

(a) Exhaust emissions for new Phase 1 and Phase 2 nonroad spark
ignition engines at or below 19 kilowatts (kW), shall not exceed the
following levels. Throughout this part, NMHC+NO_X standards
are applicable only to natural gas fueled engines at the option of the
manufacturer, in lieu of HC+NO_X standards.

Table 1.--Phase 1 Exhaust Emission Standards
[Grams per kilowatt-hour]
----------------------------------------------------------------------------------------------------------------
Hydrocarbons+oxides
Engine displacement class of nitrogen Hydrocarbons Carbon monoxide Oxides of
(HC+NO_X) nitrogen (NO_X)
----------------------------------------------------------------------------------------------------------------
I....................................... 16.1 ............... 519 ...............
II...................................... 13.4 ............... 519 ...............
III..................................... ................... 295 805 5.36
IV...................................... ................... 241 805 5.36
V....................................... ................... 161 603 5.36
----------------------------------------------------------------------------------------------------------------

Table 2.--Phase 2 Class I Engine Exhaust Emission Standards
[grams per kilowatt-hour]
----------------------------------------------------------------------------------------------------------------
Engine class HC+NO_X NMHC+NO_X CO Effective date
----------------------------------------------------------------------------------------------------------------
I............................... 16.1 14.8 610 August 1, 2007; in addition,
any Class I engine family
initially produced on or
after August 1, 2003 must
meet the Phase 2 Class I
standards before they may be
introduced into commerce.
----------------------------------------------------------------------------------------------------------------

Table 3.--Phase 2 Class II Engine Exhaust Emission Standards by Model Year
]grams per kilowatt-hour]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Model Year
---------------------------------------------------------------------------------------------------------------------------------------------------------
2005 and
Engine Class Emission requirement 2001 2002 2003 2004 later
--------------------------------------------------------------------------------------------------------------------------------------------------------
II............................................ HC +NO_X 18.0 16.6 15.0 13.6 12.1
NMHC+NO_X 16.7 15.3 14.0 12.7 11.3
CO 610 610 610 610 610
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
(3) Notwithstanding paragraph (a)(2) of this section, two stroke
engines used to power lawnmowers or other nonhandheld equipment may
meet Phase 1 Class III, IV or V standards and requirements, as
appropriate, through model year 2002 subject to the provisions of
Sec. 90.107(e), (f) and (h). Such engines shall not be included in any
computations of Phase 2 averaging, banking, or trading credits or
eligible production.
* * * * *
(5) Notwithstanding paragraph (a)(2) of this section, engines used
exclusively to power products which are used

[[Page 15237]]

exclusively in wintertime, such as snowthrowers and ice augers, at the
option of the engine manufacturer, need not certify to or comply with
standards regulating emissions of HC, NO_X, HC+NO_X
or NMHC+NO_X, as applicable. If the manufacturer exercises
the option to certify to standards regulating such emissions, such
engines must meet such standards. If the engine is to be used in any
equipment or vehicle other than an exclusively wintertime product such
as a snowthrower or ice auger, it must be certified to the applicable
standard regulating emissions of HC, NO_X, HC+NO_X
or NMHC+NO_X as applicable.
(6) In lieu of certifying to the applicable Phase 2 standards,
small volume engine manufacturers as defined in this part may, at their
option, certify their engines families as Phase 1 engines until the
2010 model year. Such engines shall not exceed the applicable Phase 1
standards and are excluded from the averaging, banking and trading
program and any related credit calculations. Beginning with the 2010
model year, these engines must meet the applicable Phase 2 standards.
(7) In lieu of certifying to the applicable Phase 2 standards,
manufacturers of small volume engine families, as defined in this part
may, at their option, certify their small volume engine families as
Phase 1 engines until the 2010 model year. Such engines shall not
exceed the applicable Phase 1 standards and are excluded from the
averaging, banking and trading program and any related credit
calculations. Beginning with the 2010 model year, these engines must
meet the applicable Phase 2 standards.
(8) Notwithstanding the standards shown in Table 3 of this section,
the HC+NO_X (NMHC+NO_X) standard for Phase 2 Class
II side valve engine families with annual production of 1000 or less
shall be 24.0 g/kW-hr (22.0 g/kW-hr) for model years 2010 and later.
Engines produced subject to this provision may not exceed this standard
and are excluded from the averaging, banking and trading program and
any related credit calculations.
* * * * *
5. Section 90.104 is amended by adding introductory text and adding
paragraphs (d) through (h) to read as follows:

Sec. 90.104 Compliance with emission standards.

Paragraphs (a) through (c) of this section apply to Phase 1 engines
only. Paragraphs (d) through (h) of this section apply only to Phase 2
engines.
* * * * *
(d) The exhaust emission standards (FELs, where applicable) for
Phase 2 engines set forth in this part apply to the emissions of the
engines for their full useful lives as determined pursuant to
Sec. 90.105.
(e) For all Phase 2 engines, if all test engines representing an
engine family have emissions, when properly tested according to
procedures in this part, less than or equal to each Phase 2 emission
standard (FEL, where applicable) in a given engine class and given
model year, when multiplicatively adjusted by the deterioration factor
determined in this section, that family complies with that class of
emission standards for purposes of certification. If any test engine
representing an engine family has emissions adjusted multiplicatively
by the deterioration factor determined in this section, greater than
any one emission standard (FEL, where applicable) for a given
displacement class, that family does not comply with that class of
emission standards.
(f) Each engine manufacturer must comply with all provisions of the
averaging, banking and trading program outlined in subpart C of this
part for each engine family participating in that program.
(g)(1) Small volume engine manufacturers and small volume engine
families may, at their option, take deterioration factors for
HC+NO_X (NMHC+NO_X) and CO from Table 1 of this
section, or they may calculate deterioration factors for
HC+NO_X (NMHC+NO_X) and CO according to the process
described in paragraph (h) of this section. For technologies that are
not addressed in Table 1 of this section, the manufacturer may ask the
Administrator to assign a deterioration factor prior to the time of
certification.
(2) Table 1 follows:

Table 1: Nonhandheld Engine HC+NO_X (NMHC+NO_X) and CO Assigned Deterioration Factors for Small Volume
Manufacturers and Small Volume Engine Families
----------------------------------------------------------------------------------------------------------------
Side valve engines Overhead valve
---------------------- engines
Engine class ---------------------- Engines with
HC+NO_X CO HC+NO_X aftertreatment
(NMHC+NO_X) (NMHC+NO_X) CO
----------------------------------------------------------------------------------------------------------------
Class I................................. 2.1 1.1 1.5 1.1 Dfs must be calculated
using the formula in Sec.
90.104(g)(3).
Class II................................ 1.6 1.1 1.4 1.1
----------------------------------------------------------------------------------------------------------------

(3) Formula for calculating deterioration factors for engines with
aftertreatment:

DF = [(NE * EDF) - (CC * F)]/(NE - CC)

Where:
DF = deterioration factor
NE = new engine emission levels prior to the catalyst (g/kW-hr)
EDF = deterioration factor for engines without catalyst as shown in
Table 1
CC = amount converted at 0 hours in g/kW-hr
F = 0.8 for HC (NMHC) and 0.0 for NO_X for Class I and II
engines
F = 0.8 for CO for all classes of engines

(h)(1) Manufacturers shall obtain an assigned df or calculate a df,
as appropriate, for each regulated pollutant for all Phase 2 engine
families. Such dfs shall be used for certification, production line
testing, and Selective Enforcement Auditing.
(2) For engines not using assigned dfs from Table 1 of this
section, dfs shall be determined as follows:
(i) On at least one test engine representing the configuration
chosen to be the most likely to exceed HC+NO_X
(NMHC+NO_X) emission standards, (FELs where applicable), and
constructed to be representative of production engines pursuant to
Sec. 90.117, conduct full Federal test procedure emission testing
pursuant to the regulations of subpart E of this part at the number of
hours representing stabilized emissions pursuant to Sec. 90.118. If
more than one engine is tested, average the results and round to the
same number of decimal places contained in the applicable standard,
expressed to one additional significant figure;
(ii) Conduct such emission testing again following aging the
engine. The aging procedure should be designed to

[[Page 15238]]

allow the manufacturer to appropriately predict the in-use emission
deterioration expected over the useful life of the engine, taking into
account the type of wear and other deterioration mechanisms expected
under typical consumer use which could affect emissions performance. If
more than one engine is tested, average the results and round to the
same number of decimal places contained in the applicable standard,
expressed to one additional significant figure;
(iii) Divide the full useful life emissions (average emissions, if
applicable) for each regulated pollutant by the stabilized emissions
(average emissions, if applicable) and round to two significant
figures. The resulting number shall be the df, unless it is less than
1.0, in which case the df shall be 1.0.
(iv) At the manufacturer's option additional emission test points
can be scheduled between the stabilized emission test point and the
full useful life test period. If intermediate tests are scheduled, the
test points must be evenly spaced over the full useful life period
(plus or minus 2 hours) and one such test point shall be at one-half of
full useful life (plus or minus 2 hours). For each pollutant
HC+NO_X (NMHC+NO_X) and CO, a line must be fitted
to the data points treating the initial test as occurring at hour zero,
and using the method of least-squares. The deterioration factor is the
calculated emissions durability period divided by the calculated
emissions at zero hours.
(3) EPA may reject a df if it has evidence that the df is not
appropriate for that family within 30 days of receipt from the
manufacturer. The manufacturer must retain actual emission test data to
support its choice of df and furnish that data to the Administrator
upon request. Manufacturers may request approval by the Administrator
of alternate procedures for determining deterioration. Any submitted df
not rejected by EPA within 30 days shall be deemed to have been
approved.
(4) Calculated deterioration factors may cover families and model
years in addition to the one upon which they were generated if the
manufacturer submits a justification acceptable to the Administrator in
advance of certification that the affected engine families can be
reasonably expected to have similar emission deterioration
characteristics.
(5) Engine families that undergo running changes need not generate
a new df if the manufacturer submits a justification acceptable to the
Administrator concurrent with the running change that the affected
engine families can be reasonably expected to have similar emission
deterioration characteristics.
6. Section 90.105 is revised to read as follows:

Sec. 90.105 Useful life periods for Phase 2 engines.

(a) Manufacturers shall declare the applicable useful life category
for each engine family at the time of certification as described in
this section. Such category shall be the category which most closely
approximates the expected useful lives of the equipment into which the
engines are anticipated to be installed as determined by the engine
manufacturer. Manufacturers shall retain data appropriate to support
their choice of useful life category for each engine family. Such data
shall be furnished to the Administrator upon request.
(1) For nonhandheld engines: Manufacturers shall select a useful
life category from Table 1 of this section at the time of
certification.
(2) Table 1 follows:

Table 1: Useful Life Categories for Nonhandheld Engines [hours]
------------------------------------------------------------------------

------------------------------------------------------------------------
Class I........................................... 125 250 500
Class II.......................................... 250 500 1000
------------------------------------------------------------------------

(3) [Reserved]
(4) [Reserved]
(5) Data to support a manufacturer's choice of useful life
category, for a given engine family, may include but are not limited
to:
(i) Surveys of the life spans of the equipment in which the subject
engines are installed;
(ii) Engineering evaluations of field aged engines to ascertain
when engine performance deteriorates to the point where usefulness and/
or reliability is impacted to a degree sufficient to necessitate
overhaul or replacement;
(iii) Warranty statements and warranty periods;
(iv) Marketing materials regarding engine life;
(v) Failure reports from engine customers; and
(vi) Engineering evaluations of the durability, in hours, of
specific engine technologies, engine materials or engine designs.
(b) [Reserved]
7. Section 90.106 is amended by revising paragraph (a) and adding
new paragraph (b)(3) to read as follows:

Sec. 90.106 Certificate of conformity.

(a)(1) Except as provided in Sec. 90.2(b), every manufacturer of
new engines produced during or after model year 1997 must obtain a
certificate of conformity covering such engines; however, engines
manufactured during an annual production period beginning prior to
September 1, 1996 are not required to be certified.
(2) Except as required in paragraph (b)(3) of this section, Class
II engines manufactured during an annual production period beginning
prior to September 1, 2000 are not required to meet Phase 2
requirements.
(b) * * *
(3) Manufacturers who commence an annual production period for a
Class II engine family between January 1, 2000 and September 1, 2000
must meet Phase 2 requirements for that family only if that production
period will exceed 12 months in length.
* * * * *
8. Section 90.107 is amended by removing the period at the end of
paragraph (d)(5) and adding a semicolon in its place, by removing
``and'' at the end of paragraph (d)(9), by removing the period at the
end of paragraph (d)(10) and adding a semicolon in its place, and by
adding new paragraph (d)(11) to read as follows:

Sec. 90.107 Application for certification.

* * * * *
(d) * * *
(11) This paragraph (d)(11) is applicable only to Phase 2 engines.
(i) Engine manufacturers participating in the averaging, banking
and trading program as described in subpart C of this part shall
declare the applicable Family Emission Limit (FEL) for
HC+NO_X (NMHC+NO_X).
(ii) Provide the applicable useful life as determined under
Sec. 90.105.
* * * * *
9. Section 90.108 is amended by adding paragraphs (c) and (d) to
read as follows:

Sec. 90.108 Certification.

* * * * *
(c) For certificates issued for engine families included in the
averaging, banking and trading program as described in subpart C of
this part:
(1) Failure to comply with all applicable averaging, banking and
trading provisions in this part will be considered to be a failure to
comply with the terms and conditions upon which the certificate was
issued, and the certificate may be determined to be void ab initio.
(2) The manufacturer shall bear the burden of establishing to the
satisfaction of the Administrator that the conditions upon which the
certificate was granted were satisfied or waived.

[[Page 15239]]

(d) The Administrator may, upon request by a manufacturer, waive
any requirement of this part otherwise necessary for the issuance of a
certificate. The Administrator may set such conditions in a certificate
as he or she deems appropriate to assure that the waived requirements
are either satisfied or are demonstrated, for the subject engines, to
be inappropriate, irrelevant or met by the application of a different
requirement under this chapter. The Administrator may indicate on such
conditional certificates that failure to meet these conditions may
result in suspension or revocation or the voiding ab initio of the
certificate.
10. Section 90.113 is amended by revising the section heading and
adding two sentences to the beginning of paragraph (a) to read as
follows:

Sec. 90.113 In-use testing program for Phase 1 engines.

(a) This section applies only to Phase 1 engines. In-use testing
provisions for Phase 2 engines are found in subpart M of this part. * *
*
* * * * *
11. Section 90.114 is amended by removing ``and'' at the end of
paragraph (c)(9), by removing the period at the end of paragraph
(c)(10) and adding a semicolon in its place and by adding new
paragraphs (c)(11) and (f) to read as follows:

Sec. 90.114 Requirement of certification--engine information label.

* * * * *
(c) * * *
(11) For Phase 2 engines, the useful life category as determined by
the manufacturer pursuant to Sec. 90.105. Such useful life category
shall be shown by one of the following statements to be appended to the
statement required under paragraph (c)(7) of this section:
(i) ``EMISSIONS COMPLIANCE PERIOD: [useful life] HOURS''; or
(ii) ``EMISSIONS COMPLIANCE PERIOD: CATEGORY [fill in C, B or A as
indicated and appropriate from the tables in Sec. 90.105], REFER TO
OWNER'S MANUAL FOR FURTHER INFORMATION'';
* * * * *
(f) Manufacturers electing to use the labeling language of
paragraph (c)(11)(ii) of this section must provide in the documents
intended to be conveyed to the ultimate purchaser, the statement:
(1) For nonhandheld engines: The Emissions Compliance Period
referred to on the Emissions Compliance label indicates the number of
operating hours for which the engine has been shown to meet Federal
emission requirements. For engines less than 225 cc displacement,
Category C=125 hours, B=250 hours and A=500 hours. For engines of 225
cc or more, Category C=250 hours, B=500 hours and A=1000 hours.
(2) [Reserved]
(3) The manufacturer must provide, in the same document as the
statement in paragraph (f)(1) of this section, a statement of the
engine's displacement or an explanation of how to readily determine the
engine's displacement. The Administrator may approve alternate language
to the statement in paragraph (f)(1) of this section, provided that the
alternate language provides the ultimate purchaser with a clear
description of the number of hours represented by each of the three
letter categories for the subject engine's displacement.
12. Section 90.116 is amended by revising paragraph (d)(6) and
(d)(7) and adding paragraphs (d)(8) through (d)(10) to read as follows:

Sec. 90.116 Certification procedure--determining engine displacement,
engine class, and engine families.

* * * * *
(d) * * *
(6) The location of valves, where applicable, with respect to the
cylinder (e.g. side valves or overhead valves);
(7) The number of catalytic converters, location, volume and
composition;
(8) The thermal reactor characteristics;
(9) The fuel required (e.g. gasoline, natural gas, LPG); and
(10) The useful life category.
* * * * *
13. Section 90.117 is amended by revising paragraph (a) to read as
follows:

Sec. 90.117 Certification procedure--test engine selection.

(a) For Phase 1 engines, the manufacturer must select, from each
engine family, a test engine that the manufacturer determines to be
most likely to exceed the emission standard. For Phase 2 engines, the
manufacturer must select, from each engine family, a test engine of a
configuration that the manufacturer determines to be most likely to
exceed the HC+NO_X (NMHC+NO_X) Family Emission
Limit (FEL), or HC+NO_X (NMHC+NO_X) standard if no
FEL is applicable.
* * * * *
14. Section 90.118 is amended by revising the section heading and
adding a new paragraph (e) to read as follows:

Sec. 90.118 Certification procedure--service accumulation and usage of
deterioration factors.

* * * * *
(e) For purposes of establishing whether Phase 2 engines comply
with applicable exhaust emission standards or FELs, the test results
for each regulated pollutant as measured pursuant to Sec. 90.119 shall
be multiplied by the applicable df determined under Sec. 90.104 (g) or
(h). The product of the two numbers shall be rounded to the same number
of decimal places contained in the applicable standard, and compared
against the applicable standard or FEL, as appropriate.
15. Section 90.120 is amended by adding paragraph (c) to read as
follows:

Sec. 90.120 Certification procedure--use of special test procedures.

* * * * *
(c) Optional procedures approved during Phase 1 can be carried over
to Phase 2, following advance approval by the Administrator, to the
extent the alternate procedure continues to yield results equal to the
results from the specified test procedures in subpart E of this part.
16. Section 90.122 is amended by revising the first sentence of
paragraph (a) and adding paragraph (d)(4) as follows:

Sec. 90.122 Amending the application and certificate of conformity.

(a) The engine manufacturer must notify the Administrator when
either an engine is to be added to a certificate of conformity, an FEL
is to be changed, or changes are to be made to a product line covered
by a certificate of conformity. * * *
* * * * *
(d)* * *
(4) If the Administrator determines that a revised FEL meets the
requirements of this subpart and the Act, the appropriate certificate
of conformity will be amended, or a new certificate will be issued to
reflect the revised FEL. The certificate of conformity is revised
conditional upon compliance with Sec. 90.207(b).
* * * * *
17. Subpart C, which was formerly reserved, is added to part 90 to
read as follows:

Subpart C--Certification Averaging, Banking, and Trading Provisions

Sec.
90.201 Applicability.
90.202 Definitions.
90.203 General provisions.
90.204 Averaging.
90.205 Banking.
90.206 Trading.
90.207 Credit calculation and manufacturer compliance with emission
standards.
90.208 Certification.

[[Page 15240]]

90.209 Maintenance of records.
90.210 End-of-year and final reports.
90.211 Request for hearing.

Subpart C--Certification Averaging, Banking, and Trading Provisions

Sec. 90.201 Applicability.

The requirements of this subpart C are applicable to all Phase 2
spark-ignition engines subject to the provisions of subpart A of this
part except as provided in Sec. 90.103(a). These provisions are not
applicable to any Phase 1 engines. Participation in the averaging,
banking and trading program is voluntary, but if a manufacturer elects
to participate, it must do so in compliance with the regulations set
forth in this subpart. The provisions of this subpart are applicable
for HC+NO_X (NMHC+NO_X) emissions but not for CO
emissions.

Sec. 90.202 Definitions.

The definitions in subpart A of this part apply to this subpart.
The following definitions also apply to this subpart:
Averaging means the exchange of emission credits between engine
families within a given manufacturer's product line.
Banking means the retention of emission credits by the manufacturer
generating the emission credits or obtaining such credits through
trading, for use in future model year averaging or trading as permitted
in this part.
Emission credits represent the amount of emission reduction or
exceedance, by an engine family, below or above the applicable
HC+NO_X (NMHC+NO_X) emission standard,
respectively. FELs below the standard create ``positive credits,''
while FELs above the standard create ``negative credits.'' In addition,
``projected credits'' refer to emission credits based on the projected
applicable production volume of the engine family. ``Reserved credits''
are emission credits generated within a model year waiting to be
reported to EPA at the end of the model year. ``Actual credits'' refer
to emission credits based on actual applicable production volume as
contained in the end-of-year reports submitted to EPA. Some or all of
these credits may be revoked if EPA review of the end-of-year reports
or any subsequent audit action(s) reveals problems or errors of any
nature with credit computations.
Trading means the exchange of emission credits between
manufacturers.

Sec. 90.203 General provisions.

(a) The certification averaging, banking, and trading provisions
for HC+NO_X and NMHC+NO_X emissions from eligible
engines are described in this subpart.
(b) An engine family may use the averaging, banking and trading
provisions for HC+NO_X and NMHC+NO_X emissions if
it is subject to regulation under this part with certain exceptions
specified in paragraph (c) of this section. HC+NO_X and
NMHC+NO_X credits shall be interchangeable subject to the
limitations on credit generation, credit usage, and other provisions
described in this subpart.
(c) A manufacturer shall not include in its calculation of credit
generation and may exclude from its calculation of credit usage, any
new engines:
(1) Which are intended to be exported, unless the manufacturer has
reason or should have reason to believe that such engines have been or
will be imported in a piece of equipment; or
(2) Which are subject to state engine emission standards pursuant
to a waiver granted by EPA under section 209(e) of the Act, unless the
manufacturer demonstrates to the satisfaction of the Administrator that
inclusion of these engines in averaging, banking and trading is
appropriate.
(d) For an engine family using credits, a manufacturer may, at its
option, include its entire production of that engine family in its
calculation of credit usage for a given model year.
(e)(1) A manufacturer may certify engine families at Family
Emission Limits (FELs) above or below the applicable emission standard
subject to the limitation in paragraph (f) of this section, provided
the summation of the manufacturer's projected balance of credits from
all credit transactions for all engine classes in a given model year is
greater than or equal to zero, as determined under Sec. 90.207.
(2) A manufacturer of an engine family with an FEL exceeding the
applicable emission standard must obtain positive emission credits
sufficient to address the associated credit shortfall via averaging,
banking, or trading.
(3) An engine family with an FEL below the applicable emission
standard may generate positive emission credits for averaging, banking,
or trading, or a combination thereof.
(4) In the case of a Selective Enforcement Audit (SEA) failure,
credits may be used to cover subsequent production of engines for the
family in question if the manufacturer elects to recertify to a higher
FEL. Credits may not be used to remedy a nonconformity determined by an
SEA, except that the Administrator may permit the use of credits to
address a nonconformity determined by an SEA where the use of such
credits is one component of a multi-part remedy for the previously
produced engines and the remedy, including the use of credits and the
quantity of credits being used, is such that the Administrator is
satisfied that the manufacturer has strong and lasting incentive to
accurately verify its new engine emission levels and will set or reset
its FELs for current and future model years so that production line
compliance is assured.
(5) In the case of a production line testing (PLT) failure pursuant
to subpart H of this part, a manufacturer may revise the FEL based upon
production line testing results obtained under subpart H of this part
and upon Administrator approval pursuant to Sec. 90.122(d). The
manufacturer may use credits to cover both past production and
subsequent production of the engines as needed as allowed under
Sec. 90.207(c).
(f) No Phase 2 engine family may have a HC + NO_X FEL
that is greater than 32.2 g/kW-hr for Class I engines and 26.8 g/kW-hr
for Class II engines.
(g)(1) Credits generated in a given model year by an engine family
subject to the Phase 2 emission requirements may only be used in
averaging, banking or trading, as appropriate, for any other engine
family for which the Phase 2 requirements are applicable. Credits
generated in one model year may not be used for prior model years,
except as allowed under Sec. 90.207(c).
(2) For the 2005 model year and for each subsequent model year,
manufacturers of Class II engines must provide a demonstration that the
production weighted average FEL for HC+NO_X (including
NMHC+NO_X FELs), for all of the manufacturer's Class II
engines, will not exceed 13.6 g/kW-hr for the 2005 model year, 13.1 g/
kW-hr for the 2006 model year and 12.6 g/kW-hr for the 2007 and each
subsequent Phase 2 model year. Such demonstration shall be subject to
the review and approval of the Administrator, shall be provided at the
time of the first Class II certification of that model year and shall
be based on projected eligible production for that model year.
(h) Manufacturers must demonstrate compliance under the averaging,
banking, and trading provisions for a particular model year by 270 days
after the end of the model year. Except as provided in Sec. 90.207(c),
an engine family generating negative credits for which the manufacturer
does not obtain or generate an adequate number of positive credits by
that date from the same or previous model year engines will violate the
conditions of the

[[Page 15241]]

certificate of conformity. The certificate of conformity may be voided
ab initio pursuant to Sec. 90.123 for this engine family.

Sec. 90.204 Averaging.

(a) Negative credits from engine families with FELs above the
applicable emission standard must be offset by positive credits from
engine families having FELs below the applicable emission standard, as
allowed under the provisions of this subpart. Averaging of credits in
this manner is used to determine compliance under Sec. 90.207(b).
(b) Cross-class averaging of credits is allowed across all classes
of nonroad spark-ignition nonhandheld engines at or below 19 kW.
(c) Credits used in averaging for a given model year may be
obtained from credits generated in the same model year by another
engine family, credits banked in previous model years, or credits of
the same or previous model year obtained through trading. The
restrictions of this paragraph notwithstanding, credits from a given
model year may be used to address credit needs of previous model year
engines as allowed under Sec. 90.207(c).
(d) The use of credits generated under the early banking provisions
of Sec. 90.205(b) is subject to regulations under this subpart.

Sec. 90.205 Banking.

(a)(1) Beginning August 1, 2007, a manufacturer of a Class I engine
family with an FEL below the applicable emission standard for a given
model year may bank credits in that model year for use in averaging and
trading. For new Class I engine families initially produced during the
period starting August 1, 2003 through July 31, 2007, a manufacturer of
a Class I engine family with an FEL below the applicable emission
standard for a given model year may bank credits in that model year for
use in averaging and trading.
(2) [Reserved]
(3) Beginning with the 2001 model year, a manufacturer of a Class
II engine family with an FEL below the applicable emission standard for
a given model year may bank credits in that model year for use in
averaging and trading.
(4) [Reserved]
(5) [Reserved]
(6) Negative credits may be banked only according to the
requirements under Sec. 90.207(c).
(b)(1) For Class I engine families initially produced during the
period beginning with the 1999 model year and prior to August 1, 2003,
a manufacturer may bank early credits for engines with HC +
NO_X FELs below 16.1 g/kW-hr. All early credits for such
Class I engines shall be calculated against a HC + NO_X level
of 20.5 g/kW-hr and may continue to be calculated against the 20.5 g/
kW-hr level until August 1, 2007.
(2) Beginning with the 1999 model year and prior to the applicable
date listed in paragraph (a) of this section for Class II engines, a
manufacturer may bank early credits for all Class II engines with
HC+NO_X FELs below 12.1 g/kW-hr. All early credits for Class
II engines shall be calculated against a HC+NO_X level of
18.0 g/kW-hr.
(3) [Reserved]
(4) [Reserved]
(5) [Reserved]
(6) Engines certified under the early banking provisions of this
paragraph are subject to all of the requirements of this part
applicable to Phase 2 engines.
(c) A manufacturer may bank actual credits only after the end of
the model year and after EPA has reviewed the manufacturer's end-of-
year reports. During the model year and before submittal of the end-of-
year report, credits originally designated in the certification process
for banking will be considered reserved and may be redesignated for
trading or averaging in the end-of-year report and final report.
(d) Credits declared for banking from the previous model year that
have not been reviewed by EPA may be used in averaging or trading
transactions. However, such credits may be revoked at a later time
following EPA review of the end-of-year report or any subsequent audit
actions.

Sec. 90.206 Trading.

(a) An engine manufacturer may exchange emission credits with other
engine manufacturers in trading.
(b) Credits for trading can be obtained from credits banked in
previous model years or credits generated during the model year of the
trading transaction.
(c) Traded credits can be used for averaging, banking, or further
trading transactions.
(d) Traded credits are subject to the limitations on use for past
model years, as set forth in Sec. 90.204(c).
(e) In the event of a negative credit balance resulting from a
transaction, both the buyer and the seller are liable, except in cases
involving fraud. Certificates of all engine families participating in a
negative trade may be voided ab initio pursuant to Sec. 90.123.

Sec. 90.207 Credit calculation and manufacturer compliance with
emission standards.

(a) For each engine family, HC+NO_X [NMHC+NO_X]
certification emission credits (positive or negative) are to be
calculated according to the following equation and rounded to the
nearest gram. Consistent units are to be used throughout the equation.

Credits = Production x (Standard--FEL) x Power x Useful life x Load
Factor
Where:

Production = eligible production as defined in this part. Annual
production projections are used to project credit availability for
initial certification. Eligible production volume is used in
determining actual credits for end-of-year compliance determination.
Standard = the current and applicable Small SI engine HC+NO_X
(NMHC+NO_X) emission standard in grams per kilowatt hour as
determined in Sec. 90.103 or, for early credits, the applicable
emission level as specified in Sec. 90.205(b).
FEL = the family emission limit for the engine family in grams per
kilowatt hour.
Power = the maximum modal power of the certification test engine, in
kilowatts, as calculated from the applicable federal test procedure as
described in this part.
Useful Life = the useful life in hours corresponding to the useful life
category for which the engine family was certified.
Load Factor = 47 percent (i.e., 0.47) for Test Cycle A and Test Cycle
B. For approved alternate test procedures, the load factor must be
calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR30MR99.000

[[Page 15242]]

Where:

%MTT mode<INF>i</INF> = percent of the maximum FTP torque for mode i.
%MTS mode<INF>i</INF> = percent of the maximum FTP engine rotational
speed for mode i.
WF mode<INF>i</INF> = the weighting factor for mode i.

(b) Manufacturer compliance with the emission standards is
determined on a corporate average basis at the end of each model year.
A manufacturer is in compliance when the sum of positive and negative
emission credits it holds is greater than or equal to zero, except that
the sum of positive and negative credits may be less than zero as
allowed under paragraph (c) of this section.
(c) If, as a result of production line testing as required in
subpart H of this part, an engine family is determined to be in
noncompliance pursuant to Sec. 90.710, the manufacturer may raise its
FEL for past and future production as necessary. Further, a
manufacturer may carry a negative credit balance (known also as a
credit deficit) for the subject class and model year and for the next
three model years. The credit deficit may be no larger than that
created by the nonconforming family. If the credit deficit still exists
after the model year following the model year in which the
nonconformity occurred, the manufacturer must obtain and apply credits
to offset the remaining credit deficit at a rate of 1.2 grams for each
gram of deficit within the next two model years. The provisions of this
paragraph are subject to the limitations in paragraph (d) of this
section.
(d) Regulations elsewhere in this part notwithstanding, if an
engine manufacturer experiences two or more production line testing
failures pursuant to the regulations in subpart H of this part in a
given model year, the manufacturer may raise the FEL of previously
produced engines only to the extent that such engines represent no more
than 10 percent of the manufacturer's total eligible production for
that model year, as determined on the date when the FEL is adjusted.
For any additional engine families determined to be in noncompliance,
the manufacturer must conduct offsetting projects approved in advance
by the Administrator.
(e) If, as a result of production line testing under this subpart,
a manufacturer desires to lower its FEL it may do so subject to
Sec. 90.708(c).
(f) Except as allowed at paragraph (c) of this section, when a
manufacturer is not in compliance with the applicable emission standard
by the date 270 days after the end of the model year, considering all
credit calculations and transactions completed by then, the
manufacturer will be in violation of the regulations in this part and
EPA may, pursuant to Sec. 90.123, void ab initio the certificates of
engine families for which the manufacturer has not obtained sufficient
positive emission credits.

Sec. 90.208 Certification.

(a) In the application for certification a manufacturer must:
(1) Submit a statement that the engines for which certification is
requested will not, to the best of the manufacturer's belief, cause the
manufacturer to be in noncompliance under Sec. 90.207(b) when all
credits are calculated for the manufacturer's engine families.
(2) Declare an FEL for each engine family for HC+NO_X
(NMHC+NO_X). The FEL must have the same number of significant
digits as the emission standard.
(3) Indicate the projected number of credits generated/needed for
this family; the projected applicable eligible annual production
volume, and the values required to calculate credits as given in
Sec. 90.207.
(4) Submit calculations in accordance with Sec. 90.207 of projected
emission credits (positive or negative) based on annual production
projections for each family.
(5) (i) If the engine family is projected to have negative emission
credits, state specifically the source (manufacturer/engine family or
reserved) of the credits necessary to offset the credit deficit
according to projected annual production.
(ii) If the engine family is projected to generate credits, state
specifically (manufacturer/engine family or reserved) where the
projected annual credits will be applied.
(iii) The manufacturer may supply the information required by this
section in the form of a spreadsheet detailing the manufacturer's
annual production plans and the credits generated or consumed by each
engine family.
(b) All certificates issued are conditional upon manufacturer
compliance with the provisions of this subpart both during and after
the model year of production.
(c) Failure to comply with all provisions of this subpart will be
considered to be a failure to satisfy the conditions upon which the
certificate was issued, and the certificate may be determined to be
void ab initio pursuant to Sec. 90.123.
(d) The manufacturer bears the burden of establishing to the
satisfaction of the Administrator that the conditions upon which the
certificate was issued were satisfied or waived.
(e) Projected credits based on information supplied in the
certification application may be used to obtain a certificate of
conformity. However, any such credits may be revoked based on review of
end-of-year reports, follow-up audits, and any other verification steps
considered appropriate by the Administrator.

Sec. 90.209 Maintenance of records.

(a) The manufacturer must establish, maintain, and retain the
following adequately organized and indexed records for each engine
family:
(1) EPA engine family identification code;
(2) Family Emission Limit (FEL) or FELs where FEL changes have been
implemented during the model year;
(3) Maximum modal power for the certification test engine;
(4) Projected production volume for the model year; and
(5) Records appropriate to establish the quantities of engines that
constitute eligible production as defined in Sec. 90.3 for each FEL.
(b) Any manufacturer producing an engine family participating in
trading reserved credits must maintain the following records on an
annual basis for each such engine family:
(1) The engine family;
(2) The actual applicable production volume;
(3) The values required to calculate credits as given in
Sec. 90.207;
(4) The resulting type and number of credits generated/required;
(5) How and where credit surpluses are dispersed; and
(6) How and through what means credit deficits are met.
(c) The manufacturer must retain all records required to be
maintained under this section for a period of eight years from the due
date for the end-of-model year report. Records may be retained as hard
copy or reduced to microfilm, ADP diskettes, and so forth, depending on
the manufacturer's record retention procedure; provided, that in every
case all information contained in the hard copy is retained.
(d) Nothing in this section limits the Administrator's discretion
in requiring the manufacturer to retain additional records, or submit
information not specifically required by this section, if otherwise
permitted by law.
(e) Pursuant to a request made by the Administrator, the
manufacturer must submit to the Administrator the information that the
manufacturer is required to retain.
(f) EPA may, pursuant to Sec. 90.123, void ab initio a certificate
of conformity

[[Page 15243]]

for an engine family for which the manufacturer fails to retain the
records required in this section or to provide such information to the
Administrator upon request.

Sec. 90.210 End-of-year and final reports.

(a) End-of-year and final reports must indicate the engine family,
the engine class, the actual production volume, the values required to
calculate credits as given in Sec. 90.207, and the number of credits
generated/required. Manufacturers must also submit how and where credit
surpluses were dispersed (or are to be banked) and/or how and through
what means credit deficits were met. Copies of contracts related to
credit trading must be included or supplied by the broker, if
applicable. The report must include a calculation of credit balances to
show that the credit summation for all engines is equal to or greater
than zero (or less than zero in cases of negative credit balances as
permitted in Sec. 90.207(c)). For model year 2005 and later, the report
must include a calculation of the production weighted average
HC+NO_X (including NMHC+NO_X) FEL for Class II
engine families to show compliance with the provisions of
Sec. 90.203(g)(2).
(b) The calculation of eligible production for end-of-year and
final reports must be based on engines produced for the United States
market, excluding engines which are subject to state emission standards
pursuant to a waiver granted by EPA under section 209(e) of the Act.
Upon advance written request, the Administrator will consider other
methods to track engines for credit calculation purposes that provide
high levels of confidence that eligible production or sales are
accurately counted.
(c)(1)End-of-year reports must be submitted within 90 days of the
end of the model year to: Manager, Engine Compliance Programs Group
(6403-J), U.S. Environmental Protection Agency, Washington, DC 20460.
(2) Unless otherwise approved by the Administrator, final reports
must be submitted within 270 days of the end of the model year to:
Manager, Engine Compliance Programs Group (6403-J), U.S. Environmental
Protection Agency, Washington, DC 20460.
(d) Failure by a manufacturer to submit any end-of-year or final
reports in the specified time for any engines subject to regulation
under this part is a violation of Sec. 90.1003(a)(2) and section 213(d)
of the Clean Air Act for each engine.
(e) A manufacturer generating credits for banking only who fails to
submit end-of-year reports in the applicable specified time period (90
days after the end of the model year) may not use the credits until
such reports are received and reviewed by EPA. Use of projected credits
pending EPA review is not permitted in these circumstances.
(f) Errors discovered by EPA or the manufacturer in the end-of-year
report, including errors in credit calculation, may be corrected in the
final report.
(g) If EPA or the manufacturer determines that a reporting error
occurred on an end-of-year or final report previously submitted to EPA
under this section, the manufacturer's credits and credit calculations
must be recalculated. Erroneous positive credits will be void except as
provided in paragraph (h) of this section. Erroneous negative credit
balances may be adjusted by EPA.
(h) If EPA review determines a reporting error in the
manufacturer's favor (that is, resulting in an increased credit
balance) or if the manufacturer discovers such an error within 270 days
of the end of the model year, EPA shall restore the credits for use by
the manufacturer.

Sec. 90.211 Request for hearing.

An engine manufacturer may request a hearing on the Administrator's
voiding of the certificate under Secs. 90.203(h), 90.206(e), 90.207(f),
90.208(c), or 90.209(f), pursuant to Sec. 90.124. The procedures of
Sec. 90.125 shall apply to any such hearing.

Subpart D--Emission Test Equipment Provisions

18. Section 90.301 is amended by revising paragraph (a) and adding
paragraph (d) to read as follows:

Sec. 90.301 Applicability.

(a) This subpart describes the equipment required in order to
perform exhaust emission tests on new nonroad spark-ignition engines
and vehicles subject to the provisions of subpart A of this part.
Certain text in this subpart is identified as pertaining to Phase 1 or
Phase 2 engines. Such text pertains only to engines of the specified
Phase. If no indication of Phase is given, the text pertains to all
engines, regardless of Phase.
* * * * *
(d) For Phase 2 Class I, and Phase 2 Class II natural gas fueled
engines, the following sections from 40 CFR Part 86 are applicable to
this subpart. The requirements of these sections which pertain
specifically to the measurement and calculation of non-methane
hydrocarbon (NMHC) exhaust emissions from otto cycle heavy-duty engines
must be followed when determining the NMHC exhaust emissions from Phase
2 Class I, and Phase 2 Class II natural gas fueled engines. Those
sections are: 40 CFR 86.1306-90 Equipment required and specifications;
overview, 40 CFR 86.1309-90 Exhaust gas sampling system; otto-cycle
engines, 40 CFR 86.1311-94 Exhaust gas analytical system; CVS bag
sampling, 40 CFR 86.1313-94(e) Fuel Specification--Natural gas-fuel, 40
CFR 86.1314-94 Analytical gases, 40 CFR 86.1316-94 Calibrations;
frequency and overview, 40 CFR 86.1321-94 Hydrocarbon analyzer
calibration, 40 CFR 86.1325-94 Methane analyzer calibration, 40 CFR
86.1327-94 Engine dynamometer test procedures, overview, 40 CFR
86.1340-94 Exhaust sample analysis, 40 CFR 86.1342-94 Calculations;
exhaust emissions, 40 CFR 86.1344-94(d) Required information--Pre-test
data, 40 CFR 86.1344-94(e) Required information--Test data.
19. Section 90.302 is revised to read as follows:

Sec. 90.302 Definitions.

The definitions in Sec. 90.3 apply to this subpart. The following
definitions also apply to this subpart.
Intermediate speed means the engine speed which is 85 percent of
the rated speed.
Natural gas means a fuel whose primary constituent is methane.
Rated speed means the speed at which the manufacturer specifies the
maximum rated power of an engine.
20. Section 90.308 is amended by revising paragraph (c) to read as
follows:

Sec. 90.308 Lubricating oil and test fuels.

* * * * *
(c) Test fuels--service accumulation and aging. Unleaded gasoline
representative of commercial gasoline generally available through
retail outlets must be used in service accumulation and aging for
gasoline-fueled spark-ignition engines. As an alternative, the
certification test fuels specified under paragraph (b) of this section
may be used for engine service accumulation and aging. Leaded fuel may
not be used during service accumulation or aging.
21. Section 90.329 is amended by adding paragraph (c) to read as
follows:

Sec. 90.329 Catalyst thermal stress test.

* * * * *
(c) Phase 2 engines. The catalyst thermal stress test is not
required for engine families certified to the Phase 2 standards.

[[Page 15244]]

Subpart E--Gaseous Exhaust Test Procedures

22. Section 90.401 is amended by adding paragraphs (c) and (d) to
read as follows:

Sec. 90.401 Applicability.

* * * * *
(c) Certain text in this subpart is identified as pertaining to
Phase 1 or Phase 2 engines. Such text pertains only to engines of the
specified Phase. If no indication of Phase is given, the text pertains
to all engines, regardless of Phase.
(d) For Phase 2 Class I, and Phase 2 Class II natural gas fueled
engines, the following sections from 40 CFR part 86 are applicable to
this subpart. The requirements of these sections which pertain
specifically to the measurement and calculation of non-methane
hydrocarbon (NMHC) exhaust emissions from otto cycle heavy-duty engines
must be followed when determining the NMHC exhaust emissions from Phase
2 Class I, and Phase 2 Class II natural gas fueled engines. Those
sections are: 40 CFR 86.1327-94 Engine dynamometer test procedures,
overview, 40 CFR 86.1340-94 Exhaust sample analysis, 40 CFR 86.1342-94
Calculations; exhaust emissions, 40 CFR 86.1344-94(d) Required
information--Pre-test data, and 40 CFR 86.1344-94(e) Required
information--Test data.
23. Section 90.404 is amended by adding a sentence after the first
sentence of paragraph (b) to read as follows:

Sec. 90.404 Test procedure overview.

* * * * *
(b) * * * For Phase 2 Class I and Phase 2 Class II natural gas
fueled engines the test is also designed to determine the brake-
specific emissions of non-methane hydrocarbons. * * *
* * * * *
24. Section 90.409 is amended by revising paragraph (a)(3) to read
as follows:

Sec. 90.409 Engine dynamometer test run.

(a) * * *
(3) For Phase 1 engines, at the manufacturer's option, the engine
can be run with the throttle in a fixed position or by using the
engine's governor (if the engine is manufactured with a governor). In
either case, the engine speed and load must meet the requirements
specified in paragraph (b)(12) of this section. For Phase 2 Class I and
Phase 2 Class II engines equipped with an engine speed governor, the
governor must be used to control engine speed during all test cycle
modes except for Mode 1 or Mode 6, and no external throttle control may
be used that interferes with the function of the engine's governor; a
controller may be used to adjust the governor setting for the desired
engine speed in Modes 2-5 or Modes 7-10; and during Mode 1 or Mode 6
fixed throttle operation may be used to determine the 100 percent
torque value.
* * * * *
25. Section 90.410 is amended by revising paragraph (b) to read as
follows:

Sec. 90.410 Engine test cycle.

* * * * *
(b) For Phase 1 engines and Phase 2 Class I and II engines not
equipped with an engine speed governor, during each non-idle mode, hold
both the specified speed and load within <plus-minus> five percent of
point. During the idle mode, hold speed within <plus-minus> ten percent
of the manufacturer's specified idle engine speed. For Phase 2 Class I
and II engines equipped with an engine speed governor, during Mode 1 or
Mode 6 hold both the specified speed and load within <plus-minus> five
percent of point, during Modes 2-3, or Modes 7-8 hold the specified
load with <plus-minus> five percent of point, during Modes 4-5 or Modes
9-10, hold the specified load within the larger range provided by +/
-0.27Nm (+/-0.2 lb-ft), or +/-ten (10) percent of point, and during the
idle mode hold the specified speed within <plus-minus> ten percent of
the manufacturer's specified idle engine speed (see Table 1 in Appendix
A to subpart E of this part for a description of test Modes). The use
of alternative test procedures is allowed if approved in advance by the
Administrator.
* * * * *
26. Section 90.427 is amended by revising paragraph (a) to read as
follows:

Sec. 90.427 Catalyst thermal stress resistance evaluation.

(a) The purpose of the evaluation procedure specified in this
section is to determine the effect of thermal stress on catalyst
conversion efficiency for Phase 1 engines. The thermal stress is
imposed on the test catalyst by exposing it to quiescent heated air in
an oven. The evaluation of the effect of such stress on catalyst
performance is based on the resultant degradation of the efficiency
with which the conversions of specific pollutants are promoted. The
application of this evaluation procedure involves the several steps
that are described in the following paragraphs.
* * * * *

Subpart F--Selective Enforcement Auditing

27. Section 90.503 is amended by revising paragraphs (f)(3) and
(f)(4) to read as follows:

Sec. 90.503 Test orders.

* * * * *
(f) * * *
(3) Any SEA test order for which the family or configuration, as
appropriate, fails under Sec. 90.510 or for which testing is not
completed will not be counted against the annual limit.
(4) When the annual limit has been met, the Administrator may issue
additional test orders to test those families or configurations for
which evidence exists indicating nonconformity, or for which the
Administrator has reason to believe are not being appropriately
represented or tested in Production Line Testing conducted under
subpart H of this part, if applicable. An SEA test order issued
pursuant to this provision will include a statement as to the reason
for its issuance.
28. Section 90.509 is amended by revising paragraph (b) to read as
follows:

Sec. 90.509 Calculation and reporting of test results.

* * * * *
(b)(1) Final test results are calculated by summing the initial
test results derived in paragraph (a) of this section for each test
engine, dividing by the number of tests conducted on the engine, and
rounding to the same number of decimal places contained in the
applicable standard. For Phase 2 engines only, this result shall be
expressed to one additional significant figure.
(2) Final deteriorated test results (for Phase 2 test engines only)
are calculated by applying the appropriate deterioration factors, from
the certification process for the engine family, to the final test
results, and rounding to the same number of decimal places contained in
the applicable standard.
* * * * *
29. Section 90.510 is amended by revising paragraph (b) to read as
follows:

Sec. 90.510 Compliance with acceptable quality level and passing and
failing criteria for selective enforcement audits.

* * * * *
(b) For Phase I engines, a failed engine is an engine whose final
test results pursuant to Sec. 90.509(b), for one or more of the
applicable pollutants exceed the emission standard. For Phase 2
engines, a failed engine is an engine whose final deteriorated test
results pursuant to

[[Page 15245]]

Sec. 90.509(b), for one or more of the applicable pollutants exceed the
emission standard (FEL, if applicable).
* * * * *
30. Section 90.512 is amended by revising paragraph (b) to read as
follows:

Sec. 90.512 Request for public hearing.

* * * * *
(b)The manufacturer's request shall be filed with the Administrator
not later than 15 days after the Administrator's notification of his or
her decision to suspend, revoke or void, unless otherwise specified by
the Administrator. The manufacturer shall simultaneously serve two
copies of this request upon the Director of the Engine Programs and
Compliance Division and file two copies with the Hearing Clerk of the
Agency. Failure of the manufacturer to request a hearing within the
time provided constitutes a waiver of the right to a hearing.
Subsequent to the expiration of the period for requesting a hearing as
of right, the Administrator may, in his or her discretion and for good
cause shown, grant the manufacturer a hearing to contest the
suspension, revocation or voiding.
* * * * *

Subpart G--Importation of Nonconforming Engines

31. Section 90.612 is amended by revising paragraph (g) to read as
follows:

Sec. 90.612 Exemptions and exclusions.

* * * * *
(g) Applications for exemptions and exclusions provided for in
paragraphs (b), (c), and (e) of this section are to be mailed to: U.S.
Environmental Protection Agency, Office of Mobile Sources, Engine
Compliance Programs Group (6403-J), Washington, D.C. 20460, Attention:
Imports.
32. Subpart H, which was previously ``reserved'', is added to part
90 to read as follows:

Subpart H--Manufacturer Production Line Testing Program

Sec.
90.701 Applicability.
90.702 Definitions.
90.703 Production line testing by the manufacturer.
90.704 Maintenance of records; submission of information.
90.705 Right of entry and access.
90.706 Engine sample selection.
90.707 Test procedures.
90.708 Cumulative Sum (CumSum) Procedure.
90.709 Calculation and reporting of test results.
90.710 Compliance with criteria for production line testing.
90.711 Suspension and revocation of certificates of conformity.
90.712 Request for public hearing.
90.713 Administrative procedures for public hearing.

Subpart H--Manufacturer Production Line Testing Program

Sec. 90.701 Applicability.

(a) The requirements of this subpart are applicable to all Phase 2
nonroad nonhandheld engines families subject to the provisions of
subpart A of this part unless otherwise exempted in this subpart.
(b) The procedures described in this subpart are optional for small
volume engine manufacturers and small volume engine families as defined
in this part. Small volume engine manufacturers and small volume engine
families for which the manufacturer opts not to conduct testing under
this subpart pursuant to this paragraph shall remain subject to the
Selective Enforcement Auditing procedures of subpart F of this part.
(c) Engine families for which the manufacturer opts to conduct in-
use testing pursuant to subpart M of this part are exempt from this
subpart, but shall remain subject to the Selective Enforcement Auditing
procedures of subpart F of this part.

Sec. 90.702 Definitions.

The definitions in subpart A of this part apply to this subpart.
The following definitions also apply to this subpart.
Configuration means any subclassification of an engine family which
can be described on the basis of gross power, emission control system,
governed speed, injector size, engine calibration, and other parameters
as designated by the Administrator.
Test sample means the collection of engines selected from the
population of an engine family for emission testing.

Sec. 90.703 Production line testing by the manufacturer.

(a) Manufacturers of small SI engines shall test production line
engines from each engine family according to the provisions of this
subpart.
(b) Production line engines must be tested using the test procedure
specified in subpart E of this part except that the Administrator may
approve minor variations that the Administrator deems necessary to
facilitate efficient and economical testing where the manufacturer
demonstrates to the satisfaction of the Administrator that such
variations will not significantly impact the test results. Any
adjustable engine parameter must be set to values or positions that are
within the range recommended to the ultimate purchaser, unless
otherwise specified by the Administrator. The Administrator may specify
values within or without the range recommended to the ultimate
purchaser.

Sec. 90.704 Maintenance of records; submission of information.

(a) The manufacturer of any new small SI engine subject to any of
the provisions of this subpart must establish, maintain, and retain the
following adequately organized and indexed records:
(1) General records. A description of all equipment used to test
engines in accordance with Sec. 90.703. Subpart D of this part sets
forth relevant equipment requirements in Secs. 90.304, 90.305, 90.306,
90.307, 90.308, 90.309, 90.310 and 90.313.
(2) Individual records. These records pertain to each production
line test conducted pursuant to this subpart and include:
(i) The date, time, and location of each test;
(ii) The number of hours of service accumulated on the test engine
when the test began and ended;
(iii) The names of all supervisory personnel involved in the
conduct of the production line test;
(iv) A record and description of any adjustment, repair,
preparation or modification performed prior to and/or subsequent to
approval by the Administrator pursuant to Sec. 90.707(b)(1), giving the
date, associated time, justification, name(s) of the authorizing
personnel, and names of all supervisory personnel responsible for the
conduct of the repair;
(v) If applicable, the date the engine was shipped from the
assembly plant, associated storage facility or port facility, and the
date the engine was received at the testing facility;
(vi) A complete record of all emission tests performed pursuant to
this subpart (except tests performed directly by EPA), including all
individual worksheets and/or other documentation relating to each test,
or exact copies thereof, in accordance with the record requirements
specified in Secs. 90.405 and 90.406; and
(vii) A brief description of any significant events during testing
not otherwise described under paragraph (a)(2) of this section,
commencing with the test engine selection process and including such
extraordinary events as engine damage during shipment.
(3) The manufacturer must establish, maintain and retain general
records, pursuant to paragraph (a)(1) of this section, for each test
cell that can be

[[Page 15246]]

used to perform emission testing under this subpart.
(b) The manufacturer must retain all records required to be
maintained under this subpart for a period of one year after completion
of all testing required for the engine family in a model year. Records
may be retained as hard copy (i.e., on paper) or reduced to microfilm,
floppy disk, or some other method of data storage, depending upon the
manufacturer's record retention procedure; provided, that in every
case, all the information contained in the hard copy is retained.
(c) The manufacturer must, upon request by the Administrator,
submit the following information with regard to engine production:
(1) Projected production or actual production for each engine
configuration within each engine family for which certification has
been requested and/or approved;
(2) Number of engines, by configuration and assembly plant,
scheduled for production or actually produced.
(d) Nothing in this section limits the Administrator's discretion
to require a manufacturer to establish, maintain, retain or submit to
EPA information not specified by this section and otherwise permitted
by law.
(e) All reports, submissions, notifications, and requests for
approval made under this subpart must be addressed to: Manager, Engine
Compliance Programs Group (6403J), U.S. Environmental Protection
Agency, Washington, DC 20460.
(f) The manufacturer must electronically submit the results of its
production line testing using EPA's standardized format. The
Administrator may exempt manufacturers from this requirement upon
written request with supporting justification.

Sec. 90.705 Right of entry and access.

(a) To allow the Administrator to determine whether a manufacturer
is complying with the provisions of this subpart or other subparts of
this part, one or more EPA enforcement officers may enter during
operating hours and upon presentation of credentials any of the
following places:
(1) Any facility, including ports of entry, where any engine to be
introduced into commerce or any emission-related component is
manufactured, assembled, or stored;
(2) Any facility where any test conducted pursuant to this or any
other subpart or any procedure or activity connected with such test is
or was performed;
(3) Any facility where any test engine is present; and
(4) Any facility where any record required under Sec. 90.704 or
other document relating to this subpart or any other subpart of this
part is located.
(b) Upon admission to any facility referred to in paragraph (a) of
this section, EPA enforcement officers are authorized to perform the
following inspection-related activities:
(1) To inspect and monitor any aspect of engine manufacture,
assembly, storage, testing and other procedures, and to inspect and
monitor the facilities in which these procedures are conducted;
(2) To inspect and monitor any aspect of engine test procedures or
activities, including test engine selection, preparation and service
accumulation, emission test cycles, and maintenance and verification of
test equipment calibration;
(3) To inspect and make copies of any records or documents related
to the assembly, storage, selection, and testing of an engine; and
(4) To inspect and photograph any part or aspect of any engine and
any component used in the assembly thereof that is reasonably related
to the purpose of the entry.
(c) EPA enforcement officers are authorized to obtain reasonable
assistance without cost from those in charge of a facility to help the
officers perform any function listed in this subpart and they are
authorized to request the manufacturer to make arrangements with those
in charge of a facility operated for the manufacturer's benefit to
furnish reasonable assistance without cost to EPA.
(1) Reasonable assistance includes, but is not limited to,
clerical, copying, interpretation and translation services; the making
available on an EPA enforcement officer's request of personnel of the
facility being inspected during their working hours to inform the EPA
enforcement officer of how the facility operates and to answer the
officer's questions; and the performance on request of emission tests
on any engine which is being, has been, or will be used for production
line or other testing.
(2) By written request, signed by the Assistant Administrator for
Air and Radiation, and served on the manufacturer, a manufacturer may
be compelled to cause the personal appearance of any employee at such a
facility before an EPA enforcement officer. Any such employee who has
been instructed by the manufacturer to appear will be entitled to be
accompanied, represented, and advised by counsel.
(d) EPA enforcement officers are authorized to seek a warrant or
court order authorizing the EPA enforcement officers to conduct the
activities authorized in this section, as appropriate, to execute the
functions specified in this section. EPA enforcement officers may
proceed ex parte to obtain a warrant or court order whether or not the
EPA enforcement officers first attempted to seek permission from the
manufacturer or the party in charge of the facility(ies) in question to
conduct the activities authorized in this section.
(e) A manufacturer must permit an EPA enforcement officer(s) who
presents a warrant or court order to conduct the activities authorized
in this section as described in the warrant or court order. The
manufacturer must also cause those in charge of its facility or a
facility operated for its benefit to permit entry and access as
authorized in this section pursuant to a warrant or court order whether
or not the manufacturer controls the facility. In the absence of a
warrant or court order, an EPA enforcement officer(s) may conduct the
activities authorized in this section only upon the consent of the
manufacturer or the party in charge of the facility(ies) in question.
(f) It is not a violation of this part or the Clean Air Act for any
person to refuse to permit an EPA enforcement officer(s) to conduct the
activities authorized in this section if the officer(s) appears without
a warrant or court order.
(g) A manufacturer is responsible for locating its foreign testing
and manufacturing facilities in jurisdictions where local law does not
prohibit an EPA enforcement officer(s) from conducting the entry and
access activities specified in this section. EPA will not attempt to
make any inspections which it has been informed local foreign law
prohibits.

Sec. 90.706 Engine sample selection.

(a) At the start of each model year, the small SI engine
manufacturer will begin to randomly select engines from each engine
family for production line testing at a rate of one percent of the
projected production of that family. Each engine will be selected from
the end of the assembly line.
(1) For newly certified engine families: After two engines are
tested, the manufacturer will calculate the required sample size for
the model year for each pollutant
(HC+NO_X(NMHC+NO_X) and CO) according to the Sample
Size

[[Page 15247]]

Equation in paragraph (b) of this section.
(2) For carry-over engine families: After one engine is tested, the
manufacturer will combine the test with the last test result from the
previous model year and then calculate the required sample size for the
model year for each pollutant according to the Sample Size Equation in
paragraph (b) of this section.
(b)(1) Manufacturers will calculate the required sample size for
the model year for each pollutant for each engine family using the
Sample Size Equation in this paragraph. N is calculated for each
pollutant from each test result. The higher of the two values for the
number N indicates the number of tests required for the model year for
an engine family. N is recalculated for each pollutant after each test.
Test results used to calculate the variables in the following Sample
Size Equation must be final deteriorated test results as specified in
Sec. 90.709(c).
[GRAPHIC] [TIFF OMITTED] TR30MR99.001

Where:

N = required sample size for the model year.
t<INF>95</INF> = 95% confidence coefficient. It is dependent on the
actual number of tests completed, n, as specified in the table in
paragraph (b)(2) of this section. It defines one-tail, 95% confidence
intervals.
<greek-s> = actual test sample standard deviation calculated from the
following equation:
[GRAPHIC] [TIFF OMITTED] TR30MR99.002

x<INF>i</INF> = emission test result for an individual engine.
x = mean of emission test results of the actual sample.
FEL = Family Emission Limit or standard if no FEL.
n = The actual number of tests completed in an engine family.

(2) The following table specifies the Actual Number of Tests (n) &
1-tail Confidence Coefficients (t<INF>95</INF>):

----------------------------------------------------------------------------------------------------------------
n t<INF>95</INF> n t<INF>95</INF> n t<INF>95</INF>
----------------------------------------------------------------------------------------------------------------
2............................... 6.31 12 1.80 22 1.72
3............................... 2.92 13 1.78 23 1.72
4............................... 2.35 14 1.77 24 1.71
5............................... 2.13 15 1.76 25 1.71
6............................... 2.02 16 1.75 26 1.71
7............................... 1.94 17 1.75 27 1.71
8............................... 1.90 18 1.74 28 1.70
9............................... 1.86 19 1.73 29 1.70
10.............................. 1.83 20 1.73 30 1.70
11.............................. 1.81 21 1.72 1.645
----------------------------------------------------------------------------------------------------------------

(3) A manufacturer must distribute the testing of the remaining
number of engines needed to meet the required sample size N, evenly
throughout the remainder of the model year.
(4) After each new test, the required sample size, N, is
recalculated using updated sample means, sample standard deviations and
the appropriate 95% confidence coefficient.
(5) A manufacturer must continue testing and updating each engine
family's sample size calculations according to paragraphs (b)(1)
through (b)(4) of this section until a decision is made to stop testing
as described in paragraph (b)(6) of this section or a noncompliance
decision is made pursuant to Sec. 90.710(b).
(6) If, at any time throughout the model year, the calculated
required sample size, N, for an engine family is less than or equal to
the actual sample size, n, and the sample mean, x, for HC +
NO_X (NMHC+NO_X) and CO is less than or equal to
the FEL or standard if no FEL, the manufacturer may stop testing that
engine family.
(7) If, at any time throughout the model year, the sample mean, x,
for HC + NO_X (NMHC+NO_X) or CO is greater than the
FEL or standard if no FEL, the manufacturer must continue testing that
engine family at the appropriate maximum sampling rate.
(8) The maximum required sample size for an engine family
(regardless of the required sample size, N, as calculated in paragraph
(b)(1) of this section) is the lesser of thirty tests per model year or
one percent of projected annual production for that engine family for
that model year.
(9) Manufacturers may elect to test additional engines. Additional
engines, whether tested in accordance with the testing procedures
specified in Sec. 90.707 or not, may not be included in the Sample Size
and Cumulative Sum equation calculations as defined in paragraph (b)(1)
of this section and Sec. 90.708(a), respectively. However, such
additional test results may be used as appropriate to ``bracket'' or
define the boundaries of the production duration of any emission
nonconformity determined under this subpart. Such additional test data
must be identified and provided to EPA with the submittal of the
official CumSum results.
(c) The manufacturer must produce and assemble the test engines
using its normal production and assembly process for engines to be
distributed into commerce.
(d) No quality control, testing, or assembly procedures shall be
used on any test engine or any portion thereof, including parts and
subassemblies, that have not been or will not be used during the
production and assembly of all other engines of that family, unless the
Administrator approves the modification in production or assembly
procedures in advance.

Sec. 90.707 Test procedures.

(a)(1) For small SI engines subject to the provisions of this
subpart, the prescribed test procedures are specified in subpart E of
this part.
(2) The Administrator may, on the basis of a written application by
a manufacturer, prescribe test procedures other than those specified in
paragraph (a)(1) of this section for any small SI engine the
Administrator determines is not susceptible to satisfactory testing
using procedures specified in paragraph (a)(1) of this section.
(b)(1) The manufacturer may not adjust, repair, prepare, or modify
any test engine and may not perform any emission test on any test
engine unless this adjustment, repair, preparation, modification and/or
test is documented in the manufacturer's engine assembly and inspection
procedures and is actually performed by the manufacturer on every
production line engine or unless this adjustment, repair,

[[Page 15248]]

preparation, modification and/or test is required or permitted under
this subpart or is approved in advance by the Administrator.
(2) The Administrator may adjust or cause to be adjusted any engine
parameter which the Administrator has determined to be subject to
adjustment for certification, Production Line Testing and Selective
Enforcement Audit testing, to any setting within the physically
adjustable range of that parameter, as determined by the Administrator,
prior to the performance of any test. However, if the idle speed
parameter is one which the Administrator has determined to be subject
to adjustment, the Administrator may not adjust it or require that it
be adjusted to any setting which causes a lower engine idle speed than
would have been possible within the physically adjustable range of the
idle speed parameter if the manufacturer had accumulated 12 hours of
service on the engine under paragraph (c) of this section, all other
parameters being identically adjusted for the purpose of the
comparison. The manufacturer may be requested to supply information
necessary to establish an alternate minimum idle speed. The
Administrator, in making or specifying these adjustments, may consider
the effect of the deviation from the manufacturer's recommended setting
on emission performance characteristics as well as the likelihood that
similar settings will occur on in-use engines. In determining
likelihood, the Administrator may consider factors such as, but not
limited to, the effect of the adjustment on engine performance
characteristics and information from similar in-use engines.
(c) Service accumulation. (1) Unless otherwise approved by the
Administrator, prior to performing exhaust emission production line
testing, the manufacturer may accumulate up to 12 hours of service on
each test engine. For catalyst-equipped engines, the manufacturer must
accumulate a number of hours equal to the number of hours accumulated
to represent stabilized emissions on the engine used to obtain
certification.
(2) Service accumulation must be performed in a manner using good
engineering judgment to obtain emission results representative of
production line engines.
(d) Unless otherwise approved by the Administrator, the
manufacturer may not perform any maintenance on test engines after
selection for testing.
(e) If an engine is shipped to a remote facility for production
line testing, and an adjustment or repair is necessary because of
shipment, the engine manufacturer must perform the necessary adjustment
or repair only after the initial test of the engine, except in cases
where the Administrator has determined that the test would be
impossible or unsafe to perform or would permanently damage the engine.
Engine manufacturers must report to the Administrator, in the quarterly
report required by Sec. 90.709(e), all adjustments or repairs performed
on test engines prior to each test.
(f) If an engine cannot complete the service accumulation or an
emission test because of a malfunction, the manufacturer may request
that the Administrator authorize either the repair of that engine or
its deletion from the test sequence.
(g) Testing. A manufacturer must test engines with the test
procedure specified in subpart E of this part to demonstrate compliance
with the applicable FEL (or standard where there is no FEL). If
alternate or special test procedures pursuant to regulations at
Sec. 90.120 are used in certification, then those alternate procedures
must be used in production line testing.
(h) Retesting. (1) If an engine manufacturer reasonably determines
that an emission test of an engine is invalid because of a procedural
error, test equipment problem, or engine performance problem that
causes the engine to be unable to safely perform a valid test, the
engine may be retested. A test is not invalid simply because the
emission results are high relative to other engines of the family.
Emission results from all tests must be reported to EPA. The engine
manufacturer must also include a detailed explanation of the reasons
for invalidating any test in the quarterly report required in
Sec. 90.709(e). If a test is invalidated because of an engine
performance problem, the manufacturer must document in detail the
nature of the problem and the repairs performed in order to use the
after-repair test results for the original test results.
(2) Routine retests may be conducted if the manufacturer conducts
the same number of tests on all engines in the family. The results of
these tests must be averaged according to procedures of Sec. 90.709.

Sec. 90.708 Cumulative Sum (CumSum) procedure.

(a) (1) Manufacturers must construct separate CumSum Equations for
each regulated pollutant (HC+NO_X (NMHC+NO_X) and
CO) for each engine family. Test results used to calculate the
variables in the CumSum Equations must be final deteriorated test
results as defined in Sec. 90.709(c). The CumSum Equation is
constructed as follows:

C<INF>i</INF>=max[0 0R (C<INF>i-1</INF>+X<INF>i</INF>-(FEL+F))]

Where:

C<INF>i</INF>=The current CumSum statistic.
C<INF>i</INF><INF>-1</INF>=The previous CumSum statistic. Prior to any
testing, the CumSum statistic=0 (i.e. C<INF>0</INF>=0).
X<INF>i</INF>=The current emission test result for an individual
engine.
FEL=Family Emission Limit (the standard if no FEL).
F=.25 x <greek-s>.

(2) After each test pursuant to paragraph (a)(1) of this section,
C<INF>i </INF>is compared to the action limit, H, the quantity which
the CumSum statistic must exceed, in two consecutive tests, before the
engine family may be determined to be in noncompliance for a regulated
pollutant for purposes of Sec. 90.710.

Where:

H=The Action Limit. It is 5.0 x <greek-s>, and is a function of the
standard deviation, <greek-s>.
<greek-s>=is the sample standard deviation and is recalculated after
each test.

(b) After each engine is tested, the CumSum statistic shall be
promptly updated according to the CumSum Equation in paragraph (a) of
this section.
(c)(1) If, at any time during the model year, a manufacturer amends
the application for certification for an engine family as specified in
Sec. 90.122(a) by performing an engine family modification (i.e. a
change such as a running change involving a physical modification to an
engine, a change in specification or setting, the addition of a new
configuration, or the use of a different deterioration factor) with no
changes to the FEL (where applicable), all previous sample size and
CumSum statistic calculations for the model year will remain unchanged.
(2) If, at any time during the model year, a manufacturer amends
the application for certification for an engine family as specified in
Sec. 90.122 (a) by modifying its FEL (where applicable) for future
production, as a result of an engine family modification, the
manufacturer must continue its calculations by inserting the new FEL
into the sample size equation as specified in Sec. 90.706(b)(1) and
into the CumSum equation in paragraph (a) of this section. All previous
calculations remain unchanged. If the sample size calculation indicates
that additional tests are required, then those tests must be performed.
CumSum statistic calculations must not indicate that the family has
exceeded the action limit for two consecutive tests. Where applicable,

[[Page 15249]]

the manufacturer's final credit report as required by Sec. 90.210 must
break out the credits that result from each FEL and corresponding
CumSum analysis for the set of engines built to each FEL.
(3) If, at any time during the model year, a manufacturer amends
the application for certification for an engine family as specified in
Sec. 90.122 (a) (or for an affected part of the year's production in
cases where there were one or more mid-year engine family
modifications), by modifying its FEL (where applicable) for past and/or
future production, without performing an engine modification, all
previous sample size and CumSum statistic calculations for the model
year must be recalculated using the new FEL. If the sample size
calculation indicates that additional tests are required, then those
tests must be performed. The CumSum statistic recalculation must not
indicate that the family has exceeded the action limit for two
consecutive tests. Where applicable, the manufacturer's final credit
report as required by Sec. 90.210 must break out the credits that
result from each FEL and corresponding CumSum analysis for the set of
engines built to each FEL.

Sec. 90.709 Calculation and reporting of test results.

(a) Initial test results are calculated following the applicable
test procedure specified in Sec. 90.707 (a). The manufacturer rounds
these results to the number of decimal places contained in the
applicable emission standard expressed to one additional significant
figure.
(b) Final test results are calculated by summing the initial test
results derived in paragraph (a) of this section for each test engine,
dividing by the number of tests conducted on the engine, and rounding
to the same number of decimal places contained in the applicable
standard expressed to one additional significant figure.
(c) The final deteriorated test results for each test engine are
calculated by applying the appropriate deterioration factors, derived
in the certification process for the engine to the final test results,
and rounding to the same number of decimal places contained in the
applicable standard.
(d) If, at any time during the model year, the CumSum statistic
exceeds the applicable action limit, H, in two consecutive tests for
any regulated pollutant, (HC+NO_X (NMHC+NO_X) or
CO) the engine family may be determined to be in noncompliance and the
manufacturer must notify EPA by contacting its official EPA
certification representative within ten working days of such exceedance
by the CumSum statistic.
(e) Within 45 calendar days of the end of each quarter, each engine
manufacturer must submit to the Administrator a report which includes
the following information:
(1) The location and description of the manufacturer's or other's
exhaust emission test facilities which were utilized to conduct testing
reported pursuant to this section;
(2) Total production and sample sizes, N and n, for each engine
family;
(3) The FEL (standard, if no FEL) against which each engine family
was tested;
(4) A description of the process to obtain engines on a random
basis;
(5) A description of the test engines;
(6) For each test conducted:
(i) A description of the test engine, including:
(A) Configuration and engine family identification;
(B) Year, make, and build date;
(C) Engine identification number; and
(D) Number of hours of service accumulated on engine prior to
testing;
(ii) Location where service accumulation was conducted and
description of accumulation procedure and schedule;
(iii) Test number, date, test procedure used, initial test results
before and after rounding, final test results before and after rounding
and final deteriorated test results for all exhaust emission tests,
whether valid or invalid, and the reason for invalidation, if
applicable;
(iv) A complete description of any adjustment, modification,
repair, preparation, maintenance, and/or testing which was performed on
the test engine, was not reported pursuant to any other paragraph of
this subpart, and will not be performed on all other production
engines;
(v) A CumSum analysis, as required in Sec. 90.708, of the
production line test results for each engine family; and
(vi) Any other information the Administrator may request relevant
to the determination whether the new engines being manufactured by the
manufacturer do in fact conform with the regulations with respect to
which the certificate of conformity was issued;
(7) For each failed engine as defined in Sec. 90.710(a), a
description of the remedy and test results for all retests as required
by Sec. 90.711(g);
(8) The date of the end of the engine manufacturer's model year
production for each engine family; and
(9) The following signed statement and endorsement by an authorized
representative of the manufacturer:

This report is submitted pursuant to Sections 213 and 208 of the
Clean Air Act. This production line testing program was conducted in
complete conformance with all applicable regulations under 40 CFR
Part 90. No emission-related changes to production processes or
quality control procedures for the engine family tested have been
made during this production line testing program that affect engines
from the production line. All data and information reported herein
is, to the best of (Company Name) knowledge, true and accurate. I am
aware of the penalties associated with violations of the Clean Air
Act and the regulations thereunder. (Authorized Company
Representative.)

Sec. 90.710 Compliance with criteria for production line testing.

(a) A failed engine is one whose final deteriorated test results
pursuant to Sec. 90.709(c), for HC+NO_X (NMHC+NO_X)
or CO exceeds the applicable Family Emission Limit (FEL) or standard if
no FEL.
(b) An engine family shall be determined to be in noncompliance, if
at any time throughout the model year, the CumSum statistic,
C<INF>i</INF>, for HC+NO_X (NMHC+NO_X) or CO, is
greater than the action limit, H, for that pollutant, for two
consecutive tests.

Sec. 90.711 Suspension and revocation of certificates of conformity.

(a) The certificate of conformity is suspended with respect to any
engine failing pursuant to Sec. 90.710(a) effective from the time that
testing of that engine is completed.
(b) The Administrator may suspend the certificate of conformity for
an engine family which is determined to be in noncompliance pursuant to
Sec. 90.710(b). This suspension will not occur before thirty days after
the engine family is determined to be in noncompliance and the
Administrator has notified the manufacturer of its intent to suspend.
During this thirty day period the Administrator will work with the
manufacturer to achieve appropriate production line changes to avoid
the need to halt engine production, if possible. The Administrator will
approve or disapprove any such production line changes proposed to
address a family that has been determined to be in noncompliance under
this subpart within 15 days of receipt. If the Administrator does not
approve or disapprove such a proposed change within such time period,
the proposed change shall be considered approved.
(c) If the results of testing pursuant to the regulations in this
subpart indicate that engines of a particular family produced at one
plant of a manufacturer do not conform to the regulations in this part
with respect to which the certificate of conformity was issued, the
Administrator may suspend the

[[Page 15250]]

certificate of conformity with respect to that family for engines
manufactured by the manufacturer at all other plants.
(d) Notwithstanding the fact that engines described in the
application for certification may be covered by a certificate of
conformity, the Administrator may suspend such certificate immediately
in whole or in part if the Administrator finds any one of the following
infractions to be substantial:
(1) The manufacturer refuses to comply with any of the requirements
of this subpart.
(2) The manufacturer submits false or incomplete information in any
report or information provided to the Administrator under this subpart.
(3) The manufacturer renders inaccurate any test data submitted
under this subpart.
(4) An EPA enforcement officer is denied the opportunity to conduct
activities authorized in this subpart and a warrant or court order is
presented to the manufacturer or the party in charge of the facility in
question.
(5) An EPA enforcement officer is unable to conduct activities
authorized in Sec. 90.705 because a manufacturer has located its
facility in a foreign jurisdiction where local law prohibits those
activities.
(e) The Administrator shall notify the manufacturer in writing of
any suspension or revocation of a certificate of conformity in whole or
in part, except that the certificate is immediately suspended with
respect to any failed engines as provided for in paragraph (a) of this
section.
(f) The Administrator may revoke a certificate of conformity for an
engine family after the certificate has been suspended pursuant to
paragraph (b) or (c) of this section if the proposed remedy for the
nonconformity, as reported by the manufacturer to the Administrator, is
one requiring a design change or changes to the engine and/or emission
control system as described in the application for certification of the
affected engine family.
(g) Once a certificate has been suspended for a failed engine, as
provided for in paragraph (a) of this section, the manufacturer must
take the following actions before the certificate is reinstated for
that failed engine:
(1) Remedy the nonconformity;
(2) Demonstrate that the engine conforms to the applicable
standards (FELs, where applicable) by retesting the engine in
accordance with these regulations; and
(3) Submit a written report to the Administrator, described in
Sec. 90.709(e)(7), after successful completion of testing on the failed
engine, which contains a description of the remedy and test results for
each engine in addition to other information that may be required by
this part.
(h) Once a certificate for a failed engine family has been
suspended pursuant to paragraph (b) or (c) of this section, the
manufacturer must take the following actions before the Administrator
will consider reinstating the certificate:
(1) Submit a written report to the Administrator which identifies
the reason for the noncompliance of the engines, describes the proposed
remedy, including a description of any proposed quality control and/or
quality assurance measures to be taken by the manufacturer to prevent
future occurrences of the problem, and states the date on which the
remedies will be implemented; and
(2) Demonstrate that the engine family for which the certificate of
conformity has been suspended does in fact comply with the regulations
of this part by testing as many engines as needed so that the CumSum
statistic, as calculated in Sec. 90.708(a), falls below the action
limit. Such testing must comply with the provisions of this part. If
the manufacturer elects to continue testing individual engines after
suspension of a certificate, the certificate is reinstated for any
engine actually determined to be in conformance with the Family
Emission Limits (or standards if no FEL) through testing in accordance
with the applicable test procedures, provided that the Administrator
has not revoked the certificate pursuant to paragraph (f) of this
section.
(i) Once the certificate has been revoked for an engine family, if
the manufacturer desires to continue introduction into commerce of a
modified version of that family, the following actions must be taken
before the Administrator may issue a certificate for that modified
family:
(1) If the Administrator determines that the proposed change(s) in
engine design may have an effect on emission performance deterioration,
the Administrator shall notify the manufacturer within five working
days after receipt of the report in paragraph (h)(1) of this section
whether subsequent testing under this subpart will be sufficient to
evaluate the proposed change or changes or whether additional testing
will be required;
(2) After implementing the change or changes intended to remedy the
nonconformity, the manufacturer must demonstrate that the modified
engine family does in fact conform with the regulations of this part by
testing as many engines as needed from the modified engine family so
that the CumSum statistic, as calculated in Sec. 90.708(a) using the
newly assigned FEL if applicable, falls below the action limit; and
(3) When the requirements of paragraphs (i)(1) and (i)(2) of this
section are met, the Administrator shall reissue the certificate or
issue a new certificate, as the case may be, to include that family. As
long as the CumSum statistic remains above the action limit, the
revocation remains in effect.
(j) At any time subsequent to a suspension of a certificate of
conformity for a test engine pursuant to paragraph (a) of this section,
but not later than 15 days (or such other period as may be allowed by
the Administrator) after notification of the Administrator's decision
to suspend or revoke a certificate of conformity in whole or in part
pursuant to paragraph (b), (c), or (f) of this section, a manufacturer
may request a hearing as to whether the tests have been properly
conducted or any sampling methods have been properly applied.
(k) Any suspension of a certificate of conformity under paragraph
(d) of this section shall:
(1) Be made only after the manufacturer concerned has been offered
an opportunity for a hearing conducted in accordance with Secs. 90.712
and 90.713; and
(2) Not apply to engines no longer in the possession of the
manufacturer.
(l) After the Administrator suspends or revokes a certificate of
conformity pursuant to this section and prior to the commencement of a
hearing under Sec. 90.712, if the manufacturer demonstrates to the
Administrator's satisfaction that the decision to suspend or revoke the
certificate was based on erroneous information, the Administrator shall
reinstate the certificate.
(m) To permit a manufacturer to avoid storing non-test engines
while conducting subsequent testing of the noncomplying family, a
manufacturer may request that the Administrator conditionally reinstate
the certificate for that family. The Administrator may reinstate the
certificate subject to the following condition: the manufacturer must
commit to performing offsetting measures that remedy the nonconformity
at no expense to the owners, and which are approved in advance by the
Administrator for all engines of that family produced from the time the
certificate is conditionally reinstated if the CumSum statistic does
not fall below the action limit.

[[Page 15251]]

Sec. 90.712 Request for public hearing.

(a) If the manufacturer disagrees with the Administrator's decision
to suspend or revoke a certificate or disputes the basis for an
automatic suspension pursuant to Sec. 90.711(a), the manufacturer may
request a public hearing.
(b) The manufacturer's request shall be filed with the
Administrator not later than 15 days after the Administrator's
notification of his or her decision to suspend or revoke, unless
otherwise specified by the Administrator. The manufacturer shall
simultaneously serve two copies of this request upon the Manager of the
Engine Compliance Programs Group and file two copies with the Hearing
Clerk for the Agency. Failure of the manufacturer to request a hearing
within the time provided constitutes a waiver of the right to a
hearing. Subsequent to the expiration of the period for requesting a
hearing as of right, the Administrator may, in his or her discretion
and for good cause shown, grant the manufacturer a hearing to contest
the suspension or revocation.
(c) A manufacturer shall include in the request for a public
hearing:
(1) A statement as to which engine configuration(s) within a family
is to be the subject of the hearing; and
(2) A concise statement of the issues to be raised by the
manufacturer at the hearing, except that in the case of the hearing
requested under Sec. 90.711(j), the hearing is restricted to the
following issues:
(i) Whether tests have been properly conducted (specifically,
whether the tests were conducted in accordance with applicable
regulations under this part and whether test equipment was properly
calibrated and functioning);
(ii) Whether sampling plans and statistical analyses have been
properly applied (specifically, whether sampling procedures and
statistical analyses specified in this subpart were followed and
whether there exists a basis for distinguishing engines produced at
plants other than the one from which engines were selected for testing
which would invalidate the Administrator's decision under
Sec. 90.711(c));
(3) A statement specifying reasons why the manufacturer believes it
will prevail on the merits of each of the issues raised; and
(4) A summary of the evidence which supports the manufacturer's
position on each of the issues raised.
(d) A copy of all requests for public hearings will be kept on file
in the Office of the Hearing Clerk and will be made available to the
public during Agency business hours.

Sec. 90.713 Administrative procedures for public hearing.

The administrative procedures for a public hearing requested under
this subpart shall be those procedures set forth in the regulations
found at Secs. 90.513 through 90.516. References in Sec. 90.513 to
Sec. 90.511(j), Sec. 90.512(c)(2), Sec. 90.511(e), Sec. 90.512,
Sec. 90.511(d), Sec. 90.503, Sec. 90.512(c) and Sec. 90.512(b) shall be
deemed to mean Sec. 90.711(j), Sec. 90.712(c)(2), Sec. 90.711(e),
Sec. 90.712, Sec. 90.711(d), Sec. 90.703, and Sec. 90.712(c) and
Sec. 90.712(b), respectively. References to ``test orders'' in
Sec. 90.513 are not applicable.
33. Subpart I is amended by revising the subpart heading to read as
follows:

Subpart I--Emission-related Defect Reporting Requirements,
Voluntary Emission Recall Program, Ordered Recalls

34. Section 90.801 is amended by designating the existing text as
paragraph (a) and adding paragraphs (b), (c), (d), (e), (f) and (g) to
read as follows:

Sec. 90.801 Applicability.

* * * * *
(b) Phase 2 engines subject to provisions of subpart B of this part
are subject to recall regulations specified in 40 CFR part 85, subpart
S, except as otherwise provided in this section.
(c) Reference to section 214 of the Clean Air Act in 40 CFR
85.1801(a) is deemed to mean section 216 of the Clean Air Act.
(d) Reference to section 202 of the Act in 40 CFR 85.1802(a) is
deemed to mean section 213 of the Act.
(e) Reference to ``family particulate emission limits'' as defined
in part 86 promulgated under section 202 of the Act'' in 40 CFR
85.1803(a) and 85.1805(a)(1) is deemed to mean ``family emission
limits'' as defined in subpart C of this part 90 promulgated under
section 213 of the Act''.
(f) Reference to ``vehicles or engines'' throughout 40 CFR part 85,
subpart S is deemed to mean ``Phase 2 nonroad small SI engines at or
below 19 kW.''
(g) In addition to the requirements in 40 CFR 85.1805(a)(9) for
Phase 2 engines include a telephone number provided by the
manufacturer, which may be used to report difficulty in obtaining
recall repairs.
35. Section 90.802 is amended by adding a sentence at the end of
the introductory text to read as follows:

Sec. 90.802 Definitions.

* * * The definitions of 40 CFR 85.1801 also apply to this part.
* * * * *
36. Section 90.803 is amended by revising paragraph (c) to read as
follows:

Sec. 90.803 Emission defect information report.

* * * * *
(c) The manufacturer must submit defect information reports to
EPA's Engine Compliance Programs Group not more than 15 working days
after an emission-related defect is found to affect 25 or more engines
manufactured in the same certificate or model year. Information
required by paragraph (d) of this section that is either not available
within 15 working days or is significantly revised must be submitted to
EPA's Engine Compliance Programs Group as it becomes available.
* * * * *
37. Section 90.805 is amended by revising paragraph (a) to read as
follows:

Sec. 90.805 Reports, voluntary recall plan filing, record retention.

(a) Send the defect report, voluntary recall plan, and the
voluntary recall progress report to: Group Manager, Engine Compliance
Programs Group, (6403-J), Environmental Protection Agency, Washington,
D.C. 20460.
* * * * *
38. A new Sec. 90.808 is added to subpart I read as follows

Sec. 90.808 Ordered recall provisions.

(a) Effective with respect to Phase 2 small SI engines:
(1) If the Administrator determines that a substantial number of
any class or category of engines, although properly maintained and
used, do not conform to the regulations prescribed under section 213 of
the Act when in actual use throughout their useful life (as defined
under Sec. 90.105), the Administrator shall immediately notify the
manufacturer of such nonconformity and require the manufacturer to
submit a plan for remedying the nonconformity of the engines with
respect to which such notification is given.
(i) The manufacturer's plan shall provide that the nonconformity of
any such engines which are properly used and maintained will be
remedied at the expense of the manufacturer.
(ii) If the manufacturer disagrees with such determination of
nonconformity and so advises the Administrator, the Administrator shall
afford the manufacturer and other interested persons an opportunity to
present their views and evidence in support thereof at a public
hearing. Unless, as a result of such hearing, the Administrator
withdraws such determination of nonconformity, the Administrator shall,
within 60 days after the completion of

[[Page 15252]]

such hearing, order the manufacturer to provide prompt notification of
such nonconformity in accordance with paragraph (a)(2) of this section.
The manufacturer shall comply in all respects with the requirements of
this subpart.
(2) Any notification required to be given by the manufacturer under
paragraph (a)(1) of this section with respect to any class or category
of engines shall be given to dealers, ultimate purchasers, and
subsequent purchasers (if known) in such manner and containing such
information as required in subparts I and M of this part.
(3)(i) Prior to an EPA ordered recall, the manufacturer may perform
a voluntary emissions recall pursuant to regulations at Sec. 90.804.
Such manufacturer is subject to the reporting and recordkeeping
requirements of Sec. 90.805.
(ii) Once EPA determines that a substantial number of engines fail
to conform with the requirements of section 213 of the Act or this
part, the manufacturer will not have the option of a voluntary recall.
(b) The manufacturer bears all cost obligation a dealer incurs as a
result of a requirement imposed by paragraph (a) of this section. The
transfer of any such cost obligation from a manufacturer to a dealer
through franchise or other agreement is prohibited.
(c) Any inspection of an engine for purposes of paragraph (a)(1) of
this section, after its sale to the ultimate purchaser, is to be made
only if the owner of such vehicle or engine voluntarily permits such
inspection to be made, except as may be provided by any state or local
inspection program.

Subpart J--Exclusion and Exemption of Nonroad Engines From
Regulations

39. Section 90.905 is amended by revising paragraph (f) to read as
follows:

Sec. 90.905 Testing exemption.

* * * * *
(f) A manufacturer of new nonroad engines may request a testing
exemption to cover nonroad engines intended for use in test programs
planned or anticipated over the course of a subsequent one-year period.
Unless otherwise required by the Director, Engine Programs and
Compliance Division, a manufacturer requesting such an exemption need
only furnish the information required by paragraphs (a)(1) and (d)(2)
of this section along with a description of the recordkeeping and
control procedures that will be employed to assure that the engines are
used for purposes consistent with Sec. 90.1004(b).
40. Section 90.906 is amended by revising paragraphs (a)
introductory text and (a)(3) introductory text to read as follows:

Sec. 90.906 Manufacturer-owned exemption and precertification
exemption.

(a) Any manufacturer owned nonroad engine, as defined by
Sec. 90.902, is exempt from Sec. 90.1003, without application, if the
manufacturer complies with the following terms and conditions:
* * * * *
(3) Unless the requirement is waived or an alternative procedure is
approved by the Director, Engine Programs and Compliance Division, the
manufacturer must permanently affix a label to each nonroad engine on
exempt status. This label should:
* * * * *
41. Section 90.909 is amended by revising paragraph (c) to read as
follows:

Sec. 90.909 Export exemptions.

* * * * *
(c) EPA will maintain a list of foreign countries that have in
force nonroad emission standards identical to U.S. EPA standards and
have so notified EPA. This list may be obtained by writing to the
following address: Group Manager, Engine Compliance Programs Group,
Engine Programs and Compliance Division (6403-J), Environmental
Protection Agency, Washington, D.C. 20460. New nonroad engines exported
to such countries must comply with U.S. EPA certification regulations.
* * * * *
42. Section 90.911 is revised to read as follows:

Sec. 90.911 Submission of exemption requests.

Requests for exemption or further information concerning exemptions
and/or the exemption request review procedure should be addressed to:
Group Manager, Engine Compliance Programs Group, Engine Programs and
Compliance Division (6403J), Environmental Protection Agency,
Washington, D.C. 20460.

Subpart K--Prohibited Acts and General Enforcement Provisions

43. Section 90.1003 is amended by revising paragraphs (a)(2),
(a)(4)(i), (b)(4), and (b)(5) and by redesignating paragraphs
(a)(4)(iii) and (a)(4) (iv) as paragraphs (a)(4) (iv) and (a)(4)(v)
respectively, and by adding new paragraphs (a)(4)(iii) and (b)(6) to
read as follows:

Sec. 90.1003 Prohibited acts.

(a) * * *
(2) (i) For a person to fail or refuse to permit access to or
copying of records or to fail to make reports or provide information
required under Sec. 90.1004.
(ii) For a person to fail or refuse to permit entry, testing or
inspection authorized under Secs. 90.126, 90.506, 90.705, 90.1004, or
90.1207.
(iii) For a person to fail or refuse to perform tests or to have
tests performed as required under Secs. 90.119, 90.504, 90.703,
90.1004, 90.1204.
(iv) For a person to fail to establish or maintain records as
required under Secs. 90.209, 90.704, 90.805, or 90.1004.
(v) For a person to fail to submit a remedial plan as required
under Sec. 90.808.
* * * * *
(4)* * *
(i) To sell, offer for sale, or introduce or deliver into commerce,
a nonroad engine unless the manufacturer has complied with the
requirements of Sec. 90.1103.
* * * * *
(iii) To fail or refuse to comply with the requirements of
Sec. 90.808.
* * * * *
(b)* * *
(4) Certified nonroad engines shall be used in all equipment or
vehicles that are self-propelled, portable, transportable, or are
intended to be propelled while performing their function, unless the
manufacturer of the equipment or vehicle can prove that the vehicle or
equipment will be used in a manner consistent with paragraph (2) of the
definition of Nonroad engine in Sec. 90.3. Nonroad vehicle and
equipment manufacturers may continue to use noncertified nonroad
engines built prior to the applicable implementation date of the Phase
1 rule until noncertified engine inventories are depleted; further
after the applicable implementation of the Phase 2 regulations in this
part, nonroad vehicle and equipment manufacturers may continue to use
Phase 1 engines until Phase 1 engine inventories are depleted.
Stockpiling (i.e., build up of an inventory of uncertified engines or
Phase 1 engines beyond normal business practices to avoid or delay
compliance with the Phase 1 or Phase 2 regulations in this part,
respectively) will be considered a violation of this section.
(5) A new nonroad engine, intended solely to replace an engine in a
piece of nonroad equipment that was originally produced with an engine
manufactured prior to the applicable implementation date as described
in Secs. 90.2, 90.103 and 90.106, or with an engine that was

[[Page 15253]]

originally produced in a model year in which less stringent standards
under this part were in effect, shall not be subject to the
requirements of Sec. 90.106 or prohibitions and provisions of
paragraphs (a)(1) and (b)(4) of this section provided that:
(i) The engine manufacturer has ascertained that no engine produced
by itself or the manufacturer of the engine that is being replaced, if
different, and certified to the requirements of this subpart, is
available with the appropriate physical or performance characteristics
to repower the equipment; and
(ii) The engine manufacturer or its agent takes ownership and
possession of the old engine in partial exchange for the replacement
engine; and
(iii) The replacement engine is clearly labeled with the following
language, or similar alternate language approved in advance by the
Administrator: THIS ENGINE DOES NOT COMPLY WITH FEDERAL NONROAD OR ON-
HIGHWAY EMISSION REQUIREMENTS. SALE OR INSTALLATION OF THIS ENGINE FOR
ANY PURPOSE OTHER THAN AS A REPLACEMENT ENGINE IN A NONROAD VEHICLE OR
PIECE OF NONROAD EQUIPMENT WHOSE ORIGINAL ENGINE WAS NOT CERTIFIED, OR
WAS CERTIFIED TO LESS STRINGENT EMISSION STANDARDS THAN THOSE THAT
APPLY TO THE YEAR OF MANUFACTURE OF THIS ENGINE, IS A VIOLATION OF
FEDERAL LAW SUBJECT TO CIVIL PENALTY; and
(iv) Where the replacement engine is intended to replace an engine
built after the applicable implementation date of regulations under
this part, but built to less stringent emission standards than are
currently applicable, the replacement engine shall be identical in all
material respects to a certified configuration of the same or later
model year as the engine being replaced.
(6)(i) Regulations elsewhere in this part notwithstanding, for
three model years after the phase-in of Class I and Class II Phase 2
standards; i.e. through August 1, 2010 for Class I engines and through
model year 2008 for Class II engines, small volume equipment
manufacturers as defined in this part may continue to use, and engine
manufacturers may continue to supply, engines certified to Phase 1
standards (or identified and labeled by their manufacturer to be
identical to engines previously certified under Phase 1 standards),
provided the equipment manufacturer has demonstrated to the
satisfaction of the Administrator that no certified Phase 2 engine is
available with suitable physical or performance characteristics to
power a piece of equipment in production prior to the initial effective
date of Phase 2 standards, as indicated in 90.103(a). The equipment
manufacturer must also certify to the Administrator that the equipment
model has not undergone any redesign which could have facilitated
conversion of the equipment to accommodate a Phase 2 engine.
(ii) Regulations elsewhere in this part notwithstanding, for the
duration of the Phase 2 rule in this part, equipment manufacturers who
certify to the Administrator that annual eligible production of a
particular model of equipment will not exceed 500 for a Class I model
in production prior to August 1, 2007 or a Class II model in production
prior to the 2001 model year, may continue to use in that model, and
engine manufacturers may continue to supply, engines certified to Phase
1 requirements, (or identified and labeled by their manufacturer to be
identical to engines previously certified under Phase 1 standards). To
be eligible for this provision, the equipment manufacturer must have
demonstrated to the satisfaction of the Administrator that no certified
Phase 2 engine is available with suitable physical or performance
characteristics to power the equipment. The equipment manufacturer must
also certify to the Administrator that the equipment model has not
undergone any redesign which could have facilitated conversion of the
equipment to accommodate a Phase 2 engine.
(iii) An equipment manufacturer which is unable to obtain suitable
Phase 2 engines and which can not obtain relief under any other
provision of this part, may, prior to the date on which the
manufacturer would become in noncompliance with the requirement to use
Phase 2 engines, apply to the Administrator to be allowed to continue
using Phase 1 engines, through August 1, 2008 for Class 1 engines and
through the 2006 model year for Class II engines, subject to the
following criteria:
(A) The inability to obtain Phase 2 engines is despite the
manufacturer's best efforts and is the result of an extraordinary
action on the part of the engine manufacturer that was outside the
control of and could not be reasonably foreseen by the equipment
manufacturer; such as canceled production or shipment, last minute
certification failure, unforeseen engine cancellation, plant closing,
work stoppage or other such circumstance; and
(B) the inability to market the particular equipment will bring
substantial economic hardship to the equipment manufacturer resulting
in a major impact on the equipment manufacturer's solvency.
(iv) The written permission from the Administrator to the equipment
manufacturer shall serve as permission for the engine manufacturer to
provide such Phase 1 engines required by the equipment manufacturers
under this paragraph (b)(6) of this section. As Phase 1 engines, these
engines are exempt from Production Line Testing requirements under
subpart H of this part and in-use testing provisions under subpart M of
this part, and are excluded from the certification averaging, banking
and trading program of subpart C of this part.

Subpart L--Emission Warranty and Maintenance Instructions

44. Section 90.1103 is amended by revising paragraphs (a) and (b)
to read as follows:

Sec. 90.1103 Emission warranty, warranty period.

(a) Warranties imposed by this subpart shall be for the first two
years of engine use from the date of sale to the ultimate purchaser.
(b) The manufacturer of each new nonroad engine must warrant to the
ultimate purchaser and each subsequent purchaser that the engine is
designed, built and equipped so as to conform at the time of sale with
applicable regulations under section 213 of the Act, and the engine is
free from defects in materials and workmanship which cause such engine
to fail to conform with applicable regulations for its warranty period.
* * * * *
45. Section 90.1104 is amended by adding paragraph (e) to read as
follows:

Sec. 90.1104 Furnishing of maintenance instructions to ultimate
purchaser.

* * * * *
(e) If a manufacturer includes in an advertisement a statement
respecting the cost or value of emission control devices or systems,
the manufacturer shall set forth in the statement the cost or value
attributed to these devices or systems by the Secretary of Labor
(through the Bureau of Labor Statistics). The Secretary of Labor, and
his or her representatives, has the same access for this purpose to the
books, documents, papers, and records of a manufacturer as the
Comptroller General has to those of a recipient of assistance for
purposes of section 311 of the Act.
46. A new subpart, Subpart M is added to part 90 to read as
follows:

[[Page 15254]]

Subpart M--Voluntary In-Use Testing

Sec.
90.1201 Applicability.
90.1202 Definitions.
90.1203 Voluntary Manufacturer In-use testing program.
90.1204 Maintenance, aging and testing of engines.
90.1205 In-use test program reporting requirements.
90.1206 Reserved.
90.1207 Entry and access.
90.1208--90.1249 [Reserved]

Subpart M--Voluntary In-Use Testing

Sec. 90.1201 Applicability.

The provisions of this subpart from Sec. 90.1201 through
Sec. 90.1249 are applicable to all nonhandheld Phase 2 engines subject
to the provisions of subpart A of this part.

Sec. 90.1202 Definitions.

For the purposes of this subpart, except as otherwise provided, the
definitions in subparts A and C of this part apply to this subpart.

Sec. 90.1203 Voluntary Manufacturer In-Use Testing Program.

(a) Manufacturers may elect to participate in the voluntary in-use
testing program by notifying the Administrator in writing of their
intent to conduct emissions testing on in-use engines prior to the
beginning of each model year. The notification must include a list of
engine families the manufacturer has selected to include in the testing
program.
(b) Each engine family included in the voluntary in-use testing
program is exempted from the Production Line Testing requirements
according to Sec. 90.701(c) for two model years, the current model year
and the subsequent model year. Manufacturers may only include up to
twenty percent of their eligible engine families in this in-use testing
program each model year.
(c) The manufacturer must randomly select or procure a minimum of
three engines, from each family included in the voluntary program, for
emissions testing. These three engines may be selected or procured
from:
(1) Existing consumer or independently owned fleets,
(2) Existing manufacturer owned fleets, or
(3) The production line and placed into either manufacturer or
consumer owned fleets. Although a minimum of three engines must be
emissions tested from each engine family in this testing program, a
manufacturer may elect to emissions test more than three engines per
family.
(d) The manufacturer or the manufacturer's designee must:
(1) Age the selected engines in equipment representing the top 50
percent, by production, of available equipment for the engine family.
(2) Age the selected engines to at least 75 percent of each
engines' useful life as determined pursuant to Sec. 90.105.
(3) Age the engine/equipment combination in actual field conditions
encountered with typical use of the equipment as described in the
owner's manual or other literature sold with the equipment or engine.
(e) Documents obtained in the procurement or aging process must be
maintained as required in Sec. 90.121.
(f) The manufacturer must complete testing within three calendar
years from the time they notified the Administrator of their intent to
participate in the voluntary in-use testing program, unless otherwise
approved by the Administrator; the Administrator will give such
approval upon acceptance of documentation demonstrating that
appropriate in-use testing will take a longer period of time.

Sec. 90.1204 Maintenance, aging and testing of engines.

(a) Prior to aging the engines and after appropriate stabilization,
manufacturers may optionally conduct emissions testing on the engines,
according to the test procedures described in subpart E of this part.
These tests to serve as baseline references.
(b) Manufacturers must obtain information regarding the accumulated
usage, maintenance, operating conditions, and storage of the test
engines.
(1) The manufacturer may take reasonable measures to assure that
the engines and equipment were properly used and maintained during the
field aging process, but additional maintenance to that indicated in
the owners manual or other literature sold with the equipment or engine
is prohibited.
(2) Unless otherwise approved by the Administrator, once a
manufacturer begins aging and/or testing an engine, the manufacturer
may not remove that engine from the selected sample unless that engine
experiences catastrophic mechanical failure or safety concerns
requiring major engine repair.
(c) The manufacturer may perform minimal set-to-spec maintenance on
components of a test engine that are not subject to parameter
adjustment. Components subject to parameter adjustment must be sealed
and tamperproof and may not be adjusted for testing. Unless otherwise
approved by the Administrator, maintenance to any test engine may
include only that which is listed in the owner's instructions for
engines with the amount of service and age of the test engine.
(d) After aging each engine to at least 75 percent of the engine's
useful life as determined pursuant to Sec. 90.105, at least one valid
emission test, according to the test procedure outlined in subpart E of
this part, is required for each test engine. Data from other emission
testing or performance testing performed on a test engine must be
supplied to EPA, and may not be used for the purpose of determining the
need for maintenance on an engine.
(e) Documents obtained in the procurement, aging, maintenance, or
testing process must be maintained as required in Sec. 90.121.

Sec. 90.1205 In-use test program reporting requirements.

(a) The manufacturer shall submit to the Administrator within
ninety (90) days of completion of testing for a given model year's
engines, all emission testing results generated from the voluntary in-
use testing program. The following information must be reported for
each test engine:
(1) Engine family;
(2) Model;
(3) Application;
(4) Engine serial number;
(5) Date of manufacture;
(6) Hours of use;
(7) Date and time of each test attempt;
(8) Results (if any) of each test attempt;
(9) Schedules, descriptions and justifications of all maintenance
and/or adjustments performed;
(10) Schedules, descriptions and justifications of all
modifications and/or repairs; and
(11) A listing of any test engines that were deleted from the aging
process or testing process and technical justifications to support the
deletion.
(b) All testing reports and requests for approvals made under this
subpart shall be addressed to: Manager, Engine Compliance Programs
Group (6403-J), U.S. Environmental Protection Agency, Washington, D.C.
20460.

Sec. 90.1206 [Reserved]

Sec. 90.1207 Entry and access.

(a) To allow the Administrator to determine whether a manufacturer
is complying with the provisions under this subpart, EPA enforcement
officers or their authorized representatives, upon presentation of
credentials, shall be permitted entry, during operating hours, into any
of the following places:

[[Page 15255]]

(1) Any facility where engines undergo or are undergoing aging,
maintenance, repair, preparation for aging, selection for aging or
emission testing.
(2) Any facility where records or documents related to any of
activities described in paragraph (a)(1) of this section are kept.
(3) Any facility where any engine that is being tested or aged, was
tested or aged or will be tested or aged is present.
(b) Upon admission to any facility referred to in paragraph (a) of
this section, EPA enforcement officers or EPA authorized
representatives are authorized to perform those activities set forth in
Sec. 90.705 (b) and also to inspect and make copies of records related
to engine aging (service accumulation) and maintenance.
(c) The provisions of Sec. 90.705(c), (d), (e), (f) and (g) also
apply to entry and access under this subpart.

Secs. 90.1208--90.1249 [Reserved]

[FR Doc. 99-6175 Filed 3-29-99; 8:45 am]
BILLING CODE 6560-50-P

Notices For
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Phase 2 Emission Standards for New Nonroad Spark-Ignition Nonhandheld Engines At or Below 19 Kilowatts

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