Fuels and Fuel Additives; Amendments to the Enforcement
Exemptions for California Gasoline Refiners
Related Material
[Federal Register: April 16, 1997 (Volume 62, Number 73)]
[Proposed Rules]
[Page 18695-18703]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ap97_dat-34]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[FRL-5812-2]
Fuels and Fuel Additives; Amendments to the Enforcement
Exemptions for California Gasoline Refiners
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: In this action, EPA is proposing to amend certain requirements
of the reformulated gasoline (RFG) regulations which are applicable to
California gasoline refiners, importers and oxygenate blenders. These
amendments will reduce the burden associated with the overlapping
California and federal regulations of gasoline refiners and oxygenate
blenders located in California and importers of California gasoline.
The first proposed amendment would allow California gasoline refiners,
importers, and oxygenate blenders to substitute the California RFG test
methods for federal RFG test methods for their production of gasoline
used in California and conventional gasoline used outside of
California. The second proposed amendment would allow California
gasoline refiners, importers and oxygenate blenders to retain the
current exemption from various federal recordkeeping, reporting, and
other enforcement-related provisions if they produce California RFG,
using one of the California ``alternative'' certification methods and
containing less oxygen than the federal RFG oxygen standard, if it is
supplied to areas within California that are not required to receive
federal RFG. The California gasoline refiners, importers and oxygenate
blenders would conduct an annual gasoline quality survey for the
federally-covered RFG areas of California to ensure the gasoline in
each federally-covered RFG area is in compliance with the federal
oxygen standard. The third proposed amendment would correct an omission
in existing 40 CFR 80.81(e)(1). The fourth proposed amendment would
permit a refiner of California gasoline to sample and test at off-site
tankage that is approved by the California Air Resources Board (CARB)
as part of the refiner's ``production facility'' if certain conditions
are met. EPA believes that these proposed changes will grant refiners
flexibility without any anticipated adverse environmental impact.
DATES: Comments on this proposed rule must be received by May 16, 1997.
EPA does not plan to hold a public hearing on this proposed rule,
unless one is requested. If a request by May 1, 1997, a public hearing
will be held. If such a hearing is held, comments must be received
within 30 days of the date of such hearing.
ADDRESSES: Written comments on this proposed action should be addressed
to Public Docket No. A-97-06, Waterside Mall (Room M-1500),
Environmental Protection Agency, Air Docket Section, 401 M Street, SW,
Washington, D.C. 20460. Documents related to this rule have been placed
in public dockets A-97-06 and may be inspected between the hours of
8:00 a.m. to 5:30 p.m., Monday through Friday. A reasonable fee may be
charged for copying docket material. Those wishing to notify EPA that
they request an opportunity for a public hearing on this action should
contact Anne-Marie C. Pastorkovich, U.S. Environmental Protection
Agency, Office of Air and Radiation, (202) 233-9013.
FOR FURTHER INFORMATION CONTACT: Anne-Marie Cooney Pastorkovich, U.S.
Environmental Protection Agency, Office of Air and Radiation, (202)
233-9013.
SUPPLEMENTARY INFORMATION:
I. Regulated Entities
Regulated categories and entities potentially affected by this
action include:
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Category Examples of regulated entities
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Industry............................ Refiners, importers and oxygenate
blenders in California.
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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 be potentially regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
an entity is regulated by this action, one should carefully examine the
RFG provisions at 40 CFR part 80, particularly Sec. 80.81 dealing
specifically with California gasoline. 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.
II. Background
A. RFG Standards and California Covered Areas
Section 211(k) of the Clean Air Act (the Act) requires EPA to
establish requirements for reformulated gasoline (RFG) to be used in
specified ozone nonattainment areas (federally-covered areas), as well
as ``anti-dumping'' requirements for non-reformulated, or conventional,
gasoline used in the rest of the country, beginning in January 1995.
The RFG covered areas in California are Los Angeles and San Diego, and
Sacramento. The Act requires that RFG reduce ozone forming volatile
organic compound (VOC) and toxics emissions from motor vehicles, not
increase emission of oxides of nitrogen (NOX), and meet certain
content standards for oxygen, benzene and heavy metals. The relevant
regulations for RFG and conventional gasoline may be found at 40 CFR
part 80, subparts D, E, and F.1
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\1\ See 59 FR 7812 (February 16, 1994).
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B. Exemptions Specifically Related to California Gasoline
On September 18, 1992, the California Air Resources Board (CARB)
adopted regulations requiring reformulation of California gasoline. The
CARB regulations established a comprehensive set of gasoline
specifications designed to achieve reductions in emissions of VOCs,
NOX, carbon monoxide (CO), sulfur dioxide, and toxic air
pollutants from gasoline-fueled vehicles.2 The CARB regulations
set standards for eight gasoline parameters--sulfur, benzene, olefins,
aromatic hydrocarbons, oxygen, Reid vapor pressure (RVP), and
distillation temperatures for the 50 percent and 90 percent evaporation
points (T-50 and T-90, respectively)--applicable starting March 1, 1996
for all gasoline in the California distribution network (except for
gasoline being exported from California). The CARB regulations also
provide for the production and sale of alternative gasoline
formulations, with certification under the CARB program based on a
predictive model or vehicle emission testing.3
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\2\ See Title 13, California Code of Regulations sections 2250-
2272 (as amended January 26, 1996).
\3\ Id., sections 2265 and 2266.
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During the federal RFG rulemaking, and in response to comments by
California refiners, EPA concluded (1) that VOC and toxics emission
reductions resulting from the California Phase 2 standards would be
equal to or more stringent than the federal Phase I RFG standards
(applicable from January
[[Page 18697]]
1, 1995 through December 31, 1999), (2) that the content standards for
oxygen and benzene under California Phase 2 would in practice be
equivalent to the federal content standards, and (3) that the CARB's
compliance and enforcement program is designed to be sufficiently
rigorous.4 As a result, 40 CFR 80.81 exempts certain refiners,
importers and oxygenate blenders of California Phase 2 gasoline
(hereafter referred to as ``refiners'') from a number of federal RFG
and conventional gasoline provisions intended to demonstrate compliance
with the federal standards.5 While the federal RFG and
conventional gasoline standards continue to apply in California,
refiners of gasoline sold in California are exempt in most cases from
various enforcement-related provisions. California refiners are not
exempt from these federal enforcement requirements with regard to
gasoline that is delivered for use outside California, because the
California Phase 2 standards and the CARB enforcement program do not
cover gasoline exported from California.
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\4\ See 59 FR 7758, 7759 (February 16, 1994).
\5\ Specifically, the federal RFG regulations at Sec. 80.81
provide that, subsequent to March 1, 1996 (the start of the
California Phase 2 program), the specified parties are exempt from
meeting the enforcement requirements dealing with: compliance
surveys (Sec. 80.68), independent sampling and testing
(Sec. 80.65(f)), designation of gasoline (Sec. 80.65(d)), marking of
conventional gasoline (Secs. 80.65(g) and 80.82), downstream
oxygenate blending (Sec. 80.69), record keeping (Secs. 80.74 and
80.104), reporting (Secs. 80.75 and 80.105), product transfer
documents (Sec. 80.77), parameter value reconciliation requirements
(Sec. 80.65(e)(2)), reformulated gasoline and RBOB compliance
requirements (Sec. 80.65(c)), annual compliance audit requirements
(Sec. 80.65(h)), and compliance attest engagement requirements
(subpart F). Various restrictions apply to the exemptions, and the
exemptions do not apply after December 31, 1999.
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In letters of June 15, August 3 and November 10, 1995, the Western
States Petroleum Association (WSPA), on behalf of gasoline refiners in
California, petitioned EPA to revise the exemption provisions at 40 CFR
80.81 to provide additional flexibility. The three principle areas
discussed in the petition are the gasoline testing methods, the
standard for Reid vapor pressure (RVP), and production of gasoline not
meeting the federal standard for oxygen content. In February 1996, EPA
notified WSPA that EPA would initiate rulemaking to address these
issues.6 Since the California Phase 2 program was scheduled to
begin March 1, 1996, EPA announced that it would grant California
refiners temporary relief through specific exemptions from enforcement
related to test methods, oxygen content of gasoline not used in the RFG
areas, and RVP until the rulemakings could be completed.
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\6\ See letter from Mr. Steve Herman, Assistant Administrator
for Enforcement and Compliance Assurance, EPA, to Mr. Douglas
Henderson, Executive Director, Western States Petroleum Association,
dated February 29, 1996. A copy of this letter has been placed in
the docket at the location listed in the ADDRESSES section.
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A final rule related to the RVP standard was published as a direct
final rule in the Federal Register on May 8, 1996, and became effective
on July 8, 1996.7
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\7\ ``Fuels and Fuel Additives--Reformulated Gasoline Sold in
California; Reid Vapor Pressure lower limit adjustment--Direct Final
Rule,'' 61 FR 20736 (May 8, 1996).
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Today's proposal addresses the remaining two issues: gasoline
testing methods and the use in conventional gasoline areas of gasoline
certified by California that does not meet the federal RFG standard for
oxygen content. EPA is proposing changes similar to the temporary
enforcement exemptions granted to the California refiners in its
February 1996 letter.
III. Description of Proposed Action
A. Testing Methods
Both the federal RFG and the California Phase 2 programs specify
testing methods to demonstrate compliance with the standards applicable
under each programs. However, in the case of the tests for four
parameters (benzene, sulfur, oxygen, and aromatics) the methods 8
specified under the two programs are different.
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\8\ See 40 CFR 80.46(a),(e), (f) and (g) for Federal RFG test
method requirements.
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The 40 CFR 80.81(h) exemption in the federal RFG regulation allows
California refiners to use the California test methods prescribed in
Title 13, California Code of Regulations, sections 2260 et seq.,
instead of the federal test methods prescribed at 40 CFR 80.46, when
producing California Phase 2 gasoline that is used in California.
Therefore, California refiners may use either the federal or CARB
methods for gasoline used within the state. However, under existing
federal regulations, California refiners are still required to use the
federal test methods prescribed at 40 CFR 80.46 for gasoline that is
used outside California, including conventional gasoline subject to the
anti-dumping standards specified at 40 CFR 80.101.9
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\9\ EPA estimates that the portion of gasoline exported from
California and used in neighboring states is about twelve percent of
the total California gasoline production and imports.
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WSPA, on behalf of California refiners, has requested that EPA
extend the test method exemption at 40 CFR 80.81(h) to also cover the
gasoline produced by California refiners that is exported from
California to other states. WSPA asked for this change because a
refiner who is utilizing the flexibility of the CARB testing methods
for gasoline sold within California, would have to implement federal
test methods to certify the same gasoline for export to surrounding
states.
EPA believes that WSPA has raised a valid concern and that, under
certain conditions, it may be appropriate to allow the use of non-
federal test methods for gasoline exported from California. Absent such
relief, California refiners who export gasoline to other states are
required to certify such gasoline using federal testing methods. Both
``downgraded'' RFG and conventional gasoline are exported from
California. If a California refiner chooses to utilize the flexibility
of the CARB testing methods, they must also implement the federal test
methods in order to certify gasoline for distribution outside
California.
EPA believes that the standards under the California Phase 2
program are expected to result in lower emissions than will result from
federal RFG and, as discussed below, there may be emissions benefits
for areas receiving ``downgraded'' California RFG. Moreover CARB is
expected to enforce these standards in a comprehensive, aggressive
manner that will result in high compliance. The Agency does not believe
that any environmental detriment would occur from allowing the use of
the CARB test methods for gasoline produced in California, but shipped
out of state for use in non-RFG areas. Because some of the gasoline
shipped out of California as conventional gasoline may be
``downgraded'' RFG or gasoline meeting California Phase 2 standards, an
environmental benefit may be expected for areas receiving such gasoline
exported from California. Thus, allowing flexibility in testing method
for California refiners might actually produce an environmental benefit
to surrounding areas, because such flexibility would make it easier and
more economical for California refiners to export cleaner gasoline.
In its February 29, 1996 response to WSPA, EPA indicated its
intention to change the federal RFG regulations to allow additional
testing flexibility for California refiners and immediately gave
California refiners additional flexibility for a limited time. In that
letter, EPA stated that it will not enforce the requirement at 40 CFR
80.65(e)(1) and 40 CFR 80.101(i)(1)(i)(A) to test gasoline using the
federal test methods specified under 40 CFR 80.46 for benzene, sulfur,
oxygen or aromatics,
[[Page 18698]]
with regard to gasoline that is produced in or imported into California
but that is used outside California.
In order to qualify for this enforcement relief, the refiner or
importer must meet certain conditions, designed to ensure that only
gasoline produced by refiners or importers subject to CARB enforcement,
and that is sold in Federal conventional gasoline areas outside
California, is covered by this flexibility and to ensure that only
gasoline meeting RFG standards will actually be sold in Federal RFG
areas. Furthermore, it is necessary to establish equivalency between
CARB and Federal test method results, since the methods themselves are
not necessarily equivalent and therefore different methods (if not
correlated) would yield different results. In the absence of
correlation, the possibility of one fuel having more than one value
associated with it could cause disruption and confusion in the
distribution system. EPA believes that the conditions, as described in
the next paragraph, are necessary to protect the environmental benefits
associated with the Federal RFG and anti-dumping program.
To qualify, the gasoline must be produced at a refinery located in
California at which gasoline meeting the California Phase 2 standards
and requirements is produced, or the gasoline must be imported into
California from outside the United States as California Phase 2
gasoline (i.e., gasoline that meets the standards and requirements of
the California Phase 2 program). When exported from California, such
gasoline must be classified as federal conventional gasoline, and may
not be classified as federal RFG. Furthermore, the refiner must
correlate the results from any non-federal test method to the method
specified under 40 CFR 80.46 for any gasoline that is used outside
California, and such correlation must be demonstrated to EPA upon
request.
The temporary enforcement flexibility described above and in EPA's
February 29, 1996 letter will expire at the conclusion of this
rulemaking (i.e. upon the effective date of the final rule).
EPA is proposing today to amend 40 CFR 80.81 to incorporate the
enforcement flexibility regarding test methods that EPA temporarily
granted in its February 29, 1996 letter to WSPA. EPA is proposing this
action because the Agency believes that it may result in lower
compliance costs and greater flexibility for California refiners and
because there is no expected adverse environmental impact from this
proposed action.
B. Standard for Oxygen
Section 211(k) of the Clean Air Act requires that the RFG standard
of 2.0 weight percent (wt%) minimum oxygen must be met in each
federally-covered RFG area. When EPA promulgated the California
enforcement exemptions at 40 CFR 80.81, the statewide standards for
California Phase 2 gasoline would have been equal to or more stringent
than all federal RFG standards. With regard to oxygen content, the
California Phase 2 standards included a statewide flat limit of 1.8 to
2.2 wt% oxygen that EPA considered, in practice, to be equivalent to
the federal standard of 2.0 wt% minimum. As a result, EPA did not need
to distinguish between California Phase 2 gasoline used in the
federally-covered RFG areas within California from the California Phase
2 gasoline used in the other areas of California, in order to have
confidence that RFG standards would be met in each federally covered
RFG area in California.
The final California Phase 2 requirements were changed, however,
and now allow gasoline that does not meet the federal RFG standard for
oxygen. Under two alternative California certification methods, the
California predictive model and the vehicle emissions testing method,
there is no minimum oxygen content requirement for summertime
California Phase 2 gasoline.10 Under 40 CFR 80.81(e)(2), certain
enforcement exemptions are withdrawn if a California refiner uses one
of the alternative California certification methods, unless within 30
days of receiving the California certification it notifies EPA and
demonstrates that its gasoline meets all federal RFG per-gallon
standards, including the 2.0 weight % oxygen standard.
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\10\ See Title 13, California Code of Regulations, section
2262.5 for the oxygen standards, section 2265 for the alternative
predictive model method, and section 2266 for the alternative
vehicle emission testing method.
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Therefore, in order to retain the enforcement exemptions, 40 CFR
80.81(e)(2) currently requires that all California Phase 2 gasoline
produced by a refiner, regardless of whether it is sold in a federally-
covered RFG area, must meet the federal RFG standard for oxygen
content. Because neither of the two alternative California
certification methods ensure that the federal oxygen content standard
will be met, except during designated winter months, a refiner that
uses an alternative California certification method must either
additionally notify and demonstrate to EPA that its gasoline meets the
federal RFG standard for oxygen content or lose its eligibility for
certain federal exemptions under 40 CFR 80.81. This loss of eligibility
applies even if the gasoline not meeting the federal RFG standard for
oxygen content is being distributed only to those areas of California
that are not federally-covered RFG areas.
In its petition, WSPA asked EPA to amend the enforcement exemption
provisions to allow California refiners to supply California Phase 2
gasoline containing less than 2.0 wt% oxygen to markets within
California that are not federally-covered RFG areas without having to
comply with the notification and demonstration requirements of 40 CFR
80.81(e)(2) and without losing the federal enforcement exemptions. In
its February 29, 1996 response to WSPA, EPA said it is appropriate to
amend 40 CFR 80.81, provided that annual gasoline quality surveys for
oxygen content are conducted in each federally-covered RFG area, in
order to ensure the gasoline in each federally-covered RFG area in
California is in compliance with the federal oxygen content standard.
EPA reached these conclusions because the statewide California Phase 2
standards, with the exception of oxygen content, are more stringent
than the standards for federal RFG, including any gasoline formulation
certified using the alternative methods. In addition, EPA believes that
these standards will be appropriately enforced by CARB. EPA believes
that the California Phase 2 program provides emission reductions that
equal or exceed that of the federal Phase I RFG program, except for the
oxygen content requirements. EPA concluded that the federal RFG oxygen
requirements do not have to be met in areas of California that are not
subject to the federal RFG standards, in order to ensure compliance
with the oxygen requirements for areas that are subject to the federal
RFG standards. The annual compliance survey is a more appropriate
mechanism to ensure such compliance under these circumstances.
Consistent with, and as described in, the February 29, 1996 letter,
EPA is proposing to amend 40 CFR 80.81 to allow refiners to produce
California Phase 2 gasoline containing less than 2.0 wt% oxygen for use
outside the federally-covered RFG areas in California, provided
appropriate annual gasoline quality surveys for oxygen are conducted in
each federally-covered RFG area in California. These surveys must show
an average oxygen content in each covered area of at least 2.0 wt%.
While EPA could require that all gasoline batches being produced for
the federally-covered RFG areas be tested for oxygen content at the
refinery, or
[[Page 18699]]
prior to importation as applicable, such testing would not ensure that
all gasoline being sold in the federally-covered RFG areas contains at
least 2.0 wt% oxygen. Even though each refinery might meet its refinery
gate standard for oxygen on average, some areas might still receive RFG
with relatively low oxygen content while others might receive RFG with
relatively high oxygen content. The surveys are designed to ensure that
all Federal RFG program areas receive RFG that meets at least the
minimum required oxygen standard.
As in the federal RFG program outside of California, the compliance
surveys appear to be the most practical method to assure that, on
average, the federally-covered RFG areas in California receive gasoline
that meets the federal standard for oxygen content. The federal RFG
program at 40 CFR 80.67 allows refiners, importers, and oxygenate
blenders to meet certain federal RFG standards on average, rather than
on a per-gallon basis for each batch of gasoline. The requirement must
then be met on average, over the entire production, without any
averaging for each specific covered area to which the gasoline is
distributed.
Refiners, importers and oxygenate blenders producing gasoline to
meet standards on average are allowed to produce some batches of
gasoline that are less stringent than the averaging standards (within
the limits of a per-gallon minimum or maximum standard, as applicable).
But they must also produce some batches of gasoline that are more
stringent than the averaging standards, such that on average, the
applicable averaging standard is met. The averaging standards are
somewhat more stringent than the per-gallon standard (e.g., the oxygen
content averaging standard is 2.1 wt%, and the per-gallon standard is
2.0 wt%). It is expected that, if all refiners meet either the per-
gallon standards or the averaging standards, the covered areas
receiving their gasoline should achieve an average oxygen content no
lower than would occur without the allowance for such averaging, based
on the extensive fungible distribution system for gasoline products.
Because many gasoline distribution systems are fungible, some
uncertainty exists as to where each batch of gasoline from each
supplier is ultimately distributed, and what batches, or portions of
batches, from each supplier that each covered area actually receives.
For example, under the averaging program, the possibility still exists
that one or more covered areas may receive too many batches of RFG that
have a relatively low oxygen content (e.g. greater than or equal to 1.5
wt%, but less than 2.0 wt%), so that the required oxygen levels will
not have been achieved in that area.
Consequently, the federal RFG program at 40 CFR 80.67 requires
compliance surveys under 40 CFR 80.68 for refiners that elect to meet
the standards on average under 40 CFR 80.41(b), (d) or (f), as
applicable, rather than to meet the per-gallon standards for each batch
of gasoline under 40 CFR 80.41(a), (c), or (e), as applicable. In
general, the compliance surveys are to ensure that each covered area
receives gasoline that cumulatively (from all suppliers and across
time) has the same oxygen content it would have if averaging was not
allowed. However, the federal RFG regulations at 40 CFR 80.81(b)(1)
exempts refiners of California gasoline (with respect to California
gasoline) from the compliance survey provisions at 40 CFR 80.68, for
the reasons described earlier.
In response to the WSPA request concerning oxygen content
requirements in California and the changes in California Phase 2
standards regarding oxygen content, EPA has reconsidered the limited
use application of the compliance survey provisions. EPA believes that
a yearly survey program, such as that required under 40 CFR 80.68 for
averaging under the federal RFG program, along with other program
requirements (such as compliance by each refinery separately), provides
the most flexible alternative to refiners and the most assurance to EPA
that complying gasoline is actually being sold in the federally-covered
RFG areas.
As stated in its February 29, 1996 response to WSPA, EPA decided to
allow California refiners to produce gasoline that contains less than
2.0 wt% oxygen for use outside the federally-covered RFG areas, until
appropriate amendments to the RFG requirements were been published in
the Federal Register and become effective. In particular, EPA said it
will not enforce the requirement at 40 CFR 81(e)(2) that California
refiners must demonstrate that federal RFG per-gallon standards are met
on each occasion California Phase 2 gasoline is certified under Title
13, California Code of Regulations, section 2265 (dealing with gasoline
certification based on the California predictive model), provided that
two conditions are met. First, a program of gasoline quality surveys
must be conducted in each RFG covered area in California each year to
monitor annual average oxygen content. Second, the surveys must be
conducted in accordance with each requirement specified under 40 CFR
80.68(b) and (c), dealing with surveys for RFG quality, and 40 CFR
80.41(o) through (r), dealing with the effects of survey failures,
except that the surveys need only evaluate for oxygen content and a
minimum of four surveys (a survey series) must be conducted in each
covered area each calendar year.
EPA proposes to retain as an option the existing 30-day
notification and demonstration provisions at 40 CFR 80.81(e)(2).
Under the existing provision, gasoline certified using an
alternative California certification method and not meeting the federal
standard for oxygen content may not be marketed anywhere in California
without losing the enforcement exemptions listed in paragraph (e)(1).
This is because EPA cannot allow non-complying fungible gasoline in
California, unless there are adequate enforcement procedures to ensure
compliance of the gasoline in the federally-covered RFG areas with the
federal standards.
EPA considered whether it should simply eliminate the exemption for
compliance surveys at 40 CFR 80.81(b)(1) for California gasoline.
However, such an action would impact all refiners of California
gasoline, even for those that choose to not certify using one of the
alternative California certification procedures, and those that
produce, import or blend only California gasoline that meets the
federal oxygen content standard. Instead, EPA proposes to offer the
compliance surveys as an option for refiners of California gasoline
that do not choose the existing notification and demonstration option
at 40 CFR 80.81(e)(2), and that do not want to meet the federal oxygen
content standard for gasoline being used in areas of California that
are not federally-covered RFG areas. Further, EPA proposes some
exceptions to the compliance surveys as specified for federally-covered
RFG areas outside of California.
First, EPA proposes that surveys conducted under the proposed
compliance survey option of the exemption provisions at 40 CFR
80.81(e)(2) not be considered for the purposes of determining the
required number of surveys that must be conducted for compliance with
the federal RFG program at 40 CFR 80.68. Under 40 CFR 80.68(b), the
required number of compliance surveys required in a year for federally-
covered RFG areas outside of California depends partly on the number of
areas required to be surveyed in the year, the number of surveys
conducted the previous year,
[[Page 18700]]
and the survey results from the previous year.
EPA believes that the proposed optional surveys for federally-
covered RFG areas in California should not impact the required surveys
for federally-covered RFG areas outside of California. This is because
of the differences in the purpose, scope and desired consequences
between the two survey programs. The federal RFG compliance surveys
required at 40 CFR 80.68 are designed to detect and apply remedial
actions to geographical and temporal noncompliance that may occur due
to the combination of averaging and refinery based standards.
Parameters for all standards being averaged are required to be
measured, and the ultimate consequence of multiple failures of the
survey series is to effectively disallow the use of averaging. In
contrast, the proposed optional surveys under 40 CFR 80.81(e)(2) are
designed to detect and apply remedial actions to geographical and
temporal noncompliance with the oxygen content standard that may occur
due to the absence of California oxygenate standards and other
enforcement requirements intended to ensure the delivery of RFG into
RFG areas, such as product transfer documents. The ultimate consequence
of multiple failures of the survey series is to either withdraw certain
federal enforcement exemptions, or require refiners to produce
California gasoline that meets the federal oxygen content standard for
all areas within California (see fourth issue of this section).
Second, EPA proposes a fixed number of surveys for the proposed
compliance survey option, similar to the temporary enforcement
flexibility granted in the February 29, 1996 letter to WSPA. Under 40
CFR 80.68(b), a formula is used to determine the number of surveys
required in a year, which depends on a specified schedule, the number
of surveys required the previous year, gasoline volume supplied to the
covered areas, and results of the survey the previous year. However,
EPA believes that a minimum four surveys each year for each federally-
covered RFG area is adequate to determine whether the average oxygen
content is adequate. Therefore, EPA is proposing that 40 CFR
80.81(e)(2) require only a minimum of four surveys each year for each
federally-covered RFG area in California. As with the surveys required
under 40 CFR 80.68 for federally-covered areas outside of California,
EPA will determine when these optional surveys conducted in California
under 40 CFR 80.81(e)(2) shall be conducted.
Third, the proposed consequences of passing and failing an optional
survey series in a federally-covered RFG area in California under 40
CFR 80.81(e)(2) is different than the existing consequences of passing
and failing a required survey series in federally-covered RFG areas
outside of California under 40 CFR 80.68. A failure of an oxygen
content compliance survey required at 40 CFR 80.68 for a federally-
covered RFG area outside of California will result in the
``ratcheting'' of the minimum per-gallon oxygen standard to be more
stringent (i.e., to be closer to the averaging standard) for the
following year. As a consequence, the allowable range, and thus the
flexibility, for averaging will be reduced. For example, the per-gallon
minimum standard under averaging for oxygen content is 1.5 wt%. Under
40 CFR 80.41(o), if a covered area fails the survey series for a year,
the per-gallon minimum oxygen content standard for the following year
will be increased by 0.1 wt% to 1.6 wt%. If the covered area fails the
survey series in a subsequent year, the per-gallon minimum oxygen
content standard for the following year will be increased by 0.1 wt% to
1.7 wt%, and so on. If the covered area fails the survey series any
five years (consecutive or non-consecutive), the per-gallon minimum
oxygen content standard for the years following the fifth failure will
be equal to the federal per-gallon oxygen standard of 2.0 wt%. However,
a one-time relaxation of the per-gallon minimum standard by 0.1 wt% is
allowed following two consecutive years of survey series passes for
oxygen content.
For this survey option, EPA proposes that only one year of passing
the survey series in a covered area will be needed to initiate
relaxation of the minimum oxygen content standard for the following
year. EPA proposes that the minimum oxygen content standard be relaxed
by 0.1 wt% for each year following a year in which the survey series
passes in a federally-covered RFG area in California. However, EPA will
not allow the minimum oxygen content standard to be less than 1.5 wt%,
the minimum oxygen content standard for federal RFG under averaging. As
with failures of survey series required under 40 CFR 80.68 in
federally-covered RFG areas outside of California in accordance with 40
CFR 80.41(q)(4), adjusted standards under the compliance survey option
of 40 CFR 80.81(e)(2) apply to all averaged gasoline produced by a
refiner for use in any federally-covered RFG area. However, the
proposed procedures and consequences of the oxygen surveys contained in
this notice differ somewhat from the survey coincidences under 40 CFR
80.68. The surveys proposed today are much smaller in scope than the
existing, ``general'' survey provisions and the consequences for
successive failures, as discussed in greater detail in this section,
may be the subject of future Agency rulemaking action to remove some or
all of the California enforcement exemptions.
EPA proposes that the ultimate consequence of multiple failures of
the optional compliance surveys be withdrawal of the survey option,
rather than the effective withdrawal of the averaging option, as with
the required compliance surveys conducted under 40 CFR 80.68 for
federally-covered RFG areas outside of California. The compliance
survey option provides refiners of California gasoline additional
flexibility under the federal exemption provisions, conditioned on the
premise that those refiners will control the oxygen content of the
gasoline being distributed to the federally-covered RFG areas within
California. If the refiners do not control the oxygen content of the
gasoline going to those areas as determined by the results of the
surveys, EPA believes that it may be reasonable to remove the
flexibility provided under this option. Consequently, EPA proposes that
a failure of a survey series in one federally-covered RFG area in
California for three consecutive years, or an equivalent ``net''
failure of three years over any number of years (i.e., number of years
the survey series failed subtracted from the number of years the survey
series passed), the compliance survey option will no longer be
applicable for any federally-covered RFG area in California. In
practice, this situation will occur if a survey series fails for a
covered area in a year in which the minimum oxygen content standard had
been raised to 1.7 wt% due to a survey series failure in that covered
area the previous year.
Consistent with the existing compliance survey requirements for
federally-covered RFG areas outside of California, EPA proposes to
allow the optional compliance survey under 40 CFR 80.81(e)(2) to be
conducted either by individual refiners under 40 CFR 80.68(a) or as a
group of refiners under 40 CFR 80.68(b). The temporary enforcement
flexibility granted by the February 29, 1996 response to WSPA omitted
the individual survey option of 40 CFR 80.68(a), because that survey
option is not currently being used and is not expected to be used for
practical reasons. Under either 80.68(a) or (b), covered refiners are
required to actively participate in a survey program. The consequences
of any survey failure will
[[Page 18701]]
apply to all suppliers serving the failed area.
It should be noted that the California Phase 2 gasoline that does
not meet the federal RFG standards, including the oxygen standard, is
classified under the federal regulations as conventional gasoline. In
addition, the flexibility allowed by today's proposed amendments does
not alter the prohibitions under section 211(k)(5) of the Clean Air
Act, and 40 CFR 80.78(a)(1) against selling or dispensing conventional
gasoline to ultimate consumers in federally-covered RFG areas, and
against selling conventional gasoline for resale in federally-covered
RFG areas unless the gasoline is segregated and marked as
``conventional gasoline, not for sale to ultimate consumers in a
covered area.'' Nothing in today's proposal would change the
requirement that refiners and importers in California meet all other
Federal RFG standards, including the oxygen standard, for gasoline
produced or imported for use in Federal RFG covered areas in
California. These standards must be met separately for each refinery
and by each importer.
The proposed amendments to 40 CFR 80.81 are generally consistent
with the February 29, 1996 letter to WSPA.
C. Correction to 80.81(e)(1)
EPA proposes to correct 40 CFR 80.81(e)(1), which erroneously omits
one provision, paragraph (f), from the list of enforcement exemption
provisions that would not apply under the conditions of paragraphs
(e)(2) or (e)(3). Paragraph (e)(2) specifies that the exemption
provisions listed in paragraph (e)(1) do not apply if a refiner
certifies California gasoline under one of the alternative California
certification procedures, unless the refiner notifies EPA of that
alternative certification and demonstrates to EPA that its gasoline
meets all federal per-gallon standards. (This proposal adds a
compliance survey option to section (e)(2)(ii).) Paragraph (e)(3)
specifies that the exemption provisions listed in paragraph (e)(1) do
not apply in the case of a refiner of California gasoline that has been
assessed a civil, criminal or administrative penalty for certain
violations of federal or California regulations, except upon a showing
of good cause.
Paragraph (f) specifies that for California phase 2 gasoline
(California gasoline that is sold or made available for sale after
March 1, 1996) the following federal RFG enforcement requirements are
waived: the oxygenated fuels provisions of 80.78(a)(1)(iii), the
product transfer provisions of 80.78(a)(1)(iv), the oxygenate blending
provisions contained in 80.78(a)(7), and the segregation of simple and
complex model certified gasoline provision of 80.78(a)(9). Under the
conditions of either paragraph (e)(2) or (e)(3), EPA would need those
enforcement provisions to ensure that gasoline being used in federally-
covered RFG areas in California complies with the federal standards.
Therefore, EPA proposes to amend paragraph 40 CFR 80.81(e)(1) to
include paragraph (f) in the list of enforcement exemptions that would
become inapplicable under the conditions of paragraphs (e)(2) or
(e)(3).
D. Proposed Amendment to Sampling and Testing Requirements for
California refiners
Under 40 CFR 80.65(e)(1), a refiner must determine the properties
of each batch of RFG it produces prior to the gasoline leaving the
refinery.11 Under the California RFG program, refiners may obtain
approval to sample and test gasoline for compliance with California RFG
standards at off-site ``production'' tankage. This approval would have
to be obtained under Title 13, Section 2260(a)(28) of the California
Code of Regulations, which states:
---------------------------------------------------------------------------
\11\ Under 40 CFR 80.2 (h), a ``refinery'' is ``a plant where
gasoline or diesel fuel is produced.''
(28) ``Production facility'' means a facility in California at
which gasoline * * * is produced. Upon request of a producer, the
executive director [of CARB] may designate, as part of the
producer's production facility, a physically separate bulk storage
facility which (A) is owned or leased by the producer, and (B) is
operated by or at the direction of the producer, and (C) is not used
to store or distribute gasoline * * * that is not supplied from the
---------------------------------------------------------------------------
production facility.''
It is EPA's understanding that the third requirement, (C), is
interpreted by CARB to require that the gasoline must be transported to
the off-site tankage served via a dedicated pipeline.
In this notice, EPA is proposing amendments to 40 CFR 80.81(h),
which would allow California refiners who have obtained approval from
the State of California to conduct sampling and testing at off-site
tankage served by a dedicated pipeline to use this approach under the
federal RFG program as well. Specifically, the proposed rule would
allow a California refiner who has obtained approval from the State of
California to conduct sampling and testing at off-site tankage under
California Code of Regulations Title 13, Section 2260(a)(28), to
conduct sampling and testing at such approved off-site tankage for
purposes of the federal RFG program. The gasoline must be sampled and
tested under the terms of a current, valid protocol agreement between
the refiner and CARB. The refiner must provide a copy of the current,
valid protocol agreement specifying the off-site tankage as part of the
production facility, to the EPA Administrator or the Administrator's
designated agent, upon request.
EPA believes that this proposed approach is justified because of
the unique situation that exists in the case of refiners subject to the
California RFG requirements, including the enforcement sampling and
testing program that is carried out by the State of California at
refineries producing California RFG. EPA also believes that this
proposed approach will minimize any unnecessary inconsistencies between
the federal and California RFG requirements which do not result in
differences in environmental or public health impacts.
IV. Statutory Authority
Section 114, 211 and 301(a) of the Clean Air Act as amended (42
U.S.C. 7414, 7545, and 7601(a)).
V. Environmental Impact
This rule is expected to have no negative environmental impact.
These amendments are intended to eliminate duplicative enforcement
requirements, and do not relax the federal standards. EPA has
determined that the statewide California Phase 2 program is equal to or
more stringent than the federal Phase I RFG program, except for the
oxygen standard. In fact, as described above, the California Phase 2
program is designed to, and may result in, greater emissions reductions
that the federal RFG program. The additional testing flexibility
allowed certain refiners of California gasoline under today's proposed
regulation may, in fact, result in an environmental benefit because it
would give California refiners flexibility to sell gasoline meeting
California Phase 2 standards as federal conventional gasoline in other
areas. It is reasonable to expect that such gasoline would be
``cleaner'' than other conventional gasoline and could result in an
environmental benefit to the areas receiving it.
VI. Economic Impact
Today's proposed regulation is expected to give refiners of
California gasoline additional operational flexibility and is not
expected to result in additional compliance costs for regulated
parties, including small entities.
[[Page 18702]]
The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that
Federal Agencies examine the impacts of their regulations on small
entities. The act requires an Agency to prepare a regulatory
flexibility analysis in conjunction with notice and comment rulemaking,
unless the Agency head certifies that the rule will not have a
significant impact on a substantial number of small entities. 5 U.S.C.
605(b). The Administrator certifies that this rule will not have a
significant impact on a substantial number of small entities. This rule
is not expected to result in any additional compliance cost to
regulated parties and may be expected to reduce compliance cost.
Specifically, the additional flexibility allowed by permitting use of
CARB testing methods for California gasoline exported to surrounding
areas, the proposed oxygen survey option, and the proposed off-site
sampling and testing allowance would grant all California refiners
(regardless of size), additional compliance flexibility and would
permit them options that could significantly lower compliance costs.
The changes proposed today are expected to be beneficial for all
affected industry parties, including affected small entities.
VII. Executive Order 12866
Under Executive Order 12866,12 the Agency must determine
whether a regulation is ``significant'' and therefore subject to OMB
review and the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
---------------------------------------------------------------------------
\12\ 58 FR 51736 (October 4, 1993).
---------------------------------------------------------------------------
(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 of 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
this Executive Order.13
---------------------------------------------------------------------------
\13\ Id. at section 3(f)(1)-(4).
---------------------------------------------------------------------------
It has been determined that this rule is not a ``significant
regulatory action'' under the terms of Executive Order 12866 and is
therefore not subject to OMB review.
VIII. Unfunded Mandates
Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``UMRA''), P.L. 104-4, EPA must prepare a budgetary impact statement
to accompany any general notice of proposed rulemaking or final rule
that includes a Federal mandate which may result in estimated costs to
State, local, or tribal governments in the aggregate, or to the private
sector, of $100 million or more. Under Section 205, for any rule
subject to Section 202 EPA generally must select the least costly, most
cost-effective, or least burdensome alternative that achieves the
objectives of the rule and is consistent with statutory requirements.
Under Section 203, before establishing any regulatory requirements that
may significantly or uniquely affect small governments, EPA must take
steps to inform and advise small governments of the requirements and
enable them to provide input.
EPA has determined that the rule proposed today does not include a
federal mandate as defined in UMRA. The rule does not include a Federal
mandate that may result in estimated annual costs to State, local or
tribal governments in the aggregate, or to the private sector, of $100
million or more, and it does not establish regulatory requirements that
may significantly or uniquely affect small governments.
IX. Paperwork Reduction Act
The information collection requirements in this proposed 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
(ICR NO. 1591.07) covering this and related collections. OMB has
approved the remainder of the information collection requirements for
the Standards for Reformulated Gasoline Regulations and has assigned
OMB control number 2060-0277. A copy may be obtained from Sandy Farmer,
OPPE Regulatory Information Division; U.S. Environmental Protection
Agency (2137); 401 M St., S.W.; Washingtion, DC 20460 or by calling
(202) 260-2740.
Today's proposal rule includes optional oxygen surveys applicable
in RFG program areas located within the state of California. This
survey option is necessary to ensure that the environmental and public
health benefits of the RFG program are met in California RFG areas and
is designed to preserve the California enforcement exemptions contained
in 40 CFR 80.81. Specifically, today's proposed rule allows refiners to
produce California Phase 2 gasoline containing less than 2.0 weight%
oxygen for use outside federally covered areas provided appropriate
annual gasoline quality surveys for oxygen are conducted in each
covered area in California.
EPA estimates the cost of all the required RFG surveys to be
approximately 2.3 million for 1997 and approximately $6.0 million for
1998 and beyond (when complex model standards apply). The vast majority
of the cost is attributable to the comprehensive surveys required under
40 CFR 80.68.
Section 80.68 surveys are applicable in all Federal RFG covered
areas outside California and cover a broader range of parameters than
the proposed California surveys, which are designed to monitor annual
average oxygen content only. The proposed California surveys are
limited in their number. Four surveys are proposed to be conducted each
year in each of three California Federal RFG covered areas, for a total
of 12 surveys. Industry has generally welcomed this California survey
option, since it grants flexibility and potentially reduces compliance
burdens.
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 Ageny. This includes the time
needed to review instructions; develop, acquire, install, utilize
technology and systems for the purposes of collecting, validating, and
verifing information, processing and maintaining information, and
disclosing and providing 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 OMG control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
Comments are requested on the Agency's need for this information,
the accuracy of the provided burden estimates, and any suggested
methods for minimizing respondent burden, including through the use of
automated collection techniques. Send comments on the ICR to the
Director, OPPE Regulatory Information Division; U.S. Environmental
Protection Agency (2137); 401 M St., S.W., Washington March 17, 1997 C
20460 and to the
[[Page 18703]]
Office of Information and Regulatory Affairs; Office of Management and
Budget, 725 17th St., N.W. Washington, DC 20503, marked ``Attention''
Desk Officer for EPA. Include the ICR number in any correspondence.
Since OMB is required to make a decision concerning the ICR between 30
and 60 days after April 16, 1997, a comment to OMB is best assured of
having its full effect, if OMB receives it by May 16, 1997. The final
rule will respond to any OMB or public comments on the information
collection requirements contained in this proposal.
List of Subjects in 40 CFR Part 80
Environmental protection, Air pollution control, California
exemptions, Gasoline, Reformulated gasoline, Motor vehicle pollution.
Dated: April 9, 1997.
Carol M. Browner,
Administrator.
40 CFR part 80 is proposed to be amended as follows:
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
1. The authority citation for part 80 continues to read as follows:
Authority: Secs. 114, 211 and 301(a) of the Clean Air Act as
amended (42 U.S.C. 7414, 7545, and 7601(a)).
2. Section 80.81 is amended by revising paragraphs (e)(1), (e)(2)
and (h) to read as follows:
Sec. 80.81 Enforcement exemptions for California gasoline.
* * * * *
(e)(1) The exemption provisions contained in paragraphs (b)(2),
(b)(3), (c), and (f) of this section shall not apply under the
circumstances set forth in paragraphs (e)(2) and (e)(3) of this
section.
(2) Such exemption provisions shall not apply to any refiner,
importer, or oxygenate blender of California gasoline with regards to
any gasoline formulation that it produces or imports is certified under
Title 13, California Code of Regulations, section 2265 or section 2266,
unless:
(i)(A) Written notification option. The refiner, importer, or
oxygenate blender, within 30 days of the issuance of such
certification:
(1) Notifies the Administrator of such certification;
(2) Submits to the Administrator copies of the applicable
certification order issued by the State of California and the
application for certification submitted by the regulated party to the
State of California; and
(3) Submits to the Administrator a written demonstration that all
gasoline formulations produced, imported or blended by the refiner,
importer or oxygenate blender for use in California meets each of the
complex model per-gallon standards specified in Sec. 80.41(c).
(B) If the Administrator determines that the written demonstration
submitted under paragraph (e)(2)(i)(A) of this section does not
demonstrate that all certified gasoline formulations meet each of the
complex model per-gallon standards specified in Sec. 80.41(c), the
Administrator shall provide notice to the party (by first class mail)
of such determination and of the date on which the exemption provisions
specified in paragraph (e)(1) of this section shall no longer be
applicable, which date shall be no earlier than 90 days after the date
of the Administrator's notification; or
(ii) Compliance survey option. The compliance survey requirements
of Sec. 80.68 are met for each covered area in California for which the
refiner, importer or oxygenate blender supplies gasoline for use in the
covered area, except that:
(A) The survey series must determine compliance only with the
oxygen content standard of 2.0 weight-percent;
(B) The survey series must consist of at least four surveys a year
for each covered area;
(C) The surveys shall not be included in determining the number of
surveys under Sec. 80.68(b)(2);
(D) In the event a survey series conducted under this paragraph
(e)(2)(ii) fails in accordance with Sec. 80.68(c)(12), the provisions
of Secs. 80.41(o), (p) and (q) are applicable, except that if the
survey series failure occurs in a year in which the applicable minimum
oxygen content is 1.7 weight percent, the compliance survey option of
this section shall not be applicable for any future year; and
(E) Not withstanding Sec. 80.41(o), in the event a covered area
passes the oxygen content series in a year, the minimum oxygen content
standard for that covered area beginning in the year following the
passed survey series shall be made less stringent by decreasing the
minimum oxygen content standard by 0.1%, except that in no case shall
the minimum oxygen content standard be less than that specified in
Sec. 80.41(d).
* * * * *
(h)(1) For the purposes of the batch sampling and analysis
requirements contained in Sec. 80.65(e)(1), any refiner, importer or
oxygenate blender of California gasoline may use a sampling and/or
analysis methodology prescribed in Title 13, California Code of
Regulations, sections 2260 et seq., in lieu of any applicable
methodology specified in Sec. 80.46, with regards to
(i) Such gasoline; or
(ii) That portion of its gasoline produced or imported for use in
other areas of the United States, provided that
(A) The gasoline must be produced by a refinery that is located in
the state of California that produces California gasoline, or imported
by an importer of California gasoline;
(B) The gasoline must be classified as conventional gasoline upon
exportation from the California, or upon release or shipment from the
refinery if the refinery is located outside of California; and
(C) The refiner or importer must correlate the results from the
applicable sampling and /or analysis methodology prescribed in Title
13, California Code of Regulations, sections 2260 et seq., with the
method specified at Sec. 80.46, and such correlation must be adequately
demonstrated to EPA upon request.
(2) Nothwithstanding the requirements of Sec. 80.65(e)(1) regarding
when the properties of a batch of reformulated gasoline must be
determined, a refiner of California gasoline may determine the
properties of gasoline as specified under Sec. 80.65(e)(1) at off site
tankage provided that:
(i) The samples are properly collected under the terms of a current
and valid protocol agreement between the refiner and the California Air
Resources Board with regard to sampling at the off site tankage and
consistent with requirements prescribed in Title 13, California Code of
Regulations, sections 2260 et seq.; and
(ii) The refiner provides a copy of the protocol agreement to EPA
upon request.
* * * * *
[FR Doc. 97-9867 Filed 4-15-97; 8:45 am]
BILLING CODE 6560-50-P
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