Control of Air Pollution From New Motor Vehicles and New Motor Vehicle Engines: State Commitments to National Low Emission Vehicle Program

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[Federal Register: August 22, 1997 (Volume 62, Number 163)]
[Proposed Rules]
[Page 44753-44799]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22au97-52]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 86
[AMS-FRL-5872-8]
RIN 2060-AF75

Control of Air Pollution From New Motor Vehicles and New Motor
Vehicle Engines: State Commitments to National Low Emission Vehicle
Program

AGENCY: Environmental Protection Agency (EPA).
ACTION: Supplemental notice of proposed rulemaking (SNPRM).

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SUMMARY: For several years, EPA, the Ozone Transport Commission (OTC)
States, the auto manufacturers and other interested parties have been
developing a voluntary clean car program called the National Low
Emission Vehicle (``National LEV'') program, which is designed to
reduce smog and other pollution from new motor vehicles. National LEV
would be a regulatory program that would be enforceable in the same
manner as any other federal new motor vehicle program, except that it
can only come into effect if the OTC States and the auto manufacturers
agree to it.
A significant amount of progress has been made in developing this
program. In October, 1995, EPA proposed the National LEV program. In
June of this year, EPA issued a final rule setting forth the basic
framework and regulatory provisions of the National LEV program. EPA
will resolve the remaining issues in a supplemental final rule it
intends to issue this fall. This supplemental notice of proposed
rulemaking (SNPRM) seeks comment on some of the remaining issues to be
addressed in the supplemental final rule.

DATES: Written comments on this SNPRM must be submitted by September
22, 1997 to the address specified below. EPA will hold a public hearing
on this SNPRM on September 8, 1997 if one is requested by August 29,
1997. This hearing, if requested, would begin at 9:00 a.m. and continue
until 4:30 p.m. or until all commenters have the opportunity to
testify.

ADDRESSES: Interested parties may submit written comments (in
triplicate, if possible) to Public Docket No. A-95-26, at: Air Docket
Section, U.S. Environmental Protection Agency, 401 M Street SW,
Washington, DC 20460 (Telephone 202-260-7548; Fax 202-260-4400).
Materials relevant to this final rule have been placed in Public Docket
No. A-95-26. The docket is located at the above address, in Room M-
1500, Waterside Mall, and may be inspected weekdays between 8:00 a.m.
and 5:30 p.m. A reasonable fee may be charged by EPA for copying docket
materials.
Members of the public may contact the person indicated below to
find out whether a hearing will be held and, if so, the exact location.
Requests for a public hearing should be directed to the contact person
indicated below. The hearing, if requested, will be held in the Ann
Arbor, Michigan metropolitan area.
For further information on electronic availability of this SNPRM,
see the SUPPLEMENTARY INFORMATION section below.

FOR FURTHER INFORMATION CONTACT: Karl Simon, Office of Mobile Sources,
U.S. Environmental Protection Agency, 401 M Street SW, Washington, DC
20460. Telephone (202) 260-3623; Fax (202) 260-6011; e-mail
simon.karl@epamail.epa.gov.

SUPPLEMENTARY INFORMATION:

Regulated Entities

Entities potentially regulated by this action are those that
manufacture and sell motor vehicles in the United States. Regulated
categories and entities include:

------------------------------------------------------------------------
Examples of regulated
Category entities
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Industry.................................. New motor vehicle
manufacturers.
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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 potentially be regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
your activities are regulated by this action, you should carefully
examine the applicability criteria in Sec. 86.1701-97 of the rule
published in the June 6, 1997 Federal Register (62 FR 31192). 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, regulatory support document, and
other related documents are also available electronically from the EPA
Internet Web site. This service is free of charge, except for any cost
you already incur for internet connectivity. The electronic version of
this proposed rule is made available on the day of publication on the
primary Web site listed below. The EPA Office of Mobile Sources also
publishes Federal Register notices and related documents on the
secondary Web site listed below.
1. http://www.epa.gov/fedrgstr/EPA-AIR/ (either select desired
date or use Search feature)
2. http://www.epa.gov/OMSWWW/lev-nlev.htm
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. Outline

The preamble is organized into the following sections.

I. Outline
II. Background
III. National LEV Start Date
IV. National LEV Will Produce Larger VOC and NO_X Emission
Reductions in the OTR Compared to OTC State Adopted Section 177
Programs
V. OTC State Commitments
A. Duration of OTC State Commitments
B. Timing of OTC State Commitments, Manufacturer Opt-Ins, and
EPA Finding National LEV in Effect
C. OTC State Commitments, Manufacturer Opt-Ins, and EPA Finding
that National LEV Is in Effect
1. Initial Opt-In by OTC States
2. Manufacturer Opt-Ins
3. EPA Finding That National LEV Is in Effect
4. SIP Revisions
VI. Incentives for Parties to Keep Commitments to Program
A. Offramp for Manufacturers for OTC State Violation of
Commitment
1. OTC State No Longer Accepts National LEV as a Compliance
Alternative
2. OTC State Fails to Submit SIP Revision Committing to National
LEV
3. OTC State Submits Inadequate SIP Revision Committing to
National LEV
B. OTC State or Manufacturer Legitimately Opts Out of National
LEV
C. Offramp for Manufacturers for EPA Failure to Consider In-Use
Fuel Issues
D. Offramp for OTC States
1. OTC State Offramp Based on Manufacturer Opt-Out
2. OTC State Offramp Based on Change to Stable Standards
E. Lead Time Under Section 177
VII. National LEV Will Produce Creditable Emissions Reductions
A. OTC States Will Keep Their Commitments to National LEV
B. EPA is Unlikely to Change a Stable Standard to Allow OTC
States to Opt Out of National LEV
C. EPA is Unlikely to Fail to Consider In-Use Fuels Issues to
Allow Manufacturers to Opt Out of National LEV
VIII. Additional Provisions

[[Page 44755]]

A. Early Reduction Credits for Northeast Trading Region
B. Calculation of Compliance With Fleet Average NMOG Standards
C. Certification of Tier 1 Vehicles in a Violating State
D. Provisions Relating to Changes to Stable Standards
E. Nationwide Trading Region
F. Elimination of Five-Percent Cap on Sales of Tier 1 Vehicles
and TLEVs in the OTR
G. Technical Corrections to Final Framework Rule
IX. Supplemental Federal Test Procedure
A. Background
B. Elements of the CARB Proposal and Applicability Under
National LEV
1. Test Procedure
2. Emission Standards
a. LEVs and ULEVs
b. Tier 1 Vehicles and TLEVs
3. Implementation Schedule
4. Implementation Compliance
X. Administrative Requirements
A. Administrative Designation
B. Regulatory Flexibility
C. Unfunded Mandates Reform Act
D. Reporting and Recordkeeping Requirements
XI. Statutory Authority

II. Background ¹

This Supplemental Notice of Proposed Rulemaking (SNPRM) is another
step towards a voluntary clean car program (``National LEV'') that will
help control emissions nationwide as well as in the northeastern
states. As discussed in previous Federal Register
documents,² there have been a number of regulatory and other
steps in the development of this program. The process will conclude
with EPA establishing all the regulations necessary to set up the
voluntary clean car program, which will then come into effect if the
auto manufacturers and the OTC States commit to it. In June of this
year, EPA published a final rule setting forth the framework for the
program, including the specific standards that would apply to new motor
vehicles if manufacturers opted in. See 62 FR 31192 (June 6, 1997)
(``Final Framework Rule''). This SNPRM solicits comments on specified
program issues that EPA must resolve to finalize the regulations for
the National LEV program.³ Once EPA issues that supplemental
final rule, it will be up to the OTC States and the auto manufacturers
to determine whether the program comes into effect.
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\1\ Although this section contains a brief summary of the
National LEV program and the process that led up to it, this SNPRM
assumes that the reader has an in-depth understanding of the
National LEV program and is best read as a supplement to the
October, 1995, NPRM and the June, 1997, Final Framework Rule.
Readers should review those documents for in-depth discussion of the
program, the process and other background information.
\2\ See 60 FR 4712 (Jan. 24, 1995), 60 FR 52734 (Oct. 10, 1995),
62 FR 31192 (June 6, 1997).
\3\ This SNPRM supplements EPA's October 10, 1995, proposal for
the National LEV program (60 FR 52734) (``NPRM'').
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Under the National LEV program, auto manufacturers would have the
option of agreeing to comply with tailpipe standards that are more
stringent than EPA can mandate prior to model year (MY) 2004. Once
manufacturers commit to the program, the standards will be enforceable
in the same manner that other federal motor vehicle emissions control
requirements are enforceable. See the Final Framework Rule at 62 FR
31201-31223 for a detailed discussion of the program structure,
tailpipe and related standards, and legal authority for and
enforceability of National LEV. Manufacturers have indicated their
willingness to volunteer to meet these tighter emissions standards if
EPA and the northeastern states (i.e., those in the Ozone Transport
Commission (OTC) or the ``OTC States'') agree to certain conditions,
including providing manufacturers with regulatory stability and
reducing regulatory burdens by harmonizing federal and California motor
vehicle emissions standards.
The National LEV program has been developed through an
unprecedented, cooperative effort by the OTC States, auto
manufacturers, environmentalists, fuel providers, EPA and other
interested parties. The OTC States and environmentalists provided the
opportunity for this cooperative effort by pushing for adoption of the
California Low Emission Vehicle (CAL LEV) program throughout the
northeast Ozone Transport Region (OTR). Under EPA's leadership, the
states, auto manufacturers, environmentalists, and other interested
parties then embarked on a process to develop a voluntary National LEV
program, a process marked by extensive public participation and a focus
on joint problem solving. See the Final Framework Rule at 62 FR 31199
and the NPRM at 60 FR 52739-52740 for further discussion of public
participation in the National LEV decisionmaking process.
National LEV will provide public health and environmental benefits
by reducing air pollution nationwide. Both inside and outside the OTR,
National LEV will reduce ground level ozone, the principal harmful
component in smog, as well as emissions of other pollutants, including
particulate matter (PM), benzene, and formaldehyde. The Final Framework
Rule contains a substantive discussion on the health and environmental
benefits of the National LEV program. See 62 FR 31195. EPA has
determined that the National LEV program will result in emissions
reductions in the OTR that are equivalent to or greater than the
emissions reductions that would be achieved through OTC State Section
177 Programs. National LEV will also provide manufacturers regulatory
stability and reduce regulatory burden by harmonizing federal and
California motor vehicle standards. This will reduce testing and design
costs for motor vehicles, as well as allow more efficient distribution
and marketing of vehicles nationwide. See the Final Framework Rule at
60 FR 31195-31197 and 31224 for further discussion of the benefits of
the National LEV program.
In addition to the national public health benefits that would
result from National LEV, the program has been motivated largely by the
OTC's efforts to reduce motor vehicle emissions either by adoption of
the CAL LEV program throughout the OTR or by adoption of the National
LEV program. One of the OTC States' efforts was a petition the OTC
filed with EPA. On December 19, 1994, EPA approved this petition, which
requested that EPA require all OTC States to adopt the CAL LEV program
(called the Ozone Transport Commission Low Emission Vehicle (OTC LEV)
program). See 60 FR 4712 (January 24, 1995) (``OTC LEV Decision''). See
the Final Framework Rule at 60 FR 31195 for a summary of this decision.
In February of this year, the U.S. Court of Appeals for the District of
Columbia affirmed states' rights to adopt the CAL LEV program, but
reversed EPA's decision requiring the OTC States to do so. Some, but
not all, OTC States have adopted CAL LEV programs to date.
Given statutory constraints on EPA, National LEV will be
implemented only if it is agreed to by the OTC States and the auto
manufacturers. EPA does not have authority to force either the OTC
States or the manufacturers to sign up to the program. EPA cannot
require the auto manufacturers to meet the National LEV standards,
absent the manufacturers' consent, because section 202(b)(1)(C) of the
Clean Air Act (CAA, or ``the Act'') prevents EPA itself from mandating
new exhaust standards applicable before model year 2004. The auto
manufacturers have indicated that they would be willing to opt into
National LEV only if the OTC States make certain commitments, including
committing to allow the manufacturers to comply with National LEV in
lieu of Section 177 Programs. EPA cannot require the OTC States to make
such commitments (although EPA can issue regulations to help make the
commitments enforceable). Thus, National LEV cannot come into effect

[[Page 44756]]

absent the agreement of the auto manufacturers and the OTC States.
Over the past several years, the OTC States and the auto
manufacturers have conducted negotiations to develop an agreement on
National LEV to be contained in a Memorandum of Understanding (MOU).
The parties have reached agreement on most provisions of the National
LEV program. Each side has sent EPA an MOU that it has initialed,
indicating its agreement with the National LEV program as contained in
that Memorandum of Understanding.⁴ Although there are
differences in the two Memoranda, they show that agreement has been
reached between the OTC States and the auto manufacturers on most of
the provisions of the National LEV program. Based on the MOUs provided
to the Agency, EPA issued the Final Framework Rule on June 6, 1997,
setting the framework for and describing most of the elements of the
National LEV program.
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\4\ See Docket No. A-95-26, IV-G-31 and IV-G-34.
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Although the parties had hoped to jointly sign a comprehensive MOU
affirming their mutual agreement on the National LEV program, the
parties now agree that further discussions are unlikely to result in
resolution of the last outstanding issues. Nonetheless, EPA and the
parties believe that National LEV would provide substantial public
health and environmental benefits. Failure to come to agreement on a
National LEV program would be a significant lost opportunity.
EPA believes that there is sufficient common ground between the
parties to provide a basis for a National LEV program that all parties
could agree to opt into, even if the parties do not first come to
agreement on an MOU laying out the elements of that program. Therefore,
EPA intends to issue a supplemental final rule that would allow the
parties to opt into National LEV even without final agreement on an
MOU. In that final rule, EPA plans to resolve the remaining issues. To
do so, EPA must first take comment on the issues presented in this
notice. EPA believes that finalizing a program for the OTC States and
manufacturers to evaluate as a whole presents the greatest likelihood
that the country will achieve the benefits of National LEV.
EPA is proposing to resolve most of the outstanding issues in the
National LEV program. EPA believes that a targeted proposal will speed
the rulemaking process, give the parties a better sense of the likely
parameters of the final program, and help to focus attention on the few
key critical issues that remain. Nevertheless, in the few areas where
the OTC States and manufacturers are farther apart in their positions
and in the areas where EPA needs more factual information to support a
decision, the Agency is explicitly taking comment on several options.
In this SNPRM, EPA is making proposals and soliciting public
comment on issues relating to how the OTC States will voluntarily opt
into the National LEV program and commit to allow motor vehicle
manufacturers to comply with the National LEV program in lieu of state
Section 177 Programs. These issues include the duration of the OTC
State commitments, the instruments and process through which the OTC
States will commit to the program, and the substantive details of their
commitments.
EPA is also proposing resolutions of several other outstanding
structural details of the National LEV program. These provisions
include the timing of OTC State and auto manufacturer opt-ins to the
National LEV program, incentives for the parties to keep their
commitments to the National LEV program and conditions under which OTC
States and manufacturers could exit the program (``offramps''), and the
start date of the National LEV program.
In addition, EPA is proposing to address a number of technical
issues not fully resolved in the Final Framework Rule. These include
provisions relating to how the off-cycle supplemental federal test
procedure would apply to National LEV vehicles, provisions to address
manufacturer concerns regarding the effect of in-use fuels on National
LEV vehicles, and provisions relating to banking and trading issues.
EPA is soliciting comment solely on the issues raised in this notice
and any closely related elements of the final rule that would need to
be modified in accordance with today's proposals. Except to the extent
that resolution of an issue raised in this notice would necessitate
modifications of the Final Framework Rule, EPA is not reopening that
final rule for further public comment.⁵
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\5\ The supplemental final rule will resolve the issues raised
in this SNPRM, the issues that were raised in the NPRM and not
resolved in the Final Framework Rule, and any closely related
elements of the Final Framework Rule that would need to be modified
in accordance with today's proposal. The reader should be aware
that, although the CAA does not require publication of proposed
regulatory text, EPA has included the proposed regulatory text for
most, but not all, of the proposed program elements. Also, for some
provisions of the Final Framework Rule where EPA is not proposing a
change in the language but is merely reordering the provisions, EPA
has not reproduced those provisions here. In particular, please note
that EPA is not proposing to modify or drop 40 CFR 86.1705(g)(5) in
the existing final regulations. While a new provision in today's
proposed regulations is designated Sec. 86.1705(g)(5), the existing
provision will be renumbered in the supplemental final rule.
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III. National LEV Start Date

Although EPA had proposed model year MY1997 as the start date for
National LEV,⁶ in the Final Framework Rule EPA used MY1997
only as a placeholder for the start date of National LEV. EPA noted
that MY1997 was no longer a reasonable start date due to changes in
circumstances after the proposal. Today EPA proposes that the National
LEV program start in MY1999. This would still produce VOC and
NO_X emissions reductions from National LEV that are
equivalent to or exceed the emissions reductions that would occur in
the OTR in the absence of National LEV, as discussed below in section
IV.
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\6\ 60 FR 52746 (Oct. 10, 1995).
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As initially proposed by the manufacturers and negotiated with the
OTC States, National LEV was designed to begin in MY1997. Thus, EPA
used MY1997 as the program start date in modeling the volatile organic
compound (VOC) and nitrogen oxide (NO_X) emissions reductions
from National LEV and in finding that those reductions were equivalent
to or greater than the emissions reductions expected from OTC LEV,
assuming that OTC LEV was implemented by the OTC States by the date
required under the OTC LEV state implementation program (SIP) call
(i.e., all OTC States were to have state LEV programs effective in
MY1999). In addition, the MOUs initialed by the OTC States and the
manufacturers assumed a program start date of MY1997. However, as EPA
noted in the Final Framework Rule, changed circumstances have since
made a National LEV start date of MY1997 unrealistic. Thus, in the
Final Framework Rule, EPA used MY1997 as a placeholder for the start
date for National LEV, but noted that it would take comment on a
realistic start date at a later time.
Several factors make a National LEV start date of MY1997
unrealistic. Given the delays that have occurred in reaching agreement
between the manufacturers and the OTC States, and the resulting delays
in the National LEV rulemaking, manufacturers are unlikely to be able
to opt into National LEV prior to late in calendar year 1997. By then,
manufacturers will have already completed EPA certification and
agreements with suppliers for the MY1998 vehicles. A MY1997 start date
would effectively require manufacturers to begin the program with
debits for MY1997 and probably for MY1998 as

[[Page 44757]]

well, and then make up those debits over the next few model years. EPA
does not believe it is reasonable to have the National LEV program
start with some manufacturers having debits from the beginning, which
will be difficult to erase as the fleet average NMOG standards become
more stringent.
Moreover, the court decision vacating EPA's OTC LEV decision
removed the legal requirement for National LEV to produce emissions
reductions at least equivalent to those that would be produced by OTC
LEV under EPA's SIP call. Nor does EPA believe there is any compelling
practical need to begin National LEV effective MY1997. Because many of
the OTC States will not have Section 177 Programs in place effective
MY1999, and there is no longer a SIP call requiring such programs, a
MY1997 start date for National LEV is not necessary to produce a
quantity of emissions reductions equivalent to or greater than those
that would be produced in the absence of National LEV through the
alternative approach of individual OTC State adoption of Section 177
Programs. Even if National LEV begins in MY1999, the program will still
produce emissions benefits in the OTR at least equivalent to and likely
significantly greater than the alternative, as well as producing
substantial additional emissions reductions for the rest of the
country.
EPA is proposing that National LEV start with MY1999. All
requirements set forth in the Final Framework Rule for MY1997 and
MY1998 would be dropped. National LEV would start in MY1999 with all
the requirements set forth in the Final Framework Rule for MY1999
(e.g., non-methane organic gas (NMOG) average of 0.148 grams/mile for
light-duty vehicles and light light-duty trucks (0-3750 loaded vehicle
weight (LVW)) in the OTR). In proposing a start date of MY1999, EPA is
proposing to drop the first two years of the National LEV program set
forth in the Final Framework Rule--it is not proposing that the entire
program be delayed two years. Thus, the 2001 nationwide NMOG fleet
average of 0.075 g/mi for light-duty vehicles and light light-duty
trucks (0-3750 LVW) would not be changed. EPA has not included in
today's notice proposed new regulatory language to reflect this
proposed start date due to the straightforward nature of the necessary
changes to the regulations.⁷
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\7\ The sections in the Final Framework Rule regulations that
would need to be modified to account for a start date of MY1999
include 40 CFR 86.097-1, 86.101, 86.1701-97, 86.1705-97, 86.1708-97,
86.1709-97, and 86.1710-97. In addition, section titles would need
to be changed in some sections, such as 40 CFR 86.602-97, 86.1003-
97, 86.1012-97, and all subpart R sections. EPA is taking comment on
other changes to the Final Framework Rule regulations that need to
be made to account for the change in start dates for the National
LEV program.
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EPA is also taking comment on allowing manufacturers to sell
California-certified vehicles instead of National LEV vehicles
throughout the Northeast Trading Region (NTR) for MY1999 and MY2000.
Manufacturers are concerned that they would have insufficient time to
produce and certify National LEV vehicles for these two model years
given the likely effective date of the National LEV program and their
typical production planning cycles, which call for determining models
to be produced and arranging for parts with suppliers in advance of
actual vehicle production. Allowing manufacturers to increase their
production of California-certified vehicles and sell them throughout
the NTR could help manufacturers meet the National LEV fleet average
NMOG standards for these two model years. To date, EPA has required
manufacturers to certify to federal National LEV standards and
requirements, rather than accepting California-certified-vehicles
alone, to ensure that all federal certification requirements are met.
While National LEV harmonizes most of the elements of the federal and
California motor vehicle programs, certain additional elements of the
federal program would not necessarily be met by California-certified
vehicles.

IV. National LEV Will Produce Larger VOC and NO_X Emission
Reductions in the OTR Compared to OTC State Adopted Section 177
Programs

In the Final Framework Rule, EPA found that the National LEV
program would provide greater emission reductions than those from OTC
LEV (which is equivalent to state-by-state adoption of the CAL LEV
program throughout the OTR). See 62 FR 31224. EPA assumed a start date
of MY1997 for the National LEV program and MY1999 for the state Section
177 Programs. EPA noted at that time that it would update the modeling
of benefits in the OTR to reflect realistic start date assumptions.
Since the MY2001 introduction of National LEV vehicles nationwide
remains unaffected by today's proposal, National LEV will continue to
provide substantial emission reductions to the 37 states outside the
OTR (``37 States''). EPA's modeling includes nationwide emissions
inventories as well (included in Docket A-95-26).
Using realistic start dates, EPA's modeling shows that National LEV
would produce larger VOC and NO_X emission reductions in the
OTR than would Section 177 Programs in the OTR. This modeling is based
on National LEV starting in MY1999, which EPA is proposing today, and
on state Section 177 Programs going into effect as provided in the
current state regulations. EPA's modeling includes a sensitivity
analysis that shows National LEV would produce greater emission
reductions than state Section 177 Programs even if all OTC States
adopted Section 177 Programs as quickly as is realistically possible,
given their current status.
EPA's updated analysis more accurately reflects expected reductions
from OTC State Section 177 Programs than did the analysis described in
the Final Framework Rule. EPA's previous modeling assumed that all of
the OTC States had Section 177 Programs in effect for MY1999 and later.
Given the two-year lead time requirement for such adoption, as
specified in section 177 of the Clean Air Act, it is impossible for all
OTC States to have a Section 177 Program in place for MY1999. In fact,
only six states have adopted a Section 177 Program as of July 1, 1997:
New York, Massachusetts, Rhode Island, Connecticut, New Jersey, and
Vermont. While other OTC States are contemplating adoption of a Section
177 Program, the earliest any such adoption could become enforceable is
MY2000. EPA's analysis does not assume that any other OTC State will
implement a Section 177 Program. Therefore, for purposes of modeling
emission benefits, EPA is capturing the current level of CAL LEV
adoption in the OTR. EPA believes that this realistic assumption is the
proper comparison to National LEV since legally, individual state
adoption is the only manner in which California vehicles can be
required in the Northeast.
EPA's modeling shows that National LEV would achieve greater
emission reductions in the OTR than individual OTC State Section 177
Programs. The emission levels are listed in the table below. The
modeling is based on National LEV starting in MY1999 in the OTR and
MY2001 in the rest of the country. For the OTC State Section 177
Program case, EPA included only those OTC States that have adopted the
CAL LEV program and will have an enforceable state program as of July
1, 1997. These states and their program start dates are New York
(MY1996), Massachusetts (MY1996), Rhode Island (MY1999), Connecticut
(MY1998), Vermont (MY1999), and New Jersey (MY1999). All other states
would receive Federal Tier 1 vehicles. EPA did

[[Page 44758]]

not include existing OTC State zero emission vehicle (ZEV) sales
mandates in either of its modeling runs since these mandates are not
affected by the National LEV rule. ZEV sales mandates would thus have
similar effects on emission levels in both modeling cases and would not
affect the relative emissions benefits of National LEV compared to
those of OTC State Section 177 Programs.
EPA believes its current modeling makes the appropriate assumptions
and correctly estimates a realistic level of OTC State Section 177
Programs. However, to test its assumptions, EPA also ran a sensitivity
analysis assuming that the seven OTC States without a Section 177
Program in place as of July 1, 1997 had adopted the program effective
in MY2000, the earliest time a state that had not yet adopted a Section
177 Program could legally enforce such a program, given the two year
lead time requirement in section 177 of the Act. This analysis showed
that, even with all 13 OTC States having a Section 177 Program in place
at the earliest possible times, National LEV still provided greater
emission reductions in the Northeast.

Table 1.--Ozone Season Weekday Emissions for Highway Vehicles in the OTR
[Tons/day]
------------------------------------------------------------------------
OTC state National
Year Pollutant CAL LEV LEV
------------------------------------------------------------------------
2005.......................... NMOG 1,573 1,499
NO_X 2,526 2,403
2007.......................... NMOG 1,480 1,366
NO_X 2,427 2,226
2015.......................... NMOG 1,386 1,148
NO_X 2,367 1,899
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V. OTC State Commitments

A. Duration of OTC State Commitments

EPA is proposing that the OTC States would commit to the National
LEV program until MY2006. This means that the OTC States would commit
to accept manufacturers' compliance with National LEV (or equally or
more stringent mandatory federal standards) as an alternative to
compliance with a state Section 177 Program through MY2005. The length
of the auto manufacturers' commitment was set in the Final Framework
Rule. Under that rule, manufacturers that opt into the program would be
bound to comply with National LEV until the first model year that
manufacturers are subject to a mandatory federal tailpipe emissions
program at least as stringent as the National LEV program with respect
to NMOG, NO_X and carbon monoxide (CO) exhaust emissions
(``Tier 2 standards''). Under section 202(b)(1)(c) of the Clean Air
Act, EPA could not mandate such standards prior to MY2004. Thus, the
manufacturers' commitment to National LEV lasts at least until MY2004
and could last longer.
The proposed duration of the OTC State commitments differs slightly
from the duration specified in the initialed MOUs. The initialed MOUs
provide that the auto manufacturers' and the states' commitments to the
program would end at the same time. Under the MOU approach, the auto
manufacturers' and the states' commitments would last through MY2003
and possibly through MY2005, depending on whether, by January 1, 2001,
EPA had promulgated a final rule mandating Tier 2 standards at least as
stringent as National LEV and effective in MY2004, MY2005, or MY2006.
If EPA did not issue the specified regulations on time, then National
LEV would end with MY2003 and, starting in MY2004, in any state where
California or OTC LEV standards were not in place, the applicable
standards for manufacturers would revert back to the federal Tier 1
standards.
In the Final Framework Rule, EPA did not accept the MOU provisions
for setting the duration of the National LEV program. As it explained
fully in that final rule, EPA rejected the MOU provisions because it is
unacceptable to set up a program that has the country take a step
backward environmentally if the Agency fails to act by a specified
deadline. Instead, under the Final Framework Rule, the auto
manufacturers' commitment to National LEV would continue until a
mandatory national tailpipe emissions program that is at least
equivalent in stringency to the National LEV program is in effect. Once
EPA promulgates such a mandatory tailpipe emissions program, the
manufacturers' obligation under the National LEV program would end in
the first model year that the mandatory program is at least as
stringent on a fleet wide basis as National LEV. Under section
202(b)(1)(C) of the Clean Air Act, this cannot occur until MY2004.
Today's proposal attempts to be as faithful to the OTC States' and
auto manufacturers' intent regarding the duration of state commitments
to National LEV as is possible, given that EPA did not accept the MOU
provision that would have put the country back to Tier 1 if EPA failed
to issue Tier 2 standards by a certain date. The MOU approach to the
duration of the OTC State commitments indicates that the OTC States are
willing to commit to National LEV through MY2005, if they are assured
that they would continue to receive vehicles meeting LEV stringency or
better standards (on average). The Final Framework Rule provisions for
the duration of the auto manufacturers' commitment provides such
assurance. Thus, EPA's proposed approach to duration of the OTC State
commitments would not bind the states beyond what they have indicated
is acceptable. Moreover, under the MOU approach to the duration of the
OTC State commitments, under no circumstances would the states be bound
beyond MY2005, so the manufacturers could not have expected the OTC
State commitments to extend further.
EPA believes this approach is also fair to the manufacturers. It
gives them the maximum stability (both in terms of state LEV programs
and nationwide tailpipe standards) that they could have hoped to have
achieved under the MOU. Admittedly, the manufacturers' commitment to
National LEV may last longer than the OTC States' commitment (it could
also end earlier), but only if the National LEV standards remain
effective longer than currently anticipated. Manufacturers thus would
get more stability of nationwide tailpipe standards than they had
bargained for, which does not provide justification for requiring
states to extend their commitments beyond MY2005.

[[Page 44759]]

B. Timing of OTC State Commitments, Manufacturer Opt-Ins, and EPA
Finding National LEV in Effect

EPA is proposing a process for the OTC States and the manufacturers
to opt into the National LEV program and for EPA to find the program in
effect that would allow the program to go into effect without requiring
the parties to sign an MOU. As discussed in the notice of proposed
rulemaking (NPRM) (60 FR 52742), to implement the program promptly upon
completion of the National LEV rulemaking, there needs to be a deadline
for EPA to assess whether the National LEV program is in effect. Also,
EPA must establish deadlines for the OTC States and manufacturers to
opt into National LEV in advance of the deadline for EPA's
determination.
EPA is proposing the following timing for the OTC States and
manufacturers to opt into National LEV, and for EPA to find the program
in effect. Because National LEV needs to be in place as soon as
possible to ensure that it is available for MY1999, the following
deadlines are based on the date of signature of the supplemental final
rule.⁸ Seventy-five days from signature of the final
supplemental rule, EPA would be required to determine whether the
National LEV program was in effect (see section V.C.3 below for the
criteria for finding National LEV in effect). This finding would be
based on the OTC States' initial opt-in packages from their Governors
and state environmental commissioners or secretaries (discussed below
in section V.C) that were submitted no later than 45 days from the date
of signature of the final supplemental rule and on the manufacturers'
opt-ins submitted no later than 60 days from signature of the final
supplemental rule. If EPA were to find National LEV in effect, all
parties would be bound by their commitments to the program. While any
party that missed its deadline for opt-in would not be barred from
submitting a late opt-in, EPA would only be required to consider timely
opt-ins in determining whether National LEV is in effect. Moreover,
given the very short timeframe for the opt-in process and the fact that
some parties may be reluctant to opt in before they know whether others
will do so, a late opt-in is likely to jeopardize the start-up of the
program.
---------------------------------------------------------------------------

\8\ EPA would provide directly affected parties actual notice
and make copies of the final rule available within a week of
signature.
---------------------------------------------------------------------------

EPA recognizes that the proposed deadlines are quite tight, and
will require swift action by the parties. Given both the manufacturers'
production schedules and the earliest plausible signature date for the
supplemental final rule, any extension of the proposed schedule may
jeopardize the MY1999 start date and, thus, the entire program.
Nevertheless, EPA requests comment on the proposed schedule and the
viable start date for the program.
EPA is proposing that, after the initial opt-ins and an EPA finding
that the program is in effect, the OTC States would generally have one
year from the date of the in-effect finding to submit the final portion
of their opt-ins, which would be a SIP revision committing the state to
the National LEV program and allowing manufacturers to comply with
National LEV as an alternative to a state Section 177 Program, as
described in more detail in section V.C.4 below. EPA is aware that a
few states, specifically Delaware, New Hampshire, Virginia and the
District of Columbia, have particular circumstances related to their
state rulemaking processes that make a one year deadline unrealistic.
Thus, EPA proposes that for these states, the deadlines would be
eighteen months from the date of the in-effect finding. The consequence
of a state missing its deadline for submission of its SIP revision
committing to National LEV would be that the manufacturers would have
the opportunity to opt out of the program. See section VI below for
further discussion of offramps.

C. OTC State Commitments, Manufacturer Opt-Ins, and EPA's Finding That
National LEV is in Effect

This section describes EPA's proposed process for the OTC States
and the manufacturers to commit to the National LEV program and for EPA
to find the program in effect. This includes how the OTC States would
commit to the program, the elements of their commitments, the
permissible conditions on OTC State and manufacturer opt-ins, and the
criteria that EPA would use to find the program in effect.
1. Initial Opt-In by OTC States
EPA proposes that the OTC States would commit to National LEV in
two steps, the first of which would be an opt-in package from each
state's Governor and environmental commissioner, indicating the OTC
State's intent to opt into National LEV. The second step would be a SIP
revision incorporating the OTC State's commitment to National LEV in
state regulations, which EPA would approve into the federally
enforceable SIP.
EPA proposes that, within 45 days of signature of the supplemental
final rule, the Governor (or Mayor, in the District of Columbia) would
submit to EPA an executive order (or, for some states, a letter)
committing the OTC State to the National LEV program. The executive
order (or letter) would contain three main elements. First, it would
state that its purpose is to opt the state into National LEV. Second,
it would state that the Governor is forwarding a letter signed by the
head of the state environmental agency (or other appropriate agency or
department), which specifies the details of the state's commitment to
the National LEV program. Third, it would state that the Governor has
directed the head of the state environmental agency to take the
necessary steps to adopt regulations and submit a SIP revision
committing the state to National LEV in accordance with the
requirements of the National LEV regulations. In addition, OTC States
with existing ZEV mandates ⁹ may add language confirming
that the opt-in will not affect the state's requirements pertaining to
ZEVs.
---------------------------------------------------------------------------

\9\ ZEV mandates are those state regulations or other laws that
impose (or purport to impose) obligations on auto manufacturers to
produce or sell a certain number or percentage of ZEVs. EPA is
proposing that any OTC State with a ZEV mandate that was adopted
prior to the OTC State's opt-in to National LEV would be treated as
a state with an existing ZEV mandate. EPA takes comment on whether
another cut-off date would be appropriate in place of the date of
the state's opt-in, including: September 15, 1996; the signature
date of the Final Framework Rule; the signature date of the final
supplemental rule; and the date of EPA's finding that National LEV
is in effect.
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The Governor's executive order (or letter) would enclose a letter
signed by the state environmental commissioner or secretary of the
appropriate state department (``commissioner's letter''), which would
specify the details of the state's commitment to National LEV.
Alternatively, if an OTC State has proposed regulations meeting the
requirements for a SIP revision specified below, the state may
substitute the proposed regulations for the portions of the
commissioner's letter for which they are duplicative. In that case, the
Governor would send to EPA the Governor's executive order (or letter),
the proposed regulations, and a letter from the commissioner, which
would contain the elements specified below that were not included in
the proposed regulations.
EPA is proposing that the commissioner's letter would include the
following elements. First, it would indicate that National LEV would
achieve reductions of VOC and NO_X emissions equivalent to or
greater than the reductions that would be achieved through state
adopted Section 177 Programs in the OTR. Second, it would

[[Page 44760]]

indicate that the state intends National LEV to be the state's new
motor vehicle emissions control program. Third, it would state that for
the duration of the state's participation in National LEV, the state
will accept National LEV or mandatory federal standards of at least
equivalent stringency as a compliance alternative to any state Section
177 Program. A state Section 177 Program is any regulation or other
law, except a ZEV mandate, adopted by an OTC State in accordance with
section 177 and which is applicable to passenger cars, light duty
trucks up through 6,000 pounds GVWR, and/or medium-duty vehicles from
6,001 to 14,000 pounds GVWR if designed to operate on gasoline, as
these vehicle categories are defined under the California regulations.
(This commitment would not restrict states from adopting and
implementing requirements under section 177 for heavy-duty trucks and
engines and diesel-powered vehicles between 6,001 and 14,000 pounds
GVWR.) The letter would further state that the state's participation in
National LEV extends until MY2006, except as provided in the National
LEV regulations' provisions for the duration of the OTC State
commitments, including provisions for state offramps. The offramps
would allow the OTC States to exit National LEV if an auto manufacturer
decided to exit the program. OTC States without existing ZEV mandate
provisions would add a statement that the state accepts National LEV as
a compliance alternative to any ZEV mandates. OTC States with existing
ZEV mandate provisions would add a statement that their acceptance of
National LEV as a compliance alternative for state Section 177 Programs
does not include or have any effect on the OTC State's ZEV mandates.
Fourth, the commissioner's letter would include both an explicit
recognition that the manufacturers are opting into National LEV in
reliance on the OTC States' opt-ins, and a recognition that the
commitments in the initial OTC State opt-in package have not yet gone
through the state rulemaking process to be incorporated into state
regulations, so they do not yet have the force of law; in addition, the
letter would recognize that the state's executive branch must comply
with any laws passed by the state legislature that might affect the
state's commitment. Fifth, the commissioner's letter would include an
acknowledgment that, if a manufacturer were to opt out of National LEV
pursuant to the opt-out provisions in the National LEV regulations, the
transition from the National LEV requirements to any state Section 177
Program or ZEV mandate would be governed by the National LEV
regulations. Sixth, similar to the manufacturers' opt-in letters, the
commissioner's letter would state that the state supports the
legitimacy of the National LEV program and EPA's authority to
promulgate the National LEV regulations.
As it stated in the NPRM for National LEV (60 FR 52740), EPA
believes that the decision regarding adoption of ZEV mandates by OTC
States must be left up to each individual OTC State, to the extent
permitted under section 177. The OTC States have indicated that they
support certain commitments regarding ZEV mandates by including those
provisions in the MOU voted on by the OTC and initialed by the OTC
pursuant to the vote. EPA is proposing in the alternative that the OTC
States without existing ZEV mandate provisions would either have to
include a statement in the commissioner's letter indicating that the
state intends to forbear from adopting a ZEV mandate effective before
MY2006 or would have to include a statement that the state will forbear
from adopting such a provision. The draft MOU initialed by the OTC
contains the ``intends to'' language, while the draft MOU initialed by
the manufacturers uses the ``will'' language.
EPA is also taking comment on whether those OTC States that have
not adopted a Section 177 Program at the time of signature of the
supplemental final rule should include in the commissioner's letter a
statement that the state intends to or will forbear from adopting a
Section 177 Program effective before MY2006. The draft MOU initialed by
the manufacturers included a statement that certain OTC States would
forbear from adopting such ``backstop'' Section 177
Programs,¹0 while the draft MOU initialed by the OTC States
did not include any statement regarding adoption of such backstop
programs.
---------------------------------------------------------------------------

\10\ ``Backstop'' Section 177 Programs are programs that allow
National LEV as a compliance alternative to the Section 177 Program
requirements.
---------------------------------------------------------------------------

Finally, EPA is proposing that the commissioner's letter may
include a statement that the state's opt-in to National LEV is
conditioned on all of the motor vehicle manufacturers listed in the
National LEV regulations opting into National LEV pursuant to the
National LEV regulations and on EPA finding National LEV to be in
effect. EPA is further proposing that, as with the manufacturers' opt-
ins, no conditions other than those specified in the regulations may be
placed on any of the state opt-in instruments (the Governor's executive
order (or letter), the commissioner's letter, or the SIP revision).
EPA is taking comment on whether the regulations should allow an
OTC State to condition its opt-in on signature of an acceptable
independent agreement with the manufacturers to promote advanced
technology vehicles (ATVs). Although EPA agrees that advancing
technology is an important policy goal and EPA believes that the
National LEV program could be a part of an agreement that would provide
important opportunities to promote ATVs, as proposed, the regulatory
portion of the National LEV program does not address ATVs. EPA also
recognizes that the manufacturers have indicated their belief that any
agreement on ATVs should only be addressed as part of a larger MOU
committing to National LEV. Some of the OTC States, however, have
indicated a continuing interest in an ATV agreement and the desire to
condition their opt-ins on the signature of an ATV agreement. Such an
agreement could be comprehensive, as contemplated by the agreement
contained in the MOU. Or, it could be a smaller agreement between a
particular state or states and a particular manufacturer or
manufacturers. EPA believes that if such a condition were allowed, it
would have to be met prior to EPA finding that National LEV was in
effect. Under the proposed timetable, this would allow manufacturers
and states only 30 days to conclude such an agreement after the due
date for the OTC States' initial opt-in packages. Even if manufacturers
were amenable to some type of an ATV agreement (or agreements with
individual states), conditioning an opt-in on an undefined ATV
agreement might dissuade manufacturers from opting in. Therefore, EPA
believes that the questions of whether there will be any ATV agreements
and if so, what they will contain, are best determined between the auto
manufacturers and the OTC States prior to the deadline for state opt-
ins.
In the proposed regulations, EPA is proposing specific language for
each element of the OTC States' opt-ins to be included in the
Governor's executive order (or letter), the commissioner's letter, and
the SIP revision. EPA is also taking comment on whether it is necessary
for EPA to specify language or whether it would be sufficient for the
National LEV regulations to identify the elements that must be in the
OTC States' opt-in documents without specifying exact language.
Although it is somewhat unusual for EPA to identify specific

[[Page 44761]]

language for state submissions, EPA believes this may be an appropriate
case to do so. Because the OTC States and manufacturers are signing up
for a voluntary program and are unlikely to sign an MOU, using
specified language would be useful to ensure that they sign up to the
same program. Otherwise, the opt-ins might not represent agreement on
the terms and conditions of the voluntary National LEV program. In
addition, as discussed further below, EPA proposes to find National LEV
in effect without providing for additional notice-and-comment on
whether the conditions are met for finding National LEV in effect. It
is more appropriate to proceed without additional rulemaking if the
Agency's in-effect finding is essentially a nondiscretionary action
based on clear factual determinations. If EPA must use its discretion
to determine whether a state has adequately committed to National LEV,
that might require further rulemaking and substantially delay
implementation of the program. However, if the OTC States use the
language specified in the regulations, which EPA will have determined
to be adequate through a notice-and-comment rulemaking, EPA could find
National LEV in effect on that basis.
EPA recognizes that some states may need to use language for
certain elements of the opt-in that deviates in a few respects from the
language proposed today, due to the requirements of different states'
individual administrative laws and rulemaking procedures. EPA requests
that any OTC States that have concerns about using the proposed
language notify EPA to that effect in comments on this proposal. EPA
requests that any such comments include alternate suggested language
for the specified elements of the opt-in, and that a state make the
minimum adjustments to the language necessary to allow the state to opt
into National LEV. EPA proposes to provide in the final rule alternate
approved specific language for specific states, as necessary to account
for individual states' particular needs. Any such language would still
need to address each of the opt-in elements and commit the state
adequately to the National LEV program. EPA also recognizes that a
state may wish to include background information, especially in the
Governor's executive order (or letter). This would be permissible under
EPA's proposed regulations, providing that the additional information
did not add conditions to the state's opt-in.
2. Manufacturer Opt-Ins
EPA is proposing that motor vehicle manufacturers' opt-ins to
National LEV would be due within 60 days from signature of the final
rule. As provided in the Final Framework Rule, a manufacturer would opt
into National LEV by submitting a written notification signed by the
Vice President for Environmental Affairs (or a company official of at
least equivalent authority who is authorized to bind the company to the
National LEV program) that unambiguously and unconditionally states
that the manufacturer is opting into the program, subject only to
conditions expressly contemplated by the regulations. See 40 CFR
86.1705(c)(2). EPA is proposing that the only permissible conditions in
a manufacturer's opt-in notification would be that all of the OTC
States opt into National LEV pursuant to the National LEV regulations
and that EPA find the program to be in effect. These conditions
parallel the proposed permissible conditions described above for the
OTC States' opt-ins.
3. EPA Finding That National LEV is in Effect
The OTC States' and the auto manufacturers' opt-ins would become
effective upon EPA's receipt of the opt-in notification or, if the opt-
in were conditioned, upon the satisfaction of that condition. Under
today's proposal, EPA would find National LEV in effect if each OTC
State and each listed manufacturer were to submit an opt-in
notification that complied with the requirements for opt-ins, and all
conditions on any of those opt-ins had been satisfied (or would be
satisfied upon EPA finding National LEV in effect). EPA is also taking
comment on whether the Agency should be able to find National LEV in
effect if each of the listed manufacturers were to submit an opt-in
notification that complied with the requirements for opt-ins, each of
the opt-in notifications submitted by an OTC State complied with the
requirements for opt-ins, and any conditions placed upon any of the
opt-ins were satisfied, even if fewer than all OTC States opted into
National LEV. EPA believes that National LEV should be a national
program--effective in all states but California. This would provide the
OTR with emissions reductions greater than what could be achieved
without National LEV and would simplify distribution and other aspects
of the sale of motor vehicles. Moreover, the manufacturers have stated
that they are not willing to opt into National LEV unless each and
every OTC State opts into National LEV. However, if the OTC States and
auto manufacturers are willing to participate in a National LEV program
even if all OTC States do not opt-in, EPA will not stand in the way of
National LEV going into effect. Once EPA finds National LEV in effect,
the manufacturers would be subject to the National LEV requirements for
new motor vehicles for the duration of the program, and the OTC States
would be committed to participate in the National LEV program for the
duration of their commitments, as discussed above in section V.A.
While the OTC States' SIP revisions are a necessary component of
their commitments to National LEV, EPA is proposing to make the finding
as to whether National LEV is in effect before the OTC States' SIP
revisions are due. Through the executive order (or letter), the
Governor of each state will have opted into National LEV and started
the process for submission of an approvable SIP revision. Also, as
discussed further below, EPA is proposing that an OTC State's failure
to submit the SIP revision within the time provided for submission
would give manufacturers an opportunity to opt out of the National LEV
program. Together, this high level directive for action and the
consequences of a failure to conclude the action provide substantial
assurance that the OTC States will submit their SIP revisions within
the specified time.
EPA would publish the finding that National LEV is in effect in the
Federal Register, but the Agency would not need to go through
additional rulemaking to make this determination. In the Final
Framework Rule, EPA stated that further Agency rulemaking to find
National LEV in effect would be unnecessary because EPA would establish
the criteria for the finding through notice-and-comment rulemaking, and
EPA's finding that the criteria are satisfied would be an easily
verified objective determination. See 62 FR 31226 (June 6, 1997). As
discussed above, to find National LEV in effect, EPA would have to
determine that the OTC States and the manufacturers had submitted opt-
in notifications that met the requirements specified in the regulations
and that any conditions on those opt-ins had been satisfied. EPA
established most of the specifics of the manufacturers' opt-in
notifications in the Final Framework Rule after taking comment on those
issues in the NPRM. In today's SNPRM, EPA is taking comment on
additional details of manufacturer opt-in notifications and the
specifics of the OTC States' opt-in notifications, which EPA will
finalize in the supplemental final rule. Thus, the

[[Page 44762]]

public will have had full opportunity to comment on the adequacy of the
elements of the manufacturers' and OTC States' opt-ins and the language
provided for those opt-ins. As with the manufacturers' opt-ins,
determining whether a state has used the specified language without
adding any conditions is a simple, objective determination, which would
not require further rulemaking. Similarly, if OTC States or
manufacturers conditioned their opt-ins on either all manufacturers or
all OTC States opting into National LEV, determining whether these
conditions were satisfied would be a simple factual inquiry involving
no discretion on the part of EPA. Thus, EPA proposes to find that
National LEV is in effect without conducting further rulemaking if the
Agency determines that it has received opt-in notifications from each
OTC State and listed manufacturer that include the specified elements
in approved language without qualifications and the Agency determines
that all conditions on those opt-ins have been satisfied.
4. SIP Revisions
EPA proposes that within one year of the date of EPA's finding that
National LEV is in effect, the OTC States would complete the second
phase of their commitments to National LEV by submitting SIP revisions
to EPA incorporating their commitments (``National LEV SIP
revisions'').¹1 EPA proposes that the SIP revisions would
contain the following elements incorporated in enforceable state
regulations. The first regulatory provision would commit that, for the
duration of the state's participation in National LEV, the
manufacturers may comply with National LEV or mandatory federal
standards of at least equivalent stringency as a compliance alternative
to any state Section 177 Program (which is any regulation or other law,
except a ZEV mandate, adopted by an OTC State in accordance with
section 177 and which is applicable to passenger cars, light duty
trucks up through 6,000 pounds GVWR, and medium-duty vehicles from
6,001 to 14,000 pounds GVWR if designed to operate on gasoline, as
these vehicle categories are defined under the California
regulations).¹2 This provision would not restrict states
from adopting and implementing requirements under section 177 for
heavy-duty trucks and engines and diesel-powered vehicles between 6,001
and 14,000 pounds GVWR. The regulations would also commit the state to
participate in National LEV until MY2006, except as provided in the
National LEV regulatory provisions for the duration of the OTC State
commitments, including provisions for state offramps. States that did
not have an existing ZEV mandate (see n. 9 above) would additionally
provide that manufacturers may comply with National LEV as a compliance
alternative to any ZEV mandates for the duration of the state's
participation in National LEV. The second element of the state
regulations would explicitly acknowledge that, if a manufacturer were
to opt out of National LEV pursuant to the opt-out provisions in the
National LEV regulations, the transition from the National LEV
requirements to any state Section 177 Program or ZEV mandate (for
states without existing ZEV mandates) would be governed by the National
LEV regulations, thereby incorporating these National LEV provisions by
reference into state law.
---------------------------------------------------------------------------

\11\ See section V.B above for discussion of the proposed
extended deadline for a few specified states.
\12\ OTC States that had Section 177 Programs at the time of
opt-in would need to modify their existing regulations in accordance
with this provision. EPA is also taking comment on whether by some
earlier date (perhaps June 1, 1998), OTC States with Section 177
Programs at the time of opt-in would have to take whatever actions
would be necessary to ensure that manufacturers complying with
National LEV in MY1999 would not have to comply with the state
Section 177 Program for MY1999.
---------------------------------------------------------------------------

The SIP submission to EPA would include state regulations
containing the elements discussed above, and a transmittal letter or
similar document from the state commissioner forwarding those
regulations. EPA proposes that three additional elements of the SIP
commitment may be included either in the transmittal letter or the
state regulations. First, the state would commit to support National
LEV as an acceptable alternative to state Section 177 Programs. Second,
the state would recognize that its commitment to National LEV is
necessary to ensure that National LEV remain in effect. Third, the
state would state that it is submitting the SIP revision to EPA in
accordance with the National LEV regulations.
EPA is further proposing that the provisions of the OTC States'
commitments relating to ZEV mandates should also be included in the SIP
revision. EPA is proposing in the alternative that in the transmittal
letter portion of the SIP submission to EPA, each OTC State without an
existing ZEV mandate (see n. 9 above) would have to state either that,
for the duration of the state's participation in National LEV, the
state intends to forbear from adopting any ZEV mandate provisions
effective before MY2006, or the state will forbear from adopting such
provisions. EPA is taking comment on whether this commitment instead
should be incorporated in the state's regulations.
Finally, EPA is also taking comment on whether those OTC States
that have not adopted a Section 177 Program at the time of signature of
the supplemental final rule should include in the transmittal letter
for the SIP revision or in the state regulations a statement that the
state intends to or will forbear from adopting a Section 177 Program
effective before MY2006. As noted above, the draft MOU initialed by the
manufacturers included a statement that certain OTC States would
forbear from adopting such backstop Section 177 Programs, while the
draft MOU initialed by the OTC States did not include any comparable
statement.
As with the finding that National LEV is in effect, EPA is
proposing that the Agency could approve SIP revisions committing to the
National LEV program without further rulemaking, as long as the
revisions include the language specified in the regulations without
adding conditions and meet the CAA requirements for approvable SIP
submissions. In this notice, EPA is providing full opportunity for
public comment on the language that the states would use in their SIP
revisions. Thus, in reviewing a SIP submittal, EPA would only have to
determine whether the submittal included the specified language without
additional conditions, and whether it met the statutory criteria for
approvable SIP submissions, as laid out in sections 110(a)(2) and
110(l) of the CAA. Section 110(a)(2), in relevant part, specifies that
the state must have provided public notice and a hearing on the SIP
provisions and the submission must provide necessary assurances that
the state will have adequate personnel, funding and authority under
state law to carry out the provisions. Section 110(l) (discussed in
more detail below) provides that SIP revisions must not interfere with
attainment or any other applicable requirement.
In this case, these requirements for EPA's approval are easily
verified objective criteria. They would leave EPA little discretion in
deciding whether to approve the SIP revision, and consequently would
remove any benefits to be derived from conducting notice-and-comment
rulemaking on each approval. Determining whether the language of the
SIP submittal tracks the language provided in the final regulations and
whether the state has substantively qualified or conditioned that
language through modifications or additions is a straightforward,

[[Page 44763]]

essentially ministerial task. This is also true for assessing whether
the state has provided notice and a public hearing on the SIP
submission. Because National LEV is a federal program, the state needs
no personnel or funding to carry it out, so there is nothing related to
the requirement for adequate personnel and funding for EPA to evaluate.
For a state with existing regulations requiring compliance with a state
Section 177 Program, EPA would merely have to determine whether the
state had modified its regulations to include the language in the
National LEV regulations to accept National LEV as a compliance
alternative for the specified duration of the state commitment, as well
as the additional provisions specified above. Again, this is a very
simple, objective assessment, requiring no exercise of discretion.
Finally, EPA has determined that National LEV would provide reductions
in the OTR equivalent to or greater than OTC State Section 177 Programs
in the OTR (see section IV), so that a state commitment to National LEV
would not interfere with attainment or any other Act requirement.
Because the satisfaction of the criteria for approval of the state SIP
revisions is so clear as to be virtually self-executing, EPA believes
that conducting further notice-and-comment rulemaking on whether the
criteria were satisfied for each individual SIP revision would produce
additional delay while serving no purpose.
Incorporating the OTC States' commitments to National LEV in state
regulations approved into the SIPs will substantially enhance the
stability of the National LEV program and support giving states credit
for SIP purposes for emissions reductions from National LEV. A SIP
revision would clearly indicate a state's commitment to National LEV
and would reiterate the state executive branch's support for the
National LEV program. More importantly, an approved SIP revision is
federal law and hence has binding legal effect. Violation of a
commitment to National LEV contained in a SIP is enforceable as a
violation of applicable federal law.
The SIP revision would provide that the state commits to accept
National LEV or mandatory federal standards of at least equivalent
stringency as a compliance alternative to a state program under section
177 for a specified time period. If a state adopted new state law or
regulations that violated this commitment in the SIP (e.g., by
requiring compliance only with a state Section 177 Program), this new
state law would not be valid prior to EPA action on the SIP revision
incorporating the new law. Prior to such action, the new state law
would be precluded by the federal law with which it conflicted (i.e.,
the SIP revision EPA had approved). Moreover, pursuant to section
304(a)(1) and (f), manufacturers could bring suit against the state to
enforce the initial SIP commitment in court. To revise the SIP, the
state would have to submit a new SIP revision and EPA would have to
approve the new revision through notice and comment rulemaking.
Moreover, if EPA disapproved the newly submitted SIP revision, then the
new state law would continue to violate the approved SIP revision
containing the state commitment to National LEV, and manufacturers
could continue to enforce the initial SIP commitment in court.
EPA would be obligated under section 110(l) of the CAA to
disapprove a SIP revision that violated a state's commitment to allow
National LEV as a compliance alternative if EPA were to find that the
SIP revision would interfere with other states' ability to attain or
maintain the national ambient air quality standards (NAAQS).
Specifically, section 110(l) provides that EPA must disapprove a plan
revision if it ``interfere[s] with any applicable requirement
concerning attainment and reasonable further progress * * * or any
other applicable requirement of this Act.'' By the terms of its
rulemaking, National LEV comes into and stays in effect only if all
relevant states commit to allow it as a compliance alternative. If
National LEV comes into effect, a number of OTC States, as well as
states outside the OTR, are likely to rely on National LEV as a means
of attaining and maintaining the ozone NAAQS. These states are likely
to forego adoption of other control measures because they will count on
reductions from National LEV to meet their attainment and maintenance
obligations. In this manner, other states will be relying on each of
the OTC States' commitments to National LEV. An OTC State breaking its
commitment to allow National LEV as a compliance alternative could lead
to the dissolution of the National LEV program, which in turn would
likely deprive other states of the emission reductions from National
LEV, and could thereby interfere with other states' ability to attain.
As discussed above, EPA is proposing that in the SIP revisions
committing to National LEV, each OTC State would explicitly recognize
that the state's commitment to National LEV is necessary to ensure that
the program remain in effect.

VI. Incentives for Parties To Keep Commitments to Program

Once it comes into effect, National LEV is designed to be a stable
program that will remain in effect until replaced by mandatory federal
tailpipe standards of at least equivalent stringency. Manufacturers
have the option, but not the requirement, to participate in National
LEV. Manufacturers have indicated a willingness to opt into the
program, but only if the EPA and the OTC States make certain
commitments. To give the manufacturers both assurance that the
commitments will be kept and recourse if they are not, EPA is proposing
that the program include a few specified conditions (``offramps'') that
would allow manufacturers to opt out of National LEV if EPA or the OTC
States did not keep their commitments. In addition, the OTC States also
need assurance that National LEV will continue to provide the benefits
they anticipated when they opted into the program, both in terms of the
number of manufacturers covered by the program and the level of
emissions reductions that the program was designed to achieve. Thus,
EPA is proposing that National LEV would also include limited offramps
for the OTC States to protect against changes in anticipated emission
benefits or the number of covered manufacturers. Both the
manufacturers' and the OTC States' proposed offramps are structured to
maximize all parties' incentives to maintain the agreed-upon program
provisions and thereby to maximize the stability of National LEV over
its intended duration.
In the unlikely event that any of the offramps were triggered and
manufacturers or states opted out, EPA's proposed regulations set forth
which requirements would apply, the timing of such requirements, the
states in which they would apply, and the manufacturers that would have
to comply with them. The main purpose of these provisions is to enhance
the stability of the program by minimizing the incentives for EPA or
the OTC States to act in a manner that would trigger an offramp.
Additionally, EPA has structured the offramp provisions such that no
single event automatically would end the National LEV program. EPA will
continue to make National LEV available as long as one or more
manufacturers and one or more OTC States wish to remain in the program.
EPA recognizes, of course, that if a significant number of OTC States
or manufacturers were to opt out of National LEV, after a certain point
it is unlikely that the remaining parties

[[Page 44764]]

would choose to continue the program. However, the issue is highly
unlikely to arise and if it did, it is not clear what would be the
critical mass of opt-outs sufficient to end the program. Rather than
deciding now how many OTC State and auto manufacturer opt outs would be
significant enough to end National LEV, EPA believes it is both more
appropriate and more efficient to leave that decision to the OTC States
and manufacturers to decide, in the unlikely event that an offramp is
triggered and significant opt-outs occur.
In the NPRM, EPA proposed that manufacturers' right to opt out of
the National LEV program would be limited to two conditions. These
offramps were: (1) EPA modification of a Stable Standard, except as
specifically provided, and (2) an OTC State's failure to meet or keep
its commitment regarding adoption or retention of a state motor vehicle
program under section 177. The Final Framework Rule addressed the first
offramp, which would allow manufacturers to opt out of National LEV if
EPA modified a Stable Standard except as provided for under the
National LEV regulations, but did not address the second offramp. This
second offramp is addressed here. EPA also is proposing to add a third
type of offramp related to auto manufacturers' concerns regarding the
effects of using federal fuel (instead of California fuel) on emissions
control systems. This is discussed in section VI.C below. In addition,
EPA is proposing a fourth type of offramp based on an OTC State or
another manufacturer legitimately opting out of National LEV.

A. Offramp for Manufacturers for OTC State Violation of Commitment

Under today's proposal, there are several ways in which an OTC
State might break its commitment and thereby allow manufacturers to opt
out of National LEV. These are: (1) Final action in violation of the
commitment to continue to allow National LEV as a compliance
alternative to a Section 177 Program or to a ZEV mandate (in those OTC
States without existing ZEV mandates); (2) failure to submit a National
LEV SIP revision within the timeframe set forth in the National LEV
regulations; and (3) submission of an inadequate National LEV SIP
revision. ¹3 In addition, EPA is taking comment on whether
manufacturers should also be able to opt out of National LEV if an OTC
State without an existing ZEV mandate adopted a ZEV mandate (even if it
accepted National LEV as a compliance alternative for that requirement)
and that state had either stated its intent or committed not to adopt
such a mandate. ¹4 The discussion below addresses each of
these proposed possible types of OTC State violations individually. EPA
does not believe that any of these scenarios are likely to arise under
the National LEV program. Nevertheless, spelling out in the regulations
the consequences under each of these scenarios will provide the parties
certainty regarding the worst-case outcomes, and more importantly,
allows EPA to structure the consequences so as to minimize the
likelihood that any of these scenarios will occur.
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\13\ In addition, as discussed in the following section, EPA is
proposing that manufacturers may opt out if an OTC State takes a
legitimate offramp.
\14\ If, as discussed at n. 12 above, EPA were to set a separate
date by which OTC States with Section 177 Programs had to take
action to ensure that manufacturers complying with National LEV
would not have to comply with the state program requirements,
failure to meet such a deadline would also trigger an offramp. EPA
is taking comment on what the consequences should be if such an
offramp were triggered.
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1. OTC State No Longer Accepts National LEV as a Compliance Alternative
The most significant way in which an OTC State could violate its
commitment to National LEV would be to attempt to have a Section 177
Program that was in effect and that did not allow National LEV or
mandatory federal standards of at least equivalent stringency as a
compliance alternative \15\ through MY2005.\16\ This could happen if an
OTC State accepted National LEV as a compliance alternative to a state
Section 177 Program or a ZEV mandate (in an OTC State without an
existing ZEV mandate) and then took final action purportedly removing
those provisions from its regulations, leaving only the state Section
177 Program or ZEV mandate requirements in place. It would also happen
if an OTC State took final action purportedly adopting a Section 177
Program or a ZEV mandate (in an OTC State without an existing ZEV
mandate) without providing for National LEV as a compliance
alternative.\17\ This violation of the OTC State's commitment to
National LEV attempts to directly impose a compliance burden on the
manufacturers and would abandon the most fundamental element of the
agreement underlying the voluntary National LEV program.
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\15\ Throughout this preamble, EPA often uses ``National LEV as
a compliance alternative'' as shorthand for ``National LEV or
mandatory federal standards of at least equivalent stringency as a
compliance alternative.''
\16\ An OTC State with a Section 177 Program that did not allow
National LEV as a compliance alternative as of MY2006 or later would
not be in violation of its commitment under National LEV.
\17\ In addition, an OTC State with a Section 177 Program in its
regulations at the time of opt-in that does not already permit
manufacturers to comply with National LEV as a compliance
alternative might fail to modify those existing regulations within
the time-frame provided, which would be the same as the deadline for
submission of the state's SIP revision. The consequences of this
type of violation would differ slightly from the consequences of
other types of violations that attempted to have a Section 177
Program without allowing National LEV as a compliance alternative,
as noted below in n.18.
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The consequences of such a violation, as proposed below, take into
account the seriousness of the breach of the commitment, even though
the violation would not necessarily burden the manufacturers. Once a
state had adequately committed to National LEV through an approved SIP
revision, even if the state were to change its regulations to disallow
compliance with National LEV, the requirement would not be enforceable
until EPA approved a further SIP revision incorporating the change, as
discussed above in section V.C.4. Yet although the violation might not
actually impose any burden on the manufacturers because it is not
enforceable, manufacturers should not be bound to comply with the
National LEV requirements in the violating state and should not be
bound to continue in the National LEV program, as even an unenforceable
Section 177 Program would create risks and uncertainties for
manufacturers. Manufacturers would be at risk of having to defend
against a state enforcement action. The question of whether, under any
circumstances, EPA could approve a proposed state SIP revision deleting
National LEV as a compliance alternative--if only by virtue of the lack
of precedence for this issue--would create further uncertainty for
manufacturers.
EPA is proposing that manufacturers would be able to opt out at any
time after an OTC State takes final action that would require
manufacturers to comply with a Section 177 Program or a ZEV mandate (in
an OTC State without an existing ZEV mandate) prior to MY2006 without
allowing them to comply with National LEV or mandatory federal
standards of at least equivalent stringency as an alternative, even if
the effective date of the state requirement would be some time in the
future. The final state action would be the action promulgating the
state law or regulations at issue, not the act of defending such law or
regulations in litigation. Thus, a self-effectuating state law
purporting to impose a Section 177 Program without including National
LEV as a compliance alternative would

[[Page 44765]]

be final state action, as would final state regulations purporting to
impose such a program. A state law directing the relevant state agency
to change its regulations to remove National LEV as a compliance
alternative would not be a final state action, but the regulations
promulgated in accordance with that directive would be final state
action.
EPA is proposing that, if an OTC State were to violate its
commitment by purportedly disallowing National LEV as a compliance
alternative, there would be both automatic consequences in the
violating state and an opportunity for manufacturers to opt out of
National LEV.\18\ To determine the consequences in the violating state,
there are two significant issues. The first issue is what are the
compliance obligations of the manufacturers in the violating state. The
second issue is when would the state Section 177 Program or ZEV mandate
requirements apply to manufacturers. Outside of the violating state,
manufacturers would continue to be subject to the National LEV
requirements unless they opted out of the National LEV program.
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\18\ In an OTC State that had a Section 177 Program in its
regulations at the time of opt-in and that had never accepted
National LEV as a compliance alternative to the Section 177 Program
requirements, the consequences in the violating state discussed in
this section would not apply, given EPA's interpretation of section
177. See section VI.D. However, the provisions for a manufacturer's
offramp would be the same for a state that failed to modify existing
regulations to accept National LEV as a compliance alternative as
for any other state action not allowing National LEV as a compliance
alternative.
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Until the violating state's Section 177 Program or ZEV mandate
requirements apply, the manufacturers' compliance obligations in that
state would be governed by the terms of the National LEV regulations.
EPA is proposing that, in a state that has violated its commitment by
attempting to have a Section 177 Program or ZEV mandate without
allowing National LEV as a compliance alternative, beginning with the
next model year,¹9 National LEV regulations would allow
manufacturers to sell vehicles complying with Tier 1 tailpipe standards
in that state and those vehicles would not be counted in determining
whether the NLEV fleet average NMOG standard was met. Because model
years generally run somewhat ahead of the calendar years with the same
numbers, generally this will result in a near-term or immediate change
in the manufacturers' compliance obligations. Until the violating
state's Section 177 Program requirements applied (which might not be
until MY2006), the manufacturers would only have to meet the federal
Tier 1 tailpipe standards for vehicles sold in the violating state, and
those vehicles would not be used to calculate the manufacturers' fleet
NMOG averages.
---------------------------------------------------------------------------

\19\ The ``next model year'' would be the model year named for
the calendar year following the calendar year in which the OTC State
took final state action violating its commitment. For example, if an
OTC State violated its commitment by taking final state action in
calendar year 1999, the next model year would be MY2000.
---------------------------------------------------------------------------

The earliest date on which the violating state's Section 177
Program or ZEV mandate would apply would be governed by the lead time
requirements in section 177 and EPA's regulations on model year at 40
CFR part 85 subpart X and in the National LEV regulations. This date
would apply only for any auto manufacturer that opted out of National
LEV as a result of the violating state's action (provided that it is
later than the effective date of the opt-out), for any auto
manufacturer that decided to comply with the violating state's
requirements even though it otherwise chose to stay in National LEV,
and for all manufacturers if EPA approved the violating state's program
into the SIP. (As discussed below, EPA believes the violating state's
refusal to allow National LEV as a compliance alternative would not
otherwise be effective until MY2006. Thus, if none of these situations
occurred, National LEV regulations would allow manufacturers to sell in
the violating state vehicles that meet Tier 1 tailpipe standards and to
exclude those vehicles from the NMOG fleet average calculation until
MY2006.)
After National LEV is in effect, a change to a state regulation
that deletes National LEV as a compliance alternative attempts to
change the manufacturers' obligations. In that circumstance, as
discussed in section VI.D below, EPA interprets section 177 to require
two years of lead time from the date that the state takes final action
changing its regulations (or other law) deleting National LEV as a
compliance alternative regardless of when the state adopted its
previous Section 177 Program. Thus, pursuant to the model year
regulations at 40 CFR part 85 subpart X and those proposed here, the
earliest the state Section 177 Program or ZEV mandate requirements
could apply would be to engine families for which production begins
after the date two calendar years from the date of the final state
action. For example, if the violating state promulgated regulations
purportedly removing National LEV as a compliance alternative on June
1, 2000, the earliest the state Section 177 Program or ZEV mandate
requirements could apply would be to engine families that began
production on or after June 1, 2002, which likely would apply to some,
but not all, MY2003 vehicles. EPA is also taking comment on whether
there is a way to ensure that manufacturers have at least four, rather
than two, years of lead time from the date that the state takes final
action changing its regulations deleting National LEV as a compliance
alternative, and what the legal basis would be for such an approach.
The combined effect of the National LEV regulations allowing
manufacturers to comply with Tier 1 tailpipe standards in the violating
state and the requirement for two years lead time before the state
Section 177 Program or ZEV mandate requirements could apply means that,
if an OTC State were to violate its commitment by not allowing National
LEV as a compliance alternative, manufacturers would be subject to only
Tier 1 tailpipe standards (and not the NLEV NMOG average) in that state
for at least two years. As a consequence, the violating state could not
claim SIP credits for control of emissions from vehicles meeting
anything more stringent than Tier 1 tailpipe standards during that
period. EPA believes that this would provide a powerful incentive for
the OTC States to uphold their commitments to accept National LEV as a
compliance alternative for the specified duration.
EPA recognizes that it may take manufacturers some time to take
advantage of the less stringent Tier 1 tailpipe standards, and that,
consequently, the hardware of the vehicles supplied to the violating
state may not change dramatically in the short-term. However,
manufacturers would be able to revise vehicle compliance levels rapidly
to provide that, for warranty and recall purposes, the vehicles are
only complying with Tier 1 tailpipe standards. This means that over the
life of those vehicles they would only be required to produce emissions
below the 50,000 mile and 100,000 mile Tier 1 standards and enforcement
action could not be taken to require those vehicles to meet any more
stringent standards.\20\ As long as manufacturers are not required to
sell vehicles meeting standards more stringent than Tier 1 in the
violating state, it would not be appropriate for EPA to approve SIP
credits for any emissions reductions beyond the levels provided by Tier
1 tailpipe standards. Those vehicles would not be included in
calculating the manufacturers'

[[Page 44766]]

compliance with the National LEV fleet average NMOG standards and the
SIP would not provide in any way for vehicles sold in that state to
meet emission standards more stringent than Tier 1 levels. EPA is
proposing to include in the supplemental final regulations provisions
for this approach to SIP credits for vehicles sold in a violating
state.
---------------------------------------------------------------------------

\20\ See section VIII.C for discussion of how EPA's vehicle
certification process would allow a manufacturer to provide vehicles
meeting Tier 1 standards in a violating state.
---------------------------------------------------------------------------

In addition to the relaxed emissions standards that would apply to
vehicles sold in the violating state, the other incentive for OTC
States not to violate their commitments is that manufacturers would
also be able to opt out of National LEV if an OTC State violated its
commitment to the program by not allowing National LEV as a compliance
alternative. EPA is proposing that there would be no time limit for
manufacturers to exercise their right to opt out as long as the state
was in violation of its commitment. After a manufacturer opted out,
there also would be no opportunity for the state to cure the violation
by changing the state law or regulations to accept National LEV as a
compliance alternative and thereby negate an opt-out that a
manufacturer had already submitted, regardless of whether that opt-out
had become effective already. However, once a violating state took
final action to cure the violation, manufacturers that had not already
opted out could not opt out based on the violation that the state had
cured.
The Final Framework Rule gives EPA an opportunity to make a finding
as to the validity of an opt-out based on a change to a Stable
Standard. See 62 FR 31202-07. This both provides a safe harbor for a
manufacturer that relies on an EPA determination of validity, and
provides for rapid resolution in the United States Court of Appeals for
the District of Columbia if the validity is disputed, thereby avoiding
protracted litigation in federal district court. In contrast, EPA does
not believe such a process is necessary here. The validity of an opt-
out based on a state disallowing National LEV as a compliance
alternative should be a straight-forward factual determination.
Consequently, EPA believes there is very little benefit to be gained by
providing for an EPA determination of the validity of such an opt-out,
and EPA is not proposing such a provision.
EPA is proposing that a manufacturer that opts out of National LEV
based on a state violation of its commitment to National LEV must
continue to comply with National LEV until the opt-out becomes
effective (although Tier 1 tailpipe standards will apply in the
violating state, as proposed above). EPA is proposing that each
manufacturer's opt-out notification would specify the effective date of
the opt-out, which in no event could be any earlier than the next model
year (i.e., the model year named for the calendar year following the
calendar year in which the manufacturer opted out).\21\ After the
effective date of its opt-out, a manufacturer would have to comply with
any non-violating state's Section 177 Program (except for ZEV mandates)
provided that at least two-years lead time (as provided in section 177)
had passed since the adoption of the state's Section 177 Program. Other
than those ZEV mandates that would be unaffected by the National LEV
program (i.e., existing ZEV mandates), if a manufacturer opts out, it
would not be subject to any other ZEV mandates until two years of lead
time had passed, which would run from the date the manufacturer opts
out of National LEV and be measured according to the section 177
implementing regulations. After the effective date of a manufacturer's
opt-out, in a non-violating state without a Section 177 Program, the
manufacturer must meet all applicable federal standards that would
apply in the absence of National LEV.
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\21\ If, however, an OTC State took a legitimate offramp as
discussed below, a manufacturer could not use a delayed effective
date of opt out to continue to comply with National LEV in a state
that had opted out after that state's opt-out became effective. As
discussed below in section VI.B, an OTC State legitimately opting
out of National LEV is required to provide manufacturers at least
two years lead time.
---------------------------------------------------------------------------

The following summarizes EPA's proposal for the tailpipe standards
that would apply if an OTC State violated its commitment by not
allowing National LEV as a compliance alternative. For vehicles sold in
the violating state, all manufacturers would be allowed to sell
vehicles meeting Tier 1 standards and to exclude those vehicles from
the NMOG fleet average beginning in the next model year after the date
of the state violation for at least the two-year lead time set forth in
section 177 and the implementing regulations; then manufacturers would
become subject to the state Section 177 Program only if the
manufacturer opted out of National LEV and its opt-out had become
effective, if the manufacturer decided to comply with the violating
state's new Section 177 Program while remaining in National LEV, or if
EPA approved the state's requirements into the SIP. If a manufacturer
opted out, before the opt-out became effective, the manufacturer would
continue to be subject to all National LEV requirements for vehicles
sold outside of the violating state. Once a manufacturer's opt-out had
become effective, for vehicles sold outside of the violating state, the
manufacturer would have to comply with any backstop state Section 177
Programs (except ZEV mandates) that a state had adopted at least two
years before the effective date of opt-out and, in other states, would
have to comply with all applicable federal standards that would apply
in the absence of National LEV. Manufacturers would not have to comply
with any ZEV mandates (except those that were unaffected by National
LEV) until after two years of lead time had passed as set forth in
section 177, which would start to run from the date EPA received the
manufacturer's opt-out. Manufacturers that did not opt out would
continue to be subject to all National LEV requirements for vehicles
sold outside of the violating state and, in the violating state, would
be allowed, under the National LEV regulations, to sell vehicles
meeting Tier 1 tailpipe standards and to exclude those vehicles from
the NMOG fleet average. To the extent these proposed regulations would
provide a manufacturer with less than the two-years lead time set forth
in section 177, the manufacturer would waive that protection by opting
into National LEV and then setting an effective date in its opt-out
notification that was earlier than the two-years leadtime would
provide.
2. OTC State Fails to Submit SIP Revision Committing to National
LEV
The second way in which an OTC State could violate its commitment
to National LEV would be to fail to submit a SIP revision to EPA
containing the state's regulatory commitment to the program. The
consequences of this violation differ slightly from a situation where a
state does submit such a SIP revision, receives EPA approval for it,
but then violates the commitment by attempting to remove National LEV
as a compliance alternative. Failure to submit a SIP revision would not
necessarily indicate that the state was attempting to impose a
compliance obligation on the manufacturers contrary to the terms of the
fundamental agreement underlying the voluntary National LEV program.
Consequently, if manufacturers did not choose to opt out of National
LEV, they would continue to be subject to all the National LEV
requirements for vehicles sold both within and outside of the violating
state, and the National LEV program would continue. However, the
portion of the OTC State commitments contained in the SIP revisions is
critical to the long-term enforceability of the state commitments, so
EPA believes it is

[[Page 44767]]

important to allow the manufacturers to opt out of National LEV if a
state fails to submit a SIP revision. This will maximize the incentives
for OTC States to submit their National LEV SIP revisions and to
provide manufacturers recourse in the event of a state failure to do
so.
As under the previous scenario, EPA is proposing that there would
be no time limit for manufacturers to exercise their right to opt out
of National LEV if an OTC State had missed the deadline for its
National LEV SIP revision and had not yet submitted such a SIP
revision. Once the state submitted its SIP revision, even if after the
deadline, manufacturers would no longer have the opportunity to decide
to opt out of National LEV. Unlike the previous scenario, EPA is
proposing that a state that had missed the deadline for its SIP
submission would have a limited opportunity to cure the violation. For
the first six months from the deadline for the SIP submission,
manufacturers would only be able to opt out conditioned on the state
not submitting a SIP revision within six months of the initial
deadline. If the state submitted the revision within that six-month
grace period, any opt-outs based on that violation would be invalidated
and would not come into effect. EPA believes this limited opportunity
to cure is appropriate here, given the very tight timeframes provided
for the OTC States to submit their SIP revisions and the fact that
failure to submit this SIP revision would not pose the risk of any
immediate change in the manufacturers' compliance obligations. After
the six-month grace period, the state's submission of a SIP revision
would not negate an opt-out that a manufacturer had already submitted
to EPA, even if the manufacturer's opt-out had not yet become
effective. However, no manufacturer would be able to opt out after the
state submitted the SIP revision no matter how late. As under the
previous scenario, whether or not a state has failed to submit a SIP
revision by a given date and thereby provided a basis for an opt-out is
a very clear cut issue. Consequently, EPA is not proposing to provide
for an EPA determination of the validity of an opt-out based on this
violation.
Again consistent with the previous scenario, EPA is proposing that,
if a manufacturer opts out it may set the effective date of its opt-out
as early as the next model year after the date of the opt-out or any
model year thereafter. ²² If a manufacturer opts out of
National LEV, in the violating state, the National LEV regulations
would allow the manufacturer to meet Tier 1 tailpipe standards and
would not require those vehicles to be included in the NMOG fleet
average calculations. These special provisions for vehicles sold in the
violating state would start with the next model year after the
manufacturer opts out (e.g., MY2000 for a manufacturer that opts out in
calendar year 1999) and continue until the effective date set in the
opt-out notice. As under the scenario above, the violating state would
not receive SIP credits for emissions reductions from vehicles meeting
anything more stringent than the Tier 1 tailpipe standards while those
standards apply. Once the manufacturer's opt-out had become effective,
the manufacturer would be subject to a Section 177 Program in the
violating state if the two-year lead time requirement of section 177
had been met. EPA is taking comment on whether, regardless of the
effective date of an opt-out, National LEV regulations should allow
manufacturers to sell vehicles that meet Tier 1 tailpipe standards for
four years in the violating state.
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\22\ If, however, an OTC State took a legitimate offramp as
discussed below, a manufacturer could not use a delayed effective
date of opt out to continue to comply with National LEV in a state
that had opted out after the state opt-out became effective. As
discussed below in section VI.B an OTC State legitimately opting out
of National LEV is required to provide manufacturers at least two
years lead time.
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If a manufacturer opted out of National LEV, in non-violating
states it would continue to meet all National LEV requirements until
the effective date of its opt out. For vehicles sold in the non-
violating states, once the opt-out became effective.
3. OTC State Submits Inadequate SIP Revision Committing to National LEV
A third way in which an OTC State could violate its commitment to
National LEV would be to submit a SIP revision that did not adequately
commit the state to the National LEV program. Evaluation and approval
of SIP revisions is an EPA responsibility, as delegated by Congress
under section 110(k) of the Act. Thus, EPA believes that it is
appropriate for the Agency to evaluate the adequacy of the submission
before a manufacturer could opt out on the basis of a claimed
inadequacy. EPA is proposing that manufacturers would be able to opt
out if EPA disapproved a National LEV SIP revision, and either the
state failed to submit a corrected SIP revision within one year of
EPA's disapproval, or the state submitted a modified SIP revision and
EPA subsequently disapproved the revision. Under this scenario, the
date of the violation that would allow a manufacturer to opt out of
National LEV would be either the state's failure to submit a National
LEV SIP revision committing to National LEV within one year of EPA's
disapproval of its initial SIP revision, or publication of EPA's second
disapproval. EPA also considered and is taking comment on the following
alternative approaches for when a manufacturer could opt out based on
an inadequate National LEV SIP revision. One alternative would be to
allow manufacturers to opt out immediately upon EPA's initial
disapproval of a state's National LEV SIP revision. Another would be to
allow manufacturers to opt out if a state's National LEV SIP revision
was inadequate and EPA failed to approve it within nine months (or one
year) of the deadline for state submission of the SIP revision, whether
that failure was through disapproval or inaction. Still another
alternative would be upon a determination by the manufacturer that the
SIP revision is inadequate, even if EPA has not yet acted on it.
As with the other types of state violations, EPA is proposing no
deadline for manufacturers to opt out based on this offramp. Also,
there would be no opportunity for the state to cure the violation after
a manufacturer had opted out, although manufacturers that had not opted
out could no longer do so once the state had cured a violation and EPA
had approved the SIP revision committing the state to National LEV. As
proposed, the action allowing opt out is very clear, and hence EPA is
not proposing to provide for an EPA determination of the validity of an
opt-out based on this type of violation.
Again consistent with the previous scenarios, EPA is proposing that
if a manufacturer opts out it may set the effective date of its opt-out
as early as the next model year or any model year
thereafter.²³ EPA is proposing that manufacturers'
obligations under National LEV and state Section 177 Programs would be
identical to those described if a state failed to submit a SIP
revision.
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\23\ If, however, an OTC State took a legitimate offramp as
discussed below, a manufacturer could not use a delayed effective
date of opt out to continue to comply with National LEV in a state
that had opted out after the state opt-out became effective. As
discussed below in section VI.B an OTC State legitimately opting out
of National LEV is required to provide manufacturers at least two
years lead time.
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B. OTC State or Manufacturer Legitimately Opts Out of National LEV

Following the general principle that parties should be able to exit
National

[[Page 44768]]

LEV if there is a significant change in the assumptions that underlay
their decision to opt in initially, a manufacturer also could opt out
if an OTC State or another manufacturer were to opt out of National LEV
legitimately.²⁴ This offramp could be used within 30 days of
EPA's receipt of an OTC State or a manufacturer opt-out. The
manufacturer could set an effective date for its opt-out beginning the
next model year after the date of the manufacturer's opt-out, or any
model year thereafter. EPA would not determine the validity of opt-out
under this offramp unless EPA is to determine the validity of the
initial opt-out. EPA is proposing that manufacturers' obligations under
National LEV and state Section 177 Programs would be identical to those
described if a state failed to submit a SIP revision, except that no
state would be a violating state.
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\24\ The validity of any opt-out from National LEV would depend
in part on whether the underlying condition allowing opt-out has
actually occurred. Where the initial state or manufacturer's opt-out
was invalid, it would not provide an offramp for another
manufacturer to opt-out of National LEV. Thus, throughout this
notice when EPA refers to an initial opt-out as the condition that
allows another opt-out, it refers only to valid initial opt-outs.
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C. Offramp for Manufacturers for EPA Failure to Consider In-Use Fuel
Issues

EPA is proposing an additional offramp for manufacturers related to
the potential effects of fuel sulfur levels on emissions performance of
National LEV vehicles. EPA is proposing that manufacturers could opt
out of National LEV if EPA failed to consider certain vehicle
modifications, on-board diagnostic control systems, or preconditioning
of vehicles when requested to do so by a manufacturer as a result of an
alleged effect of high-sulfur fuel levels. Manufacturers are concerned
that the sulfur levels of in-use fuels supplied outside of California
may affect the on-board diagnostic (OBD) systems and tailpipe emissions
of National LEV vehicles. However, EPA does not believe that at this
point it has sufficient data on these potential effects to identify any
problems conclusively and to fully resolve any such problems in the
context of the National LEV regulations. EPA recognizes that this
remains an important issue for the manufacturers, however, and is
proposing to build into National LEV means to allow problems related to
fuel sulfur effects on emissions performance of National LEV vehicles
to be addressed within the context of National LEV as more information
becomes available. These problems would be addressed on a case-by-case
basis. EPA would act based on a manufacturer's request, supported by
data, that a specific engine family or families are adversely affected
by sulfur in a manner covered by one of the conditions incorporated
into the National LEV regulations and that appropriate relief is
warranted for such family or families.
EPA recognizes that sulfur effects on motor vehicles is also an
issue outside of the National LEV context and is being addressed in
numerous other actions. These include testing being done to support
EPA's Tier 2 Study and the Ozone Transport Assessment Group's
recommendation to EPA to explore reducing fuel sulfur levels. EPA is
working with the various stakeholders in developing data to quantify
any sulfur effects on current and future technology vehicles. EPA has
said that in appropriate instances, EPA will address sulfur effects on
specific mobile source programs. In March, 1997, EPA released a paper
entitled ``OBD & Sulfur White Paper: Sulfur's Effect on the OBD
Catalyst Monitor on Low Emission Vehicles.'' This paper summarized the
sulfur concerns and the available data, and outlined EPA's approach to
resolving OBD/sulfur issues on a case-by-case basis. ²⁵ EPA
is pursuing additional investigations into sulfur impacts on OBD and
emission control system performance with the cooperation and
contribution of other stakeholders. However, as of yet there is little
additional data, and while the OBD & Sulfur White Paper will likely be
revised in the near future, its suggested case-by-case approach remains
EPA's expected approach regarding the OBD/sulfur issue.
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\25\ OBD and Sulfur White Paper, March 1997 (Docket A-95-26, IV-
B-06).
---------------------------------------------------------------------------

Based on their continuing concerns regarding the effects of fuel
sulfur levels on OBD systems and vehicle emissions, the auto
manufacturers approached EPA in June, 1997 with a proposed resolution
for National LEV. Believing that the effects of fuel sulfur were not
adequately addressed by EPA in the National LEV program, the
manufacturers proposed that National LEV should include an offramp for
manufacturers related to in-use fuels issues and that they should be
allowed to exit the National LEV program if EPA were to act (or fail to
act) in a specified manner to resolve specific sulfur-related issues.
The manufacturers outlined six different conditions (set forth below)
related to EPA actions (or lack of action) on these issues that they
believe should allow the manufacturers to opt out of National LEV.
Below, EPA has reproduced each of the conditions for triggering the
offramp as stated by the manufacturers, followed by a discussion and
EPA's proposal regarding each of the requested offramp conditions.
First, the manufacturers suggested that they be allowed to opt out
if ``EPA declines to allow the use of OBD catalyst monitor systems
which, if functioning properly on low sulfur gasoline, indicate sulfur-
induced passes when exposed to high sulfur gasoline.''
Under current regulations, manufacturers are required to install
OBD systems that monitor emission control components for any
malfunction or deterioration causing exceedance of certain emission
thresholds. These systems also must alert the vehicle operator to the
need for repair by illuminating a dashboard malfunction indicator light
(MIL) and must store diagnostic information in the vehicle's computer
to assist the diagnosis and repair of the problem. Before an OBD system
can appear on new vehicles, EPA must certify that the system meets
these requirements, and these requirements must continue to be met in
actual in-use operation. Proper functioning of OBD systems is evaluated
by simulating various malfunctions of the emission control system
(e.g., replacing the catalyst or oxygen sensors with ineffective
components) and determining whether or not the OBD system ``notices''
the simulated malfunction and responds appropriately.
The offramp condition suggested by the manufacturers reflects their
concern that their OBD systems will be designed to pass a certification
or recall test properly using the low-sulfur fuel required in
California, but that high-sulfur fuel supplied outside of California
may affect the OBD system such that it may be unable to detect catalyst
degradation at the necessary emission level. In such cases, the MIL
could fail to illuminate (a ``sulfur-induced pass''), whereas if the
vehicle was operated on low sulfur fuel the MIL would react
appropriately. In the unlikely event that EPA concluded that an OBD
system should not be certified specifically because of this type of
behavior, manufacturers suggest that they be allowed to opt out of the
National LEV program.
EPA acknowledges that some data indicate that some OBD systems may
behave in the way suggested by this suggested condition for triggering
an offramp. Thus, an OBD system might be affected by high-sulfur fuel
and fail to register decreased catalyst performance. However, EPA
believes that more data is needed to characterize this potential

[[Page 44769]]

concern better. Also, as stated above, considerable efforts involving
various stakeholders are underway to evaluate this and other related
concerns further. EPA believes that, in the context of the National LEV
program, it may be inappropriate to penalize a manufacturer who uses a
system that performs as required on low-sulfur fuel but has sulfur-
induced passes due to high-sulfur fuel. However, EPA needs to evaluate
this potential problem properly on a case-by-case basis. To certify
such a system, EPA would have to conclude that the effect was due
solely to sulfur and that the OBD system could not otherwise account
for the effects of high-sulfur fuel. EPA is also concerned that
providing an offramp if the Agency failed to certify an OBD system upon
a manufacturer's request puts the Agency in the difficult position of
having to approve every request or else risk the collapse of the
National LEV program, even if EPA believes that certification is not
technically supportable.
EPA is proposing that manufacturers could opt out of National LEV
if EPA, upon a written request from a manufacturer in relation to the
certification of an OBD catalyst monitor system, fails to consider the
use of the system because it indicates sulfur-induced passes when
exposed to high-sulfur gasoline, even though it functions properly on
low-sulfur gasoline. EPA does not intend to preclude the use of such
systems out-of-hand, but believes it cannot at this time accept the
offramp language proposed by manufacturers given the current state of
knowledge and the need for EPA to evaluate requests carefully on a
case-by-case basis. EPA is taking comment on the manufacturers'
suggestion. EPA is also taking comment on an alternative that would
allow manufacturers to opt out if EPA determined that an OBD system
functioned properly on low-sulfur fuel, had sulfur-induced passes due
solely to high-sulfur fuel and that the OBD system could not otherwise
account for the effects of high-sulfur fuel, and EPA then refused to
certify the OBD system because of the sulfur-induced
Second, the manufacturers suggested that they be allowed to opt out
of National LEV if ``EPA declines to approve modifications to, on a
case-by-case basis, vehicles that exhibit sulfur-induced MIL
illuminations due to high sulfur gasoline so as to eliminate the
sulfur-induced MIL.''
This suggested offramp condition reflects the manufacturers'
concern that exposure to high-sulfur fuel could cause the performance
of the catalyst to degrade to the point of OBD detection and the MIL is
therefore illuminated, even though the same catalyst would not have
degraded enough to cause the MIL to illuminate if the vehicle had been
operated on low-sulfur fuel. When such a MIL illumination problem is
identified, under current regulations modifications to OBD systems to
resolve the problem could be accomplished via field fixes or running
changes, which are methods that allow a manufacturer (with EPA
approval) to make changes to a previously certified emission control
system configuration. With this offramp proposal, manufacturers are
essentially requesting that they be allowed to determine when a sulfur-
related MIL illumination is occurring in a given engine family and what
the appropriate response is, and that if they are not allowed to
implement their chosen response (e.g., if EPA does not approve a
particular field fix or running change requested by a manufacturer)
they are then provided an opportunity to exit the National LEV program.
EPA pledged to address the issue of sulfur-induced MIL
illuminations on an in-use, case-by-case basis until future data and
information enable a long-term resolution of this issue. This remains
the current policy. EPA currently believes that it would be
inappropriate to modify OBD systems unless a manufacturer were able to
supply in-use data, or at least production-ready vehicle data,
demonstrating that sulfur has an adverse effect on catalyst monitoring
systems for specific engine families. EPA believes that the offramp
language suggested by the manufacturers would be inappropriate because
it would effectively force EPA to accept solutions to this problem that
may not be technically supportable or else risk the termination of the
National LEV program.
EPA is proposing that manufacturers could opt out if, based on a
written request from a manufacturer, EPA declines to consider, on a
case-by-case basis, the manufacturer's suggested modifications to
vehicles that exhibit sulfur-induced MIL illuminations due to high-
sulfur gasoline so as to eliminate the sulfur-induced MIL. As explained
below, EPA is proposing that the National LEV regulations would define
a specific process that would allow manufacturers to notify EPA of this
type of problem and would require EPA to respond to a manufacturer's
request (e.g., for a running change) within a specified time period.

taking comment on an alternative that would allow manufacturers to opt
out if, on a case-by-case basis, EPA determined that an OBD system
exhibited sulfur-induced MIL illuminations due solely to high-sulfur
fuel and failed to allow modifications to the vehicles to eliminate the
sulfur-induced MIL.
Third, the manufacturers suggested that they be allowed to opt out
of National LEV if ``EPA declines to adjust I/M (240/ASM) cut points to
account for the effect of the high sulfur content of current
commercially available gasoline.''
Similar to the previous issue, manufacturers are concerned that
high-sulfur levels could degrade catalysts to the point where vehicles
would fail state Inspection/Maintenance (I/M) tests due to the high-
sulfur fuel, and they are requesting that EPA adjust I/M standards
upwards to account for the impact of sulfur. If EPA does not take such
action, manufacturers have proposed that they be allowed to opt out of
the National LEV program. EPA does not believe adjustments to I/M cut
points to account for the impacts of sulfur are necessary or
appropriate at this time. While data being collected by the several
cooperative sulfur test programs may help EPA in assessing this issue,
there is currently no data to determine whether an adjustment to I/M
cutpoints is necessary and if so, the appropriate degree of such an
adjustment. Although EPA is taking comment on the manufacturers'
suggestion, EPA cannot justify establishing the above condition as a
trigger for an offramp because the necessity for such an adjustment is
not clear at this time. EPA is interested in obtaining data, including
data on Tier 1 vehicles, that might help quantify the effect of sulfur
on I/M testing and will work with all the stakeholders to develop the
appropriate response if data indicates there is a problem in this
instance.
Fourth, the manufacturers suggested that they be allowed to opt out
of National LEV if ``EPA declines to allow sufficient pre-conditioning
procedures (including low sulfur fuel and additional vehicle
preparation cycles) prior to in-use testing to remove the effects of
high sulfur from currently available gasoline.''
Current emission test procedures require specific procedures to
``precondition'' each test vehicle before the vehicle enters the actual
emission test portion of the procedure. This ensures that all vehicles
enter the emission test in a similar condition. Current data suggests
that the deleterious effect of sulfur on the catalyst is reversible by
operating the vehicle for some period of time on a low-sulfur fuel.
This suggested offramp condition is designed to alleviate

[[Page 44770]]

manufacturers concern that in-use vehicles tested by EPA (recall
testing) might not experience enough preconditioning operation under
current regulations to eradicate the effect of sulfur, and that this
could cause vehicles to inappropriately fail in-use emission tests.
This issue does not apply to preconditioning of vehicles for
certification or Selective Enforcement Auditing (SEA) testing, since
these vehicles would not have been exposed to high-sulfur fuel.
Consequently, manufacturers propose that EPA allow them to expand the
preconditioning of the vehicle used for in-use testing in order to
guarantee the maximum reversal of the sulfur impact.
Current regulations allow the approval of additional
preconditioning in ``unusual circumstances'' if the need is
demonstrated (see 40 CFR 86.132-96(d)). EPA stated in the Final
Framework Rule that ``[d]etrimental effects on National LEV vehicles
from commercially available fuel sold in the 49 States could likely be
considered an unusual circumstance'' (62 FR 31230). The specific
preconditioning offramp language proposed by the auto manufacturers is
inappropriate because it would remove EPA's ability to determine what
type and amount of preconditioning is necessary and appropriate,
particularly given that all stakeholders are continuing to explore the
exact nature of sulfur's impact on various technologies and the degree
of reversibility exhibited by different emission control technologies.
EPA will work with manufacturers in the context of the currently
applicable regulations to determine an appropriate level of allowable
preconditioning. Any preconditioning procedure utilized under 40 CFR
86.132-96(d) to address sulfur effects on National LEV vehicles must be
directed only at alleviating sulfur effects. EPA also notes that the
automakers, oil industry, and EPA are currently testing the potential
effects of various sulfur levels on clean vehicles, and in the context
of this testing a pre-conditioning cycle to remove sulfur effects on
catalysts is being analyzed. EPA will look at the results of this
testing and other appropriate test results presented by interested
parties and will determine whether any resulting sulfur preconditioning
cycle is appropriate to apply to specific National LEV vehicles for in-
use testing. Currently it is premature to discuss whether an offramp
should be triggered by EPA's refusal to allow a specific sulfur
preconditioning procedure since no such procedure has been developed.
Sulfur effects seem to vary depending on catalyst type and location, so
EPA will not automatically apply one procedure to all manufacturers
unless new information arises from the various test programs that
causes EPA to determine that to be an appropriate course of action.
EPA believes that given the current understanding of sulfur effects
on in-use emission performance (as measured by in-use testing) and the
case-by-case approach EPA is planning to use to address sulfur effects
on OBD systems, manufacturers should only be able to opt out of
National LEV based on preconditioning concerns if EPA fails to consider
information before the Agency in a specific case showing a need for
additional preconditioning. Thus, EPA is proposing that manufacturers
would be able to opt out of National LEV if EPA declines to consider,
on a case-by-case basis, prior to in-use testing, pre-conditioning
procedures designed solely to remove the effects of high sulfur from
currently available gasoline. EPA is taking comment on the
manufacturers suggestion. EPA is also taking comment on an alternative
that would allow manufacturers to opt out if EPA determined that there
are significant effects of high-sulfur fuel on OBD systems, and then
EPA declined to allow sufficient pre-conditioning procedures prior to
in-use testing to remove the effects of high sulfur from currently
available gasoline.
Fifth, the manufacturers suggested that they be allowed to opt out
of National LEV if ``EPA declines to ensure that in-use, SEA, and/or
certification testing of low emission vehicles is conducted using
California Phase 2 reformulated gasoline (RFG).''
The regulations promulgated in the Final Framework Rule allow the
use of California Phase II RFG for in-use, SEA, and certification
testing. Certification test fuel specifications, which include
California Phase II RFG, are part of the National LEV Core Stable
Standards, and thus EPA cannot change these specifications over the
objection of the manufacturers without providing an offramp for them to
opt out of National LEV (See 62 FR 31202). Under National LEV,
manufacturers will be able to choose to use specified Federal or
California gasoline for exhaust emission testing, except where a
specific fuel is required, such as Federal fuel for evaporative
emissions testing. EPA's longstanding policy of conducting SEA and
recall testing using the fuel on which the manufacturer chose to
certify its vehicle will continue to apply under the National LEV
program. EPA does not believe that a specific condition for opt-out
related to use of California Phase 2 RFG for vehicle testing is
necessary given the fuel specifications already in the National LEV
regulations and EPA's policy regarding in-use test fuels. However, EPA
is taking comment on allowing manufacturers to opt out of National LEV
if EPA declines to conduct National LEV compliance testing on the fuel
used by a manufacturer during certification of the vehicle or engine.
Sixth, the manufacturers suggested that they be allowed to opt out
of National LEV if ``EPA, after concluding that there are significant
effects of high sulfur fuel, fails to initiate a multi-party process to
take appropriate action to ameliorate the effects of high sulfur
gasoline.''
EPA has already committed that it will conduct a multi-party
process to resolve in-use fuel sulfur issues if further testing reveals
a significant sulfur effect on National LEV vehicles. See 62 FR 31221.
However, EPA believes that it is unnecessary to make violation of this
commitment a condition that would allow manufacturers to opt out of
National LEV.
EPA is proposing the following process for manufacturers to opt out
of National LEV if one of the conditions described above occurred. A
manufacturer would have to send a request to EPA in writing identifying
the particular problem at issue, demonstrating that it was due to in-
use fuel sulfur levels, and requesting EPA to consider taking a
specified action in response. EPA proposes that the Agency would have
60 days to respond to the manufacturer's request in writing, stating
the Agency's decision and explaining the basis for the decision. If EPA
fails to respond in this manner in the timeframe allotted,
manufacturers would have 180 days after the deadline for the EPA
response to decide to opt out of National LEV. Once EPA responded to
the manufacturer's request, even if after the 60-day deadline, a
manufacturer that had not yet opted out based on this offramp would no
longer be able to do so, although if a manufacturer had already
submitted an opt-out, that opt-out would be unaffected by EPA's
subsequent response. Only the manufacturer that sent the initial
request to EPA would be able to opt out if EPA failed to respond, but
in section VI, EPA is proposing that if one manufacturer (or OTC State)
opted out based on any of the identified offramps, other manufacturers
would be able to opt out as well on the basis that there had been a
change to the set of parties originally covered by the program.

[[Page 44771]]

EPA proposes that, consistent with opt-outs based on other
offramps, a manufacturer that opts out based on this offramp must
continue to comply with National LEV until the opt-out becomes
effective. The manufacturer may set the effective date of its opt-out
as early as the next model year or any model year thereafter. After the
effective date of its opt-out, the manufacturer would be subject to any
backstop Section 177 Programs (except for ZEV mandates) provided that
at least two-years lead time (as provided in section 177) had passed
since the adoption of the state's Section 177 Program, or would be
subject to Tier 1 requirements in states without such backstops. Other
than those ZEV mandates that would be unaffected by the National LEV
program (i.e., existing ZEV mandates), if a manufacturer opts out, it
will not be subject to any other ZEV mandates until two years of lead
time has passed, which would run from the date the manufacturer opts
out of National LEV and would be measured according to the section 177
implementing regulations.
In lieu of providing the offramps described above, EPA is also
taking comment on an alternative approach that would make the
provisions for EPA action described above a substantive requirement on
EPA under the regulations, rather than making EPA's failure to act a
condition that would allow manufacturers to opt out of National LEV.
For example, the preconditioning regulations of 40 CFR 86.132-96(d)
would be modified to include a requirement that EPA respond to any
manufacturer's request made under that section within 60 days. In the
event that EPA failed to respond within the specified time period, the
manufacturer would be able to enforce the regulatory requirement
against EPA, but would not also be able to opt out of National LEV.

D. Offramp for OTC States

In light of the proposed practically and legally binding
commitments that the OTC States would make to the National LEV program,
it is also appropriate to identify the limited circumstances under
which the states should no longer be bound by those commitments. EPA is
proposing two circumstances in which an OTC State could opt out of
National LEV: (1) If a manufacturer were to opt out of National LEV; or
(2) if EPA were to change a Stable Standard in a way that would make it
less stringent and as a consequence, it would have changed EPA's
initial determination that National LEV would produce emissions
reductions equivalent to OTC State Section 177 Programs. EPA is
proposing that if an OTC State were to take an identified legitimate
offramp from National LEV, it would no longer be bound by any
commitments that it made to the program in its initial opt-in package,
other than its commitment to follow the National LEV regulations to
transition from National LEV to a state Section 177 Program. An OTC
State that was already in violation of its National LEV commitments
would not be able legitimately to opt out of National LEV based on a
manufacturer's opt-out.
To opt out of National LEV, EPA is proposing that the state
official that signed the commissioner's letter in that state would send
EPA an opt-out notification letter. The letter would state that the
state was opting out of National LEV and specify the condition allowing
the state to opt out. The date of the state opt-out would be the date
that EPA received the opt-out letter, but EPA is proposing that there
would be a two-year transition period before the state opt-out would
become effective and the state could require compliance with a Section
177 Program without allowing National LEV as a compliance alternative.
EPA is taking comment on whether the National LEV regulations should
require a four-year transition period instead. Whether an opt-out
letter alone would itself remove National LEV as a compliance
alternative as of the effective date of the opt-out depends on how the
state regulations are written. In opting into National LEV the state
could structure its regulations and SIP to provide that National LEV
would not be an alternative to the state's Section 177 Program if the
state had opted out of National LEV pursuant to the National LEV
regulations and the opt-out had become effective.
1. OTC State Offramp Based on Manufacturer Opt-Out
EPA is proposing that an OTC State would be able to opt out of
National LEV without violating its commitment if a manufacturer opted
out of National LEV under one of the identified offramps for
manufacturers.²⁶ All parties would have made the choice to
opt into National LEV with an understanding about the manufacturers and
states that would be subject to the program. If those fundamental
assumptions were to change, the parties to the voluntary program should
have the opportunity to reevaluate their commitments and choose to opt
out. Some OTC States have indicated, for example, that they believe it
would not be feasible in their states to have some manufacturers
subject to National LEV while others that had opted out of National LEV
were subject to Section 177 Program requirements.
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\26\ The condition allowing an OTC State to opt out would only
arise if the initial manufacturers' opt-out were valid. See n. 27.
---------------------------------------------------------------------------

If a manufacturer opted out, EPA is proposing that OTC States would
have a three-month period to submit an opt-out letter. The start of the
three-month period would depend on the reason the manufacturer opted
out. If a manufacturer were to opt out because of state action or
inaction, or because of EPA's failure to consider a manufacturer's
request related to effects of in-use fuels, the three-month period
would start on the date EPA received the manufacturer's opt out
notification.²⁷ For a manufacturer's opt-out based on a
change to a Stable Standard, the three-month period would start on the
date of EPA's finding that the opt-out was valid or the date of a final
judicial ruling that a disputed opt-out was valid. If a state did not
opt out within that three-month period, the opportunity to opt out
based on that manufacturer action would no longer be available.
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\27\ However, if a manufacturer were to opt out because a state
failed to submit a SIP revision by the applicable deadline and the
manufacturer submitted the opt-out notification within six months of
the applicable deadline for the SIP revision, the manufacturer's
opt-out would not be final until the end of that six-month period.
That date (not the date of the manufacturer's opt-out) would start
the three-month period for state opt out.
---------------------------------------------------------------------------

The state opt-out could not become effective until the state had
provided manufacturers with the two-year lead time set forth in section
177, with the two-year lead time to start on the date that EPA received
that state's opt-out letter. Until the state's opt-out became
effective, manufacturers that had not opted out of National LEV or
whose opt-outs had not yet become effective would continue to be
subject to all the National LEV requirements for vehicles sold in that
state. Manufacturers whose opt-outs had already become effective would
not be affected by the state opt-out. Once the state opt-out became
effective, all manufacturers would be subject to the state's Section
177 Program, if it had been adopted at least two years
previously.²⁸ As the existence of a manufacturer opt-out as
the basis for the state opt-out is a simple factual determination, EPA
is not proposing that the Agency should evaluate the

[[Page 44772]]

validity of a state opt-out before it could become effective.
---------------------------------------------------------------------------

\28\ This is true even for a manufacturer that had opted out and
set an effective date for its opt-out that was later than the
effective date of the state's opt-out.
---------------------------------------------------------------------------

2. OTC State Offramp Based on Change to Stable Standards
The second condition that would allow an OTC State to opt out of
National LEV would be an EPA change to a Stable Standard that made
National LEV less stringent and, if the change had been known at the
start of National LEV, would have changed EPA's initial determination
that National LEV would produce emissions reductions at least
equivalent to the adopted OTC State Section 177 Programs. This offramp
for OTC States is the counterpart to the manufacturers' offramp if EPA
makes certain types of changes to Stable Standards that make the
Standards more stringent.
In section IV above, EPA discussed its determination that National
LEV would produce equivalent or greater emissions reductions than the
alternative of adopted OTC State Section 177 Programs. In the modeling,
EPA assumed that, in the absence of National LEV, programs would be in
place in those OTC States that currently have Section 177 Programs
(including backstop programs) and that the federal Tier 1 standards
would apply in the other OTC States. EPA is proposing that, if EPA were
to change any of the Stable Standards in a way that made the
requirements less stringent, an OTC State could request EPA to
reevaluate whether National LEV is still equivalent to the alternative
approach of OTC State Section 177 Programs. The National LEV
regulations would provide that within six months of receiving the
request EPA would conduct such an evaluation or would determine that
the revision to the standard or requirement would not make it less
stringent.
In reevaluating equivalency, EPA would use the same model and
inputs as it used in the initial equivalency determination. EPA would
modify the modeling only to reflect the effect of the modified Stable
Standard and the effect of having Section 177 Programs (identical in
stringency to the Section 177 Programs modeled in the initial
equivalency determination) in any additional OTC States that had
adopted section 177 backstop programs since the initial equivalency
determination. In reevaluating equivalency, EPA believes that the focus
of the evaluation should be the ongoing validity of the initial
decision to opt into National LEV, not whether the parties would make
the same decision at the time of the reevaluation based on then-current
conditions. This is consistent with the approach that the parties took
to the periodic equivalency evaluation in the initialed MOUs. At the
time of their opt-ins, the parties should not have anticipated that EPA
would change one of the Stable Standards, and such a change would
affect one of the basic assumptions used to calculate the relative
benefits of National LEV and the alternative of OTC State Section 177
Programs. Thus, it is appropriate to reevaluate the equivalency of the
two approaches given such a change, and provide the OTC States an
opportunity to opt out of National LEV if it is no longer equivalent to
the alternative.
EPA is proposing to include in the equivalency reevaluation the
effect of Section 177 Programs in any additional OTC States that had
adopted Section 177 Programs since the initial equivalency
determination. This represents a compromise between OTC States' and
manufacturers' positions. In making the initial equivalency
determination, EPA is proposing to compare National LEV to the
alternative of OTC State Section 177 Programs. See section IV. As
discussed above, EPA is proposing to assume that Section 177 Program
requirements would apply in those OTC States that currently have the
requirements or backstop requirements in their state law or regulations
and that the federal Tier 1 standards would apply in the other OTC
States. The OTC States requested that EPA take a somewhat different
approach to the initial equivalency determination by assuming that
Section 177 Programs would also apply in particular OTC States that are
currently in the process of developing such regulations. For the
initial determination, such a change in the assumptions would have no
effect on EPA's finding that National LEV would produce emissions
reductions at least equivalent to those that would be produced by the
alternative. EPA performed a sensitivity analysis for the initial
equivalency determination to analyze the effects of the most optimistic
assumptions regarding adoption of Section 177 Programs by OTC States,
which indicated that even with those assumptions National LEV would
still produce emissions reductions equivalent to or greater than that
alternative. However, given the OTC States' concern, EPA believes it
would be appropriate to modify the inputs to any reevaluation to
reflect the then-current reality in terms of which OTC States had
actually adopted Section 177 Programs. The modeling would continue to
assume that all states with Section 177 Programs would have the same
requirements used in the initial equivalency modeling, as discussed
above. Thus, the reevaluation would not reflect any changes in the
state's legal authority under the CAA to adopt programs subsequent to
their decision to opt into National LEV, but it would take into account
subsequent actions taken by the OTC States based on legal authority
they had at the time of the decision.
EPA does not believe it would be appropriate to include in the
reevaluation of equivalency the effects of other changes in
circumstances affecting emissions reductions under National LEV or the
alternative, such as changes to California's LEV program. At the time
of opt-in, all of the parties will be aware that circumstances might
change over the period that National LEV is in effect. For example,
California might modify its requirements during that time. In making
the decision to opt into National LEV and choose it over the
alternative for a given period of time, the parties will have to
evaluate the likelihood that any of the relevant circumstances would
change sufficiently to reverse their inclination to opt in. Thus, the
OTC States will have to consider the likelihood that California would
modify its CAL LEV requirements and the likely effect of such a
modification, and decide whether to commit to National LEV in lieu of a
state Section 177 Program that could include any subsequent changes to
CAL LEV. By opting in, the OTC States will have made the decision that
the possibility of those benefits is outweighed by the certainty of the
benefits from National LEV (if it goes into effect). The reevaluation
of equivalency should not allow parties to reconsider that initial
choice with the benefit of hindsight. National LEV will only come into
effect if the parties to the program commit to it for a specified
duration, and an EPA change to the underlying standards should not
become an opportunity to undermine that basic commitment.
If EPA made a change to a Stable Standard that would have changed
the equivalency determination, EPA is proposing that the OTC States
would have three months to opt out, running from the date that EPA
found that National LEV would no longer produce emissions reductions
equivalent to those that would be produced by OTC State Section 177
Programs. If a state did not opt out within that three month period,
the opportunity to opt out based on that finding would no longer be
available.
Also consistent with the other state offramp, a state opt-out based
on a change to a Stable Standard could not become effective until it
had provided

[[Page 44773]]

manufacturers with the two-year lead time set forth in section 177,
with the two-year lead time to start on the date that EPA received the
state's opt-out letter. The manufacturers' obligations if a state took
this offramp would be determined the same way as described in the
preceding section (when an OTC State opts out because a manufacturer
opted out).

E. Lead Time Under Section 177

The proposed opt-out regulations discussed above incorporate and
rely on EPA's proposed interpretation of section 177's requirements
related to state adoption of the CAL LEV program. Section 177 of the
Act provides the legal authority for states to adopt ``standards
relating to the control of emissions from new motor vehicles'' and
governs the timing of implementation of such requirements. It provides
that a state may adopt new motor vehicle standards only if they are
identical to California standards for a given model year for which EPA
has granted a waiver, and the state must ``adopt such standards at
least two years before commencement of such model year (as determined
by regulation of the Administrator).'' EPA has previously adopted
regulations interpreting this provision. See 40 CFR 85.2301 et seq.
These regulations do not adequately address the issue of when the two-
year lead time starts for backstop Section 177 Programs (i.e., a
Section 177 Program that allows National LEV as a compliance
alternative) after National LEV has come into effect.
It is not clear under section 177 or EPA's current implementing
regulations when the two-year lead time period would start if, after
National LEV came into effect, a state with a backstop Section 177
Program were to delete National LEV as a compliance alternative (either
in violation of its commitment to National LEV or legitimately by
taking an offramp) or if a manufacturer legitimately decided to opt out
of National LEV. Therefore, as part of the National LEV regulations,
EPA is proposing regulations to determine the date on which the two-
year lead time period starts in the special circumstances that arise
only when a state has a backstop Section 177 Program that allows
National LEV as a compliance alternative and National LEV has gone into
effect.
The meaning of the two-year lead time provision in section 177 is
ambiguous in the context of National LEV and backstop Section 177
Programs. There are at least three possible ways to approach this
provision in this context. One possible approach is that the two-year
lead time period starts when the state adopts the backstop Section 177
Program. Under this interpretation, section 177 would require the state
to have adopted its backstop Section 177 Program at least two years
before the model year to which it applies. After the two-year lead time
had run from the date of adoption, the state could remove National LEV
as a compliance alternative and require immediate compliance with the
Section 177 Program at any time. EPA does not believe this is a proper
application of section 177 in the National LEV context. The two-year
lead time requirement is intended to give manufacturers time to make
the changes in product planning, production and distribution that are
involved in switching from one motor vehicle program to another. It
recognizes the practical difficulties in making large production shifts
in very short time-frames. Where manufacturers have had the legal
authority to comply with National LEV in lieu of the state program,
allowing states to drop National LEV as a compliance alternative with
no lead time would allow states to circumvent the protection that
Congress conferred on manufacturers in section 177.²⁹ Thus,
EPA is not proposing to adopt this approach.
---------------------------------------------------------------------------

\29\ EPA is proposing to reject the date of state adoption of
regulations as the starting date for determining whether the section
177 lead time requirement has been met only in those situations
where a state has adopted a backstop Section 177 Program and
National LEV has come into effect. For those states that already
have backstop Section 177 Programs, if National LEV does not come
into effect, the date of adoption of the state regulations is still
the controlling date for determining when the two-year lead time
requirement has been met. In those states, the only legal option
available to manufacturers has been to comply with the state Section
177 Program. The theoretical possibility that they might not have to
comply with the state requirements does not mean that they have not
been given the two-year lead time required by section 177.
---------------------------------------------------------------------------

Another possible approach to section 177 in these limited
circumstances, and the one that EPA is proposing to adopt, is that, if
a manufacturer will need to comply with a state Section 177 Program
after National LEV has come into effect, the two-year lead time runs
from the date that the manufacturer knew that it would need to comply
with the state Section 177 Program rather than with National LEV. EPA
believes this is the most appropriate way to implement section 177 in
this special circumstance, as long as manufacturers are able to waive
the two-year lead time requirement. Given that the failure to provide
statutory lead time renders noncomplying state programs unenforceable,
rather than rendering them void,³⁰ there should be little
question that manufacturers have the ability to waive the lead time
requirement if they choose. This approach to section 177 (including
both when lead time starts and that manufacturers can waive the lead
time) ensures that, in the context of National LEV and state backstop
Section 177 Programs, two of Congress' purposes in adopting section 177
are met--it protects manufacturers from having insufficient time to
switch from one motor vehicle program to another, and it allows states
to ensure that they can achieve the extra emissions reductions from
motor vehicles contemplated by section 177.
---------------------------------------------------------------------------

\30\ See American Automobile Manufacturers Ass'n v. Greenbaum,
No. 93-10799-MA, slip op. at 23, 1993 WL 442946 (D. Mass. Oct. 27,
1993), aff'd., 31 F.3d 18 (1st Cir., 1994).
---------------------------------------------------------------------------

EPA's proposed interpretation of section 177 is reflected in
today's proposed regulations regarding what requirements would apply in
the unlikely event that an OTC State were to break its commitment to
National LEV or that a manufacturer or an OTC State were to opt out of
National LEV. For example, if a state with a backstop Section 177
Program were to delete National LEV as a compliance alternative after
National LEV had come into effect, the state would have changed the
manufacturers' regulatory obligations and the manufacturers would be
entitled to two-years lead time running from the date of the state
action purporting to change the manufacturers' regulatory obligation.
By opting into National LEV, manufacturers would not be agreeing to
waive the lead time required under section 177 in a circumstance where
a state broke its commitment to National LEV and deleted National LEV
as a compliance alternative, and thus the manufacturer would get the
full two-years lead time set by section 177.
Another example demonstrates how the waiver provision modifies the
two-year lead time. If an offramp were triggered and a manufacturer
were to decide to opt out of National LEV and then set an effective
date one year from the time of its opt out, under today's proposed
regulations, upon the effective date of the opt out, the manufacturer
would be required to comply with Section 177 Programs (except for
backstop ZEV mandates) in any state that had not broken its commitment
to National LEV. To the extent that this provides the manufacturer with
less than two-years lead time, the manufacturer will have waived the
lead time provision by opting into National

[[Page 44774]]

LEV combined with setting the effective date for its opt-out. For
backstop ZEV mandates, however, manufacturers would not have to comply
with the ZEV mandate until the two-year lead time period had passed
(which would start running from the date of the manufacturer's opt-out)
because in opting into National LEV manufacturers are not waiving the
two-year lead time with respect to ZEV mandates.
A third possible approach to section 177's two-year lead time
requirement provides an alternative basis for today's proposal. Under
this approach, the lead time requirement differs depending upon the
factual setting. In some instances, measuring lead time from the date
of state adoption of a backstop Section 177 Program still provides
manufacturers adequate protection and thereby implements both the clear
language of the statute and the clear intent of the provision. For
example, in opting into National LEV, a manufacturer is choosing to
accept a compliance alternative that involves some risk of a rapid
change in the manufacturer's regulatory obligations if the manufacturer
opts out. However, as proposed here, the program that the manufacturer
is opting into provides substantial protection for manufacturers with
regard to the applicability of backstop Section 177 Programs upon an
opt-out. Because the manufacturer controls the effective date of the
opt-out and the manufacturer would not be subject to a backstop Section
177 Program until its opt-out became effective, the manufacturer can
ensure that it does not become subject to a Section 177 Program without
whatever lead time it views as adequate. In this situation, the
statutory intent to ensure that manufacturers have lead time is met by
providing that a state can immediately implement a Section 177 Program
for any manufacturer whose opt-out from National LEV is effective, if
the backstop Section 177 Program was adopted at least two years
previously. Thus, for situations where the manufacturer controls the
date that it becomes subject to the Section 177 Program, section 177
would start the two year lead time period from the date of state
adoption of the backstop Section 177 Program.
The other type of situation is one where the state takes an action
imposing requirements on a manufacturer under section 177 and the
manufacturer has no control over the timing of those requirements. For
example, a state might remove National LEV as a compliance alternative
from its state regulations, leaving only the Section 177 Program
requirements in place, which the state had adopted at least two years
earlier. In that instance, making the manufacturer immediately subject
to the section 177 requirements would be contrary both to the purposes
of the section 177 lead time requirement and to the intended operation
of National LEV. By opting into National LEV the manufacturer did not
accept the possibility that a state might commit to National LEV and
then violate that commitment. Nor is there any way for the manufacturer
to protect itself against an immediate application of the section 177
requirements by the violating state, except not to opt into National
LEV at all. Under the circumstances where the state controls the timing
of the applicability of the Section 177 Program, the section 177 lead
time provisions would be implemented by requiring two years of lead
time from the date that the manufacturer knew it would become subject
to the state's Section 177 Program without the option of complying with
National LEV as an alternative.
The interpretation of section 177 that EPA is proposing would apply
only in the very unique situation presented by National LEV--where
states and manufacturers are both voluntarily opting into the national
program. It does not necessarily provide any guidance for other
circumstances.

VII. National LEV Will Produce Creditable Emissions Reductions

In the Final Framework Rule, EPA noted that National LEV must be an
enforceable program to grant states credits for SIP purposes for
emission reductions from National LEV vehicles. As discussed in the
Final Framework Rule, there are two aspects to ensuring that National
LEV is enforceable. See 62 FR 31225 (June 6, 1997). First, the National
LEV program emissions standards and requirements must be enforceable
against those manufacturers that have opted into the program and are
operating under its provisions. In the Final Framework Rule, EPA found
that the National LEV program meets this aspect of enforceability.
Second, the National LEV program itself must be sufficiently stable to
make it likely to achieve the expected emissions reductions. To achieve
the expected emissions reductions from National LEV, the offramps must
not be triggered and the program must remain in effect for its expected
lifetime. EPA also found in the Final Framework Rule that the program
elements finalized in that rule would contribute to a stable National
LEV program. In today's notice, EPA proposes that the complete National
LEV program as contained in today's proposal and the Final Framework
Rule would be sufficiently stable to make the program enforceable and
hence creditable for SIP purposes.
The only circumstances that would allow the National LEV program to
terminate prematurely would be an OTC State's failure to meet the
commitments it makes regarding adoption of motor vehicle programs under
section 177 of the Act, certain EPA changes to Stable Standards that
would allow either a manufacturer or an OTC State to opt out of
National LEV, or certain EPA actions or inactions related to in-use
fuels. ³¹ The Final Framework Rule described the basis for
EPA's belief that the Agency is unlikely to change any of the Stable
Standards in a manner that would give the auto manufacturers the right
to opt out of National LEV. Here EPA proposes to find that National LEV
is stable because EPA believes that an OTC State is unlikely to fail to
meet its commitments to National LEV, EPA is unlikely to change any of
the Stable Standards in a manner that would allow the OTC States to opt
out of National LEV, and EPA is unlikely to act in a manner that would
allow manufacturers to opt out based on the proposed offramps related
to in-use fuels.
---------------------------------------------------------------------------

\31\ EPA is also proposing that OTC States could opt out if a
manufacturer opted out, and manufacturers could opt out if either
another manufacturer or an OTC State opted out. Yet for purposes of
evaluating the stability of the National LEV program, EPA need not
consider these secondary opt-out opportunities because they would
only arise if an OTC State or EPA had already triggered another
offramp.
---------------------------------------------------------------------------

A. OTC States Will Keep Their Commitments to National LEV

As discussed above, under this proposal there are three ways in
which an OTC State could violate its commitments to National LEV and
allow the manufacturers to opt out of the program: (1) Attempt to have
a state Section 177 Program (including ZEV mandates, except in states
with existing ZEV mandates) that was in effect and that prior to MY2006
did not allow National LEV as a compliance alternative; (2) failure to
submit a National LEV SIP revision to EPA by the specified date; or (3)
failure to submit an adequate National LEV SIP revision. EPA is
confident that the OTC States will keep all of their commitments to
National LEV for the duration of the program. The OTC States' practical
ability to meet their commitments, the fact that the OTC States would
have made commitments to the program through both practically binding
instruments and legally binding instruments, and the effects of a

[[Page 44775]]

violation of their commitments, all combine to support a finding that
the states are unlikely to trigger an offramp for manufacturers.
First, the OTC States should have no practical difficulty carrying
out their commitments. As proposed, after the OTC States have opted
into National LEV and the program has come into effect, the states
would need to adopt regulations (or modify existing regulations) to
commit to accept National LEV as a compliance alternative for the
specified duration and to submit those regulations to EPA as a SIP
revision within one year (or for a few states, eighteen months) of the
date of EPA's finding that National LEV is in effect. Based on
discussions with each of the OTC States on the time needed to complete
a rulemaking in that state, EPA believes that these are realistic
deadlines for state action, which would provide sufficient time for the
states to complete their regulatory processes and submit their SIP
revisions. (See docket no. A-95-26 for memo on these discussions.) In
addition, the SIP submissions follow fairly quickly upon the initial
OTC State opt-ins, which maintains the political momentum for the
states to follow through on the second step of their commitments. The
deadline for SIP submissions would require states to begin developing
their regulatory commitments almost immediately after their Governors
issue executive orders (or letters) committing to National LEV and
directing the state agencies to submit the SIP revisions. EPA believes
it is highly unlikely that states would go through all the effort to
sign up to the National LEV program and then almost immediately derail
the program by failing to submit a SIP revision. There appears to be no
way in which such an action could benefit a state, and there could be a
substantial negative public reaction associated with such a reversal.
Apart from the need to adopt regulations and submit a SIP revision,
there is no other action states need to take to uphold their
commitments to National LEV and hence no practical impediment to states
carrying out their commitments to National LEV.
In addition, the OTC States would be practically and legally bound
to uphold their commitments to allow National LEV as a compliance
alternative to a state Section 177 Program for the duration of their
commitments. The initial opt-ins from the Governors and state
commissioners would provide a substantial expression of support for
National LEV at high state political levels. Through the opt-in
instruments, the state would have publicly committed to accept National
LEV as a compliance alternative to a state Section 177 Program for the
duration of the commitment. The executive order (or letter) would both
invest the commitments with the full authority of the state Governors
and initiate the second step of the opt-in. An explicit directive from
the Governor to submit such a SIP revision should assure that the state
agency will initiate the ordered action. The only foreseeable cause of
failure to do so would be if a Governor subsequently countermanded the
directive. EPA believes this eventuality is highly unlikely, given both
the short time frame in which such a reversal would have to occur and
all of the other incentives for the states to meet their commitments,
such as the environmental costs of allowing the manufacturers to opt
out once the program has begun. While the outcome of a government
rulemaking process cannot be predetermined, these same incentives for
the states to meet their commitments make it highly probable that, once
proposed, the states will finalize the regulatory changes and SIP
revisions necessary to complete their commitments to National LEV.
Once EPA has approved a National LEV SIP revision, the state would
be legally bound to uphold its commitment. As discussed above in
section V.C.4, an approved SIP provision committing a state to accept
National LEV as a compliance alternative to a state Section 177 Program
or ZEV mandate would preclude a conflicting state law that required
manufacturers to comply with a state Section 177 Program or ZEV mandate
without allowing National LEV as a compliance alternative. Until EPA
approved a subsequent SIP revision, manufacturers could enforce the
initial SIP commitment in court. Furthermore, EPA would be obligated to
disapprove a subsequent SIP revision that violated a state's commitment
to allow National LEV as a compliance alternative for the specified
period because it would likely interfere with other states' ability to
attain the NAAQS. Other states would have reasonably relied upon the
emissions reductions from National LEV for attainment and maintenance,
and the effect of approving the new SIP revision would almost certainly
be to deprive the states of those reductions.
Even if the state were not bound to its commitment legally, the
practical effects of not meeting its commitment provide an independent
basis for finding that National LEV is stable. The structure of the
proposed opt-out provisions would establish substantial disincentives
for OTC States to violate their commitments, given the requirements
that would apply to vehicles sold in the violating state, the
opportunity it would provide for manufacturers to opt out of National
LEV, and the consequences of such an opt-out. As discussed in detail
above in section VI.A.1, EPA is proposing that, for an OTC State that
has violated its commitment by attempting to have a state Section 177
Program that does not allow National LEV as a compliance alternative,
the consequences in that violating state would be that under National
LEV all manufacturers would be able to comply with Tier 1 tailpipe
standards and not count those vehicles in the fleet NMOG average. Thus,
the violating state would receive SIP credits based on this reduced
compliance obligation. Similarly, if a state fails to submit its SIP
revision committing to National LEV or submits an inadequate SIP
revision, the same reduced tailpipe standard requirements would apply
in the violating state for any manufacturer that opted out of National
LEV until the manufacturer's opt out became effective. Thus, the
violating state would (or is likely to, depending upon the type of
violation) receive higher emitting vehicles and commensurately fewer
SIP credits for a potentially long period of time. (See section VI.A
above for a discussion of timing of requirements applicable to
manufacturers under various options.)
In addition, states would be further discouraged from violating
their commitments because a state violation would give manufacturers
the opportunity and reason to opt out of National LEV, and manufacturer
opt-outs would hurt air quality in all states. If National LEV is in
effect, a substantial number of the OTC States and probably all of the
37 States are unlikely to have backstop Section 177 Programs in place.
States without backstop Section 177 Programs would not be able to
implement a state Section 177 Program for over two years because of the
time needed to adopt a program and the two years of lead time required
under section 177. During this period, manufacturers that had opted out
of National LEV would have to comply only with federal Tier 1 standards
for sales of new motor vehicles in those states without backstop
programs. Also, sales of these Tier 1 vehicles would further increase
vehicle emissions in both the violating state and states with backstop
Section 177 Programs as well, through migration of dirtier Tier 1
vehicles.
EPA is confident that the combination of the feasibility of
compliance with the OTC State commitments, the practical

[[Page 44776]]

and legal constraints on a state breaking its commitment, and the
environmental and SIP-related consequences of a state breaking its
commitment make it highly unlikely that an OTC State that has opted
into National LEV will violate any of its commitments to the program.

B. EPA Is Unlikely To Change a Stable Standard To Allow OTC States To
Opt Out of National LEV

In the Final Framework Rule, EPA explained why the Agency is
unlikely to change any of the Stable Standards in a manner that would
give the auto manufacturers the right to opt out of National LEV. EPA
also believes it is unlikely to change any of the Stable Standards in a
manner that would allow the OTC States to opt out of National LEV. As
proposed above in section VI.B.2, an OTC State would be able to opt out
of National LEV if EPA changed a Stable Standard in a way that made it
less stringent and as a consequence would have changed EPA's initial
determination that National LEV would produce emissions reductions
equivalent to the OTC State Section 177 Programs that would be in place
in the absence of National LEV. Given the greater emissions reductions
that would be produced by National LEV compared to the alternative of
OTC State Section 177 Programs (discussed above in section IV), only a
significant weakening of a Stable Standard would be likely to have
changed EPA's determination that National LEV would produce emissions
reductions at least equivalent to the alternative. Such a weakening of
a Stable Standard would be contrary to EPA's mission of environmental
protection and would jeopardize the National LEV program, which the
Agency strongly supports and in which EPA has invested significant
resources.
EPA's mission is to protect human health and the environment, in
this case by reducing air pollution from motor vehicles. Absent a
serious problem of technical feasibility, EPA has no reason to make the
Stable Standards significantly less stringent over time. EPA has
evaluated each of the National LEV requirements contained in the Final
Framework Rule and today's proposal, and the Agency believes that they
are technically feasible. Almost all of the technical requirements for
vehicles certified under National LEV are consistent with the
provisions of the draft MOU initialed by the motor vehicle
manufacturers' associations as an acceptable approach to the program,
which strongly indicates that the manufacturers believe the National
LEV requirements are feasible. While a few requirements, such as the
Supplemental Federal Test Procedure (SFTP), were not fully developed at
the time the manufacturers initialed the draft MOU, the manufacturers
are extremely unlikely to sign up to a voluntary program with
substantial outstanding technical issues and no identified approach for
resolution. Moreover, the requirements under National LEV are no more
stringent than the requirements under the California LEV program. EPA
has granted a waiver of preemption under section 209 of the Act for the
California LEV program after finding that the standards were
technically feasible. See 58 FR 4166 (Jan. 13, 1993).
In addition, EPA strongly supports National LEV and is extremely
unlikely to act in a manner that would risk dissolution of the program.
For many areas of the country National LEV would be a very cost-
effective program to reduce motor vehicle emissions of pollutants that
harm public health and the environment. EPA has invested significant
resources in facilitating the negotiations between the parties and
developing the regulatory framework for the National LEV program, and
the Agency would not lightly jeopardize the results of this effort.

C. EPA Is Unlikely To Fail To Consider In-Use Fuels Issues To Allow
Manufacturers To Opt Out of National LEV

EPA also believes that the Agency is unlikely to act or fail to act
in a manner that would allow the manufacturers to opt out of National
LEV based on an offramp related to in-use fuels. As discussed above,
EPA is proposing an additional offramp for manufacturers to address
their concerns regarding the potential effects of fuel sulfur levels on
the emission performance of National LEV vehicles. This offramp could
be triggered if manufacturers assert that one of the identified
potential problems related to fuel sulfur levels arises and EPA
declines to consider allowing manufacturers to take the identified
actions in response. EPA recognizes that the potential effects of fuel
sulfur levels are of particular concern to manufacturers. If ongoing
additional investigations indicate problems that need to be addressed,
EPA will need to reassess the fuel sulfur issue in both the National
LEV context and other EPA motor vehicle emission control programs, as
discussed above in section VII.C. Given EPA's recognition of the
manufacturers' concerns and the ongoing process for resolving them
outside of the National LEV context, EPA believes it is highly unlikely
that the Agency would fail to respond to a manufacturer's request to
address any problems that are identified or decline to consider any
reasonable solutions. In addition, EPA would have all the same
incentives here to avoid taking any action that would jeopardize the
benefits from the National LEV program, as discussed above for changes
to Stable Standards.

VIII. Additional Provisions

A. Early Reduction Credits for Northeast Trading Region

EPA is proposing that manufacturers may generate early reduction
credits for sales of vehicles in the Northeast Trading Region (NTR) in
MY1997 and MY1998, prior to the start of National LEV in MY1999. This
would provide manufacturers added flexibility as well as create an
incentive for them to introduce cleaner vehicles into this region
before MY1999, thus providing air quality benefits sooner. EPA proposes
to take the same approach to these early reduction credits in the NTR
as the Final Framework Rule took to the early reduction credits earned
in the 37 States before MY2001. Since the credits cannot be used or
traded before MY1999, EPA is proposing to treat any credits earned in
the NTR before MY1999 as if earned in MY1999 for annual discounting
purposes. This is consistent with EPA's approach to early reduction
credits in the 37 States and with California's approach to allowing
early generation of credits. These credits will be subject to the
normal discount rate starting with MY1999, meaning they will retain
their full value for MY2000 and will be discounted from then on. In
addition, EPA is proposing that, consistent with the approach to early
reduction credits in the 37 States, early reduction credits in the NTR
will be subject to a one-time ten percent discount applied in MY1999,
as discussed below.
Manufacturers would be able to generate early reduction credits in
the NTR by supplying vehicles with lower emissions than otherwise
required during this time period in any OTC State that is in National
LEV for MY1999 and later. Specifically, manufacturers would be able to
generate credits for sales of TLEVs, LEVs, ULEVs and ZEVs sold in the
OTR outside New York and Massachusetts in MY1997, and outside of New
York, Massachusetts and Connecticut in MY1998, to the extent that such
vehicles can be sold under EPA's cross-border sales
policy.³²

[[Page 44777]]

Additionally, manufacturers could generate credits for sales of
vehicles achieving a lower fleet average NMOG value than required under
the state Section 177 Programs in New York and Massachusetts in MY1997,
and in New York, Massachusetts and Connecticut in MY1998, assuming that
those states have committed to National LEV for MY1999 and later.
Manufacturers would not be able to take credit for vehicles sold to
meet the applicable NMOG averages in New York, Massachusetts and
Connecticut in MY1997 and MY1998, as that would be using vehicles
required independent of National LEV to reduce the stringency of the
National LEV requirements, and hence would be ``double-counting.''
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\32\ See docket no. A-95-26, IV-A-03 for EPA's cross border
sales policy. The current cross border sales policy allows sales of
vehicles certified to California's emission standards in states
contiguous to, or within 50 miles of, California and states that
have a Section 177 Program in place. Thus, in the OTR for MY1997 and
MY1998, manufacturers would be allowed to sell California vehicles
in Maine, New Hampshire, Vermont, Massachusetts, New York, Rhode
Island, Pennsylvania, and Connecticut.
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EPA believes that there are substantial benefits to encouraging
early introductions of cleaner vehicles. However, the Final Framework
Rule included a discount for early reduction credits in the 37 States
in part to address a concern that giving full, undiscounted credits for
all early reductions may generate some windfall credits. See 62 FR
31214-31215. ``Windfall'' credits are credits given for emission
reductions the manufacturer would have made even in the absence of an
early credit program. The purpose of giving credits for early
reductions is to encourage manufacturers to make reductions that they
would not have made but for the credit program. Because credits can be
used to offset higher emissions in later years, if manufacturers are
given credits for early reductions they would have made even without a
credit program, an early credit provision could decrease the
environmental benefits of the program.
EPA is taking comment on the potential for windfall credits in the
NTR and whether ten percent is an appropriate discount factor.
Specifically, EPA requests comment on whether a lower number such as
five percent or no discount factor would be more appropriate in light
of the probability that manufacturers would introduce cleaner vehicles
early absent early reduction credits, and the fact that National LEV is
a voluntary program that will produce cleaner vehicles than EPA has the
authority to require before MY2004. In addition, EPA requests comment
on whether it should apply a uniform approach to early reduction
credits in the 37 States and the NTR, or whether there are reasons to
take different approaches in the two regions. EPA is also taking
comment on whether ten percent (or some lower percent or zero) is the
appropriate discount factor for early credits in the 37 states given
that National LEV is now proposed to start in MY1999 instead of MY1997.

B. Calculation of Compliance With Fleet Average NMOG Standards

Various provisions in the Final Framework Rule assume that National
LEV is a 49-state program. However, it is possible that National LEV
would continue even if one or more OTC States opt out. Having less than
49 states in the National LEV program would require changes in the
Final Framework Rule's provisions for determining compliance with the
fleet average NMOG standards.³³
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\33\ These changes would also be required if not all OTC States
opted in. EPA continues to believe that National LEV should be a 49-
state program. EPA notes that the auto manufacturers have repeatedly
stated that all OTC States must opt into National LEV. However, if
the auto manufacturers and the relevant OTC States were interested
in National LEV proceeding even with less than 49 states
participating, EPA would want National LEV to proceed. The air
quality benefits of National LEV are too important not to do so.
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EPA is proposing to modify the Final Framework Rule so that the
NMOG fleet average calculation will not include vehicle sales in any
OTC State that legitimately opts out once that opt-out becomes
effective.\34\ This would help ensure that states that opt into
National LEV will receive the anticipated emissions benefits as long as
they and the auto manufacturers participate in National LEV. The
opposite approach (i.e., including all vehicle sales in any OTC States
that are not participating in National LEV) would concentrate cleaner
cars in those OTC States not in National LEV at the expense
(environmentally) of OTC States committed to National LEV.
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\34\ Similarly, if National LEV came into effect without all OTC
States opting in, EPA is proposing that vehicle sales in those
states would not be included in the NMOG average. EPA's proposed
treatment of vehicle sales in OTC States that break their
commitments is addressed in the proposed regulatory provisions and
preamble discussion of manufacturer and OTC State offramps.
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EPA is taking comment on whether to count in a manufacturer's fleet
average NMOG calculation those California-certified vehicles that are
sold under EPA's Cross Border Sales (CBS) policy in states that are
participating in National LEV. A National LEV program consisting of
less than all of the OTC States would necessitate the continuation of
EPA's CBS policy for those manufacturers producing vehicles certified
separately to Federal and California standards. This policy allows
manufacturers to introduce into commerce California-certified vehicles
in states that are contiguous to California or other states that have
adopted the Section 177 Program. Thus, if a state were not
participating in National LEV and instead had a Section 177 Program in
effect, under the CBS policy, manufacturers would be allowed to sell
California-certified vehicles in National LEV states bordering the non-
participating state. This raises the issue of how to count such
California-certified vehicles sold in those contiguous states in
calculating the manufacturer's compliance with its National LEV fleet
average NMOG requirement.
One approach to the fleet average NMOG calculation would be to
include in the calculation all vehicle sales in the states
participating in National LEV regardless of whether the vehicles are
California or federally-certified. EPA is concerned that this might
encourage manufacturers to sell only (or primarily) California-
certified vehicles in the OTR (at least in MY1999 and MY2000), which
might not be allowed under the Clean Air Act. It might also raise
warranty and recall problems if those vehicles were found to violate
LEV (but not Tier 1) standards in use. Another alternative would be to
count only vehicles certified to federal standards in the fleet average
NMOG calculation. EPA is also taking comment on whether it would be
appropriate to count some (but not all) types of California-certified
vehicles in the National LEV fleet average NMOG calculation. In any
event, EPA would want to ensure that manufacturers would not include
those vehicles sold in National LEV states to consumers residing in a
state with a Section 177 Program in the manufacturers' compliance
determinations for both the National LEV NMOG average and the
applicable Section 177 Program; it would not be equitable to allow
manufacturers to take credit for such sales for two independent
programs.

C. Certification of Tier 1 Vehicles in a Violating State

If an OTC State violated its commitment to National LEV, in some
instances National LEV would only require manufacturers to supply
vehicles meeting Tier 1 emission standards in the violating state. EPA
is proposing that, as one means of implementing this provision, EPA
would allow a manufacturer to change the compliance levels of its
vehicles sold in a violating OTC State through the submission of
running changes to EPA. A running change is a mechanism manufacturers
use to obtain approval

[[Page 44778]]

from EPA for modifications or additions to vehicles or engines that
have already been certified by EPA but are still in production. By
allowing a manufacturer to change the compliance levels of its vehicles
through a running change only applicable to vehicles sold in a
violating OTC State, EPA would give a manufacturer a procedure to
respond to a state violation in a timely fashion and produce a real
disincentive for an OTC State to violate its commitment.
Manufacturers currently use running changes in the federal
certification process to obtain EPA approval of a change in specified
vehicle configuration or an addition of a vehicle or engine to an
approved engine family that is still in production.\35\ A manufacturer
may notify the Administrator in advance of or concurrent with making
the addition or change. The manufacturer must demonstrate to EPA that
all vehicles or engines affected by the change will continue to meet
the applicable emission standards. This demonstration can be based on
an engineering evaluation and testing if the manufacturer determines
such testing is necessary. The Administrator may require that
additional emission testing be performed if the manufacturer's
determination is not supported by the data included in its running
change application. EPA may disapprove a running change request, which
could then require manufacturers to remedy vehicles or engines produced
under the request.
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\35\ See 40 CFR 86.079-32, 86.079-33, and 86.082-34.
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EPA is proposing to exercise its current authority to allow
manufacturers to use a running change to modify quickly the compliance
level of their National LEV vehicles to Tier 1 tailpipe standards when
the National LEV regulations allow a manufacturer to sell vehicles
meeting Tier 1 tailpipe standards in a particular state. Running
changes submitted under this proposal will reflect only the change in
emission standards the vehicles are meeting. Vehicles sold in an OTC
State that had violated its National LEV commitment will be treated as
Tier 1 vehicles for purposes of federal enforcement requirements and
warranty limits and would not count in the manufacturers' NMOG fleet
average. A manufacturer providing vehicles that in a violating OTC
State were complying at only Tier 1 levels and were meeting more
stringent standards elsewhere would be required to modify its
certification application to reflect the change and install a modified
Vehicle Emission Control Information (VECI) label. The label would
state that the vehicle complies with TLEV, LEV, or ULEV standards, but
if such vehicle is sold in the specified violating OTC State, such
vehicle is certified to Tier 1 tailpipe standards. The modified VECI
label will highlight the distinction in vehicle compliance levels to
consumers and the general public. EPA believes that running changes for
this particular situation may be allowed by applying good engineering
judgment, rather than additional emission testing, since a vehicle
certified to National LEV TLEV, LEV, ULEV, or ZEV standards should also
meet Federal Tier 1 standards. In the instance where an engineering
evaluation would be insufficient to support a change, EPA would require
additional data.
Vehicles complying only with Tier 1 tailpipe standards and sold in
an OTC State that had violated its National LEV commitment would be
treated as Tier 1 vehicles in that state for purposes of demonstrating
compliance with federal requirements and SIP credits. These vehicles
would be held only to the Tier 1 tailpipe standards for purposes of
recall liability in that state. For example, a vehicle recall on a
National LEV vehicle certified to LEV standards might not be subject to
recall action in the violating state if the problem causing the recall
did not cause the vehicles to exceed the Tier 1 standards.
³⁶
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\36\ EPA is considering making significant changes to its
existing federal compliance program, currently targeted to begin
with MY2000 (these changes are referred to as CAP 2000, or
Compliance Assurance Program 2000). While CAP 2000 is still pre-
proposal, EPA has established a docket (A-96-50), which contains
information on the concepts currently being considered. Once
promulgated, CAP 2000 may have some potential ramifications for
quickly changing certification designations for National LEV
vehicles sold in an OTC State that had violated its National LEV
commitment. In particular, EPA is considering significantly
streamlining its current certification program and requiring
manufacturers to perform an in-use verification testing program to
demonstrate that the streamlined certification procedures are
capable of predicting in-use compliance. This program would apply to
all federally certified vehicles, including Tier 1 vehicles. Thus,
CAP 2000 could also possibly apply to any National LEV vehicles that
were only required to comply with Tier 1 tailpipe standards under
the proposal outlined above.
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D. Provisions Relating to Changes to Stable Standards

The Final Framework Rule provided that, with certain exceptions,
manufacturers would be able to opt out of National LEV if EPA changed a
motor vehicle requirement that it had designated a ``Stable Standard.''
The Stable Standards are divided into two categories: Core Stable
Standards and Non-Core Stable Standards. Core Stable Standards
generally are the National LEV standards that EPA could not impose
absent the consent of the manufacturers. Non-Core Stable Standards are
other federal motor vehicle standards that EPA does not anticipate
changing for the duration of National LEV. For both Core and Non-Core
Stable Standards, EPA can make changes to which manufacturers do not
object. For Non-Core Stable Standards, EPA can also make changes that
do not increase the stringency of the standard or that harmonize the
standard with the comparable California standard. EPA can make other
changes to any of the Stable Standards, but such changes would allow
the manufacturers to opt out of National LEV. See the Final Framework
Rule for more detail on the specific Stable Standards and the offramp
for manufacturers associated with changes to the Stable Standards. 62
FR 31202-31207.
EPA is proposing to make a few minor changes to the provisions for
opt-outs based on a change to a Stable Standard. Under the Final
Framework Rule, a manufacturer cannot opt out of National LEV based on
a change to a Stable Standard unless the manufacturer has provided a
written comment during the rulemaking on that change stating that it is
sufficient to trigger a National LEV offramp. If EPA went ahead and
made the change despite the objection, manufacturers generally would
have to decide whether to exercise their opt-out option within 180 days
of the occurrence of the condition triggering opt-out. EPA usually
consults extensively with manufacturers regarding contemplated changes
to the technical motor vehicle requirements to get information on the
manufacturers' views regarding the feasibility and effectiveness of
different requirements. Also, manufacturers have the opportunity during
the comment period to alert EPA to any changes that manufacturers
believe may be sufficient to provide an offramp. Thus, EPA is highly
unlikely to make any change to a Stable Standard that may allow the
manufacturers to opt-out without being aware of that potential and
without carefully weighing the emissions benefits of the change
relative to the emissions benefits of assuring the continuation of
National LEV.
Nevertheless, in the final rule, EPA provided an additional
protection to ensure that a change to a Stable Standard did not
inadvertently provide an offramp. EPA has an opportunity to prevent an
opt-out based on a change to a Stable Standard from coming into effect
by withdrawing the change to the Stable Standard before the effective
date

[[Page 44779]]

of the opt-out. In addition, to make EPA's ability to cure the offramp
effective, the final rule delays the earliest possible effective date
of an opt-out based on a change to a Core Stable Standard. Such an opt-
out could not become effective until the model year named for the
second calendar year following the calendar year in which the
manufacturer opted out.
EPA is proposing to delete the provisions allowing the Agency the
ability to cure under these circumstances, and is proposing to set the
earliest effective date of an opt-out based on a change to a Core
Stable Standard to be the same as the earliest effective date of an
opt-out based on a violation of an OTC State commitment to National
LEV. Thus, an opt-out based on an EPA change to a Core Stable Standard
or an OTC State violation of its commitment to National LEV could
become effective beginning in the ``next model year.'' \37\ See section
VI.A above for further discussion of the effective date of opt-outs
based on an OTC State violation of its commitment to National LEV.
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\37\ The ``next model year'' is the model year named for the
calendar year following the calendar year in which the event
allowing opt-out occurred.
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EPA believes that providing the Agency a formal opportunity to cure
a change to a Stable Standard adds unnecessary complexity to the
program. Also, if an offramp were triggered, EPA's ability to cure
extends the period of uncertainty as to whether National LEV would
remain in effect, which is a destabilizing influence on the program.
EPA believes it is highly unlikely that the Agency would change a
Stable Standard so as to trigger an offramp. Nevertheless, in the
hypothetical situation where one of those conditions triggering an
offramp occurred, EPA believes that it would be in all of the parties'
best interests to know as soon as possible whether any manufacturer
intended to opt-out, and if so, when that opt-out would become
effective. Adding yet another layer of complexity to the opt-out
provisions undermines that goal.
In the Final Framework Rule, EPA stated that, if a manufacturer
were to take an offramp because EPA changed a Stable Standard, the
applicable state or federal standards would apply. At that time, EPA
did not discuss in detail the timing for when state or federal
standards would apply. Today EPA is proposing that, if a manufacturer
validly opted out of National LEV based on an EPA change to a Stable
Standard, once the manufacturer's opt out was effective, the
manufacturer's obligations would be determined the same as if the
manufacturer had opted out because an OTC State failed to submit its
National LEV SIP revision on time (except that no state could be
treated as a violating state). The manufacturer would be subject to any
backstop Section 177 Programs for which the two-year lead time
requirement of section 177 had been met (running from the date the
state adopted the backstop program), or would be subject to Tier 1
requirements in states without such programs. Manufacturers would be
subject to backstop ZEV mandates once the two-year lead time set forth
in section 177 had passed (running from the date of the manufacturer's
opt-out notification). To the extent that these regulations would
provide a manufacturer with less than the two-year lead time set forth
in section 177, the manufacturer waives that protection by opting into
National LEV and then setting an effective date in its opt-out
notification that provides for less than two-years lead time.

E. Nationwide Trading Region

The National LEV program, as initially proposed and as set forth in
the Final Framework Rule, requires manufacturers to determine
compliance with the fleet average NMOG standards for the two classes of
National LEV vehicles in two separate trading regions: The OTC States
and the 37 States making up the rest of the country (except
California). Credits and debits generated under the program are
specific to the region of creation.
Several factors led the parties to support and EPA to establish
separate trading regions in the Final Framework Rule. In part, the two
regions were set up because the National LEV program starts in the OTR
before it applies in the rest of the country. Additionally, at the time
the two regions were proposed, the separate regions were designed in
part to meet the OTC States' legal obligations under the OTC LEV SIP
call. The OTC States were concerned that manufacturers would provide a
different, higher emitting mix of vehicles in the OTR than they would
in the 37 States region if they were allowed to average their vehicle
sales over a nationwide region. Also, to ensure that the OTC States
would receive the intended benefit of the program's earlier start in
the OTR, the separate trading regions facilitated the offset of debits
generated in the OTR through vehicle introductions or credits earned in
the OTR.
The elimination of the legal requirement to have National LEV
provide equivalent emission reductions to the OTC LEV program and the
change in program start dates for both National LEV and OTC State
Section 177 Programs allows EPA to reconsider the necessity of
establishing separate trading regions.³⁸ As a result of the
court decision, EPA no longer is required to demonstrate that National
LEV provides emission reductions at least equivalent to those from the
OTC LEV program. The main purposes in having two separate trading
regions were to ensure that the manufacturers meet certain fleet
average NMOG standards in the OTR for purposes of the equivalency
requirement and to provide the actual emissions reductions in the OTR
that the OTC States would expect to receive upon opting into National
LEV. The absence of the legal requirement to find equivalency means
that separate trading regions are not necessary to demonstrate that
National LEV will achieve emissions reductions in the OTR at the level
that would be provided by compliance with the fleet average NMOG
requirements in the OTR alone. Additionally, in comparison to
individual OTC State adopted Section 177 Programs, National LEV
starting in MY1999 provides greater emission reductions in the OTR.
Thus, EPA does not believe that two trading regions are necessary to
achieve the actual emissions reductions expected in the OTR under
National LEV. Finally, EPA believes that even with one trading region,
manufacturers' fleets in the OTR will comply with the fleet average
NMOG standards, as discussed below.
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\38\ EPA could have reconsidered the need for two separate
trading regions prior to promulgating the Final Framework Rule, but
it did not do so. EPA thought it best to take comment on combining
the two trading regions before doing so.
---------------------------------------------------------------------------

EPA is proposing to establish a nationwide trading region (not
including California), starting in MY2001. For MY1999 and MY2000,
manufacturers will have to demonstrate compliance with National LEV
standards only in the OTR. For MY2001 and later, when the program is
introduced nationwide, EPA is proposing that there be one compliance
region. EPA believes this will not detrimentally affect the
environmental benefits of National LEV in the OTR and will reduce
manufacturers' and EPA's administrative burden in demonstrating
compliance with the National LEV fleet average NMOG standards. A
discrepancy between the fleet sold in the OTR and outside the OTR would
only be possible if a manufacturer's fleet was made up of a number of
engine families certified to Tier 1, TLEV, and LEV standards and
vehicle buying patterns differed significantly between

[[Page 44780]]

the Northeast states and other regions of the country. EPA does not
believe that vehicle sales patterns of the relevant vehicles will
differ dramatically between the two regions. Moreover, for there to be
even a possibility of introducing a greater percentage of dirtier
vehicles in the OTR than in the rest of the country, a manufacturer's
fleet after MY2000 would have to include Tier 1 vehicles and TLEVs, as
well as LEVs. EPA does not believe significant numbers of Tier 1
vehicles and TLEVs will be sold in the OTR after MY2000, since other
provisions of the National LEV program will act to reduce the incentive
to sell substantial numbers of such vehicles at that time. Beginning in
MY2001, National LEV regulations prohibit manufacturers from offering
for sale any Tier 1 vehicles and TLEVs in the NTR unless the same
engine families are certified and offered for sale in California in the
same model year. See 62 FR 31218 (June 6, 1997).³⁹
California's more stringent fleet average NMOG standard and SFTP phase-
in requirements, as described in section IX, will act to limit the
number of Tier 1 and TLEV engine families certified and sold in
California, and, therefore, the number sold in the NTR.
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\39\ To meet this requirement, manufacturers will not be
required always to sell exactly the same engine families in both
California and the NTR because in some instances, that would not be
possible. In the specific case of Tier 1 engine families, National
LEV maintains Federal Tier 1 standards while California has its own
Tier 1 standards, so a manufacturer could not sell an identical
California Tier 1 vehicle as a Federal Tier 1 vehicle in the NTR
under the National LEV program. Therefore, for purposes of this
provision, EPA will consider a National LEV Tier 1 or TLEV engine
family the same as a California Tier 1 or TLEV engine family if the
National LEV engine family has the same technology (hardware and
software) as the comparable California engine family. A manufacturer
could always certify a Tier 1 or TLEV engine family as a 50-state
family and avoid this issue.
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Additionally, even though the National LEV fleet average NMOG
standard is not as stringent as California's, the 0.075 g/mi and 0.100
g/mi standards applicable for MY2001 and later will make it difficult
for manufacturers to include substantial numbers of Tier 1 vehicles and
TLEVs in their fleet and still comply with the National LEV NMOG fleet
average standard. For example, manufacturers would have to build five
ULEVs for every one Tier 1 vehicle produced, and approximately three
ULEVs for every two TLEVs produced, to comply with the 0.075 g/mi fleet
average NMOG standard. Therefore, EPA believes there are strong
incentives for manufacturers to limit or even eliminate the production
and sale of Tier 1 vehicles and TLEVs in the NTR in MY2001 and later,
which would result in a nationwide vehicle fleet of essentially LEVs.
Compliance under one nationwide trading region versus two separate
regions for MY2001 and later model years will reduce the manufacturers'
compliance burden by eliminating the need to specifically track vehicle
sales to two separate regions and maintain two separate tallies of
credits and debits specific to the two regions. A single trading region
will also reduce EPA's administrative burden in determining whether
manufacturers are complying with the applicable fleet average NMOG
standards. Given a nationwide fleet that is all or almost all LEVs, a
separate trading region for the OTR would not have any significant air
quality benefit and would add additional unnecessary complexity to the
National LEV program.
Under today's proposal, National LEV would continue to include the
NTR, which would apply for MY1999-2000 and cover vehicles sold in the
OTC States. The second region would be the All States Trading Region
(ASTR), which would include all states in National LEV except for
California, and apply for 2001 and later model years. Manufacturers
would demonstrate compliance with the fleet average NMOG standards in
these two regions under the provisions set forth in the Final Framework
Rule. EPA is proposing to delete the 37 State trading region that was
finalized in the Final Framework Rule.
The National LEV regulations would still need to address how to
treat credits and debits generated before MY2001. EPA is proposing that
manufacturers could continue to generate early reduction credits in the
states outside the NTR before MY2001 to apply to the ASTR from MY2001
on. Manufacturers could also use credits generated in the NTR for
demonstrating compliance in the ASTR from MY2001 on at the same value
as if the manufacturer had used them in the NTR under the Final
Framework Rule. However, EPA is proposing that a manufacturer could not
apply early reduction credits generated outside the NTR to offset any
debits generated in the NTR before MY2001. Using credits generated
outside the NTR to offset debits generated in the NTR during MY1999 and
MY2000 would decrease the environmental benefits that should accrue to
the NTR. EPA is taking comment on two possible methods to ensure that
any debits in the NTR from MY1999 or MY2000 are made up in the NTR. One
possibility is for EPA to require compliance with fleet average NMOG
standards in the NTR and the 37 States after MY2000 if a manufacturer
has outstanding debits in the NTR after calculating its compliance with
the MY2000 fleet average NMOG standards for the Class A and B vehicle
categories. Such a manufacturer would be required to meet separate
fleet average NMOG standards in the OTR and 37 States until the model
year following the model year for which it has eliminated the
outstanding debits. Another possibility is that an All States Trading
Region would start for all manufacturers in MY2001. A manufacturer with
debits in the NTR after MY2000, however, would be required to make up
those debits in the NTR. Unless a manufacturer bought NTR-specific
credits, sufficient to offset its NTR debit on a timely basis, the
manufacturer would need to calculate an NTR NMOG average for MY2001 and
apply any NTR-specific credits to its NTR debits. Under no circumstance
could credits outside the NTR be used to offset NTR debits from MY2000
or MY1999.
EPA is also taking comment on allowing a manufacturer to
demonstrate compliance with the fleet average NMOG standards using
actual production data in lieu of actual sales data if the manufacturer
is demonstrating compliance with the fleet average NMOG standards in
the ASTR. In the Final Framework Rule, EPA included regulations
allowing manufacturers to use production data in lieu of sales data if
a manufacturer's entire fleet, apart from California, was certified to
LEV or cleaner standards. EPA was concerned about allowing the use of
production data without these restrictions because of the need to
demonstrate compliance in two separate trading regions. However, if EPA
establishes a nationwide trading region, EPA is taking comment on
allowing manufacturers to demonstrate compliance using production date
rather than sales date, even if the manufacturer's fleet is not all LEV
or cleaner vehicles. A manufacturer would need to petition EPA to allow
production volume to be used in lieu of actual sales volume and would
have to submit the petition to EPA within 30 days after the end of the
model year. EPA would grant such petition if the manufacturer
establishes, to the satisfaction of the Administrator, that production
volume is functionally equivalent to sales volume. Manufacturers would
still have to keep sales data in the NTR to demonstrate compliance with
the ban on the sale of Tier 1 and TLEV engine families if such engine
families are not certified for sale

[[Page 44781]]

in California for the same model year. EPA has previously allowed
manufacturers to use production volume in lieu of sales volume as part
of the Tier 1 standards phase-in.

F. Elimination of Five-Percent Cap on Sales of Tier 1 Vehicles and
TLEVs in the OTR

EPA's Final Framework Rule codified the OTC States' and
manufacturers' recommendation that National LEV include provisions
limiting the sale of Tier 1 vehicles and TLEVs in the NTR after MY2000.
The first provision is that manufacturers may sell in the NTR Tier 1
vehicles and TLEVs only if the same or similar engine families are
certified and offered for sale in California as Tier 1 vehicles and
TLEVs. See section VIII.E above for further discussion on this
provision. The second provision is a five-percent cap on sales of Tier
1 vehicles and TLEVs in the NTR starting in MY2001, which allows all
manufacturers to sell Tier 1 vehicles and TLEVs in the NTR to the
extent permitted under the first limitation as long as the overall Tier
1 vehicle and TLEV fleet does not exceed five percent of the National
LEV vehicles sold in the NTR. EPA is proposing to delete the five-
percent cap provision. The parties originally developed this provision
to address OTC States' concerns that National LEV could have a
disproportionate effect on NO_X emissions when compared to
OTC state-by-state adoption of Section 177 Programs. See 62 FR 31217.
EPA is now proposing to delete this provision because of the change in
the OTC States' legal obligation since this provision was proposed and
because of the additional administrative burden it would entail if EPA
were to adopt today's proposal to have a single trading region starting
in MY2001. Furthermore, EPA believes the five-percent cap would not
provide any air quality benefit given the expected fleet make-up after
MY2000 and the other limitation on sales of these vehicles in the NTR.
First, the court reversal of the requirement that all OTC States
adopt Section 177 Programs effective in MY1999, means there is no
longer a legal requirement that EPA find that National LEV is
equivalent to state Section 177 Programs throughout the OTR.
Additionally, as discussed above (see section IV comparing NLEV and OTC
LEV emissions reductions), the expected benefits in the OTR of National
LEV as compared to OTC State adopted Section 177 Programs has
increased. Therefore, there is no legal need and less practical need
for a five-percent cap to control NO_X emissions.
Second, EPA believes the five percent cap is not necessary because
it expects manufacturers will not introduce significant numbers of Tier
1 vehicles and TLEVs after MY2000 in the national, let alone the
Northeast, market. See section VIII.E above for EPA's rationale for
this belief. This means that National LEV will not have a
NO_X penalty when compared to OTC State adopted Section 177
Programs. A National LEV fleet, made up primarily of LEV vehicles, will
have similar effects on NO_X emissions when compared to a CAL
LEV fleet consisting primarily of LEV and ULEV vehicles since both
types of vehicles have the same NO_X emission standards. EPA
believes that any sales of Tier 1 vehicles and TLEVs in the NTR after
MY2000 will make up less than five percent of the fleet in any
instance, and does not believe having a separate program to ensure such
sales limits is needed.
Finally, even if there were some benefit to the NTR from a five-
percent cap, EPA believes the benefit would be so minimal (at best)
that it would not justify the administrative burden given EPA's
proposal for one trading region after MY2000. Under EPA's proposal for
an All State Trading Region for 2001 and later model years and the
proposal to allow manufacturers to demonstrate compliance through
production data, manufacturers would not need to report state-specific
sales data, except to demonstrate compliance with the five-percent cap.

G. Technical Corrections to Final Framework Rule

The Agency is also proposing today to make several minor technical
corrections to the National LEV regulations issued in the Final
Framework Rule. As already noted, a number of changes must be made to
reflect the proposed start of the program in the 1999 model year,
rather than the 1997 model year as was used as a placeholder in the
June 6 Final Framework Rule. In addition, EPA is aware of several other
errors and omissions that require correction, and is continuing to
evaluate the regulations to determine the need for additional such
corrections. Errors and omissions identified to date include a missing
``0-3750'' in the Loaded Vehicle Weight column of Table R97-8 (62 FR
31249), and incorrect full useful life in-use formaldehyde (HCHO)
standards for LEVs and ULEVs for light light-duty trucks of 3751-5750
lbs loaded vehicle weight in Table R97-13 (62 FR 31250). In the latter
case, the LEV and ULEV standards were reported as 0.018 and 0.014 grams
per mile, respectively, when in fact they should have been 0.023 and
0.013 grams per mile, respectively. EPA is not including proposed
regulatory text for these changes with today's action, but anticipates
making these and similar minor corrections with the finalization of
today's proposal later this year. In addition, a June 24, 1997 letter
from the American Automobile Manufacturers Association (AAMA) and
Association of International Automobile Manufacturers (AIAM) (available
in the public docket for review) suggests numerous other technical
corrections to the regulations EPA promulgated on June 6, 1997. The
technical corrections detailed by AAMA/AIAM will be reviewed by EPA,
and to the extent that they are necessary and appropriate they will be
implemented when this rulemaking is finalized later this year.
In the Final Framework Rule, EPA required manufacturers to track
vehicles to the ``point of first sale'' for purposes of determining
compliance with fleet average NMOG standards. See 62 FR 31212. EPA
defined ``point of first sale'' as ``the location where the completed
LDV or LDT is purchased'' and it ``may be a retail customer, dealer, or
secondary manufacturer.'' See 40 CFR 86.1702-97(b). EPA recognized that
requiring manufacturers to always track vehicle sales to the ultimate
purchaser would add an additional burden on manufacturers without
having any significant effect on air quality.
Requiring manufacturers to track vehicles to the point of first
sale was intended to impose similar requirements on manufacturers as
those associated with EPA's Tier 1 standard phase-in compliance
requirements found in 40 CFR 86.094-8 and 86.094-9. In the Tier 1
program, manufacturers could demonstrate compliance ``based on total
actual U.S. sales of light-duty vehicles of the applicable model year
by a manufacturer to a dealer, distributor, fleet operator, broker, or
any other entity which comprises the point of first sale.'' See 40 CFR
86.094-8(a)(1)(i)(B)(1)(i). EPA believes the National LEV vehicle sales
tracking requirements operate in the same manner as those found in the
Tier 1 regulations, but the auto manufacturers have notified EPA of
their concern that National LEV imposes different requirements.
(Document available in docket A-95-26.)
To eliminate confusion about the required level of vehicle tracking
necessary to demonstrate compliance with National LEV fleet average
NMOG standards, EPA is proposing to modify the definition of ``point of
first sale'' in the National LEV program to include the ``point of
first sale'' language found in

[[Page 44782]]

the Tier 1 regulations. EPA did not intend to limit ``point of first
sale'' entities to those specifically listed in the National LEV
regulations. EPA also does not intend to limit a manufacturer to
tracking vehicles only to the point of first sale if a manufacturer
decides further tracking gives it a more accurate account of vehicle
sales in the different trading regions or its current vehicle tracking
system is set up to track vehicles beyond the point of first sale.
However, as noted in the Final Framework Rule, EPA does not believe
this additional level of tracking vehicles is necessary.

IX. Supplemental Federal Test Procedure

A. Background

The Federal Test Procedure (FTP) is the vehicle test procedure
historically used by EPA and the California Air Resources Board (CARB)
to determine the compliance of light-duty vehicles and light-duty
trucks with the conventional or ``on-cycle'' exhaust emission
standards. Using the FTP, emissions performance is tested while the
vehicle is driven over a ``typical'' driving schedule, using a
dynamometer to simulate the vehicle-to-road interface. Pursuant to the
requirements of section 206(h) of the CAA, EPA recently promulgated
revisions to the Federal Test Procedure to make the test procedure
better represent the manner in which vehicles are actually driven (61
FR 54852, October 22, 1996). The primary new element of the revisions
was the addition of a Supplemental Federal Test Procedure (SFTP) with
accompanying emission standards designed to address shortcomings of the
conventional FTP in the representation of aggressive driving behavior,
rapid speed fluctuations, driving behavior following startup, and use
of air conditioning. In addition, a new set of requirements designed to
more accurately reflect real road forces on the test dynamometer
affects both the SFTP and the preexisting conventional FTP. Absent any
modifications that might result due to implementation of the National
LEV Program, these new requirements are to be phased in, applying to 40
percent of a manufacturer's fleet of light-duty vehicles and light
light-duty trucks in MY2000, 80 percent in MY2001, and 100 percent in
MY2002. A similar phase-in schedule for heavy LDTs begins in MY2002.
The SFTP emission standards promulgated by EPA are appropriate for
vehicles meeting the so-called ``Tier 1'' on-cycle emission standards;
EPA did not propose LEV-stringency off-cycle standards as part of its
FTP revisions or as part of an earlier National LEV rulemaking.
EPA and CARB coordinated closely their review of the FTP, their
research efforts, and the development of their respective off-cycle
policies. On April 23, 1997, CARB published a proposal detailing their
approach to addressing off-cycle emissions in the State of
California.⁴⁰ Following a comment period that remained open
through May 6, 1997, CARB released a notice of public hearing
accompanied by a staff report regarding its proposed adoption of SFTP
test procedures and standards (``Staff Report'').⁴¹ The
proposal has four basic elements to it: test procedures, emission
standards for LEVs and ULEVs, emission standards for Tier 1 vehicles
and TLEVs, and a phase-in schedule. CARB adopted SFTP requirements
largely consistent with their proposal at a public hearing on July 24,
1997. Any additional minor changes that arise in subsequent stages of
CARB's regulatory process will be addressed in the National LEV
supplemental final rule.
---------------------------------------------------------------------------

\40\ Draft Regulatory Measure to Control Emissions During Non-
Federal Test Procedure Driving Conditions From Passenger Cars,
Light-Duty Trucks, and Medium-Duty Vehicles Under 8,500 Pounds Gross
Vehicle Weight Rating, Mail-Out #MSC 97-06, April 23, 1997.
Available in the public docket for review, and also at http://
arbis.arb.ca.gov/msprog/macmail/macmail.htm.
\41\ Notice of Public Hearing to Consider Adoption of New
Certification Tests and Standards to Control Emissions from
Aggressive Driving and Air-Conditioner Usage for Passenger Cars,
Light-Duty Trucks, and Medium-Duty Vehicles Under 8,501 Pounds Gross
Vehicle Weight Rating, Mail Out #97-13, May 27, 1997. Available in
the public docket for review, and also at http://arbis.arb.ca.gov/
msprog/macmail/macmail.htm#msc9713.
---------------------------------------------------------------------------

EPA stated in the National LEV Final Framework Rule its intent to
harmonize the SFTP requirements of the National LEV program with
California once California completes the adoption of such requirements
under its LEV program. Given that the finalization of today's proposal
will occur sometime after the CARB public hearing, EPA is optimistic
that the timing will allow the CARB and National LEV SFTP programs to
be largely harmonized with the completion of the supplemental final
National LEV rulemaking initiated by today's proposal. However, pending
completion of that harmonization, the federal SFTP requirements that
have already been promulgated are the default requirements for vehicles
in the National LEV program. In today's notice, as further described
below, EPA is proposing to adopt the CARB SFTP substantially as
outlined by CARB in its June 6, 1997 Staff Report and as adopted at
their July 24, 1997 public hearing.⁴²
---------------------------------------------------------------------------

\42\ An additional issue arises if for some reason it becomes
impossible, impractical, or undesirable for the National LEV program
to harmonize with the CARB SFTP requirements. As the Agency
recognized in the October 22, 1996 final rule promulgating the SFTP,
the phase-in schedule of the new standards and test procedures
contained in that rule ``could create an additional burden for auto
manufacturers if the [National LEV] Program goes into effect as
proposed with a MY2001 implementation nationwide'' (61 FR 54854). As
noted above, the new SFTP requirements, which are of a Tier 1 level
of stringency, start phasing in with MY2000. In that model year, if
the National LEV Program is in effect, vehicles in the OTR will be a
mixture of TLEVs, LEVs, and ULEVs that is driven by the National LEV
fleet average NMOG requirements. Outside the OTR, however, many
MY2000 vehicles are expected to be Tier 1 technology vehicles
(except for possibly in some of the states bordering OTC States),
which would be the applicable set of emission standards in that
model year. A minimum of forty percent of a manufacturer's
nationwide fleet would be required to meet the SFTP emission
standards. However, if the National LEV Program continues in effect,
the program would transition to a nationwide program with MY2001. In
that model year the fleet average NMOG standard would be 0.075
grams/mile-equivalent to a fleet of 100 percent LEVs. The effect of
the nationwide implementation of National LEV at this fleet average
level would be essentially to make Tier 1 vehicles obsolete. In
MY2001 a minimum of eighty percent of a manufacturer's fleet must
meet the new federal SFTP standards. Under such a scenario, the auto
manufacturers would have to invest in bringing a number of Tier 1
engine families into compliance with the federal SFTP standards for
MY2000 only to transition to a fleet of LEVs in the following model
year. EPA believes that the environmental benefit of this investment
would be minimal, and the costs to industry would be considerable.
Consequently, under the scenario where the CARB SFTP does not apply
to National LEV vehicles and the default federal requirements apply,
EPA does not believe it is practical or necessary to hold
manufacturers to the 40 percent phase-in in MY2000 if the affected
vehicles are essentially phased out in the following model year.
However, EPA does not view a shifting of the entire phase-in
schedule forward by a model year (e.g., the 40 percent requirement
would apply in MY2001) as a necessary or desirable solution to the
problem. Instead, EPA is proposing to waive the MY2000 requirement,
but continue the existing phase-in with the existing MY2001 and
MY2002 requirements. While EPA proposes this as a resolution to an
issue that arises under a specific scenario, this is not addressed
in the proposed regulatory text; which assumes successful
harmonization with the CARB SFTP requirements (making such an
adjustment to the phase-in of the federal requirements moot, as
described below). Furthermore, this proposal would only apply if
National LEV is in effect. If National LEV does not come into
effect, the current phase-in schedule would continue to apply.
---------------------------------------------------------------------------

B. Elements of the CARB Proposal and Applicability Under National LEV

1. Test Procedure
CARB adopted high speed, high acceleration, and air conditioner
supplemental test procedures that are in all respects identical to the
procedures adopted by EPA. EPA anticipates that the remaining CARB
rulemaking process is highly unlikely to make any changes to the test
procedure elements, and that

[[Page 44783]]

their final rule will maintain complete harmonization in this regard.
The two agencies cooperated closely in the development of the driving
schedules and testing protocols and placed significant emphasis on
total alignment throughout the development process. Therefore, EPA
proposes that the SFTP test procedures for all vehicles covered by
National LEV would be those currently contained in federal regulations
(40 CFR 86.158, 86.159, 86.160, 86.161, 86.162, 86. 163, and 86.164).
2. Emission Standards
California adopted two sets of emission standards, one applicable
to LEVs, ULEVs, and super ULEVs (SULEVs), and the other applicable to
Tier 1 vehicles and TLEVs. However, the only SULEVs in CARB's
regulations are in their Medium-Duty Vehicle category, a class of
vehicles not covered by the National LEV Program, and consequently not
covered in the following discussion of emission standards or in today's
proposed regulations.
a. LEVs and ULEVs. For each of the affected vehicle weight
categories, CARB adopted a set of SFTP certification standards that
applies to LEVs and ULEVs (see Table 1). Due to limited data on
emissions and appropriate reactivity adjustment factors, CARB exempted
alternative fuel vehicles from these standards, applying them only to
gasoline, diesel, and fuel-flexible vehicles while operating on
gasoline or diesel fuel. These standards would only apply at 4,000
miles, a significant departure from EPA's traditional method of
standard setting. These standards have already received the support of
the auto industry. In conjunction with the low-mileage standards, CARB
maintains that there be no in-use vehicle compliance requirements
(recall testing) for SFTP standards, which CARB admits raises the issue
of the adequacy of controls on in-use emissions. Although CARB believes
that in-use testing based on the preexisting conventional FTP, combined
with the efficacy of On-Board Diagnostics II (OBD II) systems, is
likely to capture emissions increases occurring under off-cycle
conditions, they recognize the risk that ``in-use vehicles may show
[off-cycle] emission deterioration not paralleled by deterioration over
the FTP.'' Because of this, CARB plans to assess in-use off-cycle
emissions and implement 50,000-mile and 100,000-mile standards if
necessary, although they have committed to maintaining stability in the
standards through the phase-in period.

Table 2.--Proposed US06 and SC03 4,000 Mile Certification Standards for LEVs and ULEVs
----------------------------------------------------------------------------------------------------------------
US06 (g/mi) SC03 (g/mi)
Vehicle type Loaded vehicle weight (lbs.) -----------------------------------------
NMHC+NOX CO NMHC+NOX CO
----------------------------------------------------------------------------------------------------------------
LDV...................... All.................................. 0.14 8.0 0.20 2.7
LDT...................... 0-3,750.............................. 0.14 8.0 0.20 2.7
3,751-5,750.......................... 0.25 10.5 0.27 3.5
----------------------------------------------------------------------------------------------------------------

EPA is proposing today to adopt the standards shown in Table 1 as
the SFTP standards applicable to LEVs and ULEVs covered under the
National LEV Program. These standards will be applied to the National
LEV Program in the same manner as adopted by CARB, in that they apply
at 4,000 miles and there will be no in-use enforcement to these SFTP
standards for LEVs and ULEVs.
Although the low-mileage approach to standard-setting is
unconventional, EPA believes that the incorporation of the above
standards into the NLEV program can be justified technically,
environmentally, and legally. The National LEV provisions are
structured to ensure that vehicles certified under National LEV will
continue to meet all of the federal requirements for Tier 1 vehicles
and hence meet the minimum requirements under the Act, in addition to
the more stringent National LEV requirements. Section 202(a) of the Act
requires motor vehicle standards to apply for the full useful life of
the vehicle, which is 100,000 miles, pursuant to section 202(d). The
Tier 1 standards, both FTP and SFTP, apply to federal Tier 1 vehicles
at 50,000 miles and 100,000 miles. Thus, the statute requires that
National LEV LEVs and ULEVs also meet the Tier 1 SFTP requirements at
50,000 and 100,000 miles.
EPA carefully assessed the level of the standards adopted by CARB
for LEVs and ULEVs, and found that they are of a sufficient stringency
to provide emission reductions significantly greater than those that
would be achieved by applying full useful life Tier 1 SFTP standards to
LEVs and ULEVs. Moreover, for LEVs and ULEVs the full useful life
National LEV FTP standards should prevent deterioration of the same
types of systems that control emissions over the SFTP cycles.
Therefore, the combination of the stringent SFTP 4,000 mile standard
and the full useful life LEV and ULEV FTP standards provides
considerable confidence that these vehicles will be certified at a low
emission level and will not deteriorate during their useful life to a
point where they may be emitting above the Tier 1 100,000 mile SFTP
levels.
While EPA is confident that the combination of requirements
applicable to LEVs and ULEVs means that they would not emit above the
Tier 1 100,000 mile SFTP levels, manufacturers are concerned that
structuring the regulations to apply the Tier 1 100,000 mile SFTP
standards to LEVs and ULEVs would impose a substantial additional
burden on the manufacturers for no environmental benefit. If EPA were
to apply the full useful life Tier 1 100,000 mile SFTP standards to
LEVs and ULEVs, manufacturers would need to conduct additional testing
for each manufacturer to ensure compliance with such standards. While
manufacturers share EPA's confidence that the vehicles will meet the
full useful life Tier 1 SFTP standards, nonetheless manufacturers have
stated that they would have to conduct full useful life SFTP tests to
protect against any possibility of enforcement liability.
Alternatively, manufacturers might choose not to opt into the National
LEV program. In either case, manufacturers would incur substantial
additional burdens.
In light of these factual determinations, EPA believes that a de
minimis exemption to the statutory requirements is appropriate here,
which would allow EPA to set SFTP standards for LEVs and ULEVs at 4,000
miles only. In a situation such as this where Congress has not drafted
a statute so rigidly as to preclude a de minimis exemption, the courts
have held that agencies have implied authority to craft a de minimis
exemption from a statutory provision ``when the burdens

[[Page 44784]]

of regulation yield a gain of trivial or no value.'' See EDF v. EPA, 82
F.3d 451 (DC Cir. 1996); Alabama Power v. Costle, 636 F.2d 323 (DC Cir.
1979). EPA believes that applying the Tier 1 level stringency 50,000
and 100,000 mile SFTP standards to LEVs and ULEVs would produce no or
trivial additional environmental benefit because EPA is confident the
vehicles would meet those emissions levels even in the absence of
enforceable standards. Such standards would also impose substantial
additional costs on manufacturers. Consequently, EPA believes a de
minimis exemption from the statutory requirement to set full useful
life SFTP standards for LEVs and ULEVs under National LEV is
appropriate here.
b. Tier 1 Vehicles and TLEVs. Because the extensive test programs
culminating in CARB's development of SFTP standards focused on
developing standards for LEVs and ULEVs, CARB proposed to apply to Tier
1 vehicles and TLEVs standards identical to those promulgated by EPA
for Tier 1 vehicles. As under the federal regulations, these standards
would apply at 50,000 and 100,000 miles, and vehicles certifying to
these standards would face an in-use compliance requirement.
Additionally, CARB also proposed to maintain EPA's higher
NMHC+NO_X standard for diesel vehicles, as well as EPA's
exemption of alternative fuel Tier 1 vehicles and TLEVs from compliance
with the SFTP standards.
CARB's treatment of Tier 1 vehicles and TLEVs, however, remains an
issue of some controversy. Auto manufacturers have approached CARB
staff and requested consideration of 4,000-mile standards for Tier 1
vehicles and TLEVs, which would align the certification requirements of
these vehicles with the requirements that apply to LEVs and ULEVs. The
methodology suggested by the auto manufacturers for establishing 4,000-
mile standards for Tier 1 vehicles and TLEVs is to increase the
proposed LEV SFTP emission standards (Table 1) by the ratio of Tier 1
to LEV emission standards applicable to the conventional FTP. EPA
supports the current CARB proposal, in that it maintains what EPA
strongly believes are appropriate standards for Tier 1 vehicles. CARB
pursued low-mileage standards for LEVs and ULEVs for several reasons,
but largely because the value of the data they had collected at high
mileage for standard-setting became questionable. EPA did not face
similar problems with standard-setting, and was able to establish
50,000-mile and 100,000-mile standards that are well-justified and
appropriate for Tier 1 vehicles. It has been EPA's experience with pre-
LEV technologies that full useful life standards with in-use recall
liability are important for ensuring clean and durable vehicles. In
addition, part of the justification for providing a de minimis
exemption for LEVs and ULEVs from the statutory requirement that the
Tier 1 requirements apply for the full useful life of these vehicles is
that the LEV and ULEV 4,000 mile standards are significantly more
stringent than Tier 1 standards, so the vehicles would have to
deteriorate drastically to exceed the full useful life Tier 1 standards
in use. This argument would not apply to Tier 1 vehicles with 4,000
mile standards calculated as the manufacturers have suggested.
Consequently, today's notice proposes that the NLEV program adopt
CARB's proposed treatment of Tier 1 vehicles and TLEVs.
3. Implementation Schedule
As noted earlier, EPA's SFTP requirements applicable to Tier 1
vehicles would begin to phase in with the 2000 model year, achieving
100 percent compliance in the 2002 model year. The implementation
schedule proposed by CARB is somewhat different, in that it starts
later and extends for four years. CARB initially considered maintaining
the federal phase-in rate for Tier 1 vehicles and TLEVs, while
subjecting LEVs and ULEVs to the longer and later schedule, but elected
instead to propose phasing in all vehicle emission categories at the
same rate. Although Tier 1 vehicles and TLEVs are certified to
standards of different stringency than LEVs and ULEVs, CARB proposed to
allow the number of vehicles from both groups to be combined for the
purpose of determining compliance with the phase-in schedule. CARB
proposed this approach because of the concern that, if a separate
phase-in schedule was maintained for Tier 1 vehicles and TLEVs,
manufacturers would have to dedicate resources to making Tier 1
vehicles SFTP-compliant when the rest of the California LEV program is
causing Tier 1 vehicles to phase out in the fairly short term. In their
Staff Report, CARB acknowledges that Tier 1 vehicles and TLEVs will be
phasing out due to the decreasing NMOG fleet average requirements and
they specifically structure their SFTP program to allow these vehicles
time to phase out without having to comply with SFTP standards. CARB
prefers to allow manufacturers to focus efforts on development of LEVs
and ULEVs that comply with LEV/ULEV SFTP standards, which will be the
predominant vehicles in California, rather than expend effort on
vehicles that will be phasing out in California in the time frame of
their proposed SFTP phase-in. While allowing Tier 1 vehicles an
adequate opportunity to phase out, CARB also ensures an adequate phase-
in of LEVs and ULEVs complying with the SFTP be ensured. They achieve
this by requiring that the percentage of LEVs and ULEVs meeting the
SFTP requirements also meet the required phase-in schedule. This
implies that meeting the phase-in percentage with the subset of the
fleet made up of LEVs and ULEVs will also meet the overall phase-in
requirement if a manufacturer has no Tier 1 vehicles or TLEVs. If a
manufacturer does have some Tier 1 or TLEV engine families, it would
have the choice of making some proportion of those vehicles SFTP-
compliant or expending some effort phasing in additional LEV or ULEV
engine families in order to maintain compliance with the phase-in
requirements.
To provide some additional flexibility, CARB proposed a concept of
equivalent phase-in schedules, which would be allowed in place of the
required phase-in schedule. This approach allows manufacturers to use
an alternative phase-in schedule providing that the alternative
measures up to the required schedule according to a set methodology.
The equivalent phase-in methodology calculates credits by weighting the
required phase-in percentages in each model year of the phase-in
schedule by the number of model years prior to and including the last
model year of the scheduled phase-in, then summing these credits over
the phase-in period. These ``credits'' are calculated for the required
phase-in schedule, and any alternative phase-in that results in an
equal or larger cumulative total number of credits by the end of the
last model year of the scheduled phase-in is acceptable. For example,
in the case of the CARB proposed phase-in, the required ``credits''
are: (25% * 4 years)+(50% * 3 years)+(85% * 2 years)+(100% * 1
year)=520. This allows manufacturers some additional flexibility while
ensuring no loss in overall emissions over the phase-in schedule.
Additionally, using this methodology, manufacturers can gain credits
towards their phase-in through early introductions of vehicles meeting
the applicable requirement even prior to the beginning of the required
phase-in (e.g., 10 percent compliance five years before full phase-in
gains 50 ``points'' towards the total required). Regardless of the
number of ``points'' earned by a given alternative schedule, phase-in
of 100% must be achieved in the required final

[[Page 44785]]

year of the phase-in. EPA proposes to adopt this proposal, with the
additions noted below.
It is not entirely clear from the CARB Staff Report what
enforcement mechanism will apply to the proposed allowance for an
alternative phase-in. However, EPA believes that allowing the
alternative phase-in approach requires that it be accompanied by an
appropriate enforcement mechanism. Although it is possible that a
manufacturer could reach the next-to-last year of the phase-in and
realize that there is no way to achieve the desired credits, EPA
believes that manufacturers would not plan this phase-in on a year-by-
year basis, but rather would determine a specific schedule prior to
implementation that integrates the phase-in with the product planning
cycle and that would enable manufacturers to achieve the required
points with an adequate margin of safety. In the event that a
manufacturer does not attain the required number of phase-in credits,
EPA proposes that enforcement will be much like the current enforcement
provisions regarding non-compliance with a phase-in schedule.
Specifically, failure to attain the required credits will be regarded
as a failure to satisfy the conditions on which the certificate was
issued. Vehicles sold in violation of that condition will not be
covered by the certificate and hence will be subject to the currently
available penalties. Today's notice proposes appropriate revisions to
40 CFR 86.096-30 to address this enforcement issue.
Although EPA is proposing in today's notice largely to adopt these
phase-in elements of CARB SFTP and apply them on a national basis to
the National LEV program, doing so raises several issues that EPA must
consider. Perhaps most important is the implication that the structure
of the phase-in as proposed by CARB allows Tier 1 vehicles to delay
meeting SFTP standards beyond when they would have to meet SFTP
standards under the currently applicable federal program. A couple of
mitigating factors suggest that harmonizing with CARB in this regard is
on balance a desirable policy. First, because of the requirement in the
National LEV Program that Tier 1 vehicles and TLEVs can not be sold in
the OTR after MY2000 unless those same engine families are certified as
Tier 1 vehicles and TLEVs in California, it will be the California NMOG
fleet average that will be driving the number of Tier 1 vehicles and
TLEVs in the OTR (and in the rest of the country, for all practical
purposes). It is EPA's expectation that Tier 1 vehicles in particular
are unlikely to exist beyond the 2002 or 2003 model year, and if they
exist in those years they will be a very small fraction of the new
vehicle fleet. The environmental impact of not certifying this very
small number of vehicles to SFTP standards should be negligible.
Second, while the structure of the CARB phase-in requirements allows
manufacturers to put off demonstrating compliance of Tier 1 vehicles
with SFTP standards, potentially until such vehicles are no longer
produced, for those years where a manufacturer continues to sell such
vehicles they must phase some of them into SFTP standards or phase in
additional LEVs or ULEVs to meet the overall fleet phase-in
requirements. Given the overall benefits of achieving a fleet of LEVs
and ULEVs that meet an appropriate SFTP standard, EPA believes that it
is appropriate to harmonize the NLEV SFTP phase-in with the phase-in
schedule as proposed by CARB.
4. Implementation Compliance
EPA must determine manufacturer compliance with the SFTP phase-in
levels under the National LEV program. EPA is proposing to give the
manufacturers the option of combining their entire fleet of light-duty
vehicles and light light-duty trucks and such that this combined fleet
meets the applicable phase-in requirements. EPA is also proposing to
have manufacturers demonstrate compliance with the phase-in
requirements based on vehicles sold outside of California, but is
taking comment on having compliance determinations based on vehicles
sold only in California or in all states.
EPA believes that combining light-duty vehicles and light light-
duty trucks into one fleet and then determining SFTP phase-in
requirements based on the combined fleet makes sense by giving
manufacturers some additional flexibility in meeting the requirements
without having detrimental environmental impacts. Manufacturers will
have the ability to determine which light-duty vehicles and light
light-duty trucks to include in their SFTP fleet for a particular model
year instead of meeting specified phase-in levels for each vehicle
class. For example, in MY2002, assuming equal numbers of light-duty
vehicles and light light-duty trucks are produced, a manufacturer could
certify 45% of its light-duty vehicle fleet and 55% of its light light-
duty truck fleet to SFTP standards as long as 50% of its overall fleet
met the SFTP standards, provided that all other provisions of the
phase-in requirements were met. EPA does not believe that this proposal
would have detrimental environmental effects because EPA does not
expect actual SFTP phase-ins between vehicle classes to differ
significantly. This proposal is consistent with CARB's requirements as
well as the Federal Tier 1 SFTP regulations.
EPA has concerns about the manufacturers' proposal to show
compliance with National LEV SFTP requirements based on a
manufacturer's California fleet mix as opposed to its National LEV
fleet mix. While EPA anticipates that vehicle product offering between
California and the rest of the country will be similar, it is not
certain that sales of such vehicles will be proportionately equivalent
between the two regions. As California accounts for roughly only 10
percent of U.S. sales, EPA is concerned about having this small
fraction dictate phase-in for 90% of the fleet. For example, harsher
weather patterns elsewhere could cause sales of convertible vehicles in
California to make up a greater percentage of a manufacturer's
California fleet than of the manufacturer's federal fleet, while sales
of four-wheel drive vehicles could be a greater percentage of the
federal fleet. Sales mix differences between the California and Federal
fleet can also differ between manufacturers. Thus, EPA is hesitant at
this time to tie compliance with the National LEV SFTP standards solely
to the vehicle mix offered in California. EPA does not believe that
requiring compliance based on Federal, as opposed to California sales,
is an undue burden on manufacturers. EPA has used a similar approach in
other programs, such as the Tier 1 standards, on the understanding that
providing a phase-in to manufacturers provides them with sufficient
flexibility and burden reduction.
EPA is taking comment, however, on the manufacturers' proposal to
base National LEV SFTP compliance on their vehicle sales mixes in
California. Another option is to have EPA use the California vehicle
sales mix, but include a maximum percentage by which a manufacturer's
California SFTP fleet and its National LEV SFTP fleet may vary. A
variance of five percentage points would still allow manufacturers to
make their compliance determinations based on their California vehicle
sales mix, but it would also ensure that the National LEV SFTP fleet
will be substantially similar to the California fleet. This would mean
that a manufacturer would certify 25% of its California fleet to SFTP
standards in MY2002 and would be in compliance with National LEV SFTP
requirements

[[Page 44786]]

as long as its Federal sales of SFTP-certified vehicles were at least
20% of the 49-state sales total.
EPA is also taking comment on a second alternative which would
combine sales of California, any state with a Section 177 program, and
Federal vehicles for the purpose of calculating fleet percentages in
determining phase-in compliance. Compliance would be determined by
analyzing a manufacturer's entire fleet of vehicles sold in the United
States for compliance with the applicable SFTP phase-in requirements. A
manufacturer choosing to overcomply in California would be able to have
its Federal SFTP fleet levels somewhat below the applicable phase-in
percentages, but the nationwide averaging requirement would ensure that
the difference between California and Federal SFTP fleets would be
minimal. This alternative would also give manufacturers credit for the
California fleet sales and ensure that they meet the phase-in targets,
while properly accounting for the bulk of sales which are in the other
49 states. In addition, this approach is consistent with the original
Tier 1 final rule in which EPA elected to allow manufacturers to
include California sales and sales to section 177 states in the phase-
in compliance calculation. See 56 FR 25724 (June 5, 1991).

X. Administrative Requirements

A. Administrative Designation

Under Executive Order 12866 (58 FR 51735), the Agency must
determine whether the regulatory action is ``significant'' and
therefore subject to OMB review and the requirements of the Executive
Order. The Order defines a ``significant regulatory action'' as one
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, it has been
determined that this rule is not a ``significant regulatory action''.
The Final Framework Rule was determined to be a ``significant
regulatory action'' because it had an annual effect on the economy of
more than $100 million. 62 FR 31231. The regulations being proposed in
this rule will not have an economic impact greater than $100 million.
EPA has submitted this rule to OMB for review. Changes made in response
to OMB suggestions or recommendations will be documented in the public
record. EPA prepared a Regulatory Impact Analysis (RIA) for the Final
Framework Rule (docket A-95-26, V-A-02). EPA indicated that the RIA
will need to be modified to reflect the later start date proposed today
and any new cost information. EPA will issue a final RIA at the time
the supplemental final rule is issued.

B. Regulatory Flexibility

The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, small not-for-profit enterprises, and small governmental
jurisdictions. This proposed rule would not have a significant impact
on a substantial number of small entities. Only manufacturers of motor
vehicles, a group which does not contain a substantial number of small
entities, will have to comply with the requirements of this rule.
Therefore, I certify that this action will not have a significant
economic impact on a substantial number of small entities.

C. Unfunded Mandates Reform Act

Under sections 202 and 205 of the Unfunded Mandates Reform Act of
1995 (UMRA), EPA generally must prepare a written statement to
accompany any proposed or final rule that includes a federal mandate
that may result in expenditures by state, local, or tribal governments
in the aggregate, or by the private sector, of $100 million or more in
any one year.
EPA has determined that the written statement requirements of
sections 202 and 205 of UMRA do not apply to today's rule, and thus do
not require EPA to conduct further analyses pursuant to those
requirements. National LEV is not a federal mandate because it does not
impose any enforceable duties and because it is a voluntary program.
Because National LEV would not impose a federal mandate on any party,
section 202 does not apply to this rule. Even if these unfunded
mandates provisions did apply to this rule, they are met by the
Regulatory Impact Analysis prepared pursuant to Executive Order 12866
and contained in the docket.
Section 203 requires EPA to establish a plan for informing and
advising any small governments that may be significantly or uniquely
impacted by the rule. EPA has not prepared such a plan because small
governments would not be significantly or uniquely impacted by the
rule.
Under section 204, an agency must develop an effective process for
state, local, and tribal officials to provide meaningful input in the
development of regulatory proposals that contain significant
intergovernmental mandates. Section 204 does not apply because this
rule would not impose any mandates. Throughout the National LEV
process, however, EPA has provided numerous opportunities for states to
provide meaningful input.

D. Reporting and Recordkeeping Requirements

Today's rule does not impose any additional reporting or
recordkeeping burdens on an affected party. The Information Collection
Request (ICR) for the National LEV program was developed as part of the
Final Framework Rule and has already been submitted for approval to the
OMB under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An ICR
document has been prepared by EPA (ICR No. 1761.02) and a copy may be
obtained from Sandy Farmer, OPPE Regulatory Information Division, EPA,
401 M St., SW (Mail Code 2137), Washington, DC 20460 or by calling
(202) 260-2740. The information requirements are not effective until
OMB approves them.

XI. Statutory Authority

The promulgation of these regulations is authorized by sections
177, 202, 203, 204, 205, 206, 207, 208 and 301 of the Clean Air Act as
amended by the Clean Air Act Amendments of 1990 (CAAA) (42 U.S.C. 7507,
7521, 7522, 7523, 7524, 7525, 7541, 7542, and 7601).

List of Subjects in 40 CFR Part 86

Administrative practice and procedure, Confidential Business
Information, Labeling, Motor vehicle pollution, Reporting and
recordkeeping requirements.

Dated: August 4, 1997.
Carol M. Browner,
Administrator.

For the reasons set out in the preamble, chapter I, title 40 of the
Code

[[Page 44787]]

of Federal Regulations is proposed to be amended as follows:

PART 86--CONTROL OF AIR POLLUTION FROM NEW AND IN-USE MOTOR
VEHICLES AND NEW AND IN-USE MOTOR VEHICLE ENGINES: CERTIFICATION
AND TEST PROCEDURES

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

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

Subpart A--[Amended]

2. Section 86.096-30 is amended by adding paragraph (a)(23) to read
as follows:

Sec. 86.096-30 Certification.

* * * * *
(a) * * *
(23) For all light-duty vehicles and light light-duty trucks
certified to standards under Secs. 86.1710 through 86.1712, the
provisions of paragraphs (a)(23)(i) through (iv) of this section apply.
(i) All certificates issued are conditional upon manufacturer
compliance with all provisions of Secs. 86.1709 through 86.1709 both
during and after model year production.
(ii) Failure to meet the required implementation schedule sales
percentages of the Alternative Phase-In schedule requirements (if
chosen), in Sec. 86.1708(a)(1)(i) for light-duty vehicles or
Sec. 86.1708(a)(1)(i) for light light-duty trucks, will be considered
to be a failure to satisfy the conditions upon which the certificate(s)
was issued and the individual vehicles sold in violation of the
implementation schedule shall not be covered by the certificate.
(iii) The manufacturer shall bear the burden of establishing to the
satisfaction of the Administrator that the conditions upon which the
certificate was issued were satisfied.
(iv) For recall and warranty purposes, vehicles not covered by a
certificate because of a violation of this condition of the certificate
will continue to be held to the standards stated in the certificate
that would have otherwise applied to the vehicles.
* * * * *

Subpart R--[Amended]

3. Section 86.1702-97 is redesignated as Sec. 86.1702-99 and
amended in paragraph (b) by revising the definitions for ``Northeast
Trading Region'' and ``Point of first sale'' and by adding new
definitions in alphabetical order for ``All States Trading Region,''
``Covered State,'' ``Existing ZEV Mandate,'' ``Ozone Transport
Commission States,'' ``Section 177 Program,'' and ``ZEV Mandate,'' to
read as follows:

Sec. 86.1702-99 Definitions.

* * * * *
(b) * * *
* * * * *
All States Trading Region (ASTR) means the region comprised of all
states except the OTC States that have not opted into National LEV
pursuant to the opt-in provisions at Sec. 86.1705 or that have opted
out of National LEV and whose opt outs have become effective, as
provided at Sec. 86.1707; and California; and any state outside the OTR
with a Section 177 Program in effect that does not allow National LEV
as a compliance alternative.
* * * * *
Covered State means an OTC State that has opted into National LEV
and meets the conditions specified under Sec. 86.1705(d).
* * * * *
Existing ZEV Mandate means any OTC State regulation or other law
that imposes (or purports to impose) obligations on auto manufacturers
to produce or sell a certain number or percentage of ZEVs and that was
adopted prior to the date that the state submitted a National LEV opt-
in notification to EPA.
* * * * *
Northeast Trading Region (NTR) means the region comprised of the
OTC States that have opted into National LEV pursuant to the opt-in
provisions at Sec. 86.1705(e) and have not opted out of National LEV
pursuant to the opt-out provisions at Sec. 86.1707 or whose opt outs
have not yet become effective, as provided at Sec. 86.1707.
* * * * *
Ozone Transport Commission States or OTC States means the States of
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire,
New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Virginia,
and the District of Columbia.
* * * * *
Point of first sale is the location where the completed LDV or LDT
is purchased, also known as the final product purchase location. The
point of first sale may be a retail customer, dealer, distributor,
fleet operator, broker, secondary manufacturer, or any other entity
which comprises the point of first sale. In cases where the end user
purchases the completed vehicle directly from the manufacturer, the end
user is the point of first sale.
* * * * *
Section 177 Program means state regulations or other laws, except
ZEV Mandates, which apply to any of the following categories of motor
vehicles: Passenger cars, light duty trucks up through 6,000 pounds
GVWR, and medium duty vehicles from 6,001 to 14,000 pounds GVWR if
designed to operate on gasoline, as these categories of motor vehicles
are defined in the California Code of Regulations, Title 13, Division
3, Chapter 1, Article 1, Section 1900.
* * * * *
ZEV Mandate means any state regulation or other law that imposes
(or purports to impose) obligations on auto manufacturers to produce,
deliver for sale, or sell a certain number or percentage of ZEVs.
4. Section 86.1705-97 is redesignated as Sec. 86.1705-99 and
amended by revising the heading of the section, by adding a heading to
paragraph (a), and by revising paragraphs (a) introductory text,
(a)(2), (a)(3), and (b) through (g), to read as follows:

Sec. 86.1705-99 General provisions; opt-in.

(a) Covered manufacturers. Covered manufacturers must comply with
the provisions in this subpart, and in addition, must comply with the
requirements of 40 CFR parts 85 and 86. A manufacturer shall be a
covered manufacturer if:
* * * * *
(2) Where a manufacturer has included a condition on opt-in
provided for in paragraph (c)(2) of this section, that condition has
been satisfied; and
(3) The manufacturer has not opted out, pursuant to Sec. 86.1707,
or the manufacturer has opted out but that opt-out has not become
effective under Sec. 86.1707.
(b) Covered manufacturers must comply with the standards and
requirements specified in this subpart beginning in model year 1999. A
manufacturer not listed in Sec. 86.1706(b) that opts into the program
after EPA issues a finding pursuant to Sec. 86.1706(a) that the program
is in effect must comply with the standards and requirements of this
subpart beginning in the model year that includes January 1 of the
calendar year after the calendar year in which that manufacturer opts
in. Light-duty vehicles and light light-duty trucks sold by covered
manufacturers must comply with the provisions of this subpart.
(c) Manufacturer opt-ins. (1) To opt into the National LEV program,
a motor vehicle manufacturer must submit a written opt-in notification
to the Administrator signed by a person or

[[Page 44788]]

entity within the corporation or business with authority to bind the
corporation or business to its election and holding the position of
vice president for environmental affairs or a position of comparable or
greater authority. The notification must unambiguously and
unconditionally (apart from the permissible conditions specified in
paragraph (c)(2) of this section) indicate the manufacturer's agreement
to opt into the program and be subject to the provisions in this
subpart, and include the following language:

XX COMPANY, its subsidiaries, successors and assigns hereby opts
into the voluntary National LEV program, as defined in 40 CFR part
86, subpart R, and agrees to be legally bound by all of the
standards, requirements and other provisions of the National LEV
program. XX COMPANY commits not to challenge EPA's authority to
establish or enforce the National LEV program, and commits not to
seek to certify any vehicle except in compliance with the
regulations in subpart R.

(2) The opt-in notification may indicate that the manufacturer opts
into the program subject to either or both of the following conditions:
(i) That the Administrator finds under Sec. 86.1706 that the
National LEV program is in effect, to be indicated with the following
language:

This opt-in is subject to the condition that the Administrator
make a finding pursuant to 40 CFR 86.1706 that the National LEV
program is in effect.

(ii) That certain states (limited to the OTC States) opt into
National LEV pursuant to Sec. 86.1705, to be indicated with the
following language:

This opt-in is subject to the condition that each of the states
of [list state names] opt into National LEV pursuant to 40 CFR
86.1705.

(3) A manufacturer shall be considered to have opted in upon the
Administrator's receipt of the opt-in notification and satisfaction of
the conditions set forth in paragraph (c)(2) of this section, if
applicable.
(d) Covered states. An OTC State shall be a covered state if:
(1) The state has opted into National LEV pursuant to paragraph (e)
of this section;
(2) Where a state has included a condition on opt-in provided for
in paragraph (e)(3)(viii) of this section, that condition has been
satisfied; and
(3) The state has not opted out, pursuant to Sec. 86.1707, or the
state has opted out but that opt-out has not become effective under
Sec. 86.1707.
(e) OTC State opt-ins. To opt into the National LEV program, a
state must submit the following as an opt-in notification to EPA:
(1)(i) An Executive Order signed by the governor of the state (or
the mayor of the District of Columbia) that unambiguously and
unconditionally (apart from the permissible conditions set forth in
this section) indicates the state's agreement to opt into the National
LEV program and includes the following language (language in brackets
indicates that either formulation is acceptable):

This instrument [commits STATE to / opts STATE into] the
National Low Emission Vehicle (National LEV) program, in accordance
with the EPA National LEV program regulations at 40 CFR part 86,
subpart R.
I hereby direct HEAD OF APPROPRIATE STATE AGENCY to forward to
EPA with my concurrence the [enclosed letter signed / enclosed
letter and proposed regulations signed and proposed] by the HEAD OF
APPROPRIATE STATE AGENCY, which [specifies /specify] the details of
STATE's commitment to the National LEV program.
I hereby direct APPROPRIATE STATE AGENCY to follow the
procedures prescribed by the general statutes of STATE to take the
necessary steps to adopt regulations and submit a state
implementation plan revision committing STATE to National LEV in
accordance with the EPA National LEV program regulations on SIP
revisions at 40 CFR part 86, subpart R, and with section 110 of the
Clean Air Act and its implementing regulations at 40 CFR parts 51
and 52.

(ii) States with Existing ZEV Mandates may add language to the
Executive Order submitted pursuant to paragraph (e)(1) of this section
confirming that this opt-in will not affect the state's requirements
pertaining to ZEVs.
(2) If a state does not submit an Executive Order pursuant to
paragraph (e)(1) of this section, a letter signed by the governor of
the state (or the mayor of the District of Columbia) that unambiguously
and unconditionally (apart from the permissible conditions set forth in
this section) indicates the state's agreement to opt into the National
LEV program and includes the following language (language in brackets
indicates that either formulation is acceptable):
(i) ``This submittal is made in accordance with the EPA National
Low Emission Vehicle (National LEV) regulations at 40 CFR part 86,
subpart R to [commit STATE to / opt STATE into] the National LEV
program.''
(ii)(A) ``I am forwarding to EPA the [enclosed letter which I
signed / enclosed letter and proposed regulations which were signed and
proposed] by HEAD OF APPROPRIATE STATE AGENCY at my direction, and
which [specifies / specify] the details of STATE's commitment to the
National LEV program.'' or;
(B) ``I am forwarding to EPA and concur with the [enclosed letter
signed / enclosed letter and proposed regulations signed and proposed]
by HEAD OF APPROPRIATE STATE AGENCY, which [specifies / specify] the
details of STATE's commitment to the National LEV program.''
(iii) ``I [hereby direct / have directed] APPROPRIATE STATE AGENCY
to follow the procedures prescribed by the general statutes of STATE to
take the necessary steps to adopt regulations and submit a state
implementation plan revision committing STATE to National LEV in
accordance with the EPA National LEV regulations on SIP revisions at 40
CFR part 86, subpart R, and with section 110 of the Clean Air Act and
its implementing regulations at 40 CFR parts 51 and 52.''
(iv) States with Existing ZEV Mandates may add language to the
letter submitted pursuant to section (e)(2) of this section confirming
that this opt-in will not affect the state's requirements pertaining to
ZEVs.
(3) A letter signed by the head of the appropriate state agency
that would unconditionally (except as set forth in this section)
include the following:
(i) States without any Section 177 Program or with a Section 177
Program but not an Existing ZEV Mandate shall include the following
language:

National LEV is designed as a compliance alternative for OTC
State programs adopted pursuant to section 177 of the Clean Air Act
that apply to passenger cars, light duty trucks up through 6,000
pounds GVWR, and/or medium duty vehicles from 6,001 to 14,000 pounds
GVWR if designed to operate on gasoline, as these categories of
motor vehicles are defined in the California Code of Regulations,
Title 13, Division 3, Chapter 1, Article 1, Section 1900. For the
duration of STATE's participation in National LEV, [STATE will allow
manufacturers to / manufacturers may] comply with National LEV in
lieu of compliance with any program adopted by STATE pursuant to the
authority provided in section 177 of the Clean Air Act applicable to
the vehicle classes specified above, including any ZEV mandates.
STATE's participation in National LEV extends until model year 2006,
except as provided in 40 CFR 86.1707.
For the duration of STATE's participation in National LEV, STATE
[intends to / will] forbear from adopting and implementing a ZEV
mandate effective before model year 2006.

(ii) States with a Section 177 Program and an Existing ZEV Mandate,
shall include the following language:

[[Page 44789]]

pounds GVWR if designed to operate on gasoline, as these categories
of motor vehicles are defined in the California Code of Regulations,
Title 13, Division 3, Chapter 1, Article 1, Section 1900. With the
exception of any requirements pertaining to ZEVs, for the duration
of STATE's participation in National LEV, [ STATE will allow
manufacturers to / manufacturers may] comply with National LEV or
equally stringent mandatory federal standards in lieu of compliance
with any program adopted by STATE pursuant to the authority provided
in section 177 of the Clean Air Act applicable to the vehicle
classes specified above. STATE's participation in National LEV
extends until model year 2006, except as provided in 40 CFR 86.1707.
Any existing or future requirement pertaining to ZEVs is not
affected by STATE's acceptance of National LEV as a compliance
alternative for other state requirements.

(iii) All states shall include the following language:

Based on EPA's determination in the preamble to the final
supplemental National LEV rule [CITE], STATE believes that National
LEV will achieve reductions of VOC and NO_X emissions that
are equivalent to or greater than the reductions that would be
achieved through OTC State adoption of California Low Emission
Vehicle programs in the Ozone Transport Region.

(iv) All states shall include the following language:

STATE intends National LEV to be STATE's new motor vehicle
emissions control program.

(v) All states shall include the following language:

STATE recognizes that motor vehicle manufacturers are committing
to National LEV with the expectation that, through model year 2006,
OTC States will allow National LEV as a compliance alternative for
state Section 177 Programs applying to the vehicle classes specified
above (except any requirements pertaining to ZEVs in states with
Existing ZEV Mandates). It is our intent to abide by this
commitment. However, the provisions of this letter will not have the
force of law until STATE adopts them as state regulations. Adoption
of state regulations and the contents of a final SIP revision will
be determined through a state rulemaking process pursuant to the
state requirements at [CITE to STATE law] and federal law. Also,
STATE must comply with any subsequent STATE legislation that might
affect this commitment.

(vi) All states shall include the following language:

If the manufacturers exit the National LEV program pursuant to
the EPA National LEV regulations at 40 CFR 86.1707, STATE
acknowledges that the transition from National LEV requirements to
any STATE Section 177 Program applying to the vehicle classes
specified above, including any requirements pertaining to ZEVs
(except any requirements pertaining to ZEVs in states with Existing
ZEV Mandates), will proceed in accordance with the EPA National LEV
regulations at 40 CFR 86.1707.

(vii) All states shall include the following language:

STATE supports the legitimacy of the National LEV program and
EPA's authority to promulgate the National LEV regulations.

(viii) Any state may include the following language:

This [commitment/opt-in] is conditioned on all motor vehicle
manufacturers (listed in EPA regulations at 40 CFR 86.1706(b))
opting into National LEV and on EPA finding that National LEV is in
effect pursuant to 40 CFR 86.1706.

(4) In lieu of statements described in paragraphs (e)(3)(i),
(e)(3)(ii) and (e)(3)(vi) of this section, states may submit proposed
regulations containing the provisions required under paragraphs (g)(1),
(g)(2), (g)(3), and (g)(5) of this section.
(f) A state shall be considered to have opted in upon the
Administrator's receipt of the opt-in notification and satisfaction of
the conditions set forth in paragraph (e)(3)(viii) of this section, if
applicable.
(g) Each OTC State that opts into National LEV pursuant to
paragraph (e) of this section shall submit a SIP revision within one
year of the date that EPA finds National LEV is in effect (pursuant to
Sec. 86.1706(a)), except for the District of Columbia, New Hampshire,
Delaware, and Virginia, for which the deadline is 18 months from the
date of such finding. The SIP revisions shall include the following:
(1) Covered States without any Section 177 Program, or with a
Section 177 Program but not an Existing ZEV Mandate, shall submit
regulations containing the following language:

For the duration of STATE's participation in National LEV,
manufacturers may comply with National LEV or equally stringent
mandatory federal standards in lieu of compliance with any program,
including any mandates for sales of zero emission vehicles (ZEVs),
adopted by STATE pursuant to the authority provided in section 177
of the Clean Air Act applicable to passenger cars , light duty
trucks up through 6,000 pounds GVWR, and/or medium duty vehicles
from 6,001 to 14,000 pounds GVWR if designed to operate on gasoline,
as these categories of motor vehicles are defined in the California
Code of Regulations, Title 13, Division 3, Chapter 1, Article 1,
Section 1900.
STATE's participation in National LEV extends until model year
2006, except as provided in 40 CFR 86.1707.

(2) Covered States with a Section 177 Program and an Existing ZEV
Mandate shall submit regulations containing the following language:

With the exception of any STATE requirements pertaining to zero
emission vehicles (ZEVs), for the duration of STATE's participation
in National LEV, manufacturers may comply with National LEV or
equally stringent mandatory federal standards in lieu of compliance
with any program adopted by STATE pursuant to the authority provided
in section 177 of the Clean Air Act applicable to passenger cars,
light duty trucks up through 6,000 pounds GVWR, and/or medium duty
vehicles from 6,001 to 14,000 pounds GVWR if designed to operate on
gasoline, as these categories of motor vehicles are defined in the
California Code of Regulations, Title 13, Division 3, Chapter 1,
Article 1, Section 1900.
STATE's participation in National LEV extends until model year
2006, except as provided in 40 CFR 86.1707.
Any existing or future STATE requirement pertaining to ZEVs is
not affected by STATE's acceptance of National LEV as a compliance
alternative for other state requirements.

(3) All covered states shall submit regulations containing the
following language:

If a covered manufacturer, as defined at 40 CFR 86.1702, opts
out of the National LEV program pursuant to the EPA National LEV
regulations at 40 CFR 86.1707, the transition from National LEV
requirements to any STATE section 177 program applicable to
passenger cars, light duty trucks up through 6,000 pounds GVWR, and/
or medium duty vehicles from 6,001 to 14,000 pounds GVWR if designed
to operate on gasoline, as these categories of motor vehicles are
defined in the California Code of Regulations, Title 13, Division 3,
Chapter 1, Article 1, Section 1900, will proceed in accordance with
the EPA National LEV regulations at 40 CFR 86.1707.

(4) All covered states shall accompany the regulatory language with
the following language:

STATE commits to support National LEV as an acceptable
alternative to state CAL LEV programs.
STATE recognizes that its commitment to National LEV is
necessary to ensure that National LEV remain in effect.
STATE is submitting this SIP revision in accordance with the
applicable Clean Air Act requirements at section 110 and EPA
regulations at 40 CFR Part 86 and 40 CFR Parts 51 and 52.

(5) States without Existing ZEV Mandates shall accompany the
regulatory language with the following language:

For the duration of STATE's participation in National LEV, STATE
[intends to / will] forbear from adopting and implementing a ZEV
mandate effective prior to model year 2006.

5. Section 86.1706-97 is revised to read as follows:

Sec. 86.1706-97 National LEV program in effect.

(a) No later than [date of first business day 75 days after date of
signature of

[[Page 44790]]

final rule] EPA shall issue a finding as to whether National LEV is in
effect. EPA shall base this finding on opt-in notifications from OTC
States submitted pursuant to Sec. 86.1705(e) and received by EPA [date
45 days after date of signature of final rule], and on opt-in
notifications from manufacturers submitted pursuant to Sec. 86.1705(c)
and received by EPA [date 60 days after date of signature of final
rule].
(b) EPA shall find that the NLEV program is in effect and shall
subsequently publish this determination if the following conditions
have been met:
(1) All manufacturers listed in paragraph (c) of this section have
lawfully opted in pursuant to Sec. 86.1705(c) and any conditions placed
on the opt-ins allowed under Sec. 86.1705(c)(2) have been met (apart
from a condition that EPA find the National LEV program in effect);
(2) All OTC States have lawfully opted in pursuant to
Sec. 86.1705(e) and any conditions placed on the opt-ins allowed under
Sec. 86.1705(e)(3)(viii) have been met (apart from a condition that EPA
find the National LEV program in effect); and
(3) No valid opt out has become effective pursuant to Sec. 86.1707.
(c) List of manufacturers of light-duty vehicles and light-duty
trucks:

American Suzuki Motor Corporation
BMW of North America, Inc.
Chrysler Corporation
Fiat Auto U.S.A., Inc.
Ford Motor Company
General Motors Corporation
Hyundai Motor America
Isuzu Motors America, Inc.
Jaguar Motors Ltd.
Kia Motors America, Inc.
Land Rover North America, Inc.
Mazda (North America) Inc.
Mercedes-Benz of North America
Mitsubishi Motor Sales of America, Inc.
Nissan North America, Inc.
Porsche Cars of North America, Inc.
Rolls-Royce Motor Cars Inc.
Saab Cars USA, Inc.
Subaru of America, Inc.
Toyota Motor Sales, U.S.A., Inc.
Volkswagen of America, Inc.
Volvo North America Corporation

6. Section 86.1707-99 is added to subpart R to read as follows:

Sec. 86.1707-99 General provisions; opt-outs.

A covered manufacturer or covered state may opt out of the National
LEV program only according to the provisions of this section. Vehicles
certified under the National LEV program must continue to meet the
standards to which they were certified, regardless of whether the
manufacturer of those vehicles remains a covered manufacturer. A
manufacturer that has opted out remains responsible for any debits
outstanding on the effective date of opt-out, pursuant to
Sec. 86.1710(d)(3).
(a) Procedures for opt-outs--manufacturers. To opt out of the
National LEV program, a covered manufacturer must notify the
Administrator as provided in Sec. 86.1705(c)(1), except that the
notification shall specify the condition and final action allowing opt-
out, indicate the manufacturer's intent to opt out of the program and
no longer be subject to the provisions in this subpart, and specify an
effective date for the opt-out. The effective date shall be specified
in terms of the first model year for which the opt-out shall be
effective, but shall be no earlier than the applicable date indicated
in paragraphs (d) through (i) of this section. For an opt-out pursuant
to paragraph (d) of this section, the manufacturer shall specify the
revision triggering the opt-out and shall also provide evidence that
the triggering revision does not harmonize the standard or requirement
with a comparable California standard or requirement, if applicable, or
that the triggering revision has increased the stringency of the
revised standard or requirement, if applicable. The notification shall
include the following language:

XX COMPANY, its subsidiaries, successors and assigns hereby opt
out of the voluntary National LEV program, as defined in 40 CFR part
86, subpart R.

(b) Procedures for opt-outs--OTC states. To opt out of the National
LEV program, a covered state must notify the Administrator through a
written statement from the head of the appropriate state agency. The
notification shall specify the final action allowing opt-out, indicate
the state's intent to opt out of the program and no longer be subject
to the provisions in this subpart, and specify an effective date for
the opt-out. The effective date shall be specified in terms of the
first model year for which the opt-out shall be effective, but shall be
no earlier than the applicable date indicated in paragraphs (d) through
(k) of this section. The notification shall include the following
language:

STATE hereby opts out of the voluntary National LEV program, as
defined in 40 CFR part 86, subpart R.

(c) Procedures for opt-outs--EPA notification. Upon receipt of an
opt-out notification under this section, EPA shall promptly notify the
covered states and covered manufacturers of the opt-out. Publication in
the Federal Register of notice of receipt of the opt-out notification
is sufficient but not necessary to meet EPA's obligation to notify
covered states and covered manufacturers.
(d) Conditions allowing manufacturer opt-outs--change to Stable
Standards. A covered manufacturer may opt out if EPA promulgates a
final rule or other final agency action making a revision not specified
in paragraph (d)(9)(iii) of this section to a standard or requirement
listed in paragraph (d)(9)(i) of this section and the covered
manufacturer objects to the revision.
(1) A covered manufacturer may opt out within 180 days of the EPA
action allowing opt-out under this paragraph (d). A valid opt-out based
on a revision to a Core Stable Standard may be effective no earlier
than the model year named for the calendar year following the calendar
year in which the manufacturer sends its opt-out notification to EPA. A
valid opt-out based on a revision to a Non-Core Stable Standard may
become effective no earlier than the first model year to which that
revision applies.
(i) Only a covered manufacturer that objects to a revision may opt
out if EPA adopts that revision, except that if such a manufacturer
opts out, other manufacturers that did not object to the revision may
also opt out pursuant to Sec. 86.1707(i). An objection shall be
sufficient for this purpose only if it was filed during the public
comment period on the proposed revision and the objection states that
the proposed revision is sufficiently significant to allow opt-out
under Sec. 86.1707(d).
(2) Within sixty days of receipt of an opt-out notification, EPA
shall determine whether the opt-out is valid by determining whether the
alleged condition allowing opt-out has occurred and whether the opt-out
complies with the requirements under paragraphs (a) and (d) of this
section. An EPA determination regarding the validity of an opt-out is
not a rule, but is a nationally applicable final agency action subject
to judicial review pursuant to section 307(b) of the Clean Air Act (42
U.S.C. 7607(b)).
(3) A manufacturer that has submitted an opt-out notification to
EPA remains a covered manufacturer until EPA or a reviewing court
determines that the opt-out is valid and the opt-out has come into
effect under paragraph (d)(1) of this section.
(4) In the event that a manufacturer petitions for judicial review
of an EPA determination that an opt-out is invalid, the manufacturer
remains a covered manufacturer until final judicial resolution of the
petition. Pending resolution of the petition, and after the

[[Page 44791]]

date that the opt-out would have come into effect under paragraph
(d)(1) of this section if EPA had determined the opt-out was valid, the
manufacturer may certify vehicles to any standards in this part
applicable to vehicles certified in that model year and sell such
vehicles without regard to the limitations contained in Sec. 86.1711-
99. However, if the opt-out is finally determined to be invalid, the
manufacturer will be liable for any failure to comply with
Secs. 86.1710 through 86.1712, except for failure to comply with the
limitations contained in Sec. 86.1711(b).
(5) Upon the effective date of a manufacturer's opt-out based on
this condition, that manufacturer shall be subject to all provisions
that would apply to a manufacturer that had not opted into the National
LEV program, including all applicable standards and requirements
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et
seq.) and any state standards in effect pursuant to section 177 of the
Clean Air Act (42 U.S.C. 7507). For any state Section 177 Program that
has been in place at least two years as of the effective date of a
manufacturer's opt-out, a manufacturer waives its right under section
177 of the Clean Air Act to two years of lead time to the extent that
the effective date of its opt-out provides for less than two years of
lead time and to the extent such a waiver is necessary. With respect to
ZEV Mandates, the manufacturer will not be deemed to have waived its
two-year lead time under section 177 of the Clean Air Act, and such
lead time shall run from the date of EPA's receipt of the
manufacturer's opt-out notice.
(6) If a covered manufacturer opts out based on this condition, any
covered state that is not a violating state under paragraph (e), (f) or
(g) of this section may opt out within 90 calendar days of the date of
either an EPA finding that the opt-out is valid, or a judicial ruling
that a disputed opt-out is valid. The state's opt-out notification
shall specify an effective date for the state's opt-out that may not
provide for less than the two-years lead-time required under section
177 of the Clean Air Act (running from the date of the EPA's receipt of
the state's opt-out notification).
(7) In states that do not opt out, obligations under National LEV
shall be unaffected for covered manufacturers.
(8) In a state that opts out pursuant to paragraph (d)(6) of this
section, obligations under National LEV shall be unaffected for covered
manufacturers until the effective date of the state's opt out. Upon the
effective date of the state's opt out, in that state covered
manufacturers shall comply with any state standards in effect pursuant
to section 177 of the Clean Air Act or, if such state standards are not
in effect, with all provisions that would apply to a manufacturer that
had not opted into the National LEV program, including all applicable
standards and requirements promulgated under title II of the Clean Air
Act (42 U.S.C. 7521 et seq.).
(9)(i) The following are the emissions standards and requirements
that, if revised, may provide covered manufacturers the opportunity to
opt out pursuant to paragraph (d)(1) of this section:
(A) The tailpipe emissions standards for NMOG, NO_X, CO,
HCHO, and PM specified in Sec. 86.1708(b) and (c) and Sec. 86.1709(b)
and (c);
(B) Fleet average NMOG standards and averaging, banking and trading
provisions specified in Sec. 86.1710;
(C) Provisions regarding limitations on sale of Tier 1 vehicles and
TLEVs contained in Sec. 86.1711;
(D) The compliance test procedure (Federal Test Procedure) as
specified in subparts A and B of this part, as used for determining
compliance with the exhaust emission standards specified in
Sec. 86.1708(b) and (c) and Sec. 86.1709(b) and (c);
(E) The compliance test fuel, as specified in Sec. 86.1771;
(F) The definition of low volume manufacturer specified in
Sec. 86.1702;
(G) The on-board diagnostic system requirements specified in
Sec. 86.1717;
(H) The light-duty vehicle refueling emissions standards and
provisions specified in Sec. 86.099-8(d), and the light-duty truck
refueling emissions standards and provisions specified in Sec. 86.001-
9(d);
(I) The cold temperature carbon monoxide standards and provisions
for light-duty vehicles specified in Sec. 86.099-8(k), and for light
light-duty trucks specified in Sec. 86.099-9(k);
(J) The evaporative emissions standards and provisions for light-
duty vehicles specified in Sec. 86.099-8(b), and the evaporative
emissions standards and provisions for light light-duty trucks
specified in Sec. 86.099-9(b);
(K) The reactivity adjustment factors and procedures specified in
Sec. 86.1777(d);
(L) The Supplemental Federal Test Procedure, standards and phase-in
schedules specified in Sec. 86.000-8(e), Sec. 86.000-9(e),
Sec. 86.127(f) and (g), Sec. 86.129(e) and (f), Sec. 86.130(e),
Sec. 86.131(f), Sec. 86.132(n) and (o), Sec. 86.158, Sec. 86.159,
Sec. 86.160, Sec. 86.161, Sec. 86.162, Sec. 86.163, Sec. 86.164, and
Appendix I to this part, paragraphs (g) and (h).
(ii) The standards and requirements listed in paragraphs
(d)(9)(i)(A) through (d)(9)(i)(F) of this section are the ``Core Stable
Standards''; the standards and requirements listed in paragraphs
(d)(9)(i)(G) through (d)(9)(i)(L) of this section are the ``Non-Core
Stable Standards.''
(iii) The following types of revisions to the Stable Standards
listed in paragraph (d)(9)(i) of this section do not provide covered
manufacturers the right to opt out of the National LEV program:
(A) Revisions to which covered manufacturers do not object;
(B) Revisions to a Non-Core Stable Standard that do not increase
the overall stringency of the standard or requirement;
(C) Revisions to a Non-Core Stable Standard that harmonize the
standard or requirement with the comparable California standard or
requirement for the same model year (even if the harmonization
increases the stringency of the standard or requirement), provided that
EPA can only raise to 1.0 any of the reactivity adjustment factors
specified in 86.1777 applicable to gasoline meeting the specifications
of 86.1771(a)(1), even if the California factor is greater than 1.0;
(D) Revisions to a Non-Core Stable Standard that are effective
after model year 2006;
(E) Revisions to cold temperature carbon monoxide standards and
provisions for light-duty vehicles (as specified in Sec. 86.099-8(k))
and for light light-duty trucks (as specified in Sec. 86.099-9(k)) that
are effective after model year 2000.
(10) Promulgation of mandatory standards and requirements that end
the effectiveness of the National LEV program pursuant to
Sec. 86.1701(c) does not provide an opportunity to opt out of the
National LEV program.
(e) Conditions allowing manufacturer opt-outs--state Section 177
Program that does not allow National LEV as a compliance alternative. A
covered manufacturer may opt out of National LEV if a covered state
takes final action such that it has in its regulations a state Section
177 Program and/or a ZEV Mandate (except in a state with an Existing
ZEV Mandate at the time of its opt-in), that, prior to the 2006 model
year, does not allow National LEV as a compliance alternative. A
manufacturer could opt out based on this condition even if the state
regulations are contrary to an approved SIP revision committing the
state to National LEV pursuant to Sec. 86.1705(g). For purposes of this
paragraph (e), such a state shall be called the ``violating state''.

[[Page 44792]]

(1) A covered manufacturer may opt out any time after the violating
state takes such final action, provided that the violating state has
not withdrawn or otherwise nullified the relevant final action. An opt-
out under this opt-out condition may be effective no earlier than the
model year named for the calendar year following the calendar year in
which the manufacturer sends its opt-out notification to EPA.
(2) As of the model year named for the calendar year following the
violating state's final action, the violating state shall no longer be
included in the applicable trading region for purposes of calculating
covered manufacturers' compliance with the fleet average NMOG standards
under Sec. 86.1710. Beginning in that model year and until the
violating state's regulations become effective pursuant to sections
110(l) and 177 of the Clean Air Act, the National LEV program allows
covered manufacturers to certify and produce for sale vehicles meeting
the exhaust emission standards of Sec. 86.096-8(a)(1)(i) and subsequent
model year provisions or Sec. 86.097-9(a)(1)(i) and subsequent model
year provisions in the violating state. The two-year lead time required
by section 177 of the Clean Air Act for the state Section 177 Program
or ZEV Mandate shall run from the date of the final state action.
Notwithstanding an earlier effective date of a manufacturer's opt out
based on this condition, the manufacturer's opt out is not effective in
the violating state until the two-year lead time for the violating
state's program has passed (which shall run from the date of the final
violating state action).
(3) Upon the effective date of a manufacturer's opt-out based on
this condition in any covered state that is not a violating state under
this paragraph (e), that manufacturer shall be subject to all
provisions that would apply to a manufacturer that had not opted into
National LEV, including all applicable standards and requirements
promulgated under title II of the Clean Air Act and any state standards
in effect pursuant to section 177 of the Clean Air Act (42 U.S.C.
7507). For any state Section 177 Program that has been in place in a
non-violating state at least two years as of the effective date of a
manufacturer's opt-out, a manufacturer waives its right under section
177 of the Clean Air Act to two years of lead time to the extent that
the effective date of its opt-out provides for less than two years of
lead time and to the extent such a waiver is necessary. With respect to
ZEV Mandates, the manufacturer will not be deemed to have waived its
two-year lead time under section 177 of the Clean Air Act, which shall
run from the date of EPA's receipt of the manufacturer's opt-out
notice.
(4) If a covered manufacturer opts out based on this opt-out
condition, any covered state that is not a violating state under
paragraph (e), (f) or (g) of this section may opt out within 90
calendar days of EPA's receipt of the manufacturer's opt-out
notification. The state's opt-out notification shall specify an
effective date for the state's opt-out that may not provide for less
than the two-years lead-time required under section 177 of the Clean
Air Act (running from the date of EPA's receipt of the state's opt-out
notification).
(5) In non-violating states that have not opted out, obligations
under National LEV shall be unaffected for covered manufacturers.
(6) In a non-violating state that opts out pursuant to paragraph
(e)(4) of this section, obligations under National LEV shall be
unaffected for covered manufacturers until the effective date of the
non-violating state's opt-out. Upon the effective date of the state's
opt-out, in that state covered manufacturers shall comply with any
state standards in effect pursuant to section 177 of the Clean Air Act
or, if such state standards are not in effect, with all provisions that
would apply to a manufacturer that had not opted into the National LEV
program, including all applicable standards and requirements
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et
seq.).
(f) Conditions allowing manufacturer opt-outs--failure to submit
SIP revision. A covered manufacturer may opt out of National LEV if a
covered state fails to submit a National LEV SIP revision on the date
specified in Sec. 86.1705(g). For purposes of this paragraph (f), such
a state shall be called the ``violating state''.
(1) A covered manufacturer may opt out any time after the violating
state misses the deadline for its National LEV SIP revision, provided
that the violating state has not submitted a National LEV SIP revision
prior to the manufacturer's submission of its opt-out notification. If
a manufacturer opts out within 180 days from the deadline for the state
to submit its National LEV SIP revision, the opt-out must be
conditioned on the state not submitting a National LEV SIP revision
within 180 days from the deadline for such SIP revision. If the state
submits such a SIP revision within the 180-day period, any manufacturer
opt-outs based on this opt-out condition would be invalidated and would
not come into effect. An opt-out under this opt-out condition may be
effective no earlier than the model year named for the calendar year
following the calendar year in which the manufacturer sends its opt-out
notification to EPA, or the date 180 days from the deadline for the
state to submit its National LEV SIP revision, whichever is later.
(2) For a manufacturer that opts out based on this opt-out
condition, as of model year 2000 (or model year 2001 if the violating
state is the District of Columbia, New Hampshire, Delaware, or
Virginia) or the model year named for the calendar year following EPA's
receipt of the opt-out notification, whichever is later, the violating
state shall no longer be included in the applicable trading region for
purposes of calculating that manufacturer's compliance with the fleet
average NMOG standards under Sec. 86.1710. Beginning in that model year
and until the manufacturer's opt-out becomes effective, the National
LEV program allows a manufacturer that has opted out based on this
condition to certify and produce for sale vehicles meeting the exhaust
emission standards of Sec. 86.096-8(a)(1)(i) and subsequent model year
provisions or Sec. 86.097-9(a)(1)(i) and subsequent model year
provisions in the violating state. National LEV obligations in the
violating state remain unchanged for those manufacturers that do not
opt out based on this condition.
(3) Upon the effective date of a manufacturer's opt-out based on
this opt-out condition, in any covered state that is not a violating
state under this paragraph (f), that manufacturer shall be subject to
all provisions that would apply to a manufacturer that had not opted
into National LEV, including all applicable standards and requirements
promulgated under title II of the Clean Air Act and any state standards
in effect pursuant to section 177 of the Clean Air Act (42 U.S.C.
7507). For any state Section 177 Program that has been in place in a
non-violating state at least two years as of the effective date of a
manufacturer's opt-out, a manufacturer waives its right under section
177 of the Clean Air Act to two years of lead time to the extent that
the effective date of its opt-out provides for less than two years of
lead time and to the extent such a waiver is necessary. With respect to
ZEV Mandates, the manufacturer will not be deemed to have waived its
two-year lead time under section 177 of the Clean Air Act, which shall
run from the date of EPA's receipt of the manufacturer's opt-out
notice.
(4) If a covered manufacturer opts out based on this opt-out
condition, any covered state that is not a violating state under
paragraph (e), (f) or (g) of this section may opt out within 90
calendar

[[Page 44793]]

days of EPA's receipt of the manufacturer's opt-out notification. The
state's opt-out notification shall specify an effective date for the
state's opt-out that may not provide for less than the two-years lead-
time required under section 177 of the Clean Air Act (running from the
date of EPA's receipt of the state's opt-out notification).
(5) In non-violating states that have not opted out, obligations
under National LEV shall be unaffected for covered manufacturers.
(6) In a non-violating state that opts out pursuant to paragraph
(f)(4) of this section, obligations under National LEV shall be
unaffected for covered manufacturers until the effective date of the
non-violating state's opt-out. Upon the effective date of the state's
opt-out, in that state covered manufacturers shall comply with any
state standards in effect pursuant to section 177 of the Clean Air Act
or, if such state standards are not in effect, with all provisions that
would apply to a manufacturer that had not opted into the National LEV
program, including all applicable standards and requirements
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et
seq.).
(g) Conditions allowing manufacturer opt-outs--lack of an
approvable SIP revision. A covered manufacturer may opt out of National
LEV if EPA disapproves a National LEV SIP revision submitted by a
covered state pursuant to Sec. 86.1705(g) and the State fails to
correct the SIP revision. For purposes of this paragraph (g), such a
state shall be called the ``violating state.''
(1) A covered manufacturer may opt out any time after EPA has
disapproved a state's National LEV SIP revision provided that it is
more than a year after EPA's disapproval and the state has not yet
submitted a revised National LEV SIP. If the state has submitted a
revised National LEV SIP revision, covered manufacturers may not opt
out unless and until EPA disapproves the state's revised National LEV
SIP revision. An opt-out under this condition may be effective no
earlier than the model year named for the calendar year following the
calendar year in which the EPA receives the manufacturer's opt-out
notification.
(2) For a manufacturer that opts out based on this opt-out
condition, as of the model year named for the calendar year following
EPA's receipt of the opt-out notification, the violating state shall no
longer be included in the applicable trading region for purposes of
calculating that manufacturer's compliance with the fleet average NMOG
standards under Sec. 86.1710. Beginning in that model year and until
the manufacturer's opt-out becomes effective, the National LEV program
allows a manufacturer that has opted out based on this condition to
certify and produce for sale vehicles meeting the exhaust emission
standards of Sec. 86.096-8(a)(1)(i) and subsequent model year
provisions or Sec. 86.097-9(a)(1)(i) and subsequent model year
provisions in the violating state. National LEV obligations in the
violating state remain unchanged for those manufacturers that do not
opt out based on this condition.
(3) Upon the effective date of a manufacturer's opt-out based on
this opt-out condition, in any covered state that is not a violating
state under this paragraph (g), that manufacturer shall be subject to
all provisions that would apply to a manufacturer that had not opted
into National LEV, including all applicable standards and requirements
promulgated under title II of the Clean Air Act and any state standards
in effect pursuant to section 177 of the Clean Air Act (42 U.S.C.
7507). For any state Section 177 Program that has been in place at
least two years as of the effective date of a manufacturer's opt-out,
in a non-violating state a manufacturer waives its right under section
177 of the Clean Air Act to two years of lead time to the extent that
the effective date of its opt-out provides for less than two years of
lead time and to the extent such a waiver is necessary. With respect to
ZEV Mandates, the manufacturer will not be deemed to have waived its
two-year lead time under section 177 of the Clean Air Act, which shall
run from the date of EPA's receipt of the manufacturer's opt-out
notice.
(4) If a covered manufacturer opts out based on this opt-out
condition, any covered state that is not a violating state under
paragraph (e), (f) or (g) of this section may opt out within 90
calendar days of EPA's receipt of the manufacturer's opt-out
notification. The state's opt-out notification shall specify an
effective date for the state's opt-out that may not provide for less
than the two-years lead-time required under section 177 of the Clean
Air Act (running from the date of EPA's receipt of the state's opt-out
notification).
(5) In non-violating states that have not opted out, obligations
under National LEV shall be unaffected for covered manufacturers.
(6) In a non-violating state that opts out pursuant to paragraph
(g)(4) of this section, obligations under National LEV shall be
unaffected for covered manufacturers until the effective date of the
non-violating state's opt-out. Upon the effective date of the state's
opt-out, in that state covered manufacturers shall comply with any
state standards in effect pursuant to section 177 of the Clean Air Act
or, if such state standards are not in effect, with all provisions that
would apply to a manufacturer that had not opted into the National LEV
program, including all applicable standards and requirements
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et
seq.).
(h) Conditions allowing manufacturer opt-outs--EPA failure to
consider in-use fuel issues. A covered manufacturer may opt out of
National LEV if EPA does not meet its obligations related to fuel
sulfur effects, as those obligations are set forth in paragraph (h)(7)
of this section.
(1) A manufacturer may request in writing that EPA consider taking
a specific action with regard to a fuel sulfur effect described in
paragraph (h)(7) of this section. The request must identify the alleged
fuel sulfur related problem, demonstrate that the problem exists and is
caused by in-use fuel sulfur levels, and ask EPA to consider taking a
specific action. Within 60 days of EPA's receipt of the manufacturer's
request, EPA must respond to the manufacturer's request in writing,
stating the Agency's decision and explaining the basis for the
decision.
(2) If EPA fails to respond to a manufacturer's request within the
time provided, the covered manufacturer that submitted the request may
opt out within 180 days of the deadline for the EPA response (if such a
manufacturer opts out, other manufacturers that did not submit requests
may also opt out pursuant to Sec. 86.1707(i). Once EPA responds to the
request, even if after the expiration of the 60-day EPA deadline, a
manufacturer that had not yet submitted an opt-out notification may no
longer opt out based on this opt-out condition. An opt-out based on
this condition may be effective no earlier than the model year named
for the calendar year following the calendar year in which EPA received
the manufacturer's opt-out notification.
(3) Upon the effective date of a manufacturer's opt-out based on
this opt-out condition, that manufacturer shall be subject to all
provisions that would apply to a manufacturer that had not opted into
the National LEV program, including all applicable standards and
requirements promulgated under title II of the Clean Air Act (42 U.S.C.
7521 et seq.) and any state standards in effect pursuant to section 177
of the Clean Air Act (42 U.S.C. 7507). For any state Section 177
Program that has been in place at least two years as of the effective
date of a manufacturer's opt-out, a manufacturer

[[Page 44794]]

waives its right under section 177 of the Clean Air Act to two years of
lead time to the extent that the effective date of its opt-out provides
for less than two years of lead time and to the extent such a waiver is
necessary. With respect to ZEV Mandates, the manufacturer will not be
deemed to have waived its two-year lead time under section 177 of the
Clean Air Act, and such lead time shall run from the date of EPA's
receipt of the manufacturer's opt-out notice.
(4) If a covered manufacturer opts out based on this condition, any
covered state that is not a violating state under paragraph (e), (f) or
(g) of this section may opt out within 90 calendar days of EPA's
receipt of the manufacturer's opt-out notification. The state's opt-out
notification shall specify an effective date for the state's opt-out
that may not provide for less than the two-years lead-time required
under section 177 of the Clean Air Act (running from the date of EPA's
receipt of the state's opt-out notification).
(5) In states that do not opt out, obligations under National LEV
shall not be affected for covered manufacturers.
(6) In a state that opts out pursuant to paragraph (h)(4) of this
section, obligations under National LEV shall be unaffected for covered
manufacturers until the effective date of the state's opt out. Upon the
effective date of the state's opt out, in that state covered
manufacturers shall comply with any state standards in effect pursuant
to section 177 of the Clean Air Act or, if such state standards are not
in effect, with all provisions that would apply to a manufacturer that
had not opted into the National LEV program, including all applicable
standards and requirements promulgated under title II of the Clean Air
Act (42 U.S.C. 7521 et seq.).
(7) Following are EPA's obligations related to the potential
effects of sulfur levels in in-use fuels. If EPA does not meet the
obligations pursuant to paragraph (h)(1) of this section, it will
provide covered manufacturers the opportunity to opt out pursuant to
paragraph (h)(1) of this section:
(i) During the certification process and upon a manufacturer's
request, EPA will consider allowing the use of an on-board diagnostic
system (as required by Sec. 86.1717), that functions properly on low
sulfur gasoline, but indicates sulfur-induced passes when exposed to
high sulfur gasoline.
(ii) Upon a manufacturer's request, if vehicles exhibit sulfur-
induced MIL illuminations due to high sulfur gasoline, EPA will
consider allowing modifications to such vehicles on a case-by-case
basis so as to eliminate the sulfur-induced MIL.
(iii) Upon a manufacturer's request, prior to in-use testing, that
presents information to EPA regarding pre-conditioning procedures
designed solely to remove the effects of high sulfur from currently
available gasoline, EPA will consider allowing such procedures on a
case-by-case basis.
(i) Conditions allowing manufacturer opt-outs--OTC state or
manufacturer opts out. A covered manufacturer may opt out of National
LEV if a covered state or another covered manufacturer opts out of the
National LEV program pursuant to this section.
(1) If a covered manufacturer's opt-out under Sec. 86.1707(i) is
based on a covered state or covered manufacturer's opt-out under
paragraph (e), (g), (h), (i), (j) or (k) of this section, the
manufacturer may opt out within 90 calendar days of EPA's receipt of
the underlying state or manufacturer's opt-out notification. If a
manufacturer's opt-out under Sec. 86.1707(i) is based on a
manufacturer's opt-out under paragraph (d) of this section, the
manufacturer may opt out within 90 calendar days of the date of either
an EPA finding or a judicial ruling that the opt-out under paragraph
(d) of this section is valid. If a manufacturer's opt-out under
Sec. 86.1707(i) is based on a manufacturer's opt-out under paragraph
(f) of this section, the manufacturer may opt out within 90 days of the
expiration of the condition required by paragraph (f) of this section,
or within 90 calendar days of EPA's receipt of the underlying state or
manufacturer's opt-out notification, whichever is later. An opt-out
under Sec. 86.1707(i) may be effective no earlier than the model year
named for the calendar year following the calendar year in which the
manufacturer sends its opt-out notification to EPA.
(2) Upon the effective date of a manufacturer's opt-out based on
this opt-out condition, in any covered state that manufacturer shall be
subject to all provisions that would apply to a manufacturer that had
not opted into National LEV, including all applicable standards and
requirements promulgated under title II of the Clean Air Act and any
state standards in effect pursuant to section 177 of the Clean Air Act
(42 U.S.C. 7507). For any state Section 177 Program that has been in
place at least two years as of the effective date of a manufacturer's
opt-out, a manufacturer waives its right under section 177 of the Clean
Air Act to two years of lead time to the extent that the effective date
of its opt-out provides for less than two years of lead time and to the
extent such a waiver is necessary. With respect to ZEV Mandates, the
manufacturer will not be deemed to have waived its two-year lead time
under section 177 of the Clean Air Act, which shall run from the date
of EPA's receipt of the manufacturer's opt-out notice.
(3) If a covered manufacturer opts out based on this condition, any
covered state that is not a violating state under paragraph (e), (f) or
(g) of this section may opt out within 90 calendar days of EPA's
receipt of the manufacturer's opt-out notification. The state's opt-out
notification shall specify an effective date for the state's opt-out
that may not provide for less than the two-years lead-time required
under section 177 of the Clean Air Act (running from the date of EPA's
receipt of the state's opt-out notification).
(4) In non-violating states that have not opted out, obligations
under National LEV shall be unaffected for covered manufacturers.
(5) In a non-violating state that opts out pursuant to paragraph
(i)(3) of this section, obligations under National LEV shall be
unaffected for covered manufacturers until the effective date of the
non-violating state's opt-out. Upon the effective date of the state's
opt-out, in that state covered manufacturers shall comply with any
state standards in effect pursuant to section 177 of the Clean Air Act
or, if such state standards are not in effect, with all provisions that
would apply to a manufacturer that had not opted into the National LEV
program, including all applicable standards and requirements
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et
seq.).
(j) Conditions allowing OTC state opt-outs--change to Stable
Standards. Any covered state may opt out of National LEV if EPA
promulgates a final rule or other final agency action revising a
standard or requirement listed in paragraph (d)(9)(i) of this section,
and, had the revised standard or requirement been included at the time,
it would have changed EPA's [date of signature of final rule]
determination (``initial determination'') that National LEV would
produce emissions reductions at least equivalent to the OTC State
Section 177 Programs that would apply in the absence of National LEV.
(1) If EPA promulgates a final rule or other final agency action
revising a standard or requirement listed in paragraph (d)(9)(i) of
this section, a covered state may request in writing that EPA
reevaluate, using the revised standard or requirement, its initial
determination that National LEV would produce emissions reductions at
least equivalent to the OTC State Section 177

[[Page 44795]]

Programs that would be operative in the absence of National LEV. Within
180 days of receipt of the state's request, EPA must take final agency
action to determine whether the revision would have changed EPA's
initial determination. These EPA determinations are not rules, but are
nationally applicable final agency actions subject to judicial review
pursuant to section 307(b) of the Clean Air Act (42 U.S.C. 7607(b)). In
reevaluating its determination regarding the relative emission benefits
of National LEV, EPA shall use the same Mobile emission factor model
and the same inputs and assumptions as used in the initial
determination, with the following exceptions:
(i) In modeling the emission reductions from National LEV, EPA must
use the revised standard or requirement in place of the standard or
requirement as it existed when EPA made its initial determination; and
(ii) In modeling the emissions reductions that would be achieved
through the OTC State Section 177 Programs that would apply in the
absence of National LEV, EPA shall take into account all Section 177
Programs adopted by OTC States (including programs that allow National
LEV as a compliance alternative) that had been adopted subsequent to
EPA's initial determination. In accounting for the emissions effect of
OTC State Section 177 Programs, EPA shall continue to assume that all
OTC State Section 177 Programs have the same substantive requirements
used in EPA's initial determination and shall not model any effects of
state regulation of medium-duty vehicles (as defined in the California
Code of Regulations, Title 13, Division 3, Chapter 1, Article 1,
Section 1900).
(2) A covered state may opt out of National LEV within 90 days of a
final EPA determination pursuant to paragraph (j)(1) of this section
that a revision to a standard or requirement listed in paragraph
(d)(9)(i) of this section, if it had been included at the time, would
have changed EPA's initial determination that National LEV would
produce emissions reductions at least equivalent to the OTC State
Section 177 Programs that would be operative in the absence of National
LEV. The state's opt-out notification shall specify an effective date
for the state's opt-out that may not provide for less than the two-
years lead-time required under section 177 of the Clean Air Act
(running from the date of EPA's receipt of the state's opt-out
notification).
(3) If a covered state opts out based on this condition, a covered
manufacturer may opt out of National LEV pursuant to Sec. 86.1707(i).
(4) In a state that opts out pursuant to paragraph (j)(1) of this
section, obligations under National LEV shall be unaffected for covered
manufacturers until the effective date of that state's opt-out. Upon
the effective date of the state's opt-out, in that state covered
manufacturers shall comply with any state standards in effect pursuant
to section 177 of the Clean Air Act or, if such state standards are not
in effect, with all provisions that would apply to a manufacturer that
had not opted into the National LEV program, including all applicable
standards and requirements promulgated under title II of the Clean Air
Act (42 U.S.C. 7521 et seq.).
7. Section 86.1708-97 is redesignated as Sec. 86.1708-99 and
amended by revising the section heading, by redesignating Tables R97-1
through R97-7 as Tables R99-1 through R99-7, by revising the references
``R97-1'', ``R97-2'', ``R97-3'', ``R97-4'', ``R97-5'', ``R97-6'', and
``R97-7'' to read ``R99-1'', ``R99-2'', ``R99-3'', ``R99-4'', ``R99-
5'', ``R99-6'', and ``R99-7'', respectively, wherever they appear in
the section, and by adding paragraph (e) to read as follows:

Sec. 86.1708-99 Exhaust emission standards for 1999 and later light-
duty vehicles.

* * * * *
(e) SFTP Standards. Exhaust emission standards from 2001 and later
model year light-duty vehicles shall meet the additional SFTP standards
in this paragraph (e) according to the implementation schedules in this
paragraph (e). The standards set forth in this paragraph (e) refer to
exhaust emissions emitted over the Supplemental Federal Test Procedure
(SFTP) as set forth in subpart B of this part and collected and
calculated in accordance with those procedures.
(1) Tier 1 vehicles and TLEVs. The SFTP exhaust emission levels
from new 2001 and subsequent model year light-duty vehicles certified
to the exhaust emission standards in Sec. 86.099-8(a)(1)(i) and
subsequent model year provisions and light-duty vehicles certified as
TLEVs shall not exceed the standards in Table R99-7.1, according to the
implementation schedule in paragraph (e)(1)(i) of this section.

Table R99-7.1--SFTP Exhaust Emission Standards (g/mi) for Tier 1 Vehicles and TLEVs
----------------------------------------------------------------------------------------------------------------
CO
NMHC +NO_X--------------------------------------
Useful life Fuel type composite Composite
A/C test US06 test option
----------------------------------------------------------------------------------------------------------------
Intermediate........................ Gasoline.............. 0.65 3.0 9.0 3.4
Diesel................ 1.48 NA 9.0 3.4
Full................................ Gasoline.............. 0.91 3.7 11.1 4.2
Diesel................ 2.07 NA 11.1 4.2
----------------------------------------------------------------------------------------------------------------

(i) Phase-in requirements. For the purposes of this paragraph
(e)(1) only, each manufacturer's light-duty vehicle and light light-
duty truck fleet shall be defined as the total projected number of
light-duty vehicles certified to the exhaust emission standards in
Sec. 86.099-8(a)(1)(i) and subsequent model year provisions and light
light-duty trucks certified to the exhaust emission standards in
Sec. 86.099-9(a)(1)(i) and subsequent model year provisions and
certified as TLEVs sold in the United States. As an option, a
manufacturer may elect to have its total light-duty vehicle and light
light-duty truck fleet defined, for the purposes of this paragraph
(e)(1) only, as the total projected number of the manufacturer's light-
duty vehicles and light light-duty trucks, other than zero emission
vehicles, certified and sold in the United States.
(A) Manufacturers of light-duty vehicles and light light-duty
trucks, except low volume manufacturers, shall certify a minimum
percentage of their light-duty vehicle and light light-duty truck fleet
according to the following phase-in schedule:

------------------------------------------------------------------------
Model year Percentage
------------------------------------------------------------------------
2001....................................................... 25
2002....................................................... 50
2003....................................................... 85

[[Page 44796]]

2004 and subsequent........................................ 100
------------------------------------------------------------------------

(B) Low volume manufacturers of light-duty vehicles and light
light-duty trucks shall certify 100 percent of their light-duty vehicle
and light light-duty truck fleet in the 2004 and subsequent model
years.
(ii) [Reserved]
(2) LEVs and ULEVs. The SFTP standards in this paragraph (e)(2)
represent the maximum SFTP exhaust emissions at 4,000 miles +/- 250
miles or at the mileage determined by the manufacturer for emission
data vehicles in accordance with Sec. 86.1726. The SFTP exhaust
emission levels from new 2001 and subsequent model year light-duty
vehicle LEVs and ULEVs shall not exceed the standards in the following
table, according to the implementation schedule in paragraph (e)(2)(i)
of this section:

Table R99-7.2.--SFTP Exhaust Emission Standards (g/mi) for LEVs and
ULEVs
------------------------------------------------------------------------
US06 test A/C test
------------------------------------------------------------------------
NMHC +NO_X CO NMHC +NO_X CO
------------------------------------------------------------------------
0.14............. 8.0 0.20 2.7
------------------------------------------------------------------------

(i) Phase-in requirements. For the purposes of this paragraph
(e)(2) only, each manufacturer's light-duty vehicle and light light-
duty truck fleet shall be defined as the total projected number of
light-duty vehicles and light light-duty trucks certified as LEVs and
ULEVs sold in the United States.
(A) Manufacturers of light-duty vehicles and light light-duty
trucks, except low volume manufacturers, shall certify a minimum
percentage of their light-duty vehicle and light light-duty truck fleet
according to the following phase-in schedule:

(B) Manufacturers may use an ``Alternative or Equivalent Phase-in
Schedule'' to comply with the phase-in requirements. An ``Alternative
Phase-in'' is one that achieves at least equivalent emission reductions
by the end of the last model year of the scheduled phase-in. Model-year
emission reductions shall be calculated by multiplying the percent of
vehicles (based on the manufacturer's projected California sales volume
of the applicable vehicle fleet) meeting the new requirements per model
year by the number of model years implemented prior to and including
the last model year of the scheduled phase-in. The ``cumulative total''
is the summation of the model-year emission reductions (e.g., a four
model-year 25/50/85/100 percent phase-in schedule would be calculated
as: (25%*4 years) + (50%*3 years) + (85%*2 years) + (100%*1 year) =
520). Any alternative phase-in that results in an equal or larger
cumulative total than the required cumulative total by the end of the
last model year of the scheduled phase-in shall be considered
acceptable by the Administrator under the following conditions: All
vehicles subject to the phase-in shall comply with the respective
requirements in the last model year of the required phase-in schedule;
and if a manufacturer uses the optional phase-in percentage
determination in paragraph (e)(1)(i) of this section, the cumulative
total of model-year emission reductions as determined only for light-
duty vehicles and light light-duty trucks certified to this paragraph
(e)(2) must also be equal to or larger than the required cumulative
total by end of the 2004 model year. Manufacturers shall be allowed to
include vehicles introduced before the first model year of the
scheduled phase-in (e.g., in the previous example, 10 percent
introduced one year before the scheduled phase-in begins would be
calculated as: (10%*5 years) and added to the cumulative total).
(C) Low volume manufacturers of light-duty vehicles and light
light-duty trucks shall certify 100 percent of their light-duty vehicle
and light light-duty truck fleet in the 2004 and subsequent model
years.
(ii) [Reserved]
(3) A/C-on specific calibrations. A/C-on specific calibrations
(e.g. air to fuel ratio, spark timing, and exhaust gas recirculation),
may be used which differ from A/C-off calibrations for given engine
operating conditions (e.g., engine speed, manifold pressure, coolant
temperature, air charge temperature, and any other parameters). Such
calibrations must not unnecessarily reduce the NMHC+NO_X
emission control effectiveness during A/C-on operation when the vehicle
is operated under conditions which may reasonably be expected to be
encountered during normal operation and use. If reductions in control
system NMHC+NO_X effectiveness do occur as a result of such
calibrations, the manufacturer shall, in the Application for
Certification, specify the circumstances under which such reductions do
occur, and the reason for the use of such calibrations resulting in
such reductions in control system effectiveness. A/C-on specific
``open-loop'' or ``commanded enrichment'' air-fuel enrichment
strategies (as defined below), which differ from A/C-off ``open-loop''
or ``commanded enrichment'' air-fuel enrichment strategies, may not be
used, with the following exceptions: Cold-start and warm-up conditions,
or, subject to Administrator approval, conditions requiring the
protection of the vehicle, occupants, engine, or emission control
hardware. With these exceptions, such strategies which are invoked
based on manifold pressure, engine speed, throttle position, or other
engine parameters shall use the same engine parameter criteria for the
invoking of this air-fuel enrichment strategy and the same degree of
enrichment regardless of whether the A/C is on or off. ``Open-loop'' or
``commanded'' air-fuel enrichment strategy is defined as enrichment of
the air to fuel ratio beyond stoichiometry for the purposes of
increasing engine power output and the protection of engine or
emissions control hardware. However, ``closed-loop biasing,'' defined
as small changes in the air-fuel ratio for the purposes of optimizing
vehicle emissions or driveability, shall not be considered an ``open-
loop'' or ``commanded'' air-fuel enrichment strategy. In addition,
``transient'' air-fuel enrichment strategy (or ``tip-in'' and ``tip-
out'' enrichment), defined as the temporary use of an air-fuel ratio
rich of stoichiometry at the beginning or duration of rapid throttle
motion, shall not be considered an ``open-loop'' or ``commanded'' air-
fuel enrichment strategy.
(4) ``Lean-on-cruise'' calibration strategies. ``Lean-on-cruise''
air-fuel calibration strategies shall not be employed during vehicle
operation in

[[Page 44797]]

normal driving conditions, unless such strategies are also
substantially employed during the SFTP. A ``lean-on-cruise'' air-fuel
calibration strategy is defined as the use of an air-fuel ratio
significantly greater than stoichiometry, during non-deceleration
conditions at speeds above 40 mph, for the purposes of improving fuel
economy or other purposes. A/C-on ``lean-on-cruise'' strategies which
differ from A/C-off ``lean-on-cruise'' strategies for a given engine
operating condition (e.g., engine speed, manifold pressure, coolant
temperature, air charge temperature, and any other parameters) shall
not be used.
(5) Applicability to alternative fuel vehicles. These SFTP
standards do not apply to vehicles certified on fuels other than
gasoline and diesel fuel, but the standards do apply to the gasoline
and diesel fuel operation of flexible-fuel vehicles and dual-fuel
vehicles.
(6) Single-roll electric dynamometer requirement. For all vehicles
certified to the SFTP standards, a single-roll electric dynamometer or
a dynamometer which produces equivalent results, as set forth in
Sec. 86.108, must be used for all types of emission testing to
determine compliance with the associated emission standards.
8. Section 86.1709-97 is redesignated as Sec. 86.1709-99 and
amended by revising the section heading, by redesignating Tables R97-8
through R97-14 as Tables R99-8 through R99-14, by revising the
references ``R97-8'', ``R97-9'', ``R97-10'', ``R97-11'', ``R97-12'',
``R97-13'', and ``R97-14'' to read ``R99-8'', ``R99-9'', ``R99-10'',
``R99-11'', ``R99-12'', ``R99-13'', and ``R99-14'', respectively,
wherever they appear in the section, and by adding paragraph (e) to
read as follows:

Sec. 86.1709-99 Exhaust emission standards for 1999 and later light
light-duty trucks.

* * * * *
(e) SFTP Standards. Exhaust emission standards from 2001 and later
model year light light-duty trucks shall meet the additional SFTP
standards in this paragraph (e) according to the implementation
schedules in this paragraph (e). The standards set forth in this
paragraph (e) refer to exhaust emissions emitted over the Supplemental
Federal Test Procedure (SFTP) as set forth in subpart B of this part
and collected and calculated in accordance with those procedures.
(1) Tier 1 vehicles and TLEVs. The SFTP exhaust emission levels
from new 2001 and subsequent model year light light-duty trucks
certified to the exhaust emission standards in Sec. 86.099-9(a)(1)(i)
and subsequent model year provisions and light light-duty trucks
certified as TLEVs shall not exceed the standards in Table R99-14.1,
according to the implementation schedule in paragraph (e)(1)(i) of this
section.

Table R99-14.1.--SFTP Exhaust Emission Standards (g/mil) for Tier 1 Vehicles and TLEVs
----------------------------------------------------------------------------------------------------------------
CO
NMHC+NO_X --------------------------------------
Useful life Fuel type LVW (lbs) composite Composite
A/C test US06 test option
----------------------------------------------------------------------------------------------------------------
Intermediate................. Gasoline........ 0-3750 0.65 3.0 9.0 3.4
3751-5750 1.02 3.9 11.6 4.4
Diesel.......... 0-3750 1.48 NA 9.0 3.4
3751-5750 NA NA NA NA
Full......................... Gasoline........ 0-3750 0.91 3.7 11.1 4.2
3751-5750 1.37 4.9 14.6 5.5
Diesel.......... 0-3750 2.07 NA 11.1 4.2
3751-5750 NA NA NA NA
----------------------------------------------------------------------------------------------------------------

(i) Phase-in requirements. For the purposes of paragraph (e)(1) of
this section only, each manufacturer's light-duty vehicle and light
light-duty truck fleet shall be defined as the total projected number
of light-duty vehicles certified to the exhaust emission standards in
Sec. 86.099-8(a)(1)(i) and subsequent model year provisions and light
light-duty trucks certified to the exhaust emission standards in
Sec. 86.099-9(a)(1)(i) and subsequent model year provisions and
certified as TLEVs sold in the United States. As an option, a
manufacturer may elect to have its total light-duty vehicle and light
light-duty truck fleet defined, for the purposes of this paragraph
(e)(1) only, as the total projected number of the manufacturer's light-
duty vehicles and light light-duty trucks, other than zero emission
vehicles, certified and sold in the United States.
(A) Manufacturers of light-duty vehicles and light light-duty
trucks, except low volume manufacturers, shall certify a minimum
percentage of their light-duty vehicle and light light-duty truck fleet
according to the following phase-in schedule:

(B) Low volume manufacturers of light-duty vehicles and light
light-duty trucks shall certify 100 percent of their light-duty vehicle
and light light-duty truck fleet in the 2004 and subsequent model
years.
(ii) [Reserved]
(2) LEVs and ULEVs. The SFTP standards in this paragraph (e)(2)
represent the maximum SFTP exhaust emissions at 4,000 miles +/- 250
miles or at the mileage determined by the manufacturer for emission
data vehicles in accordance with Sec. 86.1726. The SFTP exhaust
emission levels from new 2001 and subsequent model year light light-
duty truck LEVs and ULEVs shall not exceed the standards in the
following table, according to the implementation schedule in paragraph
(e)(2)(i) of this section:

[[Page 44798]]

Table R99-14.2.--SFTP Exhaust Emission Standards (g/mi) for LEVs and
ULEVs
------------------------------------------------------------------------
US06 test A/C test
------------------------------------------------------------------------
NMHC +NO_X CO NMHC +NO_X CO
------------------------------------------------------------------------
0.14............. 8.0 0.20 2.7
------------------------------------------------------------------------

(B) Manufacturers may use an ``Alternative or Equivalent Phase-in
Schedule'' to comply with the phase-in requirements. An ``Alternative
Phase-in'' is one that achieves at least equivalent emission reductions
by the end of the last model year of the scheduled phase-in. Model-year
emission reductions shall be calculated by multiplying the percent of
vehicles (based on the manufacturer's projected California sales volume
of the applicable vehicle fleet) meeting the new requirements per model
year by the number of model years implemented prior to and including
the last model year of the scheduled phase-in. The ``cumulative total''
is the summation of the model-year emission reductions (e.g., a four
model-year 25/50/85/100 percent phase-in schedule would be calculated
as: (25%*4 years) + (50%*3 years) + (85%*2 years) + (100%*1 year) =
520). Any alternative phase-in that results in an equal or larger
cumulative total than the required cumulative total by the end of the
last model year of the scheduled phase-in shall be considered
acceptable by the Administrator under the following conditions: All
vehicles subject to the phase-in shall comply with the respective
requirements in the last model year of the required phase-in schedule;
and if a manufacturer uses the optional phase-in percentage
determination in paragraph (e)(1)(i) of this section, the cumulative
total of model-year emission reductions as determined only for light-
duty vehicles and light light-duty trucks certified to this paragraph
(e)(2) must also be equal to or larger than the required cumulative
total by the end of the 2004 model year. Manufacturers shall be allowed
to include vehicles introduced before the first model year of the
scheduled phase-in (e.g., in the previous example, 10 percent
introduced one year before the scheduled phase-in begins would be
calculated as: (10%*5 years) and added to the cumulative total).
(C) Low volume manufacturers of light-duty vehicles and light
light-duty trucks shall certify 100 percent of their light-duty vehicle
and light light-duty truck fleet in the 2004 and subsequent model
years.
(ii) [Reserved]
(3) A/C-on specific calibrations. A/C-on specific calibrations
(e.g. air to fuel ratio, spark timing, and exhaust gas recirculation),
may be used which differ from A/C-off calibrations for given engine
operating conditions (e.g., engine speed, manifold pressure, coolant
temperature, air charge temperature, and any other parameters). Such
calibrations must not unnecessarily reduce the NMHC+NO_X
emission control effectiveness during A/C-on operation when the vehicle
is operated under conditions which may reasonably be expected to be
encountered during normal operation and use. If reductions in control
system NMHC+NO_X effectiveness do occur as a result of such
calibrations, the manufacturer shall, in the Application for
Certification, specify the circumstances under which such reductions do
occur, and the reason for the use of such calibrations resulting in
such reductions in control system effectiveness. A/C-on specific
``open-loop'' or ``commanded enrichment'' air-fuel enrichment
strategies (as defined below), which differ from A/C-off ``open-loop''
or ``commanded enrichment'' air-fuel enrichment strategies, may not be
used, with the following exceptions: Cold-start and warm-up conditions,
or, subject to Administrator approval, conditions requiring the
protection of the vehicle, occupants, engine, or emission control
hardware. With these exceptions, such strategies which are invoked
based on manifold pressure, engine speed, throttle position, or other
engine parameters shall use the same engine parameter criteria for the
invoking of this air-fuel enrichment strategy and the same degree of
enrichment regardless of whether the A/C is on or off. ``Open-loop'' or
``commanded'' air-fuel enrichment strategy is defined as enrichment of
the air to fuel ratio beyond stoichiometry for the purposes of
increasing engine power output and the protection of engine or
emissions control hardware. However, ``closed-loop biasing,'' defined
as small changes in the air-fuel ratio for the purposes of optimizing
vehicle emissions or driveability, shall not be considered an ``open-
loop'' or ``commanded'' air-fuel enrichment strategy. In addition,
``transient'' air-fuel enrichment strategy (or ``tip-in'' and ``tip-
out'' enrichment), defined as the temporary use of an air-fuel ratio
rich of stoichiometry at the beginning or duration of rapid throttle
motion, shall not be considered an ``open-loop'' or ``commanded'' air-
fuel enrichment strategy.
(4) ``Lean-on-cruise'' calibration strategies. ``Lean-on-cruise''
air-fuel calibration strategies shall not be employed during vehicle
operation in normal driving conditions, unless such strategies are also
substantially employed during the SFTP. A ``lean-on-cruise'' air-fuel
calibration strategy is defined as the use of an air-fuel ratio
significantly greater than stoichiometry, during non-deceleration
conditions at speeds above 40 mph, for the purposes of improving fuel
economy or other purposes. A/C-on ``lean-on-cruise'' strategies which
differ from A/C-off ``lean-on-cruise'' strategies for a given engine
operating condition (e.g., engine speed, manifold pressure, coolant
temperature, air charge temperature, and any other parameters) shall
not be used.
(5) Applicability to alternative fuel vehicles. These SFTP
standards do not apply to vehicles certified on fuels other than
gasoline and diesel fuel, but the standards do apply to the gasoline
and diesel fuel operation of flexible-fuel vehicles and dual-fuel
vehicles.
(6) Single-roll electric dynamometer requirement. For all vehicles
certified to the SFTP standards, a single-roll electric dynamometer or
a dynamometer which produces equivalent results, as set forth in
Sec. 86.108, must be used for all types

[[Page 44799]]

of emission testing to determine compliance with the associated
emission standards.

[FR Doc. 97-21138 Filed 8-21-96; 8:45 am]
BILLING CODE 6560-50-U

Notices For
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Control of Air Pollution From New Motor Vehicles and New Motor Vehicle Engines: State Commitments to National Low Emission Vehicle Program

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